<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 8, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
LYCOS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7370 04-3277338
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Code Number) Identification
incorporation or organization) No.)
</TABLE>
400-2 TOTTEN POND ROAD, WALTHAM, MASSACHUSETTS 02451
(781) 370-2700
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
ROBERT J. DAVIS
LYCOS, INC.
400-2 TOTTEN POND ROAD
WALTHAM, MASSACHUSETTS 02451
(781) 370-2700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
COPY TO:
SCOTT A. BARSHAY, ESQ. CURTIS L. MO, ESQ.
CRAVATH, SWAINE & MOORE ROD J. HOWARD, ESQ.
WORLDWIDE PLAZA ANDREW R. HULL, ESQ.
825 EIGHTH AVENUE BROBECK, PHLEGER & HARRISON LLP
NEW YORK, NY 10019 TWO EMBARCADERO PLACE
(212) 474-1000 2200 GENG ROAD
PALO ALTO, CA 94303
(650) 424-0160
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
Upon consummation of the merger referred to herein.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, please check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
------------------------
(CALCULATION TABLE ON NEXT PAGE)
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED PROPOSED
SECURITIES TO BE AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
REGISTERED REGISTERED(1) PRICE PER UNIT OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common stock, par value $0.01 per share 2,585,980 N/A $4,200,328 $1,168
</TABLE>
(1) Based on the maximum number of shares to be issued in connection with the
merger, calculated by dividing (i) $88,000,000 plus $600,000, the estimated
amount of cash held by Quote.com at the time of the closing of the merger,
(excluding any payment of fees and expenses incurred by Quote.com in
connection with the merger) minus (a) $7,400,000, the estimated amount of
relevant outstanding indebtedness of Quote.com at the time of the closing of
the merger, (b) $1,181,131, the estimated amount of cash payable to Eric S.
Hunsader, and (c) $500,000, the estimated fees and expenses incurred by
Quote.com in connection with the merger (excluding the fees and expenses
payable to Hambrecht & Quist LLC) by (ii) $30.75, the price per share of
Lycos common stock used for calculating the maximum number of shares of
Lycos common stock issuable in the merger.
(2) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act, and calculated pursuant to
Rule 457(f) under the Securities Act. Pursuant to Rule 457(f)(2) under the
Securities Act, because Quote.com has accumulated capital deficit, the
proposed maximum aggregate offering price of the registrant's common stock
was calculated as the sum of: (i) $359,995, one-third of the stated value of
2,736,598 outstanding shares of Quote.com common stock at September 30,
1999, (ii) $62,000, one-third of the stated value of 1,446,951 outstanding
shares of Quote.com Series A preferred stock at September 30, 1999, (iii)
$1,153,333, one-third of the stated value of 853,659 outstanding shares of
Quote.com Series B preferred stock at September 30, 1999, (iv) $1,647,000,
one-third of the stated value of 762,700 outstanding shares of Quote.com
Series C preferred stock at September 30, 1999, and (v) $978,000, one-third
of the stated value of 413,793 outstanding shares of Quote.com Series D
preferred stock at September 30, 1999.
<PAGE>
SUBJECT TO COMPLETION
THIS PROXY STATEMENT/PROSPECTUS AND THE INFORMATION CONTAINED HEREIN IS SUBJECT
TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE
SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED UNTIL THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROXY STATEMENT/PROSPECTUS SHALL
NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
QUOTE.COM, INC.
850 NORTH SHORELINE BOULEVARD
MOUNTAIN VIEW, CA 94043-1913
Dear Shareholders:
As you may be aware, Quote.com, Inc. has entered into an agreement with
Lycos, Inc. providing for the merger of Quote.com with a wholly owned subsidiary
of Lycos. If the merger is completed, Quote.com will become a wholly owned
subsidiary of Lycos and your shares of Quote.com capital stock will be converted
into the right to receive shares of Lycos common stock, in accordance with the
exchange ratios set forth in the merger agreement.
Quote.com has scheduled a special meeting of the Quote.com shareholders to
vote on the matters described in this document. The special meeting will be held
on , 1999 at 10:00 a.m., California time, at the offices of Quote.com
located at the above address. At the special meeting, you will be asked to (i)
approve and adopt the merger agreement, (ii) approve the merger and (iii)
approve the payment to be made to Eric. S. Hunsader pursuant to a consulting
agreement between Mr. Hunsader and Quote.com to ensure that such payment does
not constitute a parachute payment under Section 280G of the Internal Revenue
Code, which could have adverse tax consequences to Lycos and Mr. Hunsader.
The merger cannot be completed unless the merger agreement and the merger
are approved by the affirmative vote of each of (i) the holders of record of at
least a majority of the outstanding shares of Quote.com common stock and
preferred stock, voting together as a single class, (ii) the holders of record
of at least a majority of the outstanding shares of (a) Quote.com common stock,
voting as a separate class, and (b) Quote.com preferred stock, voting as a
separate class and (iii) the holders of record of at least 80% of the
outstanding shares of Quote.com Series B preferred stock, Series C preferred
stock and Series D preferred stock, voting together as a single class.
To ensure that the payment to be made to Mr. Hunsader pursuant to the
consulting agreement does not result in adverse tax consequences to Lycos and
Mr. Hunsader, it must be approved by the holders of more than 75% of the
outstanding shares of Quote.com common stock and the outstanding shares of
Quote.com preferred stock, excluding shares held by Mr. Hunsader, voting
together as a single class.
You may vote at the special meeting if you owned your shares as of the close
of business on , 1999.
THE QUOTE.COM BOARD OF DIRECTORS, BY A UNANIMOUS VOTE OF DIRECTORS PRESENT
AT THE MEETING, HAS APPROVED THE MERGER AGREEMENT AND THE MERGER AND RECOMMENDS
THAT YOU VOTE "FOR" (A) THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT, (B)
THE APPROVAL OF THE MERGER AND (C) THE APPROVAL OF THE PAYMENT TO BE MADE TO MR.
HUNSADER PURSUANT TO THE CONSULTING AGREEMENT. DANIEL NOVA, WHO IS A DIRECTOR OF
BOTH QUOTE.COM AND LYCOS, WAS NOT PRESENT AT THE MEETING AND DID NOT PARTICIPATE
IN THE VOTE IN CONNECTION WITH THE MERGER, THE MERGER AGREEMENT AND THE PAYMENT
TO MR. HUNSADER. PURSUANT TO A SHAREHOLDERS AGREEMENT BETWEEN LYCOS AND CERTAIN
SHAREHOLDERS OF QUOTE.COM, WE ARE ASSURED OF RECEIVING THE REQUISITE VOTES IN
FAVOR OF THE MERGER AGREEMENT, THE MERGER AND THE PAYMENT TO MR. HUNSADER AT THE
SPECIAL MEETING.
<PAGE>
Please read all of this proxy statement/prospectus carefully, including the
matters referred to beginning on page 13 under the heading "Risk Factors,"
before voting.
Thank you for your cooperation.
Sincerely,
Robert Honeycutt
President & Chief Executive Officer
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the Lycos common stock to be issued under
this proxy statement/prospectus or determined if this proxy statement/prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS , 1999, AND IS FIRST
BEING MAILED TO SHAREHOLDERS ON OR ABOUT , 1999.
<PAGE>
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 1999
TO THE SHAREHOLDERS OF QUOTE.COM, INC.:
We will hold a special meeting of shareholders of Quote.com, Inc., a
California corporation, at 10:00 a.m., California time, on ,
, 1999 to consider and vote upon the following:
- A proposal to approve and adopt the Agreement and Plan of Merger, dated as
of September 2, 1999, among Quote.com, Lycos, Inc. and Quicksilver
Acquisition Corp., a wholly owned subsidiary of Lycos pursuant to which
Quote.com will become a wholly owned subsidiary of Lycos and all
outstanding shares of Quote.com capital stock, other than shares held by
shareholders who perfect their dissenters' rights under California law,
will be converted into the right to receive shares of Lycos common stock;
and
- A proposal to approve the estimated aggregate payment of $2,362,262 to Mr.
Hunsader pursuant to a consulting agreement between Mr. Hunsader and
Quote.com to ensure that such payment does not constitute a parachute
payment under Section 280G of the Internal Revenue Code, which could have
adverse tax consequences to Lycos and Mr. Hunsader.
We will transact no other business at the special meeting except such
business as may be properly brought before the special meeting or any
adjournment of it by the Quote.com board of directors.
Shareholders of record at the close of business on , 1999 are entitled
to notice of, and to vote at, the meeting and any adjournments or postponements
of the meeting. We cannot complete the merger unless the proposals relating to
the merger agreement and the merger are approved by the affirmative vote of each
of (i) the holders of record of at least a majority of the outstanding shares of
Quote.com common stock and preferred stock, voting together as a single class,
(ii) the holders of record of at least a majority of the outstanding shares of
(a) Quote.com common stock, voting as a separate class, and (b) Quote.com
preferred stock, voting as a separate class, and (iii) the holders of record of
at least 80% of the outstanding shares of Quote.com Series B preferred stock,
Series C preferred stock and Series D preferred stock, voting together as a
single class. If the payment to Mr. Hunsader is not approved by the holders of
more than 75% of the outstanding shares of Quote.com common stock and the
outstanding shares of Quote.com preferred stock, excluding shares held by Mr.
Hunsader, voting together as a single class, then such payment will constitute a
parachute payment under Section 280G of the Internal Revenue Code, which will
result in the imposition on Mr. Hunsader of an additional 20% excise tax on the
portion of such payment which constitutes an excess parachute payment under
Section 280G, and Lycos will be prevented from taking a deduction for such
excess parachute payment for United States federal income tax purposes.
FOR MORE INFORMATION ABOUT THE MERGER, THE MERGER AGREEMENT AND THE PAYMENT
TO MR. HUNSADER, PLEASE REVIEW THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS.
Whether or not you expect to attend the meeting, please complete, date, sign
and return the enclosed proxy as promptly as possible so that your shares may be
represented at the special meeting. A postage-paid return envelope is enclosed
for that purpose. Even if you have given your proxy, you may still vote in
person if you attend the meeting.
Please do not send any stock certificates at this time.
By Order of the Board of Directors
Secretary
Mountain View, California
, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
SUMMARY.................................................................................................... 1
The Companies............................................................................................ 1
Quote.com Board of Directors Recommendation to Quote.com Shareholders.................................... 1
The Merger............................................................................................... 1
PRICE RANGE OF COMMON STOCK................................................................................ 8
DIVIDEND POLICIES.......................................................................................... 9
SELECTED HISTORICAL FINANCIAL DATA......................................................................... 10
COMPARATIVE PER SHARE DATA................................................................................. 12
RISK FACTORS............................................................................................... 13
Risks Factors Relating to the Merger..................................................................... 13
FORMULA FOR DETERMINING PURCHASE PRICE AND SHARES ISSUABLE MAY REDUCE VALUE OF MERGER PROCEEDS TO
QUOTE.COM SHAREHOLDERS................................................................................ 13
QUOTE.COM SHAREHOLDERS WILL BE SUBJECT TO MARKET RISKS ASSOCIATED WITH INTERNET COMPANIES.............. 13
SUCCESSFUL INTEGRATION OF LYCOS' AND QUOTE.COM'S OPERATIONS AND THE REALIZATION OF POTENTIAL BENEFITS
OF THE MERGER ARE UNCERTAIN........................................................................... 13
METHOD OF ACCOUNTING FOR THE MERGER MAY DELAY PROFITABILITY OF LYCOS................................... 14
ISSUANCE OF ADDITIONAL SHARES OF LYCOS COMMON STOCK IN THE MERGER MAY REDUCE LYCOS' STOCK PRICE........ 14
Risks Factors Relating to Lycos.......................................................................... 14
LYCOS' PERFORMANCE WILL DEPEND ON THE GROWTH AND COMMERCIAL ACCEPTANCE OF THE INTERNET................. 14
LYCOS IS DEPENDENT UPON KEY SENIOR MANAGEMENT.......................................................... 14
LYCOS MUST HIRE AND RETAIN SKILLED PERSONNEL TO BE SUCCESSFUL.......................................... 14
LYCOS MAY NOT BE ABLE TO MANAGE EFFECTIVELY THE POTENTIAL GROWTH OF ITS BUSINESSES..................... 15
LYCOS' SYSTEMS MAY FAIL TO FUNCTION OR MAY NOT HAVE ADEQUATE CAPACITY WHICH COULD IMPAIR LYCOS' ABILITY
TO ATTRACT ADVERTISERS AND USERS...................................................................... 15
INTERNET SECURITY CONCERNS COULD HINDER COMMERCIAL TRANSACTIONS CONDUCTED OVER THE INTERNET............ 15
LYCOS MUST BE ABLE TO ADAPT TO TECHNOLOGICAL CHANGE AND TO DEVELOP NEW PRODUCTS TO REMAIN
COMPETITIVE........................................................................................... 16
THE ACQUISITIONS AND INVESTMENTS THAT LYCOS HAS MADE AND MAY MAKE IN THE FUTURE MAY NOT BE SUCCESSFUL
AND MAY CREATE UNANTICIPATED PROBLEMS FOR LYCOS....................................................... 16
LYCOS' SYSTEM MAY EXPERIENCE DIFFICULTIES RELATED TO YEAR 2000 COMPUTER PROBLEMS....................... 16
THE SPECIAL MEETING........................................................................................ 18
Date, Time and Place..................................................................................... 18
Purpose.................................................................................................. 18
Record Date and Outstanding Shares....................................................................... 18
Vote Required............................................................................................ 18
Proxies.................................................................................................. 19
Recommendation of Quote.com Board of Directors........................................................... 19
THE MERGER................................................................................................. 20
General.................................................................................................. 20
Effective Time of the Merger............................................................................. 20
Merger Consideration..................................................................................... 20
Allocation of Merger Consideration....................................................................... 22
Rights of Dissenting Shareholders........................................................................ 25
Conversion and Exchange of Share Certificates............................................................ 28
Background of the Merger................................................................................. 28
Reasons for the Merger................................................................................... 29
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Other Interests of Officers and Directors in the Merger.................................................. 31
Hunsader Payment......................................................................................... 31
Accounting Treatment..................................................................................... 32
Material United States Federal Income Tax Consequences................................................... 32
THE AGREEMENT AND PLAN OF MERGER........................................................................... 34
Representations and Warranties........................................................................... 34
Covenants................................................................................................ 35
Conditions to Consummation of the Merger................................................................. 37
Termination and Amendment................................................................................ 38
Fees and Expenses........................................................................................ 38
INDEMNIFICATION AND ESCROW AGREEMENT....................................................................... 39
APPROVAL OF HUNSADER PAYMENT............................................................................... 40
SHAREHOLDERS AGREEMENT..................................................................................... 41
COMPARISON OF THE RIGHTS OF STOCKHOLDERS OF LYCOS AND SHAREHOLDERS OF QUOTE.COM............................ 43
Comparison of Authorized Outstanding Capital Stock....................................................... 43
Comparison of Rights of Common Stock..................................................................... 43
Comparison of Rights and Preferences of Preferred Stock.................................................. 44
Comparison of Securityholder Rights...................................................................... 48
BUSINESS OF LYCOS.......................................................................................... 57
BUSINESS OF QUOTE.COM...................................................................................... 57
Strategy................................................................................................. 59
Products and Services.................................................................................... 59
Employees and Facilities................................................................................. 60
Litigation............................................................................................... 60
QUOTE.COM MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............ 61
DESCRIPTION OF LYCOS CAPITAL STOCK......................................................................... 67
Common Stock............................................................................................. 67
Preferred Stock.......................................................................................... 67
Transfer Agent and Registrar............................................................................. 68
SECURITY OWNERSHIP OF QUOTE.COM............................................................................ 69
LEGAL MATTERS.............................................................................................. 71
EXPERTS.................................................................................................... 71
WHERE YOU CAN FIND MORE INFORMATION........................................................................ 71
FORWARD-LOOKING STATEMENTS................................................................................. 73
FINANCIAL STATEMENTS OF QUOTE.COM.......................................................................... F-1
ANNEXES
Annex A--Agreement and Plan of Merger.................................................................... A-1
Annex B--Shareholders Agreement.......................................................................... B-1
Annex C--Indemnification and Escrow Agreement............................................................ C-1
Annex D--Chapter 13 of the California Corporations Code.................................................. D-1
</TABLE>
ii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT WILL HAPPEN TO QUOTE.COM AS A RESULT OF THE MERGER?
A: Quote.com will become a wholly owned subsidiary of Lycos.
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering the information contained in this
proxy statement/ prospectus, please complete, date, sign and return the enclosed
proxy as promptly as possible, so that your shares may be represented at the
special meeting. A postage-paid return envelope is enclosed for that purpose. If
you sign and send your proxy and do not indicate how you want to vote, we will
count your proxy as a vote in favor of the approval and adoption of the merger
agreement and the approval of the merger and the transactions contemplated by
the merger agreement, including the payment to Mr. Hunsader.
The Quote.com special meeting will take place on , 1999. You may
attend the special meeting and vote your shares in person rather than
completing, dating, signing and returning your proxy.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY?
A: You can change your vote at any time before your proxy is voted at the
special meeting. You can do this in one of three ways. First, you can send a
written notice stating that you would like to revoke your proxy. Second, you can
complete and submit a new, later dated proxy. If you choose either of these two
methods, you must submit your notice of revocation or your new proxy to
Quote.com at the address on page 1. Third, you can attend your special meeting
and vote in person. Simply attending the meeting, however, will not revoke your
proxy.
Q: SHOULD I SEND IN MY QUOTE.COM STOCK CERTIFICATE NOW?
A: No. After the merger is completed, you will receive written instructions for
exchanging your stock certificates. Please do not send in your stock
certificates now.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A: We expect to complete the merger in the fourth calendar quarter of 1999. We
are working to complete the merger as quickly as possible and intend to do so
shortly after the special meeting.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have any questions about the merger or if you need additional copies
of this proxy statement/prospectus or the enclosed proxy, you should contact:
Lycos, Inc.
Attention: Investor Relations
400-2 Totten Pond Road
Waltham, MA 02451
(781) 370-2700
Quote.com, Inc.
Attention: Investor Relations
850 North Shoreline Boulevard
Mountain View, CA 94043
(650) 930-1000
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROXY
STATEMENT/PROSPECTUS, BUT MAY NOT CONTAIN ALL THE INFORMATION THAT IS IMPORTANT
TO YOU. TO FULLY UNDERSTAND THE MERGER AGREEMENT, THE MERGER AND THE OTHER
TRANSACTIONS CONTEMPLATED THEREBY, YOU SHOULD CAREFULLY READ THIS ENTIRE PROXY
STATEMENT/PROSPECTUS AND THE OTHER DOCUMENTS TO WHICH WE HAVE REFERRED YOU. SEE
"WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 71. WE HAVE INCLUDED PAGE
REFERENCES PARENTHETICALLY TO DIRECT YOU TO A MORE COMPLETE DESCRIPTION OF THE
TOPICS PRESENTED IN THIS SUMMARY.
THE COMPANIES (Page 1)
Quote.com, Inc.
850 North Shoreline Boulevard
Mountain View, California 94043-1913
(650) 930-1000
Quote.com is a leading Internet investment information and tools provider,
utilizing both business to consumer and branded business to business
distribution models. Quote.com reaches consumers directly through its website at
www.Quote.com and achieves business to business distribution through direct
sales to retail financial institutions worldwide. Through its website, Quote.com
provides a comprehensive package of financial content, tools and transaction
capabilities targeted at independent individual investors and retail oriented
professionals, such as registered investment advisors and certified financial
planners.
Lycos, Inc.
400-2 Totten Pond Road
Waltham, Massachusetts 02451
(781) 370-2700
Lycos, "Your Personal Internet Guide," is a "New Generation Online Service"
that offers through the Internet a network of online services and content
including community, chat, e-mail and online shopping. Lycos seeks to draw a
large number of viewers to its websites by providing a one-stop destination for
identifying, selecting and accessing resources, services, content and
information on the Internet. The Lycos Network is dedicated to helping each
individual user locate, retrieve and manage information tailored to his or her
personal interests.
QUOTE.COM BOARD OF DIRECTORS RECOMMENDATION TO QUOTE.COM SHAREHOLDERS (Page 19)
The Quote.com board of directors has determined that:
- the merger agreement and the merger are advisable and in the best
interests of Quote.com and its shareholders;
- the consideration to be paid to the holders of Quote.com common stock and
Quote.com preferred stock is fair to such holders; and
- it is in the best interests of Quote.com and its shareholders to approve
the payment to Mr. Hunsader.
The Quote.com board of directors recommends that you vote "FOR" the merger
agreement, the merger and the payment to Mr. Hunsader.
To review the background of and reasons for the merger, as well as certain
risks related to the merger, please see "The Merger--Background of the Merger",
"The Merger--Reasons for the Merger" and "Risk Factors" starting on pages 29, 30
and 13, respectively.
THE MERGER (Page 20)
WHAT QUOTE.COM SHAREHOLDERS WILL RECEIVE (Page 28)
In the merger, Quote.com shareholders that do not comply with the
requirements of the California Corporations Code relating to dissenters' rights
will receive Lycos common stock in exchange for their shares of Quote.com
capital stock.
The total amount of shares of Lycos common stock to be received by Quote.com
shareholders will be determined by dividing (i) $88.0 million (increased by the
amount of cash held by
1
<PAGE>
Quote.com at the time of the closing of the merger and reduced by the amount of
relevant indebtedness of Quote.com outstanding at the time of the closing of the
merger, the cash payment to be made to Mr. Hunsader and the fees and expenses
incurred by Quote.com in connection with the merger and the payment to Mr.
Hunsader (excluding fees and expenses of Hambrecht & Quist LLC, Quote.com's
financial advisor) by (ii) the average closing price of Lycos common stock,
during the 20 trading days ending on the trading day preceding the completion of
the merger. The average closing price of Lycos common stock used to calculate
the merger consideration will not be more than $51.25 or less than $30.75.
No fractional shares of Lycos common stock will be issued in connection with
the merger. Instead of receiving a fractional share, a shareholder who would
otherwise be entitled to a fractional share will receive an amount of cash,
rounded to the nearest whole cent, equal to the product of (1) the fractional
share and (2) the last quoted sale price of Lycos common stock on the closing
date.
Set forth below is a table that shows the aggregate number of whole shares
of Lycos common stock that holders of Quote.com capital stock would receive in
the merger at various average closing prices of Lycos common stock.
The table is based on the number of shares, options and warrants of
Quote.com outstanding as of September 30, 1999 and assumes the exercise of such
options and warrants. In addition, it assumes that:
- Quote.com holds $600,000 in cash (excluding any payment of fees and
expenses incurred by Quote.com in connection with the merger) and has
relevant outstanding indebtedness of $7,400,000 at the time of the closing
of the merger.
- The cash payment to Mr. Hunsader is $1,181,131.
- Fees and expenses incurred in the merger are $500,000 (excluding the fees
and expenses payable to Hambrecht & Quist LLC).
<TABLE>
<CAPTION>
AGGREGATE NUMBER
OF SHARES OF
AVERAGE CLOSING LYCOS COMMON
PRICE OF LYCOS STOCK TO BE PAID
COMMON STOCK IN THE MERGER
----------------------- -----------------
<S> <C> <C> <C>
$ 25.00 or lower 2,585,980
27.00 2,585,980
29.00 2,585,980
Lower collar limit 30.75 2,585,980
31.00 2,565,125
33.00 2,409,663
35.00 2,271,968
37.00 2,149,159
39.00 2,038,945
41.00 1,939,485
43.00 1,849,276
45.00 1,767,086
47.00 1,691,891
49.00 1,622,834
51.00 1,559,194
Upper collar limit 51.25 1,551,588
53.00 1,551,588
55.00 1,551,588
57.00 or higher 1,551,588
</TABLE>
The aggregate merger consideration will be allocated among the classes and
series of Quote.com capital stock based on the merger share value. The merger
share value equals the aggregate number of Lycos shares to be received by the
shareholders of Quote.com in the merger multiplied by the average closing price
of Lycos common stock during the 20 trading days ending on the trading day
preceding the completion of the merger, without giving effect to any minimum or
maximum prices used to calculate the aggregate merger consideration.
If the merger share value is equal to or greater than $90.0 million, then
the aggregate merger consideration will be allocated as follows:
- First, proportionally to (i) holders of Quote.com Series B preferred stock
until they receive an amount of Lycos common stock equal to $6.50 for each
of their shares, (ii) holders of Quote.com Series C preferred stock until
they receive an amount of Lycos common stock equal to $10.38 for each of
their shares and (iii) holders of Quote.com Series D preferred stock until
they receive an amount of Lycos common stock equal to $11.49 for each of
their shares.
2
<PAGE>
- Second, to holders of Quote.com Series A preferred stock until they
receive an amount of Lycos common stock equal to $6.00 for each of their
shares.
- Third, proportionally to holders of Quote.com preferred stock (on an as
converted basis) and Quote.com common stock until (i) holders of Quote.com
Series B preferred stock receive an amount of Lycos common stock equal to
$21.58 for each of their shares, (ii) holders of Quote.com Series C
preferred stock receive an amount of Lycos common stock equal to $34.48
for each of their shares and (iii) holders of Quote.com Series D preferred
stock receive an amount of Lycos common stock equal to $38.16 for each of
their shares. All amounts referred to in this paragraph include amounts
allocated pursuant to the prior two paragraphs.
- Fourth, proportionally to holders of Quote.com Series A preferred stock
(on an as converted basis) and Quote.com common stock.
The following table illustrates the allocation of shares of Lycos common
stock among the classes and series of Quote.com capital stock under the price
and other assumptions set forth above and assuming that the merger share value
is equal to or greater than $90 million.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF LYCOS COMMON STOCK TO BE ISSUED IN EXCHANGE
FOR EACH SHARE OF QUOTE.COM
AVERAGE CLOSING ---------------------------------------------------------------
PRICE OF LYCOS SERIES A SERIES B SERIES C SERIES D COMMON
COMMON STOCK PREFERRED PREFERRED PREFERRED PREFERRED STOCK
- --------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 58.00 0.236 0.245 0.312 0.331 0.133
60.00 0.235 0.243 0.308 0.327 0.135
62.00 0.234 0.242 0.304 0.322 0.137
64.00 0.233 0.241 0.301 0.319 0.139
66.00 0.232 0.239 0.298 0.315 0.141
</TABLE>
If the merger share value is less than $90.0 million, then the aggregate
merger consideration will be allocated as follows:
- First, proportionally to (i) holders of Quote.com Series B preferred stock
until they receive an amount of Lycos common stock equal to $8.50 for each
of their shares, (ii) holders of Quote.com Series C preferred stock until
they receive an amount of Lycos common stock equal to $13.58 for each of
their shares and (iii) holders of Quote.com Series D preferred stock until
they receive an amount of Lycos common stock equal to $15.03 for each of
their shares.
- Second, to holders of Quote.com Series A preferred stock until they
receive an amount of Lycos common stock equal to $6.00 for each of their
shares.
- Third, proportionally to holders of Quote.com preferred stock (on an as
converted basis) and Quote.com common stock until (i) holders of Quote.com
Series B preferred stock receive an amount of Lycos common stock equal to
$12.78 for each of their shares, (ii) holders of Quote.com Series C
preferred stock receive an amount of Lycos common stock equal to $20.42
for each of their shares and (iii) holders of Quote.com Series D preferred
stock receive an amount of Lycos common stock equal to $22.60 for each of
their shares. All amounts referred to in this paragraph include amounts
allocated pursuant to the prior two paragraphs.
- Fourth, proportionally to holders of Quote.com Series A preferred stock
(on an as converted basis) and Quote.com common stock.
The following table illustrates the allocation of shares of Lycos common
stock among the classes and series of Quote.com capital stock under the price
and other assumptions set forth above and assuming that the merger share value
is less than $90 million.
3
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OF LYCOS COMMON STOCK TO BE
ISSUED IN EXCHANGE FOR EACH SHARE OF QUOTE.COM
AVERAGE CLOSING --------------------------------------------------
PRICE OF LYCOS SERIES A SERIES B SERIES C SERIES D COMMON
COMMON STOCK PREFERRED PREFERRED PREFERRED PREFERRED STOCK
- --------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 25.00 0.390 0.490 0.693 0.751 0.150
27.00 0.386 0.473 0.667 0.721 0.164
29.00 0.385 0.441 0.646 0.696 0.178
30.75 0.384 0.416 0.631 0.678 0.189
31.00 0.381 0.412 0.626 0.672 0.188
33.00 0.358 0.387 0.588 0.632 0.176
35.00 0.338 0.365 0.554 0.596 0.166
37.00 0.319 0.345 0.524 0.563 0.157
39.00 0.303 0.328 0.497 0.534 0.149
41.00 0.288 0.312 0.473 0.508 0.142
43.00 0.275 0.297 0.451 0.485 0.135
45.00 0.263 0.284 0.431 0.463 0.129
47.00 0.251 0.272 0.413 0.444 0.124
49.00 0.241 0.261 0.396 0.425 0.119
51.00 0.232 0.251 0.380 0.409 0.114
51.25 0.231 0.249 0.378 0.407 0.113
53.00 0.230 0.241 0.373 0.401 0.117
55.00 0.230 0.232 0.368 0.394 0.121
57.00 0.230 0.224 0.358 0.388 0.125
</TABLE>
These tables are included for illustrative purposes only. The actual average
closing stock prices and the amount of cash held by Quote.com at the time of the
closing of the merger, the amount of the relevant outstanding indebtedness of
Quote.com at the time of the closing of the merger, the amount of the cash
payment to Mr. Hunsader and the fees and expenses incurred in connection with
the merger, as well as many of the other variables, will not be known until just
prior to the merger. In the event of a stock split or similar transaction
affecting Lycos common stock or in the event Lycos common stock is converted or
exchanged as a result of any consolidation or merger to which Lycos is a party,
the merger consideration, allocation of shares, collar limits and similar
provisions will be appropriately adjusted or converted, as the case may be.
MARKET PRICES AND DIVIDEND INFORMATION (Page 9)
Shares of Lycos common stock are quoted on the Nasdaq National Market.
Shares of Quote.com capital stock are not listed on an exchange or quoted on the
Nasdaq National Market. On August 25, 1998 and July 27, 1999, Lycos effected 2
for 1 stock splits. All per share data included in this proxy
statement/prospectus give effect to these stock splits. The quarterly high and
low closing prices of Lycos common stock have been as follows:
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL QUARTER ENDED HIGH LOW
- ------------- -------------------------- --------- ---------
<C> <S> <C> <C>
1996 April 30, 1996 (commencing
April 2, 1996)............ $ 7.32 $ 3.50
July 31, 1996............. 4.82 1.47
1997 October 31, 1996.......... 3.19 1.44
January 31, 1997.......... 4.69 2.38
April 30, 1997............ 5.69 3.00
July 31, 1997............. 4.82 2.80
1998 October 31, 1997.......... 10.50 4.07
January 31, 1998.......... 10.50 6.32
April 30, 1998............ 19.79 8.80
July 31, 1998............. 26.82 12.08
1999 October 31, 1998.......... 22.25 10.03
January 31, 1999.......... 72.69 20.63
April 30, 1999............ 55.25 34.50
July 31, 1999............. 61.03 20.40
</TABLE>
On September 1, 1999, the trading day immediately prior to the date of the
signing of the merger agreement, Lycos common stock closed at $42. The closing
price for Lycos common stock on , the last practicable trading day for
which information was available prior to the date of this proxy
statement/prospectus, was $ . You should check current market prices for
Lycos common stock.
There have been significant historical fluctuations in Lycos stock price,
and any increase in Lycos stock price prior to the time that you receive your
Lycos shares should not be viewed as representative of what the stock price will
be when you receive your shares. Furthermore, the changes in Lycos stock price
during the period shown above should not be viewed as directly comparable to the
increase or decrease in the price of other Internet stocks during the same
period.
Neither Lycos nor Quote.com has ever declared or paid cash dividends on
shares of their common stock. Holders of Quote.com Series A preferred stock,
Series B preferred stock, Series C preferred stock and Series D preferred stock
are entitled to per annum dividends of $0.367, $0.41, $0.66 and $0.731,
respectively, if funds are legally available therefor, payable when, as and if
declared by the Quote.com board of directors. Quote.com has never declared or
paid dividends on shares of its preferred stock.
4
<PAGE>
EFFECT OF THE MERGER ON QUOTE.COM AND ITS SHAREHOLDERS (Page 20)
Upon completion of the merger, Quote.com will become a subsidiary of Lycos.
Former Quote.com shareholders will hold between approximately 1.6% and
approximately 2.7% of Lycos' common stock after the merger, based on 95,872,211
shares of Lycos common stock outstanding at September 30, 1999.
The 1.6% figure assumes that the average closing price of Lycos common stock
during the 20 trading days ending on the trading day preceding the completion of
the merger is $51.25, which is the upper collar limit, and that 1,551,588 shares
of Lycos common stock are issued in the merger. The 2.7% figure assumes that the
average closing price of Lycos common stock during the 20 trading days ending on
the trading day preceding the completion of the merger is $30.75, which is the
lower collar limit, and that 2,585,980 shares of Lycos common stock are issued
in the merger. Both percentages were calculated using the assumptions used to
prepare the tables set forth above.
VOTE REQUIRED (Page 18)
In order to complete the merger, the approval and adoption of the merger
agreement and the approval of the merger must be obtained from the following
persons:
- the holders of record of at least a majority of the outstanding shares of
Quote.com common stock and preferred stock, voting as a single class;
- the holders of record of at least a majority of the outstanding shares of
(a) Quote.com common stock, voting as a separate class, and (b) Quote.com
preferred stock, voting as a separate class; and
- the holders of record of at least 80% of the outstanding shares of
Quote.com Series B preferred stock, Series C preferred stock and Series D
preferred stock, voting together as a single class.
To ensure that the payment to Mr. Hunsader pursuant to his consulting
agreement with Quote.com does not constitute a parachute payment under Section
280G of the Internal Revenue Code, which would have adverse tax consequences for
Lycos and Mr. Hunsader, it must be approved by the holders of more than 75% of
the outstanding shares of Quote.com common stock and the outstanding shares of
Quote.com preferred stock, excluding shares held by Mr. Hunsader, voting
together as a single class.
Shareholders of Quote.com who hold approximately 92% of the outstanding
shares of Quote.com common stock and approximately 96% of the shares of
Quote.com preferred stock have entered into a shareholders agreement with Lycos.
Under the terms of the shareholders agreement, these shareholders have agreed to
vote all their outstanding Quote.com capital stock in favor of the merger
agreement, the merger and the payment to Mr. Hunsader and have appointed
representatives of Lycos as proxies to vote their shares of Quote.com capital
stock. Further information concerning the shareholders agreement is contained
under "Shareholders Agreement" on page 41.
BECAUSE THE VOTE OF THESE SHAREHOLDERS IS SUFFICIENT TO APPROVE AND ADOPT
THE MERGER AGREEMENT AND APPROVE THE MERGER AND THE PAYMENT TO MR. HUNSADER,
SUCH APPROVALS ARE ASSURED.
RIGHTS OF DISSENTING SHAREHOLDERS (Page 25)
Shareholders of Quote.com who do not vote in favor of the merger agreement
and the merger and who otherwise comply with the requirements of the California
Corporations Code relating to dissenters' rights will be entitled to receive an
amount in cash equal to the fair market value of their Quote.com capital stock.
The fair market value of shares of Quote.com capital stock may be more or less
than the value of Lycos common stock to be paid to other Quote.com shareholders
in the merger. Dissenting Quote.com shareholders must precisely follow specific
procedures to exercise this right, or the right may be lost. These procedures
are described in this proxy statement/
5
<PAGE>
prospectus, and the relevant provisions of California law are attached as Annex
D hereto.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES (Page 32)
Quote.com and Lycos intend that the merger will qualify as a reorganization
within the meaning of the Internal Revenue Code. If the merger qualifies as a
reorganization, you will generally not recognize gain or loss for United States
federal income tax purposes upon the receipt of Lycos common stock in the
merger, although you will recognize gain or loss upon the receipt of any cash
instead of a fractional share of Lycos common stock. It is a condition to
completion of the merger that Quote.com receive a legal opinion from Brobeck,
Phleger & Harrison LLP, its legal counsel, stating that the merger will
constitute a reorganization within the meaning of the Internal Revenue Code.
Tax matters are very complicated and the tax consequences of the merger to
you will depend upon the facts of your situation. You should consult your own
tax advisors for a full understanding of the tax consequences of the merger to
you.
OTHER INTERESTS OF OFFICERS AND DIRECTORS IN THE MERGER (Page 31)
In considering the Quote.com board's recommendation that you vote for the
merger and the merger agreement, you should be aware that the executive officers
of Quote.com and the directors of Quote.com have interests in the merger that
are different from, or in addition to, their rights as Quote.com shareholders.
For information concerning the interests of executive officers and directors as
shareholders, see "Security Ownership of Quote.com" starting on page 69.
As a result of the merger, all unvested options outstanding under the
Quote.com 1996 Stock Option Plan will become fully vested upon the earlier to
occur of (i) an optionee's completion of 12 months of continuous employment with
Quote.com following the merger or (ii) such optionee's involuntary termination
without cause within such twelve-month period.
The issuance by Quote.com of stock bonus and option grants to officers,
employees and consultants of Quote.com will result in the issuance of
approximately 50,000 additional shares of Quote.com common stock prior to the
merger and, therefore, will decrease the merger proceeds payable with respect to
each share of Quote.com common stock outstanding prior to such issuance.
Certain directors are principals of investment entities that own a majority
of the outstanding Quote.com common stock and Series A preferred stock and all
of the outstanding Quote.com Series B preferred stock, Series C preferred stock
and Series D preferred stock. In addition, Mr. Daniel Nova, a director of
Quote.com, is also a director of Lycos.
CONDITIONS TO THE MERGER (Page 37)
The completion of the merger depends upon meeting a number of conditions,
including the following:
- the receipt by Quote.com of shareholder approval and adoption of the
merger agreement and approval of the merger;
- the receipt of all necessary authorizations, orders, consents and
approvals of governmental entities;
- the absence of any order, injunction or other legal restraint preventing
the occurrence of the merger;
- the approval for quotation on the Nasdaq National Market of the shares of
Lycos common stock to be issued in the merger;
- the representations and warranties in the merger agreement are true,
except for inaccuracies that do not have and are not reasonably likely to
have, individually or in the aggregate, a material adverse effect on
Quote.com or Lycos; and
- all covenants and agreements in the merger agreement have been satisfied
in all material respects.
6
<PAGE>
In addition, Lycos' obligation to complete the merger is subject to the
satisfaction of a number of additional conditions including the following:
- the absence of any pending litigation by any governmental entity, or any
suit with a reasonable probability of success brought by any other third
party, seeking to restrain the completion of the merger or to prevent
Lycos from effectively controlling Quote.com in any material respect; and
- holders of no more than 5% of Quote.com capital stock have perfected their
dissenters' rights under California law.
TERMINATION OF THE MERGER AGREEMENT (Page 38)
The merger agreement may be terminated at any time prior to completion of
the merger by:
- the mutual consent of Lycos and Quote.com;
- either Lycos or Quote.com if the merger is not completed by December 31,
1999;
- Lycos or Quote.com if there has been a material breach of any
representation, warranty, covenant, condition or agreement set forth in
the merger agreement by the other party and the breach has not been cured
within 20 business days after the breaching party receives notice of the
breach;
- either Lycos or Quote.com if the shareholders of Quote.com do not approve
and adopt the merger agreement and approve the merger; or
- either Lycos or Quote.com if a law, court order or other legal action that
prohibits the completion of the merger has become final and nonappealable.
ACCOUNTING TREATMENT (Page 32)
Lycos intends to treat the merger as a purchase for accounting and financial
reporting purposes, which means that Lycos will treat Quote.com as a separate
entity for periods prior to the closing and, thereafter, as a wholly owned
subsidiary of Lycos.
INDEMNIFICATION BY QUOTE.COM SHAREHOLDERS AND ESCROW OF SHARES (Page 39)
The Quote.com shareholders that have entered into the shareholders agreement
have also agreed to enter into an indemnification and escrow agreement with
Lycos. Under the terms of the indemnification and escrow agreement, a portion of
the shares to be received by these shareholders in the merger, which represents
10% of the aggregate number of shares of Lycos common stock to be issued in the
merger, will be deposited into an escrow fund. The purpose of this escrow fund
is to compensate Lycos for certain losses incurred, including as a result of:
- any inaccuracy in or breach of any representation and warranty of
Quote.com that is contained in the merger agreement or any certificate
delivered pursuant to the merger agreement;
- the failure of Quote.com to perform any of its covenants or agreements
contained in the merger agreement or in any certificate delivered by
Quote.com in connection with the merger;
- certain obligations of Quote.com to Mr. Hunsader;
- any tax liabilities of Quote.com and any of its subsidiaries or affiliates
for the pre-closing tax period;
- the termination by Quote.com or by Lycos of certain employees; and
- the failure by shareholders who have entered the indemnification and
escrow agreement to perform any covenant, agreement, obligation or
undertaking to which they are subject in the agreement.
Except for fraud, wilful misconduct or wilful concealment by or on behalf of
Quote.com or certain of its shareholders, claims against the escrow fund are the
sole and exclusive remedy for the satisfaction of indemnification claims by
Lycos.
The form of the indemnification and escrow arrangement to be entered into is
attached to this proxy statement/prospectus as Annex C.
7
<PAGE>
PRICE RANGE OF COMMON STOCK
Shares of Lycos common stock are quoted on the Nasdaq National Market under
the symbol "LCOS." Shares of Quote.com capital stock are not listed on an
exchange or quoted on the Nasdaq National Market. The shares of Lycos common
stock issued in connection with the merger will be quoted on the Nasdaq National
Market. On August 25, 1998 and July 27, 1999, Lycos effected 2 for 1 stock
splits. All per share data included in this proxy statement/prospectus give
effect to these stock splits. The table below provides, for the fiscal quarters
indicated, the reported high and low trading prices of Lycos common stock as
reported on the Nasdaq National Market.
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL QUARTER ENDED HIGH LOW
- ------------- ------------------------------------------------------------------------------------- --------- ---------
<C> <S> <C> <C>
1996 April 30, 1996 (commencing April 2, 1996)............................................ $ 7.32 $ 3.50
July 31, 1996........................................................................ 4.82 1.47
1997 October 31, 1996..................................................................... 3.19 1.44
January 31, 1997..................................................................... 4.69 2.38
April 30, 1997....................................................................... 5.69 3.00
July 31, 1997........................................................................ 4.82 2.80
1998 October 31, 1997..................................................................... 10.50 4.07
January 31, 1998..................................................................... 10.50 6.32
April 30, 1998....................................................................... 19.79 8.80
July 31, 1998........................................................................ 26.82 12.08
1999 October 31, 1998..................................................................... 22.25 10.03
January 31, 1999..................................................................... 72.69 20.63
April 30, 1999....................................................................... 55.25 34.50
July 31, 1999........................................................................ 61.03 20.40
</TABLE>
On September 1, 1999, the full trading day prior to the signing of the
merger agreement, Lycos common stock closed at $42. On , 1999, the last
practicable trading day for which information was available prior to the date of
this proxy statement/prospectus, Lycos common stock closed at $ . As of
, 1999 Lycos had approximately registered stockholders of record.
Quote.com is a privately-owned company, and, therefore, no market value
information on its stock is available. As of September 30, 1999, Quote.com had
74 holders of record of common stock, 10 holders of its Series A preferred
stock, 3 holders of record of its Series B preferred stock, 7 holders of record
of its Series C preferred stock and 1 holder of record of its Series D preferred
stock.
Because the market price of Lycos common stock changes, the market value of
the shares to be issued in the merger may increase or decrease at any time.
However, the merger agreement provides that the average closing price of Lycos
common stock used to calculate the merger consideration will not be more than
$51.25 or less than $30.75.
8
<PAGE>
DIVIDEND POLICIES
Neither Lycos nor Quote.com has ever declared or paid cash dividends on
shares of their common stock. Holders of Quote.com Series A preferred stock,
Series B preferred stock, Series C preferred stock and Series D preferred stock
are entitled to per annum dividends of $0.367, $0.41, $0.66 and $0.731,
respectively, if funds are legally available therefor, payable when, as and if
declared by the Quote.com board of directors. Quote.com has never declared or
paid dividends on shares of its preferred stock.
Lycos currently intends to retain all of its earnings to finance the
development and expansion of its business and therefore does not intend to
declare or pay cash dividends on its common stock in the foreseeable future. The
Lycos board of directors, in its discretion, will determine whether to declare
and pay dividends in the future. Any future declaration and payment of dividends
will depend upon:
- Lycos' results of operations;
- Lycos' earnings and financial condition;
- contractual limitations;
- cash requirements;
- future prospects;
- applicable law; and
- other factors deemed relevant by Lycos' board of directors.
9
<PAGE>
LYCOS, INC.
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected historical financial data of Lycos as of and for the
years ended July 31, 1998, 1997 and 1996 and as of July 31, 1995 and for the
period from Inception (June 1, 1995) to July 31, 1995 have been derived from the
consolidated financial statements of Lycos, which have been audited by KPMG LLP,
independent certified public accountants. The Lycos selected historical
financial data as of April 30, 1999 and for the nine months ended April 30, 1999
and 1998 have been derived from the unaudited financial statements of Lycos,
which have been prepared on the same basis as the audited financial statements
of Lycos. On August 25, 1998 and July 27, 1999, Lycos effected 2 for 1 stock
splits. All share and per share data included in this proxy statement/prospectus
give effect to these stock splits. The selected historical financial data should
not be considered to be indicative of future results and should be read in
conjunction with Lycos' consolidated financial statements, the related notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" incorporated by reference in this proxy
statement/prospectus.
<TABLE>
<CAPTION>
NINE MONTHS INCEPTION
ENDED APRIL 30, YEAR ENDED JULY 31, (JUNE 1, 1995)
-------------------- ------------------------------- TO JULY 31,
1999 1998 1998 1997 1996 1995
--------- --------- --------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
Statements of Operations Data-Lycos
Net revenues............................. $ 90,418 $ 37,035 $ 56,060 $ 22,273 $ 5,257 $ 5
In process research and development...... -- 16,280 17,280 -- 452 --
Amortization of intangible assets........ 35,687 2,521 7,614 540 360 --
Operating loss........................... (45,703) (23,272) (31,491) (8,750) (5,802) (105)
Net loss................................. (30,651) (21,643) (28,439) (6,619) (5,088) (105)
Basic and diluted net loss per share:.... $ (0.36) $ (0.37) $ (0.46) $ (0.12) $ (0.11) $ --
Weighted average shares used in computing
basic and diluted net loss per
share:................................. 85,420 58,553 61,866 55,179 47,970 44,051
</TABLE>
<TABLE>
<CAPTION>
JULY 31,
------------------------------------------------
APRIL 30, 1999 1998 1997 1996 1995
------------------- --------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Balance Sheet Data-Lycos
Working capital.......................... $ 158,169 $ 146,922 $ 38,129 $ 39,974 $ 329
Total assets............................. 538,490 317,235 65,419 53,661 1,317
Long-term portion of deferred revenue.... 74,566 26,160 5,100 -- --
Long-term portion of notes payable....... 1,030 -- -- -- --
Total stockholders' equity............... 376,340 237,164 37,647 44,106 1,145
</TABLE>
10
<PAGE>
QUOTE.COM
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected historical financial data of Quote.com as of and for
the years ended September 30, 1998, 1997, 1996 and 1995 have been derived from
the consolidated financial statements of Quote.com, which have been audited by
PricewaterhouseCoopers LLP, independent certified public accountants. The
selected historical financial data of Quote.com as of and for the year ended
September 30, 1994 have been derived from the unaudited financial statements of
Quote.com, which have been prepared on the same basis as the audited financial
statements of Quote.com. The Quote.com selected historical financial data as of
March 31, 1999 and for the six months ended March 31, 1999 and 1998 have been
derived from the unaudited financial statements of Quote.com, which have been
prepared on the same basis as the audited financial statements of Quote.com. The
selected historical financial data should not be considered to be indicative of
future results and should be read in conjunction with Quote.com's consolidated
financial statements, the related notes thereto and "Quote.com Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
page 61.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED MARCH 31, YEAR ENDED SEPTEMBER 30,
-------------------- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 1998 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- --------- -------------
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Operations Data-Quote.com
Net revenues............................... $ 6,223 $ 5,834 $ 11,467 $ 7,110 $ 2,470 $ 421 $ 11
In process research and development........ -- 388 388 -- -- -- --
Amortization of intangible assets.......... 32 5 -- -- -- -- --
Loss from operations....................... (2,638) (1,711) (3,370) (4,692) (1,996) 45 (151)
Net loss................................... (2,883) (1,767) (3,515) (4,793) (2,014) 20 (151)
Net loss per share; Basic and diluted...... $ (1.10) $ (0.83) $ (1.51) $ (2.44) $ (0.67) $ -- $ (0.04)
Weighted average shares used in computing
basic and diluted net loss per share:.... 2,609 2,120 2,332 1,961 2,999 3,500 3,500
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------------------------------------
MARCH 31, 1999 1998 1997 1996 1995 1994
-------------------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Balance Sheet Data-Quote.com.................
Working capital............................ $(3,124) $ (46) $ 68 $ 748 $ (188) $ (3 )
Total assets............................... 6,372 5,184 4,248 2,556 385 103
Long-term portion of notes payable......... 258 357 -- 28 65 167
Total shareholders' equity (deficit)....... (1,092) 1,722 1,766 1,459 32 (81 )
</TABLE>
11
<PAGE>
COMPARATIVE PER SHARE DATA
The following table includes selected historical per share data and the
corresponding unaudited pro forma per share amounts for Lycos common stock and
Quote.com capital stock for the periods indicated, giving effect to the merger.
The data presented are based upon the financial statements and related notes of
each of Lycos and Quote.com appearing elsewhere in, or incorporated by reference
into, this proxy statement/prospectus. This information is only a summary and
should be read in conjunction with the historical financial statements of Lycos
and Quote.com and related notes thereto. On August 25, 1998 and July 27, 1999,
Lycos effected 2 for 1 stock splits. All per share data included in this proxy
statement/prospectus give effect to these stock splits. The comparative per
share data does not necessarily indicate the results of the future operations of
the combined organization or the actual results that would have occurred if the
merger had occurred at the beginning of the periods indicated.
LYCOS
<TABLE>
<CAPTION>
YEAR ENDED
JULY 31, 1998
NINE MONTHS -------------
ENDED
APRIL 30,
1999
-------------
(UNAUDITED)
<S> <C> <C>
HISTORICAL PER COMMON SHARE DATA:
Basic and diluted loss from continuing operations.................................. $ (0.36) $ (0.46)
Book value......................................................................... 4.41 3.04
PRO FORMA PER COMMON SHARE DATA: (1)
Basic and diluted loss from continuing operations.................................. $ (0.56) $ (0.80)
Book value......................................................................... 5.37 5.39
</TABLE>
QUOTE.COM
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
1998
NINE MONTHS -------------
ENDED
MARCH 31,
1999
-------------
(UNAUDITED)
<S> <C> <C>
HISTORICAL PER COMMON SHARE DATA:
Basic and diluted loss from continuing operations................................. $ (1.46) $ (1.38)
Book value........................................................................ (0.42) 0.68
PRO FORMA EQUIVALENT PER COMMON SHARE DATA: (1)(2)
Basic and diluted loss from continuing operations................................. $ (0.01) $ (0.01)
Book value........................................................................ $ 0.10 $ 0.10
</TABLE>
- ------------------------------
(1) Figures calculated based on an average closing Lycos share price of $57.33
for the five days ended October 7, 1999 and the resulting number of shares
of Lycos common stock outstanding as if the merger had been completed on
April 30, 1999.
(2) Represents pro forma equivalent Quote.com amounts calculated by multiplying
the Lycos pro forma per common share data by the ratio of common shares
issued to acquire Quote.com (based on a $51.25 Lycos share price, which is
the upper collar limit) to the total pro forma common shares outstanding.
12
<PAGE>
RISK FACTORS
SHAREHOLDERS OF QUOTE.COM SHOULD CONSIDER THE FOLLOWING FACTORS, IN ADDITION
TO THE OTHER INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS WHEN
DECIDING HOW TO VOTE ON THE PROPOSALS CONTAINED HEREIN.
RISK FACTORS RELATING TO THE MERGER
FORMULA FOR DETERMINING PURCHASE PRICE AND SHARES ISSUABLE MAY REDUCE VALUE OF
MERGER PROCEEDS TO QUOTE.COM SHAREHOLDERS.
The total purchase price to be paid in the merger is defined in terms of
dollars and the purchase price is to be paid in shares of Lycos common stock.
For purposes of determining the total number of shares to be issued in the
merger, the Lycos common stock will be valued based on the average closing price
of Lycos common stock during the 20 trading days ending on the trading day
preceding the completion of the merger. However, if this average price is less
than $30.75, the shares will be deemed to be valued at $30.75 per share,
regardless of the actual average price. If the 20-day average closing stock
price is so limited, the number of shares of Lycos common stock that Quote.com
shareholders receive in the transaction would be limited and the value of your
merger proceeds would be decreased.
QUOTE.COM SHAREHOLDERS WILL BE SUBJECT TO MARKET RISKS ASSOCIATED WITH INTERNET
COMPANIES.
The market price of the Lycos common stock you receive in the merger could
be subject to significant fluctuations in response to a variety of factors,
including quarter-to-quarter variations in Lycos' operating results or
announcements of technological innovations or new products by Lycos or its
competitors. For example, a shortfall in revenues, or an increase in losses from
levels expected by securities analysts, could have an immediate and significant
adverse effect on the market price of Lycos common stock.
In addition, the stock market in recent years has experienced extreme price
and volume fluctuations that have often dramatically affected the market prices
of many high technology companies, particularly those companies doing business
on the Internet. These fluctuations have often been unrelated or
disproportionate to the operating performance of the companies. These
fluctuations, as well as general economic and market conditions, may adversely
affect the market price for Lycos common stock.
SUCCESSFUL INTEGRATION OF QUOTE.COM'S OPERATIONS INTO LYCOS AND THE REALIZATION
OF POTENTIAL BENEFITS OF THE MERGER ARE UNCERTAIN.
Quote.com and Lycos have entered into the merger agreement with the
expectation that the merger will result in benefits to both companies through
the integration of the companies' operations and synergies created thereby. If
Lycos and Quote.com fail to integrate the two companies efficiently, the
expected benefits of the merger may not be realized. The integration of
operations will require, among other things, that Lycos integrate the website
operated by Quote.com into the Lycos Network and possibly combine the companies'
administrative, executive and technical staffs and sales and marketing
operations. The difficulties of this integration may be increased by the
geographical separation of the two companies and their employees in that Lycos
is headquartered in Waltham, Massachusetts and Quote.com is headquartered in
Mountain View, California. This integration will require the dedication of
management resources that may temporarily distract management's attention from
the day-to-day business of the combined company. We cannot assure you that this
integration will be achieved efficiently or that any of the expected benefits of
the merger will be realized.
13
<PAGE>
METHOD OF ACCOUNTING FOR THE MERGER MAY DELAY PROFITABILITY OF LYCOS.
The merger will be accounted for under the "purchase" method of accounting,
meaning that the purchase price for Quote.com must be allocated to the acquired
assets and assumed liabilities of Quote.com. The combined company's
profitability is expected to be delayed beyond the time frame in which Lycos or
Quote.com, as independent entities, may have otherwise achieved profitability
because of the use of the purchase method of accounting. Any amount allocated to
goodwill, preliminarily estimated at $90.2 million, must be amortized ratably
over five years. Additionally, an in-process research and development charge,
preliminarily estimated to be between $1 million and $5 million, will be
recorded in the quarter the merger is completed and will be deducted from net
income in determining the profitability of Lycos for that quarter.
ISSUANCE OF ADDITIONAL SHARES OF LYCOS COMMON STOCK IN THE MERGER MAY REDUCE
LYCOS' STOCK PRICE.
In connection with the merger, we estimate that between approximately
1,551,588 and approximately 2,585,980 newly-issued shares of Lycos common stock
will be issued to current Quote.com shareholders. The issuance of Lycos common
stock in the merger will reduce Lycos' earnings per share, if any. This dilution
could reduce the market price of Lycos common stock unless and until the
combined company achieves revenue growth or cost savings and other business
economies sufficient to offset the effect of this issuance. There can be no
assurance that we will achieve revenue growth, cost savings or other business
economies or that you will achieve greater returns as a Lycos stockholder than
as a Quote.com shareholder. In addition, the immediate availability of this
substantial number of additional shares of Lycos common stock for sale in the
market could decrease the per share market price of Lycos common stock.
RISK FACTORS RELATING TO LYCOS
LYCOS' PERFORMANCE WILL DEPEND ON THE GROWTH AND COMMERCIAL ACCEPTANCE OF THE
INTERNET.
Lycos' future success will depend substantially upon the widespread adoption
of the Internet as a primary medium for commerce and business applications. If
the Internet does not become a viable and substantial commercial medium, Lycos'
business, operating results and financial condition will be materially adversely
affected. The Internet has experienced, and is expected to continue to
experience, significant user and traffic growth, which has, at times, caused
user frustration with slow access and download times. The Internet
infrastructure may not be able to support the demands placed on it by continued
growth. Critical issues concerning the commercial use of the Internet, like
security, reliability, cost, accessibility and quality of service, remain
unresolved and may negatively affect the growth of Internet use or the
attractiveness of commerce and business communication on the Internet. In
addition, the Internet could lose its viability if there are delays in the
development or adoption of new standards and protocols to handle increased
activity or if there is increased government regulation and taxation of Internet
commerce.
LYCOS IS DEPENDENT UPON KEY SENIOR MANAGEMENT.
Lycos' success depends to a significant degree upon the contributions of
Lycos' executive management team. The loss of the services of members of Lycos'
executive management team could have a material and adverse effect on Lycos'
business, financial condition and results of operations.
LYCOS MUST HIRE AND RETAIN SKILLED PERSONNEL TO BE SUCCESSFUL.
Lycos' success depends upon its ability to attract and retain highly
qualified management, technical and sales and marketing personnel. The process
of locating and hiring personnel with the combination of skills and attributes
required to carry out Lycos' strategy is often lengthy and intensely
competitive.
14
<PAGE>
The loss of the services of key personnel or the inability to attract additional
qualified personnel could have a material and adverse effect on Lycos' business,
financial condition and results of operations.
LYCOS MAY NOT BE ABLE TO MANAGE EFFECTIVELY THE POTENTIAL GROWTH OF ITS
BUSINESSES.
The businesses of Lycos have grown rapidly in recent periods. The growth of
these businesses has resulted, and, for Lycos, is expected in the future to
result in the growth in the number of its employees, in the establishment of
offices in disparate regions of the country and in increased responsibility for
both existing and new management personnel. In addition, this growth has and
will put additional pressure on existing operational, financial and management
information systems. Lycos may not sustain its current rate of growth. To the
extent Lycos continues to grow and Lycos does not manage this expansion
successfully, Lycos' ability to retain key personnel and its business, operating
results and financial condition could be materially and adversely affected.
LYCOS' SYSTEMS MAY FAIL TO FUNCTION OR MAY NOT HAVE ADEQUATE CAPACITY THAT COULD
IMPAIR LYCOS' ABILITY TO ATTRACT ADVERTISERS AND USERS.
The satisfactory performance, reliability and availability of Lycos'
services and its network infrastructure are critical to attracting Internet
users and maintaining relationships with business customers and consumers.
System interruptions that result in the unavailability of sites or slower
response times for consumers would reduce the number of business websites and
advertisements purchased and reduce the attractiveness of Lycos' online services
to business customers and consumers. Any increase in system interruptions or
slower response times could have a material and adverse effect on Lycos'
business, financial condition and results of operations. Lycos has experienced
system interruptions in the past. These interruptions are expected to occur from
time to time in the future.
Any substantial increase in traffic on the Lycos Network or on any of Lycos'
Websites will require Lycos to expand and adapt its network infrastructure.
Lycos' inability to add additional software and hardware to accommodate
increased traffic on the Lycos Network or on any of Lycos' Websites may cause
unanticipated system disruptions and result in slower response times. In
addition, Lycos currently depends on a limited number of suppliers for certain
key technologies used to roll out and manage the Lycos Network. Lycos may not be
able to expand its network infrastructure on a timely basis to meet increased
demand and key technology suppliers may not continue to provide Lycos with
products and services that meet Lycos' requirements.
INTERNET SECURITY CONCERNS COULD HINDER COMMERCIAL TRANSACTIONS CONDUCTED OVER
THE INTERNET.
The need to securely transmit confidential information over the Internet has
been a significant barrier to commercial transactions conducted over the
Internet and communications over the Web. Any well-publicized compromise of
security could deter more people from using the Web or from using it to conduct
transactions that involve transmitting confidential information, like stock
trades or purchases of goods or services. Because much of Lycos' business
involves use of the Web to purchase goods or services, Lycos' business could be
adversely affected by security violations of its or its commerce partners'
Websites.
Lycos may also incur significant costs to protect against the threat of
security violations or to alleviate problems caused by these violations. These
violations could expose Lycos to a risk of loss or litigation and possible
liability. In addition, Lycos may suffer losses as a result of orders placed
with fraudulent credit card data, even though the consumer's payment for these
orders has been authorized by the associated financial institution.
15
<PAGE>
LYCOS MUST BE ABLE TO ADAPT TO TECHNOLOGICAL CHANGE AND TO DEVELOP NEW PRODUCTS
TO REMAIN COMPETITIVE.
The market for Internet products and services is characterized by rapidly
changing technology, evolving industry standards and customer demands, and
frequent new product introductions and enhancements. These market
characteristics are exacerbated by the emerging nature of this market and by the
fact that many companies are expected to introduce new competitive Internet
products in the near future. To be successful, Lycos must continually improve
the performance, features and reliability of the Lycos search and navigation
services. In addition, a key element of Lycos' business strategy is the
development, introduction and integration of new products that capitalize on the
increasing use of the Internet. Lycos cannot assure you that it will be
successful in developing or integrating these products or services or that these
products and services will meet with market acceptance. In addition, new product
releases by Lycos may contain undetected errors that require significant design
modifications, resulting in a loss of customer confidence in Lycos' products and
services and, consequently, viewer support, which will diminish the use of
Lycos' products and services.
THE ACQUISITIONS AND INVESTMENTS THAT LYCOS HAS MADE AND MAY MAKE IN THE FUTURE
MAY NOT BE SUCCESSFUL AND MAY CREATE UNANTICIPATED PROBLEMS FOR LYCOS.
Lycos has completed acquisitions of companies, technologies or assets that
complement Lycos' business. Lycos may not be able to identify additional
suitable acquisition candidates available for sale at reasonable prices or to
complete any desired acquisitions. In addition, Lycos may not be able to
successfully integrate any or all of the businesses it acquires into Lycos'
operations. In order to pay for future acquisitions, Lycos may have to:
- issue equity securities, which would decrease the ownership interest of
all Lycos stockholders; or
- incur additional debt.
Acquisitions involve numerous risks, including difficulties in the
assimilation of the operations, services, products and personnel of the acquired
company. Lycos' systems, procedures or controls may not be able to support
Lycos' operations. Acquisitions also divert management's attention from other
business concerns. Lycos also encounters risks by entering markets in which it
has little or no experience. Problems with an acquired business could impair the
performance of Lycos. Lycos has made investments in companies involved in the
development of technologies or services that are complementary or related to
Lycos' operations. Lycos may make investments of this type in the future. Lycos
has invested and may continue to invest in companies that are in an early stage
of development and may be expected to incur substantial losses. Lycos cannot
assure you that any investments in these companies will result in any return,
nor can there be any assurance as to the timing of any return.
LYCOS' SYSTEM MAY EXPERIENCE DIFFICULTIES RELATED TO YEAR 2000 COMPUTER
PROBLEMS.
The codes of many currently installed computer systems and software products
accept only two-digit entries in the date code field and cannot distinguish 21st
century dates from 20th century dates. Many companies' software and computer
systems, including those of Lycos and the companies Lycos depends on, may need
to be upgraded or replaced so that they will be able to distinguish 21st century
dates from 20th century dates in order to comply with year 2000 requirements and
therefore be year 2000 compliant.
LYCOS' STATE OF YEAR 2000 READINESS. Lycos is currently evaluating the year
2000 readiness of the hardware and software products it sells, the information
technology systems it uses and its non-information technology systems, like
building security, voice mail and other systems. This evaluation includes the
following phases:
- identification of all hardware and software products it sells and
information technology systems and non-information technology systems it
uses;
16
<PAGE>
- assessment of repair or replacement requirements;
- repair or replacement;
- testing;
- implementation; and
- creation of contingency plans in the event of year 2000 failures.
Lycos has completed its assessment of all current versions of these hardware
and software products and believes that they are year 2000 compliant. Lycos is
currently completing its testing of these systems which it expects to complete
by October 31, 1999. There can be no assurance that these tests will be
successful.
Whether a complete system or device that uses hardware or software used by
Lycos will process 21st century dates depends on other components that are
supplied by parties other than Lycos. The suppliers of Lycos' critical
information systems have informed Lycos that this software is year 2000
compliant. Lycos relies, both domestically and internationally, upon various
service providers that are outside of its control including:
- various vendors;
- governmental agencies;
- utility companies;
- telecommunications service companies;
- delivery service companies; and
- other service providers.
These third parties may suffer a year 2000 business disruption caused by the
inability of various systems to process 21st century dates that could hinder
Lycos' ability to conduct its business.
To the extent that Lycos fails to identify and remedy any non-compliant
internal or external Year 2000 problems, or the Year 2000 phenomenon creates a
systemic failure beyond Lycos' control, like a prolonged telecommunications or
electrical failure or a prolonged failure of third-party software on which Lycos
relies, Lycos could be prevented from operating its business and permitting
users access to its Websites.
COSTS OF YEAR 2000 COMPLIANCE TO LYCOS. To date, Lycos has not incurred any
material expenditures in connection with identifying or evaluating year 2000
compliance issues. Most of its expenses thus far relate to retaining third party
consultants to assist Lycos in its compliance efforts and to the opportunity
cost of time spent by Lycos employees evaluating its software, the current
versions of the hardware and software sold by Lycos and year 2000 compliance
matters generally.
STATUS OF LYCOS' CONTINGENCY PLAN. Lycos has not yet developed a year
2000-specific contingency plan. If Lycos discovers year 2000 compliance issues,
then it will evaluate the need for contingency plans relating to these issues.
17
<PAGE>
THE SPECIAL MEETING
DATE, TIME AND PLACE
A special meeting of Quote.com shareholders will be held on , 1999, at
10:00 a.m. California time. The proxy will be used for the purposes described in
this proxy statement/prospectus and in the accompanying notice of special
meeting. The meeting will be held at the offices of Quote.com located at 850
North Shoreline Boulevard, Mountain View, California. Quote.com intends to mail
this proxy statement/prospectus and accompanying notice of special meeting and
proxy card on or about , 1999 to all shareholders entitled to vote at the
meeting. The costs of soliciting proxies will be borne by Quote.com, subject to
the provisions of the merger agreement relating to the payment of expenses.
PURPOSE
The special meeting will be held to consider and vote upon:
- A proposal to approve and adopt the merger agreement pursuant to which
Quote.com will become a wholly owned subsidiary of Lycos and the
outstanding shares of Quote.com capital stock, other than shares held by
shareholders who perfect their dissenters' rights under California law,
will be converted into the right to receive shares of Lycos common stock;
and
- A proposal to approve the estimated aggregate payment of $2,362,262 to Mr.
Hunsader pursuant to a consulting agreement with Quote.com to ensure that
such payment does not constitute a parachute payment under Section 280G of
the Internal Revenue Code, which could have adverse tax consequences on
Lycos and Mr. Hunsader.
No other business at the special meeting may be transacted except such
business as may be properly brought before the special meeting or any
adjournment of it by the Quote.com board of directors.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of Quote.com capital stock at the close of business
on , 1999 will be entitled to notice of and to vote at the meeting. At the
close of business on that date, shares of Quote.com common stock, shares
of Quote.com Series A preferred stock, shares of Quote.com Series B
preferred stock, shares of Quote.com Series C preferred stock and
shares of Quote.com Series D preferred stock were outstanding and entitled to
vote at the special meeting. Each record holder of Quote.com common stock and
Quote.com preferred stock on that date will be entitled to one vote for each
share held.
VOTE REQUIRED
The merger cannot be completed unless the merger agreement and the merger
are approved by the affirmative vote or consent of each of (i) the holders of
record of at least a majority of the outstanding shares of Quote.com common
stock and the outstanding shares of Quote.com preferred stock, voting together
as a single class, (ii) the holders of record of at least a majority of the
outstanding shares of (a) Quote.com common stock, voting as a separate class,
and (b) Quote.com preferred stock, voting as a separate class and (iii) the
holders of record of at least 80% of the outstanding shares of Quote.com Series
B preferred stock, Series C preferred stock and Series D preferred stock, voting
together as a single class. If the payment to Mr. Hunsader is not approved by
the holders of more than 75% of the outstanding shares of Quote.com common stock
and the outstanding shares of Quote.com preferred stock, excluding shares held
by Mr. Hunsader, voting together as a single class, then such payment will
constitute a parachute payment under Section 280G of the Internal Revenue Code,
which will result in the imposition on Mr. Hunsader of an additional
18
<PAGE>
20% excise tax on the portion of such payment which constitutes an excess
parachute payment under Section 280G of the Internal Revenue Code and Lycos will
be prevented from taking a deduction for such excess parachute payment for
United States federal income tax purposes, which could have adverse tax
consequences to Lycos.
IN ACCORDANCE WITH THE TERMS OF THE SHAREHOLDERS AGREEMENT, WE ARE ASSURED OF
RECEIVING THE REQUISITE VOTES IN FAVOR OF THE MERGER AGREEMENT, THE MERGER AND
THE PAYMENT TO MR. HUNSADER AT THE SPECIAL MEETING.
PROXIES
If you complete, date, sign and return a proxy, the persons named as proxy
holders therein will vote your shares as you indicate on the proxy. If you do
not specify on the proxy how to vote your shares, the proxy holders will vote
your shares in favor of the merger agreement, the merger and the payment to Mr.
Hunsader. The inspector of elections appointed for the meeting will separately
tabulate affirmative and negative votes and abstentions. Abstentions will have
the same effect as negative votes.
You may revoke your proxy before it is voted by filing with Quote.com's
corporate secretary a written notice of revocation or a duly executed proxy
bearing a later date. You may also revoke your proxy by attending the meeting
and voting in person. Attending the meeting will not, by itself, revoke a proxy.
At September 30, 1999, executive officers, directors and affiliates of
directors of Quote.com owned 80.4% of the outstanding shares of Quote.com common
stock, assuming full conversion of all Quote.com preferred stock into shares of
Quote.com common stock. Mr. Hunsader owned 7.3% of the outstanding shares of
Quote.com capital stock, assuming full conversion of all Quote.com preferred
stock into shares of Quote.com common stock as of such date.
RECOMMENDATION OF QUOTE.COM BOARD OF DIRECTORS
The Quote.com board of directors, by a unanimous vote of directors present
at the meeting, has approved the merger contemplated by the merger agreement and
has determined that (i) the merger agreement and the merger are advisable and in
the best interests of Quote.com and its shareholders, (ii) the consideration to
be paid to holders of Quote.com common stock and Quote.com preferred stock in
the merger is fair to such holders and (iii) it is in the best interests of
Quote.com and its shareholders to approve the payment to Mr. Hunsader. Daniel
Nova, who is a director of both Quote.com and Lycos, was not present at the
meeting and did not participate in the vote in connection with the merger, the
merger agreement and the payment to Mr. Hunsader. After careful consideration,
the Quote.com board of directors recommends that you vote "FOR" the merger
agreement, the merger and the payment to Mr. Hunsader.
19
<PAGE>
THE MERGER
This section contains detailed information regarding the terms of the merger
agreement, Quote.com's reasons for the merger and the events leading up to the
execution of the merger agreement. The merger agreement and its key exhibits are
attached to this proxy statement/prospectus as Annexes A, B and C.
Please note that the following description is a summary only. You should
read the following summary and the merger agreement for a full understanding of
the terms of the merger.
GENERAL
Quicksilver Acquisition Corp., a newly formed Delaware corporation and a
wholly owned subsidiary of Lycos, will be merged with and into Quote.com. As a
result, the separate corporate existence of Quicksilver Acquisition Corp. will
cease and Quote.com will continue as a wholly owned subsidiary of Lycos.
EFFECTIVE TIME OF THE MERGER
The merger will take effect when the certificate of merger has been filed
with the Secretary of State of the State of Delaware in accordance with Delaware
law and the merger agreement has been delivered to and filed with the Secretary
of State of the State of California in accordance with California law. The
latest to occur of these events is referred to as the "effective time."
The merger agreement provides that the merger and the other transactions
contemplated by the merger agreement will be completed within two business days
of the waiver or satisfaction of all of the conditions to the obligations of
Lycos, Quicksilver Acquisition Corp. and Quote.com to complete the merger. The
merger agreement may be terminated by either Lycos or Quote.com if the merger
has not occurred on or before December 31, 1999. In addition, the merger
agreement may be terminated by the mutual consent of Quote.com and Lycos or by
either party if certain conditions have not been satisfied. See "The Agreement
and Plan of Merger--Termination and Amendment" on page 38.
MERGER CONSIDERATION
As a result of the merger, upon the completion of the merger, the
outstanding shares of Quote.com capital stock, other than Quote.com dissenting
shares, will be converted into the right to receive the applicable merger
consideration as described below. In the event of a stock split or similar
transaction affecting Lycos common stock or in the event Lycos common stock is
converted or exchanged as a result of any consolidation or merger to which Lycos
is a party, the merger consideration, allocation of shares, collar limits and
similar provisions will be appropriately adjusted or converted, as the case may
be.
TOTAL MERGER CONSIDERATION. In the merger, Quote.com shareholders will
receive shares of Lycos common stock in exchange for their shares of Quote.com
capital stock. The total amount of shares of Lycos common stock to be received
by Quote.com shareholders will be determined by dividing (i) $88.0 million
(increased by the amount of cash held by Quote.com at the time of the closing of
the merger and reduced by (x) the amount of relevant outstanding indebtedness of
Quote.com at the time of the closing of the merger, (y) the amount of fees and
expenses incurred by Quote.com in connection with the merger (excluding fees and
expenses payable to Hambrecht & Quist LLC) and (z) the amount of the cash
payment to Mr. Hunsader), by (ii) the average closing price of Lycos common
stock during the 20 trading days ending on the trading day preceding the
completion of the merger. The average closing price of Lycos common stock used
to calculate the merger consideration will not be more than $51.25 or less than
$30.75.
20
<PAGE>
Set forth below is a table that shows the aggregate number of whole shares
of Lycos common stock that holders of Quote.com capital stock would receive in
the merger, at various average closing prices of Lycos common stock.
The table is based on the number of shares, options and warrants of
Quote.com outstanding as of September 30, 1999 and assumes the exercise of such
options and warrants. In addition, it assumes that:
- Quote.com holds $600,000 in cash (excluding any payment of fees and
expenses incurred by Quote.com in connection with the merger) and has
relevant outstanding indebtedness of $7,400,000 at the time of the closing
of the merger.
- The cash payment to Mr. Hunsader is $1,181,131.
- Fees and expenses incurred in the merger are $500,000 (excluding fees and
expenses payable to Hambrecht & Quist LLC).
<TABLE>
<CAPTION>
AGGREGATE NUMBER OF
AVERAGE CLOSING SHARES OF LYCOS
PRICE OF LYCOS COMMON STOCK
COMMON STOCK TO BE PAID IN THE MERGER
--------------- -------------------------
<S> <C> <C>
$ 25.00or
lower 2,585,980
27.00 2,585,980
29.00 2,585,980
Lower collar limit 30.75 2,585,980
31.00 2,565,125
33.00 2,409,663
35.00 2,271,968
37.00 2,149,159
39.00 2,038,945
41.00 1,939,485
43.00 1,849,276
45.00 1,767,086
47.00 1,691,891
49.00 1,622,834
51.00 1,559,194
Upper collar limit 51.25 1,551,588
53.00 1,551,588
55.00 1,551,588
57.00or
higher 1,551,588
</TABLE>
MERGER CONSIDERATION TO BE RECEIVED BY CLASS OR SERIES. Shareholders of
Quote.com will receive different amounts of shares of Lycos common stock per
share of Quote.com capital stock held, depending on the kind of Quote.com
capital stock (common or preferred) owned, and, in the case of Quote.com
preferred stock, the series. Under Quote.com's amended and restated articles of
incorporation there are two different methods for allocating the merger
consideration among the Quote.com capital stock classes and series, depending on
the aggregate value of the shares of Lycos common stock issued in the merger.
21
<PAGE>
ALLOCATION OF MERGER CONSIDERATION
In order to allocate the aggregate number of shares of Lycos common stock
issued in the merger among the classes and series of Quote.com capital stock, a
merger share value will be obtained by multiplying (i) the aggregate number of
such shares of Lycos common stock by (ii) the average closing price of Lycos
common stock during the 20 trading days ending on the trading day preceding the
completion of the merger, without giving effect to any collar limits used to
calculate the aggregate merger consideration.
ALLOCATION OF MERGER CONSIDERATION IF THE MERGER SHARE VALUE IS EQUAL TO OR
GREATER THAN $90.0 MILLION. If the merger share value is equal to or greater
than $90.0 million, then, in accordance with the terms of Quote.com's amended
and restated articles of incorporation, the aggregate merger consideration will
be allocated as follows:
First, proportionally to (i) holders of Quote.com Series B preferred stock
until they receive an amount of Lycos common stock equal to $6.50 for each share
of Quote.com Series B preferred stock held, (ii) holders of Quote.com Series C
preferred stock until they receive an amount of Lycos common stock equal to
$10.38 for each share of Quote.com Series C preferred stock held and (iii)
holders of Quote.com Series D preferred stock until they receive an amount of
Lycos common stock equal to $11.49 for each share of Quote.com Series D
preferred stock held.
Second, upon completion of the distribution to the holders of Quote.com
Series B preferred stock, Series C preferred stock and Series D preferred stock
described in the immediately preceding paragraph, to holders of Quote.com Series
A preferred stock until they receive an amount of Lycos common stock equal to
$6.00 per share for each share of Quote.com Series A preferred stock then held.
Third, upon completion of the distribution to the holders of Quote.com
Series A preferred stock, Series B preferred stock, Series C preferred stock and
Series D preferred stock described in the immediately preceding two paragraphs,
the remaining shares of Lycos common stock to be paid in the merger will be
distributed proportionally among the holders of Quote.com preferred stock and
Quote.com common stock based upon the number of shares of Quote.com common stock
held by them (or, in the case of Quote.com preferred stock, the number of shares
of Quote.com common stock into which such preferred stock is convertible). This
allocation will be made until (i) holders of Quote.com Series B preferred stock
receive an aggregate amount of Lycos common stock equal to $21.58 for each share
of Quote.com Series B preferred stock held, (ii) holders of Quote.com Series C
preferred stock receive an amount of Lycos common stock equal to $34.48 for each
share of Quote.com Series C preferred stock held and (iii) holders of Quote.com
Series D preferred stock receive an amount of Lycos common stock equal to $38.16
for each share of Quote.com Series D preferred stock held.
Fourth, after the allocations described above have been made, the remaining
shares of Lycos common stock to be paid in the merger will be distributed
proportionally among the holders of Quote.com Series A preferred stock and
Quote.com common stock based upon the number of shares of Quote.com common stock
held by them (or, in the case of the Quote.com Series A preferred stock, the
number of shares of Quote.com common stock into which such preferred stock is
convertible).
Set forth below is a table that shows the allocation of shares of Lycos
common stock among the classes of Quote.com capital stock, at various average
closing prices of Lycos common stock. The table is based on the number of
shares, options and warrants of Quote.com outstanding as of September 30, 1999
and assumes exercise of such options and warrants. In addition it assumes that:
- The merger share value is equal to or greater than $90 million.
22
<PAGE>
- Quote.com holds $600,000 in cash (excluding any payment of fees and
expenses incurred by Quote.com in connection with the merger) and has
relevant outstanding indebtedness of $7,400,000 at the time of the closing
of the merger.
- The cash payment to Mr. Hunsader is $1,181,131.
- Fees and expenses incurred in the merger are $500,000 (excluding fees and
expenses payable to Hambrecht & Quist).
<TABLE>
<CAPTION>
NUMBER OF SHARES OF LYCOS COMMON STOCK TO BE
AVERAGE ISSUED IN EXCHANGE FOR EACH SHARE OF QUOTE.COM
CLOSING PRICE ---------------------------------------------------------------
OF LYCOS SERIES A SERIES B SERIES C SERIES D COMMON
COMMON STOCK PREFERRED PREFERRED PREFERRED PREFERRED STOCK
- --------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 58.00 0.236 0.245 0.312 0.331 0.133
60.00 0.235 0.243 0.308 0.327 0.135
62.00 0.234 0.242 0.304 0.322 0.137
64.00 0.233 0.241 0.301 0.319 0.139
66.00 0.232 0.239 0.298 0.315 0.141
</TABLE>
ALLOCATION OF MERGER CONSIDERATION IF THE MERGER SHARE VALUE IS LESS THAN
$90.0 MILLION. If the merger share value is less than $90.0 million, then, in
accordance with the terms of Quote.com's amended and restated articles of
incorporation, the aggregate merger consideration will be allocated as follows:
First, proportionally to (i) holders of Quote.com Series B preferred stock
until they receive an amount of Lycos common stock equal to $8.50 for each share
of Quote.com Series B preferred stock held, (ii) holders of Quote.com Series C
preferred stock until they receive an amount of Lycos common stock equal to
$13.58 for each share of Quote.com Series C preferred stock held, and (iii)
holders of Quote.com Series D preferred stock until they receive an amount of
Lycos common stock equal to $15.03 for each share of Quote.com Series D
preferred stock held.
Second, upon completion of the distribution to the holders of Quote.com
Series B preferred stock, Series C preferred stock and Series D preferred stock
described in the immediately preceding paragraph, to holders of Quote.com Series
A preferred stock until they receive an amount of Lycos common stock equal to
$6.00 for each share of Quote.com Series A preferred stock then held.
Third, upon completion of the distribution to the holders of Quote.com
Series A preferred stock, Series B preferred stock, Series C preferred stock and
Series D preferred stock described in the immediately preceding two paragraphs,
the remaining shares of Lycos common stock to be paid in the merger will be
distributed proportionally among the holders of the Quote.com preferred stock
and the Quote.com common stock based upon the number of shares of Quote.com
common stock held by them (or, in the case of the Quote.com preferred stock, the
number of shares of Quote.com common stock into which such preferred stock is
convertible). This allocation will be made until (i) holders of Quote.com Series
B preferred stock receive an aggregate amount of Lycos common stock equal to
$12.78 for each share of Quote.com Series B preferred stock held, (ii) holders
of Quote.com Series C preferred stock receive an amount of Lycos common stock
equal to $20.42 for each share of Quote.com Series C preferred stock held and
(iii) holders of Quote.com Series D preferred stock receive an amount of Lycos
common stock equal to $22.60 for each share of Quote.com Series D preferred
stock held.
Fourth, after the allocations described above have been made, the remaining
shares of Lycos common stock to be paid in the merger will be distributed
proportionally among the holders of Quote.com Series A preferred stock and
Quote.com common stock based upon the number of shares of Quote.com common stock
held by them (or, in the case of the Quote.com Series A preferred stock, the
number of shares of Quote.com common stock into which such preferred stock is
convertible).
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<PAGE>
Set forth below is a table that shows the allocation of shares of Lycos
common stock among the classes of Quote.com capital stock, at various average
closing prices of Lycos common stock. The table is based on the assumptions used
to prepare the table set forth above.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF LYCOS COMMON STOCK TO BE
AVERAGE ISSUED IN EXCHANGE FOR EACH SHARE OF QUOTE.COM
CLOSING PRICE ---------------------------------------------------------------
OF LYCOS SERIES A SERIES B SERIES C SERIES D COMMON
COMMON STOCK PREFERRED PREFERRED PREFERRED PREFERRED STOCK
- --------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 25.00 0.390 0.490 0.693 0.751 0.150
27.00 0.386 0.473 0.667 0.721 0.164
29.00 0.385 0.441 0.646 0.696 0.178
30.75 0.384 0.416 0.631 0.678 0.189
31.00 0.381 0.412 0.626 0.672 0.188
33.00 0.358 0.387 0.588 0.632 0.176
35.00 0.338 0.365 0.554 0.596 0.166
37.00 0.319 0.345 0.524 0.563 0.157
39.00 0.303 0.328 0.497 0.534 0.149
41.00 0.288 0.312 0.473 0.508 0.142
43.00 0.275 0.297 0.451 0.485 0.135
45.00 0.263 0.284 0.431 0.463 0.129
47.00 0.251 0.272 0.413 0.444 0.124
49.00 0.241 0.261 0.396 0.425 0.119
51.00 0.232 0.251 0.380 0.409 0.114
51.25 0.231 0.249 0.378 0.407 0.113
53.00 0.230 0.241 0.373 0.401 0.117
55.00 0.230 0.232 0.368 0.394 0.121
57.00 0.230 0.224 0.358 0.388 0.125
</TABLE>
TREATMENT OF OPTIONS AND WARRANTS. As of September 30, 1999, Quote.com had
1,707,789 outstanding options to purchase shares of Quote.com common stock,
warrants to purchase 128,900 shares of Quote.com common stock, warrants to
purchase 7,634 shares of Quote.com Series C preferred stock and warrants to
purchase 8,276 shares of Quote.com Series D preferred stock.
Upon the completion of the merger, each outstanding option will be converted
into an option to acquire that number of shares of Lycos common stock determined
by multiplying the number of shares of Quote.com common stock subject to such
option by the fraction of a share of Lycos common stock payable in the merger
with respect to each share of Quote.com common stock (rounded down to the
nearest whole share). Upon the completion of the merger, the exercise price of
each option will become equal to the exercise price for the shares of Quote.com
common stock subject to the option divided by the fraction of a share of Lycos
common stock payable in the merger with respect to each share of Quote.com
common stock into which the option is convertible (rounded up to the nearest
whole cent).
Upon the completion of the merger, each outstanding warrant to purchase
shares of Quote.com common stock will be converted into a warrant to acquire
that number of shares of Lycos common stock determined by multiplying the number
of shares of Quote.com common stock subject to such warrant by the fraction of a
share of Lycos common stock payable in the merger with respect to each share of
Quote.com common stock. Upon the completion of the merger, the exercise price of
each such warrant will become equal to the aggregate exercise price for the
shares of Quote.com common stock subject to the warrant divided by the number of
shares of Lycos common stock deemed subject to the warrant (rounded up to the
nearest whole cent).
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<PAGE>
Upon the completion of the merger, each outstanding warrant to purchase
shares of Quote.com Series C preferred stock will be converted into a warrant to
acquire that number of shares of Lycos common stock determined by multiplying
the number of shares of Quote.com Series C preferred stock subject to such
warrant by the fraction of a share of Lycos common stock payable in the merger
with respect to each share of Quote.com Series C preferred stock. Upon the
completion of the merger, the exercise price of each such warrant will become
equal to the aggregate exercise price for the shares of Quote.com Series C
preferred stock subject to the warrant divided by the number of shares of Lycos
common stock deemed subject to the warrant (rounded up to the nearest whole
cent).
Upon the completion of the merger, each outstanding warrant to purchase
shares of Quote.com Series D preferred stock will be converted into a warrant to
acquire that number of shares of Lycos common stock determined by multiplying
the number of shares of Quote.com Series D preferred stock subject to such
warrant by the fraction of a share of Lycos common stock payable in the merger
with respect to each share of Quote.com Series D preferred stock. Upon the
completion of the merger, the exercise price of each such warrant will become
equal to the aggregate exercise price for the shares of Quote.com Series D
preferred stock subject to the warrant divided by the number of shares of Lycos
common stock deemed subject to the warrant (rounded up to the nearest whole
cent).
FRACTIONAL SHARES. No fractional shares of Lycos common stock will be
issued in connection with the merger. Instead of receiving a fractional share, a
shareholder who would otherwise be entitled to a fractional share will receive
an amount of cash (rounded to the nearest whole cent) equal to the product of
(1) the fractional share and (2) the last quoted sale price of Lycos common
stock on the closing date.
RIGHTS OF DISSENTING SHAREHOLDERS
THE FOLLOWING SUMMARY OF THE STATUTORY PROCEDURE TO BE FOLLOWED BY A
DISSENTING QUOTE.COM SHAREHOLDER IN ORDER TO EXERCISE HIS, HER OR ITS
DISSENTERS' RIGHTS UNDER CHAPTER 13 OF THE CALIFORNIA CORPORATIONS CODE, OR CCC,
IS NOT A COMPLETE STATEMENT OF THE LAW RELATING TO DISSENTERS' RIGHTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF CHAPTER 13 OF THE
CCC. THIS DISCUSSION AND CHAPTER 13 OF THE CCC SHOULD BE REVIEWED CAREFULLY BY
ANY QUOTE.COM SHAREHOLDER WHO WISHES TO EXERCISE STATUTORY DISSENTERS' RIGHTS OR
WHO WISHES TO PRESERVE THE RIGHT TO DO SO, SINCE FAILURE TO COMPLY WITH THE
PROCEDURES SET FORTH IN CHAPTER 13 OF THE CCC WILL RESULT IN THE LOSS OR WAIVER
OF DISSENTERS' RIGHTS. A COPY OF CHAPTER 13 OF THE CCC IS ATTACHED HERETO AS
ANNEX D AND IS INCORPORATED HEREIN BY REFERENCE.
If the merger is approved by the required vote of Quote.com shareholders,
each Quote.com shareholder who DOES NOT vote in favor of the merger and who
follows the procedures set forth in Chapter 13 of the CCC will be entitled to
exercise dissenters' rights under the CCC and thereby have their Quote.com
shares purchased by Quote.com for cash at the fair market value of the Quote.com
shares. Any Quote.com shares as to which such dissenters' rights are exercised
will not be converted into the right to receive shares of Lycos common stock but
instead will be converted into the right to receive such consideration as may be
determined to be due with respect to such Quote.com shares pursuant to the CCC.
25
<PAGE>
Upon approval of the merger, a shareholder of Quote.com on the record date
for such approval may, by complying with the provisions of Chapter 13 of the
CCC, require Quote.com to purchase for cash at fair market value the shares
owned by such holders and that were not voted to approve and adopt the merger
agreement and approve the merger. The fair market value of Quote.com shares will
be determined as of the day before the first announcement of the terms of the
proposed merger, excluding any appreciation or depreciation in consequence of
the proposed merger (i.e., valuing the Quote.com shares as if the merger had not
occurred) but adjusted for any stock split, reverse stock split or stock
dividend that becomes effective thereafter.
Shares of Quote.com capital stock must satisfy each of the following
requirements to qualify as dissenting shares under California law: (i) the
shares of Quote.com capital stock must have been outstanding on the record date;
(ii) the shares of Quote.com capital stock must not have been voted in favor of
the merger; (iii) the holder of such shares of Quote.com capital stock must make
a written demand that Quote.com repurchase such shares of Quote.com capital
stock at fair market value; and (iv) the holder of such shares of Quote.com
capital stock must submit share certificates for endorsement.
Within ten days after the date of the approval of the merger, Quote.com must
mail a notice of the approval of the merger to each shareholder who has not
voted to approve and adopt the merger, together with a statement of the price
determined by Quote.com to represent the fair market value of the Quote.com
shares, a brief description of the procedure to be followed in order for the
shareholder to pursue dissenters' rights, and a copy of Sections 1300 to 1304 of
Chapter 13 of the CCC. The statement of price by Quote.com constitutes an offer
by Quote.com to purchase all properly dissenting shares at the stated amount.
In order to exercise rights as a dissenting shareholder, within 30 days
after the date on which notice of the approval of the merger by the outstanding
shares of Quote.com capital is mailed to dissenting shareholders, Quote.com must
receive a dissenting shareholder's written demand that Quote.com repurchase such
dissenting shareholder's dissenting shares setting forth the number and class of
dissenting shares held of record by such dissenting shareholder that the
dissenting shareholder demands that Quote.com purchase, and a statement of what
the dissenting shareholder claims to be the fair market value of the dissenting
shares as of the day before the announcement of the proposed merger. The
statement of fair market value in such demand by the dissenting shareholder
constitutes an offer by the dissenting shareholder to sell the dissenting shares
at such price to Quote.com. Such holder must also submit to Quote.com, within 30
days after the date on which notice of the approval by the outstanding shares
was mailed to shareholders, share certificates representing any dissenting
shares that the dissenting shareholder demands that Quote.com purchase, so that
such dissenting shares may either be stamped or endorsed with the statement that
the shares are dissenting shares or exchanged for certificates of appropriate
denomination so stamped or endorsed.
If the dissenting shareholder and Quote.com agree that the shares qualify as
dissenting shares and agree upon the price of the shares, the dissenting
shareholder will be entitled to the agreed upon price plus the legal rate of
interest on judgments from the date of such agreement, to be paid to the
dissenting shareholder within the later of 30 days after the date of such
agreement or 30 days after any statutory or contractual conditions to the
consummation of the merger are satisfied or waived subject to surrender, by the
dissenting shareholder, of his or her certificates representing the dissenting
shares to Quote.com.
If the dissenting shareholder and Quote.com fail to agree upon the fair
market value of the dissenting shares or whether the shares qualify as
dissenting shares, the dissenting shareholder may file a complaint in California
superior court within six months after the date on which notice of the approval
of the merger is mailed to shareholders requesting that the court determine the
fair market value of the dissenting shares and/or whether the shares qualify as
dissenting shares. California law
26
<PAGE>
provides, among other things, that a dissenting shareholder may not withdraw the
demand for payment of the fair market value of dissenting shares unless
Quote.com consents to such request for withdrawal.
Under the provisions of Section 500 ET SEQ. and Section 1306 of the CCC, a
California corporation is legally prohibited from purchasing shares of stock
through the payment of cash or other property, even if all dissenters rights
conditions are fulfilled, unless the corporation satisfies certain financial
conditions. Due to these legal restrictions, Quote.com may not be legally able
to repurchase all or any dissenting shares of the dissenting shareholders for
cash following the merger.
To the extent that the above-mentioned provisions of the CCC prohibit cash
payments to holders of dissenting shares who exercise and perfect their
dissenters' rights, such dissenting shareholders will become creditors of
Quote.com for an amount equal to the fair market value of their shares as to
which the dissenters' rights are perfected plus interest accrued thereon at the
legal rate on judgments until the date of payment. The rights of such dissenting
shareholders, however, will be subordinate to the rights of all other creditors
of Quote.com in any liquidation proceeding.
Dissenting shareholders considering seeking appraisal should be aware that
the fair market value of their shares of capital stock, as determined under
Chapter 13 of the CCC, could be more than, the same as or less than the amount
that would be paid to them pursuant to the merger agreement. The costs and
expenses of the appraisal proceeding will be determined by the court and
assessed against Quote.com unless the court determines that the dissenting
shareholder did not act in good faith in demanding payment of the fair market
value of his, her or its shares, in which case such costs and expenses may be
assessed against the dissenting shareholder.
If any Quote.com shareholder who demands the purchase of his, her or its
shares under Chapter 13 of the CCC fails to perfect, or effectively withdraws or
loses his, her or its right to such purchase, the shares of such holder will be
converted into a right to receive the applicable merger consideration with
respect thereto in accordance with the terms of the merger agreement.
Dissenting shares lose their status as dissenting shares and the holders of
dissenting shares cease to be dissenting shareholders and cease to be entitled
to require Quote.com to purchase their shares if (a) the merger is abandoned;
(b) the shares are transferred prior to their submission for the required
endorsement or are surrendered for conversion into shares of another class in
accordance with the amended and restated articles of incorporation of Quote.com;
(c) the dissenting shareholder and Quote.com do not agree upon the status of the
shares as dissenting shares or do not agree on the purchase price, but neither
Quote.com nor the shareholder files a complaint or intervenes in a pending
action within six months after mailing of the notice of approval of the merger;
or (d) with Quote.com's consent, the shareholder delivers to Lycos a written
withdrawal of such shareholder's demand for purchase of his, her or its shares.
Except as expressly limited by provisions of California law pertaining to
dissenters' rights, holders of dissenting shares, continue to have all the
rights and privileges incident to their shares until the fair market value of
their shares is agreed upon or determined.
FAILURE TO FOLLOW THE STEPS REQUIRED BY CHAPTER 13 OF THE CCC FOR PERFECTING
DISSENTERS' RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS (IN WHICH EVENT A
SHAREHOLDER WILL BE ENTITLED TO RECEIVE THE APPLICABLE MERGER CONSIDERATION WITH
RESPECT TO SUCH DISSENTING SHARES IN ACCORDANCE WITH THE MERGER AGREEMENT). IN
VIEW OF THE COMPLEXITY OF THE PROVISIONS OF CHAPTER 13, QUOTE.COM SHAREHOLDERS
WHO ARE CONSIDERING OBJECTING TO THE MERGER SHOULD CONSULT THEIR OWN LEGAL
ADVISORS.
For more information on the rights of Quote.com shareholders, see
"Comparison of Rights of Stockholders of Lycos and Shareholders of Quote.com" on
page 43.
27
<PAGE>
CONVERSION AND EXCHANGE OF SHARE CERTIFICATES
Upon the completion of the merger, the Quote.com capital stock issued and
outstanding immediately prior to such time, other than Quote.com dissenting
shares, will automatically be converted into the right to receive the applicable
merger consideration with respect thereto from Lycos.
Upon the completion of the merger, Lycos will (1) authorize its exchange
agent to make available the shares of Lycos common stock to be issued in the
merger and (2) deposit 10% of such shares to be held in escrow with the escrow
agent in accordance with the terms of the indemnification and escrow agreement.
Holders of Quote.com capital stock who properly complete and validly execute
and surrender letters of transmittal and certificates representing Quote.com
capital stock to Lycos will be entitled to receive the shares of Lycos common
stock and any cash payment to which they are entitled following surrender of
these documents. Surrendered Quote.com capital stock will be canceled.
Until surrendered as provided above, (1) each outstanding certificate that
prior to the merger represented Quote.com capital stock, other than certificates
for dissenting shares, will for all corporate purposes evidence only the right
to receive the portion of the merger consideration to which such holder is
entitled pursuant to the merger agreement and (2) each outstanding certificate
evidencing Quote.com dissenting shares will evidence only the right of the
holder to pursue such holder's remedies as a dissenting shareholder as provided
under applicable California law.
YOU SHOULD NOT SUBMIT YOUR STOCK CERTIFICATES FOR EXCHANGE UNTIL YOU HAVE
RECEIVED THE LETTER OF TRANSMITTAL AND INSTRUCTIONS REFERRED TO ABOVE.
BACKGROUND OF THE MERGER
In early 1998, Chris Cooper, a founder and director of Quote.com, met with
Edward M. Philip, Chief Operating Officer and Chief Financial Officer of Lycos,
to discuss various business relationship possibilities. Lycos decided that they
were not interested in pursuing such relationships at that time.
During the early part of 1999, Lycos began investigating various acquisition
opportunities of financial Internet sites. In early May 1999, Dennis Cicconne,
the former Vice President of Mergers and Acquisitions for Lycos, contacted
Robert Honeycutt, President of Quote.com, to discuss the possibility of a
transaction. On May 25, 1999, Lycos and Quote.com entered into a confidentiality
agreement. While discussions continued with respect to the feasibility of an
acquisition of Quote.com by Lycos, Lycos engineers visited the Quote.com
facilities to conduct a due diligence review with respect to the functionality
of the various technologies utilized in the Quote.com Website.
In early June 1999, Mr. Honeycutt met with Robert Davis, President of Lycos,
at Lycos' headquarters in Waltham, MA. The purpose of this meeting was to
further discuss the feasibility of any acquisition by Lycos of Quote.com.
During the week of June 14, 1999, Mr. Honeycutt received a call from Mr.
Davis indicating that Lycos did not wish to pursue a transaction with Quote.com
at that time.
On July 22, 1999, Mr. Honeycutt received a call from Dan Nova, a director of
Quote.com who is also a director of Lycos, suggesting that Lycos might be
interested in acquiring Quote.com.
On July 28, 1999, Mr. Rosenblum, Vice President of Mergers and Acquisitions
at Lycos, Kyung Kim, Finance Manager at Lycos and Michael Armistead, General
Manager of WhoWhere?, met with Pietro Dova, Vice President, Finance and
Administration of Quote.com, Jon S. Hjartberg, Vice President and Executive
Producer of Quote.com, and Akmal Hashmi, Executive Vice President of Business
Development of Quote.com, to explore possible business and operating synergies
and to better understand the Quote.com business model. The Quote.com business
model, financial statements and business strategy were discussed in detail
during the meeting.
28
<PAGE>
In early August 1999, Quote.com informed Lycos that it intended to raise
additional funds through a private placement of its preferred stock. Quote.com
indicated that if Lycos intended to make a proposal to acquire Quote.com that
such proposal should be made promptly.
On August 18, 19 and 20, 1999, Mr. Rosenblum, Daniel Sullivan, Deputy
General Counsel of Lycos, Brian Lucy, Controller of Lycos, Charles Kilby,
Product Manager of Lycos, Mr. Kim of Lycos and two representatives from Lycos'
outside legal counsel visited Quote.com offices for due diligence review which
included interviews of senior management and review of the financial statements
and key business metrics of the business.
On Sunday, August 22, 1999, Mr. Honeycutt arranged for a board of directors
conference call. After discussing the financing and corporate finance
alternatives available to Quote.com, and receiving the advice of Hambrecht &
Quist LLC and Brobeck, Phleger & Harrison LLP, the board of directors authorized
Quote.com management to pursue a transaction with Lycos.
On the evening of August 22, Mr. Honeycutt and Mr. Cooper of Quote.com and
Jay Desai, Vice President of Hambrecht & Quist LLC, discussed with Mr. Davis of
Lycos the general terms of the merger and executed an exclusivity letter.
Over the following two weeks, negotiations over the terms of the merger
agreement took place between representatives of Lycos, Quote.com and their
respective legal counsel. Representatives of Lycos simultaneously participated
in negotiations with certain shareholders of Quote.com regarding the terms of
the shareholders agreement. On September 2, 1999, Quote.com held a board of
directors meeting to consider the proposed terms of the merger and the merger
agreement. Mr. Honeycutt briefed the Quote.com board on the outcome of the
negotiations and summarized the principal business points of the proposed
merger. Rod Howard and Curtis Mo of Brobeck, Phleger & Harrison LLP then
reviewed the principal legal terms of the proposed merger and the principal
legal considerations applicable to the Quote.com board of directors'
determination. Mr. Desai of Hambrecht & Quist LLC then commented on certain
financial aspects of the transaction and the history of negotiations with other
parties. Following discussion and deliberation, the board of directors of
Quote.com authorized Mr. Honeycutt to sign a merger agreement consistent with
the terms discussed. The definitive merger agreement was signed on September 2,
1999. Also on September 2, 1999, Lycos and certain shareholders of Quote.com
signed the shareholders agreement.
REASONS FOR THE MERGER
At a meeting held on September 2, 1999, the Quote.com board of directors, by
a unanimous vote of directors present at the meeting, approved the merger
agreement and determined that the merger is fair to, and in the best interests
of, Quote.com and its shareholders. Daniel Nova, who is a director of both
Quote.com and Lycos, was not present at the meeting and did not participate in
the vote in connection with the merger, the merger agreement and the payment to
Mr. Hunsader. In reaching its decision, the Quote.com board of directors
considered a number of factors, including the following:
- That Quote.com shareholders would receive tradable shares of Lycos common
stock as consideration in the merger, providing Quote.com shareholders
with the opportunity to either obtain immediate liquidity by selling their
Lycos shares in the public market or to participate as Lycos stockholders
in the potential long-term benefits that the board of directors believes
could result from the merger.
- The merger consideration payable to Quote.com shareholders as compared to
other comparable transactions.
- The performance of Lycos common stock in the public market.
- The access to the greater financial and technical resources of Lycos that
a merger would provide.
- The experience, depth and competence of Lycos' operating team.
29
<PAGE>
- Management's belief that, in order to succeed in an increasingly
competitive market, Quote.com needed to align itself with a larger partner
with broad consumer reach on the Internet or in traditional media.
- Management's belief that joining the Lycos Network would provide Quote.com
more extensive reach and higher visibility than it could achieve on its
own, allowing Quote.com to provide its content and services to a broader
audience than it could achieve independently.
- The potential synergies that could be created between Lycos' success in
the Internet segments in which it operates and Quote.com's established
presence in the investment and finance segment of the Internet.
- Information concerning the respective businesses, competitive position and
prospects, financial performance and condition, operations and management
of Quote.com and Lycos on both a historical and future basis and as
separate and combined entities.
- An analysis of Quote.com's cash flows and other financial statement
information and the necessity of obtaining additional funding through
private or public capital markets to continue as a financially viable
independent entity.
- The high cost of private capital and the diminished prospects of obtaining
such funding on acceptable terms in sufficient time given Quote.com's
financial condition.
- Recent volatility in stock market valuations of Quote.com's closest public
company competitors, leading management to attribute more risk to an
independent strategy aimed toward an initial public offering of Quote.com
common stock.
- Past unsuccessful merger negotiations and the prospects of finding other
suitable merger opportunities on terms more favorable to Quote.com and its
shareholders than the merger.
- The board of directors belief that the merger consideration and the terms
of the merger agreement are fair to the Quote.com shareholders.
The Quote.com board of directors also identified and considered a number of
potentially negative factors in its deliberations concerning the merger,
including, but not limited to:
- The risk that the potential benefits of the merger may not be fully
realized.
- The possibility that the merger may not be consummated, even if approved
by Quote.com's shareholders.
- The risk of management and employee disruption associated with the merger,
including the risk that key technical, sales and management personnel of
Quote.com might not remain employed by the combined company.
- The possibility that the expected growth of Quote.com's business might not
be realized.
- The risk that the value of Lycos common stock might decline below the
floor set forth in the merger agreement, resulting in a lower value of
consideration delivered to Quote.com shareholders than would be the case
without such a floor.
- The risk that the merger or public disclosure of the merger proposal could
adversely affect Quote.com's relationship with some of its customers and
strategic partners.
The Quote.com board of directors believes, on balance, that the potential
benefits of the merger to Quote.com and its shareholders outweigh the risks.
The foregoing discussion of the information and factors considered by the
Quote.com board of directors is not intended to be exhaustive, but is believed
to include all material factors considered by the Quote.com board of directors.
In view of the complexity and wide variety of information and factors, both
positive and negative, considered in connection with its evaluation of the
merger, the
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Quote.com board of directors did not find it practicable to and did not quantify
or otherwise assign relative or specific weights to the specific factors it
considered in reaching its determination.
OTHER INTERESTS OF OFFICERS AND DIRECTORS IN THE MERGER
Some of the executive officers and directors of Quote.com have interests in
the merger that are different from those of the Quote.com shareholders
generally. The Quote.com board of directors has considered these interests in
approving the merger agreement and the merger. Quote.com shareholders should
consider these interests carefully before voting.
- As a result of the merger, all unvested options outstanding under the
Quote.com 1996 Stock Option Plan will become fully vested upon the earlier
to occur of (i) an optionee's completion of 12 months of continuous
employment with Quote.com following the merger or (ii) such optionee's
involuntary termination without cause within such twelve-month period.
- A majority of the Quote.com directors are principals of investment
entities that own a majority of the outstanding Quote.com common stock and
Series A preferred stock and all of the outstanding Quote.com Series B
preferred stock, Series C preferred stock and Series D preferred stock.
Another of the directors owns options to purchase Quote.com common stock.
See "Security Ownership of Quote.com" on page 69. As a result, a majority
of the Quote.com directors may be subject to potential conflicts of
interest as a result of their appointment to the Quote.com board of
directors as representatives of the Quote.com common shareholders and the
Quote.com Series A, Series B, Series C and Series D preferred
shareholders. These directors may have been subject to potential conflicts
of interest in voting to approve the merger where their interests as
shareholders or otherwise may differ from the interests of Quote.com
shareholders as a whole. These potential conflicts of interest may include
conflicts regarding approval of the proposed merger with Lycos, on the one
hand, and a decision to remain independent or to pursue a different
corporate transaction on the other hand. Similarly, there may have been
potential conflicts regarding the amount and allocation of the shares of
Lycos common stock to be received in the merger, as well as other terms of
the merger.
- One Quote.com director, Daniel Nova, is also a director of Lycos. Due to
the conflict of interest arising from Mr. Nova's dual representation on
the boards of directors of Quote.com and Lycos, Mr. Nova did not
participate in either Quote.com or Lycos board meetings, discussions or
votes pertaining to the merger or any related transactions. However, Mr.
Nova participated in valuation discussions between the parties.
HUNSADER PAYMENT
In accordance with the terms of the consulting agreement between Quote.com
and Mr. Hunsader, Mr. Hunsader is entitled to receive a payment from Quote.com
in an amount equal to the difference between $5.0 million and the aggregate
value of the merger consideration payable to Mr. Hunsader in respect of the
453,610 shares of Quote.com stock owned by him prior to the completion of the
merger. The consulting agreement further requires that the payment to Mr.
Hunsader be paid 50% in cash and 50% in shares of Quote.com common stock.
Immediately prior to the completion of the merger, Quote.com will (1) terminate
the consulting agreement, (2) issue to Mr. Hunsader that number of shares of
Quote.com common stock which would entitle Mr. Hunsader to receive shares of
Lycos common stock having an aggregate value of 50% of the amount payable to Mr.
Hunsader pursuant to the consulting agreement and (3) pay to Mr. Hunsader in
cash 50% of the amount payable to Mr. Hunsader pursuant to the consulting
agreement. Quote.com estimates that it will issue to Mr. Hunsader 203,118 shares
of Quote.com common stock in connection with this payment, having an aggregate
value of $1,181,131, assuming an average closing stock price of Lycos common
stock during the 20 trading days ending on the trading day preceding the
completion of the merger of $51.25 per share, and that it will pay Mr. Hunsader
$1,181,131 in cash.
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ACCOUNTING TREATMENT
Lycos intends to treat the merger as a purchase for accounting and financial
reporting purposes, which means that Lycos will treat Quote.com as a separate
entity for periods prior to the closing and, thereafter, as a wholly owned
subsidiary of Lycos.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion describes the material United States federal income
tax consequences of the exchange of shares of Quote.com capital stock for Lycos
common stock pursuant to the merger that are generally applicable to holders of
Quote.com capital stock. Brobeck, Phleger & Harrison LLP, legal counsel to
Quote.com, is of the opinion that the following discussion accurately describes
such material federal income tax consequences. This discussion is based on
currently existing provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), existing and proposed Treasury regulations thereunder and current
administrative rulings and court decisions, all of which are subject to change.
Any such change, which may or may not be retroactive, could alter the tax
consequences to Quote.com shareholders as described herein.
Quote.com shareholders should be aware that this discussion does not address
all United States federal income tax considerations that may be relevant to
particular Quote.com shareholders in light of their particular circumstances,
such as shareholders who are dealers in securities or foreign currency, who are
subject to the alternative minimum tax provisions of the Code, who are foreign
persons, who do not hold their Quote.com capital stock as capital assets, who
hold their Quote.com capital stock as part of a straddle, pledge against
currency risk, constructive sale or conversion transaction, or who acquired
their shares in connection with stock option or stock purchase plans or in other
compensatory transactions. In addition, the following discussion does not
address the tax consequences of the merger under foreign, state or local tax
laws, the tax consequences of other transactions effectuated prior or subsequent
to, or concurrently with, the merger (whether or not any such transactions are
undertaken in connection with the merger), including without limitation any
transaction in which shares of Quote.com capital stock are acquired or shares of
Lycos common stock are disposed of, or the tax consequences of the assumption by
Lycos of the Quote.com options. Accordingly, QUOTE.COM SHAREHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF
THE MERGER, INCLUDING THE APPLICABLE UNITED STATES FEDERAL, STATE, LOCAL AND
FOREIGN TAX CONSEQUENCES.
The merger is intended to constitute a reorganization within the meaning of
the Code. Provided that the merger does so qualify as a reorganization, then,
subject to the limitations and qualifications referred to herein, the merger
will generally result in the following United States federal income tax
consequences to the Quote.com shareholders:
- No gain or loss will be recognized by holders of Quote.com capital stock
upon their receipt of Lycos common stock in exchange for Quote.com capital
stock in the merger (except to the extent of cash received in lieu of
fractional shares of Lycos common stock).
- The aggregate tax basis of the Lycos common stock received by Quote.com
shareholders in the merger, together with any tax basis attributable to
fractional shares deemed to be disposed of, will be the same as the
aggregate tax basis of the Quote.com capital stock surrendered in exchange
therefor.
- The holding period of the Lycos common stock received by each Quote.com
shareholder in the merger will include the period for which the Quote.com
capital stock surrendered in exchange therefore was considered to be held.
- Cash payments received by holders of Quote.com capital stock in lieu of
fractional shares of Lycos common stock will be treated as if such
fractional shares of Lycos common stock had
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been issued in the merger and then redeemed by Lycos. A Quote.com
shareholder receiving cash in lieu of a fractional share of Lycos common
stock will recognize gain or loss upon such payment measured by the
difference, if any, between the amount of cash received and such
shareholder's basis in such fractional share.
The parties have not and will not request a ruling from the Internal Revenue
Service as to the tax consequences of the merger. The consummation of the merger
is conditioned upon Quote.com's receipt of an opinion from Brobeck, Phleger &
Harrison LLP to the effect that the merger will constitute a reorganization
within the meaning of the Code. Quote.com shareholders should be aware that the
tax opinion does not bind the Internal Revenue Service, and the Internal Revenue
Service is therefore not precluded from successfully asserting a contrary
position. The tax opinion will be subject to certain assumptions and
qualifications, including but not limited to the truth and accuracy of certain
representations made by Lycos and Quote.com.
A successful Internal Revenue Service challenge to the reorganization status
of the merger would result in Quote.com shareholders recognizing taxable gain or
loss with respect to each share of capital stock of Quote.com surrendered equal
to the difference between the shareholder's basis in such share and the fair
value as of the completion of the merger of the Lycos common stock received in
exchange therefor. In such event, a shareholder's aggregate basis in the Lycos
common stock so received would equal the fair value of such stock, and the
shareholder's holding period for such stock would begin the day after the
merger.
TAX CONSEQUENCES OF THE ESCROW. Under the merger agreement, 10% of the
aggregate number of shares of Lycos common stock issuable in the merger will be
placed in escrow. The return of any escrow shares to Lycos in satisfaction of an
indemnifiable claim should not result in the recognition of gain or loss to the
holders of escrow shares. The return of any escrow shares to Lycos should be
characterized as an adjustment to the exchange terms of the merger agreement.
Accordingly, the basis of each share of Lycos common stock received in the
merger by holders of escrow shares would be adjusted. Shareholders of Quote.com
are urged to consult their tax advisors regarding the tax consequences to them
of the transfer of the escrow shares.
BACKUP WITHHOLDING WITH RESPECT TO CASH PAID INSTEAD OF FRACTIONAL SHARES OF
LYCOS COMMON STOCK. Certain non-corporate Quote.com shareholders may be subject
to backup withholding at a 31% rate on cash payments received instead of
fractional shares of Lycos common stock. Backup withholding will not apply,
however, to a Quote.com shareholder who (1) furnishes a correct taxpayer
identification number and certifies that he, she or it is not subject to backup
withholding on the substitute Form W-9 or successor form included in the letter
of transmittal to be delivered to Quote.com shareholders following the date of
the merger, (2) provides a certification of foreign status on Form W-8 or
successor form or (3) is otherwise exempt from backup withholding.
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THE AGREEMENT AND PLAN OF MERGER
Please note that the following description of the merger agreement is a
summary only. You should read the following summary and the merger agreement
attached as Annex A to this proxy statement/ prospectus or a full understanding
of the merger agreement. The merger agreement is incorporated by reference into
this proxy statement/prospectus. Material elements of the merger agreement are
described in this proxy statement/prospectus.
REPRESENTATIONS AND WARRANTIES
In the merger agreement, Lycos, Quicksilver Acquisition Corp. and Quote.com
made certain customary representations and warranties relating to, among other
things:
- their respective organization as corporations and similar corporate
matters;
- their respective authority to enter into the merger agreement, the absence
of any conflict between the merger agreement and certain contracts,
corporate instruments and laws, and the enforceability of the merger
agreement against each of them;
- their and their subsidiaries' respective capital structures;
- their compliance with law;
- the absence of certain litigation;
- the absence of material adverse changes;
- the engagement and payment of fees of brokers, investment bankers and
financial advisors; and
- the accuracy of information supplied by each of Lycos and Quote.com in
connection with this proxy statement/prospectus.
In addition, Quote.com made representations and warranties relating to,
among other things:
- the accuracy and completeness of certain financial information;
- the filing of tax returns and payment of taxes;
- the absence of certain changes or events since June 30, 1999 and the
absence of undisclosed liabilities;
- the status of certain employee matters, benefit plans, equity interests
and insurance policies;
- the status of certain relationships with customers and suppliers;
- the satisfaction of certain takeover laws;
- the shareholder vote required for approval;
- year 2000 compliance;
- the accuracy of information regarding the Internet traffic through
Quote.com's website;
- the status of operations of Quote.com, including its employees and
principal customers;
- the status of various assets of Quote.com, including properties,
liabilities, contracts, intellectual property and accounts receivable; and
- the ownership by Quote.com of certain software.
In addition, Lycos represented and warranted that it has filed with the SEC
all reports, schedules, forms, statements and other documents required to be
filed with the SEC since August 1, 1997.
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The representations and warranties of the parties will remain in full force
and effect until the first anniversary of the closing date. See "Indemnification
and Escrow Agreement" on page 39.
COVENANTS
Lycos, Quicksilver Acquisition Corp. and Quote.com have agreed to several
covenants. Quote.com has agreed, among other things, to carry on its business in
the ordinary course until the completion of the merger. In addition, Quote.com
has agreed that, among other things and subject to certain exceptions, prior to
the completion of the merger, except as consented to in writing by Lycos,
neither Quote.com nor any of its subsidiaries may:
- declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, or split, combine
or reclassify any of its capital stock or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or purchase, redeem or
otherwise acquire any shares of capital stock of or any other securities
of Quote.com or its subsidiaries;
- issue, deliver, sell, grant, pledge or otherwise encumber (or authorize or
propose such action with respect to) any shares of its capital stock, or
any securities convertible into, or any rights, warrants or options to
acquire, any such securities or convertible securities, other than the
issuance of shares of Quote.com common stock to Mr. Hunsader pursuant to
his consulting agreement with Quote.com, the conversion of shares of any
class of Quote.com preferred stock in accordance with their current terms
or any conversion into shares in accordance with their current terms of
outstanding Quote.com debt instruments, the issuance of Quote.com capital
stock upon the exercise of options and warrants in accordance with their
terms and certain other issuances of options to new and existing employees
in the ordinary course of business, consistent with past practice;
- amend or propose to amend its amended and restated articles of
incorporation or amended and restated bylaws or similar organizational
documents;
- acquire or agree to acquire any business or any corporation, partnership,
joint venture, association or other entity or division thereof or any
assets in excess of $100,000;
- sell, lease, license, mortgage or otherwise encumber or subject to any
lien or otherwise dispose of any of its properties or assets (other than
the sale or other disposition of the 40,000 shares of common stock of
Cybernet Data Systems, Inc. (a.k.a. EDGAR Online, Inc.) held by
Quote.com);
- incur any debt or guarantee any debt, issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt of Quote.com
or any of its subsidiaries, enter into agreement to maintain any financial
statement condition of another person or enter into any arrangement having
the economic effect of any of the foregoing, or make any loans, advances
or capital contributions to, or investments in, any other person;
- make or agree to make any new capital expenditure or expenditures which,
in the aggregate, are in excess of $100,000;
- pay, discharge, settle or satisfy any claims, liabilities or obligations,
other than the payment, discharge, settlement or satisfaction in the
ordinary course of business consistent with recent past practice or in
accordance with their terms, of claims, liabilities or obligations
reflected or reserved against on the balance sheet of Quote.com as of July
31, 1999, or incurred since July 31, 1999, in the ordinary course of
business consistent with recent past practice, or waive any material
benefits of, or agree to modify in any materially adverse respect, any
confidentiality, standstill or similar agreements to which Quote.com or
any of its subsidiaries is a party;
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- modify, amend or terminate any material contract or waive, release or
assign any material rights or claims thereunder;
- enter into any contract relating to the distribution, sale, license or
marketing by third parties of Quote.com's or its subsidiaries' products or
material intellectual property;
- terminate, adopt, enter into or amend any collective bargaining agreement
or benefit plan, increase the compensation or fringe benefits of, or pay
any bonus to, any director, officer or employee, pay any material benefit
not provided for under any benefit plan, increase in any manner the
severance or termination pay of any director, officer or employee, enter
into certain arrangements with any current or former director, officer,
employee or consultant or take certain other actions with respect to any
benefit plan, except (a) Quote.com has the right to accelerate the vesting
of stock options held by employees whose service is terminated by
Quote.com without cause prior to the completion of the merger and such
termination is at the written request, or with the prior written consent,
of Lycos and (b) Quote.com has the right to offer severance packages
consistent with past severance practices to employees whose service is
terminated by Quote.com without cause prior to the completion of the
merger and such termination is at the written request, or with the prior
written consent of Lycos, but in no case will any such severance package
exceed more than four (4) weeks of the employee's current base salary;
- enter into any material contract, other than contracts for the sale or
licensing of Quote.com's products in the ordinary course of business;
- revalue any of its material assets or, except as required by generally
accepted accounting principles, make any change in accounting methods,
principles or practices;
- knowingly or intentionally take any action that would or could reasonably
be expected to result in any representation and warranty of Quote.com set
forth in the merger agreement becoming untrue or any condition to the
merger not being satisfied;
- commence any litigation (other than litigation relative to collections of
accounts receivable or as a result of litigation commenced against
Quote.com or any of its subsidiaries); and
- hire more than three employees, except to replace employees terminated
after the date of the merger agreement and prior to the completion of the
merger.
Quote.com also has agreed that it will not nor will it permit its
subsidiaries or authorize certain other persons to:
- solicit, initiate or encourage or take any other action designed or
reasonable likely to facilitate any inquiries, expression of interest,
proposals or offers of any business combination or similar transactions
involving any purchase of more than 15% of the assets or capital stock of
Quote.com or any of its subsidiaries; or
- participate in any discussions or negotiations with, or furnish any
information concerning, Quote.com to any person, other than Lycos, with
respect to any of the foregoing.
The merger agreement provides that neither the board of directors of
Quote.com nor any committee thereof may withdraw or modify or propose to modify
in a manner adverse to Lycos its approval or recommendation of the merger or the
merger agreement, approve or recommend or propose to approve or recommend any
alternative acquisition or business combination proposal described above or
enter into any agreement relating thereto.
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CONDITIONS TO CONSUMMATION OF THE MERGER
The obligation of Lycos, Quicksilver Acquisition Corp. and Quote.com to
consummate the merger are subject to the satisfaction or waiver of customary and
other conditions, including:
- the receipt by Quote.com of shareholder approval and adoption of the
merger agreement and approval of the merger;
- the receipt of all necessary authorizations, orders, consents and
approvals of governmental entities;
- the absence of any order, injunction or other legal restraint preventing
the occurrence of the merger; and
- the approval for quotation on the Nasdaq National Market of the shares of
Lycos common stock to be issued in the merger.
The obligation of Lycos to consummate the merger is additionally subject to
the satisfaction or waiver of certain conditions, including:
- the accuracy of the representations and warranties of Quote.com contained
in the merger agreement on the date of the merger agreement and at the
time of the closing of the merger (except where the inaccuracy does not
have and is not reasonably likely to have, individually or in the
aggregate, a material adverse effect on Quote.com);
- the performance in all material respects by Quote.com of all its covenants
and agreements in the merger agreement;
- the receipt of all legally required consents of governmental entities, all
other consents of governmental entities except for those the failure of
which to be obtained, individually or in the aggregate, could not
reasonably be expected to have a material adverse effect on Lycos or
Quote.com or interfere in any material respect with the ability of Lycos
to operate the business of Quote.com;
- the absence of any pending litigation by any governmental entity, or any
suit with a reasonable probability of success bought by any third party,
seeking to restrain the completion of the merger, seeking to prohibit or
limit in any material respect the ownership or operation by Lycos or
Quote.com of a material portion of the business or assets of Quote.com and
its subsidiaries or Lycos and its subsidiaries or to prevent Lycos from
effectively controlling Quote.com in any material respect;
- holders of no more than 5% of Quote.com capital stock have perfected their
dissenters' rights under California law;
- the receipt by Lycos of a certificate from Quote.com certifying the
Quote.com aggregate indebtedness as of the closing date, the full
satisfaction of the payment to Mr. Hunsader pursuant to his consulting
agreement with Quote.com, the amount of cash held by Quote.com as of the
closing date and certain other matters;
- the indemnification and escrow agreement being in full force and effect;
- certain employment and non-competition agreements being in full force and
effect;
- the amendment in accordance with the terms of the merger agreement of all
non-employee options and warrants of Quote.com; and
- a certain agreement between Lycos and Mr. Hunsader being in full force and
effect.
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The obligation of Quote.com to consummate the merger is additionally subject
to the satisfaction or waiver of certain conditions, including:
- the accuracy of the representations and warranties of Lycos contained in
the merger agreement on the date of the merger agreement and at the time
of the closing of the merger (except where such inaccuracy does not have
and is not reasonably likely to have, individually or in the aggregate, a
material adverse effect on Lycos);
- the performance in all material respects by Lycos of all of its covenants
and agreements in the merger agreement; and
- the receipt by Quote.com of a legal opinion from Brobeck, Phleger &
Harrison that the merger will qualify as a reorganization for federal
income tax purposes.
The merger agreement defines "material adverse effect" as any state of
facts, change, effect, condition, development, event or occurrence that has
been, is or could reasonably be expected to be materially adverse to the
business, assets, condition (financial or otherwise) or results of operations of
a party and its subsidiaries, taken as a whole, other than (1) those arising
directly as a result of the merger agreement or the transactions contemplated by
the merger agreement or the announcement of the merger agreement or the
transactions contemplated by the merger agreement or material changes in general
economic or business conditions in the industry and market in which Quote.com or
Lycos, as the case may be, operates or (2) in the case of Lycos, any decrease in
the price of Lycos common stock or any state of facts, change, effect,
condition, development, event or occurrence arising out of or relating to any
decrease in the price of Lycos common stock.
TERMINATION AND AMENDMENT
The merger agreement may be terminated at any time prior to the completion
of the merger by:
- the mutual consent of Lycos and Quote.com;
- either Lycos or Quote.com if the merger has not occurred by December 31,
1999;
- either Lycos or Quote.com if there has been a material breach of any
representation, warranty, covenant, condition or agreement set forth in
the merger agreement by the other party has not been cured within 20
business days after the breaching party receives notice of such breach;
- either Lycos or Quote.com if the shareholders of Quote.com do not approve
and adopt the merger agreement and approve the merger; or
- either Lycos or Quote.com if a law, court order or other legal action that
prohibits the completion of the merger has become final and nonappealable.
The merger agreement may be amended, subject to certain limitations, by a
written instrument signed on behalf of each party to the agreement.
FEES AND EXPENSES
Except for certain tax-related expenses, all fees and expenses incurred in
connection with the merger, the merger agreement and the transactions
contemplated by the merger agreement will be paid by the party incurring such
fees or expenses, whether or not the merger is consummated; PROVIDED, that the
fees and expenses of Quote.com (other than the fees of Hambrecht & Quist) will
be deducted from the merger consideration in accordance with the terms of the
merger agreement.
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STOCK OPTIONS AND WARRANTS
The merger agreement provides for the assumption of outstanding Quote.com
stock options and warrants, and requires Lycos to prepare and file a
registration statement before the merger is completed to register the shares of
Lycos stock issuable upon exercise of Quote.com stock options. See "The
Merger--Allocation of Merger Consideration--Treatment of Options and Warrants"
beginning on page 25.
EMPLOYEE BENEFITS
Under the terms of the merger agreement, Lycos and Quote.com will provide
continuing employees of Quote.com with benefits that are at least as favorable,
taken as a whole, as the benefits currently provided to employees of Lycos
performing similar functions. In addition, the merger agreement gives continuing
employees full credit for their employment with Quote.com for eligibility and
vesting purposes under Lycos and Quote.com employee benefits and for purposes of
vacation accrual. Lycos will also use reasonable efforts to waive any
limitations as to pre-existing conditions, exclusions and waiting periods that
might otherwise limit the participation or coverage of continuing employees of
Quote.com under Lycos's insurance plans.
CERTAIN OTHER AGREEMENTS
The merger agreement requires Lycos and Quote.com to fulfill and honor
Quote.com's existing indemnification obligations to Quote.com directors and
officers for at least six years after the merger becomes effective. The merger
agreement also requires Quote.com's post-merger charter and by-laws to contain
exculpation and indemnification terms that are at least as favorable to
Quote.com directors and officers as the terms presently included in Quote.com's
amended and restated articles of incorporation and bylaws. With certain limited
exceptions, these terms may not be amended, modified or repealed for six years
after the completion of the merger. These terms have the effect of limiting the
personal liability of Quote.com directors and officers to Quote.com and its
shareholders, including potential liability relating to the merger. See "The
Merger--Other Interests of Officers and Directors in the Merger" on page 31.
HUNSADER PAYMENT
The merger agreement provides for certain payments to be made to Mr.
Hunsader, a shareholder of Quote.com, in connection with a consulting agreement
between Mr. Hunsader and Quote.com. See "Hunsader Payment" on page 31.
INDEMNIFICATION AND ESCROW AGREEMENT
Please note that the following description is a summary only.
In connection with the merger, certain principal shareholders of Quote.com
will enter into an indemnification and escrow agreement substantially in the
form of Annex C to this proxy statement/ prospectus pursuant to which such
shareholders will indemnify and hold Lycos and its affiliates harmless from any
and all losses, net of insurance proceeds, setoffs or recoupment actually
recovered, realized or retained by Lycos, arising out of, based upon or
resulting from:
- any inaccuracy in or breach of any representation and warranty of
Quote.com that is contained in the merger agreement or in any certificate
delivered pursuant to the merger agreement;
- the failure of Quote.com to perform any of its covenants or agreements
contained in the merger agreement or in any certificate delivered by
Quote.com in connection with the merger;
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- any actions, suits, proceedings, demands, assessments, judgments, damages,
awards, costs and expenses, including reasonable attorney fees, incident
to any of the foregoing;
- any obligation of Quote.com to pay royalties to Mr. Hunsader pursuant to a
certain software marketing agreement between Mr. Hunsader and Quote.com;
- any termination by Mr. Hunsader of a certain software tools license
agreement between Quote.com and Mr. Hunsader;
- the termination of employment by Quote.com or by Lycos after the
completion of the merger of Mr. Robert Honeycutt, Mr. Pietro Dova, Mr.
Aaron Barnes, Mr. Akmal Hashmi or Karen Kelley, including any severance or
other termination payments resulting from such termination;
- any tax liabilities of Quote.com and any of its subsidiaries or affiliates
for the pre-closing tax period; or
- the failure by a shareholder to perform any covenant, agreement,
obligation or undertaking of such shareholder in the indemnification and
escrow agreement and any actions, suits, proceedings, demands,
assessments, judgments, damages, awards, costs and expenses, including
reasonable attorney fees, incident to any of the foregoing.
Except with respect to fraud, wilful misconduct or wilful concealment by or
on behalf of Quote.com or certain shareholders of Quote.com, claims against the
escrow fund are the sole and exclusive remedy for the satisfaction of
indemnification claims by Lycos with respect to any inaccuracy in, or breach of,
any representation, warranty, covenant or agreement by Quote.com in the merger
agreement.
Subject to certain exceptions set forth in the indemnification and escrow
agreement, no claim for indemnification under the indemnification and escrow
agreement may be brought by Lycos (1) until the aggregate amount of all claims
for indemnification exceeds $150,000, and then only to the extent of such
excess, or (2) for any individual item where the loss relating thereto is less
than $25,000.
To secure payment of these indemnification obligations, 10% of the total
shares of Lycos common stock deliverable as merger consideration will be
delivered to the escrow agent under the indemnification and escrow agreement.
Because not all Quote.com shareholders are parties to the indemnification and
escrow agreement, slightly more than 10% of the shares of Lycos common stock to
be issued in the merger to the shareholders who are parties to the
indemnification and escrow agreement will be delivered into escrow. Generally,
the shares will be held for a period ending on the first anniversary of the
completion of the merger. Escrowed shares may, however, be withheld after this
date to satisfy claims for indemnification that are made prior to that date.
APPROVAL OF HUNSADER PAYMENT
Quote.com estimates that the aggregate value of the payment to be made to
Mr. Hunsader in accordance with the terms of the consulting agreement between
Quote.com and Mr. Hunsader is $2,362,262. Such amount is equal to the difference
between $5.0 million and the aggregate value of the merger consideration payable
to Mr. Hunsader in respect of the 453,610 shares of Quote.com common stock owned
by him prior to the completion of the merger. Quote.com estimates that it will
issue to Mr. Hunsader 203,118 shares of Quote.com common stock in connection
with this payment, having an aggregate value of $1,181,131, assuming an average
closing price of Lycos common stock during the 20 trading days ending on the
trading day preceding the completion of the merger of $51.25 per share and that
it will pay Mr. Hunsader $1,181,131 in cash.
No separate shareholder approval would normally be required to authorize the
payment to Mr. Hunsader. However, to avoid adverse tax consequences to Lycos and
Mr. Hunsader, the Quote.com board of directors is asking the Quote.com
shareholders to approve the payments to Mr. Hunsader.
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POTENTIAL ADVERSE TAX CONSEQUENCES
In certain circumstances, payments of compensation made by a corporation to
certain individuals, known as disqualified individuals, in connection with a
change in ownership or control are subject to significant tax consequences under
Sections 280G and 4999 of the Internal Revenue Code. As the holder of shares
representing at least 1% of the total fair value of all of Quote.com's
outstanding shares, Mr. Hunsader is a disqualified individual and the merger, if
it becomes effective, will constitute a change in ownership or control for
purposes of Section 280G. Accordingly, the payment to be made to Mr. Hunsader
under the consulting agreement is subject to the provisions of Sections 280G and
4999 of the Internal Revenue Code.
In general, if the total of all compensatory payments made to a disqualified
individual that are contingent on a change in ownership or control equals or
exceeds three times the individual's average annual compensation over the
five-year period (or any shorter period of employment with the payor
corporation) immediately preceding the calendar year in which the change in
ownership or control occurs, known as the individual's base amount, such
payments will constitute parachute payments under Section 280G of the Internal
Revenue Code.
Unless special rules apply, the amount by which the aggregate of all
parachute payments made to the disqualified individual exceeds that individual's
base amount, (the difference being the excess parachute payment), is subject to
the following tax treatment:
- The corporation making the parachute payment is denied a tax deduction for
the excess parachute payment; and
- The recipient of the parachute payment is subject to a nondeductible 20%
excise tax on the excess parachute payment.
Unless approved by the Quote.com shareholders in the manner described below,
the payment to Mr. Hunsader payment will constitute a parachute payment under
Section 280G of the Internal Revenue Code and, accordingly, Lycos will be
prevented from taking a deduction for the excess parachute payment for United
States federal income tax purposes and Mr. Hunsader will be subject to an
additional 20% excise tax on the excess parachute payment.
SHAREHOLDER APPROVAL EXCEPTION
Under Section 280G of the Internal Revenue Code, the payment to Mr. Hunsader
will not constitute a parachute payment if it is approved by a vote of the
shareholders of Quote.com who own, immediately before the merger, more than 75%
of the voting power of Quote.com, disregarding shares owned, actually or
constructively, by Mr. Hunsader, and if such vote is based on adequate
disclosure concerning the payment to be made to Mr. Hunsader. The vote must also
determine Mr. Hunsader's right to receive the payment. Accordingly, in order to
avoid the risk of adverse tax consequences, Mr. Hunsader has agreed that his
right to receive the payment will be determined by a vote of the Quote.com
shareholders in accordance with Section 280G of the Internal Revenue Code. The
Quote.com shareholders are therefore being asked to approve the payment to Mr.
Hunsader and such payment will not be made unless the requisite shareholder
approval is obtained.
All Quote.com shareholders other than Mr. Hunsader may participate in the
vote on this proposal.
SHAREHOLDERS AGREEMENT
Please note that the following description of the shareholders agreement is
a summary only. The shareholders agreement attached as Annex B to this proxy
statement/prospectus contains the complete terms of that agreement.
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In connection with the execution of the merger agreement, certain of the
directors and holders of Quote.com capital stock, who together hold
approximately 92% of the outstanding Quote.com common stock and approximately
96% of the outstanding Quote.com preferred stock at September 2, 1999, each
agreed to vote all shares of Quote.com capital stock held by such holders in
favor of the merger agreement, the merger and the other transactions
contemplated by the merger agreement. The effect of the shareholders agreement
is to ensure that Quote.com shareholder approval of the merger agreement, the
merger and the other transactions contemplated by the merger agreement will be
obtained.
Each of the parties to the shareholders agreement has also agreed to vote
against the following actions:
- any business combination or similar transaction involving more than 15% of
the assets or capital stock of Quote.com or any of its subsidiaries; and
- any amendment to Quote.com's amended and restated articles of
incorporation or amended and restated bylaws or any other action that is
intended, or could reasonably be expected, to prevent, materially impede
or interfere with the completion of the merger or the transactions
contemplated by the merger agreement or change in any manner the voting
rights of any class or shares of Quote.com capital stock.
Each of the parties to the shareholders agreement agreed not to:
- sell, transfer, pledge, assign or otherwise dispose of (or enter into any
agreement to do so) their shares of Quote.com capital stock unless the
transferee enters into an agreement that is substantially identical to the
shareholders agreement;
- enter into certain voting agreements;
- solicit, initiate or encourage or take any other action designed or
reasonable likely to facilitate any inquiries, expression of interest,
proposals or offers of any business combination or similar transactions
involving any purchase of more than 15% of the assets or capital stock of
Quote.com or any of its subsidiaries or participate in any discussions or
negotiations or enter into any agreement with respect to any of the
foregoing; and
- excercise any rights of appraisal or dissent.
Each of the parties to the shareholders agreement has irrevocably granted
to, and appointed Lycos, Edward M. Philip, Lycos' chief operating officer and
chief financial officer, Thomas E. Guilfoile, Lycos' vice president, finance &
administration, and Jeffrey M. Snider, Lycos' general counsel, in their
respective capacities as designees of Lycos, such party's proxy and
attorney-in-fact to vote or grant a consent with respect to his Quote.com
capital stock with respect to the merger agreement and the merger and other
certain agreements in the indemnification and escrow agreement.
The shareholders agreeement requires each shareholder party thereto to enter
into the indemnification and escrow agreement.
The shareholders agreement terminates upon the earlier to occur of the
completion of the merger and the termination of the merger agreement in
accordance with its terms.
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COMPARISON OF THE RIGHTS OF STOCKHOLDERS OF LYCOS AND
SHAREHOLDERS OF QUOTE.COM
The rights of Quote.com's shareholders are governed by its amended and
restated articles of incorporation, its amended and restated bylaws and the laws
of the State of California. The rights of Lycos's stockholders are governed by
its restated certificate of incorporation, its amended and restated bylaws and
the laws of the State of Delaware. After the completion of the merger, Quote.com
shareholders will become Lycos stockholders and will be governed by Lycos'
restated certificate of incorporation, its amended and restated bylaws and the
laws of the State of Delaware.
The following is a summary of the material differences between the rights of
holders of Lycos common stock and the rights of holders of Quote.com capital
stock at the date hereof. These differences arise from differences between the
Delaware General Corporation Law, or DGCL, and the California Corporations Code,
or CCC, and between the respective corporate charters and bylaws of Lycos and
Quote.com. This summary is not a complete comparison of rights that may be of
interest to you, and you should therefore read the full text of the states'
corporate statutes and the respective corporate charters and bylaws of Lycos and
Quote.com. For information as to how these documents may be obtained, see "Where
You Can Find More Information" on page 71.
COMPARISON OF AUTHORIZED AND OUTSTANDING CAPITAL STOCK
Quote.com: The authorized capital stock of Quote.com consists of 10,000,000
shares of Quote.com common stock, 1,446,951 shares of Quote.com Series A
preferred stock, 853,659 shares of Quote.com Series B preferred stock, 770,334
shares of Quote.com Series C preferred stock and 422,069 shares of Quote.com
Series D preferred stock. As of September 30, 1999, there were 2,736,598 shares
of Quote.com common stock outstanding, 1,446,951 shares of Quote.com Series A
preferred stock outstanding, 853,659 shares of Quote.com Series B preferred
stock outstanding, 762,700 shares of Quote.com Series C preferred stock
outstanding and 413,793 shares of Quote.com Series D preferred stock
outstanding.
Lycos: The authorized capital stock of Lycos consists of 300,000,000 shares
of common stock, par value $0.01 per share, and 5,000,000 shares of preferred
stock, par value $0.01 per share. As of September 30, 1999, there were
95,872,211 shares of Lycos common stock outstanding and no shares of Lycos
preferred stock outstanding.
COMPARISON OF RIGHTS OF COMMON STOCK.
Quote.com: Holders of Quote.com common stock are entitled to one vote per
share in the election of directors, subject to cumulative voting rights, and on
all other matters on which shareholders are entitled or permitted to vote. See
"Comparison of Securityholder Rights--Cumulative Voting" on page 53. Subject to
the preferences of the holders of Quote.com preferred stock, the holders of
Quote.com common stock are entitled to receive dividends as may be declared from
time to time by the Quote.com Board of directors. The Quote.com common stock has
no redemption, preemptive, conversion or other subscription rights.
Lycos: Holders of Lycos common stock are entitled to one vote per share in
the election of directors and on all other matters on which stockholders are
entitled or permitted to vote. Holders of Lycos common stock do not have the
right to cumulate their votes in the election of directors. Subject to the
preferences of the holders of Lycos preferred stock, if any, the holders of
Lycos common stock are entitled to receive dividends as may be declared from
time to time by Lycos' board of directors.
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COMPARISON OF RIGHTS AND PREFERENCES OF PREFERRED STOCK.
Quote.com: Upon consummation of the merger, the holders of Quote.com
preferred stock will become holders of Lycos common stock. Thereafter, these
shareholders will no longer be entitled to the following rights, privileges and
preferences of the Quote.com preferred stock:
(i) Dividend Preference: Holders of Quote.com Series A preferred stock, Series
B preferred stock, Series C preferred stock and Series D preferred stock
are entitled to per annum dividends of $0.367, $0.41, $0.66 and $0.731,
respectively, if funds are legally available, payable when, as and if
declared by the Quote.com board of directors. Holders of Quote.com common
stock, subject to the prior rights of the preferred stock, are entitled to
receive dividends out of funds legally available, when, as and if declared
by the Quote.com board of directors. However, the Quote.com board of
directors may not pay any dividends on common stock unless it has first
received the approval of at least 80% of the then outstanding shares of
Series B preferred stock, Series C preferred stock and Series D preferred
stock, voting together as a single class.
(ii) Liquidation Preference: In the event of any liquidation, dissolution or
winding up of Quote.com, either voluntary or involuntary, in which the
aggregate proceeds to be distributed to all shareholders of Quote.com
equals or exceeds $90.0 million, distributions to the shareholders of
Quote.com will be made in the following manner:
Prior to all other allocations, (i) holders of Quote.com Series B preferred
stock will receive $6.50 for each share of Quote.com Series B preferred stock
held, (ii) holders of Quote.com Series C preferred stock will receive $10.38 for
each share of Quote.com Series C preferred stock held and (iii) holders of
Quote.com Series D preferred stock will receive $11.49 for each share of
Quote.com Series D preferred stock.
Upon completion of the distribution to the holders of Quote.com Series B
preferred stock, Series C preferred stock and Series D preferred stock described
in the immediately preceding paragraph, the holders of Quote.com Series A
preferred stock will be entitled to receive $6.00 per share for each share of
Quote.com Series A preferred stock then held.
Upon completion of the distribution to the holders of Quote.com Series A
preferred stock, Series B preferred stock, Series C preferred stock and Series D
preferred stock described in the immediately preceding two paragraphs, the
remaining assets and funds of Quote.com available for distribution to
shareholders of Quote.com will be distributed ratably among the holders of the
Quote.com preferred stock and the Quote.com common stock based upon the number
of shares of Quote.com common stock held by them (or, in the case of the
Quote.com preferred stock, the number of shares of Quote.com common stock into
which such preferred stock is convertible). This allocation will be made until
(i) holders of Quote.com Series B preferred stock have received $21.58 for each
share of Quote.com Series B preferred stock held, (ii) holders of Quote.com
Series C preferred stock have received $34.48 for each share of Quote.com Series
C preferred stock held and (iii) holders of Quote.com Series D preferred stock
will have received $38.16 for each share of Quote.com Series D preferred stock
held.
After the allocations described in the preceding three paragraphs have been
made, the remaining assets and funds of Quote.com available for distribution to
shareholders of Quote.com will be distributed ratably among the holders of
Quote.com Series A preferred stock and Quote.com common stock based upon the
number of shares of Quote.com common stock held by them (or, in the case of the
Quote.com Series A preferred stock, the number of shares of Quote.com common
stock into which such preferred stock is convertible).
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If the aggregate proceeds are less than $90.0 million then distributions to the
shareholders of Quote.com will be made in the following manner:
Prior to all other allocations, (i) holders of Quote.com Series B preferred
stock will receive $8.50 for each share of Quote.com Series B preferred stock
held, (ii) holders of Quote.com Series C preferred stock will receive $13.58 for
each share of Quote.com Series C preferred stock held, and (iii) holders of
Quote.com Series D preferred stock will receive $15.03 for each share of
Quote.com Series D preferred stock held.
Upon completion of the distribution to the holders of Quote.com Series B
preferred stock, Series C preferred stock and Series D preferred stock described
in the immediately preceding paragraph, the holders of Quote.com Series A
preferred stock will be entitled to receive $6.00 per share for each share of
Quote.com Series A preferred stock then held.
Upon completion of the distribution to the holders of Quote.com Series A
preferred stock, Series B preferred stock, Series C preferred stock and Series D
preferred stock described in the immediately preceding two paragraphs, the
remaining assets and funds of Quote.com available for distribution to
shareholders of Quote.com will be distributed ratably among the holders of the
Quote.com preferred stock and the Quote.com common stock based upon the number
of shares of Quote.com common stock held by them (or, in the case of the
Quote.com preferred stock, the number of shares of Quote.com common stock into
which such preferred stock is convertible). This allocation will be made until
(i) holders of Quote.com Series B preferred stock have received $12.78 for each
share of Quote.com Series B preferred stock held, (ii) holders of Quote.com
Series C preferred stock have received $20.42 for each share of Quote.com Series
C preferred stock held and (iii) holders of Quote.com Series D preferred stock
will have received $22.60 for each share of Quote.com Series D preferred stock
held.
After the allocations described in the preceding three paragraphs have been
made, the remaining assets and funds of Quote.com available for distribution to
shareholders of Quote.com will be distributed ratably among the holders of
Quote.com Series A preferred stock and Quote.com common stock based upon the
number of shares of Quote.com common stock held by them (or, in the case of the
Quote.com Series A preferred stock, the number of shares of Quote.com common
stock into which such preferred stock is convertible).
For the purposes of determining the liquidation preferences due to holders
of Quote.com capital stock, (i) any acquisition of Quote.com by means of merger
or other form of corporate reorganization in which the shareholders of Quote.com
do not own a majority of the outstanding shares of the surviving corporation, or
(ii) a sale of all or substantially all of the assets of Quote.com will in
either case be treated as a liquidation, dissolution or winding up of Quote.com
and will entitle the holders of existing preferred stock and common stock to
receive at the closing cash, securities or other property as specified above.
(iii) Conversion: At the option of the holder, each share of Quote.com preferred
stock may be converted at any time into one share of Quote.com common
stock, subject to adjustment for, among other things, stock splits, stock
dividends and issuances of additional shares of Quote.com common stock and
securities convertible into Quote.com common stock at a per share price
less than the original issue price of such share of Quote.com preferred
stock.
In addition, outstanding shares of Quote.com preferred stock will
automatically convert into shares of Quote.com common stock (subject to
adjustment as described above), as set forth below:
- Each share of Series A preferred stock will automatically be converted
into shares of common stock immediately upon (A) the approval by the
holders of a majority of the then outstanding shares of Series A preferred
stock, or (B) the closing of a firm commitment underwritten public
offering pursuant to an effective registration statement under the
Securities Act of 1933, in
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connection with which all outstanding shares of Series B preferred stock
are converted into shares of common stock.
- Each share of Series B preferred stock will automatically be converted
into shares of common stock immediately upon (A) the approval by the
holders of a majority of the then outstanding shares of Series B preferred
stock or (B) the closing of a firm commitment underwritten public offering
pursuant to an effective registration statement under the Securities Act
of 1933 covering the offer and sale of common stock, the aggregate gross
proceeds of which exceed $15,000,000 at a per share issuance price of at
least $7.50 (appropriately adjusted for any recapitalization).
- Each share of Series C preferred stock will automatically be converted
into shares of common stock at the conversion price at the time in effect
immediately upon (A) the approval by the holders of a majority of the then
outstanding shares of Series C preferred stock or (B) the closing of a
firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933 covering the offer
and sale of common stock, the aggregate gross proceeds of which exceed
$15,000,000 at a per share issuance price of at least $11.98
(appropriately adjusted for any recapitalization).
- Each share of Series D preferred stock will automatically be converted
into shares of common stock immediately upon (A) the approval by the
holders of a majority of the then outstanding shares of Series D preferred
stock or (B) the closing of a firm commitment underwritten public offering
pursuant to an effective registration statement under the Securities Act
of 1933 covering the offer and sale of common stock, the aggregate gross
proceeds of which exceed $15,000,000 at a per share issuance price of at
least $13.25 (appropriately adjusted for any recapitalization).
(iv) Protective Provisions: As a general matter, the holders of Quote.com
preferred stock vote together with the holders of Quote.com common stock
as a single class on all actions to be taken by the Quote.com
shareholders. The Quote.com amended and restated articles of
incorporation, however, provide that Quote.com cannot take the following
actions without the consent of at least 80% of the then outstanding shares
of Series B preferred stock, Series C preferred stock and Series D
preferred stock, voting together as a single class:
- alter or change the rights, preferences or privileges of the shares of
Series B preferred stock, Series C preferred stock or Series D preferred
stock so as to affect such shares adversely;
- authorize or issue any new class or series of stock or any other
securities convertible into equity securities of the corporation having
rights as to dividends, redemption, liquidation or voting on parity with
or superior to those of the Series B preferred stock, Series C preferred
stock or Series D preferred stock;
- pay any dividend on the common stock;
- repurchase any existing preferred stock or common stock, except from
current or former employees, directors or consultants of the corporation
in connection with the termination of the shareholder's employment,
directorship or consulting relationship with the corporation;
- sell, convey, or otherwise dispose of all or substantially all of its
property or business or merge into or consolidate with any other
corporation (other than a wholly owned subsidiary corporation) or effect
any transaction or series of related transactions in which more than 50%
of the voting power of the corporation is disposed of;
- liquidate or dissolve the corporation;
- except as approved by the board of directors of Quote.com, make any loans
or advances to employees (other than in the ordinary course of business as
part of travel advances or salary);
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- mortgage or pledge, or create a security interest in, or permit any
subsidiary to mortgage, pledge or create a security interest in, all or
substantially all of the property of the corporation or such subsidiary of
the corporation, unless approved by the board of directors of Quote.com;
- take any action that would result in taxation of the holders of shares of
the Series B preferred stock, Series C preferred stock or Series D
preferred stock under Section 305 of the Internal Revenue Code (or any
comparable provision of the Internal Revenue Code as from time to time
amended);
- increase the authorized number of directors of Quote.com to more than
seven (7); or
- increase the authorized number of shares of the Series B preferred stock,
the Series C preferred stock or the Series D preferred stock.
In addition, the Quote.com amended and restated articles of incorporation
provide that Quote.com may not liquidate or dissolve the corporation without
obtaining the approval of the holders of at least 66 2/3% of the then
outstanding shares of Series B preferred stock, Series C preferred stock and
Series D preferred stock, voting together as a single class. The Quote.com
amended and restated articles of incorporation also provide that if a series of
existing preferred stock would be adversely affected by an amendment of the
articles in a different manner than the other series of existing preferred
stock, then such amendment will require the approval of the holders of a
majority of the then outstanding shares of such affected series.
(v) Redemption Rights: Neither the Quote.com preferred stock nor the Quote.com
common stock is redeemable.
(vi) Election of Directors: In an election of directors to the Quote.com board
of directors, the Quote.com amended and restated articles of incorporation
provide that (i) so long as at least 500,000 shares of Series B preferred
stock are outstanding, the holders of shares of Series B preferred stock,
voting separately as a class, shall have the right to elect one member of
the board of directors, (ii) so long as at least 500,000 shares of Series
B preferred stock remain outstanding, the holders of shares of Series A
preferred stock and common stock, voting together as a class, shall have
the right to elect two members of the board of directors, (iii) so long as
at least 285,000 shares of Series C preferred stock remain outstanding,
the holders of shares of Series C preferred stock, voting separately as a
class, shall have the right to elect one member of the board of directors,
(iv) for so long as at least 140,000 shares of Series D preferred stock
remain outstanding, the holders of shares of Series D preferred stock,
voting separately as a class shall have the right to elect one member of
the board of directors, and (v) each additional member of the board of
directors, if any, shall be elected by the vote of the holders of the
existing preferred stock and the holders of the common stock, voting
together as a single class.
(vii) Contractual Rights: Certain contractual rights presently possessed by
holders of Quote.com preferred stock will cease to exist after the merger,
including but not limited to, certain information rights, registration
rights, rights of representation on the Quote.com board of directors,
rights to attend meetings of the Quote.com board of directors and other
rights unique to the organization and financing of Quote.com.
Lycos: The Lycos board of directors is authorized to issue up to 5,000,000
shares of preferred stock. The Lycos board of directors may issue one or more
series of preferred stock and may fix the relative rights, preferences,
privileges, qualifications, limitations and restrictions of each series of
preferred stock, including dividend rights, dividend rates, conversion rights,
voting rights, terms of redemption prices, liquidation preferences and the
number of shares constituting any series or the designation of such series. The
rights of the holders of Lycos common stock will be subject to, and may be
adversely affected by, the rights of the holders of any preferred stock that may
be issued in the future. The issuance of preferred stock, while providing
desirable flexibility in connection with possible
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acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire a majority of the outstanding voting
stock of Lycos.
COMPARISON OF SECURITYHOLDER RIGHTS.
VOTE REQUIRED FOR EXTRAORDINARY TRANSACTIONS. The CCC requires that the
principal terms of a merger be approved by the affirmative vote of a majority of
the outstanding shares of each class entitled to vote thereon, except that,
unless required by its articles of incorporation, no authorizing shareholder
vote is required of a corporation surviving a merger if the shareholders of such
corporation shall own, immediately after the merger, more than five-sixths of
the voting power of the surviving corporation. However, the Quote.com amended
and restated articles of incorporation require a greater percentage vote for
such transactions. Specifically, in the event of a merger of Quote.com into
another corporation (other than a wholly owned subsidiary of Quote.com),
Quote.com must obtain the approval of (i) the holders of record of a majority of
the outstanding preferred stock and a majority of the outstanding common stock,
voting together as a single class, (ii) the holders of record of at least a
majority of the outstanding shares of (a) Quote.com common stock, voting as a
separate class, and (b) Quote.com preferred stock, voting as a separate class,
and (iii) the holders of record of at least 80% of the outstanding shares of
Series B preferred stock, Series C preferred stock and Series D preferred stock,
voting together as a single class. The CCC further requires the affirmative vote
of a majority of the outstanding shares entitled to vote thereon if (a) the
surviving corporation's articles of incorporation will be amended and would
otherwise require shareholder approval or (b) shareholders of such corporation
will receive shares of the surviving corporation having different rights,
preferences, privileges or restrictions (including shares in a foreign
corporation) than the shares surrendered. Shareholder approval is not required
under the CCC for mergers or consolidations in which a parent corporation merges
or consolidates with a subsidiary of which it owns at least 90% of the
outstanding shares of each class of stock.
The DGCL requires the affirmative vote of a majority of the outstanding
stock entitled to vote thereon to authorize any merger or consolidation of a
corporation, except that, unless required by its certificate of incorporation,
no authorizing stockholder vote is required of a corporation surviving a merger
if (a) such corporation's certificate of incorporation is not amended in any
respect by the merger; (b) each share of stock of such corporation outstanding
immediately prior to the effective date of the merger will be an identical
outstanding or treasury share of the surviving corporation after the effective
date of the merger; and (c) the number of shares to be issued in the merger does
not exceed 20% of such corporation's outstanding common stock immediately prior
to the effective date of the merger. The Lycos restated certificate of
incorporation does not require a greater percentage vote for such actions.
Stockholder approval is also not required under the DGCL for mergers or
consolidations in which a parent corporation merges or consolidates with a
subsidiary of which it owns at least 90% of the outstanding shares of each class
of stock.
ANTI-TAKEOVER PROVISIONS AND INTERESTED STOCKHOLDER TRANSACTIONS. The
Quote.com bylaws provide that in addition to the board of directors, the
chairman of the board of directors and the president, one or more shareholders
holding not less than 10% of the voting power of the corporation may call a
special meeting of the shareholders.
The Lycos bylaws provide that special meetings of stockholders may be called
by the President, the Chairman of the board of directors or by the board of
directors, unless otherwise prescribed by applicable law.
The DGCL prohibits, in certain circumstances, a "business combination"
between the corporation and an "interested stockholder" within three years of
the stockholder becoming an "interested stockholder." An "interested
stockholder" is a holder who, directly or indirectly, controls 15% or more of
the outstanding voting stock or is an affiliate of the corporation and was the
owner of 15% or more of the outstanding voting stock at any time within the
prior three year period. A "business
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combination" includes a merger or consolidation involving the corporation and
the interested stockholder, a sale or other disposition of assets having an
aggregate market value equal to 10% or more of the consolidated assets of the
corporation or the aggregate market value of the outstanding stock of the
corporation involving the corporation and the interested stockholder, certain
transactions that would increase the interested stockholder's proportionate
share ownership in the corporation and the receipt by the interested stockholder
of the benefit of any loans, advances, guarantees, pledges or other financial
benefits provided by or through the corporation. This provision does not apply
where: (i) either the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder is approved by the
corporation's board of directors prior to the date the interested stockholder
acquired such 15% interest; (ii) upon the consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the outstanding voting stock of the
corporation excluding for the purposes of determining the number of shares
outstanding shares held by persons who are directors and also officers and by
employee stock plans in which participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered; (iii)
the business combination is approved by a majority of the board of directors and
the affirmative vote of two-thirds of the outstanding votes entitled to be cast
by disinterested stockholders at an annual or special meeting; (iv) the
corporation does not have a class of voting stock that is listed on a national
securities exchange, authorized for quotation on an inter-dealer quotation
system of a registered national securities association, or held of record by
more than 2,000 stockholders unless any of the foregoing results from action
taken, directly or indirectly, by an interested stockholder or from a
transaction in which a person becomes an interested stockholder; (v) the
stockholder acquires a 15% interest inadvertently and divests itself of such
ownership and would not have been a 15% stockholder in the preceding 3 years but
for the inadvertent acquisition of ownership; (vi) the stockholder acquired the
15% interest when these restrictions did not apply; or (vii) the corporation has
opted out of this provision. Lycos has not opted out of this provision.
Under the CCC, there is no comparable provision. However, the CCC does
provide that, except where the fairness of the terms and conditions of the
transaction has been approved by the California Commissioner of Corporations and
except in a "short-form" merger (the merger of a parent corporation with a
subsidiary in which the parent owns at least 90% of the outstanding shares of
each class of the subsidiary's stock), if the surviving corporation or its
parent corporation owns, directly or indirectly, shares of the target
corporation representing more than 50% of the voting power of the target
corporation prior to the merger, the nonredeemable common stock of a target
corporation may be converted only into nonredeemable common stock of the
surviving corporation or its parent corporation, unless all of the shareholders
of the class consent. The effect of this provision is to prohibit a cash-out
merger of minority shareholders, except where the majority shareholders already
own 90% or more of the voting power of the target corporation and could,
therefore, effect a short-form merger to accomplish such a cash-out of minority
shareholders.
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DIRECTOR NOMINATIONS. The Quote.com bylaws require advance notice of
director nominations.
The Lycos bylaws require advance notice of director nominations. To be
timely, such notice must be delivered to the secretary of Lycos not later than
(1) with respect to an annual meeting or a special meeting in lieu of an annual
meeting, 60 days prior to the first anniversary of the date the initial notice
to the previous year's annual meeting of stockholders or special meeting in lieu
of an annual meeting, and (2) with respect to a special meeting of stockholders
not in lieu of an annual meeting, the close of business on the tenth day
following the date on which notice of such meeting is first given to
stockholders. The notice must include (1) information concerning the
stockholder, including his or her name and address, (2) a representation that
the stockholder is entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to present the matter specified in the notice,
and (3) such other information as would be required to be included in a
definitive proxy statement for the presentation of such matter to the
stockholders.
AMENDMENT TO GOVERNING DOCUMENTS. Unless otherwise specified in a
California corporation's articles of incorporation, an amendment to the articles
of incorporation requires the approval of the corporation's board of directors
and the affirmative vote of a majority of the outstanding shares entitled to
vote thereon, either before or after the board of directors approval, although
certain minor amendments may be adopted by the board of directors alone such as
amendments causing stock splits (including an increase in the authorized number
of shares in proportion thereto) and amendments changing names and addresses
given in the articles of incorporation, as set forth in the protective
provisions of the Quote.com articles. However, the Quote.com articles require a
greater level of approval for certain amendments thereto. Under the CCC, the
holders of the outstanding shares of a class are entitled to vote as a class if
a proposed amendment to the articles of incorporation would (i) increase or
decrease the aggregate number of authorized shares of such class; (ii) effect an
exchange, reclassification or cancelation of all or part of the shares of such
class, including a reverse stock split but excluding a stock split; (iii) effect
an exchange, or create a right of exchange, of all or part of the shares of
another class into the shares of such class; (iv) change the rights,
preferences, privileges or restrictions of the shares of such class; (v) create
a new class of shares having rights, preferences or privileges prior to the
shares of such class, or increase the rights, preferences or privileges or the
number of authorized shares of any class having rights, preference or privileges
prior to the shares of such class; (vi) in the case of preferred shares, divide
the shares of any class into series having different rights, preferences,
privileges or restrictions or authorize the board of directors to do so; or
(vii) cancel or otherwise affect dividends on the shares of such class which
have accrued but have not been paid. Under the CCC, a corporation's bylaws may
be adopted, amended or repealed either by the board of directors or the
shareholders of the corporation. The Quote.com bylaws provide that the Quote.com
bylaws may be adopted, amended or repealed either by the vote of the holders of
a majority of the outstanding shares entitled to vote or by the board of
directors; provided, however, that the Quote.com board of directors may not
amend the Quote.com bylaws in order to change the authorized number of directors
without shareholder approval.
The DGCL requires a vote of the corporation's board of directors followed by
the affirmative vote of a majority of the outstanding stock of each class
entitled to vote for any amendment to the certificate of incorporation, unless a
greater level of approval is required by the certificate of incorporation.
Further, the DGCL states that if an amendment would increase or decrease the
aggregate number of authorized shares of such class, increase or decrease the
par value of shares of such class or alter or change the powers, preferences or
special rights of a particular class or series of stock so as to affect them
adversely, the class or series shall be given the power to vote as a class
notwithstanding the absence of any specifically enumerated power in the
certificate of incorporation. The DGCL also states that the power to adopt,
amend or repeal the bylaws of a corporation shall be in the stockholders
entitled to vote, provided that the corporation in its certificate of
incorporation may confer such power on the board of directors in addition to the
stockholders. The Lycos restated
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certificate of incorporation expressly authorizes the board of directors to
adopt, amend or repeal the Lycos bylaws.
APPRAISAL RIGHTS. Under the CCC, if the approval of the outstanding shares
of the corporation is required for a merger or reorganization, each shareholder
entitled to vote on the transaction, and who did not vote in favor of the
reorganization may require the corporation to purchase for cash at their fair
market value the shares owned by such shareholder. No appraisal rights are
available for shares listed on any national securities exchange certified by the
Commissioner of Corporations or listed on the list of OTC margin stocks issued
by the Board of directors of Governors of the Federal Reserve Systems, unless
(a) there exists with respect to such shares any restriction on transfer imposed
by the corporation or by any law or regulation or (b) if demands for payment are
filed with respect to 5% or more of the outstanding shares of that class.
Under the DGCL, holders of shares of any class or series, who neither vote
in favor of the merger or consolidation nor consent thereto in writing, have the
right, in certain circumstances, to dissent from a merger or consolidation by
demanding payment in cash for their shares equal to the fair value (excluding
any appreciation or depreciation as a consequence or in expectation of the
transaction) of such shares, as determined by agreement with the corporation or
by an independent appraiser appointed by a court in an action timely brought by
the corporation or the dissenters. The DGCL grants dissenters' appraisal rights
only in the case of mergers or consolidations and not in the case of a sale or
transfer of assets or a purchase of assets for stock regardless of the number of
shares being issued. Further, no appraisal rights are available for shares of
any class or series listed on a national securities exchange or designated as a
national market system security on the Nasdaq National Market or held of record
by more than 2,000 stockholders, unless the agreement of merger or consolidation
converts such shares into anything other than (a) stock of the surviving
corporation; (b) stock of another corporation which is either listed on a
national securities exchange or designated as a national market system security
on the Nasdaq National Market or held of record by more than 2,000 stockholders;
(c) cash in lieu of fractional shares; or (d) some combination of the above. In
addition, dissenters' rights are not available for any shares of the surviving
corporation if the merger did not require the vote of the stockholders of the
surviving corporation.
DERIVATIVE ACTION. The CCC provides that a shareholder bringing a
derivative action on behalf of the corporation must have been a shareholder at
the time of the transaction in question or that plaintiff's shares thereafter
devolved upon plaintiff by operation of law from a holder who was a holder at
the time of the transaction or any part thereof complained of; provided, that
any shareholder who does not meet these requirements may nevertheless be allowed
in the discretion of the court to maintain the action upon meeting certain
specified requirements. In addition, the shareholder must allege with
particularity the shareholder's efforts to secure from the board such action as
the shareholder requires or the reasons for not making such efforts, and alleges
further that the shareholder has either informed the corporation or the board of
directors in writing of the ultimate facts of each cause of action against each
defendant or delivered to the corporation or the board a true copy of the
complaint which the shareholder proposes to file. The CCC also provides that the
corporation or the defendant in a derivative suit may make a motion to the court
for an order requiring the plaintiff shareholder to furnish a security bond.
Derivative actions may be brought in Delaware by a stockholder on behalf of,
and for the benefit of, the corporation. The DGCL provides that a stockholder
must aver in the complaint that he or she was a stockholder of the corporation
at the time of the transaction of which he or she complains. A stockholder may
not sue derivatively unless he first makes demand on the corporation that it
bring suit and such demand has been refused, unless it is shown that such demand
would have been futile.
STOCKHOLDER CONSENT IN LIEU OF MEETING. Under the CCC and the DGCL, unless
otherwise provided in the articles or certificate of incorporation, any action
required to be taken or which may be
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taken at an annual or special meeting of stockholders may be taken without a
meeting if a consent in writing is signed by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize such action at a meeting at which all shares entitled to vote were
present and voted. Under the CCC, if consent is sought from less than all
shareholders entitled to vote, prompt notice of the action taken by written
consent in the form required under the CCC is required to be provided to all
shareholders entitled to vote who did not consent in writing. In addition,
unless the consents of all shareholders entitled to vote have been solicited in
writing, notice of any shareholder approval pursuant to certain specified
provisions of the CCC shall be given at least 10 days before consummation of the
action authorized by such approval. The Quote.com amended and restated articles
of incorporation do not prohibit shareholder action by written consent. The
Lycos restated certificate of incorporation permits stockholder action without a
meeting only by unanimous written consent of all of the Lycos stockholders
entitled to vote on such action.
FIDUCIARY DUTIES OF DIRECTORS. Directors of corporations incorporated or
organized under the CCC and the DGCL have fiduciary obligations to the
corporation and its shareholders. Pursuant to these fiduciary obligations, the
directors must act in accordance with the so-called duties of "due care" and
"loyalty." Under the CCC, the duty of loyalty requires directors to perform
their duties in good faith in a manner that the director reasonably believes to
be in the best interests of the corporation and its shareholders. The duty of
care requires that the directors act with such care, including reasonable
inquiry, as an ordinarily prudent person in a like position would exercise under
similar circumstances.
Under the DGCL, the duty of care requires that the directors act in an
informed and deliberative manner and to inform themselves, prior to making a
business decision, of all material information reasonably available to them. The
duty of loyalty may be summarized as the duty to act in good faith, not out of
self-interest and in a manner that the directors reasonably believe to be in the
best interests of the corporation.
STOCKHOLDER PROPOSALS. The Lycos bylaws provide that any business to be
brought before a stockholders meeting must be of a nature that is appropriate
for consideration at an annual meeting and must be (1) specified in the notice
of meeting, or any supplement to such notice, given by or at the direction of
the Lycos' board of directors or (2) be otherwise properly brought before the
meeting by the stockholder. A written notice conforming to the requirements
outlined in "Comparison of the Rights of Stockholders of Lycos and Shareholders
of Quote.com--Comparison of Securityholders Rights--Director Nominations" on
page 50 is required.
INDEMNIFICATION. Under the CCC, (i) a corporation has the power to
indemnify present and former directors, officers, employees and agents against
expenses, judgments, fines, settlements and other amounts (other than in
connection with actions by or in the right of the corporation) if that person
acted in good faith and in a manner the person reasonably believed to be in the
best interests of the corporation and, in the case of a criminal proceeding, had
no reasonable cause to believe the conduct of the person was unlawful, and (ii)
a corporation has the power to indemnify, with certain exceptions, any person
who is a party to any action by or in the right of the corporation, against
expenses actually and reasonably incurred by that person in connection with the
defense or settlement of the action if the person acted in good faith and in a
manner the person believed to be in the best interests of the corporation and
its shareholders.
The indemnification authorized by the CCC is not exclusive, and a
corporation may grant its directors, officers, employees or other agents certain
additional rights to indemnification. The Quote.com amended and restated
articles of incorporation and the Quote.com bylaws provide for the
indemnification of its agents (as defined under the CCC) to the fullest extent
permissible under the CCC, which may be in excess of the indemnification
expressly permitted by Section 317 of the CCC, subject to the limits set forth
in Section 204 of the CCC with respect to actions for breach of duty to the
corporation and its shareholders.
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Under the DGCL expenses incurred by an officer or director in defending any
action may be paid in advance, if such director or officer undertakes to repay
such amounts if it is ultimately determined that he or she is not entitled to
indemnification. In addition, the DGCL authorizes a corporation's purchase of
indemnity insurance for the benefit of its officers, directors, employees and
agents whether or not the corporation would have the power to indemnify against
the liability covered by the policy. The DGCL also permits a Delaware
corporation to provide indemnification in excess of that provided by statute.
The DGCL does not require authorizing provisions in the certificate of
incorporation. Limitations on indemnification may be imposed by a court based on
principles of public policy. The Lycos amended any restated bylaws provide for
indemnification of directors, officers and certain other persons associated with
Lycos.
The CCC and the DGCL allow for the advance payment of an indemnitee's
expenses prior to the final disposition of an action, provided that the
indemnitee undertakes to repay any such amount advanced if it is later
determined that the indemnitee is not entitled to indemnification with regard to
the action for which the expenses were advanced.
DIRECTOR LIABILITY. The CCC and the DGCL each provide that the charter
documents of the corporation may include provisions which limit or eliminate the
liability of directors to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided such liability does
not arise from certain proscribed conduct, including, in the case of the DGCL,
for any breach of the director's duty of loyalty to the corporation or its
stockholders, acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, the payment of unlawful dividends or
expenditure of funds for unlawful stock purchases or redemptions or transactions
from which such director derived an improper personal benefit, or, in the case
of the CCC, intentional misconduct or knowing and culpable violation of law,
acts or omissions that a director believes to be contrary to the best interests
of the corporation or its shareholders or that involve the absence of good faith
on the part of the director, the receipt of an improper personal benefit, acts
or omissions that show reckless disregard for the director's duty to the
corporation or its shareholders, where the director in the ordinary course of
performing a director's duties should be aware of a risk of serious injury to
the corporation or its shareholders, acts or omissions that constitute an
unexcused pattern of inattention that amounts to an abdication of the director's
duty to the corporation and its shareholders, interested transactions between
the corporation and a director in which a director has a material financial
interest and liability for improper distributions, loans or guarantees. The
Quote.com amended and restated articles of incorporation contain a provision
limiting the liability of its directors to the fullest extent provided by the
CCC. The Lycos restated certificate of incorporation contains a provision
eliminating the liability of directors to the corporation or its stockholders
for monetary damages for certain breaches of their fiduciary duty.
CUMULATIVE VOTING. In an election of directors under cumulative voting,
each share of stock normally having one vote is entitled to a number of votes
equal to the number of directors to be elected. A stockholder may then cast all
such votes for a single candidate or may allocate them among as many candidates
as the stockholder may choose. Without cumulative voting, the holders of a
majority of the shares present at an annual meeting or any special meeting held
to elect directors would have the power to elect all the directors to be elected
at that meeting, and no person could be elected without the support of holders
of a majority of the shares voting at such meeting.
The CCC provides any shareholder with the right to cumulate his or her votes
in the election of directors upon proper notice of his or her intention to do
so. The Quote.com bylaws provide that Quote.com shareholders may cumulate their
votes for the election of directors provided that the candidate's name has been
placed in nomination prior to the voting and one or more shareholders has given
notice at the meeting prior to the voting of the shareholder's intent to
cumulate the shareholder's vote. Under the DGCL, cumulative voting in the
election of directors is a permitted option. The Lycos
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restated certificate of incorporation and the Lycos amended and restated bylaws
do not permit cumulative voting.
ADVANCE NOTICE OF MEETING DATE. The CCC and Quote.com's bylaws require that
shareholders of record be provided prior written notice no more than 60 days nor
less than 10 days of the date for any meeting of shareholders.
The DGCL requires that stockholders be provided prior written notice no more
than 60 days nor less than 10 days before the date of the meeting of
stockholders.
INSPECTION OF BOOKS AND RECORDS. The CCC and the DGCL allow any shareholder
to inspect the accounting books and records and minutes of proceedings of the
shareholders and the board of directors and to inspect the shareholders' list at
any reasonable time during usual business hours, for a purpose reasonably
related to such holder's interests as a shareholder. Additionally, the CCC
provides for an absolute right to inspect and copy the corporation's
shareholders list by a shareholder or shareholders holding at least 5% in the
aggregate of the of the corporation's outstanding voting shares, or any
shareholder or shareholders holding 1% or more of such shares who have filed a
Schedule 14A with the SEC.
SIZE OF THE BOARD OF DIRECTORS. Under the CCC, as provided in the articles
of incorporation or bylaws, the number of directors may be specific or may be
not less than a stated minimum nor more than a stated maximum, with the exact
number to be fixed by the board of directors or shareholders. The CCC provides
that if a company has more than two shareholders, the minimum number of
directors cannot be less than three. A bylaw changing or fixing a number of
directors may only be adopted by approval of a majority of the outstanding
shares. The current number of Quote.com directors is set at seven.
The DGCL states that the board of directors shall consist of one or more
members with the number of directors to be fixed as provided in the bylaws of
the corporation, unless the certificate of incorporation fixes the number of
directors, in which case a change in the number of directors shall be made only
by amendment of the certificate of incorporation. The Lycos amended and restated
bylaws provide that the number of directors which shall constitute the board of
directors shall be fixed from time to time exclusively by the Lycos board of
directors. The number of directors may be decreased at any time and from time to
time by a majority of the directors then in office, but only to eliminate
vacancies existing by reason of death, resignation, removal or expiration of the
term of a director.
CLASSIFIED BOARD OF DIRECTORS. A classified board is one on which a certain
number of directors, but not necessarily all, are elected on a rotating basis
each year. Under the CCC, directors generally must be elected annually. However,
a "listed corporation," as defined below, is permitted to adopt a classified
board. Quote.com is not a listed corporation and neither the Quote.com amended
and restated articles of incorporation nor the Quote.com bylaws provide for a
classified board of directors.
A "listed corporation" is defined under the CCC as a corporation with
outstanding securities listed on the New York Stock Exchange or the American
Stock Exchange or designated as qualified for trading as a national market
system security on the National Association Quotation System (or any successor
national market system).
Delaware law permits, but does not require, a classified board of directors,
under which the directors can be divided into as many as three classes with
staggered terms of office, with only one class of directors standing for
election each year.
The Lycos certificate provides for a classified board of directors with
three classes of directors. Lycos board of directors is currently divided into
three classes: Class I, whose term expires at the annual meeting of stockholders
held in 1999 and consists of one member, Robert J. Davis; Class II, whose term
expires at the annual meeting of stockholders held in 2000 and consists of two
members,
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Daniel J. Nova and Richard H. Sabot; and Class III, whose term expires at the
annual meeting of stockholders held in 2001 and consists of one member, John M.
Connors, Jr. Subsequently, each term will expire at each third succeeding annual
meeting of stockholders.
REMOVAL OF DIRECTORS. The CCC provides that the board of directors may
declare vacant the office of a director who has been declared of unsound mind by
an order of court or who has been convicted of a felony. Further, any director
or the entire board of directors may be removed, with or without cause, with the
approval of a majority of the outstanding shares entitled to vote thereon;
however, no director may be removed (unless the entire board of directors is
removed) if the number of shares voted against the removal would be sufficient
to elect the director under cumulative voting. Shareholders holding at least 10%
of the outstanding shares in any class may sue in superior county court to
remove from office any officer or director for fraud, dishonest acts or gross
abuse of authority or discretion.
The Lycos restated certificate of incorporation provides for the removal of
directors by a majority vote of Lycos stockholders only for cause.
TRANSACTIONS INVOLVING DIRECTORS. Both the CCC and the DGCL state that any
contract or transaction between a corporation and any of its directors, or a
second corporation in which a director has a material financial interest is not
void or voidable if either (a) the material facts as to the transaction and as
to the director's interest are fully disclosed and a majority of the
disinterested shareholders represented and voting at a duly held meeting approve
or ratify the transaction in good faith, (b) after full disclosure the
transaction is approved by the board of directors or a committee in good faith
by a vote sufficient without counting the vote of the interested director and
the transaction is just and reasonable to the corporation, or (c) the person
asserting the validity of the contract or transaction sustains the burden of
proving that the contract or transaction was just and reasonable as to the
corporation at the time it was authorized, approved or ratified.
FILLING VACANCIES ON THE BOARD OF DIRECTORS. Under the CCC, any vacancy on
the board of directors other than one created by removal of a director may be
filled by the board of directors, unless otherwise provided in the articles of
incorporation or bylaws. If the number of directors is less than a quorum, a
vacancy may be filled by the unanimous written consent of the directors then in
office, by the affirmative vote of a majority of the directors at a meeting held
pursuant to notice or waivers of notice or by a sole remaining director. A
vacancy created by removal of a director can only be filled by the shareholders
unless board of directors approval is authorized by a corporation's articles of
incorporation or by a bylaw approved by the corporation's shareholders. The
Quote.com bylaws provide that vacancies created by the removal of a director may
be filled only by the approval of the shareholders.
The DGCL provides that, unless otherwise provided in the certificate of
incorporation or bylaws, vacancies may be filled by a majority of the directors
then in office, although less than a quorum, or by a sole remaining director.
Further, if, at the time of filling any vacancy, the directors then in office
shall constitute less than a majority of the whole board of directors, the Court
of Chancery may, upon application of any stockholder or stockholders holding at
least 10% of the total number of the shares at the time outstanding having the
right to vote for such directors, summarily order any election to be held to
fill any such vacancies or newly created directorships, or to replace the
directors chosen by the directors then in office. The Lycos amended and restated
bylaws provide that vacancies in the office of a director and newly created
directorships shall be filled by a majority of the directors then in office,
though less than a quorum, unless previously filled by the Lycos stockholders.
DISSOLUTION. Under the CCC, shareholders holding 50% or more of the total
voting power may authorize a corporation's voluntary dissolution, with or
without the approval of the corporation's board of directors, and this right may
not be modified by the articles of incorporation. In addition, one-half
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or more of the directors in office, a shareholder or shareholders who hold
shares representing not less than 33 1/3 percent of the total outstanding shares
(assuming conversion of any convertible preferred shares) or the outstanding
common shares or any other person expressly authorized to do so in the articles
may file in the superior court of the proper county a verified complaint for
involuntary dissolution on any one or more of the grounds specified in the
statute.
Under the DGCL, unless the board of directors approves the proposal to
dissolve, the dissolution must be unanimously approved by all the stockholders
entitled to vote thereon. Only if the dissolution is initially approved by the
board of directors may the dissolution be approved by a simple majority of the
outstanding shares of the corporation's stock entitled to vote. In the event of
such a board-initiated dissolution, the DGCL allows a Delaware corporation to
include in its certificate of incorporation a supermajority voting requirement
in connection with dissolutions. The Lycos restated certificate of incorporation
contains no such supermajority voting requirement.
The foregoing discussion of certain similarities and material differences
between the rights of Quote.com shareholders and the rights of Lycos
stockholders under their respective corporate charters and bylaws is only a
summary of certain provisions and does not purport to be a complete description
of such similarities and differences, and is qualified in its entirety by
reference to the CCC and the DGCL, the common law thereunder and the full text
of the corporate charters and bylaws of each of Quote.com and Lycos.
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BUSINESS OF LYCOS
Lycos, "Your Personal Internet Guide," is a "New Generation Online Service"
that offers through the Internet a network of online services and content
including community, chat, e-mail and on-line shopping. Lycos seeks to draw a
large number of viewers to its websites by providing a one-stop destination for
identifying, selecting and accessing resources, services, content and
information on the Internet. The Lycos network is dedicated to helping each
individual user locate, retrieve and manage information tailored to his or her
personal interests.
Since its inception in June 1995, Lycos has rapidly expanded into a global
Internet resource used daily by millions of people throughout the world. Lycos
is one of the leading online media services in terms of level of use of its
Website, revenues and user reach, serving millions of information requests per
day. According to Media Metrix, Lycos' Websites attracted approximately 46.5% of
all Internet users during August, 1999. Lycos generates revenues primarily
through selling advertising and sponsorships, electronic commerce and by
licensing its products and technology. Lycos' Websites have become a widely
accepted advertising medium for several prominent companies, including
Coca-Cola, Disney, General Motors, Hilton, IBM, Proctor and Gamble and Visa.
Lycos has established electronic commerce and sponsorship relationships with
several companies, including First USA Bank, Web MD, Barnes & Noble, Fleet Bank
and Preview Travel. In addition, Lycos has established strategic licensing and
technological alliances with some of the world's leading corporations, including
such companies as Bertelsmann, Sumitomo, Microsoft and Viacom.
Lycos' ability to easily adapt its technology in a variety of languages has
made its service a popular global Internet destination, easily accessible to
users throughout the world. In order to expand the international distribution of
Lycos' services, in May 1997, Lycos entered into a joint venture with
Bertelsmann AG to launch local versions of the Lycos service throughout Europe.
In March 1998, Lycos entered into a joint venture with Sumitomo Corp., and in
April 1999, Lycos entered into a joint venture with Mirae Corp. to offer
localized versions of the Lycos Network Services in Korea. Recently, in
September 1999, Lycos entered into a joint venture agreement with Singapore
Telecommunications Ltd. to offer localized services in up to 14 Asian countries
and Internet Initiative Japan, Inc. to offer a localized version of the Lycos
service in Japan. Lycos currently offers localized versions of the Lycos service
in Austria, Belgium, France, Germany, Italy, Japan, Korea, Luxembourg, the
Netherlands, Spain, Sweden, Switzerland and the United Kingdom.
See "Where You Can Find More Information" on page 71.
BUSINESS OF QUOTE.COM
Quote.com, founded in 1993, is a leading Internet investment information and
tools provider, utilizing both business to consumer and branded business to
business distribution models. Quote.com reaches consumers directly through
www.Quote.com and achieves business to business distribution through direct
sales to retail financial institutions and others worldwide. Through its retail
presence at www.Quote.com, Quote.com provides a comprehensive package of
financial content, tools and transaction capabilities targeted at independent
individual investors and retail oriented professionals such as registered
investment advisors and certified financial planners. Quote.com's retail
services are provided in the form of subscription packages that range from free
to $99.95 per month. Under the Quote.com brand, Quote.com also provides retail
financial institutions a one-stop-shop for Wall Street quality information and
tools that allow them to deliver to their end-customers a full-featured
investment-themed Web site at low cost and with fast time to market.
Quote.com has made available a core set of services for free in order to
attract new and recurring users to its Web site. Through education, promotion
and a focus on the quality of the user's experience on-line, Quote.com expects
to convert many of the free users to subscribers over time as the user
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becomes a more serious or active investor. Currently, the Quote.com site has
over 360,000 registered users.
Quote.com's revenues are derived from four complementary sources:
- Retail subscriptions for premium services where revenues are derived
principally from individuals subscribing to one or more of Quote.com's
subscription offerings. Subscription revenues are recognized ratably in
the period in which the service is delivered, provided no significant
obligations remain for Quote.com.
- Advertising and sponsorships where revenues are derived principally from
short term advertising contracts in which Quote.com guarantees a minimum
level of impressions (a view of an advertising banner or other promotional
unit by the site user) for a fixed fee. Advertising revenues are
recognized ratably in the period in which the advertisement is displayed,
provided no significant obligations remain for Quote.com.
- Co-branded and private label distribution partnerships with third parties
where revenues are derived principally from licensing Quote.com's branded
content to third parties for monthly fees which are either fixed or usage
based. Partner revenues are recognized ratably in the period in which the
service is delivered, provided no significant obligations remain.
- Partnerships with on-line brokers where Quote.com will be paid a small fee
for each order delivered to that broker through Quote.com services and
also receive fees as a percentage of assets under management of an IPO
mutual fund being launched by Hambrecht & Quist and Charles Schwab.
However, revenues from either of these sources have not been significant
to date.
Quote.com's subscription revenue is derived from subscription packages
ranging in price from $19.95 to $99.95 per month. The average subscriber in June
1999 was paying approximately $75 per month, versus approximately $30 per month
in January 1998. Quote.com subscription packages provide access to multiple
sources of market and fundamental data, news, editorial and a variety of
investment tools. Quote.com's premier subscription package provides access to
real-time streaming quotes and analytics, including Level II NASDAQ information.
Advertising and sponsorship revenue is driven by high traffic levels and by
desirable demographics in our user population. Quote.com employs a direct sales
force which focuses on financial services, consumer and luxury goods
advertisers.
Quote.com's partner business focuses on business-to-business content
delivery services primarily focused on retail financial institutions such as
brokerages, mutual fund companies, commercial banks, insurance companies, credit
unions, investment planning firms, and retail accounting firms. These financial
institutions require the highest quality, most comprehensive content and tools
delivered as fast as possible. Quote.com currently has over 150 partner
institutions as customers. Its largest customers include Charles Schwab,
Waterhouse Securities, Vanguard, Bank of America, Sun America and Toronto
Dominion Bank.
Quote.com has also entered into agreements to exchange advertising on its
site for advertisements on Internet sites of other companies. Barter revenues
and expenses are recorded at the fair market value of the services provided or
received. Revenue from barter transactions is recognized as income when the
advertisements are delivered on Quote.com's site. Barter expense is recognized
when Quote.com's advertisements are run on the other company's web site, which
is typically in the same period when the barter revenue is recognized.
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STRATEGY
Through aggressive marketing and distribution partnerships, Quote.com's strategy
is to build a profitable business balancing subscription, advertising and
strategic distribution partnership revenue. Quote.com will try to achieve this
by doing the following:
- Building on Quote.com's pioneering brand recognition, build a solid
premium brand identified as a trusted source of information, tools,
guidance and community for serious individual investors
- Foster strategic relationships with key broadcast and print media and
financial services firms and content providers for cross-marketing and
content in the U.S. and in selected international markets.
- Embrace the community of newer investors by providing community and
education content and tools which enable them to learn how to become
better investors
- Invest in customer service and support infrastructure to build loyalty in
the premium subscriber base, creating opportunity to sell additional
services (e-commerce) provided by Quote.com or partners, including such
services as tax services, estate planning, and other products and services
targeted at a wealthy and motivated demographic.
- Direct advertisement and marketing efforts across multiple media to drive
traffic and new subscriptions
- Continue to develop and deliver superior investment tools, such as
streaming real-time data, easy to use analysis and portfolio tools,
thereby maintaining a lead in value provided to Quote.com's customers
- Providing Wall Street quality services and site experience at consumer
prices by leveraging our low cost of delivery (low bandwidth utilization).
- Extend Quote.com's international presence and content base by partnering
with national financial services and content providers in certain targeted
countries.
PRODUCTS AND SERVICES
Quote.com's collection of information and tools includes some of the most
well-known brand names in the finance industry, including Reuters, First Call,
Standard & Poor's, Dow Jones, and others. Quote.com's proprietary LiveCharts
java applet was the first to deliver streaming data on the Internet, and has
become one of the most popular applets on the Internet. My.Quote.com is a
personalized site allowing Quote.com's customers to select, in one convenient
place, information and services that best meet their needs. Quote.com also owns
proprietary content and analytics, such as the content, commentary and analysis
that appears on our IPO Edge site.
Quote.com currently offers free services, as well as a Plus package for
$19.95 which includes streaming market data through LiveCharts and access to
several fundamental and market data sources. Quote.com's Qcharts package
provides real-time streaming market data and web-based access to fundamental and
market information for $79.95. The Premium Qcharts package is sold for $99.95
per month and includes other premium information services. Quote.com also has a
network of 3(rd) party developers who can use tools, including Quote.com's
real-time market data feed interface, to develop applications that in turn can
be sold and real-time enabled with a subscription to Quote.com's real-time
information services.
Quote.com's Template/Object architecture enables the rapid customization of
online financial Websites, making it possible for Quote.com to build and
maintain financial sites for over 150 partners. Quote.com has developed the
Continuum time-series database and real-time streaming data delivery
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system allowing it to provide unprecedented levels of information at very low
bandwidths, providing it with a cost advantage over other providers, giving its
customers access to many sources of financial information, commentary and
guidance, as well as Wall Street quality applications at consumer prices.
EMPLOYEES
As of September 30, 1999 Quote.com had 93 employees including 48 in
engineering and infrastructure, 38 in sales, marketing, and customer support,
and 7 in finance and administration. From time to time, Quote.com also employs
independent contractors to support its engineering, infrastructure, sales,
marketing and administrative functions.
FACILITIES
Quote.com's headquarters are located in a leased facility consisting of
approximately 30,000 square feet located in Mountain View, California. The lease
expires in March 2004. Quote.com currently sublets approximately 10,000 square
feet of its headquarters facility on a sublease that expires in February 2000.
Quote.com also leases offices for its sales force in New York City, New York.
LITIGATION
Quote.com is not subject to any material legal proceedings. Quote.com has
received a letter dated September 16, 1999, including a draft complaint and a
draft arbitration demand from one of its content providers, ULTRA Trading
Analytics, Inc. In its letter, ULTRA maintains that Quote.com has breached a
software license agreement dated June 21, 1996. ULTRA has threatened to commence
an arbitration proceeding against Lycos and Quote.com and file a lawsuit against
four of the Company's customers. Quote.com's legal counsel is presently
investigating the subject matter of the letter and Quote.com is presently
evaluating the terms of a settlement offer. ULTRA has agreed to not commence any
proceedings so long as Quote.com promptly explores settlement alternatives.
Regardless of the outcome, Quote.com does not believe that ULTRA's claims could
result in a material adverse effect upon the business and operations of
Quote.com.
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QUOTE.COM MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Quote.com, founded in 1993, is a leading Internet investment information and
tools provider, utilizing both business to consumer and branded business to
business distribution models. Quote.com reaches consumers directly through
www.Quote.com and achieves business to business distribution through direct
sales to retail financial institutions and others worldwide. Through its retail
presence at www.Quote.com, Quote.com provides a comprehensive package of
financial content, tools and transaction capabilities targeted at independent
individual investors and retail oriented professionals such as registered
investment advisors and certified financial planners. Quote.com's retail
services are provided in the form of subscription packages that range from free
to $99.95 per month. Under the Quote.com brand, Quote.com also provides retail
financial institutions a one-stop-shop for Wall Street quality information and
tools that allow them to deliver to their end-customers a full featured
investment-themed Web site at low cost and with fast time to market.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 1999 AND MARCH 31,
1998.
NET REVENUES
Total revenues for the six month period ended March 31, 1999 increased by
$389,000 or approximately 7%, to approximately $6.2 million from approximately
$5.8 million for the previous six month period ended March 31, 1998. The
increase was a result of growth in the number of subscriptions and an increase
in the average revenue per subscriber. Increases in subscription revenue more
than offset declines in Advertising and Partnership revenue.
SUBSCRIPTION REVENUE. Subscription revenues for the six month period ended
March 31, 1999 increased by approximately $1.1 million or approximately 99%, to
approximately $2.2 million from approximately $1.1 million for the previous six
month period ended March 31, 1998. The increase was a result of growth in
subscriptions to Quote.com's QCharts and QCharts Premium packages which retail
for $79.99 and $99.99 per month, respectively. The total number of subscribers,
including those subscribing to other packages, grew from approximately 5,400 in
March 1998 to approximately 7,900 in March 1999. QCharts was introduced in March
1998 and has largely been promoted via limited print and on-line advertising and
by word-of-mouth on investment message boards.
ADVERTISING REVENUE. Advertising revenues for the six month period ended
March 31, 1999 decreased by approximately $305,000 or approximately 16%, to
approximately $1.6 million from approximately $1.9 million for the previous six
month period ended March 31, 1998. The decrease was a result of lower
investments in marketing and brand-building activities in late 1998 and early
1999, rumors that Quote.com was for sale, increased competition and lower
advertising rates, as well as declines in the rate of growth of traffic to our
site. Certain large advertising customers did not renew during the six months
ended March 31, 1999.
PARTNERSHIP REVENUE. Partnership revenues for the six month period ended
March 31, 1999 decreased by approximately $371,000 or approximately 13%, to
approximately $2.4 million from approximately $2.8 million for the previous six
month period ended March 31, 1998. The decrease was a result of the loss of some
large customers and increased price competition. A loss of certain partnerships
and a decline in new business can be attributed in part to rumors that Quote.com
was for sale from the summer of 1998 through December 1998.
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COST OF REVENUES
Quote.com's costs of revenues consists of fees paid to third-party data
providers, costs related to Internet connectivity services and infrastructure,
and advertising royalties paid to partners for the right to display online
advertising on co-branded pages served up on partner Web sites. Cost of revenues
for the six month period ended March 31, 1999 increased by approximately
$953,000 or approximately 43%, to approximately $3.2 million from approximately
$2.2 million for the previous six month period ended March 31, 1998. The
increase was a result of increased costs for real-time market data feeds and
news products, as well as the addition of new sources of market and fundamental
information. Quote.com also added additional Internet service providers,
expanding the available bandwidth to accommodate growth in usage of its Web
site, and added headcount in operations to support the growth in Quote.com's
overall infrastructure.
OPERATING EXPENSES
Total Operating Expenses for the six month period ended March 31, 1999
increased by approximately $363,000 or approximately 7%, to approximately $5.7
million from approximately $5.3 million for the previous six month period ended
March 31, 1998. The increase was primarily a result of higher product
development and marketing expenses.
PRODUCT DEVELOPMENT. Product Development expenses for the six month period
ended March 31, 1999 increased by approximately $333,000 or approximately 17%,
to approximately $2.4 million from approximately $2.0 million for the previous
six month period ended March 31, 1998. The increase was primarily a result of
increased headcount in engineering and operations, and increases in the use of
outside contractors to accelerate development of key projects.
SALES AND MARKETING. Sales and Marketing expenses for the six month period
ended March 31, 1999 increased by approximately $329,000 or approximately 15%,
to approximately $2.5 million from approximately $2.1 million for the previous
six month period ended March 31, 1998. The increase was a result of increased
headcount in marketing and additional promotional and travel expenses.
GENERAL AND ADMINISTRATIVE. General and Administrative expenses for the six
month period ended March 31, 1999 increased by approximately $89,000 or
approximately 12%, to approximately $862,000 from approximately $773,000 for the
previous six month period ended March 31, 1998. The increase was a result of
general increases associated with processing larger volumes of business,
increased general corporate expenses and an increase in headcount.
INTEREST EXPENSE (NET). Interest Expense includes interest earned,
discounts taken, credit card discounts, interest paid, loss on sale of assets
and miscellaneous expense and income not associated with operating activities.
Total Interest Expense for the six month period ended March 31, 1999 increased
by approximately $189,000 or approximately 340%, to approximately $245,000 from
approximately $56,000 for the previous six month period ended March 31, 1998.
The increase was substantially a result of an increase in interest paid of
approximately $136,000 for the six months ended March 31, 1999 and an increase
of approximately $49,000 in credit card discounts paid as a result of higher
credit card transaction volume related to increased subscription revenues.
INCOME TAXES. During the six month period ended March 31, 1999, Quote.com
recorded tax benefits of approximately $2.5 million related to the loss from
continuing operations in the current period.
LIQUIDITY AND CAPITAL RESOURCES
Through March 31, 1999, Quote.com financed its operations primarily from
proceeds of the private sale of equity securities and secured debt totaling
approximately $16 million. In November 1998, as a
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result of securing a six month $3.5 million note from a third party, Quote.com
used a portion of the proceeds to repay existing bank indebtedness. At March 31,
1999, Quote.com had cash and cash equivalents of approximately $2.7 million.
Quote.com regularly invests excess funds in short-term interest bearing money
market funds.
Quote.com used cash from operations of approximately $1.1 million in the six
month period ended March 31, 1999, due primarily to the net loss. Capital
expenditures have been primarily for computer equipment and software to support
expansion of Quote.com's operations and management information systems. As of
March 31, 1999, Quote.com's principal commitments for capital expenditures
consisted of obligations under capital leases of approximately $130,000 and
equipment related notes totaling approximately $280,000.
Quote.com management believes that its current cash reserves as well as
commitments to secure interim funding from its principal preferred shareholders
will be sufficient to meet its anticipated cash needs for working capital and
capital expenditures through the expected closing of the merger with Lycos. For
longer term funding, Quote.com would seek to sell additional equity or debt
securities.
RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 1998, 1997 and
1996
NET REVENUES
Total revenues for the fiscal year ended September 30, 1998 increased by
approximately $4.4 million or approximately 61%, to approximately $11.5 million
from approximately $7.1 million in 1997 and by approximately $4.6 million or
188% from approximately $2.5 million in 1996. The increase was a result of
growth in the partner business line, increases in advertising revenue, and, to a
lesser extent, increases in subscription revenue.
SUBSCRIPTION REVENUE. Subscription revenues for the fiscal year ended
September 30, 1998 increased by approximately $679,000 or approximately 37%, to
approximately $2.5 million from approximately $1.8 million in 1997 and by
approximately $372,000 or approximately 25% from approximately $1.5 million in
1996. The increase was a direct result of growth in the number of subscribers to
Quote.com's suite of packages. The total number of paying subscribers grew from
approximately 4,900 in September 1997 to approximately 6,400 in September 1998.
ADVERTISING REVENUE. Advertising revenues for the fiscal year ended
September 30, 1998 increased by approximately $1.4 million or approximately 68%,
to approximately $3.5 million from approximately $2.1 million in 1997 and by
approximately $1.6 million or approximately 336% from approximately $475,000 in
1996. The 1998 increase was primarily a result of increases in site traffic and
inventory available for sale to advertisers over the prior fiscal year. The 1997
increase was primarily as a result of only four months of advertising activity
recorded in 1996.
PARTNERSHIP REVENUE. Partnership revenues for the fiscal year ended
September 30, 1998 increased by approximately $2.6 million or approximately 93%,
to approximately $5.4 million from approximately $2.8 million in 1997 and by
approximately $2.3 million or approximately 429% from approximately $526,000 in
1996. The 1998 increase was a result of closing several significant new partner
contracts. The 1997 increase included the benefits of twelve month of recorded
activity for several large partners who became customers during the course of
1996.
COST OF REVENUES
Quote.com's costs of revenues consists of fees paid to third-party data
providers, costs related to Internet connectivity services and infrastructure,
and advertising royalties paid to partners for the right to display online
advertising on co-branded pages served up on partner Web sites. Cost of revenues
for the fiscal year ended September 30, 1998, increased by approximately $1.9
million or approximately
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69%, to approximately $4.7 million from approximately $2.8 million in 1997 and
by approximately $2.2 million or approximately 319% from approximately $674,000
in 1996. The increases were primarily due to the addition of new sources of
market and fundamental information, increases in costs for existing sources of
market and fundamental information, increases in demand for real-time market
data feeds and news products, increases in advertising royalties paid to
partners and increases in infrastructure and other support costs.
OPERATING EXPENSES
Total Operating Expenses for the fiscal year ended September 30, 1998,
increased by approximately $1.1 million or approximately 12%, to approximately
$10.1 million from approximately $9.0 million in 1997 and by approximately $5.2
million or approximately 137% from approximately $3.8 million in 1996. The 1998
increases were primarily a result of increased research and development costs,
including increases in salary expense, as well as increased depreciation expense
associated with capital expenditures, increases in rent and related facilities
costs, and an in-process research and development charge related to Quote.com's
acquisition of Halley's Software in March 1998. The 1997 increases were
primarily as a result of increased headcount in all areas of the business,
increases in rent and related facilities costs, and increased marketing and
advertising expenses.
PRODUCT DEVELOPMENT. Product Development expenses consist primarily of
compensation and benefits expenses for engineering and operations personnel,
consulting fees, infrastructure fees and allocated costs. Product Development
expenses for the fiscal year ended September 30, 1998 increased by approximately
$1.0 million or approximately 31%, to approximately $4.3 million from
approximately $3.3 million in 1997 and by approximately $2.5 million or
approximately 343% from approximately $740,000 in 1996. The increases were
primarily a result of increased headcount in engineering and operations,
including increased expenses for consultants.
SALES AND MARKETING. Sales and Marketing expenses consist primarily of
compensation and benefits expenses, commissions paid to sales representatives,
consulting fees, advertising and promotional expenses including trade show
attendance, and allocated costs. Sales and Marketing expenses for the fiscal
year ended September 30, 1998 decreased by approximately $556,000 or
approximately 13%, to approximately $3.9 million from approximately $4.4 million
for the previous fiscal year and increased by approximately $3.2 million or
approximately 259% from approximately $1.2 million in 1996. The 1998 decrease
was primarily a result of a decrease in amounts spent on advertising, including
a decrease in the use of barter for promotional purposes, and a reduction in our
partner sales force in March 1998. The 1997 increase was primarily a result of
increased headcount in sales and marketing and an increase in marketing and
advertising expenditures, including barter.
GENERAL AND ADMINISTRATIVE. General and Administrative expenses consist
primarily of compensation and benefits costs for finance and administration
personnel, legal, human resources, professional fees, other general corporate
expenses and allocated costs. General and Administrative expenses for the fiscal
year ended September 30, 1998 increased by approximately $239,000 or
approximately 19%, to approximately $1.5 from approximately $1.2 million in 1997
and by approximately $733,000 or approximately 143% from approximately $513,000
in 1996. The increases were a result of general increases associated with
processing larger volumes of business related transactions, including increases
in headcount, general corporate expenses and other related expenses.
CHARGES FOR ACQUIRED RESEARCH AND DEVELOPMENT. In March 1998, Quote.com
acquired Halley's Software in a stock purchase transaction. Upon the
consummation of the acquisition, Quote.com's management made certain assessments
of the identifiable assets resulting from or to be used in research and
development activities as of the respective acquisition dates. In determining
the amount of in-process research and development expense, the activity of
Halley's Software was evaluated to determine the stage of development and
related fair value. Since Halley's Software was a development
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stage company that had not generated significant commercial revenue as of the
acquisition date, significant uncertainty existed in relation to the
introduction of its products and services. As a result of this analysis, and for
the fiscal year ending September, 1998, Quote.com expensed approximately
$388,000 versus no in-process research and development expense for all prior
fiscal years.
Operating losses were approximately $3.4 million in 1998, $4.7 million in
1997 and $2.0 million in 1996. The decrease in operating losses in 1998 was
primarily a result of higher growth rate in revenues versus operating expenses.
INTEREST EXPENSE (NET). Interest Expense includes interest earned,
discounts taken, credit card discounts, Interest Paid, Loss on Sale of Assets
and miscellaneous expense and income not associated with operating activities.
Total Interest Expense for the fiscal year ended September 30, 1998 increased by
approximately $44,000 or approximately 44%, to approximately $145,000 from
approximately $101,000 in 1997 and by approximately $82,000 or approximately
448% from approximately $18,000 in 1996. The increases were substantially a
result of higher interest expenses, higher deferred rent expenses and increased
credit card discounts from processing higher transaction volumes for Quote.com's
subscriptions business.
INCOME TAXES. Income tax expenses recorded during 1998, 1997 and 1996
represent state minimum franchise taxes. Based upon available information, which
includes Quote.com's historical operating losses and the uncertainties regarding
future results of operations of Quote.com, Quote.com provided a full valuation
allowance against its net deferred tax assets during each of these periods, as
it was determined that it was more likely than not that the deferred tax assets
would not be realized. At September 30, 1998, Quote.com had approximately $7.7
million of Federal net operating loss carry-forwards for tax reporting purposes
available to offset future taxable income. Because the merger will result in an
ownership change of Quote.com for purposes of Section 382 of the Internal
Revenue Code, the ability of Quote.com to use these net operating loss carry
forwards to offset taxable income in the future will be limited.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field and cannot distinguish
21(st) century dates from 20(th) century dates. These date code fields will need
to distinguish 21(st) century dates from 20(th) century dates and, as a result,
many companies' software and computer systems may need to be upgraded or
replaced in order to comply with such Year 2000 requirements.
Quote.com has evaluated the Year 2000 readiness of the hardware and software
products sold by Quote.com ("Products"), the information technology systems used
in its operations, and its non-information technology systems, such as building
security, voice mail and other systems. Quote.com's evaluation covered the
following phases: (i) identification of all Products, information technology
systems, and non-information technology systems; (ii) assessment of repair or
replacement requirements; (iii) repair or replacement; (iv) testing; (v)
implementation; and (vi) creation of contingency plans in the event of Year 2000
failures. The initial evaluation was completed in the summer of 1999. Based on
this evaluation, Quote.com believes that its Products are substantially Year
2000 compliant. Final testing will not be completed until the last quarter of
1999.
However, the assessment of whether a complete system or device in which a
product or system is embedded will operate correctly for an end-user depends in
large part on the Year 2000 compliance of the product or system's other
components, many of which are supplied by parties other than Quote.com. Further,
Quote.com relies, both domestically and internationally, upon various vendors,
governmental agencies, utility companies, telecommunications service companies,
delivery service companies and other service providers who are outside of
Quote.com's control. There is no assurance
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that such parties will not suffer a Year 2000 business disruption, which could
have a material adverse effect on Quote.com's financial condition and results of
operations.
To date, Quote.com has not incurred any material expenditures in connection
with identifying or evaluating year 2000 compliance issues. Most of its expenses
have related to the opportunity cost of time spent by employees of Quote.com
evaluating its software, the current versions of its products, and Year 2000
compliance matters generally.
As discussed above, Quote.com is engaged in an ongoing Year 2000 assessment.
The results of this assessment will be taken into account in determining the
nature and extent of any contingency plan. Currently, Quote.com does not have a
Year 2000 contingency plan in place.
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DESCRIPTION OF LYCOS CAPITAL STOCK
The authorized shares of Lycos capital stock consist of 300,000,000 shares
of common stock and 5,000,000 shares of preferred stock.
The following is a summary of certain provisions of the common stock and
preferred stock terms. This summary only summarizes the major terms; it is not a
complete discussion of the terms of the Lycos capital stock.
COMMON STOCK
Lycos common stockholders have one vote per share on matters on which they
may vote. There are no cumulative voting rights. If the Lycos board of directors
declares dividends, then the Lycos common stockholders receive ratable
dividends, subject to the preferential rights of any outstanding Lycos preferred
stock. If Lycos is liquidated or dissolved, then the Lycos common stockholders
will share ratably in Lycos' assets that are distributed to its stockholders,
subject to the preferential rights of any outstanding Lycos preferred stock. The
shares of Lycos common stock outstanding upon the effective date of this proxy
statement/prospectus are, and the shares offered under this proxy statement/
prospectus will be, fully paid and nonassessable when issued and paid for. The
rights, preferences and privileges of Lycos common stockholders are subject to,
and may be adversely affected by, the rights of holders of shares of any
preferred stock that Lycos may issue in the future. As of September 30, 1999,
Lycos had 95,872,211 shares of issued and outstanding common stock.
PREFERRED STOCK
The Lycos board of directors may issue up to 5,000,000 shares of preferred
stock without further stockholder approval. The Lycos board of directors may
issue one or more series of preferred stock and may fix the relative rights,
preferences, privileges, qualifications, limitations and restrictions of each
series of preferred stock, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption prices, liquidation preferences and
the number of shares constituting any series or the designation of such series.
Lycos' ability to issue preferred stock provides desirable flexibility in
connection with possible acquisitions and other corporate purposes. However, if
Lycos issues preferred stock, this could delay, defer or prevent a change in
control of Lycos or discourage bids for Lycos common stock at a premium over the
market price of the common stock and may decrease the market price of the Lycos
common stock. Additionally, the issuance of preferred stock could adversely
affect the voting and other rights of the holders of the Lycos common stock. No
shares of Lycos preferred stock are outstanding or will be outstanding after the
merger. Lycos has no present plans to issue any shares of preferred stock.
CERTAIN RESTATED CERTIFICATE OF INCORPORATION, BY-LAWS AND STATUTORY PROVISIONS
AFFECTING STOCKHOLDERS
CLASSIFIED BOARD AND OTHER MATTERS. Lycos' board of directors is divided
into three classes. Each class serves for three years, and one class is elected
each year. Under the DGCL, unless a corporation's certificate of incorporation
provides otherwise, stockholders may remove a director only for cause if the
corporation's board of directors is divided into classes. Therefore, Lycos
stockholders may only remove a director for cause. If a stockholder wishes to
nominate a person for an election of directors or to bring any other matter
before a meeting of stockholders, then such person must inform Lycos' secretary
of this intent within the time periods specified in Lycos' amended and restated
by-laws. Lycos' restated certificate of incorporation provides that only the
board of directors, the Chairman of the board of directors or the President of
Lycos may call special meetings of Lycos stockholders. The restated certificate
of incorporation also provides that no action required or permitted to be taken
at any annual or special meeting of the Lycos stockholders may be taken without
a meeting, unless the consent of all of the Lycos stockholders entitled to vote
on such action is obtained. The affirmative
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vote of the holders of at least 80% of the combined voting power of then
outstanding voting stock of Lycos, voting together as a single class, is
required to alter, amend or repeal the provisions described above. The
classification of the board of directors, stockholder written consent
requirements and the limitations on the removal of directors and the filing of
vacancies could make it more difficult for a third party to acquire, or
discourage a third party from acquiring, control of Lycos.
See "Comparison of the Rights of Stockholders of Lycos and Shareholders of
Quote.com" on page 43.
DIRECTORS LIABILITY. The restated certificate of incorporation of Lycos
provides that no director will be personally liable to Lycos or its stockholders
for monetary damages for breach of fiduciary duty as a director, except for:
- any breach of the director's duty of loyalty to Lycos or its stockholders;
- acts or omissions not in good faith or which involve intentional
misconduct;
- acts or omissions in respect of certain unlawful dividend payments or
stock redemptions or repurchases; or
- any transaction from which such director derives improper personal
benefit.
This provision eliminates the rights of Lycos and its stockholders, through
stockholders' derivative suits on behalf of Lycos, to recover monetary damages
against a director for breach of the fiduciary duty of care as a director,
including breaches resulting from negligent or grossly negligent behavior,
except in the situations described above. However Lycos or its stockholders may
seek non-monetary based remedies, such as an injunction or rescission, against a
director for breach of his fiduciary duty. The limitations summarized above do
not limit liability under the federal securities laws. Lycos amended and
restated by-laws provide that Lycos will, to the full extent permitted by the
DGCL as currently in effect, indemnify and advance expenses to each of its
currently acting and former directors, officers, employees and agents arising in
connection with their acting in such capacities.
Some of the provisions described above may delay stockholder actions with
respect to business combinations and the election of new members to the board of
directors. As such, the provisions could have the effect of discouraging open
market purchases of Lycos common stock because a stockholder who desires to
participate in a business combination or elect a new director may consider them
disadvantages. The existence of these provisions may depress the market price of
the Lycos common stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Lycos common stock is EquiServe,
L.P.
68
<PAGE>
SECURITY OWNERSHIP OF QUOTE.COM
SECURITY OWNERSHIP OF QUOTE.COM
The following table indicates beneficial ownership of Quote.com capital
stock as of September 30, 1999 by:
- each executive officer and director of Quote.com;
- each shareholder that beneficially owns more than 5% of any class or
series of Quote.com's outstanding capital stock; and
- the executive officers and directors of Quote.com as a group.
Percentage beneficial ownership is based on 2,736,598 shares of common
stock, 1,446,951 shares of Series A preferred stock, 853,659 shares of Series B
preferred stock, 762,700 shares of Series C preferred stock and 413,793 Series D
shares of preferred stock, outstanding as of September 30, 1999. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. Except as indicated by the footnotes below, Quote.com
believes, based on information provided to it, that the persons and entities
named in the table below have sole voting and investment power with respect to
all shares of Quote.com capital stock shown as beneficially owned by them. In
computing the number of shares subject to options or warrants held by any of the
individuals or entities listed below, such shares are deemed outstanding for the
purpose of determining percentage ownership of that individual but are not
deemed outstanding for the purpose of computing the percentage ownership of any
other individual.
The following table also shows the beneficial ownership of Lycos common
stock after the merger by such Quote.com shareholders based upon certain
assumptions described in footnote 17 to the table.
Unless otherwise noted, the principal address of each of the shareholders
listed below is c/o Quote.com, Inc., 850 North Shoreline Boulevard, Mountain
View, CA 94043.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP OF
NUMBER OF QUOTE.COM SHARES BENEFICIALLY OWNED LYCOS COMMON STOCK AFTER
(PERCENTAGE OF SERIES/CLASS BENEFICIALLY OWNED) THE MERGER (17)
----------------------------------------------------------- -------------------------
SERIES B SERIES C SERIES D PERCENTAGE
COMMON SERIES A PREFERRED PREFERRED PREFERRED NUMBER OF OF
NAME STOCK STOCK STOCK STOCK STOCK SHARES COMMON STOCK
- -------------------------------- --------- --------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
EXECUTIVE OFFICERS AND
DIRECTORS:
Christopher L. Cooper (1)....... 1,725,000 1,341,281 -- -- -- 504,938 *
63.0% 92.7%
Michael Moritz (2).............. 113,900 -- 853,659 76,270 -- 254,660 *
4.0% 100.0% 10.0%
Daniel J. Nova (3).............. -- -- -- 572,025 -- 216,476 *
75.0%
Daniel P. Doyle (4)............. -- -- -- -- 413,793 168,303 *
100.0%
Robert L. Honeycutt (5)......... 428,000 -- -- -- -- 48,562 *
13.5%
Akmal Hashmi (6)................ 142,000 -- -- -- -- 16,112 *
4.9%
Pietro Dova (7) ................ 129,722 -- -- -- -- 14,719 *
4.5%
Kaj O.P. Pedersen (8)........... 97,300 -- -- -- -- 11,040 *
3.4%
Aaron A. Barnes (9)............. 80,000 -- -- -- -- 9,077 *
2.8%
Jon S. Hjartberg (10)........... 64,625 -- -- -- -- 7,333 *
2.3%
</TABLE>
69
<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP OF
NUMBER OF QUOTE.COM SHARES BENEFICIALLY OWNED LYCOS COMMON STOCK AFTER
(PERCENTAGE OF SERIES/CLASS BENEFICIALLY OWNED) THE MERGER (17)
----------------------------------------------------------- -------------------------
SERIES B SERIES C SERIES D PERCENTAGE
COMMON SERIES A PREFERRED PREFERRED PREFERRED NUMBER OF OF
NAME STOCK STOCK STOCK STOCK STOCK SHARES COMMON STOCK
- -------------------------------- --------- --------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Karen B. Kelley (11)............ 30,000 -- -- -- -- 3,404 *
1.1%
OTHER 5% SHAREHOLDERS:
AZ Company Ltd.................. 1,725,000 1,341,281 -- -- -- 504,938 *
c/o Fitzgerald & Associates, 6 63.0% 92.7%
Sullivan's Way, Cork, Ireland
(1)
Sequoia Capital,................ 113,900 -- 853,659 76,270 -- 254,660 *
3000 Sand Hill Road, Suite 4.0% 100.0% 10.0%
280, Building 4, Menlo Park,
CA 94025 (12)
Highland Capital Partners,...... -- -- -- 572,025 -- 216,476 *
Two International Place, 75.0%
Boston, MA 02110 (13)
Shawmut Capital, Partners, -- -- -- -- 413,793 168,303 *
Inc.,......................... 100.0%
75 Federal Street, 18(th)
floor, Boston, MA 02110 (14)
Barra, Inc.,.................... 18,000 -- -- 114,405 -- 45,338 *
2100 Milvia Street, Berkeley, * 15.0%
CA 94704
Eric Scott Hunsader,............ 503,610 -- -- -- -- 57,141 *
534 Essex Road, Kenilworth, IL 18.1%
60043 (15)
All executive officers and
directors as a group (11
people) (16).................. 2,810,547 1,341,281 853,659 648,295 413,793 1,254,624 1.3%
73.7% 92.7% 100.0% 85.0% 100.0%
</TABLE>
- ------------------------------
* Less than 1%.
- ------------------------------
(1) Consists of 1,725,000 shares of common stock held by AZ Company Ltd. and
1,341,281 shares of Series A preferred stock held by AZ Company Ltd. Mr.
Cooper has certain contractual arrangements with the directors of AZ Company
Ltd. Mr. Cooper disclaims beneficial ownership of any interest in AZ Company
Ltd. and of shares of Quote.com capital stock held by AZ Company Ltd.
(2) Consists of 113,900 warrants of common stock, 853,659 shares of Series B
preferred stock and 76,270 shares of Series C preferred stock held by
Sequoia Capital. Mr. Moritz is a general partner of Sequoia Capital. Mr.
Moritz disclaims beneficial ownership of these shares except to the extent
of his pecuniary interest therein.
(3) Consists of 572,025 shares of Series C preferred stock held by Highland
Capital Partners. Mr. Nova is a general partner of Highland Capital
Partners. Mr. Nova disclaims beneficial ownership of these shares except to
the extent of his pecuniary interest therein. Ownership after the merger
excludes shares of Lycos common stock held by Mr. Nova or Highland Capital
Partners prior to the closing of the merger.
(4) Consists of 413,793 shares of Series D preferred stock held by Shawmut
Capital Partners, L.P. Mr. Doyle is managing director of Shawmut Capital
Partners, L.P. Mr. Doyle disclaims beneficial ownership of these shares
except to the extent of his pecuniary interest therein.
(5) Includes 428,000 shares subject to options held by Mr. Honeycutt that are
presently exercisable under the terms of Quote.com's 1996 Stock Option Plan.
(6) Includes 142,000 shares subject to options held by Mr. Hashmi that are
presently exercisable under the terms of Quote.com's 1996 Stock Option Plan.
(7) Includes 118,500 shares subject to options held by Mr. Dova that are
presently exercisable under the terms of Quote.com's 1996 Stock Option Plan.
(8) Includes 97,300 shares subject to options held by Mr. Pedersen that are
presently exercisable under the terms of Quote.com's 1996 Stock Option Plan.
70
<PAGE>
(9) Includes 80,000 shares subject to options held by Mr. Barnes that are
presently exercisable under the terms of Quote.com's 1996 Stock Option Plan.
(10) Includes 64,625 shares subject to options held by Mr. Hjartberg that are
presently exercisable under the terms of Quote.com's 1996 Stock Option Plan.
(11) Includes 30,000 shares subject to options held by Ms. Kelley that are
presently exercisable under the terms of Quote.com's 1996 Stock Option Plan.
(12) Includes 105,358 warrants of common stock, 789,635 shares of Series B
preferred stock and 68,796 shares of Series C preferred stock owned by
Sequoia Capital VII; 5,125 warrants of common stock, 38,415 shares of Series
B preferred stock and 3,356 shares of Series C preferred stock owned by
Sequoia Technology Partners VII; 3,417 warrants of common stock and 25,609
shares of Series B preferred stock owned by Sequoia 1995; 2,211 shares of
Series C preferred stock owned by Sequoia 1997; and 1,907 shares of Series C
preferred stock owned by Sequoia International Partners. Mr. Moritz
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest therein.
(13) Includes 549,1444 shares owned by Highland Capital Partners III and 22,881
shares owned by Highland Entrepreneur's Fund III respectively. Mr. Nova
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest therein. Ownership after the merger excludes shares of
Lycos common stock held by Highland Capital Partners prior to the closing of
the merger.
(14) Includes 413,793 shares owned by Shawmut Capital Partners. Mr. Doyle
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest therein.
(15) Includes 50,000 shares subject to options held by Mr. Hunsader that are
presently exercisable under the terms of Quote.com's 1996 Stock Option Plan.
(16) See footnotes 1 through 11 above. Includes 113,900 warrants for common
stock and 960,425 common stock options that are presently exercisable under
the terms of Quote.com's 1996 Stock Option Plan.
(17) Figures assume (a) a Lycos common stock price of $51.25 used to calculate
the merger consideration, (b) Quote.com holds $600,000 in cash (excluding
any payment of fees and expenses incurred in the merger) and has relevant
outstanding indebtedness of $7,400,000 at the time of the closing of the
merger, (c) the cash payment to Mr. Hunsader is $1,181,131 and (d) the fees
and expenses incurred in the merger are $500,000 (excluding fees and
expenses payable to Hambrecht & Quist LLC).
LEGAL MATTERS
The legality of the shares of Lycos common stock offered by this proxy
statement/prospectus will be passed upon for Lycos by Cravath, Swaine & Moore.
Brobeck, Phleger & Harrison LLP, counsel for Quote.com, has delivered an
opinion concerning certain material United States federal income tax
consequences of the merger. See "The Merger-- Material Federal Income Tax
Consequences" on page 32.
EXPERTS
The consolidated financial statements of Lycos incorporated by reference
into this proxy statement/ prospectus have been audited by KPMG LLP, independent
public accountants, as stated in their report appearing in such incorporated
documents. Lycos' consolidated financial statements are incorporated by
reference in this proxy statement/prospectus in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Quote.com included in this proxy
statement/prospectus have been audited by PricewaterhouseCoopers LLP,
independent public accountants, as stated in their report appearing elsewhere
herein. Quote.com' consolidated financial statements are included in this proxy
statement/prospectus in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
71
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Lycos files annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements or
other information Lycos files at the SEC's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Lycos' SEC
filings are also available to the public from commercial document retrieval
services and at the Website maintained by the SEC at www.sec.gov. Lycos has
filed a registration statement to register with the SEC the Lycos common stock
to be issued to Quote.com shareholders in the merger. This proxy
statement/prospectus is part of that registration statement. As allowed by SEC
rules, this proxy statement/prospectus does not contain all of the information
you can find in the registration statement or the exhibits to the registration
statement.
Some of the important business and financial information that you may want
to consider in deciding how to vote is not included in this proxy
statement/prospectus, but rather is "incorporated by reference" to documents
that have been filed by Lycos with the SEC. The information that is incorporated
by reference consists of:
- Lycos' Current Reports on Form 8-K filed on August 11, 1998, August 13,
1998 and October 20, 1998 and on Form 8-K/A filed on October 27, 1998, and
Lycos' Current Reports on Form 8-K for the events reported on February 9,
1999, filed on February 11, 1999 and February 26, 1999, for the events
reported on May 11, 1999, filed on May 14, 1999, for the events reported
on October 5, 1998, filed on July 15, 1999, for the events reported on
July 27, 1999, filed on August 6, 1999, for the events reported on
September 2, 1999, filed on September 16, 1999;
- Lycos' Proxy Statement on Schedule 14A filed on June 16, 1999;
- Lycos' Annual Reports on Form 10-K/A for the year ended July 31, 1998,
filed on February 2, 1999 and on April 16, 1999;. Lycos' Current Reports
on Form 8-K/A for the events reported each of February 2, 1998, April 30,
1998 and August 13, 1998, filed on February 2, 1999;
- Lycos' Quarterly Reports on Form 10-Q for the quarter ended October 31,
1998, filed on December 14, 1998, for the quarter ended January 31, 1999,
filed on March 16, 1999 and for the quarter ended April 30, 1999, filed on
June 1, 1999;
- Lycos' Quarterly Reports on Form 10-Q/A for the quarters ended October 31,
1998 and January 31, 1999, filed on April 16, 1999;
- Lycos' Annual Report on Form 10-K for the fiscal year ended July 31, 1998,
filed on October 29, 1998;
- All documents filed by Lycos under the Securities Exchange Act of 1934
(e.g., Forms 10-Q and 8-K) after the date of this proxy
statement/prospectus and prior to the special meeting.
If there is any contrary information in a previously filed document that is
incorporated by reference, then you should rely on the information in this proxy
statement/prospectus.
If you are a shareholder of Quote.com, you can obtain any of the documents
incorporated by reference through Lycos or the SEC. Documents incorporated by
reference are available from Lycos without charge, excluding all exhibits. You
may obtain documents incorporated by reference in this proxy
statement/prospectus by requesting them in writing to the following address or
by telephone:
Lycos, Inc.
Attention: Investor Relations
400-2 Totten Pond Road
Waltham, Massachusetts 02451
(718) 370-2700
72
<PAGE>
If you would like to request documents from Lycos, please do so by ,
1999 to ensure that you receive them before the special meeting.
If you are a shareholder of Quote.com and have any questions or require
additional material from Quote.com, please call investor relations at Quote.com
at (650) 930-1000 (collect). Copies of the Quote.com by-laws and articles of
incorporation are available without charge, upon written or oral request, from
Quote.com, at the following address:
Quote.com, Inc.
Attention: Investor Relations
850 N. Shoreline Blvd.
Mountain View, CA 94043
(650) 930-1000
If you would like to request document from Quote.com, please do so by
, 1999 to ensure that you receive them before the special meeting.
You should rely on the information contained or incorporated by reference in
this proxy statement/ prospectus to vote on the merger agreement, the merger and
the payment to Mr. Hunsader. We have not authorized anyone to provide you with
information that is different from what is contained in this proxy
statement/prospectus. This proxy statement/prospectus is dated ,
1999 and you should not assume that the information contained in the proxy
statement/prospectus is accurate as of any date other than such date. This proxy
statement/prospectus does not constitute an offer to sell or a solicitation of
an offer to buy any securities, or the solicitation of a proxy, in any
jurisdiction in which, or to any person to whom, it is unlawful to make any such
offer or solicitation.
FORWARD-LOOKING STATEMENTS
We have made forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and of Section 21E of the Securities Exchange Act of
1934 in this document. Forward-looking statements include information concerning
the possible or assumed future results of operations of the combined company as
well as statements preceded by, followed by or that include words such as
"believes," "expects," "anticipates" or similar expressions. Certain important
factors, in addition to those discussed under the caption "Risk Factors" and
elsewhere in this document and in the documents that Lycos has incorporated by
reference, could affect the future results of the combined company and could
cause those results to differ materially from those expressed in our
forward-looking statements. In addition, we do not have any intention or
obligation to update forward-looking statements after we distribute this
document, even if new information, future events or other circumstances have
made them incorrect or misleading.
73
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Quote.com, Inc.:
Independent Auditors' Report............................................................................... F-2
Consolidated Balance Sheets................................................................................ F-3
Consolidated Statements of Operations and Comprehensive Income (Loss)...................................... F-4
Consolidated Statements of Shareholders' (Deficit) Equity.................................................. F-5
Consolidated Statements of Cash Flows...................................................................... F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Quote.com, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of changes in shareholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Quote.com, Inc. and its subsidiary at September 30, 1997 and 1998, and the
results of their operations and their cash flows for the three years ended
September 30, 1996, 1997 and 1998 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred net losses since inception and
additional financing will be needed to enable the Company to fund its
operations. These matters raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
PricewaterhouseCoopers LLP
San Jose, California
November 9, 1998, except as to Note 15,
which is as of September 30, 1999
F-2
<PAGE>
QUOTE.COM, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
----------------------------- --------------
1997 1998 1999
------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................... $ 1,162,000 $ 1,741,000 $ 2,734,000
Accounts receivable, net of allowance for doubtful accounts of
$109,000, $121,000 and $216,000 (unaudited)................... 897,000 1,015,000 959,000
Other current assets............................................ 313,000 231,000 290,000
------------- -------------- --------------
Total current assets.......................................... 2,372,000 2,987,000 3,983,000
Property and equipment, net....................................... 1,775,000 2,037,000 2,237,000
Other assets...................................................... 101,000 160,000 152,000
------------- -------------- --------------
Total assets.................................................. $ 4,248,000 $ 5,184,000 $ 6,372,000
------------- -------------- --------------
------------- -------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank borrowings, current portion................................ $ 831,000 $ 638,000 $ --
Accounts payable................................................ 624,000 695,000 1,065,000
Accrued expenses and other current liabilities.................. 616,000 953,000 1,700,000
Notes payable to related parties................................ 70,000 -- --
Deferred revenue................................................ 163,000 475,000 513,000
Notes payable, current portion.................................. -- 228,000 3,783,000
Capital lease obligations, current portion...................... -- 44,000 46,000
------------- -------------- --------------
Total current liabilities..................................... 2,304,000 3,033,000 7,107,000
Bank borrowings................................................... 138,000 -- --
Notes payable..................................................... -- 244,000 169,000
Capital lease obligations......................................... -- 113,000 89,000
Other long term liabilities....................................... 40,000 72,000 99,000
------------- -------------- --------------
Total liabilities............................................. 2,482,000 3,462,000 7,464,000
------------- -------------- --------------
Commitments and contingencies (Notes 5, 6, 7 and 12)
Shareholders' equity (deficit):
Convertible Preferred Stock, no par value;
3,500,000 shares authorized; 3,063,310, 3,477,103 and
3,477,103 (unaudited) shares issued and outstanding........... 8,587,000 11,521,000 11,521,000
Common Stock, no par value; 10,000,000 shares authorized;
2,047,218, 2,550,427 and 2,623,016 (unaudited) shares issued
and outstanding............................................... 393,000 889,000 958,000
Receivable from shareholder..................................... (41,000) -- --
Accumulated deficit............................................. (7,173,000) (10,688,000) (13,571,000)
------------- -------------- --------------
Total shareholders' equity (deficit).......................... 1,766,000 1,722,000 (1,092,000)
------------- -------------- --------------
Total liabilities and shareholder's equity (deficit).......... $ 4,248,000 $ 5,184,000 $ 6,372,000
------------- -------------- --------------
------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
QUOTE.COM, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED SEPTEMBER 30, MARCH 31,
------------------------------------------- ----------------------------
1996 1997 1998 1998 1999
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
NET REVENUES.......................... $ 2,470,000 $ 7,110,000 $ 11,467,000 $ 5,834,000 $ 6,223,000
COST OF REVENUES...................... 674,000 2,829,000 4,776,000 2,237,000 3,190,000
------------- ------------- ------------- ------------- -------------
Gross profit.......................... 1,796,000 4,281,000 6,691,000 3,597,000 3,033,000
------------- ------------- ------------- ------------- -------------
OPERATING EXPENSES:
Product development................. 740,000 3,279,000 4,295,000 2,017,000 2,350,000
Sales and marketing................. 1,238,000 4,449,000 3,893,000 2,130,000 2,459,000
General and administrative.......... 514,000 1,245,000 1,485,000 773,000 862,000
Charge for acquired research and
development....................... -- -- 388,000 388,000 --
Compensation charge on repurchase of
shares............................ 1,300,000 -- -- -- --
------------- ------------- ------------- ------------- -------------
Total operating expenses........ 3,792,000 8,973,000 10,061,000 5,308,000 5,671,000
------------- ------------- ------------- ------------- -------------
Loss from operations.................. (1,996,000) (4,692,000) (3,370,000) (1,711,000) (2,638,000)
Interest expense, net................. (13,000) (89,000) (99,000) (45,000) (180,000)
Other expense, net.................... (5,000) (12,000) (46,000) (11,000) (65,000)
Net loss.............................. $ (2,014,000) $ (4,793,000) $ (3,515,000) $ (1,767,000) $ (2,883,000)
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Net loss per share:
Basic and diluted................... $ (0.67) $ (2.44) $ (1.51) $ (0.83) $ (1.10)
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Weighted average shares
outstanding....................... 2,999,856 1,961,360 2,332,096 2,119,609 2,609,208
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
QUOTE.COM, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK RECEIVABLE
--------------------- -------------------- FROM ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHAREHOLDER DEFICIT TOTAL
--------- ---------- --------- --------- ------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30,
1995......................... -- $ -- 3,500,000 $ 70,000 $ -- $ (174,000) $ (104,000)
Issuance of Common Stock....... -- -- 211,336 317,000 -- -- 317,000
Conversion of Common Stock to
Series A Convertible
Preferred Stock................ 1,855,670 194,000 (1,855,670) (194,000) -- -- --
Issuance of Series B
Convertible Preferred Stock
at $4.10 per share, net...... 853,659 3,460,000 -- -- -- -- 3,460,000
Repurchase of Series A
Convertible Preferred Stock
at $3.67 per share, net of
compensation expense......... (408,719) (8,000) -- -- -- (192,000) (200,000)
Net loss....................... -- -- -- -- -- (2,014,000) (2,014,000)
--------- ---------- --------- --------- ------------- ------------ ----------
Balance at September 30,
1996......................... 2,300,610 3,646,000 1,855,666 193,000 -- (2,380,000) 1,459,000
Exercise of stock options...... -- -- 191,552 97,000 (41,000) -- 56,000
Issuance of Series C
Convertible Preferred Stock
at $6.55 per share, net...... 762,700 4,941,000 -- -- -- -- 4,941,000
Compensation expense on
issuance of Common Stock and
warrants to third parties.... -- -- -- 103,000 -- -- 103,000
Net loss....................... -- -- -- -- -- (4,793,000) (4,793,000)
--------- ---------- --------- --------- ------------- ------------ ----------
Balance at September 30,
1997......................... 3,063,310 8,587,000 2,047,218 393,000 (41,000) (7,173,000) 1,766,000
Issuance of Series D
Convertible Preferred Stock
at $7.25 per share, net...... 413,793 2,934,000 -- -- -- -- 2,934,000
Issuance of Common Stock for
acquisition of Halley's
Software, Inc................ -- -- 450,000 450,000 -- -- 450,000
Issuance of Common Stock and
warrants for services........ -- -- 10,631 20,000 -- -- 20,000
Exercise of stock options...... -- -- 42,578 26,000 -- -- 26,000
Stock option loans............. -- -- -- 41,000 -- 41,000
Net loss....................... -- -- -- -- -- (3,515,000) (3,515,000)
--------- ---------- --------- --------- ------------- ------------ ----------
Balance at September 30,
1998......................... 3,477,103 11,521,000 2,550,427 889,000 -- (10,688,000) 1,722,000
Exercise of stock options
(unaudited).................. -- -- 72,589 69,000 -- -- 69,000
Net loss (unaudited)........... -- -- -- -- -- (2,883,000) (2,883,000)
--------- ---------- --------- --------- ------------- ------------ ----------
Balance at March 31, 1999
(unaudited).................. 3,477,103 $11,521,000 2,623,016 $ 958,000 $ -- ($13,571,000) $(1,092,000)
--------- ---------- --------- --------- ------------- ------------ ----------
--------- ---------- --------- --------- ------------- ------------ ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
QUOTE.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS
SEPTEMBER 30, ENDED MARCH 31,
---------------------------------- ----------------------
<S> <C> <C> <C> <C> <C>
1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ----------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss......................................... $(2,014,000) $(4,793,000) $(3,515,000) $(1,767,000) $(2,883,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization................ 129,000 515,000 994,000 446,000 609,000
Charge for acquired research and
development................................ -- -- 388,000 353,000 --
Compensation expense on issuance of Common
Stock and warrants to third parties........ -- 103,000 20,000 18,000 --
Deferred rent expense and other noncash
charges.................................... -- -- 72,000 46,000 27,000
Changes in assets and liabilities:
Accounts receivable, net................... (475,000) (379,000) (118,000) (479,000) 56,000
Other current assets....................... (160,000) (124,000) 82,000 98,000 (59,000)
Other assets............................... -- (101,000) (35,000) -- (24,000)
Accounts payable........................... 420,000 122,000 71,000 (33,000) 370,000
Accrued expenses and other current
liabilities.............................. 296,000 288,000 297,000 455,000 747,000
Deferred revenue........................... 54,000 103,000 312,000 (55,000) 38,000
---------- ---------- ---------- ---------- ----------
Net cash used in operating activities.... (1,750,000) (4,266,000) (1,432,000) (918,000) (1,119,000)
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment............ (712,000) (1,578,000) (1,218,000) (595,000) (777,000)
---------- ---------- ---------- ---------- ----------
Net cash used in investing activities...... (712,000) (1,578,000) (1,218,000) (595,000) (777,000)
---------- ---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Common Stock........... 317,000 56,000 67,000 10,000 69,000
Proceeds from issuance of Convertible Preferred
Stock, net..................................... 3,460,000 4,941,000 2,934,000 2,931,000 --
Repurchase of Convertible Preferred Stock........ (200,000) -- -- -- --
Proceeds from shareholder note receivable........ -- -- -- 41,000 --
Proceeds from borrowings under notes payable..... -- 969,000 567,000 468,000 3,700,000
Lease-back transactions.......................... -- -- 163,000 -- --
Principal payments............................... (28,000) -- (432,000) (138,000) (880,000)
Repayment of notes payable to related parties.... (5,000) (98,000) (70,000) -- --
---------- ---------- ---------- ---------- ----------
Net cash from financing activities....... 3,544,000 5,868,000 3,229,000 3,312,000 2,889,000
---------- ---------- ---------- ---------- ----------
Net change in cash and cash equivalents............ 1,082,000 24,000 579,000 1,799,000 993,000
Cash and cash equivalents at beginning of period... 56,000 1,138,000 1,162,000 1,162,000 1,741,000
---------- ---------- ---------- ---------- ----------
Cash and cash equivalents at end of period......... $1,138,000 $1,162,000 $1,741,000 $2,961,000 $2,734,000
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest........................... $ 5,000 $ 82,000 $ 99,000 $ 44,000 $ 179,000
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Noncash investing and financing activities:
Receivable from shareholder...................... $ -- $ 41,000 $ -- $ -- $ --
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
QUOTE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY AND SUMMARY OF ITS SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
Quote.com, Inc. (the "Company") was founded in October 1993 to develop and
provide quality financial market data and relevant business news to internet
users in a timely fashion. The Company began by selling subscription services on
the World Wide Web in July 1994 and has further expanded its market by creating
a network of strategic distribution partners. The Company began selling online
advertising in June 1996.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1998, the Company had an accumulated deficit of $10,688,000
and continued to be dependent on external sources of capital to support its
operations. In November 1998, the Company received a secured loan from a
corporation for $3,500,000 (see Note 6). Additionally, certain of the Company's
shareholders have made commitments for additional cash advances to fund working
capital requirements. Management believes that the cash provided by the loan and
the amounts available under investor commitments will be sufficient to fund
operations through September 30, 1999. However, the Company's future capital
needs will require the Company to obtain additional financing, which may include
the sale and issuance of equity securities. Failure to raise sufficient funds
may require the Company to modify, delay or abandon some of its planned future
expansion or expenditures, which could have a material adverse effect on the
Company's business operating results and financial condition.
The financial statements have been presented on a going concern basis which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded assets
or the amount and classification of liabilities or any adjustments that might be
necessary should the Company be unable to continue as a going concern.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Quote.com,
Inc. and its wholly-owned subsidiary. All significant intercompany accounts and
transactions have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
REVENUE RECOGNITION
In October 1997, March 1998 and December 1998, the American Institute of
Certified Public Accountants ("AICPA") issued Statements of Position ("SOP")
97-2, 98-4 and 98-9, respectively, which provide guidance on applying generally
accepted accounting principles in recognizing revenue on software transactions.
SOP 97-2 and 98-4 are effective for the Company's fiscal year ending September
30, 1999. SOP 98-9 is effective for the Company's fiscal year ending September
30, 2000.
F-7
<PAGE>
QUOTE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. THE COMPANY AND SUMMARY OF ITS SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company has assessed the provisions of SOP 97-2, SOP 98-4 and SOP 98-9 and
does not expect that adoption will have a material impact on its financial
statements.
The Company generates revenues from the following activities:
Subscription revenues are derived from the sale of services provided on the
Company's Internet directory. Subscription revenues are recognized ratably over
the subscription period. For the years ended September 30, 1996, 1997, 1998 and
for the six months ended March 31, 1998 and 1999, subscription revenues
represented 60%, 28%, 22%, 19% (unaudited) and 36% (unaudited) of net revenues,
respectively.
The Company provides financial market data through strategic distribution
partners. Revenues from agreements with such partners are recognized as amounts
that are earned under the terms of applicable agreements, provided no
significant Company obligations exist and collection of the resulting receivable
is probable. For the years ended September 30, 1996, 1997, 1998 and for the six
months ended March 31, 1998 and 1999, customer contract revenues represented
22%, 41%, 48%, 49% (unaudited) and 39% (unaudited) of net revenues,
respectively.
Advertising revenues are derived from the sale of advertising space on the
Company's web site. Advertising revenues are recognized ratably over the period
the advertisement is displayed, provided no significant Company obligations
remain and collection of the resulting receivable is probable. For the year
ended September 30, 1996, 1997, 1998 and for the six months ended March 31, 1998
and 1999, advertising revenues represented 18%, 31%, 30%, 32% (unaudited) and
25% (unaudited) of net revenues, respectively. Revenues from the sale of certain
advertising space on the Company's web site are shared with third parties under
the terms of certain agreements. The Company records advertising revenues
allocable to third parties under the terms of such agreements as a cost of
revenues.
PRODUCT DEVELOPMENT
Statement of Financial Accounting Standard No. 86, "Accounting for the Costs
of Computer Software to be Sold, Leased or Otherwise Marketed," requires
capitalization of certain software development costs subsequent to the
establishment of technological feasibility. Based upon the Company's product
development process, technological feasibility is established upon completion of
a working model. For all periods presented herein, software development costs
incurred subsequent to the establishment of technological feasibility have been
immaterial. Accordingly, the Company has charged all such costs to product
development expense.
ADVERTISING COSTS
Advertising costs are recorded as an expense the first time an advertisement
appears. For the years ended September 30, 1996, 1997, 1998 and for the six
months ended March 31, 1998 and 1999, advertising expense totaled $120,000,
$437,000, $153,000, $39,000 (unaudited) and $255,000 (unaudited), respectively.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation in accordance with
Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock
Issued to Employees," and complies with the
F-8
<PAGE>
QUOTE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. THE COMPANY AND SUMMARY OF ITS SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
disclosure provisions of Statement of Financial Accounting Standards No. 123
("SFAS 123"), "Accounting for Stock-Based Compensation."
CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. At September 30, 1997
and 1998 and at March 31, 1999, cash equivalents include $819,000, $1,149,000
and $2,791,000 (unaudited), respectively, of money market funds and certificate
of deposits, the fair value of which approximates cost.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash, cash equivalents and accounts
receivable. Substantially all of the Company's cash and cash equivalents are
invested in a highly-liquid mutual fund with two financial institutions.
To date, accounts receivable have been derived from revenues earned from
customers located primarily in the United States. The Company performs ongoing
credit evaluations of its customers and, generally, requires no collateral from
its customers. The Company maintains an allowance for doubtful accounts based
upon the expected collectibility of the accounts receivable balances.
For the periods ended September 30, 1996, 1997, 1998 and for the six months
ended March 31, 1998 and 1999, one customer accounted for 11%, no customers
accounted for greater than 10%, one customer accounted for 11%, one customer
accounted for 12% (unaudited) and no customers accounted for greater than 10%
(unaudited), respectively, of the total revenue. At September 30, 1997 and 1998
and at March 31, 1999, one customer accounted for 13%, three customers accounted
for 37% and three customers accounted for 37% (unaudited), respectively, of the
Company's accounts receivable.
PROPERTY AND EQUIPMENT
Property and equipment, including leasehold improvements, are stated at
cost. Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, generally three to seven years, or the life of the
lease, whichever is shorter.
LONG-LIVED ASSETS
The Company evaluates the recoverability of its long-lived assets in
accordance with Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of" ("SFAS 121"). SFAS 121 requires recognition of impairment of long-lived
assets in the event the net book value of such assets exceeds the future
undiscounted cash flows attributable to such assets.
INCOME TAXES
Income taxes are computed using the asset and liability method. Under the
asset and liability method, deferred income tax assets and liabilities are
determined based on the differences between the financial reporting and tax
bases of assets and liabilities and are measured using the currently enacted tax
rates and laws.
F-9
<PAGE>
QUOTE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. THE COMPANY AND SUMMARY OF ITS SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED REVENUE
Deferred revenue consists of billings in excess of recognized revenue
relating to advertising, subscription and distribution partner agreements.
NET LOSS PER SHARE
Basic net loss per share is computed using the weighted average number of
common shares outstanding. Diluted net loss per share is computed using the
weighted average number of common and potential common shares outstanding.
Potential common shares consist of the incremental number of common shares
issuable upon conversion of Convertible Preferred Stock (using the if-converted
method) and common shares issuable upon the exercise of stock options and
warrants (using the treasury stock method). Potential common shares are excluded
from the computation if their effect is anti-dilutive.
Weighted average potential common shares, which are excluded from the
determination of diluted net loss per share as their effect is anti-dilutive,
are as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH
YEAR ENDED SEPTEMBER 30, 31,
---------------------------------- ----------------------
<S> <C> <C> <C> <C> <C>
1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ----------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Convertible Preferred Stock............. 756,365 2,676,736 3,437,424 3,399,801 3,477,103
Common Stock options.................... 282,162 860,988 1,157,652 1,157,652 1,301,209
Preferred Stock warrants................ -- -- 15,910 15,910 15,910
Common Stock warrants................... -- 102,978 122,530 116,373 128,900
---------- ---------- ---------- ---------- ----------
1,038,527 3,640,702 4,733,516 4,689,736 4,923,122
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
UNAUDITED INTERIM RESULTS
The accompanying interim consolidated balance sheet as of March 31, 1999 and
the consolidated statements of operations, of changes in shareholders' equity
and of cash flows for the six months ended March 31, 1998 and 1999 are
unaudited. In the opinion of management, these statements have been prepared on
the same basis as the audited financial statements and include all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly the
Company's financial position, results of operations and cash flows as of March
31, 1999 and for the six months ended March 31, 1998 and 1999. The data
disclosed in the notes to the consolidated financial statements related to these
periods are unaudited. The results for the six months ended March 31, 1999 are
not necessarily indicative of the results to be expected for the year ended
September 30, 1999.
SEGMENT INFORMATION
Effective October 1, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about Segments
of an Enterprise and Related Information." SFAS No. 131 establishes standards
for the way companies report information about operating segments in financial
statements. It also establishes standards for related disclosures about products
and services, geographic areas and major customers. In accordance with the
provisions of SFAS No. 131, the Company has determined that it operates in only
one operating segment.
F-10
<PAGE>
QUOTE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. THE COMPANY AND SUMMARY OF ITS SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
COMPREHENSIVE INCOME
Effective October 1, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting comprehensive income
and its components in financial statements. Comprehensive income, as defined,
includes all changes in equity (net assets) during a period from nonowner
sources. To date, the Company's comprehensive net loss has not varied materially
from the reported net loss.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") No. 98-1, "Software for Internal
Use," which provides guidance on accounting for the cost of computer software
developed or obtained for internal use. SOP No. 98-1 is effective for financial
statements for fiscal years beginning after December 15, 1998. The Company does
not expect that the adoption of SOP No. 98-1 will have a material impact on its
financial statements.
2. ACQUISITION OF HALLEY'S SOFTWARE INC.
In March 1998, the Company entered into a stock purchase agreement to
acquire all of the outstanding shares of Halley's Software, Inc. for 450,000
shares of the Company's Common Stock at $1.00 per share. The acquisition was
recorded as a purchase for accounting purposes. Approximately $388,000 was
allocated to in-process research and development and immediately charged to the
Company's statement of operations for the period ended September 30, 1998. As a
result of this transaction, the Company recognized goodwill of $98,000, which is
being amortized over the estimated useful life of 18 months. Upon acquisition,
the historical financial results of Halley's Software, Inc. were DE MINIMIS.
3. BALANCE SHEET COMPONENTS
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
-------------------------- ------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
(UNAUDITED)
PROPERTY AND EQUIPMENT:
Computer equipment and purchased software............................... $ 2,207,000 $ 3,409,000 $ 4,165,000
Furniture, office equipment and fixtures................................ 225,000 241,000 254,000
Leasehold improvements.................................................. 63,000 63,000 63,000
------------ ------------ ------------
2,495,000 3,713,000 4,482,000
Less: accumulated depreciation and amortization......................... (720,000) (1,676,000) (2,245,000)
------------ ------------ ------------
$ 1,775,000 $ 2,037,000 $ 2,237,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
F-11
<PAGE>
QUOTE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. BALANCE SHEET COMPONENTS (CONTINUED)
Assets acquired under capital lease obligations are included in property and
equipment and totaled $0, $163,000 and $163,000 (unaudited), with related
accumulated amortization of $0, $8,000 and $35,000 (unaudited) at September 30,
1997 and 1998 and March 31, 1999, respectively.
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
---------------------- ------------
1997 1998 1999
---------- ---------- ------------
<S> <C> <C> <C>
(UNAUDITED)
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:
Accrued compensation....................................................... $ 244,000 $ 282,000 $ 385,000
Data providers costs....................................................... 82,000 109,000 281,000
General reserve............................................................ 150,000 415,000 500,000
Other accrued liabilities.................................................. 140,000 147,000 534,000
---------- ---------- ------------
$ 616,000 $ 953,000 $ 1,700,000
---------- ---------- ------------
---------- ---------- ------------
</TABLE>
F-12
<PAGE>
QUOTE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. NOTES PAYABLE TO RELATED PARTIES
Notes payable to shareholder related entities were unsecured and bore
interest ranging from 4.5% to 6.5% per annum and were payable on demand. The
notes payable, principal plus interest, were paid in full during the period
ended September 30, 1998.
5. BANK BORROWINGS
At September 30, 1998, the Company had $500,000 and $138,000 outstanding
under a Line of Credit and Term Loan, respectively, with a bank ("Bank
Borrowings"). At September 30, 1998, interest on the Line of Credit and the Term
Loan were 8.75% and 9.00%, respectively. Additionally, the bank issued a Letter
of Credit to the Company's landlord pursuant to the Company's office lease
agreement (see Note 12). Each instrument was secured by the tangible and
intangible assets of the Company. On November 9, 1998, pursuant to a Loan,
Guarantee and Termination agreement with Intuit Inc. ("Intuit"), the Company
repaid the total outstanding balances on the Line of Credit and Term Loan and
terminated the bank's security interests, liens and encumbrances in the assets
and properties of the Company. The Letter of Credit remains outstanding and is
secured by the guarantee of Intuit.
6. NOTES PAYABLE
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
----------------------- -----------
1997 1998 1999
----- ---------- -----------
<S> <C> <C> <C>
(UNAUDITED)
Comdisco, Inc. Loan............................................................... $ -- $ 400,000 $ 325,000
International Software Finance Corporation........................................ -- 72,000 127,000
Intuit Loan....................................................................... -- -- 3,500,000
--- ---------- -----------
-- 472,000 3,952,000
Less: Current portion............................................................. -- 228,000 3,783,000
--- ---------- -----------
$ -- $ 244,000 $ 169,000
--- ---------- -----------
</TABLE>
The loan extended by Comdisco bears interest at 13.7% per annum and is
secured by certain of the Company's assets. Monthly payments of $15,000,
starting from April 1998, are due until March 2001 along with a final payment of
$47,000.
The line of credit extended by International Software Finance Corp. bears
interest at 14% per annum and is intended to be used for the purchase of certain
software products. Under the agreement, $299,000 of credit is available and is
secured by a $150,000 letter of credit, which will be reduced by $25,000 per
month beginning April 1, 1999.
On November 9, 1998, the Company entered into a Loan, Guarantee and
Termination agreement (the "Agreement") with Intuit for aggregate proceeds of
$3,500,000, which is secured by the tangible and intangible assets of the
Company. Under the terms of the Agreement, the funds will be used solely for
working capital purposes and to repay those amounts outstanding under the Bank
Borrowings agreements. The loan expires in May 1999 and bears interest at a rate
of 10% per annum. In addition, Intuit agreed to guarantee the outstanding
letters of credit. The loan was repaid subsequent to March 31, 1999.
F-13
<PAGE>
QUOTE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. CAPITAL LEASE
Future minimum lease payments under capital leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDED CAPITAL
SEPTEMBER 30, LEASES
- ---------------------------------------------------------------------------------- ----------
<S> <C>
1999.............................................................................. $ 61,000
2000.............................................................................. 61,000
2001.............................................................................. 69,000
2002.............................................................................. --
Thereafter........................................................................ --
----------
Total minimum lease payments...................................................... 191,000
Less: Amount representing interest................................................ (34,000)
----------
Present value of capital lease obligations........................................ 157,000
Less: Current portion............................................................. (44,000)
Long-term portion of capital lease obligations.................................... $ 113,000
----------
----------
</TABLE>
8. SHAREHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
The following table summarizes Convertible Preferred Stock at September 30,
1998 and March 31, 1999 (unaudited):
<TABLE>
<CAPTION>
SHARES
----------------------- NET
AUTHORIZED OUTSTANDING PROCEEDS
---------- ----------- -------------
<S> <C> <C> <C>
Series A............................................ 1,446,951 1,446,951 $ 186,000
Series B............................................ 853,659 853,659 3,460,000
Series C............................................ 770,334 762,700 4,941,000
Series D............................................ 422,069 413,793 2,934,000
---------- ----------- -------------
3,493,013 3,477,103 $ 11,521,000
---------- ----------- -------------
---------- ----------- -------------
</TABLE>
The Company's Articles of Incorporation, as amended, authorize the Company
to issue 3,500,000 shares with no par value Preferred Stock in the aggregate.
The rights, preferences, privileges and restrictions of holders of Series A,
B, C and D Convertible Preferred Stock ("Series A," "Series B," "Series C" and
"Series D," respectively) are set forth in the Company's Amended and Restated
Certificate of Incorporation, and are summarized as follows:
VOTING RIGHTS
Each share of Series A, B, C and D has the same number of votes as the
number of shares of Common Stock into which the Preferred Stock is convertible.
DIVIDENDS
Holders of Series A, B, C and D are entitled to noncumulative, preferential
dividends of $0.367, $0.41, $0.66 and $0.731, respectively, per share per annum
when and if declared by the Board of
F-14
<PAGE>
QUOTE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. SHAREHOLDERS' EQUITY (CONTINUED)
Directors. In the event that the Company declares any dividends on the Common
Stock, the holders of the Preferred Stock shall be entitled to receive, in
addition to the dividends provided above, a proportionate share of any such
dividend on an as converted basis.
LIQUIDATION
In the event of any liquidation, dissolution or winding up of the Company,
either voluntary or involuntary, distribution to shareholders is to be made in
the following manner:
The holders of the Series B, C and D are entitled to receive, prior and in
preference to any distribution of the assets of the Company to the holders of
the Series A or Common Stock an amount equal to $6.50, $10.38 and $11.49 per
share, respectively, in which the aggregate assets to be distributed to all
shareholders are equal to or greater than $90,000,000, and $8.50, $13.58 and
$15.03 per share, respectively, in which the aggregate assets to be distributed
are less than $90,000,000, for each share of Series B, C and D Preferred Stock
then held plus all declared and unpaid dividends, if any, on such shares.
Upon completion of the distribution to the holders of Series B, C and D, the
holders of Series A Preferred Stock are entitled to receive, prior and in
preference to any distribution of the assets of the Company to the holders of
Common Stock, an amount equal to $6.00 per share for each share of Series A then
held plus all declared and unpaid dividends, if any, on such shares.
Upon completion of the distribution to the holders of Series A, B, C and D,
the remaining assets of the Company available for distribution to shareholders
shall be distributed ratably among the holders of the Preferred Stock and the
Common Stock of the Company based upon the number of shares of Common Stock on
an as converted basis until, with respect to the holders of Preferred Stock,
such holders shall have received an aggregate of $21.58, $34.48 and $38.16 per
share of Series B, C and D Preferred Stock, respectively, in which the aggregate
assets to be distributed to all shareholders are equal to or greater than
$90,000,000, and $12.78, $20.42 and $22.60 per share of Series B, C and D
Preferred Stock, respectively, in which the aggregate assets to be distributed
to all shareholders are less than $90,000,000. Thereafter, the remaining assets
and funds of the Company legally available for distribution shall be distributed
ratably among the holders of Series A and the Common Stock based on the number
of shares of Common Stock on an as converted basis.
F-15
<PAGE>
QUOTE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ACQUISITION
In the event of any acquisition of the Company, by means of merger or other
form of corporate reorganization in which the shareholders of the Company do not
own a majority of the outstanding shares of the surviving corporation, or a sale
of all or substantially all of the assets of the Company, shall in either case
be treated as a liquidation, dissolution or winding up of the Company and shall
entitle the holders of existing Preferred Stock and Common Stock to receive at
the closing cash, securities or other property as specified in case of
liquidation, dissolution or winding up of the Company.
CONVERSION
Each share of Series A, B, C and D is convertible at the option of the
holder at any time into Common Stock at the initial conversion rate of one share
of Common Stock for each share of Preferred Stock. The initial conversion rate
of Preferred Stock is subject to adjustment as provided in the amended and
restated Articles of Incorporation. Each share of Series A Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
conversion rate upon the closing of a firm commitment underwritten initial
public offering of the Company's Common Stock. Each share of Series B, C and D
shall be automatically converted into shares of Common Stock at the then
effective conversion rate upon the closing of a firm commitment underwritten
initial public offering of the Company's Common Stock at a price of not less
than $7.50, $11.98 and $13.25 per share, respectively, and an aggregate offering
price to the public of not less than $15,000,000, exclusive of underwriting
commissions and offering expenses.
COMMON STOCK
The Company's Articles of Incorporation, as amended, authorize the Company
to issue 10,000,000 shares of Common Stock.
In March 1998, the Company acquired Halley's Software, Inc. for 450,000
shares of Common Stock valued at $1.00 (see Note 2 and Note 12).
For the year ended September 30, 1998, the Company issued 2,250 and 8,381
shares of Common Stock to officers and consultants of the Company, respectively,
at prices ranging from $0.90 to $1.00 per share. The estimated fair value of
such services was determined to be $10,000 and recorded as expense in the year
ended September 30, 1998.
See Note 15--Subsequent Events.
9. WARRANTS
PREFERRED STOCK WARRANTS
During the year ended September 30, 1997, the Company issued a warrant to
purchase 12,195 shares of Series B Preferred Stock for $4.10 per share to a
lender. The warrant is exercisable for 5 years after issuance. Following the
issuance of Series C Preferred Stock in March 1997, the terms of the warrant
were amended to allow the warrant holder the right to purchase 7,634 shares of
Series C Preferred Stock for $6.55 per share. The estimated fair value of the
warrant is $24,000, which was recorded as an expense in the year ended September
30, 1997.
F-16
<PAGE>
QUOTE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. WARRANTS (CONTINUED)
During the year ended September 30, 1997, the Company issued a warrant to
purchase 9,160 shares of Series C Preferred Stock for $6.55 per share to a
lender. The warrant is exercisable for 5 years after issuance. Following the
issuance of Series D Preferred Stock in October 1997, the terms of the warrant
were amended to allow the warrant holder the right to purchase 8,276 shares of
Series D Preferred Stock for $7.25 per share. In addition, in lieu of exercising
the warrant, the holder has the right to require the Company to purchase the
warrant for $10,000. The estimated fair value of the warrant is $29,000 which
has been fully amortized.
COMMON STOCK WARRANTS
During the year ended September 30, 1997, the Company issued a warrant to
purchase 113,900 shares of Common Stock at $0.50 per share to a shareholder. The
warrant is exercisable for 5 years after issuance. The estimated fair value of
the warrant is $27,000, which was recorded as an expense in the year ended
September 30, 1997.
In February 1998, in connection with a Loan and Security Agreement and a
Master Lease Agreement, the Company issued to the lender warrants to purchase
15,000 shares of Common Stock at $1.00 per share. The warrants are exercisable
for a period of 10 years after issuance or seven years from the effective date
of the Company's initial public offering, whichever is shorter. The estimated
fair value of the warrants is approximately $10,000, which was recorded as an
expense during the year ended September 30, 1998.
10. RECEIVABLE FROM SHAREHOLDER
During the year ended September 30, 1997, the Company received a note for
$41,000 from a shareholder in exchange for and secured by 82,656 shares of the
Company's Common Stock. The note bore interest at an annual rate of 8%. The
receivable was paid in full during the period ended September 30, 1998.
11. STOCK OPTION PLAN
In May 1996, the Board of Directors adopted the 1996 Stock Option Plan (the
"Plan"). The Plan, as amended, provides for the granting of up to 1,816,194
incentive stock options and nonqualified stock options. Under the Plan,
incentive stock options may be granted to employees, officers and directors of
the Company and nonqualified stock options and stock purchase rights may be
granted to consultants, employees, directors and officers of the Company.
Options granted under the Plan are for periods not to exceed ten years, and must
be issued at prices not less than 100% and 85%, for incentive and nonqualified
stock options, respectively, of the fair market value of the stock on the date
of grant as determined by the Board of Directors. Options granted to
Stockholders who own greater than 10% of the outstanding stock are for periods
not to exceed five years and must be issued at prices not less than 110% of the
fair market value of the stock on the date of grant as determined by the Board
of Directors. Options granted under the Plan generally vest ratably each month
over a forty-eight month period.
In April 1999, the Board of Directors amended the 1996 Stock Option Plan to
increase the shares of common stock available for granting up to 2,166,194
(unaudited). Subsequent to March 31, 1999 until June 30, 1999, the Company has
granted 208,500 stock options at a weighted-average exercise price of $1.10 per
share.
F-17
<PAGE>
QUOTE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. STOCK OPTION PLAN (CONTINUED)
The following summarizes stock option activity under the Plan:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OPTIONS EXERCISE
AVAILABLE OPTIONS PRICE
FOR GRANT OUTSTANDING PER SHARE
----------- ----------- -------------
<S> <C> <C> <C>
Options authorized......................................................... 1,531,000 -- $ --
Options granted............................................................ (1,087,159) 1,087,159 0.53
Options exercised.......................................................... -- -- --
Options canceled........................................................... 522,836 (522,836) 0.50
----------- -----------
Balance at September 30, 1996.............................................. 966,677 564,323 0.53
Options authorized......................................................... 285,194 -- --
Options granted............................................................ (1,067,705) 1,067,705 0.58
Options exercised.......................................................... -- (183,790) 0.50
Options canceled........................................................... 290,586 (290,586) 0.51
----------- -----------
Balance at September 30, 1997.............................................. 474,752 1,157,652 0.56
Options authorized......................................................... -- -- --
Options granted............................................................ (1,060,403) 1,060,403 1.00
Options exercised.......................................................... -- (42,578) 0.61
Options canceled........................................................... 1,088,175 (1,088,175) 0.71
----------- -----------
Balance at September 30, 1998.............................................. 502,524 1,087,302 0.89
Options authorized (unaudited)............................................. -- -- --
Options granted (unaudited)................................................ (555,995) 555,995 1.00
Options exercised (unaudited).............................................. -- (72,755) 0.96
Options canceled (unaudited)............................................... 125,777 (125,777) 0.95
----------- -----------
Balance at March 31, 1999 (unaudited)...................................... 72,306 1,444,765 0.92
----------- -----------
----------- -----------
</TABLE>
The minimum value of options granted for the years ended September 30, 1997
and 1998 and for the six months ended March 31, 1999 was approximately $0.11,
$0.19 and $0.20 (unaudited), respectively.
The following table summarizes the information about stock options
outstanding and exercisable as of September 30, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------------------------- OPTIONS EXERCISABLE
WEIGHTED ------------------------
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
RANGE OF EXERCISABLE PRICE OUTSTANDING LIFE PRICE OUTSTANDING PRICE
- --------------------------------------------------- ----------- --------------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$0.50--$0.90....................................... 377,111 8.37 $0.64 193,938 $ 0.62
1.00-- 1.50....................................... 710,191 9.45 1.02 120,327 1.15
----------- -----------
1,087,302 9.07 0.89 314,265 0.82
----------- -----------
----------- -----------
</TABLE>
F-18
<PAGE>
QUOTE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. STOCK OPTION PLAN (CONTINUED)
The following table summarizes the information about stock options
outstanding and exercisable as of March 31, 1999 (unaudited):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------------------------- OPTIONS EXERCISABLE
WEIGHTED ------------------------
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
RANGE OF EXERCISABLE PRICE OUTSTANDING LIFE PRICE OUTSTANDING PRICE
- --------------------------------------------------- ----------- --------------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$0.50--$0.90....................................... 282,225 7.81 $0.60 162,196 $ 0.57
1.00-- 1.50....................................... 1,162,540 9.40 1.01 175,073 1.03
----------- -----------
1,444,765 9.08 0.92 337,269 0.81
----------- -----------
----------- -----------
</TABLE>
FAIR VALUE DISCLOSURES
The fair value of each option grant is estimated on the date of grant using
the minimum value method with the following assumptions used for grants during
the applicable periods: dividend yield of 0% for all periods; risk-free interest
rates of 5.97% to 6.57% for options granted during the year ended September 30,
1997, 4.62% to 5.93% for options granted during the year ended September 30,
1998 and 4.18% (unaudited) to 5.14% (unaudited) for options granted for the six
months ended March 31, 1999, and a weighted average expected option term of four
years for all periods.
The Company applies the measurement principles of APB No. 25 in accounting
for its stock option plan. Had compensation for options granted for the periods
ended September 30, 1997 and 1998 and March 31, 1999 (unaudited) been determined
based on the fair value at the grant dates as prescribed by SFAS No. 123, the
Company's net loss would not have been materially different from the reported
net loss for the respective periods.
12. COMMITMENTS AND CONTINGENCIES
The Company leases office space and equipment under noncancelable operating
leases with various expiration dates through March 2004. The Company subleases
certain properties which expire in February 28, 1999. Rent expense for the years
ended September 30, 1996, 1997, 1998 and for the six months ended March 31, 1998
and 1999 was $148,000, $423,000, $670,000, $350,000 (unaudited) and $313,000
(unaudited), respectively. The terms of the facility lease provide for rental
payments on a graduated scale. The Company recognizes rent expense on a
straight-line basis over the lease period, and has accrued for rent expense
incurred but not paid.
F-19
<PAGE>
QUOTE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Future minimum lease payments under noncancelable operating leases, and
future minimum sublease rental receipts under noncancelable operating leases are
as follows:
<TABLE>
<CAPTION>
YEAR ENDED OPERATING SUBLEASE
SEPTEMBER 30, LEASES INCOME
- ---------------------------------------------------------------------------------------- ------------ ----------
<S> <C> <C>
1999.................................................................................... $ 798,000 $ 100,000
2000.................................................................................... 788,000 --
2001.................................................................................... 775,000 --
2002.................................................................................... 769,000 --
Thereafter.............................................................................. 1,181,000 --
------------ ----------
Total minimum lease payments and sublease income........................................ $ 4,311,000 $ 100,000
------------ ----------
------------ ----------
</TABLE>
In March 1997, under the terms of the lease for office space, a bank issued
to the landlord a standby Letter of Credit, secured by the Company's Line of
Credit in the amount of $200,000 in favor of the Company. The present amount is
reduced by $50,000 per year each April 1. At September 30, 1998, the amount
outstanding under the Letter of Credit was $150,000. On November 9, 1998, the
Company entered into a Loan, Guarantee and Termination agreement with Intuit,
whereby Intuit guaranteed the Letter of Credit and the bank's security interest
in the Company's tangible and intangible assets was released (see Note 5).
The Company is subject to various claims and litigation arising in the
normal course of business. It is the opinion of management and outside legal
counsel that losses, if any, will not have a material effect on the Company's
financial position or results, operations or cash flows.
CONSULTING AGREEMENT
In connection with the acquisition of Halley's Software, Inc., the Company
entered into a consulting agreement with the former owner. Under the terms of
this agreement, upon the occurrence of specific events, including, sale of all
or substantially all of the assets of the Company, a change in control of the
Company, dissolution, liquidation or bankruptcy of the Company; should the
Company seek to maintain exclusive rights to the technology acquired, the
Company will pay to the former owner an amount equal to $5,000,000 less the sum
of the fair value of the 450,000 shares of Common Stock of the Company issued in
connection with the acquisition and the fair value of all subsequent additional
stock royalty payments to the former owner. As of September 30, 1998, all stock
royalty payments have been made under the consulting agreement and are reflected
as expense in the consolidated statements of operations. The estimated payment
based on the merger agreement is $2.4 million (see Note 15).
13. EMPLOYEE BENEFIT PLANS
In 1997, the Company sponsored a 401(k) defined contribution plan covering
eligible employees who elect to participate. The Company may elect to contribute
matching and discretionary contributions to the Plan. No contributions were made
by the Company in fiscal 1998.
14. INCOME TAXES
No current provision or benefit for federal or state income taxes has been
recorded for the years ended September 30, 1996, 1997 and 1998 and for the six
months ended March 31, 1998 (unaudited) and 1999 (unaudited) as the Company has
incurred net operating losses and has no carryback potential.
F-20
<PAGE>
QUOTE.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. INCOME TAXES (CONTINUED)
At September 30, 1998 and March 31, 1999, the Company had approximately
$7,700,000 and $10,200,000 (unaudited), respectively, of federal net operating
loss carryforwards for tax reporting purposes available to offset future taxable
income; such carryforwards begin to expire in 2008. Under the Tax Reform Act of
1986, the amounts of and benefits from net operating losses carried forward may
be impaired or limited in certain circumstances. Events which may cause
limitations in the amount of net operating losses that the Company may utilize
in any one year include, but are not limited to, a cumulative ownership change
of more than 50% over a three year period.
Deferred tax assets, totaling approximately $3,500,000 and $4,800,000
(unaudited) at September 30, 1998 and March 31, 1999, respectively, consist
primarily of net operating loss carryforwards, reserves, accrued expenses and
credit carryforwards which are not yet deductible for tax purposes. The Company
has provided a full valuation allowance on the deferred tax asset because of the
uncertainty regarding realizability based upon the weight of currently available
information.
15. SUBSEQUENT EVENTS
ACQUISITION OF IPO CROSSROADS
On April 26, 1999, the Company entered into a stock purchase agreement to
acquire all of the outstanding shares of IPO Crossroads, LLC for 100,000 shares
of the Company's Common Stock at $1.10 per share. The acquisition has been
accounted for using the purchase method of accounting. As a result of this
transaction, the Company recognized goodwill of $83,000, which will be amortized
over the estimated useful life of 18 months.
SECURED PROMISSORY NOTE
On June 30, 1999, the Company entered into a security agreement (the
"Agreement") with InfoSpace.com, Inc. ("InfoSpace"), for aggregate proceeds of
$6,000,000, which is secured by the tangible and intangible assets of the
Company. Under the terms of the Agreement, the funds will be used solely for
working capital purposes and to repay those amounts under the Intuit agreement
(Note 5). In addition, InfoSpace agreed to guarantee the outstanding letters of
credit. The loan is repayable on the earlier of (a) March 31, 2000 or (b) the
date of any financing by the Company in excess of $8,000,000, the sale of all,
or substantially all, of the assets of the Company or execution of a merger
agreement with a third party. Pursuant to the merger agreement, the Company
obtained an extension of the due date of the InfoSpace promissory note until the
closing of the merger with Lycos.
MERGER AGREEMENT
On September 2, 1999, the company signed a definitive agreement to merge
with Lycos, Inc. ("Lycos"), a publicly traded company. In the merger, Quote.com
shareholders will receive Lycos common stock in exchange for their shares of
Quote.com capital stock. The total amount of shares of Lycos common stock to be
received by Quote.com shareholders is determined as described in the merger
agreement.
F-21
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANNEX A
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
AMONG
LYCOS, INC.,
QUICKSILVER ACQUISITION CORP.
AND
QUOTE.COM, INC.
DATED AS OF SEPTEMBER 2, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
ARTICLE I
THE MERGER
SECTION 1.01. Effective Time of the Merger........................................................... A-2
SECTION 1.02. Closing................................................................................ A-2
SECTION 1.03. Effect of the Merger................................................................... A-2
SECTION 1.04. Articles of Incorporation and By-laws.................................................. A-2
SECTION 1.05. Directors.............................................................................. A-2
SECTION 1.06. Officers............................................................................... A-2
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.01. Conversion of Capital Stock............................................................ A-3
SECTION 2.02. Exchange of Certificates............................................................... A-6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Organization and Standing of the Company............................................... A-9
SECTION 3.02. Authority; Noncontravention............................................................ A-9
SECTION 3.03. Capital Stock of the Company........................................................... A-10
SECTION 3.04. Equity Interests....................................................................... A-11
SECTION 3.05. Financial Statements................................................................... A-11
SECTION 3.06. Undisclosed Liabilities................................................................ A-12
SECTION 3.07. Taxes.................................................................................. A-12
SECTION 3.08. Assets................................................................................. A-14
SECTION 3.09. Intellectual Property, Etc............................................................. A-14
SECTION 3.10. Contracts.............................................................................. A-16
SECTION 3.11. Litigation; Decrees.................................................................... A-18
SECTION 3.12. Operation of the Business; Absence of Changes or Events................................ A-19
SECTION 3.13. Compliance with Applicable Laws........................................................ A-20
SECTION 3.14. Certain Employee Matters............................................................... A-20
SECTION 3.15. Benefit Plans.......................................................................... A-22
SECTION 3.16. Insurance.............................................................................. A-23
SECTION 3.17. Customers; Effect of Transaction....................................................... A-23
SECTION 3.18. Disclosure............................................................................. A-24
SECTION 3.19. Voting Requirements.................................................................... A-24
SECTION 3.20. Brokers; Schedule of Fees and Expenses................................................. A-24
SECTION 3.21. State Takeover Statutes................................................................ A-24
SECTION 3.22. Year 2000 Compliance................................................................... A-24
SECTION 3.23. Information Supplied................................................................... A-25
SECTION 3.24. Customer Accounts Receivable........................................................... A-25
SECTION 3.25. Corporate Name......................................................................... A-25
SECTION 3.26. Accounts; Safe Deposit Boxes; Powers of Attorney; Officers and Directors............... A-25
SECTION 3.27. Traffic................................................................................ A-25
SECTION 3.28. Minute Books, Etc...................................................................... A-26
SECTION 3.29. Halley's Software...................................................................... A-26
SECTION 3.30. Underdeliveries under Advertising Contracts............................................ A-26
</TABLE>
A-i
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
SECTION 4.01. Organization........................................................................... A-26
SECTION 4.02. Authority; Noncontravention............................................................ A-26
SECTION 4.03. Capital Stock of Parent................................................................ A-27
SECTION 4.04. Parent SEC Documents................................................................... A-27
SECTION 4.05. Absence of Certain Changes or Events................................................... A-27
SECTION 4.06. Litigation............................................................................. A-27
SECTION 4.07. Taxes.................................................................................. A-27
SECTION 4.08. Interim Operations of Sub.............................................................. A-28
SECTION 4.09. Information Supplied................................................................... A-28
SECTION 4.10. Brokers................................................................................ A-28
ARTICLE V
COVENANTS
SECTION 5.01. Covenants of the Company............................................................... A-28
SECTION 5.02. No Solicitation........................................................................ A-32
SECTION 5.03. Other Actions.......................................................................... A-32
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Preparation of the Form S-4 and the Proxy Statement; Shareholders Meeting.............. A-33
SECTION 6.02. Access to Information.................................................................. A-33
SECTION 6.03. Legal Conditions to Merger............................................................. A-34
SECTION 6.04. Stock Options; Warrants................................................................ A-34
SECTION 6.05. Fees and Expenses...................................................................... A-35
SECTION 6.06. Additional Agreements.................................................................. A-35
SECTION 6.07. Indemnification........................................................................ A-35
SECTION 6.08. Quotation.............................................................................. A-36
SECTION 6.09. Litigation............................................................................. A-36
SECTION 6.10. Tax Treatment.......................................................................... A-36
SECTION 6.11. Letters of the Company's Accountants................................................... A-36
SECTION 6.12. Letters of Parent's Accountants........................................................ A-36
SECTION 6.13. Affiliates............................................................................. A-36
SECTION 6.14. Shareholders Agreement Legend.......................................................... A-36
SECTION 6.15. Employee Benefits...................................................................... A-36
SECTION 6.16. Transition Team........................................................................ A-37
SECTION 6.17. Hunsader Payment....................................................................... A-37
SECTION 6.18. Waivers................................................................................ A-37
ARTICLE VII
CONDITIONS
SECTION 7.01. Conditions to Each Party's Obligation to Effect the Merger............................. A-38
SECTION 7.02. Conditions of Obligations of Parent and Sub............................................ A-38
SECTION 7.03. Conditions of Obligations of the Company............................................... A-40
ARTICLE VIII
TERMINATION AND AMENDMENT
SECTION 8.01. Termination............................................................................ A-40
</TABLE>
A-ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
SECTION 8.02. Effect of Termination.................................................................. A-40
SECTION 8.03. Amendment.............................................................................. A-41
SECTION 8.04. Extension; Waiver...................................................................... A-41
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Survival of Representations, Warranties and Covenants.................................. A-41
SECTION 9.02. Notices................................................................................ A-41
SECTION 9.03. Definitions............................................................................ A-42
SECTION 9.04. Entire Agreement; No Third Party Beneficiaries; Rights of Ownership.................... A-42
SECTION 9.05. GOVERNING LAW.......................................................................... A-43
SECTION 9.06. Publicity.............................................................................. A-43
SECTION 9.07. Assignment............................................................................. A-43
SECTION 9.08. Counterparts........................................................................... A-43
SECTION 9.09. Exhibits and Schedules; Interpretation................................................. A-43
SECTION 9.10. Consent to Jurisdiction................................................................ A-43
SECTION 9.11. Waiver of Jury Trial................................................................... A-44
SECTION 9.12. Enforcement............................................................................ A-44
Annex I Members of the Transition Team
Exhibit A Form of Articles of Incorporation of the Surviving Corporation
Exhibit B Form of By-laws of the Surviving Corporation
Exhibit C Form of Proprietary Information and Inventions Assignment Agreement
Exhibit D Form of Letter
Exhibit E Form of Indemnification and Escrow Agreement
</TABLE>
A-iii
<PAGE>
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER dated as of September 2, 1999 (this
"Agreement"), by and among LYCOS, INC., a Delaware corporation
("Parent"), QUICKSILVER ACQUISITION CORP., a Delaware corporation and a
wholly owned subsidiary of Parent ("Sub"), and QUOTE.COM, INC., a
California corporation (the "Company").
WHEREAS the Board of Directors of each of Sub and the Company deems it
advisable and in the best interests of their respective shareholders to
consummate, and have approved, the merger (the "Merger"), on the terms and
subject to the conditions set forth herein, of Sub with and into the Company in
which the Company would become a subsidiary of Parent, all in accordance with
the General Corporation Law of the State of Delaware (the "DGCL") and the
General Corporation Law of the State of California (the "CGCL");
WHEREAS the Board of Directors of the Company has (a) determined that the
consideration to be paid to the shareholders of the Company for each share held
by them of Company Common Stock and Company Preferred Stock (each as defined in
Section 2.01) in the Merger is fair to and in the best interests of such
shareholders, (b) approved this Agreement and the transactions contemplated
hereby and (c) recommended to such shareholders that they approve the Merger and
this Agreement;
WHEREAS for U.S. federal income tax purposes, it is intended that (a) the
Merger will qualify as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), and the rules and
regulations promulgated thereunder and (b) this Agreement constitutes a plan of
reorganization;
WHEREAS simultaneously with the execution and delivery of this Agreement and
as a condition to the willingness of Parent and Sub to enter into this
Agreement, Parent and certain principal shareholders of the Company
(collectively, the "Principal Shareholders") are entering into an agreement (the
"Shareholders Agreement") pursuant to which the Principal Shareholders will
agree to vote to adopt and approve this Agreement and approve the transactions
contemplated hereby, and to take certain other actions in furtherance of the
Merger upon the terms and subject to the conditions set forth in the
Shareholders Agreement;
WHEREAS as a condition to the consummation of the Merger, Parent, the
Principal Shareholders, the Representative (as defined therein), on behalf of
the Principal Shareholders, and the Escrow Agent named therein will enter into
an Indemnification and Escrow Agreement (the "Escrow Agreement") pursuant to
which, among other things, the Holders will agree to indemnify Parent against,
among other things, losses arising out of breaches of the representations,
warranties and covenants set forth in this Agreement and to the escrow of 10% of
the Merger Consideration otherwise issuable hereunder to all holders
(collectively, the "Holders") of Company Capital Stock to secure the
indemnification obligations referred to above; and
WHEREAS as a condition to the consummation of the Merger, Parent and certain
employees of the Company will enter into agreements (the "Employment and
Non-Competition Agreements") pursuant to which such employees will agree, among
other things, to continue their employment with the Company after the Effective
Time and not to have certain Relationships (as defined in the Employment and
Non-Competition Agreements) with certain third parties during the Noncompetition
Period (as defined in the Employment and Non-Competition Agreements).
A-1
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. EFFECTIVE TIME OF THE MERGER. Subject to the provisions of
this Agreement, as soon as practicable on or after the Closing Date (as defined
in Section 1.02), (a) a copy of this Agreement (or such other properly executed
agreement of merger conforming to the requirements of the CGCL as the parties
may agree upon), together with an officer's certificate of each constituent
corporation in accordance with Section 1103 of the CGCL (collectively, the
"California Agreement of Merger"), shall be delivered by the Company to the
Secretary of State of the State of California for filing, as provided in the
CGCL, and (b) a certificate of merger and all other appropriate documents
(collectively, the "Delaware Certificate of Merger") shall be duly prepared,
executed, acknowledged and filed with the Secretary of State of the State of
Delaware by the parties hereto as provided in the DGCL. The Merger shall become
effective upon the filing of the California Agreement of Merger with the
Secretary of State of the State of California or at such time thereafter as is
agreed upon by Parent and the Company and provided in the California Agreement
of Merger (the "Effective Time").
SECTION 1.02. CLOSING. The closing of the Merger (the "Closing") will take
place at 10:00 a.m., New York time, on a date to be specified by the parties,
which shall be not later than the second business day after satisfaction or
waiver of the conditions set forth in Article VII that by their terms are not to
be satisfied or waived at the Closing (the "Closing Date"), at the offices of
Cravath, Swaine & Moore, 825 Eighth Avenue, New York, New York 10019, unless
another date or place is agreed to in writing by the parties hereto.
SECTION 1.03. EFFECT OF THE MERGER. At the Effective Time, Sub shall be
merged with and into the Company, and the Company shall continue as the
surviving corporation in the Merger (the "Surviving Corporation").
SECTION 1.04. ARTICLES OF INCORPORATION AND BY-LAWS. (a) The Amended and
Restated Articles of Incorporation of the Company shall be amended at the
Effective Time to read in its entirety in the form of Exhibit A hereto, and, as
so amended, such Articles of Incorporation shall be the Articles of
Incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law.
(b) The Amended and Restated By-laws of the Company as in effect immediately
prior to the Effective Time shall be amended at the Effective Time to read in
their entirety in the form of Exhibit B hereto, and, as so amended, such By-laws
shall be the By-laws of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law.
SECTION 1.05. DIRECTORS. The directors of Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
SECTION 1.06. OFFICERS. The officers of the Company immediately prior to
the Effective Time shall be the officers of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
A-2
<PAGE>
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.01. CONVERSION OF CAPITAL STOCK. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Common Stock, no par value, of the Company (the "Company Common
Stock"), any shares of Series A Preferred Stock, no par value, of the Company
(the "Company Series A Preferred Stock"), any shares of Series B Preferred
Stock, no par value, of the Company (the "Company Series B Preferred Stock"),
any shares of Series C Preferred Stock, no par value, of the Company (the
"Company Series C Preferred Stock"), any shares of Series D Preferred Stock, no
par value, of the Company (the "Company Series D Preferred Stock" and, together
with the Company Series A Preferred Stock, the Company Series B Preferred Stock
and the Company Series C Preferred Stock, the "Company Preferred Stock"; the
Company Common Stock and Company Preferred Stock are referred to herein
collectively as the "Company Capital Stock") or any shares of capital stock of
Sub:
(a) CAPITAL STOCK OF SUB. Each issued and outstanding share of the
capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of common stock, par value $0.01 per share, of the
Surviving Corporation.
(b) PARENT-OWNED STOCK TO REMAIN OUTSTANDING. All shares of Company
Capital Stock owned by any subsidiary (as defined in Section 9.03) of the
Company or Parent (other than Sub) immediately prior to the Effective Time
shall automatically be converted into one fully paid and nonassessable share
of common stock, par value $0.01 per share, of the Surviving Corporation.
(c) CONVERSION OF COMPANY CAPITAL STOCK. Subject to Sections 2.01(e),
2.01(f) and 2.02(e) and subject further to the terms of the Escrow Agreement
and except for shares of Company Capital Stock to remain outstanding in
accordance with Section 2.01(b), the Merger Consideration (as defined in
this Section 2.01(c)) shall be first allocated (as set forth in clauses
(i)--(iii) below) and then paid (as set forth in clause (iv) below) to the
Holders as follows:
(i) the holders of Company Series B Preferred Stock, Company Series C
Preferred Stock and Company Series D Preferred Stock shall be entitled to
receive, PARI PASSU, but prior and in preference to any allocation of
Merger Shares (as defined in this Section 2.01(c)) to the holders of
Company Series A Preferred Stock or Company Common Stock by reason of
their ownership thereof, an amount of Merger Shares (calculated based on
the Closing Date Average Closing Price (as defined in this Section
2.01(c)) equal to (a) $6.50 per share (if the Merger Share Value (as
defined in this Section 2.01(c)) is equal to or exceeds $90 million) or
$8.50 per share (if the Merger Share Value is less than $90 million) for
each share of Company Series B Preferred Stock then held by them (the
"Initial Series B Allocation"), (b) $10.38 (if the Merger Share Value is
equal to or exceeds $90 million) or $13.58 per share (if the Merger Share
Value is less than $90 million) per share for each share of Company
Series C Preferred Stock then held by them (the "Initial Series C
Allocation") and (c) $11.49 per share (if the Merger Share Value is equal
to or exceeds $90 million) or $15.03 per share (if the Merger Share Value
is less than $90 million) for each share of Company Series D Preferred
Stock then held by them (the "Initial Series D Allocation");
(ii) upon completion of the allocations described in clause (i)
above, the holders of Company Series A Preferred Stock shall be entitled
to receive, prior and in preference to any allocation of Merger Shares to
the holders of Company Common Stock by reason of their ownership thereof,
an amount of Merger Shares (calculated based on the Closing Date Average
Closing Price) equal to $6.00 per share for each share of Company Series
A Preferred Stock then held by them (the "Initial Series A Allocation");
(iii) upon completion of the allocations described in clauses (i) and
(ii) above, any remaining Merger Shares shall be allocated ratably among
the holders of Company Preferred
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Stock and Company Common Stock (the "Initial Common Allocation") based
upon the number of shares of Company Common Stock (or shares of Company
Common Stock then issuable upon conversion of Company Preferred Stock)
held by them until, (A) with respect to the holders of Company Series B
Preferred Stock, such holders shall have received an aggregate amount of
Merger Shares (calculated based on the Closing Date Average Closing
Price) equal to $21.58 per share (if the Merger Share Value is equal to
or exceeds $90 million) or $12.78 per share (if the Merger Share Value is
less than $90 million) of Company Series B Preferred Stock (in either
case, including all amounts paid to such holders in respect of such
shares under clause (i) above and this clause (iii)) (the "Final Series B
Allocation" and, together with the Initial Series B Allocation, the
"Series B Allocated Merger Shares"), (B) with respect to the holders of
Company Series C Preferred Stock, such holders shall have received an
aggregate amount of Merger Shares (calculated based on the Closing Date
Average Closing Price) equal to $34.48 per share (if the Merger Share
Value is equal to or exceeds $90 million) or $20.42 per share (if the
Merger Share Value is less than $90 million) of Company Series C
Preferred Stock (in either case, including all amounts paid to such
holders in respect of such shares under clause (i) above and this clause
(iii)) (the "Final Series C Allocation" and, together with the Initial
Series C Allocation, the "Series C Allocated Merger Shares") and (c) with
respect to the holders of Company Series D Preferred Stock, such holders
shall have received an aggregate amount of Merger Shares (calculated
based on the Closing Date Average Closing Price) equal to $38.16 per
share (if the Merger Share Value is equal to or exceeds $90 million) or
$22.60 per share (if the Merger Share Value is less than $90 million) of
Company Series D Preferred Stock (in either case, including all amounts
paid to such holders in respect of such shares under clause (i) above and
this clause (iii)) (the "Final Series D Allocation" and, together with
the Initial Series D Allocation, the "Series D Allocated Merger Shares").
Thereafter, any remaining Merger Shares shall be allocated ratably among
the holders of Company Series A Preferred Stock (the "Final Series A
Allocation" and, together with the "Initial Series A Allocation, the
"Series A Allocated Merger Shares") and holders of Company Common Stock
(the "Final Common Allocation" and, together with the Initial Common
Allocation, the "Common Allocated Merger Shares") based on the number of
shares of Company Common Stock held by each (assuming conversion of all
Company Series A Preferred Stock); and
(iv) upon completion of the allocations described in clauses
(i)-(iii) above, (A) each issued and outstanding share of Company Common
Stock shall be converted into the right to receive that number (the
"Common Stock Exchange Ratio") of fully paid and nonassessable shares of
common stock, par value $.01 per share, of Parent ("Parent Common Stock")
equal to the amount obtained by dividing (x) the Common Allocated Merger
Shares by (y) the aggregate number of outstanding shares of Company
Common Stock as of the Effective Time (assuming the conversion of all
Stock Options and the exercise of all Common Stock Warrants) (the "Common
Stock Merger Consideration"),
(B) each share of Company Series A Preferred Stock shall be converted
into the right to receive that number (the "Series A Exchange Ratio") of
fully paid and nonassessable shares of Parent Common Stock equal to the
amount obtained by dividing (x) the Series A Allocated Merger Shares by
(y) the aggregate number of outstanding shares of Company Series A
Preferred Stock as of the Effective Time (the "Series A Merger
Consideration"),
(C) each share of Company Series B Preferred Stock shall be converted
into the right to receive that number (the "Series B Exchange Ratio") of
fully paid and nonassessable shares of Parent Common Stock equal to the
amount obtained by dividing (x) the Series B Allocated Merger Shares by
(y) the aggregate number of outstanding shares of Company Series B
Preferred Stock as of the Effective Time (the "Series B Merger
Consideration"),
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(D) each share of Company Series C Preferred Stock shall be converted
into the right to receive that number (the "Series C Exchange Ratio") of
fully paid and nonassessable shares of Parent Common Stock equal to the
amount obtained by dividing (x) the Series C Allocated Merger Shares by
(y) the aggregate number of outstanding shares of Company Series C
Preferred Stock as of the Effective Time (assuming the exercise of all
Series C Warrants) (the "Series C Merger Consideration"), and
(E) each share of Company Series D Preferred Stock shall be converted
into the right to receive that number (the "Series D Exchange Ratio") of
fully paid and nonassessable shares of Parent Common Stock equal to the
amount obtained by multiplying (x) the Series D Allocated Merger Shares
by (y) the aggregate number of outstanding shares of Company Series D
Preferred Stock as of the Effective Time (assuming the exercise of all
Series D Warrants) (the "Series D Merger Consideration").
The Common Stock Merger Consideration, the Series A Merger Consideration,
the Series B Merger Consideration, the Series C Merger Consideration and the
Series D Merger Consideration are referred to herein collectively as the "Merger
Consideration". The term "Merger Shares" shall mean that number of shares of
Parent Common Stock, rounded to the nearest whole share, equal to the amount
obtained by dividing (A) $88,000,000 plus the Closing Date Cash (as defined in
Section 7.02) (less (x) the amount of Company Indebtedness (as defined in
Section 3.03) as of the Closing Date (other than (i) the fees and expenses of
Hambrecht & Quist LLC, which shall not exceed the amount set forth in the terms
of the letter agreement dated May 10, 1999, between the Company and Hambrecht &
Quist LLC (the "H&Q Fee") and (ii) the portion of such Company Indebtedness owed
to the holders of Company Preferred Stock), (y) the Hunsader Amount (as defined
in Section 6.17) and (z) all the fees and expenses incurred by the Company
(other than the H&Q Fee) in connection with the Merger, this Agreement and the
transactions contemplated by this Agreement (the "Company Expenses") (as defined
in Section 6.05)) by (B) the Closing Date Average Closing Price. The Closing
Date Average Closing Price shall be an amount equal to the average of the last
quoted sale price per share of Parent Common Stock on the Nasdaq National Market
("Nasdaq") (as reported in THE WALL STREET JOURNAL, or, if not reported thereby,
any other authoritative source) for the 20 consecutive trading days ending on
and including the trading day preceding the Closing Date. Notwithstanding
anything to the contrary contained herein, in the event that the Closing Date
Average Closing Price is less than $30.75 (the "Minimum Price"), then solely for
the purposes of the definition of Merger Shares, the Closing Date Average
Closing Price shall be deemed to be the Minimum Price, and in the event that the
Closing Date Average Closing Price is greater than $51.25 (the "Maximum Price"),
then solely for the purposes of the definition of Merger Shares, the Closing
Date Average Closing Price shall be deemed to be the Maximum Price. The term
"Merger Share Value" shall mean the product obtained by multiplying (A) the
Merger Shares by (B) the Closing Date Average Closing Price.
As of the Effective Time, all such shares shall no longer be outstanding and
shall automatically be canceled and shall cease to exist, and each holder of a
certificate that immediately prior to the Effective Time represented any such
shares (a "Certificate") shall cease to have any rights with respect thereto,
except the right to receive the applicable Merger Consideration with respect
thereto and any cash in lieu of fractional shares of Parent Common Stock to be
issued or paid in consideration therefor upon surrender of such certificate in
accordance with Section 2.02 (subject, in the case of such shares held by the
Holders, to the terms of the Escrow Agreement), without interest.
(d) ANTI-DILUTION PROVISIONS. In the event Parent changes (or
establishes a record date for changing) the number of shares of Parent
Common Stock issued and outstanding prior to the Effective Time as a result
of a stock split, stock dividend, recapitalization, subdivision,
reclassification, combination, exchange of shares or similar transaction
with respect to the outstanding Parent Common Stock or in the event Parent
Common Stock is converted or exchanged as a result of any consolidation or
merger to which Parent is a party (other than a merger in which Parent is
the continuing corporation and which does not result in any
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reclassification of, or change in, outstanding shares of Parent Common
Stock), and the record date or the closing date, as the case may be,
therefor shall be prior to the Effective Time, Parent Common Stock, the
Merger Shares and the Merger Consideration shall be adjusted to reflect such
stock split, stock dividend, recapitalization, subdivision,
reclassification, combination, exchange of shares or similar transaction or
converted to reflect such consolidation or merger.
(e) SHARES OF DISSENTING SHAREHOLDERS. Notwithstanding anything in
this Agreement to the contrary, any issued and outstanding shares of Company
Capital Stock held by a person (a "Dissenting Shareholder") who duly demands
purchase of his shares of Company Capital Stock pursuant to the CGCL and is
in compliance with all the provisions of the CGCL concerning the right of
such holders to demand purchase of their shares in connection with the
Merger ("Dissenting Shares") shall not be converted as described in Section
2.01(c) but shall become the right to receive an amount in cash equal to the
fair value of such shares as may be determined to be due to such Dissenting
Shareholder as provided in the CGCL. If, however, such Dissenting
Shareholder withdraws his demand for purchase or fails to perfect or
otherwise loses his right of purchase, in any case pursuant to the CGCL, the
shares of Company Capital Stock of such shareholder shall be deemed to be
converted as of the Effective Time into the right to receive the applicable
Merger Consideration with respect to such shares, without interest. The
Company shall give Parent (i) prompt notice of any demands for purchase of
shares received by the Company from Dissenting Shareholders and (ii) the
opportunity to participate in and direct all negotiations and proceedings
with respect to any such demands. The Company shall not, without the prior
written consent of Parent, make any payment with respect to, or settle,
offer to settle or otherwise negotiate, any such demands.
(f) ESCROW OF MERGER SHARES. At the Closing, on behalf of the
Principal Shareholders and pursuant to the terms of the Escrow Agreement,
Parent will deposit with the Escrow Agent named therein that number of
shares of Parent Common Stock equal to 10% of the total number of shares of
Parent Common Stock issuable to the Holders pursuant to Section 2.01(c).
SECTION 2.02. EXCHANGE OF CERTIFICATES. (a) EXCHANGE AGENT. As of the
Effective Time, Parent shall enter into an agreement with such bank or trust
company as may be reasonably designated by Parent and reasonably acceptable to
the Company (the "Exchange Agent"), which shall provide that Parent shall,
subject to Section 2.01(f), deposit with the Exchange Agent as of the Effective
Time, for the benefit of the holders of shares of Company Capital Stock, for
exchange in accordance with this Article II, through the Exchange Agent,
certificates representing the shares of Parent Common Stock (such shares of
Parent Common Stock, together with any dividends or distributions with respect
thereto with a record date after the Effective Time, any Excess Shares (as
defined below) and any cash (including cash proceeds from the sale of the Excess
Shares) payable in lieu of any fractional shares of Parent Common Stock being
hereinafter referred to as the "Exchange Fund") issuable pursuant to Section
2.01 in exchange for outstanding shares of Company Capital Stock.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable and not
more than 10 business days after the Effective Time, the Exchange Agent
shall mail to each holder of record of a Certificate whose shares were
converted into the right to receive the applicable Merger Consideration with
respect thereto pursuant to Section 2.01 (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
Parent and the Company may reasonably specify) and (ii) instructions for use
in surrendering the Certificates in exchange for the Merger Consideration.
Upon surrender of a Certificate for cancelation to the Exchange Agent,
together with such letter of transmittal, duly executed, and such other
documents as may reasonably be required by the Exchange Agent, the holder of
such Certificate shall receive, subject to Section 2.01(f), in exchange
therefor a certificate representing that number of whole shares of Parent
Common Stock which such holder has the right to receive pursuant to the
provisions of this Article II, certain dividends or other distributions
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as and to the extent specified in Section 2.02(c) and cash in lieu of any
fractional share of Parent Common Stock as and to the extent specified in
Section 2.02(e), and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of Company Capital Stock
which is not registered in the transfer records of the Company, a
certificate representing the proper number of shares of Parent Common Stock
may be issued to a person other than the person in whose name the
Certificate so surrendered is registered if such Certificate shall be
properly endorsed or otherwise be in proper form for transfer and the person
requesting such issuance shall pay any transfer or other taxes required by
reason of the issuance of shares of Parent Common Stock to a person other
than the registered holder of such Certificate or establish to the
satisfaction of Parent that such tax has been paid or is not applicable.
Until surrendered as contemplated by this Section 2.02(b), each Certificate
shall be deemed at any time after the Effective Time to represent only the
right to receive upon such surrender the applicable Merger Consideration
with respect thereto, certain dividends or distributions as and to the
extent specified in Section 2.02(c) and any cash in lieu of fractional
shares of Parent Common Stock to be issued or paid in consideration therefor
upon surrender of such certificate as and to the extent specified in Section
2.02(e). No interest shall be paid or will accrue on any cash payable to
holders of Certificates pursuant to the provisions of this Article II.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions with respect to Parent Common Stock with a record date
after the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Parent Common Stock represented
thereby, and no cash payment in lieu of fractional shares shall be paid to
any such holder pursuant to Section 2.02(e), and all such dividends, other
distributions and cash in lieu of fractional shares of Parent Common Stock
shall be paid by Parent to the Exchange Agent and shall be included in the
Exchange Fund, in each case until the surrender of such Certificate in
accordance with this Article II. Subject to the effect of applicable escheat
or similar laws, following surrender of any such Certificate there shall be
paid to the holder of the certificate representing whole shares of Parent
Common Stock issued in exchange therefor, without interest, (i) at the time
of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such
whole shares of Parent Common Stock, and the amount of any cash payable in
lieu of a fractional share of Parent Common Stock to which such holder is
entitled as and to the extent specified in Section 2.02(e) and (ii) at the
appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time but prior to such surrender and
with a payment date subsequent to such surrender payable with respect to
such whole shares of Parent Common Stock.
(d) NO FURTHER OWNERSHIP RIGHTS IN COMPANY CAPITAL STOCK. Subject to
Section 2.01(f), all shares of Parent Common Stock issued upon the surrender
for exchange of Certificates in accordance with the terms of this Article II
(including any cash paid pursuant to this Article II) shall be deemed to
have been issued (and paid) in full satisfaction of all rights pertaining to
the shares of Company Capital Stock theretofore represented by such
Certificates, and there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the shares of Company
Capital Stock which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation or the Exchange Agent for any reason, they shall be
canceled and exchanged as provided in this Article II, except as otherwise
provided by law.
(e) NO FRACTIONAL SHARES. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender
for exchange of Certificates, no dividend or distribution of Parent shall
relate to such fractional share interests and such fractional share
interests will not entitle the owner thereof to the right to vote or to any
other rights of a stockholder of Parent.
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(i) In lieu of such fractional share interests, Parent shall pay to
each former holder of Company Capital Stock an amount in cash equal to
the product obtained by multiplying (A) the fractional share interest to
which such former holder (after taking into account all shares of Company
Capital Stock held at the Effective Time by such holder) would otherwise
be entitled by (B) the last quoted sale price for a share of Parent
Common Stock on the Nasdaq (as reported in THE WALL STREET JOURNAL, or,
if not reported thereby, any other authoritative source) on the Closing
Date, and, in such case, all references herein to the cash proceeds of
the sale of the Excess Shares and similar references shall be deemed to
mean and refer to the payments calculated as set forth in this Section
2.02(e)(iv).
(ii) As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of Certificates formerly representing
Company Capital Stock with respect to any fractional share interests, the
Exchange Agent shall make available such amounts to such holders of
Certificates formerly representing Company Capital Stock subject to and
in accordance with the terms of Section 2.02(c).
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
which remains undistributed to the holders of the Certificates for six
months after the Effective Time shall be delivered to Parent, upon demand,
and any holders of the Certificates who have not theretofore complied with
this Article II shall thereafter look only to Parent (and Parent shall
assume and perform the obligations of the Exchange Agent) for payment of
their claim for the applicable Merger Consideration with respect thereto,
any dividends or distributions with respect to Parent Common Stock and any
cash in lieu of fractional shares of Parent Common Stock.
(g) NO LIABILITY. None of Parent, Sub, the Company or the Exchange
Agent shall be liable to any person in respect of any shares of Parent
Common Stock, any dividends or distributions with respect thereto, any cash
in lieu of fractional shares of Parent Common Stock or any cash from the
Exchange Fund, in each case delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(h) INVESTMENT OF EXCHANGE FUND. The Exchange Agent shall invest any
cash included in the Exchange Fund, as directed by Parent, on a daily basis.
Any interest and other income resulting from such investments shall be added
to the Exchange Fund and used to pay the expenses of the Exchange Fund.
(i) LOST CERTIFICATES. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required
by Parent, the posting by such person of a bond in such reasonable amount as
Parent may direct as indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent shall issue in exchange
for such lost, stolen or destroyed Certificate the applicable Merger
Consideration with respect thereto and, if applicable, any unpaid dividends
and distributions on shares of Parent Common Stock deliverable in respect
thereof and any cash in lieu of fractional shares, in each case pursuant to
this Agreement.
(j) WITHHOLDING RIGHTS. The Exchange Agent shall be entitled to deduct
and withhold from the consideration otherwise payable to any holder of
Company Capital Stock pursuant to this Agreement such amounts as may be
required to be deducted and withheld with respect to the making of such
payment under the Code, or under any provision of state, local or foreign
Tax law. To the extent that amounts are so withheld and paid over to the
appropriate Taxing Authority, the Exchange Agent will be treated as though
it withheld an appropriate amount of the type of consideration otherwise
payable pursuant to this Agreement to any holder of Company Capital Stock,
sold such consideration for an amount of cash equal to the fair market value
of such consideration at the time of such deemed sale and paid such cash
proceeds to the appropriate Taxing Authority.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
Except for items disclosed on the disclosure schedule or the exhibits or
schedules thereto (with specific reference to the Section of this Agreement to
which the information stated in such disclosure relates) delivered by the
Company to Parent prior to the execution and delivery of this Agreement (the
"Company Disclosure Schedule"), the Company represents and warrants to Parent as
follows:
SECTION 3.01. ORGANIZATION AND STANDING OF THE COMPANY. Each of the
Company and its subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation. Each
of the Company and its subsidiaries has all requisite corporate or other power
and authority necessary to enable it to use its corporate name and to own, lease
or otherwise hold and operate its properties or assets and to carry on its
business as now being conducted and proposed to be conducted, except where the
failure to have such power and authority could not be reasonably expected to
have a material adverse effect (as defined in Section 9.03) on the Company. Each
of the Company and its subsidiaries is duly qualified or licensed to do business
as a foreign corporation in each jurisdiction in which the nature of its
business, or the ownership, leasing or operation of its properties or assets,
requires such qualification or licensing, except where the failure to be so
qualified could not reasonably be expected to have a material adverse effect on
the Company. The Company has delivered to Parent true and complete copies of its
Amended and Restated Articles of Incorporation (which for all purposes under
this Agreement include each certificate of determination with respect thereto),
as amended to the date hereof, and the Amended and Restated By-laws, as in
effect on the date hereof, and the certificates of incorporation and by-laws or
other similar organizational documents of its subsidiaries, in each case as
amended to the date hereof. The respective certificates of incorporation and
by-laws or other similar organizational documents of the subsidiaries of the
Company do not contain any provision limiting or otherwise restricting the
ability of (i) the Company to control such subsidiaries or (ii) the Company or
any of its subsidiaries to engage in any lawful business or activity. The share
certificate and transfer books of the Company and each of its subsidiaries
(which have been made available to Parent and its representatives) are true and
complete in all material respects.
SECTION 3.02. AUTHORITY; NONCONTRAVENTION. The Company has the requisite
corporate or other power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and, assuming the Shareholder Approval (as defined
in Section 3.19) has been obtained, the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or,
assuming the Shareholder Approval has been obtained, to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company and, when executed and delivered by Parent and Sub,
will constitute a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws of
general application affecting the enforcement of creditors' rights. The
execution and delivery of this Agreement do not, and, assuming the Shareholder
Approval has been obtained, the consummation of the transactions contemplated by
this Agreement and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancelation or acceleration of any obligation or to loss of a material benefit
under, or result in the creation of any pledge, claim, lien, charge, encumbrance
or security interest of any kind or nature whatsoever (a "Lien") in or upon any
of the properties or assets of the Company or any of its subsidiaries under, any
provision of (i) the Amended and Restated Articles of Incorporation or the
Amended and Restated By-laws of the Company or the
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certificates of incorporation or by-laws or other similar organizational
documents of any of its subsidiaries, (ii) any loan or credit agreement, bond,
debenture, note, mortgage, indenture, lease or other contract, commitment,
agreement, arrangement, obligation, undertaking, instrument, permit, concession,
franchise or license (each a "Contract") to which the Company or any of its
subsidiaries is a party or any of their respective properties or assets is
subject or (iii) subject to the governmental filings and other matters referred
to in the following sentence, any (A) statute, law, ordinance, rule or
regulation (a "Law") or (B) order, writ, injunction, decree, judgment or
stipulation (an "Order"), in each case, applicable to the Company or any of its
subsidiaries or any of their respective properties or assets, other than, in the
case of clauses (ii) and (iii), and in the case of clause (i) to the extent such
clause relates to the Company's subsidiaries, any such conflicts, violations,
defaults, rights, losses or Liens that individually or in the aggregate could
not reasonably be expected to have a material adverse effect on the Company or
affect Parent in a material and adverse way, impair in any material respect the
ability of the Company to perform its obligations under this Agreement or
prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement. No consent, approval, order or authorization of,
or registration, declaration or filing with, any Federal, state or local,
domestic or foreign, government or any court, administrative agency or
commission or other governmental authority or agency, domestic or foreign (a
"Governmental Entity"), is required by or with respect to the Company or any of
its subsidiaries in connection with the execution and delivery of this Agreement
by the Company or the consummation by the Company of the Merger or the other
transactions contemplated by this Agreement, except for (1) the filing of the
California Agreement of Merger with the Secretary of State of the State of
California, the filing of the Delaware Certificate of Merger with the Secretary
of State of the State of Delaware and the filing of appropriate documents with
the relevant authorities of other states in which the Company or any of its
subsidiaries is qualified to do business and (2) such other consents, approvals,
orders, authorizations, registrations, declarations and filings the failure of
which to be obtained or made individually or in the aggregate could not
reasonably be expected to have a material adverse effect on the Company, impair
in any material respect the ability of the Company to perform its obligations
under this Agreement or prevent or materially delay the consummation of any of
the transactions contemplated by this Agreement.
SECTION 3.03. CAPITAL STOCK OF THE COMPANY. The authorized capital stock
of the Company consists of 10,000,000 shares of Company Common Stock, of which
2,734,547 shares are issued and outstanding as of the date of this Agreement,
and 3,500,000 shares of Company Preferred Stock, of which (a) 1,446,951 shares
have been designated as Company Series A Preferred Stock (1,446,951 of which
Company Series A Preferred Stock shares are issued and outstanding as of the
date of this Agreement); (b) 853,659 shares have been designated as Company
Series B Preferred Stock (853,659 of which Company Series B Preferred Stock
shares are issued and outstanding as of the date of this Agreement); (c) 770,334
shares have been designated as Company Series C Preferred Stock (762,700 of
which Company Series C Preferred Stock shares are issued and outstanding as of
the date of this Agreement); and (d) 422,069 shares have been designated as
Company Series D Preferred Stock (413,793 of which Company Series D Preferred
Stock shares are issued and outstanding as of the date of this Agreement). As of
the date of this Agreement, (i) 1,890,703 shares of Company Common Stock were
reserved for issuance upon the exercise of Stock Options (as defined in Section
6.04(a)(i)) outstanding under the Company Stock Plan (as defined below), (ii)
113,900 shares of Company Common Stock were reserved for issuance upon the
exercise of outstanding warrants to purchase Company Common Stock with an
exercise price of $0.50 per share and 15,000 shares of Company Common Stock were
reserved for issuance upon the exercise of outstanding warrants to purchase
Company Common Stock with an exercise price of $1.00 per share (collectively,
the "Common Stock Warrants"), (iii) 7,634 shares of Company Series C Preferred
Stock were reserved for issuance upon the exercise of outstanding warrants to
purchase Company Series C Preferred Stock with an exercise price of $6.55 per
share (the "Series C Warrants"), (iv) 8,276 shares of Company Series D Preferred
Stock were reserved for issuance upon the exercise of outstanding warrants to
purchase Company Series D
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Preferred Stock with an exercise price of $7.25 per share (the "Series D
Warrants" and, together with the Common Stock Warrants and the Series C
Warrants, the "Warrants") and (v) 3,493,013 shares of Company Common Stock were
reserved for issuance upon the conversion of Company Preferred Stock (including
the Company Series C Preferred Stock and the Company Series D Preferred Stock
issuable upon exercise of the Series C Warrants and the Series D Warrants,
respectively). Except as set forth above, as of the date of this Agreement no
shares of capital stock or other voting securities of the Company were issued,
reserved for issuance or outstanding. There are no outstanding stock
appreciation rights with respect to shares of Company Capital Stock. There are
no bonds, debentures, notes or other indebtedness of the Company or any of its
subsidiaries having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which shareholders of the
Company may vote. Except (i) as set forth above, (ii) as expressly permitted by
Section 5.01(a)(ii) and (iii) the Hunsader Shares (as defined in Section 6.17),
there are no securities, options, warrants, calls, rights or Contracts of any
kind to which the Company or any of its subsidiaries is a party, or by which the
Company or any of its subsidiaries is bound, obligating the Company or any of
its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, shares of capital stock or other securities of the Company or any of its
subsidiaries or obligating the Company or any of its subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right or
Contract. There are not any outstanding contractual or other obligations (i) of
the Company or any of its subsidiaries to repurchase, redeem or otherwise
acquire any shares of capital stock or other securities of the Company or (ii)
of the Company to vote or to dispose of any shares of capital stock or other
securities of any of its subsidiaries. All outstanding options to purchase
Company Common Stock were issued pursuant to the Company's 1996 Stock Option
Plan, as amended to date (the "Company Stock Plan"). Section 3.03(a) of the
Company Disclosure Schedule sets forth a true and complete list of the holders
of outstanding Stock Options, the number of shares of Company Common Stock
subject to each such outstanding Stock Option and the exercise prices thereof,
in each case as of the date of this Agreement. Section 3.03 of the Company
Disclosure Schedule sets forth a true and complete list, as of the date of this
Agreement, of (A) the identity of each holder of shares of Company Capital Stock
and Warrants, (B) the number of shares of each class of Company Capital Stock
and the Warrants owned of record by such holder and (C) the exercise price of
each of the Warrants. All the outstanding indebtedness for borrowed money of the
Company or its subsidiaries is prepayable without prepayment penalty or premium
(other than the payment of customary LIBOR breakage costs), and no indebtedness
for borrowed money of the Company or its subsidiaries contains any restriction
upon the incurrence of indebtedness for borrowed money by the Company or any of
its subsidiaries or restricts the ability of the Company or any of its
subsidiaries to grant any Liens on its properties or assets. The Company has
outstanding Indebtedness (as defined in Section 3.10) (the "Company
Indebtedness") in the aggregate principal amount of $6,438,648.00, as of the
date of this Agreement.
SECTION 3.04. EQUITY INTERESTS. Section 3.04 of the Company Disclosure
Schedule lists each subsidiary of the Company. All the outstanding shares of
capital stock or other voting or equity interests of each subsidiary of the
Company are owned by the Company, by another wholly owned subsidiary of the
Company or by the Company and another wholly owned subsidiary of the Company,
free and clear of all Liens, and are duly authorized, validly issued, fully paid
and nonassessable. Except for the capital stock of its subsidiaries, the Company
does not own, directly or indirectly, any capital stock or other ownership
interest in any person.
SECTION 3.05. FINANCIAL STATEMENTS. The Company has delivered to Parent
the audited consolidated balance sheets of the Company as of September 30, 1997,
and September 30, 1998, and the related audited consolidated income statements,
statements of changes in shareholders equity and cash-flow statements of the
Company for the fiscal years ended on such dates (the financial statements
described above are collectively referred to as the "Financial Statements"). The
Financial Statements were derived from and are in accordance in all material
respects with the books and records of the Company and its consolidated
subsidiaries, have been prepared in conformity with generally accepted
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accounting principles ("GAAP") consistently applied (except as described in the
notes included therein) and fairly present the financial condition of the
Company and its subsidiaries as of the dates thereof and the results of
operations of the Company and its subsidiaries for the periods then ended.
The Company has also delivered to Parent unaudited consolidated balance
sheets and related unaudited consolidated income statements, statements of
changes in shareholders equity and cash-flow statements of the Company as of
March 31, 1999, June 30, 1999 and July 31, 1999 and for the six month, nine
month and ten month, respectively, periods then ended (the "Unaudited
Statements"). The Unaudited Statements have been prepared in accordance in all
material respects with GAAP and on a consistent basis with the audited
consolidated financial statements of the Company as of and for the year ended
September 30, 1998 (except that they do not contain footnotes and are subject to
normal recurring year-end audit adjustments). There were no changes in the
method of application of the Company's accounting policies or changes in the
method of applying the Company's use of estimates in the preparation of the
Unaudited Statements as compared with the audited consolidated financial
statements of the Company as of September 30, 1998, and the year then ended.
SECTION 3.06. UNDISCLOSED LIABILITIES. Except as set forth or reflected on
the Financial Statements or the Unaudited Statements (or specifically described
in the notes thereto), neither the Company nor any of its subsidiaries has any
material liabilities or obligations of any nature (whether accrued, absolute,
contingent, unasserted or otherwise) except for liabilities and obligations
incurred since the date of the most recent balance sheet included in the
Unaudited Statements in the ordinary course of business consistent with past
practice.
SECTION 3.07. TAXES. (a) As used in this Agreement, (i) "Code" shall mean
the Internal Revenue Code of 1986, as amended, and the Treasury Regulations
promulgated thereunder; (ii) "Taxes" shall mean all Federal, state and local,
domestic and foreign, income, franchise, property, sales, excise, employment,
payroll, social security, value-added, ad valorem, transfer, withholding and
other taxes, including taxes based on or measured by gross receipts, profits,
sales, use or occupation, tariffs, levies, impositions, assessments or other
governmental charges of any nature, including any interest, penalties or
additions with respect thereto and any obligations under any agreements or
arrangements with any other person with respect to such amounts; (iii) "Taxing
Authority" shall mean any domestic, foreign, federal, national, state, county or
municipal or other local governmental body (including any subdivision, agency or
commission thereof), or any quasi-governmental body, in each case, exercising
regulatory authority in respect of Taxes; and (iv) "Tax Return" shall mean all
returns, reports, forms, including information returns, with respect to Taxes.
(b) The Company and each of its subsidiaries, and any affiliated group
(within the meaning of Section 1504 of the Code) of which the Company or any of
its subsidiaries is or has ever been a member or any group of corporations with
which the Company or any of its subsidiaries files, has filed or is or was
required to file an affiliated, consolidated, combined, unitary or aggregate Tax
Return (each such group, a "Company Consolidated Group"), has timely filed or
caused to be filed all income and franchise Tax Returns and all other material
Tax Returns required to be filed by each such entity. All such Tax Returns are
true and complete in all material respects. The Company, each of its
subsidiaries and each Company Consolidated Group has timely paid or caused to be
timely paid (or the Company has timely paid on its subsidiaries' behalf) all
Taxes due from it or them with respect to the taxable periods covered by such
Tax Returns, and, in accordance with generally accepted accounting principles,
the balance sheet of the Company as of September 30, 1998, reflects an adequate
reserve for all Taxes payable by the Company and each of its subsidiaries for
all taxable periods and portions thereof through its date. Neither the Company
nor any of its subsidiaries nor any Company Consolidated Group has requested any
extension of time within which to file any Tax Return which Tax Return has not
yet been filed.
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(c) No income or franchise or other material Tax Return of the Company, any
of its subsidiaries or any Company Consolidated Group is or has ever been under
audit or examination by any Taxing Authority, and no written or unwritten notice
of such an audit or examination has been received by the Company, any of its
subsidiaries or any Company Consolidated Group. Each material deficiency, if
any, resulting from any audit or examination relating to Taxes by any Taxing
Authority has been timely paid. No material issues relating to Taxes were raised
by the relevant Taxing Authority during any presently pending audit or
examination, and no material issues relating to Taxes were raised by the
relevant Taxing Authority in any completed audit or examination that can
reasonably be expected to recur in a later taxable period. The relevant statute
of limitations is open with respect to all U.S. Federal income Tax Returns of
the Company and each of its subsidiaries. The Company has made available to
Parent documents, if any, setting forth the years in which the statute of
limitations has not yet expired for the income, franchise and other material Tax
Returns of the Company, any of its subsidiaries or any Company Consolidated
Group and listing the last year in which the Company, any of its subsidiaries or
any Company Consolidated Group is subject to audit with respect to all income,
franchise and other material Tax Returns.
(d) There is no currently effective agreement or other document extending,
or having the effect of extending, the period of assessment or collection of any
Taxes and no power of attorney with respect to any Taxes has been executed or
filed with any Taxing Authority.
(e) No material Liens for Taxes exist with respect to any assets or
properties of the Company or any of its subsidiaries, except for statutory Liens
for Taxes not yet due.
(f) Neither the Company nor any of its subsidiaries is a party to or bound
by any Tax sharing agreement, Tax indemnity obligation or similar agreement,
arrangement or practice with respect to Taxes (including any advance pricing
agreement, closing agreement or other agreement relating to Taxes with any
Taxing Authority).
(g) Neither the Company nor any of its subsidiaries will be required to
include in a taxable period ending after the Effective Time taxable income
attributable to income that accrued in a prior taxable period but was not
recognized in any prior taxable period as a result of the installment method of
accounting, the completed contract method of accounting, the long-term contract
method of accounting, the cash method of accounting or Section 481 of the Code
or any comparable provision of any other Tax law or for any other reason.
(h) No amount or other entitlement that could be received (whether in cash
or property or the vesting of property) as a result of any of the transactions
contemplated by this Agreement by any officer, director or employee of the
Company or its subsidiaries who is a "disqualified individual" (as such term is
defined in proposed Treasury Regulation Section 1.280G-1) would be characterized
as an "excess parachute payment" or a "parachute payment" (as such terms are
defined in Section 280G(b)(1) of the Code).
(i) The Company and each of its subsidiaries has complied in all material
respects with all applicable laws relating to the payment and withholding of
Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 3121 and
3402 of the Code or similar provisions of state, local, domestic or foreign Tax
law) and has, within the time and the manner prescribed by law, withheld from
and paid over to the proper governmental authorities all amounts required to be
so withheld and paid over under applicable laws.
(j) No consent under Section 341(f) of the Code has been filed with respect
to the Company or any of its subsidiaries.
(k) Neither the Company nor any of its subsidiaries has been a United States
real property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code.
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(l) No property owned by the Company or any of its subsidiaries (i)
constitutes "tax exempt use property" within the meaning of Section 168(h)(1) of
the Code or (ii) is tax exempt bond financed property within the meaning of
Section 168(g) of the Code.
(m) Neither the Company nor any of its subsidiaries has ever (i) made an
election under Section 1362 of the Code to be treated as an S corporation for
Federal income tax purposes or (ii) made a similar election under any comparable
provision of any state, local or foreign Tax law.
(n) Neither the Company nor any of its subsidiaries is or ever has been a
personal holding company within the meaning of Section 542 of the Code.
(o) Section 3.07(o) of the Company Disclosure Schedule sets forth each
state, county, local, municipal or foreign jurisdiction in which the Company and
each of its subsidiaries (i) files, is required or has been required to file a
Tax Return relating to state and local income, franchise, license, excise, net
worth property and sales and use Taxes except in a case where the Company or any
of its subsidiaries is or has been required to file such a Tax Return and such
failure to file could not reasonably be expected to have a material adverse
effect on the Company or any of its subsidiaries or (ii) is or has been liable
for any material Taxes on a "nexus" basis at any time for taxable periods ending
after December 31, 1994.
(p) Neither the Company nor any of its subsidiaries has constituted either a
"distributing corporation" or a "controlled corporation" (within the meaning of
Section 355(a)(1)(A) of the Code) in any distribution of stock qualifying for
tax-free treatment under Section 355 of the Code (i) within the two-year period
ending on the date of this Agreement or (ii) in a distribution which could
otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
purchase of Company Capital Stock contemplated by this Agreement.
(q) Neither the Company nor any of its subsidiaries has taken any action or
knows of any fact, agreement, plan or other circumstance that is reasonably
likely to prevent the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code.
SECTION 3.08. ASSETS. (a) The Company and each of its subsidiaries has
good and marketable title to, or good and valid leasehold interests in, all of
its material personal properties and assets (including with respect to all real
property and interests in real property leased by it), in each case, free and
clear of any Liens, except for such property and assets as are no longer used or
useful in the conduct of its businesses and except for defects in title,
easements, restrictive covenants and similar encumbrances that individually or
in the aggregate could not reasonably be expected to materially affect the
ability of the Company and its subsidiaries to use such property or assets in
their intended manner.
(b) The Company and each of its subsidiaries has complied in all material
respects with the terms of all material leases to which it is a party and under
which it is in occupancy, and all such leases are in full force and effect,
except for such noncompliance or failure to be in full force and effect as could
not reasonably be expected to materially affect the ability of the Company to
obtain the benefit of such leases. The Company and each of its subsidiaries
enjoys peaceful and undisturbed possession in all material respects under all
material real property leases to which it is a party.
(c) Neither the Company nor any of its subsidiaries holds any fee or other
ownership interest in any real property. Section 3.08 of the Company Disclosure
Schedule sets forth a complete list of all real property and interests in real
property leased by the Company.
SECTION 3.09. INTELLECTUAL PROPERTY, ETC. (a) Section 3.09(a) of the
Company Disclosure Schedule sets forth a true and complete list of all material
patents, patent applications, trademarks, trade names, service marks and
registered copyrights and mask work rights and applications therefor, if
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any, owned by or licensed to the Company or any of its subsidiaries. All
material patents, patent applications, trademarks, mask works, service marks and
copyrights of the Company or any of its subsidiaries have been duly registered
and filed with or issued by each appropriate Governmental Entity in the
jurisdictions indicated in Section 3.09(a) of the Company Disclosure Schedule,
all necessary affidavits of continuing use have been filed, and all necessary
maintenance fees have been paid to continue all such rights in effect. The
Company and each of its subsidiaries owns or is licensed or otherwise has the
right to use, without payment to any other person except for fees set forth in
Section 3.09(b) of the Company Disclosure Schedule, all Intellectual Property
(as defined in Section 3.09(m) below) necessary for or material to the conduct
of its business as presently conducted or as proposed to be conducted, in each
case free and clear of all Liens. The conduct of the Company's business, as
presently conducted and as proposed to be conducted, does not in any material
respect conflict with, or result in any violation of or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancelation or acceleration of any obligation or loss of a material benefit
under, or result in the creation of any Lien in or upon any of the properties or
assets of the Company or any of its subsidiaries under, any Contract between the
Company or any of its subsidiaries and any person or any other Intellectual
Property rights of any other person.
(b) Section 3.09(b) of the Company Disclosure Schedule sets forth a true and
complete list of all material options, rights, licenses or interests of any kind
relating to Intellectual Property granted to the Company or any of its
subsidiaries, other than software licenses for generally available software
(such as Lotus 1-2-3, Word Perfect and the like) and generally available system
development tools, or granted by the Company to any other person.
(c) All software, other than generally available software (such as Lotus
1-2-3, WordPerfect and the like) and generally available system development
tools, that is either marketed to customers of the Company or any of its
subsidiaries as a program or as part of a product or service or is used by the
Company or any of its subsidiaries to support its business:
(i) is owned by the Company or any of its subsidiaries or the Company or
any of its subsidiaries has the right to use, modify, copy, sell,
distribute, sublicense and make Derivative Works (as defined in Section
3.09(m)) from such software, free and clear of any limitations or Liens; and
(ii) is free from any interest of any former or present employees of, or
contractors or consultants to, the Company or any of its subsidiaries.
(d) To the extent third party software is marketed to customers of the
Company or any of its subsidiaries together with the Intellectual Property of
the Company or any of its subsidiaries, (i) the third party rights have been
identified in Section 3.09(d) of the Company Disclosure Schedule, (ii) all
necessary licenses have been obtained and (iii) no royalties or payments are due
(or such royalties and payments are identified in Section 3.09(d) of the Company
Disclosure Schedule).
(e) None of the material trade secrets of the Company or any of its
subsidiaries has been published or disclosed by the Company or any of its
subsidiaries or, to the knowledge of the Company or any of its subsidiaries, by
any other person to any person except pursuant to licenses or Contracts
requiring such other persons to keep such trade secrets confidential.
(f) The Company and each of its subsidiaries is not, and to the knowledge of
the Company, no other party to any licensing, distributorship or other similar
arrangements with the Company or any of its subsidiaries relating to
Intellectual Property is, in breach of or default under its obligations under
such arrangements in any material respect.
(g) No person has any marketing rights to the Intellectual Property of the
Company or any of its subsidiaries, other than pursuant to the OEM contracts
listed in Exhibit 3.10(i) to Section 3.10 of the Company Disclosure Schedule.
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(h) Neither the Company nor any of its subsidiaries has received any written
communications, and no executive officer of the Company has received any oral
communication, alleging the Company or any of its subsidiaries has infringed or
violated or, by conducting its businesses as presently conducted and as proposed
to be conducted by the Company or any of its subsidiaries, would infringe or
violate any of the Intellectual Property of any other person.
(i) To the knowledge of the Company, no person is infringing on or otherwise
violating any right of the Company or any of its subsidiaries in any material
respect with respect to any material Intellectual Property owned by or licensed
to the Company or any of its subsidiaries.
(j) The Company and each of its subsidiaries have taken reasonable steps to
protect their Intellectual Property consistent with industry practice.
(k) No licenses or rights have been granted to distribute the source code
of, or to use source code to create Derivative Works, of, any product currently
marketed by, commercially available from or under development by the Company or
any of its subsidiaries for which the Company or any of its subsidiaries
possesses the source code. As used herein, "Derivative Work" shall mean a work
that is based upon one or more preexisting works, such as a revision,
enhancement, modification, abridgement, condensation, expansion or any other
form in which such preexisting works may be recast, transformed or adapted, and
which, if prepared without authorization of the owner of the copyright in such
preexisting work, would constitute a copyright infringement. For purposes
hereof, a Derivative Work shall also include any compilation that incorporates
such a preexisting work as well as translations from one human language to
another and from one type of code to another.
(l) Neither the Company nor any of its subsidiaries has assigned, sold or
otherwise transferred ownership of any material patent, patent application,
trademark, service mark, copyright or mask work owned by the Company.
(m) For purposes of this Agreement, "Intellectual Property" shall mean
trademarks (registered or unregistered), service marks, brand names, trade
dress, trade names, copyrights, the goodwill associated with the foregoing and
registrations in any jurisdiction of, and applications in any jurisdiction to
register, the foregoing, including any extension, modification or renewal of any
such registration or application; inventions, whether patented, patentable or
not patentable in any jurisdiction; mask works, trade secrets and confidential
proprietary information and rights in any jurisdiction to limit the use or
disclosure thereof by any person; registration or applications for registration
of copyrights in any jurisdiction, and any renewals or extensions thereof; any
similar intellectual property or proprietary rights; any computer programs or
software (including source code, object code and data), other than commercially
available computer programs and software; and licenses relating to the
foregoing.
SECTION 3.10. CONTRACTS. None of the Company or any of its subsidiaries is
a party to or bound by, and none of their properties or assets are bound by or
subject to, any written or oral:
(a) employment agreement or employment Contract that is not terminable
at will by the Company or such subsidiary both without any penalty and
without any obligation of the Company or any of its subsidiaries to pay
severance or other amounts (including any bonus) other than base salary,
accrued commissions, vacation pay and legally mandated benefits;
(b)(i) employee collective bargaining agreement or other Contract with
any labor union, (ii) plan, program or Contract that provides for the
payment of bonus, severance, termination or similar type of compensation or
benefits upon the termination or resignation of any employee of the Company
or such subsidiary or (iii) plan, program or Contract that provides for
medical or life insurance benefits for former employees of the Company or
such subsidiary or for current employees of the Company or such subsidiary
upon their retirement from, or termination of employment with, the Company
or such subsidiary (other than health coverage continuation provided under
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended);
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(c) Contract pursuant to which the Company or any of its subsidiaries
has agreed not to compete with any person or to engage in any activity or
business, or pursuant to which any benefit is required to be given or lost
as a result of so competing or engaging;
(d) Contract with (i) any shareholder of the Company or any of its
subsidiaries, (ii) any affiliate of the Company or any of its subsidiaries
or of any shareholder of the Company or any of its subsidiaries or (iii) any
director, officer or employee of the Company or any of its subsidiaries or
of any affiliate of the Company or any of its subsidiaries (other than
employment agreements covered by clause (b) above);
(e) license or franchise granted by the Company or any of its
subsidiaries pursuant to which the Company or any such subsidiary has agreed
to refrain from granting license or franchise rights to any other person;
(f) Contract under which the Company or such subsidiary has (i) incurred
any Indebtedness that is currently owing or (ii) given any Guarantee (each
as defined below);
(g) Contract expressly creating or granting a Lien (including Liens upon
properties acquired under conditional sales, capital leases or other title
retention or security devices);
(h) Contract for OEM services that is currently in effect or that is
scheduled to become effective by December 31, 1999;
(i) Contract providing for future performance by the Company or such
subsidiary in consideration of amounts previously paid in excess of $15,000
(including any provision requiring "make good" or recovery of advertising
shortfall (including advertising banners, buttons or account openings));
(j) Contract pursuant to which payments of royalty fees to third parties
in excess of $5,000 per month were made in July or August of 1999;
(k) Contract granting a third party any license to Intellectual Property
that is not limited to the internal use of such third party;
(l) Contract providing confidential treatment by the Company or such
subsidiary of material third party information;
(m) Contract which is material in any respect containing any provisions
dealing with a "change of control" or similar event with respect to the
Company or such subsidiary;
(n) Contract granting the other party or any third person "most favored
nation" status;
(o) Contract providing for monetary liquidated damages (but not
including other kinds of provisions that provide for limiting the maximum
amounts payable or for refunds of amounts in the event of a breach or
termination of the Contract);
(p) Contract that expressly guarantees that the materials and/or
services to be provided under the Contract will be Year 2000 Ready (as
defined in Section 3.22); and
(q) Contract pursuant to which the Company or any of its subsidiaries is
restricted in any material respect in the development, marketing or
distribution of their respective products or services in competition with
that of another; and
(r) Contract which (i) has aggregate future sums due from the Company or
such subsidiary in excess of $50,000 and is not terminable by the Company or
such subsidiary for a cost of less than $25,000 or (ii) is otherwise
material to the business of the Company or such subsidiary as presently
conducted or as proposed to be conducted.
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Each material Contract, including the Software Tools License Agreement dated
April 2, 1997, between Eric S. Hunsader and Halley's Software, Inc., of the
Company and each of its subsidiaries is in full force and effect and is a legal,
valid and binding agreement of the Company or such subsidiary and, to the
knowledge of the Company or such subsidiary, of each other party thereto,
enforceable against the Company or any of its subsidiaries, as the case may be,
and, to the knowledge of the Company, against the other party or parties
thereto, in each case, in accordance with its terms. The Company and each of its
subsidiaries has performed or is performing all material obligations required to
be performed by it under each of its Contracts and is not (with or without
notice or lapse of time or both) in breach or default in any material respect
thereunder; and, to the knowledge of the Company or such subsidiary, no other
party to any of its Contracts is (with or without notice or lapse of time or
both) in breach or default in any material respect thereunder. Neither the
Company nor any of its subsidiaries knows of any circumstances that could (x)
materially adversely affect in any material respect its ability to perform its
obligations under any material Contract or (y) require the Company to become
obligated to provide advertising or similar services under any provision
contained in any Contract requiring "make good" or recovery of advertising
shortfall (including advertising banners, buttons or account openings).
"Guarantee" of or by any person shall mean any obligation, contingent or
otherwise, of such person guaranteeing any indebtedness of any other person (the
"primary obligor") in any manner, whether directly or indirectly, and including
any obligation of such person, direct or indirect, (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such indebtedness or to
purchase (or to advance or supply funds for the purchase of) any security for
the payment of such indebtedness, (b) to purchase property, securities or
services for the purpose of assuring the owner of such indebtedness of the
payment of such indebtedness or (c) to maintain working capital, equity capital
or other financial statement condition or liquidity of the primary obligor so as
to enable the primary obligor to pay such indebtedness; PROVIDED, HOWEVER, that
the term Guarantee shall not include endorsements for collection or deposit, in
either case in the ordinary course of business.
"Indebtedness" of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such person
upon which interest charges are customarily paid, (d) all obligations of such
person under conditional sale or other title retention agreements relating to
property or assets purchased by such person, (e) all obligations of such person
issued or assumed as the deferred purchase price of property or services, (f)
all indebtedness of others secured by (or for which the holder of such
indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property owned or acquired by such person, whether or not the
obligations secured thereby have been assumed, (g) all guarantees by such
person, (h) all capital lease obligations of such person, (i) all obligations of
such person in respect of interest rate protection agreements, foreign currency
exchange agreements or other interest or exchange rate hedging arrangements and
(j) all obligations of such person as an account party in respect of letters of
credit and bankers' acceptances to the extent of any drawdowns thereon. The term
"Indebtedness" shall not include the Hunsader Amount or the Company Expenses.
SECTION 3.11. LITIGATION; DECREES. There are no lawsuits, claims,
arbitration or other proceedings or to the knowledge of the Company
investigations ("Litigation") pending or, to the knowledge of the Company,
threatened by or against or affecting (other than litigation to which the
Company or any of its subsidiaries is not a party that may generally affect the
lines of business in which the Company or any of its subsidiaries operates) the
Company or any of its subsidiaries, or any of their respective properties or
assets. There is no outstanding Order applicable to the Company or any of its
subsidiaries or any of their respective properties, assets or businesses having,
or which could reasonably be expected to have, a material adverse effect on the
Company or its business as conducted on the date hereof. Section 3.11 of the
Company Disclosure Schedule sets forth a complete list of Litigation for
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which legal process has been served upon the Company or any of its subsidiaries
and which has not been settled or disposed on the date hereof.
SECTION 3.12. OPERATION OF THE BUSINESS; ABSENCE OF CHANGES OR EVENTS. (a)
Since June 30, 1999, the Company and each of its subsidiaries has conducted its
business only in the ordinary course consistent in all material respects with
past practice and there has not been (i) any state of facts, change, effect,
condition, development, event or occurrence that has had or could reasonably be
expected to have a material adverse effect with respect to the Company, (ii) any
declaration, setting aside or payment of any dividend on, or other distribution
(whether in cash, stock or property) in respect of, any of the Company's or any
of its subsidiaries' capital stock, or any purchase, redemption or other
acquisition of any of the Company's or any of its subsidiaries' capital stock or
any other securities of the Company or its subsidiaries or any options,
warrants, calls or rights to acquire any such shares or other securities (other
than in connection with the exercise of Stock Options), (iii) any split,
combination or reclassification of any of the Company's or any of its
subsidiaries' capital stock or any issuance or the authorization of any issuance
of any other securities in respect of, in lieu of or in substitution for shares
of the Company's or any of its subsidiaries' capital stock, (iv) (A) any
granting by the Company or any of its subsidiaries of any increase in
compensation or fringe benefits, except for normal increases effected prior to
June 30, 1999, of cash compensation in the ordinary course of business
consistent with past practice, or any payment by (or entering into of any
obligation or Contract with respect to any payment by) the Company or any of its
subsidiaries of any bonus, except for bonuses prior to June 30, 1999, made in
the ordinary course of business consistent with past practice, in each case to
any director, officer or employee, (B) any granting by the Company or any of its
subsidiaries to any officer or employee of any increase in severance or
termination pay, (C) any entry by the Company or any of its subsidiaries into
any currently effective employment, severance, termination or indemnification or
consulting agreement with any current or former director, officer, employee or
consultant, or (D) any adoption of, or material amendment to, a Benefit Plan
(other than amendments required by law or required to maintain the qualified
status of a Benefit Plan), (v) any damage, destruction or loss, whether or not
covered by insurance, that individually or in the aggregate could reasonably be
expected to have a material adverse effect on the Company, (vi) any material
change in accounting methods, principles or practices by the Company or any of
its subsidiaries, except insofar as may have been required by a change in
generally accepted accounting principles, (vii) the making of any Tax election
that, individually or in the aggregate, could reasonably be expected to have a
material adverse effect on the Tax liabilities or Tax attributes of the Company
or any of its subsidiaries or the entering into of any settlement or compromise
with respect to any material income Tax liability, (viii) any revaluation by the
Company or any of its subsidiaries of any of its material assets or (ix) any
Contract with regard to the acquisition or disposition of any material
Intellectual Property or rights thereto other than licenses in the ordinary
course of business consistent with past practice.
(b) Since June 30, 1999, each of the Company and its subsidiaries has
continued all pricing, sales, receivables, payables and inventory production
practices substantially in accordance with generally accepted industry practices
and has not engaged in (i) any trade loading practices or any other promotional
sales or discount activity with any customers or distributors with the effect of
accelerating to pre-Closing periods sales to the trade or otherwise that would
otherwise be expected (based on recent past practice) to occur in post-Closing
periods, (ii) any practice which would have the effect of accelerating to
pre-Closing periods collections of receivables that would otherwise be expected
(based on recent past practice) to be made in post-Closing periods, (iii) any
practice which would have the effect of postponing to post-Closing periods
payments by the Company or any of its subsidiaries that would otherwise be
expected (based on recent past practice) to be made in pre-Closing periods or
(iv) any other promotional sales, discount activity or inventory overstocking or
understocking in a manner outside the ordinary course of business or contrary to
generally accepted industry practices. Since September 30, 1998, each of the
Company and its subsidiaries has not overstocked or understocked inventory or
produced inventory in excess of, or failed to produce inventory in amounts
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comparable to, amounts that would be expected to be produced by the Company and
its subsidiaries in post-Closing periods or otherwise in amounts in excess of or
below those amounts of inventory produced by the Company in the ordinary course
of business consistent with generally accepted industry practices.
SECTION 3.13. COMPLIANCE WITH APPLICABLE LAWS. (a) The Company and each of
its subsidiaries and their respective properties, assets, operations and
businesses have been and are being operated and have been and are in compliance
in all material respects with all applicable Laws.
(b) The Company and each of its subsidiaries has obtained all franchises,
licenses, permits, authorizations and approvals ("Permits") that are required
with respect to the operation of its business and the ownership of its assets
under Federal, state, local and foreign Laws, including environmental, health
and safety laws and import/export laws, other than any Permits the failure of
which to obtain could not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the Company. The Company and each
of its subsidiaries is in compliance in all material respects with all terms and
conditions of such Permits.
(c) There are no past or present or, to the knowledge of the Company, future
events, conditions, circumstances, activities, practices, incidents, actions or
plans that are reasonably likely to (i) interfere with or prevent compliance or
continued compliance by the Company or any of its subsidiaries with any
environmental, health and safety laws governing the Company's or any of its
subsidiaries' operations or with any Law, Order, notice or demand letter issued,
entered, promulgated or approved thereunder or (ii) give rise to any material
liability of the Company or any of its subsidiaries under any environmental,
health and safety law governing the Company's or any of its subsidiaries' past,
present and currently contemplated future operations. The Company has not
received any written or oral notice of violation based on or related to the
manufacture, processing, distribution, use, treatment, storage, disposal
(including off-site disposal), transport or handling, or the emission,
discharge, release or threatened release into, or migration through, the
environment, of any hazardous or toxic substance or waste (including petroleum
and derivative products), or based on or related to importation or export of
goods or services.
SECTION 3.14. CERTAIN EMPLOYEE MATTERS. (a) No director, officer or, to
the knowledge of the Company, other employee of the Company or any of its
subsidiaries is a party to or bound by any Contract, or subject to any Order of
any Governmental Entity, that may interfere with the use of such director's,
officer's or other employee's best efforts to promote the interests of the
Company and its subsidiaries, conflict with the business of the Company or any
of its subsidiaries (as now conducted or as proposed to be conducted) or the
transactions contemplated by this Agreement or could reasonably be expected to
have a material adverse effect on the Company. No activity of any employee of
the Company or any of its subsidiaries as or while an employee of the Company or
any such subsidiary has caused a violation of any employment agreement,
confidentiality agreement, patent disclosure agreement or other Contract. The
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated by this Agreement and compliance with the provisions
of this Agreement will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancelation or acceleration of any obligation to or
loss of a material benefit under, any Contract under which any such employees
are now obligated.
(b) All former and current employees, contractors and consultants of the
Company and each of its subsidiaries including any employee employed by both the
Company or any of its subsidiaries, on the one hand, and TriNet Employer Group,
Inc. ("TriNet"), on the other hand, including all employees, contractors and
consultants involved in the development of Intellectual Property of the Company
and each of its subsidiaries, have executed and delivered to the Company a
confidential information agreement in substantially the form attached as Exhibit
C hereto restricting such person's right to use
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and disclose confidential information of the Company and its subsidiaries. All
such persons have been party to a proprietary rights agreement in a form
substantially similar to that attached as Exhibit C hereto with the Company,
during the entire term of each such person's employment with or retention by the
Company or by TriNet, pursuant to which either (i) in accordance with applicable
Federal, state and foreign law, the Company has been accorded full, effective,
exclusive and original ownership of all Intellectual Property thereby arising or
(ii) there has been conveyed to the Company by appropriately executed
instruments of assignment full, effective and exclusive ownership of all
tangible and intangible property including inventions relating to the business
of the Company and its subsidiaries and thereby arising within the scope of
their employment or engagement by or with the Company or TriNet, copies of which
agreements have been made available to Parent prior to the date hereof. No
employee, contractor or consultant has made any alteration or modification to
the form of agreement attached as Exhibit C hereto. No employee, contractor or
consultant associated with any person who has contributed to, or participated
in, the conception and development of Intellectual Property for the Company or
any of its subsidiaries has asserted or threatened any claim against the Company
or such subsidiary in connection with such person's involvement in the
conception and development of such Intellectual Property and to the knowledge of
the Company no such person has a reasonable basis for any such claim.
(c) None of the Company or any of its subsidiaries, or any of their
respective officers, employees or (to the knowledge of the Company or such
subsidiary) contractors or consultants, has any patents issued or applications
pending for any device, process, method, design or invention of any kind now
used or needed by the Company or such subsidiary in the furtherance of its
business operations as presently conducted or as proposed to be conducted by the
Company or such subsidiary, which patents or applications have not been assigned
to the Company or such subsidiary with such assignment duly recorded in the
United States Patent Office or with the applicable foreign Governmental Entity.
(d) None of the employees of the Company or any of its subsidiaries are
represented by any union with respect to their employment by the Company or such
subsidiary. Since the date of its incorporation, neither the Company nor any of
its subsidiaries has experienced any labor disputes, union organization attempts
or work stoppage due to labor disagreements. The Company and each of its
subsidiaries is in compliance in all material respects with all applicable Laws
respecting employment and employment practices, occupational safety and health
standards, terms and conditions of employment and wages and hours, and is not
engaged in any unfair labor practice. The Company has not received notice of any
unfair labor practice charge or complaint against the Company or any of its
subsidiaries which is pending and, to the knowledge of the Company, there is no
unfair labor practice charge or complaint against the Company threatened before
the National Labor Relations Board or any comparable state or foreign agency or
authority. There is no labor strike, dispute, request for representation,
slowdown or stoppage actually pending or threatened against or affecting the
Company or any of its subsidiaries. No question concerning representation has
been raised or is, to the knowledge of the Company, threatened respecting the
employees of the Company or any of its subsidiaries. No grievance which could
reasonably be expected to have a material adverse effect on the Company, nor any
arbitration proceeding arising out of collective bargaining agreements, is
pending or, to the knowledge of the Company, threatened against the Company or
any of its subsidiaries.
(e) Section 3.14(e) of the Company Disclosure Schedule sets forth a complete
and accurate list of all current employees of the Company and each of its
subsidiaries, including their title and current compensation and whether any
such employee was, to the knowledge of the Company, formerly an employee of
Parent.
(f) Section 3.14(f) of the Company Disclosure Schedule sets forth (i) the
name of each employee of the Company entitled to severance benefits actually
payable as of the Effective Time or upon termination of employment after the
Effective Time pursuant to any individual employment, severance, termination or
change of control agreement or arrangement between the Company or any of its
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subsidiaries and such employee, (ii) the category or type of each such severance
benefit to which such employee is entitled, (iii) the aggregate value of each
such severance benefit actually payable as of the Effective Time and each such
severance benefit that would be payable upon termination of employment after the
Effective Time and (iv) the aggregate value of severance that would be paid to
each employee set forth on Section 3.14(f) of the Company Disclosure Schedule
upon termination of employment based on the terms of any severance plan or plans
applicable to such employee in effect at the Effective Time.
SECTION 3.15. BENEFIT PLANS. (a) Section 3.15(a) of the Company Disclosure
Schedule contains a list and brief description of each "employee pension benefit
plan" (as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")) (hereinafter a "Pension Plan"), "employee welfare
benefit plan" (as defined in Section 3(1) of ERISA, hereinafter a "Welfare
Plan"), stock option, stock purchase, deferred compensation plan or arrangement,
and other employee fringe benefit plan or arrangement maintained, contributed to
or required to be maintained or contributed to by the Company and its
subsidiaries or any other person or entity that, together with the Company, is
treated as a single employer under Section 414(b), (c), (m) or (o) of the Code
(each a "Commonly Controlled Entity") or any entity that is considered a
co-employer with the Company or any Commonly Controlled Entity for the benefit
of any present or former officers, employees, directors or independent
contractors of the Company or any of its subsidiaries (all the foregoing being
herein called "Benefit Plans"). The Company has delivered to Parent true,
complete and correct copies of (1) each Benefit Plan (or, in the case of any
unwritten Benefit Plans, descriptions thereof), (2) the two most recent annual
reports on Form 5500 filed with the Internal Revenue Service with respect to
each Benefit Plan (if any such report was required by applicable law), (3) the
most recent summary plan description for each Benefit Plan for which such a
summary plan description is required by applicable law and (4) each trust
agreement and insurance or annuity contract relating to any Benefit Plan. No
Benefit Plan is a defined benefit plan (within the meaning of Section 3(35) of
ERISA) or is subject to Title IV of ERISA or the minimum funding requirements of
Section 412 of the Code or Section 302 of ERISA.
(b) Each Benefit Plan has been administered in all material respects in
accordance with its terms. The Company, its subsidiaries and all the Benefit
Plans are in compliance in all material respects with the applicable provisions
of ERISA and the Internal Revenue Code of 1986, as amended (the "Code"). All
reports, returns and similar documents with respect to the Benefit Plans
required to be filed with any governmental agency or distributed to any Benefit
Plan participant have been duly and timely filed or distributed. The Company has
received no notice, and to the Company's knowledge, there are no investigations
by any governmental agency, termination proceedings or other claims (except
claims for benefits payable in the normal operation of the Benefit Plans), suits
or proceedings against or involving any Benefit Plan or asserting any rights or
claims to benefits under any Benefit Plan that could give rise to any material
liability, and there are not any facts that could give rise to any material
liability in the event of any such investigation, claim, suit or proceeding.
(c) All contributions to, and payments from, the Benefit Plans that may have
been required to be made in accordance with the terms of the Benefit Plans and
any applicable collective bargaining agreement have been timely made.
(d) Each Benefit Plan that is a Pension Plan (hereinafter, a "Company
Pension Plan") has been the subject of a determination letter from the Internal
Revenue Service to the effect that such Company Pension Plan is qualified and
exempt from Federal income taxes under Sections 401(a) and 501(a), respectively,
of the Code; no such determination letter has been revoked, and, to the
knowledge of the Company, revocation has not been threatened; and such Company
Pension Plan has not been amended since the effective date of its most recent
determination letter in any respect that might adversely affect its
qualification, materially increase its cost or require security under Section
307 of ERISA. The Company has delivered to Parent a copy of the most recent
determination letter received
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with respect to each Company Pension Plan for which such a letter has been
issued, as well as a copy of any pending application for a determination letter.
The Company has also provided to Parent a list of all Company Pension Plan
amendments as to which a favorable determination letter has not yet been
received. No event has occurred that could subject any Company Pension Plan to
tax under Section 511 of the Code.
(e) With respect to each Benefit Plan, (i) there has not occurred any
prohibited transaction in which the Company or any of its employees has engaged
that could subject the Company or any of its employees, or, to the knowledge of
the Company, a trustee, administrator or other fiduciary of any trust created
under any Benefit Plan to the tax or penalty on prohibited transactions imposed
by Section 4975 of ERISA or the sanctions imposed under Title I of ERISA, and
(ii) neither the Company or, to the knowledge of the Company, any trustee,
administrator or other fiduciary of any Benefit Plan nor any agent of any of the
foregoing has engaged in any transaction or acted in a manner that could, or
failed to act so as to, subject the Company or, to the knowledge of the Company,
any trustee, administrator or other fiduciary to any liability for breach of
fiduciary duty under ERISA or any other applicable law.
(f) The list of Welfare Plans in Section 3.15(f) of the Company Disclosure
Schedule discloses whether each Welfare Plan is (i) unfunded, (ii) funded
through a "welfare benefit fund", as such term is defined in Section 419(e) of
the Code, or other funding mechanism or (iii) insured. Each such Welfare Plan
may be amended or terminated without material liability to the Company at any
time after the Closing Date. The Company and its subsidiaries comply with the
applicable requirements of Section 4980B(f) of the Code with respect to each
Benefit Plan that is a group health plan, as such term is defined in Section
5000(b)(1) of the Code.
(g) No employee of the Company will be entitled to any additional benefits
or any acceleration of the time of payment or vesting of any benefits under any
Benefit Plan as a result of the transactions contemplated by this Agreement and
no amount payable to any employee of the Company or its subsidiaries as a result
of the transactions contemplated by this Agreement or otherwise will fail to be
deductible by reason of Section 280G of the Code.
(h) All options (whether or not currently outstanding) granted to
individuals which were intended to qualify as "incentive stock options" under
Section 422 of the Code so qualify and the Company will have no liability to any
of such individuals if it should be determined that such options do not qualify
as incentive stock options.
SECTION 3.16. INSURANCE. Section 3.16 of the Company Disclosure Schedule
sets forth a complete and accurate list and description, including annual
premiums and deductibles, of all policies of fire, liability, product liability,
workmen's compensation, health and other forms of insurance presently in effect
on the date hereof with respect to the Company's and its subsidiaries' business,
true and complete copies of which have been delivered to, or made available for
review by, Parent. All such policies are valid, outstanding and enforceable
policies and provide insurance coverage for the properties, assets and
operations of the Company and each of its subsidiaries, of the kinds, in the
amounts and against the risks required to comply with applicable Law. The
Company reasonably believes such policies are sufficient to protect the
properties, assets, operations and business of the Company and each of its
subsidiaries against the risks of the sort normally insured by similar
businesses. No notice of cancelation or termination has been received with
respect to any such policy.
SECTION 3.17. CUSTOMERS; EFFECT OF TRANSACTION. (a) The Company does not
have any customer to whom it made more than 5% of its sales during its most
recent six-month period. Since the date of the Unaudited Statements, there has
not been (i) any material adverse change in the business relationship of the
Company with any customer named in Section 3.17(a) of the Company Disclosure
Schedule or (ii) any change in any material term (including credit terms) of the
sales agreements or related agreements with any such customer. During the past
two years, the Company has received no
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customer complaints concerning its products and services, nor has it had any of
its products returned by a purchaser thereof, other than complaints and returns
in the ordinary course of business.
(b) No creditor, supplier, employee, client or other customer or other
person having a material business relationship with the Company or any of its
subsidiaries has informed any executive officer of the Company or such
subsidiary orally or in writing or has informed the Company or such subsidiary
in writing that such person intends to materially change the relationship
because of the transactions contemplated by this Agreement.
SECTION 3.18. DISCLOSURE. No representation or warranty by the Company
contained in this Agreement and no statement contained in the Company Disclosure
Schedule and any certificate or other document or instrument delivered or to be
delivered pursuant to this Agreement by the Company or its representatives
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary to make the statements contained
therein not misleading.
SECTION 3.19. VOTING REQUIREMENTS. The affirmative vote or consent of each
of (a) the holders of a majority of the outstanding shares of Company Common
Stock together with the holders of the outstanding shares of Company Preferred
Stock, voting as a single class and (b) the holders of 80% of the outstanding
shares of Company Series B Preferred Stock, Company Series C Preferred Stock and
Company Series D Preferred Stock, voting as a single class (collectively, the
"Shareholder Approval"), are the only votes or consents of the holders of any
class or series of the Company's capital stock necessary to approve and adopt
this Agreement and approve the transactions contemplated hereby.
SECTION 3.20. BROKERS; SCHEDULE OF FEES AND EXPENSES. No broker,
investment banker, financial advisor or other person, other than Hambrecht &
Quist LLC, the fees and expenses of which will be paid by the Company, is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company. The Company has
furnished to Parent true and complete copies of all agreements under which any
such fees or expenses are payable and all indemnification and other agreements
related to the engagement of the persons to whom such fees are payable. The fees
and expenses of any accountant, broker, financial advisor, legal counsel or
other person retained by the Company in connection with this Agreement or the
transactions contemplated hereby incurred or to be incurred by the Company in
connection with this Agreement and the transactions contemplated by this
Agreement will not exceed the fees and expenses set forth in Section 3.20 of the
Company Disclosure Schedule.
SECTION 3.21. STATE TAKEOVER STATUTES. The Board of Directors of the
Company has approved the Merger and this Agreement and the other transactions
contemplated by this Agreement, and such approval is sufficient to render
inapplicable to the Merger and this Agreement and the other transactions
contemplated by this Agreement, any state takeover statute or similar Law that
would otherwise be applicable to the Merger and this Agreement and the other
transactions contemplated by this Agreement.
SECTION 3.22. YEAR 2000 COMPLIANCE. All computer and other systems,
software (whether embedded or otherwise), hardware and other products (other
than motherboards) owned or licensed by the Company or any of its subsidiaries
and used in connection with the services provided by the Company and, to the
Company's knowledge, all computer and other systems, software (whether embedded
or otherwise), hardware and other products (other than motherboards) produced by
any third party that are licensed by the Company or any of its subsidiaries
under a license that does not explicitly disclaim liability with respect to
failures of such products to be Year 2000 Ready, in each case have been written,
manufactured and tested to be Year 2000 Ready. For purposes of this Agreement,
"Year 2000 Ready" shall mean, with respect to any system, software (whether
embedded or otherwise), product, equipment or facility, that such system,
product, equipment or facility is capable of correctly processing, providing,
receiving and manipulating date data within and between the twentieth and
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twenty-first centuries, and its operation and functionality has not been
adversely affected and will not be adversely affected in any material respect as
a result of the advent of the Year 2000.
SECTION 3.23. INFORMATION SUPPLIED. None of the information supplied or to
be supplied by the Company in writing specifically for inclusion or
incorporation by reference in the registration statement on Form S-4 to be filed
with the Securities and Exchange Commission (the "SEC") by Parent in connection
with the issuance of Parent Common Stock in the Merger (the "Form S-4") will
(except to the extent revised or superseded by amendments or supplements
contemplated hereby), at the time the Form S-4 is filed with the SEC, at any
time it is amended or supplemented or at the time it becomes effective under the
Securities Act of 1933, as amended (the "Securities Act"), contain any untrue
statement of a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they are made,
not misleading. The proxy statement relating to the Shareholders Meeting (as
defined herein) (such proxy statement, as amended or supplemented from time to
time, the "Proxy Statement") will not, at the date it is first mailed to the
Company's shareholders or at the time of the Shareholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The Proxy
Statement will comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations thereunder. Notwithstanding
the foregoing, no representation or warranty is made by the Company with respect
to statements made or incorporated by reference therein based on information
supplied by Parent specifically for inclusion or incorporation by reference in
the Proxy Statement.
SECTION 3.24. CUSTOMER ACCOUNTS RECEIVABLE. All customer accounts
receivable of the Company, whether reflected on the Unaudited Statements or
subsequently created, have arisen from bona fide transactions in the ordinary
course of business consistent with past practice. The Company reasonably
believes all such customer accounts receivable are good and collectible at the
aggregate recorded amounts thereof, net of any applicable reserves for doubtful
accounts reflected on the Unaudited Statements. The Company has good and
marketable title to its accounts receivable, free and clear of all Liens. Since
the date of the Unaudited Statements, there have not been any write-offs as
uncollectible of any accounts receivable of the Company, except for write-offs
in the ordinary course of business consistent with past practice.
SECTION 3.25. CORPORATE NAME. The Company (i) has the exclusive right to
use its name as the name of a corporation in any jurisdiction in which the
Company does business and (ii) has not received any notice of conflict during
the past two years with respect to the rights of others regarding the corporate
name of the Company. To the knowledge of the Company, no person is presently
authorized by the Company to use the name of the Company.
SECTION 3.26. ACCOUNTS; SAFE DEPOSIT BOXES; POWERS OF ATTORNEY; OFFICERS
AND DIRECTORS. Section 3.26 of the Company Disclosure Schedule sets forth (i) a
true and correct list of all bank and savings accounts, certificates of deposit
and safe deposit boxes of the Company and its subsidiaries and those persons
authorized to sign thereon, (ii) a true and correct list of all powers of
attorney granted by the Company and its subsidiaries and those persons
authorized to act thereunder and (iii) a true and correct list of all officers
and directors of the Company and its subsidiaries.
SECTION 3.27. TRAFFIC. Section 3.27 of the Company Disclosure Schedule
sets forth (A) for each of May, June and July of 1999, pageview information
regarding the Company's business, including each of (i) its www.quote.com
website, (ii) its OEM partnership with Alpha Microsystems (Stockvue) and (iii)
LiveCharts, and (B) as of the last day of each such Month, the number of paid
subscribers (excluding trials) for each of the Company's Plus, Q Charts and Q
Charts Premium products, which, in each case, are true and correct. The Company
has not paid any third party any fee for traffic referrals.
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SECTION 3.28. MINUTE BOOKS, ETC. The minute books, stock certificate book
and stock ledger of the Company are complete and correct in all material
respects.
SECTION 3.29. HALLEY'S SOFTWARE. The Company or a subsidiary of the
Company owns all of the Software (as defined in Section III.22 of the Agreement
and Plan of Merger dated March 9, 1998, among the Company, Halley's Acquisition
Corp., Halley's Software, Inc. and Eric S. Hunsader).
SECTION 3.30. UNDERDELIVERIES UNDER ADVERTISING CONTRACTS. The Company has
not underdelivered services in amounts in excess of 100,000 advertising banners
per month under any of its advertising Contracts during the six-month period
ended August 31, 1999.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Except for items disclosed on the disclosure schedule or on the exhibits or
schedules thereto (with specific reference to the Section of this Agreement to
which the information stated in such disclosure relates) delivered by Parent to
the Company prior to the execution and delivery of this Agreement (the "Parent
Disclosure Schedule"), Parent and Sub represent and warrant to the Company as
follows:
SECTION 4.01. ORGANIZATION. Each of Parent and Sub is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite power and authority to own,
lease and otherwise hold and operate its assets and to carry on its business as
now being conducted.
SECTION 4.02. AUTHORITY; NONCONTRAVENTION. Each of Parent and Sub has the
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation by Parent and Sub of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent and Sub and no other corporate
proceedings on the part of Parent and Sub are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Parent and Sub and, when executed and
delivered by the Company, constitutes a legal, valid and binding obligation of
each of Parent and Sub, enforceable against Parent and Sub in accordance with
its terms, subject to bankruptcy, insolvency, reorganization, moratorium or
other similar laws of general application affecting the enforcement of
creditors' rights. The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancelation or acceleration of
any obligation or to loss of a material benefit under, or result in the creation
of any Lien, in or upon any of the properties or assets of Parent under, any
provision of (i) the charter or by-laws of Parent or Sub, (ii) any Contract
applicable to Parent or Sub or their respective properties or assets or (iii)
subject to the governmental filings and other matters referred to in the
following sentence, any (A) Law or (B) Order, in each case, applicable to Parent
or Sub or their respective properties or assets, other than, in the case of
clauses (ii) and (iii), any such conflicts, violations, defaults, rights, losses
or Liens that individually or in the aggregate could not reasonably be expected
to impair in any material respect the ability of Parent or Sub to perform its
obligations under this Agreement or prevent or materially delay the consummation
of any of the transactions contemplated by this Agreement. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Parent or Sub in
connection with the execution and delivery of this Agreement by Parent or Sub or
the consummation by Parent or Sub of the Merger or the other transactions
contemplated by this Agreement, except for (1) the filing with the SEC of the
Form S-4 and such reports under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as may be required in connection with this Agreement and
the transactions
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contemplated by this Agreement, (2) the filing of the California Agreement of
Merger with the Secretary of State of the State of California and the filing of
the Delaware Certificate of Merger with the Secretary of State of the State of
Delaware and (3) such other consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made individually or in the aggregate could not reasonably be expected to impair
in any material respect the ability of Parent or Sub to perform its obligations
under this Agreement or prevent or materially delay the consummation of any of
the transactions contemplated by this Agreement.
SECTION 4.03. CAPITAL STOCK OF PARENT. (a) The authorized capital stock of
Parent consists of 300,000,000 shares of Parent Common Stock, of which
94,900,701 shares were issued and outstanding on July 31, 1999, and 5,000,000
shares of Preferred Stock, par value $0.01 per share, none of which are issued
or outstanding. Except as set forth in Section 4.03 of the Parent Disclosure
Schedule, all of the issued and outstanding shares of Parent Common Stock are
(and all shares of Parent Common Stock to be issued in connection with the
Merger, when issued in accordance with this Agreement, shall be) duly
authorized, validly issued, fully paid and nonassessable, and none of such
shares has been or will be issued in violation of any applicable preemptive
rights.
(b) The authorized capital stock of Sub consists of 1,000 shares of common
stock, par value $0.01 per share, of which 1,000 shares are issued and
outstanding, all of which shares are owned beneficially and of record by Parent.
SECTION 4.04. PARENT SEC DOCUMENTS. Parent has filed with the SEC all
reports, schedules, forms, statements and other documents required to be filed
with the SEC since August 1, 1997 (collectively, the "Parent SEC Documents"). As
of their respective dates, the Parent SEC Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such Parent SEC Documents, and none of the Parent SEC Documents at
the time they were filed contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of Parent included in
the Parent SEC Documents complied as to form, as of their respective dates of
filing with the SEC, in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with GAAP (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly presented in all material respects the consolidated
financial position of Parent and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and the absence of footnotes).
SECTION 4.05. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby and except as disclosed in the Parent SEC Documents filed and publicly
available prior to the date of this Agreement (the "Parent Filed SEC
Documents"), since the date of the most recent financial statements included in
the Parent Filed SEC Documents, Parent has conducted its business only in the
ordinary course and there has not been any material adverse change with respect
to Parent.
SECTION 4.06. LITIGATION. There is no action, suit, proceeding, claim,
arbitration or to the knowledge of Parent investigation pending or as to which
Parent or any of its subsidiaries has received any notice of assertion that in
any manner challenges or seeks to prevent, enjoin, alter or delay the Merger.
SECTION 4.07. TAXES. Neither Parent nor any of its subsidiaries has taken
any action or knows of any fact, agreement, plan or other circumstance that is
reasonably likely to prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code.
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SECTION 4.08. INTERIM OPERATIONS OF SUB. Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as contemplated
hereby.
SECTION 4.09. INFORMATION SUPPLIED. None of the information supplied or to
be supplied by Parent or Sub in writing specifically for inclusion or
incorporation by reference in (i) the Form S-4 will (except to the extent
revised or superseded by amendments or supplements contemplated hereby), at the
time the Form S-4 is filed with the SEC, at any time it is amended or
supplemented or at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they are made, not misleading or (ii)
the Proxy Statement will, at the date it is first mailed to the Company's
shareholders or at the time of the Shareholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. Notwithstanding the
foregoing, no representation or warranty is made by Parent with respect to
statements made or incorporated by reference therein based on information
supplied by the Company specifically for inclusion or incorporation in the Form
S-4.
SECTION 4.10. BROKERS. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial advisor's or
similar fee or commission, in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Parent.
ARTICLE V
COVENANTS
SECTION 5.01. COVENANTS OF THE COMPANY. (a) During the period from the
date of this Agreement to the Effective Time, except as consented to in writing
by Parent or as specifically contemplated by this Agreement, the Company shall,
and shall cause its subsidiaries to, use their reasonable best efforts to carry
on their respective businesses in the ordinary course (unless, as to a
particular action, Parent withholds its written consent under this Section
5.01(a)) consistent with recent past practice and use their reasonable best
efforts to comply in all material respects with all applicable laws, rules and
regulations and, to the extent consistent therewith, use their reasonable best
efforts to preserve their material assets and material technology and preserve
their relationships with material customers, suppliers, licensors, licensees,
distributors and others having business dealings with them. Without limiting the
generality of the foregoing, during the period from the date of this Agreement
to the Effective Time, except as consented to in writing by Parent or as
specifically contemplated by this Agreement, the Company shall not, and shall
not permit any of its subsidiaries to:
(i) (x) declare, set aside or pay any dividends on, or make other
distributions in respect of, any of its capital stock, (y) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or (z) purchase, redeem or
otherwise acquire any shares of capital stock or any other securities of the
Company or any of its subsidiaries, including any Stock Option;
(ii) issue, deliver, sell, pledge or otherwise encumber or authorize or
propose the issuance, delivery, sale, pledge or other encumbrance of, any
shares of its capital stock, or any other securities of any class or any
securities convertible into, or any rights, warrants, calls, subscriptions
or options to acquire, any such shares or convertible securities, other than
(w) the Hunsader Shares, (x) the conversion of shares of any class of
Company Preferred Stock in accordance with their current terms or any
conversion into shares pursuant to and in accordance with their current
terms of the Company Convertible Debt, (y) the issuance of Company Capital
Stock upon the
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exercise of Stock Options and Warrants in accordance with their respective
current terms and (z) the issuance of Stock Options granted in the ordinary
course of business, consistent with past practice, (I) to new employees of
the Company and to Mr. Francis Gagnon, in each case, as set forth in Section
3.03 of the Company Disclosure Schedule, such Stock Options representing in
the aggregate not more than 21,500 shares of Company Common Stock, (II) to
employees of the Company in connection with regular performance reviews,
such Stock Options representing in the aggregate not more than 100,000
shares of Company Common Stock and not more than 10,000 shares of Company
Common Stock to any one employee and (III) to new employees hired pursuant
to clause (xvi) of this Section 5.01(a), such Stock Options representing in
the aggregate not more than 100,000 shares of Company Common Stock and not
more than 15,000 shares of Company Common Stock to any one new employee.
(iii) amend or propose to amend its amended and restated articles of
incorporation or amended and restated by-laws or similar organizational
documents;
(iv) acquire or agree to acquire (x) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, joint venture,
association or other entity or division thereof or (y) any assets which, in
the aggregate, are in excess of $100,000;
(v) sell, lease, license, mortgage or otherwise encumber or subject to
any Lien or otherwise dispose of any of its properties or assets (other than
the sale or other disposition of the 40,000 shares of common stock of
Cybernet Data Systems, Inc. (doing business as EDGAR Online, Inc., a public
company) held by the Company), except sales in the ordinary course of
business consistent with recent past practice;
(vi) except pursuant to agreements in effect prior to the date hereof
and set forth in Section 5.01(a)(vi) of the Company Disclosure Schedule,
incur any Indebtedness or Guarantee any such Indebtedness of another person,
issue or sell any debt securities or options, warrants, calls or other
rights to acquire any Indebtedness of the Company or any of its
subsidiaries, enter into any "keep well" or other agreement to maintain any
financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, or make any
loans, advances or capital contributions to, or investments in, any other
person;
(vii) make or agree to make any new capital expenditure or expenditures
which, in the aggregate, are in excess of $100,000;
(viii) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction in
the ordinary course of business consistent with recent past practice or in
accordance with their terms, of claims, liabilities or obligations reflected
or reserved against on the balance sheet of the Company as of July 31, 1999,
or incurred since July 31, 1999, in the ordinary course of business
consistent with recent past practice, or waive any material benefits of, or
agree to modify in any materially adverse respect, any confidentiality,
standstill or similar agreements to which the Company or any of its
subsidiaries is a party;
(ix) except in the ordinary course of business, modify, amend or
terminate any material Contract to which the Company or such subsidiary is a
party or waive, release or assign any material rights or claims thereunder;
(x) enter into any Contracts relating to (x) the distribution, sale,
license or marketing by third parties of the Company's or such subsidiary's
products or products licensed by the Company or such subsidiary or (y)
material Intellectual Property (other than, in each case, in the ordinary
course of business consistent with recent past practice);
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(xi) except as otherwise contemplated by this Agreement or as required
to comply with applicable law or agreements, plans or arrangements existing
on the date hereof, (A) terminate, adopt, enter into or amend any collective
bargaining agreement or Benefit Plan, (B) increase in any manner the
compensation or fringe benefits of, or pay any bonus to, any director,
officer or employee, (C) pay any material benefit not provided for under any
Benefit Plan, (D) increase in any manner the severance or termination pay of
any director, officer or employee, (E) enter into (I) any employment,
severance, termination or indemnification agreement, or consulting agreement
(other than in the ordinary course of business consistent with past
practice), with any current or former director, officer, employee or
consultant or (II) any agreements with any current or former director,
officer, employee or consultant the benefits of which are contingent, or the
terms of which are materially altered, upon the occurrence of a transaction
involving the Company or any of its subsidiaries of the nature contemplated
by this Agreement, (F) grant any awards under any Benefit Plan (including
the grant of Stock Options, stock appreciation rights, stock based or stock
related awards, performance units or restricted stock or the removal of
existing restrictions in any Benefit Plans or agreements or awards made
thereunder), (G) take any action to fund or in any other way secure the
payment of compensation or benefits under any employee plan, contract,
agreement or arrangement or Benefit Plan or (H) take any action to
accelerate the vesting or payment of any compensation or benefit under any
Benefit Plan; PROVIDED, HOWEVER, that (1) the Company shall have the right
to accelerate, in full or in part, the vesting of Stock Options held by
employees whose service is terminated by the Company without cause prior to
the Effective Time and such termination is at the written request, or with
the prior written consent, of Parent and (2) the Company shall have the
right to offer severance packages consistent with the Company's past
severance practices to employees whose service is terminated by the Company
without cause prior to the Effective Time and such termination is at the
written request, or with the prior written consent of Parent, but in no case
shall any such severance package exceed more than four (4) weeks of the
employee's current base salary;
(xii) except as otherwise contemplated by this Agreement, enter into any
material Contract, other than Contracts for the sale or licensing of the
Company's products in the ordinary course of business;
(xiii) revalue any of its material assets or, except as required by
generally accepted accounting principles, make any change in accounting
methods, principles or practices;
(xiv) knowingly or intentionally take any action that would or could
reasonably be expected to result in (A) any representation and warranty of
the Company set forth in this Agreement that is qualified as to materiality
becoming untrue, (B) any such representation and warranty that is not so
qualified becoming untrue in any material respect or (C) any condition to
the Merger set forth in Article VII not being satisfied;
(xv) commence any Litigation (other than Litigation relative to
collections of accounts receivable or as a result of Litigation commenced
against the Company or any of its subsidiaries);
(xvi) hire no more than three employees, except to replace employees
terminated after the date of this Agreement and prior to the Effective Time;
provided, that no employee shall be hired after the date of this Agreement
unless such person executes a written agreement with the Company in which
such person acknowledges that the Company is party to this Agreement and
that such person will not be entitled to receive any severance or other
termination pay in the event of his or her termination by Parent or the
Company; and
(xvii) authorize any of, or commit, resolve or agree to take any of, the
actions prohibited by clauses (i) through (xvi) above.
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(b) CERTAIN TAX MATTERS. (i) TAX RETURNS. (A) During the period from the
date of this Agreement to the Effective Time, the Company, and each of its
subsidiaries and each Company Consolidated Group shall timely file or cause to
be timely filed all Tax Returns ("Post-Signing Returns") required to be filed by
it (after taking into account any applicable extensions) (in each case, at the
Company's own cost and expense and in a manner that is consistent with past
practice and that is not reasonably likely to defer income to a taxable period
that ends after the Closing Date or to accelerate deductions to a taxable period
that ends on or before the Closing Date).
(B) The Company and each of its subsidiaries shall timely pay all Taxes due
and payable in respect of such Post-Signing Returns that are filed pursuant to
Section 5.01(b)(i)(A) of this Agreement.
(ii) COMPANY COVENANTS. (A) The Company shall accrue a reserve in its
books and records and financial statements in accordance with past practice
for all Taxes payable by the Company and each of its subsidiaries for which
no Post-Signing Return is due prior to the Effective Time.
(B) Prior to the Effective Time, the Company and each of its
subsidiaries shall promptly notify Parent of any suit, claim, action,
investigation, proceeding or audit (collectively, "Actions") pending
against or with respect to the Company or any of its subsidiaries in
respect of any Tax. Neither the Company nor any of its subsidiaries shall
settle or compromise any such Action without Parent's prior written
consent (which consent shall not be unreasonably withheld).
(C) Prior to the Effective Time, neither the Company nor any of its
subsidiaries shall make or change any material Tax election, amend any
Tax Return or take any other action (or fail to take any other action) in
respect of Taxes, in each case, if such action (or failure to take
action) could reasonably be expected to have the effect of increasing the
Tax liability of Parent or any of its affiliates (including, after the
Closing Date, the Company and its subsidiaries) with respect to a taxable
period that ends after the Closing Date.
(iii) Additional Tax Matters. (A) Any and all existing Tax sharing
agreements or arrangements between the Company and/or any subsidiary, on the
one hand, and any other party, on the other hand, shall be terminated as of
the Closing Date. After such date, none of the Company or any of its
subsidiaries shall have any obligations thereunder.
(B) All stock transfer, real property transfer, documentary, sales,
use, registration, value-added and other similar Taxes (including
interest, penalties and additions thereto) incurred in connection with
the transactions contemplated by the Agreement shall be borne by the
Company, and the Company shall indemnify Parent or any of its affiliates
for any such Taxes incurred as a result of the Company's failure timely
to pay such Taxes.
(C) The Company shall deliver to Parent at or prior to the Closing a
certificate, in form and substance reasonably satisfactory to Parent and
the Company, certifying that the transactions contemplated by this
Agreement are not subject to the Foreign Investment in Real Property Tax
Act.
(c) ADVICE OF CHANGES; FILINGS. The Company and each of its subsidiaries
shall (i) confer on a regular and frequent basis with Parent to report on
operational matters and other matters requested by Parent and (ii) promptly
advise Parent orally and in writing of any change or event which could
reasonably be expected to have a material adverse effect on the Company. If
Parent delivers notice to the Company that the Company or any of its
subsidiaries is not in compliance with clause (i) of the preceding sentence,
Parent shall in such notice set forth a proposed schedule for such discussions
to achieve such compliance and the Company shall have five days from receipt of
such notice to conform to such schedule. The Company and Parent shall promptly
provide the other copies of all filings made by such party with any Federal,
state, local or foreign Governmental Entity in connection with this Agreement
and the transactions contemplated hereby, other than the portions of such
filings that
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include confidential information not directly related to the transactions
contemplated by this Agreement.
SECTION 5.02. NO SOLICITATION. (a) The Company shall not, nor shall it
permit any of its subsidiaries to, nor shall it authorize or permit any
director, officer or employee of the Company or any of its subsidiaries or any
investment banker, financial advisor, attorney, accountant or other
representative or agent retained by the Company or any of its subsidiaries to,
directly or indirectly, (i) solicit, initiate or encourage (including by way of
furnishing information), or take any other action designed or reasonably likely
to facilitate, any inquiries or the making of any proposal which constitutes, or
may reasonably be expected to lead to, any Takeover Proposal or (ii) participate
in any discussions or negotiations regarding any Takeover Proposal. Without
limiting the foregoing, it is understood that any action of any director,
officer or employee of the Company or any of its subsidiaries, or any investment
banker, financial advisor, attorney, accountant or other representative or agent
of the Company or any of its subsidiaries, whether or not such person is
purporting to act on behalf of the Company or any of its subsidiaries or
otherwise, shall be deemed to be a breach of this Section 5.02(a) by the Company
if such action is a violation of or inconsistent with the restrictions set forth
in the preceding sentence. For purposes of this Agreement, "Takeover Proposal"
means any inquiry, proposal or offer, or any expression of interest by any third
party relating to the Company's willingness or ability to receive or discuss a
proposal or offer, other than a proposal or offer by Parent or any of its
subsidiaries, for a merger, consolidation, combination, reorganization,
acquisition, recapitalization, joint venture, dissolution, liquidation or other
business combination or similar transaction involving, or any purchase of, more
than 15% of the assets of the Company or any of its subsidiaries or more than
15% of any class of capital stock of the Company or any of its subsidiaries.
(b) Neither the Board of Directors of the Company nor any committee thereof
shall (i) withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Parent, the approval or recommendation by such Board of Directors or
such committee of the Merger or this Agreement, (ii) approve or recommend, or
propose to approve or recommend, any Takeover Proposal or (iii) cause the
Company to enter into any letter of intent, memorandum of understanding,
agreement in principle, acquisition agreement, merger agreement, confidentiality
agreement or other agreement (each, an "Acquisition Agreement") related to any
Takeover Proposal.
(c) The Company shall advise Parent orally and in writing promptly (and in
any event within 24 hours) after the making of any Takeover Proposal or any
inquiry or communication with respect to or that could reasonably be expected to
lead to any Takeover Proposal and the identity of the person making any such
Takeover Proposal or inquiry, and, in each case, the terms and conditions
thereof, including any amendment or other modification to the terms of any such
Takeover Proposal or inquiry or communication. The Company shall keep Parent
fully informed of the status, including any change to the details of any such
Takeover Proposal or inquiry or communication on a prompt basis.
SECTION 5.03. OTHER ACTIONS. The Company shall not, nor shall it permit
any of its subsidiaries to, take any action that would, or that could reasonably
be expected to, result in (i) any of the representations and warranties of the
Company set forth in this Agreement that are qualified as to materiality
becoming untrue, (ii) any of such representations and warranties that are not so
qualified becoming untrue in any material respect or (iii) any of the conditions
set forth in Article VII not being satisfied.
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ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. PREPARATION OF THE FORM S-4 AND THE PROXY STATEMENT;
SHAREHOLDERS MEETING. (a) As soon as practicable following the date of this
Agreement, Parent and the Company shall prepare the Proxy Statement and the Form
S-4 and Parent shall file with the SEC the Form S-4, in which the Proxy
Statement will be included as a prospectus. If the SEC requires a Tax opinion in
connection with the filing of the Form S-4, the Company shall cause Brobeck,
Phleger & Harrison LLP, counsel to the Company, to provide such opinion in the
form required by the SEC. The issuance of such opinion shall be conditioned upon
the receipt by Brobeck, Phleger & Harrison LLP of customary representation
letters from each of the Company and Parent in a form previously agreed to by
the parties. Each of the Company and Parent shall use all reasonable efforts to
have the Form S-4 declared effective under the Securities Act as promptly as
practicable after such filing. The Company will use all reasonable efforts to
cause the Proxy Statement to be mailed to the Company's shareholders as promptly
as practicable after the Form S-4 is declared effective under the Securities
Act. Parent shall also take any action (other than qualifying to do business in
any jurisdiction in which it is not now so qualified) required to be taken under
any applicable state securities laws in connection with the issuance of Parent
Common Stock in the Merger and under the Company Stock Plan. Each of Parent and
the Company shall furnish all information concerning itself to the other as may
be reasonably requested in connection with any such action and the preparation,
filing and distribution of the Form S-4 and the Proxy Statement.
(b) The Company will, as soon as practicable following the date of this
Agreement, establish a record date (which will be as soon as practicable
following the date of this Agreement) for, duly call, give notice of, convene
and hold a meeting of its shareholders (the "Shareholders Meeting") for the
purpose of approving and adopting this Agreement and approving the transactions
contemplated by this Agreement (including the issuance of the Hunsader Shares).
The Company will, through its Board of Directors, recommend to its shareholders
approval and adoption of this Agreement and approval of the transactions
contemplated by this Agreement (including the issuance of the Hunsader Shares).
Without limiting the generality of the foregoing, the Company agrees that its
obligations pursuant to this Section 6.01(b) shall not be affected by the
commencement, public proposal, public disclosure or communication to the Company
of any Takeover Proposal.
(c) In the event that the Form S-4 appears unlikely to become effective
within sixty (60) days after the date of this Agreement, then at the Company's
written request and if consented to in writing by Parent, Parent and the Company
shall use commercially reasonable efforts to effect the issuance of the shares
of Parent Common Stock to be issued pursuant to this Agreement pursuant to
Section 3(a)(10) of the Securities Act and the rules and regulations promulgated
thereunder.
SECTION 6.02. ACCESS TO INFORMATION. Upon reasonable notice, the Company
shall, and shall cause each of its subsidiaries to, afford to the officers,
employees, accountants, counsel and other representatives of Parent, access,
during normal business hours during the period prior to the Effective Time, to
all its employees, properties, books, contracts, commitments and records and,
during such period, the Company shall, and shall cause each of its subsidiaries,
accountants, counsel and other advisors to, furnish promptly to Parent all
information concerning its business, properties and personnel as Parent may
reasonably request. Unless otherwise required by law, Parent will treat any such
information which is nonpublic as confidential in accordance with the terms of
the Mutual Confidentiality and Nondisclosure Agreement dated as of May 25, 1999
(the "Confidentiality Agreement"), between Parent and the Company, until such
time as such information otherwise becomes publicly available through no
wrongful act of either party, and in the event of termination of this Agreement
for any reason Parent shall promptly upon request return or destroy all
nonpublic documents obtained from the Company, and any copies made of such
documents, to the Company.
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SECTION 6.03. LEGAL CONDITIONS TO MERGER. Each of the Company, Parent and
Sub will use reasonable efforts to take, and will cause each of its subsidiaries
to use reasonable efforts to take, all actions and to do, or cause to be done,
all things necessary, proper and advisable under applicable laws and regulations
to consummate and make effective the transactions contemplated by this Agreement
(including cooperating fully with the other parties hereto, furnishing all
information to each other in connection with any requirements imposed upon any
party in connection with the Merger). Each of the Company, Parent and Sub will,
and will cause each of its subsidiaries to, take all reasonable actions
necessary to obtain (and will cooperate with each other in obtaining) any
consent, authorization, order or approval of, or any exemption by, any
Governmental Entity or other public or private third party, required to be
obtained or made by Parent or the Company in connection with the Merger or the
taking of any action contemplated thereby or by this Agreement, except that no
party need waive any substantial rights or agree to any substantial limitation
on its operations or to dispose of, or enter into any licensing or similar
arrangement with respect to, any material assets.
SECTION 6.04. STOCK OPTIONS; WARRANTS. (a) As soon as practicable
following the date of this Agreement, the Board of Directors of the Company (or,
if appropriate, any committee administering the Company Stock Plan) shall adopt
such resolutions or take such other actions (if any) as may be required to
effect the following:
(i) adjust the terms of all outstanding stock options (the "Stock
Options") granted under the Company Stock Plan, whether vested or unvested,
as necessary to provide that, at the Effective Time, each such Stock Option
outstanding immediately prior to the Effective Time shall be amended and
converted into an option to acquire, on the same terms and conditions as
were applicable under such Stock Option, the number of shares of Parent
Common Stock (rounded down to the nearest whole share), determined by
multiplying the number of shares of Company Common Stock subject to such
Stock Option by the Common Stock Exchange Ratio, at an exercise price per
share of Parent Common Stock equal to (1) the per share exercise price for
the shares of Company Common Stock otherwise purchasable pursuant to such
Stock Option divided by (2) the Common Stock Exchange Ratio (each, as so
adjusted, an "Adjusted Option"), PROVIDED that such exercise price shall be
rounded up to the nearest whole cent; and
(ii) make such other changes to the Company Stock Plan as Parent and the
Company may agree are appropriate to give effect to the Merger.
(b) The adjustments provided herein with respect to any Stock Options that
are "incentive stock options" as defined in Section 422 of the Code shall be and
are intended to be effected in a manner which is consistent with Section 424(a)
of the Code.
(c) At the Effective Time, by virtue of the Merger and without the need of
any further corporate action, Parent shall assume the Company Stock Plan, with
the result that all obligations of the Company under the Company Stock Plan,
including with respect to Stock Options outstanding at the Effective Time, shall
be obligations of Parent following the Effective Time.
(d) Prior to the Effective Time, Parent shall prepare and file with the SEC
a registration statement on Form S-8 (or another appropriate form) registering a
number of shares of Parent Common Stock equal to the number of shares subject to
the Adjusted Options. Such registration statement shall be kept effective (and
the current status of the prospectus or prospectuses required thereby shall be
maintained) as long as any Adjusted Options may remain outstanding.
(e) As soon as practicable and in any event within 30 days after the
Effective Time, Parent shall deliver to the holders of unvested Stock Options
appropriate notices setting forth such holders' rights pursuant to the
respective Company Stock Plan and the agreements evidencing the grants of such
Stock Options and that such Stock Options and agreements shall be assumed by
Parent and shall continue in
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effect on the same terms and conditions (subject to the adjustments required by
this Section 6.04 after giving effect to the Merger).
(f) A holder of an Adjusted Option may exercise such Adjusted Option in
whole or in part in accordance with its terms by delivering a properly executed
notice of exercise to Parent, together with the consideration therefor and the
Federal withholding tax information, if any, required in accordance with the
related Company Stock Plan.
(g) Except as otherwise contemplated by this Section 6.04 and except to the
extent required under the respective terms of the Stock Options or Company Stock
Plan, all restrictions or limitations on transfer with respect to Stock Options
awarded under the Company Stock Plan or any other plan, program or arrangement
of the Company, to the extent that such restrictions or limitations shall not
have already lapsed, shall remain in full force and effect with respect to such
options after giving effect to the Merger and the assumption by Parent as set
forth above.
(h) At the Effective Time, by virtue of the Merger and without the need for
any further corporate action, each Warrant outstanding immediately prior to the
Effective Time shall be automatically converted into an option or warrant to
acquire, on the same terms and conditions as were applicable under such Warrant,
the number of shares of Parent Common Stock (rounded down to the nearest whole
share) determined by multiplying the number of shares of Company Capital Stock
subject to such Warrant by the applicable Merger Consideration with respect such
shares of Company Capital Stock (as provided in Section 2.01(c)), at a price per
share of Parent Common Stock equal to (A) the aggregate exercise price for the
shares of Company Capital Stock otherwise purchasable pursuant to such Warrant
divided by (B) the aggregate number of shares of Parent Common Stock deemed
purchasable pursuant to such Warrant; PROVIDED, HOWEVER, that such exercise
price shall be rounded up to the nearest whole cent.
(i) The Company acknowledges, and shall cause the plan administrator under
the Company Stock Plans to acknowledge, that the provisions of this Section 6.04
shall be deemed to satisfy any requirement of comparability under any such
Company Stock Plan or any option agreement evidencing an option grant thereunder
so that no option which is unvested immediately prior to the Closing shall
become vested as a result of the transactions contemplated by this Agreement.
SECTION 6.05. FEES AND EXPENSES. Except as provided above in Section
5.01(b), all fees and expenses incurred in connection with the Merger, this
Agreement and the transactions contemplated by this Agreement shall be paid by
the party incurring such fees or expenses, whether or not the Merger is
consummated.
SECTION 6.06. ADDITIONAL AGREEMENTS. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full title
to all properties, assets, rights, approvals, immunities and franchises of
either the Company or Sub, the proper officers and directors of each party to
this Agreement shall take all such necessary action.
SECTION 6.07. INDEMNIFICATION. From and after the Effective Time, the
Surviving Corporation shall (and, in the event of the liquidation, dissolution
or winding up of the Surviving Corporation, Parent shall) fulfill and honor in
all respects any indemnification obligations of the Company owed to its
directors and officers (the "Indemnified Parties") under the Company's Amended
and Restated Articles of Incorporation and Amended and Restated By-laws as in
effect on the date hereof. The Certificate of Incorporation and By-laws of the
Surviving Corporation will contain provisions with respect to exculpation and
indemnification that are at least as favorable to the Indemnified Parties as
those contained in the Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws of the Company as in effect on the date hereof,
which provisions will not be amended, repealed or otherwise modified for a
period of six years from the Effective Time in any manner that would
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adversely affect the rights thereunder of individuals who, immediately prior to
the Effective Time, were directors, officers, employees or agents of the
Company, unless such modification is required by law. This Section 6.07 shall
survive the consummation of the Merger, is intended to benefit each Indemnified
Party, shall be binding upon the successors and assigns of Parent and the
Surviving Corporation, and shall be enforceable by the Indemnified Parties.
SECTION 6.08. QUOTATION. To the extent Parent does not issue treasury
shares in the Merger or under the Company Stock Plan which are already quoted on
the Nasdaq, Parent shall file an application with the Nasdaq for the quotation
of the shares of Parent Common Stock issuable in the Merger on the Nasdaq and
shall use reasonable efforts to cause the shares of Parent Common Stock to be
issued in the Merger, under the Company Stock Plan or upon exercise of the
Warrants to be approved for quotation on the Nasdaq, subject to official notice
of issuance, prior to the Closing Date.
SECTION 6.09. LITIGATION. The Company shall provide to Parent immediate
written notice and copies of all pleadings and correspondence in connection with
any litigation against the Company and/or its directors relating to the
transactions contemplated by this Agreement.
SECTION 6.10. TAX TREATMENT. Each of Parent and the Company shall use
reasonable efforts to cause the Merger to qualify as a reorganization under the
provisions of Section 368 of the Code and shall use reasonable efforts to obtain
both the opinion of counsel referred to in Section 6.01(a) and the opinion of
counsel referred to in Section 7.03(c), including the execution of the letters
of representation referred to therein.
SECTION 6.11. LETTERS OF THE COMPANY'S ACCOUNTANTS. The Company shall use
its reasonable efforts to cause to be delivered to Parent two "comfort" letters
in customary form from PricewaterhouseCoopers LLP, the Company's independent
public accountants, one dated a date within two business days before the date on
which the Form S-4 shall become effective and one dated a date within two
business days before the Closing Date, each addressed to Parent.
SECTION 6.12. LETTERS OF PARENT'S ACCOUNTANTS. Parent shall use its
reasonable efforts to cause to be delivered to the Company two "comfort" letters
in customary form from KPMG Peat Marwick LLP, Parent's independent public
accountants, one dated a date within two business days before the date on which
the Form S-4 shall become effective and one dated a date within two business
days before the Closing Date, each addressed to the Company, in the form
customarily given to underwriters in securities offerings of Parent in the past.
SECTION 6.13. AFFILIATES. Prior to the Closing Date, the Company shall
deliver to Parent a letter identifying all persons who may be deemed, in the
Company's reasonable judgment, at the time this Agreement is submitted for
approval and adoption to the shareholders of the Company, "affiliates" of the
Company for purposes of Rule 145 under the Securities Act. The Company shall use
its reasonable efforts to cause each such person to deliver to Parent on or
prior to the Closing Date a written agreement substantially in the form attached
as Exhibit D hereto.
SECTION 6.14. SHAREHOLDERS AGREEMENT LEGEND. The Company will inscribe
upon any Certificate representing Subject Shares (as such term is defined in the
Shareholders Agreement) submitted to the Company by a Principal Shareholder in
connection with any proposed transfer of any Subject Shares by such Principal
Shareholder the following legend: "THE SHARES OF COMMON STOCK, NO PAR VALUE, OF
QUOTE.COM, INC. REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A SHAREHOLDERS
AGREEMENT DATED AS OF SEPTEMBER 2, 1999, AND ARE SUBJECT TO THE TERMS THEREOF.
COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT THE PRINCIPAL EXECUTIVE OFFICES OF
QUOTE.COM, INC.".
SECTION 6.15. EMPLOYEE BENEFITS. (a) Parent shall, or shall cause the
Company to, give individuals who are employed by the Company or any of its
subsidiaries as of the Effective Time and who remain employees of the Company or
such subsidiary following the Effective Time (each such
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employee, an "AFFECTED EMPLOYEE") full credit to the extent each such Affected
Employee has been credited with service under each comparable employee benefit
plan or arrangement maintained by the Company immediately prior to the Effective
Time (i) for purposes of eligibility and vesting under each employee benefit
plan or arrangement maintained by Parent or the Company for such Affected
Employees' service with the Company and (ii) for purposes of vacation accrual.
(b) Parent shall use reasonable best efforts, or shall cause the Company, to
(i) waive all limitations as to pre-existing conditions, exclusions and waiting
periods with respect to participation and coverage requirements applicable to
the Affected Employees under any welfare benefit plans that such Affected
Employees may be eligible to participate in after the Effective time, other than
limitations or waiting periods that are already in effect with respect to such
Affected Employees and that have not been satisfied as of the Effective Time
under any welfare plan maintained for the Affected Employee immediately prior to
the Effective Time and (ii) provide each Affected Employee with credit for the
remaining short plan year for any co-payments and deductibles paid under each
comparable welfare plan maintained by the Company prior to the Effective Time in
satisfying any applicable deductible or co-payment requirements under any
welfare plans that such Affected Employees are eligible to participate in after
the Effective Time.
(c) Following the Effective Time, Parent shall provide (or shall cause the
Company to provide) benefits to the Affected Employees that are at least as
favorable, taken as a whole, as the benefits currently provided to employees of
Parent performing functions similar to those to be performed by such Affected
Employees after the Effective Time.
SECTION 6.16. TRANSITION TEAM. Immediately following the execution of this
Agreement, the parties will create a special transition team (the "Transition
Team") comprised of the individuals from Parent and the Company set forth in
Annex I hereto and the Company will make available to the Transition Team
sufficient office space, facilities and support within its corporate
headquarters. Parent and the Company will consult with each other regarding the
business and operations of the Company and its subsidiaries and the Transition
Team will have the authority to make recommendations to the chief executive
officer of the Company (including with regard to marketing and promotional
expenditures, hiring, review and termination of sales and general and
administrative employees and the entering into, renewal and termination of OEM
Contracts) prior to the Effective Time. In addition, the Transition Team will
develop recommendations concerning the future operations of the Surviving
Corporation and its subsidiaries following the Effective Time.
SECTION 6.17. HUNSADER PAYMENT. As of immediately prior to the Effective
Time, the Company shall (i) terminate the Consulting Agreement dated as of March
9, 1998, between the Company and Eric S. Hunsader, as amended by the letter
agreement dated May 11, 1999 (the "Hunsader Consulting Agreement"), (ii) issue
to Mr. Hunsader the number of shares of Company Common Stock (the "Hunsader
Shares") which would entitle Mr. Hunsader to receive, upon conversion in the
Merger in accordance with Section 1.02(c), an amount of shares of Parent Common
Stock having a value equal to the product obtained by multiplying (A) .5 by (B)
a fraction the numerator of which is the aggregate amount payable pursuant to
Section 7(C)(i) of the Hunsader Consulting Agreement as a result of the
consummation of the Merger and after giving effect to the Merger Consideration
to be received by Mr. Hunsader in the Merger with respect to the shares of
Company Common Stock owned by Mr. Hunsader (other than the Hunsader Shares) (the
"Hunsader Amount") and the denominator of which is the Closing Date Average
Closing Price and (iii) pay to Mr. Hunsader one-half of the Hunsader Amount in
cash (the "Hunsader Cash").
SECTION 6.18. WAIVERS. The Company shall use its reasonable best efforts
to cause to be delivered to Parent the written waiver set forth in Section 6.18
of the Company Disclosure Schedule, in form and substance reasonably
satisfactory to Parent.
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ARTICLE VII
CONDITIONS
SECTION 7.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation of each party hereto to effect the Merger
shall be subject to the satisfaction on or prior to the Closing Date of the
following conditions:
(a) SHAREHOLDER APPROVAL. The Shareholder Approval shall have been
obtained.
(b) GOVERNMENTAL APPROVALS. All authorizations, consents, orders or
approvals of, or declarations or filings with, or expirations of waiting
periods imposed by, any Governmental Entity which is required by law to be
obtained or expired prior to consummating the Merger, or shall have been
filed, occurred or been obtained.
(c) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other Order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger (collectively, "Legal Restraints") shall be
in effect.
(d) QUOTATION. The shares of Parent Common Stock issuable to the
Company's shareholders as contemplated by this Agreement shall have been
approved for quotation on the Nasdaq, subject to official notice of
issuance.
(e) FORM S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order or, if applicable, the provisions of Section 6.01(c)
shall have been satisfied and evidence satisfactory thereof shall have been
delivered to each party.
SECTION 7.02. CONDITIONS OF OBLIGATIONS OF PARENT AND SUB. The obligations
of Parent and Sub to effect the Merger shall be subject to the satisfaction on
or prior to the Closing Date of the following conditions unless waived by Parent
and Sub:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained herein shall be true and correct as of the date of
this Agreement and as of the Effective Time with the same effect as though
made as of the Effective Time (except that the accuracy of representations
and warranties that by their terms speak as of a specified date will be
determined as of such date), except where the failure of such
representations and warranties to be so true and correct (without giving
effect to any limitation as to "materiality" or "material adverse effect"
set forth therein) does not have, and is not reasonably likely to have,
individually or in the aggregate, a material adverse effect on the Company.
Parent shall have received a certificate signed on behalf of the Company by
the chief executive officer of the Company to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date. Parent shall
have received a certificate signed on behalf of the Company by the chief
executive officer of the Company to such effect.
(c) CONSENTS, ETC. There shall have been obtained or issued all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of Governmental Entities legally required to effect the Merger and
the other transactions contemplated hereby and (ii) all other Governmental
licenses, consents, approvals, authorizations, qualifications and orders of
Governmental Entities or other third parties required under Contracts or
otherwise in connection with this Agreement and the transactions
contemplated hereby, except, in the case of this clause (ii), for those the
failure of which to be obtained, individually or in the aggregate, could not
reasonably be expected to (x) have a material adverse effect on the Company
or Parent or (y) interfere in any material
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respect with the ability of Parent to operate the business of the Company
after the Closing in substantially the same manner it was conducted prior to
the Closing.
(d) NO LITIGATION. There shall not be pending any suit, action or
proceeding brought by any Governmental Entity, or any suit, action or
proceeding with a reasonable probability of success brought by any other
third party, (i) challenging or seeking to restrain or prohibit the
consummation of the Merger; or (ii) seeking to prohibit or limit in any
material respect the ownership or operation by the Company, Parent or any of
their respective affiliates of a material portion of the business or assets
of the Company and its subsidiaries, taken as a whole, or Parent and its
subsidiaries, taken as a whole, or to require any such person to dispose of
or hold separate any material portion of the business or assets of the
Company and its subsidiaries, taken as a whole, or Parent and its
subsidiaries, taken as a whole, as a result of the Merger; or (iii) seeking
to prohibit Parent or any of its affiliates from effectively controlling in
any material respect a substantial portion of the business or operations of
the Company or its subsidiaries.
(e) LEGAL RESTRAINT. No Legal Restraint that could reasonably be
expected to result, directly or indirectly, in any of the effects referred
to in clauses (i) through (iii) of paragraph (d) of this Section 7.02 shall
be in effect.
(f) DISSENTING SHARES. Not more than 5.0 percent of the aggregate
number of outstanding shares of Company Capital Stock shall constitute
Dissenting Shares.
(g) COMPANY INDEBTEDNESS, HUNSADER PAYMENT, COMPANY EXPENSES AND
CLOSING DATE CASH. Parent shall have received a certificate signed on behalf
of the Company by the chief executive officer and the chief financial
officer certifying (i) the aggregate principal amount of Company
Indebtedness outstanding as of the Closing Date and the portion thereof
constituting Company Indebtedness owed to holders of Company Preferred
Stock, (ii) that the Hunsader Shares have been issued and the Hunsader Cash
has been paid to Mr. Hunsader in full satisfaction of the Company's
obligations under Section 7(C)(i) of the Hunsader Consulting Agreement,
(iii) the aggregate amount of all Company Expenses, (iv) that the aggregate
amount of the Company Expenses set forth in the immediately preceding clause
(iii) represents the entire amount of Company Expenses and that there are no
anticipated additional Company Expenses and (v) the amount of cash owned by
the Company as of the Closing Date (the "Closing Date Cash").
(h) ESCROW AGREEMENT. The Escrow Agreement in the form attached hereto
as Exhibit E shall be in full force and effect.
(i) EMPLOYMENT AND NON-COMPETITION AGREEMENTS. The Employment and
Non-Competition Agreements with each of the employees of the Company set
forth in Section 7.02(i) of the Company Disclosure Schedule shall be in full
force and effect.
(j) TERMINATION OF AGREEMENTS. Each of the agreements set forth in
Section 7.02(j) of the Company Disclosure Schedule shall have been
terminated, effective no later than the Effective Time.
(k) NON-EMPLOYEE OPTIONS AND WARRANTS. The Company shall have caused
each Non-Employee Option and Warrant to be amended prior to the Effective
Time so as to comply with Section 6.04(h) of this Agreement.
(l) HUNSADER LETTER AGREEMENT. The letter agreement dated September 1,
1999, between Parent and Eric S. Hunsader shall be in full force and effect.
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SECTION 7.03. CONDITIONS OF OBLIGATIONS OF THE COMPANY. The obligation of
the Company to effect the Merger shall be subject to the satisfaction on or
prior to the Closing Date of the following conditions unless waived by the
Company:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Parent contained herein shall be true and correct as of the date of this
Agreement and as of the Effective Time with the same effect as though made
as of the Effective Time (except that the accuracy of representations and
warranties that by their terms speak as of a specified date will be
determined as of such date), except where the failure of such
representations and warranties to be so true and correct (without giving
effect to any limitation as to "materiality" or "material adverse effect"
set forth therein) does not have, and is not reasonably likely to have,
individually or in the aggregate, a material adverse effect on Parent. The
Company shall have received a certificate signed on behalf of Parent by an
authorized signatory of Parent to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND SUB. Parent and Sub shall
have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior the Closing Date. The
Company shall have received a certificate signed on behalf of Parent by an
authorized signatory of Parent to such effect.
(c) TAX OPINION. The Company shall have received from Brobeck, Phleger
& Harrison LLP, counsel to the Company, on the Closing Date, an opinion,
dated as of such date and stating that the Merger will qualify for U.S.
federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code. The issuance of such opinion shall be
conditioned upon the receipt by such Tax counsel of customary representation
letters from each of the Company and Parent. Such representation letters and
such opinion shall be in a form previously agreed to by the parties.
ARTICLE VIII
TERMINATION AND AMENDMENT
SECTION 8.01. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual consent of Parent and the Company;
(b) by either Parent or the Company if there shall have been a material
breach of any representation, warranty, covenant, condition or agreement on
the part of the other set forth in this Agreement which breach is incapable
of cure or, if capable of cure, shall not have been cured within twenty
business days following receipt by the breaching party of notice of such
breach;
(c) by either Parent or the Company if any Legal Restraint shall have
become final and nonappealable;
(d) by either Parent or the Company if the Shareholder Approval shall
not have been obtained at the Shareholder Meeting duly convened therefor or
at any adjournment or postponement thereof; or
(e) by either Parent or the Company if the Merger shall not have been
consummated on or before December 31, 1999; PROVIDED, HOWEVER, that the
right to terminate this Agreement pursuant to this Section 8.01(e) shall not
be available to any party whose failure to perform any of its obligations
under this Agreement results in the failure of the Merger to be consummated
by such time.
SECTION 8.02. EFFECT OF TERMINATION. In the event of a termination of this
Agreement by either the Company or Parent as provided in Section 8.01, this
Agreement shall forthwith become void and
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there shall be no liability or obligation on the part of Parent, Sub or the
Company or their respective officers or directors, except with respect to any
wilful breach of any covenant or agreement contained in this Agreement prior to
such termination; and except that Section 6.05, this Section 8.02, Article IX
and the last sentence of Section 6.02 shall continue in effect.
SECTION 8.03. AMENDMENT. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
but no amendment shall be made which by law requires further approval by the
shareholders of the Company without such further approval. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties hereto.
SECTION 8.04. EXTENSION; WAIVER. At any time prior to the Effective Time,
each of the parties hereto, by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed, (i) extend the time of
for the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document delivered pursuant hereto and
(iii) waive compliance of the other party with any of the agreements or
conditions to its obligations contained herein. Any agreement on the part of the
party hereto to any such extension or waiver shall be valid only if set forth in
a written instrument signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations, warranties and covenants in this Agreement and in any
instrument delivered pursuant to this Agreement shall survive the Effective Time
for purposes of the Escrow Agreement.
SECTION 9.02. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or mailed by registered or certified mail
(return receipt requested) to the parties to this Agreement at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Sub, to
Lycos, Inc.
400-2 Totten Pond Road
Waltham, MA 02451-2000
Attention: Jeffrey M. Snider
Telecopy No.: (781) 370-2600
with a copy to
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Attention: Scott A. Barshay, Esq.
Telecopy: (212) 474-3700
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(b) if to the Company, to
Quote.com, Inc.
850 North Shoreline Blvd.
Mountain View, CA 94043-1931
Attention: Robert Honeycutt, President
and CEO
Telecopy: (650) 930-1111
with a copy to:
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, CA 94303
Attention: Curtis L. Mo, Esq.
Rod J. Howard, Esq.
Telecopy: (650) 496-2885
SECTION 9.03. DEFINITIONS. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person and, for purposes of
Section 3.10(d) only, shall include (i) any director or officer of such
person and (ii) any person owning 5% or more of the voting securities of
such person;
(b) "knowledge" of any person which is not an individual means the
knowledge of such person's executive officers after reasonable inquiry and
investigation.
(c) "material adverse effect" means, when used in connection with the
Company or Parent, any state of facts, change, effect, condition,
development, event or occurrence that has been, is or could reasonably be
expected to be materially adverse to the business, assets, condition
(financial or other) or results of operations of such party and its
subsidiaries, taken as a whole, other than (i) any state of facts, change,
effect, condition, development, event or occurrence arising directly as a
result of (A) this Agreement or the transactions contemplated hereby or the
announcement thereof (including (x) loss of personnel (including severance
and option acceleration liabilities), customers or suppliers or (y) the
delay or cancelation of orders for products, but excluding the Hunsader
Consulting Agreement) or (B) material changes in general economic or
business conditions in the industry and market in which the Company or
Parent, as the case may be, operates or (ii) in the case of Parent, any
decrease in the price per share of Parent Common Stock or any state of
facts, change, effect, condition, development, event or occurrence arising
out of or relating to any decrease in the price per share of Parent Common
Stock;
(d) "person" means an individual, corporation, company, limited
liability company, partnership, joint venture, association, trust,
unincorporated organization or other entity;
(e) a "subsidiary" of any person means another person, an amount of the
voting securities or other voting ownership or voting partnership interests
of which is sufficient to elect at least a majority of its Board of
Directors or other governing body (or, if there are no such voting
interests, more than 50% of the equity interests of which) is owned directly
or indirectly by such first person; and
SECTION 9.04. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; RIGHTS OF
OWNERSHIP. This Agreement and the Confidentiality Agreement (including the
documents and the instruments referred to herein) (a) constitute the entire
agreement and supersede all prior agreements and understandings,
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both written and oral, among the parties with respect to the subject matter
hereof and (b) except as expressly set forth in Sections 6.04 and 6.07 of this
Agreement, are not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
SECTION 9.05. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF
THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF
LAWS THEREOF, EXCEPT TO THE EXTENT THE LAWS OF CALIFORNIA ARE MANDATORILY
APPLICABLE TO THE MERGER.
SECTION 9.06. PUBLICITY. Except as otherwise required by law or, in the
case of Parent, the rules of the Nasdaq, for so long as this Agreement is in
effect, neither the Company nor Parent shall issue or cause the publication of
any press release or other public announcement with respect to the transactions
contemplated by this Agreement without the consent of the other party, which
consent shall not be unreasonably withheld. The parties hereto have agreed upon
the form of a joint press release announcing the execution of this Agreement and
the transactions contemplated hereby.
SECTION 9.07. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of the other parties, except that Sub
may assign, in its sole discretion, any or all of its rights, interests and
obligations hereunder to Parent or to any direct or indirect wholly owned
subsidiary of Parent. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
SECTION 9.08. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be a single agreement.
SECTION 9.09. EXHIBITS AND SCHEDULES; INTERPRETATION. The headings
contained in this Agreement or in any Exhibit or Schedule thereto and in the
table of contents to this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Any
matter set forth in any provision, subprovision, section or subsection of any
Schedule shall, unless the context otherwise manifestly requires, be deemed set
forth for all purposes of the Schedules. All Exhibits and Schedules annexed to
this Agreement or referred to herein are hereby incorporated in and made a part
of this Agreement as if set forth in full herein. Any capitalized terms used in
any Schedule or Exhibit to this Agreement but not otherwise defined herein,
shall have the meaning as defined in this Agreement. When a reference is made in
this Agreement to a Section, Article, Exhibit or Schedule, this reference shall
be to a Section or Article of, or an Exhibit or Schedule to, this Agreement
unless otherwise indicated. For all purposes hereof, (a) the words "include",
"includes" and "including" shall be deemed followed by the words "without
limitation" and (b) the words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
SECTION 9.10. CONSENT TO JURISDICTION. Each of the parties hereto
irrevocably and unconditionally submits to the exclusive jurisdiction of (a) any
Delaware State court, (b) any Federal court of the United States of America
sitting in the State of Delaware and (c) any Federal court of the United States
of America sitting in the Northern District of California, for the purposes of
any suit, action or other proceeding arising out of this Agreement or any
transaction contemplated hereby (and each agrees that no such action, suit or
proceeding relating to this Agreement shall be brought by it or any of its
affiliates except in such courts). Each of the parties hereto further agrees
that service of any process, summons, notice or document by U.S. registered mail
to such person's respective address set forth above shall be effective service
of process for any action, suit or proceeding in Delaware or California with
respect to any matters to which it has submitted to jurisdiction as set forth
above in the
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<PAGE>
immediately preceding sentence. Each of the parties hereto irrevocably and
unconditionally waives (and agrees not to plead or claim) any objection to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby in (a) any Delaware State court, (b) any
Federal court of the United State of America sitting in the State of Delaware or
(c) any Federal court of the United States of America sitting in the Northern
District of California, or that any such action, suit or proceeding brought in
any such court has been brought in an inconvenient forum.
SECTION 9.11. WAIVER OF JURY TRIAL. Each party hereto hereby waives, to
the fullest extent permitted by applicable law, any right it may have to a trial
by jury in respect of any Litigation directly or indirectly arising out of,
under or in connection with this Agreement. Each party hereto (a) certifies that
no representative, agent or attorney of any other party has represented,
expressly or otherwise, that such party would not, in the event of Litigation,
seek to enforce the foregoing waiver and (b) acknowledges that it and the other
parties hereto have been induced to enter into this Agreement, by, among other
things, the mutual waiver and certifications in this Section 9.11.
SECTION 9.12. ENFORCEMENT. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties hereto shall be entitled to
an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any Federal
court sitting in the State of Delaware or the Northern District of California or
in any Delaware State court, this being in addition to any other remedy to which
they are entitled at law or in equity.
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<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized as of the
date first written above.
<TABLE>
<S> <C> <C>
LYCOS, INC.,
by /s/ SCOT ROSENBLUM
--------------------------------------
Name: Scot Rosenblum
Title: Vice President
QUICKSILVER ACQUISITION CORP.,
by /s/ JEFFREY M. SNIDER
--------------------------------------
Name: Jeffrey M. Snider
Title: Secretary
QUOTE.COM, INC.,
by /s/ ROBERT HONEYCUTT
--------------------------------------
Name: Robert Honeycutt
Title: President & CEO
</TABLE>
A-45
<PAGE>
ANNEX B
SHAREHOLDERS AGREEMENT
SHAREHOLDERS AGREEMENT dated as of September 2, 1999 (this
"Agreement"), among LYCOS, INC., a Delaware corporation ("Parent"),
and the individuals and other parties listed on Schedule A attached
hereto (each, a "Shareholder" and, collectively, the "Shareholders").
WHEREAS Parent, Quicksilver Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Parent ("Sub"), and Quote.com, Inc., a California
corporation (the "Company"), propose to enter into an Agreement and Plan of
Merger dated as of the date hereof (as the same may be amended or supplemented,
the "Merger Agreement"; terms used but not defined herein shall have the
meanings set forth in the Merger Agreement) providing for the merger of Sub with
and into the Company (the "Merger") upon the terms and subject to the conditions
set forth in the Merger Agreement;
WHEREAS each Shareholder owns the number of shares of capital stock of the
Company set forth opposite such Shareholder's name on Schedule A hereto (such
shares of capital stock of the Company, together with any other shares of
capital stock of the Company acquired by such Shareholder after the date hereof
and during the term of this Agreement (including through the exercise of any
stock options, warrants or similar instruments), being collectively referred to
herein as the "Subject Shares"); and
WHEREAS as a condition to its willingness to enter into the Merger
Agreement, Parent has requested that each Shareholder enter into this Agreement.
NOW, THEREFORE, to induce Parent to enter into, and in consideration of its
entering into, the Merger Agreement, and in consideration of the premises and
the representations, warranties and agreements contained herein, the parties
hereto agree as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES OF EACH SHAREHOLDER. Each
Shareholder hereby, severally and not jointly, represents and warrants to Parent
as follows:
(a) ORGANIZATION; AUTHORITY; EXECUTION AND DELIVERY; ENFORCEABILITY. To
the extent that such Shareholder is an entity other than an individual, such
Shareholder is duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization and has all requisite corporate or
other power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by such Shareholder and the consummation by such Shareholder of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of such Shareholder. This Agreement has been duly executed and delivered by
such Shareholder and constitutes a legal, valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance with its terms.
The execution and delivery by such Shareholder of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof, will not, conflict with, or result in any breach or violation
of, or default (with or without notice or lapse of time or both) under, or
result in the termination of, or accelerate the performance required by, or give
rise to a right of termination, cancelation or acceleration of any obligation or
loss of a benefit under, or to increased, additional, accelerated or guaranteed
rights or entitlements of any person under, or result in the creation of any
Lien on any properties or assets of such Shareholder pursuant to, (i) any
provision of the certificate of incorporation or by-laws or partnership
agreement or the comparable organizational documents of such Shareholder, (ii)
any Contract to which such Shareholder is a party or by which any of the
properties or assets of such Shareholder are bound or (iii) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to such
Shareholder or its assets. No consent, approval, order or
B-1
<PAGE>
authorization of, action by or in respect of, or registration, declaration or
filing with, any Governmental Entity is required by or with respect to such
Shareholder in connection with the execution and delivery of this Agreement by
such Shareholder or the consummation by such Shareholder of the transactions
contemplated hereby. No trust of which such Shareholder is a trustee requires
the consent of any beneficiary to the execution and delivery of this Agreement
or to the consummation of the transactions contemplated hereby.
(b) THE SUBJECT SHARES. Such Shareholder is the record and beneficial
owner of (or is the trustee of a trust that is the record holder of, and whose
beneficiaries are the beneficial owners of), and has good and marketable title
to, the Subject Shares set forth opposite its name on Schedule A hereto, free
and clear of any Liens. Such Shareholder does not own of record any shares of
capital stock of the Company other than the Subject Shares set forth opposite
its name on Schedule A hereto, and does not beneficially own any shares of
capital stock of the Company other than Subject Shares. Such Shareholder has the
sole right to vote and Transfer (as defined below) the Subject Shares set forth
opposite its name on Schedule A hereto, and none of such Subject Shares is
subject to any voting trust or other agreement, arrangement or restriction with
respect to the voting or the Transfer of such Subject Shares, except as set
forth in Sections 3 and 4 of this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent hereby
represents and warrants to each Shareholder as follows: Parent has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Parent and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Parent. This
Agreement has been duly executed and delivered by Parent and, assuming due
execution by each Shareholder, constitutes a valid and binding obligation of
Parent, enforceable against Parent in accordance with its terms. The execution
and delivery by Parent of this Agreement do not, and the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
breach or violation of, or default (with or without notice or lapse of time or
both) under, or give rise to a right of termination, cancelation or acceleration
of any obligation under, or to increased, additional, accelerated or guaranteed
rights or entitlements of any person under, or result in the creation of any
Lien on any assets of Parent pursuant to, (i) any provision of the charter or
by-laws of Parent, (ii) any Contract to which Parent is a party or by which any
of its assets is bound or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent or any of its assets. No
consent, approval, order or authorization of, action by or in respect of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to Parent in connection with the execution and delivery of this
Agreement by Parent or the consummation by Parent of the transactions
contemplated hereby.
SECTION 3. COVENANTS OF EACH SHAREHOLDER. Each Shareholder, severally and
not jointly, covenants and agrees as follows:
(a) At any meeting of the shareholders of the Company called to vote upon
the Merger, the Merger Agreement or any of the transactions contemplated by the
Merger Agreement, or at any adjournment thereof, or in any other circumstances
upon which a vote, consent or other approval (including by written consent) with
respect to the Merger, the Merger Agreement or any of the transactions
contemplated by the Merger Agreement, is sought, such Shareholder shall,
including by executing a written consent solicitation if requested by Parent,
vote (or cause to be voted) such Shareholder's Subject Shares in favor of the
adoption and approval by the Company of the Merger Agreement and the approval of
the terms thereof and of the Merger and each of the other transactions
contemplated by the Merger Agreement (including the issuance of the Hunsader
Shares).
(b) At any meeting of the shareholders of the Company or at any adjournment
thereof or in any other circumstances upon which such Shareholder's vote,
consent or other approval is sought, such Shareholder shall vote (or cause to be
voted) the Subject Shares of such Shareholder against, and shall
B-2
<PAGE>
not consent to (and shall cause not to be consented to), any of the following
(or any agreement to enter into or effect any of the following): (i) any
Takeover Proposal or transaction or occurrence which if publicly proposed and
offered to the Company and its shareholders (or any of them) would be the
subject of a Takeover Proposal (collectively, "Alternative Transactions") or
(ii) any amendment of the Company's Amended and Restated Certificate of
Incorporation or Amended and Restated By-laws or other proposal, action or
transaction involving the Company or any of its subsidiaries, which amendment or
other proposal, action or transaction would or could reasonably be expected to
prevent or materially impede, interfere with, hinder or delay the consummation
of the Merger or any of the other transactions contemplated by the Merger
Agreement or to dilute in any material respect the benefits to Parent of the
Merger and the other transactions contemplated by the Merger Agreement, or
change in any manner the voting rights of any class or shares of Company Capital
Stock (collectively, "Frustrating Transactions").
(c) Other than this Agreement, such Shareholder shall not (i) sell,
transfer, pledge, assign or otherwise dispose of (including by gift)
(collectively, "Transfer"), or consent to any Transfer of, any Subject Shares or
any interest therein or enter into any Contract, option or other arrangement
(including any profit sharing or other derivative arrangement) with respect to
the Transfer of, any Subject Shares or any interest therein to any person other
than pursuant to the Merger Agreement, unless prior to any such Transfer the
transferee of such Subject Shares enters into a shareholders agreement with
Parent on terms substantially identical to the terms of this Agreement, or (ii)
enter into any voting arrangement, whether by proxy, voting agreement or
otherwise, in connection with, directly or indirectly, any Alternative
Transaction or Frustrating Transaction or otherwise with respect to the Subject
Shares.
(d) Such Shareholder shall not, and shall not authorize or permit any of its
subsidiaries or affiliates (other than the Company) or any of its or their
directors, officers, employees, partners, investment bankers, attorneys or other
advisors or representatives to, directly or indirectly, (i) solicit, initiate,
encourage or take any other action to facilitate any inquiries with respect to
any Takeover Proposal or the submission of any Takeover Proposal, (ii) enter
into any agreement with respect to any Takeover Proposal or (iii) participate in
any discussions or negotiations regarding, or furnish to any person any
information with respect to, or otherwise cooperate in any way with, or assist
or participate in any effort or attempt by any person with respect to, any
Takeover Proposal.
(e)(i) Such Shareholder shall use its best efforts to take, or cause to be
taken, all other actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all other things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by the Merger
Agreement.
(ii) Such Shareholder shall not, and shall not authorize or permit any of
its subsidiaries or affiliates (other than the Company) or any of its or their
directors, officers, employees, partners, investment bankers, attorneys or other
advisors or representatives to, issue any press release or make any other public
statement with respect to the Merger Agreement, this Agreement, the Merger or
any of the other transactions contemplated by the Merger Agreement or this
Agreement without the prior written consent of Parent, except as may be required
by applicable law.
(f) Such Shareholder hereby waives any rights of appraisal, or rights to
dissent from the Merger, that such Shareholder may have.
(g) If, at the time the Merger Agreement is submitted for approval to the
shareholders of the Company, a Shareholder may be deemed, in the reasonable
judgment of Parent or the Company, an "affiliate" of the Company for purposes of
Rule 145 under the Securities Act, such Shareholder shall deliver to Parent on
or prior to the Closing Date a written agreement substantially in the form
attached as Exhibit D to the Merger Agreement.
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<PAGE>
(h) Such Shareholder shall execute and deliver to Parent the Escrow
Agreement.
SECTION 4. GRANT OF IRREVOCABLE PROXY; APPOINTMENT OF PROXY. (a) Each
Shareholder hereby irrevocably grants to, and appoints, Parent and Edward M.
Philip, its Chief Operating Officer and Chief Financial Officer, Thomas E.
Guilfoile, its Vice President, Finance & Administration, and Jeffrey M. Snider,
its General Counsel, in their respective capacities as designees of Parent, and
any individual who shall hereafter succeed to any such office of Parent, and
each of them individually, such Shareholder's proxy and attorney-in-fact (with
full power of substitution), for and in the name, place and stead of such
Shareholder, to vote such Shareholder's Subject Shares, or grant a consent or
approval in respect of such Subject Shares, (i) in favor of the Merger, the
adoption and approval by the Company of the Merger Agreement and the approval of
the other transactions contemplated by the Merger Agreement (including the
issuance of the Hunsader Shares) and (ii) against any Alternative Transaction or
Frustrating Transaction.
(b) Such Shareholder represents that any proxies heretofore given in respect
of such Shareholder's Subject Shares are not irrevocable, and that all such
proxies are hereby revoked.
(c) Such Shareholder hereby affirms that the irrevocable proxy set forth in
this Section 4 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the performance of
the duties of the Shareholder under this Agreement. Such Shareholder hereby
further affirms that the irrevocable proxy is coupled with an interest and may
under no circumstances be revoked. Such Shareholder hereby ratifies and confirms
all that such irrevocable proxy may lawfully do or cause to be done by virtue
hereof.
SECTION 5. FURTHER ASSURANCES. Each Shareholder will, from time to time,
execute and deliver, or cause to be executed and delivered, such additional or
further consents, documents and other instruments as Parent may request for the
purpose of effectuating the matters covered by this Agreement, including the
grant of the proxies set forth in Section 4.
SECTION 6. CERTAIN EVENTS. Each Shareholder agrees that this Agreement and
the obligations hereunder shall attach to such Shareholder's Subject Shares and
shall be binding upon any person or entity to which legal or beneficial
ownership of such Subject Shares shall pass, whether by operation of law or
otherwise, including such Shareholder's heirs, guardians, administrators or
successors. In the event of any stock split, stock dividend, merger,
reorganization, recapitalization or other change in the capital structure of the
Company affecting the Company Capital Stock, or the acquisition of additional
shares of Company Capital Stock or other voting securities of the Company by any
Shareholder, the number of Subject Shares listed on Schedule A hereto beside the
name of such Shareholder shall be adjusted appropriately and this Agreement and
the obligations hereunder shall attach to any additional shares of Company
Capital Stock or other voting securities of the Company issued to or acquired by
such Shareholder.
SECTION 7. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise, by any of the parties hereto without the
prior written consent of the other parties hereto, except that Parent may
assign, in its sole discretion, any of or all its rights, interests and
obligations under this Agreement to any direct or indirect wholly owned
subsidiary of Parent, but no such assignment shall relieve Parent of its
obligations under this Agreement. Any purported assignment in violation of this
Section 7 shall be void. Subject to the preceding sentences of this Section 7,
this Agreement will be binding upon, inure to the benefit of, and be enforceable
by, the parties hereto and their respective successors and assigns.
SECTION 8. TERMINATION. This Agreement shall terminate upon the earlier of
(a) the Effective Time and (b) the termination of the Merger Agreement in
accordance with its terms. No such termination of this Agreement shall relieve
any party hereto from any liability for any breach of this Agreement prior to
termination.
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<PAGE>
SECTION 9. GENERAL PROVISIONS. (a) AMENDMENTS. This Agreement may not be
amended except by an instrument in writing signed by each of the parties hereto.
(b) NOTICES. All notices, requests, clauses, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (with confirmation) or sent by
overnight or same-day courier (providing proof of delivery) to Parent in
accordance with Section 9.02 of the Merger Agreement and to the Shareholders at
their respective addresses set forth on Schedule A hereto (or at such other
address for a party as shall be specified by like notice).
(c) INTERPRETATION. When a reference is made in this Agreement to Sections
or Schedules, such reference shall be to a Section or Schedule to this Agreement
unless otherwise indicated. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Wherever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. The
term "or" is not exclusive. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms. Any
agreement or instrument defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement or instrument as from
time to time amended, modified or supplemented. References to a person are also
to its permitted successors and assigns.
(d) COUNTERPARTS; EFFECTIVENESS. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties hereto and delivered to the other party. The effectiveness
of this Agreement shall be conditioned upon the execution and delivery of the
Merger Agreement by each of the parties thereto.
(e) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement
(including the documents and instruments referred to herein) (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties hereto with respect to the subject matter of
this Agreement and (ii) is not intended to confer upon any person other than the
parties hereto (and the persons specified as proxies in Section 4) any rights or
remedies.
(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO ANY
PRINCIPLES OF CONFLICTS OF LAWS OF SUCH STATE.
(g) SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner and to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 10. ENFORCEMENT. Each of the parties hereto agrees that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties hereto shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement in any
Delaware state court or any Federal court located in the State of Delaware, this
being in addition to any other remedy to which they are entitled at law or in
equity. In addition, each of the parties hereto (a) consents to submit itself to
the
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personal jurisdiction of any Delaware state court or any Federal court located
in the State of Delaware in the event any dispute arises out of or under or
relates to this Agreement or any of the transactions contemplated hereby, (b)
agrees that it will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court, (c) agrees that it will
not bring any action, suit or proceeding arising out of or under or relating to
this Agreement or any of the transactions contemplated hereby in any court other
than any Delaware state court or any Federal court located in the State of
Delaware and (iv) waives any right to trial by jury with respect to any action,
suit or proceeding arising out of or under or relating to this Agreement or any
of the transactions contemplated hereby in any Delaware state court or any
Federal court located in the State of Delaware, and hereby further and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
IN WITNESS WHEREOF, Parent has caused this Agreement to be signed by its
officer thereunto duly authorized and each Shareholder has signed this
Agreement, all as of the date first written above.
LYCOS, INC.,
by
/s/ Scott Rosenblum
--------------------------------------
Name: Scott Rosenblum
Title: Vice-President
SHAREHOLDERS:
Regis McKenna
/s/ Regis McKenna
--------------------------------------
Name: Regis McKenna
Richard Campione
/s/ Richard Campione
--------------------------------------
Name: Richard Campione
Nosheen Hashemi
/s/ Noosheen Hashemi
--------------------------------------
Name: Noosheen Hashemi
Robert Bennin
/s/ Robert Bennin
--------------------------------------
Name: Robert Bennin
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<PAGE>
Kevin Westerlund
/s/ Kevin Westerlund
--------------------------------------
Name: Kevin Westerlund
Sequoia Capital VII,
Sequoia Technology
Partners VII,
Sequoia International
Partners,
Sequoia 1995, and
Sequoia 1997
by
/s/ Michael Moritz
--------------------------------------
Name: Michael Moritz
MLS-I L.P.
by
/s/ Marvin Schoffstall
--------------------------------------
Name: Marvin Schoffstall
Title: General Partner
Shawmut Equity Partners, L.P.
by
/s/ Daniel Doyle
--------------------------------------
Name: Daniel Doyle
Title: Mangaing Director
Highland Capital Partners III
by
/s/ Daniel Nova
--------------------------------------
Name: Daniel Nova
Highland Capital Fund III
by
/s/ Daniel Nova
--------------------------------------
Name: Daniel Nova
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<PAGE>
Jeffrey Tang
/s/ Jeffrey Tang
--------------------------------------
Name: Jeffrey Tang
Eric Hunsader
/s/ Eric Hunsader
--------------------------------------
Name: Eric Hunsader
AZ Company
by
/s/ John Fitzgerald
--------------------------------------
Name: John Fitzgerald
Title: Director
Joseph Yosi Amran
/s/ Joseph Yosi Amran
--------------------------------------
Name: Joseph Yosi Amran
Avon Kendrick
/s/ Avon Kendrick
--------------------------------------
Name: Avon Kendrick
Dennis Shaler
/s/ Dennis Shaler
--------------------------------------
Name: Dennis Shaler
L.E. Holdings, Ltd.
by
/s/ Laurence Ecker
--------------------------------------
Name: Laurence Ecker
Title: General Partner
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<PAGE>
Maro Corporation
by
/s/ Mark S. Jones
--------------------------------------
Name: Mark S. Jones
Roger W. Marlin
/s/ Roger W. Marlin
--------------------------------------
Name: Roger Marlin
Peter Smits
by
/s/ Dennis Shaler
--------------------------------------
Name: Dennis Shaler
Title: Attorney in fact for Peter
Smits
Pietro Dova
/s/ Pietro Dova
--------------------------------------
Name: Pietro Dova
Riva Investments
by
/s/ Jim Caviglia
--------------------------------------
Name: Jim Caviglia
Title: Partner
/s/ Ron Cefalu
--------------------------------------
Name: Ron Cefalu
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<PAGE>
ANNEX C
INDEMNIFICATION AND ESCROW AGREEMENT
INDEMNIFICATION AND ESCROW AGREEMENT dated as of [ ], 1999 (this
"Agreement"), among LYCOS, INC., a Delaware corporation ("Parent"),
STATE STREET BANK AND TRUST COMPANY, as Escrow Agent (the "Escrow
Agent"), the shareholders of the Company (as defined below) listed on
the signature pages hereto (the "Principal Shareholders") and [ ],
as representative of the Principal Shareholders.
WHEREAS Parent, Quicksilver Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Parent ("Sub"), and Quote.com, Inc. the Company, a
California corporation (the "Company"), are parties to the Agreement and Plan of
Merger dated as of September 2, 1999 (as the same may be amended or
supplemented, the "Merger Agreement") providing for the merger of Sub with and
into the Company (the "Merger") upon the terms and subject to the conditions set
forth in the Merger Agreement;
WHEREAS, the Merger Agreement provides that as of the Effective Time (such
term and each other term used but not defined herein shall have the meaning
assigned to it in the Merger Agreement; notwithstanding the foregoing, the
Escrow Agent will have no duty to read or interpret the Merger Agreement and may
rely on the use of such defined terms in any communication received by it),
share certificates representing 10% of the shares (the "Escrow Shares" or the
"Escrow Fund") of Parent Common Stock to be issued in the Merger in accordance
with the terms of the Merger Agreement, shall be deposited in escrow, to be held
and disposed of by the Escrow Agent as provided herein; and
WHEREAS, Parent, the Principal Shareholders and the Representative desire
the Escrow Agent to serve as the escrow agent, and the Escrow Agent is willing
to do so, upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, it is agreed:
ARTICLE I
INDEMNIFICATION
SECTION 1.01. SURVIVAL OF COVENANTS, AGREEMENTS, REPRESENTATIONS AND
WARRANTIES. For purposes of this Agreement (and notwithstanding anything to the
contrary provided under applicable law or in the Merger Agreement), the
representations, warranties, covenants and agreements of the Company contained
in the Merger Agreement or in any certificate or other document delivered
pursuant thereto or in connection therewith (other than any representation,
warranty, covenant or agreement contained in any agreement specifically listed
on the Company Disclosure Schedule) shall be deemed to survive the Closing and
to remain in full force and effect for the period set forth in Section 1.04,
regardless of any investigation made by or on behalf of any party hereto;
PROVIDED that any and all rights of indemnification and any and all other
remedies relating thereto shall be subject to Section 1.04 and all other
limitations contained in this Agreement.
SECTION 1.02. INDEMNIFICATION BY THE PRINCIPAL SHAREHOLDERS. (a) "Losses"
of any person shall mean any and all demands, claims, suits, actions, causes of
action, proceedings, assessments, losses, damages, liabilities, Taxes, costs and
expenses incurred by such person, including interest, penalties, fines,
judgments, awards and financial responsibility for investigation and cleanup
costs. "Losses" of Parent or its Affiliates (other than the Company) shall also
include any Losses incurred by the Company or its subsidiaries (PROVIDED that
the existence of any such breach or inaccuracy of any such representation or
warranty set forth in Section 1.02(c)(i) shall be determined on the basis set
forth in such Section 1.02(c)(i)). As used in this Article I, an "Affiliate" of
Parent shall include any direct or indirect subsidiary of Parent and any
officer, director or employee of Parent or any such subsidiary. As used in this
Article I, an "Indemnifying Party" shall mean, with respect to any Loss, the
person or
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persons that have agreed to indemnify and hold harmless Parent and its
Affiliates with respect to such Loss pursuant to Section 1.02(b), (c) or (d), as
provided below.
(b) Each Principal Shareholder agrees, severally and not jointly, only as to
itself, to indemnify and hold harmless each Indemnitee (such term and each other
term used herein but not defined in the Merger Agreement shall have the meaning
assigned to it in Article VIII or elsewhere herein) from and against any and all
Losses (other than Losses relating to Taxes, for which indemnification
provisions are set forth in Section 1.02(d)) asserted against, imposed upon, or
incurred by such Indemnitee which arise out of or in connection with:
(i) the failure by such Principal Shareholder to perform any covenant,
agreement, obligation or undertaking in this Agreement or in any
certificate, instrument, document or agreement delivered by such Principal
Shareholder pursuant to or in connection with this Agreement; and
(ii) any and all actions, suits, proceedings, demands, assessments,
judgments, damages, awards, costs and expenses (including fees) incident to
any of the foregoing or incurred in connection with the enforcement of the
rights of any Indemnitee with respect to the foregoing.
(c) Each Principal Shareholder agrees, severally and not jointly, to
indemnify and hold harmless, from and after the Effective Time, each Indemnitee
from and against any and all Losses (other than Losses relating to Taxes, for
which indemnification provisions are set forth in Section 1.02(d)) asserted
against, imposed upon, or incurred by such Indemnitee which arise out of or in
connection with:
(i) any inaccuracy in, or any breach of, any representation or warranty
of the Company contained in the Merger Agreement, or in any certificate,
instrument, document or agreement delivered by the Company pursuant to or in
connection with the transactions contemplated thereby (it being agreed that
for purposes of determining the existence of any such inaccuracy or breach,
all such representations and warranties of the Company that are directly or
indirectly qualified as to materiality shall be deemed to be not so
qualified);
(ii) the failure by the Company to perform any covenant or agreement in
the Merger Agreement or in any certificate delivered by the Company pursuant
to the Merger Agreement, in each of the above cases which is required to be
performed at or prior to the Effective Time;
(iii) any and all actions, suits, proceedings, demands, assessments,
judgments, damages, awards, costs and expenses (including reasonable
attorney fees) incident to any of the foregoing or incurred in connection
with the enforcement of the rights of any person indemnified under this
Section with respect to the foregoing;
(iv) any obligation of the Company to pay royalties to Eric S. Hunsader
pursuant to the Software Marketing Agreement dated March 11, 1997, by and
between Eric S. Hunsader and Quote.com, Inc.;
(v) any termination by Eric S. Hunsader of the Software Tools License
Agreement dated April 2, 1997, by and between Eric S. Hunsader and Halley's
Software, Inc.; and
(vi) the termination by Parent or the Company after the Effective Time
of Mr. Pietro Dova, Mr. Aaron Barnes, Mr. Akmal Hashmi, Robert Honycutt and
Karen Kelley or any of them (including, without limitation, any severance or
other termination payments resulting therefrom).
(d) (i) Each Principal Shareholder agrees, severally and not jointly, to
indemnify and hold harmless, from and after the Effective Time, each Indemnitee
from and against, (A) all liability for Taxes of the Company and any of its
subsidiaries for the Pre-Closing Tax Period; (B) all liability for Taxes (as a
result of Treasury regulation Section 1.1502-6 or any comparable provision of
state, local or foreign Tax law) of any person which at any time prior to the
Closing is or has ever been affiliated with the Company or any of its
subsidiaries or with which at any time prior to the Closing the Company or any
of its subsidiaries joins or has ever joined or is or has ever been required to
join in filing any affiliated, consolidated, combined, unitary or aggregate Tax
Return; (C) all liability for Taxes that result from the Company's (or any of
its subsidiaries') failure to withhold from amounts paid by the Company
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or any of its subsidiaries prior to the Closing Date; (D) all liability for
Taxes of the Company or any of its subsidiaries for any Post-Closing Tax Period
that result by reason of the application in a Pre-Closing Tax Period of Section
481 of the Code or any comparable provisions of state, local, domestic or
foreign Tax law; (E) all liability for Taxes of the Company as a result of a
breach of a representation or warranty set forth in Section 3.07 of the Merger
Agreement; (F) all liability for Taxes required to be paid after the Closing
Date by the Company or any of its subsidiaries under any Tax sharing, Tax
indemnity, Tax allocation or similar contract (whether or not written) to which
the Company or any of its subsidiaries is or was a party prior to the Closing;
and (G) all liability for reasonable legal and accounting fees and expenses for
or with respect to any item in clause (A), (B), (C), (D), (E) or (F) above.
(ii) In the case of any taxable period that includes (but does not end on)
the Closing Date (a "STRADDLE PERIOD"): (A) real, personal and intangible
property Taxes ("Property Taxes") of the Company with respect to which the
Indemnitees shall be indemnified shall be equal to the amount of such Property
Taxes for the entire Straddle Period multiplied by a fraction, the numerator of
which is the number of days during the Straddle Period that are in the
Pre-Closing Tax Period and the denominator of which is the number of days in the
Straddle Period; and (B) the Taxes of the Company (other than Property Taxes)
for the Pre-Closing Tax Period shall be computed as if such Taxable period ended
as of the close of business on the Closing Date, and, in the case of any Taxes
of the Company attributable to the ownership by the Company of any equity
interest in any partnership or other "flowthrough" entity, as if a Taxable
period of such partnership or other "flowthrough" entity ended as of the close
of business on the Closing Date. All indemnification payments hereunder shall be
due on the later of (i) the date on which the relevant Taxes are required to be
paid to the relevant Taxing Authority (including with respect to estimated
Taxes) and (ii) five business days after Parent notifies the Representative that
such Taxes are due (and the amount thereof).
(iii) Any refund or credit of Taxes of the Company or any of its
subsidiaries for a Pre-Closing Tax Period with respect to which the relevant Tax
Return was filed by Parent or its subsidiaries after the Effective Time shall be
for the account of a Principal Shareholder but only (x) if such refund or credit
is received, or a claim with respect to such refund or credit is filed with the
relevant Taxing Authority, on or before the close of business on the third
anniversary of the Effective Time and (y) to the extent that the amount of such
refund or credit does not exceed the aggregate amount of indemnification
payments made hereunder by such Principal Shareholder with respect to such Tax
for the relevant taxable period. Any refund or credit of Taxes of the Company or
any of its subsidiaries for a Straddle Period that meets the requirements of
clauses (x) and (y) above shall be equitably apportioned between Parent or its
subsidiaries, on the one hand, and the relevant Principal Shareholder, on the
other hand.
(e) For the purposes of the indemnity provided in this Section 1.02, any
Losses hereunder shall be determined on the basis of the net effect after giving
effect to any actual cash payments, setoffs or recoupment or any payments in
each case actually received, realized or retained by the Indemnitee as a result
of any event giving rise to a claim for such indemnification. The amount of any
Losses for which indemnification is provided hereunder shall be net of any
amount recovered by the Indemnitee under insurance policies with respect to such
Losses. To the extent that an Indemnitee (or its Affiliate) has rights under
insurance policies or similar rights in respect of any Loss it shall use its
commercially reasonable efforts to exercise such rights. No claim for
indemnification under this Article I (other than Sections 1.02(c)(vi) and
1.02(d)) shall be brought under this Agreement (x) unless and until the
aggregate amount of all claims for indemnification under this Article I (other
than Sections 1.02(c)(vi) and 1.02(d)) exceeds $150,000, and then only to the
extent of any such excess or (y) for any individual item where the Loss relating
thereto is less than $25,000.
(f) All Losses (including Losses relating to Taxes) under this Article I
shall be calculated in a manner such that the net after-Tax effect of the
indemnification payment received by an Indemnitee equals the net after-Tax Loss
(including any Loss relating to Taxes) suffered or payable by such Indemnitee
for which such indemnification payment is being made. Without limiting the
generality of
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the foregoing, for the purposes of the indemnity provided in this Section 1.02,
all Losses (including Losses relating to Taxes) hereunder shall be increased to
take into account any net Tax cost incurred by the Indemnitee as a result of the
receipt or accrual of such indemnification payment. Any indemnification payment
hereunder shall initially be made without regard to this paragraph and shall
later be adjusted to reflect any net Tax cost or net Tax benefit only after the
Indemnitee has actually realized such cost or benefit. For purposes of this
agreement, the Indemnitee shall be deemed to have "actually realized" a net Tax
cost or a net Tax benefit to the extent that, and at such times as, the amount
of Taxes payable by such Indemnitee is increased above or reduced below, as the
case may be, the amount of Taxes that such Indemnitee would be required to pay
but for the receipt or accrual of the indemnification payment or the payment or
incurrence of such Loss. Any indemnification payment under this Agreement shall
be treated as an adjustment to purchase price.
SECTION 1.03. THIRD-PARTY CLAIMS. (a) If a claim by a third party (a
"Third Party Claim") is made against Parent or any of its Affiliates arising out
of a matter for which Parent or such Affiliate is entitled to be indemnified
pursuant to Section 1.02, Parent shall promptly notify the Representative in
writing of such claim. The failure to notify promptly the Representative
hereunder shall not relieve the Principal Shareholders of their obligations
hereunder except to the extent (and only to the extent) that the Principal
Shareholders are actually and materially prejudiced by such failure. The
Principal Shareholders shall be responsible for the fees and expenses of the
counsel employed by the indemnified party. In no event shall the Principal
Shareholders be liable for the fees and expenses of more than one counsel (in
addition to any local counsel) for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances.
(b) The Principal Shareholders shall be entitled to participate in the
defense of a Third Party Claim, individually or jointly, through their counsel,
at their own expense.
(c) So long as the Principal Shareholders are participating in the defense
of a Third Party Claim in good faith, Parent shall reasonably cooperate with
such Principal Shareholders by providing records and information that are
reasonably relevant to such Third Party Claim. Parent shall not settle,
compromise, admit to liability or confess to judgment with respect to any Third
Party Claim without the written consent of the Representative, which consent
will not be unreasonably withheld or delayed. No such consent will be required
if Parent agrees in writing to forego all claims for indemnification from the
Principal Shareholders with respect to such Third Party Claim, or Parent is
exposed to Losses in excess of amounts reasonably expected to be received from
the Principal Shareholders or to non-monetary remedies; provided, however, that
Parent uses reasonable efforts to obtain in such settlement a release of the
Principal Shareholders and the Company with respect to all such Third Party
Claims.
SECTION 1.04. TERMINATION OF INDEMNIFICATION. The Escrow Fund shall be
held by the Escrow Agent on the terms and subject to the conditions set forth
herein until, and the obligations of any Principal Shareholder to indemnify any
Indemnitee pursuant to Section 1.02(b), Section 1.02(c) or Section 1.02(d) shall
terminate at, the close of business on the first anniversary of the Effective
Time (the "Expiration Date"), as certified to the Escrow Agent in writing by
Parent, and thereafter, with respect to such amount, if any, as provided in
Section 3.07, to be retained to satisfy any Indemnity Claims with respect to
matters not absolute as to liability or not liquidated as to amount at such date
but with respect to which Parent shall have given the notice described in
Section 3.01 hereof, until such time as such liability is determined pursuant to
the provisions hereof.
SECTION 1.05. SOLE AND EXCLUSIVE REMEDY AGAINST THE PRINCIPAL
SHAREHOLDERS. Except with respect to fraud, wilful misconduct or wilful
concealment by or on behalf of the Company or a Principal Shareholder, claims
against the Escrow Fund pursuant to Article III constitute the Indemnitees' sole
and exclusive remedy for damages and monetary relief against such Principal
Shareholder pursuant to Sections 1.02(b), (c) or (d) with respect to any
inaccuracy in, or any breach of, any representation, warranty, covenant or
agreement of the Company in the Merger Agreement or of any Principal Shareholder
in this Agreement.
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ARTICLE II
APPOINTMENT OF ESCROW AGENT;
CREATION OF ESCROW
SECTION 2.01. APPOINTMENT OF ESCROW AGENT. Parent and the Representative
hereby appoint the Escrow Agent, and the Escrow Agent hereby agrees to act, as
depository and administrator of the Escrow Fund, upon the terms and conditions
set forth below.
SECTION 2.02. CREATION OF ESCROW FUND; DEPOSIT OF ESCROW SHARES. (a)
Pursuant to the Merger Agreement, at the Effective Time Parent shall deposit in
escrow with the Escrow Agent, as escrow agent, a stock certificate or
certificates representing the Escrow Shares which shall be registered in the
name of the Escrow Agent as escrow agent hereunder, or in the Escrow Agent's
discretion, into the name of its nominee. The Escrow Agent shall have no
responsibility for the genuineness, validity, market value, title or sufficiency
for any intended purpose of the Escrow Fund. The Escrow Fund shall be held and
distributed by the Escrow Agent in accordance with the terms and conditions of
this Agreement. The number of Escrow Shares beneficially owned by each Principal
Shareholder is set forth in Schedule 2.04 attached hereto. The Principal
Shareholders hereby authorize Parent to deliver directly to the Escrow Agent all
dividends and other distributions paid in Parent Common Stock made in respect of
any Escrow Shares held in the Escrow Fund, all of which dividends and
distributions shall be added to and become part of the Escrow Fund held for the
respective Principal Shareholders on account of whose shares such dividends or
distributions were paid. Any cash dividends or distributions of property (other
than securities) received by the Escrow Agent in respect of the Escrow Fund
shall be paid by the Escrow Agent to the Principal Shareholders according to the
Escrow Shares held by it for each Principal Shareholder. Parent, upon depositing
the Escrow Shares (and upon depositing any dividends and other distributions
made in respect of the Escrow Shares which are paid in securities) with the
Escrow Agent in the Escrow Fund, as hereinabove provided, shall deliver to the
Escrow Agent three copies of a schedule, signed by the chief financial officer
or the controller of Parent, identifying the securities being deposited by
Parent in the Escrow Fund, two copies of which schedule shall be countersigned
by an appropriate officer of the Escrow Agent, acknowledging the deposit of such
securities in the Escrow Fund, and returned by the Escrow Agent to Parent and
the Representative. The Escrow Agent shall hold the Escrow Fund in a separate
account and shall invest such account (to the extent of any cash held therein)
and disburse such account as hereinafter provided. The Escrow Fund, less any
amounts therefrom disbursed to Parent, shall be disbursed by the Escrow Agent to
the Principal Shareholders on or after the Expiration Date in accordance with
the provisions of this Agreement.
(b) If any dividends or distributions made on or in respect of an Escrow
Share that are required to be distributed to the Escrow Agent as provided
pursuant to clause (a) above are received by any Principal Shareholder prior to
the release of such Escrow Share to such Principal Shareholder in accordance
with the provisions of this Agreement, such dividends or distributions shall not
be commingled by such Principal Shareholder with any of its other funds or
property but shall be held separate and apart therefrom, shall be held in trust
for the benefit of the Escrow Agent and shall be forthwith delivered to the
Escrow Agent in the same form as so received (with any necessary endorsement).
(c) Parent and each Principal Shareholder acknowledge and agree that, to the
extent and so long as any of the Escrow Shares are held by the Escrow Agent
hereunder, Parent shall have, as of and from the date such Escrow Shares are
received by the Escrow Agent, a perfected first priority security interest in
such Escrow Shares to secure the payment of the amount, if any, payable by a
Principal Shareholder pursuant to Article I of this Agreement. In connection
therewith, each Principal Shareholder expressly agrees (i) that the Escrow Agent
shall to the extent necessary perfect Parent's first priority security interest
in the Escrow Shares, (ii) to execute and deliver such instruments as
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Parent may from time to time reasonably request for the purpose of evidencing
and perfecting such security interest and (iii) to execute and deliver such
instruments as Parent and the Representative may from time to time reasonably
request for the purpose of evidencing the release of such security interest with
respect to any Escrow Shares distributed to the Principal Shareholders in
accordance with the provisions of this Agreement. In the event that any cash
portion of the Escrow Shares is invested pursuant to Section 4.01, the Escrow
Agent shall take all actions necessary, including, but not limited to,
appropriate identification on the Escrow Agent's books and records, to ensure
that all such investments are deemed held by the Escrow Agent as Parent's agent
for the purpose of perfecting Parent's first-priority security interest therein.
SECTION 2.03. PRINCIPAL SHAREHOLDER RIGHTS. While any Escrow Shares are
held in escrow in the Escrow Fund, and pending the disbursement thereof to
Parent or the Principal Shareholders, as the case may be, in connection with any
disbursement of property from the Escrow Fund in accordance with Article III
hereof, the Principal Shareholders will have all rights with respect thereto
(including, without limitation, the right to vote such shares), except (i) the
right of possession thereof, (ii) the right to sell, assign, pledge, hypothecate
or otherwise dispose of such Escrow Shares or any interest therein and (iii) the
right to receive any dividends or other distributions in respect thereof paid in
securities. The Escrow Agent grants a proxy to the Principal Shareholders to the
extent necessary for them to vote their Escrow Shares. The Parent shall deliver
any stockholder communications directly to the Principal Shareholders, and the
Escrow Agent shall not be responsible for voting with regard to the Escrow
Shares. The Escrow Agent shall be under no obligation to exercise rights in the
Escrow Shares, and shall be responsible for only reasonable measures to maintain
the physical safekeeping thereof, and otherwise to perform and observe such
duties on its part as are expressly set forth in this Agreement.
SECTION 2.04. PRINCIPAL SHAREHOLDER PERCENTAGE INTEREST IN ESCROW
FUND. Attached hereto as Schedule 2.04 is a schedule listing each Principal
Shareholder, such Principal Shareholder's address and Social Security or other
tax identification number, the number of Escrow Shares delivered to the Escrow
Agent at the Effective Time on behalf of such Principal Shareholder, and each
Principal Shareholder's percentage interest in the Escrow Fund. At the time of
its delivery to the Escrow Agent of any shares of Parent Common Stock, Parent
shall notify the Escrow Agent of the Principal Shareholder's account for which
such shares are delivered.
ARTICLE III
DISTRIBUTIONS FROM ESCROW
SECTION 3.01. CLAIMS BY PARENT. In the event of the occurrence of an event
which Parent asserts (on or prior to the Expiration Date) constitutes a Loss
against which an Indemnitee is entitled to indemnification pursuant to Article I
of this Agreement (each an "Indemnity Claim"), Parent shall notify the
Representative and the Escrow Agent promptly (and in any event on or prior to
the Expiration Date) of such event, and shall deliver for receipt by the Escrow
Agent a certificate signed by any officer of Parent: (1) stating the aggregate
amount of Parent's Losses or an estimate thereof and (2) specifying in
reasonable detail the individual items of Losses included in the amount so
stated, the date each such item was paid or properly accrued or arose, or the
basis for such anticipated liability, and the nature of the misrepresentation,
breach of warranty or covenant or other matter to which such item is related.
SECTION 3.02. CLAIMS NOT DISPUTED BY REPRESENTATIVE. If, within 20 days
after receipt of the notice described in Section 3.01 hereof, the Representative
does not give the notice provided for in Section 3.03 hereof, Parent shall be
entitled to make demand upon the Escrow Agent that it retain for future return
to Parent as and when the amount of the Loss is determined pursuant to the
provisions hereof, if it is not then determined, or that it then disburse to
Parent, if the amount of the Loss has then been determined, a number of Escrow
Shares having a value equal to the lesser of (i) the full
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amount set forth in the notice described in Section 3.01 (plus the value of all
securities held in the Escrow Fund which constitutes, or arose in respect of,
dividends and distributions on such Escrow Shares) and (ii) the entire Escrow
Fund. For purposes of this Agreement, the value of each Escrow Share returned to
Parent in satisfaction of Indemnity Claims shall be equal to the Closing Date
Average Closing Price.
SECTION 3.03. CLAIMS DISPUTED BY THE REPRESENTATIVE. If the Representative
disputes an Indemnity Claim described in a notice from Parent given pursuant to
Section 3.01 hereof, or the amount that Parent is claiming on account of such
Indemnity Claim, the Representative shall, within 20 days after his receipt of
such notice given by Parent, notify the Escrow Agent and Parent of such dispute
in writing, setting forth the basis therefor in reasonable detail, based on his
then good faith belief (the "Dispute Notice"). In the event the Representative
disputes the entire Indemnity Claim, the Escrow Agent shall not distribute any
amount with respect thereto until the Escrow Agent receives a written agreement
signed by the Representative and Parent stating the amount to which Parent is
entitled in connection with such Indemnity Claim, or delivery of a copy of the
final decision of the majority of the arbitrators made in accordance with
Section 3.05 setting forth instructions to the Escrow Agent as to the
distribution of Escrow Shares, if any, that shall be made with respect to any
disputed claim (the "Arbitration Award"), at which time the Escrow Agent shall
disburse to Parent the lesser of (i) a number of Escrow Shares having a value
(determined in accordance with the final sentence of Section 3.02 hereof) equal
to the amount set forth in such agreement or Arbitration Award (plus the value
of all securities held in the Escrow Fund which constitutes, or arose in respect
of, dividends and distributions on such Escrow Shares) and (ii) the entire
Escrow Fund.
SECTION 3.04. CLAIMS DISPUTED BY REPRESENTATIVE IN PART. In the event the
Representative notifies the Escrow Agent that it disputes part of, but not all
of, an Indemnity Claim, the Escrow Agent shall, if the amount is undetermined,
retain, or, if the amount is determined, distribute to Parent, the lesser of (i)
a number of Escrow Shares having a value (determined in accordance with the last
sentence of Section 3.02 hereof) equal to an amount attributable to that portion
of the Indemnity Claim which is not disputed by the Representative (together
with the value of all securities held in the Escrow Fund which constitutes, or
arose in respect of, dividends and distributions on such Escrow Shares) and (ii)
the entire Escrow Fund. The Escrow Agent shall not distribute any amount with
respect to the balance of the Indemnity Claim except in accordance with the
procedures set forth in Section 3.03.
SECTION 3.05. ARBITRATION. If the Representative disputes an Indemnity
Claim described in a notice from Parent given pursuant to Section 3.01 hereof,
or the amount that Parent is claiming on account of such Indemnity Claim (the
"Contested Amount"), the matter shall be settled by binding arbitration in
Wilmington, Delaware. All claims shall be settled by three arbitrators in
accordance with the Commercial Arbitration Rules then in effect of the American
Arbitration Association (the "AAA Rules"). If the Representative and Parent are
unable to resolve any such dispute within 45 days after delivery of the Dispute
Notice, the Representative and Parent shall each designate one arbitrator within
15 days after the termination of such 45-day period. The Representative and
Parent shall cause such designated arbitrators mutually to agree upon and
designate a third arbitrator; PROVIDED, HOWEVER, that (i) failing such agreement
within 70 days of delivery of the Dispute Notice, the third arbitrator shall be
appointed in accordance with the AAA Rules and (ii) if either the Representative
or Parent fails to timely designate an arbitrator, the dispute shall be resolved
by the one arbitrator timely designated. Parent shall notify the Escrow Agent of
the selection of arbitrators pursuant to this Section 3.05 within three business
days after the appointment of the last of such arbitrators, and a summary of the
dispute being submitted to such arbitrators. The non-prevailing party shall pay
the fees and expenses of the three arbitrators. The Representative and Parent
shall cause the arbitrators to decide the matter to be arbitrated pursuant
hereto within 30 days after the appointment of the last arbitrator. The
arbitrators' decision shall relate solely to whether Parent is entitled to
receive the Contested Amount (or a portion
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thereof) pursuant to the applicable terms of this Agreement. The final decision
of the majority of the arbitrators shall be furnished to the Representative,
Parent and the Escrow Agent in writing and shall constitute the conclusive
determination of the issue in question binding upon the Representative, the
Principal Shareholders and Parent, and shall not be contested by any of them.
Such decision may be used in a court of law only for the purpose of seeking
enforcement of the arbitrators' decision.
SECTION 3.06. NOTICE TO WITHHOLD ON EXPIRATION DATE; DISTRIBUTION FOLLOWING
EXPIRATION DATE. (a) On or prior to the Expiration Date, Parent shall notify the
Escrow Agent and the Representative of the amount, if any, to be retained after
the Expiration Date on account of Indemnity Claims with respect to which Parent
has given the notice specified in Section 3.01 hereof which are not, at such
time, absolute as to liability or liquidated as to amount, such notice to
contain the information specified in Section 3.01 to the extent it requires
supplementation or change based on Parent's then knowledge, whereupon the Escrow
Agent shall retain Escrow Shares having a value (determined in accordance with
Section 3.02 hereof) equal to the amount set forth in the notice given by Parent
pursuant to this Section 3.06(a) (plus the value of all shares held in the
Escrow Fund which constitute, or arose in respect of, dividends and
distributions on such Escrow Shares). In the event Parent does not timely
provide the notice required by this Section 3.06(a) all remaining property held
in the Escrow Fund shall be distributed by the Escrow Agent to the Principal
Shareholders promptly after the Expiration Date.
(b) As soon as practicable following the Expiration Date, such number of
Escrow Shares (including any fractional shares) and such other property as shall
remain in the Escrow Fund, less all Escrow Shares required by Parent to be
retained in the Escrow Fund pursuant to notice given under clause (a) of this
Section 3.06, shall be released from the provisions of this Agreement, submitted
by the Escrow Agent to Parent's transfer agent for transfer, and, upon return,
distributed promptly by the Escrow Agent to the Principal Shareholders, in the
proportions indicated on Schedule 2.04, by first class mail or expedited courier
service to each Principal Shareholder at the address indicated on such Schedule,
or such other address as shall have been specified in a written notice to the
Escrow Agent from the relevant Principal Shareholder or the Representative, with
any cash amounts paid in the form of a check issued by and drawn on the Escrow
Agent.
SECTION 3.07. RETENTION OF ESCROW FUND AFTER EXPIRATION DATE. Upon receipt
of a notice pursuant to Section 3.06(a) hereof, the Escrow Agent shall continue
to hold after the Expiration Date, with respect to each Indemnity Claim included
in such notice, the amount specified by such notice in respect of such Indemnity
Claim until such time as the Escrow Agent receives a written agreement signed by
the Representative and Parent stating the amount, if any, which Parent is
entitled to receive from the Escrow Fund in connection with such Indemnity
Claim, or a copy of an Arbitration Award with respect to such Indemnity Claim,
at which time the Escrow Agent shall return to Parent's transfer agent, with
respect to such Indemnity Claim, Escrow Shares having a value (determined in
accordance with the final sentence of Section 3.02 hereof) equal to the amount
specified in such agreement or Arbitration Award (plus the value of all
securities held in the Escrow Account which constitutes, or arose in respect of,
dividends and distributions on such Escrow Shares) and shall distribute to the
Principal Shareholders, in the proportions indicated on Schedule 2.04, such
property, if any, which the Escrow Agent was holding after the Expiration Date
pursuant to Section 3.06(a) by reason of such Indemnity Claim and which is in
excess of the amount so distributed to Parent with respect thereto; PROVIDED,
HOWEVER, that, to the extent the distribution of such property from the Escrow
Fund to the Principal Shareholders would cause the value of the property
remaining in the Escrow Fund after such distribution to fall below the amount
(as stipulated in Parent's Section 3.06(a) notice) of all still unresolved
Indemnity Claims identified in the Section 3.06(a) notice, such property shall
be retained by the Escrow Agent in the Escrow Fund and shall be available for
distribution to Parent upon the resolution of any unresolved Indemnity Claims,
and such property shall not be distributed to the Principal Shareholders until
such time, if any, as such distribution can be made without causing the value of
all property remaining in the Escrow Fund to fall below the amount of all
remaining unresolved Indemnity Claims identified in the Section 3.06(a) notice.
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SECTION 3.08. ALLOCATION OF SHARES DISTRIBUTED TO PARENT. In the event
Escrow Shares are retained by the Escrow Agent or distributed to Parent pursuant
to any provisions of this Article III, such Escrow Shares shall be taken from
the Escrow Shares deposited by each Principal Shareholder in proportion to such
Principal Shareholder's percentage interest in the Escrow Fund as set forth on
Schedule 2.04.
ARTICLE IV
INVESTMENT OF ESCROW DEPOSIT AND ACCOUNTING
SECTION 4.01. INVESTMENT OF ESCROW FUND. All cash held in the Escrow Fund
shall be invested by the Escrow Agent in an insured, interest-bearing money
market account, or in such other investments as Parent and the Representative
may agree in a writing delivered to the Escrow Agent. All interest and other
income earned on the Escrow Fund shall be added to and become part of the Escrow
Fund, and the distribution thereof shall be subject to the terms of this
Agreement. Any losses on investments will be debited to the Escrow Fund, and the
Escrow Agent shall have no liability for investment losses, including losses on
investments required to be liquidated before maturity in order to make a
required distribution from the Escrow Fund.
SECTION 4.02. ACCOUNTING. In the event cash is held in the Escrow Fund,
the Escrow Agent shall supply a written account to Parent and the Representative
at the end of each month prior to the Expiration Date in which there is cash in
the Escrow Fund (and thereafter to the extent any amounts remain in escrow
pursuant to Section 3.07 hereof) listing all transactions with respect to the
Escrow Fund during the immediately preceding month.
SECTION 4.03. SALE INSTRUCTIONS. (a) In connection with any sale of the
Escrow Shares pursuant to Section and 6.01(d) of this Agreement for purposes of
paying fees pursuant to such Section, the Escrow Agent shall receive and be
entitled to rely upon, prior to taking any action in that regard, written
direction from Parent as to the manner and method to be undertaken in carrying
out such sale, including without limitation written direction (i) identifying
the number of Escrow Shares to be sold, (ii) identifying the brokerage firm
Parent requests to be used or instructing the Escrow Agent to use its affiliated
brokerage service and (iii) setting forth any necessary or special instructions
with respect to the sale (including any stop loss or minimum price per share
instruction); and Parent shall execute and deliver any instruments reasonably
required by the Escrow Agent in order to carry out such sale or liquidation.
(b) The Escrow Agent shall have no responsibility in connection with such
sale other than to make delivery of the Escrow Shares to the selected brokerage
firm, with instructions (including any special instructions provided by Parent),
and to receive and deposit into the Escrow Fund (to be administered and
distributed in accordance with this Agreement) any net sale proceeds received
therefrom. The Escrow Agent shall have no liability for any actions or omissions
of any such brokerage firm, and shall have no liability for the price or
execution achieved. Without limiting the generality of the foregoing, Parent
expressly acknowledges that (a) the Escrow Shares may need to be sent to a
transfer agent to be reissued in saleable form, (b) the Escrow Shares may be
subject to transfer restrictions that may limit their marketability and impose
restrictions upon the number or types of purchasers to whom they can be offered
or sold and (c) the Escrow Agent shall have no liability for any failure or
delay (or any price change during any such delay) on the part of Parent or any
transfer agent, or caused by any necessary registration or delivery procedures,
or compliance with any applicable transfer restrictions, involved in the
transfer of such Escrow Shares.
(c) The net sale proceeds of any such sale of Escrow Shares received by the
Escrow Agent shall be apportioned among the Principal Shareholders on a pro rata
basis as set forth in Schedule 2.04 less a $5.00 per Principal Shareholder fee
for the proration of the net sales price and individual 1099-B
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Reporting (the "Sales Administration Fee"). The Sales Administration Fee shall
be assessed each day a sale is effected until the total number of shares
specified in a written direction from Parent are sold.
SECTION 4.04. TAX REPORTING. The parties hereto agree that, for Tax
reporting purposes, all interest or other income earned from the investment of
the Escrow Fund shall be allocable to the Principal Shareholders in the
proportions set forth at Schedule 2.04 as such proportions may be modified due
to the receipt by the Escrow Agent of any additional shares of Parent Common
Stock.
SECTION 4.05. CERTIFICATION OF TAX IDENTIFICATION NUMBER. The
Representative agrees to provide the Escrow Agent with each Principal
Shareholder's certified Tax identification number on a completed and executed
Form W-9 (or Form W-8, in the case of non-U.S. persons), to deliver such Form
W-9s (or Form W-8s, in the case of non-U.S. persons) to the Escrow Agent within
30 days from the date hereof. The Representative has advised the Principal
Shareholders that, in the event their Tax identification numbers are not
certified to the Escrow Agent, the U.S. Internal Revenue Code of 1986, as
amended, may require withholding of a portion of any interest or other income
earned on the investment of the Escrow Fund in accordance with the U.S. Internal
Revenue Code of 1986, as amended.
ARTICLE V
REPRESENTATIVE; SUCCESSOR REPRESENTATIVE
SECTION 5.01. APPOINTMENT OF REPRESENTATIVE. (a) Each of the Principal
Shareholders hereby irrevocably constitutes and appoints [ ] as such Principal
Shareholder's true and lawful agent and attorney-in-fact to act on such
Principal Shareholder's behalf with respect to any and all Indemnity Claims. In
such representative capacity, [ ], or any person who shall succeed in such
representative capacity pursuant to the terms of this Agreement, is referred to
in this Agreement as the "Representative". The Representative shall take, and
the Principal Shareholders agree that the Representative shall take, any and all
actions which he believes are necessary or appropriate under this Agreement for
and on behalf of the Principal Shareholders, as fully as if the Principal
Shareholders were acting on their own behalf, including, without limitation,
defending all Indemnity Claims, consenting to, compromising or settling all
Indemnity Claims, conducting negotiations with Parent and its representatives
regarding such claims, dealing with Parent and the Escrow Agent under this
Agreement with respect to all matters arising under this Agreement, taking any
and all other actions specified in or contemplated by this Agreement and
engaging counsel, accountants or other representatives in connection with the
foregoing matters. Parent and the Escrow Agent shall have the right to rely upon
all actions taken or omitted to be taken by the Representative pursuant to this
Agreement, all of which actions or omissions shall be legally binding upon each
of the Principal Shareholders. The Representative shall have reasonable access
to information of and concerning any Indemnity Claim and which is in the
possession, custody or control of the Company and the reasonable assistance of
the Company's officer's and employees for purposes of performing the
Representative's duties under this Agreement and exercising its rights under
this Agreement, including for the purpose of evaluating any Indemnity Claim
against the Escrow Fund by Parent; PROVIDED that the Representative shall treat
confidentially and not disclose any nonpublic information from or concerning any
Indemnity Claim to anyone (except to the Representative's attorneys, accountants
and other advisers, to former shareholders of the Company whose shares are held
in escrow pursuant to this Agreement, to the arbitrators appointed to resolve
disputes pursuant to this Agreement, and on a need-to-know basis to other
individuals who agree to keep such information confidential).
(b) Each Principal Shareholder hereby ratifies and confirms, and hereby
agrees to ratify and confirm, any action taken by the Representative in the
exercise of the agency and power of attorney granted to the Representative
pursuant to this Section 5.01, which agency and power of attorney, being coupled
with an interest, is irrevocable and a durable agency and power of attorney and
shall survive the death, incapacity or incompetence of such Principal
Shareholder.
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(c) Each Principal Shareholder agrees and acknowledges that the
Representative shall represent and bind all of the Principal Shareholders and
that Parent and the Escrow Agent shall be entitled to rely exclusively on the
Representative for all purposes specified herein, and that no suit, action,
proceeding or claim may be brought against Parent, the Escrow Agent or any of
their respective affiliates by any Principal Shareholder with respect to any
matter herein that is to be effected by the Representative.
(d) Until notified in writing by the Representative that he has resigned or
by a majority in interest of the Principal Shareholders that he has been
removed, the Escrow Agent may act upon the directions, instructions and notices
of the Representative who is an original party to this Agreement, and
thereafter, upon the directions, instructions and notices of any successor named
in a writing executed by a majority-in-interest of the Principal Shareholders
filed with the Escrow Agent.
SECTION 5.02. RELIANCE. In the performance of his duties hereunder, the
Representative shall be entitled to rely upon any document or instrument
reasonably believed by him to be genuine, accurate as to content and signed by
any Principal Shareholder or Parent. The Representative may assume that any
person purporting to give any notice in accordance with the provisions hereof
has been duly authorized to do so.
SECTION 5.03. LIABILITY. (a) If the Representative is required by the
terms hereof to determine the occurrence of any event or contingency, the
Representative shall, in making such determination, be liable to the Principal
Shareholders only for his proven bad faith or wilful misconduct, as determined
in light of all the circumstances, including the time and facilities available
to him in the ordinary conduct of business. In determining the occurrence of any
such event or contingency, the Representative may request from any of the
Principal Shareholders or any other person such reasonable additional evidence
as the Representative in his sole discretion may deem necessary to determine any
fact relating to the occurrence of such event or contingency, and may at any
time inquire of and consult with others, including any of the Principal
Shareholder, and the Representative shall not be liable to any Principal
Shareholder for any damages resulting from his delay in acting hereunder pending
his receipt and examination of additional evidence requested by him.
(b) The Representative is authorized, in his sole discretion, to comply with
final, nonappealable orders issued or process entered by any court of competent
jurisdiction with respect to the Escrow Fund. If any portion of the Escrow Fund
is disbursed to the Representative and is at any time attached, garnished or
levied upon under any court order, or in case the payment, assignment, transfer,
conveyance or delivery of any such property shall be stayed or enjoined by any
court order, or in case any order, judgment or decree shall be made or entered
by any court affecting such property or any part thereof, then and in any such
event, the Representative is authorized, in his sole discretion, but in good
faith, to rely upon and comply with any such order, writ, judgment or decree
which he is advised by legal counsel selected by him is binding upon him without
the need for appeal or other action; and if the Representative complies with any
such order, writ, judgment or decree, he shall not be liable to any Principal
Shareholder or to any other Person by reason of such compliance even though such
order, writ, judgment or decree may be subsequently reversed, modified,
annulled, set aside or vacated.
(c) In no event shall the Representative be liable to any Principal
Shareholder for incidental, indirect, special, consequential, or punitive
damages.
(d) Each Principal Shareholder shall be liable for its proportionate
percentage of the expenses (including reasonable attorneys' fees) paid or
incurred by the Representative. The Representative shall be entitled, but not
limited to, reimbursement of any such expenses from the Escrow Fund prior to any
distribution thereof to the Principal Shareholders.
SECTION 5.04. SUCCESSOR REPRESENTATIVE. If [ ] resigns (by giving at
least 60 days' written notice of such resignation to Parent and the Escrow
Agent) or dies or becomes incapable of continuing to act as the Representative
for any reason, a successor Representative shall be appointed by a writing
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signed by Principal Shareholders holding in the aggregate a majority of the
Principal Shareholders' interest in the Escrow Fund, such appointment to become
effective upon the delivery of executed counterparts of such writing to Parent
and the Escrow Agent, together with an acknowledgment signed by the successor
Representative named in such writing that he or she accepts the responsibility
of successor Representative and agrees to perform and be bound by all provisions
of this Agreement applicable to the Representative. Pending the election of a
successor Representative, the Principal Shareholder holding the largest number
of outstanding shares of Company Capital Stock as of the Effective Time
(excluding the former Representative) shall act as the interim Representative.
Failing such appointment, Parent, the Escrow Agent or any Principal Shareholder
may apply to a court of competent jurisdiction for the appointment of a
successor Representative.
SECTION 5.05. REMOVAL OF REPRESENTATIVE. Principal Shareholders who in the
aggregate hold at least a majority of the Principal Shareholders' interest in
the Escrow Fund shall have the right at any time during the term of this
Agreement to remove the then-acting Representative and to appoint a successor
Representative; PROVIDED, HOWEVER, that neither such removal of the then acting
Representative nor such appointment of a successor Representative shall be
effective until the delivery to Parent and the Escrow Agent of executed
counterparts of a writing signed by each such Principal Shareholder with respect
to such removal and appointment, together with an acknowledgment signed by the
successor Representative appointed in such writing that he or she accepts the
responsibility of successor Representative and agrees to perform and be bound by
all of the provisions of this Agreement applicable to the Representative.
SECTION 5.06. AUTHORITY OF SUCCESSOR REPRESENTATIVE. Each interim and
successor Representative shall have all of the power, authority, rights and
privileges conferred by this Agreement upon the original Representative, and the
term "Representative" as used herein shall be deemed to include any interim or
successor Representative.
SECTION 5.07. NOTICES. Any notices given by Parent or the Escrow Agent
while there is no Representative shall be sufficiently given if given to the
other, with a copy provided directly to the Principal Shareholder holding the
largest number of Escrow Shares pursuant to Schedule 2.04. A copy of all such
notices shall be delivered to the successor Representative upon his or her
appointment and he or she shall have 30 days thereafter to take such actions as
may be required under the terms of this Agreement in connection with any such
notice.
ARTICLE VI
ESCROW AGENT
SECTION 6.01. ESCROW AGENT DUTIES, PROTECTIONS, INDEMNIFICATIONS, ETC. (a)
The other parties hereto acknowledge and agree that the Escrow Agent (i) shall
not be responsible for any of the agreements referred to herein but shall be
obligated only for the performance of such duties as are specifically set forth
in this Escrow Agreement; (ii) shall not be obligated to take any legal or other
action hereunder which might in its judgment involve expense or liability unless
it shall have been furnished with indemnity acceptable to it; (iii) may rely on
and shall be protected in acting or refraining from acting upon any written
notice, instruction (including, without limitation, wire transfer instructions,
whether incorporated herein or provided in a separate written instruction),
instrument, statement, request or document furnished to it hereunder and
believed by it to be genuine and to have been signed or presented by the proper
person, and shall have no responsibility for making any investigation into the
facts or matters set forth therein or otherwise determining the accuracy or
rightfulness thereof; and (iv) may consult counsel satisfactory to it, including
in-house counsel, and the written advice or opinion of such counsel shall be
full and complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in accordance with the
written advice or opinion of such counsel.
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(b) Neither the Escrow Agent nor any of its directors, officers or employers
shall be liable to anyone for any action taken or omitted to be taken by it or
any of its directors, officers or employees hereunder except in the case of
gross negligence, bad faith or willful misconduct. Parent and the Principal
Shareholders as a group, in proportion to their respective percentage interests
in the Escrow Fund, jointly and severally, covenant and agree to indemnify the
Escrow Agent and hold it harmless without limitation from and against any loss,
liability or expense of any nature incurred by the Escrow Agent arising out of
or in connection with this Agreement or with the administration of its duties
hereunder, including, but not limited to, legal fees and expenses and other
costs and expenses of defending or preparing to defend against any claim of
liability in the premises, unless such loss, liability or expense shall be
caused by the Escrow Agent's gross negligence, bad faith or willful misconduct.
In no event shall the Escrow Agent be liable for indirect, punitive, special or
consequential damages.
(c) The Principal Shareholders, severally and not jointly, in proportion to
their respective percentage interests in the Escrow Fund, agree to assume any
and all obligations imposed now or hereafter by any applicable Tax law with
respect to the payment of Escrow Funds under this Agreement, and to indemnify
and hold the Escrow Agent harmless from and against any additions for late
payment, interest, penalties and other expenses, that may be assessed against
the Escrow Agent on any such payment or other activities under this Agreement.
The Principal Shareholders undertake to instruct the Escrow Agent in writing
with respect to the Escrow Agent's responsibility for withholding and other
Taxes, assessments or other governmental charges, certifications and
governmental reporting in connection with its acting as Escrow Agent under this
Agreement. The Principal Shareholders, severally and not jointly, in proportion
to their respective percentage interests in the Escrow Fund, agree to indemnify
and hold the Escrow Agent harmless from any liability on account of Taxes,
assessments or other governmental charges, including without limitation Taxes
withheld or deducted or penalties imposed for failure to withhold or deduct
Taxes, and any liability for failure to obtain proper certifications or to
properly report to governmental authorities, to which the Escrow Agent may be or
become subject in connection with or which arises out of this Agreement,
including costs and expenses (including reasonable fees and expenses), interest
and penalties.
(d) Parent, on the one hand, and the Principal Shareholders, on the other
hand, agree to each pay or reimburse one-half of the Escrow Agent's fees and
expenses (up to an aggregate $1,800) for any legal fees and expenses incurred in
connection with the preparation of this Agreement and to each pay one-half of
the Escrow Agent's reasonable compensation for its normal services hereunder in
accordance with the fee schedule attached as Schedule 6.01(d) hereto, which may
be subject to change on an annual basis. The Escrow Agent shall be entitled to
reimbursement on demand for all expenses incurred in connection with the
administration of the escrow created hereby which are in excess of its
compensation for normal services hereunder, including without limitation payment
of any legal fees and expenses incurred by the Escrow Agent in connection with
the resolution of any claim by any party hereunder. The Escrow Agent may deduct
each Principal Shareholder's portion of such fees and expenses from the Escrow
Fund.
(e) The provisions of paragraphs (b), (c) and (d) of this Section 6.01 shall
survive the resignation or removal of the Escrow Agent or the termination of
this Agreement.
SECTION 6.02. DISPUTES. In the event that the Escrow Agent shall be
uncertain as to its duties or rights hereunder, or shall receive instructions
from any party hereto with respect to the Escrow Fund which, in its opinion, are
in conflict with any of the provisions of this Agreement, it shall be entitled
to refrain from taking any action at its sole discretion and election until such
time as there has been a final determination of the rights of Parent and the
Representative with respect to the Escrow Fund (or relevant portion thereof).
For purposes of this Section 6.02, there shall be deemed to have been a final
determination of the rights of Parent and the Representative with respect to the
Escrow Fund (or relevant portion thereof) at such time as the Escrow Agent shall
receive (i) an executed counterpart of an agreement between the Representative
and Parent or (ii) a copy of an Arbitration Award, which provides for the
disposition of the Escrow Fund (or relevant portion thereof).
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SECTION 6.03. RESIGNATION. The Escrow Agent may at any time resign and be
discharged of the duties imposed hereunder (but without prejudice for any
liability for bad faith, gross negligence or wilful misconduct hereunder) by
giving notice to the Representative and Parent at least 60 business days prior
to the date specified for such resignation to take effect, in which case, upon
the effective date of such resignation:
(a) all property then held by the Escrow Agent hereunder shall be
delivered by it to such person as may be designated in writing by Parent and
the Representative, whereupon the Escrow Agent's obligations hereunder shall
cease and terminate;
(b) if no such person has been designated by such date, all obligations
of the Escrow Agent hereunder shall, nevertheless, cease and terminate,
subject to clause (c) below; and
(c) the Escrow Agent's sole responsibility thereafter shall be to (i)
keep all property then held by it (and to make the investments as
hereinbefore provided) and to account for and deliver the same to the
successor escrow agent designated in writing by Parent and the
Representative or, if no such successor escrow agent shall have been so
designated, in accordance with the directions of an Arbitration Award, and
the provisions of Section 6.01(d) and Section 6.01(e) shall remain in
effect, or (ii) deposit the Escrow Fund with a court of competent
jurisdiction, whereupon its duties hereunder shall terminate.
SECTION 6.04. REMOVAL OF ESCROW AGENT. Parent and the Representative may,
upon at least 30 business days prior written notice to the Escrow Agent executed
by each of them, dismiss the Escrow Agent hereunder and appoint a successor. In
such event, the Escrow Agent shall promptly account for and deliver to the
successor escrow agent named in such notice the then balance of the Escrow Fund,
including all investments thereof and accrued income thereon. Upon acceptance
thereof and of such accounting by such successor escrow agent, and upon
reimbursement to the Escrow Agent of all expenses and other amounts due to it
hereunder through the date of such accounting and delivery, the Escrow Agent
shall be released and discharged from all of its duties and obligations
hereunder, but without prejudice to any liability of the Escrow Agent for its
bad faith, gross negligence or wilful misconduct hereunder.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. TERM. This Agreement shall continue in force until the final
distribution of all amounts held by the Escrow Agent hereunder.
SECTION 7.02. NOTICES. (a) All notices, instructions and other
communications given hereunder or in connection herewith shall be in writing.
Any such notice, instruction or communication shall be sent either (i) by
registered or certified mail, return receipt requested, postage prepaid, or (ii)
via a reputable nationwide overnight courier service, in each case to the
address set forth below. Any such notice, instruction or communication shall be
deemed to have been delivered and received three business days after it is sent
prepaid, or one business day after it is sent via a reputable nationwide
overnight courier service.
If to Parent:
Lycos, Inc.
400-2 Totten Pond Road
Waltham, MA 02451-2000
Attention: General Counsel
Tel: (781) 370-2700
Fax: (781) 370-2600
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with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: Scott A. Barshay, Esq.
Tel: (212) 474-1000
Fax: (212) 474-3700
If to the Principal Shareholders or the Representative, to the
Representative, at:
[ ]
Attention: [ ]
Tel:
Fax:
with a copy to:
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng RoadePalo Alto, CA 94303
Attention: Curtis L. Mo, Esq.
Rod J. Howard, Esq.
Tel: (650) 424-0160
Fax: (650) 496-2885
If to the Escrow Agent, to:
BY OVERNIGHT OR COURIER:
State Street Corporation
Corporate Trust
2 Avenue de LaFayette
Boston, MA 02111-1724
BY MAIL:
State Street Corporation
Corporate Trust
P.O. Box 778
Boston, MA 02102-0778
Attention: Lycos/Quicksilver Escrow
Fax: (617) 662-1463
or, in each case, to such other address as may be specified in writing to the
other parties.
Any party may give any notice, instruction or communication in connection
with this Agreement using any other means (including personal delivery, telecopy
or ordinary mail), but no such notice, instruction or communication shall be
deemed to have been delivered unless and until it is actually received by the
party to whom it was sent. Any party may change the address to which notices,
instructions or communications are to be delivered by giving the other parties
to this Agreement notice thereof in the manner set forth in this Section 7.02.
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(b) WIRING INSTRUCTIONS. Any funds to be paid to the Escrow Agent
hereunder shall be sent by wire transfer pursuant to the following instructions
(or by such method of payment and pursuant to such instruction as may have been
given in advance and in writing by the Escrow Agent, in accordance with Section
7.02(a) above).
If to the Escrow Agent:
Bank: State Street Bank & Trust Company
ABA #: 0110 0002 8
A/C #: 9903-990-1
Attn: Corporate Trust Department
Ref: Lycos/Quicksilver Escrow
SECTION 7.03. ASSIGNMENT. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective representatives,
successors and assigns. Neither this Agreement nor any rights, duties or
obligations hereunder shall be assigned by any party hereto without the prior
written consent of the parties hereto (except as contemplated by Article V and
Article VI hereof with respect to the successor Representative or any successor
escrow agent).
SECTION 7.04. GOVERNING LAW. The parties hereto agree that this Agreement,
and the respective rights, duties and obligations of the parties hereunder,
shall be governed by and continued in accordance with the laws of the State of
Delaware, without giving effect to principles of conflicts of law thereunder.
Each of the parties hereby (i) irrevocably consents and agrees that any legal or
equitable action or proceeding arising under or in connection with this
Agreement shall be brought exclusively in any court sitting in the State of
Delaware and any court to which an appeal may be taken in any such litigation,
PROVIDED, HOWEVER, that the Escrow Agent may in its discretion, bring any action
in any court sitting in Boston, Massachusetts and (ii) by execution and delivery
of this Agreement, irrevocably submits to and accepts, with respect to any such
action or proceeding, for itself and in respect of its properties and assets,
generally and unconditionally, the jurisdiction of the aforesaid courts, and
irrevocably waives any and all rights such party may now or hereafter have to
object to such jurisdiction.
SECTION 7.05. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original.
SECTION 7.06. HEADINGS. The Article and Section headings in this Agreement
are for convenience only and do not constitute part of this Agreement.
SECTION 7.07. AMENDMENT. This Agreement supersedes any prior agreements
among the parties relating to the subject matter hereof (except for the Merger
Agreement and the documents executed and delivered in connection therewith) and
can be amended only by a writing signed by Parent, the Escrow Agent and the
Representative or their respective successors in interest.
SECTION 7.08. FORCE MAJEURE. Neither Parent nor Representative nor Escrow
Agent shall be responsible for delays or failures in performance resulting from
acts beyond its control. Such acts shall include but not be limited to acts of
God, strikes, lockouts, riots, acts of war, epidemics, governmental regulations
superimposed after the fact, fire, communication line failures, computer
viruses, power failures, earthquakes or other disasters.
SECTION 7.09. REPRODUCTION OF DOCUMENTS. This Agreement and all documents
relating thereto, including, without limitation, (a) consents, waivers and
modifications which may hereafter be executed and (b) certificates and other
information previously or hereafter furnished, may be reproduced by any
photographic, photostatic, microfilm, optical disk, micro-card, miniature
photographic or other similar process. The parties agree that any such
reproduction shall be admissible
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in evidence as the original itself in any judicial or administrative proceeding,
whether or not the original is in existence and whether or not such reproduction
was made by a party in the regular course of business, and that any enlargement,
facsimile or further reproduction of such reproduction shall likewise be
admissible in evidence.
SECTION 7.10. CERTAIN DEFINITIONS. As used in this Agreement, the
following terms shall have the meanings specified below:
"Indemnitee" shall mean Parent, any Affiliate of Parent, the Company and any
subsidiary of the Company, and their respective successors and assigns.
"Post-Closing Tax Period" shall mean all taxable periods beginning after the
Closing Date and the portion ending after the Closing Date of any taxable period
that includes (but does not end on) such day.
"Pre-Closing Tax Period" shall mean all taxable periods ending on or before
the Closing Date and the portion ending on the Closing Date of any taxable
period that includes (but does not end on) such day.
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IN WITNESS WHEREOF, the parties to this Agreement have caused this Agreement
to be duly executed as of the date first written above.
<TABLE>
<S> <C> <C>
LYCOS, INC.,
by
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Name:
Title:
REPRESENTATIVE,
by
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Name:
STATE STREET BANK AND TRUST
COMPANY, as Escrow Agent,
by
----------------------------------------
Name:
Title:
PRINCIPAL SHAREHOLDERS:
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</TABLE>
C-18
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<TABLE>
<S> <C> <C>
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C-19
<PAGE>
SCHEDULE 6.01(d)
TO ANNEX C
STATE STREET BANK
AND TRUST COMPANY
August 30, 1999
Mr. Jeffrey M. Snider, Esq.
Lycos, Inc.
400-2 Totten Pond Road
Waltham, MA 02451
RE: LYCOS, INC./QUICKSILVER ACQUISITION CORP.
Dear Mr. Snider:
On behalf of State Street Bank and Trust Company, I am pleased to provide our
fee schedule to act as Escrow Agent for the above-referenced transaction. Our
fees are outlined below:
FEES AND EXPENSES:
<TABLE>
<S> <C>
ACCEPTANCE FEE: WAIVED
ANNUAL FEE: $3,500.00 per year or any part
thereof
WIRE FEE: $20.00 per wire
SWEEP FEE: 40 basis points per annum of the
(SSgA or selected other Money average daily net assets
Market Funds)
OUT-OF-POCKET EXPENSES: At Cost
LEGAL FEE: At Cost
(State Street will use Rob Coughlin of Peabody & Arnold as Counsel)
</TABLE>
The transaction underlying this proposal, and all related legal documentation,
is subject to review and acceptance by State Street in accordance with its
policies and procedures. Should the actual transaction materially differ from
the assumptions used herein, State Street reserves the right to modify this
proposal. In the event that the subject transaction fails to close for reasons
beyond the control of State Street, the party requesting these services agrees
to pay State Street's acceptance fees, legal fees and out-of-pocket expenses.
Please do not hesitate to call me at (617) 662-1129 with any questions. We look
forward to hearing from you.
Sincerely,
/s/ John F. Sugden
John F. Sugden
Vice President
<PAGE>
ANNEX D
CHAPTER 13: DISSENTERS' RIGHTS
CALIFORNIA CORPORATIONS CODE
SECTION 1300-1312
SECTION1300. REORGANIZATION OR SHORT-FORM MERGER; DISSENTING SHARES; CORPORATE
PURCHASE AT FAIR MARKET VALUE; DEFINITIONS
(a) If the approval of the outstanding shares (Section 152) of a corporation
is required for a reorganization under subdivisions (a) and (b) or subdivision
(e) or (f) of Section 1201, each shareholder of the corporation entitled to vote
on the transaction and each shareholder of a subsidiary corporation in a
short-form merger may, by complying with this chapter, require the corporation
in which the shareholder holds shares to purchase for cash at their fair market
value the shares owned by the shareholder which are dissenting shares as defined
in subdivision (b). The fair market value shall be determined as of the day
before the first announcement of the terms of the proposed reorganization or
short-form merger, excluding any appreciation or depreciation in consequence of
the proposed action, but adjusted for any stock split, reverse stock split, or
share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which come
within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or short-form
merger either (A) listed on any national securities exchange certified by
the Commissioner of Corporations under subdivision (o) of Section 25100 or
(B) listed on the list of OTC margin stocks issued by the Board of Governors
of the Federal Reserve System, and the notice of meeting of shareholders to
act upon the reorganization summarizes this section and Sections 1301, 1302,
1303 and 1304; provided, however, that this provision does not apply to any
shares with respect to which there exists any restriction on transfer
imposed by the corporation or by any law or regulation; and provided,
further, that this provision does not apply to any class of shares described
in SUBPARAGRAPH (A) or (B) if demands for payment are filed with respect to
5 percent or more of the outstanding shares of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not voted
in favor of the reorganization or, (B) if described in SUBPARAGRAPH (A) or
(B) of paragraph (1) (without regard to the provisos in that paragraph),
were voted against the reorganization, or which were held of record on the
effective date of a short-form merger; provided, however, that ***
SUBPARAGRAPH (A) rather than *** SUBPARAGRAPH (B) of this paragraph applies
in any case where the approval required by Section 1201 is sought by written
consent rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the recordholder
of dissenting shares and includes a transferee of record.
D-1
<PAGE>
SECTION1301. NOTICE TO HOLDERS OF DISSENTING SHARES IN REORGANIZATIONS; DEMAND
FOR PURCHASE; TIME; CONTENTS
(a) If, in the case of a reorganization, any shareholders of a corporation
have a right under Section 1300, subject to compliance with paragraphs (3) and
(4) of subdivision (b) thereof, to require the corporation to purchase their
shares for cash, such corporation shall mail to each such shareholder a notice
of the approval of the reorganization by its outstanding shares (Section 152)
within 10 days after the date of such approval, accompanied by a copy of
Sections 1300, 1302, 1303, 1304 and this section, a statement of the price
determined by the corporation to represent the fair market value of the
dissenting shares, and a brief description of the procedure to be followed if
the shareholder desires to exercise the shareholder's right under such sections.
The statement of price constitutes an offer by the corporation to purchase at
the price stated any dissenting shares as defined in subdivision (b) of Section
1300, unless they lose their status as dissenting shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to purchase
the shareholder's shares for cash under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, and who desires the
corporation to purchase such shares shall make written demand upon the
corporation for the purchase of such shares and payment to the shareholder in
cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of record
by the shareholder which the shareholder demands that the corporation purchase
and shall contain a statement of what such shareholder claims to be the fair
market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market value
constitutes an offer by the shareholder to sell the shares at such price.
SECTION1302. SUBMISSION OF SHARES CERTIFICATES FOR ENDORSEMENT; UNCERTIFICATED
SECURITIES
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder, the shareholder shall submit to the corporation at
its principal office or at the office of any transfer agent thereof, (a) if the
shares are certificated securities, the shareholder's certificates representing
any shares which the shareholder demands that the corporation purchase, to be
stamped or endorsed with a statement that the shares are dissenting shares or to
be exchanged for certificates of appropriate denomination so stamped or endorsed
or (b) if the shares are uncertificated securities, written notice of the number
of shares which the shareholder demands that the corporation purchase. Upon
subsequent transfers of the dissenting shares on the books of the corporation,
the new certificates, initial transaction statement, and other written
statements issued therefor shall bear a like statement, together with the name
of the original dissenting holder of the shares.
SECTION1303. PAYMENT OF AGREED PRICE WITH INTEREST; AGREEMENT FIXING FAIR MARKET
VALUE; FILING; TIME OF PAYMENT
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the fair
market value of any dissenting shares as between the corporation and the holders
thereof shall be filed with the secretary of the corporation.
D-2
<PAGE>
(b) Subject to the provisions of Section 1306, payment of the fair market
value of dissenting shares shall be made within 30 days after the amount thereof
has been agreed or within 30 days after any statutory or contractual conditions
to the reorganization are satisfied, whichever is later, and in the case of
certificated securities, subject to surrender of the certificates therefor,
unless provided otherwise by agreement.
SECTION1304. ACTION TO DETERMINE WHETHER SHARES ARE DISSENTING SHARES OR FAIR
MARKET VALUE; LIMITATION; JOINDER; CONSOLIDATION; DETERMINATION OF
ISSUES; APPOINTMENT OF APPRAISERS
(a) If the corporation denies that the shares are dissenting shares, or the
corporation and the shareholder fail to agree upon the fair market value of the
shares, then the shareholder demanding purchase of such shares as dissenting
shares or any interested corporation, within six months after the date on which
notice of the approval by the outstanding shares (Section 152) or notice
pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, but
not thereafter, may file a complaint in the superior court of the proper county
praying the court to determine whether the shares are dissenting shares or the
fair market value of the dissenting shares or both or may intervene in any
action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be joined
as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues. If the
status of the shares as dissenting shares is in issue, the court shall first
determine that issue. If the fair market value of the dissenting shares is in
issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
SECTION1305. REPORT OF APPRAISERS; CONFIRMATION; DETERMINATION BY COURT;
JUDGMENT; PAYMENT; APPEAL; COSTS
(a) If the court appoints an appraiser or appraisers, they shall proceed
forthwith to determine the fair market value per share. Within the time fixed by
the court, the appraisers, or a majority of them, shall make and file a report
in the office of the clerk of the court. Thereupon, on the motion of any party,
the report shall be submitted to the court and considered on such evidence as
the court considers relevant. If the court finds the report reasonable, the
court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a report
within 10 days from the date of their appointment or within such further time as
may be allowed by the court or the report is not confirmed by the court, the
court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be rendered
against the corporation for payment of an amount equal to the fair market value
of each dissenting share multiplied by the number of dissenting shares which any
dissenting shareholder who is a party, or who has intervened, is entitled to
require the corporation to purchase, with interest thereon at the legal rate
from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for the
shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of Section
1301).
D-3
<PAGE>
SECTION1306. PREVENTION OF IMMEDIATE PAYMENT; STATUS AS CREDITORS; INTEREST
To the extent that the provisions of Chapter 5 prevent the payment to any
holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5.
SECTION1307. DIVIDENDS ON DISSENTING SHARES
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the outstanding
shares (Section 152) and prior to payment for the shares by the corporation
shall be credited against the total amount to be paid by the corporation
therefor.
SECTION1308. RIGHTS OF DISSENTING SHAREHOLDERS PENDING VALUATION; WITHDRAWAL OF
DEMAND FOR PAYMENT
Except as expressly limited in this chapter, holders of dissenting shares
continue to have all the rights and privileges incident to their shares, until
the fair market value of their shares is agreed upon or determined. A dissenting
shareholder may not withdraw a demand for payment unless the corporation
consents thereto.
SECTION1309. TERMINATION OF DISSENTING SHARE AND SHARE HOLDER STATUS
Dissenting shares lose their status as dissenting shares and the holders
thereof cease to be dissenting shareholders and cease to be entitled to require
the corporation to purchase their shares upon the happening of any of the
following:
(a) The corporation abandons the reorganization. Upon abandonment of the
reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter all
necessary expenses incurred in such proceedings and reasonable attorneys' fees.
(b) The shares are transferred prior to their submission for endorsement in
accordance with Section 1302 or are surrendered for conversion into shares of
another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon the
status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six months after the date on which notice of
the approval by the outstanding shares or notice pursuant to subdivision (i) of
Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
SECTION1310. SUSPENSION OF RIGHTS TO COMPENSATION OR VALUATION PROCEEDINGS;
LITIGATION OF SHAREHOLDERS' APPROVAL
If litigation is instituted to test the sufficiency or regularity of the
votes of the shareholders in authorizing a reorganization, any proceedings under
Sections 1304 and 1305 shall be suspended until final determination of such
litigation.
D-4
<PAGE>
SECTION1311. EXEMPT SHARES
This chapter, except Section 1312, does not apply to classes of shares whose
terms and provisions specifically set forth the amount to be paid in respect to
such shares in the event of a reorganization or merger.
SECTION1312. RIGHT OF DISSENTING SHAREHOLDER TO ATTACK, SET ASIDE OR RESCIND
MERGER OR REORGANIZATION; RESTRAINING ORDER OR INJUNCTION;
CONDITIONS.
(a) No shareholder of a corporation who has a right under this chapter to
demand payment of cash for the shares held by the shareholder shall have any
right at law or in equity to attack the validity of the reorganization or
short-form merger, or to have the reorganization or short-form merger set aside
or rescinded, except in an action to test whether the number of shares required
to authorize or approve the reorganization have been legally voted in favor
thereof; but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event of
a reorganization or short-form merger is entitled to payment in accordance with
those terms and provisions or, if the principal terms of the reorganization are
approved pursuant to subdivision (b) of Section 1202, is entitled to payment in
accordance with the terms and provisions of the approved reorganization.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded, the shareholder shall not thereafter have any right to demand payment
of cash for the shareholder's shares pursuant to this chapter. The court in any
action attacking the validity of the reorganization or short-form merger or to
have the reorganization or short-form merger set aside or rescinded shall not
restrain or enjoin the consummation of the transaction except upon 10 days'
prior notice to the corporation and upon a determination by the court that
clearly no other remedy will adequately protect the complaining shareholder or
the class of shareholders of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded, (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the controlled
party, and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable as
to the shareholders of any party so controlled.
D-5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 145 of the Delaware General Corporation Law, Lycos'
Amended and Restated Certificate of Incorporation, as amended, includes a
provision that eliminates the personal liability of its directors for monetary
damages for breach or alleged breach of their duty of care. In addition, the
Delaware General Corporation Law and Lycos' Amended and Restated By-laws provide
for indemnification of Lycos, directors and officers for liabilities and
expenses that they may incur in such capacities. In general, directors and
officers are indemnified with respect to actions taken in good faith in a manner
reasonably believed to be in, or not opposed to, the best interests of Lycos,
and with respect to any criminal action or proceeding, actions that the
indemnitee had no reasonable cause to believe were unlawful.
Lycos has purchased insurance with respect to, among other things, the
liabilities that may arise under the provisions referred to above. The directors
and officers of Lycos are also insured against certain liabilities arising under
the Securities Act of 1933, as amended, which might be incurred by them in such
capacities and against which they are not indemnified by Lycos.
Lycos has entered into separate indemnification agreements with its
directors and officers. The indemnification agreements create certain
indemnification obligations of Lycos in favor of the directors and officers and,
as permitted by applicable law, will clarify and expand the circumstances under
which a director or officer will be indemnified.
ITEM 21. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- -------------- --------------------------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Merger dated as of September 2, 1999 by and among Registrant, Quicksilver
Acquisition Corp. and Quote.com, Inc. (filed as Annex A to the Proxy Statement/Prospectus forming
a part of this Registration Statement).
3.1* Restated Certificate of Incorporation of the Registrant dated as of April 4, 1996.
3.2 Certificate of Amendment of Restated Certificate of Incorporation dated as of July 16, 1999.
3.3* Amended and Restated By-Laws of Registrant.
3.3s Certificate of Amendment of Restated Certificate of Incorporation of the Registrant dated August
13, 1998.
4.1* Specimen Certificate of Registrant's Common Stock (incorporated by reference to Exhibit 4.1 to the
Registration Statement on Form S-1 (Reg. No. 333-1354)).
8.1 Opinion of Brobeck, Phleger & Harrison LLP as to United States federal income tax consequences.
10.1* Subscription Agreement between Registrant and CMG@Ventures, dated June 16, 1995.
10.2* Subscription Agreement between Registrant and CMU, dated June 16, 1995.
10.3* Subscription Agreement between Registrant and Dr. Mauldin, dated June 16, 1995.
10.4* Subscription Agreement between Registrant and Dr. Mauldin, dated February 9, 1996.
10.5* Subscription Agreement between Registrant and CMU, dated February 9, 1996.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- -------------- --------------------------------------------------------------------------------------------------
<S> <C>
10.6* License Agreement among CMU, CMGI, CMG@Ventures, and Registrant, dated June 16, 1995, as amended.
10.7* Amendment and Waiver to License Agreement among CMU, CMGI, CMG@Ventures, Registrant and Dr.
Mauldin, dated February 9, 1996.
10.8* Stockholders, Agreement between Registrant and Christopher Kitze, dated October 12, 1995.
10.10* Registration Rights Agreement among Registrant, CMU, CMG@Ventures and Dr. Mauldin, dated February
9, 1996.
10.11* Consulting, Non-Compete, Invention and Non-Disclosure Agreement between Registrant and Dr.
Mauldin, dated June 16, 1995.
10.12* Non-Competition, Non-Disclosure and Developments Agreement between Point Communications
Corporation and Christopher Kitze, dated October 12, 1995.
10.13* Letter Agreement between Robert J. Davis and Registrant dated February 7, 1996.
10.14 Amendment to Letter Agreement between Robert J. Davis and Registrant dated as of August 27, 1999.
10.15 Amendment to Employment Letter Agreement between Edward M. Philip and Registrant dated as of
August 27, 1999.
10.16* Lycos, Inc. 1995 Stock Option Plan.
10.17* Lycos, Inc. 1996 Stock Option Plan.
10.18* Lycos, Inc. 1996 Non-Employee Director Stock Option Plan.
10.19* Lycos, Inc. 1996 Employee Stock Purchase Plan.
10.20* Form of Indemnity Agreement between Registrant and its executive officers and directors.
10.21* Amendment to License Agreement among CMU, CMGI and Registrant, dated March 4, 1996.
10.22***+ Agreement between Registrant and Bertelsmann Internet Services GmbH dated as of May 1, 1997.
10.23+ First Amendment Agreement between Bertelsmann Internet Services GmbH and Registrant, dated as of
November 12, 1998.
10.24*** Office sublease between Praxis International and Registrant dated December 4, 1996.
10.25**** Leggat McCall Properties Lease, dated January 30, 1998.
10.26+ Information Services Agreement between Inktomi Corporation and Wired Digital, Inc., dated as of
May 1, 1999.
10.27+ Joint Venture Agreement between Registrant and Singapore Telecommunications Limited dated as of
September 13, 1999.
10.28+ Joint Venture Agreement between Registrant and Mirae Corporation dated as of March 19, 1999.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- -------------- --------------------------------------------------------------------------------------------------
<S> <C>
10.29+ Premier Provider Agreement between Netscape Communications Corporation and Registrant dated as of
June 10, 1999.
10.30+ Joint Venture Agreement among Registrant, Sumitomo Corp. and Internet Initiative Japan, Inc. dated
as of March 5, 1998, as amended by the Agreement by and among Registrant, Sumitomo Corp., Sumisho
Computer Systems Corp. and Internet Initiative Japan, Inc. dated June 29, 1998.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Brobeck, Phleger & Harrison LLP (set forth in Exhibit 8.1).
23.2 Consent of Independent Accountants.
23.3 Consent of Independent Accountants.
</TABLE>
- ------------------------
<TABLE>
<C> <S>
s Previously filed.
* Incorporated by reference from the Registrant's Registration Statement on Form S-1
(Registration No. 333-1354).
** Incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for
the quarterly period ended April 30, 1996 (File No. 0-27830).
*** Incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for
the quarterly period ended April 30, 1997 (File No. 0-27830).
**** Incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for
the quarterly period ended April 30, 1998 (File No. 0-27830).
***** Incorporated by reference from the Registrant's Annual Report on Form 10-K for the
annual period ended July 31, 1998.
+ Confidential material omitted and filed separately with the Securities and Exchange
Commission.
</TABLE>
ITEM 22. UNDERTAKINGS
A. Undertaking Regarding Filings Incorporating Subsequent Securities Exchange
Act of 1934 Documents by Reference
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934,(and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934, as amended) that is incorporated by reference
in this registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
B. Undertaking in Respect of Indemnification
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other
II-3
<PAGE>
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
C. Undertaking Regarding 145(a) Transaction
The undersigned registrant hereby undertakes as follows:
(1) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form.
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Securities Act of 1933, as amended, and is used in
connection with an offering subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
D. Undertaking in Response to Providing Information
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
E. Undertaking Regarding Post-Effective Amendments
The undersigned registrant hereby undertakes to supply by means of a
posteffective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Waltham, Commonwealth of
Massachusetts, on the 7th day of October, 1999.
LYCOS, INC.
By /s/ ROBERT J. DAVIS
-----------------------------------------
Name: Robert J. Davis
Title: President and Chief Executive
Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Robert J. Davis and Edward M. Philip, and each of them, as his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including pre-effective and post-effective amendments) to
this Registration Statement and all documents relating thereto, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission granting unto said attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each
and every act and thing necessary or advisable to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURES TITLE DATE
- ------------------------------ --------------------------- -------------------
President, Chief Executive
/s/ ROBERT J. DAVIS Officer and Director
- ------------------------------ (Principal Executive October 7, 1999
Robert J. Davis Officer)
Chief Operating Officer and
/s/ EDWARD M. PHILIP Chief Financial Officer
- ------------------------------ (Principal Financial and October 7, 1999
Edward M. Philip Accounting Officer)
/s/ JOHN M. CONNORS, JR. Director
- ------------------------------ October 7, 1999
John M. Connors, Jr.
/s/ DANIEL J. NOVA Director
- ------------------------------ October 7, 1999
Daniel J. Nova
/s/ RICHARD H. SABOT Director
- ------------------------------ October 7, 1999
Richard H. Sabot
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- -------------- --------------------------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Merger dated as of September 2, 1999 by and among Registrant, Quicksilver
Acquisition Corp. and Quote.com, Inc. (filed as Annex A to the Proxy Statement/Prospectus forming
a part of this Registration Statement).
3.1* Restated Certificate of Incorporation of the Registrant dated as of April 4, 1996.
3.2 Certificate of Amendment of Restated Certificate of Incorporation dated as of July 16, 1999.
3.3* Amended and Restated By-Laws of Registrant.
3.3s Certificate of Amendment of Restated Certificate of Incorporation of the Registrant dated August
13, 1998.
4.1* Specimen Certificate of Registrant's Common Stock (incorporated by reference to Exhibit 4.1 to the
Registration Statement on Form S-1 (Reg. No. 333-1354)).
8.1 Opinion of Brobeck, Phleger & Harrison LLP as to United States federal income tax consequences.
10.1* Subscription Agreement between Registrant and CMG@Ventures, dated June 16, 1995.
10.2* Subscription Agreement between Registrant and CMU, dated June 16, 1995.
10.3* Subscription Agreement between Registrant and Dr. Mauldin, dated June 16, 1995.
10.4* Subscription Agreement between Registrant and Dr. Mauldin, dated February 9, 1996.
10.5* Subscription Agreement between Registrant and CMU, dated February 9, 1996.
10.6* License Agreement among CMU, CMGI, CMG@Ventures, and Registrant, dated June 16, 1995, as amended.
10.7* Amendment and Waiver to License Agreement among CMU, CMGI, CMG@Ventures, Registrant and Dr.
Mauldin, dated February 9, 1996.
10.8* Stockholders, Agreement between Registrant and Christopher Kitze, dated October 12, 1995.
10.10* Registration Rights Agreement among Registrant, CMU, CMG@Ventures and Dr. Mauldin, dated February
9, 1996.
10.11* Consulting, Non-Compete, Invention and Non-Disclosure Agreement between Registrant and Dr.
Mauldin, dated June 16, 1995.
10.12* Non-Competition, Non-Disclosure and Developments Agreement between Point Communications
Corporation and Christopher Kitze, dated October 12, 1995.
10.13* Letter Agreement between Robert J. Davis and Registrant dated February 7, 1996.
10.14 Amendment to Letter Agreement between Robert J. Davis and Registrant dated as of August 27, 1999.
10.15 Amendment to Employment Letter Agreement between Edward M. Philip and Registrant dated as of
August 27, 1999.
10.16* Lycos, Inc. 1995 Stock Option Plan.
10.17* Lycos, Inc. 1996 Stock Option Plan.
10.18* Lycos, Inc. 1996 Non-Employee Director Stock Option Plan.
10.19* Lycos, Inc. 1996 Employee Stock Purchase Plan.
10.20* Form of Indemnity Agreement between Registrant and its executive officers and directors.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- -------------- --------------------------------------------------------------------------------------------------
<S> <C>
10.21* Amendment to License Agreement among CMU, CMGI and Registrant, dated March 4, 1996.
10.22***+ Agreement between Registrant and Bertelsmann Internet Services GmbH dated as of May 1, 1997.
10.23+ First Amendment Agreement between Bertelsmann Internet Services GmbH and Registrant, dated as of
November 12, 1998.
10.24*** Office sublease between Praxis International and Registrant dated December 4, 1996.
10.25**** Leggat McCall Properties Lease, dated January 30, 1998.
10.26+ Information Services Agreement between Inktomi Corporation and Wired Digital, Inc. dated as of May
1, 1999.
10.27+ Joint Venture Agreement between Registrant and Singapore Telecommunications Limited dated as of
September 13, 1999.
10.28+ Joint Venture Agreement between Registrant and Mirae Corporation dated as of March 19, 1999.
10.29+ Premier Provider Agreement between Netscape Communications Corporation and Registrant dated as of
June 10, 1999.
10.30+ Joint Venture Agreement among Registrant, Sumitomo Corp. and Internet Initiative Japan, Inc. dated
as of March 5, 1998, as amended by the Agreement by and among Registrant, Sumitomo Corp., Sumisho
Computer Systems Corp. and Internet Initiative Japan, Inc. dated June 29, 1998.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Brobeck, Phleger & Harrison LLP (set forth in Exhibit 8.1).
23.2 Consent of Independent Accountants.
23.3 Consent of Independent Accountants.
</TABLE>
- ------------------------
s Previously filed.
* Incorporated by reference from the Registrant's Registration Statement on
Form S-1 (Registration No. 333-1354).
** Incorporated by reference from the Registrant's Quarterly Report on Form
10-Q for the quarterly period ended April 30, 1996 (File No. 0-27830).
*** Incorporated by reference from the Registrant's Quarterly Report on Form
10-Q for the quarterly period ended April 30, 1997 (File No. 0-27830).
**** Incorporated by reference from the Registrant's Quarterly Report on Form
10-Q for the quarterly period ended April 30, 1998 (File No. 0-27830).
***** Incorporated by reference from the Registrant's Annual Report on Form 10-K
for the annual period ended July 31, 1998.
+ Confidential material omitted and filed separately with the Securities and
Exchange Commission.
<PAGE>
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
OF RESTATED CERTIFICATE
OF INCORPORATION OF LYCOS, INC.
Lycos, Inc., a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware, does hereby certify that:
FIRST: The name of the Corporation is Lycos, Inc. (the "Corporation").
SECOND: The date on which the Certificate of Incorporation for this
Corporation was filed with the Secretary of State of the State of Delaware is
June 1, 1995. A Restated Certificate of Incorporation was filed with the
Secretary of State of the State of Delaware on April 4, 1996 (the "Restated
Certificate") and was amended by a Certificate of Amendment filed with the
Secretary of the State of Delaware on August 13, 1998.
THIRD: The following amendments to the Restated Certificate was duly
adopted in accordance with the provision of Section 242 of the General
Corporation Law of the State of Delaware (the "General Corporation Law") by
resolutions duly adopted by the Board of Directors of this Corporation and was
approved by the stockholders in a special meeting of the stockholders on
July 15, 1999 called and held in accordance with the General Corporation Law.
Article FOURTH of the Restated Certificate is hereby amended by
deleting the first paragraph of said Article FOURTH and replacing such
paragraph with the following:
"FOURTH: The total number of shares of all classes of capital stock
which the Corporation shall have the authority to issue is 305,000,000
shares, consisting of 300,000,000 shares of Common Stock with a par
value of $.01 per share (herein called the "Common Stock") and 5,000,000
shares of Preferred Stock with a par value of $.01 per share (herein
called the "Preferred Stock")."
IN WITNESS HEREOF, this Corporation has caused this Certificate of
Amendment to be signed by its Vice President in Waltham, Massachusetts this
16 day of July, 1999.
LYCOS, INC.
/s/ Thomas E. Guilfoile
-----------------------------------
Thomas Guilfoile, Vice President of
Finance and Administration
<PAGE>
EXHIBIT 8.1
October 7, 1999
---
Quote.com
850 N. Shoreline Blvd.
Mountain View, CA 94043
Ladies and Gentlemen:
This opinion is being delivered to you in connection with (i) the
Agreement and Plan of Merger (the "Agreement") dated as of September 2, 1999,
among Lycos, Inc., a Delaware corporation ("Lycos"), Quicksilver Acquisition
Corp., a Delaware corporation ("Sub"), and Quote.com, Inc., a California
corporation ("Quote.com"), and (ii) the preparation and filing with the
Securities and Exchange Commission of a Form S-4 Registration Statement relating
to the Merger (the "Registration Statement"). Pursuant to the Agreement, Sub
will merge with and into Quote.com (the "Merger"), and Quote.com. will become a
wholly owned subsidiary of Lycos.
Except as otherwise provided, capitalized terms referred to herein have
the meanings set forth in the Agreement. All section references, unless
otherwise indicated, are to the Internal Revenue Code of 1986, as amended (the
"Code").
We have acted as legal counsel to Quote.com in connection with the
Merger. As such, and for the purpose of rendering this opinion, we have examined
and are relying upon (without any independent investigation or review thereof)
the truth and accuracy, at all relevant times, of the statements, covenants,
representations and warranties contained in the following documents (including
all schedules and exhibits thereto):
1. The Agreement;
2. The Registration Statement; and
3. Such other instruments and documents related to the formation,
organization and operation of Lycos, Quote.com and Sub and to the consummation
of the Merger and the other transactions contemplated by the Agreement as we
have deemed necessary or appropriate.
In connection with rendering this opinion, we have assumed or obtained
representations (and are relying thereon, without any independent investigation
or review thereof) that:
A. Original documents submitted to us (including signatures) are
authentic, documents submitted to us as copies conform to the original
documents, and there has been (or will be by the Effective Time) due execution
and delivery of all documents where due execution and delivery are
prerequisites to the effectiveness thereof; and
<PAGE>
Quote.com, Inc. October 7, 1999
--
Page 2
B. The Merger will be consummated in accordance with the Agreement
without any waiver or breach of any material provision thereof, and the Merger
will be effective under applicable state law.
Based on our examination of the foregoing items and subject to the
assumptions, exceptions, limitations and qualifications set forth herein, we are
of the opinion that the statements regarding United States federal income tax
consequences set forth in the Registration Statement under the heading "The
Merger - Material United States Federal Income Tax Consequences," insofar as
they constitute statements of law or legal conclusions, are correct in all
material respects. We express no opinion as to any federal, state or local,
foreign or other tax consequences, other than as set forth in the Registration
Statement under the heading "The Merger - Material United States Federal Income
Tax Consequences."
In addition to the assumptions and representations described above,
this opinion is subject to the exceptions, limitations and qualifications set
forth below.
(1) This opinion represents and is based upon our best judgment
regarding the application of federal income tax laws arising under the Code,
existing judicial decisions, administrative regulations and published rulings
and procedures. Our opinion is not binding upon the Internal Revenue Service or
the courts, and there is no assurance that the Internal Revenue Service will not
successfully assert a contrary position. Furthermore, no assurance can be given
that further legislative, judicial or administrative changes, on either a
prospective or retroactive basis, will not adversely affect the accuracy of the
conclusions stated herein. Nevertheless, we undertake no responsibility to
advise you of any new developments in the application or interpretation of the
federal income tax laws.
(2) No opinion is expressed as to any transaction other than the
Merger (whether or not undertaken in connection with the Merger) or as to any
transaction whatsoever, including the Merger, if all the transactions described
in the Agreement are not consummated in accordance with the terms of such
Agreement and without waiver or breach of any material provision thereof or if
all of the representations, warranties, statements and assumptions upon which
we relied (including, without limitation, the Tax Representation Letters of the
parties referred to above) are not true and accurate at all relevant times. In
the event any one of the statements, representations, warranties or assumptions
upon which we have relied to issue this opinion is incorrect, our opinion might
be adversely affected and may not be relied upon.
This opinion is rendered to you solely in connection with the filing of
the Registration Statement. We hereby consent to the filing of this opinion as
an exhibit to the Registration Statement. We also consent to the references to
our firm name wherever appearing in the Registration Statement with respect to
the discussion of the federal income tax consequences of the Merger, including
any amendments to the Registration Statement. This opinion may not be relied
upon for any other purpose, and may not be made available to any other person,
without our prior written consent.
Very truly yours,
/s/ BROBECK, PHLEGER & HARRISON LLP
------------------------------------
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
Exhibit 10.14
AMENDMENT TO EMPLOYMENT LETTERS
WHEREAS Lycos, Inc., a Delaware corporation ("Lycos"), and Robert J.
Davis (the "Executive") executed employment letters dated June 21, 1995 and
February 7, 1996 (collectively, the "Employment Letters");
WHEREAS Lycos and the Executive wish to amend the Employment Letters
in certain respects as provided herein;
NOW, THEREFORE, Lycos and the Executive agree as follows:
1. Change in Control. In the event of a Change in Control (as
defined herein), outstanding stock options granted by Lycos to the Executive
shall become vested and immediately exercisable on the date of the Change in
Control (to the extent not then already vested and exercisable), but only to the
extent such acceleration does not result in an "excess parachute payment" within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), as determined by Lycos's independent auditors (the "Accounting
Firm") after taking into account other payments or benefits the Executive may be
entitled to receive (the "Section 280G Limitation"). In the event that certain
of the Executive's outstanding stock options will not become vested and
immediately exercisable pursuant to the Section 280G Limitation, the Accounting
Firm will determine which options will be accelerated upon the occurrence of the
Change in Control by determining which of the Executive's options, if
accelerated, will provide him the maximum economic value in connection with the
Section 280G Limitation.
2. Termination Following a Change in Control. (a) If, within two
years following a Change in Control, the Executive's employment with Lycos (or
its successor) is terminated by Lycos (or its successor) for reasons other than
Cause (as defined herein) or the Executive terminates his employment with Lycos
(or its successor) for Good Reason (as defined herein), (i) all outstanding
stock options granted by Lycos shall become vested and exercisable for a period
of 90 days following the date the Executive ceases to be employed by Lycos (or
its successor), or until the date on which the option expires by its terms,
whichever occurs first and (ii) in the event it shall be determined that any
payment or distribution to or for the benefit of the Executive (whether paid or
payable or distributed or distributable pursuant to the terms of this Amendment
to the
<PAGE>
2
Employment Agreement) or otherwise, but determined without regard to any
additional payments required under this Section 2(a) (ii) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code or any interest or
penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment (a "Gross-up Payment") in an amount
such that after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes and Excise Tax) imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payment. The Executive's employment shall be
deemed to have been terminated following a Change in Control by the Company
without Cause if the Executive's employment is terminated prior to a Change in
Control without Cause at the direction of Party who has entered into an
agreement with the Company the consummation of which will constitute a Change in
Control.
(b) Subject to the provisions of Section 2(c), all determinations
required to be made under this Section 2, including whether and when a Gross-Up
Payment is required and the amount of such Gross-UP Payment and the assumptions
to be utilized in arriving at such determination, shall be made by the
Accounting Firm (or such other certified public accounting firm reasonably
acceptable to Lycos as may be designated by the Executive) which shall provide
detailed supporting calculations both to Lycos and the Executive within 15
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by Lycos. All fees and expenses of
the Accounting Firm shall be borne solely by Lycos. Any Gross-Up Payment, as
determined pursuant to this Section 2, shall be paid by Lycos to the Executive
within five days of the later of (i) the due date for the payment of any Excise
Tax, and (ii) the receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon Lycos and the
Executive. As a result of the uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by Lycos should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that Lycos exhausts its
remedies pursuant to Section 2(c) and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment
<PAGE>
3
shall be paid promptly by Lycos to or for the benefit of the Executive.
(c) The Executive shall notify Lycos in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by Lycos
of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is informed
in writing of such claim and shall apprise Lycos of the nature of such claim
and the date on which such claim is requested to be paid. The Executive shall
not pay such claim prior to the expiration of the 30-day period following the
date on which it gives such notice to the Company (or such shorter period ending
on the date that any payment of taxes with respect to such claim is due). If
Lycos notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) give Lycos any information reasonably requested by Lycos
relating to such claim;
(ii) take such action in connection with contesting such claim as
Lycos shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney selected by Lycos;
(iii) cooperate with Lycos in good faith in order to effectively
contest such claim, and
(iv) permit Lycos to participate in any proceedings relating to such
claim;
provided, however, that Lycos shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive harmless, on an after-tax
basis, for an Excise Tax or income tax (including interest and penalties with
respect thereto) imposed as a result of such representation and payment of costs
and expenses. Without limitation on the foregoing provisions of this Section
2(c), Lycos shall control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as Lycos
shall determine; provided, however, that if
<PAGE>
4
Lycos directs the Executive to pay such claim and sue for refund, Lycos shall
advance the amount of such payment to the Executive, on an interest-free basis
and shall indemnify and hold the Executive harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any extension of
the statute of limitations relating to payment of taxes for the taxable year of
the Executive with respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, Lycos' control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 2(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to Lycos'
complying with the requirements of Section 2(c)) promptly pay to Lycos the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 2(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim
and Lycos does not notify the Executive in writing of its intent to contest such
denial of refund prior to the expiration of 30 days after such determination,
then such advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
3. Definitions. The following terms shall have the meanings
indicated when used in this Amendment:
(a) "Cause" shall mean
(i) the wilful and continued failure of the Executive to
perform substantially the Executive's duties with Lycos or one of its
affiliates (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board of Directors of
Lycos ("Board") or the Chairman of Lycos which specifically identifies the
manner in which the Board believes that the Executive
<PAGE>
5
has not substantially performed the Executive's duties, or
(ii) the wilful engaging by the Executive in illegal conduct
or gross misconduct which is materially and demonstrably injurious to
Lycos, or
(iii) conviction of a felony or guilty or nolo contendere plea
by the Executive with respect thereto.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "wilful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of Lycos. Any act, or
failure to act, based upon authority given pursuant to a resolution duly adopted
by the Board or upon the instructions of the Chairman or a senior officer of the
Lycos shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith an in the best interest of Lycos. The cessation of
employment of the Executive shall not be deemed to be for Cause unless and until
there shall have been delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than two-thirds of the entire
membership of the Board (excluding the Executive if he is a member of the Board)
at a meeting of the Board called and held for such purpose (after reasonable
notice is provided to the Executive and the Executive is given an opportunity,
together with counsel, to be heard before the Board), finding that, in the good
faith opinion of the Board, the Executive is guilty of the conduct described in
subparagraph (i) or (ii) above, and specifying the particulars thereof in
detail.
(b) "Change in Control" shall be deemed to occur if the conditions
set forth in any one of the following paragraphs shall have been satisfied:
(i) any person (as defined in Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Act") is or becomes the beneficial
owner as defined in Rule 13d-3 under the Act, directly or indirectly, (A)
of securities of Lycos (not including in the securities beneficially owned
by such person any securities acquired directly from Lycos or its
affiliates) representing 20% or more of the combined voting power of
Lycos' then outstanding securities; or (B) of securities of Lycos
(including in the securities owned by such person any securities acquired
directly from Lycos or its affiliates) representing more than
<PAGE>
6
50% of the combined voting power of Lycos' then outstanding securities; or
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board and any new
director (other than a director designated by a person who has entered
into an agreement with Lycos to effect a transaction described in clause
(i), (iii) or (iv) of this Section 3(b) whose election by the Board or
nomination for the election by the Lycos' stockholders was approved by a
vote of at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof; or
(iii) the consummation of (A) a merger or consolidation of
Lycos with any other corporation, other than (1) a merger or consolidation
which would result in the voting securities of Lycos outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of Lycos, at
least 50% of the combined voting power of the voting securities of Lycos,
or such surviving entity outstanding immediately after such merger or
consolidation or (2) a merger or consolidation effected to implement a
recapitalization of Lycos (or similar transaction) in which no person
acquires more than 50% of the combined voting power of Lycos' then
outstanding securities or (B) any other transaction as a result of which
the shareholders of Lycos immediately prior to such transaction cease to
have the ability to designate a majority of the members of the Board; or
(iv) the shareholders of Lycos approve a plan of complete
liquidation of Lycos or an agreement for the sale or disposition by Lycos
of all or substantially all of Lycos' assets.
(c) "Good Reason" shall mean, in the absence of a written consent of
the Executive:
(i) the assignment to the Executive of any duties inconsistent
in any respect with the Executive's position (including status, offices,
titles and reporting requirements), authority, duties or
<PAGE>
7
responsibilities, or any other action by Lycos which, in the Executive's
reasonable judgment, results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by Lycos promptly after receipt of notice thereof given by the
Executive;
(ii) any failure by the Company to comply with any of the
provisions of the Employment Agreement (as amended by this Amendment),
other than an isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by Lycos promptly after
receipt of notice thereof given by the Executive;
(iii) Lycos requiring the Executive to be based at any
location other than the Boston, Massachusetts metropolitan area;
(iv) any purported termination by Lycos of the Executive's
employment otherwise than for Cause;
(v) any failure by Lycos to require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and for assets of the Company to
assume expressly and agree to perform all obligations under the
Executive's Employment Agreement, as amended pursuant hereto to the same
extent Lycos would be required to perform if no succession had taken
place.
4. Validity/Pooling. The invalidity or unenforceability of any
provision of this Amendment to the Employment Letters shall not affect the
validity or enforceability of any other provision of this Amendment, which shall
remain in full force and effect. If (a) the Board approves a merger or
consolidation of Lycos which is intended by the Board to satisfy the accounting
rules related to the pooling of interest method of accounting (the "Pooling
Rules") and (b) any provision of this Amendment would violate the Pooling Rules,
then such provision shall be null and void ab initio. In such event, Lycos and
the Executive shall negotiate, in good faith, a replacement provision of
equivalent value which does not cause such a violation, provided, and to the
extent, that Lycos' outside auditors determine that any such replacement
provision is permissible without violating the Pooling Rules.
<PAGE>
8
5. Effective Date. This Amendment to the Employment Letters shall be
effective as of the date it is executed by both parties.
IN WITNESS WHEREOF, the parties have caused this Amendment to the
Employment Letters to be executed as of the 27th day of August 1999.
LYCOS, INC.,
By: /s/ Thomas E. Guilfoile
------------------------------
Thomas E. Guilfoile
/s/ Robert J. Davis
------------------------------
Robert J. Davis
<PAGE>
Exhibit 10.15
AMENDMENT TO EMPLOYMENT LETTERS
WHEREAS Lycos, Inc., a Delaware corporation ("Lycos"), and Edward
M. Philip (the "Executive") executed an employment letter dated December 8,
1995, as clarified by a letter dated December 11, 1995 (collectively, the
"Employment Letters");
WHEREAS Lycos and the Executive wish to amend the Employment Letters
in certain respects as provided herein;
NOW, THEREFORE, Lycos and the Executive agree as follows:
1. Change in Control. In the event of a Change in Control (as
defined herein), outstanding stock options granted by Lycos to the Executive
shall become vested and immediately exercisable on the date of the Change in
Control (to the extent not then already vested and exercisable), but only to the
extent such acceleration does not result in an "excess parachute payment" within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), as determined by Lycos's independent auditors (the "Accounting
Firm") after taking into account other payments or benefits the Executive may be
entitled to receive (the "Section 280G Limitation"). In the event that certain
of the Executive's outstanding stock options will not become vested and
immediately exercisable pursuant to the Section 280G Limitation, the Accounting
Finn will determine which options will be accelerated upon the occurrence of the
Change in Control by determining which of the Executive's options, if
accelerated, will provide him the maximum economic value in connection with the
Section 280G Limitation.
2. Termination Following a Change in Control. (a) If, within two
years following a Change in Control, the Executive's employment with Lycos (or
its successor) is terminated by Lycos (or its successor) for reasons other than
Cause (as defined herein) or the Executive terminates his employment with Lycos
(or its successor) for Good Reason (as defined herein), (i) all outstanding
stock options granted by Lycos shall become vested and exercisable for a period
of 90 days following the date the Executive ceases to be employed by Lycos (or
its successor), or until the date on which the option expires by its terms,
whichever occurs first and (ii) in the event it shall be determined that any
payment or distribution to or for the benefit of the Executive (whether paid or
payable or distributed or
<PAGE>
2
distributable pursuant to the terms of this Amendment to the Employment
Agreement) or otherwise, but determined without regard to any additional
payments required under this Section 2(a)(ii) (a "Payment") would be subject to
the excise tax imposed by Section 4999 of the Code or any interest or penalties
are incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes and Excise Tax) imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payment. The Executive's employment shall be deemed
to have been terminated following a Change in Control by the Company without
Cause if the Executive's employment is terminated prior to a Change in Control
without Cause at the direction of a party who has entered into an agreement with
the Company the consummation of which will constitute a Change in Control.
(b) Subject to the provisions of Section 2(c), all determinations
required to be made under this Section 2, including whether and when a Gross-Up
Payment is required and the amount of such Gross-UP Payment and the assumptions
to be utilized in arriving at such determination, shall be made by the
Accounting Firm (or such other certified public accounting firm reasonably
acceptable to Lycos as may be designated by the Executive) which shall provide
detailed supporting calculations both to Lycos and the Executive within 15
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by Lycos. All fees and expenses of
the Accounting Firm shall be borne solely by Lycos. Any Gross-Up Payment, as
determined pursuant to this Section 2, shall be paid by Lycos to the Executive
within five days of the later of (i) the due date for the payment of any Excise
Tax, and (ii) the receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon Lycos and the
Executive. As a result of the uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by Lycos should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that Lycos exhausts its
remedies pursuant to Section 2(c) and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the
<PAGE>
3
Underpayment that has occurred and any such Underpayment shall be paid promptly
by Lycos to or for the benefit of the Executive.
(c) The Executive shall notify Lycos in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by Lycos
of the Gross-Up Payment. Such notification shall be given as soon as practicable
but no later than ten business days after the Executive is informed in writing
of such claim and shall apprise Lycos of the nature of such claim and the date
on which such claim is requested to be paid. The Executive shall not pay such
claim prior to the expiration of the 30-day period following the date on which
it gives such notice to the Company (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If Lycos notifies
the Executive in writing prior to the expiration of such period that it desires
to contest such claim, the Executive shall:
(i) give Lycos any information reasonably requested by Lycos
relating to such claim;
(ii) take such action in connection with contesting such claim as
Lycos shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney selected by Lycos;
(iii) cooperate with Lycos in good faith in order to effectively
contest such claim, and
(iv) permit Lycos to participate in any proceedings relating to such
claim;
provided, however, that Lycos shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive harmless, on an after-tax
basis, for an Excise Tax or income tax (including interest and penalties with
respect thereto) imposed as a result of such representation and payment of costs
and expenses. Without limitation on the foregoing provisions of this Section
2(c), Lycos shall control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate
<PAGE>
4
courts, as Lycos shall determine; provided, however, that if Lycos directs the
Executive to pay such claim and sue for refund, Lycos shall advance the amount
of such payment to the Executive, on an interest-free basis and shall indemnify
and hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, Lycos' control of the contest
shall be limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive shall be entitled to settle or contest, as
the case may be, any other issue raised by the Internal Revenue Service or any
other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 2(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to Lycos'
complying with the requirements of Section 2(c)) promptly pay to Lycos the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 2(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
Lycos does not notify the Executive in writing of its intent to contest such
denial of refund prior to the expiration of 30 days after such determination,
then such advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
3. Definitions. The following terms shall have the meanings
indicated when used in this Amendment:
(a) "Cause" shall mean
(i) the wilful and continued failure of the Executive to
perform substantially the Executive's duties with Lycos or one of its
affiliates (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board of Directors of
Lycos ("Board") or the Chairman of Lycos which specifically identifies the
<PAGE>
5
manner in which the Board believes that the Executive has not
substantially performed the Executive's duties, or
(ii) the wilful engaging by the Executive in illegal conduct
or gross misconduct which is materially and demonstrably injurious to
Lycos, or
(iii) conviction of a felony or guilty or nolo contendere plea
by the Executive with respect thereto.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "wilful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of Lycos. Any act, or
failure to act, based upon authority given pursuant to a resolution duly adopted
by the Board or upon the instructions of the Chairman or a senior officer of
the Lycos shall be conclusively presumed to be done, or omitted to be done, by
the Executive in good faith an in the best interest of Lycos. The cessation of
employment of the Executive shall not be deemed to be for Cause unless and until
there shall have been delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than two-thirds of the entire
membership of the Board (excluding the Executive if he is a member of the Board)
at a meeting of the Board called and held for such purpose (after reasonable
notice is provided to the Executive and the Executive is given an opportunity,
together with counsel, to be heard before the Board), finding that, in the good
faith opinion of the Board, the Executive is guilty of the conduct described in
subparagraph (i) or (ii) above, and specifying the particulars thereof in
detail.
(b) "Change in Control" shall be deemed to occur if the conditions
set forth in any one of the following paragraphs shall have been satisfied:
(i) any person (as defined in Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Act") is or becomes the beneficial
owner as defined in Rule 13d-3 under the Act, directly or indirectly, (A)
of securities of Lycos (not including in the securities beneficially owned
by such person any securities acquired directly from Lycos or its
affiliates) representing 20% or more of the combined voting power of
Lycos' then outstanding securities or (B) of securities of Lycos
(including in the securities owned by such person any securities acquired
directly
<PAGE>
6
from Lycos or its affiliates) representing more than 50% of the combined
voting power of Lycos' then outstanding securities; or
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board and any new
director (other than a director designated by a person who has entered
into an agreement with Lycos to effect a transaction described in clause
(i), (iii) or (iv) of this Section 3(b) whose election by the Board or
nomination for the election by the Lycos' stockholders was approved by a
vote of at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof; or
(iii) the consummation of (A) a merger or consolidation of
Lycos with any other corporation, other than (1) a merger or consolidation
which would result in the voting securities of Lycos outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of Lycos, at
least 50% of the combined voting power of the voting securities of Lycos,
or such surviving entity outstanding immediately after such merger or
consolidation, or (2) a merger or consolidation effected to implement a
recapitalization of Lycos (or similar transaction) in which no person
acquires more than 50% of the combined voting power of Lycos' then
outstanding securities or (B) any other transaction as a result of which
the shareholders of Lycos immediately prior to such transaction cease to
have the ability to designate a majority of the members of the Board; or
(iv) the shareholders of Lycos approve a plan of complete
liquidation of Lycos or an agreement for the sale or disposition by Lycos
of all or substantially all of Lycos' assets.
(c) "Good Reason" shall mean, in the absence of a written consent of
the Executive:
(i) the assignment to the Executive of any duties inconsistent
in any respect with the Executive's position (including status, offices,
titles and
<PAGE>
7
reporting requirements), authority, duties or responsibilities, or any
other action by Lycos which, in the Executive's reasonable judgment,
results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial
and inadvertent action not taken in bad faith and which is remedied by
Lycos promptly after receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the
provisions of the Employment Agreement (as amended by this Amendment),
other than an isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by Lycos promptly after
receipt of notice thereof given by the Executive;
(iii) Lycos requiring the Executive to be based at any
location other than the Boston, Massachusetts metropolitan area;
(iv) any purported termination by Lycos of the Executive's
employment otherwise than for Cause;
(v) any failure by Lycos to require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and for assets of the Company to
assume expressly and agree to perform all obligations under the
Executive's Employment Agreement, as amended pursuant hereto to the same
extent Lycos would be required to perform if no succession had taken
place.
4. Validity/Pooling. The invalidity or unenforceability of any
provision of this Amendment to the Employment Letters shall not affect the
validity or enforceability of any other provision of this Amendment, which shall
remain in full force and effect. If (a) the Board approves a merger or
consolidation of Lycos which is intended by the Board to satisfy the accounting
rules related to the pooling of interest method of accounting (the "Pooling
Rules") and (b) any provision of this Amendment would violate the Pooling Rules,
then such provision shall be null and void ab initio. In such event, Lycos and
the Executive shall negotiate, in good faith, a replacement provision of
equivalent value which does not cause such a violation, provided, and to the
extent, that Lycos' outside auditors determine that any such replacement
provision is permissible without violating the Pooling Rules.
<PAGE>
8
5. Effective Date. This Amendment to the Employment Letters shall be
effective as of the date it is executed by both parties.
IN WITNESS WHEREOF, the parties have caused this Amendment to the
Employment Letters to be executed as of the 27th day of August 1999.
LYCOS, INC.,
By: /s/ Thomas E. Guilfoile
------------------------------
Thomas E. Guilfoile
/s/ Edward M. Philip
------------------------------
Edward M. Philip
<PAGE>
EXHIBIT 10.23
THIS FIRST AMENDMENT AGREEMENT (the "Amendment") dated as of
November 12, 1998, by and among BERTELSMANN INTERNET GROUP GmbH,
formerly known as BERTELSMANN INTERNET SERVICES GmbH, a company
organized under the laws of Germany, having its principal office at
Carl-Bertelsmann Strasse 161E, Gutersloh, Germany ("BIG") and
LYCOS, INC., a corporation organized under the laws of the State of
Delaware, having its principal office at 400-2 Totten Pond Road,
Waltham, Massachusetts, U.S.A. 02154 ("Lycos").
WITNESSETH
WHEREAS, BIG and Lycos have previously entered into that certain
Agreement dated May 1, 1997 (the "Agreement") to jointly establish the
Business (as defined in the Agreement); and
WHEREAS, the parties hereto desire to amend the Agreement on the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises stated herein, and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto do hereby agree as follows:
A. DEFINITIONS.
Capitalized terms used herein and not defined herein shall have the
meanings given them in the Agreement.
B. AMENDMENT OF THE AGREEMENT.
1. AMENDMENT TO SECTION 1.40. Section 1.40 of the Agreement is hereby
deleted in its entirety and the following is inserted therefor:
"Territory" shall mean all of the countries listed on EXHIBIT C, together
with Sweden, Norway, Denmark, Finland and Iceland. For the avoidance of
doubt, BIG and Lycos hereby agree that the Territory in the Lycos License is
hereby extended to include such Scandinavian countries.
<PAGE>
2. AMENDMENT TO ARTICLE I.
Article I of the Agreement is hereby amended by adding the following new
Section 1.43 at the end thereof:
1.43 "Tripod Technology" shall mean the personal homepage publishing
and community-building technology (including all updates, enhancements and
developments thereof) developed by Lycos's wholly-owned subsidiary,
Tripod, Inc., which technology shall consist of a community site
substantially the same as currently utilized at the URL WWW.TRIPOD.COM.
3. AMENDMENT TO SECTION 3.2(d).
Section 3.2(d) of the Agreement is hereby deleted in its entirety and
the following is inserted therefor:
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 BIG or their Affiliates to the extent available in a country
and provide limited liability to the Parties, or as otherwise agreed by
the Parties. The constituent documents of each Joint Entity shall
provide that all financial, accounting and tax consequences and benefits
of losses borne by a Joint Entity shall be allocated to BIG until such
time as the Joint Entity has reached Breakeven (but not later than the
date on which Lycos actually funds the operations or operations are
funded by borrowings of the Joint Entity after BIG is not long obligated
to fund unilaterally) and thereafter, losses shall be allocated in
accordance with the respective interests of the Parties on a periodic
basis provided that, in the event the funding limitation obligation of
BIG ends on a date other than the end of a month, losses shall continue
to be allocated to BIG until the end of the month in which BIG's funding
obligation terminates.
<PAGE>
3
4. AMENDMENT TO SECTION 4.2.
(a) Section 4.2(a) of the Agreement is hereby deleted in its
entirety and the following is inserted therefor:
(a) This Section 4.2 establishes the funding obligations of BIG with
respect to the the Joint Entities until such time as Breakeven is
reached (on an aggregate basis for all Joint Entities) or Failure
Notice is given by BIG. Subject to the foregoing limitation, BIG
shall fund the operations of the Joint Entities by way of
contributing capital in accordance with and up to the aggregate
amount of the funding requirements established for the 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 BIG, and (ii)
the funding obligation of BIG shall not in any case [***].
(b) Section 4.2(c) of the Agreement is hereby deleted in its
entirety and the following is inserted therefor:
(c) In the event that the specific funding limitation as to the
Joint Entities (as set forth in Section 4.2(a)) is reached. BIG
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 BIG
*** A CONFIDENTIAL PORTION OF THE MATERIAL
HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
will be required to lend to the Joint Entities as part of such
Business Plan is [***]. For the avoidance of doubt, in the event
that the funding limitation under the Loan Facility with respect to
the Joint Entities is not reached, then the Joint Entities shall
have no right to receive, and BIG shall have no obligation to fund,
the portion of the funding limitation in excess of the amount
actually funded by BIG under this Section. The Loan Facility shall
be provided by BIG 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 BIG's and Lycos's 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. Such loan shall bear interest at the internal
BIG rate for the applicable maturity, PROVIDED that such rate shall
not exceed prevailing market rates for the same maturity. All
amounts of unpaid principal and interest outstanding under the Loan
Facility shall become due and payable on the last day of the second
consecutive fiscal quarter in which the Joint Entities have
generated positive cash flow from operating activities to the extent
of available cash (after adequate reserves) and thereafter all
available cash (after adequate reserves) will be used to repay the
Loan Facility before declaring dividends. The 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. Notwithstanding anything to
the contrary contained in this Agreement, at
*** A CONFIDENTIAL PORTION OF THE MATERIAL
HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
such time as the funding limitation under the Loan Facility is reached,
the Parties shall discuss, in good faith, taking into consideration the
then current development and marketing success of the Tripod Technology
as well as the feasibility of maintaining the Tripod Technology
business. If either of the Parties determines, in its sole discretion,
to discontinue either promoting or funding the Tripod Technology, such
Party shall have the right to withdraw its participation in the Tripod
Technology business of the Joint Entities, and the other Party, in its
sole discretion, may unilaterally engage in such business within the
Territory (including assumption of all rights, accounts receivable,
accounts payable, liabilities, contracts and all assets relating
thereto), with no obligation to compensate the withdrawing Party. If
BIG intends to engage in the Tripod Technology business in accordance
with the foregoing, Lycos shall cause the Tripod License (as defined
below) to be extended to BIG upon its request. If BIG is the
withdrawing Party, BIG hereby agrees that the accrued losses and
drawdowns under the Loan Facility which are attributable solely to
the Tripod Technology business shall not be required to be repaid. This
Section 4.2(c) shall not be affected by Breakeven, provided, however,
that BIG shall have no obligation to make loans hereunder after Failure
Notice has been given.
5. AMENDMENT TO ARTICLE VII. Article VII of the Agreement is hereby amended
by adding the following new Section 7.12 at the end thereof:
7.12 TRIPOD LICENSE.
(a) Annexed hereto as EXHIBIT E-1 is a license agreement (the "Tripod
License") by which Lycos, in consideration of the performance by BIG of the
obligations and agreements of BIG under this Agreement and the Tripod
License, shall, or shall cause Tripod or 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 Tripod License shall be
modified to the extent necessary to protect the rights of Lycos/Tripod in
its property under local
<PAGE>
laws in the country or countries in which a particular Joint Entity
provides Search services, as determined by Lycos in its reasonable
discretion.
(b) The Joint Entities have paid Lycos the aggregate amount
[***], due in accordance with the Tripod License in consideration of
the Joint Entities' right to utilize the Tripod Technology as provided
in the Tripod License. BIG and Lycos agree that BIG had heretofore
contributed to BIG's capital reserve account in the Joint Entities
the sum of [***] to furnish the Joint Entities with the necessary funds
for the aforementioned payment.
(c) All software included within the Tripod Technology licensed
under the Tripod License shall include the Source Code therefore
(except for software not owned by Lycos or Tripod and for which
neither Lycos nor Tripod has 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 or Tripod 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).
(d) Promptly upon formation and organization of a Joint Entity,
Lycos shall or shall cause Tripod or a direct or in direct
subsidiary of Lycos to execute and deliver to each Joint Entity, and
BIG and Lycos shall cause each Joint Entity to execute and deliver
to Lycos, Tripod or such direct or indirect subsidiary of Lycos, the
Tripod License in accordance with this Agreement.
(e) In the event that Lycos causes Tripod or a direct or indirect
subsidiary to enter into the Tripod License, Lycos shall execute and
deliver its guarantee to such Joint Entity with respect to the
Tripod License.
*** A CONFIDENTIAL PORTION OF THE MATERIAL
HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
C. REFERENCE TO AND EFFECT ON THE AGREEMENT
1. Upon the effectiveness of this Amendment, each reference in the
Agreement to "this Agreement", "hereunder", "hereof", "herein" or words
of like import shall mean and be a reference to the Agreement, as
amended hereby.
2. This Amendment is incorporated in its entirety into the
Agreement, and except as modified hereby, the Agreement and all of the
terms, covenants and conditions of the Agreement are hereby ratified and
confirmed and shall remain in full force and effect.
3. The execution, delivery and effectiveness of this Amendment shall
not constitute a Waiver of any provision of the Agreement.
D. HEADINGS. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
E. COUNTERPARTS. This Amendment may be executed by one or more of the
parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have duly executed this Amendment as of
the date first above written.
BERTELSMANN INTERNET GROUP GMBH,
by /s/ Dr. Martin Danhoff
--------------------------
Name: Dr. Martin Danhoff
Title: In-house Counsel
LYCOS, INC.
by /s/ Robert Davis
--------------------------
Name: Robert Davis
Title: President
<PAGE>
EXHIBIT E-1
LICENSE AGREEMENT
This License Agreement (hereinafter the "Agreement") entered into as of the 12th
day of November, 1998 by and among Lycos, Inc., a Delaware corporation, having a
principal place of business at 400-2 Totten Pond Road, Waltham, MA ("Lycos"),
Tripod, Inc., a Delaware corporation, having a principal place of business at
191 Water Street, Williamstown, MA ("Tripod", and together with Lycos, the
"Company"), and Lycos-Bertelsmann GmbH & Co. KG ("Lycos-Bertelsmann"), a
company organized under the laws of Germany (hereinafter referred to as
"Licensee" and, together with the Company, the "Parties").
Witnesseth
WHEREAS, Lycos and Bertelsmann Internet Group GmbH ("BIG") are parties to
an Agreement effective as of May 1, 1997 as amended (the "Basic Agreement"),
pursuant to which, among other things, Lycos licensed to Lycos-Bertelsmann the
intellectual property necessary to operate the Business in the Territory (both
as defined in the Basic Agreement); and
WHEREAS, on February 11, 1998, Lycos acquired Tripod pursuant to the
merger of a wholly-owned subsidiary of Lycos into Tripod;
WHEREAS, Licensee wishes to license certain technology of Tripod for the
purpose of establishing a localized version of the "Tripod Site" (as presently
available at the URL http://www.tripod.com) within the Territory.
WHEREAS, Licensee desires to license rights in the technology upon the
terms and conditions herein set forth.
NOW THEREFORE, in consideration of the mutual covenants contained herein
and intending to be legally bound hereby, the Parties agree as follows:
I. CERTAIN DEFINITIONS
A. "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,
by contract otherwise. For the sake of clarity, the Parties agree that the
Persons in which Bertelsmann AG ("BAG") possesses an interest and which offer
the services of [***] in the Territory are not Affiliates of BAG or BIG
*** A CONFIDENTIAL PORTION OF
MATERIAL HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
(directly or indirectly) for so long as the ownership interest therein is equal
to no more than fifty percent (50%).
B. "Application Programming Interfaces" shall mean the specifications of any
Object Code licensed hereunder which define the external programming
requirements necessary to interface between such Object Code and any other
Object Code licensed hereunder.
C. "Code" shall mean Object Code and Source Code.
D. "Components" shall mean information, materials, products, features, services,
content, computer software, designs, artistic renderings, drawings, sketches,
characters, layouts and the digital implementations thereof.
E. "Copyrights" shall mean the copyrights owned by the Company in the Licensed
Properties.
F. "Derivative Works" shall mean all "derivative works" and "compilations"
within the meanings of such terms as defined in the U.S. Copyright Act (17
U.S.C. Section 101 et seq.).
G. "Effective Date" shall mean the last date of the execution of this Agreement
by both Parties.
H. "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.
I. "Internet" shall mean any collection of computer networks composed of
backbone networks including, without limitation, APRAnet, NSFNet, MILNET,
mid-level networks, regional networks and stub networks. These may include
commercial, university and other research networks and military networks and may
span many different physical networks around the world with various protocols
including the Internet Protocol, as the same may evolve in the future.
J. "Joint Enhancements" shall mean any enhancements, added functionalities,
additions, extensions or improvements to Tripod Europe that are created or
developed jointly by Tripod, its Affiliates or their agents, on the one hand,
and Licensee, its Permitted Sublicensees or their agents on the other hand,
including any Components which are jointly contributed to Tripod Europe.
K. "Licensed Marks" shall mean the trademarks and service marks of Tripod as
described in Attachment A.
<PAGE>
L. "Licensed Properties" shall mean, collectively, the Licensed Software and
Licensed Marks.
M. "Licensed Software" shall mean all Object Code necessary to implement,
operate, and maintain the Tripod Site, including the relevant Application
Programming Interfaces and including the technologies and methods necessary to
mirror member homepages created by Tripod members domiciled within the Territory
between the Tripod Site and the Localized Sites. Licensed Software shall
include, without limitation, the Object Code set forth in Attachment B.
N. "Localized Sites" shall mean Licensee's and its Permitted Sublicensees'
Internet sites through which Tripod Europe is made available to users.
O. "Object Code" shall mean (i) machine executable programming instructions,
substantially in binary form, which are intended to be directly executable by an
operating system 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).
P. "Permitted Sublicensees" shall mean any entity whose principal place of
business is located in the Territory which offers access to a localized version
of Tripod Europe as part of its Internet online service or other Web-based sites
to procure sales primarily within the Territory pursuant to a license agreement
with Licensee containing terms and conditions as are consistent with this
Agreement.
Q. "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 corporation, bank, trust company, land trust, business trust or
other organization, or a Governmental Body, or their equivalent under the
applicable legal system.
R. "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).
S. "Territory" shall be defined as defined in the Basic Agreement.
T. "Tripod Europe" shall mean the versions of the Tripod Site which are
localized and customized specifically for the Territory in the languages
specifically relevant to the Territory.
U. "Tripod Derivative Works" shall mean Derivative Works, including any
translations and customizations as necessary for the market in the Territory,
created by the Company or Licensee or Licensee's Permitted Sublicensees for use
in the Territory.
<PAGE>
V. "Tripod Enhancements" shall mean any enhancements, added functionalities,
additions, extensions of or improvements to the Licensed Properties that are
created or developed by Tripod, its Affiliates or their agents, including any
Components which are contributed to Tripod Europe by such Persons.
W. Any capitalized term which is not specifically defined herein shall have the
meaning given to that term in the Basic Agreement.
II. LICENSE GRANT
A. Subject to the terms and conditions of this Agreement, the Company hereby
grants to Licensee, during the Term (as defined below), the exclusive, royalty
free right and license to (1) use, reproduce, display, perform, transmit,
distribute, market and promote, via the Internet within the Territory, the
Licensed Properties (including the Tripod Derivative Works and the Tripod
Enhancements), for the purpose of creating Tripod Europe; and (2) the right and
license to sublicense the Licensed Properties to Permitted Sublicensees, subject
to Section II.D. below. Licensor shall not itself exploit the Licensed
Properties in the Territory in any manner during the Term other than through the
Licensee and the Tripod Site (but only to the extent the same is accessible
within the Territory).
The Parties intend that the Licensee will offer Tripod Europe through the
Localized Sites under the Tripod brand name using the Tripod logo which will
have optical appearance and interface as similar as commercially reasonable and
practicable to the Tripod Web Site, except that Tripod Europe will be localized
and customized for the Territory.
B. Company shall include within the Licensed Software technologies and methods
to mirror to the Localized Sites the homepages created on the Tripod Site by
Tripod members domiciled in the Territory. The Company shall, in an appropriate
fashion and at an appropriate time, notify existing Tripod members domiciled in
the Territory of the existence of Tripod Europe and shall encourage such members
to create and maintain mirrored versions of their homepages with Tripod Europe
and to maintain links on the homepages on the Tripod Site to link to the
homepages on the Tripod Europe Localized Site. If such members do not
voluntarily agree to mirror their homepages with Tripod Europe, the Company
shall use all commercially reasonable efforts to persuade and motivate them to
do so. Company shall provide Licensee with monthly tracking information to
document such member transfers. At a point in time to be mutually agreed upon
between the Company and Licensee, the Company shall mirror to Licensee's servers
those existing Tripod members' homepages who either elect to have their
homepages so mirrored, or who fail to opt out when given the option. The Company
shall provide Licensee with a complete list of all Tripod member e-mail
addresses located in the Territory. On an ongoing basis, the Company shall
provide Licensee with the e-mail addresses of new members who register on the
Tripod Site who are domiciled in the
<PAGE>
Territory; provided, however, that Licensee shall not disclose those e-mail
addresses to any third party without the Company's prior written consent.
C. [***]
D. Licensee shall have the right and license to sublicense the Licensed
Properties to Permitted Sublicensees. Except as provided in this Section II.D,
Section II.J or in Section XVII, Licensee shall have no right to assign,
sublicense or otherwise transfer any of the Licensed Properties. Notwithstanding
anything to the contrary contained in paragraph II.A. above, Licensee may not
sell, license, sublicense or otherwise transfer any of the Licensed Properties
to any Competitor.
E. Tripod Europe and the Localized Sites shall be operated, produced, marketed,
licensed, sold and performed by Licensee and its Permitted Sublicensees in
compliance with all applicable governmental laws, rules and regulations.
Licensee shall keep the Company fully informed of, and shall move expeditiously
to resolve, any complaint by a commercial and/or Governmental Body relevant to
the Licensed Properties.
F. Without the prior written approval of the Company, Licensee (i) agrees not to
alter or modify the form, fit or function of the Licensed Software in any
respect; and (ii) agrees not to use the Licensed Marks in any manner except as
specifically set forth herein.
G. Except as provided in this Article II, nothing in this Agreement shall be
deemed to grant any license or rights in any other technology, products or
services to Licensee except for rights specifically granted herein with respect
to the Licensed Properties. Licensee has no right to utilize or dispose of any
Licensed Property beyond the scope of this Article II or following the
termination of this Agreement for any reason. Licensee agrees, upon termination
of this Agreement in accordance with its terms, immediately to cease the use and
copying of Licensed Software, and to cease the use, marketing and distribution
of the Licensed Properties, and to cease the use of Licensed Marks, and to cease
the sublicensing of the Licensed Properties to Permitted Sublicensees, and
further agrees to take reasonable steps to destroy all copies of the Licensed
Software and all Licensed Properties and materials embodying or related to any
of the foregoing as soon as reasonably possible.
H. Licensee agrees to provide to the Company, once monthly on the first of every
month, beginning with the first of the month which occurs thirty (30) days or
more after the Effective Date of this Agreement, a file in the standard on-line
reporting system, consistent with past practice, as provided to the Steering
Committee.
I. At the same time as the Company delivers the Licensed Software to the
Licensee pursuant to Section III.A., the Company and Licensee shall enter into a
mutually satisfactory escrow agreement pursuant to which the Source Code
relating to the Licensed
*** A CONFIDENTIAL PORTION OF
MATERIAL HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
Software (except for Source Code relating to software not owned by the Company
and for which the Company does not have Source Code distribution rights) will be
deposited with an independent escrow agent located in the United States
(provided that such escrow agreement shall be governed by New York law). The
said Source Code shall be delivered to the escrow agent on magnetic media in a
sealed envelope. On a semi-annual basis, the Company shall deliver a copy of any
updated version of the Source Code to the escrow agent on magnetic media in a
sealed envelope and the escrow agent shall return to the Company the sealed
envelope containing the previous version of the Source Code. In the event the
Company shall commence a voluntary case concerning itself under the United
States Bankruptcy Code or an involuntary case is commenced against the Company
and the petition is not dismissed within 60 days or the Company makes a general
assignment for the benefit of creditors, Licensee shall be granted a license by
the Company to use the Source Code delivered by the Company in order for the
Licensee to use the Licensed Properties in the manner set forth in this
Agreement for the term of this Agreement. In no event shall the Licensee be
entitled to use any portion of the Source Code to develop new products or
derivatives of the Licensed Properties. The fees and expenses incurred by
either party in connection with establishing and maintaining the escrow
arrangement described herein shall be paid by the Licensee.
J. Licensee may sublicense the Licensed Properties solely to allow Permitted
Sublicensees to offer access to Tripod Europe in the Territory as part of their
Internet online services or other Web-based sites within the Territory,
provided, however, that Licensee: (a) must provide, as a condition of
sublicense, that said sublicensee enters into a license agreement on the terms
and conditions as are reasonably acceptable to the Company and agrees not to:
(i) sell, license or otherwise transfer the Licensed Properties, except as is
necessary to provide access to the localized version of Lycos Europe as part of
its Internet online service or other Web-based site; (ii) copy, reverse compile,
dissemble, or reverse engineer any portion of the Licensed Properties; (iii) use
the Licensed Properties to provide products or services competitive with
Licensed Properties; or (iv) assist or allow others to do any such things as set
forth herein; and (b) Licensee shall be responsible for providing all
maintenance and technical support and updates to such sublicensees for the
Licensed Properties. Licensee agrees that any services required by sublicensees,
including, but not limited to, training, technical support, installation and
maintenance, are the sole responsibility of Licensee. Licensee further
acknowledges that it is not entitled to make any representations and warranties
on behalf of the Company to any sublicensee regarding the Licensed Properties,
and shall indemnify and hold the Company harmless from and against any claims,
costs and damages arising from and in connection with such unauthorized
representations. The Company shall be a third party beneficiary of the license
agreements with sublicensees. The Company agrees that it shall not unreasonably
withhold or delay consent to any sublicense and any sublicense agreement
submitted to the Company shall be deemed to be approved, unless it is rejected
within five (5) business days after the Company's receipt thereof.
K. The term "Territory" as used with respect to the Licensed Properties and the
rights conveyed hereunder to technology and trademarks shall refer to and shall
only constitute
<PAGE>
a limitation on the geographical area where the Business is physically situated
or the geographical area where the services of the Licensee 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.
III. DELIVERY, INSTALLATION AND TESTING OF THE LICENSED SOFTWARE
A. The Company shall deliver the Licensed Software on agreed media no later than
the date hereof, and the Licensee shall thereafter, with the Company's on-site
advice and assistance (if requested by Licensee), launch Tripod Europe through
the Localized Site no later than the date hereof.
B. In connection with the delivery and installation of the Licensed Software,
the Company will provide the services indicated on Schedule III(B). Unless
otherwise indicated on Schedule III(B), the services will be provided at no
charge to Licensee.
C. After delivery of the Licensed Software, the Licensee shall carry out
functional tests of the Licensed Software during ten (10) days ("Test Period")
in order to verify that the Licensed Software complies with the online
documentation furnished to and accepted by the Licensee. During the tests, the
Licensee will notify the Company without delay in writing of any inconsistency
found by it and the Company will immediately commence to correct such
inconsistency at the cost of the Company and deliver to the Licensee the
resulting corrections and a new Test Period shall begin for verification
according to the same procedure. The Licensee shall accept the Licensed Software
immediately after it has been verified that it complies with the online
documentation furnished to and accepted by the Licensee. If the Licensee does
not notify the Company of its non-acceptance during the Test Period, the
Licensed Software will be deemed accepted. The Licensee shall begin its tests no
later than ten (10) days after delivery pursuant to Paragraph III.A.
IV. TECHNICAL ASSISTANCE AND SUPPORT
A. The Company agrees to provide Licensee, without charge, with software
upgrades to Licensed Software including new versions of Licensed Software
running under new operating systems and running under database management
software upgrades, as they may become available. The Company shall provide to
the Licensee such updates, developments, enhancements and improvements to the
Licensed Software as may be available to the Company from time to time and any
replacements to the Licensed Software, without cost, to assure that the Licensed
Software provided by the Licensee through the Localized Sites is the same system
(or as functionally equivalent as is
<PAGE>
feasible given differences in multinational operating systems which cannot be
controlled by the Parties) as that which is utilized on the Tripod Site.
Licensee shall be responsible for providing any software upgrades to the
Licensed Software to Permitted Sublicensees. At the time the Company makes
available to Licensee any upgrades to the Licensed Software, the Company shall
advise Licensee of the changes to the Licensed Software from the previous
version of the Licensed Software provided to Licensee
B. In the event that the Company makes available through the Tripod Site any
product or service which is either owned exclusively by the Company or which is
licensed by the Company and which the Company has the right to sublicense to a
third party, then, if requested by Licensee, the Company shall make such product
or service available to Licensee for inclusion in Tripod Europe, on such terms
and conditions as are mutually acceptable to the Company and Licensee. The
Parties agree that the Licensee shall pay to the Company all costs and expenses
(including all fully burdened costs of the Company) relating to the localization
and customization of the products and services for the Territory. If any fees
are payable to third parties in respect of sublicenses described herein, the
Company shall advise Licensee, and the Parties shall negotiate a reasonable fee
to the extent Licensee desires to sublicense such rights. Such fee shall be paid
by Licensee.
C. The Company shall provide Licensee, upon request, all technical support,
including access to the Company's technical staff and assistance in the delivery
and installation of the Licensed Properties, reasonably necessary for Licensee
to complete development of and operate Localized Sites. The cost and expenses of
the Company for the foregoing (including the fully burdened costs of the
Company) shall be paid by Licensee. The Company and Licensee shall develop
procedures for the services to be provided by the Company, including development
schedules, performance criteria and costs associated therewith.
D. The Company shall use best efforts to fix bugs in the Licensed Software as
soon as reasonably possible. Such efforts will be conducted by telephone or
electronic means. In the event that the Company is unable to fix such bugs, the
Company will provide on-site technical support to Licensee in order to fix such
bugs. The costs and expenses of the Company for the foregoing (including the
fully burdened costs of the Company) shall be paid by the Company, except for
costs and expenses relating to the localization and customization of the
Licensed Properties, which shall be paid by Licensee.
E. After the initial delivery of the Licensed Software, if the Steering
Committee of the Licensee with the participation and voting of the Lycos members
(who shall vote in the same manner as the BIG members), requests in writing on
behalf of the Licensee that the Company perform a development project requiring
access to the Source Code relating to the Licensed Software to accommodate
significant technical, competitive or legal requirements specific to the
Territory, 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
<PAGE>
organization with expertise in the computer industry) in the Territory 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, then the Company
shall at its option:
(i) make the changes within a reasonable period, subject
to the payment of the costs and expenses of the Company
(including the Company's fully burdened costs); or
(ii) decline to undertake the project but, as soon as
feasible, provide an Applications Programming Interface, so
that the Licensee is 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 relating
to the Licensed Software needed to make the change.
Changes made pursuant to this subparagraph E shall be based on specifications
reasonably approved by the Company and shall be subject to quality assurance
testing by the Company 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 the Company prior to delivery of any Source Code.
To the full extent permitted by law, the Company shall retain full ownership to
all changes in the Source Code (but, to the extent that it does not contain
Source Code, not the product, if any developed by or on behalf of the Licensee
using the Source Code) and the Company in any event shall have the full and
exclusive exploitation rights to such changed Source Code. The Licensee shall
execute such documents of assignment as may be required to give effect to this
subparagraph. All changes made pursuant to this section belonging to the Company
or the Licensee, shall be deemed Licensed Properties under the terms of this
Agreement. In the event that the Company uses any such changes, the Company
shall pay Licensee a reasonable fee and royalty for such usage in an amount as
shall be reasonably determined by the Parties.
F. All proposed changes and improvements by the Company shall constitute
confidential information of the Company. Licensee acknowledges that the Company
shall have the right to make public announcements relating to all current and
future products and services and all development plans.
G. If the documentation required to implement, operate, and maintain Tripod
Europe is insufficient for such purposes, the Company shall either supplement
the documentation or provide sufficient training or consultation, the costs and
expenses of which shall be paid by the Company, except for costs and expenses
relating to the localization and customization of such documentation, which
shall be paid by Licensee.
<PAGE>
H. For purposes of technology development and assistance, the Company shall
dedicate such time and priority to the requests of Licensee as is proportional
to the business traffic generated by the Licensee in relation to the overall
business of the Company and all other licensees of the Company.
I. Lycos agrees that Licensee will be entitled to have one designee on behalf of
all Joint Entities attend all product development meetings held by Lycos and
participate therein.
V. PATENTS AND OTHER INTELLECTUAL PROPERTY
A. All patents, copyrights, and all other intellectual property rights in the
Licensed Properties which may be obtainable will remain the property of the
Company.
B. The Company shall retain all ownership rights in and to the Licensed
Properties, Tripod Enhancements and Tripod Derivative Works. Licensee assigns
any interest it may be deemed to possess in any Licensed Properties, Tripod
Enhancements and the Tripod Derivative Works to the Company and will assist the
Company in every reasonable way, at the Company's expense, to obtain, secure,
perfect, maintain, defend and enforce for the Company's benefit all intellectual
property rights with respect to such properties.
C. The respective ownership interests of the Company and Licensee in any Joint
Enhancements shall be as agreed upon by the parties at the time such Joint
Enhancements are created or contributed; provided, however, that, if the parties
cannot reach agreement as to the ownership of any Joint Enhancement, then such
Joint Enhancement shall be deemed to be jointly owned by the Company and
Licensee and any subsequent use of such Joint Enhancement by either party shall
require the prior approval of the other party, which approval shall not be
unreasonably withheld or delayed.
D. Title to all developments, enhancements and improvements which are not Joint
Enhancements, Tripod Derivative Works or Tripod Enhancements, which either
originate with or are paid for by Licensee (other than payments to the Company,
its Affiliates or their agents), shall be the property of Licensee. Subject to
Section 7.6(h) of the Basic Agreement, Licensee hereby grants the Company a
non-exclusive, worldwide (except for the Territory) license, with the right to
sublicense, to use all such developments, enhancements and improvements in the
Licensed Properties, subject to payment of a reasonable fee and royalty for such
usage in an amount as shall be reasonably determined by the Parties.
VI. MARKING, TRADEMARKS AND TRADE NAMES
<PAGE>
A. Licensee shall have marked the appropriate portions of all Licensed
Properties with the applicable United States of America and foreign Patent
numbers in accordance with the applicable laws of the countries in which the
materials are intended to be used and offered.
B. Except as reasonably necessary in the opinion of Licensee to facilitate
registration on behalf of the Company, Licensee (or its agents) shall neither
register (except as set forth on Schedule VI(B), subject in any case to the last
sentence of this Section VI(B)) nor use any Tripod or Lycos trademarks, trade
names, service marks, domain names, domain addresses, patents, copyrights and
similar rights of any type under the law of any Governmental Body, including all
applications and registrations relating to any of the foregoing (collectively,
"Intellectual Property Rights"), except as specifically provided herein. Any use
of Tripod or Lycos Intellectual Property Rights will inure to the benefit of
Tripod or Lycos as the case may be. Licensee acknowledges that it does not have
any rights or any title whatsoever in or to Tripod or Lycos Intellectual
Property Rights, except as specifically provided herein. Upon expiration or
termination of this Agreement for any reason, Licensee shall promptly transfer,
convey and assign to the Company all Intellectual Property Rights in the name,
or under the direction or control, of Licensee.
C. Subject to all the terms and conditions of the Agreement, during the term of
this Agreement, Licensee shall have the non-exclusive, non-transferable right to
use the Licensed Marks to market Tripod Europe in the Territory. To the extent
reasonably feasible and subject to translation, Licensee shall always use the
Licensed Marks in all instances exactly as set forth herein when referring to or
identifying with Licensed Properties.
D. Licensee shall at all times hereafter take such steps in the marketing and
sale of the Licensed Properties to protect the Copyrights and all Code,
databases, Intellectual Property Rights, data and materials supplied by the
Company, using measures at least as secure as those used by Licensee in
protecting its own proprietary software.
VII. TERMINATION
A. Unless earlier terminated as provided herein or unless otherwise provided in
the Basic Agreement, this Agreement shall be effective during the period (the
"Term") from the date of this Agreement until the sooner of: (i) the date on
which the Parties hereto mutually agree to terminate this Agreement; (ii) the
date on which this Agreement is terminated under Section VII.B. below, or (iii)
the date on which the Company delivers to BIG the Cancellation Notice (as
defined in the Basic Agreement).
B. A Party may terminate this Agreement upon written notice in the event of (i)
any material breach of any warranty, representation or covenant of this
Agreement or the Basic Agreement by the other Party which remains uncured thirty
(30) days after written notice of such breach, or (ii) in the event of any
bankruptcy, insolvency, receivership,
<PAGE>
dissolution, liquidation, or similar proceeding of the other Party which
continues for thirty (30) days from filing. In addition, if Licensee shall cease
to carry on its business with respect to the operation of Tripod Europe for any
reason, this Agreement shall immediately terminate and shall be of no further
force or effect, except as provided in Section VII.C. below. Notwithstanding
anything in this Agreement to the contrary, a material default by Licensee shall
not constitute grounds for termination of this Agreement if the Company or any
member of the Steering Committee or Board of Directors of Licensee designated by
the Company is primarily responsible for the Licensee's failure to comply with
the terms and conditions of this Agreement or if the Company causes Licensee to
cease the conduct of business by Licensee.
C. The termination of this Agreement pursuant to this Article VII shall not
terminate (1) the obligation of Licensee to pay the Company any amounts
required to be paid hereunder, prior to the effective date of the termination,
and other amounts, which are accrued or which are otherwise to be paid by
Licensee under the terms of this Agreement or (2) the obligations of Licensee
under Articles V, IX, XI, XII, XIII, XV, XVII and XIX hereunder. If the Company
terminates this Agreement pursuant to this paragraph, nothing herein shall be
construed to release either party from any obligation that matured prior to the
effective date of such termination. In the event of the termination of this
Agreement, Licensee shall immediately assign to the Company all of its
assignable rights under those license agreements with Permitted Sublicensees,
which the Company requests in writing to be assigned to it, and upon such
assignment, the Company shall assume all obligations for the maintenance and
updating of the Licensed Products subject to the license agreements with the
Permitted Sublicensees. Licensee shall be responsible for providing all service
and support for those License Agreements with Permitted Sublicensees' which the
Company does not request be assigned to it.
VIII. WARRANTIES; DISCLAIMER; EXCLUSIVE REMEDY
A. The Company represents, warrants and covenants to Licensee that:
(i) The Company has good and marketable title to the
Licensed Properties in the Territory, including
all rights under applicable copyrights, trade
secrets, patents, and trademarks free and clear of
all liens or encumbrances and free from all claims
and demands of third parties, except as disclosed
on Schedule VIII(A)(i), attached hereto and
incorporated herein by reference;
(ii) no third party has any rights to use the Licensed
Software in the Territory in connection with
versions of the Tripod Site which are localized
and customized for the Territory;
<PAGE>
(iii) the Licensed Properties are sufficient to allow
Licensee to provide Tripod Europe in the
Territory, provided that no representation is made
with respect to content which is not owned by the
Company;
(iv) the Licensed Software has not been and will not be
published by the Company or otherwise disclosed to
any Person by the Company other than persons
within the employ of the Company, its advisors and
third parties (and in each case, such disclosure
has and will be made in accordance with
appropriate confidentiality measures) and there is
no commitment to publish the Licensed Software;
(v) the Licensed Software does not infringe the rights
of any Person. The Company has not received any
notice from any Person of any alleged or actual
infringement which would materially and adversely
affect the Business;
(vi) the Licensed Software and its use, development or
exploitation is not subject to any rights of any
Person other than Licensee including, but not
limited to, any license, lease, consent, right of
first refusal, option, mortgage, lien or
encumbrance;
(vii) the Licensed Software is not subject to any
agreement, consent or any rights of any other
Person; and
(viii) the Company is not required to pay any
consideration to any Person, other than its normal
compensation and benefits to employees (all of
which have been paid on a current basis) to use,
develop or exploit the Licensed Software.
B. In connection with the Licensed Marks, the Company hereby represents and
warrants to Licensee that:
(i) The Company has filed applications to register the
Licensed Marks with the European Union and the
Company has not received notice that there is any
<PAGE>
impediment to registration, except as disclosed on
Schedule VIII(B)(i);
(ii) The Company has not licensed the Licensed Marks to
any other Person in the Territory or in a manner
which may interfere with the use thereof by
Licensee (except for worldwide non-exclusive
licenses to the Company's licensees which are not
targeted to the Territory);
(iii) to the best knowledge of the Company, there are no
restrictions, whether by contract, operation of
law, or otherwise, on the Company's ability to
grant to Licensee the right to use the Licensed
Marks in the Territory for the Term;
(iv) to the best knowledge of the Company, the Licensed
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
Licensee as contemplated by the Basic Agreement
nor, to the Company's knowledge, does any use by
any third party materially infringe upon the
Licensed Marks, and there are no claims pending or
threatened with respect to any such infringement
by or against the Licensed Marks, except as
disclosed on Schedule VIII(B)(i); and
(v) the right to use the Licensed Marks is not
dependent on the rights of any third parties and
Licensee is not required to make any payments to
any third parties in respect of the Licensed
Marks.
C. THE COMPANY WARRANTS THAT THE LICENSED SOFTWARE FURNISHED HEREUNDER WILL
FUNCTION SUBSTANTIALLY AS SET FORTH IN THE ON-LINE DOCUMENTATION FURNISHED TO
THE LICENSEE IN CONNECTION WITH THIS AGREEMENT. THIS IS A LIMITED WARRANTY AND,
EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT, IT IS
THE ONLY WARRANTY MADE BY THE COMPANY HEREUNDER. SUBJECT TO AND EXCEPT FOR THE
FOREGOING, THE COMPANY MAKES NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED AS TO ANY MATTER INCLUDING, BUT NOT LIMITED TO, WARRANTY OF FITNESS FOR
A PARTICULAR PURPOSE, OR MERCHANTABILITY, OR EXCLUSIVITY, OR RESULTS OBTAINED
FROM USE OF ANY INTELLECTUAL PROPERTY DEVELOPED UNDER THIS AGREEMENT. IF ANY
UNAUTHORIZED MODIFICATIONS ARE MADE TO THE LICENSED
<PAGE>
SOFTWARE BY LICENSEE THIS WARRANTY SHALL IMMEDIATELY TERMINATE. LICENSEE MUST
NOTIFY IN WRITING WITHIN NINETY (90) DAYS OF DELIVERY OF THE LICENSED SOFTWARE
OF ANY DEFECT IN SUCH SOFTWARE.
D. NEITHER PARTY HERETO SHALL BE LIABLE TO THE OTHER FOR INDIRECT, SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES SUCH AS LOSS OF PROFITS OR INABILITY TO USE
SAID LICENSED SOFTWARE OR ANY APPLICATIONS THEREOF, EVEN IF SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY THEREOF.
E. LICENSEE AGREES THAT IT WILL NOT MAKE ANY WARRANTY ON BEHALF OF THE COMPANY,
EXPRESSED OR IMPLIED TO ANY PERSON CONCERNING THE APPLICATION OF OR THE RESULTS
TO BE OBTAINED WITH THE TECHNOLOGY UNDER THIS AGREEMENT.
F. THE COMPANY'S SOLE OBLIGATION AND LICENSEE'S SOLE REMEDY UNDER THE LIMITED
WARRANTY, CONTAINED IN ARTICLE VIII IS THAT THE COMPANY WILL USE BEST EFFORTS TO
REPAIR OR REPLACE THE LICENSED SOFTWARE IF IT DOES NOT CONFORM TO THIS WARRANTY.
LICENSEE AGREES THAT THE COMPANY'S SOLE LIABILITY HEREUNDER ARISING OUT OF ANY
THEORY OF CONTRACT, NEGLIGENCE, STRICT LIABILITY IN TORT OR OTHERWISE, INCLUDING
WITHOUT LIMITATION, ANY BREACH OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES
CONTAINED IN THIS AGREEMENT, SHALL NOT EXCEED: (i) THE AMOUNTS CONTRIBUTED TO
LICENSEE BY BIG UNDER THE BASIC AGREEMENT IN CONNECTION WITH BIG'S FUNDING
OBLIGATION WITH RESPECT TO THE AGGREGATE CAP; PLUS (ii) [***].
IX. INFRINGEMENT
A. If any unmodified Licensed Software provided to Licensee by the Company is
alleged or held to infringe a proprietary right of a third party, the Company
shall, at its own expense, and in its sole discretion, (1) procure for Licensee
and the end-users or customers of Licensee the right to continue to use the
allegedly infringing Licensed Software; (2) replace or modify the Licensed
Software to make it non-infringing; or (3) terminate this Agreement and accept
the return of the Licensed Software and related documentation.
B. The Company shall defend, at its own expense (or in the Company's discretion,
settle), indemnify and hold the Licensee harmless from and against any loss,
injury, demand, cost, expense or claim (including reasonable attorneys' fees)
arising out of any allegation that the Licensed Software infringes any patents,
copyrights, trade secrets or
*** A CONFIDENTIAL PORTION OF
MATERIAL HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
other proprietary rights of any third party ("Claim of Infringement"), provided
that the Licensee timely notifies the Company in writing of any such claim,
provided that failure to timely notify the Company shall not constitute a
defense unless the Company is harmed as a result.
C. (i) In furtherance of the foregoing, the Company agrees to defend any claims
or suits brought against the Licensee, and will indemnify and hold harmless such
Licensee against any award of damages and costs made against Licensee 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 Licensee or a Licensee Affiliate) that the
Licensed Software owned and delivered by the Company or any direct or indirect
subsidiary under this Agreement infringes any patent issued by any country
within the Territory (a "Patent Infringement Claim"). The Licensee shall give
the Company prompt written notice of any Patent Infringement Claim against
Licensee. The Company shall give Licensee prompt written notice of any Patent
Infringement Claims against the Company.
(ii) The Company 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) the Company may not
partially settle any Patent Infringement Claim without the written consent of
Licensee, unless such settlement releases Licensee fully from such claim, (ii)
the Company shall promptly provide Licensee with copies of all pleadings or
similar document relating to any Patent Infringement Claim, (iii) the Company
shall consult with the Licensee with respect to the defense and settlement of
any Patent Infringement Claim, and (iv) in any litigation to which Licensee is a
party, Licensee shall be entitled to be separately represented at its own
expense by counsel of its own selection.
(iii) Should any Licensed Software become or, in the Company's opinion, be
likely to become, the subject of any Patent Infringement Claim, the Company
shall, at its sole option and expense, and for purposes of eliminating or
mitigating any indemnification obligations hereunder (a) procure the right for
the Licensee to continue using the Licensed Software or (b) replace or modify
such Licensed Software so that it becomes non-infringing (provided that the
provisions of this Section IX.C. shall apply to any such modified Licensed
Software).
(iv) The Company shall have no liability for any Patent Infringement Claim
or any other claim of intellectual property infringement or trade secret
misappropriation to the extent (A) such infringement is based upon adherence to
specifications, designs or instructions furnished by Licensee, (B) such claim is
based upon the combination, operation or use of any Licensed Software with
products or content owned by any Person other than the Company, (C) such claim
is based upon the combination by the Licensee of any Licensed Software or
modification of any products or content supplied by any Person other than the
Company, (D) such claim is based upon an authorized Licensee's use of a Licensed
Software in a manner which is inconsistent with the terms of this
<PAGE>
Agreement and if such infringement would not have occurred except for such use
or (E) such claim is based upon use of a version of the Licensed Software other
than the latest version of the Licensed Software, if such claim could have been
avoided by use of the latest version and such latest version has been made
reasonably available to Licensee in accordance with the terms of this Agreement.
D. (i) The Company agrees to indemnify, defend and hold harmless Licensee from
and against any and all damages, liabilities, costs, losses and expenses
(including legal costs and reasonable attorneys' fees) arising out of or
connection with any claim, demand or action by any Person (other than Licensee
or any Licensee Affiliate) which is inconsistent with any of the warranties,
representations or covenants made by the Company in paragraph B or C of Article
VIII of this Agreement (a "Trademark Claim"); provided, however, that the
Company shall have no liability hereunder for any Trademark Claim relating to or
arising from opposition proceedings in connection with filing of applications to
register the Licensed Marks in countries other than countries within the
European Union and Switzerland or other Trademark Claims arising in such
countries, it being the intention of the Parties that the Licensee shall bear
the cost and expense of such Trademark Claims in such other countries. Licensee
shall give the Company prompt written notice of any Trademark Claim against
Licensee. The Company shall give Licensee prompt written notice of any Trademark
Claims against the Company.
(ii) the Company 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) the Company may not partially settle any
Trademark Claim without the written consent of Licensee, unless such settlement
releases Licensee fully from such claim; (ii) the Company shall promptly provide
Licensee with copies of all pleadings or similar document relating to any
Trademark Claim; (iii) the Company shall consult with Licensee with respect to
the defense and settlement of any Trademark Claim; and (iv) in any litigation to
which Licensee is a party, Licensee shall be entitled to be separately
represented at its own expense by counsel of its own selection.
E. Licensee acknowledges and agrees that the Company makes no representation or
warranty with respect to the Licensed Marks (other than as expressly provided
herein), and the Company shall have no obligations hereunder for indemnification
or otherwise arising out of or based upon Licensee's use of such other Licensed
Marks.
X. MARKETING EFFORTS OF LICENSEE
As a material condition to this Agreement, Licensee shall use its best efforts
to effect introduction of Tripod Europe into the commercial market via the
Internet on or about December 1, 1998, 1998, to market and promote the
commercial exploitation of Tripod Europe in the Territory, and to sell
advertising, promotional, electronic commerce, and other revenue-generating
services on Tripod Europe.
<PAGE>
XI. COSTS
A. All costs and expenses incurred by Licensee in carrying out its obligations
under this Agreement shall be paid by Licensee, and Licensee shall not be
entitled to any reimbursement from the Company. Licensee shall possess or obtain
at its own expense all necessary licenses and permits and shall comply with all
laws, ordinances, rules or regulations affecting the importation into and/or
resale or transfer of Licensed Properties. Except as specifically provided
herein, all costs and expenses incurred by the Company in carrying out its
obligations under this Agreement shall be paid by the Company.
B. Inspection of Books and Records.
(i) During the Term of this Agreement and thereafter,
the Company 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
Company engineering costs) for developing,
localizing, maintaining and enhancing the licensed
products under this Agreement and all other
Licensed Properties.
(ii) All statements and all other accounts rendered by
the Company to Licensee shall be binding upon
Licensee and not be the subject of any objection
by Licensee for any reason, unless specific
objection, in writing, stating the basis thereof
is given to the Company within one (1) year
following the date the Company mails such
statement or account to Licensee. Licensee shall
have the right to appoint a duly qualified
independent chartered or certified public
accountant, or its equivalent, in the Territory to
examine the Company's books and records in so far
as the same pertain to the costs and expenses
payable to the Company under this Agreement. Such
examination shall take place at the Company'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 Licensee's
sole cost and expense. Licensee acknowledges that
the Company's books and records contain
confidential
<PAGE>
trade information and warrants that Licensee will
not communicate to any third parties, other than
the professional advisors of Licensee, any
information or facts obtained as a result of such
examination of the books and records of the
Company, except in connection with an action,
proceeding or claim brought against the Company or
as otherwise provided by or at law. If the
examination discloses an overcharge of costs, the
Company shall pay the amount of such overcharge
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.
(iii) If the calculation of any costs or expenses
hereunder is determined by a computer-based
system, the Licensee shall be permitted to examine
the machine-sensible data utilized by such system
and the related documentation describing such
system. The Company 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.
C. All amounts payable to the Company under this Agreement shall be due and
payable by Licensee 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.
XII. CONFIDENTIALITY
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 this
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
<PAGE>
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 under the Basic Agreement or as otherwise required under applicable law,
including, in the case of the Company, 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) relating to the Confidential
Information of the other Party and the Joint Entities which such 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 BIG and Lycos which are expressly agreed to in writing prior to
such undertaking. Lycos agrees that BIG 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 BIG'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 BIG under the Basic Agreement shall not apply to any entity owned
by BAG (other than BIG and subsidiaries owned by BIG).
XIII. BREACH
No acquiescence in any breach of this Agreement by either Party shall operate to
excuse any subsequent or prior breach provided, however: (i) a breach of this
Agreement by Licensee due to the actions or inactions of the Company or any
member of the Steering Committee or Director of Licensee appointed by the
Company shall not constitute a breach; and (ii) any notice of breach shall be
given to all Directors of Licensee and in connection with the cure of such
breach, Licensee shall take all action required by directors who are not
designated by the Company.
<PAGE>
XIV. PRIOR AGREEMENT
This Agreement supersedes all previous agreements relating to the subject matter
hereof, whether oral or in a writing, and constitutes the entire agreement of
the parties hereto and shall not be amended or altered in any respect except in
a writing executed by the Parties.
XV. 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
hereof, 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 BIG, the Company and the
Licensee, the Parties agree that all three (3) arbitrators shall be appointed by
the ICC, unless the Parties agree otherwise.
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
<PAGE>
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 has
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.
XVI. 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 the 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 Licensee to:
Lycos-Bertelsmann GmbH & Co. KG
Carl-Bertelsmann Strasse 161-L
33311 Gutersloh, Germany
Attention: Christoph Mohn, Geschaftsfuhrer
<PAGE>
with copies to:
Bertelsmann AG
Carl-Bertelsmann Strasse 270
33311 Gutersloh, Germany
Attention: Dr. Klaus Eierhoff
Telefax: 011 49 5241 80 9555
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 the Company to:
Lycos, Inc.
400-2 Totten Pond Road
Waltham, Massachusetts, U.S.A. 02154
Attention: President
Telefax: 781-370-2600
with copies to:
Lycos, Inc.
400-2 Totten Pond Road
Waltham, Massachusetts, U.S.A. 02154
Attention: General Counsel
Telefax: 781-370-2600
and:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, Massachusetts 02110
Attention: Michael J. Riccio, Jr., Esq.
<PAGE>
Telefax: 617-951-1295
XVII. ASSIGNMENT
Licensee shall neither assign nor transfer this Agreement or any interest
herein, or enter into any merger agreement effectively transferring this
Agreement to another party, without the prior written consent of the Company,
except that Licensee may (i) sublicense the Licensed Properties to Permitted
Sublicensees as provided herein, or (ii) assign this Agreement to any Person in
the context of the sale or other transfer of all or the majority of its
respective stock or assets of Licensee, including in connection with a
restructuring or reorganization of its respective business, provided that any
assignment to a Competitor shall require the prior written consent of the
Company, which the Company may withhold in its sole discretion. The Company may
assign this Agreement and/or subcontract its performance hereunder upon notice
to Licensee, to any of its Affiliates, provided that the Company shall remain
obligated to discharge its obligations under this Agreement.
XVIII. HEADINGS
The paragraph headings contained in this Agreement are set forth for the
convenience of the Parties only, do not form a part of this Agreement and are
not to be considered a party hereof for the purpose of construction or
interpretation hereof, or otherwise.
XIX. NON-COMPETITIVE USE; DEALING WITH COMPETITORS
Licensee shall not use, sell, license, sublicense or otherwise transfer any of
the Licensed Properties except as authorized under this Agreement. Licensee
shall not copy, reverse compile, disassemble, or reverse engineer any portion of
Licensed Software or use it to provide products or services competitive to
Licensed Software or to assist or allow others to do any such act as set forth
in this Article.
XX. REPRESENTATIONS
A. The Company and Licensee represent and warrant the following to each other:
(i) Neither the execution and delivery by it of this Agreement nor the
consummation of the transactions contemplated hereby, violates any law or
regulation or conflict with, or results in a breach of or default under any
agreement, license, instrument, judgment, decree or order to which it is a party
or by which it is bound, where such violation, conflict, or breach would have a
material adverse effect on such Party's financial condition or operations or
ability to fulfill its obligations under this Agreement.
<PAGE>
(ii) No approval or consent of any governmental agency or instrumentality
is required for the authorization, execution, or delivery by it of this
Agreement.
(iii) Neither this Agreement nor any document or certificate furnished by
such Party pursuant to this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein not misleading.
(iv) The execution and delivery of this Agreement and the performance by
such Party of its obligations hereunder are within such Party's corporate power,
have been duly authorized by proper corporate action on the part of such Party
and are not in violation of the organizational documents of such Party.
B. In addition, the Company represents and warrants the following to
Licensee:
(i) Except as specifically disclosed, the Company holds title to, or
otherwise has the right to market the Licensed Properties and all of the
copyrights subsisting therein.
(ii) The Licensed Properties shall be in substantial conformance with all
of Tripod's documentation and specifications for the Term. Any upgrades shall be
in substantial conformance with the Company's documentation and specifications
from the date of release of such upgrades.
(iii) To the knowledge of Tripod, the Licensed Property does not contain
any virus, time bomb, or drop dead device or other code designed to disable a
computer program or other hardware device. To the knowledge of Tripod, neither
the Licensed Software, nor the Licensed Marks infringe or violate any trademark,
copyright, patent rights or any trade secret or proprietary information rights
of any third party.
XXI. CONSTRUCTION; 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. All appendices, exhibits and schedules are hereby incorporated by reference
and are part of this Agreement as if expressly set forth at length herein.
XXII. 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
<PAGE>
shall stay in force and the unenforceable, void or incomplete provision shall
be replaced by a valid provision or 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 VII
of this Agreement.
XXIII. CONFORMITY WITH LOCAL LAW/CONSISTENCY
A. The Parties covenant and agree that this Agreement shall be amended to the
extent necessary to provide each Party with the full benefit of the
confidentiality provisions and the remedies provided under this Agreement. The
Parties agree to amend this Agreement and to negotiate in good faith
supplemental agreements with each other or with governmental authorities as may
be required to cause this Agreement to comply with applicable laws, including,
without limitation, data protection laws, and as may be necessary to give full
effect to the intent of the Parties as stated herein. Notwithstanding anything
to the contrary contained in this Section, this Agreement shall be modified to
the extent necessary to protect the rights of the Company and Licensee in their
property under the laws of each particular country as determined by the Parties
in their reasonable discretion.
B. If there are any inconsistencies or conflicts between the terms of this
Agreement and the Basic Agreement, the terms of the Basic Agreement shall
supersede the terms of this Agreement.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly
executed in duplicate counterparts, each of which shall be deemed to constitute
an original, effective as of the date first above written.
Lycos, Inc.
By: /s/ Robert J. Davis
-----------------------------------------
Name and Title: Robert J. Davis,
Chief Executive Officer and President
Date:
Tripod, Inc.
By: /s/ Robert J. Davis
-----------------------------------------
26
<PAGE>
Duly Authorized
Date:
Lycos-Bertelsmann GmbH & Co. KG
By: /s/ Christoph Mohn
-----------------------------------------
CHRISTOPH MOHN, CEO
Date: 30-11-1998
<PAGE>
Exhibit 10.26
AMENDED AND RESTATED
INFORMATION SERVICES AGREEMENT
This Information Services Agreement ("Agreement") is entered into as
of May 1, 1999 (the "Effective Date"), by and between Inktomi Corporation, a
Delaware corporation with its principal place of business at 1900 South Norfolk
Street, Suite 310, San Mateo, California, 94403 ("Inktomi") and Wired Digital,
Inc., a Delaware corporation with its principal place of business at 660 Third
Street, 4th Floor, San Francisco, CA 94107 ("Customer").
RECITALS
A. Inktomi and Customer entered into an Information Services Agreement
dated as of April 1, 1998 (the "Prior Agreement").
B. Inktomi and Customer wish to amend and restate the Prior Agreement to
read as set forth herein to, among other matters, change the pricing for the
services rendered hereunder, alter the parties' rights and obligations with
respect to "Usage Data" as that term is defined in the Prior Agreement, alter
the kind of house ads Inktomi may place on Customer Services, and include a
termination for convenience right for Customer.
AGREEMENT
In consideration of the foregoing and the mutual promises contained herein
the parties agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms will
have the indicated meanings:
1.1. "CUSTOMER SERVICE(S)" means any online search service utilizing
the Inktomi Technology, whether branded HotBot or otherwise and whether
displayed as a separate Web site or the relevant portion of a Web page, that is
operated, assembled, developed or marketed by Customer alone or in conjunction
with third parties, including the commercial Internet search service currently
operated by Customer and located on the Web at www.hotbot.com ("HotBot");
PROVIDED HOWEVER that "Customer Services" shall not include any Web sites or Web
pages operated, assembled, developed or marketed by Lycos, Inc. or any affiliate
of Lycos, Inc. (other than Customer). For purposes of clarity, the foregoing
clause shall not preclude Customer from placing text links and promotional logos
on Web sites or Web pages operated, assembled, developed or marketed by Lycos,
Inc. or any affiliate of Lycos, Inc. that do nothing more than link end users
directly to Customer Services and that are clearly branded as a Customer
Service.
1.2. "DATABASE" means Inktomi's full text index database of Web pages
accessible by end users of the Customer Services at any given time.
<PAGE>
1.3. "INKTOMI DATA PROTOCOL" means the written specification on how an
Interface communicates and interacts with the Inktomi Search Engine.
1.4. "INKTOMI SEARCH ENGINE" means Inktomi's current Search Engine as
of the Effective Date, inclusive of the Database, as the same may be upgraded,
modified, changed, or enhanced by Inktomi at its sole discretion, subject to the
terms of this Agreement. The Inktomi Search Engine does not and will not include
features, options and modules developed and customized specifically for third
parties and provided to such third parties on an exclusive basis, or features,
options, modules and future products which Inktomi licenses or provides
separately.
1.5. "INKTOMI SEARCH RESULT DATA" means the proprietary search result
data (consisting of URLs, corresponding Web site descriptions, and corresponding
numerical relevancy rankings among the individual search results provided by
Inktomi) that is provided by Inktomi to Customer for serving and display to end
users of the Customer Services as part of the search results delivered in
response to such end users' search queries.
1.6. "INKTOMI TECHNOLOGY" means the Inktomi Search Engine, the Inktomi
Data Protocol, the Interface Construction Tools and all other computer software,
technology and/or documentation which is supplied by Inktomi for use in or in
connection with delivery of the Services, including without limitation all
source code and object code therefor and all algorithms, ideas and Intellectual
Property Rights therein.
1.7. "INTELLECTUAL PROPERTY RIGHTS" means any and all rights existing
from time to time under patent law, copyright law, semiconductor chip protection
law, moral rights law, trade secret law, trademark law, unfair competition law,
publicity rights law, privacy rights law, and any and all other proprietary
rights, and any and all applications, renewals, extensions and restorations
thereof, now or hereafter in force and effect worldwide.
1.8. "INTERFACE" means the editorial and graphical content and design
of the Web pages served to end users of Customer Services, including without
limitation the Search Page, all Results Pages, instruction pages, frequently
asked questions pages and any Customer Service end user terms and guidelines.
1.9. "INTERFACE CONSTRUCTION TOOLS" means all software tools, if any,
in object code form, provided by Inktomi to assist Customer to build Interfaces
to the Inktomi Search Engine, including without limitation Inktomi's application
server currently known as Forge.
1.10. "RESULTS PAGES" means all Web pages displaying search results
presented to end-users directly as a result of accessing the query mechanisms of
the Inktomi Search Engine or indirectly though a cache controlled or influenced
by Customer.
1.11. "RESULTS SET" means a set of results consisting of between zero
and one hundred records presented to an end-user of the Customer Service (either
directly from the
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Inktomi Search Engine or indirectly through a cache controlled or influenced by
Customer) in response to a search query.
1.12. "SEARCH ENGINE" means computer software which crawls the
Internet, downloads and analyzes text and other data, sorts and organizes the
data, creates an index of accessible data, and, after receiving a particular
search request (in the form of a word query), locates material accessible in the
database, and presents the results of the search.
1.13. "SEARCH PAGE" means the Web page on a Customer Service through
which end users may access the Inktomi Search Engine and run searches against
the Database.
1.14. "SERVICES" means the Internet search engine services to be
provided by Inktomi for Customer under this Agreement, as more fully described
on Exhibit A.
1.15. "TERM" shall have the meaning indicated in Section 10.
1.16. "WEB" means the so-called World Wide Web, containing, INTER
ALIA, pages written in hypertext markup language (HTML) and/or any similar
successor technology.
1.17. "WEB PAGE" means a document on the Internet which may be viewed
in its entirety without leaving the applicable distinct URL address.
1.18. "WEB SITE" means a collection of inter-related Web pages.
2. PROVISION OF SERVICES; IMPLEMENTATION.
2.1. SERVICES AND IMPLEMENTATION. Subject to the terms and conditions
of this Agreement, Inktomi shall provide the Services to Customer for use as
part of the Customer Services, such services to be provided substantially in
accordance with the functionality specifications, performance criteria and
limitations specified on EXHIBIT A. Inktomi, at its own expense, shall provide
all data transmission capacity (bandwidth), disk storage, server capacity and
other hardware and software required to run the Inktomi Search Engine and
maintain the Database. Customer, at its own expense, shall create the Interfaces
to the Inktomi Search Engine for the Customer Services, and shall provide all
disk storage, server capacity and other hardware and software required to run
and maintain the Customer Services and the Interfaces, and to modify and serve
advertisements on the Interfaces. Inktomi shall provide reasonable assistance
(through telephone, e-mail, the Web, or fax) to Customer during regular business
hours regarding development of the Interfaces and integration of the same with
the Inktomi Search Engine. Customer, at its own expense, shall provide all data
transmission capacity (bandwidth) required to connect to and receive information
from the Inktomi Search Engine. Customer may only provide search services based
on the Services to end users of the Customer Services, and shall have no right
to distribute or resell or provide services based on the Services to other
service providers. Inktomi shall keep Customer reasonably informed of any
modifications or changes to the Inktomi Search Engine and will not make any such
modifications or changes if the same
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would preclude Inktomi from performing the Services substantially in accordance
with the functionality specifications, performance criteria and limitations
specified on EXHIBIT A.
2.2. TEST CLUSTER. During the development period for any new Interface
or modification period for any existing Interface, Customer shall only have
access through the Inktomi Data Protocol to a non-production version of the
Inktomi Search Engine (the "Test Cluster"). Upon completion of the new or
modified Interface and all desired testing against the Test Cluster, Customer
shall present the Interface to Inktomi for technical review and testing against
the production version of the Inktomi Search Engine. Inktomi shall promptly
notify Customer of any technical problems or issues discovered by Inktomi
regarding the Interface. Once accepted by Inktomi, Inktomi shall provide access
to Customer to the production version of the Inktomi Search Engine. Customer may
run reasonable tests against the Test Cluster and the production version of the
Inktomi Search Engine, provided however that Customer may not conduct any load
testing (prior to commercial launch of its search service) without the prior
consent of Inktomi. Load testing as used herein means the generation and
delivery of more than five queries per second.
2.3. INKTOMI DATA PROTOCOL. Inktomi has previously provided the
Inktomi Data Protocol and the Interface Construction Tools to Customer. Inktomi
grants to Customer a nontransferable, nonexclusive license during the Term to
use the Inktomi Data Protocol and the Interface Construction Tools solely to
create and maintain the Interfaces to the Inktomi Search Engine for the Customer
Services. Inktomi will provide all future releases of the Inktomi Data Protocol
and Interface Construction Tools to Customer at the same time Inktomi makes such
releases available to its general customer base.
2.4. OTHER SERVICES AND SUPPORT. Upon request, and provided that
Customer is current with service fees due under this Agreement, Inktomi may
provide additional services and support beyond the services and support set
forth herein. Any such service or support shall be provided at Inktomi's then
applicable consulting rates and charges.
2.5. INKTOMI TECHNOLOGY. As between Customer and Inktomi, Customer
acknowledges that Inktomi owns all right, title and interest in and to the
Inktomi Technology (except for any software licensed by third parties to
Inktomi), and that Customer shall not acquire any right, title, and interest in
or to the Inktomi Technology, except as expressly set forth in this Agreement.
Customer shall not modify, adapt, translate, prepare derivative works from,
decompile, reverse engineer, disassemble or otherwise attempt to derive source
code from any Inktomi software or documentation. Customer will not remove,
obscure, or alter Inktomi's copyright notice, trademarks, or other proprietary
rights notices affixed to or contained within any Inktomi software or
documentation.
2.6. INTERFACE. As between Inktomi and Customer, Inktomi acknowledges
that Customer owns all right, title and interest, including without limitation
all Intellectual Property Rights, in and to the Interfaces (except for any
software licensed by third parties to Customer and except for editorial content
regarding the use and functionality of the Inktomi Search Engine provided by
Inktomi to Customer for incorporation into the Customer Services, which content
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shall be and remain Inktomi Technology), and that Inktomi shall not acquire any
right, title or interest in or to the Interfaces, except as expressly set forth
in this Agreement.
2.7. INKTOMI SEARCH RESULT DATA. As between Customer and Inktomi,
Customer acknowledges and agrees that Inktomi owns all right, title and interest
in and to the Inktomi Search Result Data, including without limitation any and
all Intellectual Property Rights therein, and that Customer shall not acquire
any right, title or interest in or to the Inktomi Search Result Data, except as
expressly set forth in this Agreement. Inktomi hereby grants to Customer a
worldwide, nontransferable, nonsublicensable, nonexclusive license to use,
reproduce, reformat, publicly perform and publicly display the Inktomi Search
Result Data for the limited purpose of serving and displaying such Inktomi
Search Result Data to end users of the Customer Services as part of the search
results delivered in response to such end users' search queries; and except as
may be required to fulfill such limited purpose, Customer shall not use,
reproduce, modify, adapt, prepare derivative works from, distribute, resell,
provide or disclose to any third party any Inktomi Search Result Data, alone or
in combination with other data, without the express prior written consent of
Inktomi.
2.8. CUSTOMER SERVICES DATA. As between Inktomi and Customer, Inktomi
acknowledges and agrees that Customer (or its third party licensor(s)) owns all
right, title and interest in and to the data generated on or by use of the
Customer Services, including without limitation the following: all end user
personal identification and site behavioral data; end user demographic and
psychographic data; end user input data, preferences and search queries; end
user advertising and search result click-through data; and search result data
provided by parties other than Inktomi and any information derived therefrom, in
each case including without limitation any and all Intellectual Property Rights
therein, and that Inktomi shall not acquire any right, title, or interest
therein or thereto except as expressly set forth in this Agreement; PROVIDED
HOWEVER that to the extent any of the foregoing data (such as sets of end user
search result click-through data) include or is derived from any Inktomi Search
Result Data, the portion of such data comprising or derived from Inktomi Search
Result Data is and shall remain the sole property of Inktomi, shall not be used
by Customer or disclosed by Customer to any third party, and shall otherwise
remain subject to the restrictions set forth in Section 2.7 above.
2.8.1. Notwithstanding the foregoing, if requested by Inktomi,
for each URL provided by Inktomi to Customer in a set of search results selected
by an end user after initiating a search against the Inktomi Search Engine,
Customer shall use commercially reasonable efforts to provide Inktomi with the
following information: the search query, the URL selected, the rank within the
search result list of the URL, and the name of the Inktomi database from which
the URL originated ("Click Through Data"). Customer hereby grants to Inktomi a
worldwide, nontransferable, nonsublicensable, nonexclusive license to use and
process that portion of Click Through Data owned by Customer for the limited
purpose of ordering and refining Inktomi search results and algorithms
associated with the provision of search services to its customers; PROVIDED
HOWEVER that Inktomi may not disclose that it obtains Click Through Data from
Customer and may not use or disclose that portion of Click Through Data owned by
Customer for any purpose or in any manner other than as specifically set forth
herein, without
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Customer's prior written consent. Customer shall cooperate with Inktomi to
develop and implement procedures to capture and remit such Click Through Data to
Inktomi.
2.9. NONEXCLUSIVE SERVICES. Customer understands that Inktomi will
provide the Services on a nonexclusive basis. Customer acknowledges that Inktomi
has customized and provided, and will continue to customize and provide, its
software and technology to other parties for use in connection with a variety of
applications, including search engine applications. Nothing in this Agreement
will be deemed to limit or restrict Inktomi from customizing and providing its
software and technology to other parties for any purpose, including in
connection with search engine applications, or in any way affect the rights
granted to such other parties.
3. PUBLICITY; BRANDING AND ATTRIBUTION; TRADEMARK LICENSE; HOUSE ADS.
3.1. PUBLICITY. Except as provided in the Inktomi Attribution and
Publicity Guidelines attached hereto as EXHIBIT C, Customer shall not mention
Inktomi, SmartCrawl or any other Inktomi product, technology or service in any
press release or marketing materials or Web site without Inktomi's prior written
consent, which shall not be unreasonably withheld or delayed. Except as provided
in the Customer Publicity Guidelines attached hereto as EXHIBIT D, Inktomi shall
not mention Customer (or its affiliates), Customer Services or any Customer
product incorporating Inktomi Technology or the Database in any press release or
marketing materials or Web site without Customer's prior written consent, which
shall not be unreasonably withheld or delayed. Inktomi agrees not to contact
end-users of Customer Services without Customer's prior consent, except where
such end-users are engaging in conduct that is adversely affecting the
performance or usage of the Inktomi Search Engine. Customer agrees that it shall
not make, support or facilitate any public statement regarding the volume of
search queries responded to by the Inktomi Search Engine; its intentions to use,
continue to use, decrease its use or discontinue use of the Services as part of
the Customer Services; or its satisfaction or dissatisfaction with the Services,
without Inktomi's prior written consent.
3.2. BRANDING AND ATTRIBUTION. Customer shall have sole control and
discretion over branding of Customer Services. Without limiting the foregoing,
Customer may place proper proprietary notices for its copyright and trademark
interests in the Interface and on its trademarks and marketing materials.
Inktomi will receive appropriate, subsidiary attribution on all Results Pages as
the provider of Services and will be invited to participate in certain Customer
marketing and promotional opportunities, in accordance with the Inktomi
Attribution and Publicity Guidelines set forth on Exhibit C and will receive
attribution in Customer Service marketing materials to the extent Customer's
other information service providers receive attribution therein.
3.3. TRADEMARK LICENSE. Inktomi hereby grants Customer a
nontransferable, nonexclusive license under Inktomi's trademarks during the Term
for the purpose of fulfilling Customer's obligations, and exercising its rights,
hereunder. Customer hereby grants to Inktomi a nontransferable, nonexclusive
license under Customer's trademarks during the Term for the purpose of
fulfilling Inktomi's obligations, and exercising its rights, hereunder. Each
party will submit advertising materials containing the other party's trademarks
to the other party before
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release to the public for inspection, and such other party will have the right
to modify any such advertisements. All use of Inktomi trademarks by Customer
shall inure to the benefit of Inktomi, and all use of Customer trademarks by
Inktomi shall inure to the benefit of Customer. Except as set forth in this
Section, nothing in this Agreement shall grant or shall be deemed to grant to
one party any right, title or interest in or to the other party's trademarks. At
no time during or after the term of this Agreement shall one party challenge or
assist others to challenge the trademarks of the other party (except to the
extent such restriction is prohibited by applicable law) or the registration
thereof or attempt to register any trademarks, marks or trade names confusingly
similar to those of the other party.
3.4. HOUSE ADS. To the extent there is unsold advertising inventory on
the Customer Services during the Term, Inktomi may run advertisements on the
Customer Services on a rotating basis (or, if available, based on key words),
provided however that (a) Inktomi may not use more than ten percent (10%) of the
unsold Customer Service inventory in any one month without Customer's prior
approval and (b) Inktomi may place advertisements only for Inktomi's non-search
products on Customer Services. Any such unpaid house ads delivered to Customer
on behalf of Inktomi shall be subject to Customer's standard online advertising
terms and conditions.
4. WARRANTIES AND DISCLAIMER.
4.1. INKTOMI WARRANTIES. Inktomi warrants that (i) it has full
power and authority to enter into this Agreement, (ii) it has not previously
and will not grant any rights in the Inktomi Technology to any third party
that are inconsistent with the rights granted to Customer hereunder, (iii)
throughout the Term, the Inktomi Technology and the Services provided for
Customer shall be [***] and shall [***] [***] with the [***] on [***] and
(iv) the Inktomi Technology [***] and Inktomi shall [***] in connection with
the Customer Services, any [***] or other programs containing [***] which are
[***] or [***] to [***] with an [***] Inktomi does [***] warrant that the
Services [***] of [***] or that [***] of the Services will be [***] INKTOMI
MAKES NO OTHER WARRANTY OF ANY KIND, WHETHER EXPRESS, IMPLIED, STATUTORY OR
OTHERWISE, INCLUDING [***] OF [***] FOR A [***] AND [***]. IN PARTICULAR,
INKTOMI MAKES NO WARRANTIES WHATSOEVER REGARDING THE [***] OF THE [***] IN
THE [***] AND TO THE MAXIMUM EXTENT PERMITTED BY LAW [***] OR [***] FOR SUCH
MATERIAL.
4.2. CUSTOMER WARRANTIES. Customer warrants that it has full power and
authority to enter into this Agreement. Customer further warrants that it will
seek all necessary governmental approvals required to effectuate this Agreement.
CUSTOMER MAKES NO OTHER WARRANTY OF ANY KIND, WHETHER EXPRESS, IMPLIED,
STATUTORY OR
*** A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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OTHERWISE, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR USE, AND NONINFRINGEMENT.
5. END-USER SUPPORT. Customer, at its own expense shall provide first
level customer support services to end users of the Customer Services. Inktomi,
at its own expense, shall provide second level technical support services to
Customer regarding the operation of the Inktomi Search Engine. Such support
services will be provided during regular business hours Pacific time via
telephone, e-mail, the Web, or fax. Responses will be provided within the same
business day where possible and in any event within one business day following
receipt.
6. PAYMENTS.
6.1. SERVICE FEES. Customer shall pay Inktomi service fees in the
amount and on terms specified on Exhibit B attached hereto.
6.2. RECORDS. Customer shall keep complete and accurate records
pertaining to the Net Revenue it generates in connection with Customer
Services attributable to the Inktomi Search Engine, and the number of Results
Sets served from a cache controlled or maintained by Customer. Such records
shall be maintained for a two-year period following the year in which any
payments pertaining to such revenue were due. Inktomi shall have the right to
examine Customer's records from time to time but no more than once every six
(6) months to determine the correctness of any payment made under this
Agreement. Such examination shall be conducted at reasonable times during
Customer's normal business hours and upon at least ten (10) business days'
advance notice and in a manner so as not to interfere unreasonably with the
conduct of Customer's business. If any such examination indicates that
Customer has underpaid by more than [***] of the aggregate payments due for
the period subject to such examination, Customer shall reimburse Inktomi for
reasonable costs of such examination.
6.3. TAXES. Customer shall be responsible for all sales taxes and
other similar taxes imposed by any federal, state or local governmental entity
on the transactions contemplated by this Agreement, excluding taxes based upon
Inktomi's net income. When Inktomi has the legal obligation to pay or collect
such taxes, the appropriate amount shall be invoiced to and paid by Customer
unless Customer provides Inktomi with a valid tax exemption certificate
authorized by the appropriate taxing authority.
6.4. PAYMENT. All fees quoted and payments made hereunder shall be in
U.S. Dollars. Customer shall pay all amounts due under this Agreement to Inktomi
at the address indicated at the beginning of this Agreement or such other
location as Inktomi designated in writing.
7. CONFIDENTIALITY.
7.1. DEFINITION OF CONFIDENTIAL INFORMATION. All information and
documents disclosed or produced by either party in the course of this Agreement
which are disclosed in written form and identified by a marking thereon as
proprietary, or oral information which is
*** A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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defined at the time of disclosure and confirmed in writing within ten (10)
business days of its disclosure, shall be deemed the "Confidential Information"
of the disclosing party. Notwithstanding the above, the parties agree that any
information (in any form, whether in tangible or intangible) relating to the
Inktomi Search Engine, the Inktomi Technology, the Inktomi Data Protocol, the
Interface Construction Tools, and Inktomi Search Result Data is Confidential
Information of Inktomi.
7.2. TREATMENT OF CONFIDENTIAL INFORMATION. Each party agrees to
protect the other party's Confidential Information in the same manner as such
party protects its own Confidential Information of substantially similar
proprietary value, but in no case less than reasonable care. Each party agrees
that it will use the Confidential Information of the other party only for the
purposes of this Agreement and that it will not divulge, transfer, sell,
license, lease, or otherwise disclose or release any such information or
documents to third parties, with the exception of (i) its employees or
subcontractors who require access to such for purposes of carrying out such
party's obligation hereunder and (ii) persons who are employed as auditors by a
public accounting firm or by a federal or state agency. Each party will use
reasonable efforts to advise any person obtaining Confidential Information that
such information is proprietary and to obtain a written agreement obligating
such person to maintain the confidentiality of any Confidential Information
belonging to the party or its suppliers.
7.3. NO OTHER CONFIDENTIAL INFORMATION. Neither party shall have any
obligation under this Section 7 for information of the other party which the
receiving party can substantiate with documentary evidence that has been or is
(i) developed by the receiving party independently and without the benefit of
information disclosed hereunder by the disclosing party; (ii) lawfully obtained
by the receiving party from a third party without restriction and without breach
of this Agreement; (iii) publicly available without breach of this Agreement;
(iv) disclosed without restriction by the disclosing party to a third party; or
(v) known to the receiving party prior to its receipt from the disclosing party.
7.4. TERMS OF AGREEMENT. Neither party shall make any public
disclosure of the specific terms of this Agreement, except with the prior
written consent of the other party or to potential investors or merger partners.
Without limiting the foregoing, the parties shall cooperate in good faith to
obtain confidential treatment for mutually agreed terms in the event that this
Agreement will be filed with the Securities and Exchange Commission.
8. INDEMNIFICATION.
8.1. INKTOMI INDEMNIFICATION. Inktomi shall [***] Customer and [***]
and [***] them [***] from and against any and all [***] and [***], including
[***], which Customer [***] may incur as a result of: (a) any claims which,
[***], would constitute a [***] or [***] made by Inktomi under this
Agreement, (b) any claims relating to the [***], [***] or any [***] therein
([***] any [***] by [***], [***]
*** A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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[***] or [***] contained in the [***]), including [***] a claim that the [***],
[***] or [***] a [***] of any [***], or (c) Inktomi's other [***], [***] or
[***] hereunder (including [***]).
8.2. CUSTOMER INDEMNIFICATION. Customer shall indemnify Inktomi
[***] and [***] them [***] from and against any and all [***] and [***],
including [***], which Inktomi [***] may incur as a result of: (a) any claims
which, [***], would constitute a [***] or [***] made by Customer under this
Agreement, (b) any claims relating to any [***] or any [***] therein,
including [***] a claim that any [***] or [***] a [***] of any [***], or (c)
Customer's other [***] or [***] hereunder or in [***] with the [***].
8.3. CONDITIONS. Neither party shall have any obligation to
indemnify the other party for a claim unless the indemnified party (a) gives
prompt written notice of the claim, (b) allows the [***] to [***] control the
[***] of such claim, and (c) provides the indemnifying party with the [***]
and [***] necessary for the [***] of such claim. The indemnified party shall
have the right to [***] in the [***] at [***].
9. LIMITATION OF LIABILITY.
9.1. MAXIMUM LIABILITY. EXCEPT FOR [***] OUT OF OR [***] TO [***]
OF THE [***] OR [***] HEREIN, EACH PARTY'S LIABILITY UNDER THIS AGREEMENT
SHALL BE [***] TO AMOUNTS [***] TO INKTOMI FOR [***] (UNDER THIS AGREEMENT
AND ALL PRECEEDING AGREEMENTS) DURING THE [***] PRIOR TO THE [***] OF THE
[***] TO [***].
9.2. WAIVER OF CONSEQUENTIAL DAMAGES. EXCEPT FOR [***] OUT OF OR
[***] TO [***] OF THE [***] OR [***] HEREIN, [***] WILL BE LIABLE FOR [***]
OR [***], OR FOR [***] OR [***], INCLUDING [***]FOR [***], HOWEVER [***]
AND UNDER ANY [***], INCLUDING BUT NOT LIMITED TO [***]AND [***], AND WHETHER
OR NOT IT [***] OR [***] OR [***]OF THE [***] OF SUCH [***].
*** A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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9.3. REMOVAL OF MATERIALS. Inktomi shall use commercially reasonable
efforts as promptly as practicable following delivery of a request from Customer
to remove any materials or URLs from the Database that Customer reasonably
believes may lead to liability for Customer or Inktomi, and Inktomi may remove
any materials or URLs from the Database that it reasonably believes may create
liability for Customer or Inktomi, in each case with notice to the other party.
10. TERM AND TERMINATION.
10.1. TERM. The term of this Agreement (the "Term") shall commence on
the Effective Date and shall continue in force through March 31, 2001, unless
earlier terminated as provided herein.
10.2. TERMINATION FOR BREACH. Either party may suspend performance
and/or terminate this Agreement if the other party materially breaches any term
or condition of this Agreement and fails to cure that breach within [***]
days after receiving written notice of the breach.
10.3. TERMINATION FOR CONVENIENCE. Customer may terminate this
Agreement for convenience at any time following the Effective Date by giving no
less than [***] days written notice to Inktomi. During the notice period,
Customer shall continue to pay Inktomi the minimum monthly service charge as set
forth in EXHIBIT B.
10.4. TERMINATION DUE TO INSOLVENCY. Either party may suspend
performance and/or terminate this Agreement if the other party becomes insolvent
or makes any assignment for the benefit of creditors or similar transfer
evidencing insolvency, or suffers or permits the commencement of any form of
insolvency or receivership proceeding, or has any petition under bankruptcy law
filed against it, which petition is not dismissed within sixty (60) days of such
filing, or has a trustee or receiver appointed for its business or assets or any
party thereof.
10.5. EFFECT OF TERMINATION. Upon the termination of this Agreement
for any reason (i) all license rights granted herein shall terminate, (ii)
Customer shall immediately pay to Inktomi all amounts due and outstanding as of
the date of such termination and (iii) each party shall return to the other
party, or destroy and certify the destruction of, all Confidential Information
of the other party. Following expiration or termination of this Agreement, each
party shall cooperate and use reasonable efforts to seek to remove or modify, as
requested, any representations of or references to the Customer Services from
publicly available caches, indexes, archives or search engines.
10.6. PURCHASE RIGHT UPON ABANDONMENT. During the Term of this
Agreement and for [***] thereafter, if Customer ceases operating its HotBot
search engine business in the ordinary course and Customer does not sell or
otherwise dispose of all the assets relating to and used exclusively by
Customer's HotBot business (including without limitation the Interface and
the HotBot specific trademarks, service marks and trade names) within
[***] days following the occurrence of such abandonment of the HotBot
business, then for [***] days
*** A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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Inktomi shall have the right to purchase all or part of Customer's remaining
assets relating to the HotBot business on [***] and [***] terms and
conditions.
10.7. SURVIVAL. In the event of any termination or expiration of this
Agreement for any reason, Sections 1, 2.5, 2.6, 2.7, 2.8, 4, 6, 7, 8, 9, 10 and
11 shall survive termination. Neither party shall be liable to the other party
for damages of any sort resulting solely from terminating this Agreement in
accordance with its terms.
10.8. REMEDIES. Each party acknowledges that its breach of the
confidentiality or service/license restrictions contained herein may cause
irreparable harm to the other party, the extent of which would be difficult to
ascertain. Accordingly, each party agrees that, in addition to any other
remedies to which the other party may be legally entitled, such party shall have
the right to seek immediately injunctive relief in the event of a breach of such
sections by the other party or any of its officers, employees, consultants or
other agents.
11. MISCELLANEOUS.
11.1. CAPACITY. Each party warrants that it has full power to enter
into and perform this Agreement, and the person signing this Agreement on either
party's behalf has been duly authorized and empowered to enter in such
agreement. Each party further acknowledges that it has read this Agreement,
understands it and agrees to be bound by it. Each party acknowledges that such
party has not been induced to enter into such agreements by any representations
or statements, oral or written, not expressly contained herein or expressly
incorporated by reference.
11.2. NOTICE. Any notice required for or permitted by this Agreement
shall be in writing and shall be delivered as follows with notice deemed given
as indicated: (i) by personal delivery when delivered personally, (ii) by
overnight courier upon written verification of receipt, (iii) by telecopy or
facsimile transmission when confirmed by telecopier or facsimile transmission
report, or (iv) by certified or registered mail, return receipt requested, upon
verification of receipt. All notices must be sent to the addresses first
described above or to such other address that the receiving party may have
provided for the purpose of notice in accordance with this Section.
11.3. ASSIGNMENT. Neither party may assign its rights or delegate its
obligations under this Agreement without the other party's prior written
consent, except to the surviving entity in a merger or consolidation in which it
participates or to a purchaser of all or substantially all of its assets, so
long as such surviving entity or purchaser shall expressly assume in writing the
performance of all of the terms of this Agreement.
11.4. NO THIRD PARTY BENEFICIARIES. All rights and obligations of the
parties hereunder are personal to them. This Agreement is not intended to
benefit, nor shall it be deemed to give rise to, any rights in any third party,
except as expressly provided herein.
*** A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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11.5. GOVERNING LAW. This Agreement will be governed and construed, to
the extent applicable, in accordance with United States law, and otherwise, in
accordance with California law, without regard to conflict of law principles.
Any dispute or claim arising out of or in connection with this Agreement shall
be resolved by final and binding arbitration administered by JAMS/ENDISPUTE
("JAMS"), located at Two Embarcadero Center, Suite 1100, San Francisco,
California, 94111, telephone (415) 982-5267. The arbitration shall be held at
the JAMS office in San Francisco, California, or as agreed by the parties and
JAMS. Judgment on the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof. The parties acknowledge that the United
Nations Convention on Contracts for the International Sale of Goods is
specifically excluded from application to this Agreement.
11.6. INDEPENDENT CONTRACTORS. The parties are independent
contractors. Neither party shall be deemed to be an employee, agent, partner or
legal representative of the other for any purpose and neither shall have any
right, power or authority to create any obligation or responsibility on behalf
of the other.
11.7. FORCE MAJEURE. Neither party shall be liable hereunder by reason
of any failure or delay in the performance of its obligations hereunder (except
for the payment of money) on account of strikes, shortages, riots, insurrection,
fires, flood, storm, explosions, earthquakes, acts of God, war, governmental
action, or any other cause which is beyond the reasonable control of such party
(each a "Force Majeure Event"). Each party will use its reasonable best efforts
to notify the other party of the occurrence of a Force Majeure Event within
three (3) business days of such occurrence.
11.8. COMPLIANCE WITH LAW. Each party shall be responsible for
compliance with all applicable laws, rules and regulations, if any, related to
the performance of its obligations under this Agreement.
11.9. WAIVER. The failure of either party to require performance by
the other party of any provision shall not affect the full right to require such
performance at any time thereafter; nor shall the waiver by either party of a
breach of any provision hereof be taken or held to be a waiver of the provision
itself.
11.10. SEVERABILITY. If any provision of this Agreement is held by a
court of competent jurisdiction to be contrary to law, such provision shall be
changed and interpreted so as to best accomplish the objectives of the original
provision to the fullest extent allowed by law and the remaining provisions of
this Agreement shall remain in full force and effect.
11.11. HEADINGS. The section headings appearing in this Agreement are
inserted only as a matter of convenience and in no way define, limit, construe
or describe the scope or extent of such paragraph, or in any way affect such
agreements.
11.12. COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, each of which will be considered an original, but all
of which together will constitute one and the same instrument.
13
<PAGE>
11.13. ENTIRE AGREEMENT. This Agreement, and the Exhibits hereto,
constitute the entire agreement between the parties with respect to the subject
matter hereof. This Agreement supersedes, and the terms of this Agreement
govern, any other prior or collateral agreements with respect to the subject
matter hereof; including without limitation the Prior Agreement and the Letter
Agreement dated September 28, 1998 between Inktomi and Lycos, Inc. Any
amendments to this Agreement must be in writing and executed by an officer of
the parties.
IN WITNESS WHEREOF, the parties have caused this Information Services
Agreement to be signed by their duly authorized representatives.
WIRED DIGITAL, INC. INKTOMI CORPORATION
By: /s/ Elizabeth Vanderslice By: /s/ Richard Pierce
_____________________________ _____________________________
Name: Elizabeth Vanderslice Name: Richard Pierce
___________________________ __________________________
Title: President Title: Vice President of Marketing
__________________________ __________________________
14
<PAGE>
EXHIBIT A
SERVICES
BASIC SERVICES:
Inktomi will use the Inktomi Search Engine to crawl the Internet, download
and analyze text and other data, sort and organize the data, create an index of
accessible data, and, after receiving a particular search request from an end
user (in the form of a word query), locate material accessible in the Database,
and present the results of the search to the end user. The functionality
specifications and performance criteria applicable to such services are as
follows:
BASELINE FUNCTIONALITY SPECIFICATIONS:
- Inktomi will provide a minimum [***] document searchable Web
index for all queries and will provide a minimum [***] document
searchable Web index that may be accessed by up to [***]% of daily
queries.
- Ability to search by [***] (up to [***] levels), [***] and [***]
- Ability to search by [***] and [***], and search with [***]
(including [***] and [***])
- Search on included object, covering the following objects: Acrobat,
java applets, active x controls, audio, plugins, Flash, form, frame,
image, script, Shockwave, table, video and vrml
- Search on included [***], by [***]
- Search on [***], which permutes different combinations of the
query text to cover different [***] orderings ([***], etc)
- Search on specific [***], covering [***] and [***]
- Limit search to [***] containing [***] to a [***]
- Limit search to articles found in a specified newsgroup
- Limit search to words in the HTML "title" field
- Ability to selectively control the [***] of each [***] ([***]
records, [***] records, [***] records, [***] records, [***] records,
[***] records)
- [***]
- [***]
- Search by [***]
- [***] support
- [***] filtration, which assists in the creation of [***] in
which [***] site is represented [***]
- [***] filtration
*** A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
PERFORMANCE CRITERIA
- Size of Database - Minimum [***] million documents for all
queries and a minimum of [***] million
documents that may be accessed for up to
[***]% of daily queries
- Database Freshness - Full update once every [***] weeks
- Uptime/Downtime - Minimum [***]% uptime ([***]% downtime)
over monthly windows. Downtime = any
[***] minute period in which Inktomi
Technology processes [***] requests.
The parties will work toward a more
[***] and definition of uptime/downtime
and [***] the same during the Term.
- Query/Response Speed - Average speed less than or equal to
[***] ([***] response time)
- Latency - The parties will work together to
determine the definition of a "[***]"
the [***] concerning such [***] and
[***], and [***] the same during the
Term.
[***], Inktomi will provide standard crawl and uptime reports
to Customer.
ADDITIONAL SERVICES
In addition to the Basic Services described above, Inktomi will provide
the following additional services to Customer:
[***]. Customer may [***] Web URLs to Inktomi for [***]
within the Database. Inktomi will make [***] to [***] the URL's and
[***] to the Database within [***]. It is understood that many of
the URL's will "[***]" of the [***], [***] by [***] "[***]". Inktomi
makes [***] to [***] in the database. Inktomi and Customer agree to
work to provide a soluti0on that provides [***] of [***] or otherwise
affecting the [***] quality of the Database.
*** A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
OPTIONAL SERVICES
DIRECTORY SERVICES. Customer shall have the option to use
directory services through the Inktomi Directory Engine when Inktomi
makes such services commercial available to its general customer base.
The fees associated with this service will be negotiated between
Inktomi and Customer should Customer wish to exercise this option. The
directory services will be set forth in a separate addendum to this
Agreement and will consist of the following, as requested by Customer
- AutoDirectory - browsable categorized content
- Find More Like This - searches based on an existing document or
category
- One Click Refine - dynamic categorization of indexed search
results, producing clickable "buckets"
[A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION]
<PAGE>
EXHIBIT B
Service Fees
[A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION]
<PAGE>
EXHIBIT C
INKTOMI ATTRIBUTION AND PUBLICITY GUIDELINES
Attribution on Results Pages: A "Powered by Inktomi" style attribution line with
logo which provides a link to Inktomi's Web site located at www.inktomi.com will
appear on all Results Pages. The message will have a tertiary presence to the
(1) Customer Service and (2) Customer brand presences on the page
Press and Media Communications (press releases and media interviews and events):
Releases, interviews and events that relate to Inktomi Technology underlying
Customer Services will contain a discussion of the technology in appropriate
detail, and the Inktomi Technology will be attributed to Inktomi.
Inktomi will receive attribution in press releases regarding HotBot (and other
Customer Services incorporating the Services) that primarily speak to issues of
Web page searching. This will include but not necessarily be limited to press
releases about Inktomi Technology functionality and awards for HotBot (and other
Customer Services incorporating the Services) that are awarded based on Web
search prowess.
The attribution will be placed above the description of Wired (customarily found
at the bottom of the release) and may be included in an "About HotBot" section
of the release. The minimum text will be: "HotBot's Web searching is powered by
technology from Inktomi Corporation."
Customer Service/Customer Advertisements and Marketing Materials: Inclusion of
Inktomi and technology attribution to Inktomi will be in the sole discretion of
Customer.
Cross-Marketing: The parties will participate in cross-marketing opportunities
as they may mutually agree, including by way of example graphical cross-links
between the parties' Web sites and Customer Service.
<PAGE>
EXHIBIT D
CUSTOMER PUBLICITY GUIDELINES
Consistent with support Customer's efforts to brand and promote Customer
Services, Inktomi will refer to Customer Services and specifically the HotBot
service in a manner consistent with Customer's positioning strategy.
Accordingly, the parties have agreed that references substantially consistent
with the sample language set forth below will be deemed acceptable and approved,
as such guidelines may be modified from time to time by mutual agreement of the
parties. For any Customer/Customer Service reference outside the scope of such
pre-approved language, Inktomi will provide Customer with advance review of the
relevant press release, advertising, or marketing materials as provided in
Section 3.1.
Sample Pre-Approved Constructions:
- - HotBot, the Wired search engine, is powered by technology from Inktomi
Corporation.
- - Wired's HotBot search engine, powered by Inktomi technology.
- - Other partners leveraging Inktomi technology in commercial search engines
include Wired in the U.S. (http://www.hotbot.com), OzEmail in Australia/New
Zealand (http://www.anzwers.com.au) and NTT in Japan (http://www.goo.ne.jp.
- - Radar UOL offers advanced capabilities similar to those developed by
Inktomi for partners Wired, OzEmail and NTT.
<PAGE>
EXHIBIT 10.27
JOINT VENTURE AGREEMENT
THIS JOINT VENTURE AGREEMENT is made as of September 13, 1999 by and
between LYCOS, INC. ("Lycos"), a corporation organized under the laws of the
State of Delaware, United States of America, and SINGAPORE TELECOMMUNICATIONS
LIMITED ("SingTel"), a company incorporated under the laws of Singapore.
RECITALS
A. Lycos provides a World Wide Web navigation, search, directory, web
community and e-mail service which is supported by advertising and electronic
commerce. Lycos has exclusive worldwide rights to certain technology and knowhow
used in providing such service. Lycos is interested in providing a comparable
service, as culturally adapted and with suitable local content, for each of the
countries in the Territory (as defined below) through a joint venture with
SingTel.
B. SingTel is interested in establishing such a joint venture with
Lycos, and has various knowledge, experience and resources which would be of
benefit to the joint venture.
NOW, THEREFORE, the parties to this Agreement hereby agree as follows:
1. INCORPORATION OF THE COMPANY. As promptly as possible after the
execution of this Agreement, the parties shall cause a private limited liability
company to be incorporated under the laws of Singapore (the "Company") in
accordance with the following:
1.1 NAME. The name of the Company shall be "Lycos Asia Pte
Ltd" or such other name as may be agreed by the parties and approved by the
Singapore Registrar of Companies.
1.2 MEMORANDUM AND ARTICLES. The Memorandum of Association
(the "Memorandum") and Articles of Association (the "Articles") of the Company
shall, as to form and substance, be as agreed to between the parties in
connection with the incorporation of the Company.
1.3 AUTHORISED CAPITAL. [***]
1.4 INITIAL SUBSCRIPTION.
(a) The Memorandum shall be subscribed by two
(2) persons and the parties shall each appoint one person to act as its nominee
for such purpose. Such nominees will each agree in the Memorandum to subscribe
for one (1) Share. As soon as practicable after the allotment and issue of such
Shares to such nominees, the nominee appointed by Lycos shall
*** A CONFIDENTIAL PORTION OF MATERIAL HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
transfer his or her Share to Lycos and the nominee appointed by SingTel shall
transfer his or her Share to SingTel, and such transfers shall not be subject to
any restriction on transfer of Shares set forth in this Agreement or in the
Articles.
(b) Within sixty (60) days after the incorporation of the
Company, each of Lycos and SingTel shall simultaneously subscribe and pay for
its complement of Initial Shares (as defined below) at the Initial
Subscription Price (as defined in Section 2.2), at a total subscription
price, expressed in U.S. Dollars, of [***]. The Initial Subscription Price
shall be paid by each party by wire transfer to the bank account of the
Company and shall be received by the Company in clear funds within such sixty
(60) day period. "Initial Shares" with respect to a party means the whole
number of Shares determined by dividing the Initial Subscription Price by
S$1.00.
1.5 INITIAL ADDRESS OF REGISTERED OFFICE. The address of
the registered office of the Company shall initially be as follows:
31 Exeter Road
#18-00, Comcentre
Singapore 239732
1.6 FIRST DIRECTORS. The first Directors of the Company
shall be the following two directors appointed by Lycos, and two directors
appointed by SingTel as promptly as possible after the date of this Agreement:
Edward M. Philip
Eric J. Gerritsen
1.7 FINANCIAL YEAR. The financial year of the Company
shall conform to the fiscal year of Lycos, as in effect from time to time.
1.8 INCORPORATION COSTS AND EXPENSES. The parties hereto
shall procure that the Company shall bear all costs and expenses directly
relating to the incorporation of the Company, including without limitation
registration fees, filing fees, notary fees, stamp duties and the like, and, to
the extent permitted by law, legal fees.
2. CAPITAL CONTRIBUTIONS.
2.1 CAPITAL COMMITMENT. [***]
2.2 INITIAL CAPITAL CONTRIBUTION. As used in
this Agreement, "Initial Subscription Price" means the Singapore Dollar
equivalent of [cad 157]***[cad 179], as converted from US Dollars to Singapore
Dollars at an exchange rate calculated and fixed on the date
*** A CONFIDENTIAL PORTION OF MATERIAL HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
("Calculation Date") falling three (3) Business Days (as defined in Section 2.4)
prior to the scheduled payment date as being the average of the closing rates as
published by The Asian Wall Street Journal for the seven (7) Business Days
preceding (and excluding) the Calculation Date at which Singapore Dollars can be
purchased with US Dollars. Each of Lycos and SingTel shall make an initial
capital contribution to the Company by payment of the Initial Subscription Price
pursuant to Section 1.4.
2.3 MANDATORY ADDITIONAL CAPITAL CONTRIBUTIONS. After each
of the parties has made its initial capital contribution to the Company as
required under Section 2.2, each of the parties shall, from time to time in
accordance with the capital contribution schedule set forth in the attached
EXHIBIT A, contribute additional capital to the Company up to a maximum
amount not to exceed [***] for each of Lycos and SingTel, for a total maximum
aggregate additional amount of
[A CONFIDENTIAL PORTION OF MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.] Each additional capital contribution
to be made by the parties under this Section 2.3 shall be made by wire
transfer to the bank account of the Company in Singapore Dollars at an
exchange rate calculated and fixed on the date ("Relevant Calculation Date")
falling three (3) Business Days prior to the scheduled payment date as being
the average of the closing rates as published by The Asian Wall Street
Journal for the seven (7) Business Days preceding (and excluding) the
Relevant Calculation Date at which Singapore Dollars can be purchased with US
Dollars.
2.4 BUSINESS DAY. As used in this Agreement, "Business Day"
means a day (other than a Saturday or a Sunday or public holiday) on which banks
are open for business in Singapore; provided, however, that if any payment
obligation of Lycos hereunder falls due on a date on which banks are not open
for business in New York City, the due date for such payment shall automatically
be extended to the next date on which banks are open for business in New York
City and Singapore.
2.5 NO FRACTIONAL SHARES. In the event any capital
contribution amount after conversion from US Dollars to Singapore Dollars
results in either of the parties being entitled to fractional parts of a Share,
the fractional entitlement shall be disregarded and such party shall be allotted
and issued such maximum whole number of Shares as corresponds to the relevant
capital contribution amount paid by such party, with the excess funds relating
to the fractional parts of a Share to be refunded to such party.
2.6 VOLUNTARY ADDITIONAL CAPITAL CONTRIBUTIONS. Neither party
shall be required or permitted to make any capital contribution to the Company
in excess of its commitment amount as required under Section 2.1 unless by
mutual agreement.
3. LICENSES.
3.1 INITIAL LYCOS LICENSES. Within seven (7) days after the
incorporation of the Company, Lycos shall enter into a license agreement with
the Company in the form attached as EXHIBIT B (the "Local Searchservice
Agreement"), and cause Tripod, Inc. to enter into a license agreement with the
Company in the form attached as EXHIBIT C (the "Tripod Agreement"). As promptly
as possible after the incorporation of the Company, Lycos shall (a)
*** A CONFIDENTIAL PORTION OF MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
enter into a license agreement with the Company in substantially the form of
the attached EXHIBIT B, but as modified to provide for the licensing of the
MyLycos technology, to provide for lump sum royalties in the amount of [***]
with respect to the initial English version of MyLycos and [***] with respect
to the initial Chinese double byte version of MyLycos, and to omit the
provision for termination in the event of failure to agree on "Commercial
Readiness", and (b) cause WhoWhere, Inc. to enter into a license agreement
with the Company in substantially the form of the attached EXHIBIT B, but as
modified to provide for the licensing of the MailCity technology, to provide
for lump sum royalties in the amount [***] of with respect to the initial
English version of MailCity and with respect to the initial Chinese double
byte version of MailCity, and [***] to omit the provision for termination in
the event of failure to agree on "Commercial Readiness" (the four aforesaid
agreements, collectively, the "Lycos License Agreements").
3.2 ADDITIONAL PROPERTIES OF LYCOS AND ITS AFFILIATES. Lycos
agrees that neither Lycos nor any of its Affiliates (as defined in Section
21.14) will grant to any third party, or itself exercise, any right or license
to offer, operate or maintain any service or feature from time to time offered
by Lycos at or by any Affiliate of Lycos at a web site linked to on a networked
basis (other than MyLycos, Tripod, MailCity or any search, navigation and
directory service offered by Lycos under the "Lycos" brand name) which Lycos or
such Affiliate is free to license to third parties, at a website including a
country designation for any country in the Territory or at any other website
which specifically targets residents in any country in the Territory unless
Lycos or such Affiliate first offers to grant to the Company, on most favored
customer terms (which may include payment of a lump sum royalty on a most
favored customer basis), the right and license to offer, operate and maintain
such features or services at the local websites at which the Company offers its
services and the Company shall have failed to accept such offer within sixty
(60) days after such offer is made, or, notwithstanding the good faith efforts
of the parties, shall have failed to enter into a mutually acceptable license
agreement with Lycos or such Affiliate within ninety (90) days after such offer
is made.
3.3 PROPERTIES OF SINGTEL AND ITS AFFILIATES. SingTel agrees
that neither SingTel nor any of its Affiliates will grant to any third party, or
itself exercise, any right or license to offer, operate or maintain any Internet
content properties acquired, licensed or developed by SingTel or its Affiliates
after the date of this Agreement, at a website including a country designation
for any country in the Territory or at any other website which specifically
targets residents in any country in the Territory unless SingTel or such
Affiliate first offers to grant to the Company, on most favored customer terms
(which may include payment of a lump sum royalty on a most favored customer
basis), the right and license to offer, operate and maintain such Internet
content property at the local websites at which the Company offers its services
and the Company shall have failed to accept such offer within sixty (60) days
after such offer is made, or, notwithstanding the good faith efforts of SingTel
and the Company, shall have failed to enter into a mutually acceptable license
agreement with SingTel or such Affiliate within ninety (90) days after such
offer is made. SingTel further agrees that a provision to the effect of this
Section 3.1, and an exclusivity provision comparable to Section 2.2 of the Local
Searchservice Agreement, shall be included in any license agreement for Internet
content
*** A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
properties hereafter entered into between SingTel or any of its Affiliates and
the Company, whether entered into pursuant to this Section 3.3 or otherwise.
4. DURATION AND SURVIVAL.
4.1 DURATION. This Agreement shall commence and be effective
from the date hereof and continue in effect until the earlier to occur of any of
the following events, upon the occurrence of which this Agreement shall
terminate:
(a) the voluntary written agreement of the
parties to terminate this Agreement;
(b) the dissolution of the Company pursuant to
the provisions of this Agreement or otherwise;
(c) the purchase by Lycos of all of the ordinary
shares in the capital of the Company registered in the name of SingTel or any of
its Affiliates pursuant to the provisions of this Agreement or otherwise;
(d) the making of any order by the High Court of
the Republic of Singapore for the winding up or judicial management of the
Company, or the passing of any special resolution by the shareholders of the
Company for the winding up or liquidation of the Company;
(e) the acquisition of all of the ordinary
shares in the capital of the Company by a third party, or the acquisition of the
Company by a third party by means of merger or consolidation resulting in the
exchange of any ordinary shares for securities issued, or caused to be issued,
by the acquiring entity;
(f) the listing of the shares in the capital of
the Company on any stock exchange; or
(g) the termination of the Local Searchservice
Agreement pursuant to Section 6.2 thereof or the Tripod Agreement pursuant to
Section 5.2 thereof.
4.2 SURVIVAL. The provisions of Section 15 shall
survive the termination of this Agreement.
5. PARTIES AS SHAREHOLDERS.
5.1 EXERCISE OF RIGHTS. Each of the parties, in its capacity
as a shareholder of the Company, shall exercise, or refrain from exercising, any
of its voting rights as a shareholder of the Company and any of its rights to
appoint and remove Directors, so as to insure the adoption of any and every
resolution of shareholders necessary to give effect to the provisions of this
Agreement and to insure that no resolution of shareholders is adopted in
violation of the provisions of this Agreement.
<PAGE>
5.2 COMPLIANCE BY DIRECTORS.
(a) Each party shall cause the Directors which
such party has the right to designate under this Agreement to act or refrain
from acting, in their capacity as Directors, so as to observe, comply with and
give effect to the provisions of this Agreement.
(b) The failure of a Director to act or refrain
from acting, in his or her capacity as a Director, so as to observe, comply with
and give effect to the provisions of this Agreement shall constitute a breach of
this Agreement by the party for which such Director is designee.
5.3 PREVALENCE OF AGREEMENT. In the event of any inconsistency
or conflict between the provisions of this Agreement and the provisions of the
Memorandum or Articles, the parties shall give effect to the provisions of this
Agreement.
6. MANAGEMENT.
6.1 DIRECTORS.
(a) As used in this Agreement:
(i) "Additional Appointment Date" shall
mean the earlier of (A) either (1) the third anniversary date of the date of
incorporation of the Company or (2) the first Business Day of the financial year
of the Company in which the third anniversary date of the date of incorporation
of the Company falls, as Lycos may decide, or (B) the date on which SingTel
completes a sale of the SingTel Shares (as defined in Section 20.1) pursuant to
Section 20; and
(ii) "Initial Period" shall mean the period
commencing from the date of incorporation of the Company and ending on the
Additional Appointment Date.
(b) At all times during the Initial Period, the
Company shall have four (4) Directors, two (2) of whom shall be designated by
Lycos and two (2) of whom shall be designated by SingTel.
(c) At all times after the Initial Period, the
Company shall have (without necessity of amending the Memorandum or the Articles
at the expiration of the Initial Period to make provision therefor) five (5)
Directors, three (3) of whom shall be designated by Lycos and two (2) of whom
shall be designated by SingTel.
(d) Lycos and SingTel shall cast their votes as
shareholders of the Company to elect Directors in accordance with the
requirements of Section 6.1(b) or (c), as applicable. Neither party shall cast
its votes as a shareholder of the Company to remove a Director designated by the
other party without the written consent of the other party.
<PAGE>
(e) The Company shall have a Chairman of the
Board, who shall be one of the acting Directors of the Company. The Chairman of
the Board shall preside at all meetings of the Board of Directors of the Company
(the "Board") at which the Chairman of the Board is present, but otherwise shall
not have any powers, rights, duties or authorities which are different from the
powers, rights, duties and authorities of any of the other Directors. The right
to appoint the Chairman of the Board shall rotate between Lycos and SingTel, and
Lycos shall have the right to appoint the first Chairman of the Board. Upon
appointment by either Lycos or SingTel, the Chairman of the Board shall hold
such office for the period from the conclusion of one annual general meeting of
shareholders until the conclusion of the next following annual general meeting
of shareholders, except that the first appointed Chairman of the Board shall
hold such office from the date of the first Board meeting held after the
incorporation of the Company to the conclusion of the first annual general
meeting of shareholders.
(f) A Director shall be entitled at any time and from
time to time to appoint any person to act as his or her alternate and to
terminate such appointment, in each case in accordance with the applicable
provisions of the Articles. From the time of appointment until the termination
of such appointment, any such alternate director shall be entitled to receive
notices of meetings of the Board, to attend meetings of the Board (whether or
not the Director appointing him or her is present at any such meeting) and
generally to exercise all of the powers, rights, duties and authorities and
perform all of the functions of the appointing Director, except that he or she
shall not be entitled to vote at any meeting at which the appointing Director is
present. In the event that the appointing Director is not present at any meeting
of the Board, such alternate director shall be entitled to exercise the vote of
the appointing Director at such meeting, and if such alternate director
represents more than one Director, such alternate director shall be entitled to
one vote for every Director he or she represents who is not present at such
meeting.
6.2 DECISIONS BY THE BOARD OF DIRECTORS. The quorum necessary
for the transaction of any business of the Board shall be four (4) Directors,
two of whom are Directors appointed by Lycos and two of whom are Directors
appointed by SingTel. All decisions or actions taken by the Board shall require
the affirmative majority vote of the Directors present at the meeting; provided,
however, that any resolution of the Directors with regard to short notice of
meetings of the Board shall require the approval of all of the Directors; and
provided further that effective upon and from the expiration of the Initial
Period the unanimous affirmative vote of all of the Directors shall be required
with respect to any of the following matters:
(a) the entry or participation by the Company in
any business which is not within the scope of the business described in Section
7.2;
(b) the authorization, creation, allotment or
issuance of any shares, or classes or series of shares, in the capital of the
Company or any securities or debentures of the Company (other than the allotment
and issuance of Shares pursuant to Section 2.2 and Section 2.3), the issuance or
grant of any option over the unissued share capital of the Company, or any
change in the capital structure of the Company or the rights, preferences and
privileges of any shares, or classes or series of shares, in the capital of the
Company;
<PAGE>
(c) the merger, consolidation, amalgamation or
other such combination of the Company with any other entity, the
recapitalization of the Company, the redemption, repurchase or cancellation of
any securities of the Company, or a sale of all or substantially all of the
assets of the Company;
(d) the giving or provision by the Company of
any guarantees or indemnities, other than guarantees or indemnities necessary to
secure borrowing or indebtedness of the Company or its Affiliates in the
ordinary course of business, and any extension of credit or the making of any
loans to any person or entity other than in the ordinary course of business;
(e) any transactions or agreements by the
Company other than in the ordinary course of business and on arms-length terms
with:
(i) any shareholder;
(ii) any Affiliate of any shareholder;
(iii) any Director or officer of the
Company;
(iv) any director or officer of any
shareholder or any Affiliate of any shareholder;
(v) any person who is a spouse, child or
stepchild of the persons referred to in subparagraphs (iii) or (iv) above; or
(vi) any body corporate as to which the
persons referred to in subparagraphs (iii) or (iv) above are interested in
shares in the share capital of such body corporate of a nominal value equal to
at least twenty percent (20%) of such share capital or are entitled to exercise
or control the exercise of more than twenty percent (20%) of the voting power at
any general meeting of such body corporate;
(f) any material modification of any transaction
or any material amendment of any agreement subject to Section 6.2(e);
(g) any delegation of any powers of (or ceding
of control by) the Board to (i) any committee of Directors, or (ii) any person,
including any officer of the Company, with respect to any matter requiring the
unanimous affirmative vote of the Directors as set forth in this Section 6.2;
(h) the declaration of any dividends or other
distributions of profits of the Company; or
(i) any amendment to the Memorandum or the
Articles.
6.3 MEETINGS OF DIRECTORS.
<PAGE>
(a) The Company shall bear all reasonable
expenses of Directors in connection with their attendance at meetings of the
Board, including without limitation travel, lodging and meals. Unless otherwise
agreed by the parties, the location of meetings of the Board shall alternate
between a location in Asia, as designated by SingTel from time to time, and a
location in the United States, as designated by Lycos from time to time.
(b) Meetings of the Board shall be held at such
times as the Board shall determine. A meeting of the Board shall be held at
least four (4) times per year. Not less than seven (7) days' notice (or such
shorter period of notice in respect of any particular meeting as may be agreed
unanimously by all Directors) specifying the date, place and time of the meeting
and the business to be transacted at such meeting shall be given to all
Directors.
(c) All or any of the Directors may participate
in a meeting of the Board by means of a conference telephone or any
communications equipment which allows all persons participating in the meeting
to hear one another. A person so participating shall be deemed to be present in
person at the meeting and shall be entitled to vote or be counted in a quorum
accordingly. Any meeting of the Board in which one or more of the Directors
participates by conference telephone or other communications equipment shall be
deemed to take place at the site where the largest number of participating
Directors are present, or if there is no site at which the number of
participating Directors present exceeds the number of participating Directors
present at each other site at which participating Directors are present, at the
site where the Chairman of the Board is located.
(d) Any action required or permitted to be taken
by the Board may be taken by a resolution in writing signed by all of the
Directors, except that after the Initial Period any action required or permitted
to be taken by the Board (other than any action requiring the unanimous approval
of all of the Directors pursuant to Section 6.2) may be taken by at least four
(4) Directors, two (2) of whom are Directors appointed by Lycos and two (2) of
whom are Directors appointed by SingTel. Any such resolutions may be executed in
counterparts, and copies of such resolutions transmitted by facsimile shall have
the same effect as the originals.
6.4 MINUTES OF MEETINGS. Minutes of meetings of the Board and
meetings of the shareholders of the Company, including records of all
resolutions adopted and all actions taken by the Board or the shareholders of
the Company, shall be in English.
6.5 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer or
such other position as shall constitute the most senior executive position of
the Company (the "Chief Executive Officer") shall be as designated by SingTel.
The Chief Executive Officer shall have internal control over the day-to-day
affairs of the Company, including without limitation (a) the Company's incurring
or making of any capital expenditures, (b) the Company's acquisition of any
assets or property, or (c) the Company's creation of any security interest or
encumbrance over any of its assets or properties.
<PAGE>
6.6 CHIEF OPERATING OFFICER. The Chief Operating Officer or
such other position as shall constitute the second most senior executive
position of the Company (the "Chief Operating Officer") shall be as designated
by Lycos.
6.7 MANAGEMENT PERSONNEL. Except as provided in Sections 6.5
and 6.6, the management personnel of the Company shall be as designated by the
Chief Executive Officer in consultation with the Chief Operating Officer.
6.8 BUSINESS PLANS AND STRATEGIES. The management team of the
Company shall have responsibility for developing and executing the business
plans and strategies of the Company. The annual business plans, and any proposed
diversification of or other material change to the business of the Company (as
such business is described in Section 7.2), shall be subject to the internal
approval of the Chief Executive Officer, who may in his discretion, subject
always to the best interests of the Company, make all final decisions with
respect thereto. Only the Chief Executive Officer shall submit to the Board for
its approval the annual business plans for the Company, any variations of any
such approved annual business plans, and any proposed diversification of or
other material change to the business of the Company (as such business is
described in Section 7.2).
7. BUSINESS OF THE COMPANY.
7.1 TERRITORY. For purposes of this Agreement, "Territory"
means the following countries, except any of such countries otherwise excluded
under the provisions of Section 7.4:
(a) Singapore, Hong Kong, Peoples' Republic of
China, Taiwan, Malaysia and India (collectively, "Tier One Countries");
(b) Thailand, Philippines and Brunei
(collectively, "Tier Two Countries"); and
(c) Indonesia, Vietnam, Laos, Myanmar and
Cambodia (collectively, "Tier Three Countries").
7.2 BUSINESS PURPOSE. The business purpose of the Company
shall be, and the parties have entered into this Agreement for the purpose of
forming the Company to engage in, the following activities, directly or through
Licensee Subsidiaries or Licensee Affiliates (as such terms are defined below)
established pursuant to Section 8 or other sublicensees where permitted under
the Lycos License Agreements:
(a) to provide, at a local site for each country
in the Territory, a "Lycos" branded World Wide Web navigation, search,
directory, web community and e-mail service which has the "look and feel" of the
World Wide Web navigation, search, directory, web community and e-mail service
offered by Lycos at and web sites linked to on a networked basis, but which is
adapted culturally and in local content to be
<PAGE>
suitable for, and is in a suitable language or languages for, each such
country (collectively, the "Service");
(b) to generate revenue from all sources
relating to the Service, including without limitation revenue from the sale of
advertising and from electronic commerce; and
(c) to engage in all business activities
relating to the development, maintenance, support, enhancement and promotion of
the Service, including without limitation the development and acquisition of
local content and the development and expansion of distribution channels for the
Service.
For the avoidance of doubt, the Lycos branding and "look and feel" of the
Service as referred to in paragraph (a) of this Section 7.2 shall not preclude
the use of separate brand identities for established properties licensed by
Lycos or its Affiliates to the Company under the Lycos License Agreements or
otherwise, for established properties licensed by SingTel or its Affiliates to
the Company, for established properties acquired by the Company from third
parties or for new properties developed by the Company.
7.3 ROLL-OUT SCHEDULE.
(a) Unless otherwise agreed by the parties from
time to time, the Service shall be initiated first in Tier One Countries, then
in Tier Two Countries and finally in Tier Three Countries. Subject to Section
7.3 (b), any of the Tier One Countries for which the Service is not initiated on
or before September 30, 2000, any of the Tier Two Countries for which the
Service is not initiated on or before December 31, 2000, and any of the Tier
Three Countries for which the Service is not initiated on or before March 31,
2001 shall thereupon be automatically excluded from the Territory and from the
business activities of the Company.
(b) If the Company fails to meet the deadline set
forth in Section 7.3(a) with respect to any country included in the Territory
and such failure is solely attributable to (i) events beyond the control of
the Company, including without limitation acts of God, war, invasion,
rebellion, revolution, insurrection, civil commotion, civil war, acts of
government, earthquakes, fire, lightning, storms, floods, unusually severe
weather conditions, natural disasters, strikes, lockouts, boycotts, labor
disputes, terrorism, sabotage, arson, and the like, (ii) the failure of the
Company (or any Licensee Subsidiary or Licensee Affiliate established for
such country), notwithstanding its diligent efforts, to obtain from any
government, regulatory or administrative body any license, approval or permit
required with respect to such country, or (iii) the failure of Lycos and/or
its Affiliates to timely perform their respective obligations under the Lycos
License Agreements, then such deadline shall be extended by a reasonable
period of time having regard to the circumstances of the delay.
7.4 ACQUISITION OF ADDITIONAL PROPERTIES. The Company shall
not be permitted to acquire from a party other than Lycos, SingTel or their
respective Affiliates any Internet content properties which are similar or
identical to any Internet content properties of Lycos,
<PAGE>
SingTel or their respective Affiliates not then licensed to the Company unless
the Company first offers to acquire from Lycos, SingTel or such Affiliate, on
most favored customer terms (which may include payment of a lump sum royalty on
a most favored customer basis), the right and license to offer, operate and
maintain such Internet content property at the local webites at which the
Company offers its services and Lycos, SingTel or such Affiliate of Lycos or
SingTel, as applicable, shall have failed to accept such offer within sixty (60)
days after such offer is made, or, notwithstanding the good faith efforts of the
parties, shall have failed to enter into a mutually acceptable license agreement
with the Company within ninety (90) days after such offer is made.
7.5 EMPLOYEES. The Company shall hire and engage such
employees as shall be required from time to time to carry out its business
purposes.
7.6 ACCOUNTING MATTERS AND BOOKS AND RECORDS.
(a) The Company shall be required to keep
accurate books of account and financial and related records in accordance with
both United States and Singapore generally accepted accounting principles,
consistently applied. Upon reasonable prior notice and during normal business
hours, the Company shall be required to make available at its principal office
in Singapore for inspection by Lycos and SingTel, and their designated
representatives, the books of account and records of the Company.
(b) The auditors for the Company shall be KPMG
Peat Marwick or such other internationally recognized firm of certified public
accountants as may be designated by Lycos from time to time.
(c) Within twenty (20) days after the end of the
calendar month in which the Company commences to transact business, and within
twenty (20) days after the end of each calendar month thereafter, the Company
shall be required to provide to Lycos, for the calendar month then ended,
unaudited financial statements, prepared in accordance with United States
generally accepted accounting principles, for the Company and each Licensee
Subsidiary and Licensee Affiliate then existing.
(d) Within thirty (30) days after the end of
each financial year of the Company, the Company shall be required to provide to
Lycos, for the financial year then ended, unaudited financial statements,
prepared in accordance with United States generally accepted accounting
principles, for the Company and each Licensee Subsidiary and Licensee Affiliate
then existing.
(e) Within ninety (90) days after the end of
each financial year of the Company which ends during or concurrently with the
expiration of the Initial Period, and within sixty (60) days after the end of
each financial year of the Company which ends after the Initial Period, the
Company shall be required to provide to Lycos, for the financial year then
ended, audited financial statements, prepared in accordance with United States
generally accepted accounting principles, for the Company and each Licensee
Subsidiary and Licensee Affiliate then existing.
<PAGE>
8. LICENSEE SUBSIDIARIES AND LICENSEE AFFILIATES.
8.1 LICENSEE SUBSIDIARIES.
(a) Subject to the approval of the Board of
Directors of the Company, the Company may establish wholly-owned corporate
subsidiaries to engage in the business described in Section 7.2 with respect to
one or more specific countries included in the Territory (collectively,
"Licensee Subsidiaries").
(b) Except as may be otherwise required by
applicable local law, the composition of the board of directors of any Licensee
Subsidiary shall be determined in accordance with this paragraph. The number of
Lycos designated directors and the number of SingTel designated directors
appointed to the board of directors of any Licensee Subsidiary shall be the same
as the number of Lycos designated Directors and the number of SingTel designated
Directors, respectively, appointed to the Board of Directors of the Company.
(c) Except as may be otherwise required by
applicable local law, all matters set forth in subparagraphs (a) through (i) of
Section 6.2 shall require the unanimous affirmative vote of all of the directors
of any Licensee Subsidiary (and for this purpose each reference to the "Company"
in subparagraphs (a) through (i) of Section 6.2 shall be deemed to be a
reference to such Licensee Subsidiary).
(d) Lycos and SingTel agree that any sublicense
granted to a Licensee Subsidiary under the Lycos License Agreements shall be
royalty-free, provided that the Company shall be permitted to recapture from any
Licensee Subsidiary any cost items for technical assistance, referrals, catalog
generation or the like benefitting such Licensee Subsidiary and chargeable to
the Company.
(e) The financial year of each Licensee
Subsidiary shall conform with the fiscal year of Lycos, as in effect from time
to time, and each Licensee Subsidiary shall be required to maintain its books of
account and financial and related records both in accordance with United States
generally accepted accounting principles and in accordance with such other
accounting system as may be imposed by local requirements.
8.2 LICENSEE AFFILIATES.
(a) Subject to the approval of the Board of
Directors of the Company, the Company may establish affiliated corporate
entities as to which the Company owns at least fifty percent (50%) and less than
one hundred percent (100%) of all voting interests and neither Lycos nor SingTel
directly or indirectly owns any voting interest other than through the Company,
to engage in the business described in Section 7.2 with respect to one or more
specific countries included in the Territory (collectively, "Licensee
Affiliates").
(b) Except as may be otherwise required by
applicable local law, the composition of the board of directors of any Licensee
Affiliate shall be determined in accordance
<PAGE>
with this paragraph. During the Initial Period, the board of directors of any
Licensee Affiliate shall at all times have six directors, four of which shall be
appointed by the Company. Lycos shall have the right to appoint two of the four
directors to be appointed by the Company and SingTel shall have the right to
appoint two of the four directors to be appointed by the Company. After the
Initial Period, the board of directors of any Licensee Affiliate shall at all
times have five directors, three of which shall be appointed by the Company.
Lycos shall have the right to appoint two of the three directors to be appointed
by the Company and SingTel shall have the right to appoint one of the three
directors to be appointed by the Company.
(c) Except as may otherwise be required by
applicable local law, all matters set forth in subparagraphs (a) through (i) of
Section 6.2 shall require the unanimous affirmative vote of all of the directors
of any Licensee Affiliate (and for this purpose each reference to the "Company"
in subparagraphs (a) through (i) of Section 6.2 shall be deemed to be a
reference to such Licensee Affiliate), and all other matters shall require a
greater than 66 2/3% vote of all of the directors of any Licensee Affiliate.
(d) Lycos and SingTel agree that any sublicense
granted to a Licensee Affiliate under the Lycos License Agreements shall be
royalty-free, provided that the Company shall be permitted to recapture from any
Licensee Affiliate any cost items for technical assistance, referrals, catalog
generation or the like benefitting such Licensee Affiliate and chargeable to the
Company.
(e) The financial year of each Licensee Affiliate
shall conform with the fiscal year of Lycos, as in effect from time to time, and
each Licensee Affiliate shall be required to maintain its books of account and
financial and related records both in accordance with United States generally
accepted accounting principles and in accordance with such other accounting
system as may be imposed by local requirements.
9. LISTING. The parties intend that shares of the Company be listed on
a local Singapore exchange or on an appropriate foreign exchange (such as
NASDAQ) as soon as practically feasible after the Company's first full year of
business. The parties acknowledge and agree that the timing and particulars of
any such listing will depend on business and market conditions and regulatory
requirements, and that the written consent or written agreement of each of the
parties is required in connection with any such listing. The Company shall not
be listed unless and until all capital contributions required to be made by the
parties under Section 2.2 and Section 2.3 shall have been made in full, and
Lycos shall have received the full amount of all royalty payments required to be
made by the Company to Lycos under the Lycos License Agreements. For the
avoidance of doubt, the failure of the parties to agree on any matter relating
to the listing of the Company shall not constitute a deadlock for any purpose
under Section 16.
10. OWNERSHIP OF PROPERTIES DEVELOPED BY THE COMPANY. The Company shall
be the owner of any trademark, copyright and other intellectual property rights
in respect of any and all brand names, trade names, content, services or other
such properties originally created or developed by the Company, it being
understood that any brand names, trade names, content, services or other such
properties licensed by Lycos or SingTel to the Company, and any
<PAGE>
derivatives thereof, are not "originally developed or created by the Company"
within the meaning of this Section 10.
11. URLS. To the extent permitted under applicable local law and
regulation, the Company shall be the owner, for the ultimate benefit of Lycos,
of domain names which include the name "Lycos" or any other name licensed to the
Company under the Lycos License Agreements and which are the domain names of
sites at which the Company offers the Service ("Lycos Domain Names"). In the
event the Company is at any time not permitted under applicable local law and
regulation to be the owner of any Lycos Domain Name, then a third party
acceptable to Lycos and SingTel and permitted under applicable local law and
regulation to be the owner of such Lycos Domain Name shall be designated to hold
ownership of such Lycos Domain Name for the benefit of the Company, and for the
ultimate benefit of Lycos. Before any such Lycos Domain Name is registered in
the name of the Company or any third party, the Company and/or such third party,
as applicable, shall execute and deliver to Lycos such instruments or documents
as Lycos may reasonably require to assure to Lycos its ultimate beneficial
interest in such Lycos Domain Name. For the avoidance of doubt, for so long as
Lycos or an Affiliate of Lycos is a shareholder of the Company, the Company
shall have the right to use any Lycos Domain Names without charge, other than
payment of registration and maintenance fees to the applicable regulatory
authority. Further, the Company shall, as absolute owner, own all right, title
and interest in, to and under all domain names (other than Lycos Domain Names)
for all websites established and operated by the Company.
12. LEAKAGE. With respect to all internet traffic which is incoming to
and websites linked to on a networked basis and which originates from any
country in the Territory for which the Service has been
initiated, Lycos shall automatically redirect such traffic to the appropriate
website at which the Service is offered for such country, except that and
websites linked to on a networked basis shall be accessible through links
maintained at the local sites. In addition, with respect to all internet traffic
which is incoming to and websites linked to on a networked basis and which
originates from any country outside the Territory from a user identifiable as a
user whose normal access would be from a country in the Territory for which the
Service has been initiated, Lycos shall automatically redirect such traffic to
the appropriate website at which the Service is offered for such country
13. REPRESENTATIONS AND WARRANTIES OF LYCOS. Lycos hereby represents
and warrants to SingTel as follows:
13.1 ORGANIZATION, POWER AND AUTHORITY. Lycos is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, United States of America. Lycos has all requisite power and
authority to execute, deliver and perform its obligations under this Agreement.
13.2 AUTHORIZATION AND BINDING OBLIGATIONS. Lycos has taken
all requisite corporate action to authorize and approve the execution, delivery
and performance of this Agreement by Lycos. This Agreement has been duly
executed and delivered by Lycos, and
<PAGE>
constitutes the legal, valid and binding obligations of Lycos, enforceable
against Lycos in accordance with its terms.
13.3 NO CONFLICTS. The execution, delivery and performance of
this Agreement by Lycos, and the consummation of the transactions contemplated
hereby, will not (a) violate any provision of the Certificate of Incorporation
or Bylaws of Lycos, (b) violate, conflict with or result in (or with notice or
lapse of time or both result in) a breach of or default under any term or
provision of any contract or agreement to which Lycos is a party or by which
Lycos or any of its assets or properties is or may be bound, or (c) violate any
order, judgment, injunction, award or decree of any court or arbitration body,
or any governmental, administrative or regulatory authority, by which Lycos or
any of its assets or properties is or may be bound.
13.4 NO PENDING LITIGATION. No action, suit or proceeding
which seeks to prevent the consummation of the transactions contemplated by this
Agreement, or would impair the ability of Lycos to consummate the transactions
contemplated by this Agreement, is pending against Lycos, and no such action,
suit or proceeding has been threatened against Lycos.
14. REPRESENTATIONS AND WARRANTIES OF SINGTEL. SingTel hereby
represents and warrants to Lycos as follows:
14.1 ORGANIZATION, POWER AND AUTHORITY. SingTel is a company
duly organized and validly existing under the laws of Singapore, and has all
requisite power and authority to execute, deliver and perform its obligations
under this Agreement.
14.2 AUTHORIZATION AND BINDING OBLIGATIONS. SingTel has taken
all requisite corporate action to authorize and approve the execution, delivery
and performance of this Agreement by SingTel. This Agreement has been duly
executed and delivered by SingTel, and constitutes the legal, valid and binding
obligations of SingTel, enforceable against SingTel in accordance with its
terms.
14.3 NO CONFLICTS. The execution, delivery and performance of
this Agreement by SingTel, and the consummation of the transactions contemplated
hereby, will not (a) violate any provision of the memorandum of association or
articles of association of SingTel, (b) violate, conflict with or result in (or
with notice or lapse of time or both result in) a breach of or default under any
term or provision of any contract or agreement to which SingTel is a party or by
which SingTel or its assets or properties is or may be bound, or (c) violate any
order, judgment, injunction, award or decree of any court or arbitration body,
or any governmental, administrative or regulatory authority, by which SingTel or
any of its respective assets or properties is or may be bound.
14.4 NO PENDING LITIGATION. No action, suit or proceeding
which seeks to prevent the consummation of the transactions contemplated by this
Agreement, or would impair the ability of SingTel to consummate the transactions
contemplated by this Agreement, is
<PAGE>
pending against SingTel, and no such action, suit or proceeding has been
threatened against SingTel.
15. CONFIDENTIALITY. For so long as this Agreement remains in effect
and for a period of two (2) years after the termination of this Agreement
howsoever occasioned, each of Lycos and SingTel shall keep strictly
confidential, and shall not disclose, use, divulge, publish or otherwise reveal,
directly or through any third party (including without limitation the Company),
any confidential or proprietary information of the other party which was
disclosed by or received pursuant to this Agreement, or in connection with the
preparation and negotiation of this Agreement, or by reason of the performance
by the parties of their obligations hereunder or their involvement in activities
of the Company, 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
(collectively, "Confidential Information"), except as may be necessary in
connection with filings with governmental agencies as required under applicable
law, including, in the case of Lycos, the rules and regulations promulgated
under the Securities Exchange Act of 1934. Upon the termination of this
Agreement, each of Lycos and SingTel shall either destroy or return to the other
all memoranda, notes, records, reports and other documents (including all copies
thereof) relating to the Confidential Information of the other which such party
may then possess or have under its control. Notwithstanding the foregoing,
Confidential Information of a party shall not include (a) information which was
already known to the recipient at the time of its receipt, (b) information which
is or becomes freely and generally available to the public through no wrongful
act of the recipient, (c) information which is rightfully received by the
recipient from a third party legally entitled to disclose such information free
of confidentiality restrictions, (d) information disclosed in connection with
legal action initiated by a party to enforce rights under this Agreement, or any
agreement executed pursuant to this Agreement, or (e) information required to be
disclosed by the order of any court, provided that the recipient gives the
disclosing party reasonable prior notice so as to permit the disclosing party an
opportunity to seek a protective order.
16. DEADLOCK.
16.1 DEADLOCK. As used in this Agreement, "Deadlock" shall
mean that at two consecutive meetings of the Board a formal vote of the
Directors is taken on any of the matters set forth in Section 6.2 (other than
Section 6.2(e) or (f)) and that the vote taken on each such occasion is 2-2 if
such votes are taken within the Initial Period or less than unanimous if such
votes are taken after the Initial Period, or that at two consecutive shareholder
meetings a formal vote of the shareholders of the Company is taken to approve
any of the following matters and that the vote taken on each such occasion is
50-50 if such votes are taken during the Initial Period or less than unanimous
if such votes are taken after the Initial Period:
(a) the entry or participation by the Company in
any business which is not within the scope of the business described in Section
7.2;
<PAGE>
(b) the authorization, creation, allotment or
issuance of any shares, or classes or series of shares, in the capital of the
Company or any other securities or debentures of the Company (other than the
allotment and issuance of Shares pursuant to Section 2.2 and Section 2.3), the
issuance or grant of any option over the unissued share capital of the Company,
or any change in the capital structure of the Company or the rights, preferences
and privileges of any shares, or classes or series of shares, in the capital of
the Company;
(c) the merger, consolidation, amalgamation or
other such combination of the Company with any other entity, the
recapitalization of the Company, the redemption, repurchase or cancellation of
any securities of the Company, or a sale of all or substantially all of the
assets of the Company;
(d) the giving or provision by the Company of
any guarantees or indemnities, other than guarantees or indemnities necessary to
secure borrowing or indebtedness of the Company or its Affiliates in the
ordinary course of business, and any extension of credit or the making of any
loans to any person or entity other than in the ordinary course of business;
(e) any delegation of any powers of (or ceding
of control by) the Board to (i) any committee of Directors, or (ii) any person,
including any officer of the Company, with respect to any matter referred to in
paragraphs (a) through (g) of this Section 16.1;
(f) the declaration of any dividends or other
distributions of profits of the Company; or
(g) any amendment to the Memorandum or the
Articles.
16.2 REMEDY. In the event of any Deadlock, then, unless each
party expressly waives its rights under this Section 16.2 within thirty (30)
days after the vote resulting in such Deadlock:
(a) The Company and, unless otherwise agreed by
the parties, all Licensee Subsidiaries and Licensee Affiliates shall be
dissolved, and the parties, in their capacities as shareholders of the Company,
shall promptly take all such actions as may be required to cause the Company
and, unless otherwise agreed by the parties, the Licensee Subsidiaries and
Licensee Affiliates to expeditiously wind up their affairs and dissolve.
(b) In the event Lycos was the party which
initiated or proposed the item as to which the Deadlock occurred, then,
within thirty (30) days after the dissolution of the Company and all Licensee
Subsidiaries and Licensee Affiliates has been completed, Lycos shall pay to
SingTel, in cash or in cash and Lycos stock as described below, an amount in
US Dollars equal to the sum of:
(i) the amount (the "Lycos Base Amount")
by which the total amount of the capital contributions made by SingTel to the
Company during the period from the date of incorporation of the Company up to
and including the date of dissolution, not to exceed a
<PAGE>
maximum amount of [***], exceeds the
total amount of all liquidation distributions distributed to SingTel upon the
dissolution of the Company, whether in cash or in kind (with such in kind
distributions being valued at the fair market value of the property
distributed); plus
(ii) an amount (the "Lycos Incremental
Amount") equal to: [***]
The Lycos Base Amount shall be paid by Lycos entirely in cash in US Dollars. The
Lycos Incremental Amount shall be paid by Lycos, at its option, entirely in
cash, entirely in Lycos stock traded on NASDAQ or in part in cash and in part in
Lycos stock traded on NASDAQ, in such proportion as Lycos may determine. The
number of shares of Lycos stock to be issued or transferred to SingTel in full
or partial payment of the Lycos Incremental Amount shall be determined by
dividing the payment amount by the average share price of Lycos stock over the
thirty (30) day period ending on the 7th Business Day prior to the date on which
payment of the Lycos Incremental Amount is to be paid. The issuance or transfer
of any Lycos stock to SingTel pursuant to this Section 16.2(b) shall be made in
compliance with all applicable securities laws.
(c) In the event SingTel was the party which
initiated or proposed the item as to which the Deadlock occurred, then, within
thirty (30) days after the dissolution of the Company and all Licensee
Subsidiaries and Licensee Affiliates has been completed, SingTel shall pay to
Lycos an amount in US Dollars equal to the sum of:
(i) the amount (the "SingTel Base
Amount") by which the total amount of the capital contributions made by Lycos to
the Company during the period from the date of incorporation of the Company up
to and including the date of dissolution, not to exceed a maximum amount of
[***]; plus
(ii) an amount (the "SingTel Incremental
Amount") equal to: [***]
*** A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
The SingTel Base Amount shall be paid by SingTel entirely in cash in US Dollars.
The SingTel Incremental Amount shall be paid by SingTel, at its option, entirely
in cash, entirely in shares in the capital or stock of SingTel or any Affiliate
of SingTel traded on the Stock Exchange of Singapore Ltd or in part in cash and
in part in shares in the capital or stock of SingTel or any Affiliate of SingTel
traded on the Stock Exchange of Singapore Ltd, in such proportion as SingTel may
determine. The number of shares or amount of such stock to be issued or
transferred to Lycos in full or partial payment of the SingTel Incremental
Amount shall be determined by dividing the payment amount by the average share
price of such shares or stock over the thirty (30) day period ending on the 7th
Business Day prior to the date on which payment of the SingTel Incremental
Amount is to be paid. The issuance or transfer of any such shares or stock to
Lycos pursuant to this Section 16.2(c) shall be made in compliance with all
applicable securities laws.
17. LYCOS BREACH.
17.1 LYCOS BREACH. As used in this Agreement, "Lycos Breach"
shall mean the occurrence of any of the following breaches of this Agreement,
and the failure of Lycos to cure any such breach within sixty (60) days after
written notice of such breach is given by SingTel to Lycos:
(a) failure of Lycos to make any capital
contribution when and as required under Section 2.2 or Section 2.3 of this
Agreement;
(b) failure by Lycos to perform its obligations under
Section 3.1 with respect to the execution of the Lycos License Agreements by the
parties thereto; or
(c) failure of Lycos to perform its obligations
under Section 5.1, or the occurrence of a breach under Section 5.2(b) which,
under Section 5.2(b) is deemed to be a breach of Lycos.
17.2 REMEDIES. In the event of any Lycos Breach, SingTel shall
be entitled, at its election made by giving written notice thereof to Lycos, to
select either of the following remedies as its sole and exclusive remedy:
(a) recover from Lycos its provable contract
damages attributable to such breach; or
(b) require Lycos to purchase all of the
ordinary shares in the capital of the Company registered in the name of SingTel
or any of its Affiliates as of the date of such
<PAGE>
written election notice (collectively, for purposes of Section 17.3, the
"SingTel Shares") in accordance with the applicable provisions of Section 17.3.
17.3 PURCHASE AND SALE OF SINGTEL SHARES.
(a) Upon written notice of election given by
SingTel under Section 17.2 to require Lycos to purchase all of the SingTel
Shares ("SingTel Sale Notice"), SingTel shall be bound to sell to Lycos, and
Lycos shall be bound to purchase from SingTel, all of the SingTel Shares in
accordance with the applicable provisions of this Section 17.3. The sale and
purchase of the SingTel Shares shall be effected at a closing (the "SingTel
Closing") to be held in Singapore at the registered office of SingTel at 3:00 pm
on the seventh (7th) Business Day after the SingTel Determination Date (as
defined below) or at such other place and time as the parties may agree in
writing.
(b) At the SingTel Closing, SingTel shall
deliver to Lycos duly executed transfer form(s) in relation to the transfer of
the SingTel Shares by SingTel to Lycos together with the relative share
certificates in respect of the SingTel Shares in exchange for receipt of the
SingTel Purchase Price (as defined below) from Lycos, and Lycos shall pay to
SingTel the SingTel Purchase Price by cashier's order or bank draft drawn on a
licensed bank in Singapore made payable to SingTel in exchange for receipt of
such transfer form(s) and share certificates.
(c) Unless the parties otherwise agree on the
amount of the SingTel Purchase Price, the SingTel Shares shall be appraised by
three independent third party appraisers, each of whom shall have not less than
ten (10) years experience in appraising the value of private companies. Within
thirty (30) days after the date on which Lycos receives the SingTel Sale Notice,
each of Lycos and SingTel shall select one appraiser. The appraiser selected by
Lycos and the appraiser selected by SingTel shall select the third appraiser
within twenty-one (21) days after the selection of an appraiser by each of Lycos
and SingTel has been completed, except that if such appraisers are unable to
agree on the third appraiser within such twenty-one (21) day period, either
Lycos or SingTel may make written request to the President for the time being of
the Singapore International Arbitration Centre (the "President of SIAC") to
appoint the third appraiser, which appointment by The President of SIAC shall be
binding on Lycos and SingTel. Each appraiser shall present its appraisal report
within forty-five (45) days after the selection of the third appraiser and shall
express the appraised value of the SingTel Shares in Singapore Dollars. Any
appraisal report not presented within such forty-five (45) day period shall be
disregarded. If three appraisal reports are timely presented, the two appraisal
reports which are closest in amount shall be averaged (with the third appraisal
report being disregarded) and the resulting amount, which shall be expressed in
Singapore Dollars, shall be the appraised value of the SingTel Shares, if two
appraisal reports are timely presented, the two appraisal reports shall be
averaged and the resulting amount, which shall be expressed in Singapore
Dollars, shall be the appraised value of the SingTel Shares, and if one
appraisal report is timely presented, such report
<PAGE>
shall be the appraised value of the SingTel Shares (as so determined, the
"SingTel Appraised Value"). The fees and costs of the appraiser selected by
Lycos shall be borne by Lycos, the fees and costs of the appraiser selected by
SingTel shall be borne by SingTel, and the fees and costs of the appraiser
appointed by such appraisers (or by The President of SIAC) shall be borne half
by Lycos and half by SingTel. The date on which the SingTel Appraised Value is
determined by completion of the procedure set forth in this paragraph (c) is
referred to in this Section 17.3 as the "SingTel Determination Date."
(d) As used in this Section 17.3, "SingTel
Purchase Price"means (i) the purchase price of the SingTel Shares as
determined by the written agreement of the parties at any time prior to or on
the SingTel Determination Date, or, in the absence of such agreement, (ii)
the higher of (A) the amount of the capital contributions made by SingTel to
the Company during the period from the date of incorporation of the Company
up to and including the date of the SingTel Sale Notice, not to exceed [***],
or (B) an amount equal to [***] of the SingTel Appraised Value.
18. SINGTEL BREACH.
18.1 SINGTEL BREACH. As used in this Agreement, "SingTel
Breach" shall mean the occurrence of any of the following breaches of this
Agreement, and the failure of SingTel to cure any such breach within sixty (60)
days after written notice of such breach is given by Lycos to SingTel:
(a) failure of SingTel to make any capital
contribution when and as required under Section 2.2 or Section 2.3 of this
Agreement;
(b) failure of SingTel to perform its
obligations under Section 5.1, or the occurrence of a breach under Section
5.2(b) which, under Section 5.2(b) is deemed to be a breach of SingTel.
18.2 REMEDIES. In the event of any SingTel Breach, Lycos shall
be entitled, at its election made by giving written notice thereof to SingTel,
to select any of the following remedies as its sole and exclusive remedy:
(a) recover from SingTel its provable contract
damages attributable to such breach;
(b) dissolve the Company and, unless otherwise
agreed between the parties, the Licensee Subsidiaries and the Licensee
Affiliates, in which case, the Company and, unless otherwise agreed between the
parties, all Licensee Subsidiaries and Licensee Affiliates shall be dissolved,
and the parties, in their capacities as shareholders of the Company, shall
promptly take all such actions as may be required to cause the Company and,
unless otherwise agreed between the parties, the Licensee Subsidiaries and the
Licensee Affiliates to expeditiously wind up their affairs and dissolve; or
*** A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
(c) require SingTel to sell to Lycos all of the
ordinary shares in the capital of the Company registered in the name of SingTel
or any of its Affiliates as of the date of such written election notice
(collectively, for purposes of Section 18.3, the "SingTel Shares") in accordance
with the provisions of Section 18.3.
18.3 PURCHASE AND SALE OF SINGTEL SHARES.
(a) Upon written notice of election given by
Lycos under Section 18.2 to require Singtel to sell to Lycos all of the SingTel
Shares ("Lycos Election Notice"), SingTel shall be bound to sell to Lycos, and
Lycos shall be bound to purchase from SingTel, all of the SingTel Shares in
accordance with the applicable provisions of this Section 18.3. The sale and
purchase of the SingTel Shares shall be effected at a closing (the "Lycos
Closing") to be held in Singapore at the registered office of SingTel at 3:00 pm
on the seventh (7th) Business Day after the Lycos Determination Date (as defined
below) or at such other place and time as the parties may agree in writing.
(b) At the Lycos Closing, SingTel shall deliver to
Lycos duly executed transfer form(s) in relation to the transfer of the SingTel
Shares by SingTel to Lycos together with the relative share certificates in
respect of the SingTel Shares in exchange for receipt of the Lycos Purchase
Price (as defined below) from Lycos, and Lycos shall pay to SingTel the Lycos
Purchase Price by cashier's order or bank draft drawn on a licensed bank in
Singapore made payable to SingTel in exchange for receipt of such transfer
form(s) and share certificates.
(c) Unless the parties otherwise agree on the
amount of the Lycos Purchase Price, the SingTel Shares shall be appraised by
three independent third party appraisers, each of whom shall have not less than
ten (10) years experience in appraising the value of private companies. Within
thirty (30) days after the date on which Lycos receives the SingTel Sale Notice,
each of Lycos and SingTel shall select one appraiser. The appraiser selected by
Lycos and the appraiser selected by SingTel shall select the third appraiser
within twenty-one (21) days after the selection of an appraiser by each of Lycos
and SingTel has been completed, except that if such appraisers are unable to
agree on the third appraiser within such twenty-one (21) day period, either
Lycos or SingTel may make written request to The President of SIAC to appoint
the third appraiser, which appointment by The President of SIAC shall be binding
on Lycos and SingTel. Each appraiser shall present its appraisal report within
forty-five (45) days after the selection of the third appraiser and shall
express the appraised value of the SingTel Shares in Singapore Dollars. Any
appraisal report not presented within such forty-five (45) day period shall be
disregarded. If three appraisal reports are timely presented, the two appraisal
reports which are closest in amount shall be averaged (with the third appraisal
report being disregarded) and the resulting amount, which shall be expressed in
Singapore Dollars, shall be the appraised value of the SingTel Shares, if two
appaisal reports are timely presented, the two appraisal reports shall be
averaged and the resulting amount, which shall be expressed in Singapore
Dollars, shall be the appraised value of the SingTel Shares, and if one
appraisal report is timely presented, such report shall be the appraised value
of the SingTel Shares (as so determined, the "Lycos Appraised Value"). The fees
and costs of the appraiser selected by Lycos shall be borne by Lycos, the fees
and costs of the appraiser selected by SingTel shall be borne by SingTel, and
<PAGE>
the fees and costs of the appraiser appointed by such appraisers (or by The
President of SIAC) shall be borne half by Lycos and half by SingTel. The date on
which the Lycos Appraised Value is determined by completion of the procedure set
forth in this paragraph (c) is referred to in this Section 18.3 as the "Lycos
Determination Date."
(d) As used in this Section 18.3, "Lycos Purchase
Price"means (i) the purchase price of the SingTel Shares as determined by the
written agreement of the parties at any time prior to or on the Lycos
Determination Date, or, in the absence of such agreement, (ii) [***] of the
Lycos Appraised Value.
19. RESTRICTIONS ON TRANSFER OF SHARES.
19.1 GENERAL RESTRICTION ON TRANSFER OF SHARES. Except as
otherwise expressly provided in Section 17, 18, 19.2, 19.3 or Section 20,
neither Lycos nor SingTel shall sell, assign or otherwise transfer any or all of
its Shares or any interest therein.
19.2 TRANSFER TO AFFILIATES. Subject to the following
conditions, each of Lycos and SingTel shall have the right to transfer all (and
not some only) of its Shares to its Affiliates (any such Affiliate to which any
such Shares are transferred, a "Transferee Affiliate"):
(a) Each such Transferee Affiliate shall assume
by written agreement all of the transferor's obligations under this Agreement in
respect of the Shares transferred to such Transferee Affiliate, including
without limitation the obligation to sell Shares in accordance with the
applicable provisions of this Agreement.
(b) The Shares transferred to a Transferee
Affiliate shall remain subject to all of the restrictions on transfer set forth
in this Agreement.
(c) SingTel shall not transfer any Shares to any
Affiliate of SingTel which at the time of transfer is a competitor of Lycos, and
Lycos shall not transfer any Shares to any Affiliate of Lycos which at the time
of transfer is a competitor of the SingTel group.
(d) If any Transferee Affiliate ceases to be an
Affiliate of the original transferor, it shall be required to notify the
other shareholders of the Company of same and shall be required to transfer
all of its Shares to the original transferor, any such transfer being
expressly permitted under this Section 19.
19.3 TRANSFER UPON ACQUISITION. Notwithstanding anything to
the contrary in this Agreement or the Articles, each of Lycos and SingTel shall
have the right to transfer all (and not some only) of its Shares in connection
with any merger or other transaction, regardless of its form, in which all or
substantially all of the assets of such party are acquired, to the surviving,
acquiring or resulting entity in any such transaction.
20. SINGTEL RIGHT TO SELL SHARES.
*** A CONFIDENTIAL PORTION OF MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
20.1 RIGHT TO SELL SHARES. Subject to the terms and conditions
of this Section 20, SingTel shall have the right to sell all (but not less than
all) of its Shares (for purposes of this Section 20, the "SingTel Shares").
20.2 RESTRICTED PERIOD. Except for any sale of the SingTel
Shares to Lycos and any transfer to any of the SingTel Shares by SingTel to any
Transferee Affiliate as permitted under Section 19.2, SingTel shall not sell any
or all of the SingTel Shares during the period commencing from the date of this
Agreement and ending on the later of (a) the second anniversary date of this
Agreement or (b) the date on which SingTel completes its required capital
contributions to the Company under Sections 2.2 and 2.3 (the "Restricted
Period").
20.3 SALE NOTICE. In the event SingTel desires to sell all
(but not less than all) of the SingTel Shares at any time after the expiration
of the Restricted Period, SingTel shall give written notice thereof (for
purposes of this Section 20, "Sale Notice") to Lycos in writing, and shall
specify in such Sale Notice the price at which SingTel is willing to sell the
SingTel Shares, which shall be SingTel's best estimation of the fair market
value of the SingTel Shares (for purposes of this Section 20, the "Sale Notice
Offering Price"). The Sale Notice Offering Price shall be binding on SingTel for
thirty (30) days after the Sale Notice is received by Lycos and shall lapse at
the expiration of such thirty (30) day period. SingTel shall not be entitled to
give more than one Sale Notice in any twenty-four (24) month period.
20.4 NEGOTIATED SALE. Notwithstanding anything to the contrary
in this Agreement, SingTel may at any time, whether before or after Lycos
receives any Sale Notice from SingTel, sell all (but not less than all) of the
SingTel Shares (a) to Lycos on such terms and conditions as may be negotiated
and agreed to between SingTel and Lycos, or (b) to a purchaser or purchasers
(which may include Lycos or any of its Affiliates) approved by Lycos in writing,
on such terms and conditions as may be agreed to between SingTel and such
purchaser or purchasers. In the event any purchase and sale of the SingTel
Shares is effected pursuant to this Section 20.4 after Lycos has received a Sale
Notice from SingTel and before any other sale of the SingTel Shares contemplated
by this Section 20, the provisions of this Section 20 shall thereupon cease to
apply and shall have no further force or effect.
20.5 ELECTIVE SALE TO LYCOS. Lycos may, by giving written
notice ("Election Notice") to SingTel during the thirty (30) day period after
the date on which Lycos receives a Sale Notice from SingTel, elect to purchase
the SingTel Shares at the Sale Notice Offering Price. Any purchase and sale of
the SingTel Shares pursuant to this Section 20.5 shall be effected at a closing
(the "Election Sale Closing") to be held in Singapore at the registered office
of SingTel at 3:00 p.m. on the fourteenth (14th) Business Day after SingTel
receives the Election Notice, or at such other place and time as SingTel and
Lycos may agree in writing. In the event any purchase and sale of the SingTel
Shares is effected pursuant to this Section 20.5 at the Election Sale Closing,
the provisions of this Section 20 shall thereupon cease to apply and shall have
no further force or effect.
20.6 SALE TO LYCOS DESIGNEES. During the 270 day period after
the date on which Lycos receives a Sale Notice (the "Lycos Designation Period"),
Lycos shall have the right
<PAGE>
to enter into discussions with a third party or third parties regarding the
purchase of the SingTel Shares by such third party or third parties, and SingTel
shall be required from time to time, within five (5) Business Days after written
request by Lycos, to specify the price at which SingTel is willing to sell the
SingTel Shares, which price shall be SingTel's best estimation of the fair
market value of the SingTel Shares, and, unless superseded by a price specified
by SingTel in response to a subsequent written request by Lycos, shall be
binding on SingTel for thirty (30) days from the date on which such price is
specified to Lycos and shall (unless a Designation Notice (as defined below) is
given by Lycos) lapse at the expiration of such thirty (30) day period (for
purposes of this Section 20, such price, as revised in response to written
requests from Lycos from time to time, the "SingTel Offering Price"). Lycos may,
by giving written notice ("Designation Notice") to SingTel during the Lycos
Designation Period, elect to require SingTel to sell the SingTel Shares at the
SingTel Offering Price (as in effect at the time such Designation Notice is
given by Lycos) to a purchaser or purchasers (which may include Lycos or any of
its Affiliates) designated by Lycos in such Designation Notice. Any purchase and
sale of the SingTel Shares pursuant to this Section 20.6 shall be effected at a
closing (the "Designee Sale Closing") to be held in Singapore at the registered
office of SingTel at 3:00 p.m. on the fourteenth (14th) Business Day after
SingTel receives the Designation Notice, or at such other place and time as the
parties may agree in writing. In the event any purchase and sale of the SingTel
Shares is effected pursuant to this Section 20.6 at the Designee Sale Closing,
the provisions of this Section 20 shall thereupon cease to apply and shall have
no further force or effect.
20.7 APPRAISAL. In the event that a purchase and sale of the
SingTel Shares pursuant to Section 20.4, 20.5 or 20.6 does not occur during the
Lycos Designation Period, the value of the SingTel Shares shall be determined by
appraisal in accordance with this Section 20.7. The SingTel Shares shall be
appraised by three independent third party appraisers, each of whom shall have
not less than ten (10) years experience in appraising the value of private
companies. Within thirty (30) days after the expiration of the Lycos Designation
Period, each of Lycos and SingTel shall select one appraiser. The appraiser
selected by Lycos and the appraiser selected by SingTel shall select the third
appraiser within twenty-one (21) days after the selection of an appraiser by
each of Lycos and SingTel has been completed, except that if such appraisers are
unable to agree on the third appraiser within such twenty-one (21) day period,
either Lycos or SingTel may make written request to The President of SIAC to
appoint the third appraiser, which appointment by The President of SIAC shall be
binding on Lycos and SingTel. Each appraiser shall present its appraisal report
within forty-five (45) days after the selection of the third appraiser and shall
express the appraised value of the SingTel Shares in Singapore Dollars. Any
appraisal report not presented within such forty-five (45) day period shall be
disregarded. If three appraisal reports are timely presented, the two appraisal
reports which are closest in amount shall be averaged (with the third appraisal
report being disregarded) and the resulting amount, which shall be expressed in
Singapore Dollars, shall be the appraised value of the SingTel Shares, if two
appaisal reports are timely presented, the two appraisal reports shall be
averaged and the resulting amount, which shall be expressed in Singapore
Dollars, shall be the appraised value of the SingTel Shares, and if one
appraisal report is timely presented, such report shall be the appraised value
of the SingTel Shares (as so determined, the "Appraised Value"). The fees and
costs of the appraiser selected by Lycos shall be borne by Lycos, the fees and
costs of the
<PAGE>
appraiser selected by SingTel shall be borne by SingTel, and the fees and costs
of the appraiser appointed by such appraisers (or by The President of SIAC)
shall be borne half by Lycos and half by SingTel. The date on which the
Appraised Value is determined by completion of the procedure set forth in this
Section 20.7 is referred to in this Section 20 as the "Determination Date." In
the event that a purchase and sale of the SingTel Shares pursuant to Section
20.6 occurs after the expiration of the Designation Period pursuant to a
Designation Notice given by Lycos during the Designation Period, the parties
shall promptly discontinue the appraisal process commenced under this Section
20.7.
20.8 SALE TO LYCOS OR LYCOS DESIGNEE AT APPRAISED VALUE. In
the event that a purchase and sale of the SingTel Shares pursuant to Section
20.4, 20.5 or 20.6 does not occur during the Lycos Designation Period, and a
purchase and sale of the SingTel Shares does not occur after the expiration of
the Lycos Designation Period pursuant to a Designation Notice given within the
Designation Period, then, Lycos may, by giving written notice ("Purchase
Notice") to SingTel during the period of fourteen (14) Business Days after the
Determination Date, elect to purchase the SingTel Shares, or require SingTel to
sell the SingTel Shares to a purchaser or purchaser designated by Lycos (which
may include Lycos or any of its Affiliates), at the Appraised Value. Any
purchase and sale of the SingTel Shares pursuant to this Section 20.8 shall be
effected at a closing (the "Appraised Value Closing") to be held in Singapore at
the registered office of SingTel at 3:00 p.m. on the fourteenth (14th) Business
Day after SingTel receives the Purchase Notice, or at such other place and time
as the parties may agree in writing.
20.9 SALE TO SINGTEL SELECTED THIRD PARTY. In the event that
the appraisal process is completed under Section 20.7 and either (a) Lycos does
not give a Purchase Notice pursuant to Section 20.8 during the period of
fourteen (14) Business Days after the Determination Date, or (b) Lycos does give
a Purchase Notice pursuant to Section 20.8 during the period of fourteen (14)
Business Days after the Determination Date but the Appraised Value Closing does
not occur on or before the date by which the Appraised Value Closing is required
to occur under Section 20.8, then, until the expiration of 180 days after the
Determination Date (in the event clause (a) above applies) or the date by which
the Appraised Value Closing was required to occur (in the event clause (b) above
applies) (as applicable, the "Cut-Off Date"), SingTel shall be free to sell the
SingTel Shares to any third party selected by SingTel at a price no less than
the Appraised Value. In the event SingTel has not completed a sale of the
SingTel Shares to a third party selected by SingTel at a price no less than the
Appraised Value within 180 days after the Cut-Off Date, SingTel's rights to sell
the SingTel Shares shall thereupon again be subject to all of the requirements
of this Section 20.
20.10 CLOSING. At any closing held pursuant to any of the
provisions of this Section 20, SingTel shall deliver to the purchaser or
purchasers duly executed transfer form(s) for, and share certificates in respect
of, the SingTel Shares in exchange for receipt of the purchase price therefor,
which shall be payable by cashier's order or bank draft drawn on a licensed bank
in Singapore made payable to SingTel.
20.11 ADJUSTMENT OF TERRITORY. If at the time of any closing
held pursuant to any of the provisions of this Section 20 the Company has not
initiated the Service in any country of
<PAGE>
the Territory, such country shall be excluded from the Territory and from the
business of the Company and the parties shall take such steps as may be
necessary to cause the Lycos License Agreements to be terminated with respect to
any such country.
21. MISCELLANEOUS.
21.1 BROKERS. Each of Lycos and SingTel shall hold the other
harmless from any claims, liabilities or damages relating to any commissions or
fees claimed by any broker or finder by reason of any engagement or relationship
of such broker or finder by or with Lycos or SingTel, respectively.
21.2 NOTICES. Any notice, request, demand, approval or consent
required or permitted under this Agreement shall be in writing and shall be
effective upon actual receipt when delivered by (a) registered mail, postage
prepaid, return receipt requested, (b) personal delivery, (c) an overnight
courier of recognized reputation (such as DHL or Federal Express), or (d)
transmission by facsimile (with confirmation by mail), in each case addressed as
follows:
If to Lycos: Lycos, Inc.
400-2 Totten Pond Road
Waltham, MA 02451, U.S.A.
Attention: General Counsel
Telephone: (781) 370-2700
Facsimile: (781) 370-2600
With a copy to: Coudert Brothers
1055 West 7th Street, 20th Floor
Los Angeles, CA 90017, U.S.A.
Attention: Richard G. Wallace
Telephone: (213) 688-9088
Facsimile: (213) 689-4467
If to SingTel: Singapore Telecommunications
Limited
31 Exeter Road, #18-00 Comcentre
Singapore 239732
Attention: Vice President
(Business Development)
Telephone: (65) 838-3388
Facsimile: (65) 235-4566
and
<PAGE>
Attention: Company Secretary
Telephone: (65) 838-3388
Facsimile: (65) 732-8426
Any party may change its address or facsimile number for notice purposes by
notice given to the other parties in accordance with this Section 21.2.
21.3 ASSIGNMENT. Neither party's rights, duties or
responsibilities under this Agreement may be assigned, delegated or otherwise
transferred in any manner, without the prior written consent of the other party.
Notwithstanding the foregoing, no such consent shall be required in connection
with the assignment, delegation or other transfer of any such rights, duties or
responsibilities (a) by a party to any Affiliate, (b) in connection with any
merger or other transaction, regardless of its form, in which all or
substantially all of the assets of either party are acquired, or (c) in
connection with the sale of all of the shares of SingTel and its Affiliates in
the share capital of the Company pursuant to Section 20 to a party other than
Lycos, provided that such party shall assume all of the obligations of SingTel
under this Agreement. In the event of any assignment permitted under this
Section 21.3, the parties shall enter into such novation agreements as may be
necessary to properly give effect to such assignment.
21.4 ENTIRE AGREEMENT. This Agreement, including the exhibits
referred to herein, which are hereby incorporated in and made a part of this
Agreement, constitutes the entire contract among the parties with respect to the
subject matter covered by this Agreement. This Agreement supersedes all previous
letters of intent, agreements and understandings, if any, by and among the
parties with respect to the subject matter covered by this Agreement. This
Agreement may not be amended, changed or modified except by a writing duly
executed by the parties hereto.
21.5 SEVERABILITY. If any provision of this Agreement is held
by a court of competent jurisdiction to be unenforceable, invalid or void in any
respect, no other provision of this Agreement shall be affected thereby, all
other provisions of this Agreement shall nevertheless be carried into effect and
the parties shall amend this Agreement to modify the unenforceable, invalid or
void provision to give effect to the intentions of the parties to the extent
possible in a manner which is valid and enforceable.
21.6 REMEDIES AND WAIVERS. All rights and remedies of the
parties are separate and cumulative, and no one of them, whether exercised or
not, shall be deemed to be to the exclusion of or to limit or prejudice any
other rights or remedies which the parties may have. The parties shall not be
deemed to waive any of their rights or remedies under this Agreement, unless
such waiver is in writing and signed by the party to be bound. No delay or
omission on the part of any party in exercising any right or remedy shall
operate as a waiver of such right or remedy or any other right or remedy. A
waiver on any one occasion shall not be construed as a bar to or waiver of any
right or remedy on any future occasion.
21.7 ARBITRATION. In the event any dispute arises between
Lycos and SingTel with respect to any matter arising out of or relating to this
Agreement which cannot be amicably
<PAGE>
resolved, such dispute shall be submitted to the London Court of International
Arbitration for binding arbitration in accordance with the UNCITRAL arbitration
rules as then in effect. The arbitration shall be conducted in the English
language, and shall be held in London, England. Any arbitration award rendered
in any such arbitration proceeding may be entered in and enforced by any court
of competent jurisdiction. Nothing contained in this Section 21.7 shall prevent
or be construed to prevent either party from seeking a temporary restraining
order or a preliminary or permanent injunction or any other form of interim,
provisional or equitable relief in any court of competent jurisdiction.
21.8 GOVERNING LAW, CONSENT TO JURISDICTION, ETC. This
Agreement shall be governed by, and interpreted in accordance with, the laws of
Singapore except that each party shall have the right in its capacity as a
disclosing party to enforce the provisions of Section 15 under either the laws
of the State of Massachusetts or the laws of Singapore. For all purposes
relating to this Agreement, the parties shall submit to the non-exclusive
jurisdiction of the Courts of Singapore, and for the purposes specified above
relating to the provisions of Section 15, the parties shall submit to the
non-exclusive jurisdiction of the Courts of Singapore and the federal and state
courts located in the State of Massachusetts provided that in any matter brought
before the federal and state courts located in the State of Massachusetts the
parties irrevocably waive all rights to a jury trial.
21.9 HEADINGS. The headings contained in this Agreement are
for convenience only and are not a part of this Agreement, and do not in any way
interpret, limit or amplify the scope, extent or intent of this Agreement, or
any of the provisions of this Agreement.
21.10 COUNTERPARTS AND FACSIMILE. This Agreement may be
executed in counterparts, each of which shall constitute an original, but all of
which together shall constitute one and the same agreement. Transmission of
facsimile copies of signed original signature pages of this Agreement shall have
the same effect as delivery of the signed originals.
21.11 CONTROLLING LANGUAGE. This Agreement has been prepared,
negotiated and signed in English, and English is the controlling language of
this Agreement.
21.12 PRESS RELEASES. Neither Lycos nor SingTel shall issue
any press releases or publicity statements relating to this Agreement, the
transactions contemplated by this Agreement or the business of the Company
without the prior written approval of the other, which approval shall not be
unreasonably withheld or delayed, except that each of Lycos and SingTel shall be
permitted to issue any press releases or publicity statements (whether or not
approved by the other) to the extent required by any securities laws or
regulations applicable to Lycos or SingTel, respectively.
21.13 BINDING EFFECT. Subject to Section 21.3, this Agreement
shall be binding upon and shall inure to the benefit of the parties and their
respective successors and assigns.
<PAGE>
21.14 AFFILIATES. "Affiliate" shall mean, as to either party,
any person or entity that, directly or indirectly, controls, is under common
control with, or is controlled by, such party, where such control is by the
power, directly or indirectly, to direct or cause the direction of the
management and policies of such person or entity, whether through the ownership
of voting securities, by contract or otherwise; provided, however, that the
Company and any corporation or other entity directly or indirectly owned or
controlled by the Company shall not be an "Affiliate" of either party as such
term is used in this Agreement; and provided further that the term "Affiliate"
shall not include a person or entity in which either party has an interest
coupled with the right to veto specific matters concerning such person or entity
but which such party does not otherwise control.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LYCOS, INC.,
a corporation organized under the laws of
Delaware, USA
/s/ Edward M. Philip
----------------------------
By: Edward M. Philip
Its: Chief Operating Officer
SINGAPORE TELECOMMUNICATIONS LIMITED,
a corporation organized under the laws of
Singapore
/s/ Mary Ong
----------------------------
By: Mary Ong
Its: Vice President of Business Development
<PAGE>
LIST OF EXHIBITS
EXHIBIT A: Capital Contribution Schedule
EXHIBIT B: Local Searchservice Agreement
EXHIBIT C: Tripod Agreement
<PAGE>
EXHIBIT A
CAPITAL CONTRIBUTION SCHEDULE
[A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]
<PAGE>
Exhibit 10.27
EXHIBIT B
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (this "Agreement") is made and entered into as
of _____________, 1999 by and between LYCOS, INC., a corporation organized under
the laws of the State of Delaware, United States of America ("Lycos"), and LYCOS
ASIA PTE LTD, a corporation organized under the laws of Singapore ("Licensee").
RECITALS
A. Lycos owns or licenses from third parties certain rights relating to
the Lycos Searchservice (as defined below).
B. Licensee desires to offer local versions of the Lycos Searchservice
in the various countries in the Territory (as defined below), as customized for
the market in each such country.
C. On the terms and subject to the conditions hereafter set forth,
Licensee desires to obtain from Lycos, and Lycos is willing to grant to
Licensee, the rights and licenses described below.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, and for other valuable consideration received, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
have the meanings set forth below:
"Additional Properties shall mean, as to Lycos or any of its
Affiliates, any service or feature from time to time offered by Lycos at or by
any Affiliate of Lycos at a web site linked to on a networked basis (other than
MyLycos, Tripod, MailCity or any search, navigation and directory service
offered by Lycos under the "Lycos" brand name,) which Lycos or such Affiliate is
free to license to third parties.
"Affiliate" shall mean, as to any Person, any other Person
that, directly or indirectly, controls, is under common control with, or is
controlled by, such Person, where such control is through the ownership of
voting securities, except that, in any event, a Licensee Affiliate shall not
constitute an Affiliate of Lycos or SingTel for any purpose under this Agreement
and any third party which may hereafter acquire control of Lycos shall not
constitute an Affiliate of Lycos for any purpose under this Agreement.
"Commercial Readiness" shall mean, with respect to any Local
Searchservice, the performance of such Local Searchservice at a performance
level commensurate with the performance of the Lycos Searchservice.
<PAGE>
"Derivative Works" shall mean all Enhancements which are
"derivative works," as such term is defined in the U.S. Copyright Act (17 U.S.C.
Section 101 et seq.).
"Directory Software" shall mean all computer software used by
Lycos as of the date of this Agreement in connection with the Lycos
Searchservice, and performing the functionality described in the attached
EXHIBIT A.
"Enhancements" shall mean all enhancements, improvements,
additions or modifications to the Local Catalogs, the Local Directories, the
Lycos Catalog, the Lycos Directories, the Licensed Software, the Licensed
Property or the Local Searchservices, of whatever type or nature, whether
created or developed solely by Lycos or its Affiliates, agents, consultants or
independent contractors, solely by Licensee or its Affiliates, agents,
consultants or independent contractors, or jointly by Lycos or its Affiliates,
agents, consultants or independent contractors, on one hand, and Licensee or its
Affiliates, agents, consultants or independent contractors, on the other hand.
"Effective Date" shall mean the date of this Agreement as set
forth in the preamble hereof.
"Internet" shall mean the global computer network comprised of
multiple interconnected computer networks commonly and collectively referred to
as the "internet," as the same may exist from time to time.
"Initial Chinese Version" shall mean the first Local Catalogs
made available by Lycos to Licensee in either traditional Chinese language or
simplified Chinese language, and the Licensed Software relevant to such Local
Catalog.
"Initial English Version" shall mean the first Local Catalog
made available by Lycos to Licensee in the English language, and the Licensed
Software relevant to such Local Catalog.
"Initial Local Catalogs" shall mean Local Catalogs in English,
traditional Chinese and simplified Chinese, for use in the Tier One Countries.
"Initial Local Searchservices" shall mean Local Searchservices
in English, traditional Chinese and simplified Chinese, for use in the Tier One
Countries.
"Joint Enhancements" shall mean any Enhancements which are not
Derivative Works and which are created or developed jointly by Lycos or its
Affiliates, agents, consultants or independent contractors, on one hand, and
Licensee or its Affiliates, agents, consultants or independent contractors, on
the other hand.
"Joint Venture Agreement" shall mean the Joint Venture
Agreement dated as of September __, 1999 by and between Lycos and SingTel.
<PAGE>
"Licensed Brands" shall mean the brand names, logos and word
phrases listed in the attached EXHIBIT B, and any other brand names, logos and
word phrases which Lycos hereafter uses specifically in connection with the
Lycos Searchservice, to the extent such brand names, logos or word phrases are
not registered as trademarks or service marks in countries in the Territory.
"Licensed Marks" shall mean the registered trademarks and
service marks listed in the attached EXHIBIT B, and any other brand name, logo
or word phrase hereafter used by Lycos specifically in connection with the Lycos
Searchservice (including without limitation any Licensed Brand) and registered
by Lycos (or a third party which grants Lycos the right to use or grant licenses
to use any such other brand name, logo or word phrase) as a trademark or service
mark in any country in the Territory.
"Licensed Property" shall mean the Licensed Technology and all
rights in patents, copyright, proprietary information or other intellectual
property recognizable under applicable law in the Territory derived from or
pertaining to the Local Catalogs, the Lycos Catalog, the Lycos Directory, the
Licensed Software, the Licensed Technology, the Local Searchservices or the
Lycos Enhancements, EXCLUDING, HOWEVER, any of the foregoing relating to
web-crawler or spider technology used to index and catalog web sites on the
Internet.
"Licensed Software" shall mean the Lycos Software and the
Directory Software, enabled as necessary to handle double-byte characters, and
all relevant application programming interfaces, as the Lycos Software, the
Directory Software and the relevant application programming interfaces are
modified or supplemented to support the Local Searchservices, and as thereafter
modified, supplemented, updated or replaced (by software developed by Lycos)
from time to time.
"Licensed Technology" shall mean all inventions, ideas,
knowhow, expertise, trade secrets and proprietary information now or hereafter
used by Lycos in connection with the Licensed Software, EXCLUDING, HOWEVER, any
of the foregoing relating to web-crawler or spider technology used to index and
catalog web sites on the Internet.
"Licensee Affiliate" shall mean a corporation or other entity
of which Licensee owns, directly or indirectly, at least 50% of all of the
issued and outstanding shares or other voting ownership interests, and which has
been established pursuant to, and in compliance with the applicable requirements
of, the Joint Venture Agreement.
"Licensee Enhancements" shall mean any Enhancements, including
compilations, which (a) are not Derivative Works, and (b) are created or
developed solely by Licensee or its Affiliates, agents, consultants or
independent contractors (other than Lycos) without breaching any provision of
this Agreement, including without limitation all Local Directories and all local
content created or generated solely by Licensee or any Licensee Affiliate.
<PAGE>
"Local Catalog" shall mean, with respect to a country in the
Territory, one or more local versions of the Lycos Catalog, in English and/or in
a principal language of such country, each version of which consists of URLs in
the language of such version drawn from such country or a group of countries in
the Territory as well as (to a lesser extent) from countries outside the
Territory, as such database is modified, supplemented, replaced or updated from
time to time, and "Local Catalogs" shall mean, collectively, all of the Local
Catalogs for the various countries in the Territory.
"Local Directory" shall mean, with respect to a country in the
Territory, a local version of the Lycos Directory, compiled and edited by
Licensee specifically for such country, as such local version is modified,
supplemented, replaced or updated from time to time, and "Local Directories"
shall mean, collectively, all of the Local Directories for the various countries
in the Territory.
"Local Searchservice" shall mean, with respect to a country in
the Territory, one or more local versions of the Lycos Searchservice, as
customized for such country and in the same language or languages as the Local
Catalog with respect to such country, and "Local Searchservices" shall mean,
collectively, all of the Local Searchservices for the various countries in the
Territory.
"Local Site" shall mean, with respect to a country in the
Territory, the Internet site or sites through which the Local Searchservice for
such country is from time to time made available to users, the domain name for
which Local Site shall include the name "Lycos" and the appropriate country
designation for such country, and "Local Sites" shall mean, collectively, all of
the Local Sites for the various countries in the Territory.
"Lycos Catalog" shall mean the database compiled by Lycos and
accessed through the search engine providing the search function of the Lycos
Searchservice, as such database is modified, supplemented, replaced or updated
from time to time.
"Lycos Directory" shall mean the directory compiled and edited
by or for Lycos from the Lycos Catalog, as such directory is modified,
supplemented, replaced or updated from time to time.
"Lycos Enhancements" shall mean any Enhancements which are (a)
Derivative Works, or (b) created or developed solely by Lycos or its Affiliates,
agents, consultants or independent contractors.
"Lycos Searchservice" shall mean the search service offered by
Lycos on the Internet at www.lycos.com, through a search engine used to access
the Lycos Catalog, which provides to the user information regarding Internet
sites relevant to the user's search request.
"Lycos Software" shall mean all computer software used by
Lycos as of the date of this Agreement to operate and maintain the Lycos
Searchservice, and performing the
<PAGE>
functionality described in the attached EXHIBIT A, EXCLUDING, HOWEVER, any
software relating to web-crawler or spider technology used to index and catalog
web sites on the Internet.
"Person" shall mean a natural person, sole proprietorship,
corporation, general partnership, limited partnership, limited liability
partnership, limited liability company, joint venture, unincorporated
organization, joint stock company, trust, estate, Regulatory Body or other
entity.
"Regulatory Body" shall mean any national, state, municipal,
local or other governmental body or authority, or any quasi-governmental or
private body exercising any regulatory authority, including any subdivision or
agency thereof.
"Roll-Out Schedule" shall mean the roll-out schedule
established pursuant to Section 11.1(a).
"Searchservice" shall mean a search service offered on the
Internet, through a search engine used to access a database of Internet sites,
which provides to the user information regarding Internet sites relevant to the
user's search request.
"SingTel" shall mean Singapore Telecommunications Limited, a
corporation organized under the laws of Singapore.
"Staging Period" shall mean, with respect to any Local
Searchservice, the period commencing from the date Lycos makes the Local
Catalogs and the Licensed Software for such Local Searchservice available to
Licensee under Section 6.1 and ending upon the determination of the parties
under Section 6.2 that such Local Searchservice has achieved Commercial
Readiness.
"Territory" shall mean the Tier One Countries, the Tier Two
Countries and the Tier Three Countries.
"Third Party Properties" shall mean, as to any party other
than Lycos or any of its Affiliates, any service or feature from time to time
offered by such party at an Internet site.
"Tier One Countries" shall mean Singapore, Hong Kong, Peoples'
Republic of China, Taiwan, Malaysia and India.
"Tier Two Countries" shall mean Thailand, Philippines and
Brunei.
"Tier Three Countries" shall mean Indonesia, Vietnam, Laos,
Myanmar and Cambodia.
2. LICENSE.
<PAGE>
2.1 GRANT OF LICENSE. On the terms and subject to the
conditions of this Agreement, Lycos hereby grants to Licensee the following
rights and licenses:
(a) the exclusive right and license to provide,
operate and maintain the Local Searchservice for each country in the Territory
at the Local Site for such country;
(b) the exclusive right and license to market,
promote and otherwise exploit, in each country in the Territory, the Local
Searchservice for such country offered at the Local Site for such country;
(c) the exclusive right and license to do the
following in connection with, and only in connection with, providing, operating
and maintaining the Local Searchservice for each country in the Territory at the
Local Site for such country:
(i) use, store, process, reformat, retrieve
and transmit the Local Catalogs and the Lycos Catalog, or any portion thereof,
and allow users of such Local Searchservices to download from the Local Catalogs
and the Lycos Catalog to the user's computer hard drive or onto a separate disk;
(ii) compile and edit the Local Directories
from the Local Catalogs, and select, design and provide local content for, and
incorporate such local content into, each of the Local Searchservices, the Local
Directories and the Local Catalogs;
(iii) market and sell, and attach and place
advertising content, materials and displays on, and/or linked to, the Internet
webpages of the Local Searchservices and/or Local Directories, including without
limitation banners, still and/or animated displays, java applets or displays,
hyperlinked material, and audio and/or video material, whether for a fee or
otherwise, for the purposes of advertising and promoting any goods and/or
services of Licensee or any third party;
(iv) use the Local Catalogs, the Lycos
Catalog, the Lycos Directory, the Licensed Brands, the Licensed Property and the
Lycos Enhancements; and
(v) use the Licensed Marks in the countries
in the Territory where such Licensed Marks are registered as trademarks.
2.2 EXCLUSIVITY. The rights and licenses granted under Section
2.1 are "exclusive" to the extent provided in this Section 2.2. Lycos shall not,
during the term of this Agreement, grant to any third party, or itself exercise
(other than for the benefit of Licensee), any right or license granted under
Section 2.1 or any right or license to offer, operate or maintain any
Searchservice offered under the brand name "Lycos" at a web site including a
country designation for any country in the Territory or at any other website
which specifically targets residents in any country in the Territory. Licensee
acknowledges that, except as otherwise expressly provided in this Section 2.2,
Lycos is free to use or license the Local Catalogs, the
<PAGE>
Lycos Catalog, the Lycos Directory, the Licensed Brands, the Licensed Marks, the
Licensed Property and the Lycos Enhancements.
2.3 RESTRICTIONS ON TRANSFER. Except as expressly permitted
pursuant to and in accordance with Section 2.4, Licensee shall have no right to
sell, assign, sublicense or otherwise transfer, whether voluntarily or
involuntarily, any of the rights and license granted under Section 2.1.
2.4 SUBLICENSING.
(a) Subject to Section 2.4(b), Licensee shall have
the right to grant sublicenses under this Agreement for one or more countries in
the Territory to a Licensee Affiliate established to exploit such country or
countries (or, where applicable local law would prevent Licensee from directly
or through a Licensee Affiliate exploiting any country or countries in the
Territory, to a locally owned or controlled sublicensee located in such country
or countries and reasonably acceptable to Lycos) without any obligation to pay
Lycos any additional or increased royalty to Lycos by reason of any such
sublicense.
(b) Lycos shall have the right to approve all of the
terms and conditions on which any sublicense is granted by Licensee to a
sublicensee, which approval shall not be unreasonably withheld. Any sublicense
granted by Licensee to a sublicensee shall be granted pursuant to a written
sublicense agreement in form and substance acceptable to Lycos.
3. DOMAIN NAMES.
3.1 OWNERSHIP OF DOMAIN NAMES. To the extent permitted under
applicable local law and regulation, Licensee shall be the owner, for the
ultimate benefit of Lycos, of domain names which include the name "Lycos" and
which are the domain names of websites at which Licensee offers the Local
Searchservices ("Lycos Domain Names"). In the event Licensee is at any time not
permitted under applicable local law and regulation to be the owner of any Lycos
Domain Name, then a third party acceptable to Lycos and Licensee and permitted
under applicable local law and regulation to be the owner of such Lycos Domain
Name shall be designated to hold ownership of such Lycos Domain Name for the
benefit of Licensee, and for the ultimate benefit of Lycos. Before any such
Lycos Domain Name is registered in the name of Licensee or any third party,
Licensee and/or such third party, as applicable, shall execute and deliver to
Lycos such instruments or documents as Lycos may reasonably require to assure to
Lycos its ultimate beneficial interest in such Lycos Domain Name. For the
avoidance of doubt, for so long as Lycos or an Affiliate of Lycos is a
shareholder of Licensee, Licensee shall have the right to use any Lycos Domain
Names without charge, other than payment of registration and maintenance fees.
Further, Licensee shall, as absolute owner, own all right, title and interest
in, to and under all domain names (other than Lycos Domain Names) for all
websites established and operated by the Licensee.
3.2 AVAILABILITY OF DOMAIN NAMES. Lycos makes no assurance or
representation that the domain name comprised of "www.lycos" and the appropriate
country
<PAGE>
designation is or will be available for any particular country in the Territory.
In the event the domain name comprised of "www.lycos" and the appropriate
country designation for any particular country in the Territory is not available
at the time of the initial commercial launch of the Local Searchservice for such
country, Lycos and Licensee shall, by mutual agreement, select a domain name for
such country which includes the name "Lycos" in combination with other letters
or words. Lycos shall use reasonable commercial efforts to procure for Licensee
registration of domain names comprised of "www.lycos" and the appropriate
country designation for any country in the Territory which have been registered
by third parties, provided that Lycos shall not be required to commence
litigation against any such third party or to make any payment to any such third
party in an amount which Lycos considers to be unreasonable under the
circumstances.
4. CATALOGS. Lycos shall provide and update the Local Catalogs, and be
solely responsible for compiling, maintaining and updating the Lycos Catalog.
Licensee shall not, without the prior written approval of Lycos in each
instance, modify or change the Lycos Catalog in any respect. Lycos shall make
the Local Catalogs and the Lycos Catalog available as provided in Section 6, and
shall update the Local Catalogs and the Lycos Catalog as provided in Section
10.1.
5. LICENSED SOFTWARE. Lycos shall be solely responsible for (a) making
any modifications or changes to the Lycos Software which may be necessary to
develop or create Licensed Software capable of supporting the Local
Searchservices, (b) updating the Licensed Software, and (c) maintaining and
supporting, at Licensee's cost and expense (except as otherwise expressly
provided herein), the Licensed Software. Licensee shall not, without the prior
written approval of Lycos in each instance, modify or change the Licensed
Software in any respect. Lycos shall initially make the Licensed Software for
any Local Searchservice available as provided in Section 6.1 and shall update
the Licensed Software as provided in Section 10.2.
6. INITIAL STAGING, TESTING, PROBLEM RESOLUTION, COMMERCIAL READINESS
AND LAUNCH.
6.1 INITIAL STAGING. Within sixty (60) days after the
Effective Date, Lycos shall make the Initial Local Catalogs, the Lycos Catalog
and the Licensed Software, each as then existing, for the Initial Local
Searchservices available for use on a staging server located in the United
States, and shall inform Licensee how to access the Initial Local Catalogs, the
Lycos Catalog and the Licensed Software for the Initial Local Searchservices on
such staging server. Thereafter from time to time in accordance with the
Roll-Out Schedule, Lycos shall make the Local Catalog, the Lycos Catalog and the
Licensed Software, each as then existing, for other Local Searchservices
available for use on a staging server located in the United States, and shall
inform Licensee how to access the Local Catalog, the Lycos Catalog and the
Licensed Software for such Local Searchservices on such staging server.
6.2 TESTING, PROBLEM RESOLUTION AND COMMERCIAL READINESS.
During the Staging Period for any Local Searchservice, Lycos and Licensee shall
conduct such tests of the Local Catalogs, the Lycos Catalog and the Licensed
Software for such Local Searchservice as either party deems necessary or
desirable, and Lycos shall, at Lycos's expense, use reasonable
<PAGE>
commercial efforts to resolve any material performance issues with respect to
the Local Catalogs, the Lycos Catalog and the Licensed Software for such Local
Searchservice as may be identified by Lycos or as may be identified by Licensee
and communicated by Licensee to Lycos. When any Local Searchservice has achieved
Commercial Readiness, as jointly determined by Lycos and Licensee in their
reasonable commercial judgment, the Staging Period for such Local Searchservice
shall terminate. In the event that, notwithstanding the good faith efforts of
the parties, the parties have not jointly determined within 180 days after the
Effective Date that the Initial English Version and the Initial Chinese Version
have achieved Commercial Readiness, either party may terminate this Agreement by
written notice to the other.
6.3 INITIAL PUBLIC ACCESS AND LAUNCH. Upon termination of the
Staging Period with respect to any Local Searchservice by joint determination of
the parties that such Local Searchservice has achieved Commercial Readiness,
Lycos shall make the Local Catalog, the Lycos Catalog and the Licensed Software,
each as then existing, for such Local Searchservice available for use on the
servers which will be used to support the appropriate Local Site, either by
installation thereon if such servers are then located in the United States or by
transmission to Licensee by File Transfer Protocol or Federal Express, as Lycos
may determine in its discretion, if such servers are then located outside the
United States. Within sixty (60) days after Lycos has completed such
installation or transmission to Licensee, Licensee shall announce to the public
the commencement of such Local Searchservice at the appropriate Local Site,
making due allowance for the development of a well-considered plan for the
commercial launch and initial marketing of such Local Searchservice.
7. LOCAL CONTENT AND LOCALIZATION.
7.1 LOCAL CONTENT. Licensee acknowledges that the displayable
content available through access to the Local Catalog, the Lycos Catalog and the
Licensed Software for any Local Searchservice will be limited to the content of
the Local Catalog and the Lycos Catalog and displays relating directly to
navigation, search and directory functions. Licensee shall design and develop
local content, including both information and advertising, customized for the
market in each country in the Territory and combine such local content with the
displayable content available through access to the Local Catalog, the Lycos
Catalog and the Licensed Software for each Local Searchservice, all in a manner
and format substantially similar to the Lycos Searchservice.
7.2 LOCALIZATION. Licensee shall be responsible, at its
expense, for all translation and other localization work (other than
modification of the Local Catalogs, the Lycos Catalog and the Licensed Software)
required in order to develop the Local Searchservices.
8. TRANSFER OF OPERATIONS.
8.1 INITIAL OPERATIONS. Initially, Lycos shall operate and
maintain the Local Searchservices for Licensee using dedicated equipment
purchased or leased by Licensee and installed and located in the United States.
Licensee shall reimburse Lycos for all reasonable costs (including indirect
costs and overhead) reasonably incurred by Lycos in operating and maintaining
the Local Searchservices for Licensee, including without limitation costs
incurred in preparing to commence such operation and
<PAGE>
maintenance, but excluding all costs expressly agreed to be borne by Lycos under
this Agreement.
8.2 TRANSFER OF OPERATIONS. When and as feasible, as
determined and agreed by Lycos and Licensee, Lycos shall transfer the operation
and maintenance of the Local Searchservices from Lycos to Licensee, and, in
connection with such transfer, the equipment referred to in Section 8.1 shall be
shipped by Lycos, at Licensee's expense, to a site in the Territory as
determined by mutual agreement between Lycos and Licensee.
9. TRAINING AND TECHNICAL ASSISTANCE.
9.1 INITIAL TRAINING. Within three (3) months after the
Effective Date, Lycos shall, at times reasonably convenient to Lycos and
Licensee, provide training at Lycos' principal place of business in the United
States for up to five (5) technical trainees who are employees of Licensee, for
a total of not more than three (3) man months, provided that the cost of travel,
food and lodging for such technical trainees shall be borne by Licensee, or, at
the option of Licensee, Lycos shall provide training at a location in Singapore
designated by Licensee for technical trainees who are employees of Licensee,
provided that the cost of travel, food and lodging for the Lycos trainers shall
be borne by Licensee.
9.2 INITIAL TECHNICAL ASSISTANCE. For a period of three (3)
months after the date of the commercial launch of any Local Searchservice, Lycos
shall, with respect to such Local Searchservice, provide to Licensee, without
charge, such technical assistance as Licensee may reasonably require to operate
and maintain such Local Searchservice at a performance level commensurate with
the performance of the Lycos Searchservice.
9.3 SUBSEQUENT TECHNICAL ASSISTANCE. After the expiration of
the period referred to in Section 9.1, Lycos shall, with respect to the relevant
Local Searchservice, provide to Licensee such technical assistance as Licensee
may reasonably require to operate and maintain such Local Searchservice at a
performance level commensurate with the performance of the Lycos Searchservice,
and Licensee shall compensate Lycos for such technical assistance in accordance
with the most favorable rates offered by Lycos to its customers for providing
such services.
10. UPDATES.
10.1 CATALOG UPDATES. Lycos shall provide to Licensee updates
to (a) the Lycos Catalog when and as such updates are made accessible through
the Lycos Searchservice, and (b) the Local Catalogs at the same intervals as,
and as soon as practical after, updates of the Lycos Catalog are made accessible
through the Lycos Searchservice. Licensee shall reimburse Lycos for its actual
costs incurred in generating such updates. Until operations are transferred by
Lycos to Licensee pursuant to Section 8.2, such updates shall be made available
on the equipment through which the Local Catalogs and the Lycos Catalog are made
available by Lycos to Licensee. After operations are transferred by Lycos to
Licensee pursuant to Section 8.2, such updates shall be made available by File
Transfer Protocol or by Federal Express, as Lycos may
<PAGE>
determine. Lycos shall promptly notify Licensee each time any updates of the
Lycos Catalog or the Local Catalogs are made available.
10.2 LICENSED SOFTWARE UPDATES. Lycos shall provide to
Licensee, without charge, updates to (including entirely new versions of) the
Licensed Software at the same intervals as, and as soon as practical after,
updates of the Lycos Software and the Directory Software become available. Until
operations are transferred by Lycos to Licensee pursuant to Section 8.2, such
updates shall be made available by Lycos to Licensee on the equipment through
which the Lycos Software and the Directory Software are made available by Lycos
to Licensee, and Lycos shall promptly notify Licensee each time any such update
is made available. After operations are transferred by Lycos to Licensee
pursuant to Section 8.2, such updates shall be made available by Lycos to
Licensee by File Transfer Protocol or by Federal Express, as Lycos may
determine. At the time Lycos makes available to Licensee any updates to the
Licensed Software, Lycos shall notify Licensee of the changes to the Licensed
Software effected by such updates.
11. DUTIES OF LICENSEE.
11.1 ROLL-OUT SCHEDULE.
(a) Unless otherwise agreed between Lycos and
Licensee, and, for so long as the Joint Venture Agreement remains in effect,
between Lycos and SingTel, Local Searchservices shall be initiated first in Tier
One Countries, then in Tier Two Countries and finally in Tier Three Countries.
Subject to Section 11.2 (b), any of the Tier One Countries for which the Service
is not initiated on or before September 30, 2000, any of the Tier Two Countries
for which the Service is not initiated on or before December 31, 2000, and any
of the Tier Three Countries for which the Service is not initiated on or before
March 31, 2001 shall thereupon be automatically excluded from the Territory and
from the license granted under Section 2.1. Lycos and Licensee shall cooperate
in establishing a reasonable roll-out schedule for Local Catalogs and Local
Searchservices in languages other than English, traditional Chinese and
simplified Chinese.
(b) If the Licensee fails to meet the deadline set
forth in Section 11.1(a) with respect to any country included in the Territory
and such failure is solely attributable to (i) events beyond the control of
Licensee, including without limitation acts of God, war, invasion, rebellion,
revolution, insurrection, civil commotion, civil war, acts of government,
earthquakes, fire, lightning, storms, floods, unusually severe weather
conditions, natural disasters, strikes, lockouts, boycotts, labor disputes,
terrorism, sabotage, arson, and the like, (ii) the failure of the Licensee (or
any Licensee Affiliate established for such country), notwithstanding its
diligent efforts, to obtain from any government, regulatory or administrative
body any license, approval or permit required with respect to such country, or
(iii) the failure of Lycos to timely perform its obligations under this
Agreement, then such deadline shall be extended by a reasonable period of time
having regard to the circumstances of the delay.
11.2 TRAFFIC REPORTS.
<PAGE>
(a) Commencing on the fifth business day of the month
immediately following the month in which operations are transferred by Lycos to
Licensee pursuant to Section 8.2, and continuing on the fifth business day of
each month thereafter during the term of this Agreement, Licensee shall, for
itself and for each Licensee Affiliate, provide to Lycos via electronic mail a
file, in standard common log file format, containing a complete and detailed
record for the prior month of (a) user accesses (click stream data) to the
Licensed Software, (b) the total number of advertising impressions possible, (c)
advertising impressions filled expressed as a percentage of advertising
impressions possible, and (d) the number of specific advertisements placed by
each advertiser, indicating whether such advertisements are rotational, static
or keyword based.
(b) Commencing on the second business day of the week
immediately following the week in which the operations are transferred by Lycos
to Licensee pursuant to Section 8.2, and continuing on the second business day
of each week thereafter during the term of this Agreement, Licensee shall, for
itself and for each Licensee Affiliate, provide to Lycos via electronic mail a
report summarizing the previous week's daily traffic to each Local Site.
11.3 DATABASE TRANSFERS. Commencing on the fifth business day
of the month immediately following the month in which operations are transferred
by Lycos to Licensee pursuant to Section 8.2, and continuing on the fifth
business day of each month thereafter during the term of this Agreement,
Licensee shall, for itself and for each Licensee Affiliate, provide to Lycos via
electronic mail an updated database containing the names of the registered users
of any e-mail, web community or other service offered by Licensee and Licensee
Affiliates under license from Lycos or any of its Affiliates, together with such
other information regarding such users as Lycos may specify from time to time.
The content of the database and all other information regarding such users shall
be jointly owned by Lycos, SingTel and Licensee.
11.4 COMPLIANCE WITH LAW. Licensee shall operate and maintain
the Local Searchservice for each country in the Territory in compliance with all
applicable laws, rules and regulations of any relevant Regulatory Body.
11.5 STANDARD OF OPERATION. Licensee shall operate and
maintain the Local Searchservices in a manner which is consistent with the
quality standards of Lycos and which meets or exceeds the response performance
standards of the Lycos Searchservice, subject to compliance by Lycos with its
obligations under Section 9 and Section 10.
11.6 LYCOS APPROVAL OF SAMPLE MATERIALS. Lycos shall have the
right to approve, prior to distribution, samples of all hard copy advertising
and promotional materials developed by Licensee (or any Licensee Affiliate) and
using any of the Licensed Brands or the Licensed Marks. Lycos shall be deemed to
have given such approval in the event such samples are approved by the Chief
Operating Officer of Licensee.
11.7 PRIVACY POLICY. In connection with each Local
Searchservice, Licensee agrees to implement a privacy policy consistent with
that utilized by Lycos in connection with
<PAGE>
the Lycos Searchservice and posted at www.lycos.com, with such modifications as
may be required by applicable local law.
12. LEAKAGE. With respect to all internet traffic which is incoming to
and websites linked to on a networked basis and which originates from any
country in the Territory for which the Local Searchservice has been initiated,
Lycos shall automatically redirect such traffic to the appropriate website at
which the Local Searchservice is offered for such country, except that and
websites linked to on a networked basis shall be accessible through links
maintained at the Local Sites. In addition, with respect to all internet traffic
which is incoming to and websites linked to on a networked basis and which
originates from any country outside the Territory from a user identifiable as a
user whose normal access would be from a country in the Territory for which the
Local Searchservice has been initiated, Lycos shall automatically redirect such
traffic to the appropriate Local Site at which the Local Searchservice is
offered for such country
13. ADDITIONAL PROPERTIES.
13.1 LICENSEE'S RIGHT OF FIRST REFUSAL. Lycos agrees that
neither Lycos nor any of its Affiliates will grant to any third party, or itself
exercise, any right or license to offer, operate or maintain any Additional
Properties at a website including a country designation for any country in the
Territory or at any other website which specifically targets residents in any
country in the Territory unless Lycos or such Affiliate first offers to grant to
Licensee, on most favored customer terms (which may include payment of a lump
sum royalty on a most favored customer basis), the right and license to offer,
operate and maintain such Additional Property at the Local Sites together with
the Local Searchservice and Licensee shall have failed to accept such offer
within sixty (60) days after such offer is made, or, notwithstanding the good
faith efforts of the parties, shall have failed to enter into a mutually
acceptable license agreement with Lycos or such Affiliate within ninety (90)
days after such offer is made.
13.2 LICENSEE'S ACQUISITION OF THIRD PARTY PROPERTIES.
Licensee shall not acquire from a party other than Lycos or any of its
Affiliates any Third Party Properties which are similar or identical to any
Additional Properties of Lycos or any of its Affiliates not then licensed to
Licensee unless Licensee first offers to acquire from Lycos or such Affiliate,
on most favored customer terms (which may include payment of a lump sum royalty
on a most favored customer basis), the right and license to offer, operate and
maintain such Additional Property at the Local Sites and Lycos or such Affiliate
shall have failed to accept such offer within sixty (60) days after such offer
is made, or, notwithstanding the good faith efforts of the parties, shall have
failed to enter into a mutually acceptable license agreement with Licensee
within ninety (90) days after such offer is made.
14. [A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION]
<PAGE>
15. TAXES. In the event the Singapore government imposes any
withholding taxes on any amounts payable by Licensee to Lycos under this
Agreement, including without limitation any royalty payment to be made by
Licensee to Lycos under Section 14, Lycos shall bear all such withholding taxes
and Licensee shall deduct the amount of such withholding taxes from the amount
of such payments, remit such taxes to the appropriate taxing authority, and
remit the balance of such payments, together with evidence of the remittance of
such tax to the appropriate taxing authority, to Lycos.
16. RIGHTS IN INTELLECTUAL PROPERTY.
16.1 RESERVATION OF RIGHTS. Except as otherwise expressly set
forth in this Agreement, no right, title or interest in or to the Local
Catalogs, the Lycos Catalog, the Lycos Directory, the Licensed Software, the
Licensed Property, the Licensed Brands, the Licensed Marks, the Lycos
Enhancements, the Local Searchservices or in any domain name including the name
"Lycos," or any variant thereof or combination therewith, or in or to any other
intellectual property, shall pass to Licensee under this Agreement. Without
limiting the foregoing, no right or license is granted or shall pass to Licensee
with respect to any web-crawler or spidering technology used to index and
catalog web sites on the Internet, or to the Lycos Software, the Directory
Software or any patents, copyrights, knowhow, software or other rights or
property relating to any such technology.
16.2 LYCOS ENHANCEMENTS. All ownership and other rights in and
to the Lycos Enhancements shall vest in and inure to the benefit of Lycos. Upon
request, Licensee shall execute all such documents, including without limitation
documents of assignment, and take all such steps and render all such assistance
as may be necessary to assure to Lycos its rights under this Section 16.2.
16.3 JOINT ENHANCEMENTS. All ownership and other rights in and
to Joint Enhancements shall vest in and inure to the benefit of Lycos and
Licensee jointly. Each party shall have the right to use Joint Enhancements, but
neither party shall have the right to license Joint Enhancements without the
prior written consent of the other party.
16.4 LICENSEE ENHANCEMENTS. All ownership and other rights in
and to the Licensee Enhancements shall vest in and inure to the benefit of
Licensee. Licensee hereby grants to Lycos a royalty-free, non-exclusive,
worldwide (other than with respect to the Territory) license, with the right to
sublicense, to use the Licensee Enhancements in connection with the Lycos
Searchservice or otherwise.
16.5 NO REGISTRATION BY LICENSEE. Licensee shall not, in any
country in the Territory or in any other jurisdiction, make any patent,
trademark, service mark or copyright registration or application for
registration with respect to any intellectual property owned or licensed by
Lycos, including without limitation the Local Catalogs, the Lycos Catalog, the
Lycos
<PAGE>
Directory, the Licensed Software, the Licensed Property, the Licensed Brands,
the Licensed Marks or the Lycos Enhancements, or, except as otherwise provided
in Section 3, with respect to any domain name which includes the name "Lycos,"
or any variant thereof or combination therewith.
16.6 BENEFIT. All use of the Licensed Property shall inure to
the benefit of Lycos, or, as applicable, its licensors.
17. MARKING.
17.1 MARKING OF MATERIALS. Licensee shall, in accordance with
the applicable laws of the countries in the Territory, include any appropriate
patent, trademark and copyright markings and notations in all marketing,
advertising, promotional and other materials which are used in such countries
and which refer to the Licensed Property or the Licensed Marks. Without limiting
the foregoing, if the name "Lycos" appears in any such materials, such materials
shall include the following statement: "Lycos-REGISTERED- is a registered
trademark of Carnegie Mellon University in the United States of America [, the
country where used if registered as a trademark in such country] and other
countries. All Rights Reserved."
17.2 MARKING OF ENTRY SCREEN. Subject to applicable local law,
the following statement shall appear on the entry screen of the Local
Searchservices and at the bottom of each search result, in a font no smaller
than the font for the main text used in the relevant Local Searchservice and
otherwise in such manner as Lycos may specify to Licensee from time to time:
"-C-1995-____ Lycos, Inc.
Lycos-REGISTERED- is a registered trademark
of Carnegie Mellon University in the United
States of America [, the country for which
such Local Searchservice is offered if
registered as a trademark in such country]
and other countries. All Rights Reserved."
18. RIGHT TO LICENSE, PROTECTION OF RIGHTS AND INFRINGEMENT.
18.1 RIGHT TO LICENSE. Lycos hereby represents and warrants to
Licensee that:
(a) Lycos owns and will own, or is and will be a
licensee (with the right to grant sublicenses) of, the Local Catalogs, the Lycos
Catalog, the Lycos Directory, the Licensed Software and the Licensed Property
made available or to be made available by Lycos to Licensee under this
Agreement, and has the right and authority to grant the rights and licenses with
respect thereto set forth in Section 2.1; and
(b) "Lycos" is a registered trademark of Carnegie
Mellon University in the United States of America and in the countries in the
Territory indicated on the attached EXHIBIT B, trademark registrations for the
name "Lycos" are pending in the countries in the Territory indicated on the
attached EXHIBIT B, Lycos has requested Carnegie Mellon University to file
trademark applications for the trademark "Lycos" in all other countries in the
Territory and
<PAGE>
has undertaken to bear all expenses relating thereto, and Lycos, as licensee,
has the right and authority to grant the rights and licenses with respect to the
Licensed Marks set forth in Section 2.1.
18.2 MAXIMUM LIABILITY. [***]
18.3 LICENSED BRANDS. Lycos agrees to use reasonable
commercial efforts to cause trademark applications for registration of the name
"Lycos" to be filed in each country in the Territory where no such application
has been filed as of the date of this Agreement, it being understood that
Carnegie Mellon University is the owner of the name "Lycos" and that Lycos is
accordingly very limited as to the reasonable commercial efforts it can make to
cause such trademark applications to be filed. LYCOS MAKES NO REPRESENTATIONS
AND WARRANTIES WITH RESPECT TO THE OWNERSHIP, THE RIGHT OF LYCOS TO LICENSE OR
THE RIGHT OF LICENSEE TO USE THE LICENSED BRANDS IN ANY COUNTRY IN ANY COUNTRY
IN THE TERRITORY, AND GIVES NO ASSURANCE THAT ANY OF THE LICENSED BRANDS CAN OR
WILL BE REGISTERED AS REGISTERED TRADEMARKS IN ANY COUNTRIES IN THE TERRITORY.
18.4 INFRINGEMENT ON RIGHTS OF THIRD PARTIES.
(a) In the event Licensee's use of the Local
Catalogs, the Lycos Catalog, the Lycos Directory, the Licensed Software and the
Licensed Property in accordance with the provisions of this Agreement and in the
form in which provided by Lycos to Licensee is determined to infringe on the
rights of any third party, Lycos shall, at its own expense and in its sole
discretion, (a) procure for Licensee the right to continue such use, (b) replace
the infringing item with a non-infringing item, or (c) modify the infringing
item to make it non-infringing; provided, however, that the liability of Lycos
to Licensee for any breach by Lycos of this Section 18.4(a) shall be subject to
the applicable liability limit set forth in Section 18.2.
(b) Subject to the applicable liability limit set
forth in Section 18.2, Lycos shall indemnify and hold Licensee harmless from and
against all losses, damages and liabilities resulting from the actual
infringement of the Local Catalogs, the Lycos Catalog, the Lycos Directory, the
Licensed Software, the Licensed Property, the Licensed Brands or the Licensed
Marks on the rights of third parties; provided, however, that this
indemnification shall not apply to any continued use of the Licensed Brands or
the Licensed Marks in any country in the Territory after Licensee is put on
notice or otherwise becomes aware that use of the Licensed Brands or the
Licensed Marks in such country infringes on the rights of a third party.
18.5 INDEMNIFICATION BY LICENSEE. Lycos shall not have any
obligation or liability to Licensee for any infringement of the Local Directory
on the rights of third parties, or any infringement of the Local Catalogs, the
Lycos Catalog, the Lycos Directory, the Licensed Software and the Licensed
Property on the rights of third parties if such infringement is attributable to
modifications thereto made by Licensee with or without the consent of Lycos,
and, subject to the applicable liability limit set forth in Section 18.2,
Licensee shall indemnify and
*** A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
<PAGE>
hold Lycos harmless from and against all losses, damages or liabilities
resulting from any actual infringement resulting from such modifications.
18.6 INFRINGEMENT BY THIRD PARTIES. In the event Licensee
becomes aware of any infringement by any third party on the rights and licenses
granted by Lycos to Licensee under this Agreement, Licensee shall promptly
notify Lycos of any such infringement. Lycos may, but shall not be obligated to,
take such action against such infringement as Lycos may deem appropriate.
19. YEAR 2000 WARRANTY. Lycos hereby represents and warrants to
Licensee that the Licensed Software will perform its functions and properly
access the Local Catalogs without interruption or failure by reason of the
calendar year in which used, whether before, during or after the year 2000, or
by reason of errors in date processing, date recognition or other date dependent
functions, provided that all other products used in combination with the
Licensed Software and the Local Catalogs, including without limitation operating
systems and other software, properly exchange data with the Licensed Software.
In the event of any breach of the foregoing warranty, Lycos shall, as Licensee's
sole remedy, modify the Licensed Software so as to comply with the foregoing
warranty.
20. WARRANTY DISCLAIMERS. EXCEPT AS EXPRESSLY SET FORTH IN SECTIONS
18.1 AND 19, LYCOS MAKES NO WARRANTIES TO LICENSEE OF ANY KIND, WRITTEN OR ORAL,
EXPRESS, IMPLIED OR STATUTORY, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE, ALL OF
WHICH OTHER WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED.
21. CONFIDENTIALITY.
21.1 CONFIDENTIALITY. For so long as this Agreement remains in
effect and for a period of two (2) years after any expiration or termination of
this Agreement, each party shall keep strictly confidential, and shall not
disclose, any confidential information of the other party received under or in
connection with this Agreement, including without limitation any information,
written or oral, relating to 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; provided, however, that confidential information shall not include,
and the disclosure restrictions of this Section 21.1 shall not apply to, any
information received by either party from the other which:
(a) was already known to the recipient at the time of
receipt;
(b) was at the time of receipt, or thereafter
becomes, freely and generally available to the public through no wrongful act of
the recipient;
(c) is rightfully received by the recipient from a
third party legally entitled to disclose such information free of
confidentiality restrictions;
<PAGE>
(d) is disclosed by the recipient pursuant to the
order of any court or in connection with any legal proceeding commenced by or
against the recipient, provided that prior to any such disclosure the recipient
shall give the other party a reasonable opportunity to seek a protective order
with respect to any such disclosure; or
(e) is disclosed by the recipient, or any Affiliate
of the recipient, as required under any applicable securities laws Upon the
expiration or termination of this Agreement, either party shall either destroy
or return to the other party all memoranda, notes, records, reports and other
documents (including all copies thereof) containing any confidential information
of such other party and in such other party's possession or under its control at
the time of such expiration or termination, and shall give written certification
of compliance with this paragraph to such other party.
21.2 PRESS RELEASES AND ANNOUNCEMENTS. Neither party shall
issue any press releases or public announcements relating to this Agreement, the
transactions contemplated by this Agreement or the business of Licensee without
the prior written approval of the other party, which approval shall not be
unreasonably withheld or delayed, except that each party shall be permitted to
issue any press releases or publicity statements (whether or not approved by the
other party) to the extent required by any applicable securities laws, and Lycos
shall have the right to issue press releases and make public announcements
relating to its products, services and plans.
22. TERM AND TERMINATION.
22.1 TERM. Unless sooner terminated as provided in Section
6.2, Section 22.2, Section 22.3 or Section 22.4 the term of this Agreement shall
commence from the Effective Date and continue until the dissolution of Licensee.
22.2 AUTOMATIC TERMINATION. This Agreement is subject to
automatic termination upon the making of any order by the High Court of the
Republic of Singapore for the winding up or judicial management of the Company,
or the passing of any special resolution by the shareholders of the Company for
the winding up or liquidation of the Company.
22.3 TERMINATION BY LYCOS. Lycos may terminate this Agreement
by written notice to Licensee in the event Licensee fails to make any
installment payment of royalties when and as due, or in the event Licensee
ceases to conduct business for a period of not less than sixty (60) consecutive
days, and such failure or cessation of business continues for thirty (30) days
after written notice thereof is given by Lycos to Licensee.
22.4 TERMINATION BY LICENSEE. Licensee may terminate this
Agreement in the event Lycos materially breaches this Agreement and such breach,
if susceptible of cure, remains uncured for thirty (30) days after Licensee
gives written notice of such breach to Lycos.
<PAGE>
22.5 EFFECT OF TERMINATION. The expiration or termination of
this Agreement shall not affect any payment obligations of either party to the
other accrued or otherwise existing as of the date of such expiration or
termination. Upon the expiration or termination of this Agreement for any
reason, all of the rights and licenses granted under Section 2.1, and any
sublicenses granted pursuant to this Agreement, shall terminate, and Licensee
shall immediately (a) cease any use of the Licensed Brands, the Licensed Marks,
the Licensed Property, the Local Catalogs, the Lycos Catalog, the Lycos
Directory, the Licensed Software and the Lycos Enhancements, (b) either return
to Lycos or destroy all embodiments thereof, and (c) certify to Lycos in writing
that Licensee has complied with the requirements of clauses (a) and (b) of this
Section 22.5.
22.6 SURVIVAL. The provisions of Sections 16 and 21 shall
survive any expiration or termination of this Agreement.
23. MISCELLANEOUS.
23.1 COSTS. Except as may be otherwise expressly provided in
this Agreement, each party shall bear its own costs and expenses in carrying out
its obligations under this Agreement.
23.2 LATE PAYMENTS. All amounts payable by either party to the
other party under this Agreement shall be due and payable within thirty (30)
days after the date of invoice. If any payment is not received within thirty
(30) days after the date of invoice, interest will be imposed on such amount
from the date due until paid in full at a rate of one percent (1%) per month.
23.3 NOTICES. Any notice, request, demand, approval or consent
required or permitted under this Agreement shall be in writing and shall be
effective upon actual receipt when delivered by (a) registered mail, postage
prepaid, return receipt requested, (b) personal delivery, (c) an overnight
courier of recognized reputation (such as DHL or Federal Express), or (d)
transmission by facsimile (with confirmation by mail), in each case addressed as
follows:
If to Lycos: Lycos, Inc.
400-2 Totten Pond Road
Waltham, MA 02154, U.S.A
Attention: General Counsel
Telephone: (781) 370-2700
Facsimile: (781) 370-2600
With a copy to: Coudert Brothers
1055 West 7th Street, 20th Floor
Los Angeles, CA 90017, U.S.A.
Attention: Richard G. Wallace
Telephone: (213) 688-9088
Facsimile: (213) 689-4467
<PAGE>
If to Licensee: Lycos Asia Pte Ltd
---------------------------
---------------------------
Attention:
---------------
Telephone:
---------------
Facsimile:
---------------
Either party may change its address or facsimile number for notice purposes by
notice given to the other party in accordance with this Section 23.3.
23.4 ASSIGNMENT. Neither party's rights, duties or
responsibilities under this Agreement may be assigned, delegated or otherwise
transferred in any manner, without the prior written consent of the other party.
Notwithstanding the foregoing, no such consent shall be required in connection
with the assignment, delegation or other transfer of any such rights, duties or
responsibilities (a) by a party to any Affiliate, or (b) in connection with any
merger or other transaction, regardless of its form, in which all or
substantially all of the assets of either party are acquired.
23.5 ENTIRE AGREEMENT. This Agreement, including the exhibits
referred to herein, which are hereby incorporated in and made a part of this
Agreement, constitutes the entire contract between the parties with respect to
the subject matter covered by this Agreement. This Agreement supersedes all
previous letters of intent, agreements and understandings, if any, by and
between the parties with respect to the subject matter covered by this
Agreement. This Agreement may not be amended, changed or modified except by a
writing duly executed by the parties hereto.
23.6 SEVERABILITY. If any provision of this Agreement is held
by a court of competent jurisdiction to be unenforceable, invalid or void in any
respect, no other provision of this Agreement shall be affected thereby, all
other provisions of this Agreement shall nevertheless be carried into effect and
the parties shall amend this Agreement to modify the unenforceable, invalid or
void provision to give effect to the intentions of the parties to the extent
possible in a manner which is valid and enforceable.
23.7 REMEDIES AND WAIVERS. All rights and remedies of the
parties are separate and cumulative, and no one of them, whether exercised or
not, shall be deemed to be to the exclusion of or to limit or prejudice any
other rights or remedies which the parties may have. The parties shall not be
deemed to waive any of their rights or remedies under this Agreement, unless
such waiver is in writing and signed by the party to be bound. No delay or
omission on the part of either party in exercising any right or remedy shall
operate as a waiver of such right or remedy or any other right or remedy. A
waiver on any one occasion shall not be construed as a bar to or waiver of any
right or remedy on any future occasion.
<PAGE>
23.8 ARBITRATION. In the event any dispute arises between
Lycos and Licensee with respect to any matter arising out of or relating to this
Agreement which cannot be amicably resolved, such dispute shall be submitted to
the London Court of International Arbitration for binding arbitration in
accordance with the UNCITRAL arbitration rules as then in effect. The
arbitration shall be conducted in the English language, and shall be held in
London, England. Any arbitration award rendered in any such arbitration
proceeding may be entered in and enforced by any court of competent
jurisdiction. Nothing contained in this Section 23.8 shall prevent or be
construed to prevent either party from seeking a temporary restraining order or
a preliminary or permanent injunction or any other form of interim, provisional
or equitable relief in any court of competent jurisdiction.
23.9 GOVERNING LAW. This Agreement shall be governed by, and
interpreted in accordance with, the laws of England except that each party shall
have the right in its capacity as a disclosing party to enforce the provisions
of Section 21 under either the laws of the State of Massachusetts or the laws of
England. For all purposes relating to the enforcement of Section 21, the parties
shall submit to the non-exclusive jurisdiction of the Courts of Singapore and
the federal and state courts located in the State of Massachusetts provided that
in any matter brought before the federal and state courts located in the State
of Massachusetts the parties irrevocably waive all rights to a jury trial.
23.10 HEADINGS. The headings contained in this Agreement are
for convenience only and are not a part of this Agreement, and do not in any way
interpret, limit or amplify the scope, extent or intent of this Agreement, or
any of the provisions of this Agreement.
23.11 COUNTERPARTS AND FACSIMILE. This Agreement may be
executed in counterparts, each of which shall constitute an original, but all of
which together shall constitute one and the same agreement. Transmission of
facsimile copies of signed original signature pages of this Agreement shall have
the same effect as delivery of the signed originals.
23.12 CONTROLLING LANGUAGE. This Agreement has been prepared,
negotiated and signed in English, and English is the controlling language of
this Agreement.
23.13 THIRD PARTY BENEFICIARY. This Agreement is not intended
to and does not confer any rights on any third party, and no such third party
shall be a third party beneficiary under or in respect of this Agreement.
23.14 BINDING EFFECT. Subject to Section 23.4, this Agreement
shall be binding upon and shall inure to the benefit of the parties and their
respective successors and assigns.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LYCOS, INC.,
a corporation organized under the laws of
Delaware, USA
By:
Its:
LYCOS ASIA PTE LTD,
a company organized under the laws of Singapore
By:
Its:
<PAGE>
EXHIBITS
EXHIBIT A: Licensed Software
EXHIBIT B: Licensed Brands and Marks
<PAGE>
EXHIBIT A
[A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION]
EXHIBIT B
1. LICENSED BRANDS
The Licensed Brands are as follows:
(a) Lycos
(b) Go Get It
2. LICENSED MARKS
The Licensed Marks are as follows:
Currently none
3. TRADEMARK REGISTRATIONS FOR LYCOS IN THE TERRITORY
The trademark registrations for "Lycos" in the Territory are as
follows:
<PAGE>
Currently none
4. PENDING TRADEMARK APPLICATIONS FOR LYCOS IN THE TERRITORY
The pending trademark applications for "Lycos" in the Territory are as
follows:
(a) China - filed 10/21/97, published 11/21/98
(b) Hong Kong - filed 10/07/97
(c) Singapore - filed 08/22/97
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Exhibit 10.29
EXHIBIT C
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (this "Agreement") is made and entered into as
of _____________, 1999 by and between TRIPOD, INC., a corporation organized
under the laws of the State of Delaware, United States of America ("Lycos"), and
LYCOS ASIA PTE LTD, a corporation organized under the laws of Singapore
("Licensee").
RECITALS
A. Tripod owns or licenses from third parties certain rights relating
to the Tripod Service (as defined below).
B. Licensee desires to offer local versions of the Tripod Service in
the various countries in the Territory (as defined below), as customized for the
market in each such country.
C. On the terms and subject to the conditions hereafter set forth,
Licensee desires to obtain from Tripod, and Tripod is willing to grant to
Licensee, the rights and licenses described below.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, and for other valuable consideration received, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
have the meanings set forth below:
"Additional Properties shall mean, as to Tripod, any service
or feature from time to time offered by Tripod at which Tripod is free to
license to third parties.
"Affiliate" shall mean, as to any Person, any other Person
that, directly or indirectly, controls, is under common control with, or is
controlled by, such Person, where such control is through the ownership of
voting securities, except that, in any event, a Licensee Affiliate shall not
constitute an Affiliate of Tripod or SingTel for any purpose under this
Agreement and any third party which may hereafter acquire control of Lycos shall
not constitute an Affiliate of Tripod for any purpose under this Agreement.
"Commercial Readiness" shall mean, with respect to any Local
Service, the performance of such Local Service at a performance level
commensurate with the performance of the Tripod Service.
"Derivative Works" shall mean all Enhancements which are
"derivative works," as such term is defined in the U.S. Copyright Act (17 U.S.C.
Section 101 et seq.).
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"Enhancements" shall mean all enhancements, improvements,
additions or modifications to the Licensed Software, the Licensed Property or
the Local Services, of whatever type or nature, whether created or developed
solely by Tripod or its Affiliates, agents, consultants or independent
contractors, solely by Licensee or its Affiliates, agents, consultants or
independent contractors, or jointly by Tripod or its Affiliates, agents,
consultants or independent contractors, on one hand, and Licensee or its
Affiliates, agents, consultants or independent contractors, on the other hand.
"Effective Date" shall mean the date of this Agreement as set
forth in the preamble hereof.
"Internet" shall mean the global computer network comprised of
multiple interconnected computer networks commonly and collectively referred to
as the "internet," as the same may exist from time to time.
"Initial Chinese Version" shall mean the first Local Service
in either traditional Chinese language or simplified Chinese language to achieve
Commercial Readiness.
"Initial English Version" shall mean the first Local Service
in the English language to achieve Commercial Readiness.
"Initial Local Services" shall mean Local Services in English,
traditional Chinese and simplified Chinese, for use in the Tier One Countries.
"Joint Enhancements" shall mean any Enhancements which are not
Derivative Works and which are created or developed jointly by Tripod or its
Affiliates, agents, consultants or independent contractors, on one hand, and
Licensee or its Affiliates, agents, consultants or independent contractors, on
the other hand.
"Joint Venture Agreement" shall mean the Joint Venture
Agreement dated as of September __, 1999 by and between Lycos and SingTel.
"Licensed Brands" shall mean the brand names, logos and word
phrases listed in the attached EXHIBIT B, and any other brand names, logos and
word phrases which Tripod hereafter uses specifically in connection with the
Tripod Service, to the extent such brand names, logos or word phrases are not
registered as trademarks or service marks in countries in the Territory.
"Licensed Marks" shall mean the registered trademarks and
service marks listed in the attached EXHIBIT B, and any other brand name, logo
or word phrase hereafter used by Tripod specifically in connection with the
Tripod Service (including without limitation any Licensed Brand) and registered
by Tripod (or a third party which grants Tripod the right to use or grant
licenses to use any such other brand name, logo or word phrase) as a trademark
or service mark in any country in the Territory.
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"Licensed Property" shall mean the Licensed Technology and all
rights in patents, copyright, proprietary information or other intellectual
property recognizable under applicable law in the Territory derived from or
pertaining to the Licensed Software, the Licensed Technology, the Local Services
or the Tripod Enhancements.
"Licensed Software" shall mean the Tripod Software, enabled as
necessary to handle double-byte characters, and all relevant application
programming interfaces, as the Tripod Software and the relevant application
programming interfaces are modified or supplemented to support the Local
Services, and as thereafter modified, supplemented, updated or replaced (by
software developed by Tripod) from time to time.
"Licensed Technology" shall mean all inventions, ideas,
knowhow, expertise, trade secrets and proprietary information now or hereafter
used by Tripod in connection with the Licensed Software.
"Licensee Affiliate" shall mean a corporation or other entity
of which Licensee owns, directly or indirectly, at least 50% of all of the
issued and outstanding shares or other voting ownership interests, and which has
been established pursuant to, and in compliance with the applicable requirements
of, the Joint Venture Agreement.
"Licensee Enhancements" shall mean any Enhancements, including
compilations, which (a) are not Derivative Works, and (b) are created or
developed solely by Licensee or its Affiliates, agents, consultants or
independent contractors (other than Tripod) without breaching any provision of
this Agreement.
"Local Service" shall mean, with respect to a country in the
Territory, a local version of the Tripod Service, as customized for such country
and in English and/or a principal language of such country, and "Local Services"
shall mean, collectively, all of the Local Services for the various countries in
the Territory.
"Local Site" shall mean, with respect to a country in the
Territory, the Internet site or sites through which the Local Service for such
country is from time to time made available to users, the domain name for which
Local Site shall include the name "Tripod" and the appropriate country
designation for such country, and "Local Sites" shall mean, collectively, all of
the Local Sites for the various countries in the Territory.
"Lycos" shall mean Lycos, Inc., a Delaware corporation.
"Person" shall mean a natural person, sole proprietorship,
corporation, general partnership, limited partnership, limited liability
partnership, limited liability company, joint venture, unincorporated
organization, joint stock company, trust, estate, Regulatory Body or other
entity.
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"Regulatory Body" shall mean any national, state, municipal,
local or other governmental body or authority, or any quasi-governmental or
private body exercising any regulatory authority, including any subdivision or
agency thereof.
"Roll-Out Schedule" shall mean the roll-out schedule for Local
Services in languages other than English, traditional Chinese and simplified
Chinese established pursuant to Section 11.1(a).
"SingTel" shall mean Singapore Telecommunications Limited, a
corporation organized under the laws of Singapore.
"Staging Period" shall mean, with respect to any Local
Service, the period commencing from the date Tripod makes the Licensed Software
for such Local Service available to Licensee under Section 6.1 and ending upon
the determination of the parties under Section 6.2 that such Local Service has
achieved Commercial Readiness.
"Territory" shall mean the Tier One Countries, the Tier Two
Countries and the Tier Three Countries.
"Third Party Properties" shall mean, as to any party other
than Tripod or any of its Affiliates, any service or feature from time to time
offered by such party at an Internet site.
"Tier One Countries" shall mean Singapore, Hong Kong, Peoples'
Republic of China, Taiwan, Malaysia and India.
"Tier Two Countries" shall mean Thailand, Philippines and
Brunei.
"Tier Three Countries" shall mean Indonesia, Vietnam, Laos,
Myanmar and Cambodia.
"Tripod Enhancements" shall mean any Enhancements which are
(a) Derivative Works, or (b) created or developed solely by Tripod or its
Affiliates, agents, consultants or independent contractors.
"Tripod Service" shall mean the "website community" service
offered by Tripod at www.tripod.com, featuring a homepage building service and
opportunities for users to interact.
"Tripod Software" shall mean all computer software used by
Tripod as of the date of this Agreement in connection with the Tripod Service,
and performing the functionality described in the attached EXHIBIT A.
2. LICENSE.
2.1 GRANT OF LICENSE. On the terms and subject to the
conditions of this Agreement, Tripod hereby grants to Licensee the following
rights and licenses:
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(a) the exclusive right and license to provide,
operate and maintain the Local Service for each country in the Territory at the
Local Site for such country;
(b) the exclusive right and license to market,
promote and otherwise exploit, in each country in the Territory, the Local
Service for such country offered at the Local Site for such country;
(c) the exclusive right and license to do the
following in connection with, and only in connection with, providing, operating
and maintaining the Local Service for each country in the Territory at the Local
Site for such country:
(i) select, design and provide local content
for, and incorporate such local content into, each of the Local Services;
(ii) market and sell, and attach and place
advertising content, materials and displays on, and/or linked to, the Internet
webpages of the Local Services, including without limitation banners, still
and/or animated displays, java applets or displays, hyperlinked material, and
audio and/or video material, whether for a fee or otherwise, for the purposes of
advertising and promoting any goods and/or services of Licensee or any third
party;
(iii) use the Licensed Brands, the Licensed
Property and the Lycos Enhancements; and
(iv) use the Licensed Marks in the countries
in the Territory where such Licensed Marks are registered as trademarks.
2.2 EXCLUSIVITY. The rights and licenses granted under Section
2.1 are "exclusive" to the extent provided in this Section 2.2. Tripod shall
not, during the term of this Agreement, grant to any third party, or itself
exercise (other than for the benefit of Licensee), any right or license granted
under Section 2.1 or any right or license to offer, operate or maintain any
"website community" service offered under the brand name "Tripod" at a web site
including a country designation for any country in the Territory or at any other
website which specifically targets residents in any country in the Territory.
Licensee acknowledges that, except as otherwise expressly provided in this
Section 2.2, Tripod is free to use or license the Licensed Brands, the Licensed
Marks, the Licensed Property and the Tripod Enhancements.
2.3 RESTRICTIONS ON TRANSFER. Except as expressly permitted
pursuant to and in accordance with Section 2.4, Licensee shall have no right to
sell, assign, sublicense or otherwise transfer, whether voluntarily or
involuntarily, any of the rights and license granted under Section 2.1.
2.4 SUBLICENSING.
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(a) Subject to Section 2.4(b), Licensee shall have
the right to grant sublicenses under this Agreement for one or more countries in
the Territory to a Licensee Affiliate established to exploit such country or
countries (or, where applicable local law would prevent Licensee from directly
or through a Licensee Affiliate exploiting any country or countries in the
Territory, to a locally owned or controlled sublicensee located in such country
or countries and reasonably acceptable to Tripod) without any obligation to pay
Tripod any additional or increased royalty to Tripod by reason of any such
sublicense.
(b) Tripod shall have the right to approve all of the
terms and conditions on which any sublicense is granted by Licensee to a
sublicensee, which approval shall not be unreasonably withheld. Any sublicense
granted by Licensee to a sublicensee shall be granted pursuant to a written
sublicense agreement in form and substance acceptable to Tripod.
3. DOMAIN NAMES.
3.1 OWNERSHIP OF DOMAIN NAMES. To the extent permitted under
applicable local law and regulation, Licensee shall be the owner, for the
ultimate benefit of Tripod, of domain names which include the name "Tripod" and
which are the domain names of websites at which Licensee offers the Local
Services ("Tripod Domain Names"). In the event Licensee is at any time not
permitted under applicable local law and regulation to be the owner of any
Tripod Domain Name, then a third party acceptable to Tripod and Licensee and
permitted under applicable local law and regulation to be the owner of such
Tripod Domain Name shall be designated to hold ownership of such Tripod Domain
Name for the benefit of Licensee, and for the ultimate benefit of Tripod. Before
any such Tripod Domain Name is registered in the name of Licensee or any third
party, Licensee and/or such third party, as applicable, shall execute and
deliver to Tripod such instruments or documents as Tripod may reasonably require
to assure to Tripod its ultimate beneficial interest in such Tripod Domain Name.
For the avoidance of doubt, for so long as Lycos or an Affiliate of Lycos is a
shareholder of Licensee, Licensee shall have the right to use any Tripod Domain
Names without charge, other than payment of registration and maintenance fees.
Further, Licensee shall, as absolute owner, own all right, title and interest
in, to and under all domain names (other than Tripod Domain Names) for all
websites established and operated by the Licensee.
3.2 AVAILABILITY OF DOMAIN NAMES. Tripod makes no assurance or
representation that the domain name comprised of "www.tripod" and the
appropriate country designation is or will be available for any particular
country in the Territory. In the event the domain name comprised of "www.tripod"
and the appropriate country designation for any particular country in the
Territory is not available at the time of the initial commercial launch of the
Local Service for such country, Tripod and Licensee shall, by mutual agreement,
select a domain name for such country which includes the name "Tripod" in
combination with other letters or words. Tripod shall use reasonable efforts to
procure for Licensee registration of domain names comprised of "www.tripod" and
the appropriate country designation for any country in the Territory which have
been registered by third parties, provided that Tripod shall not be required to
commence litigation against any such third party or to make any payment to
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any such third party in an amount which Tripod considers to be unreasonable
under the circumstances.
4. LICENSED SOFTWARE. Tripod shall be solely responsible for (a) making
any modifications or changes to the Tripod Software which may be necessary to
develop or create Licensed Software capable of supporting the Local Services,
(b) updating the Licensed Software, and (c) maintaining and supporting, at
Licensee's cost and expense (except as otherwise expressly provided herein), the
Licensed Software. Licensee shall not, without the prior written approval of
Tripod in each instance, modify or change the Licensed Software in any respect.
Tripod shall initially make the Licensed Software for any Local Service
available as provided in Section 5.1 and shall update the Licensed Software as
provided in Section 9.2.
5. INITIAL STAGING, TESTING, PROBLEM RESOLUTION, COMMERCIAL READINESS
AND LAUNCH.
5.1 INITIAL STAGING. Within sixty (60) days after the
Effective Date, Tripod shall make the Licensed Software, as then existing, for
the Initial Local Services available for use on a staging server located in the
United States, and shall inform Licensee how to access the Licensed Software for
the Initial Local Services on such staging server. Thereafter from time to time
in accordance with the Roll-Out Schedule, Tripod shall make the Licensed
Software, each as then existing, for other Local Services available for use on a
staging server located in the United States, and shall inform Licensee how to
access the Licensed Software for such Local Services on such staging server.
5.2 TESTING, PROBLEM RESOLUTION AND COMMERCIAL READINESS.
During the Staging Period for any Local Service, Tripod and Licensee shall
conduct such tests of the Licensed Software for such Local Service as either
party deems necessary or desirable, and Tripod shall, at Tripod's expense, use
reasonable commercial efforts to resolve any material performance issues with
respect to the Licensed Software for such Initial Local Service as may be
identified by Tripod or as may be identified by Licensee and communicated by
Licensee to Tripod. When any Local Service has achieved Commercial Readiness, as
jointly determined by Tripod and Licensee in their reasonable commercial
judgment, the Staging Period for such Local Service shall terminate. In the
event that, notwithstanding the good faith efforts of the parties, the parties
have not jointly determined within 180 days after the Effective Date that the
Initial English Version and the Initial Chinese Version have achieved Commercial
Readiness, either party may terminate this Agreement by written notice to the
other.
5.3 INITIAL PUBLIC ACCESS AND LAUNCH. Upon termination of the
Staging Period with respect to any Local Service by joint determination of the
parties that such Local Service has achieved Commercial Readiness, Tripod shall
make the Licensed Software, as then existing, for such Local Service available
for use on the servers which will be used to support the appropriate Local Site,
either by installation thereon if such servers are then located in the United
States or by transmission to Licensee by File Transfer Protocol or Federal
Express, as Tripod may determine in its discretion, if such servers are then
located outside the United States. Within sixty (60) days after Tripod has
completed such installation or transmission to Licensee, Licensee shall announce
to the public the commencement of such Local Service at the appropriate Local
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Site, making due allowance for the development of a well-considered plan for the
commercial launch and initial marketing of such Local Service.
6. LOCALIZATION AND MIRRORED SITES.
6.1 LOCALIZATION. Licensee shall be responsible, at its
expense, for all translation and other localization work (other than
modification of the Licensed Software) required in order to develop the Local
Services.
6.2 IMPLEMENTATION OF MIRRORED SITES. Tripod shall use
reasonable commercial efforts, using information collected from users of the
Tripod Service, to identify any such users who are resident in the Territory and
to compile and maintain a current list of such users and their e-mail addresses.
Tripod shall take reasonable commercial steps to acquaint users of the Tripod
Service who are listed on such list, as updated from time to time, with the
availability of the Local Service and the opportunity to mirror at the Local
Site homepages created using the Tripod Service and to link the mirrored
homepage at the Local Site with the original homepage created using the Tripod
Service. Tripod shall transfer to Licensee, in such manner as may be agreed to
between Tripod and Licensee, the relevant data with respect to homepages created
by users of the Tripod Service whose names appear on the list of Tripod users
resident in the Territory as maintained by Tripod under this Section 6.2.
Commencing for the month in which such mirrored sites are initially created,
Tripod shall provide to Licensee monthly tracking information on transfers by
users of the Tripod Service between homepages created using the Tripod Service
and mirrored homepages at the Local Site. Tripod shall from time to time furnish
to Licensee the e-mail addresses of the users of the Tripod Service listed on
the list maintained by Tripod under this Section 6.2, provided that Licensee
shall not disclose such e-mail addresses to any third party without the written
consent of Tripod.
7. TRANSFER OF OPERATIONS.
7.1 INITIAL OPERATIONS. Initially, Tripod shall operate and
maintain the Local Services for Licensee using dedicated equipment purchased or
leased by Licensee and installed and located in the United States. Licensee
shall reimburse Tripod for all reasonable costs (including indirect costs and
overhead) reasonably incurred by Tripod in operating and maintaining the Local
Services for Licensee, including without limitation costs incurred in preparing
to commence such operation and maintenance, but excluding all costs expressly
agreed to be borne by Tripod under this Agreement.
7.2 TRANSFER OF OPERATIONS. When and as feasible, as
determined and agreed by Tripod and Licensee, Tripod shall transfer the
operation and maintenance of the Local Services from Tripod to Licensee, and, in
connection with such transfer, the equipment referred to in Section 7.1 shall be
shipped by Tripod, at Licensee's expense, to a site in the Territory as
determined by mutual agreement between Tripod and Licensee.
8. TRAINING AND TECHNICAL ASSISTANCE.
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8.1 INITIAL TRAINING. Within three (3) months after the
Effective Date, Tripod shall, at times reasonably convenient to Tripod and
Licensee, provide training at Tripod's principal place of business in the United
States for up to five (5) technical trainees who are employees of Licensee, for
a total of not more than three (3) man months, provided that the cost of travel,
food and lodging for such technical trainees shall be borne by Licensee, or, at
the option of Licensee, Tripod shall provide training at a location in Singapore
designated by Licensee for technical trainees who are employees of Licensee,
provided that the cost of travel, food and lodging for the Tripod trainers shall
be borne by Licensee.
8.2 INITIAL TECHNICAL ASSISTANCE. For a period of three (3)
months after the date of the commercial launch of any Local Service, Tripod
shall, with respect to such Local Service, provide to Licensee, without charge,
such technical assistance as Licensee may reasonably require to operate and
maintain such Local Service at a performance level commensurate with the
performance of the Tripod Service.
8.3 SUBSEQUENT TECHNICAL ASSISTANCE. After the expiration of
the period referred to in Section 8.1, Tripod shall, with respect to the
relevant Local Service, provide to Licensee such technical assistance as
Licensee may reasonably require to operate and maintain such Local Service at a
performance level commensurate with the performance of the Tripod Service, and
Licensee shall compensate Tripod for such technical assistance in accordance
with the most favorable rates offered by Tripod to its customers for providing
such services.
9. LICENSED SOFTWARE UPDATES. Tripod shall provide to Licensee, without
charge, updates to (including entirely new versions of) the Licensed Software at
the same intervals as, and as soon as practical after, updates of the Tripod
Software become available. Until operations are transferred by Tripod to
Licensee pursuant to Section 7.2, such updates shall be made available by Tripod
to Licensee on the equipment through which the Tripod Software is made available
by Tripod to Licensee, and Tripod shall promptly notify Licensee each time any
such update is made available. After operations are transferred by Tripod to
Licensee pursuant to Section 7.2, such updates shall be made available by Tripod
to Licensee by File Transfer Protocol or by Federal Express, as Tripod may
determine. At the time Tripod makes available to Licensee any updates to the
Licensed Software, Tripod shall notify Licensee of the changes to the Licensed
Software effected by such updates.
10. DUTIES OF LICENSEE.
10.1 ROLL-OUT SCHEDULE.
(a) Unless otherwise agreed between Tripod and
Licensee, and, for so long as the Joint Venture Agreement remains in effect,
between Lycos and SingTel, the Service
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shall be initiated first in Tier One Countries, then in Tier Two Countries and
finally in Tier Three Countries. Subject to Section 10.2 (b), any of the Tier
One Countries for which the Service is not initiated on or before September 30,
2000, any of the Tier Two Countries for which the Service is not initiated on or
before December 31, 2000, and any of the Tier Three Countries for which the
Service is not initiated on or before March 31, 2001 shall thereupon be
automatically excluded from the Territory and from the license granted under
Section 2.1. Tripod and Licensee shall cooperate in establishing a reasonable
roll-out schedule for Local Services in languages other than English,
traditional Chinese and simplified Chinese.
(b) If the Licensee fails to meet the deadline set
forth in Section 10.1(a) with respect to any country included in the Territory
and such failure is solely attributable to (i) events beyond the control of
Licensee, including without limitation acts of God, war, invasion, rebellion,
revolution, insurrection, civil commotion, civil war, acts of government,
earthquakes, fire, lightning, storms, floods, unusually severe weather
conditions, natural disasters, strikes, lockouts, boycotts, labor disputes,
terrorism, sabotage, arson, and the like, (ii) the failure of the Licensee (or
any Licensee Affiliate established for such country), notwithstanding its
diligent efforts, to obtain from any government, regulatory or administrative
body any license, approval or permit required with respect to such country, or
(iii) the failure of Tripod to timely perform its obligations under this
Agreement, then such deadline shall be extended by a reasonable period of time
having regard to the circumstances of the delay.
10.2 TRAFFIC REPORTS.
(a) Commencing on the fifth business day of the month
immediately following the month in which operations are transferred by Tripod to
Licensee pursuant to Section 7.2, and continuing on the fifth business day of
each month thereafter during the term of this Agreement, Licensee shall, for
itself and for each Licensee Affiliate, provide to Tripod via electronic mail a
file, in standard common log file format, containing a complete and detailed
record for the prior month of (a) user accesses (click stream data) to the
Licensed Software, (b) the total number of advertising impressions possible, (c)
advertising impressions filled expressed as a percentage of advertising
impressions possible, and (d) the number of specific advertisements placed by
each advertiser, indicating whether such advertisements are rotational, static
or keyword based.
(b) Commencing on the second business day of the week
immediately following the week in which the operations are transferred by Tripod
to Licensee pursuant to Section 7.2, and continuing on the second business day
of each week thereafter during the term of this Agreement, Licensee shall, for
itself and for each Licensee Affiliate, provide to Tripod via electronic mail a
report summarizing the previous week's daily traffic to each Local Site.
10.3 COMPLIANCE WITH LAW. Licensee shall operate and maintain
the Local Service for each country in the Territory in compliance with all
applicable laws, rules and regulations of any relevant Regulatory Body.
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10.4 STANDARD OF OPERATION. Licensee shall operate and
maintain the Local Services in a manner which is consistent with the quality
standards of Tripod and which meets or exceeds the response performance
standards of the Tripod Service, subject to compliance by Tripod with its
obligations under Section 8 and Section 9.
10.5 TRIPOD APPROVAL OF SAMPLE MATERIALS. Tripod shall have
the right to approve, prior to distribution, samples of all hard copy
advertising and promotional materials developed by Licensee (or any Licensee
Affiliate) and using any of the Licensed Brands or the Licensed Marks. Tripod
shall be deemed to have given such approval in the event such samples are
approved by the Chief Operating Officer of Licensee.
10.6 PRIVACY POLICY. In connection with each Local Service,
Licensee agrees to implement a privacy policy consistent with that utilized by
Tripod in connection with the Tripod Service and posted at www.tripod.com, with
such modifications as may be required by applicable local law.
11. LEAKAGE. With respect to all internet traffic which is incoming to
and which originates from any country in the Territory for which the Tripod
Service has been initiated, Tripod shall (or shall cause Lycos to) automatically
redirect such traffic to the appropriate website at which the Local Service is
offered for such country, except that and websites linked to on a networked
basis shall be accessible through links maintained at the Local Sites. In
addition, with respect to all internet traffic which is incoming to and which
originates from any country outside the Territory from a user identifiable as a
user whose normal access would be from a country in the Territory for which the
Local Service has been initiated, Tripod shall (or shall cause Lycos to)
automatically redirect such traffic to the appropriate Local Site at which the
Local Service is offered for such country.
12. ADDITIONAL PROPERTIES.
12.1 LICENSEE'S RIGHT OF FIRST REFUSAL. Tripod agrees that
Tripod will not grant to any third party, or itself exercise, any right or
license to offer, operate or maintain any Additional Properties of Tripod under
the brand name "Tripod" at a website including a country designation for any
country in the Territory or at any other website which specifically targets
residents in any country in the Territory unless Tripod first offers to grant to
Licensee, on most favored customer terms (which may include payment of a lump
sum royalty on a most favored customer basis), the right and license to offer,
operate and maintain such Additional Property at the Local Sites together with
the Local Service and Licensee shall have failed to accept such offer within
sixty (60) days after such offer is made, or, notwithstanding the good faith
efforts of the parties, shall have failed to enter into a mutually acceptable
license agreement with Tripod within ninety (90) days after such offer is made.
12.2 LICENSEE'S ACQUISITION OF THIRD PARTY PROPERTIES.
Licensee shall not acquire from a party other than Tripod any Third Party
Properties which are similar or identical to any Additional Properties of Tripod
not then licensed to Licensee unless Licensee first offers
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to acquire from Tripod, on most favored customer terms (which may include
payment of a lump sum royalty on a most favored customer basis), the right and
license to offer, operate and maintain such Additional Property at the Local
Sites and Tripod shall have failed to accept such offer within sixty (60) days
after such offer is made, or, notwithstanding the good faith efforts of the
parties, shall have failed to enter into a mutually acceptable license agreement
with Licensee within ninety (90) days after such offer is made.
13. [A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION]
14. TAXES. In the event the Singapore government imposes any
withholding taxes on any amounts payable by Licensee to Tripod under this
Agreement, including without limitation any royalty payment to be made by
Licensee to Tripod under Section 13, Tripod shall bear all such withholding
taxes and Licensee shall deduct the amount of such withholding taxes from the
amount of such payments, remit such taxes to the appropriate taxing authority,
and remit the balance of such payments, together with evidence of the remittance
of such tax to the appropriate taxing authority, to Tripod.
15. RIGHTS IN INTELLECTUAL PROPERTY.
15.1 RESERVATION OF RIGHTS. Except as otherwise expressly set
forth in this Agreement, no right, title or interest in or to the Licensed
Software, the Licensed Property, the Licensed Brands, the Licensed Marks, the
Tripod Enhancements, the Local Services or in any domain name including the name
"Tripod," or any variant thereof or combination therewith, or in or to any other
intellectual property, shall pass to Licensee under this Agreement.
15.2 TRIPOD ENHANCEMENTS. All ownership and other rights in
and to the Tripod Enhancements shall vest in and inure to the benefit of Tripod.
Upon request, Licensee shall execute all such documents, including without
limitation documents of assignment, and take all such steps and render all such
assistance as may be necessary to assure to Tripod its rights under this Section
15.2.
15.3 JOINT ENHANCEMENTS. All ownership and other rights in and
to Joint Enhancements shall vest in and inure to the benefit of Tripod and
Licensee jointly. Each party shall have the right to use Joint Enhancements, but
neither party shall have the right to license Joint Enhancements without the
prior written consent of the other party.
15.4 LICENSEE ENHANCEMENTS. All ownership and other rights in
and to the Licensee Enhancements shall vest in and inure to the benefit of
Licensee. Licensee hereby grants to Tripod a royalty-free, non-exclusive,
worldwide (other than with respect to the
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Territory) license, with the right to sublicense, to use the Licensee
Enhancements in connection with the Tripod Service or otherwise.
15.5 NO REGISTRATION BY LICENSEE. Licensee shall not, in any
country in the Territory or in any other jurisdiction, make any patent,
trademark, service mark or copyright registration or application for
registration with respect to any intellectual property owned or licensed by
Tripod, including without limitation the Licensed Software, the Licensed
Property, the Licensed Brands, the Licensed Marks or the Tripod Enhancements,
or, except as otherwise provided in Section 3, with respect to any domain name
which includes the name "Tripod," or any variant thereof or combination
therewith.
15.6 BENEFIT. All use of the Licensed Property shall inure to
the benefit of Tripod, or, as applicable, its licensors.
16. MARKING.
16.1 MARKING OF MATERIALS. Licensee shall, in accordance
with the applicable laws of the countries in the Territory, include any
appropriate patent, trademark and copyright markings and notations in all
marketing, advertising, promotional and other materials which are used in
such countries and which refer to the Licensed Property or the Licensed
Marks. Without limiting the foregoing, if the name "Tripod" appears in any
such materials, such materials shall include the following statement: "Tripod
- -Registered Trademark- is a registered trademark of Tripod, Inc. in the
United States of America [, the country where used if registered as a trademark
in such country] and other countries. All Rights Reserved."
16.2 MARKING OF ENTRY SCREEN. Subject to applicable local law,
the following statement shall appear on the entry screen of the Local Services,
in a font no smaller than the font for the main text used in the relevant Local
Service and otherwise in such manner as Tripod may specify to Licensee from time
to time:
"-C-199__. Tripod, Inc.
Tripod-Registered Trademark- is a registered
trademark of Tripod, Inc. in the United States
of America [, the country for which such Local
Searchservice is offered if registered as a
trademark in such country] and other
countries. All Rights Reserved."
17. RIGHT TO LICENSE, PROTECTION OF RIGHTS AND INFRINGEMENT.
17.1 RIGHT TO LICENSE. Tripod hereby represents and warrants
to Licensee that:
(a) Tripod owns and will own, or is and will be a
licensee (with the right to grant sublicenses) of, the Licensed Software and the
Licensed Property made available or to be made available by Tripod to Licensee
under this Agreement, and has the right and authority to grant the rights and
licenses with respect thereto set forth in Section 2.1; and
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<PAGE>
(b) Tripod is a registered trademark of Tripod in the
United States of America and in the countries in the Territory indicated on the
attached EXHIBIT B, and Tripod has the right and authority to grant the rights
and licenses with respect to the Licensed Marks set forth in Section 2.1.
17.2 [A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION]
17.3 LICENSED BRANDS. Tripod shall use reasonable commercial
efforts to register "Tripod" as a registered trademark in any country in the
Territory where "Tripod" is not registered as a registered trademark of Tripod
as of the date hereof. TRIPOD MAKES NO REPRESENTATIONS AND WARRANTIES WITH
RESPECT TO THE OWNERSHIP, THE RIGHT OF TRIPOD TO LICENSE OR THE RIGHT OF
LICENSEE TO USE THE LICENSED BRANDS IN ANY COUNTRY IN ANY COUNTRY IN THE
TERRITORY AND GIVES NO ASSURANCE THAT ANY OF THE LICENSED BRANDS CAN OR WILL BE
REGISTERED AS REGISTERED TRADEMARKS IN ANY COUNTRIES IN THE TERRITORY.
17.4 INFRINGEMENT ON RIGHTS OF THIRD PARTIES.
(a) In the event Licensee's use of the Licensed
Software and the Licensed Property in accordance with the provisions of this
Agreement and in the form in which provided by Tripod to Licensee is determined
to infringe on the rights of any third party, Tripod shall, at its own expense
and in its sole discretion, (a) procure for Licensee the right to continue such
use, (b) replace the infringing item with a non-infringing item, or (c) modify
the infringing item to make it non-infringing; provided, however, that the
liability of Tripod to Licensee for any breach by Tripod of this Section 17.4(a)
shall be subject to the applicable liability limit set forth in Section 17.2.
(b) Subject to the applicable liability limit set
forth in Section 17.2, Tripod shall indemnify and hold Licensee harmless from
and against all losses, damages and liabilities resulting from the actual
infringement of the Licensed Software, the Licensed Property, the Licensed
Brands or the Licensed Marks on the rights of third parties; provided, however,
that this indemnification shall not apply to any continued use of the Licensed
Brands or the Licensed Marks in any country in the Territory after Licensee is
put on notice or otherwise becomes aware that use of the Licensed Brands or the
Licensed Marks in such country infringes on the rights of a third party.
17.5 INDEMNIFICATION BY LICENSEE. Tripod shall not have any
obligation or liability to Licensee for any infringement of Licensed Software
and the Licensed Property on the rights of third parties if such infringement is
attributable to modifications thereto made by Licensee with or without the
consent of Tripod, and, subject to the applicable liability limit set forth in
Section 17.2, Licensee shall indemnify and hold Tripod harmless from and against
all
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<PAGE>
losses, damages or liabilities resulting from any actual infringement resulting
from such modifications.
17.6 INFRINGEMENT BY THIRD PARTIES. In the event Licensee
becomes aware of any infringement by any third party on the rights and licenses
granted by Tripod to Licensee under this Agreement, Licensee shall promptly
notify Tripod of any sich infringement. Tripod may, but shall not be obligated
to, take such action against such infringement as Tripod may deem appropriate.
18. YEAR 2000 WARRANTY. Tripod hereby represents and warrants to
Licensee that the Licensed Software will perform its function without
interruption or failure by reason of the calendar year in which used, whether
before, during or after the year 2000, or by reason of errors in date
processing, date recognition or other date dependent functions, provided that
all other products used in combination with the Licensed Software, including
without limitation operating systems and other software, properly exchange data
with the Licensed Software. In the event of any breach of the foregoing
warranty, Tripod shall, as Licensee's sole remedy, modify the Licensed Software
so as to comply with the foregoing warranty.
19. WARRANTY DISCLAIMERS. EXCEPT AS EXPRESSLY SET FORTH IN SECTIONS
17.1 AND 18, TRIPOD MAKES NO WARRANTIES TO LICENSEE OF ANY KIND, WRITTEN OR
ORAL, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE, ALL OF
WHICH OTHER WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED.
20. CONFIDENTIALITY.
20.1 CONFIDENTIALITY. For so long as this Agreement remains in
effect and for a period of two (2) years after any expiration or termination of
this Agreement, each party shall keep strictly confidential, and shall not
disclose, any confidential information of the other party received under or in
connection with this Agreement, including without limitation any information,
written or oral, relating to 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; provided, however, that confidential information shall not include,
and the disclosure restrictions of this Section 20.1 shall not apply to, any
information received by either party from the other which:
(a) was already known to the recipient at the time of
receipt;
(b) was at the time of receipt, or thereafter
becomes, freely and generally available to the public through no wrongful act of
the recipient;
(c) is rightfully received by the recipient from a
third party legally entitled to disclose such information free of
confidentiality restrictions;
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<PAGE>
(d) is disclosed by the recipient pursuant to the
order of any court or in connection with any legal proceeding commenced by or
against the recipient, provided that prior to any such disclosure the recipient
shall give the other party a reasonable opportunity to seek a protective order
with respect to any such disclosure; or
(e) is disclosed by the recipient, or any Affiliate
of the recipient, as required under any applicable securities laws
Upon the expiration or termination of this Agreement, either party shall
either destroy or return to the other party all memoranda, notes, records,
reports and other documents (including all copies thereof) containing any
confidential information of such other party and in such other party's
possession or under its control at the time of such expiration or
termination, and shall give written certification of compliance with this
paragraph to such other party.
20.2 PRESS RELEASES AND ANNOUNCEMENTS. Neither party shall
issue any press releases or public announcements relating to this Agreement, the
transactions contemplated by this Agreement or the business of Licensee without
the prior written approval of the other party, which approval shall not be
unreasonably withheld or delayed, except that each party shall be permitted to
issue any press releases or publicity statements (whether or not approved by the
other party) to the extent required by any applicable securities laws, and
Tripod shall have the right to issue press releases and make public
announcements relating to its products, services and plans.
21. TERM AND TERMINATION.
21.1 TERM. Unless sooner terminated as provided in Section
5.2, Section 21.2, Section 21.3 or Section 21.4 the term of this Agreement shall
commence from the Effective Date and continue until the dissolution of Licensee.
21.2 AUTOMATIC TERMINATION. This Agreement is subject to
automatic termination upon the making of any order by the High Court of the
Republic of Singapore for the winding up or judicial management of the Company,
or the passing of any special resolution by the shareholders of the Company for
the winding up or liquidation of the Company.
21.3 TERMINATION BY TRIPOD. Tripod may terminate this
Agreement by written notice to Licensee in the event Licensee fails to make any
installment payment of royalties when and as due, or in the event Licensee
ceases to conduct business for a period of not less than sixty (60) consecutive
days, and such failure or cessation of business continues for thirty (30) days
after written notice thereof is given by Tripod to Licensee.
21.4 TERMINATION BY LICENSEE. Licensee may terminate this
Agreement in the event Tripod materially breaches this Agreement and such
breach, if susceptible of cure, remains uncured for thirty (30) days after
Licensee gives written notice of such breach to Tripod.
21.5 EFFECT OF TERMINATION. The expiration or termination of
this Agreement shall not affect any payment obligations of either party to the
other accrued or otherwise existing
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<PAGE>
as of the date of such expiration or termination. Upon the expiration or
termination of this Agreement for any reason, all of the rights and licenses
granted under Section 2.1, and any sublicenses granted pursuant to this
Agreement, shall terminate, and Licensee shall immediately (a) cease any use of
the Licensed Brands, the Licensed Marks, the Licensed Property, the Local
Catalogs, the Lycos Catalog, the Licensed Software and the Tripod Enhancements,
(b) either return to Tripod or destroy all embodiments thereof, and (c) certify
to Tripod in writing that Licensee has complied with the requirements of clauses
(a) and (b) of this Section 22.5.
21.6 SURVIVAL. The provisions of Sections 15 and 20 shall
survive any expiration or termination of this Agreement.
22. MISCELLANEOUS.
22.1 COSTS. Except as may be otherwise expressly provided in
this Agreement, each party shall bear its own costs and expenses in carrying out
its obligations under this Agreement.
22.2 LATE PAYMENTS. All amounts payable by either party to the
other party under this Agreement shall be due and payable within thirty (30)
days after the date of invoice. If any payment is not received within thirty
(30) days after the date of invoice, interest will be imposed on such amount
from the date due until paid in full at a rate of one percent (1%) per month.
22.3 NOTICES. Any notice, request, demand, approval or consent
required or permitted under this Agreement shall be in writing and shall be
effective upon actual receipt when delivered by (a) registered mail, postage
prepaid, return receipt requested, (b) personal delivery, (c) an overnight
courier of recognized reputation (such as DHL or Federal Express), or (d)
transmission by facsimile (with confirmation by mail), in each case addressed as
follows:
If to Tripod: Tripod, Inc.
400-2 Totten Pond Road
Waltham, MA 02154
U.S.A
Attention: General Counsel
Telephone: (781) 370-2700
Facsimile: (781) 370-2600
With a copy to: Coudert Brothers
1055 West 7th Street, 20th Floor
Los Angeles, CA 90017
U.S.A.
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<PAGE>
Attention: Richard G. Wallace
Telephone: (213) 688-9088
Facsimile: (213) 689-4467
If to Licensee: Lycos Asia Pte Ltd
---------------------------
---------------------------
Attention:
---------------
Telephone:
---------------
Facsimile:
---------------
Either party may change its address or facsimile number for notice purposes by
notice given to the other party in accordance with this Section 22.3.
22.4 ASSIGNMENT. Neither party's rights, duties or
responsibilities under this Agreement may be assigned, delegated or otherwise
transferred in any manner, without the prior written consent of the other party.
Notwithstanding the foregoing, no such consent shall be required in connection
with the assignment, delegation or other transfer of any such rights, duties or
responsibilities (a) by a party to any Affiliate, or (b) in connection with any
merger or other transaction, regardless of its form, in which all or
substantially all of the assets of either party are acquired.
22.5 ENTIRE AGREEMENT. This Agreement, including the exhibits
referred to herein, which are hereby incorporated in and made a part of this
Agreement, constitutes the entire contract between the parties with respect to
the subject matter covered by this Agreement. This Agreement supersedes all
previous letters of intent, agreements and understandings, if any, by and
between the parties with respect to the subject matter covered by this
Agreement. This Agreement may not be amended, changed or modified except by a
writing duly executed by the parties hereto.
22.6 SEVERABILITY. If any provision of this Agreement is held
by a court of competent jurisdiction to be unenforceable, invalid or void in any
respect, no other provision of this Agreement shall be affected thereby, all
other provisions of this Agreement shall nevertheless be carried into effect and
the parties shall amend this Agreement to modify the unenforceable, invalid or
void provision to give effect to the intentions of the parties to the extent
possible in a manner which is valid and enforceable.
22.7 REMEDIES AND WAIVERS. All rights and remedies of the
parties are separate and cumulative, and no one of them, whether exercised or
not, shall be deemed to be to the exclusion of or to limit or prejudice any
other rights or remedies which the parties may have. The parties shall not be
deemed to waive any of their rights or remedies under this Agreement, unless
such waiver is in writing and signed by the party to be bound. No delay or
omission on the part of either party in exercising any right or remedy shall
operate as a waiver of such right or remedy or any other right or remedy. A
waiver on any one occasion shall not be construed as a bar to or waiver of any
right or remedy on any future occasion.
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<PAGE>
22.8 ARBITRATION. In the event any dispute arises between
Tripod and Licensee with respect to any matter arising out of or relating to
this Agreement which cannot be amicably resolved, such dispute shall be
submitted to the London Court of International Arbitration for binding
arbitration in accordance with the UNCITRAL arbitration rules as then in effect.
The arbitration shall be conducted in the English language, and shall be held in
London, England. Any arbitration award rendered in any such arbitration
proceeding may be entered in and enforced by any court of competent
jurisdiction. Nothing contained in this Section 22.8 shall prevent or be
construed to prevent either party from seeking a temporary restraining order or
a preliminary or permanent injunction or any other form of interim, provisional
or equitable relief in any court of competent jurisdiction.
22.9 GOVERNING LAW. This Agreement shall be governed by, and
interpreted in accordance with, the laws of England except that each party shall
have the right in its capacity as a disclosing party to enforce the provisions
of Section 20 under either the laws of the State of Massachusetts or the laws of
England. For all purposes relating to the enforcement of Section 20 the parties
shall submit to the non-exclusive jurisdiction of the Courts of Singapore and
the federal and state courts located in the State of Massachusetts provided that
in any matter brought before the federal and state courts located in the State
of Massachusetts the parties irrevocably waive all rights to a jury trial.
22.10 HEADINGS. The headings contained in this Agreement are
for convenience only and are not a part of this Agreement, and do not in any way
interpret, limit or amplify the scope, extent or intent of this Agreement, or
any of the provisions of this Agreement.
22.11 COUNTERPARTS AND FACSIMILE. This Agreement may be
executed in counterparts, each of which shall constitute an original, but all of
which together shall constitute one and the same agreement. Transmission of
facsimile copies of signed original signature pages of this Agreement shall have
the same effect as delivery of the signed originals.
22.12 CONTROLLING LANGUAGE. This Agreement has been prepared,
negotiated and signed in English, and English is the controlling language of
this Agreement.
22.13 THIRD PARTY BENEFICIARY. This Agreement is not intended
to and does not confer any rights on any third party, and no such third party
shall be a third party beneficiary under or in respect of this Agreement.
22.14 BINDING EFFECT. Subject to Section 22.4, this Agreement
shall be binding upon and shall inure to the benefit of the parties and their
respective successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
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<PAGE>
TRIPOD, INC.,
a corporation organized under the laws of
Delaware, USA
By:
Its:
LYCOS ASIA PTE LTD,
a company organized under the laws of
Singapore
By:
Its:
<PAGE>
EXHIBITS
Exhibit A: Licensed Software
Exhibit B: Licensed Brands and Marks
<PAGE>
EXHIBIT A
LICENSED SOFTWARE
[A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION]
EXHIBIT B
LICENSED BRANDS AND MARKS
[A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION]
<PAGE>
EXHIBIT 10.28
JOINT VENTURE AGREEMENT
THIS JOINT VENTURE AGREEMENT is made as of March 19, 1999 by and
between LYCOS, INC. ("Lycos"), a corporation organized under the laws of the
State of Delaware, United States of America, and MIRAE CORPORATION, a CHUSIK
HOESA organized under the laws of the Republic of Korea ("Mirae").
RECITALS
A. Lycos provides a World Wide Web navigation, search, directory and
community service which is supported by advertising and electronic commerce.
Lycos has exclusive worldwide rights to certain technology and knowhow used in
providing such service. Lycos is interested in providing a comparable service,
as culturally adapted and with suitable local content, for the Republic of Korea
market through a joint venture with Mirae.
B. Mirae is interested in participating with Lycos in the joint
venture, and has various knowledge, experience and resources which would be of
benefit to the joint venture.
NOW, THEREFORE, the parties to this Agreement hereby agree as follows:
1. INCORPORATION OF LYCOS KOREA. As promptly as possible after the
execution of this Agreement, the parties shall cause a CHUSIK HOESA to be
incorporated under the laws of the Republic of Korea (the "Company") as follows:
1.1 NAME. The name of the Company shall be "Lycos Korea Chusik
Hoesa" in Korean and "Lycos Korea, Inc." in English.
1.2 AUTHORIZED CAPITAL. The authorized capital of the
Company shall be [***] consisting of one common class of shares, and the
Company shall be authorized to issue 20,000 shares of [***] par value per
share (collectively, the "Stock") at the time of establishment.
1.3 SUBSCRIPTION. At the time of establishment of the
Company, each of Lycos and Mirae shall subscribe for 10,000 shares of Stock
having an aggregate par value of [***] for a total subscription of 20,000
shares of Stock having an aggregate par value of [***].
1.4 LEGENDS ON SHARE CERTIFICATES. Any share certificate
issued by the Company to evidence any shares of stock of the Company issued to
Lycos or Mirae shall bear the following legend:
"TRANSFER OF THE SHARES OF STOCK REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE JOINT VENTURE AGREEMENT
BETWEEN LYCOS, INC. AND
***A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
<PAGE>
MIRAE CORPORATION DATED _________, 1999, AND TO THE
SHAREHOLDERS AGREEMENT BETWEEN LYCOS, INC. AND MIRAE
CORPORATION DATED __________, 1999, COPIES OF WHICH ARE ON
FILE AT THE PRINCIPAL OFFICE OF THE COMPANY IN SEOUL,
KOREA."
1.5 INITIAL DIRECTORS. The initial directors of the Company
shall be as follows:
Edward M. Philip
Eric J. Gerritsen
Moon Soul Chung
Kyung Dal Cho
1.6 ADDRESS OF REGISTERED OFFICE. The address of the
registered office of the Company shall be initially as follows:
Lycos Korea, Inc.
c/o Mirae Corporation
#1309, Korea Stock Exchange, Annex Bldg.,
33, Yoidodong, Youngdungpo-gu
Seoul, Korea 150-010
1.7 FISCAL YEAR. The fiscal year of the Company shall end on
July 31, and the initial fiscal year shall be the stub period from the date of
incorporation of the Company through July 31, 1999.
1.8 ACCOUNTING AND BOOKS AND RECORDS. The Company shall keep
accurate books of account and financial and related records in accordance with
generally accepted Korean accounting principles, standards and procedures,
consistently applied. Upon reasonable prior notice and during normal business
hours, the Company shall make available at its principal office in Seoul, Korea
for inspection by Lycos and Mirae, and their designated representatives, the
books of account and records of the Company.
1.9 ARTICLES. The Articles of Incorporation of the Company
shall be in the form of the attached EXHIBIT A.
1.10 COSTS AND EXPENSES. The Company shall bear all costs and
expenses directly relating to the incorporation of the Company in the Republic
of Korea, including without limitation registration fees, notary fees, stamp
duties and the like, and, to the extent permitted by law, attorneys' fees. Mirae
shall advance any such expenses when and as required, and Mirae shall be
entitled to prompt reimbursement of such expenses by the Company upon the
completion of its incorporation.
<PAGE>
1.11 ASSISTANCE. Mirae shall provide such reasonable
assistance in connection with the incorporation of the Company as may be
required, including without limitation assistance in connection with the
preparation or filing of any reports, notices or other filings required to be
made in the Republic of Korea by the Company to or with any Korean governmental
authority.
2. TECHNOLOGY LICENSES..
2.1 LICENSING AGREEMENTS. As promptly as possible after the
incorporation of the Company, Lycos shall enter into license agreements with the
Company in the forms attached as EXHIBITS B-1 AND B-2 (the "License
Agreements"). The rights of the Company under the License Agreements shall
continue in accordance with the terms thereof notwithstanding any change in the
ownership of Lycos, any transfer of the assets or business of Lycos, or any
merger, consolidation, reorganization or recapitalization affecting Lycos.
2.2 ADDITIONAL TECHNOLOGIES. Lycos shall from time to time
enter into good faith negotiations with the Company regarding the licensing by
Lycos to the Company of additional technologies used by Lycos and not covered by
the License Agreements, to the extent such additional technologies are required
to maintain a similar look and feel between the services offered by Lycos and
the services offered by the Company. The licensing of any such additional
technologies by Lycos to the Company shall be subject to the execution of a
definitive agreement on mutually acceptable terms and conditions, which may
include provision for reasonable compensation to Lycos.
3. SHAREHOLDER AGREEMENT. In connection with the issuance of Stock to
Lycos and Mirae, Lycos and Mirae shall enter into a shareholder agreement in the
form of the attached EXHIBIT C (the "Shareholder Agreement").
4. MIRAE LOAN FACILITY. As promptly as possible after the incorporation
of the Company, Mirae shall enter into a loan agreement with the Company (the
"Loan Agreement") by which Mirae agrees to make loans (collectively, the
"Loans") to the Company as follows:
4.1 MAXIMUM AGGREGATE COMMITMENT. The maximum aggregate amount of
the Loans shall be [***] (the "Maximum Aggregate Commitment").
4.2 ADVANCES. Advances of the Loans shall be made as follows:
(a) promptly after the execution of the Loan
Agreement, Mirae shall advance to the Company [***] (the "Initial Advance");
(b) on the one (1) year anniversary date of
the Initial Advance, or at such earlier time as may be agreed between Mirae
and the Company, Mirae shall advance to the [***] Company (the "Second
Advance"); and
***A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
<PAGE>
(c) after making the Second Advance, Mirae shall from
time to time advance to the Company such amounts as may be required by the
Company to meet its financial obligations or Business Goals (as defined below);
provided, however, that the maximum amount of Loans outstanding at any one time
under the Loan Agreement shall not exceed the amount of the Maximum Aggregate
Commitment.
4.3 MATURITY DATE. "Maturity Date" shall mean the 20th
anniversary date of the Initial Advance, as automatically extended for up to
four (4) consecutive five (5) year periods unless the Company, by unanimous
affirmative vote of its board of directors, elects to fix the maturity date of
the Loans at the end of the initial period or at the end of any subsequent
extension period and gives written notice of such election to Mirae not less
than six (6) months prior to the end of the initial period or any subsequent
extension period. The principal amount of all Loans outstanding under the Loan
Agreement on the Maturity Date shall be due and payable on the Maturity Date.
4.4 APPLICABLE RATE. "Applicable Rate" means, at any point in
time, the higher of (a) eight percent (8%), or (b) the overdraft interest rate
prescribed by Korean law (or such equivalent rate as may be required from time
to time to avoid the generation of taxable income to Mirae solely by reason of
payment of interest by the Company to Mirae at a rate lower than a benchmark
rate prescribed by Korean tax law or the Korean tax authorities).
4.5 INTEREST. Interest shall accrue on the outstanding
principal amount of the Loans at a rate per annum which is equal to the
Applicable Rate, and the Company shall pay accrued interest, subject to any
available offsets, to Mirae in arrears on the last business day of each calendar
quarter and on the Maturity Date. Interest shall be calculated based on a
360-day year and the actual number of days elapsed.
4.6 VOLUNTARY PREPAYMENT. Upon the unanimous affirmative vote
of its board of directors, the Company may, without premium or penalty,
voluntarily prepay all or any portion of the Loans outstanding from time to
time. Amounts prepaid may not be reborrowed.
4.7 ACCELERATION. Mirae shall have the right to accelerate
repayment of the Loans in the event (a) any voluntary or involuntary dissolution
proceeding or any voluntary or involuntary bankruptcy proceeding is commenced by
or against the Company, (b) any of this Agreement, the License Agreements or the
Shareholder Agreement is terminated for any reason, and (c) the Company is or
becomes unable to meet its financial obligations when and as due, including
without limitation the obligation of the Company to pay principal and interest
under the Loan Agreement. Except as expressly set forth in this Section 4.7,
Mirae shall not have any acceleration rights with respect to repayment of the
Loans.
4.8 CURRENCY DENOMINATION. All of the Loans shall be
denominated in Korean Won, and all advances and payments in respect of the Loans
shall be made in Korean Won.
<PAGE>
4.9 METHOD OF PAYMENT. The Company shall pay all principal and
interest owing to Mirae under the Loan Agreement to such account as Mirae may
specify by written notice to the Company.
4.10 NO COLLATERAL OR GUARANTY. No collateral or guaranty for
any of the Loans shall be required.
5. CAPITAL CONTRIBUTIONS AND STOCKHOLDER LOANS..
5.1 CAPITAL CONTRIBUTIONS. Neither party to this Agreement
shall have any obligation to make capital contributions to the Company other
than the [***] to be contributed as capital by each of Lycos and Mirae (for a
total aggregate capital contribution of [***]) in connection with the
incorporation of the Company.
5.2 LOANS. Except as expressly provided for in Section 4,
neither party to this Agreement shall have any obligation to make loans to the
Company.
6. MANAGEMENT.
6.1 DIRECTORS. The Company shall at all times have an even
number of directors, and the initial number of directors shall be four (4).
Mirae and Lycos shall have equal representation on the board of directors of the
Company, and the parties shall cooperate in the election of directors, as more
specifically provided in the Shareholder Agreement.
6.2 REPRESENTATIVE DIRECTOR. There shall be one representative
director, who shall be a Mirae nominee.
6.3 STATUTORY AUDITOR. There shall be one statutory auditor,
who shall be a Lycos nominee.
6.4 MEETINGS OF DIRECTORS. The Company shall bear all
reasonable expenses of directors in connection with their attendance at meetings
of directors, including without limitation travel, lodging and meals.
7. BUSINESS OBJECTIVES AND BUSINESS GOALS.
7.1 BUSINESS OBJECTIVES. The business objectives of the
Company shall include, without limitation, the following:
(a) provide a World Wide Web navigation,
search, directory and community service at www.lycos.co.kr, which is generally
similar to, and of like quality with, the World Wide Web navigation, search,
directory and community service provided by Lycos at www.lycos.com, but which is
adapted culturally and in local content to be suitable for the Korean market
(the "Service");
*** A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
(b) generate revenue from the Service, including
without limitation revenue from the sale of advertising and electronic commerce;
(c) engage in all business activities relating
to the development, maintenance, support, enhancement and promotion of the
Service, including without limitation the development and acquisition of local
content and the development and expansion of distribution channels for the
Service; and
(d) engage in all business activities ancillary or
incidental to the foregoing.
7.2 BUSINESS GOALS. Set forth on the attached EXHIBIT D are
specific business goals for the Company for the period from the date of this
Agreement through December 31, 2001. Not less than three (3) months prior to the
end of such period and each consecutive three (3) year period thereafter, the
parties shall agree on specific business goals for the three (3) year period
immediately following the current period. Such business goals, as from time to
time in effect, are referred to as the "Business Goals."
8. START UP, OPERATION AND ADDITIONAL TECHNOLOGIES.
8.1 START UP. Initially, the Service shall be operated and
maintained at the U.S. data center of Lycos. When and as feasible, as
determined by Lycos and the Company, the operation and maintenance of the
Service shall be transferred to a site in the Republic of Korea. For so long
as the Service is operated and maintained at the U.S. data center of Lycos,
the Company shall pay to Lycos a fee of [A CONFIDENTIAL PORTION OF THE MATERIAL
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.] cents (one quarter of one cent) for each query processed at the
U.S. data center of Lycos in connection with the Service.
8.2 PERSONNEL. Mirae shall be responsible for assuring that
the Company is adequately staffed with properly skilled personnel as required to
enable the Company to meet its business objectives and the applicable Business
Goals.
8.3 OPERATION. Mirae shall be responsible for assuring that
the Service is operated on a twenty-four (24) hour a day, seven (7) day a week
basis, both before and after transfer of the Service to the Republic of Korea.
9. COOPERATION. The parties shall in good faith cooperate with each
other to enable the Company to maximize the success of the Company's business.
10. ADVERTISING AND REFERRALS.
10.1 PURCHASE OF ADVERTISING BY MIRAE. Mirae agrees to
purchase advertising from the Company at the applicable rates from time to time
offered by the Company to unrelated third parties and otherwise as more
specifically described in the attached EXHIBIT E. Payments by Mirae for such
advertising shall be subject to offset against obligations of the Company to
Mirae.
<PAGE>
10.2 REFERRALS BY LYCOS. Lycos shall, when there is the
opportunity to do so, refer advertising and electronic commerce business to the
Company, and the Company shall pay to Lycos, as a commission, an amount equal to
fifteen percent (15%) of all gross revenues generated by the Company from such
referrals, and shall reimburse to Lycos, on demand, all costs incurred by Lycos
in connection with any such referrals. Within thirty days after the end of each
calender quarter during the term of this Agreement, the Company shall submit to
Lycos a statement setting forth the calculation of all such commissions which
are payable with respect to gross revenues attributable to such referrals and
received by the Company in such quarter, and shall concurrently make payment to
Lycos of the amount of such commissions shown in such calculation, as converted
to U.S. Dollars at the then current rate of exchange.
11. EXCLUSIVITY. For so long as this Agreement remains in effect, Mirae
shall not, directly or indirectly, alone or in combination with others,
purchase, establish, maintain, invest in or otherwise promote, or agree to
purchase, establish, maintain, invest in or otherwise promote, any navigation,
search, directory or community service (other than the Service), except that the
foregoing restriction shall not apply to passive portfolio investments in an
entity not in excess of five percent (5%) of the total equity of such entity.
For so long as this Agreement remains in effect, Lycos shall not, directly or
indirectly, alone or in combination with others, purchase, establish, maintain,
invest in or otherwise promote, or agree to purchase, establish, maintain,
invest in or otherwise promote, any navigation, search, directory or community
service (other than the Service) operated from the Republic of Korea
specifically for the local Korean market, except that the foregoing restriction
shall not apply to passive portfolio investments in an entity not in excess of
five percent (5%) of the total equity of such entity.
12. REPRESENTATIONS AND WARRANTIES OF LYCOS. Lycos hereby represents
and warrants to Mirae as follows:
12.1 ORGANIZATION, POWER AND AUTHORITY. Lycos is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, United States of America. Lycos has all requisite power and
authority to execute, deliver and perform its obligations under this Agreement.
12.2 AUTHORIZATION AND BINDING OBLIGATIONS. Lycos has taken
all requisite corporate action to authorize and approve the execution, delivery
and performance of this Agreement by Lycos. This Agreement has been duly
executed and delivered by Lycos, and constitutes the legal, valid and binding
obligations of Lycos, enforceable against Lycos in accordance with its terms.
12.3 NO CONFLICTS. The execution, delivery and performance of
this Agreement by Lycos, and the consummation of the transactions contemplated
hereby, will not (a) violate any provision of the Certificate of Incorporation
or Bylaws of Lycos, (b) violate, conflict with or result in (or with notice or
lapse of time or both result in) a breach of or default under any term or
provision of any contract or agreement to which Lycos is a party or by which
Lycos or any of its assets or properties is or may be bound, or (c) violate any
order, judgment, injunction, award or
<PAGE>
decree of any court or arbitration body, or any governmental, administrative or
regulatory authority, by which Lycos or any of its assets or properties is or
may be bound.
12.4 NO PENDING LITIGATION. No action, suit or proceeding
which seeks to prevent the consummation of the transactions contemplated by this
Agreement, or would impair the ability of Lycos to consummate the transactions
contemplated by this Agreement, is pending against Lycos, and no such action,
suit or proceeding has been threatened against Lycos.
13. REPRESENTATIONS AND WARRANTIES OF MIRAE. Mirae hereby represents
and warrants to Lycos as follows:
13.1 ORGANIZATION, POWER AND AUTHORITY. Mirae is a CHUSIK
HOESA duly organized and validly existing under the laws of the Republic of
Korea. Mirae has all requisite power and authority to execute, deliver and
perform its obligations under this Agreement.
13.2 AUTHORIZATION AND BINDING OBLIGATIONS. Mirae has taken
all requisite corporate action to authorize and approve the execution, delivery
and performance of this Agreement by Mirae. This Agreement has been duly
executed and delivered by Mirae, and constitutes the legal, valid and binding
obligations of Mirae, enforceable against Mirae in accordance with its terms.
13.3 NO CONFLICTS. The execution, delivery and performance of
this Agreement by Mirae, and the consummation of the transactions contemplated
hereby, will not (a) violate any provision of the charter documents of Mirae,
(b) violate, conflict with or result in (or with notice or lapse of time or both
result in) a breach of or default under any term or provision of any contract or
agreement to which Mirae is a party or by which Mirae or any of its assets or
properties is or may be bound, or (c) violate any order, judgment, injunction,
award or decree of any court or arbitration body, or any governmental,
administrative or regulatory authority, by which Mirae or any of its assets or
properties is or may be bound.
13.4 NO PENDING LITIGATION. No action, suit or proceeding
which seeks to prevent the consummation of the transactions contemplated by this
Agreement, or would impair the ability of Mirae to consummate the transactions
contemplated by this Agreement, is pending against Mirae, and no such action,
suit or proceeding has been threatened against Mirae.
<PAGE>
14. CONFIDENTIALITY. For so long as this Agreement remains in effect
and for a period of three (3) years after any termination of this Agreement,
each party shall keep strictly confidential, and shall not disclose, use,
divulge, publish or otherwise reveal, directly or through any third party
(including without limitation the Company), any confidential or proprietary
information of the other party which was disclosed by or received pursuant to
this Agreement, or in connection with the preparation and negotiation of this
Agreement, or by reason of the performance by the parties of their obligations
hereunder or their involvement in activities of the Company, 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 (collectively, "Confidential Information"), except
as may be necessary in connection with filings with governmental agencies as
required under applicable law, including, in the case of Lycos, the rules and
regulations promulgated under the Securities Exchange Act of 1934, provided,
however, 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. 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) relating to the Confidential
Information of the other party which such party may then possess or have under
its control. Notwithstanding the foregoing, Confidential Information of a party
shall not include (a) information which was already known to the recipient at
the time of its receipt, (b) information which is or becomes freely and
generally available to the public through no wrongful act of the recipient, (c)
information which is rightfully received by the recipient from a third party
legally entitled to disclose such information free of confidentiality
restrictions, or (d) information disclosed in connection with legal action
initiated by a party to enforce rights under this Agreement, or any agreement
executed pursuant to this Agreement, PROVIDED that adequate safeguards (such as
protective orders) are maintained.
15. FAILURE TO MEET BUSINESS GOALS. If the Company fails to meet the
applicable Business Goals for the period commencing from the date of this
Agreement and ending on December 31, 2001 or for any consecutive three (3) year
period thereafter, then, within sixty (60) days after the end of such period,
either party shall have the right, at its option and in addition to any other
rights and remedies it may have, to:
(a) elect to dissolve the Company by giving
written notice thereof to the other party, in which case the parties shall
cooperate to take all such steps as may be necessary to dissolve the Company;
and/or
(b) elect to terminate this Agreement by giving
written notice thereof to the other party and the Company, in which case this
Agreement, the License Agreements, the Shareholder Agreement and the funding
commitment under the Loan Agreement shall automatically terminate
notwithstanding any provision to the contrary in this Agreement, the License
Agreements, the Shareholder Agreement or the Loan Agreement.
16. DEADLOCK.
16.1 MAJOR MATTERS. As used in Section 16.2, "Major
Matters" shall mean:
<PAGE>
(a) liquidation, winding-up, dissolution or
commencement of any bankruptcy or other similar proceeding;
(b) merger, consolidation, reorganization,
recapitalization, and the like;
(c) sale of all or substantially all of the
assets of the Company, or the sale of any assets individually or in the
aggregate exceeding in amount;
(d) issuance, redemption, repurchase or
retirement of any securities (including any option, warrant or right to acquire
any securities or any instrument convertible into securities);
(e) increase or decrease of authorized capital;
or
(f) approval of annual business plan (including
annual budget and marketing plans, distribution plans and pricing policies), and
any major modifications to or departures from the approved annual business plan.
16.2 DEADLOCK. In the event (a) the board of directors of the
Company deadlocks on any Major Matters, or (b) the board of directors of the
Company cannot, by majority or unanimous vote, agree on the management of the
affairs of the Company, such that the business of the Company can no longer be
conducted to advantage, then either party shall have the right, at its option
and in addition to any other rights and remedies it may have, to:
(i) elect to dissolve the Company by giving
written notice thereof to the other party, in which case the parties shall
cooperate to take all such steps as may be necessary to dissolve the Company;
and/or
(ii) elect to terminate this Agreement by giving
written notice thereof to the other party and the Company, in which case this
Agreement, the License Agreements, the Shareholder Agreement and the funding
commitment under the Loan Agreement shall automatically terminate
notwithstanding any provision to the contrary in this Agreement, the License
Agreements, the Shareholder Agreement or the Loan Agreement.
17. MATERIAL DEFAULTS. In the event that (a) Lycos materially breaches
or defaults in the performance of its obligations under this Agreement, the
License Agreements or the Shareholder Agreement, or (b) Mirae materially
breaches or defaults in the performance of its obligations under this Agreement,
the Shareholder Agreement or the Loan Agreement, and any such breach or default
is not cured within ninety (90) days after written notice of such default is
<PAGE>
given to the breaching party by the other party, then such other party shall
have the right, at its option and without prejudice to any other rights and
remedies it may have, to:
(i) elect to dissolve the Company by giving
written notice thereof to the breaching party, in which case the breaching party
agrees to cooperate with the other party to take all such steps as may be
necessary to dissolve the Company, it being agreed between Mirae and Lycos that
such other party shall have the right to vote the shares of the breaching party
in favor of dissolution if the breaching party fails to take action as required
under this paragraph (a); and/or
(ii) elect to terminate this Agreement by written
notice thereof to the breaching party and the Company, in which case this
Agreement, the License Agreements, the Shareholder Agreement and the funding
commitment under the Loan Agreement shall automatically terminate
notwithstanding any provision to the contrary in this Agreement, the License
Agreements, the Shareholder Agreement or the Loan Agreement.
18. ACCUMULATED LOSSES. If the accumulated losses appearing on the
balance sheet of the Company as of the end of any financial year exceeds the
amount of the paid up capital of the Company, either of the parties may, by
written notice given within thirty (30) days after receipt of such balance
sheet, require the parties to meet at a location agreeable to both parties to
discuss the appropriate steps to be taken with respect to the financial
situation of the Company. Such meeting of the parties shall be held within
thirty (30) days after any such notice is given. If the parties cannot reach
agreement within thirty (30) days after the date of such meeting on the
appropriate steps to be taken, either party may thereafter propose, by written
notice given to the other party, that the Company dissolve and, concurrently
with giving such notice, shall offer to sell its stock in the Company to the
other party at a price determined on the basis of the net worth of the Company.
If the other party does not agree within thirty (30) days after the giving of
such notice to purchase all of such stock at such price and assume all of the
obligations (if any) of the offering party to provide financial assistance to
the Company, then the parties shall take such steps as may be necessary to
dissolve the Company.
19. MISCELLANEOUS.
19.1 BROKERS. Each party shall hold the other party harmless
from any claims, liabilities or damages relating to any commissions or fees
claimed by any broker or finder by reason of any engagement or relationship of
such broker or finder by or with such party.
19.2 NOTICES. Any notice, request, demand, approval or consent
required or permitted under this Agreement shall be in writing and shall be
effective upon actual receipt when delivered by (a) registered mail, postage
prepaid, return receipt requested, (b) personal
<PAGE>
delivery, (c) an overnight courier of recognized reputation (such as DHL or
Federal Express), or (d) transmission by facsimile (with confirmation by mail),
in each case addressed as follows:
If to Lycos: Lycos, Inc.
400-2 Totten Pond Road
Waltham, MA 02154
Attention: General Counsel
Telephone: (781) 370-2700
Facsimile: (781) 370-2600
With a copy to: Coudert Brothers
1055 West 7th Street, 20th Floor
Los Angeles, CA 90017
Attention: Richard G. Wallace
Telephone: (213) 688-9088
Facsimile: (213) 689-4467
If to Mirae: Mirae Corporation
#1309, Korea Stock Exchange, Annex Bldg.,
33, Yoidodong, Youngdungpo-gu
Seoul, Korea 150-010
Attention: Kyung Dal Cho
Telephone: 82-2-783-0059
Facsimile: 82-2-783-0057
Either party may change its address or facsimile number for notice purposes by
notice given to the other party in accordance with this Section 19.2.
19.3 ASSIGNMENT. Neither party's rights, duties or
responsibilities under this Agreement may be assigned, delegated or otherwise
transferred in any manner, without the prior written consent of the other party.
Notwithstanding the foregoing, no such consent shall be required in connection
with the assignment, delegation or other transfer of any such rights, duties or
responsibilities (a) by a party to any affiliate which directly or indirectly
controls, is controlled by or is under common control with such party, where
such control is by more than fifty percent (50%) of the relevant voting power,
or (b) in connection with any transaction, regardless of its form, in which all
or substantially all of the assets of Lycos are acquired.
19.4 ENTIRE AGREEMENT. This Agreement, including the exhibits
referred to herein, which are hereby incorporated in and made a part of this
Agreement, constitutes the entire contract between the parties with respect to
the subject matter covered by this Agreement. This Agreement supersedes all
previous letters of intent, agreements and understandings, if any, by
<PAGE>
and between the parties with respect to the subject matter covered by this
Agreement. This Agreement may not be amended, changed or modified except by a
writing duly executed by the parties hereto.
19.5 SEVERABILITY. If any provision of this Agreement is held
by a court of competent jurisdiction to be unenforceable, invalid or void in any
respect, no other provision of this Agreement shall be affected thereby, all
other provisions of this Agreement shall nevertheless be carried into effect and
the parties shall amend this Agreement to modify the unenforceable, invalid or
void provision to give effect to the intentions of the parties to the extent
possible in a manner which is valid and enforceable.
19.6 REMEDIES AND WAIVERS. All rights and remedies of the
parties are separate and cumulative, and no one of them, whether exercised or
not, shall be deemed to be to the exclusion of or to limit or prejudice any
other rights or remedies which the parties may have. The parties shall not be
deemed to waive any of their rights or remedies under this Agreement, unless
such waiver is in writing and signed by the party to be bound. No delay or
omission on the part of either party in exercising any right or remedy shall
operate as a waiver of such right or remedy or any other right or remedy. A
waiver on any one occasion shall not be construed as a bar to or waiver of any
right or remedy on any future occasion.
19.7 ARBITRATION. In the event any dispute arises between the
parties with respect to any matter arising out of or relating to this Agreement
which cannot be amicably resolved, such dispute shall be submitted to the
International Chamber of Commerce for binding arbitration in accordance with the
commercial arbitration rules of the International Chamber of Commerce as then in
effect. The arbitration shall be conducted in the English language, and shall be
held in London, England. Any arbitration award rendered in any such arbitration
proceeding may be entered in and enforced by any court of competent
jurisdiction. Nothing contained in this Section 19.7 shall prevent or be
construed to prevent either party from seeking a temporary restraining order or
a preliminary or permanent injunction or any other form of interim, provisional
or equitable relief in any court of competent jurisdiction.
19.8 GOVERNING LAW AND CONSENT TO JURISDICTION. This Agreement
shall be governed by, and interpreted in accordance with, the laws (other than
that body of law relating to conflicts of law) of the Republic of Korea;
provided, however, that either party shall have the right to enforce the
provisions of Sections 11 and 14 under the laws (other than that body of law
relating to conflicts of law) of Massachusetts, United States of America. Mirae
hereby consents to the non-exclusive jurisdiction of the federal and state
courts located in Massachusetts, United States of America, and waives all
objections to the laying of venue in Massachusetts, including without limitation
any objection based on inconvenient forum. Mirae further consents to the service
of process by mail or by any other means permitted by Massachusetts law.
<PAGE>
19.9 ATTORNEYS' FEES. In the event any action or proceeding is
initiated for any breach of or default in any of the terms or conditions of this
Agreement, then the party or parties in whose favor judgment shall be entered or
an arbitration award shall be made, shall be entitled to have and recover from
the other parties all costs and expenses (including attorneys' fees) incurred in
such action or proceeding and any appeal therefrom.
19.10 HEADINGS. The headings contained in this Agreement are
for convenience only and are not a part of this Agreement, and do not in any way
interpret, limit or amplify the scope, extent or intent of this Agreement, or
any of the provisions of this Agreement.
19.11 COUNTERPARTS AND FACSIMILE. This Agreement may be
executed in counterparts, each of which shall constitute an original, but all of
which together shall constitute one and the same agreement. Transmission of
facsimile copies of signed original signature pages of this Agreement shall have
the same effect as delivery of the signed originals.
19.12 TRANSLATION. For the convenience of the parties, one or
more Korean translations of this Agreement may be prepared. Notwithstanding the
preparation or existence of any such Korean translations, the English language
version of this Agreement shall be controlling.
19.13 PRESS RELEASES. Neither party shall issue any press
releases or publicity statements relating to this Agreement, the transactions
contemplated by this Agreement or the business of the Company without the prior
written approval of the other party, which approval shall not be unreasonably
withheld or delayed, except that each party shall be permitted to issue any
press releases or publicity statements (whether or not approved by the other
party) to the extent required by any securities laws or regulations applicable
to such party.
19.14 THIRD PARTY BENEFICIARY. The Company is a third party
beneficiary under this Agreement. Except as to the Company, this Agreement is
not intended to and does not confer any rights on any third party, and no such
third party shall be a third party beneficiary under or in respect of this
Agreement.
19.15 BINDING EFFECT. Subject to Section 19.3, this Agreement
shall be binding upon and shall inure to the benefit of the parties and their
respective successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
LYCOS, INC.,
a corporation organized under the laws of
Delaware, USA
<PAGE>
/s/ Edward M. Philip
----------------------------
By: Edward M. Philip
Its: Chief Operating Officer
MIRAE CORPORATION,
a CHUSIK HOESA organized under the laws of the
Republic of Korea
/s/ Moon Soul Chung
----------------------------
By: Moon Soul Chung
Its: President and CEO
<PAGE>
EXHIBIT 10.28
EXHIBIT A
ARTICLES OF INCORPORATION
OF
LYCOS KOREA, INC.
CHAPTER I
GENERAL PROVISIONS
Article 1. CORPORATE NAME
The name of the Company shall be "LYCOS KOREA CHUSIK HOESA" in
Korean and "LYCOS KOREA, INC." in English.
Article 2. BUSINESS OBJECTIVES
The business objectives of the Company shall be the following:
(a) to provide a World Wide Web navigation, search,
directory and community service at "www.lycos.co.kr"
which is adapted culturally and in local content to
be suitable for the Korean market ("Service");
(b) to generate revenue from the Service, including
without limitation revenue from the sale of
advertising and electronic commerce;
(c) to engage in all business activities relating to the
development, maintenance, support, enhancement and
promotion of the Service, including without
limitation the development and acquisition of local
content and the development and expansion of
distribution channels for the Service; and
(d) to engage in all business activities ancillary or
incidental to the foregoing.
Article 3. HEAD OFFICE, BRANCHES, ETC.
3.1 The head office of the Company shall be located at
_________________, Seoul, Korea.
3.2 Branches, other business offices or other agencies
may be established, relocated or closed, as required
by resolution of the Board of Directors.
Article 4. METHOD OF PUBLIC NOTICES
Public notices of the Company shall be given in
________________ newspaper, a daily newspaper of general
circulation published in Seoul, Korea.
<PAGE>
CHAPTER II
CAPITAL AND SHARES
Article 5. SHARES
5.1 The total number of shares that the Company is
authorized to issue shall be Twenty Thousand (20,000)
shares, each having a par value of Five Thousand Won
((W)5,000).
5.2 The total number of shares to be issued by the
Company at the time of incorporation shall be Twenty
Thousand (20,000) shares.
5.2 All shares to be issued by the Company shall be one
class of common stock, in non-bearer form, having a
par value as stated hereinabove, with full voting
rights.
Article 6. SHARE CERTIFICATES
6.1 The share certificates shall be issued in
denominations of one (1), ten (10), fifty (50), one
hundred (100), five hundred (500), one thousand
(1,000), and ten thousand (10,000) shares or such
other denominations as the shareholders may
reasonably request.
6.2 The share certificates shall bear the following
words:
"Transfer of the shares of stock represented
by this certificate is subject to the Joint
Venture Agreement dated _______, 1999
between Lycos, Inc. and Mirae Corporation,
and to the Shareholder Agreement dated
_______, 1999 between Lycos, Inc. and Mirae
Corporation, copies of which are on file at
the principal office of the Company in
Seoul, Korea."
Article 7. PAYMENT FOR SHARES
Unless otherwise decided by the Board of Directors of the
Company, payment for subscribed shares shall be made in cash,
payable to a bank or banks designated by the Company. Only
those shares that have been fully paid for may be issued.
Article 8. REGISTER OF SHAREHOLDERS
- 2 -
<PAGE>
8.1 The Company shall maintain a Register of Shareholders
in compliance with the relevant provisions of Korean
law.
8.2 A shareholder desiring an alteration of any entry in
the Register of Shareholders due to the transfer of
shares or otherwise, or the registration of a pledge
shall submit an application therefor to the Company,
in the form prescribed by the Company, together with
its share certificates involved and supporting
documents as requested by the Company.
Article 9. TRANSFER OF SHARES
9.1 Any transfer of shares in the Company to a
non-shareholder must be approved by the Board of
Directors and shall be subject to the Right of First
Refusal stipulated in the Shareholders Agreement.
9.2 The Company may appoint its transfer agent and
entrust it with procedures of change of entry in the
Register of Shareholders of the Company.
Article 10. REPORT OF ADDRESSES AND SEALS
10.1 Shareholders shall report to the Company their names,
addresses, seals and any changes therein; provided,
however, that foreigners who customarily use
signatures may use signatures in place of seals.
10.2 Shareholders who reside in foreign countries may, in
addition, inform the Company of their or their
agent's provisional address in Korea to which notices
may be dispatched.
Article 11. RECORD DATE AND CLOSING OF REGISTER OF SHAREHOLDERS
11.1 Subject to the restrictions provided in the
applicable law, in order to determine persons who are
entitled to exercise voting rights, pre-emptive
rights to newly issued shares or other rights as
shareholders or pledgees, the Company may suspend
entry of alterations in the Register of Shareholders
for a certain period, or the Company may deem any
shareholder or pledgee whose name appears in the
Register of Shareholders on a specified date to the
shareholder or pledgee who is entitled to exercise
the rights enumerated above in connection with such
shares.
11.2 The Company shall give public notice of the period or
date referred to in paragraph 11.1 at least two weeks
in advance of the commencement of such period or the
occurrence of such date.
Article 12. RE-ISSUANCE OF SHARE CERTIFICATES
-3-
<PAGE>
12.1 A shareholder desiring re-issuance of a share
certificate for reason of partition or amalgamation
of shares, or damage or soiling to a share
certificate, shall submit an application therefor to
the Company, in the form prescribed by the Company,
together with the share certificate to be canceled.
When the damage or soiling is so extreme that the
share certificate is not legible, however, it shall
be regarded as lost and the following provision shall
apply for its replacement.
12.2 A shareholder desiring issuance of a new share
certificate due to loss of his share certificate
shall submit to the Company an application, in the
form prescribed by the Company, together with the
original or the certified copy of a judgment of
nullification with respect to the lost share
certificate.
Article 13. PREEMPTIVE RIGHTS
Each shareholder shall have preemptive rights to acquire any
additional shares which the Company may issue subsequent to
incorporation. Such preemptive rights shall be in such
proportion equivalent to the holdings of the issued and
outstanding shares of each shareholder at the time of issuance
of such additional shares. In the event that a shareholder
decides not to exercise its preemptive right to subscribe to
all or any portion of its proportionate amount of such
additional shares, such shares shall first be offered, in
equal proportion, to the other shareholders. The disposition
of the shares not purchased by the shareholders after
completing the above procedure shall be determined by the
Board of Directors of the Company.
CHAPTER III
GENERAL MEETINGS OF SHAREHOLDERS
Article 14. TYPES OF GENERAL MEETINGS
14.1 General Meetings of the Shareholders of the Company
shall be of two types: ordinary and extraordinary.
14.2 The Ordinary General Meeting of the Shareholders
shall be held within three (3) months following the
last day of each fiscal year.
14.3 An Extraordinary General Meeting of the Shareholders
may be convened at any time in compliance with a
resolution of the Board of Directors and applicable
laws.
Article 15. CONVENING OF GENERAL MEETINGS
15.1 All General Meetings of Shareholders shall be
convened by the Representative Director upon the
resolution of the Board of Directors. The place for
convening each General Meeting of Shareholders shall
be the head office of the Company unless otherwise
decided by the Board of Directors.
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15.2 Each General Meeting of Shareholders shall be called
by the Board of Directors giving fourteen (14) days
prior notice, stating in the English language the
date, time, place and agenda of the meeting and
dispatched via registered mail to the shareholders
who are residents of Korea and via registered
airmail, facsimile transmission or telex to all other
shareholders. The notice requirement may be waived by
the unanimous written consent of all shareholders at
the meeting. The General Meeting of Shareholders may
not resolve matters other than those stated in the
notice of the meeting, unless all the shareholders
entitled to vote, whether present or not, unanimously
agree otherwise.
Article 16. PRESIDING OFFICER
The Representative Director shall preside at all General
Meetings of Shareholders. If the Representative Director is
absent or fails to serve as presiding officer at a General
Meeting of Shareholders, the Director designated by the Board
of Directors shall preside at such meeting in his place.
Article 17. QUORUM REQUIREMENT
Except as otherwise provided by applicable mandatory
requirements of Korean law or by these Articles of
Incorporation, the quorum at all General Meetings of
Shareholders shall be the presence of shareholders
representing more than fifty percent (50%) of the total number
of shares issued and outstanding entitled to vote thereon.
Article 18. ADOPTION OF RESOLUTION
All resolutions of each General Meeting of Shareholders shall
be adopted by the affirmative vote of the shareholders who
hold shares representing more than fifty percent (50%) of the
shares of the Company present at the meeting; provided,
however, that the following matters shall require the vote of
at least two-thirds (2/3), or higher rate if required by
applicable law, of the total shares issued and outstanding:
(a) any change to the Articles of Incorporation or
by-laws of the Company;
(b) a reduction of the paid-in capital of the Company and
the manner thereof;
(c) the liquidation of the Company or its merger into, or
consolidation or amalgamation with any other company;
(d) transfer or pledge of the whole or a substantial part
of the assets or undertakings of the Company or the
acquisition by the Company of the whole or part of
the undertaking of any other person or entity, or the
capital stock of the Company, or entry by the Company
into any joint venture or partnership;
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(e) major matters prescribed in the Shareholders
Agreement; or
(f) any other matters, the adoption of which requires a
special resolution of the shareholders at a General
Meeting under the laws of Korea.
Article 19. VOTING
19.1 Each shareholder shall have one (1) vote for each
share registered in its name.
19.2 A shareholder may exercise its vote by proxy. In that
case, the proxy holder must file with the Company a
document evidencing his proper authority at each
General Meeting of Shareholders at which he acts as
proxy.
Article 20. MINUTES OF GENERAL MEETING
The proceedings and conclusions of each General Meeting of
Shareholders shall be recorded in minutes in the English and
Korean languages, which minutes shall bear the names and the
signatures and/or seals of the presiding officer and of the
Directors present at the meeting, and shall be preserved at
the Company's head office.
CHAPTER IV
DIRECTORS, STATUTORY AUDITOR AND OTHER OFFICERS
Article 21. NUMBER OF DIRECTORS AND AUDITOR
The Company shall have at least four (4) Directors and at
least one (1) Statutory Auditor.
Article 22. ELECTION
The Directors and Statutory Auditor shall be elected at and by
the General Meeting of Shareholders and any such vacancies may
be filled at a General Meeting of Shareholders.
Article 23. TERM OF OFFICE
23.1 The term of office of a Director shall be three (3)
years; provided, however, that the term of office
shall be extended until the close of the Ordinary
General Meeting of Shareholders convened in respect
of the last fiscal year which ended in their term of
office.
23.2 The term of office of a Statutory Auditor shall
commence from the date of acceptance of office and
expire at the close of the Ordinary General Meeting
of Shareholders convened with respect to the last
fiscal year within three (3) years from the date of
acceptance of office.
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23.3 The term of office of a Director or Statutory Auditor
elected to fill a vacancy shall be the remainder of
the term of office of his predecessor.
Article 24. REPRESENTATIVE DIRECTOR AND OTHER OFFICERS
24.1 The Board of Directors shall elect from among its
members one (1) Representative Director, who shall
serve as the President of the Company.
24.2 The Representative Director shall represent the
Company and shall manage the day-to-day business of
the Company under the control and supervision of the
Board of Directors. The Representative Director shall
have the authority to execute contracts on behalf of
the Company within the limitations established by the
Board of Directors.
24.3 Other officers of the Company, including but not
limited to Vice President, Secretary, Treasurer or
Finance Director, and Senior Manager shall be
appointed by the Board of Directors. All such
officers' duties with the Company shall be determined
by the Board of Directors.
Article 25. COMPENSATION
25.1 The compensation of the Directors and Statutory
Auditor of the Company shall be determined by
resolution of a General Meeting of Shareholders.
25.2 Severance allowances for the Directors and Statutory
Auditor shall be paid in accordance with the
regulations of the Company adopted by resolutions of
a General Meeting of Shareholders.
CHAPTER V
BOARD OF DIRECTORS
Article 26. MEETINGS OF BOARD OF DIRECTORS
26.1 An ordinary meeting of the Board of Directors shall
be held immediately following the Ordinary General
Meeting of Shareholders each fiscal year. Each Board
meeting shall be called by the Representative
Director giving at least seven (7) days written
notice, stating the date, time and place of the
meeting, to each Director and Statutory Auditor and
stating the agenda of the meeting. The notice
requirement may be waived with the written consent of
all Directors and Statutory Auditor.
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26.2 If any one Director requests to convene an
extraordinary meeting in writing, the Representative
Director shall call an extraordinary meeting of the
Board of Directors in accordance with the procedures
stipulated in foregoing paragraph 26.1.
26.3 Board meetings shall be held at the Company's head
office, unless the Board of Directors determines
otherwise.
Article 27. PRESIDING OFFICER OF MEETING
The Representative Director shall preside at all meetings of
the Board of Directors. If the Representative Director is
absent or fails to serve as presiding officer of any meeting,
the Director designated by the Board of Directors shall
preside at such meeting in his place.
Article 28. ADOPTION OF RESOLUTIONS
A quorum at any Board meeting shall consist of at least a
majority of the Directors then in office. Unless otherwise
required by applicable laws or the Articles of Incorporation,
any actions and resolutions taken at a Board meeting shall be
adopted by the affirmative vote of at least a majority of the
Directors then in office; provided, however, that the
following matters shall require the vote of all of the
Directors then in office:
(a) amendment or repeal of the Articles of Incorporation;
(b) liquidation, winding-up, dissolution or commencement
of any bankruptcy or other similar proceeding;
(c) merger, consolidation, reorganization,
recapitalization, and the like;
(d) sale of all or substantially all of the assets of the
Company, or the sale of any assets individually or in
the aggregate exceeding (W)75,000,000 in amount;
(e) issuance, redemption, repurchase or retirement of any
securities (including any option, warrant or right to
acquire any securities or any instrument convertible
into securities);
(f) increase or decrease of authorized capital;
(g) approval of annual financial statements;
(h) approval of annual business plan (including annual
budget and marketing plans, distribution plans and
pricing policies), and any major modifications to or
departures from the approved annual business plan;
(i) declaration of dividends;
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(j) acquisition or disposition of an interest in any
other corporation or entity, including the
incorporation of a subsidiary;
(k) guaranty of third party indebtedness;
(l) the borrowing of any funds, except as otherwise
expressly permitted by an written agreement between
the shareholders of the Company and except for any
funds borrowed in the ordinary course of business and
individually or in the aggregate not exceeding
(W)75,000,000;
(m) the sale, transfer (other than by sublicense as
expressly permitted under any relevant license
agreement between the Company and of its
shareholders), or encumbrance of any interest in
intellectual property rights;
(n) any changes or modifications by the Company of or to
any of the technology licensed to the Company by any
of its shareholders, except as expressly permitted by
and made in accordance with the terms of any relevant
license agreement by which such technology is
licensed to the Company;
(o) any material transaction between the Company and any
of its shareholders (other than as expressly
contemplated by the Joint Venture Agreement pursuant
to which the Company was formed, or any agreement
executed pursuant to the Joint Venture Agreement);
(p) any material transaction by which the Company incurs
or undertakes any financial obligation in excess of
(W)75,000,000; or
(q) removal of the President, any Vice President, any
Treasurer or Finance Director, or any Senior Manager.
Article 29. MINUTES OF MEETINGS OF THE BOARD OF DIRECTORS
The proceedings and conclusions of each meeting of the Board
of Directors and each shall be recorded in minutes in the
English and Korean languages, which minutes shall bear the
names and signatures and/or seals of the presiding officer and
all other Directors and Statutory Auditor in attendance at the
meeting and shall be preserved at the Company's head office.
Article 30. MINUTES OF MEETINGS OF SHAREHOLDERS
The proceedings and conclusions of each meeting of
shareholders shall be recorded in minutes in the English and
Korean languages.
CHAPTER VI
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ACCOUNTING
Article 31. FISCAL YEAR
31.1 The fiscal year of the Company shall commence on the
1st day of August and end on the 31st day of July of
each year.
31.2 Notwithstanding the foregoing paragraph 31.1, the
first fiscal year of the Company shall commence on
the date of incorporation of the Company and end on
the following 31st day of July.
Article 32. APPROVAL OF FINANCIAL STATEMENTS, ETC.
32.1 The Representative Director shall submit to the
Statutory Auditor at least six (6) weeks before each
Ordinary General Meeting of Shareholders the
following documents, after obtaining approval of such
documents from the Board of Directors:
(a) a balance sheet;
(b) a profit and loss statement;
(c) a statement of disposition of retained
earnings or deficit;
(d) supplementary schedules for (a), (b) and (c)
above; and
(e) a business report.
32.2 The Statutory Auditor shall submit an audit report
thereof to the Representative Director within four
(4) weeks of receipt of the documents described in
paragraph 32.1 above.
31.3 The Representative Director shall, without delay,
give public notice of the balance sheet approved by
the Ordinary General Meeting of Shareholders.
Article 33. DISPOSITION OF PROFITS
Subject to Korean laws and regulations, profit for each fiscal
year shall be disposed of in the following order of priority:
(a) establishment of any reserves required by law;
(b) establishment of such other reserves as may be
decided by a General Meeting of Shareholders; and
(c) payment of all or a portion of the remainder of such
profit as dividends to shareholders in accordance
with the resolution of a General Meeting of
Shareholders.
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Article 34. PAYMENT OF DIVIDENDS
34.1 Dividends, if declared, shall be determined by the
General Meeting of Shareholders, and paid to the
shareholders of the Company who were duly entered
into the Register of Shareholders as of the end of
the subject fiscal year.
34.2 Dividends shall be paid within thirty (30) days after
the declaration of dividends, unless otherwise
resolved by a General Meeting of Shareholders.
CHAPTER VII
SUPPLEMENTARY PROVISIONS
Article 35. BY-LAWS
The Company may adopt, with the approval of the Board of
Directors, by-laws and other regulations as may be required
for the administration of the affairs of the Company.
Article 36. OTHER MATTERS
Matters not specifically provided for herein shall be
determined in conformity with resolutions adopted at the
meeting of the Board of Directors or the General Meeting of
Shareholders of the Company, or with relevant provisions of
the Korean Commercial Code, as the case may be.
Article 37. INCORPORATING COSTS
The Company shall bear the incorporating cost as set forth in
the attachment.
Article 38. PROMOTERS
We, the undersigned Promoters of the Company, having made the
above Articles of Incorporation for the establishment of the
Company have hereunder set out our hands and affixed our seals
this ____ day of __________, 1999.
1. Name:
-------------------------------------
Address:
----------------------------------
----------------------------------
Number
of Shares:
--------------------------------
2. Name:
-------------------------------------
Address:
----------------------------------
----------------------------------
Number
of Shares:
--------------------------------
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3. Name:
-------------------------------------
Address:
----------------------------------
----------------------------------
Number
of Shares:
--------------------------------
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Attachment: DETAILS OF INCORPORATING COSTS
ITEMS AMOUNT (KOREAN WON)
Preparation of Articles of Incorporation _____________
Cost of Inaugural Shareholders _____________
Meeting _____________
Appraisal Costs _____________
Cost of Naming the Company _____________
Legal Consultation _____________
Cost for Solicitation of Shareholders _____________
Total: _____________
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Exhibit 10.28
EXHIBIT B-1
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (this "Agreement") is made and entered into as
of _____________, 1999 by and between LYCOS, INC., a corporation organized under
the laws of the State of Delaware, United States of America ("Lycos"), and LYCOS
KOREA, INC., a CHUSIK HOESA organized under the laws of the Republic of Korea
("Licensee").
RECITALS
A. Lycos owns or licenses from third parties certain rights relating to
the Lycos Searchservice (as defined below).
B. Licensee desires to offer a local version of the Lycos
Searchservice, in the Korean language and as otherwise customized for the Korean
market.
C. On the terms and subject to the conditions hereafter set forth,
Licensee desires to obtain from Lycos, and Lycos is willing to grant to
Licensee, the rights and licenses described below.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, and for other valuable consideration received, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following
terms have the meanings set forth below:
"Affiliate" shall mean, as to any Person, any other Person that,
directly or indirectly, controls, is under common control with, or is controlled
by, such Person, where such control is by the power, directly or indirectly, to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise.
"Derivative Works" shall mean all Enhancements which are
"derivative works" and "compilations" as such terms are defined in the U.S.
Copyright Act (17 U.S.C. Section 101 et seq.).
"Directory Software" shall mean all computer software owned
exclusively or licensed (without obligation to pay royalties and with right to
sublicense) by Lycos, used by Lycos in connection with the Lycos Searchservice,
and performing the functionality described in the attached EXHIBIT A.
"Enhancements" shall mean all enhancements, improvements,
additions or modifications to the Local Catalog, the Lycos Catalog, the Licensed
Software, the Licensed Technology or the Local Searchservice, of whatever type
or nature, whether created or developed
<PAGE>
solely by Lycos or its Affiliates, agents, consultants or independent
contractors, solely by Licensee or its Affiliates, agents, consultants or
independent contractors, or jointly by Lycos or its Affiliates, agents,
consultants or independent contractors, on one hand, and Licensee or its
Affiliates, agents, consultants or independent contractors, on the other hand.
"Effective Date" shall mean the date of this Agreement as set
forth in the preamble hereof.
"Internet" shall mean the various computer networks commonly and
collectively referred to as the "internet," as the same may exist from time to
time.
"Initial Availability Period" shall mean the thirty (30) day
period commencing from the date Lycos makes the Local Catalog and the Licensed
Software initially available to Licensee under Section 6.1, or such shorter
period as may be agreed to between Lycos and Licensee.
"Joint Enhancements" shall mean any Enhancements which are not
Derivative Works and which are created or developed jointly by Lycos or its
Affiliates, agents, consultants or independent contractors, on one hand, and
Licensee or its Affiliates, agents, consultants or independent contractors, on
the other hand.
"Licensed Marks" shall mean all trademarks and service marks owned
or licensed (without obligation to pay royalties and with right to sublicense)
by Lycos as of the date of this Agreement and used by Lycos in connection with
the Lycos Searchservice, which trademarks and service marks are listed in the
attached EXHIBIT B.
"Licensed Property" shall mean all patents and patent rights
listed in the attached EXHIBIT B and all rights in copyright now or hereafter
owned exclusively or licensed (without obligation to pay royalties and with
right to sublicense) by Lycos and pertaining to the Local Catalog, the Lycos
Catalog, the Licensed Software, the Licensed Technology, the Local Searchservice
or the Lycos Enhancements, EXCLUDING, HOWEVER, any of the foregoing relating to
web-crawler or spider technology used to index and catalog web sites on the
Internet.
"Licensed Software" shall mean the Lycos Software and the
Directory Software, as enabled to handle double-byte characters, and all
relevant application programming interfaces, as the Lycos Software, the
Directory Software and the relevant application programming interfaces are
modified or supplemented to support the Local Searchservice, and as thereafter
modified, supplemented, replaced or updated from time to time.
"Licensed Technology" shall mean all inventions, ideas, knowhow,
expertise, trade secrets and proprietary information now or hereafter owned
exclusively or licensed (without obligation to pay royalties and with right to
sublicense) by Lycos and used by Lycos in connection with the Licensed Marks,
the Licensed Property and the Licensed Software, EXCLUDING, HOWEVER,
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any of the foregoing relating to web-crawler or spider technology used to index
and catalog web sites on the Internet.
"Licensee Enhancements" shall mean shall mean any Enhancements
which (a) are not Derivative Works, and (b) are created or developed solely by
Licensee or its Affiliates, agents, consultants or independent contractors
(other than Lycos) without breaching any provision of this Agreement.
"Local Catalog" shall mean a local version of the Lycos Catalog,
consisting solely of URLs ending with the designation "co.kr" and such other
Korean content as may be accessed through the World Wide Web, as such database
is modified, supplemented, replaced or updated from time to time.
"Local Searchservice" shall mean a local version of the Lycos
Searchservice, as customized for the Territory and in the principal language of
the Territory.
"Local Site" shall mean www.lycos.co.kr, the Internet site through
which the Local Searchservice is to be made available to users, as provided for
in Section 3.
"Lycos Catalog" shall mean the database compiled by Lycos and
accessed through the search engine providing the search function of the Lycos
Searchservice, as such database is modified, supplemented, replaced or updated
from time to time.
"Lycos Enhancements" shall mean any Enhancements which are (a)
Derivative Works, or (b) created or developed solely by Lycos or its Affiliates,
agents, consultants or independent contractors.
"Lycos Searchservice" shall mean the search service offered by
Lycos on the Internet at www.lycos.com, through an advertiser supported search
engine used to access the Lycos Catalog, which provides to the user information
regarding Internet sites relevant to the user's search request.
"Lycos Software" shall mean all computer software owned
exclusively or licensed (without obligation to pay royalties and with right to
sublicense) by Lycos, used by Lycos to operate and maintain the Lycos
Searchservice, and performing the functionality described in the attached
EXHIBIT A, EXCLUDING, however, any software relating to web-crawler or spider
technology used to index and catalog web sites on the Internet.
"Person" shall mean a natural person, sole proprietorship,
corporation, general partnership, limited partnership, limited liability
partnership, limited liability company, joint venture, unincorporated
organization, joint stock company, trust, estate, Regulatory Body or other
entity.
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"Regulatory Body" shall mean any national, state, municipal, local
or other governmental body or authority, or any quasi-governmental or private
body exercising any regulatory authority, including any subdivision or agency
thereof.
"Territory" shall mean the Republic of Korea.
2. LICENSE.
2.1 GRANT OF LICENSE. On the terms and subject to the conditions
of this Agreement, Lycos hereby grants to Licensee the following rights and
licenses:
(a) the exclusive right and license to provide, operate and
maintain the Local Searchservice at the Local Site;
(b) the exclusive right and license to market, promote and
otherwise exploit the Local Searchservice in the Territory;
(c) the exclusive right and license to use, store, process,
reformat, retrieve and transmit the Local Catalog and the Lycos Catalog, or any
portion thereof, and to allow users of the Local Searchservice to download from
the Local Catalog and the Lycos Catalog to the user's computer hard drive or
onto a separate disk, in connection with providing, operating and maintaining
the Local Searchservice at the Local Site;
(d) the exclusive right and license to select, design and
provide local content for, and to incorporate such local content into, the Local
Searchservice; and
(e) the exclusive right and license to use the Local Catalog,
the Lycos Catalog, the Licensed Marks, the Licensed Property, the Licensed
Software, the Licensed Technology and the Lycos Enhancements solely for purposes
of exercising the rights and licenses granted under this Section 2.1.
2.2 EXCLUSIVITY. The rights and licenses granted under Section
2.1 are exclusive only to the extent such rights and licenses relate to
providing, operating and maintaining the Local Searchservice at the Local Site
from any geographic location or to marketing, promoting and otherwise exploiting
the Local Searchservice in the Territory. Notwithstanding anything to the
contrary contained in this Agreement, Lycos reserves and shall have the right to
use or license the Local Catalog, the Lycos Catalog, the Licensed Marks, the
Licensed Property, the Licensed Software, the Licensed Technology and the Lycos
Enhancements for any purpose other than (except as required to perform its
duties under this Agreement) providing a Local Searchservice at an Internet site
ending with the designation "co.kr" or marketing, promoting or otherwise
exploiting a Local Searchservice in the Territory.
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2.3 RESTRICTIONS ON SUBLICENSING AND TRANSFER. Licensee shall
have no right to sublicense, sell, assign or otherwise transfer, whether
voluntarily or involuntarily, any of the rights and license granted under
Section 2.1.
2.4 RIGHTS NOT AFFECTED BY CERTAIN CHANGES. The rights of the
Company under this Agreement shall continue in accordance with the terms hereof
notwithstanding any change in the ownership of Lycos, any transfer of the assets
or business of Lycos, or any merger, consolidation, reorganization or
recapitalization affecting Lycos.
3. LOCAL SITE. To the extent permitted under applicable local law and
regulation, Lycos shall at all times be the owner of the domain name
"www.lycos.co.kr," which is the domain name comprising the Local Site. In the
event Lycos is at any time not permitted under applicable local law and
regulation to be the owner of the domain name "www.lycos.co.kr," then, at the
sole option of Lycos, Lycos shall procure for Licensee the right to use the
domain name "www.lycos.co.kr" or, alternatively, Licensee shall be the owner of
the domain name "www.lycos.co.kr," in which event Licensee shall enter into an
agreement with Lycos, in form and substance satisfactory to Lycos, assuring to
Lycos the actual benefit of ownership of the domain name "www.lycos.co.kr"
notwithstanding registered ownership in the name of Licensee.
4. CATALOG. Lycos shall be solely responsible for compiling,
maintaining and updating the Local Catalog and the Lycos Catalog. Licensee shall
not, without the prior written approval of Lycos in each instance, modify or
change the Local Catalog and the Lycos Catalog in any respect. Lycos shall
initially make the Local Catalog and the Lycos Catalog available as provided in
Section 6.1, and shall update the Local Catalog and the Lycos Catalog as
provided in Section 10.1.
5. LICENSED SOFTWARE. Lycos shall be solely responsible for (a)
making any modifications or changes to the Lycos Software which may be necessary
to develop or create Licensed Software capable of supporting the Local
Searchservice, and (b) updating the Licensed Software. Licensee shall not,
without the prior written approval of Lycos in each instance, modify or change
the Licensed Software in any respect. Lycos shall initially make the Licensed
Software available as provided in Section 6.1 and shall update the Licensed
Software as provided in Section 10.2.
6. AVAILABILITY OF LOCAL CATALOG, LYCOS CATALOG AND LICENSED
SOFTWARE.
6.1 INITIAL AVAILABILITY. Within thirty (30) days after the
Effective Date, Lycos shall make the Local Catalog, the Lycos Catalog and the
Licensed Software, each as then existing, available for use on a staging server
located in the United States, and shall inform Licensee how to access the Local
Catalog, the Lycos Catalog and the Licensed Software made available on such
staging server. During the Initial Availability Period, Licensee shall conduct
such tests of the Local Catalog, the Lycos Catalog and the Licensed Software as
Licensee deems necessary or desirable, and Lycos shall use reasonable commercial
efforts to resolve any performance issues with respect to the Local Catalog, the
Lycos Catalog and the Licensed Software as may be identified by Licensee and
communicated by Licensee to Lycos.
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6.2 SUBSEQUENT AVAILABILITY. Promptly after the Initial
Availability Period, and prior to the transfer of operations from Lycos to
Licensee pursuant to Section 8.3, Lycos shall make the Local Catalog, the Lycos
Catalog and the Licensed Software, each as then existing, available for use on
servers located in the United States and accessed through the Local Site. The
equipment shipped by Lycos to Licensee in connection with the transfer of
operations from Lycos to Licensee pursuant to Section 8.3 shall have installed
thereon the Local Catalog, the Lycos Catalog and the Licensed Software, each as
existing at the time of such shipment. Thereafter, Lycos shall, if required and
requested by Licensee, make the Local Catalog, the Lycos Catalog and Licensed
Software available to Licensee by File Transfer Protocol or Federal Express, as
Lycos may determine in its discretion.
7. LOCAL CONTENT. Licensee acknowledges that the displayable content
available through access to the Local Catalog, the Lycos Catalog and the
Licensed Software will be limited to the content of the Local Catalog and the
Lycos Catalog and displays relating directly to navigation and search functions.
Licensee shall design and develop local content, including both information and
advertising, customized for the market in the Territory using the principal
language of the Territory, and combine such local content with the displayable
content available through access to the Local Catalog, the Lycos Catalog and the
Licensed Software, all in a manner and format substantially similar to the Lycos
Searchservice.
8. START-UP AND TRANSFER OF OPERATIONS.
8.1 LAUNCH. Licensee shall commercially launch the Local
Searchservice through the Local Site within sixty (60) days after the end of the
Initial Availability Period, and as promptly as possible within such sixty (60)
day period as circumstances permit, making due allowance for the development of
a well-considered plan for the launch and initial marketing of the Local
Searchservice.
8.2 INITIAL OPERATIONS. Initially, Lycos shall operate and
maintain the Local Searchservice for Licensee using dedicated equipment
purchased by Lycos and installed and located in the United States. Licensee
shall reimburse Lycos for all costs (including indirect costs and overhead)
reasonably incurred by Lycos in operating and maintaining the Local
Searchservice for Licensee, including without limitation the cost of such
equipment, and costs incurred in preparing to commence such operation and
maintenance. Upon reimbursement by Licensee to Lycos for the cost of any such
equipment, title to such equipment shall pass from Lycos to Licensee on an "as
is, where is" basis, and Lycos shall assign to Licensee any manufacturer
warranties relating to such equipment to the extent any such warranties are
transferable.
8.3 TRANSFER OF OPERATIONS. When and as feasible, as
determined by Lycos and Licensee, Lycos shall transfer the operation and
maintenance of the Local Searchservice from Lycos to Licensee, and, in
connection with such transfer, the equipment as to which title has passed from
Lycos to Licensee under Section 8.2 shall be shipped by Lycos, at Licensee's
expense, to a site in the Territory designated by Licensee.
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9. TECHNICAL ASSISTANCE.
9.1 INITIAL TECHNICAL ASSISTANCE. During the period commencing
from the Effective Date and ending three (3) months after commercial launch of
the Local Searchservice, Lycos shall, without charge to Licensee, (a) provide
reasonable technical assistance to Licensee in the form of (i) telephone
consultation in English between Lycos technicians and Licensee's personnel, and
(ii) written materials, in English, covering matters specified by Licensee, and
(b) provide training at Lycos' principal place of business in the United States
for up to two (2) technical trainees who are employees of Licensee, for a total
of not more than three (3) man months, provided that the cost of travel, food
and lodging for such technical trainees shall be borne by Licensee.
9.2 SUBSEQUENT TECHNICAL ASSISTANCE. After the expiration of
the period referred to in Section 9.1, Lycos shall (a) provide reasonable
technical assistance to Licensee in the form of (i) telephone consultation in
English between Lycos technicians and Licensee's personnel, and (ii) written
materials, in English, covering matters specified by Licensee, and (b) from time
to time as reasonably requested by Licensee make technical representatives
available in the Republic of Korea, at times convenient to Lycos, to consult
with and provide technical assistance to Licensee. Licensee shall bear all costs
relating to such consultation and technical assistance, including without
limitation the costs of travel, food and lodging and per diem charges (including
coverage of overhead and indirect costs) on a per person basis at the most
favorable rates offered by Lycos for providing such services.
10. UPDATES.
10.1 CATALOG UPDATES. Lycos shall provide to Licensee updates
to (a) the Lycos Catalog when and as such updates are made accessible through
the Lycos Searchservice, and (b) the Local Catalog at the same intervals as, and
as soon as practical after, updates of the Lycos Catalog are made accessible
through the Lycos Searchservice. Licensee shall make payment to Lycos for all
such updates, and the payment amount for any such update shall be [an amount
equal to the product of (i) the spidering cost per day, multiplied by (ii) the
number of days required to generate such update]. Until operations are
transferred by Lycos to Licensee pursuant to Section 8.3, such updates shall be
made available on the equipment through which the Local Catalog and the Lycos
Catalog are made available, and Lycos shall promptly notify Licensee each time
any such update is made available. After operations are transferred by Lycos to
Licensee pursuant to Section 8.3, such updates shall be made available by File
Transfer Protocol or by Federal Express, as Lycos may determine.
10.2 LICENSED SOFTWARE UPDATES. Lycos shall provide to
Licensee, without charge, updates to (including entirely new versions of) the
Licensed Software at the same intervals as, and as soon as practical after,
updates of the Lycos Software and the Directory Software become available to
joint ventures in which Lycos has a significant participation interest through
share ownership or otherwise. Until operations are transferred by Lycos to
Licensee pursuant to Section
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8.3, such updates shall be made available by Lycos to Licensee on the equipment
through which the Lycos Software and the Directory Software are made available
by Lycos to Licensee, and Lycos shall promptly notify Licensee each time any
such update is made available. After operations are transferred by Lycos to
Licensee pursuant to Section 8.3, such updates shall be made available by Lycos
to Licensee by File Transfer Protocol or by Federal Express, as Lycos may
determine. At the time Lycos makes available to Licensee any updates to the
Licensed Software, Lycos shall notify Licensee of the changes to the Licensed
Software effected by such updates.
11. ADDITIONAL SERVICES AND NEW SERVICES.
11.1 COMMUNITY SERVICES. Concurrently with the execution of
this Agreement, Lycos and Licensee have entered into a community services
license agreement, as more specifically described therein.
11.2 NEW SERVICES. In the event that Lycos hereafter makes
available at www.lycos.com new services which are in addition to the Lycos
Searchservice and the community services provided for in the license agreement
referred to in Section 11.1, and Lycos exclusively owns or licenses (without
obligation to pay royalties and with right to sublicense) the rights to such new
services, Lycos shall, at Licensee's request, grant to Licensee the right and
license to provide local versions of such new services, subject, however, to the
execution of an appropriate license agreement between Lycos and Licensee on such
terms and conditions as may be mutually acceptable to Lycos and Licensee, which
license agreement shall include a provision for the payment of royalties by
Licensee to Lycos and a provision requiring Licensee to pay to Lycos all costs
and expenses (including overhead and indirect costs) incurred by Lycos in
connection with customization of the new service for the Territory. In the event
Lycos and Licensee fail to enter into any such license agreement with respect to
any such local version of any such new service within sixty (60) days after the
commencement of good faith negotiations, Lycos shall have no further obligation
under this Section 11.2 with respect to any such new service.
12. DUTIES OF LICENSEE.
12.1 MARKETING. As a material term of this Agreement, Licensee
shall use its best efforts to market, promote and commercially exploit the Local
Searchservice in the Territory.
12.2 TRAFFIC REPORTS.
(a) Commencing on the fifth business day of the month
immediately following the month in which operation of the Local Searchservice is
transferred by Lycos to Licensee pursuant to Section 8.3, and continuing on the
fifth business day of each month thereafter during the term of this Agreement,
Licensee shall provide to Lycos via electronic mail a file, in
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standard common log file format, containing a complete and detailed record for
the prior month of (a) user accesses (click stream data) to the Licensed
Software, (b) the total number of advertising impressions possible, (c)
advertising impressions filled expressed as a percentage of advertising
impressions possible, and (d) the number of specific advertisements placed by
each advertiser, indicating whether such advertisements are rotational, static
or keyword based.
(b) Commencing on the second business day of the week
immediately following the week in which the operation of the Local Searchservice
is transferred by Lycos to Licensee pursuant to Section 8.3, and continuing on
the second business day of each week thereafter during the term of this
Agreement, Licensee shall provide to Lycos via electronic mail a report
summarizing the previous week's daily traffic to the Local Site
12.3 COMPLIANCE WITH LAW. Licensee shall operate and maintain the
Local Searchservice in compliance with all applicable laws, rules and
regulations of any relevant Regulatory Body.
12.4 STANDARD OF OPERATION. Licensee shall operate and maintain
the Local Searchservice in a manner which is consistent with the quality
standards of Lycos and which meets or exceeds the response performance standards
of the Lycos Searchservice
12.5 LYCOS APPROVAL OF SAMPLE MATERIALS. Lycos shall have the
right to approve, prior to distribution, samples of all hard copy advertising
and promotional materials developed by Licensee and using any of the Licensed
Marks. Licensee shall submit each such sample to Lycos for approval, and, in the
event Lycos fails to disapprove any such sample within fifteen (15) days after
submission, such sample shall be deemed approved.
12.6 NON-COMPETITION. For so long as this Agreement remains in
effect, Licensee shall not, directly or indirectly, alone or in combination with
others, purchase, establish, maintain, invest in or otherwise promote, or agree
to purchase, establish, maintain, invest in or otherwise promote, any
navigation, search, directory or community service, except that the foregoing
restriction shall not apply to passive portfolio investments in an entity not in
excess of five percent (5%) of the total equity of such entity and, prior to any
termination of this Agreement, the foregoing restriction shall not apply to the
Local Searchservice or any additional or new services made available in
connection with the Local Searchservice as contemplated by Section 11.
12.7 PRIVACY POLICY. Licensee agrees to implement a privacy policy
consistent with that utilized by Lycos in connection with the Lycos
Searchservice, with such modifications as may be required by applicable law.
13. [A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION]
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14. RIGHTS IN INTELLECTUAL PROPERTY.
14.1 RESERVATION OF RIGHTS. Except as otherwise expressly set
forth in Section 2.1, no right, title or interest in or to the Local Catalog,
the Lycos Catalog, the Licensed Software, the Licensed Technology, the Licensed
Marks, the Licensed Property, the Lycos Enhancements, the Local Searchservice or
the domain name "www.lycos.co.kr," or in or to any other intellectual property,
shall pass to Licensee under this Agreement. Without limiting the foregoing, no
right or license is granted or shall pass to Licensee with respect to any
web-crawler or spidering technology used to index and catalog web sites on the
Internet, or to any patents, copyrights, knowhow, software or other rights or
property relating to any such technology.
14.2 LYCOS ENHANCEMENTS. All ownership and other rights in and
to the Lycos Enhancements shall vest in and inure to the benefit of Lycos. Upon
request, Licensee shall execute all such documents, including without limitation
documents of assignment, and take all such steps and render all such assistance
as may be necessary to assure to Lycos its rights under this Section 14.2.
14.3 JOINT ENHANCEMENTS. All ownership and other rights in and
to Joint Enhancements shall vest in and inure to the benefit of Lycos and
Licensee jointly. Each party shall have the right to use Joint Enhancements, but
neither party shall have the right to license Joint Enhancements without the
prior written consent of the other party.
14.4 LICENSEE ENHANCEMENTS. All ownership and other rights in
and to the Licensee Enhancements shall vest in and inure to the benefit of
Licensee. Licensee hereby grants to Lycos a royalty-free, non-exclusive,
worldwide (except for the Territory) license, with the right to sublicense, to
use the Licensee Enhancements in connection with the Lycos Searchservice or
otherwise.
14.5 NO REGISTRATION. Licensee shall not, in the Territory or
in any other jurisdiction, make any registration or application with respect to
any patents, trademarks, service
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marks, copyrights or other intellectual property owned or licensed by Lycos,
including without limitation the Licensed Marks and the Licensed Property, or,
except as otherwise expressly contemplated by Section 3, with respect to any
domain name which includes the word "lycos," including without limitation the
domain name "www.lycos.co.kr."
14.6 BENEFIT. All use of the Licensed Marks and Licensed
Property shall inure to the benefit of Lycos, or, as applicable, its licensors.
15. MARKING AND PROTECTION.
15.1 MARKING OF MATERIALS. Licensee shall include appropriate
patent, trademark and copyright markings and notations in the Local
Searchservice and in all marketing, advertising, promotional and other materials
which use or refer to the Licensed Marks or the Licensed Property. Without
limiting the foregoing, if the trademark "Lycos(R)" appears in any such
materials, such materials shall include the following statement: "(C)1995-____
Lycos, Inc. Lycos(R) is a registered trademark of Carnegie Mellon University.
All Rights Reserved."
15.2 MARKING OF ENTRY SCREEN. The following statement shall
appear on the entry screen of the Local Searchservice and at the bottom of each
search result, in a font no smaller than the font for the main text used in the
Local Searchservice and otherwise in such manner as Lycos may specify to
Licensee from time to time:
"(C)1995-____ Lycos, Inc. Lycos(R) is a registered
trademark of Carnegie Mellon University. All Rights
Reserved."
15.3 PROTECTION. Licensee shall at all times take such steps
to protect the rights of Lycos in and to the Licensed Marks, the Licensed
Property, the Local Catalog, the Lycos Catalog, the Licensed Software, the
Licensed Technology, the Lycos Enhancements and the Local Searchservice as
Licensee takes to protect its rights with respect to its own intellectual
property, and in any event shall use a reasonable degree of care to protect such
rights of Lycos.
16. WARRANTIES; DISCLAIMER; EXCLUSIVE REMEDY.
16.1 LIMITED WARRANTY. LYCOS WARRANTS THAT THE LICENSED
SOFTWARE, WHEN USED WITH THE LOCAL CATALOG, WILL FUNCTION IN SUBSTANTIALLY THE
SAME MANNER AS THE LYCOS SOFTWARE FUNCTIONS WHEN USED WITH THE LYCOS CATALOG,
AND THAT THE SEARCH RESULTS RETRIEVED FROM THE LOCAL CATALOG USING THE LICENSED
SOFTWARE WILL HAVE SUBSTANTIALLY THE SAME APPEARANCE (ALLOWING FOR DIFFERENCES
ATTRIBUTABLE TO LANGUAGE, DIFFERENCES IN CONTENT AND LOCAL CUSTOMIZATION) AS THE
SEARCH RESULTS RETRIEVED FROM THE LYCOS CATALOG USING THE LYCOS SOFTWARE.
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16.2 DISCLAIMER. EXCEPT AS EXPRESSLY SET FORTH IN SECTION 16.1,
LYCOS MAKES NO WARRANTIES OF ANY KIND, WRITTEN OR ORAL, EXPRESS, IMPLIED OR
STATUTORY, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE, OR ANY WARRANTY
REGARDING THE ACCURACY OR CONTENT OF ANY INFORMATION OBTAINED BY USING THE
LICENSED SOFTWARE, ALL OF WHICH OTHER WARRANTIES ARE HEREBY EXPRESSLY
DISCLAIMED.
16.3 REMEDY. LYCOS' SOLE OBLIGATION AND LICENSEE'S SOLE REMEDY
UNDER THE LIMITED WARRANTY SET FORTH IN SECTION 16.1 IS THAT LYCOS SHALL USE
REASONABLE COMMERCIAL EFFORTS TO CORRECT ANY PROBLEMS WITH THE LICENSED SOFTWARE
WHICH PREVENT THE LICENSED SOFTWARE FROM FUNCTIONING AS WARRANTED, OR WHICH
CAUSE THE APPEARANCE OF THE LOCAL CATALOG TO BE OTHER THAN AS WARRANTED.
16.4 EXCLUSIONS. THE LIMITED WARRANTY SET FORTH IN SECTION 16.1
SHALL CEASE TO APPLY IN THE EVENT LICENSEE MAKES ANY MODIFICATION TO THE
LICENSED SOFTWARE OR THE LOCAL CATALOG WITHOUT THE EXPRESS WRITTEN CONSENT OF
LYCOS.
16.5 WARRANTY PERIOD. THE LIMITED WARRANTY SET FORTH IN SECTION
16.1 SHALL APPLY DURING THE SIXTY (60) DAY PERIOD COMMENCING FROM THE DATE OF
THE COMMERCIAL LAUNCH OF THE LOCAL SEARCHSERVICE, AND SHALL APPLY DURING THE
SIXTY (60) DAY PERIOD COMMENCING FROM THE DATE ON WHICH THE TRANSFER OF
OPERATIONS CONTEMPLATED BY SECTION 8.3 IS COMPLETED. LYCOS SHALL NOT HAVE ANY
OBLIGATION OR LIABILITY UNDER SUCH LIMITED WARRANTY, EXCEPT AS TO CLAIMS ARISING
DURING EITHER SIXTY (60) DAY PERIOD REFERRED TO ABOVE IN THIS SECTION 16.5 AND
AS TO WHICH LYCOS HAS RECEIVED PROMPT WRITTEN NOTICE.
16.6 LIMITATION OF LIABILITY. NEITHER PARTY SHALL BE LIABLE TO
THE OTHER FOR INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT
LIMITATION LOST PROFITS. LICENSEE AGREES THAT LYCOS' MAXIMUM LIABILITY TO
LICENSEE UNDER THIS AGREEMENT, WHETHER ARISING OUT OF CONTRACT, NEGLIGENCE,
STRICT LIABILITY OR OTHERWISE, SHALL NOT IN ANY EVENT EXCEED THE SUM OF FIVE
HUNDRED THOUSAND U.S. DOLLARS (U.S.$ 500,000).
17. INFRINGEMENT.
17.1 INFRINGEMENT. In the event the use of the Licensed
Software by Licensee or any user of the Local Searchservice is alleged or
determined to infringe on the rights of any third
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party, Lycos shall, at its own expense and in its sole discretion, (a) procure
for Licensee and users of the Local Searchservice the right to continue such
use, (b) replace the Licensed Software with non-infringing software or modify
the Licensed Software to make it non-infringing, or (c) if neither of the
remedies described in (a) and (b) are commercially reasonable, terminate this
Agreement and accept the return of the Licensed Software.
17.2 INDEMNIFICATION. Lycos shall defend (or settle), indemnify
and hold Licensee harmless from and against any claim, liability, damage, cost
or expense (including reasonable attorneys' fees) arising out of any actual or
alleged infringement by the Licensed Software on the rights of third parties. In
connection with any such defense (or settlement), Lycos shall have the right, in
its sole discretion, to select counsel of its own choosing. Upon designation of
such counsel by Lycos, Licensee may, in its sole discretion and at its sole cost
and expense, choose to be represented by its own counsel. In any event, Lycos
and Licensee shall cooperate in any such defense (or settlement).
17.3 LIMITATION. Lycos shall not have any obligation or liability
to Licensee under Section 17.1 or Section 17.2 with respect to any Licensed
Software which has been modified by Licensee without the express written consent
of Lycos, or with respect to any claim or matter as to which Licensee fails to
give written notice to Lycos within fifteen (15) days after Licensee receives
notice or otherwise becomes aware of such claim or matter.
17.4 DISCLAIMER. Lycos shall have no obligations or liabilities
under this Agreement with respect to any claims, liabilities, damages, costs or
expenses, by reason of actual or alleged infringement on the rights of third
parties or otherwise, which arise out of any use of the Licensed Marks by
Licensee or any use of the Local Catalog or the Lycos Catalog by Licensee or any
users of the Local Searchservice.
18. CONFIDENTIALITY.
18.1 CONFIDENTIALITY. For so long as this Agreement remains in
effect and for a period of three (3) years after any expiration or termination
of this Agreement, each party shall keep strictly confidential, and shall not
disclose, any confidential information of the other party received under or in
connection with this Agreement, including without limitation any information,
written or oral, relating to 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; provided, however, that confidential information shall not include,
and the disclosure restrictions of this Section 18.1 shall not apply to, any
information received from the other party which:
(a) was already known to the recipient at the time of
receipt;
(b) was at the time of receipt, or thereafter becomes,
freely and generally available to the public through no wrongful act of the
recipient;
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(c) is rightfully received by the recipient from a third
party legally entitled to disclose such information free of confidentiality
restrictions;
(d) is disclosed by the recipient pursuant to the order of
any court or in connection with any legal proceeding commenced by or against the
recipient, provided that prior to any such disclosure the recipient shall give
the other party a reasonable opportunity to seek a protective order with respect
to any such disclosure; or
(e) is disclosed by the recipient, or any Affiliate of the
recipient, as required under any applicable securities laws
Upon the expiration or termination of this Agreement, each party shall either
destroy or return to the other party all memoranda, notes, records, reports and
other documents (including all copies thereof) containing any confidential
information of such other party and in such party's possession or under its
control at the time of such expiration or termination, and shall give written
certification of compliance with this paragraph to the other party.
18.2 PRESS RELEASES AND ANNOUNCEMENTS.. Neither party shall
issue any press releases or public announcements relating to this Agreement, the
transactions contemplated by this Agreement or the business of Licensee without
the prior written approval of the other party, which approval shall not be
unreasonably withheld or delayed, except that each party shall be permitted to
issue any press releases or publicity statements (whether or not approved by the
other party) to the extent required by any applicable securities laws, and Lycos
shall have the right to issue press releases and make public announcements
relating to its products, services and plans.
19. TERM AND TERMINATION.
19.1 TERM. The term of this Agreement shall commence from the
Effective Date and continue until the sooner of (a) the date on which the
parties hereto mutually agree to terminate this Agreement; (b) the date on which
this Agreement is terminated pursuant to the Joint Venture Agreement dated as of
March 19, 1999 between Lycos and Mirae Corporation; (c) the date on which any
bankruptcy or insolvency proceeding is commenced by or against Licensee; (d) the
date on which Licensee ceases to transact business for a period of not less than
thirty (30) consecutive days; or (e) the date on which Licensee ceases its
corporate existence (by dissolution or otherwise).
19.2 TERMINATION FOR BREACH. Either party may terminate this
Agreement in the event the other party breaches this Agreement and such breach,
if susceptible of cure, remains uncured for thirty (30) days after such party
gives written notice of such breach to such other party.
19.3 EFFECT OF TERMINATION. The expiration or termination of
this Agreement shall not affect any payment obligations of either party to the
other accrued or otherwise existing as of the
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date of such expiration or termination. Upon the expiration or termination of
this Agreement for any reason, all of the rights and licenses granted under
Section 2.1 shall terminate, and Licensee shall immediately (a) cease any use of
the Licensed Marks, the Licensed Property, the Local Catalog, the Lycos Catalog,
the Licensed Software, the Licensed Technology and the Lycos Enhancements, (b)
either return to Lycos or destroy all embodiments thereof, and (c) certify to
Lycos in writing that Licensee has complied with the requirements of clauses (a)
and (b) of this Section 19.3.
19.4 SURVIVAL. The provisions of Sections 12.6, 14 and 18 shall
survive any expiration or termination of this Agreement.
20. MISCELLANEOUS.
20.1 COSTS. Except as may be otherwise expressly provided in
this Agreement, each party shall bear its own costs and expenses in carrying out
its obligations under this Agreement.
20.2 LATE PAYMENTS. All amounts payable by either party to the
other party under this Agreement shall be due and payable within thirty (30)
days of the date of invoice. If any payment is not received within thirty (30)
days of the date of invoice, interest will be imposed on such amount from the
date due until paid in full at a rate of interest per annum equal to the rate
announced from time to time by the Chase Manhattan Bank as its prime or
reference rate, plus five percent (5%).
20.3 NOTICES. Any notice, request, demand, approval or consent
required or permitted under this Agreement shall be in writing and shall be
effective upon actual receipt when delivered by (a) registered mail, postage
prepaid, return receipt requested, (b) personal delivery, (c) an overnight
courier of recognized reputation (such as DHL or Federal Express), or (d)
transmission by facsimile (with confirmation by mail), in each case addressed as
follows:
If to Lycos: Lycos, Inc.
400-2 Totten Pond Road
Waltham, MA 02154
Attention: General Counsel
Telephone: (781) 370-2700
Facsimile: (781) 370-2600
With a copy to: Coudert Brothers
1055 West 7th Street, 20th Floor
Los Angeles, CA 90017
Attention: Richard G. Wallace
Telephone: (213) 688-9088
Facsimile: (213) 689-4467
If to Licensee: Lycos Korea, Inc.
c/o Mirae Corporation
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#1309, Korea Stock Exchange, Annex Bldg.,
33, Yoidodong, Youngdungpo-gu
Seoul, Korea 150-010
Attention: Kyung Dal Cho
Telephone: 82-2-783-0059
Facsimile: 82-2-783-0057
Either party may change its address or facsimile number for notice purposes by
notice given to the other party in accordance with this Section 20.3.
20.4 ASSIGNMENT. Neither party's rights, duties or
responsibilities under this Agreement may be assigned, delegated or otherwise
transferred in any manner, without the prior written consent of the other party.
Notwithstanding the foregoing, no such consent shall be required in connection
with the assignment, delegation or other transfer of any such rights, duties or
responsibilities (a) by Lycos to an Affiliate, or (b) in connection with any
transaction, regardless of its form, in which all or substantially all of the
assets of Lycos are acquired.
20.5 ENTIRE AGREEMENT. This Agreement, including the exhibits
referred to herein, which are hereby incorporated in and made a part of this
Agreement, constitutes the entire contract between the parties with respect to
the subject matter covered by this Agreement. This Agreement supersedes all
previous letters of intent, agreements and understandings, if any, by and
between the parties with respect to the subject matter covered by this
Agreement. This Agreement may not be amended, changed or modified except by a
writing duly executed by the parties hereto.
20.6 SEVERABILITY. If any provision of this Agreement is held
by a court of competent jurisdiction to be unenforceable, invalid or void in any
respect, no other provision of this Agreement shall be affected thereby, all
other provisions of this Agreement shall nevertheless be carried into effect and
the parties shall amend this Agreement to modify the unenforceable, invalid or
void provision to give effect to the intentions of the parties to the extent
possible in a manner which is valid and enforceable.
20.7 REMEDIES AND WAIVERS. All rights and remedies of the
parties are separate and cumulative, and no one of them, whether exercised or
not, shall be deemed to be to the exclusion of or to limit or prejudice any
other rights or remedies which the parties may have. The parties shall not be
deemed to waive any of their rights or remedies under this Agreement, unless
such waiver is in writing and signed by the party to be bound. No delay or
omission on the part of either party in exercising any right or remedy shall
operate as a waiver of such right or remedy or any other right or remedy. A
waiver on any one occasion shall not be construed as a bar to or waiver of any
right or remedy on any future occasion.
20.8 ARBITRATION. In the event any dispute arises between the
parties with respect to any matter arising out of or relating to this Agreement
which cannot be amicably resolved, such dispute shall be submitted to the
International Chamber of Commerce for binding arbitration in
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accordance with the commercial arbitration rules of the International Chamber of
Commerce as then in effect. The arbitration shall be conducted in the English
language, and shall be held in London, England. Any arbitration award rendered
in any such arbitration proceeding may be entered in and enforced by any court
of competent jurisdiction. Nothing contained in this Section 20.8 shall prevent
or be construed to prevent either party from seeking a temporary restraining
order or a preliminary or permanent injunction or any other form of interim,
provisional or equitable relief in any court of competent jurisdiction.
20.9 GOVERNING LAW. This Agreement shall be governed by, and
interpreted in accordance with, the laws (other than that body of law relating
to conflicts of law) of Massachusetts, United States of America. Licensee hereby
consents to the non-exclusive jurisdiction of the federal and state courts
located in Massachusetts, United States of America, and waives all objections to
the laying of venue in Massachusetts, including without limitation any objection
based on inconvenient forum. Licensee further consents to the service of process
by mail or by any other means permitted by Massachusetts law.
20.10 ATTORNEYS' FEES. In the event any action or proceeding
is initiated for any breach of or default in any of the terms or conditions of
this Agreement, then the party in whose favor judgment shall be entered or an
arbitration award shall be made, shall be entitled to have and recover from the
other party all costs and expenses (including attorneys' fees) incurred in such
action or proceeding and any appeal therefrom.
20.11 HEADINGS. The headings contained in this Agreement are
for convenience only and are not a part of this Agreement, and do not in any way
interpret, limit or amplify the scope, extent or intent of this Agreement, or
any of the provisions of this Agreement.
20.12 COUNTERPARTS AND FACSIMILE. This Agreement may be
executed in counterparts, each of which shall constitute an original, but all of
which together shall constitute one and the same agreement. Transmission of
facsimile copies of signed original signature pages of this Agreement shall have
the same effect as delivery of the signed originals.
20.13 TRANSLATION. For the convenience of the parties, one or
more Korean translations of this Agreement may be prepared. Notwithstanding the
preparation or existence of any such Korean translations, the English language
version of this Agreement shall be controlling.
20.14 THIRD PARTY BENEFICIARY. This Agreement is not intended
to and does not confer any rights on any third party, and no such third party
shall be a third party beneficiary under or in respect of this Agreement.
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20.15 BINDING EFFECT. Subject to Section 20.4, this Agreement
shall be binding upon and shall inure to the benefit of the parties and their
respective successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LYCOS, INC.,
a corporation organized under the laws of
Delaware, USA
By:
--------------------------------------
Its:
-------------------------------------
LYCOS KOREA, INC.
a CHUSIK HOESA organized under the laws of
the Republic of Korea
By:
--------------------------------------
Its:
-------------------------------------
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EXHIBITS
Exhibit A: Licensed Software
Exhibit B: Licensed Marks
<PAGE>
EXHIBIT A
LYCOS SOFTWARE
1. Lycos Web Server
(a) Pursuit Search Engine
(b) Advertising Support Code (to the extent owned
exclusively by Lycos)
(c) Load Balance Code
(d) Fault Tolerance Failover
(e) Real Time Security and Traffic Monitoring
(f) Log Analysis Code that provides collection,
compression, and report generation of all http
services
2. Fault Tolerance Monitoring and Security Demons
<PAGE>
EXHIBIT B
Licensed Marks
- --------------
Tripod name and logo
Licensed Property
- -----------------
Patents--None
<PAGE>
Exhibit 10.28
EXHIBIT B-2
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (this "Agreement") is made and entered into as
of _____________, 1999 by and between TRIPOD, INC., a corporation organized
under the laws of the State of Delaware, United States of America ("Tripod"),
and LYCOS KOREA, INC., a CHUSIK HOESA organized under the laws of the Republic
of Korea ("Licensee").
RECITALS
A. Tripod owns or licenses from third parties certain rights relating
to the Tripod Service (as defined below).
B. Licensee desires to offer a local version of the Tripod Service, in
the Korean language and as otherwise customized for the Korean market.
C. On the terms and subject to the conditions hereafter set forth,
Licensee desires to obtain from Tripod, and Tripod is willing to grant to
Licensee, the rights and licenses described below.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, and for other valuable consideration received, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following
terms have the meanings set forth below:
"Affiliate" shall mean, as to any Person, any other Person
that, directly or indirectly, controls, is under common control with, or is
controlled by, such Person, where such control is by the power, directly or
indirectly, to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise.
"Derivative Works" shall mean all Enhancements which are
"derivative works" and "compilations" as such terms are defined in the U.S.
Copyright Act (17 U.S.C. Section 101 et seq.).
"Enhancements" shall mean all enhancements, improvements,
additions or modifications to the Licensed Software, the Licensed Technology or
the Local Service, of whatever type or nature, whether created or developed
solely by Tripod or its Affiliates, agents, consultants or independent
contractors, solely by Licensee or its Affiliates, agents, consultants or
independent contractors, or jointly by Tripod or its Affiliates, agents,
consultants or independent contractors, on one hand, and Licensee or its
Affiliates, agents, consultants or independent contractors, on the other hand.
<PAGE>
"Effective Date" shall mean the date of this Agreement as set
forth in the preamble hereof.
"Internet" shall mean the various computer networks commonly
and collectively referred to as the "internet," as the same may exist from time
to time.
"Initial Availability Period" shall mean the thirty (30) day
period commencing from the date Tripod makes the Licensed Software initially
available to Licensee under Section 6.1, or such shorter period as may be agreed
to between Tripod and Licensee.
"Joint Enhancements" shall mean any Enhancements which are not
Derivative Works and which are created or developed jointly by Tripod or its
Affiliates, agents, consultants or independent contractors, on one hand, and
Licensee or its Affiliates, agents, consultants or independent contractors, on
the other hand.
"Licensed Marks" shall mean all trademarks and service marks
owned or licensed (without obligation to pay royalties and with right to
sublicense) by Tripod as of the date of this Agreement and used by Tripod in
connection with the Tripod Service, which trademarks and service marks are
listed in the attached EXHIBIT B.
"Licensed Property" shall mean all patents and patent rights
listed in the attached EXHIBIT B and all rights in copyright now or hereafter
owned exclusively or licensed (without obligation to pay royalties and with
right to sublicense) by Tripod and pertaining to the Licensed Software, the
Licensed Technology, the Local Service or the Tripod Enhancements.
"Licensed Software" shall mean the Tripod Software, as enabled
to handle double-byte characters, and all relevant application programming
interfaces, as the Tripod Software and the relevant application programming
interfaces are modified or supplemented to support the Local Service and to
enable a user to create a homepage at the Local Site or at www.tripod.com, to
create a mirror of such homepage at the other of such sites and to link such
homepages, and as thereafter modified, supplemented, replaced or updated from
time to time.
"Licensed Technology" shall mean all inventions, ideas,
knowhow, expertise, trade secrets and proprietary information now or hereafter
owned exclusively or licensed (without obligation to pay royalties and with
right to sublicense) by Tripod and used by Tripod to operate the Tripod Service
and to enable a user to create a homepage at the Local Site or at
www.tripod.com, to create a mirror of such homepage at the other of such sites
and to link such homepages.
"Licensee Enhancements" shall mean shall mean any Enhancements
which (a) are not Derivative Works, and (b) are created or developed solely by
Licensee or its Affiliates, agents, consultants or independent contractors
(other than Tripod) without breaching any provision of this Agreement.
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"Local Service" shall mean a local version of the Tripod
Service, as customized for the Territory and in the principal language of the
Territory.
"Local Site" shall mean www.tripod.co.kr, the Internet site
through which the Local Service is to be made available to users, as provided
for in Section 3.
"Person" shall mean a natural person, sole proprietorship,
corporation, general partnership, limited partnership, limited liability
partnership, limited liability company, joint venture, unincorporated
organization, joint stock company, trust, estate, Regulatory Body or other
entity.
"Regulatory Body" shall mean any national, state, municipal,
local or other governmental body or authority, or any quasi-governmental or
private body exercising any regulatory authority, including any subdivision or
agency thereof.
"Territory" shall mean the Republic of Korea.
"Tripod Enhancements" shall mean any Enhancements which are
(a) Derivative Works, or (b) created or developed solely by Tripod or its
Affiliates, agents, consultants or independent contractors.
"Tripod Service" shall mean the "web site community" service
offered by Tripod on an advertiser supported basis at www.tripod.com, featuring
a homepage building service and opportunities for users to interact.
"Tripod Software" shall mean all computer software owned
exclusively or licensed (without obligation to pay royalties and with right to
sublicense) by Tripod, used by Tripod to operate and maintain the Tripod
Service, and performing the functionality described in the attached EXHIBIT A.
2. LICENSE.
2.1 GRANT OF LICENSE. On the terms and subject to the
conditions of this Agreement, Tripod hereby grants to Licensee the following
rights and licenses:
(a) the exclusive right and license to provide, operate and
maintain the Local Service at the Local Site;
(b) the exclusive right and license to market, promote and
otherwise exploit the Local Service in the Territory;
(c) the exclusive right and license to use the Licensed
Marks, the Licensed Property, the Licensed Software, the Licensed Technology and
the Tripod Enhancements solely for purposes of exercising the rights and
licenses granted under this Section 2.1.
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2.2 EXCLUSIVITY. The rights and licenses granted under
Section 2.1 are exclusive only to the extent such rights and licenses relate to
providing, operating and maintaining the Local Service at the Local Site from
any geographic location or to marketing, promoting and otherwise exploiting the
Local Service in the Territory. Notwithstanding anything to the contrary
contained in this Agreement, Tripod reserves and shall have the right to use or
license the Licensed Marks, the Licensed Property, the Licensed Software, the
Licensed Technology and the Tripod Enhancements for any purpose other than
(except as required to perform its duties under this Agreement) providing a
Local Service at an Internet site ending with the designation "co.kr" or
marketing, promoting or otherwise exploiting a Local Service in the Territory.
2.3 RESTRICTIONS ON SUBLICENSING AND TRANSFER. Licensee
shall have no right to sublicense, sell, assign or otherwise transfer, whether
voluntarily or involuntarily, any of the rights and license granted under
Section 2.1.
2.4 RIGHTS NOT AFFECTED BY CERTAIN CHANGES. The rights of
Licensee under this Agreement shall continue in accordance with the terms hereof
notwithstanding any change in the ownership of Tripod, any transfer of the
assets or business of Tripod, or any merger, consolidation, reorganization or
recapitalization affecting Tripod.
3. LOCAL SITE. To the extent permitted under applicable local law
and regulation, Tripod shall at all times be the owner of the domain name
"www.tripod.co.kr," which is the domain name comprising the Local Site. In the
event Tripod is at any time not permitted under applicable local law and
regulation to be the owner of the domain name "www.tripod.co.kr," then, at the
sole option of Tripod, Tripod shall procure for Licensee the right to use the
domain name "www.tripod.co.kr" or, alternatively, Licensee shall be the owner of
the domain name "www.tripod.co.kr," in which event Licensee shall enter into an
agreement with Tripod, in form and substance satisfactory to Tripod, assuring to
Tripod the actual benefit of ownership of the domain name "www.tripod.co.kr"
notwithstanding registered ownership in the name of Licensee.
4. LICENSED SOFTWARE. Tripod shall be solely responsible for
(a) making any modifications or changes to the Tripod Software which may be
necessary to develop or create Licensed Software capable of supporting the Local
Service, and (b) updating the Licensed Software. Licensee shall not , without
the prior written approval of Tripod in each instance, modify or change the
Licensed Software in any respect. Tripod shall initially make the Licensed
Software available as provided in Section 5.1 and shall update the Licensed
Software as provided in Section 8.2.
5. AVAILABILITY OF LICENSED SOFTWARE.
5.1 INITIAL AVAILABILITY. Within thirty (30) days after the
Effective Date, Tripod shall make the Licensed Software, as then existing,
available for use on a staging server located in the United States, and shall
inform Licensee how to access the Licensed Software made available on such
staging server. During the Initial Availability Period, Licensee shall conduct
such tests of
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the Licensed Software as Licensee deems necessary or desirable, and Tripod shall
use reasonable commercial efforts to resolve any performance issues with respect
to the Licensed Software as may be identified by Licensee and communicated by
Licensee to Tripod.
5.2 SUBSEQUENT AVAILABILITY. Promptly after the Initial
Availability Period, and prior to the transfer of operations from Tripod to
Licensee pursuant to Section 6.3, Tripod shall make the Licensed Software, as
then existing, available for use on servers located in the United States and
accessed through the Local Site. The equipment shipped by Tripod to Licensee in
connection with the transfer of operations from Tripod to Licensee pursuant to
Section 6.3 shall have installed thereon the Licensed Software, as existing at
the time of such shipment. Thereafter, Tripod shall, if required and requested
by Licensee, make the Licensed Software available to Licensee by File Transfer
Protocol or Federal Express, as Tripod may determine in its discretion.
6. START-UP, TRANSFER OF OPERATIONS AND IMPLEMENTATION OF
MIRRORED SITES.
6.1 LAUNCH. Licensee shall commercially launch the Local
Service through the Local Site within sixty (60) days after the end of the
Initial Availability Period, and as promptly as possible within such sixty (60)
day period as circumstances permit, making due allowance for the development of
a well-considered plan for the launch and initial marketing of the Local
Service.
6.2 INITIAL OPERATIONS. Initially, Tripod shall operate and
maintain the Local Service for Licensee using dedicated equipment installed and
located in the United States. Licensee shall reimburse Tripod for all costs
(including indirect costs and overhead) reasonably incurred by Tripod in
operating and maintaining the Local Service for Licensee, and costs incurred in
preparing to commence such operation and maintenance.
6.3 TRANSFER OF OPERATIONS. When and as feasible, as
determined by Tripod and Licensee, Tripod shall transfer the operation and
maintenance of the Local Service from Tripod to Licensee.
6.4 IMPLEMENTATION OF MIRRORED SITES. Tripod shall use
reasonable commercial efforts, using information collected from users of the
Tripod Service, to identify any such users who are resident in the Territory and
to compile and maintain a current list of such users and their e-mail addresses.
Tripod shall take reasonable commercial steps to acquaint users of the Tripod
Service who are listed on such list, as updated from time to time, with the
availability of the Local Service and the opportunity to mirror at the Local
Site homepages created using the Tripod Service and to link the mirrored
homepage at the Local Site with the original homepage created using the Tripod
Service. Tripod shall transfer to Licensee, in such manner as may be agreed to
between Tripod and Licensee, the relevant data with respect to homepages created
by users of the Tripod Service whose names appear on the list of Tripod users
resident in the Territory as maintained by Tripod under this Section 6.4.
Commencing for the month in which such mirrored sites are initially created,
Tripod shall provide to Licensee monthly tracking information on transfers by
users of the Tripod Service between homepages created using the Tripod Service
and mirrored homepages at the Local Site.
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Tripod shall from time to time furnish to Licensee the e-mail addresses of the
users of the Tripod Service listed on the list maintained by Tripod under this
Section 6.4, provided that Licensee shall not disclose such e-mail addresses to
any third party without the written consent of Tripod.
7. TECHNICAL ASSISTANCE.
7.1 INITIAL TECHNICAL ASSISTANCE. During the period
commencing from the Effective Date and ending three (3) months after commercial
launch of the Local Service, Tripod shall, without charge to Licensee, (a)
provide reasonable technical assistance to Licensee in the form of (i) telephone
consultation in English between Tripod technicians and Licensee's personnel, and
(ii) written materials, in English, covering matters specified by Licensee, and
(b) provide training at Tripod's principal place of business in the United
States for up to two (2) technical trainees who are employees of Licensee, for a
total of not more than three (3) man months, provided that the cost of travel,
food and lodging for such technical trainees shall be borne by Licensee.
7.2 SUBSEQUENT TECHNICAL ASSISTANCE. After the expiration of
the period referred to in Section 7.1, Tripod shall (a) provide reasonable
technical assistance to Licensee in the form of (i) telephone consultation in
English between Tripod technicians and Licensee's personnel, and (ii) written
materials, in English, covering matters specified by Licensee, and (b) from time
to time as reasonably requested by Licensee make technical representatives
available in the Republic of Korea, at times convenient to Tripod, to consult
with and provide technical assistance to Licensee. Licensee shall bear all costs
relating to such consultation and technical assistance, including without
limitation the costs of travel, food and lodging and per diem charges (including
coverage of overhead and indirect costs) on a per person basis at the most
favorable rates offered by Tripod for providing such services.
8. LICENSED SOFTWARE UPDATES. Tripod shall provide to Licensee,
without charge, updates to (including entirely new versions of) the Licensed
Software at the same intervals as, and as soon as practical after, updates of
the Tripod Software become available for release to Tripod licensees. Until
operations are transferred by Tripod to Licensee pursuant to Section 6.3, such
updates shall be made available by Tripod to Licensee on the equipment through
which the Tripod Software is made available by Tripod to Licensee, and Tripod
shall promptly notify Licensee each time any such update is made available.
After operations are transferred by Tripod to Licensee pursuant to Section 6.3,
such updates shall be made available by Tripod to Licensee by File Transfer
Protocol or by Federal Express, as Tripod may determine. At the time Tripod
makes available to Licensee any updates to the Licensed Software, Tripod shall
notify Licensee of the changes to the Licensed Software effected by such
updates.
9. DUTIES OF LICENSEE.
9.1 MARKETING. As a material term of this Agreement,
Licensee shall use its best efforts to market, promote and commercially exploit
the Local Service in the Territory.
9.2 TRAFFIC REPORTS.
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(a) Commencing on the fifth business day of the month
immediately following the month in which operation of the Local Service is
transferred by Tripod to Licensee pursuant to Section 6.3, and continuing on the
fifth business day of each month thereafter during the term of this Agreement,
Licensee shall provide to Tripod via electronic mail a file, in standard common
log file format, containing a complete and detailed record for the prior month
of (a) user accesses (click stream data) to the Licensed Software, (b) the total
number of advertising impressions possible, (c) advertising impressions filled
expressed as a percentage of advertising impressions possible, and (d) the
number of specific advertisements placed by each advertiser, indicating whether
such advertisements are rotational, static or keyword based.
(b) Commencing on the second business day of the week
immediately following the week in which the operation of the Local Service is
transferred by Tripod to Licensee pursuant to Section 6.3, and continuing on the
second business day of each week thereafter during the term of this Agreement,
Licensee shall provide to Tripod via electronic mail a report summarizing the
previous week's daily traffic to the Local Site.
9.3 COMPLIANCE WITH LAW. Licensee shall operate and maintain
the Local Service in compliance with all applicable laws, rules and regulations
of any relevant Regulatory Body.
9.4 STANDARD OF OPERATION. Licensee shall operate and
maintain the Local Service in a manner which is consistent with the quality
standards of Tripod and which meets or exceeds the response performance
standards of the Tripod Service.
9.5 TRIPOD APPROVAL OF SAMPLE MATERIALS. Tripod shall have
the right to approve, prior to distribution, samples of all hard copy
advertising and promotional materials developed by Licensee and using any of the
Licensed Marks. Licensee shall submit each such sample to Tripod for approval,
and, in the event Tripod fails to disapprove any such sample within fifteen (15)
days after submission, such sample shall be deemed approved.
9.6 NON-COMPETITION. For so long as this Agreement remains
in effect, Licensee shall not, directly or indirectly, alone or in combination
with others, purchase, establish, maintain, invest in or otherwise promote, or
agree to purchase, establish, maintain, invest in or otherwise promote, any
community web site service, except that the foregoing restriction shall not
apply to passive portfolio investments in an entity not in excess of five
percent (5%) of the total equity of such entity and, prior to any termination of
this Agreement, the foregoing restriction shall not apply to the Local Service.
9.7 PRIVACY POLICY. Licensee agrees to implement a privacy
policy consistent with that utilized by Tripod in connection with the Tripod
Service, with such modifications as may be required by applicable law.
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10. [A CONFIDENTIAL PORTION OF THE MATERIAL HAS OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION]
11. RIGHTS IN INTELLECTUAL PROPERTY.
11.1 RESERVATION OF RIGHTS. Except as otherwise expressly set
forth in Section 2.1, no right, title or interest in or to the Licensed
Software, the Licensed Technology, the Licensed Marks, the Licensed Property,
the Tripod Enhancements, the Local Service or the domain name
"www.tripod.co.kr," or in or to any other intellectual property, shall pass to
Licensee under this Agreement.
11.2 TRIPOD ENHANCEMENTS. All ownership and other rights in
and to the Tripod Enhancements shall vest in and inure to the benefit of Tripod.
Upon request, Licensee shall execute all such documents, including without
limitation documents of assignment, and take all such steps and render all such
assistance as may be necessary to assure to Tripod its rights under this Section
11.2.
11.3 JOINT ENHANCEMENTS. All ownership and other rights in and
to Joint Enhancements shall vest in and inure to the benefit of Tripod and
Licensee jointly. Each party shall have the right to use Joint Enhancements, but
neither party shall have the right to license Joint Enhancements without the
prior written consent of the other party.
11.4 LICENSEE ENHANCEMENTS. All ownership and other rights in
and to the Licensee Enhancements shall vest in and inure to the benefit of
Licensee. Licensee hereby grants to Tripod a royalty-free, non-exclusive,
worldwide (except for the Territory) license, with the right to sublicense, to
use the Licensee Enhancements in connection with the Tripod Service or
otherwise.
11.5 NO REGISTRATION. Licensee shall not, in the Territory or
in any other jurisdiction, make any registration or application with respect to
any patents, trademarks, service marks, copyrights or other intellectual
property owned or licensed by Tripod, including without limitation the Licensed
Marks and the Licensed Property, or, except as otherwise expressly
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contemplated in Section 3, with respect to any domain name which includes the
word "tripod," including without limitation the domain name "www.tripod.co.kr".
11.6 BENEFIT. All use of the Licensed Marks and Licensed
Property shall inure to the benefit of Tripod, or, as applicable, its licensors.
12. MARKING AND PROTECTION.
12.1 MARKING OF MATERIALS. Licensee shall include appropriate
patent, trademark and copyright markings and notations in the Local Service and
in all marketing, advertising, promotional and other materials which use or
refer to the Licensed Marks or the Licensed Property.
12.2 MARKING OF ENTRY SCREEN. The following statement shall
appear on the entry screen of the Local Service, in a font no smaller than the
font for the main text used in the Local Service and otherwise in such manner as
Tripod may specify to Licensee from time to time:
"(C)199__. Tripod, Inc. All Rights Reserved."
12.3 PROTECTION. Licensee shall at all times take such steps
to protect the rights of Tripod in and to the Licensed Marks, the Licensed
Property, the Licensed Software, the Licensed Technology, the Tripod
Enhancements and the Local Service as Licensee takes to protect its rights with
respect to its own intellectual property, and in any event shall use a
reasonable degree of care to protect such rights of Tripod.
13. WARRANTIES; DISCLAIMER; EXCLUSIVE REMEDY.
13.1 LIMITED WARRANTY. TRIPOD WARRANTS THAT THE LICENSED
SOFTWARE WILL FUNCTION IN SUBSTANTIALLY THE SAME MANNER AS THE TRIPOD SOFTWARE
FUNCTIONS WHEN USED WITH THE TRIPOD SERVICE, AND THAT THE LOCAL SERVICE USING
THE LICENSED SOFTWARE WILL HAVE SUBSTANTIALLY THE SAME APPEARANCE (ALLOWING FOR
DIFFERENCES ATTRIBUTABLE TO LANGUAGE, DIFFERENCES IN CONTENT AND LOCAL
CUSTOMIZATION) AS THE TRIPOD SERVICE USING THE TRIPOD SOFTWARE.
13.2 DISCLAIMER. EXCEPT AS EXPRESSLY SET FORTH IN SECTION
13.1, TRIPOD MAKES NO WARRANTIES OF ANY KIND, WRITTEN OR ORAL, EXPRESS, IMPLIED
OR STATUTORY, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE, OR ANY WARRANTY
REGARDING THE ACCURACY OR CONTENT OF ANY INFORMATION OBTAINED BY USING THE
LICENSED SOFTWARE, ALL OF WHICH OTHER WARRANTIES ARE HEREBY EXPRESSLY
DISCLAIMED.
13.3 REMEDY. TRIPOD'S SOLE OBLIGATION AND LICENSEE'S SOLE
REMEDY UNDER THE LIMITED WARRANTY SET FORTH IN SECTION 13.1 IS THAT TRIPOD SHALL
USE REASONABLE COMMERCIAL EFFORTS TO CORRECT ANY
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PROBLEMS WITH THE LICENSED SOFTWARE WHICH PREVENT THE LICENSED SOFTWARE FROM
FUNCTIONING AS WARRANTED, OR WHICH CAUSE THE APPEARANCE OF THE LOCAL SERVICE TO
BE OTHER THAN AS WARRANTED.
13.4 EXCLUSIONS. THE LIMITED WARRANTY SET FORTH IN SECTION
13.1 SHALL CEASE TO APPLY IN THE EVENT LICENSEE MAKES ANY MODIFICATION TO THE
LICENSED SOFTWARE WITHOUT THE EXPRESS WRITTEN CONSENT OF TRIPOD.
13.5 WARRANTY PERIOD. THE LIMITED WARRANTY SET FORTH IN
SECTION 13.5 SHALL APPLY DURING THE SIXTY (60) DAY PERIOD COMMENCING FROM THE
DATE OF THE COMMERCIAL LAUNCH OF THE LOCAL SERVICE, AND SHALL APPLY DURING THE
SIXTY (60) DAY PERIOD COMMENCING FROM THE DATE ON WHICH THE TRANSFER OF
OPERATIONS CONTEMPLATED BY SECTION 6.3 IS COMPLETED. TRIPOD SHALL NOT HAVE ANY
OBLIGATION OR LIABILITY UNDER SUCH LIMITED WARRANTY, EXCEPT AS TO CLAIMS ARISING
DURING EITHER SIXTY (60) DAY PERIOD REFERRED TO ABOVE IN THIS SECTION 13.5 AND
AS TO WHICH TRIPOD HAS RECEIVED PROMPT WRITTEN NOTICE.
13.6 LIMITATION OF LIABILITY. NEITHER PARTY SHALL BE LIABLE TO
THE OTHER FOR INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT
LIMITATION LOST PROFITS. LICENSEE AGREES THAT TRIPOD'S MAXIMUM LIABILITY TO
LICENSEE UNDER THIS AGREEMENT, WHETHER ARISING OUT OF CONTRACT, NEGLIGENCE,
STRICT LIABILITY OR OTHERWISE, SHALL NOT IN ANY EVENT EXCEED THE SUM OF FIVE
HUNDRED THOUSAND U.S. DOLLARS (U.S.$ 500,000).
14. INFRINGEMENT.
14.1 INFRINGEMENT. In the event the use of the Licensed
Software by Licensee or any user of the Local Service is alleged or determined
to infringe on the rights of any third party, Tripod shall, at its own expense
and in its sole discretion, (a) procure for Licensee and users of the Local
Service the right to continue such use, (b) replace the Licensed Software with
non-infringing software or modify the Licensed Software to make it
non-infringing, or (c) if neither of the remedies described in (a) and (b) are
commercially reasonable, terminate this Agreement and accept the return of the
Licensed Software.
14.2 INDEMNIFICATION. Tripod shall defend (or settle),
indemnify and hold Licensee harmless from and against any claim, liability,
damage, cost or expense (including reasonable attorneys' fees) arising out of
any actual or alleged infringement by the Licensed Software on the rights of
third parties. In connection with any such defense (or settlement), Tripod shall
have the right, in its sole discretion, to select counsel of its own choosing.
Upon designation of such counsel by Tripod, Licensee may, in its sole discretion
and at its sole cost and expense, choose to be
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represented by its own counsel. In any event, Tripod and Licensee shall
cooperate in any such defense (or settlement).
14.3 LIMITATION. Tripod shall not have any obligation or
liability to Licensee under Section 14.1 or Section 14.2 with respect to any
Licensed Software which has been modified by Licensee without the express
written consent of Tripod, or with respect to any claim or matter as to which
Licensee fails to give written notice to Tripod within fifteen (15) days after
Licensee receives notice or otherwise becomes aware of such claim or matter.
14.4 DISCLAIMER. Tripod shall have no obligations or
liabilities under this Agreement with respect to any claims, liabilities,
damages, costs or expenses, by reason of actual or alleged infringement on the
rights of third parties or otherwise, which arise out of any use of the Licensed
Marks by Licensee or any users of the Local Service.
15. CONFIDENTIALITY.
15.1 CONFIDENTIALITY. For so long as this Agreement remains in
effect and for a period of three (3) years after any expiration or termination
of this Agreement, each party shall keep strictly confidential, and shall not
disclose, any confidential information of the other party received under or in
connection with this Agreement, including without limitation any information,
written or oral, relating to 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; provided, however, that confidential information shall not include,
and the disclosure restrictions of this Section 15.1 shall not apply to, any
information received from the other party which:
(a) was already known to the recipient at the time of
receipt;
(b) was at the time of receipt, or thereafter becomes,
freely and generally available to the public through
no wrongful act of the recipient;
(c) is rightfully received by the recipient from a third
party legally entitled to disclose such information
free of confidentiality restrictions;
(d) is disclosed by the recipient pursuant to the order
of any court or in connection with any legal
proceeding commenced by or against the recipient,
provided that prior to any such disclosure the
recipient shall give the other party a reasonable
opportunity to seek a protective order with respect
to any such disclosure; or
(e) is disclosed by the recipient, or any Affiliate of
the recipient, as required under any applicable
securities laws
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Upon the expiration or termination of this Agreement, each party shall either
destroy or return to the other party all memoranda, notes, records, reports and
other documents (including all copies thereof) containing any confidential
information of such other party and in such party's possession or under its
control at the time of such expiration or termination, and shall give written
certification of compliance with this paragraph to the other party.
15.2 PRESS RELEASES AND ANNOUNCEMENTS.. Neither party shall
issue any press releases or public announcements relating to this Agreement, the
transactions contemplated by this Agreement or the business of Licensee without
the prior written approval of the other party, which approval shall not be
unreasonably withheld or delayed, except that each party shall be permitted to
issue any press releases or publicity statements (whether or not approved by the
other party) to the extent required by any applicable securities laws, and
Tripod shall have the right to issue press releases and make public
announcements relating to its products, services and plans.
16. TERM AND TERMINATION.
16.1 TERM. The term of this Agreement shall commence from the
Effective Date and continue until the sooner of (a) the date on which the
parties hereto mutually agree to terminate this Agreement; (b) the date on which
this Agreement is terminated pursuant to the Joint Venture Agreement dated as of
March __, 1999 between Lycos, Inc. and Mirae Corporation, the provisions of
which for the termination of this Agreement are hereby agreed to by Tripod and
Licensee; (c) the date on which any bankruptcy or insolvency proceeding is
commenced by or against Licensee; (d) the date on which Licensee ceases to
transact business for a period of not less than thirty (30) consecutive days; or
(e) the date on which Licensee ceases its corporate existence (by dissolution or
otherwise).
16.2 TERMINATION FOR BREACH. Either party may terminate this
Agreement in the event the other party breaches this Agreement and such breach,
if susceptible of cure, remains uncured for thirty (30) days after such party
gives written notice of such breach to such other party.
16.3 EFFECT OF TERMINATION. The expiration or termination of
this Agreement shall not affect any payment obligations of either party to the
other accrued or otherwise existing as of the date of such expiration or
termination. Upon the expiration or termination of this Agreement for any
reason, all of the rights and licenses granted under Section 2.1 shall
terminate, and Licensee shall immediately (a) cease any use of the Licensed
Marks, the Licensed Property, the Licensed Software, the Licensed Technology and
the Tripod Enhancements, (b) either return to Tripod or destroy all embodiments
thereof, and (c) certify to Tripod in writing that Licensee has complied with
the requirements of clauses (a) and (b) of this Section 16.3.
16.4 SURVIVAL. The provisions of Sections 9.6, 11 and 15 shall
survive any expiration or termination of this Agreement.
17. MISCELLANEOUS.
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17.1 COSTS. Except as may be otherwise expressly provided in
this Agreement, each party shall bear its own costs and expenses in carrying out
its obligations under this Agreement.
17.2 LATE PAYMENTS. All amounts payable by either party to the
other party under this Agreement shall be due and payable within thirty (30)
days of the date of invoice. If any payment is not received within thirty (30)
days of the date of invoice, interest will be imposed on such amount from the
date due until paid in full at a rate of interest per annum equal to the rate
announced from time to time by the Chase Manhattan Bank as its prime or
reference rate, plus five percent (5%).
17.3 NOTICES. Any notice, request, demand, approval or consent
required or permitted under this Agreement shall be in writing and shall be
effective upon actual receipt when delivered by (a) registered mail, postage
prepaid, return receipt requested, (b) personal delivery, (c) an overnight
courier of recognized reputation (such as DHL or Federal Express), or (d)
transmission by facsimile (with confirmation by mail), in each case addressed as
follows:
If to Tripod: Tripod, Inc.
------------------------------------
------------------------------------
Attention: General Counsel
Telephone:
-------------------------
Facsimile:
--------------------------
With a copy to: Coudert Brothers
1055 West 7th Street, 20th Floor
Los Angeles, CA 90017
Attention: Richard G. Wallace
Telephone: (213) 688-9088
Facsimile: (213) 689-4467
If to Licensee: Lycos Korea, Inc.
c/o Mirae Corporation
#1309, Korea Stock Exchange,
Annex Bldg.,
33, Yoidodong, Youngdungpo-gu
Seoul, Korea 150-010
Attention: Kyung Dal Cho
Telephone: 82-2-783-0059
Facsimile: 82-2-783-0057
Either party may change its address or facsimile number for notice purposes by
notice given to the other party in accordance with this Section 17.3.
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17.4 ASSIGNMENT. Neither party's rights, duties or
responsibilities under this Agreement may be assigned, delegated or otherwise
transferred in any manner, without the prior written consent of the other party.
Notwithstanding the foregoing, no such consent shall be required in connection
with the assignment, delegation or other transfer of any such rights, duties or
responsibilities (a) by Tripod to an Affiliate, or (b) in connection with any
transaction, regardless of its form, in which all or substantially all of the
assets of Tripod are acquired.
17.5 ENTIRE AGREEMENT. This Agreement, including the exhibits
referred to herein, which are hereby incorporated in and made a part of this
Agreement, constitutes the entire contract between the parties with respect to
the subject matter covered by this Agreement. This Agreement supersedes all
previous letters of intent, agreements and understandings, if any, by and
between the parties with respect to the subject matter covered by this
Agreement. This Agreement may not be amended, changed or modified except by a
writing duly executed by the parties hereto.
17.6 SEVERABILITY. If any provision of this Agreement is held
by a court of competent jurisdiction to be unenforceable, invalid or void in any
respect, no other provision of this Agreement shall be affected thereby, all
other provisions of this Agreement shall nevertheless be carried into effect and
the parties shall amend this Agreement to modify the unenforceable, invalid or
void provision to give effect to the intentions of the parties to the extent
possible in a manner which is valid and enforceable.
17.7 REMEDIES AND WAIVERS. All rights and remedies of the
parties are separate and cumulative, and no one of them, whether exercised or
not, shall be deemed to be to the exclusion of or to limit or prejudice any
other rights or remedies which the parties may have. The parties shall not be
deemed to waive any of their rights or remedies under this Agreement, unless
such waiver is in writing and signed by the party to be bound. No delay or
omission on the part of either party in exercising any right or remedy shall
operate as a waiver of such right or remedy or any other right or remedy. A
waiver on any one occasion shall not be construed as a bar to or waiver of any
right or remedy on any future occasion.
17.8 ARBITRATION. In the event any dispute arises between the
parties with respect to any matter arising out of or relating to this Agreement
which cannot be amicably resolved, such dispute shall be submitted to the
International Chamber of Commerce for binding arbitration in accordance with the
commercial arbitration rules of the International Chamber of Commerce as then in
effect. The arbitration shall be conducted in the English language, and shall be
held in London, England. Any arbitration award rendered in any such arbitration
proceeding may be entered in and enforced by any court of competent
jurisdiction. Nothing contained in this Section 17.8 shall prevent or be
construed to prevent either party from seeking a temporary restraining order or
a preliminary or permanent injunction or any other form of interim, provisional
or equitable relief in any court of competent jurisdiction.
17.9 GOVERNING LAW. This Agreement shall be governed by, and
interpreted in accordance with, the laws (other than that body of law relating
to conflicts of law) of Massachusetts,
-14-
<PAGE>
United States of America. Licensee hereby consents to the non-exclusive
jurisdiction of the federal and state courts located in Massachusetts, United
States of America, and waives all objections to the laying of venue in
Massachusetts, including without limitation any objection based on inconvenient
forum. Licensee further consents to the service of process by mail or by any
other means permitted by Massachusetts law.
17.10 ATTORNEYS' FEES. In the event any action or proceeding
is initiated for any breach of or default in any of the terms or conditions of
this Agreement, then the party in whose favor judgment shall be entered or an
arbitration award shall be made, shall be entitled to have and recover from the
other party all costs and expenses (including attorneys' fees) incurred in such
action or proceeding and any appeal therefrom.
17.11 HEADINGS. The headings contained in this Agreement are
for convenience only and are not a part of this Agreement, and do not in any way
interpret, limit or amplify the scope, extent or intent of this Agreement, or
any of the provisions of this Agreement.
17.12 COUNTERPARTS AND FACSIMILE. This Agreement may be
executed in counterparts, each of which shall constitute an original, but all of
which together shall constitute one and the same agreement. Transmission of
facsimile copies of signed original signature pages of this Agreement shall have
the same effect as delivery of the signed originals.
17.13 TRANSLATION. For the convenience of the parties, one or
more Korean translations of this Agreement may be prepared. Notwithstanding the
preparation or existence of any such Korean translations, the English language
version of this Agreement shall be controlling.
17.14 THIRD PARTY BENEFICIARY. This Agreement is not intended
to and does not confer any rights on any third party, and no such third party
shall be a third party beneficiary under or in respect of this Agreement.
17.15 BINDING EFFECT. Subject to Section 17.4, this Agreement
shall be binding upon and shall inure to the benefit of the parties and their
respective successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TRIPOD, INC.,
a corporation organized under the laws of
Delaware, USA
By:
-----------------------------------------
Its:
----------------------------------------
LYCOS KOREA, INC.
-15-
<PAGE>
a CHUSIK HOESA organized under the laws of
the Republic of Korea
By:
-----------------------------------------
Its:
----------------------------------------
-16-
<PAGE>
EXHIBITS
Exhibit A: Tripod Software
Exhibit B: Licensed Marks and Licensed Property
<PAGE>
EXHIBIT A
Tripod Software
- ---------------
1. Tripod Web server extensions and customizations, including advertising
support code (to the extent owned exclusively by Lycos).
2. Tripod Homepage Builder and Homepage Studio.
3. Tripod Authentication Server.
4. Tripod Counter Server.
5. Tripod FTP Server.
6. Pod Software and Pod Administration Tools.
7. Membership Registration, Log-in, Change Member Data.
8. Tripod Guestbook, Mailto, Tripod Chat, Tripod Message Boards.
9. Perl Object Hierarchy.
10. Membership Tools.
The Tripod Software does not include any third-party software or technology
utilized by Tripod in connection with the Tripod Services to the extent that
Tripod does not have the right to sublicense such third-party software or
technology on a royalty-free basis.
<PAGE>
EXHIBIT B
Licensed Marks
- --------------
1. Lycos name and logo.
2. WiseWire name and logo.
Licensed Property
- -----------------
Patents--None
<PAGE>
EXHIBIT 10.28
EXHIBIT C
SHAREHOLDER AGREEMENT
THIS SHAREHOLDER AGREEMENT is made and entered into as of __________,
1999 by and between LYCOS, INC. ("Lycos"), a corporation organized under the
laws of the State of Delaware, United States of America, and MIRAE CORPORATION,
a CHUSIK HOESA organized under the laws of the Republic of Korea ("Mirae").
Lycos and Mirae are sometimes referred to individually herein as a "Shareholder"
and collectively as the"Shareholders."
RECITALS
A. The Shareholders are parties to a Joint Venture Agreement dated as
of March __, 1999 (the "Joint Venture Agreement") relating to the establishment
of Lycos Korea, Inc., a CHUSIK HOESA organized under the laws of the Republic of
Korea (the "Company").
B. [***]
NOW, THEREFORE, the parties to this Agreement hereby agree as follows:
1. VOTING AND MANAGEMENT.
1.1 ELECTION OF DIRECTORS AND STATUTORY AUDITOR. Each
Shareholder hereby agrees that, for so long as this Agreement is in effect, such
Shareholder shall vote (or cause to be voted) the shares of Stock owned
beneficially or of record by such Shareholder and take all other actions
necessary to insure that one half of the directors of the Company shall be as
designated by Lycos and one half of the directors of the Company shall be as
designated by Mirae, the Representative Director of the Company shall be as
designated by Mirae and the Statutory Auditor of the Company shall be as
designated by Lycos.
1.2 REMOVAL. Any director elected as a Lycos designee may only
be removed with the consent of Lycos, any director (including the Representative
Director) elected as a Mirae designee may be only be removed with the consent of
Mirae, and the Statutory Auditor may only be removed with the consent of Lycos.
1.3 VOTING REQUIREMENTS. Except as may be otherwise provided
in the Articles of Incorporation of the Company or required by applicable law,
and subject to Section 1.4, the required vote for any approval by the
shareholders of the Company shall be a majority of the shares represented and
entitled to vote at a duly constituted meeting of shareholders at which a quorum
is present, and the required vote for any approval by the board of directors of
the Company shall be a majority of the directors present at a duly constituted
meeting of the board of directors at which a quorum is present.
*** A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
1.4 MAJOR MATTERS. Notwithstanding Section 1.3, any provision
of the Articles of Incorporation of the Company, or any provision of applicable
law, the parties agree that all of the following matters shall require the
written approval of both Lycos and Mirae, which approval may be evidenced by
unanimous approval of the board of directors of the Company or in any other
manner:
(a) amendment or repeal of the Articles of Incorporation;
(b) liquidation, winding-up, dissolution or commencement
of any bankruptcy or other similar proceeding;
(c) merger, consolidation, reorganization,
recapitalization, and the like;
(d) sale of all or substantially all of the assets of the
Company, or the sale of any assets individually or in the aggregate exceeding
75,000,000 in amount;
(e) issuance, redemption, repurchase or retirement of any
securities (including any option, warrant or right to acquire any securities or
any instrument convertible into securities);
(f) increase or decrease of authorized capital;
(g) approval of annual financial statements;
(h) approval of annual business plan (including annual
budget and marketing plans, distribution plans and pricing policies), and any
major modifications to or departures from the approved annual business plan;
(i) declaration of dividends;
(j) acquisition or disposition of an interest in any other
corporation or entity, including the incorporation of any subsidiary;
(k) guaranty of third party indebtedness;
(l) the borrowing of any funds, except for any funds
advanced to the Company by Mirae pursuant to Section 4 of the Joint Venture
Agreement or the loan agreement executed pursuant thereto (the "Loan
Agreement"), and except for any funds borrowed in the ordinary course of
business and individually or in the aggregate not exceeding 75,000,000;
(m) the sale, transfer (other than by sublicense as
permitted under the License Agreement), or encumbrance of any interest in
intellectual property rights, and the selection
-2-
<PAGE>
or designation of sublicensees to which sublicenses will be granted pursuant to
the License Agreement;
(n) any changes or modifications by the Company of or to
any of the technology licensed to the Company by Lycos, except as expressly
permitted by and made in accordance with the License Agreement;
(o) any material transaction between the Company and any
of its shareholders (other than pursuant to the License Agreement or the Loan
Agreement);
(p) any material transaction by which the Company incurs
or undertakes any financial obligation in excess of 75,000,000; or
(q) removal of the President, any Vice President, any
Treasurer or Finance Director, or any Senior Manager.
1.5 APPLICABLE LEGAL REQUIREMENTS. Nothing contained in
Section 1.4 relieves the Company or the Shareholders from compliance with
applicable law as to requirements for shareholder or board approvals with
respect to any of the matters set forth in Section 1.4.
1.6 VOTING. The Shareholders shall exercise their voting
rights and powers as shareholders of the Company, and shall otherwise cooperate,
to fully effect the purposes and implement the provisions of this Agreement.
1.7 MINUTES OF DIRECTORS MEETINGS. Minutes of meetings of the
Board of Directors of the Company, including records of all resolutions adopted
and all actions taken by the Board of Directors of the Company, shall be
prepared in both Korean and English, and, as between the parties to this
Agreement, in the event of any inconsistency between the Korean version and the
English version of such minutes and records, the English version of such minutes
and records shall prevail and be given effect.
1.8 MINUTES OF SHAREHOLDERS MEETINGS. Minutes of meetings of
the shareholders of the Company, including records of all resolutions adopted
and all actions taken by the shareholders of the Company, shall be prepared in
both Korean and English, and, as between the parties to this Agreement, in the
event of any inconsistency between the Korean version and the English version of
such minutes and records, the English version of such minutes and records shall
prevail and be given effect.
2. RESTRICTIONS ON TRANSFER. Neither Shareholder may voluntarily
transfer, sell, assign, pledge, hypothecate, encumber or otherwise dispose of
any or all of the Stock now owned or hereafter acquired by such Shareholder
without the approval of the Board of Directors of the Company with respect to
the identity of the transferee as required by the Articles of Incorporation
-3-
<PAGE>
of the Company. Any offer to transfer, or any attempted or purported
transfer, of any Stock in violation of this Section 2 shall be null and void.
3. TRANSFERS SUBJECT TO RIGHT OF FIRST REFUSAL.
3.1 GENERAL. Except as otherwise provided in Section 3.7, any
transfer, sale, assignment or other disposition (collectively, a "Transfer") of
any Stock by a Shareholder shall be subject to the rights of first refusal set
forth in this Section 3.
3.2 NOTICE AND OFFER TO SELL. In the event a Shareholder (the
"Offering Shareholder") desires to make a Transfer of all or any portion of the
Offering Shareholder's Stock, the Offering Shareholder shall give to the other
Shareholder (the "Offeree Shareholder") a written notice ("Offeror Notice") of
the Offering Shareholder's intention to make such Transfer, which Offeror Notice
shall set forth all of the terms and conditions of the proposed Transfer,
including without limitation (a) the name, identity and address of the proposed
transferee (the "Proposed Transferee"), (b) the number of shares of Stock to be
Transferred (the "Offered Shares") and (c) the consideration for the Transfer.
The Offeror Notice shall contain an offer to make a Transfer of the Offered
Shares to the Offeree Shareholder on the terms and conditions of the proposed
Transfer described in the Offeror Notice and in accordance with the terms and
conditions of this Agreement.
3.3 OFFEREE NOTICE. Within thirty (30) days after the Offeror
Notice is duly given, the Offeree Shareholder shall give written notice
("Offeree Notice") to the Offering Shareholder specifying whether the Offeree
Shareholder wishes to acquire all (but not less than all) of the Offered Shares
upon the terms and conditions of the proposed Transfer set forth in the Offeror
Notice. For the purpose of this Section 3.3, if the Offeree Shareholder does not
deliver an Offeree Notice within the time required by this Section 3.3, or
delivers an Offeree Notice specifying a desire to purchase less than all of the
Offered Shares, the Offeree Shareholder shall be deemed to have provided an
Offeree Notice on the last day on which an Offeree Notice may be provided
specifying no interest in acquiring any of the Offered Shares.
3.4 TRANSFER BY OFFERING SHAREHOLDER. Unless an Offeree Notice
specifying a desire to purchase all of the Offered Shares is timely received,
then, subject to Section 3.6 below, the Offering Shareholder shall be permitted,
for a period of thirty (30) days from receipt of the Offeree Notice, to make a
Transfer of all such Offered Shares to the Proposed Transferee on the terms and
conditions set forth in the Offeror Notice. If the Offering Shareholder does not
make such Transfer of the Offered Shares within such thirty (30) day period,
then any subsequent proposed Transfer of the Offered Shares shall again be
subject to all of the terms and provisions of this Section 3.
3.5 ACQUISITION AND TRANSFER. The closing of any acquisition
of Offered Shares by any Shareholder under this Agreement shall take place,
notwithstanding any contrary provisions in an Offeror's Notice, within thirty
(30) days from receipt of the Offeree Notice, unless another date is mutually
agreed upon by the parties participating in the closing. At the closing of any
Transfer
-4-
<PAGE>
of Offered Shares under this Section 3.5, the Offering Shareholder shall deliver
to the Offeree Shareholder, a certificate or certificates representing the
Offered Shares being acquired, duly endorsed, or accompanied by assignments
separate from certificate, and in proper form and order for transfer, against
receipt of the consideration, and the Offeree Shareholder shall take all
actions, including, without limitation, the filing of reports with any
governmental authority, and execute and deliver to the Offering Shareholder all
instruments and documents, as may be necessary or desirable to consummate the
acquisition and Transfer of the Offered Shares in compliance with all applicable
laws and regulations.
3.6 OBLIGATIONS OF TRANSFEREES. Each transferee and each
subsequent transferee of any shares of Stock, or of any interest in such shares
of Stock, shall hold such shares of Stock or interest therein subject to all of
the provisions of this Agreement, and such transferee shall, to evidence such
transferee's intention and agreement to assume all of the obligations of the
transferor under this Agreement and to be bound by all of the provisions of this
Agreement, execute the original or a counterpart of this Agreement upon
acquisition of such shares of Stock or any interest therein and deliver the
original or a counterpart of this Agreement to the Company.
3.7 TRANSFERS TO AFFILIATES. The provisions of this Section 3
(other than Section 3.6) shall not apply to any Transfer of shares of Stock by a
Shareholder to any corporation which directly or indirectly controls, is
controlled by or is under common control with such Shareholder, where such
control is exercised through ownership of more than fifty percent (50%) of the
relevant voting power.
3.8 OBLIGATIONS OF COMPANY. The Company shall not be required
(a) to transfer on its books any shares of Stock that have been sold or
otherwise transferred in violation of any of the provisions of this Agreement,
or (b) to treat any purported transferee of such shares of Stock as the owner
thereof or to accord to such purported transferee the right to vote such shares
of Stock as the holder thereof or to receive dividends thereon.
4. REPRESENTATIONS AND WARRANTIES. Each Shareholder represents and
warrants to the other Shareholder that (a) such Shareholder has taken all
requisite corporate action to authorize and approve the execution, delivery and
performance of this Agreement by such Shareholder, (b) this Agreement has been
duly executed and delivered by such Shareholder, and constitutes the legal,
valid and binding obligations of such Shareholder, enforceable against such
Shareholder in accordance with its terms, and (c) the execution, delivery and
performance of this Agreement by such Shareholder will not (i) violate any
provision of the charter documents of such Shareholder, (ii) violate, conflict
with or result in (or with notice or lapse of time or both result in) a breach
of or default under any term or provision of any contract or agreement to which
such Shareholder is a party or by which such Shareholder or any of its assets or
properties is or may be bound, or (iii) violate any order, judgment, injunction,
award or decree of any court or arbitration body, or any governmental,
administrative or regulatory authority, by which such Shareholder or any of its
assets or properties is or may be bound.
-5-
<PAGE>
5. TERMINATION. This Agreement shall terminate upon the occurrence of
any of the following events:
(a) the voluntary written agreement of all of the
Shareholders (or, as applicable, their successors in interest) to terminate this
Agreement;
(b) the dissolution, bankruptcy or insolvency of the
Company;
(c) the sale of all or substantially all of the Company's
assets other than in the ordinary course of business;
(d) the acquisition of the Company by another entity by
means of merger or consolidation resulting in the exchange of any Stock for
securities issued, or caused to be issued, by the acquiring entity;
(e) termination pursuant to the applicable provisions of
the Joint Venture Agreement; or
(f) at such time as only one Shareholder remains.
6. MISCELLANEOUS.
6.1 EFFECTIVE DATE. This Agreement shall be effective as of
the date hereof.
6.2 NOTICES. Any notice, request, demand, approval or consent
required or permitted under this Agreement shall be in writing and shall be
effective upon actual receipt when delivered by (a) registered mail, postage
prepaid, return receipt requested, (b) personal delivery, (c) an overnight
courier of recognized reputation (such as DHL or Federal Express), or (d)
transmission by facsimile (with confirmation by mail), in each case addressed as
follows:
If to Lycos: Lycos, Inc.
400-2 Totten Pond Road
Waltham, MA 02154
Attention: General Counsel
Telephone: (781) 370-2700
Facsimile: (781) 370-2600
With a copy to: Coudert Brothers
1055 West 7th Street, 20th Floor
Los Angeles, CA 90017
Attention: Richard G. Wallace
Telephone: (213) 688-9088
Facsimile: (213) 689-4467
-6-
<PAGE>
If to Mirae: Mirae Corporation
#1309, Korea Stock Exchange, Annex Bldg.,
33, Yoidodong, Youngdungpo-gu
Seoul, Korea 150-010
Attention: Kyung Dal Cho
Telephone: 82-2-783-0059
Facsimile: 82-2-783-0057
Either party may change its address or facsimile number for notice purposes by
notice given to the other party in accordance with this Section 6.2.
6.3 ASSIGNMENT. No party's rights, duties or responsibilities
under this Agreement may be assigned, delegated or otherwise transferred in any
manner, without the prior written consent of the other parties, except that no
such consent shall be required in connection with the assignment, delegation or
other transfer of any such rights, duties or responsibilities by a party to any
affiliate which directly or indirectly controls, is controlled by or is under
common control with such party, where such control is by more than 50% of the
relevant voting power.
6.4 ENTIRE AGREEMENT. This Agreement constitutes the entire
contract between the parties with respect to the subject matter covered by this
Agreement. This Agreement supersedes all previous representations, arrangements,
agreements and understandings, if any, by and among the parties with respect to
the subject matter covered by this Agreement. This Agreement may not be amended,
changed or modified except by a writing duly executed by the parties hereto.
6.5 SEVERABILITY. If any provision of this Agreement is held
by a court of competent jurisdiction to be unenforceable, invalid or void in any
respect, no other provision of this Agreement shall be affected thereby, all
other provisions of this Agreement shall nevertheless be carried into effect and
the parties shall amend this Agreement to modify the unenforceable, invalid or
void provision to give effect to the intentions of the parties to the extent
possible in a manner which is valid and enforceable.
6.6 SPECIFIC PERFORMANCE. Each party hereto may obtain
specific performance to enforce its rights hereunder and each party acknowledges
that failure to fulfill such party's obligation to the other parties hereto
would result in irreparable harm.
6.7 REMEDIES AND WAIVERS. All rights and remedies of the
parties are separate and cumulative, and no one of them, whether exercised or
not, shall be deemed to be to the exclusion of or to limit or prejudice any
other rights or remedies which the parties may have. The parties shall not be
deemed to waive any of their rights or remedies under this Agreement, unless
such waiver is in writing and signed by the party to be bound. No delay or
omission on the part of either party in exercising any right or remedy shall
operate as a waiver of such right or remedy or any other right or remedy. A
waiver on any one occasion shall not be construed as a bar to or waiver of any
right or remedy on any future occasion.
-7-
<PAGE>
6.8 ARBITRATION. In the event any dispute arises among the
parties, or any of them, which cannot be amicably resolved, such dispute shall
be submitted to the International Chamber of Commerce for binding arbitration in
accordance with the commercial arbitration rules of the International Chamber of
Commerce as then in effect. The arbitration shall be conducted in the English
language, and shall be held in London, England. Any arbitration award rendered
in any such arbitration proceeding may be entered in and enforced by any court
of competent jurisdiction. Nothing contained in this Section 6.8 shall prevent
or be construed to prevent either party from seeking a temporary restraining
order or a preliminary or permanent injunction or any other form of interim,
provisional or equitable relief in any court of competent jurisdiction.
6.9 GOVERNING LAW AND CONSENT TO JURISDICTION. This Agreement
shall be governed by, and interpreted in accordance with, the laws (other than
that body of law relating to conflicts of law) of the Republic of Korea. Mirae
hereby consents to the non-exclusive jurisdiction of the federal and state
courts located in Massachusetts, United States of America, and waives all
objections to the laying of venue in Massachusetts, including without limitation
any objection based on inconvenient forum. Mirae further consents to the service
of process by mail or by any other means permitted by Massachusetts law.
6.10 ATTORNEYS' FEES. In the event any action or proceeding is
initiated for any breach of or default in any of the terms or conditions of this
Agreement, then the party or parties in whose favor judgment shall be entered or
an arbitration award shall be made, shall be entitled to have and recover from
the other parties all costs and expenses (including attorneys' fees) incurred in
such action or proceeding and any appeal therefrom.
6.11 HEADINGS. The headings contained in this Agreement are
for convenience only and are not a part of this Agreement, and do not in any way
interpret, limit or amplify the scope, extent or intent of this Agreement, or
any of the provisions of this Agreement.
6.12 COUNTERPARTS AND FACSIMILE. This Agreement may be
executed in counterparts, each of which shall constitute an original, but all of
which together shall constitute one and the same agreement. Transmission of
facsimile copies of signed original signature pages of this Agreement shall have
the same effect as delivery of the signed originals.
6.13 TRANSLATION. For the convenience of the parties, one or
more Korean translations of this Agreement may be prepared. Notwithstanding the
preparation or existence of any such Korean translations, the English language
version of this Agreement shall be controlling.
6.14 THIRD PARTY BENEFICIARY. This Agreement is not intended
to and does not confer any rights on any third party, and no third party shall
be a third party beneficiary under or in respect of this Agreement.
-8-
<PAGE>
6.15 BINDING EFFECT. Subject to Section 6.3, this Agreement
shall be binding upon and shall inure to the benefit of the parties and their
respective successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LYCOS, INC.,
a corporation organized under the laws of
Delaware, USA
By:
-----------------------------------------
Its:
----------------------------------------
MIRAE CORPORATION,
a CHUSIK HOESA organized under the laws of
the Republic of Korea
By:
-----------------------------------------
Its:
----------------------------------------
-9-
<PAGE>
EXHIBIT D
[***]
*** A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
EXHIBIT E
ADVERTISING RATES AND TERMS
The advertising rates and terms are to be agreed upon by Lycos and Mirae
Corp. and will be attached to this Exhibit E.
<PAGE>
Exhibit 10.29
[LOGO]
NETSCAPE
Netscape Agreement #
6050
____________________
U.S. NET SEARCH PREMIER PROVIDER AGREEMENT
Netscape Communications Corporation, 502 E. Middlefield, Mountain View,
California 94043, a Delaware corporation, ("Netscape"), and Lycos, Inc., 400-2
Totten Pond Road, Waltham, MA 02451, a Delaware corporation ("Premier
Provider"), hereby enter into the following agreement ("Agreement"), effective
as of the date of the last signature on the Agreement ("Effective Date"):
1. Premier Provider. Premier Provider will be one of the premier search and
directory services (the "Premier Providers") for the U.S. English-language HTML
page accessible via the Internet at http://home.netscape.com/escapes/search (or
such other URL as Netscape may designate from time to time in writing) (the
"Page") that provides Internet search and directory services on the collection
of HTML pages maintained by Netscape, with a homepage of
http://home.netscape.com or at such other URL(s) as Netscape may designate)
("Netscape's Web Site"). The Page may also be accessed by Internet users of the
Netscape-distributed English-language version of its internet browsing software
(the "Browser") by clicking on the Net Search button, by clicking on bookmarks
pre-loaded in certain versions of the Browser toolbar as described herein, or by
such other methods as Netscape may specify from time to time. Netscape reserves
the right to determine additional means through which users may access the Page,
including, but not limited to, the use of mirror sites and pointers based on a
user's IP address.
2. Premier Period. Netscape will maintain the Premier Graphic, as defined below,
on the Page in accordance with Section 3 from July 1, 1999 through June 30, 2000
(the "Premier Period").
3. Services Provided by Netscape.
3.1. Premier Graphic. Premier Provider will supply Netscape with files in
HTML, GIF, or such other format as Netscape may designate from time to time (the
"Premier Graphic"). Netscape will place these files on the Page during the
Premier Period. Premier Provider will retain all rights to the Premier Graphic,
but hereby grants Netscape a royalty-free worldwide license, without charge, to
use, display, perform, reproduce, modify and distribute the Premier Graphic as
necessary to fulfill the intention of this Agreement The Premier
<PAGE>
Graphic will contain a functional search field and, if available, directory
tree. The Premier Graphic will conform to the specifications of Exhibit A, which
also describes the placement of the Premier Graphic on the Page.
3.2. Stack. Netscape will produce the Page as set forth on Exhibit A. The
Premier Graphics on the Page will appear to be overlapped in a stack (the
"Stack"). The Premier Graphic will be accessible by an end user by clicking on a
tab for the Premier Provider's service. When an end user clicks on hypertext
links ("Premier Links") placed by Premier Provider on the Premier Graphic, the
end user's Browser will access pages ("Premier URLs") on the collection of
English-language HTML documents Premier Provider maintains as its primary web
site, with a home page of http://www.lycos.com or such other address as Premier
Provider may provide in writing ("Premier Provider's Web Site"). Netscape
reserves the right to use, in its sole discretion, those portions of the Page
not used by the Stack. The Premier Graphic may be served on the top of the Stack
to an end user by the following means: (i) random rotation, as described in
Section 3.3; (ii) end user default selection, as described in Section 3.4; or
(iii) an end user selection of the Premier Graphic tab in the Stack.
3.3. Rotation. Netscape will rotate the display of the Premier Graphics to
be displayed on the top of the Stack when each 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, the Premier Graphic will appear on the
top of the Stack of each Page fifteen percent ("Rotation Percentage") of the
instances in which the Page is served up to end users who have not selected a
default Premier Graphic when accessing the Page, prior to any selection of a
particular Premier Graphic tab; provided that, if (i) Premier Provider acquires
Wired Digital Inc. ("Wired") and Wired's "HotBot" search service and (ii) the
U.S. Net Search Premier Provider Agreement between Wired and Netscape, dated as
of May , 1999 (the "HotBot Agreement") (pursuant to which the Premier Graphic
for the HotBot service is entitled to appear on the top of the Stack of each
Page one percent of the instances in which the Page is served up to end users
who have not selected a default Premier Graphic when accessing the Page (the
"HotBot Rotation Percentage")) is assigned to Premier Provider, then Premier
Provider, at its discretion on a monthly basis during the term of this
Agreement, may notify Netscape in writing that Premier Provider wishes to vary
the relative distribution of the rotation percentages between the Rotation
Percentage and the HotBot Rotation Percentage for the following month (e.g., 12%
for the Lycos search service and 4% for the HotBot search service, or 10% Lycos
and 6% HotBot, etc.), further provided that in no event will the sum of such
revised Rotation Percentage and the HotBot Rotation Percentage exceed sixteen
percent, and any such variation by Premier Provider of the relative distribution
of such rotation percentages shall be made in accordance with
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Netscape's normal Page update schedule as set forth in Exhibit A. Premier
Provider acknowledges that the Rotation Percentage is an annualized target, and
that Netscape may adjust the display of the Premier Graphic to occur at a rate
above or below the Rotation Percentage at any particular time, subject to
Netscape's obligations to deliver the Rotation Percentage averaged over the
course of the Premier Period.
3.4. End User Default. An end user may select which of the Premier
Graphics he or she would prefer to have displayed on the top of the Stack upon
the calling up of the Page. If an end user selects a default Premier Graphic,
the Premier Graphic selected by that end user will be displayed on top of the
Stack each time he or she accesses the Page until he or she eliminates or alters
the default selection.
3.5. Page Specifications. Exhibit A sets forth the specifications of the
Premier Graphic, the Stack, and their placement on the Page. Netscape may, upon
not less than thirty business days advance written notice to Premier Provider,
(i) change the location of the Stack or the Premier Graphics on the Page, (ii)
redesign or reconfigure the Stack, the Page, Netscape's Web Site, and/or the
manner in which an end user interacts with any of the pages of Netscape's Web
Site, or (iii) otherwise revise Exhibit A, subject to Netscape's obligation to
deliver the Rotation Percentage averaged over the course of the Premier Period,
and provided that the display of Premier Providers' graphics will remain the
largest and most prominent category of search graphics on the Page and that the
Premier Graphic will remain equal in size to graphics of other Premier
Providers. In the event Netscape revises Exhibit A, Premier Provider will supply
Netscape with a Premier Graphic that conforms to the revised specifications
within thirty days after it receives notice of the revision and no fewer than
five business days prior to the date Netscape specifies for the posting of the
revised Premier Graphic or Stack. If Netscape has not received such revised and
conforming materials in a timely fashion or if the materials supplied by Premier
Provider do not function in accordance with the specifications set by Netscape,
then Netscape will 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.
3.6. Update of Premier Graphic. Premier Provider may elect to revise or
update its Premier Graphic on a weekly basis in conjunction with Netscape's Page
production schedule, provided that the new version of the Premier Graphic
complies with the specifications of Exhibit A.
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4. Additional Premier Provider Benefits.
4.1. Pre-loaded Bookmark. During the Premier Period, Netscape will include
a graphic HTML link ("Bookmark") for the Premier Provider to the Page in the
bookmark section of the U.S. English-language version of 4.x versions of the
Browser. End users may reconfigure, customize, or delete the Bookmark. During
the Premier Period, if Netscape offers to include a graphic HTML link for any of
the other Premier Providers to the Page in the bookmark section of the U.S.
English-language version of 5.x versions of the Browser, Netscape will also
offer to include the Bookmark for Premier Provider in such version of the
Browser.
4.2. Limit on Premier Providers. Netscape will limit the number of
companies whose tabs appear on the Stack at any one time to a total of no more
than nine entities.
5. Exposures. An exposure ("Exposure") occurs upon: (i) the serving up to an end
user of the Premier Graphic on the top of a Stack as described in sections
3.2, 3.3, and 3.4; (ii) an end user clicking on a link programmed by Netscape
directly to Premier Provider's search functionality on Premier Provider's Web
Site (excluding Premier Links) or executing a search query directed to Premier
Provider's Web Site from any location on Netscape's Web Site with search
functionality other than the Page; (iii) the Page when accessed by a click from
the Bookmark; (iv) a link through a disabling device only if and to the extent
permitted under Section 6.3; or (v) any other Premier Provider content as a
consequence of an end user accessing a promotional page on Netscape's Web Site
if the parties agree that such promotional page traffic will constitute an
Exposure.
6. Premier Provider Obligations. In addition to the other obligations set forth
herein, Premier Provider agrees to the following provisions.
6.1. Netscape Now. Premier Provider will display the then-current version
of the "Netscape Now" button as provided by Netscape or the equivalent successor
button or the words "Download Netscape Now" (or successor text reasonably
designated by Netscape) ("the Netscape Now button/text") prominently on (i) the
home page of Premier Provider's Web Site or (ii) on all pages linked to a
Premier URL; provided that Premier Provider shall not be required to display the
Netscape Now button/text on pages of (a) any secondary web site of Premier
Provider that Premier Provider is required to construct to satisfy Premier
Provider's obligations under any unaffiliated third party contract, or (b) any
unaffiliated third party's web site. When an end user clicks on the Netscape Now
button/text, the end user's Internet client software or online service will
access the applicable HTML page located at a URL supplied
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by Netscape. On any page on which it is displayed, the Netscape Now button/text
will be displayed in the same format (i.e., button, text, or graphic) and equal
to or greater in size and prominence than the button, text, or graphic for any
other third party Internet client software, online service, software provider,
"push" content delivery system, or other online service. Premier Provider will
use its best efforts to remedy promptly any misplacement or malfunctioning of
the Netscape Now button/text on its pages. Netscape will fully cooperate with
Premier Provider to remedy any such misplacement or malfunctioning. Premier
Provider will not be liable for any such misplacement or malfunctioning outside
its reasonable control. Netscape hereby grants Premier Provider a non-exclusive,
non-transferable, non-assignable, non-sublicensable license to use, reproduce,
and display the Netscape Now button/text in connection with fulfilling the
foregoing obligation. Premier Provider's use of the Netscape Now button/text
will 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. Netscape may immediately suspend Premier Provider's
use of the Netscape Now button/text if Netscape determines that such use
violates quality standards. The use of the Netscape Now button/text in
connection with this Agreement will not create any right to the Netscape Now
button/text or associated trademarks and that all goodwill associated with the
Netscape Now button/text 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/text text. Premier Provider further agrees
that it will not use the Netscape Now button/text in a manner that could mislead
end users or reflect adversely on Netscape or its products. Premier Provider's
compliance with the terms and conditions of this section are a material
obligation of the Agreement.
6.2. Mailto Link. Premier Provider will include on the page served to an
end user in conjunction with the results of the end user's search query on
Premier Provider's service a "mailto" link to its support services that users of
Premier Provider's service can use to direct questions or help requests to
Premier Provider. Netscape will also include such a "mailto" link to its support
services on the Page. Premier Provider will use reasonable efforts to reply
promptly, but in any event within one week, to any such question or help
request.
6.3. No Disabling. Without Netscape's prior consent, Premier Provider will
not provide or implement any means or functionality that would (i) alter,
modify, or enable end users to alter or modify, the Browser standard user
interface or configuration, (ii) disable any functionality of the Browser or any
other Internet browser software, or (iii) modify the functioning pages served
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from Netscape's Web Site. Premier Provider's compliance with the terms and
conditions of this section are considered a material obligation of the
Agreement.
6.4. Use of Premier Graphic Space. Premier Provider will maintain the
Premier Graphic for the purpose of promoting Premier Provider's Internet search
and directory services, any associated online services provided under Premier
Provider's brand and/or any associated content provided by Premier Provider.
Premier Provider will not use the space allotted the Premier Graphic, or links
therein, for the benefit of a third party without first obtaining Netscape's
prior written consent. The Premier Graphic will not compare Premier Provider's
services with other services or promote any internet browser or internet access
service provider. Netscape will require all Premier Providers to comply with
materially the same restrictions on the use of their respective Premier
Graphics.
6.6. Premier Provider Website Operating Standards. Premier Provider will
comply with the website operating standards as forth in Exhibit C.
7. Payment to Netscape.
7.1 Payment [***]
*** A CONFIDENTIAL PORTION OF MATERIAL HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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7.2. Timing. Premier Provider will pay the Participation Fees upon
execution of this Agreement. All Traffic Payments will be payable on a quarterly
basis (with quarters ending September 30, 1999; December 31, 1999; March 31,
2000; and June 30, 2000), based on total Exposures delivered for that quarter
multiplied by the CPM Rate.
7.3. Payment Terms. All amounts payable to Netscape hereunder will be paid
in U.S. dollars within thirty days after receipt by Premier Provider of the
corresponding invoice submitted by Netscape. Any part of the Payment not paid to
Netscape within this period will bear interest at the lesser of one percent per
month or the maximum amount allowed by law.
7.4. Taxes. Premier Provider will pay all amounts in this Agreement in
U.S. dollars, which as stated include only amounts, without reduction for any
related U.S. or foreign local, state, national taxes, duties, leaves, or
assessments, however described or calculated (excluding taxes based on
Netscape's net income). Participant will make, and indemnify Netscape against,
any such payments and promptly give Netscape corresponding receipts. Netscape
and Participant will cooperate in minimizing any applicable tax and in obtaining
any exemption from or reduced rate of tax available under any applicable law or
tax treaty.
8. Usage Reports.
8.1. Provision of Usage Reports. Netscape and Premier Provider will each
provide the other with usage reports ("Usage Reports") containing the
information and in the format set forth in Exhibit B hereto. The Usage Reports
wit cover each one-month time period of the Premier Period, and the parties will
use reasonable commercial efforts to deliver the Usage Reports within fifteen
days following the end of each month. If, due to technical problems, a party is
unable to provide any part of a Usage Report in any given month, the following
data will be used for each day for which data is missing: ninety percent of the
usage figures reported for the same day of the week most recently reported
(e.g., if data for the day seven days prior is available, ninety percent of the
usage figures for such day; if not available, the data for the day fourteen days
prior, and so on).
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 will be liable
for any
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claims related to the usage reports other than Premier Provider's obligation
under Section 7.
8.3. Audit of Records. Each party (the "Auditing Party") shall have the
right, once during the term of this Agreement and once during the twelve month
period after termination of this Agreement, to have a mutually acceptable,
independent third party inspect the relevant books and records of the other
party ("Audited Party") in order to verify the accuracy of the Audited Party's
Usage Reports hereunder. The auditor may not be paid on a contingency or other
basis related to the outcome of the inspection, and shall execute a
confidentiality agreement with the Audited Party in a form mutually acceptable
to the parties that prohibits the auditor from disclosing information obtained
in connection with the inspection other than disclosure to the Auditing Party of
any inaccuracy in any Usage Report. The Auditing Party shall maintain in
confidence any information obtained in connection with the inspection. Any such
inspection shall be conducted during the Audited Party's regular business hours,
in such a manner as not to interfere with the Audited Party's normal business
activities, and shall be at the Auditing Party's expense; provided, however,
that if such inspection reveals that the Audited Party's Usage Reports are
inaccurate by more than ten percent (10%) for the period inspected, the Audited
Party shall reimburse the Auditing Party for the reasonable fees charged by the
auditor. Prompt adjustment shall be made to correct for any inaccuracies
disclosed by such inspection.
9. Term & Termination.
9.1. Methods of Termination. This Agreement will remain in effect from the
Effective Date through the end of the Premier Period. Either party may terminate
this Agreement before the end of the Premier Period if the other party
materially breaches its obligations hereunder and such breach remains uncured
for fifteen days following written notice to the breaching party of the breach
or as otherwise provided in Section 10. In addition, Premier Provider may
terminate this Agreement for convenience to the extent permitted in accordance
with Section 7.1.
9.2. Effect of Termination/Survival of Obligations. Except as specifically
provided otherwise in this Agreement, upon the expiration or termination of the
Agreement, all rights and obligations will cease (other than Premier Provider's
payment obligations hereunder to the extent accrued on or prior to the
termination, which will become due upon termination). The following provisions
will survive the expiration or termination of this Agreement for any reason:
Section 7.1 (Payment), Section 7.4 (Taxes), Section 8.2 (No Liability), Section
9.2 (Effect of Termination), Section 9.3 (No Compensation),
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Section 11 (Responsibility), Section 12 (Limitation of Liability), and Section
16 (General).
9.3. No Compensation. Premier Provider will not be entitled to and hereby
waives its rights to any compensation, damages, or payments in respect to
goodwill that has been established or for any damages on account of prospective
profits or anticipated sales, and Premier Provider will not be entitled to any
reimbursement for training, advertising, market development, investments,
leases, or other costs expended before the expiration or termination of this
Agreement, regardless of the grounds for termination of this Agreement.
10. Inappropriate Content. Netscape will have the right to review the contents
and format of the Premier Graphic, the Bookmark, and Premier Provider's Web
Site. If Netscape, in its reasonable discretion, at any time determines that the
Premier Graphic, Bookmark, or Premier Provider's Web Site contain any material
that Netscape deems inappropriate for any reason or that fails to comply with
Exhibit A, Netscape will inform Premier Provider of the reason Netscape has made
such determination and may refuse to include the Premier Graphic in the Page.
Netscape may terminate this Agreement if Premier Provider has not revised to
Netscape's reasonable satisfaction material to which Netscape has objected
within five business days of written notice from Netscape.
11. Responsibility / Indemnity.
11.1. Responsibility of Premier Provider. As between Netscape and Premier
Provider, Premier Provider is solely responsible for any liability arising out
of or relating to the "Services", defined as: (i) the Premier Graphic, the
Bookmark, Premier Provider's Web Site, the Premier URLs, and/or the Premier
Links, (ii) any material to which users can link through any of the foregoing,
and/or (iii) any use of Premier Provider's search and directory service pursuant
to this Agreement. Premier Provider represents and warrants that it holds the
necessary rights to permit the use of the Services by Netscape for the purpose
of this Agreement; and that the permitted use, reproduction, distribution, or
transmission of the Services will not violate any laws, government regulations,
or rights of 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, or invasion of privacy or right of publicity.
11.2. Indemnity. Either party will defend and indemnify the other party
and its officers, directors, agents, affiliates, distributors, franchisees, and
employees from any third-party claims ("Liabilities"), resulting from
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the indemnifying party's material breach of any duty, representation, or
warranty of this Agreement. If a party entitled to indemnification hereunder
(the "Indemnified Party") learns of any potentially indemnifiable claim or other
proceeding against it (an "Action"), the Indemnified Party will give the other
party (the "Indemnifying Party") prompt written notice. That notice will
describe the basis for indemnification and include copies of all relevant
pleadings, demands, and other papers related to the Action that the Indemnified
Party possesses. The Indemnifying Party will have ten days after delivery of
such notice to respond. If the Indemnifying Party elects to defend the Action or
does not respond within ten days, the Indemnifying Party will be obliged to
defend the Action, at its own expense, controlling the defense of the Action and
using counsel reasonably satisfactory to the Indemnified Party. The Indemnified
Party will cooperate, at the expense of the Indemnifying Party, in the defense
of the Action and have the right to participate, at its own expense, in that
defense. If the Indemnifying Party responds within the required ten days and
elects not to defend an Action, the Indemnified Party will be free, without
waiving its rights hereunder, to compromise or defend (and control the defense
of) such Action. In such case, the Indemnifying Party will cooperate, at its own
expense, with the Indemnified Party in defending against the Action and have the
right to participate, at its own expense, in the defense of the Action. In any
other case, any compromise or settlement of an Action will require the prior
written consent of both parties, which they will not unreasonably withhold or
delay.
12. Limitation of Liability / No Additional Warranties.
12.1. Limitation of Liability. Except as provided in Section 11.2, neither
party will be liable to the other for indirect, incidental, consequential,
special or exemplary damages (even if it knows of the possibility of such
damages) arising from this agreement, including, but not limited to, loss of
revenue, anticipated profits, or lost business. Except as provided in Section
11.2, neither party will be liable to the other for more than the aggregate
amount payable hereunder as of the date liability accrued.
12.2. No Additional Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, NEITHER PARTY MAKES, AND EACH PARTY HEREBY SPECIFICALLY DISCLAIMS,
ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED
WARRANTY OF MERCHANT ABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND IMPLIED
WARRANTIES ARISING FROM COURSE OF DEALING OR COURSE OF
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PERFORMANCE, WITHOUT LIMITING THE FOREGOING, NETSCAPE SPECIFICALLY DISCLAIMS ANY
WARRANTY REGARDING OVERALL TRAFFIC LEVELS, TRAFFIC PERFORMANCE, OR REVENUES TO
BE DERIVED UNDER THIS AGREEMENT.
13. Course of Dealing. In consideration of Premier Provider's participation in
the Premier Program, Premier Provider will not change the form or function of
Premier Provider's Web Site in a manner that directly results in a material
adverse effect to users of Netscape's Internet browser software as compared to
its performance at the time the Agreement was executed.
14. Alternative Dispute Resolution.
14.1. Negotiation. The parties will act in good faith and use commercially
reasonable efforts to promptly resolve any claim or dispute between them or any
of their subsidiaries, affiliates, successors and assigns related to this
Agreement ("Dispute"). If the pates cannot resolve a Dispute within ten days,
they will escalate it to the senior business representative of each party with
responsibility for the contractual relationship. If those representatives are
unable to resolve the Dispute during a ten-day period, they will consider
retaining a mediator to assist in discussions. Neither party will seek binding
outside resolution of the Dispute unless the parties have been unable to resolve
the Dispute through such negotiation.
14.2. Arbitration. Except for Disputes relating to issues of (i)
proprietary rights, including but not limited to intellectual property and
confidentiality, and (ii) any provision of this Agreement that expressly or
implicitly provides that the parties will mutually agree, any Dispute not
resolved by negotiation will be resolved by arbitration. Such arbitration will
be conducted by the American Arbitration Association ("AAA") in Washington, D.C.
(in the event that Premier Provider initiates the arbitration) or the county in
which Premier Provider maintains its principal place of business (in the event
that Netscape initiates the arbitration) and will be initiated and conducted in
accordance with the Commercial Arbitration Rules ("Commercial Rules") of the
AAA, including the AAA Supplementary Procedures for Large Complex Commercial
Disputes ("Complex Procedures"), as such rules will be in effect on the date of
delivery of a demand for arbitration, except to the extent that such rules are
inconsistent with the provisions set forth herein. Notwithstanding the
foregoing, the parties may agree not to apply the Complex Procedures to any
given Dispute. The Federal Arbitration Act, 9 U.S.C. Secs. 1-16, and not state
law, will govern the arbitrability of all
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Disputes. Either party will have the right to seek injunctive relief from any
court of competent jurisdiction pending the outcome of the arbitration.
14.3. Arbitration Process. The arbitration panel will consist of three
arbitrators. Each party will name an arbitrator within ten days after the
delivery of the Demand. The two arbitrators named by the parties may have prior
relationships with the naming party that in a judicial setting would be
considered a conflict of interest. The third arbitrator, selected by the first
two, will be a neutral Premier Provider, with no prior working relationship with
either party. If the two arbitrators are unable to select a third arbitrator
within ten days, a third neutral arbitrator will be appointed by the AAA from
the panel of commercial arbitrators of any of the AAA Large and Complex
Resolution Programs. If a vacancy in the arbitration panel occurs after the
hearings have commenced, the remaining arbitrator or arbitrators may not
continue with the hearing and determination of the controversy, unless the
parties agree otherwise.
14.4. Discovery. The arbitrators will allow such discovery as is
appropriate to the purposes of arbitration in accomplishing a fair, speedy and
cost-effective resolution of the Disputes. The arbitrators will refer to the
Federal Rules of Civil Procedure then in effect in setting the scope and timing
of discovery. The Federal Rules of Evidence will apply in toto. The arbitrators
may enter a default decision against any party who fails to participate in the
arbitration proceedings.
14.5. Arbitration Award / Confidentiality. The arbitrators will have the
authority to award compensatory damages and injunctive relief only. The arbiters
will accompany any award with written findings of fact and conclusions of law
relied upon in reaching the decision. The arbiters' award will be final,
binding, and non-appeallable, and judgment upon such award may be entered by any
court of competent jurisdiction. The parties will keep confidential the
existence, conduct and content of any arbitration, except as may be required by
law or by any governmental authority or for financial reporting purposes.
14.6. Costs and Fees. Each party will pay all costs associated with the
presentation of its own case. The parties will share equally the costs of the
arbitration. Notwithstanding the foregoing, the arbitrators may award and
allocate expenses and costs to the prevailing party as the interests of justice
may require.
15. [RESERVED]
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16. General.
16.1. Governing Law / Jurisdiction. This Agreement will be interpreted,
construed and enforced in all respects in accordance with the laws of the
Commonwealth of Virginia except for its conflicts of laws principles.
16.2. Entire Agreement. 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 will be valid unless in writing and signed by an
authorized representative of each party.
16.3. Assignment. Premier Provider may not assign any of its rights or
delegate any of its duties under this Agreement, or otherwise transfer this
Agreement (whether by merger, operation of law, or otherwise), without the prior
written consent of Netscape in its sole discretion. Any attempted assignment,
delegation or transfer in derogation hereof shall be null and void.
16.4. Notices. Any notice or other communication under this Agreement will
be given in writing and will be deemed to have been delivered: (i) on the
delivery date if delivered personally to the other party; (ii) one business day
after deposit with a commercial overnight carrier, with written verification of
receipt; or (iii) five business days after the mailing date if sent by U.S.
mail, return receipt requested, postage and charges prepaid, or any other means
of rapid mail delivery for which a receipt is available. In the case of
Netscape, such notice will be provided to both the Senior Vice President for
Business Affairs, America Online, Inc. (fax 703.265.1206) and the General
Counsel, Netscape Communications Corporation (fax 650.988.1132), each at the
address of Netscape set forth in the first paragraph of this Agreement. In the
case of Premier Provider, the notices will go to Premier Provider's General
Counsel, at the address for Premier Provider set forth in the first paragraph of
this Agreement.
16.5. Confidentiality. Each party acknowledges that either party may
disclose proprietary or confidential information or material ("Confidential
Information") to the other party during the course of this Agreement. All
Confidential Information will be so marked or designated at the time of
disclosure or within ten days thereafter. Confidential Information will not
include information or material made public by the disclosing party or developed
by, known to, or made known to the receiving party from an independent source
which is not subject to a duty to keep such information or material
confidential. The information contained in the Usage Reports provided
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by each party hereunder will be deemed the Confidential Information of the
disclosing party. Each party agrees that during the term of this Agreement and
for three years after it terminates, it will not disclose the other party's
Confidential Information, other than to its employees or agents who need to
access such Confidential Information to perform obligations under this
Agreement. Netscape will have the right to share information with America
Online, Inc., subject to the terms of this Section. Netscape may, in its
discretion, make public client software market share information contained in
the Usage Reports submitted by Premier Provider in a form aggregated with data
provided by other Premier Providers. Either party may disclose Confidential
Information without the consent of the other party where such disclosure is
required by law, regulation, or government or court order. In such event, the
disclosing party will provide at least five business days prior written notice
of such proposed disclosure to the other party. If any government authority
requires such disclosure, the disclosing party will: (i) redact mutually
agreed-upon portions of this Agreement to the fullest extent permitted by the
requiring body, and (ii) ask that such portions receive confidential treatment
to the fullest extent permitted by law. Upon the expiration or termination of
this Agreement, each party will promptly, return or destroy (at the option of
the party receiving the request) all of the other party's Confidential
Information.
16.6. 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.
16.7. Waiver. The failure of either party to insist upon strict
performance by the other party of any provision of this Agreement or to exercise
any right under this Agreement will not be construed its a waiver that party's
right to assert or rely upon any such provision or right in that or any other
instance.
16.8.Headings. The headings to the Sections and Subsections of this
Agreement are merely for convenience and do not affect the meaning of the
Agreement.
16.9. Independent Contractors. The parties are dealing with each other
hereunder as independent contractors. Nothing contained in this Agreement makes
either party the joint venturer, employee, or partner of the other party or
gives one party the authority to bind the other.
16.10. Severability. In the event any provision of this Agreement is held
to be unenforceable, such provision will be reformed only to the extent
necessary
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to make it enforceable, and the other provisions of this Agreement will remain
in fall force and effect.
16.11. Further Assurances. Each party will take such action (including,
but not limited to, the execution, acknowledgment, and delivery of documents) as
may reasonably be requested by the other party for the implementation or
continuing performance of this Agreement.
16.12. Remedies. Except where otherwise specified, the rights and remedies
granted to a Party under this Agreement are in addition to, not in lieu of, any
other rights or remedies it may have at law or equity.
16.13. Counterparts. This Agreement may be executed in two or more
Counterparts, each of which will be deemed an original, but all of which
together will constitute a single instrument. A facsimile of this Agreement,
including the signature pages hereto, will be deemed to be an original.
[THE FOLLOWING PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, the parties have caused their authorized representatives to
execute this Agreement:
Premier Provider: Netscape:
LYCOS, INC. NETSCAPE COMMUNICATIONS
CORPORATION
By: /s/ Jeffrey M. Snider By: /s/ Eric Keller
-------------------------------- -------------------------------------
Print Name: JEFFREY M. SNIDER Print Name: ERIC KELLER
------------------------ -----------------------------
Title: GENERAL COUNSEL Title: VICE PRESIDENT
----------------------------- ----------------------------------
Date: 6-7-99 Date: 6-10-99
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Attached Exhibits:
Exhibit A: Specifications of the Page / Site Sample Specifications
Exhibit B: Sample Formats of Usage Reports
Exhibit C: Premier Provider Website Operating Standards
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EXHIBIT A
Specifications of the Page / Site Sampler Specifications
The accompanying screen shot displays the current overall look of the Page.
As of July 1, 1999, Net Search will support the highest iterations of Netscape
Navigator versions 2.x, 3.x, 4.x for both Macintosh and PCs. (See Net Search
Sampler Test Specifications, External for complete list.) Other browsers,
including early versions of Microsoft Explorer, will be routed to a simple
version of the Page that encourages users to download a more current version of
Netscape's browser. The specifications are as follows:
Page Update Schedule: Changes to Netscape Net Search will be made once a week,
typically late Thursday evenings (exceptions to this schedule will be made for
conflicting holidays). Changes received by the end of day Thursday will go live
the following Thursday. Changes received on Friday will be considered part of
the following change cycle, and will not be implemented until the second
Thursday following.
The Site Sampler. The site sampler will consist of one graphic logo, a text
entry field, a search button, and directory listings. All samplers will have a
uniform gray background, #CCCCCC. The size of the complete sampler will be
480 x 180 pixels. Netscape will place each element in the same position on each
sampler. There are three deliverables the Premier Providers can alter: The
graphic logo, the copy for a search button, and directory listings.
The Graphic
o The graphic should be a logo less than or equal to 50 pixels tall and 200
pixels wide.
o Logos should be dithered to a gray background.
o The file size may not be any larger than 3K. Graphics any larger than 3K
will be returned.
o Likewise, animated GIFs will not be accepted.
o To minimize dithering and ensure that the users across all platforms see
what you expect them to see, we recommend use of the Netscape Color Cube.
The Search Button Copy: A standard 20-character text entry field will be
provided. Please submit your choice of copy for the search button, which will be
positioned next to it. If no copy is specified, the word "Search" will be used.
The copy must be 10 characters (including punctuation) or less.
The Directory Listings:
o All submissions should consist only of text links only. No graphics of any
kind (other than the logo) will appear within the sampler, and font size
will remain uniform throughout all samplers. The table will support
exactly 24 links within exactly 4 columns. The two leftmost columns will
contain exactly four links, the two rightmost columns will contain exactly
eight links. For changes to the sampler listing, simply send the link text
and URL to [email protected] (please make sure to indicate link order).
o All links should be created such that the back button in the user's
browser takes them back to the Page. Redirects that keep the back button
from working properly will not be accepted.
o Links that wrap on any platform will not be accepted. Each link can
contain up to 15 characters without wrapping. Netscape will provide
"wrap-checking services," if needed, for companies that do not have the
specified platform configuration.
o FONT SIZE may be set to -1, if desired. BOLD and ITALIC tags may also be
used. Please check your table carefully to mike sure it doesn't expand
when you use these tags. If you have 6 links in a column, you will
probably have to remove one if you're using the BOLD tag.
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Compatibility: All sites linked to from anywhere within the search page,
including those links found within samplers, MUST support all browsers supported
by the search page (Navigator 2, 3, 4; IE 3, 4, 5; see above for more
information). If a link points to a site that does not support a particular
browser, a one-week grace period will be allowed to implement a fix. If the site
does not support a particular browser after the grace period, the link will be
removed until a fix is implemented. Once a fix is implemented, the link will be
reinstated according to the search page change schedule detailed above.
o Compatibility issues typically arise around Netscape Navigator 2.x
browsers. Experience has shown that two common errors cause most of the
issues:
1. Navigator 2.x requires HEIGHT and WIDTH attributes within image
tags, and,
2. Navigator 2.x is very sensitive to nesting errors.
o Eliminating nesting errors and adding the appropriate image attributes
will mitigate most browser incompatibility issues. Please test all sites
linked to from Net Search with Navigator 2.x, available for download from
Netscape's product archive at
http://home.netscape.com/download/archive/index.html.
Delivery: Content providers should email logos and Links to Netscape at
[email protected]. If you are providing multiple files, please place them in
a folder labeled with the content provider's name.
PICS: We request that all Premier providers label their sites with PICS labels
if they haven't already done so
PICS, the "Platform for Internet Content Selection" is an Internet rating
standard designed to help parents, teachers and employers screen out material
they feel is inappropriate for children or employees. PICS gives Web publishers
a standard way to describe the content of Web sites or Web pages; it gives Web
browsers a standard way to read the description.
Netscape will be supporting PICS in the 4.06. release of Communicator with its
NetWatch feature. As a Netscape search participant, labeling your site is
important if NetWatch is to launch successfully. As an Internet content
provider, labeling your site is important if you want users who may have enabled
a variety screening products to see the pages you have provided there.
It should take no more than 30 minutes to procure and place the PICS labels you
will need for the home page of your site. In most cases, you will spend no time
maintaining these labels. The steps to follow are detailed below.
1. Register Your Site with RSACi and SafeSurf.
NetWatch currently supports two PICS labeling schemes: one from the
Recreational Software Advisory Council on the Internet and another from
SafeSurf.
Register with RSACi at http://www.rsac.org/homepage.asp
Register with SafeSurf at http://www.safesurf.com/classify/index.html
You typically will want to register the "entire site" with RSACi and "an
entire directory" with SafeSurf. All ratings should be set to the lowest,
or Least objectionable, level unless
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there is a need to do otherwise. The process for rating multiple areas of
a single site and the ratings themselves are described in more detail at
both the RSACi and SafeSurf sites.
When specifying your e-mail address, you will want to use or set up a
separate account or an alias, and will want to make sure you have a filter
on any alias. You most likely will be getting a lot of spam. RSACi no
longer includes the e-mail address in its labels; SafeSurf should be
making the e-mail address optional in the near future.
If your home page goes by multiple names -- for example, home.netscape.com
and www.netscape.com -- you will have to request an additional set of
labels.
Note that these Labels will be e-mailed to the address you specify when
registering.
2. Place the Labels After the [HEAD] Tag Exactly as You Receive Them.
As mentioned above, these labels will come to you at the e-mail address
you specify when registering.
Copy the labels exactly as they appear in the message, and paste them
immediately after the [HEAD] tag in the source code of your home page.
Note that you only should copy the label from an HTML-based mail system.
If you copy the label from a UNIX-based mail system, you most likely will
break it.
3. Update Your Registration or Request New Labels When Things Change
Maintenance of these labels should not be required. However, if you want
to update your registration (RSACi) or request new labels (RSACi and
SafeSurf), just begin the process again at Step 1.
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EXHIBIT B: Sample Formats of Usage Reports
Sample report provided by Premier Provider to Netscape each month:
Netscape Browsers MSIE Browsers AOL Browsers
----------------- ------------- ------------
Netscape % of total MSIE % of total AOL % of total
browsers = 50% browsers = 25% browsers = 25%
Breakdown of Netscape Breakdown of Breakdown of
Browsers: MSIE Browsers: AOL Browsers:
4.x=50% 4.x=50% 4.x=50%
3.x=25% 3.x=25% 3.x=25%
2.x=20% 2.x=20% 2.x=20%
1.x=5% 1.x=5% 1.x=5%
Sample report provided by Netscape to Premier Provider each month:
User Other
Random Default Selected Exposures Total
Exposures Exposures Exposures (Home Page, etc.) Exposures
June 1 1M 200K 400K 500K 2.1M
June 2 1.1M 200K 500K 500K 2.3M
June 3 1.2M 200K 600K 500K 2.5M
...
June 31 1.8M 300K 8OOK 500K 2.4M
Total Premier Provider
Exposures
Aggregate Exposures for
all Premier Providers
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EXHIBIT C: Premier Provider Website Operating Standards
Premier Provider Website. Premier Provider will: (1) be responsible for all
communications, hosting, and connectivity costs and expenses associated with its
Website; (2) provide all hardware, software, telecommunications lines, and other
infrastructure necessary to meet traffic demands on its Website from the Page;
(3) design and implement the network between the Page and its Website so that
(a) no single component failure will have a materially adverse impact on users
of the Page seeking to reach the Premier Provider's Website, and (b) no single
Server will run at more than 70% average utilization for a 5-minute peak in a
daily period. In this regard, Premier Provider will provide Netscape, upon
request, with a detailed network diagram regarding the network infrastructure
supporting its Website.
Optimization; Speed. Premier Provider will use commercially reasonable efforts
to ensure its Website is designed and populated in a manner that minimizes
delays for users of the Page seeking to access it. At a minimum, Premier
Provider will ensure that it initiates data transfers within no more than
fifteen seconds on average. Before the start of the Premier Period, Premier
Provider will permit Netscape to conduct performance and load testing of the its
Website (in person or through remote communications), until Netscape is
reasonably satisfied with the results of any such testing.
Technical Problems. Premier Provider agrees to use commercially reasonable
efforts to address promptly material technical problems over which Premier
Provider exercises control) affecting use by end users of the Page of its
Website (including, without limitation, infrastructure deficiencies producing
user delays). In the event that Premier Provider is unable to resolve such a
problem promptly, Netscape wild have the right to reduce or stop the traffic it
provides to Premier Provider until such time as Premier Provider corrects the
problem.
Monitoring. Premier Provider will ensure that the performance and availability
of its Website is monitored on a continuous (24 X 7) basis. Premier Provider
will provide AOL with contact information (including e-mail, phone, pager and
fax information, as applicable, for both during and after business hours) for
Premier Provider's principal business and technical representatives, for use in
cases when issues or problems arise with respect to its Website.
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Exhibit 10.30
JOINT VENTURE AGREEMENT
THIS JOINT VENTURE AGREEMENT is made as of March 5, 1998 by and among
LYCOS, INC. ("Lycos"), a corporation organized under the laws of the State of
Delaware, United States of America, SUMITOMO CORP. ("Sumitomo"), a kabushiki
kaisha organized under the laws of Japan, and INTERNET INITIATIVE JAPAN, INC.
("IIJ"), a kabushiki kaisha organized under the laws of Japan. Sumitomo and IIJ
are sometimes referred to collectively as the "Purchasers."
RECITALS
A. Lycos provides a World Wide Web search and navigation service which is
supported by advertising and electronic commerce. Lycos has exclusive worldwide
rights to certain technology and knowhow used in providing such service. Lycos
is interested in providing a comparable service, as culturally adapted and with
suitable local content, for the Japanese market, and is planning to establish a
venture in Japan for that purpose.
B. Sumitomo and IIJ are interested in participating in the venture which
Lycos is planning to establish in Japan, and each has various knowledge,
experience and resources which would be of benefit to the venture.
NOW, THEREFORE, the parties to this Agreement hereby agree as follows:
1. Incorporation of Lycos K.K. As promptly as possible after the execution
of this Agreement by all of the parties hereto, Lycos shall cause a kabushiki
kaisha to be incorporated under the laws of Japan as a wholly owned Lycos
subsidiary (the "Company"). The Company shall be incorporated in compliance with
the following provisions:
1.1 Name. The name of the Company shall be "Lycos Japan [in
katakana] Kabushiki Kaisha" and in English shall be Lycos Japan K.K.
1.2 Authorized Shares. The Company shall be authorized to issue
[***] shares of stock, all of which shares shall be of one class and shall have
a par value of [***] per share (collectively, the "Stock").
1.3 Capitalization. [***]
*** A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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1.4 Initial Directors and Statutory Auditor. The directors and
statutory auditor of the Company shall be initially as follows:
Name Position
---- --------
Lyons Nominee Representative Director
Edward M. Philip Representative Director
Robert J. Davis Director
Lycos Nominee Statutory Auditor
1.5 Address of Registered Office. The address of the registered
office of the Company shall be initially as follows:
Lycos Japan K.K.
c/o Sumitomo Corp.
1-2-2 Hitotsubashi, Chiyoda-ku
Tokyo, 100-8601, Japan
1.6 Fiscal Year. The fiscal year of the Company shall end on July
31, and the initial fiscal year shall be the stub period from the date of
incorporation of the Company through July 31, 1998.
1.7 Articles. The Articles of Incorporation of the Company shall be
in the form of the attached Exhibit A.
1.8 Costs and Expenses.
(a) The Company shall bear all costs and expenses directly
relating to the incorporation of the Company in Japan, including without
limitation registration fees payable to the Legal Affairs Bureau, notary fees,
stamp duties and bank commissions payable in connection with the contribution of
capital, but excluding any attorneys' fees and costs. At the request of Lycos
and to the extent such request is deemed reasonable by Sumitomo, Sumitomo shall
advance any expenses referred to in this paragraph (a) when and as required, and
Sumitomo shall be entitled to prompt reimbursement of such expenses by the
Company upon the completion of its incorporation.
(b) Sumitomo shall reimburse Lycos for fifty percent (50%) of
the actual out-of-pocket costs and expenses reasonably incurred by Lycos
directly in connection with the negotiation, preparation, execution and delivery
of this Agreement, or any exhibit, schedule, agreement, document or instrument
attached to, referred to in or executed or delivered pursuant to this Agreement,
or in connection with the establishment and capitalization of the Company,
including without limitation any travel expenses or fees and costs of Japanese
or United States counsel, or in connection with analysis and negotiation
relating to the choice of an appropriate vehicle for use in establishing a Lycos
presence in Japan; provided, however, that Sumitomo's reimbursement obligation
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to bear costs and expenses under this Section 1.8(b) shall be limited to a
maximum amount of Fifty Thousand U.S. Dollars (US$50,000).
1.9 Assistance. At the request of Lycos, Sumitomo shall provide such
reasonable assistance in connection with the incorporation of the Company as
Lycos may reasonably request or require, including without limitation assistance
in connection with the preparation or filing of any reports, notices or other
filings required to be made in Japan by the Company to or with any Japanese
governmental authority.
2. License Agreement. Upon completion of the incorporation of the Company,
Lycos shall enter into a license agreement with the Company in the form of the
attached Exhibit B (the "License Agreement").
3. Capital Increase.
3.1 Issuance of Additional Shares.
(a) On the terms and subject to the conditions set forth in
this Section 3, Lycos shall cause the Company to offer, issue and sell to the
Purchasers, and the Purchasers shall purchase from the Company, the number of
shares of Stock set forth below beside their respective names (collectively, the
"Additional Shares"), at a cash purchase price of [***] per share, as follows:
Party Number of Shares Aggregate Purchase Price
----- ---------------- ------------------------
[***] [***] [***]
[***] [***] [***]
(b) At the option of Sumitomo exercisable at any time prior to
the Closing (as defined below) by written notice to Lycos and IIJ, Sumitomo
may designate Nippon Telegraph and Telephone Corp., a kabushiki kaisha
organized under the laws of Japan ("NTT"), as the purchaser of [***] shares
of the [***] shares of Stock to be purchased by Sumitomo as provided in
paragraph (a), in which event Lycos shall, provided that NTT delivers to each
of the parties to this Agreement its written undertaking, in form and
substance satisfactory to all of such parties, to be bound by all of the
terms and provisions of this Agreement (other than Section 9) as though NTT
were originally a party hereto, cause the Company to offer, issue and sell to
NTT [***] shares of Stock at a cash purchase price of [***] per share, for an
aggregate purchase price of [***]. The issuance and sale of such [***] shares
of Stock by the Company to NTT shall discharge the obligations of Sumitomo
under this Agreement with respect to the purchase and sale of such shares.
Upon NTT's delivery of its written undertaking as provided above, NTT shall
be deemed a Purchaser" for all purposes under this Agreement, except that NTT
shall not be bound by the provisions of Section 9.
*** A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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3.2 Increase of Capital. Upon completion of the issuance and sale of
the additional Shares in accordance with Section 3.1, the aggregate paid in
capital of the Company shall be [***] in cash, including the [***] of capital
contributed by Lycos to the Company in connection with the incorporation of the
Company
3.3 Ownership Percentages.
(a) Upon completion of the issuance and sale of the Additional
Shares in accordance with Section 3.1(a), the number of issued and outstanding
shares of Stock owned by the stockholders of the Company, and their respective
ownership percentages, shall be as follows:
Party Number of Shares Ownership Percentage
----- ---------------- --------------------
[***] [***] [***]
[***] [***] [***]
[***] [***] [***]
(b) Upon completion of the issuance and sale of the Additional
Shares pursuant to the option set forth in Section 3.3(b), the number of issued
and outstanding shares of Stock owned by the stockholders of the Company, and
their respective ownership percentages, shall be as follows:
Party Number of Shares Ownership Percentage
----- ---------------- --------------------
[***] [***] [***]
[***] [***] [***]
[***] [***] [***]
[***] [***] [***]
3.4 Closing. The purchase and sale of the Additional Shares shall be
effected at a closing (the "Closing") to be held within thirty (30) days after
the incorporation of the Company has been completed, or within such longer
period as may be mutually agreed to by the parties, on a date and at a location
in Tokyo, Japan mutually convenient for Lycos and the Purchasers. At the
Closing, the Company shall deliver to each Purchaser, against receipt of the
cash purchase price payable by such Purchaser, a share certificate evidencing
the number of Additional Shares issued to such Purchaser.
3.5 Lycos Conditions to Closing. The obligation of Lycos to cause
the Company to offer, issue and sell the Additional Shares to the Purchasers
pursuant to Section 3.1 shall be subject to satisfaction of the following
conditions precedent, which conditions precedent are for the benefit of Lycos
and may be waived by Lycos in its sole discretion:
*** A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(a) Lycos and each of the Purchasers shall have executed a
Shareholder Agreement in the form of the attached Exhibit C ("Shareholder
Agreement"); provided, however, that in the event shares of Stock are issued to
NTT pursuant to the option set forth in Section 3.1(b), the form of Exhibit C
shall be appropriately modified to include NTT as a party;
(b) all consents and approvals of, notices and reports to, and
filings with any Japanese governmental or regulatory authority required in
connection with the offer, issuance and sale of the Additional Shares by the
Company to the Purchasers shall have been obtained or made; and
(c) the offer, issuance and sale of the Additional Shares by
the Company to the Purchasers in the manner contemplated by this Agreement shall
not result in any violation of any Japanese law, rule, regulation, order or
decree.
3.6 Purchasers' Conditions to Closing. The obligation of each of the
Purchasers to purchase the Additional Shares from the Company pursuant to
Section 3.1 shall be subject to satisfaction of the following conditions
precedent, which conditions precedent are for the benefit of each of the
Purchasers and may be waived by each of the Purchasers, as to itself only, in
the exercise of its sole discretion:
(a) the Company shall have been duly incorporated under the
laws of Japan as a kabushiki kaisha in compliance with the provisions of Section
1;
(b) the Articles of Incorporation of the Company shall be in
the form of the attached Exhibit A;
(c) Lycos and the Company shall have entered into the License
Agreement, and the License Agreement shall be in full force and effect and in
the form of the attached Exhibit B;
(d) Lycos and each of the Purchasers shall have executed a
Shareholder Agreement in the form of the attached Exhibit C; provided, however,
that in the event shares of Stock are issued to NTT pursuant to the option set
forth in Section 3.1(b), the form of Exhibit C shall be appropriately modified
to include NTT as a party;
(e) all consents and approvals of, notices and reports to, and
filings with any Japanese governmental or regulatory authority required in
connection with the offer, issuance and sale of the Additional Shares by the
Company to the Purchasers shall have been obtained or made;
(f) the offer, issuance and sale of the Additional Shares by
the Company to the Purchasers in the manner contemplated by this Agreement shall
not result in any violation of any Japanese law, rule, regulation, order or
decree; and
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(g) there shall exist no obligations or liabilities of the
Company other than as may be customarily incurred in connection with its
incorporation or as set forth in this Agreement or the License Agreement.
3.7 Satisfaction of Conditions. Each party shall use reasonable
commercial efforts in good faith to assure that all conditions precedent
applicable to such party are timely satisfied.
3.8 Issuance Expenses. All expenses relating to the offer, issuance
and sale of the Additional Shares by the Company to the Purchasers shall be
borne by the Company.
3.9 Election of Directors. Immediately following the issuance of the
Additional Shares, the Lycos nominee serving as Representative Director resident
in Japan shall resign, and three additional directors shall be elected such that
the Board of Directors of the Company shall be constituted as contemplated by
the Shareholder Agreement.
3.10 Statutory Auditors. Immediately following the issuance of the
Additional Shares, the number of statutory auditors shall be increased from one
(1) to three (3).
4. Sumitomo Loan Facility.
4.1 Loan Facility. Sumitomo agrees to make available, or to cause to
be made available through an affiliate, to the Company a revolving loan facility
(the "Facility") under which the Company shall be entitled to borrow, repay and
reborrow amounts in Japanese Yen up to a maximum aggregate amount of [***] at
any one time outstanding. Advances made or to be made under the Facility are
referred to individually as an "Advance" and collectively as "Advances," and the
lender under the Facility (whether Sumitomo or an affiliate of Sumitomo) is
referred to as "Lender."
4.2 Loan Agreement. As promptly as possible after the issuance of
the Additional Shares, Sumitomo shall, or shall cause an affiliate of Sumitomo
to, enter into a loan agreement with the Company (the "Loan Agreement") to make
provision for the Facility on the terms and conditions set forth in this Article
4 and on such additional terms and conditions as are not inconsistent with the
provisions of this Article 4 and as are agreeable to the Company and Lycos.
4.3 Commitment Period. The Facility shall be made available by
Lender to the Company during the period commencing from the date of the Loan
Agreement through the sixth (6th) anniversary date of the date of the Loan
Agreement.
4.4 Drawdown. The Company shall have the right to draw funds under
the Facility during the Commitment Period upon the affirmative vote of at least
three (3) of the directors of the Company to draw such funds; provided, however,
that each drawing shall be for an amount of not less than (Yen)50,000,000.
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4.5 Drawdown Notice. The Company shall be required to give to Lender
at least three (3) days prior written notice of the proposed date and amount of
any Advance.
4.6 Repayment. Unless otherwise specifically agreed in writing
between Lender and the Company at the time of any advance, the principal amount
of such Advance shall be due and payable on a date (the "Repayment Date") which
is the earlier of (a) the Maturity Date, or (b) the one (1) year anniversary
date of the making of such Advance.
4.7 Applicable Rate. "Applicable Rate" means, with respect to any
Advance, The Prime Rate plus one percent (1%). As used in this Section 4.8,
"Prime Rate" means the rate announced from time to time by Sumitomo Bank at its
principal lending office in Tokyo, Japan as its "prime rate."
4.8 Interest. Borrower shall pay interest on the outstanding
principal amount of each Advance at a rate per annum which is equal to the
Applicable Rate. All interest payable with respect to any Advance shall be
payable in arrears on the last day of each interest period (as determined at the
time of the Advance or as otherwise determined under the Loan Agreement) and on
the Repayment Date with respect to such Advance. Interest shall be calculated
based on a 360-day year and the actual number of days elapsed.
4.9. Prepayment. Borrower may prepay any Advance in whole or in part
without premium or penalty.
4.10 Method of Payment. Borrower shall pay all principal and
interest owing to Lender under the Facility in Japanese Yen to such account as
Lender may specify by written notice to Borrower.
4.11 No Collateral or Guaranty. No collateral for any of the
Advances shall be required, and the Advances shall be unsecured. No guaranty of
any of the Advances, including without limitation any guaranty of any of the
stockholders of the Company, shall be required.
5. Additional Capital Contributions and Stockholder Loans.
5.1 Additional Capital Contributions. Upon the incorporation of the
Company and the issuance of the Additional Shares in the manner contemplated by
this Agreement, none of the parties to this Agreement shall have any obligation
to make additional capital contributions to the Company.
5.2 Loans. Except as expressly provided for in Section 4, none of
the parties to this Agreement shall have any obligation to make loans to the
Company.
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6. Management.
6.1 Directors. The parties shall cooperate in the election of
directors, as more specifically provided for in the Shareholder Agreement.
Immediately after the issuance of the Additional Shares, there shall be two
Representative Directors, one of whom shall be a Sumitomo nominee resident in
Japan and one of whom shall be a Lycos nominee resident outside of Japan, and
the parties shall take such action as may be necessary to effect this provision.
6.2 Meetings of Directors. Unless otherwise agreed among the parties
from time to time, approximately 60% of the meetings of directors shall be held
in Japan and approximately 40% of the meetings of directors shall be held at a
location in the United States designated by Lycos. The Company shall bear all
reasonable expenses of directors in connection with their attendance at meetings
of directors, including without limitation travel, lodging and meals.
6.3 Officers. The parties shall exercise its voting rights so as to
permit Sumitomo's designated nominee to be elected as President of the Company,
and so as to permit Lycos' designated nominee to be elected as Executive Vice
President of the Company. Among the officers of the Company, the Executive Vice
President shall be second in seniority to the President.
7. Business Objectives and Start Up.
7.1 Business Objectives. The business objectives of the Company
shall include, without limitation, the following:
(a) provide a World Wide Web navigation and search service at
www.lycos.co.jp, which is generally similar to, and of like quality with, the
World Wide Web navigation and search service provided by Lycos at www.lycos.com,
but which is adapted culturally and in local content to be suitable for the
Japanese market (the "Service");
(b) generate revenue from the Service, including without
limitation revenue from the sale of advertising and electronic commerce;
(c) engage in all business activities relating to the
development, maintenance, support and enhancement of the Service, including
without limitation the development and acquisition of local content and the
development and expansion of distribution channels for the Service; and
(d) engage in all business activities ancillary or incidental
to the foregoing.
7.2 Start Up. Initially, the Service shall be operated and
maintained at the U.S. data center of Lycos. When and as feasible, as determined
by Lycos and the Company, the operation and maintenance of the Service shall be
transferred to a site in Japan.
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8. Cooperation. The parties shall in good faith cooperate with each other
to enable the Company to achieve its business objectives and purposes and to
maximize the success of the Company's business.
9. Exclusivity. Without the prior written approval of Lycos, none of the
Purchasers shall directly or through a "controlled affiliate" (as defined below)
establish, maintain or invest in, or agree to establish, maintain or invest in,
a World Wide Web search or directory service using web-crawler and spidering
technology, which search or directory service is substantially similar to the
World Wide Web search service to be provided by the Company, except that the
foregoing restriction shall not apply to passive portfolio investments in an
entity not in excess of five percent (5%) of the total equity of such entity,
and except that any of the Purchasers which as of the date of this Agreement
maintain any such service or have invested in the provider of any such service
shall have the right to continue to maintain such service or investment. Without
the prior written approval of the Purchasers, Lycos shall not directly or
through a "controlled affiliate" establish, maintain or invest in, or agree to
establish, maintain or invest in, any World Wide Web search or directory service
(other than the Service) operated from Japan for the local Japanese market. As
used in this Section 9, "controlled affiliate" of a party means any corporation
or other entity which such party controls through a more than fifty percent
(50%) ownership interest or through the right to exercise voting power
sufficient to elect a majority of directors in the case of a corporation or
other management in the case of any other entity.
10. Representations and Warranties of Lycos. Lycos hereby represents and
warrants to the Purchasers as follows:
10.1 Organization, Power and Authority. Lycos is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, United States of America. Lycos has all requisite power and authority
to execute, deliver and perform its obligations under this Agreement.
10.2 Authorization and Binding Obligations. Lycos has taken all
requisite corporate action to authorize and approve the execution, delivery and
performance of this Agreement by Lycos. This Agreement has been duly executed
and delivered by Lycos, and constitutes the legal, valid and binding obligations
of Lycos, enforceable against Lycos in accordance with its terms.
10.3 No Conflicts. The execution, delivery and performance of this
Agreement by Lycos, and the consummation of the transactions contemplated
hereby, will not (a) violate any provision of the Certificate of Incorporation
or Bylaws of Lycos, (b) violate, conflict with or result in (or with notice or
lapse of time or both result in) a breach of or default under any term or
provision of any contract or agreement to which Lycos is a party or by which
Lycos or any of its assets or properties is or may be bound, or (c) violate any
order, judgment, injunction, award or decree of any court or arbitration body,
or any governmental, administrative or regulatory authority, by which Lycos or
any of its assets or properties is or may be bound.
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10.4 No Pending Litigation. No action, suit or proceeding which
seeks to prevent the consummation of the transactions contemplated by this
Agreement, or would impair the ability of Lycos to consummate the transactions
contemplated by this Agreement, is pending against Lycos, and no such action,
suit or proceeding has been threatened against Lycos.
11. Representations and Warranties of the Purchasers.
Each of the Purchasers, severally as to itself, hereby represents
and warrants to Lycos as follows:
11.1 Organization, Power and Authority. Such Purchaser is a
kabushiki kaisha duly organized and validly existing under the laws of Japan.
Such Purchaser has all requisite power and authority to execute, deliver and
perform its obligations under this Agreement.
11.2 Authorization and Binding Obligations. Such Purchaser has taken
all requisite corporate action to authorize and approve the execution, delivery
and performance of this Agreement by such Purchaser. This Agreement has been
duly executed and delivered by such Purchaser, and constitutes the legal, valid
and binding obligations of such Purchaser, enforceable against such Purchaser in
accordance with its terms.
11.3 No Conflicts. The execution, delivery and performance of this
Agreement by such Purchaser, and the consummation of the transactions
contemplated hereby, will not (a) violate any provision of the charter documents
of such Purchaser, (b) violate, conflict with or result in (or with notice or
lapse of time or both result in) a breach of or default under any term or
provision of any contract or agreement to which such Purchaser is a party or by
which such Purchaser or any of its assets or properties is or may be bound, or
(c) violate any order, judgment, injunction, award or decree of any court or
arbitration body, or any governmental, administrative or regulatory authority,
by which such Purchaser or any of its assets or properties is or may be bound.
11.4 No Pending Litigation. No action, suit or proceeding which
seeks to prevent the consummation of the transactions contemplated by this
Agreement, or would impair the ability of such Purchaser to consummate the
transactions contemplated by this Agreement, is pending against such Purchaser,
and no such action, suit or proceeding has been threatened against such
Purchaser.
12. Termination.
12.1 Termination for Failure of Conditions. In the event that the
conditions precedent to the obligations of Lycos as set forth in Section 3.5
have not been satisfied (or waived by Lycos) by the scheduled date of the
Closing as agreed to between the parties pursuant to Section 3.4, and Lycos is
not in default of its obligations under this Agreement, Lycos shall have the
right to terminate this Agreement by giving written notice of termination to
each of the
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Purchasers without any liability of any party to any other party solely by
reason of such termination; provided, however that any such termination shall
not prejudice any claim Lycos may have against the Purchasers, or any of them,
for any breach of or default under this Agreement arising prior to such
termination. In the event that the conditions precedent to the obligations of
the Purchasers as set forth in Section 3.6 have not been satisfied (or waived
by each of the Purchasers) by the scheduled date of the Closing as agreed to
between the parties pursuant to Section 3.4, and none of the Purchasers is in
default of its obligations under this Agreement, each of the Purchasers shall
have the right to terminate this Agreement by giving written notice of
termination to Lycos without any liability of any party to any other party
solely by reason of such termination; provided, however that any such
termination shall not prejudice any claim any of the Purchasers may have against
Lycos for any breach of or default under this Agreement arising prior to such
termination.
12.2 Termination for Breach. In the event the Purchasers default in
the performance of their respective obligations under this Agreement, Lycos
shall have the right, in addition to any other rights Lycos may have, to
terminate this Agreement by giving written notice of termination to each of the
Purchasers. In the event Lycos defaults in its performance under this Agreement,
each of the Purchasers shall have the right, in addition to any other rights the
Purchasers may have, to terminate this Agreement by giving written notice of
termination to Lycos.
13. Miscellaneous.
13.1 Brokers. Each party shall hold the other parties harmless from
any claims, liabilities or damages relating to any commissions or fees claimed
by any broker or finder by reason of any engagement or relationship of such
broker or finder by or with such party.
13.2 Notices. Any notice, request, demand, approval or consent
required or permitted under this Agreement shall be in writing and shall be
effective upon actual receipt when delivered by (a) registered mail, postage
prepaid, return receipt requested, (b) personal delivery, (c) an overnight
courier of recognized reputation (such as DHL or Federal Express), or (d)
transmission by telecopier (with confirmation by mail), in each case addressed
as follows:
If to Lycos: Lycos, Inc.
500 Old Connecticut Path
Framingham, MA 01701-4570
Attention: Chief Financial Officer
Telephone: (508) 424-0400
Facsimile: (508) 820-4499
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With a copy to: Coudert Brothers
1055 West 7th Street, 20th Floor
Los Angeles, CA 90017
Attention: Richard G. Wallace
Telephone: (213) 688-9088
Facsimile: (213) 689-4467
If to Sumitomo: Sumitomo Corp.
1-2-2 Hitotsubashi, Chiyoda-ku
Tokyo, 100-8601, Japan
Telephone: 03-3217-7021
Facsimile: 03-3217-7029
If to IIJ: Internet Initiative Japan, Inc.
Takebashi Yasuda Bldg.
3-13 Kanda, Nishiki-cho, Chiyoda-ku
Tokyo, 101, Japan
Telephone:
Facsimile:
Any party may change its address or telecopier number for notice purposes by
notice given to the other parties in accordance with this Section 13.2.
13.3 Assignment. No party's rights, duties or responsibilities under
this Agreement may be assigned, delegated or otherwise transferred in any
manner, without the prior written consent of the other parties. Notwithstanding
the foregoing, no such consent shall be required in connection with the
assignment, delegation or other transfer of any such rights, duties or
responsibilities by a party to any affiliate which directly or indirectly
controls, is controlled by or is under common control with such party, where
such control is by more than 50% of the relevant voting power provided that the
assigning party unconditionally guarantees to the other parties to this
Agreement the due and punctual performance by such affiliate of such party's
obligations under this Agreement.
13.4 Entire Agreement. This Agreement, including the exhibits
referred to herein, which are hereby incorporated in and made a part of this
Agreement, constitutes the entire contract between the parties with respect to
the subject matter covered by this Agreement. This Agreement supersedes all
previous representations, arrangements, agreements and understandings, if any,
by and among the parties with respect to the subject matter covered by this
Agreement. This Agreement may not be amended, changed or modified except by a
writing duly executed by the parties hereto.
13.5 Severability. If any provision of this Agreement is held by a
court of competent jurisdiction to be unenforceable, invalid or void in any
respect, no other provision of
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this Agreement shall be affected thereby, all other provisions of this Agreement
shall nevertheless be carried into effect and the parties shall amend this
Agreement to modify the unenforceable, invalid or void provision to give effect
to the intentions of the parties to the extent possible in a manner which is
valid and enforceable.
13.6 Remedies and Waivers. All rights and remedies of the parties
are separate and cumulative, and no one of them, whether exercised or not, shall
be deemed to be to the exclusion of or to limit or prejudice any other rights or
remedies which the paties may have. The parties shall not be deemed to waive any
of their rights of remedies under this Agreement, unless such waiver is in
writing and signed by the party to be bound. No delay or omission on the part of
any party in exercising any right or remedy shall operate as a waiver of such
right or remedy or any other right or remedy. A waiver on any one occasion shall
not be construed as a bar to or waiver of any right or remedy on any future
occasion.
13.7 Arbitration. In the event any dispute arises among the parties,
or any of them, which cannot be amicably resolved, such dispute shall be
submitted to the International Chamber of Commerce for binding arbitration in
accordance with the commercial arbitration rules of the International Chamber of
Commerce as then in effect. The arbitration shall be conducted in the English
language, and, unless otherwise agreed by the parties to the dispute, shall be
held in Paris. Any arbitration award rendered in any such arbitration proceeding
may be entered in and enforced by any court of competent jurisdiction.
13.8 Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws (other than that body of law relating
to conflicts of law) of Japan.
13.9 Attorneys' Fees. In the event any action or proceeding is
initiated for any breach of or default in any of the terms or conditions of this
Agreement, then the party or parties in whose favor judgment shall be entered or
an arbitration award shall be made, shall be entitled to have and recover from
the other parties all costs and expenses (including attorneys' fees) incurred in
such action or proceeding and any appeal therefrom.
13.10 Headings. The headings contained in this Agreement are for
convenience only and are not a part of this Agreement, and do not in any way
interpret, limit or amplify the scope, extent or intent of this Agreement, or
any of the provisions of this Agreement.
13.11 Counterparts and Facsimile. This Agreement may be executed in
counterparts, each of which shall constitute an original, but all of which
together shall constitute one and the same agreement. Transmission of facsimile
copies of signed original signature pages of this Agreement shall have the same
effect as delivery of the signed originals.
13.12 Translation. For the convenience of the parties, one or more
Japanese translations of this Agreement may be prepared. Notwithstanding the
preparation or existence of
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any such Japanese translations, the English language version of this Agreement
shall be controlling.
13.13 Press Releases. None of the parties shall issue any press
releases or publicity statements relating to this Agreement, the transactions
contemplated by this Agreement or the business of the Company without the prior
written approval of the other parties, which approval shall not be unreasonably
withheld or delayed, except that each party shall be permitted to issue any
press releases or publicity statements (whether or not approved by the other
parties) to the extent required by any securities laws or regulations applicable
to such party.
13.14 Third Party Beneficiary. The Company is a third party
beneficiary under this Agreement. Except as to the Company, this Agreement is
not intended to and does not confer any rights on any third party, and no third
party shall be a third party beneficiary under or in respect of this Agreement.
13.15 Binding Effect. Subject to Section 13.3, this Agreement shall
be binding upon and shall inure to the benefit of the parties and their
respective successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LYCOS, INC.,
a corporation organized under the laws of Delaware, USA
By: /s/ Edward M. Philip
---------------------------------------------------
Its: COO
--------------------------------------------------
SUMITOMO CORP.,
a kabushiki kaisha organized under the laws of Japan
By: /s/ Atsushi Nishijo
---------------------------------------------------
Atsushi Nishijo
Its: Managing Director
--------------------------------------------------
INTERNET INITIATIVE JAPAN, INC.,
a kabushiki kaisha organized under the laws of Japan
By: /s/ Koichi Suzuki
---------------------------------------------------
Koichi Suzuki
Its: President CEO
--------------------------------------------------
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LIST OF EXHIBITS
EXHIBIT A: Articles of Company
EXHIBIT B: License Agreement
EXHIBIT C: Shareholder Agreement
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EXHIBIT A
[***]
*** A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
EXHIBIT B
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (this "Agreement") is made and entered into as of
the ____ day of ________, 1998 by and between LYCOS, INC., a Delaware
corporation ("Lycos"), and LYCOS JAPAN K.K., a kabushiki kaisha organized under
the laws of Japan ("Licensee").
RECITALS
A. Lycos owns or is the licensee with respect to certain rights in certain
technology relating to the search, retrieval and cataloging of documents on the
Internet (as defined below) and is interested in licensing such technology to
Licensee;
B. Licensee desires to license rights in such technology from Lycos upon
the terms and conditions herein set forth.
NOW THEREFORE, in consideration of the mutual covenants contained herein
and intending to be legally bound hereby, the parties agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
have the meanings set forth below:
"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,
by contract or otherwise.
"Application Programming Interfaces" shall mean the specifications
of any Object Code licensed hereunder which define the external programming
requirements necessary to interface between such Object Code and any other
Object Code licensed hereunder.
"Business" shall mean the business of providing a World Wide Web
navigation and search service at www.lycos.com.jp, which is generally similar
to, and of like quality with, the World Wide Web navigation and search service
provided by Lycos at www.lycos.com, but which is adapted culturally and in local
content to be suitable for the Japanese market.
"CMU" shall mean Carnegie Mellon University.
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"Code" shall mean Object Code and Source Code.
"Competitor" shall mean a provider of a search or directory service
using web crawler and spidering technology, which search or directory service is
substantially similar to Lycos Japan or the search and directory service offered
by Lycos from time to time.
"Components" shall mean information, materials, products, features,
services, content, computer software, designs, artistic renderings, drawings,
sketches, characters, layouts and the digital implementations thereof.
"Copyrights" shall mean the copyrights owned by Lycos in the
Licensed Properties.
"Derivative Works" shall mean all "derivative works" and
"compilations" within the meanings of such terms as defined in the U.S.
Copyright Act (17 U.S.C. Section 101 et seq.).
"Effective Date" shall mean the date of the execution of this
Agreement by both parties.
"Excluded Product" shall mean any technology, product or service
which is not owned exclusively by Lycos unless Lycos has the right to sublicense
such technology, product or service to a third party without the payment of any
fees or expenses, provided that the term Excluded Product shall not include the
Licensed Software, any enhancement or derivative thereof or any replacement
thereto.
"Excluded Service Content" shall mean any content, data or
information which is not owned exclusively by Lycos unless Lycos has the right
to sublicense such content, data or information to a third party without the
payment of any fees or expenses.
"Governmental Body" shall mean any domestic or foreign national,
state or, municipal or other local government or multi-national body, any
subdivision, agency, commission or authority thereof, or any quasi-governmental
or private body exercising any regulatory authority thereunder.
"Internet" shall mean any collection of computer networks composed
of backbone networks including, without limitation, APRAnet, NSFNet, MILNET,
mid-level networks, regional networks and stub networks. These may include
commercial, university and other research networks and military networks and may
span many different physical networks around the world with various protocols
including the Internet Protocol, as the same may evolve in the future.
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"Joint Enhancements" shall mean any enhancements, added
functionalities, additions, extensions or improvements to Lycos Japan that are
created or developed jointly by Lycos, its Affiliates or their agents, on the
one hand, and Licensee, on the other hand, including any jointly created or
developed Components.
"Licensed Database" shall mean, collectively, the Lycos Catalog and
the Local Catalog.
"Licensed Marks" shall mean the trademarks and service marks of
Lycos, Point Communications Corporation and CMU as described in Attachment A.
"Licensed Properties" shall mean, collectively, the Licensed
Software, Licensed Database, Lycos Japan and Licensed Marks.
"Licensed Software" shall mean all Object Code necessary to
implement, operate, and maintain, the Lycos Searchservice, including the
relevant Application Programming Interfaces and as enabled to handle double-byte
characters, but shall not include any web-crawler or spider technology used to
search the Internet or any Excluded Products or Excluded Service Content.
Licensed Software shall include, without limitation, the Object Code set forth
in Attachment A.
"Local Catalog" shall mean the database consisting of the version of
the Lycos Catalog which is localized and customized for the Territory in the
language specifically relevant to the Territory, which indexes URLs with domain
names designated by ".jp".
"Local Content" shall mean content added to Lycos Japan by Licensee
and that is: (i) specific to the market of the Territory; and (ii) originates in
or arises from development activities by Licensee.
"Localized Site" shall mean Licensee's Internet site through which
Lycos Japan is made available to users.
"Lycos Japan" shall mean the version of the Lycos Searchservice
which is localized and customized specifically for the Territory in the language
specifically relevant to the Territory, which offers access to the Local
Catalog.
"Lycos Catalog" shall mean the version of the database which is
developed by Lycos as the Lycos Catalog as offered by Lycos through its World
Wide Web Site located at www.lycos.com.
"Lycos Derivative Works" shall mean Derivative Works, including any
translations and customizations as necessary for the market in the Territory,
created by Lycos or Licensee for use in Lycos Japan.
B-3
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"Lycos Enhancements" shall mean any enhancements, added
functionalities, additions, extensions of or improvements to the Licensed
Properties that are created or developed by Lycos, its Affiliates or their
agents, including any Components licensed hereunder to Lycos Japan by such
Persons.
"Lycos Searchservice" shall mean the Searchservice provided by Lycos
in the United States comprised of the Lycos Catalog and Licensed Software as
listed on Attachment A hereto, as the same may evolve in the future, provided,
however, that the Lycos Searchservice shall not include (i) any technology,
product, service or content which is not an enhancement of or derivative to the
Licensed Software or Licensed Database unless the Licensee has specifically
agreed to license such technology, products, service or content on terms and
conditions acceptable to Lycos and Licensee, as provided in Section 4.2 hereof,
or (ii) any Excluded Product or Excluded Service Content.
"Object Code" shall mean (i) machine executable programming
instructions, substantially in binary form, which are intended to be directly
executable by an operating system 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).
"Patents" shall mean the patent rights owned by Lycos or CMU
relating to the Licensed Properties.
"Permitted Sublicensees" shall mean any entity whose principal place
of business is located in the Territory which offers access to Lycos Japan as
part of its Internet online service or other Web-based sites to procure sales
primarily within the Territory pursuant to a license agreement with Licensee
containing terms and conditions as are reasonably acceptable to Lycos.
"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 corporation, bank, trust company, land trust, business trust or
other organization, or a Governmental Body, or their equivalent under the
applicable legal system.
"Prime Rate" shall mean the rate of interest announced from time to
time by Chase Manhattan Bank at its principal commercial lending office as its
"prime rate."
"Searehservice" shall mean the provision via a managed public
network of an advertiser supported search engine and navigational tools that
takes 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 World Wide Web addresses to the user that relate to the input
information.
B-4
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"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).
"Territory" shall mean Japan.
2. License Grant
2.1 Subject to the terms and conditions of this Agreement, Lycos
hereby grants to Licensee, during the Term of this Agreement:
(a) subject to Section 2.9, the exclusive right and license to
use, reproduce, display, perform, transmit, distribute, market and promote, via
the Internet within the Territory and utilizing the Licensed Properties, Lycos
Japan;
(b) the exclusive right and license to use, reproduce,
display, perform, transmit, distribute, market and promote, via the Internet
within the Territory and utilizing the Licensed Properties, the Lycos
Searchservice solely for the purpose of marketing, promoting, distributing and
otherwise exploiting Lycos Japan within the Territory; and
(c) subject to Section 2.9, the right and license to
sublicense the Licensed Properties to Permitted Sublicenses.
Without limitation of the foregoing, the rights granted to Licensee
include: (i) the right to enter the Licensed Properties into Licencee's computer
databases; (ii) the right to store, process, retrieve and transmit the Licensed
Properties on or in connection with the Licensee's services; (iii) the right to
reformat the Licensed Database; (iv) the right to juxtapose and combine the
Licensed Database with materials owned and/or controlled by Licensee and/or by
third parties, provided that Lycos shall be appropriately identified as the
source of the Licensed Database by the use of its trademark and appropriate
Copyright notices; and (v) the right to offer to subscribers the option of
printing and downloading the Licensed Database and the Licensed Marks to the
subscriber's computer hard drive or onto a separate disk.
The parties intend that the Licensee will offer Lycos Japan through
the Localized Site under the Lycos brand name using the Lycos logo which will
have optical appearance and interface similar as to the Lycos Searchservice,
except that Lycos Japan will be localized and customized for the Territory.
Licensee agrees that any Permitted Sublicensee will be required to include a
"Lycos Powered" logo on all Web pages which relate to Lycos Japan licensed to
such Permitted Sublicensee.
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2.2 Except as provided in paragraph 2.1 above or in Section 18,
Licensee shall have no right to assign, sublicense or otherwise transfer any of
the Licensed Properties.
2.3 Notwithstanding anything to the contrary contained in paragraph
2.1 above, Licensee may not sell, license, sublicense or otherwise transfer any
of the Licensed Properties to any Competitor.
2.4 Lycos Japan and the Localized Site shall be operated, produced,
marketed, licensed, sold and performed by Licensee in compliance with all
applicable governmental laws, rules and regulations. Licensee shall keep Lycos
fully informed of, and shall move expeditiously to resolve, any complaint by a
commercial and/or Governmental Body relevant to the Licensed Properties.
2.5 Lycos shall provide by FTP or Federal Express updates of the
Lycos Catalog as soon as practicable after such updates are made available on
the Lycos Searchservice in the United States but in no event later than one week
after such updates are made available on the Lycos Searchservice, unless
specific alternative arrangements are agreed to in advance. Lycos shall provide
by FTP or Federal Express updates of the Local Catalog at the same intervals as
updates of the Lycos Catalog are provided.
2.6 Licensee agrees not to alter or modify the Licensed Database in
any respect; and agrees not to alter or modify the form, fit or function of the
Licensed Software in any respect; and agrees not to use the Licensed Marks in
any manner except as specifically set forth herein. Notwithstanding anything
herein to the contrary, upon written notice to Lycos, Licensee shall have the
right, at its expense, to edit the Local Catalog to the extent that any part of
the Local Catalog violates third party rights or community standards which may
be applicable to the sale of advertisements by Licensee or, with the prior
written approval of Lycos in each instance, such approval not to be
unreasonably withheld, to the extent determined necessary by Licensee to
successfully promote Lycos Japan.
2.7 Except as provided in this Section 2 or in Section 8.4, nothing
in this Agreement shall be deemed to grant any license or rights in any other
technology, products or services to Licensee except for rights specifically
granted herein with respect to the Licensed Properties. Subject to Section 8.4,
Licensee has no right to utilize or dispose of any Licensed Property beyond the
scope of this Section 2 or following the termination of this Agreement for any
reason. Subject to Section 8.4, Licensee agrees, upon termination of this
Agreement for any reason, immediately to cease the use and copying of Licensed
Software, and to cease the use, marketing and distribution of the Licensed
Properties, and to cease the use of Licensed Marks, and to cease the
sublicensing of the Licensed Properties to Permitted Sublicensees, and further
agrees to take reasonable steps to destroy all copies of the Licensed Software
and all Licensed Properties and materials embodying or related to any of the
foregoing as soon as reasonably possible.
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<PAGE>
2.8 Licensee agrees to provide to Lycos, once monthly on the fifth
of every month, beginning with the fifth of the month which occurs thirty (30)
days or mare after the Effective Date of this Agreement, a file in the standard
Common Log File Format, which contains a complete and detailed record of the
user accesses (click stream data) to the Licensed Software. The common log file
will include total number of Ad Impressions possible and percent (%) Ad
Impressions filled for the system as well as number of specific advertisements
placed by each Advertiser and whether the ads are rotational, static or keyword
based. On the second business day of each week, Licensee shall provide to Lycos
via electronic mail a report summarizing the previous week's daily traffic to
the Localized Site, which will include, without limitation, the number of page
impressions for each product and service offered through the Localized Site,
provided that the failure to provide such report on a timely basis shall not
constitute a material breach of this Agreement unless Licensee fails to provide
such report to Lycos promptly upon written request by Lycos.
2.9 Licensee may sublicense the Licensed Properties solely to allow
Permitted Sublicensees to offer access to Lycos Japan in the Territory as part
of their Internet online services or other Web-based sites within the Territory,
provided, however, that Licensee: (a) must provide, as a condition of
sublicense, that said sublicensee enters into a license agreement on the terms
and conditions as are reasonably acceptable to Lycos and agrees not to: (i)
sell, license or otherwise transfer the Licensed Properties, except as is
necessary to provide access to Lycos Japan as part of its Internet online
service or other Web-based site; (ii) copy, reverse compile, dissemble, or
reverse engineer any portion of the Licensed Properties; (iii) use the Licensed
Properties to provide products or services competitive with Licensed Properties;
or (iv) assist or allow others to do any such things as set forth herein; and
(b) Licensee shall be responsible for providing all maintenance and technical
support and updates to such sublicensees for the Licensed Properties. Licensee
agrees that any services required by sublicensees, including, but not limited
to, training, technical support, installation and maintenance, are the sole
responsibility of Licensee. Licensee further acknowledges that it is not
entitled to make any representations and warranties on behalf of Lycos to any
sublicensee regarding the Licensed Properties, and shall indemnify and hold
Lycos harmless from and against any claims, costs and damages arising from and
in connection with such unauthorized representations. Lycos shall be a third
party beneficiary of the license agreements with sublicensees.
2.10 The term "Territory" as used with respect to the Licensed
Properties and the rights conveyed hereunder to 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 Licensee 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.
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3. Fees. The rights and licenses granted hereunder with respect to the
Licensed Properties shall be free of any license fees or royalties.
4. Delivery, Installation and Testing of the Licensed Software and the
Licensed Database.
4.1 Lycos shall deliver the Licensed Software and the Licensed
Database on agreed media no later than ten (10) days after the Effective Date.
4.2 After delivery of the Licensed Software and Licensed Database,
the Licensee shall carry out functional tests of the Licensed Software and the
Licensed Database during thirty (30) days ("Test Period") in order to verify
that the Licensed Software complies with the online documentation furnished to
and accepted by the Licensee and that the Licensed Software and Licensed
Database have the same features and functions (and in the case of the Local
Catalog substantially the same features and functions) as the Licensed Software
and Licensed Database being offered by Lycos through the Lycos Searchservice.
During the tests, the Licensee will notify Lycos without delay in writing of any
inconsistency found by it and Lycos will immediately commence to correct such
inconsistency at the cost of Lycos and delivery to the Licensee the resulting
corrections and a new Test Period shall begin for verification according to the
seine procedure. Lycos' obligation to correct any inconsistency in the Licensed
Software and Licensed Database shall be limited to correcting the Licensed
Software and the Licensed Database so that the Licensed Software and the
Licensed Database have the same features and functions (and in the case of the
Local Catalog substantially the same features and functions) as the Licensed
Software and Licensed Database being offered by Lycos through the Lycos
Searchservice. The Licensee shall accept the Licensed Software immediately after
it has been verified that it complies with the online documentation furnished to
and accepted by the Licensee and the Licensee shall accept the Licensed Database
immediately after it has been verified that it has the same features and
functions (and in the case of the Local Catalog substantially the same features
and functions) as the Licensed Database being offered by Lycos through the Lycos
Searchservice. If the Licensee does not notify Lycos of its non-acceptance
during the Test Period, the Licensed Software and the Licensed Database will be
deemed accepted. The Licensee shall begin its tests no later than ten (10) days
after delivery pursuant to paragraph 4.1.
4.3 Licensee shall launch Lycos Japan through the Localized Site
within sixty (60) days after Licensee's acceptance of the Licensed Software and
the Licensed Database pursuant to the applicable provisions of Section 4.2, and
as promptly as possible within such sixty (60) day period as circumstances
permit making due allowance for the development of a well-considered plan for
launch and initial marketing of Lycos Japan.
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5. Initial Operations, Site Relocation and Technical Assistance and
Support.
5.1 Initially, Lycos shall operate and maintain Lycos Japan for
Licensee using equipment installed especially for such purpose at Lycos' data
center in Pittsburgh, Pennsylvania, U.S.A. Licensee shall reimburse Lycos for
all costs incurred by Lycos with the approval of Sumitomo Corp., such approval
not to be unreasonably withheld, in preparing to conduct and in conducting such
operation and maintenance, including without limitation the cost of all hardware
acquired by Lycos and installed at Lycos' data center in Pittsburgh,
Pennsylvania, U.S.A. specifically for the purpose of initially operating and
maintaining Lycos Japan for Licensee. Upon reimbursement by Licensee to Lycos
for the cost of any such hardware or other items of tangible personal property,
title to such hardware or other tangible property shall pass from Lycos to
Licensee.
5.2 When and as feasible, as determined by Lycos and Licensee, the
operation and maintenance of Lycos Japan shall be transferred from Lycos' data
center in Pittsburgh, Pennsylvania, U.S.A. to a site in Japan. At such time, all
equipment or other tangible property for which Lycos has been reimbursed by
Licensee as required under Section 5.1, and to which title has passed from Lycos
to Licensee as provided in Section 5.1, shall be shipped by Lycos to Licensee at
Licensee's expense.
5.3 For a period of three (3) months after Licensee commences
commercial operations, Lycos shall, without charge to Licensee, (a) provide
reasonable technical assistance to Licensee in the form of (i) telephone
consultation in English between Lycos technicians and Licensee's personnel, and
(ii) preparation of explanatory materials requested by Licensee, and (b) accept
at Lycos' principal place of business in the United States for up to three (3)
man-months up to two (2) technical trainees who are employees of Licensee,
provided that the cost of travel, food and lodging for such technical trainees
shall be borne by Licensee.
5.4 After the expiration of the three (3) month period referred to
in Section 5.3, Lycos shall (a) provide reasonable technical assistance to
Licensee in the form of (i) telephone consultation in English between Lycos
technicians and Licensee's personnel, and (ii) preparation of explanatory
materials requested by Licensee, and (b) from time to time as reasonably
requested by Licensee make technical representatives available in Japan, at
times convenient to Lycos, to consult with and provide technical assistance to
Licensee. Licensee shall bear all costs relating to such consultation and
technical assistance, including without limitation the costs of travel, food and
lodging and per diem charges (including coverage of overhead and indirect costs)
on a per person basis at the most favorable rates offered by Lycos for providing
such services.
5.5 Lycos agrees to provide Licensee, without charge, with software
upgrades to Licensed Software including new versions of Licensed Software
running under new operating systems and running under data base management
software upgrades, as they
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may become available. Lycos shall provide to the Licensee such updates,
developments, enhancements and improvements to the Licensed Software as may be
available to Lycos from time to time and any replacements to the Licensed
Software, without cost, to assure that the Licensed Software provided by the
Licensee through Lycos Japan is the same system (or as functionally equivalent
as is feasible given differences in multinational operating systems which cannot
be controlled by the parties) as that which is offered by the Lycos
Searchservice in the United States, provided that the Licensee shall pay Lycos
for all updates, developments, enhancements and improvements which it
specifically requests to be made on a custom basis based on the most favorable
rates (including coverage for overhead and indirect costs) offered by Lycos for
performing such custom work, and provided further that Lycos shall not be
obligated to accede to such requests where it would not be commercially
reasonable for Lycos to develop particular enhancements and improvements which
Licensee requests. Licensee shall be responsible for providing any software
upgrades to the Licensed Software to Permitted Sublicensees. At the time Lycos
makes available to Licensee any upgrades to the Licensed Software, Lycos shall
advise License of the changes to the Licensed Software from the previous version
of the Licensed Software provided to Licensee.
5.6 In the event that Lycos makes available through its Internet
site located at www.lycos.com any product or service which is either owned
exclusively by Lycos or which is licensed by Lycos and which Lycos has the right
to sublicense to a third party without the payment of any fees or expense, then,
if requested by Licensee, Lycos shall make such product or service available to
Licensee for inclusion in Lycos Japan, on such terms and conditions as are
mutually acceptable to Lycos and Licensee. The parties agree that the Licensee
shall pay to Lycos all costs and expenses relating to the localization and
customization of the products and services for the Territory based on the most
favorable rates (including charges for overhead and indirect costs) offered by
Lycos for providing such services.
5.8 Lycos shall, without charge to Licensee, use its best efforts to
fix bugs in the Licensed Software and the Licensed Database as soon as
reasonably possible. Such efforts will be conducted by telephone or electronic
means.
5.9 All proposed changes and improvements by Lycos shall constitute
confidential information of Lycos. Licensee acknowledges that Lycos shall have
the right to make public announcements relating to all current and future
products and services and all development plans.
6. Patents and Other Intellectual Property.
6.1 All patents, copyrights, and all other intellectual property
rights in the Licensed Software and Licensed Database which may be obtainable
will remain the property of Lycos or CMU.
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6.2 Lycos shall retain all ownership rights in and to the Licensed
Properties, Lycos Enhancements and Lycos Derivative Works. Licensee assigns any
interest (other than the licenses granted to Licensee under this Agreement) it
may be deemed to possess in any Licensed Properties, Lycos Enhancements and
Lycos Derivative Works to Lycos and will assist Lycos in every reasonable way,
at Lycos' expense, to obtain, secure, perfect, maintain, defend and enforce for
Lycos' benefit all intellectual property rights with respect to such properties.
6.3 The respective ownership interests of Lycos and Licensee in any
Joint Enhancements shall be as agreed upon by the parties at the time such Joint
Enhancements are created; provided, however, that, if the parties cannot reach
agreement as to the ownership of any Joint Enhancement, then such Joint
Enhancement shall be deemed to be jointly owned by Lycos and Licensee and any
subsequent use of such Joint Enhancement by either party shall require the prior
approval of the other party, which approval shall not be unreasonably withheld
or delayed.
6.4 Title to all developments, enhancements and improvements which
are not Lycos Derivative Works or Lycos Enhancements, which either originate
with or are paid for by Licensee (other than payments to Lycos, its Affiliates
or their agents), shall be the property of Licensee. Subject to mutual agreement
on royalties and other relevant terms and conditions, Licensee hereby grants to
Lycos a non-exclusive, worldwide (except for the Territory) license, with the
right to sublicense, to use all such developments, enhancements and improvements
in the Lycos Searchservice and related Lycos Properties.
7. Marketing, Trademarks and Trade names.
7.1 Licensee shall have included in all sales, marketing literature
and invoices relating to Licensed Properties a statement to the effect that
"this product or portions thereof is produced under license from Lycos, Inc.",
and either "Patent Pending" or, if applicable, "U.S. Patent Number X,XXX,XXX."
7.2 Licensee shall have marked the appropriate portions of all
Licensed Properties with the applicable United States of America and foreign
Patent numbers in accordance with the applicable laws of the countries in which
the materials are intended to be used and offered.
7.3 Licensee shall neither register nor use any CMU, Lycos or Point
Communications trademarks, trade names, service marks, patents, copyrights and
similar rights of any type under the law of any Governmental Body, including all
applications and registrations relating to any of the foregoing (collectively,
"Intellectual Property Rights"), except as specifically provided herein. Any use
of CMU's, Lycos' or Point Communications' Intellectual Property Rights will
inure to the benefit of CMU, Lycos or Point Communications as the case may be.
Licensee acknowledges that it does not have any rights or any title
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whatsoever in or to CMU's, Lycos', or Point Communications' Intellectual
Property Rights, except as specifically provided herein.
7.4 Subject to all the terms and conditions of the Agreement, during
the term of this Agreement, Licensee shall have the non-exclusive,
non-transferable right to use the Licensed Marks to market Lycos Japan in the
Territory. To the extent reasonably feasible and subject to translation,
Licensee shall always use the Licensed Marks in all instances exactly as set
forth herein when referring to or identifying with Licensed Properties. Licensee
agrees that all Permitted Licensees will be required to include a "Lycos
Powered" logo on a Web page which related to Lycos Japan licensed to Permitted
Sublicensees. Licensee shall affix a copyright notice to all copies, or portions
thereof of the Licensed Properties.
7.5 The following notice (text) shall appear on the entry screen of
the Licensed Properties and at the bottom of each respective query result in a
manner specified by Lycos:
"(C)1998 Lycos, Inc. Lycos(R) is a registered
trademark of Carnegie Mellon University. All
Rights Reserved."
7.6 The font of the text is to be no smaller than the main text font
size used in the Lycos Searchservice.
7.7 Whenever the trademark "Lycos(R)" or "The Lycos(R) Catalog of
the Internet", appears in any printed material of Licensee or within the
Licensed Properties, there shall be a footnote or other appropriate statement
located in such materials or properties which reads: "(C)1998 Lycos, Inc.
Lycos(R) is a registered trademark of Carnegie Mellon University. All Rights
Reserved."
7.8 Licensee shall at all times hereafter take such steps in the
marketing and sale of the Licensed Properties to protect the Copyrights and all
Code, databases, Intellectual Property Rights, data and materials supplied by
Lycos, using measures at least as secure as those used by Licensee in protecting
its own proprietary software.
8. Termination.
8.1 This Agreement shall be effective during the period (the "Term")
from the date of this Agreement until the sooner of: (i) the date on which the
parties hereto mutually agree to terminate this Agreement; (ii) the date on
which this Agreement is terminated under paragraph 8.2 below, or (iii) the date
on which Licensee permanently ceases to transact business or ceases its
corporate existence (by dissolution or otherwise).
8.2 A party may terminate this Agreement upon written notice in the
event of (i) any material breach of any warranty, representation or covenant of
this Agreement by
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the other party which remains uncured thirty (30) days after written notice of
such breach, or (ii) in the event of any bankruptcy, insolvency, receivership,
dissolution, liquidation, or similar proceeding of the other party which
continues for thirty (30) days from filing. In addition, if Licensee shall cease
to carry on its business with respect to the operation of Lycos Japan for any
reason, this Agreement shall immediately terminate and shall be of no further
force or effect, except as provided in paragraph 8.3 below.
8.3 The termination of this Agreement pursuant to this Section 8,
shall not terminate (i) the obligation of Licensee to pay Lycos any amounts
required to be paid hereunder, prior to the effective date of the termination,
and other amounts, which are accrued or which are otherwise to be paid by
Licensee under the terms of this Agreement or (ii) the obligations of Licensee
under Sections 6, 10, 12, 13 and 14 hereunder. If Lycos terminates this
Agreement pursuant to this Section 8, nothing herein shall be construed to
release either party from any obligation that matured prior to the effective
date of such termination. In the event of the termination of this Agreement, all
sublicenses granted hereunder shall terminate, and Lycos may, in its discretion,
offer licenses to any sublicensee whose sublicense is terminated upon
termination of this Agreement.
8.4 Upon the termination of this Agreement, Lycos will grant to
Licensee a reasonable grace period (not to exceed ninety (90) days) for winding
up activities in which Licensee and Permitted Sublicensees are engaged pursuant
to the rights and licenses granted by Lycos under this Agreement.
9. Warranties; Disclaimer; Exclusive Remedy.
9.1 LYCOS WARRANTS THAT THE LICENSED SOFTWARE FURNISHED HEREUNDER
WILL FUNCTION SUBSTANTIALLY AS SET FORTH IN THE ON-LINE DOCUMENTATION FURNISHED
TO THE LICENSEE IN CONNECTION WITH THIS AGREEMENT, AND THAT THE LICENSED
SOFTWARE AND THE LICENSED DATABASE HAVE THE SAME FEATURES AND FUNCTIONS (AND IN
THE CASE OF THE LOCAL CATALOG SUBSTANTIALLY THE SAME FEATURES AND FUNCTIONS) AS
THE LICENSED SOFTWARE AND LICENSED DATABASE BEING OFFERED BY LYCOS THROUGH THE
LYCOS SEARCHSERVICE. THIS IS A LIMITED WARRANTY AND, EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT, IT IS THE ONLY
WARRANTY MADE BY LYCOS HEREUNDER. SUBJECT TO AND EXCEPT FOR THE FOREGOING, LYCOS
MAKES NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED AS TO ANY MATTER
INCLUDING, BUT NOT LIMITED TO, WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, OR
MERCHANTABILITY, OR EXCLUSIVITY, OR RESULTS OBTAINED FROM USE OF ANY
INTELLECTUAL PROPERTY DEVELOPED UNDER THIS AGREEMENT. IF ANY MODIFICATIONS ARE
MADE TO THE LICENSED SOFTWARE BY LICENSEE WITHOUT THE EXPRESS WRITTEN CONSENT OF
LYCOS THIS WARRANTY
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SHALL IMMEDIATELY TERMINATE. LICENSEE MUST NOTIFY LYCOS IN WRITING WITHIN NINETY
(90) DAYS OF DELIVERY OF THE LICENSED SOFTWARE OF ANY DEFECT IN SUCH SOFTWARE.
9.2 NEITHER PARTY HERETO SHALL BE LIABLE TO THE OTHER FOR INDIRECT,
SPECIAL OR CONSEQUENTIAL DAMAGES SUCH AS LOSS OF PROFITS OR INABILITY TO USE
SAID LICENSED SOFTWARE OR ANY APPLICATIONS THEREOF.
9.3 LICENSEE AGREES THAT IT WILL NOT MAKE ANY WARRANTY ON BEHALF OF
LYCOS, EXPRESSED OR IMPLIED TO ANY PERSON CONCERNING THE APPLICATION OF OR THE
RESULTS TO BE OBTAINED WITH THE TECHNOLOGY UNDER THIS AGREEMENT.
9.4 LYCOS' SOLE OBLIGATION AND LICENSEE'S SOLE REMEDY UNDER THE
LIMITED WARRANTY CONTAINED IN SECTION 9 IS THAT LYCOS WILL USE COMMERCIALLY
REASONABLE EFFORTS TO REPAIR OR REPLACE THE LICENSED SOFTWARE AND THE LICENSED
DATABASE IF THEY DO NOT CONFORM TO THIS WARRANTY. LICENSEE AGREES THAT LYCOS'
SOLE LIABILITY HEREUNDER ARISING OUT OF ANY THEORY OF CONTRACT, NEGLIGENCE,
STRICT LIABILITY IN TORT OR OTHERWISE, INCLUDING WITHOUT LIMITATION, ANY BREACH
OF LYCOS' REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT, SHALL NOT
EXCEED THE SUM OF FIVE HUNDRED THOUSAND U.S. DOLLARS (U.S.$ 500,000).
10. Infringement.
10.1 If any unmodified Licensed Software provided to Licensee by
Lycos is alleged or held to infringe a proprietary right of a third party, Lycos
shall, at its own expense, and in its sole discretion, (1) procure for Licensee
and the end-users or customers of Licensee the right to continue to use the
allegedly infringing Licensed Software; (2) replace or modify the Licensed
Software to make it non-infringing; or (3) if neither of the remedies described
in (1) and (2) are commercially reasonable, (3) terminate this Agreement and
accept the return of the Licensed Software and related documentation.
10.2 Lycos shall defend, at its own expense (or in Lycos'
discretion, settle), indemnify and hold the Licensee harmless from and against
any loss, injury, demand, cost, expense or claim (including reasonable
attorneys' fees) arising out of any allegation that the Licensed Software
infringes any patents, copyrights, trade secrets or other proprietary rights of
any third party ("Claim of Infringement"), provided that the Licensee timely
notifies Lycos in writing of any such claim, provided that failure to timely
notify Lycos shall not constitute a defense unless Lycos is harmed as a result.
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10.3 Licensee acknowledges and agrees that Lycos makes no
representation or warranty with respect to the Licensed Marks, and Lycos shall
have no obligations hereunder for indemnification or otherwise arising out of or
based upon Licensee's use of the Licensed Marks.
11. Marketing Efforts of Licensee. As a material condition to this
Agreement, Licensee shall use its best efforts to market and promote the
commercial exploitation of Lycos Japan in the Territory, and to sell advertising
and promotional services in Lycos Japan.
12. Costs.
12.1 Except as may be otherwise expressly provided in this
Agreement, each party shall bear its own costs and expenses in carrying out its
obligations under this Agreement.
12.2 All amounts payable by either party to the other party under
this Agreement shall be due and payable within thirty (30) days of the date of
invoice. If any payment is not received within thirty (30) 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.
13. Confidentiality. For so long as this Agreement remains in effect and
for a period of three (3) years after any termination of this Agreement, 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 this Agreement, or (B) any confidential, non-public information
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 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 (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 as 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) relating to the
Confidential Information of the other party and the Joint
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Entities which such 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.
14. Breach. No acquiescence in any breach of this Agreement by either
party shall operate to excuse any subsequent or prior breach.
15. Prior Agreement. This Agreement supersedes all previous agreements
relating to the subject matter hereof, whether oral or in a writing, and
constitutes the entire agreement of the parties hereto and shall not be amended
or altered in any respect except in a writing executed by the parties.
16. Governing Law
16.1 This Agreement, and the rights and liabilities of the parties
hereunder, shall be governed by the substantive laws of the State of New York,
United States of America, to the exclusion of its rules of conflict of laws.
16.2 In the event any dispute arises among the parties, or any of
them, which cannot be amicably resolved, such dispute shall be submitted to the
International Chamber of Commerce for binding arbitration in accordance with the
commercial arbitration rules of the International Chamber of Commerce as then in
effect. The arbitration shall be conducted in the English language, and, unless
otherwise agreed by the parties to the dispute, shall be held in New York, New
York. Any arbitration award rendered in any such arbitration proceeding may be
entered in and enforced by any court of competent jurisdiction.
16.3 Any arbitration proceedings hereunder shall be held in Boston,
Massachusetts, U.S.A. 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.
16.4 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
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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.
16.5 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.
16.6 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 has jurisdiction over the parties and/or the subject matter of the
controversy.
17. 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
the 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:
If to Lycos: Lycos, Inc.
500 Old Connecticut Path
Framingham,MA 01701-4570
Attention: Chief Financial Officer
Telephone: (508) 424-0400
Facsimile: (508) 820-4499
With a copy to: Coudert Brothers
1055 West 7th Street, 20th Floor
Los Angeles, CA 90017
Attention: Richard G. Wallace
Telephone: (213) 688-9088
Facsimile: (213) 689-4467
If to Licensee: Lycos Japan K.K.
________________________________
________________________________
Attention: _____________________
Telephone: _____________________
Facsimile: _____________________
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18. Assignment. Licensee shall neither assign nor transfer this Agreement
or any interest herein, or enter into any merger agreement effectively
transferring this Agreement to another party, without the prior written consent
of Lycos, except that Licensee may sublicense the Licensed Properties to
Permitted Sublicensees as provided herein. Lycos may not assign this Agreement
and/or subcontract its performance hereunder to any third party, except that
this restriction shall not apply with respect to any assignment or subcontract
between Lycos and any Affiliate of Lycos, provided that Lycos unconditionally
guaranties to Licensee the due and punctual performance by such Affiliate of
Lycos' obligations under this Agreement, or in connection with any sale of all
or a substantial portion of the business or assets of Lycos, whether by a sale
of assets, a merger or otherwise.
19. Non-Competitive Use; Dealing With Competitors. Licensee shall not use,
sell, license, sublicense or otherwise transfer any of the Licensed Properties
except as authorized under this Agreement. Licensee shall not copy, reverse
compile, disassemble, or reverse engineer any portion of Licensed Software or
Licensed Database or use them to provide products or services competitive to
Licensed Software or Licensed Database or to assist or allow others to do any
such act as set forth in this Section 19. During the Term and for a period of
three (3) years thereafter, Licensee shall not establish or operate, or assist
any other person to establish or operate, in or for the Territory a World Wide
Web search or directory service using web-crawler and spidering technology,
which service is substantially similar to Lycos Japan.
20. Representations. Lycos and Licensee represent and warrant the
following to each other:
(a) Neither the execution and delivery by it of this Agreement nor
the consummation of the transactions contemplated hereby, violates any law or
regulation or conflict with, or results in a breach of or default under any
agreement, license, instrument, judgment, decree or order to which it is a party
or by which it is bound, where such violation, conflict, or breach would have a
material adverse effect on such party's financial condition or operations or
ability to fulfill its obligations under this Agreement.
(b) No approval or consent of any governmental agency or
instrumentality is required for the authorization, execution, or delivery by it
of this Agreement.
(c) Neither this Agreement nor any document or certificate furnished
by such party pursuant to this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein no misleading.
(d) The execution and delivery of this Agreement and the performance
by such party of its obligations hereunder are within such party's corporate
power have been duly
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authorized by proper corporate action on the part of such party and are not in
violation of the organizational documents of such party.
21. Construction; Captions; Exhibits.
21.1 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.
21.2 The captions at the headings of each Section of this Agreement
are for convenience of reference only, and are not intended 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.
21.3 All appendixes, exhibits and schedules are hereby incorporated
by reference and are part of this Agreement as if expressly set forth at length
herein.
22. 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 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 of this Agreement.
23. Conformity With Local Law. The parties covenant and agree that this
Agreement shall be amended to the extent necessary to provide each party with
the full benefit of the confidentiality provisions and the remedies provided
under this Agreement. The parties agree to amend this Agreement and to negotiate
in good faith supplemental agreements with each other or with governmental
authorities as may be required to cause this Agreement to comply with applicable
laws of Japan, including, without limitation, data protection laws, and as may
be necessary to give full effect to the intent of the parties as stated herein.
Notwithstanding anything to the contrary contained in this Section 23, this
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Agreement shall be modified to the extent necessary to protect the rights of
Lycos and Licensee in their property under the laws of Japan as determined by
the parties in their reasonable discretion.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed in duplicate counterparts, each of which shall be deemed to
constitute an original, effective as of the date first above written.
LYCOS, INC.,
a corporation organized under the laws of Delaware, USA
By:
-----------------------------------
Its:
-----------------------------------
LYCOS JAPAN K.K.,
a kabushiki kaisha organized under the laws of Japan
By:
-----------------------------------
Its:
-----------------------------------
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ATTACHMENT A
[***]
*** A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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EXHIBIT C
SHAREHOLDER AGREEMENT
THIS SHAREHOLDER AGREEMENT is made and entered into as of _______, 1998 by
and among LYCOS, INC. ("Lycos"), a corporation organized under the laws of the
State of Delaware, United States of America, SUMITOMO CORP. ("Sumitomo"), a
kabushiki kaisha organized under the laws of Japan, and INTERNET INITIATIVE
JAPAN, INC. ("IIJ"), a kabushiki kaisha organized under the laws of Japan.
Lycos, Sumitomo and IIJ are sometimes referred to individually herein as a
"Shareholder" and collectively as the "Shareholders."
RECITALS
A. The Shareholders are parties to a Joint Venture Agreement dated as of
March 5, 1998 (the "Joint Venture Agreement").
B. Lycos and Lycos Japan K.K. (the "Company"), a kabushiki kaisha
organized under the laws of Japan, have entered into a License Agreement dated
as of _______, 1998 (the "License Agreement").
C. As of the date hereof, Lycos is the sole shareholder of the Company.
The Company is authorized to issue [***] shares of stock, all of which is of one
class and has a par value of [***] per share (collectively, the "Stock"). Lycos
is the owner of [***] shares of stock.
D. Pursuant to and subject to the terms and conditions of the Joint
Venture Agreement, additional shares of Stock (the "Additional Shares") are to
be issued to Sumitomo and IIJ such that, after the issuance of the Additional
Shares, the Shareholders will own the number of shares of Stock set forth below
beside their respective names:
Shareholder Number of Shares
----------- ----------------
[***] [***]
[***] [***]
[***] [***]
E. The execution of this Agreement is a condition precedent to the
issuance of the Additional Shares pursuant to the Joint Venture Agreement.
NOW, THEREFORE, the parties to this Agreement hereby agree as follows:
*** A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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<PAGE>
1. Voting and Mangement.
1.1 Election of Directors. Each Shareholder hereby agrees that, for
so long as this Agreement is in effect, such Shareholder shall vote (or cause to
be voted) the shares of Stock owned beneficially or of record by such
Shareholder for the election of directors to the Board of Directors of the
Company such that the Board of Directors shall consist of two directors
designated by Lycos, two directors designated by Sumitomo, and one director
designated by IIJ.
1.2. Removal of Directors. Any director elected as a Lycos designee
may only be removed with the consent of Lycos, any director elected as a
Sumitomo designee may be only be removed with the consent of Sumitomo, and any
director elected as an IIJ designee may only be removed with the consent of IIJ.
1.3 Voting Requirements. Except as may be otherwise provided in the
Articles of Incorporation of the Company or required by applicable law, and
subject to Section 1.4, the required vote for any approval by the shareholders
of the Company shall be a majority of the shares represented and entitled to
vote at a duly constituted meeting of shareholders at which a quorum is present,
and the required vote for any approval by the board of directors of the Company
shall be a majority of the directors present at a duly constituted meeting of
the board of directors at which a quorum is present.
1.4 Major Matters. Notwithstanding Section 1.3, the following
matters shall require the approval of the shareholders of the Company by an
affirmative vote of not less than sixty six and two-thirds percent (66-2/3%) of
the issued and outstanding stock of the Company:
(a) amendment or repeal of the Articles of Incorporation;
(b) liquidation, winding-up, dissolution or commencement of
any bankruptcy or other similar proceeding;
(c) merger, consolidation, reorganization, recapitalization,
and the like;
(d) sale of all or substantially all of the assets of the
Company, or the sale of any assets individually or in the aggregate exceeding
(Yen)10,000,000 in amount;
(e) issuance, redemption, repurchase or retirement of any
securities (including any option, warrant or right to acquire any securities or
any instrument convertible into securities);
(f) increase or decrease of authorized capital;
(g) approval of annual financial statements;
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<PAGE>
(h) approval of annual business plan (including annual budget and
marketing plans, distribution plans and pricing policies), and any major
modifications to or departures from the approved annual business plan;
(i) declaration of dividends;
(j) acquisition or disposition of an interest in any other
corporation or entity, including the incorporation of any subsidiary;
(k) guaranty of third party indebtedness;
(l) the borrowing of any funds, except for any funds borrowed under
the [***] revolving loan facility to be made available to the Company by
Sumitomo or an affiliate of Sumitomo pursuant to Section 4 of the Joint Venture
Agreement (the "Sumitomo Facility"), and except for any funds borrowed in the
ordinary course of business and individually or in the aggregate not exceeding
[***];
(m) the sale, transfer (other than by sublicense as permitted under
the License Agreement), or encumbrance of any interest in intellectual property
rights, and the selection or designation of sublicensees to which sublicenses
will be granted pursuant to the License Agreement;
(n) any changes or modifications by the Company of or to any of the
technology licensed to the Company by Lycos, except as expressly permitted by
and made in accordance with the License Agreement;
(o) any material transaction between the Company and any of its
shareholders (other than pursuant to the License Agreement or the Sumitomo
Facility);
(p) any material transaction by which the Company incurs or
undertakes any financial obligation in excess of (Yen)50,000,000; or
(q) removal of officers or statutory auditors.
1.5 Applicable Legal Requirements. Nothing contained in Section 1.4
relieves the Company or the Shareholders from compliance with applicable law as
to requirements for shareholder or board approvals with respect to any of the
matters set forth in Section 1.4.
1.6 Voting. The Shareholders shall exercise their voting rights and
powers as shareholders of the Company, and shall otherwise cooperate, to fully
effect the purposes and implement the provisions of this Agreement.
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<PAGE>
1.7 Transfer of Certain Shares of Sumitomo to NTT. For a period of
one year from and after the date of this Agreement, Sumitomo shall have the
right to transfer to Nippon Telegraph and Telephone Corp., a kabushiki kaisha
organized under the laws of Japan ("NTT"), 625 shares of its shares of Stock
free of any of the transfer restrictions set forth in this Agreement, provided
that prior to or in connection with any such transfer NTT delivers to each of
the parties to this Agreement its written undertaking, in form and substance
satisfactory to all of such parties, to be bound by all of the terms and
provisions of this Agreement as though NTT were originally party hereto. At the
request of Sumitomo, the Shareholders shall cooperate as necessary to obtain the
approval of the Board of Directors of the Company to the transfer permitted by
this Section 1.7.
2. Restrictions on Transfer. No Shareholder may voluntarily transfer,
sell, assign, pledge, hypothecate, encumber or otherwise dispose of any or all
of the Stock now owned or hereafter acquired by such Shareholder without the
approval of the Board of Directors of the Company with respect to the identity
of the transferee as required by the Articles of Incorporation of the Company.
Any offer to transfer, or any attempted or purported transfer, of any Stock in
violation of this Section 2 shall be null and void.
3. Transfers Subject to Right of First Refusal.
3.1 General. Except as otherwise provided in Section 3.8, any
transfer, sale, assignment or other disposition (collectively, a "Transfer") of
any Stock by a Shareholder shall be subject to the rights of first refusal set
forth in this Section 3.
3.2 Notice and Offer to Sell. In the event a Shareholder (the
"Offering Shareholder") desires to make a Transfer of all or any portion of the
Offering Shareholder's Stock, such Offering Shareholder shall give to each of
the other Shareholders (each such other Shareholder, an "Offeree") a written
notice ("Offeror Notice") of the Offering Shareholder's intention to make such
Transfer, which Offeror Notice shall set forth all of the terms and conditions
of the proposed Transfer, including without limitation (a) the name, identity
and address of the proposed transferee (the "Proposed Transferee"), (b) the
number of shares of Stock to be Transferred (the "Offered Shares") and (c) the
consideration for the Transfer. The Offoror Notice shall contain an offer to
make a Transfer of the Offered Shares to the Offerees on the terms and
conditions of the proposed Transfer described in the Offeror Notice and in
accordance with the terms and conditions of this Agreement.
3.3. Offeree Notice. Within thirty (30) days after the Offeror
Notice is duly given, each Offeree shall give written notice ("Offeree Notice")
to the Company and the Offering Shareholder specifying the maximum number of
shares of Stock that such Offeree wishes to acquire upon the terms and
conditions of the proposed Transfer set forth in the Offeror Notice. For the
purpose of this Section 3.3, an Offeree that does not deliver an Offeree Notice
within the time required by this Section 3.3 shall be deemed to have provided an
Offeree Notice on the last day on which an Offeree Notice may be provided
specifying no interest in acquiring any of the Offered Shares.
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<PAGE>
3.4 Allocation of Shares. The Offering Shareholder shall be bound to
make a Transfer to each Offeree and each Offeree shall be bound to acquire from
the Offering Shareholder that number of Offered Shares as is determined in
accordance with the following:
(a) Each Offeree shall be entitled to purchase a number of
Offered Shares equal to the lesser of (i) the number of shares of Stock
specified in such Offeree's Offeree Notice or (ii) the total number of Offered
Shares multiplied by a fraction, the numerator of which is the number of shares
of Stock held by such Offeree and the denominator of which is the aggregate
number of shares of Stock held by all of the Offerees to whom Stock is being
allocated pursuant to this Section 3.4(a).
(b) If any Offered Shares remain unallocated after the
application of Section 3.4(a), then the Offering Shareholder shall give the
Offerees a second notice ("Second Offeror Notice"), which shall set forth the
number of unallocated Offered Shares, and, within fifteen (15) days after such
Second Offeror Notice is duly given, each Offeree shall give written notice
("Second Offeree Notice") to the Company and the Offering Shareholder specifying
the maximum number of Offered Shares that such Offeree wishes to acquire. The
procedure specified in Section 3.4(a) shall thereupon be reapplied (and each
"Second Offeree Notice" shall be deemed an "Offeree Notice for purposes of
reapplying Section 3.4(a)) to allocate any unallocated Offered Shares among
Offerees desiring to acquire additional Offered Shares. For the purpose of this
Section 3.4(b), an Offeree that does not deliver a Second Offeree Notice within
the time required by this Section 3.4(b) shall be deemed to have provided a
Second Offeree Notice on the last day on which a Second Offeree Notice may be
provided specifying no interest in acquiring additional Offered Shares.
3.5 Transfer by Offering Shareholder. If any Offered Shares remain
unallocated after the application of Section 3.4(a) and 3.4(b), then, subject to
Section 3.7 below, the Offering Shareholder shall be permitted, for a period of
thirty (30) days from receipt by the Company of the last Second Offeree Notice,
to make a Transfer of all such Offered Shares to the Proposed Transferee on the
terms and conditions set forth in the Offeror Notice. If the Offering
Shareholder does not make such Transfer of the Offered Shares within such thirty
(30) day period, then any subsequent proposed Transfer of the Offered Shares
shall again be subject to all of the terms and provisions of this Section 3.
3.6 Acquisition and Transfer. The closing of any acquisition of
Offered Shares by any Shareholder under this Agreement shall take place,
notwithstanding any contrary provisions in an Offeror's Notice, within thirty
(30) days from receipt by the Company of the last Second Offeree Notice or
Offeree Notice, as the case may be, unless another date is mutually agreed upon
by the parties participating in the closing. At the closing of any Transfer of
Offered Shares under this Section 3.6, the Offering Shareholder shall deliver to
any Shareholder acquiring any of such Offered Shares, a certificate or
certificates representing the Offered Shares being acquired, duly endorsed, or
accompanied by assignments separate from certificate, and in proper form and
order for transfer, against receipt of the consideration, and the Shareholder
acquiring such Offered Shares shall take all actions and execute and deliver to
the Offering Shareholder all instruments
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<PAGE>
and documents as may be necessary or desirable to consummate the acquisition and
Transfer of the Offered Shares in compliance with all applicable laws and
regulations.
3.7 Obligations of Transferees. Each transferee and each subsequent
transferee of any shares of Stock, or of any interest in such shares of Stock,
shall hold such shares of Stock or interest therein subject to all of the
provisions of this Agreement, and such transferee shall, to evidence such
transferee's intention and agreement to assume all of the obligations of the
transferor under this Agreement and to be bound by all of the provisions of this
Agreement, execute the original or a counterpart of this Agreement upon
acquisition of such shares of Stock or any interest therein and deliver the
original or a counterpart of this Agreement to the Company.
3.8 Transfers to Affiliates. The provisions of this Section 3 (other
than Section 3.7) shall not apply to any Transfer of shares of Stock by a
Shareholder to any corporation which directly or indirectly controls, is
controlled by or is under common control with such Shareholder, where such
control is exercised through ownership of more than fifty percent (50%) of the
relevant voting power provided that the transferee affiliate has agreed to
assume all of the obligations of the transferor under this Agreement and to be
bound by all of the provisions of this Agreement.
3.9 Obligations of Company. The Company shall not be required (a) to
transfer on its books any shares of Stock that have been sold or otherwise
transferred in violation of any of the provisions of this Agreement, or (b) to
treat any purported transferee of such shares of Stock as the owner thereof or
to accord to such purported transferee the right to vote such shares of Stock as
the holder thereof or to receive dividends thereon.
4. Material Defaults and Accumulated Losses.
4.1 Material Defaults. In the event that (i) Lycos materially
breaches or defaults in the performance of its obligations under this Agreement,
the Joint Venture Agreement or the License Agreement, or (ii) Sumitomo
materially breaches or defaults in the performance of its obligations under this
Agreement or the Joint Venture Agreement, or (iii) Sumitomo or its affiliate
materially breaches or defaults in the performance of its obligations under the
loan agreement to be entered into with the Company to implement the Sumitomo
Facility as contemplated by the Joint Venture Agreement (the "Loan Agreement"),
and any such breach or default is not cured within ninety (90) days after
written notice of such default is given by the non-breaching party to the
breaching party, then the non-breaching party shall have the right, at its
option and without prejudice to any other rights and remedies it may have, to:
(a) elect to dissolve the Company by giving written notice
thereof to the breaching party, in which case the breaching party agrees to join
with the non-breaching party to take all such steps as may be necessary to
dissolve the Company, it being agreed between Sumitomo and Lycos that the
breaching party shall have the right to vote the shares of the non-
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<PAGE>
breaching party in favor of dissolution if the non-breaching party fails to take
action as required under this paragraph (a); or
(b) elect to terminate this Agreement by written notice
thereof to the breaching party, in which case this Agreement, the Joint Venture
Agreement, the License Agreement and the funding commitment under the Loan
Agreement shall automatically terminate notwithstanding any provision to the
contrary in this Agreement, the Joint Venture, the License Agreement or the Loan
Agreement.
For purposes of this Section 4.1, the commencement of a bankruptcy or other
similar proceeding by or against Lycos or Sumitomo which is not dismissed within
ninety (90) days shall be deemed a material breach of or default under this
Agreement by Lycos or Sumitomo, respectively.
4.2 Accumulated Losses. If the accumulated losses appearing on the
balance sheet of the Company as of the end of any financial year exceeds the
amount of the paid up capital of the Company, any of the Shareholders may, by
written notice given within thirty (30) days after receipt of such balance
sheet, require all of the Shareholders to meet at a location agreeable to all of
the Shareholders to discuss the appropriate steps to be taken with respect to
the financial situation of the Company. Such meeting of Shareholders shall be
held within thirty (30) days after any such notice is given. If the Shareholders
cannot reach agreement within thirty (30) days after the date of such meeting on
the appropriate steps to be taken, any Shareholder may thereafter propose, by
written notice given to the other Shareholders, that the Company dissolve and,
concurrently with giving such notice, shall offer to sell its Stock at a price
determined on the basis of the net worth of the Company. If the other
Shareholders, or any of them, do not agree within thirty (30) days after the
giving of such notice to purchase all of such Stock and assume all of the
obligations (if any) of the offering Shareholder to provide financial assistance
to the Company, then all of the Shareholders shall take such steps as may be
necessary to dissolve the Company.
5. Representations and Warranties. Each Shareholder represents and
warrants to the other Shareholders that (a) such Shareholder has taken all
requisite corporate action to authorize and approve the execution, delivery and
performance of this Agreement by such Shareholder, (b) this Agreement has been
duly executed and delivered by such Shareholder, and constitutes the legal,
valid and binding obligations of such Shareholder, enforceable against such
Shareholder in accordance with its terms, and (c) the execution, delivery and
performance of this Agreement by such Shareholder will not (i) violate any
provision of the charter documents of such Shareholder, (ii) violate, conflict
with or result in (or with notice or lapse of time or both result in) a breach
of or default under any term or provision of any contract or agreement to which
such Shareholder is a party or by which such Shareholder or any of its assets or
properties is or may be bound, or (iii) violate any order, judgment, injunction,
award or decree of any court or arbitration body, or any governmental,
administrative or regulatory authority, by which such Shareholder or any of its
assets or properties is or may be bound.
6. Termination.
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<PAGE>
6.1 Termination. This Agreement shall terminate upon the occurrence
of any of the following events:
(a) the voluntary written agreement of all of the Shareholders
(or, as applicable, their successors in interest) to terminate this Agreement;
(b) the dissolution, bankruptcy or insolvency of the Company;
(c) the sale of all or substantially all of the Company's
assets other than in the ordinary course of business;
(d) the acquisition of the Company by another entity by means
of merger or consolidation resulting in the exchange of any Stock for securities
issued, or caused to be issued, by the acquiring entity; or
(e) at such time after the issuance of the Additional Shares
as only one Shareholder remains.
6.2 Surrender. Upon termination of this Agreement, all persons
holding Stock subject to the provisions of this Agreement shall surrender to the
Company the certificates for such Stock, and the Company shall issue in lieu
thereof new certificates.
7. Miscellaneous.
7.1 Effective Date. This Agreement shall be effective as of the date
of the issuance of the Additional Shares. The effectiveness of this Agreement
shall be conditioned upon the issuance of all of the Additional Shares.
7.2 Notices. Any notice, request, demand, approval or consent
required or permitted under this Agreement shall be in writing and shall be
effective upon actual receipt when delivered by (a) registered mail, postage
prepaid, return receipt requested, (b) personal delivery, (c) an overnight
courier of recognized reputation (such as DHL or Federal Express), or (d)
transmission by telecopier (with confirmation by mail), in each case addressed
as follows:
If to Lycos: Lycos, Inc.
500 Old Connecticut Path
Framingham, MA 01701-4570
Attention: Chief Financial Officer
Telephone: (508) 424-0400
Facsimile: (508) 820-4499
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<PAGE>
With a copy to: Coudert Brothers
1055 West 7th Street, 20th Floor
Los Angeles, CA 90017
Attention: Richard G. Wallace
Telephone: (213) 688-9088
Facsimile: (213) 689-4467
If to Sumitomo: Sumitomo Corp.
1-2-2 Hitotsubashi, Chiyoda-ku
Tokyo, 100-8601, Japan
Telephone: 03-3217-7021
Facsimile: 03-3217-7029
If to IIJ: Internet Initiative Japan, Inc.
Takebashi Yasuda Bldg.
3-13 Kanda, Nishiki-cho, Chiyoda-ku
Tokyo, 101, Japan
Telephone:
Facsimile:
Any party may change its address or telecopier number for notice purposes by
notice given to the other parties in accordance with this Section 7.2.
7.3 Assignment. No party's rights, duties or responsibilities under
this Agreement may be assigned, delegated or otherwise transferred in any
manner, without the prior written consent of the other parties, except that no
such consent shall be required in connection with the assignment, delegation or
other transfer of any such rights, duties or responsibilities by a party to any
affiliate which directly or indirectly controls, is controlled by or is under
common control with such party, where such control is by more than 50% of the
relevant voting power provided that the assigning party unconditionally
guarantees to the other parties to this Agreement the due and punctual
performance by such affiliate of such party's obligations under this Agreement.
7.4 Entire Agreement. This Agreement constitutes the entire contract
between the parties with respect to the subject matter covered by this
Agreement. This Agreement supersedes all previous representations, arrangements,
agreements and understandings, if any, by and among the parties with respect to
the subject matter covered by this Agreement. This Agreement may not be amended,
changed or modified except by a writing duly executed by the parties hereto.
7.5 Severability. If any provision of this Agreement is held by a
court of competent jurisdiction to be unenforceable, invalid or void in any
respect, no other provision of
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<PAGE>
this Agreement shall be affected thereby, all other provisions of this Agreement
shall nevertheless be carried into effect and the parties shall amend this
Agreement to modify the unenforceable, invalid or void provision to give effect
to the intentions of the parties to the extent possible in a manner which is
valid and enforceable.
7.6 Specific Performance. Each party hereto may obtain specific
performance to enforce its rights hereunder and each party acknowledges that
failure to fulfill such party's obligation to the other parties hereto would
result in irreparable harm.
7.7 Remedies and Waivers. All rights and remedies of the parties are
separate and cumulative, and no one of them, whether exercised or not, shall be
deemed to be to the exclusion of or to limit or prejudice any other rights or
remedies which the parties may have. The parties shall not be deemed to waive
any of their rights or remedies under this Agreement, unless such waiver is in
writing and signed by the party to be bound. No delay or omission on the part of
any party in exercising any right or remedy shall operate as a waiver of such
right or remedy or any other right or remedy. A waiver on any one occasion shall
not be construed as a bar to or waiver of any right or remedy on any future
occasion.
7.8 Arbitration. In the event any dispute arises among the parties,
or any of them, which cannot be amicably resolved, such dispute shall be
submitted to the International Chamber of Commerce for binding arbitration in
accordance with the commercial arbitration rules of the International Chamber of
Commerce as then in effect. The arbitration shall be conducted in the English
language, and, unless otherwise agreed by the parties to the dispute, shall be
held in Paris. Any arbitration award rendered in any such arbitration proceeding
may be entered in and enforced by any court of competent jurisdiction.
7.9 Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws (other than that body of law relating
to conflicts of law) of Japan.
7.10 Attorneys' Fees. In the event any action or proceeding is
initiated for any breach of or default in any of the terms or conditions of this
Agreement, then the party or parties in whose favor judgment shall be entered or
an arbitration award shall be made, shall be entitled to have and recover from
the other parties all costs and expenses (including attorneys' fees) incurred in
such action or proceeding and any appeal therefrom.
7.11 Headings. The headings contained in this Agreement are for
convenience only and are not a part of this Agreement, and do not in any way
interpret, limit or amplify the scope, extent or intent of this Agreement, or
any of the provisions of this Agreement.
7.12 Counterparts and Facsimile. This Agreement may be executed in
counterparts, each of which shall constitute an original, but all of which
together shall constitute one and the same agreement. Transmission of facsimile
copies of signed original signature pages of this Agreement shall have the same
effect as delivery of the signed originals.
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<PAGE>
7.13 Translation. For the convenience of the parties, one or more
Japanese translations of this Agreement may be prepared. Notwithstanding the
preparation or existence of any such Japanese translations, the English language
version of this Agreement shall be controlling.
7.14 Third Party Beneficiary. The Company is a third party
beneficiary under this Agreement. Except as to the Company, this Agreement is
not intended to and does not confer any rights on any third party, and no third
party beneficiary under or in respect of this Agreement.
7.15 Binding Effect. Subject to Section 7.3, this Agreement shall be
binding upon and shall inure to the benefit of the parties and their respective
successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LYCOS, INC.,
a corporation organized under the laws of Delaware, USA
By:
---------------------------------------------
Its:
---------------------------------------------
SUMITOMO CORP.,
a kabushiki kaisha organized under the laws of Japan
By:
---------------------------------------------
Its:
---------------------------------------------
INTERNET INITIATIVE JAPAN, INC.,
a kabushiki kaisha organized under the laws of Japan
By:
---------------------------------------------
Its:
---------------------------------------------
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<PAGE>
AGREEMENT
THIS AGREEMENT is made as of June 29, 1998 by and among LYCOS, INC.
("Lycos"), a corporation organized under the laws of the State of Delaware,
United States of America, SUMITOMO CORP. ("Sumitomo Corp."), a kabushiki kaisha
organized under the laws of Japan, SUMISHO COMPUTER SYSTEMS CORP. ("SCS"), a
kabushiki kaisha organized under the laws of Japan, and INTERNET INITIATIVE
JAPAN, INC. ("IIJ"), a kabushiki kaisha organized under the laws of Japan.
RECITALS
A. Lycos, Sumitomo Corp. and IIJ are parties to a Shareholders Agreement
dated as of May 12, 1998 (the "Shareholders Agreement").
B. Sumitomo Corp. owns in excess of 50% of the issued and outstanding
shares of SCS. Sumitomo Corp. has transferred to SCS 625 shares of Lycos Japan
K.K. Subsequent to such transfer, the issued and outstanding shares of Lycos
Japan K.K. are owned beneficially and of record as follows:
Shareholder No. of Shares
----------- -------------
[***] [***]
[***] [***]
[***] [***]
[***] [***]
C. The parties hereto have entered into this Agreement in satisfaction of
the requirements of Section 3.8 of the Shareholder Agreement.
NOW, THEREFORE, the parties to this Agreement hereby agree as follows:
1. SCS hereby agrees to assume all of the obligations of Sumitomo Corp.
under the Shareholders Agreement with respect to the 625 shares of Lycos Japan
K.K transferred by Sumitomo Corp. to SCS, and to be bound by all of the
provisions of the Shareholders Agreement with respect to such shares.
2. SCS shall be included in the term "Shareholders" or "parties" for all
purposes under the Shareholders Agreement, except that the term "Shareholders"
as used in Recital A of the Shareholders Agreement (which is a reference to the
parties to the Joint Venture Agreement dated as of March 5, 1998 by and among
Lycos, Sumitomo Corp. and IIJ) shall not include SCS.
3. As used in the Shareholders Agreement, the term "Sumitomo" shall apply
exclusively to Sumitomo Corp., except that the reference to "Sumitomo" in
Section 4.1(ii) shall be deemed a reference to Sumitomo Corp. and SCS as that
clause relates to their respective obligations.
*** A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
4. For notice purposes under Section 7.2 of the Shareholders Agreement,
communications to SCS shall be addressed as follows:
SUMISHO Computer Systems Corp.
10-14 Ryogoku, 2-chome
Sumida-ku, Tokyo, Japan
Telephone:
-----------------------
Facsimile:
-----------------------
5. The Shareholders Agreement shall continue in full force and effect
without amendment or modification except as otherwise expressly amended or
modified by this Agreement.
6. This Agreement constitutes the entire contract among the parties with
respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
LYCOS, INC.,
a corporation organized under the laws of Delaware, USA
By: /s/ Edward M. Philip
---------------------------------------------
Its: COO
---------------------------------------------
SUMITOMO CORP.,
a kabushiki kaisha organized under the laws of Japan
By: /s/ Isao Momota
---------------------------------------------
Isao Momota
Its: General Manager, Information &
---------------------------------------------
Telecommunications Business Dept. No.2
SUMISHO COMPUTER SYSTEMS CORP.,
a kabushiki kaisha organized under the laws of Japan
By: /s / Masamichi Umezumi
---------------------------------------------
Masamichi Umezumi
Its: Director, Package Integration Dev.
---------------------------------------------
INTERNET INITIATIVE JAPAN, INC.,
a kabushiki kaisha organized under the laws of Japan
By: /s/ Koichi Suzuki
---------------------------------------------
Its: Koichi Suzuki, President CEO
---------------------------------------------
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT INCLUDE:
a. Tripod, Inc., a Delaware corporation, doing business as "Tripod;"
b. WiseWire, Inc., a Pennsylvania corporation, doing business as
"WiseWire;"
c. WhoWhere, Inc., a California corporation, doing business as "WhoWhere;"
d. GuestWorld, Inc., a Delaware corporation, doing business as
"GuestWorld";
e. Internet Music Distribution, Inc., a Delaware corporation, doing
business as "Internet Music Distribution".
f. Wired Ventures, Inc., a Delaware corporation, doing business as "Wired
Ventures"; and
g. Quicksilver Acquisition Corp., a Delaware corporation, doing business as
"Quicksilver Acquisition Corp.".
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Lycos, Inc.:
We consent to the use of our report incorporated herein by reference and to
the references to our firm under the headings "Experts" and "Selected
Historical Financial Data" in the proxy statement/prospectus.
/s/ KPMG LLP
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KPMG LLP
Boston, Massachusetts
October 7, 1999
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EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-4 of
our report dated November 9, 1998, except as to subsequent events described
in Note 15 which are as of September 30, 1999, relating to the financial
statements of Quote.com, Inc., which appears in such Registration Statement.
We also consent to the references to us under the headings "Experts" and in
such Registration Statement.
/s/ PricewaterhouseCoopers LLP
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PricewaterhouseCoopers LLP
San Jose, California
October 7, 1999
