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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
July 11, 1997 (June 30, 1997)
CNET, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 0-20939 13-3696170
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(STATE OR OTHER (COMMISSION FILE (IRS EMPLOYER
JURISDICTION OF NUMBER) IDENTIFICATION NO.)
INCORPORATION)
150 Chestnut Street
San Francisco, California 94111
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code:
(415) 395-7800
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Effective as of June 30, 1997, CNET, Inc. (the "Registrant" or the
"Company") sold its 50% equity interest in E! Online, LLC ("E! Online") to E!
Entertainment Television, Inc. ("E! Entertainment"). E! Online, which was
formed by CNET and E! Entertainment in January 1996, operates a network of
Internet sites related to entertainment news and information.
Pursuant to this transaction, CNET (a) sold its entire equity interest in
E! Online to E! Entertainment, (b) licensed certain technology rights to E!
Online for use in connection with operating its Internet sites, (c) agreed to
provide certain consulting, hosting and transition services to E! Online in
connection with such sites, and (d) agreed to provide certain promotional
considerations to E! Online in connection with certain of CNET's Internet
sites. In return, E! Entertainment paid CNET $10.0 million in cash. E!
Entertainment also issued a promissory note to CNET, in the principal amount
of approximately $3.2 million, in satisfaction of E! Online's outstanding
indebtedness to CNET in such amount. E! Online is also required to make
additional payments to CNET pursuant to the consulting agreement entered into
in connection with the transactions.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) EXHIBITS
2.1 Master Agreement, dated as of June 30, 1997, among CNET, Inc., E!
Entertainment Television, Inc. and E! Online, LLC.
99.1 Press Release issued by CNET, Inc. on July 11, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: July 11, 1997 CNET, INC.
By: /s/ Shelby W. Bonnie
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Shelby W. Bonnie
EXECUTIVE VICE PRESIDENT,
CHIEF OPERATING
OFFICER AND CHIEF
FINANCIAL OFFICER
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INDEX TO EXHIBITS
Exhibit
Number Description
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2.1 Master Agreement, dated as of June 30, 1997, among CNET, Inc., E!
Entertainment Television, Inc. and E! Online, LLC.
99.1 Press Release issued by E! Entertainment Television, Inc. on
July 11, 1997.
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Exhibit 2.1
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MASTER AGREEMENT
This Master Agreement (the "Agreement") is made effective as of June 30, 1997
(the "Effective Date"), among CNET, Inc., a Delaware corporation ("CNET"), E!
Entertainment Television, Inc., a Delaware corporation ("E!"), and E! Online,
LLC, a California limited liability company (the "Company").
Reference is made to the Operating Agreement of the Company, dated as of January
30, 1996, between CNET and E! (the "Operating Agreement"), pursuant to which
CNET and E! formed the Company. Capitalized terms used in this Agreement and
not otherwise defined have the meanings assigned to such terms in the Operating
Agreement. The Company operates a network of Internet sites related to
entertainment news and information that are accessible under various URLs,
including www.eonline.com and www.moviefinder.com (collectively, the "Sites").
The number of Sites operated by the Company is expected to increase, and
references to the "Sites" include any additional entertainment-related sites
that may be launched by the Company in the future.
CNET desires to (a) sell its entire Member Interest in the Company, and all of
its capital stock in the Manager of the Company, to E!, (b) license certain
technology rights to the Company for use in connection with operating the Sites
and (c) provide certain consulting and hosting services to the Company in
connection with the Sites. Accordingly, the parties hereby agree as follows:
1. CONTRIBUTIONS BY CNET.
1.1 CNET INTEREST. CNET hereby sells, transfers and assigns to E! its
entire Member Interest in the Company and all of its capital stock in
the Manager of the Company (collectively, the "CNET Interest"),
effective as of the Effective Date. Simultaneously with the execution
and delivery of this Agreement, CNET is delivering to E! a duly
endorsed stock certificate evidencing all of its capital stock in the
Manager. CNET is also delivering to E! written resignations from each
of CNET's employees who is an officer of the Company or a director or
officer of the Manager of the Company.
1.2 LICENSE. Simultaneously herewith, CNET is entering into a License
Agreement with E! and the Company (the "License Agreement"), pursuant
to which CNET is granting the Company a nonexclusive, royalty-free
license to use certain technology rights identified therein solely in
connection with operating the Sites.
1.3 TRANSITION SERVICES. For a transition period to be determined by the
Company, which will not exceed three months (the "Transition Period"),
(a) CNET will provide reasonably sufficient space for the Company's
and reasonable bandwidth, telecommunications equipment and
technical personnel as necessary to host and maintain the servers
for the Sites in a manner consistent with the manner in which
such servers have been hosted and maintained by CNET to date;
(b) In order to allow CNET to host and maintain the Sites, the
Company will transmit the content of the Sites to CNET in
accordance with CNET's
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reasonable instructions and specifications, which will not be
materially more burdensome to the Company than those currently
applicable to the Company or those that would be applicable if
CNET were to retain its equity interest in the Company or those
that apply to other services in which CNET has an interest;
(c) CNET will provide human resources, accounting and other
managerial support for the Sites and its operations equivalent in
terms of quality, depth and scope to those currently being
provided by CNET to the Company and those that would be provided
if CNET were to retain its equity interest in the Company or
those provided by CNET to other services in which it has an
interest; and
(d) CNET will provide reasonable consultation and assistance to the
Company and its personnel, as requested by the Company during the
Transition Period, to facilitate (i) the transition of hosting
and maintenance responsibility for the Sites to an external data
center and (ii) the transition of the human resources, accounting
and other managerial support functions to the Company or its
designee. The consultation and assistance required pursuant to
this paragraph will include, without limitation, the activities
listed in SCHEDULE I.
CNET will provide the services required by this Section 1.3 for no
charge, other than the payments required under Section 2.1 below.
Following the Transition Period, if requested by the Company, CNET
will provide continued hosting and maintenance of the Sites (as
described in paragraph (a) above) on commercially reasonable terms, no
less favorable to the Company than those afforded to other third
parties for which CNET provides hosting and maintenance services, for
an additional period requested by the Company, up to six months;
provided that CNET will reasonably cooperate with the Company to
extend said six month additional period should the Company request a
further extension.
1.4 CONSULTING AGREEMENT. Simultaneously herewith, CNET is entering into
a Consulting Agreement with E! and the Company (the "Consulting
Agreement"), pursuant to which CNET will provide certain ongoing
services in connection with the Sites.
1.5 PROMOTIONAL CONSIDERATION. CNET will provide promotional
consideration to the Company through certain of CNET's Internet sites
as specified in SCHEDULE II.
2. CONTRIBUTIONS BY E! AND THE COMPANY.
2.1 PAYMENTS. Simultaneously with the execution and delivery of this
Agreement, E! is paying CNET $10,000,000 by wire transfer of
immediately available funds to an account designated by CNET.
2.2 CONSULTING AGREEMENT. Pursuant to the Consulting Agreement and
subject to the terms and conditions thereof, the Company will pay CNET
a fee of $1,000,000 per year, payable in quarterly installments of
$250,000 on the last day of each
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calendar quarter, beginning September 30, 1997.
2.3 PROMISSORY NOTE. Simultaneously herewith, CNET is delivering to the
Company for cancellation the original Revolving Promissory Note of the
Company, dated as of January 30, 1996 (the "Existing Note"). In
exchange, E! is issuing a new promissory note to CNET (the "New
Note"), dated as of the Effective Date, with a principal amount equal
to the outstanding principal and accrued interest on the Existing Note
as of the Effective Date.
3. REPRESENTATIONS AND WARRANTIES.
3.1 AUTHORITY. Each party to this Agreement represents and warrants to
the other parties that (a) such party has all necessary right, power
and authority to enter into this Agreement and to perform the acts
required of it hereunder, and (b) the entry into this Agreement by
such party, and the performance by such party of its obligations and
duties hereunder, do not and will not violate any agreement of such
party or by which such party is bound.
3.2 OWNERSHIP OF CNET INTEREST. CNET hereby represents and warrants to E!
and the Company that (a) CNET is the sole legal and beneficial owner
of the CNET Interest, free and clear of all liens, claims, security
interests and encumbrances, and (b) since the formation of the
Company, CNET has not effected any sale, pledge or other transfer of
its Member Interest in the Company or its capital stock in the Manager
of the Company, or any interest therein, and has not granted any third
party the right to acquire such Member Interest or capital stock or
any interest therein.
3.3 MATERIAL AGREEMENTS. Except for the agreements listed in SCHEDULE III
to this Agreement, CNET does not know of any material agreements to
which the Company is a party or by which the Company or any of its
assets is bound.
4. MUTUAL RELEASE. Each party hereby acknowledges and agrees that, following
the transfer of the CNET Interest hereunder, neither party will have any
obligations to the other party under the Operating Agreement. Each party,
for itself and its successors and assigns, hereby fully releases and
forever discharges and holds harmless the other party and its officers,
directors and agents from any and all claims, demands, losses, costs,
expenses, obligations, liabilities and damages of every kind and nature
whatsoever arising under or relating in any way, directly or indirectly, to
the Operating Agreement (including without limitation any breach or alleged
breach thereunder), the Company, the Manager or the operations of the
Company or the Manager to the extent arising out of facts or circumstances
existing on or prior to the execution and delivery of this Agreement and
known to such party. Notwithstanding the foregoing, neither party is
waiving any rights or claims under this Agreement or any of the other
agreements referenced herein as being executed in connection herewith.
5. CONFIDENTIALITY. Each party shall maintain the confidentiality of this
Agreement and the transactions contemplated hereby, and neither party shall
make any public disclosure or press statement concerning this Agreement or
such transactions, except as required by law or as agreed upon by the
parties. In the case of any disclosure required by law, the
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disclosing party will provide the other party a reasonable opportunity to
review any disclosure and a reasonable opportunity to comment upon such
disclosure or to request confidential treatment. In connection with the
transactions contemplated by this Agreement, each party may have access to
confidential or proprietary technical or business information relating to
the products, services, processes, finances, customers or prospective
customers, plans and strategies of the other party (collectively,
"Confidential Information"). Each party will take reasonable precautions
to protect the confidentiality of the other party's Confidential
Information, which precautions will be at least equivalent to those taken
by such party to protect its own Confidential Information. Except as
necessary to fulfill its obligations to the other party under this
Agreement or as required by law, neither party will knowingly disclose the
Confidential Information of the other party or use such Confidential
Information for its own benefit or for the benefit of any third party. A
party's "Confidential Information" does not include any information that is
or becomes generally available to others within such party's area of
business (other than through a breach of this Agreement by the other party)
or that is or was independently developed or obtained by the other party
without use of or reliance upon any Confidential Information received in
connection with this Agreement. Each party hereby acknowledges and agrees
that, in the event of a breach or threatened breach of this Section 5,
monetary damages would be insufficient to compensate the non-breaching
party and that, in addition to any other remedies that may be available,
the non-breaching party will be entitled to injunctive relief with respect
to such breach or threatened breach.
6. NONCOMPETITION AGREEMENT. Simultaneously herewith, CNET and E! are
entering into a separate noncompetition agreement.
7. SOLICITATION OF EMPLOYEES. During the term of the Consulting Agreement,
(a) neither CNET nor any direct or indirect majority-owned or
majority-controlled affiliate (a "Controlled Affiliate") of CNET will
solicit or approach, directly or indirectly, employees of the Company with
the intention of offering them employment at CNET or such affiliates; and
(b) neither the Company nor its Controlled Affiliates will solicit or
approach, directly or indirectly, employees of CNET with the intention of
offering them employment at the Company or such affiliates. The foregoing
limitations will not prevent any party from employing any such person who
contacts the hiring party on his or her own initiative.
8. MISCELLANEOUS.
8.1 LIMITATION OF LIABILITY. IN NO EVENT WILL ANY PARTY BE LIABLE FOR ANY
PUNITIVE, INCIDENTAL OR CONSEQUENTIAL DAMAGES IN ANY ACTION ARISING
FROM OR RELATED TO THIS AGREEMENT, WHETHER BASED IN CONTRACT OR TORT
(INCLUDING NEGLIGENCE), INCLUDING WITHOUT LIMITATION, DAMAGES RELATING
TO THE LOSS OF PROFITS, INCOME OR GOODWILL, REGARDLESS OF WHETHER SUCH
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED
THAT SUCH LIMITATIONS WILL NOT APPLY IN THE CASE OF A PARTY'S WILLFUL
MISCONDUCT OR GROSS NEGLIGENCE.
8.2 ASSIGNMENT. This Agreement may not be assigned by any of the parties
hereto; provided that (a) any rights granted to the Company under this
Agreement may
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be assigned to E! or to any Controlled Affiliate of E! that operates
the Sites, but such rights may be exercised only in connection with
the operation of the Sites; (b) CNET may assign this Agreement to any
Controlled Affiliate of CNET; and (c) any party may assign this
Agreement to the transferee of substantially all of its business
operations (whether by asset sale, stock sale, merger or otherwise),
but if the Company effects such an assignment, then its rights may be
exercised only in connection with the operation of the Sites. No
assignment of this Agreement will release the assigning party from its
obligations hereunder unless the other parties expressly agree in
writing to such a release.
8.3 FORCE MAJEURE. Neither party will be liable to the other hereunder
for any Internet or telecommunications failure, computer virus, third
party interference or other third party software or hardware that may
interfere with such party's performance obligations hereunder or cause
other problems or losses (collectively, a "Network Failure"). Neither
party will be liable for any delay or failure to fulfill its
obligations hereunder, other than the payment of money, that results
from an act of God, war, civil disturbance, court order, legislative
or regulatory action, catastrophic weather condition, earthquake,
failure or fluctuation in electrical power or other utility services,
Network Failure or other cause beyond its reasonable control.
Notwithstanding the foregoing, neither party will be released from its
obligations hereunder as a result of any event caused by the
negligence, recklessness or intentional misconduct of such party.
8.4 ENTIRE AGREEMENT. This Agreement and the other agreements and
instruments expressly referenced herein constitute the final agreement
of the parties with respect to the subject matter thereof and
supersede any prior oral or written agreements between the parties.
This Agreement will be binding upon and inure to the benefit of the
parties and their respective successors and assigns.
8.5 INVALIDITY OF PROVISIONS. If any provision of this Agreement is
declared or found to be illegal, unenforceable or void, in whole or in
part, then the parties will be relieved of all obligations arising
under such provision, but only to the extent that it is illegal,
unenforceable, or void, it being the intent and agreement of the
parties that this Agreement be deemed amended by modifying such
provision to the extent necessary to make it legal and enforceable
while preserving its intent or, if that is not possible, by
substituting therefor another provision that is legal and enforceable
and achieves the same objectives.
8.6 GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the substantive laws (and not the choice of law
provisions) of the State of California.
8.7 ATTORNEYS' FEES. If attorneys' fees or other costs are incurred to
secure performance of any obligations hereunder, or to establish
damages for the breach thereof or to obtain any other appropriate
relief, whether by way of prosecution or defense, the prevailing party
will be entitled to recover reasonable attorneys' fees and costs
incurred in connection therewith.
8.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts,
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which together will constitute a single agreement.
8.9 KNOWLEDGE. References in this Agreement to the knowledge of CNET or
E! refer to matters actually known by employees of CNET or E!,
respectively, who have been involved in the negotiation of this
Agreement or have significant responsibility for monitoring or
directing such party's interest in the Company.
8.10 FURTHER ASSURANCES. Each party agrees to execute any documents and to
perform any other acts that may be reasonably necessary or appropriate
to carry out the intent and purposes of this Agreement and to
consummate the transactions contemplated hereby.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first written above.
CNET, INC.
By: /s/ Shelby W. Bonnie
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Name: SHELBY W. BONNIE
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Title: COO & CFO
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E! ENTERTAINMENT TELEVISION, INC.
By: /s/ Lee Masters
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Name: LEE MASTERS
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Title: PRESIDENT/CEO
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E! ONLINE, LLC
By: E! ONLINE, INC., its manager
By: /s/ Shelby W. Bonnie
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Name: SHELBY W. BONNIE
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Title: SECRETARY
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CONTACTS:
Sarah Lesch, (213) 954-2513 Karen Wood, (415) 395-7800
E! Entertainment Television CNET: The Computer Network
E! ENTERTAINMENT TELEVISION PURCHASES
CNET'S INTEREST IN E! ONLINE
"ENTERTAINMENT'S HOME PAGE" NOW A WHOLLY-OWNED SUBSIDIARY OF E!
LOS ANGELES, July xx -- E! Entertainment Television has purchased the
50 percent interest in E! Online owned by CNET, Inc. (Nasdaq: CNWK), it was
announced today by Lee Masters, E!'s President and CEO. Launched August 5,
1996, E! Online (www.eonline.com) will now be a wholly-owned subsidiary of E!
Entertainment Television. In connection with the purchase, CNET has agreed to
license certain technology to E! and to provide technological and marketing
consulting services to E! Online.
E! Online will continue to operate under the direction of President Jeremy
Verba.
"This marks an exciting point in the growth of E! and E! Online," stated
Masters. "Launching as a partnership with CNET last year allowed two industry
leaders to create a site that became the category leader on the web in under six
months. The speed with which E! Online has achieved its success and recognition
from the marketplace greatly exceeded our expectations. E! Online allows E! to
further brand its
(more...)
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E! Online - 2
position as the entertainment news and information authority on television,
internationally and online."
According to Halsey Minor, Chairman and CEO of CNET, "CNET's unique
expertise in developing Web sites allowed us to build value on the Internet very
quickly for CNET and E! Entertainment Television. We are proud to have been
involved in the creation of E! Online, which we believe will continue to grow
and prosper under E! as one of the premier destinations on the Internet. This
has been a very rewarding relationship for both companies."
"CNET has been a key architect of the Internet, and it has been a pleasure
to work with such an innovative company," said Doug Sylvester, E!'s Vice
President, New Business Development, who was instrumental in negotiating the
deal for E!. "We are indebted to CNET for their contributions and expertise,
and look forward to our continuing association."
E! Online has achieved a number of milestones in its first year, including
surpassing seven million pages turned in June. The site has already spun off
its first related service in Moviefinder (www.moviefinder.com), a one-stop movie
site that offers a personalized recommendation engine; theater, television and
video listings; up-to-the-minute news; and an extensive film database. E!
Online has received both critical and popular acclaim, including being selected
as one of PC MAGAZINE's "Best Of The Web," and winning the "People's Choice --
Most Entertaining Site" at NETGUIDE MAGAZINE'S
(more...)
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E! Online - 3
annual awards for innovation on the net. Under editor-in-chief Lew Harris'
direction, E! Online has fast become known for its live, in-depth, interactive
coverage of major entertainment events, including being the exclusive webcast at
the premieres of "Evita" and "Batman & Robin."
CNET: The Computer Network is at the leading edge of media companies,
integrating television programming with a network of sites on the World Wide
Web. In both media, CNET provides authoritative information on computers, the
Internet and digital technologies. CNET's Web sites combine breakthrough
interactive technology with engaging content and design, and are widely accepted
as setting new standards for excellence in the medium. The company's television
programming, which airs on USA Network, the Sci-Fi Channel and in national
syndication.
E! Entertainment Television is the global authority for entertainment news
and information. E! offers compelling celebrity interviews, talk shows, news,
documentaries, behind-the-scenes, movie previews and the most comprehensive
coverage of the entertainment industry's awards shows. Based in Los Angeles, E!
is currently available to 44 million subscribers on 2,770 cable systems and
direct broadcast satellite providers.
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