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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 15, 1998 (June 30, 1998)
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
--------------------------------
(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.
Pursuant to a Contribution Agreement, dated as of June 4, 1998 (the
"Contribution Agreement"), among CNET, Inc., a Delaware corporation (the
"Registrant" or the "Company"), NBC Multimedia, Inc., a Delaware corporation
("NBC Multimedia"), and Snap! LLC, a Delaware limited liability company (the
"LLC"), the Company and NBC Multimedia agreed to form the LLC to operate the
Snap! Internet portal service (the "Snap Service"), which was previously
operated as a division of the Company. In connection with the formation and
initial capitalization of the LLC, which was completed on June 30, 1998, the
Company contributed to the LLC substantially all of its assets used exclusively
in the operation of the Snap Service. Initially, the LLC will be owned 81% by
the Company and 19% by NBC Multimedia, but NBC Multimedia has an option to
increase its ownership stake in the LLC to 60%. For more information concerning
the terms of the Contribution Agreement and formation of the LLC, reference is
made to the Contribution Agreement and the Amended and Restated Limited
Liability Company Agreement of the LLC, which are attached to this report as
Exhibits 2.1 and 2.2, respectively, and which are incorporated herein by
reference.
ITEM 5. OTHER EVENTS.
A Stock Purchase Agreement was entered into as of June 4, 1998 (the
"Stock Purchase Agreement") by and among the Company and National
Broadcasting Company, Inc. ("NBC"), pursuant to which the Company agreed to
issue and sell to NBC an aggregate of 812,800 shares (the "Shares") of the
Company's common stock, $.0001 par value per share (the "Common Stock"), for
an aggregate purchase price of $26,212,800 ($32.25 per share). The purchase
and sale of shares contemplated by the Stock Purchase Agreement was completed
on June 30, 1998. For more information concerning the purchase and sale of
such shares, reference is made to the Stock Purchase Agreement, which
attached to this report as Exhibit 10.1 and which is incorporated herein by
reference.
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<CAPTION>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
<C> <S>
(c) EXHIBITS
2.1 Contribution Agreement, dated as of June 4, 1998, by and among
the Company, NBC and the LLC.
2.2 Amended and Restated Limited Liability Company Agreement of the
LLC, dated as of June 30, 1998, by and among the Company and NBC
Multimedia.
10.1 Stock Purchase Agreement, dated as of June 4, 1998, by and
between the Company and NBC.
99.1 Press Release, dated as of July 9, 1998, by the Company
announcing the completion of the transactions contemplated by the
Contribution Agreement.
</TABLE>
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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 15, 1998 CNET, INC.
By: /s/ Douglas N. Woodrum
-----------------------
Douglas N. Woodrum
EXECUTIVE VICE PRESIDENT
AND CHIEF FINANCIAL
OFFICER
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
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<S> <C>
2.1 Contribution Agreement, dated as of June 4,
1998, by and among CNET, Inc., National
Broadcasting Company, Inc. and Snap! LLC.
2.2 Amended and Restated Limited Liability Company
Agreement, dated as of June 30, 1998, by and
among CNET, Inc. and NBC Multimedia, Inc.
10.1 Stock Purchase Agreement, dated as of June 4,
1998, by and among CNET, Inc. and National
Broadcasting Company, Inc.
99.1 Press Release issued by CNET, Inc. on July 9,
1998.
</TABLE>
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EXHIBIT 2.1
CONTRIBUTION AGREEMENT
among
NATIONAL BROADCASTING COMPANY, INC.,
CNET, INC.
and
SNAP! LLC
Dated as of June 4, 1998
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This Contribution Agreement (this "AGREEMENT") is made as of the 4th day of
June, 1998 by and among National Broadcasting Company, Inc., a Delaware
corporation (together with its successors and permitted assigns, "NBC"), CNET,
Inc., a Delaware corporation (together with its successors and permitted
assigns, "CNET"), and Snap! LLC, a Delaware limited liability company (the
"LLC").
W I T N E S S E T H:
WHEREAS, NBC and CNET will form the LLC for the purpose of carrying
out the transactions contemplated by this Agreement;
WHEREAS, NBC and CNET have agreed, subject to the terms and conditions
of this Agreement, for CNET to contribute at the Closing (as defined below) to
the LLC all right, title and interest to all of the properties, assets and other
rights included in the Snap! Assets (as defined below) and for the LLC to assume
certain liabilities and obligations related to the Snap! Assets;
WHEREAS, NBC and CNET have agreed, subject to the terms and conditions
of this Agreement, for NBC or its Affiliate to contribute at the Closing to the
LLC $5,864,197;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, NBC, CNET and the LLC hereby agree as follows:
ARTICLE I.
DEFINITIONS
1.1 DEFINITIONS. (a) As used herein, the following terms shall
have the following meanings:
"AFFILIATE" means with respect to a specified Person, any Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the specified Person. As used
in this definition, the term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities, as trustee
or executor, by contract or credit arrangement or otherwise. Even though the
LLC is controlled by both CNET and NBC and is therefore an affiliate, for
purposes hereof, the LLC will not be considered an Affiliate. A nonemployee
director of a corporation will be deemed not to "control" such corporation.
"BUSINESS DAY" means a day that is not a Saturday or Sunday or day on
which commercial banks are authorized by law to close in San Francisco.
"CLOSING DATE" means the actual date of Closing.
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"ENVIRONMENTAL LAWS" means any and all laws, rules, orders,
regulations, statutes, ordinances, guidelines, codes, decrees, or other legally
enforceable requirement (including, without limitation, common law) of any
foreign government, the United States, or any state, local, municipal or other
governmental authority, regulating, relating to or imposing liability or
standards of conduct concerning protection of the environment or of human
health, or employee health and safety.
"ENVIRONMENTAL PERMITS" means any and all permits, licenses,
registrations, notifications, exemptions and any other authorization required
under any Environmental Law.
"ENVIRONMENTAL REPORT" means any report, study, assessment, audit, or
other similar document that addresses any issue of actual or potential
noncompliance with, or actual or potential liability under or cost arising out
of, any Environmental Law that may in any way affect any of the Snap! Assets.
"GAAP" means generally accepted accounting principles as currently in
effect in the United States consistently applied.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"IMPLEMENTING AGREEMENTS" means, collectively, the LLC Agreement, the
Transition and Technology Agreement and the Preferred Carriage Agreement.
"LIABILITIES" means, as to any Person, all debts, liabilities and
obligations, direct, indirect, absolute or contingent of such Person or entity,
whether accrued, vested or otherwise, whether known or unknown and whether or
not actually reflected, or required by GAAP to be reflected, in such Person's
balance sheets or other books and records.
"LIENS" means any adverse claims, liens, security interests, charges,
leases, licenses or sublicenses and other encumbrances of any kind and nature.
"LLC AGREEMENT" means the Limited Liability Company Agreement for the
LLC, substantially in the form of EXHIBIT 1.1 hereto, as the same may be
amended, supplemented or otherwise modified from time to time.
"MATERIAL ADVERSE EFFECT" with respect to NBC or CNET, means a
material adverse effect on (A) the assets, liabilities, business, results of
operations or condition (financial or otherwise) of (i) NBC or the LLC, in the
case of NBC or (ii) CNET or the LLC, in the case of CNET or (B) the ability of
such party to perform its obligations hereunder or under the Implementing
Agreements to which it is a party.
"MATERIALS OF ENVIRONMENTAL CONCERN" means any gasoline or petroleum
(including, without limitation, crude oil or any fraction thereof) or petroleum
products, polychlorinated biphenyls, urea-formaldehyde insulation, asbestos,
pollutants, contaminants,
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radioactivity, and any other substances of any kind, whether or not any such
substance is defined as hazardous or toxic under any Environmental Law, that is
regulated pursuant to or could give rise to liability under any Environmental
Law.
"PERSON" means any individual, corporation, partnership, joint
venture, trust, incorporated organization, limited liability company, other form
of business or legal entity or Governmental Authority.
"SNAP! BUSINESS" means the (i) design, creation, operation,
maintenance and marketing of the Snap! Site, including customized versions of
the Snap! Site developed for third party distribution partners, (ii) marketing
and sale of advertising or other promotional content for transmission on the
Snap! Site, (iii) the provision of Snap!-branded search services and directory
listings to third parties for display on third party web sites; and (iv) all
business activities incidental to or required in connection with the foregoing.
"SNAP! SITE" means the Internet site currently accessible from the
World Wide Web at http://www.snap.com and any co-branded edition of such site
developed for Snap! distribution partners.
(b) As used in this Agreement, each of the following capitalized
terms shall have the meaning ascribed to them in the Section set forth opposite
such term:
<TABLE>
<CAPTION>
<S> <C>
Term Section
Assumed Contracts Section 2.1(a)(ii)
Assumed Liabilities Section 2.3(a)
Balance Sheet Section 4.2(a)(i)
Closing Section 3.1
Dispute Parties Section 9.4(a)
ERISA Section 4.2(l)
Excluded Assets Section 2.1(b)
Intellectual Property Section 2.1(a)(i)
Interim Financial Statements Section 4.2(a)(i)
Lease Section 4.2(f)(viii)
Licenses Section 4.2(d)
Losses and Expenses Section 8.1
Permitted Liens Section 4.2(b)(i)
Plans Section 4.2(l)
Preferred Carriage Agreement Section 3.2(c)
Real Property Section 4.2(f)
Retained Liabilities Section 2.3(a)
Snap! Assets Section 2.1(a)
Taxes Section 4.2(p)
Tax Authority Section 4.2(p)
Tax Returns Section 4.2(p)
Technology Section 6.2(g)
Transition and Technology Agreement Section 3.2(b)
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Year-End Financial Statements Section 4.2(a)(i)
</TABLE>
ARTICLE II.
INITIAL CONTRIBUTIONS; ASSUMPTION OF LIABILITIES
2.1 TRANSFERS BY CNET. (a) At the Closing, CNET shall, and shall cause
its Affiliates to, transfer, assign and deliver to the LLC all of CNET's and its
Affiliates' right, title and interest in and to the properties, assets and other
rights (other than the Excluded Assets) owned or leased by, or licensed to CNET
or any of its Affiliates and used exclusively in the conduct of the Snap!
Business or listed on SCHEDULE 2.1(a) hereto, free and clear of all Liens other
than those set forth on Schedule 4.2(b)(i) and Permitted Liens, including,
without limitation, the following:
(i) all of CNET or its Affiliates' intellectual property rights used
exclusively in the conduct of the Snap! Business, including without
limitation those which are listed on SCHEDULE 2.1(a)(i) and any and all
rights, privileges and priorities arising under United States, state,
foreign or multinational law, compact, treaty, protocol or equivalent
agreement relating to the following (collectively, the "INTELLECTUAL
PROPERTY"):
(A) patents, copyrights and copyrightable works, mask works,
trade secrets, inventions, technology, know-how, proprietary
information, research material, specifications, surveys, designs,
formulae, recipes, drawings, processes, engineering reports, computer
applications, programs and all other computer software, including
without limitation operating software, network software, firmware,
middleware, design software, design tools, management information
systems, systems documentation and instructions, databases, and the
tangible objects in which the foregoing rights are embodied (including
all computer hardware, magnetic tapes and other data processing and
storage materials);
(B) artwork, photographs, editorial materials, formats, market
research data, design, development and manufacturing files, vendor and
customer drawings, formulations and specifications and other similar
information;
(C) trademarks, service marks, trade names, service names, brand
names, corporate names, logos, trade dress, and the goodwill of the
business symbolized thereby and appurtenant thereto;
(D) all registrations, applications, recordings, common-law
rights, licenses and other third-party agreements relating to any of
the foregoing;
(E) all rights commonly known as "industrial property rights" or
the "moral rights" of authors relating to any of the foregoing;
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(F) all rights to obtain renewals, reissues, extensions,
continuations, divisions or equivalent extensions of legal protection
pertaining to the foregoing; and
(G) any and all claims, causes of action, or other rights at law
or in equity arising out of or relating to any infringement,
misappropriation, distortion, dilution or other unauthorized use or
conduct in derogation of the foregoing occurring prior to the
effective date of this Agreement;
(ii) all contracts and agreements of CNET or its Affiliates that
relate exclusively to the conduct of the Snap! Business, including leases
of real and personal property, license and distributorship agreements,
distribution agreements, content agreements, dealer agreements, supply
agreements, purchase agreements and purchase orders, outstanding quotations
and agency agreements, including without limitation those listed on
SCHEDULE 2.1(a)(ii), together with all such contracts and agreements for
the conduct of the Snap! Business that are entered into in the ordinary
course of business of the Snap! Business between the date hereof and the
Closing Date other than in violation of Section 5.7 (the "ASSUMED
CONTRACTS");
(iii) all leasehold interests in the real property listed on
SCHEDULE 2.1(a)(iii), including leasehold interest in all buildings,
structures and other improvements located on such real property and any
additions, improvements, replacements and alterations thereto between the
date of this Agreement and the Closing Date;
(iv) all office furniture, furnishings and fixtures of CNET or
its Affiliates that are used exclusively in the Snap! Business or that are
located on the real property or leaseholds listed on SCHEDULE 2.1(a)(iv)
and any additions, improvements, replacements and alterations thereto
between the date of this Agreement and the Closing Date and all warranties
and guarantees, if any, express or implied in respect of the foregoing;
(v) all equipment, machinery and vehicles of CNET or its
Affiliates used exclusively in the Snap! Business, including, without
limitation, all equipment, machinery and vehicles listed on SCHEDULE
2.1(a)(v) and any additions, improvements, replacements and alterations
thereto between the date of this Agreement and the Closing Date, and all
warranties and guarantees, if any, express or implied in respect of the
foregoing;
(vi) all management information systems and software, customer,
subscriber and vendor lists, catalogs, research material, technical
information and technology used exclusively by the Snap! Business;
(vii) all prepayments and prepaid expenses made for the Snap!
Business unless the same relate to contracts or agreements that are not
included in the Assumed Contracts and Assumed Liabilities;
(viii) all advertising, promotional, marketing and other similar
agreements entered into for the exclusive benefit of the Snap! Business and
all sales promotion and
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selling literature and promotional and advertising materials used
exclusively by the Snap! Business;
(ix) books, records and accounts of CNET or its Affiliates used
exclusively for the Snap! Business;
(x) all right, title and interest of CNET or its Affiliates
under or in respect of the Plans and all assets relating to the Plans, if
such Plans are assumed by the LLC;
(xi) all accounts receivable of the Snap! Business;
(xii) all franchises, permits and non-governmental licenses or
sublicenses of CNET or its Affiliates used exclusively for the benefit of
the Snap! Business;
(xiii) to the extent transferable under applicable law, all
franchises, approvals, permits, licenses, orders, registrations,
certificates, variances and similar rights obtained from government
authorities used exclusively for the benefit of the Snap! Business;
(xiv) all telephone numbers of CNET or its Affiliates used for the
exclusive benefit of the Snap! Business;
(xv) all inventories, raw materials, office supplies, production
supplies, packaging materials and other supplies, spare parts, work in
process, goods consigned to third parties, finished goods and other
tangible property used exclusively by the Snap! Business of any kind;
(xvi) all claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind of CNET or its Affiliates
arising out of or held for the exclusive benefit of the Snap! Business
(other than those related to Excluded Assets or Excluded Liabilities);
(xvii) all goodwill of the Snap! Business as a going concern
including, without limitation, all goodwill associated with the
Intellectual Property; and
(xviii) all other properties, assets and rights owned by CNET or its
Affiliates which are used exclusively in the Snap! Business (other than
those related to Excluded Assets or Excluded Liabilities).
For purposes of this Section 2.1, references to "exclusive" use of an asset or
right in the Snap! Business will include assets or rights that are used on an
isolated or incidental basis outside of the Snap! Business (so that all such
assets or other rights will be sold, conveyed, assigned, transferred and
delivered to the LLC in accordance with this Section 2.1(a)). The assets being
sold, conveyed, assigned, transferred and delivered to the LLC by CNET and its
Affiliates hereunder are sometimes hereinafter referred to as the ("SNAP!
ASSETS").
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(b) Notwithstanding anything to the contrary herein, all of CNET's
right, title and interest in and to all of the following properties, assets and
other rights (the "EXCLUDED ASSETS") shall be excluded from the Snap! Assets and
shall not be transferred to the LLC:
(i) such properties and assets as shall have been disposed of
not in violation of Section 5.7 hereto;
(ii) the corporate and company books and records of CNET,
including minute books and stock ledgers, and copies of business records
included in the Snap! Assets transferred to the LLC that are reasonably
required by CNET or any Affiliate in order to permit CNET or any Affiliate
to prepare any tax return or other filing or report to be made after the
Closing Date;
(iii) any trademarks, service marks or trade names incorporating
"CNET";
(iv) all claims, causes of action, choses in action, rights of
recovery, rights of set-off, counterclaims, cross claims and defenses of
any kind related to other Excluded Assets or Excluded Liabilities;
(v) all right, title and interest of CNET or its Affiliates
under or in respect of the Plans which are not included in the Assumed
Liabilities; and
(vi) all cash and cash equivalents of CNET and its Affiliates,
whether or not identified with the Snap! Business; and
(vii) all of CNET's and its Affiliates' assets which are not used
exclusively in the Snap! Business except those listed on SCHEDULE 2.1(a) or
on any Schedule under Section 2.1.
2.2 CLOSING CONTRIBUTION OF NBC. At the Closing, NBC shall transfer to
the LLC as an equity contribution $5,864,197 in cash.
2.3 ASSUMPTION OF LIABILITIES BY THE LLC. (a) On and after the Closing
Date, the LLC will, pursuant to an assumption agreement in a form reasonably
satisfactory to NBC and CNET, assume and agree to pay, perform and discharge
when due, any and all of the following Liabilities and obligations of CNET or
its Affiliates other than the Retained Liabilities (collectively, the "ASSUMED
LIABILITIES"):
(i) subject to Section 2.6 below, CNET's or its Affiliate's
trade payables and accrued current expenses relating exclusively to the
Snap! Business incurred or accrued in the ordinary course of business and
consistent with past practice prior to Closing that are not past due; and
(ii) all Liabilities of CNET or its Affiliates arising under the
Assumed Contracts assigned to the LLC hereunder (other than Liabilities
attributable to any failure by CNET or its Affiliates to comply with the
terms thereof).
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Except as set forth in this Section 2.3(a), the LLC will assume no other
Liabilities or obligations of CNET or its Affiliates. All Liabilities and
obligations of CNET and its Affiliates that are not Assumed Liabilities are
referred to herein as "RETAINED LIABILITIES."
(b) Without limiting the generality of Section 2.3(a), each of
the following is a "Retained Liability":
(i) any of CNET's obligations as a party hereunder and all fees,
expenses and other obligations and liabilities incurred by CNET in
connection with the negotiation, execution and delivery of this Agreement,
the Implementing Agreements and the other documents contemplated hereby and
thereby;
(ii) any Liability arising from (A) any indebtedness for borrowed
money of CNET or its Affiliates and (B) any purchase money indebtedness,
except for current trade payables incurred in the ordinary course of
business consistent with past practice prior to Closing that are not past
due;
(iii) any Liability of CNET or its Affiliates for Taxes relating
to the period prior to the Closing, except (subject to Section 2.6 below)
for payroll taxes accrued with respect to employees employed exclusively in
the Snap! Business in the ordinary course of business and consistent with
past practice prior to the Closing that are not past due;
(iv) any Liability or obligation of CNET arising from, or in
connection with, the ownership of the Snap! Assets or the conduct of the
Snap! Business by CNET or any other Person prior to the Closing Date,
except (subject to Section 2.6 below) current Liabilities as of the Closing
Date incurred in the ordinary course of business arising out of or relating
to any the Snap! Assets or the conduct of the Snap! Business;
(v) any Liability arising out of or related to past, present or
future litigation arising out of or relating to the ownership of the Snap!
Assets or the conduct of the Snap! Business by CNET or any other Person
prior to the Closing Date, whether the relevant cause of action is
commenced before, on or after the Closing Date;
(vi) any Liability of any other division of CNET or any
Affiliate;
(vii) all obligations and Liabilities arising out of or relating
to the Plans or any other employee benefit plan, program, policy or
arrangement presently or formerly maintained or contributed to by any
member of the controlled group of companies (as such term is defined in
Section 414 of the Code) of which CNET or any of its Affiliates is or was a
member, or with respect to which CNET or its Affiliate or such controlled
group member has any Liability;
(viii) any Liability or obligation relating to workers compensation
claims which are filed on or before the Closing Date or which are filed
after the Closing Date and which relate to occurrences or events on or
before the Closing Date;
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(ix) any claim, Liability or obligation to the extent such claim,
Liability or obligation arises out of or relates to Materials of
Environmental Concern existing on, at or under any Snap! Asset before the
Closing Date, or otherwise arises from, or in connection with, the conduct
of the Snap! Business or the ownership of the Snap! Assets by CNET or its
Affiliates or any other Person prior to the Closing Date; and
(x) any obligations or Liabilities arising out of or relating to
all claims and causes of action under federal, state and/or municipal civil
rights and/or employment law statutes arising prior to the Closing Date.
2.4 INITIAL EQUITY OWNERSHIP AT THE CLOSING. (a) In consideration for
CNET transferring, or causing to be transferred, to the LLC the Snap! Assets
pursuant to Section 2.1 hereof, at the Closing CNET will have an initial equity
interest of eighty-one percent (81%) of the interests of the LLC.
(b) In consideration for NBC contributing $5,864,197 to the LLC
pursuant to Section 2.2 hereof, at the Closing NBC will have an initial equity
interest of nineteen percent (19%) of the interests of the LLC.
(c) In the event that the Closing does not occur and this
Agreement is terminated pursuant to Section 7.1, CNET and NBC shall promptly
liquidate and dissolve the LLC.
2.5 INITIAL CAPITAL ACCOUNTS. (a) In consideration of the transfer of
the Snap! Assets at the Closing subject to the Assumed Liabilities, at the
Closing CNET will receive a credit to its capital account of the LLC of
$25,000,000.
(b) In consideration for NBC's equity contribution of $5,864,197
in cash, at the Closing NBC will receive a credit to its capital account of the
LLC of $5,864,197.
2.6 WORKING CAPITAL. CNET shall cause the current liabilities (determined
in accordance with GAAP) assumed by the LLC at Closing to not exceed the current
assets (determined in accordance with GAAP) transferred by CNET to the LLC at
Closing by more than $50,000; PROVIDED that current liabilities arising between
the date hereof and the Closing with respect to expenditures incurred after the
date hereof for the items listed on SCHEDULE 5.7 hereto in the amounts listed on
SCHEDULE 5.7 hereto and any other additional amounts as may be agreed to by NBC
prior to the incurrence or assumption of such expenditures shall not be included
as current liabilities in such calculation. To the extent that such current
liabilities exceed such current assets by more than $50,000, at the Closing CNET
will, as part of its initial capital contribution to the LLC (and without
receiving any additional interest to the LLC or credit to its capital account),
pay to the LLC an amount in cash equal to such excess. At the option of CNET,
in lieu of paying cash, CNET may offset any shortfall up to $250,000 against
amounts payable by the LLC under the Technology and Transition Agreement.
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ARTICLE III.
CLOSING
3.1 TIME AND PLACE OF CLOSING. The closing of the transactions
contemplated hereby (the "CLOSING") shall take place at the time and location
agreed upon by the parties on the second Business Day after the satisfaction of
the conditions set forth in Section 6.1 hereof, or at such other time and place
as may be mutually agreed to by the parties hereto.
3.2 IMPLEMENTING AGREEMENTS. On the Closing Date the relevant parties
shall enter into the following agreements:
(a) the LLC Agreement;
(b) an agreement (the "TRANSITION AND TECHNOLOGY AGREEMENT")
providing for the provision by CNET of certain transition services to the LLC
and the licensing to the LLC of certain technology and other intellectual
property, substantially in the form set forth as EXHIBIT 3.2(b) attached hereto;
and
(c) a preferred carriage agreement (the "PREFERRED CARRIAGE
AGREEMENT") providing for certain agreements with respect to carriage
substantially in the form set forth as EXHIBIT 3.2(c) attached hereto.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF THE PARTIES. Each of NBC and CNET
represents and warrants to the other party as follows:
(a) DUE ORGANIZATION. Such party is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, and has the requisite power and authority to own, lease and
operate its properties and to conduct its business as now conducted by it. Such
party has all requisite power and authority to enter into this Agreement and the
Implementing Agreements to which it is a party and to perform its obligations
hereunder and thereunder.
(b) AUTHORIZATION AND VALIDITY OF AGREEMENT. The execution,
delivery and performance by such party of this Agreement and the Implementing
Agreements to which it is a party and the consummation by such party of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of such party. This Agreement has been,
and each of the Implementing Agreements to which it is a party will on the
Closing Date be, duly executed and delivered by such party and constitutes or,
in the case of the Implementing Agreements, upon execution thereof will
constitute, a valid and legally binding obligation of such party, enforceable
against it in accordance with its terms.
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(c) NO GOVERNMENT APPROVALS OR NOTICES REQUIRED; NO CONFLICT WITH
INSTRUMENTS. Except as described in SCHEDULE 4.1(c), the execution, delivery
and performance of this Agreement and the Implementing Agreements by such party
and the consummation by such party of the transactions contemplated hereby and
thereby will not (i) conflict with or result in a breach of any provision of the
charter or bylaws of such party, (ii) require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Authority, (iii) require the consent or approval of any Person (other than a
Governmental Authority) or violate or conflict with, or result in a breach of
any provision of, constitute a default (or an event which with notice or lapse
of time or both would become a default) or give to any third party any right of
termination, cancellation, amendment or acceleration under, or result in the
creation of a Lien on any of the Snap! Assets under, any of the terms,
conditions or provisions of any contract or license to which such party is a
party or by which it or its assets or property are bound, or (iv) violate or
conflict with any order, writ, injunction, decree, statute, rule or regulation
applicable to such party; other than any consents and approvals the failure of
which to obtain and any violations, conflicts, breaches defaults and other
rights set forth pursuant to clauses (ii), (iii) and (iv) above which,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.
(d) CERTAIN FEES. Neither such party nor its officers,
directors or employees, on behalf of such party, has employed any broker or
finder or incurred any other Liability for any brokerage fees, commissions or
finders' fees in connection with the transactions contemplated hereby; except
that NBC has employed and will pay all fees and expenses of BT Alex Brown.
4.2 REPRESENTATIONS AND WARRANTIES OF CNET. CNET represents and warrants
to NBC and the LLC as follows:
(a) FINANCIAL INFORMATION, LIABILITIES.
(i) The unaudited balance sheets of the Snap! Business as at
December 31, 1997 (such latest balance sheet being referred to herein as
the "BALANCE SHEET") and the related statements of operations and cash
flows for the period ending on December 31, 1997, copies of which have been
furnished to NBC and which are attached hereto as SCHEDULE 4.2(a)(i)(A),
present fairly in all material respects the financial condition of the
Snap! Business as at December 31, 1997, and the results of its operations
for the period ending on December 31, 1997 (the "YEAR-END FINANCIAL
STATEMENTS"). The unaudited balance sheet of the Snap! Business as at
March 31, 1998 and the related statements of operations and cash flows of
the Snap! Business for the three-month period then ended, copies of which
have been furnished to NBC and which are attached hereto as SCHEDULE
4.2(a)(i)(B), present fairly in all material respects the financial
condition of the Snap! Business as at March 31, 1998 and the results of its
operations for the three-month period ending on March 31, 1998 (the
"INTERIM FINANCIAL STATEMENTS"). Neither CNET nor any of its Affiliates
had with respect to the Snap! Business, at December 31, 1997, any material
contingent obligation, contingent liability or liability for taxes, or any
long-term lease or unusual forward or long-term commitment not reflected in
the Balance Sheet or otherwise disclosed in the Schedules to this
Agreement.
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(ii) Except to the extent set forth in the Balance Sheet, the
Snap! Business does not have any Liabilities or obligations (absolute,
accrued, contingent or otherwise), whether due or to become due which would
be required, in accordance with GAAP, to be set forth on a consolidated
balance sheet of the Snap! Business, other than any such Liabilities or
obligations incurred since December 31, 1997 in the ordinary course of
business consistent with past practice.
(b) TITLE AND CONDITION OF PROPERTIES, ABSENCE OF LIENS. Except
as specifically disclosed on the Schedules:
(i) CNET and its Affiliates have, and the LLC on the Closing
Date will receive, good and marketable title to all personal property
(tangible and intangible), constituting Snap! Assets, free and clear of all
Liens, except (1) with respect to Snap! Assets leased, licensed or not
owned by CNET and its Affiliates or other contractual rights of CNET and
its Affiliates (and which are not reflected on the Balance Sheet as owed)
for contractual restrictions or claims on such Snap! Assets pursuant to the
lease, license or other Assumed Contract relating to such Snap! Assets and
restrictions imposed by any law or regulation with respect to licenses,
permits, copyrights, trademarks and the like; (2) with respect to Snap!
Assets in which third parties have been granted license rights pursuant to
Assumed Contracts, any contractual restrictions or claims pursuant to such
Assumed Contracts; (3) Liens disclosed on SCHEDULE 4.2(b)(i), which (unless
otherwise disclosed on SCHEDULE 4.2(b)(i)) will be released prior to the
Closing; and (4) statutory liens of landlords, carriers, warehousemen, and
other liens imposed by law incurred in the ordinary course of business for
amounts not then delinquent ("PERMITTED LIENS").
(ii) All tangible Snap! Assets taken as a whole are in good
operating condition and state of repair (ordinary wear and tear excepted)
other than machinery and equipment temporarily out of repair or out of
service for routine maintenance in the ordinary course of the Snap!
Business, and, together with the rights granted to the LLC by CNET under
the Implementing Agreements, are adequate and sufficient for the current
operations of the Snap! Business and conform to all applicable laws,
statutes, ordinances and regulations.
(c) COMPLIANCE WITH LAW AND REGULATIONS. To CNET and its
Affiliates' knowledge, CNET and each of its Affiliates is complying with all
laws, statutes, rules, regulations, ordinances, decrees or orders of any
federal, state, local or foreign authority applicable to the Snap! Business,
including, without limitation, zoning, wage and hour, equal employment
opportunity or occupational safety and health laws or regulations, and CNET and
each Affiliate has and holds all governmental permits and authorizations
necessary to entitle it to own and operate the properties of the Snap! Business
and to conduct the operations of the Snap! Business. There are no proceedings
pending or, to the knowledge of CNET and its Affiliates, threatened, or any
notices received, with respect to a violation of any such law, rule, regulation,
decree or order or which might result in the revocation, cancellation,
suspension or adverse modification of any such governmental permits or
authorizations.
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(d) LICENSES AND GOVERNMENT APPROVALS. SCHEDULE 4.2(d) includes
all material licenses, permits, approvals, consents, certificates of public
convenience, orders, franchises and other authorizations of any federal, state,
local or foreign governmental authority ("LICENSES") possessed by or granted to
CNET and its Affiliates with respect to the Snap! Business or the Snap! Assets.
Except as disclosed on SCHEDULE 4.2(d), neither CNET nor any of its Affiliates
is aware of any impediment to the renewal of such Licenses. All such Licenses
are valid and in full force and effect and no proceeding is pending or
threatened seeking the suspension, modification, revocation or limitation of any
such License. No other Licenses are required to permit the continued operation
after the date hereof of the Snap! Business as now conducted, except where the
failure to have such License, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
(e) CONTRACTS, LIST OF PROPERTIES, PERMITS AND OTHER DATA.
SCHEDULE 4.2(e) hereto accurately lists the following contracts, leases,
agreements, plans and arrangements, whether written or oral, express or implied,
or having any other legally binding basis undertaken by or for the Snap!
Business and to which CNET or any of its Affiliates is a party or by which they
or any of their property is bound:
(i) any such contract, lease, agreement, plan or arrangement
involving commitments to others to make capital expenditures or purchases
or sales involving $25,000 or more in any one case except commitments which
may be terminated without Liability or penalty by the LLC on not more than
30 days' notice;
(ii) any such contract, lease, agreement, plan or arrangement
relating to any direct or indirect indebtedness for borrowed money
(including but not limited to loan agreements, lease-purchase arrangements,
guarantees, agreements to purchase goods or services or to supply funds or
other undertakings on which others rely in extending credit), or any
conditional sales contracts, chattel mortgages, equipment lease agreements,
and other security arrangements with respect to personal property with a
value in excess of $25,000 in each instance used or owned by CNET and its
Affiliates;
(iii) any such lease for Real Property;
(iv) any such contract, lease, agreement, plan or arrangement
with or for the benefit, directly or indirectly, of any business or
operation of CNET or any Affiliate of CNET that is not included within the
Snap! Business and that is also for the benefit, directly or indirectly of
the Snap! Business;
(v) any contract containing covenants limiting the freedom of
the Snap! Business to compete in any line of business with any person or in
any area or territory;
(vi) any license agreement, either as licensor or licensee, or
any other agreement of any type relating to any of the patents, trademarks
or trade names or other assets listed on SCHEDULE 2.1(a)(i) hereto;
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(vii) any contract or arrangement of any kind whatsoever, whether
exclusive or otherwise, containing expressed terms and conditions with any
sales agent, representative, franchisee or distributor of any of the
products of the Snap! Business;
(viii) any contract or arrangement of any kind whatsoever which
requires the payment of royalties in connection with the Snap! Business;
and
(ix) any other legally binding contract, lease, agreement, plan
or arrangement not of the type covered by any of the other items of this
Section 4.2(e) which is not in the ordinary course of business or which is
material to the business, operations, properties, Liabilities or condition
(financial or otherwise) of the Snap! Business.
True and complete copies of all documents (including all amendments thereto and
waivers in respect thereof) referred to in the foregoing Schedules have been
delivered or made available to NBC. Summaries of all oral contracts listed on
the foregoing schedules previously provided to NBC are correct and do not omit
to state any fact necessary to make the statements therein complete or not
misleading. All contracts, agreements, leases, licenses, sublicenses, permits
and franchises referred to in such Schedules are in full force and effect on the
date of this Agreement. Neither CNET nor any of its Affiliates is (and to the
knowledge of CNET and its Affiliates, no other party thereto is) in breach or
default in the performance of any obligation thereunder, and, to the knowledge
of CNET and its Affiliates, no event has occurred or has failed to occur
whereby, with or without the giving of notice or the lapse of time or both, a
default or breach will be deemed to have occurred thereunder or any of the other
parties thereto have been or will be released therefrom or will be entitled to
refuse to perform thereunder, except for such breaches, defaults and events
which, either individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect. SCHEDULE 4.2(e) sets forth all consents
required to transfer or assign to the LLC any contract, lease, agreement, plan
or arrangement listed on such SCHEDULE 4.2(e). CNET has previously delivered to
NBC its standard form of the Advertising Insertion Contracts and the related
terms and conditions.
(f) REAL ESTATE. There is no real property relating to the
Snap! Business owned by CNET. With respect to the real property leased by CNET
or its Affiliates pursuant to any real estate leases included within the Snap!
Assets ("REAL PROPERTY"), except as disclosed on such Schedules:.
(i) CNET and its Affiliates have and good and valid leasehold
interests in all such Real Property, in each case free and clear of all
Liens except for Permitted Liens and as set forth on SCHEDULE 4.2(f).
(ii) There are no condemnation proceedings or eminent domain
proceedings of any kind pending or, to the knowledge of CNET and its
Affiliates, threatened against the Real Property.
(iii) Except as disclosed on SCHEDULE 4.2(f), to the knowledge of
CNET and its Affiliates, all of the Real Property is occupied under a valid
and current certificate of occupancy or similar permit, if required, the
sale of the Snap! Assets hereunder will not
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require the issuance of any new or amended certificate of occupancy and
there are no facts which would prevent the Real Property from being
occupied and used by the LLC after the Closing Date in the same manner as
before.
(iv) All improvements on the Real Property constructed by or on
behalf of CNET and its Affiliates or any other person were constructed in
compliance with all then applicable federal, state, local or foreign
statutes, laws, ordinances, regulations, rules, codes, orders or
requirements (including, but not limited to, any building, zoning or
environmental laws or codes) affecting such Real Property, except for any
failure to comply that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
(v) All improvements on the Real Property and the present use
and conditions thereof do not violate any applicable deed restrictions or
other applicable covenants, restrictions, agreements, existing site plan
approvals and, to the knowledge of CNET, zoning or subdivision regulations
or urban redevelopment plans as modified by any duly issued variances, and
no permits, licenses or certificates pertaining to the ownership or
operation of all improvements on the Real Property by CNET and its
Affiliates are required by any governmental agency having jurisdiction over
the Real Property, it being understood that CNET and its Affiliates make no
representation concerning the transferability of CNET and its Affiliates'
existing licenses and permits or those which the LLC may be required to
obtain, except for any violation or any failure to hold any permit, license
or certificate that, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect.
(vi) CNET and its Affiliates enjoy peaceful and quiet possession
of each parcel of Real Property, and there is not under any lease of any of
the leased Real Property (a "LEASE") any default by CNET and its Affiliates
thereunder or any condition which notice or the passage of time or both
would constitute such a default, and neither CNET nor any of its Affiliates
have received notice asserting the existence of any such default or
condition, and CNET and its Affiliates have no knowledge of any default
under any Lease by the landlord thereunder, in each case except for
defaults that, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect.
(vii) The rental set forth in each Lease is the actual rental
being paid, and there are no separate agreements or understandings with
respect to the same.
(g) LEGAL PROCEEDINGS. Except as disclosed in SCHEDULE 4.2(g),
there is no litigation, proceeding or governmental investigation to which CNET
or any of its Affiliates is a party pending or, to the knowledge of CNET and its
Affiliates, threatened against any of them that relates to the Snap! Business,
the Snap! Assets, the Assumed Liabilities or the transactions contemplated by
this Agreement which could, either individually or in the aggregate, result in a
Material Adverse Effect or which seeks to restrain or enjoin the consummation of
any of the transactions contemplated hereby. Neither CNET nor any of its
Affiliates is in violation of any term of any judgment, writ, decree, injunction
or order entered by any court or governmental authority (domestic or foreign)
and outstanding against CNET or its Affiliates or with respect to
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the Snap! Business or any of the Snap! Assets, except for such violations which
could not, individually or in the aggregate, have a Material Adverse Effect. To
the knowledge of CNET and its Affiliates, there are no facts which would provide
a basis for any successful prosecution of any such litigation, proceeding or
investigation.
(h) INSURANCE. The properties and assets of CNET and its
Affiliates which are of an insurable character and are used in the Snap!
Business are insured against loss or damage by fire or other risks, and CNET and
its Affiliates maintain liability insurance, to the extent and in the manner and
covering such risks as is customary or reasonable for companies engaged in a
business similar to the Snap! Business or owning assets similar to the Snap!
Assets. The coverage under each such policy and binder is in full force and
effect, and no notice cancellation or nonrenewal with respect to any such policy
or binder has been received by CNET and its Affiliates. SCHEDULE 4.2(h) lists
insurance maintained by CNET and its Affiliates on the Snap! Assets and with
respect to the employees and representatives of the Snap! Business and the
operations of the Snap! Business.
(i) LABOR. Except as set forth on SCHEDULE 4.2(i), (i) there
have been no labor strikes, grievances, slow-downs, work stoppages,
administrative, arbitration or court proceedings or other material labor
controversies or disputes during the past three (3) years, nor is any such
strike, grievance, slow-down, work stoppage administrative, arbitration or court
proceeding or other material labor controversy or dispute pending or, to the
knowledge of CNET and its Affiliates, threatened between CNET or its Affiliates,
on the one hand, and any of the employees, prospective employees, former
employees, retirees or labor unions now employed or formerly employed by the
Snap! Business, on the other hand, or affecting the Snap! Business, (ii) no
unfair labor charges or complaints have been filed against CNET or any of its
Affiliates with respect to its operations related to the Snap! Business, and
neither CNET nor any of its Affiliates has received any notice or communication
reflecting an intention or a threat to file any such charges or complaints,
(iii) neither CNET nor any of its Affiliates is party to any labor contract,
collective bargaining agreement contract, letter of understanding or, to CNET
and its Affiliates' knowledge, any other agreement, formal or informal with any
labor union or organization respecting the operation of the Snap! Business, nor
are any of the employees of the Snap! Business represented by any labor union or
organization nor have there been any labor union organizing activities at the
facilities of the Snap! Business within the last three (3) years, (iv) CNET and
each of its Affiliates has paid in full to all of its employees now employed or
formerly employed by the Snap! Business all wages, salaries, commissions,
bonuses, benefits and other compensation due to such employees, except for
accrued compensation not yet payable under the ordinary payroll practices of the
Snap! Business, (v) neither CNET nor any of its Affiliates has closed any
facility, effectuated any layoffs within the meaning of the Worker Adjustment &
Retraining Notification Act of employees or implemented any early retirement,
separation or window program within the past three years with respect to its
operations related to the Snap! Business, nor has CNET nor any of its Affiliates
planned or announced any such action or program relating to the Snap! Business
for the future, (vi) no promises of benefit improvements under the Plans have
been made by CNET or any Affiliate thereof to any employee now employed or
formerly employed by the Snap! Business, and (vii) neither CNET nor any of its
Affiliates is party to any written and/or undisclosed severance benefit
applicable to any employees of the Snap! Business except as referred to in
SCHEDULE 4.2(i). Except as disclosed in SCHEDULE 4.2(i), between April 1, 1998
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and the date hereof, no person employed by the Snap! Business was transferred to
any other business or operation of CNET or any of its Affiliates.
(j) ACCOUNTS RECEIVABLE. The accounts receivable reflected on
the Balance Sheet were, as of the date thereof, valid receivables of the Snap!
Business arising in the ordinary course of business. Except as disclosed in
SCHEDULE 4.2(j), no person or entity has any lien on such receivables or any
part thereof, no agreement for deduction, free goods, discount or other deferred
price or quantity adjustment has been made with respect to any such receivables
and to the knowledge of CNET and its Affiliates such receivables are not subject
to any valid counterclaims or setoffs.
(k) INTELLECTUAL PROPERTY. CNET and its Affiliates have, and
will transfer to the LLC on the Closing Date, good and marketable title to all
the Intellectual Property, free and clear of all Liens, except for contractual
rights, restrictions or claims arising under the Assumed Contracts. Except as
disclosed in SCHEDULE 4.2(g), no claims have been asserted against CNET or any
of its Affiliates to the effect that the use of the Intellectual Property by
CNET or its Affiliates infringes on any intellectual property of any other
person. The use of all Intellectual Property by CNET and its Affiliates and all
other intellectual property used in the Snap! Business and (assuming all
required third party consents set forth on SCHEDULE 4.1(c) are obtained), by the
LLC in connection with the operation after the Closing of the Snap! Business in
the manner currently operated does not (and will not, as of the Closing Date)
infringe on the rights of any Person. To the knowledge of CNET, there is no
infringing use of the Intellectual Property by any other Person, either within
or outside the United States, except such use that individually or in the
aggregate does not have a Material Adverse Effect. CNET and its Affiliates own
or have a license to use all Intellectual Property used in the Snap! Business as
presently conducted. Except as set forth in SCHEDULE 4.2(k), CNET and its
Affiliates have conducted the Snap! Business in compliance with all applicable
licenses, know how or other proprietary rights of others, the failure to comply
with which could, individually or in the aggregate, have a Material Adverse
Effect.
(l) EMPLOYEE BENEFIT PROGRAMS. Except as otherwise provided in
SCHEDULE 4.2(l):
(i) SCHEDULE 4.2(l) sets forth all of the "employee benefit
plans" (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), employment, change-in-control,
incentive, deferred compensation and severance policies, plans and
arrangements, and all other employee benefit, fringe benefit plans and
programs maintained or contributed to by CNET and its Affiliates with
respect to current or former employees of the Snap! Business (the "PLANS").
CNET and its Affiliates have provided or made available to NBC (a) a copy
of each of the Plans, including all amendments thereto, (b) any trust
agreements thereunder, (c) each summary plan description, (d) the most
recent favorable determination letter issued by the Internal Revenue
Service, if applicable, and (e) for each applicable year, the Form 5500 and
attached schedules, audited financial statements, and actuarial valuation
reports.
(ii) To the knowledge of CNET and its Affiliates, each Plan is in
all material respects, in compliance with the applicable requirements of
law, including, if applicable,
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ERISA and the Code, and has been established and administered in accordance
with its terms.
(iii) Each Employee Pension Benefit Plan which is intended to
qualify under Section 401(a) of the Code has received a favorable
determination letter that it is so qualified, and, to the knowledge of CNET
and its Affiliates, no facts or circumstances exist which would cause any
of such favorable determination letters to be revoked. In addition, to the
knowledge of CNET and its Affiliates, no such Plan has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA and
Section 412 of the Code), and to the knowledge of CNET and its Affiliates,
no "reportable event" (as defined in Section 4043(c) of ERISA) has occurred
with respect to any such Plan.
(iv) Except as set forth in SCHEDULE 4.2(l), and to the knowledge
of CNET and its Affiliates, no plan or arrangement exists which would be
reasonably likely to result in the payment to any employee or former
employee of the Snap! Business of any money or other property or rights or
accelerate or provide any other rights or benefits to any employee or
former employee of the Snap! Business as a result of the transactions
contemplated by this Agreement, whether or not such payment would
constitute a parachute payment within the meaning of Section 280G of the
Code, and there are no contracts, agreements or other arrangements which
would be reasonably likely to result in the payment to any such employee of
an "excess parachute payment" as that term is used in Section 280G of the
Code.
(v) Except as set forth in SCHEDULE 4.2(l), neither CNET nor any
of its Affiliates has contributed to or participated in any pension plan
which is a "multiemployer plan", as defined in Section 3(37) of ERISA, or
in any "multiple employer" plan within the meaning of Section 4063 or 4064
of ERISA, in respect of Snap! Business employees.
(vi) To the knowledge of CNET and its Affiliates all
contributions with respect to employees of the Snap! Business required to
be made on or prior to Closing under the terms of any Plan have been (or
will by Closing be) timely made by CNET and its Affiliates.
(vii) There are no pending or, to the knowledge of CNET and its
Affiliates, threatened claims (other than with respect to benefits in the
normal course), lawsuits, investigations, administrative proceedings or
other actions arising out of, or in connection with the operation or
administration of any Plan with respect to the Snap! Business covered in
(g).
(m) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since March 31, 1998
and except as otherwise disclosed herein or set forth in SCHEDULE 4.2(m) or the
other Schedules hereto, there has not been (i) any Material Adverse Effect with
respect to the Snap! Business, the Snap! Assets, the Assumed Liabilities or in
the condition (financial or other) or results of operations of the Snap!
Business, provided that operating losses in all material respects in accordance
with the Snap! Business business plan previously provided to NBC experienced by
the Snap! Business will not, in and of themselves, be deemed to constitute such
a Material Adverse Effect, (ii) any
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material damage, destruction or loss relating to the Snap! Business or the Snap!
Assets, whether or not insured, (iii) any Liability created or incurred which
the LLC will assume under Section 2.3 hereof except for Liabilities accruing
after March 31, 1998 in the ordinary course of business in a manner consistent
with past practice and, to the extent applicable, the requirements of Section
5.7, (iv) any Lien created on any Snap! Asset except Permitted Liens, (v) any
increase in, or commitment or plan adopted to increase, the wages, salaries,
compensation, pension or other benefits or payments to any of the Snap!
Business's employees, except for normal compensation adjustments in the ordinary
course of business and consistent with past practice, (vi) any capital
expenditures or commitment to make any such expenditures with respect to the
Snap! Assets or as to which the will become obligated after the Closing pursuant
to Section 2.3 hereof except (A) with respect to any such expenditures or
commitments incurred prior to the date hereof, to the extent such expenditures
and commitments do not exceed $25,000 in the aggregate and (B) with respect to
any such expenditures or commitments incurred on or after the date hereof as
permitted under Section 5.7, (vii) any rights of substantial value knowingly
waived with respect to the Snap! Assets or the Snap! Business or (viii) any sale
or transfer of any Snap! Assets other than dispositions of inventory and
obsolete or worn out equipment in the ordinary course of business. Since March
31, 1998, other than acts relating to the transactions contemplated by this
Agreement, the Snap! Business has been conducted in all significant respects
only in the ordinary course, consistent with past practice and, to the extent
applicable, Section 5.7. Since March 31, 1998 the Snap! Business has paid all
trade payables, accrued expenses and payroll taxes in accordance with past
practice and all applicable terms thereof and legal requirements.
(n) ENVIRONMENTAL MATTERS. Except as set forth on SCHEDULE
4.2(n), with respect to the Snap! Business and the Snap! Assets, and except for
matters that, individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect: (i) CNET and each of its Affiliates complies
and has complied in all material respects with all applicable Environmental
Laws, and possesses and complies in all material respects with and has possessed
and complied with all Environmental Permits; (ii) there are and have been no
Materials of Environmental Concern, or, to the knowledge of CNET and its
Affiliates other conditions, at any property owned or leased by CNET or its
Affiliates and included in the Snap! Assets that would reasonably be expected to
give rise to any Liability under any Environmental Law or result in costs
arising out of any Environmental Law; (iii) no judicial, administrative, or
arbitral proceeding (including any notice of violation or alleged violation)
under any Environmental Law to which CNET and its Affiliates are, or to the
knowledge of CNET and its Affiliates will be, named as a party is pending or, to
the knowledge of CNET and its Affiliates, threatened, nor is CNET or any of its
Affiliates the subject of any investigation in connection with any such
proceeding or potential proceeding; (iv) there are no past or present
conditions, circumstances, practices, plans, or legal requirements that to the
knowledge of CNET and its Affiliates would be expected to prevent, or materially
increase the burden on the Snap! Business of complying with applicable
Environmental Laws or of obtaining, renewing, or complying with all
Environmental Permits required under such laws; and (v) CNET and its Affiliates
have provided to NBC true and complete copies of all Environmental Reports
relating to the Snap! Business in its possession or control.
(o) ENTIRE BUSINESS. Except as set forth on SCHEDULE 4.2(o),
the Snap! Assets, together with the rights granted by CNET to the LLC pursuant
to the Implementing Agreements,
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constitute all of the properties, assets and other rights of CNET and its
Affiliates used in or necessary for the conduct of the Snap! Business as
currently conducted. On the Closing Date, subject to the provisions hereof,
CNET and its Affiliates will transfer to the LLC, or make available to the LLC
pursuant to the Implementing Agreements, all of the properties, assets and other
rights used in or necessary for the conduct by the LLC of the Snap! Business as
currently conducted by CNET and its Affiliates.
(p) TAX MATTERS. All Tax Returns required to be filed by CNET
or its Affiliates on or before the Closing Date with respect to the Snap!
Business or its activities, properties or employees have been or shall be timely
filed and all Taxes which are due or which may be claimed to be due with respect
to the Snap! Business or its activities, properties or employees have been or
shall be timely paid or accrued within the prescribed period, including any
extension thereof. All such Tax Returns are complete and accurate in all
material respects. There are no Liens upon any of the Snap! Assets in respect of
Taxes except for Liens for current Taxes that are not yet due and payable. All
Taxes required to be withheld by CNET or its Affiliates with respect to the
Snap! Business or its activities, properties or employees have been withheld and
paid over to the appropriate Tax Authority. Neither CNET nor any of its
Affiliates (or any predecessor of CNET and its Affiliates) is a party to or has
received any notice with respect to any proposed or pending action by any
governmental authority for assessment or collection of Taxes with respect to the
Snap! Business or its activities, properties or employees, nor is CNET or any of
its Affiliates a party to any dispute or threatened dispute in which action or
dispute an adverse determination reasonably could be expected to result in a
foreclosure of the Snap! Assets and no such claim for assessment or collection
of Taxes has been made upon CNET or any of its Affiliates. Neither CNET nor any
of its Affiliates is a "foreign Person" within the meaning of section 1445 of
the Code, and CNET and its Affiliates will furnish the LLC with an affidavit
that satisfies the requirements of section 1445(b)(2) of the Code. For purposes
of this Agreement, (i) the term "TAX" or "TAXES" shall mean all United States
federal, state, provincial, local and foreign income, profits, franchise, gross
receipts, payroll, sales, employment, use, property, excise, value added, net
worth, intangible, privilege, business, license, transfer, estimated, stamp,
alternative or add-on minimum, environmental, withholding and any other taxes,
duties or assessments, together with all interest, penalties and additions
imposed with respect to such amounts, (ii) the term "TAX RETURNS" shall mean any
return (including any consolidated combined or unitary return), declaration,
estimated, installment, report, claim for refund or information return or
statement relating to Taxes which is required to be filed with the appropriate
governmental agency, including any schedule or attachment thereto, and including
any amendment thereof and (iii) the term "TAX AUTHORITY" shall mean any
authority having jurisdiction over Taxes.
(q) AFFILIATE TRANSACTIONS. Except as set forth in SCHEDULE
4.2(q), there are no agreements, arrangements, undertakings or other
transactions between the Snap! Business and any other division or business of
CNET or any Affiliate of CNET.
(r) YEAR 2000 COMPLIANCE. Except as set forth in SCHEDULE
4.2(r), all the computer system and software owned or licensed by CNET or its
Affiliates and used by the Snap! Business is able to accurately process data,
including but not limited to calculating, comparing and sequencing from, into
and between the twentieth century (through the year 1999), and year 2000 and the
twenty-first century, including leap year calculations.
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(s) DISCLOSURE. Section 4.2 of this Agreement and the related
Schedules hereto contain no untrue statement of any material fact nor omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
4.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties given by the parties in Article IV and in the certificates delivered
pursuant to Article VI shall survive the Closing until the eighteen month
anniversary of the Closing Date, at which time such representations and
warranties will terminate, PROVIDED that the representations and warranties
contained in Section 4.1(a) and (b) shall survive indefinitely and not
terminate.
ARTICLE V.
COVENANTS
5.1 FILINGS. As promptly as practicable after the date of this Agreement,
each of the parties hereto shall make or cause to be made all filings and
submissions under applicable laws and regulations, if any, as may be required
for the consummation of the transactions contemplated by this Agreement. Each
of the parties hereto and their respective Affiliates shall coordinate and
cooperate in exchanging such information and providing such reasonable
assistance as may be requested by either of them in connection with the filings
and submissions contemplated by this Section 5.1.
5.2 CONSENTS. Each of the parties hereto shall use their best efforts to
obtain all necessary consents, approvals and waivers of all Governmental
Authorities necessary for the consummation of the transactions contemplated by
this Agreement and all consents, approvals and waivers required under any
contract, license or other agreement that constitutes (or but for the failure to
obtain such consent, approval or waiver, would constitute) a Snap! Asset and to
cause all other actions contemplated by SCHEDULE 5.2 to occur; in each case
without the imposition of any condition or restriction that would, individually
or in the aggregate, be reasonably likely to have a Material Adverse Effect or
any adverse modification to the terms of any contract, license or other
agreement or the incurrence of any additional obligations with respect thereof,
in each case other than as set forth in SCHEDULE 5.2; PROVIDED, that
notwithstanding anything to the contrary in this Agreement, no party nor any of
their Affiliates shall be required to make any disposition, including, without
limitation, any disposition of, or any agreement to hold separate, any
subsidiary, asset or business, and no party hereto nor any of their Affiliates
shall be required to make any payment of money nor shall any party or its
Affiliates be required to comply with any condition or undertaking or take any
action which, individually or in the aggregate, would materially adversely
effect the economic benefits to such party of the transactions contemplated
hereby and the Implementing Documents, taken as a whole or adversely effect any
other business of such party or its Affiliates.
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5.3 CERTAIN TAX MATTERS. (a) CNET shall be responsible for and pay all
sales, transfer and similar Taxes arising from, or attributable or related to,
the sale, transfer or assignment to LLC of any properties, assets or other
rights pursuant to this Agreement.
(b) Each of the parties hereto and the LLC shall provide each
other and the LLC with (i) such assistance as may be reasonably requested in
connection with the preparation of any Tax return, any audit, or any claim of
refund or credit in respect of Taxes and (ii) any records or other information
relevant to such Tax returns, audits, or claims.
5.4 AGREEMENT TO COOPERATE; FURTHER ASSURANCES. Subject to the terms and
conditions of this Agreement, each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including providing information and using reasonable efforts to
obtain all necessary or appropriate waivers, consents and approvals, and
effecting all necessary registrations and filings; PROVIDED, that
notwithstanding anything to the contrary in this Agreement, no party nor any of
their Affiliates shall be required to make any disposition, including, without
limitation, any disposition of, or any agreement to hold separate, any
subsidiary, asset or business, and no party hereto nor any of their Affiliates
shall be required to make any payments of money nor shall any party or its
Affiliates be required to comply with any condition or undertaking or take any
action which, individually or in the aggregate, would materially adversely
affect the economic benefits to such party of the transactions contemplated
hereby and by the Implementing Agreements, taken as a whole or adversely effect
any other business of such party or its Affiliates. In case at any time after
the Closing Date any further action is necessary or desirable to transfer any of
the Snap! Assets to the LLC (including obtaining any third party consents), to
effect the assumption by the LLC of the Assumed Liabilities or otherwise to
carry out the purposes of this Agreement, the proper officers and directors of
the parties hereto, of the LLC and their respective Affiliates shall execute
such further documents (including assignments, acknowledgements and consents and
other instruments of transfer) and shall take such further action as shall be
necessary or desirable to effect such transfer and to otherwise carry out the
purposes of this Agreement, in each case to the extent not inconsistent with
applicable law.
5.5 FAILURE OF CONSENT. Notwithstanding anything to the contrary set
forth in this Agreement, to the extent that any consent, approval or waiver is
not obtained with respect to any transfer or assignment of Snap! Assets to the
LLC as contemplated above, this Agreement shall not constitute a transfer or
assignment of such Snap! Assets to the LLC. In each such case, the parties
agree to cooperate with each other in any reasonable arrangement designed to
provide for use of the Snap! Assets by the LLC. If and to the extent that such
arrangement cannot be made, the LLC shall not have any obligation with respect
to such transfer or assignment of such Snap! Assets.
5.6 ACCESS TO INFORMATION. (a) From the date hereof to the Closing
Date, CNET shall afford the officers, employees, auditors and other agents of
NBC, reasonable access during normal business hours to its officers, employees,
properties, offices, plants and other facilities of the Snap! Assets and the
Snap! Business and to the contracts, commitments, books and records relating to
the Snap! Assets, the Assumed Liabilities and the Snap! Business, and shall
furnish
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NBC and such other Persons all such documents and such financial, operating and
other data and information regarding the Snap! Assets that are in the possession
of such party as NBC, through its officers, employees or agents may from time to
time reasonably request.
(b) NBC will hold, and will cause its officers, employees,
auditors and other agents to hold, in confidence pursuant to the Confidentiality
Agreement, dated May 4, 1998 between NBC and CNET, all documents and other
information received pursuant to this Section 5.6.
5.7 CONDUCT OF THE SNAP! BUSINESSES PENDING THE CLOSING DATE. CNET agrees
that except with the prior written consent of NBC, and except as may be
expressly permitted or contemplated by this Agreement or as set forth on
SCHEDULE 5.7, prior to the Closing Date CNET shall, and shall cause its
Affiliates to, with respect to the Snap! Business, the Snap! Assets and the
Assumed Liabilities:
(a) operate the Snap! Business only in the usual, regular and
ordinary manner, on a basis consistent with past practice and, to the extent
consistent with such operation, use its reasonable efforts to preserve its
present business organization intact, keep available the services of its present
employees, preserve its present business relationships and maintain all rights,
privileges and franchises necessary or desirable in the normal conduct of the
Snap! Business;
(b) maintain its inventory of supplies, parts and other
materials and keep its books, accounts, files and records in the usual, regular
and ordinary manner, on a basis consistent with past practice, and comply with
and perform in all material respects all laws and contractual and other
obligations applicable to the Snap! Business, the Assets or the Assumed
Liabilities;
(c) maintain in full force and effect adequate insurance with
respect to the Snap! Business, the Snap! Assets and the employees of the Snap!
Business covering risks customarily insured by similar businesses;
(d) not (i) enter into any contract, agreement or other
commitment which involves aggregate consideration in excess of $25,000 except as
set forth in SCHEDULE 5.7(d) and except for purchases and sales of inventories
and advertising promotion in the ordinary course of business consistent with
past practice, and CNET may add any such contract, agreement or other commitment
to SCHEDULE 4.2(e) at any time prior to the Closing, or (ii) permit any of its
Affiliates to do, or agree, in writing or otherwise, to do, any of the
foregoing;
(e) except as set forth on SCHEDULE 5.7(e) or as required by
applicable law or to the extent required under existing employee benefit plans,
agreements or arrangements as in effect on the date of this Agreement, not (i)
increase the compensation or fringe benefits of any of the Snap! Business'
officers or employees, except for increases, in the ordinary course of business,
in salary or wages of employees who are not officers, (ii) except in the
ordinary course of business grant any severance or termination pay, (iii) hire,
except in the ordinary course of business, any new employees or consultants, or
(iv) enter into or amend or terminate any collective bargaining, bonus, profit
sharing, thrift, compensation, pension, retirement, deferred
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compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any past or present
officers or employees;
(f) not (i) dispose of or abandon any of the Snap! Assets, other
than the disposition of obsolete or worn-out equipment or machinery in the
ordinary course of business, consistent with past practice, (ii) enter into or
engage in any transaction with or for the benefit of any other division or
business of CNET or any Affiliate of CNET except as contemplated by an existing
agreement set forth in SCHEDULE 4.2(q) or (iii) permit any of its Affiliates to
do, or agree, in writing or otherwise, to do, any of the foregoing;
(g) not (i) permit or allow any of the Snap! Assets to become
subject to any Liens, except for Permitted Liens, (ii) waive any material claims
or rights relating to the Snap! Business or the Snap! Assets or (iii) permit any
of its Affiliates to do, or agree, in writing or otherwise, to do, any of the
foregoing;
(h) not acquire or agree to acquire outside the ordinary course
of business any assets that are material, individually or in the aggregate, to
the Snap! Business, or make or agree to make any capital expenditures except for
capital expenditures not in excess of $25,000 for any individual expenditure and
$25,000 in the aggregate;
(i) not transfer any rights of material value of the Snap!
Business or modify or change in any material respect any existing license,
lease, contract or other document relating to the operations of the Snap!
Business, other than in the ordinary course of business consistent with past
practice;
(j) not change any material accounting principle that would
affect the Balance Sheet;
(k) not acquire or agree to acquire, by merging or consolidating
the Snap! Business with, or by using any of the Snap! Assets to purchase a
substantial portion of the stock or assets of, or by incurring a Liability which
is an Assumed Liability, any business or any corporation, partnership, joint
venture, association or other business organization or division thereof;
(l) not pledge or otherwise use any Snap! Assets as collateral
or security for any indebtedness of CNET or its Affiliates or any other Person
other than liens arising in the ordinary course of business under existing
agreements that are released prior to the Closing;
(m) pay all trade payables, accrued expenses and payroll taxes
in accordance with past practice and all applicable terms thereof and legal
requirements; and
(n) not authorize any of, or commit or agree to take any of, the
foregoing actions.
5.8 PUBLIC STATEMENTS. Before any party or any Affiliate of such party
shall release any information concerning this Agreement or the matters
contemplated hereby which is intended for
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or may result in public dissemination thereof, they shall cooperate with the
other parties, shall furnish drafts of all documents or proposed oral statements
to the other parties, provide the other parties the opportunity to review and
comment upon any such documents or statements and shall not release or permit
release of any such information without the consent of the other parties, except
to the extent required by applicable law or the rules of any securities exchange
or automated quotation system on which its securities or those of its Affiliate
are traded.
5.9 NO SOLICITATION. (a) Neither CNET nor any of its Affiliates will,
directly or indirectly, solicit any inquiries or proposals or enter into or
continue any discussions, negotiations, understandings, arrangements or
agreements relating to the merger or amalgamation of CNET (unless such merger or
amalgamation, as proposed, contemplates that the surviving entity would comply
with CNET's obligations under this Agreement) with, or the direct or indirect
disposition of a significant amount of the Snap! Assets or the Snap! Business
to, any Person other than NBC or provide any assistance or any information to or
otherwise cooperate with any Person in connection with any such inquiry,
proposal or transaction. In the event that CNET or any of its Affiliates
receives any inquiry, proposal or offer for the acquisition of a significant
amount of the Snap! Assets or the Snap! Business, or obtains information that
such an inquiry, offer or proposal is likely to be made, CNET will provide NBC
with notice thereof as soon as practical after receipt thereof, including the
identity of the prospective purchaser or soliciting party (if, but only if, such
inquiry, proposal or offer is received after an initial press release has been
issued by the parties with respect to the transactions contemplated by this
Agreement) and the proposed terms of the transaction.
(b) Neither NBC nor any of its subsidiaries will, directly, or
indirectly, make any inquiries or proposals or enter into or continue any
discussions, negotiations, understandings, arrangements or agreements relating
to the acquisition by NBC or any of its subsidiaries of all or a substantial
portion of the assets of or equity interest in a Snap Competitor (as defined in
the Preferred Carriage Agreement). In the event that NBC or any of its
subsidiaries receives any inquiry, proposal or offer for such an acquisition by
NBC or any of its subsidiaries, or obtains information that such an inquiry,
offer or proposal is likely to be made, NBC will provide CNET with notice
thereof as soon as practical after receipt thereof, including the identity of
the prospective seller or soliciting party (if, but only if, such inquiry,
proposal or offer is received after an initial press release has been issued by
the parties with respect to the transactions contemplated by this Agreement) and
the proposed terms of the transaction.
(c) The parties acknowledge that there may be no adequate
remedy at law for a breach of Section 5.9 and that money damages may not be
an adequate remedy for breach of such Section. Therefore, the parties agree
that NBC and CNET each shall have the right, in addition to any other rights
it may have, to injunctive relief and specific performance of Section 5.9 in
the event of any breach of this Section. The remedy set forth in the
preceding two sentences is cumulative and shall in no way limit any other
remedy any party hereto has at law, in equity or pursuant hereto.
5.10 EMPLOYEES UNIT OPTION PLAN. At Closing, the LLC will adopt a unit
option plan in form and substance reasonably acceptable to each of CNET and NBC
which qualifies as a non-
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variable employee stock or unit option plan under GAAP. The parties will amend
the LLC Agreement to the extent necessary (if any) to reflect the terms of such
unit option plan.
5.11 RELEASE OF LIENS. CNET agrees to cause the Liens set forth on
Schedule 4.2(b)(i) to be released at no expense to the LLC within thirty (30)
days of receipt of written notice from the LLC requesting the release of such
Liens, which notice may be given by the LLC at any time after the Closing. CNET
agrees not to permit any seizure, sale, foreclosure or similar action to occur
as a result of such Liens with respect to any of the Snap! Assets securing such
Liens.
ARTICLE VI.
CONDITIONS PRECEDENT TO CLOSING
6.1 CONDITIONS TO EACH PARTY'S CLOSING OBLIGATIONS. The respective
obligations of each party to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment of the following conditions on or
prior to the Closing Date:
(a) No statute, rule, regulation, executive order, decree, or
preliminary or permanent injunction shall have been enacted, entered,
promulgated or enforced by any state, federal or foreign court of competent
jurisdiction or governmental authority which prohibits consummation of the
transactions contemplated by this Agreement and the Implementing Agreements,
whether temporary, preliminary or permanent; PROVIDED, HOWEVER, that the parties
hereto shall use their reasonable commercial efforts to have such order, decree
or injunction vacated; and
(b) all orders, consents and approvals of Governmental
Authorities legally required for the consummation of the transactions
contemplated by this Agreement shall have been obtained and be in effect at the
Closing Date, except those for which failure to obtain such consents and
approvals would not, individually or in the aggregate, have a Material Adverse
Effect.
6.2 CONDITIONS TO THE CLOSING OBLIGATIONS OF NBC. The obligations of NBC
to consummate the transactions contemplated by this Agreement shall be subject
to the fulfillment of the following additional conditions:
(a) CNET shall have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior to
the Closing Date, and the representations and warranties of CNET set forth in
this Agreement shall be true and correct in all material respects at and as of
the Closing Date as if made at and as of such time, except to the extent that
any such representation or warranty specifically speaks to a specified date, in
which case such representation or warranty shall have been true and correct as
of such date and NBC shall have received a certificate to such effect dated the
Closing Date signed on behalf of CNET by an executive officer thereof;
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(b) the LLC shall have all intellectual property rights
necessary to conduct the Snap! Business, except for such rights the failure of
which to have would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect; and
(c) the consents set forth on SCHEDULE 6.2(c) hereof shall have
been obtained.
6.3 CONDITIONS TO THE CLOSING OBLIGATION OF CNET. The obligation of CNET
to consummate the transactions contemplated by this Agreement shall be subject
to the additional conditions that NBC shall have performed in all material
respects its obligations under this Agreement required to be performed by it at
or prior to the Closing Date, and the representations and warranties of NBC set
forth in this Agreement shall be true and correct in all material respects at
and as of the Closing Date as if made at and as of such time, except to the
extent that any such representation or warranty specifically speaks to a
specified date, in which case such representation or warranty shall have been
true and correct as of such date and CNET shall have received a certificate to
such effect dated the Closing Date signed on behalf of NBC by an executive
officer thereof.
ARTICLE VII.
TERMINATION
7.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing by:
(a) the mutual written consent of CNET and NBC;
(b) either CNET or NBC if (i) any Governmental Authority, the
consent of which is a condition to the obligations of each party hereto to
consummate the transactions contemplated hereby, shall have determined not to
grant its consent (or imposes material conditions with respect thereto such that
the condition precedent set forth in Section 6.1(c) is incapable of being
satisfied) and all appeals of such determination shall have been taken and have
been unsuccessful; or (ii) any court of competent jurisdiction in the United
States shall have issued an order, judgment or decree (other than a temporary
restraining order) restraining, enjoining or otherwise prohibiting the
transactions contemplated hereby and such order, judgment or decree shall have
become final and nonappealable;
(c) NBC if there has been a material breach by CNET of any
representation, warranty, covenant or agreement set forth in this Agreement,
which breach has not been cured within ten days following receipt by CNET of
notice of such breach;
(d) CNET if there has been a material breach by NBC of any
representation, warranty, covenant or agreement set forth in this Agreement,
which breach has not been cured within ten days following receipt by NBC of
notice of such breach; or
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(e) by either CNET or NBC by written notice to the other on or
after July 15, 1998 if the Closing has not occurred prior to receipt of such
notice.
7.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
as provided in Section 9.1 hereof, this Agreement shall forthwith become void
(except this Section 7.2, and Sections 2.4(c), 5.6(b), 5.8 and Section 9 hereof,
which shall survive the termination) and there shall be no liability on the part
of any parties or their respective officers or directors except for any breach
of any of its obligations under Sections 2.4(c), 5.6(b) and 5.8 hereof.
Notwithstanding the foregoing, no party hereto shall be relieved from liability
for any willful breach of this Agreement.
ARTICLE VIII.
INDEMNIFICATION
8.1 INDEMNIFICATION BY CNET. From and after the Closing Date, CNET shall
indemnify and hold harmless each of (w) NBC and the LLC, (x) each of NBC's or
the LLC's Affiliates, (y) each of the foregoing's respective directors,
officers, employees and agents and (z) each of the heirs, executors, successors
and assigns of any of the foregoing from and against any and all damages,
claims, losses, expenses, costs, obligations and Liabilities including, without
limiting the generality of the foregoing, Liabilities for all reasonable
attorneys' fees and expenses (including attorney and expert fees and expenses
incurred to enforce the terms of this Agreement) (collectively, "LOSSES AND
EXPENSES") suffered or incurred by any such indemnified Person arising from,
relating to or otherwise in respect of, (i) any breach of, or inaccuracy in, any
representation or warranty of CNET contained in this Agreement or in the
certificates delivered by CNET pursuant to Sections 6.2 of this Agreement; (ii)
any breach of any covenant of CNET contained in this Agreement; (iii) any
Retained Liabilities; (iv) any Permitted Liens outstanding as of the Closing to
the extent such Permitted Liens relate to Retained Liabilities or (v) the
matters set forth on SCHEDULE 8.1 hereto.
8.2 INDEMNIFICATION BY NBC. From and after the Closing Date, NBC shall
indemnify and hold harmless each of (w) CNET and the LLC, (x) each of CNET's or
the LLC's Affiliates, (y) each of the foregoing's respective directors,
officers, employees and agents and (z) each of the heirs, executors, successors
and assigns of any of the foregoing from and against any and all Losses and
Expenses suffered or incurred by any such indemnified Person arising from,
relating to or otherwise in respect of, (i) any breach of, or inaccuracy in, any
representation or warranty of NBC contained in this Agreement or in the
certificates delivered by NBC pursuant to Section 6.3 of this Agreement; (ii)
any breach of any covenant of NBC contained in this Agreement.
8.3 INDEMNIFICATION BY THE LLC. From and after the Closing Date, the LLC
shall indemnify and hold harmless each of (w) NBC and CNET, (x) each of NBC's
and CNET's Affiliates, (y) each of the foregoing's respective directors,
officers, employees and agents and (z) each of the heirs, executors, successors
and assigns of any of the foregoing from and against any and all Losses and
Expenses suffered or incurred by any such indemnified Person arising from,
relating to or otherwise in respect of any Assumed Liabilities.
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8.4 THIRD-PARTY CLAIMS. If a Claim by a third party is made against an
indemnified Person hereunder, and if such indemnified Person intends to seek
indemnity with respect thereto under this Article, such indemnified Person shall
promptly notify the indemnifying Person in writing of such Claims setting forth
such Claims in reasonable detail, provided that failure of such indemnified
Person to give prompt notice as provided herein shall not relieve the
indemnifying Person of any of its obligations hereunder, except to the extent
that the indemnifying Person is materially prejudiced by such failure. The
indemnifying Person shall have twenty (20) days after receipt of such notice to
undertake, through counsel of its own choosing, subject to the reasonable
approval of such indemnified Person, and at its own expense, the settlement or
defense thereof, and the indemnified Person shall cooperate with it in
connection therewith; PROVIDED, HOWEVER, that the indemnified Person may
participate in such settlement or defense through counsel chosen by such
indemnified Person, provided that the fees and expenses of such counsel shall be
borne by such indemnified Person. If the indemnifying Person shall assume the
defense of a Claim, it shall not settle such Claim without the prior written
consent of the indemnified Person, unless (i) such settlement includes as an
unconditional term thereof the giving by the claimant of a release of the
indemnified Person from all Liability with respect to such Claim or (ii) such
settlement does not involve the imposition of equitable remedies or the
imposition of any material obligations on such indemnified Person other than
financial obligations for which such indemnified party will be indemnified
hereunder. If the indemnifying Person shall assume the defense of a claim, the
fees of any separate counsel retained by the indemnified Person shall be borne
by such indemnified Person unless there exists a material conflict between them
as to their respective legal defenses (other than one that is of a monetary
nature), in which case the indemnified Person shall be entitled to retain one
law firm as its separate counsel, the reasonable fees and expenses of which
shall be reimbursed by the indemnifying Person. If the indemnifying Person does
not notify the indemnified Person within twenty (20) days after the receipt of
the indemnified Person's notice of a claim of indemnity hereunder that it elects
to undertake the defense thereof, the indemnified Person shall have the right to
contest, settle or compromise the Claim but shall not thereby waive any right to
indemnity therefor pursuant to this Agreement.
8.5 TERMINATION OF INDEMNIFICATION FOR BREACHES OF REPRESENTATIONS AND
WARRANTIES. The obligations to indemnify and hold harmless a party hereto
pursuant to Sections 8.1(i), 8.2(i) and 8.3(i) shall terminate when the
applicable representation or warranty terminates pursuant to Section 4.3;
PROVIDED HOWEVER, that such obligation to indemnify and hold harmless shall not
terminate with respect to any item as to which the Person to be indemnified
shall have, before the expiration of the applicable period, previously made a
claim by delivering a notice (stating in reasonable detail the basis of such
claim) to the indemnifying party.
8.6 LIMITATIONS ON INDEMNITY OBLIGATIONS. Notwithstanding any contrary
provision of this Agreement, CNET (a) will not be obligated to indemnify or hold
harmless any Person under clause (i) of Section 8.1 unless the aggregate Losses
and Expenses suffered or incurred by all indemnified Persons arising from,
relating to or otherwise in respect of all matters for which indemnification is
available under such clause (i) (without giving effect to this Section 8.6)
exceeds $500,000, in which event CNET will only be liable for the amount of such
excess and (b) the maximum liability of CNET pursuant to clause (i) of Section
8.1 is $10,000,000, PROVIDED that clauses (a) and (b) of this sentence will not
apply to any breach of Section 4.1(a), 4.1(b), 4.1(d),
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4.2(o) or 4.2(p). The indemnification obligations under this Article VIII
constitute the sole and exclusive remedy of each party for any breach of, or
inaccuracy in, any representation or warranty of another party contained in this
Agreement or in any certificate delivered pursuant hereto.
ARTICLE IX.
GENERAL PROVISIONS
9.1 NOTICES. Any notice in connection with this Agreement shall be in
writing and shall be delivered by air courier or by facsimile at the addresses
or facsimile numbers given below. If notice is given by: (a) air courier,
notice shall be deemed given when recorded on the records on the air courier as
received by the receiving party; or (b) facsimile, notice shall be deemed given
upon transmission, if on a business day and during business hours in the country
of receipt; otherwise, notice shall be deemed to have been given at 9:00 A.M. on
the next Business Day in the country of receipt.
If to NBC:
National Broadcasting Company, Inc.
30 Rockefeller Plaza
New York, New York 10112
Attn.: Marty Yudkovitz, President Interactive Media
Facsimile: (212) 664-5561
with a copy to:
National Broadcasting Company, Inc.
30 Rockefeller Plaza
New York, New York 10112
Attn.: Richard Cotton, Executive Vice President & General Counsel
Facsimile: (212) 664-2648
If to CNET:
CNET, Inc.
150 Chestnut Street
San Francisco, CA 94111
Attn.: Halsey M. Minor
Facsimile: (415) 395-9330
with a copy to:
Hughes & Luce, L.L.P.
1717 Main Street, Suite 2800
Dallas, TX 75201
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Attn.: Jon L. Mosle
Facsimile: (214) 939-5849
If to the LLC:
Snap! LLC
150 Chestnut Street
San Francisco, CA 94111
Attn.: Chief Financial Officer
9.2 INTEGRATION; AMENDMENTS. This Agreement (including the schedules and
exhibits hereto) contains the entire agreement of the parties with regard to the
matters contained herein and may not be amended or modified except in a writing
signed by all parties hereto.
9.3 NO ASSIGNMENT; SUCCESSORS AND ASSIGNS. The parties' respective rights
and obligations hereunder may not be assigned, transferred, pledged, or
encumbered, in any manner, direct or indirect, contingent or otherwise, in whole
or in part, voluntarily or by operation of law, without the prior written
consent of the other parties, provided that the foregoing shall not apply to any
assignment by operation of law to any successor Person in any merger or
consolidations, PROVIDED, that NBC may assign, in whole or in part, any of its
rights and obligations hereunder and under the Implementing Agreements to one or
more of its Affiliates without the consent of the other parties hereto, but NBC
will remain liable for its obligations hereunder and under each Implementing
Document to which it is contemplated to be a party. Subject to the preceding
sentence, this Agreement shall be binding on the parties hereto and their
respective successors and permitted assigns.
9.4 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT AND ALL COLLATERAL MATTERS RELATING HERETO SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
(b) Each of the parties hereby irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this agreement, to the non-exclusive general
jurisdiction of the Courts of the State of New York in New York County, the
Courts of the United States of America for the Southern District of New
York in New York County, and appellate courts from any thereof;
(ii) consents that any such action or proceeding may be brought
in such courts, and waives any objection that it may now or hereafter have
to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and agrees
not to plead or claim the same to the extent permitted by applicable law;
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(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the party, as the case may be, at its address set forth in
Section 9.1 or at such other address of which the other party shall have
been notified pursuant thereto;
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction for recognition and enforcement of
any judgment or if jurisdiction in the courts referenced in paragraph (i)
hereof is not available despite the intentions of the parties hereto; and
(v) waives trial by jury in any litigation in any court with
respect to, in connection with, or arising out of this Agreement, or any
Implementing Agreement, or any other instrument or document delivered
pursuant hereto, or any other claim or dispute howsoever arising, to which
the parties are party. This waiver is informed and freely made.
9.5 SEVERABILITY. The invalidity or unenforceability of any provision of
this Agreement shall in no way affect the validity or enforceability of any
other provision of this Agreement.
9.6 COUNTERPARTS. This Agreement may be executed by one or any of the
parties to the Agreement on any number of separate counterparts, and all of such
counterparts taken together shall be deemed to constitute one and the same
instrument.
9.7 SECTION HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
9.8 EXPENSES. Except as set forth in this Agreement, whether or not the
transactions contemplated by this Agreement are consummated, all legal and other
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
costs.
9.9 THE LLC. Promptly following the formation of the LLC, CNET and NBC
shall cause the LLC to become a party to this Agreement by executing and
delivering a copy hereof. This Agreement is a binding obligation on CNET and
NBC notwithstanding that the LLC has not executed this Agreement as of the date
hereof.
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IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as
of the date first set forth above.
NATIONAL BROADCASTING COMPANY, INC.
By: /s/ Thomas Rogers
Name: Thomas Rogers
Title: Executive Vice President
CNET, INC.
By: /s/ Halsey Minor
Name: Halsey Minor
Title: Chairman, President, and
Chief Executive Officer
SNAP! LLC
By: /s/ Martin Yudkovitz
Name: Martin Yudkovitz
Title: President
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<TABLE>
SCHEDULES
<S> <C>
Schedule 2.1(a) Non-Exclusive Assets
Schedule 2.1(a)(i) Intellectual Property
Schedule 2.1(a)(ii) Assumed Contracts
Schedule 2.1(a)(iv) Leaseholds
Schedule 2.1(a)(v) Equipment
Schedule 4.1(c) No Government Approvals; No Conflicts
Schedule 4.2(a)(i)(A) Year-End Financial Statements
Schedule 4.2(a)(i)(B) Interim Financial Statements
Schedule 4.2(b)(i) Liens
Schedule 4.2(d) Licenses
Schedule 4.2(e) Contracts
Schedule 4.2(f) Real Property
Schedule 4.2(g) Legal Proceedings
Schedule 4.2(h) Insurance
Schedule 4.2(i) Labor
Schedule 4.2(j) Receivables
Schedule 4.2(k) Conduct of Business
Schedule 4.2(l) Employee Benefits
Schedule 4.2(m) Absence of Certain Changes
Schedule 4.2(n) Environmental Matters
Schedule 4.2(o) Entire Business
Schedule 4.2(q) Affiliate Transactions
Schedule 4.2(r) Year 2000 Compliance
Schedule 5.2 Required Actions Related to Contracts
Schedule 5.7 Conduct of Business
Schedule 5.7(d) Conduct of Business - Certain Contracts
Schedule 5.7(e) Conduct of Business - Benefits
Schedule 6.2(c) Required Consents
Schedule 8.1 Certain Indemnities
EXHIBITS
Exhibit 1.1 LLC Agreement
Exhibit 3.2(b) Form of Transition and Technology Agreement
Exhibit 3.2(c) Form of Preferred Carriage Agreement
</TABLE>
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EXHIBIT 2.2
-----------------------------------------------------------------
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
SNAP! LLC
A DELAWARE LIMITED LIABILITY COMPANY
Dated as of June 30, 1998
-----------------------------------------------------------------
<PAGE>
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (the
"AGREEMENT") is made as of the 30th day of June, 1998, by and between NBC
Multimedia, Inc., a Delaware corporation (together with its successors, "NBC
MULTIMEDIA") and a wholly-owned subsidiary of National Broadcasting Company,
Inc., a Delaware corporation (together with its successors, "NBC") and CNET,
Inc., a Delaware corporation (together with its successors, "CNET").
W I T N E S S E T H:
WHEREAS, NBC Multimedia and CNET filed a Certificate of Formation on
June 5, 1998 for this limited liability company pursuant to the provisions of
the Delaware Limited Liability Company Act;
WHEREAS, a Limited Liability Agreement for this limited liability
company was duly adopted by NBC Multimedia pursuant to and in accordance with
the Delaware Limited Liability Company Act on June 25, 1998 (the "Original
Agreement");
WHEREAS, NBC Multimedia and CNET wish to amend and restate in its
entirety the Original Agreement in accordance with the further provisions of
this Agreement;
NOW, THEREFORE, NBC Multimedia and CNET hereby duly adopt this
Agreement pursuant to and in accordance with the Delaware Limited Liability
Company Act and in consideration of the premises and of the mutual covenants and
agreements herein contained, and intending to be legally bound hereby, NBC
Multimedia and CNET hereby agree as follows:
ARTICLE I.
DEFINITIONS
1.1 DEFINITIONS. (a) As used herein, the following terms
shall have the following meanings:
"ADDITIONAL CALL UNITS" means, with respect to each issuance of New
Units prior to the earlier of the termination of the NBC Call or the purchase of
the Call Units upon exercise of the NBC Call, a number of Units equal to (a) the
aggregate number of New Units purchased by the CNET Holders pursuant to the
exercise of their rights pursuant to Section 3.4 in respect of such issuance
MINUS (b) the maximum aggregate number of New Units that the CNET Holders could
have purchased pursuant to Section 3.4 in connection with such issuance of New
Units had the NBC Call been exercised (whether or not then exercisable pursuant
to Section 7.4) prior to such new issuance and the Call Units therefore been
owned by NBC Multimedia rather than CNET.
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"ADJUSTED PERCENTAGE INTEREST" means the Percentage Interests of all
NBC Holders and CNET Holders calculated as if (i) the NBC Option were fully
exercised and the Units issuable upon exercise of the NBC Option were held by
NBC Multimedia (unless the NBC Option has been fully exercised or has
terminated, in which event no adjustment will be made with respect to the NBC
Option) and (ii) the only Units outstanding were the Units owned by the NBC
Holders and the CNET Holders.
"AFFILIATE" means with respect to a specified Person, any Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the specified Person. As used
in this definition, the term "control" means the possession, directly or
indirectly, or as trustee or executor, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, as trustee or executor, by contract or credit arrangement
or otherwise. Notwithstanding the foregoing, MSNBC Multimedia News, LLC and
MSNBC Cable LLC and their respective successors and assigns shall not be
considered "Affiliates" of NBC or NBC's Affiliates for purposes of this
Agreement.
"AGGREGATE ADDITIONAL CALL UNITS" means, at any time, the aggregate
number of Additional Call Units resulting from all issuances of New Securities.
"AVAILABLE CASH FLOW" means, with respect to any Fiscal Year or other
period, the sum of all cash receipts of the LLC from any and all sources, less
all cash disbursements (including loan repayments, capital improvements and
replacements) and a reasonable allowance for Reserves, contingencies and
anticipated obligations as determined by the Managers.
"BUSINESS DAY" means a day that is not a Saturday or Sunday or day on
which commercial banks are authorized by law to close in New York City or San
Francisco.
"CALL UNITS" means the sum of (a) 4,387,500 Units plus (b) the number
of Aggregate Additional Call Units.
"CAPITAL CONTRIBUTION" means the total amount of cash and the agreed
fair market value (net of liabilities) contributed to the LLC by a Member.
"CERTIFICATE OF FORMATION" means the certificate of formation filed
with the Secretary of State for the purpose of forming the LLC.
"CNET HOLDER" means (i) CNET and its Permitted Transferees and (ii)
any Member not described in clause (i) who holds Units originally issued to a
Person described in clause (i) hereof. Any Member described in clause (ii)
hereof who holds (x) Units originally issued to a Person described in clause (i)
hereof and (y) Units originally issued to any Person not described in clause (i)
hereof will be a "CNET Holder" only with respect to the Units described in
clause (x).
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"CODE" means the Internal Revenue Code of 1986, as amended (or any
corresponding provision or provisions of any succeeding law).
"CONTRIBUTION AGREEMENT" means the Contribution Agreement dated as of
June 4, 1998 between NBC and CNET.
"DEPRECIATION" means, for each Fiscal Year or other period, an amount
equal to the depreciation, amortization or other cost recovery reduction
allowable with respect to an asset for such Fiscal Year or other period.
"DISSOLUTION" means the earlier of (a) the date upon which the LLC is
terminated under the Statute, or any similar provision enacted in lieu thereof,
or (b) the date upon which the LLC ceases to be a going concern.
"FISCAL YEAR" means (i) each 12-month period (or such shorter period
in the case of 1998) ending on December 31, or (ii) if after the date of this
Agreement the taxable year is required by the Code to be a period other than the
period described in clause (i), then each 12-month period which is the taxable
year of the LLC determined in accordance with the requirements of the Code;
(iii) the period from the day after the end of the most recently ended Fiscal
Year until the date the term of the LLC ends, and (iv) for purposes of making
allocations of Net Income and Net Loss, Fiscal Year means any portion of a
taxable year of the LLC to the extent required to comply with Section 706 of the
Code.
"GE" means the General Electric Company, a New York corporation,
together with its successors.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"INDEBTEDNESS" of any Person means all obligations of such Person for
borrowed money, including guarantees, and all reimbursement obligations in
respect of outstanding letters of credit (measured assuming such letters of
credit are drawn in full).
"INITIAL MEMBERS" means NBC Multimedia and CNET or their respective
Permitted Transferees of their Units in accordance with the provisions of
Section 7.1 hereof.
"INITIAL PUBLIC OFFERING" means the initial offer for sale of
Securities pursuant to an effective registration statement filed under the
Securities Act which results in an active trading market in such Securities (it
being understood that such an active trading market shall be deemed to exist if,
among other things, such Securities are listed on the NASDAQ Stock Market or
another national securities exchange).
"INTEREST" or "LLC INTEREST" means a limited liability company
interest in the LLC as provided in this Agreement and under the Statute and
includes any and all rights and benefits to
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which the holder of such Interest may be provided under this Agreement, together
with all obligations of such Person to comply with the terms and provisions of
this Agreement. Interests shall be expressed as a number of Units.
"LLC" means Snap! LLC, a Delaware limited liability company.
"LLC MINIMUM GAIN" means the amount determined by computing with
respect to each nonrecourse liability of the LLC, the amount of gain (of
whatever character), if any, that would be realized by the LLC if it disposed
(in a taxable transaction) of the Property subject to such liability in full
satisfaction thereof, and by then aggregating the amounts so computed as set
forth in Regulations Section 1.704-2(d).
"LIENS" shall mean any claim, lien (statutory or other), pledge,
option, charge, easement, security interest, right-of-way, encroachment,
encumbrance, mortgage, or other rights of third parties.
"MAXIMUM GUARANTEED AMOUNT" means $27 million of which (x) not more
than $21 million shall consist of Indebtedness incurred to finance the
operations of the LLC (excluding amounts incurred pursuant to clauses (y) and
(z)), (y) not more than $2.75 million of which consists of working capital
financing and (z) not more than $3.25 million consists of cash deposits or
reimbursement obligations for letters of credit securing the LLC's obligations
under the One Beach Street lease, PROVIDED that the Maximum Guaranteed Amount
will be reduced by the aggregate proceeds from all exercises of the NBC Option
(with such reduction being applied first against clause (x), then against clause
(y) and last to reduce clause (z)), PROVIDED, FURTHER that the Maximum
Guaranteed Amount will be reduced to the outstanding amount of guaranteed
Indebtedness if one or more claims for indemnification are made pursuant to
Section 8.1(i) of the Contribution Agreement and NBC Multimedia believes in good
faith that the amount of Losses and Expenses, when taken together with all
Losses and Expenses in respect of all other claims pursuant to Section 8.1(i),
could reasonably be expected to exceed $10 million.
"MEMBER" means a Person (a) (i) who is an Initial Member, (ii) who is
a transferee of an Interest in accordance with the provisions of Article VII or
(iii) to whom a new Interest is issued pursuant to Section 3.3 and (b) who has
not resigned or withdrawn as a Member or been dissolved. Reference to a
"Member" shall be to any one of the Members.
"MEMBER NONRECOURSE DEBT" has the meaning set forth in Regulations
Section 1704-2(b)(4).
"MEMBER NONRECOURSE DEBT MINIMUM GAIN" means an amount, with respect
to each Member Nonrecourse Debt, equal to the LLC Minimum Gain that would result
if such Member Nonrecourse Debt were treated as a nonrecourse liability of the
LLC, determined in accordance with Regulations Sections 1.704-2(i)(3).
"MEMBER NONRECOURSE DEDUCTIONS" has the meaning set forth in
Regulations Section 1.704-2(i)(2). The amount of Member Nonrecourse Deductions
with respect to a
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Member Nonrecourse Debt for a Fiscal Year of the LLC equals the excess (if any)
of the net increase (if any) in the amount of Member Nonrecourse Debt Minimum
Gain attributable to such Member Nonrecourse Debt during that Fiscal Year over
the aggregate amount of any distributions during that Fiscal Year to the Member
that bears (or is deemed to bear) the economic loss for such Member Nonrecourse
Debt to the extent such distributions are from the proceeds of such Member
Nonrecourse Debt and are allocable to an increase in Member Nonrecourse Debt
Minimum Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(2).
"NBC HOLDER" means (i) NBC Multimedia and its Permitted Transferees
and (ii) any Member not described in clause (i) who holds Units originally
issued to a Person described in clause (i) hereof. Any Member described in
clause (ii) hereof who holds (x) Units originally issued to a Person described
in clause (i) hereof and (y) Units originally issued to any Person not described
in clause (i) hereof will be a "NBC Holder" only with respect to the Units
described in clause (x).
"NET PROFITS" and "NET LOSS" mean, for each Fiscal Year or other
period, an amount equal to the LLC's taxable income or loss for such year or
period, determined in accordance with Code Section 703(a) (for this purpose, all
items of income, gain, loss or deduction required to be stated separately
pursuant to Code Section 703(a)(1) shall be included in taxable income or loss),
with the following adjustments:
(i) Any income of the LLC that is exempt from Federal income tax
and not otherwise taken into account in computing Net Profits or Net Loss
shall be added to such taxable income or loss;
(ii) Any expenditures of the LLC described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant
to Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise taken into
account in computing Net Profits or Net Loss shall be subtracted from such
taxable income or loss;
(iii) Gain or loss resulting from any disposition of Property with
respect to which gain or loss is recognized for Federal income tax purposes
shall be computed by reference to the fair market value of the Property
disposed of, notwithstanding that the adjusted tax basis of such Property
differs from its fair market value;
(iv) In lieu of depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such Fiscal Year or
other period; and
(v) Notwithstanding any other provision of this definition, any
items of income, gain, loss or deduction which are specifically allocated
shall not be taken into account in computing Net Profits or Net Loss.
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"PERCENTAGE INTERESTS" means, with respect to any Member, such
Member's Interest expressed as a percentage of all Interests of all Members,
determined by dividing the number of Units owned by such Member by the total
number of Units then outstanding. The Percentage Interests of the Members at
any time will be determined by reference to Schedule 1.1.
"PERMITTED TRANSFER" means any Transfer by a Member of a portion of or
all of its Interest, PROVIDED that such Transfer otherwise complies with the
conditions and restrictions of this Agreement.
"PERMITTED TRANSFEREE" means (a) with respect to NBC Multimedia and
its Permitted Transferees, (x) NBC, (y) any Subsidiary of NBC and (z) any
wholly-owned Subsidiary of GE and (b) with respect to CNET and its Permitted
Transferees, (i) CNET and (ii) any Subsidiary of CNET.
"PERSON" means an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, person (including, without
limitation, a "person" as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934), trust, association or entity or government, political
subdivision, agency or instrumentality of a government.
"PROPERTY" means the assets of the LLC and its subsidiaries, both
tangible and intangible.
"REGULATIONS" means the federal income tax regulations promulgated by
the Treasury Department under the Code, as such regulations may be amended from
time to time. All references herein to a specific section of the Regulations
shall be deemed also to refer to any corresponding provisions of succeeding
Regulations.
"RESERVES" means funds set aside from Capital Contributions or gross
cash revenues as reserves. Such Reserves shall be maintained in amounts
reasonably deemed sufficient by the Managers for working capital and the payment
of taxes (other than income taxes), insurance, debt service, repairs,
replacements, renewals, or other costs or expenses incident to the Business of
the LLC, or in the alternative, the Dissolution of the LLC.
"SECRETARY OF STATE" means the Secretary of State of the State of
Delaware.
"SECURITIES" means shares of common stock or other securities other
than debt of a corporation into which the LLC is converted at a future date.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder, as the same may be amended from
time to time.
"SNAP! BUSINESS" means the (i) design, creation, operation,
maintenance and marketing of the Snap! Site, including customized versions of
the Snap! Site developed for third party distribution partners, (ii) marketing
and sale of advertising or other promotional content for
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transmission on the Snap! Site, (iii) the provision of Snap!-branded search
services and directory listings to third parties for display on third party web
sites; and (iv) all business activities incidental to or required in connection
with the foregoing.
"SNAP! SITE" means the Internet site currently accessible from the
World Wide Web at http://www.snap.com and any co-branded edition of such site
developed for Snap! distribution partners.
"STATUTE" means the Delaware Limited Liability Company Act (6 DEL.C.
Section 18-101, ET SEQ.), as amended from time to time, (or any corresponding
provision or provisions of any succeeding law).
"SUBSIDIARY" of any Person means any corporation, partnership, limited
liability company, joint venture or other legal entity of which such Person
(either alone or through or together with any other Subsidiary) owns or has the
right to acquire, directly or indirectly, 50% or more of the stock or other
equity interests the holder of which is generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.
"UNIT" means a fractional, undivided share of the Interests of all
Members. The number of Units outstanding and the holders thereof are set forth
on Exhibit 1.1, as such Exhibit may be amended from time to time pursuant to
Sections 3.3 and 7.1(a). If determined by the Board of Managers, the ownership
of Units shall be evidenced by a certificate in a form approved by the Board of
Managers.
(b) As used in this Agreement, each of the following capitalized
terms shall have the meaning ascribed to them in the Section set forth opposite
such term:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Adjusted Aggregate CNET Valuation 7.5(b)(ii)
Adjusted Aggregate NBC Valuation 7.5(b)(ii)
Aggregate CNET Valuation 7.5(b)(i)
Aggregate NBC Valuation 7.5(b)(i)
Budget 6.4(a)
Business of the LLC 2.5
Buy/Sell Valuation 7.5(b)
Call Exercise Period 7.4
Capital Account 3.5(c)
CNET Buy/Sell Valuation Price 7.5(b)(v)
CNET Exercise Notice 7.5(a)
CNET Exercise Period 7.5(a)
CNET Veto 7.5(a)
Fair Market Value 7.4(b)
First NBC Notice 7.5(a)
First Valuation Right 7.5(a)
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5% Member 8.1(b)
Indemnitee 10.1
Independent Firm 7.4(b)
Initial Budget 6.4(a)
NBC Buy/Sell Valuation Price 7.5(b)(iv)
NBC Call 7.4(a)
NBC Option 7.3
NBC Valuation Notice 7.5(a)
New Units 3.4(c)
Majority Members 7.7
Managers 6.1
Officers 6.2
Option Exercise Period 7.3
Option Price 7.3
Option Units 7.3
Option Revised Buy/Sell Valuation 7.5(b)(ii)
Option Revised Buy/Sell Per Unit Valuation 7.5(b)(ii)
Other Members 7.7
Preliminary Buy/Sell for Unit Valuation 7.5(b)(i)
Proposed FMV 7.4(b)
Tax Matters Partner 8.4
Third-Party Sale 7.7
Transfer 7.1
Transferee 7.1
Transferring Members 7.7
Trigger Date 7.5(c)
</TABLE>
ARTICLE II.
ORGANIZATIONAL MATTERS
2.1 FORMATION OF LLC; NAME. The Initial Members have formed the LLC
pursuant to the provisions of the Statute by filing the Certificate of Formation
with the Secretary of State. The name of the LLC is "Snap! LLC", a Delaware
limited liability company. The LLC may conduct business under such names(s) as
may be selected by the Managers.
2.2 PRINCIPAL OFFICE. The LLC shall maintain its principal place of
business at One Beach Street, San Francisco, California, or any other location
as may be selected by the Managers.
2.3 AGENT FOR SERVICE OF PROCESS. The LLC shall continuously maintain a
registered office and a designated and duly qualified agent for service of
process on the LLC in the State of Delaware. The name and address of the LLC's
agent for service of process is The Corporation
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Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware or such other agent as the Managers designate in accordance with the
Statute.
2.4 DURATION. The existence of the LLC shall be perpetual after the date
of the filing of the Certificate of Formation with the Secretary of State,
unless the LLC is terminated or dissolved sooner in accordance with the
provisions of this Agreement.
2.5 BUSINESS AND PURPOSE OF THE LLC. The purpose of the LLC is to operate
and pursue the Snap! Business, directly or indirectly through Subsidiaries, and
to expand its activities as management and the Board of Managers deem necessary
or appropriate to advance its business or value as a General Internet Portal
Service (as defined in the Preferred Carriage Agreement (as defined in the
Contribution Agreement)), including without limitation by (i) adding additional
product features such as web page hosting, HTML mail, instant messaging,
specialized searching, etc.; (ii) expanding into international markets; (iii)
expanding into alternate platforms and delivery technologies (e.g., WebTV,
consumer devices, etc.); and (iv) forming alliances with or pursuing
acquisitions of content providers, distributions, technology providers,
competitors and others, and related businesses (collectively, the "BUSINESS OF
THE LLC"). In connection with the foregoing, the LLC will seek to maximize its
value to its equity owners by capitalizing on the resources of NBC and CNET, but
without sacrificing the interests of the LLC to the interests of NBC or CNET.
2.6 EFFECTIVE DATE OF AGREEMENT. This Agreement shall be effective as of
the date of formation of the LLC.
ARTICLE III.
CAPITAL CONTRIBUTIONS AND ISSUANCES OF UNITS
3.1 INITIAL CONTRIBUTIONS. Subject to the terms and conditions of the
Contribution Agreement, on the Closing Date (as defined in the Contribution
Agreement) the Initial Members shall make initial contributions in accordance
with the provisions of the Contribution Agreement.
3.2 ADDITIONAL CONTRIBUTIONS. Except as expressly set forth herein or as
otherwise required by law, no Member shall be required to (a) make any
additional Capital Contributions, (b) make any loan, (c) cause to be loaned any
money or other assets to the LLC or (d) guarantee any obligations of the LLC.
3.3 ISSUANCE OF ADDITIONAL UNITS. Subject to Section 3.4 and Section 6.3,
the Board of Managers is hereby authorized to cause the LLC to issue to Members
or other Persons (including, without limitation, in connection with the
contribution of property to the LLC) on such terms as the Board of Managers
shall determine, additional Units representing additional LLC Interests. Any
issuance of additional Units to a Person who is not a Member shall be
conditioned on such Person executing and delivering to the LLC a written
agreement in form and substance satisfactory to the Board of Managers whereby
such Person agrees to be bound by the terms of
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this Agreement. Upon the issuance of any additional Units pursuant to this
Section 7.3, Schedule 1.1 will be amended to reflect such issuance.
3.4 RIGHT OF FIRST REFUSAL FOR NEW UNITS. (a) The LLC hereby grants to
each NBC Holder and each CNET Holder a pro rata right of first refusal to
purchase any New Units which the LLC may, from time to time, propose to sell.
Such pro rata right of first refusal shall allow each NBC Holder and each CNET
Holder to purchase in accordance with this Section 3.4 a number of the New Units
equal to the product of (x) the number of New Units proposed to be sold
multiplied by (y) such Member's Adjusted Percentage Interest. Notwithstanding
the foregoing, with respect to each issuance of New Securities prior to the
earlier of the termination of the NBC Call or the purchase of the Call Units
upon exercise of the NBC Call, the number of New Units that may be purchased by
NBC Multimedia pursuant to this Section 3.4 in respect of any issuance of New
Units shall be increased by the aggregate amount of any New Units which the CNET
Holders determine not to purchase pursuant to this Section 3.4, PROVIDED that
the maximum number of additional New Units that NBC Multimedia will have the
right to purchase as a result of this sentence in respect of each issuance of
New Units shall equal the product of (x) the Adjusted Percentage Interest
represented by the Call Units at the time of such issuance multiplied by (y) the
number of New Units proposed to be sold.
(b) In the event the LLC proposes to issue New Units, it shall give
each NBC Holder and each CNET Holder written notice of its intention to issue
New Units, the purchase price therefor (which shall be payable solely in cash)
and the terms upon which the LLC proposes to issue the same. Each NBC Holder
and each CNET Holder shall have 30 days from the date such notice is received to
determine whether to purchase all or any portion of such New Units (up to the
maximum number such NBC Holder or CNET Holder has the right to acquire pursuant
to Section 3.4(a)) for the purchase price and upon the terms specified in the
LLC's notice by giving written notice to the LLC and stating therein the
quantity of New Units to be purchased. The right of first refusal granted
hereunder shall terminate with respect to any NBC Holder or CNET Holder if not
exercised by such NBC Holder or CNET Holder within thirty (30) days after
receipt of such notice from the LLC.
(c) "NEW UNITS" shall mean any additional Units proposed to be sold
by the LLC; PROVIDED, HOWEVER, that the term "New Units" shall not include (i)
Units issued upon the exercise of the NBC Option, (ii) Units issued in
connection with any distribution to Members or recapitalization among the
Members of the LLC, (iii) Units issued by the LLC pursuant to a bona fide
acquisition of another corporation, partnership or other business or entity or a
material portion of the assets thereof, by merger, purchase of assets or
otherwise, (iv) Units issued for compensation-related purposes to employees,
officers or directors of the LLC or (v) Units issued in connection with an
Initial Public Offering.
(d) The obligations of the LLC under this Section shall terminate
immediately upon the closing of an Initial Public Offering.
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3.5 RIGHTS WITH RESPECT TO CAPITAL. (a) No Member shall have the right
to withdraw, or receive any return of, its Capital Contribution, and no Capital
Contribution may be returned in the form of property other than cash except as
specifically provided herein.
(b) Except as expressly provided in this Agreement, no Capital
Contribution of any Member shall bear any interest or otherwise entitle the
contributing Member to any compensation for use of the contributed capital.
(c) A separate capital account ("CAPITAL ACCOUNT") shall be
maintained for each Member. For book purposes, each Member's Capital Account
will be separated into a contribution account and an income (loss) account and
will be maintained according to generally accepted accounting principles.
Section 3.7 below describes the appropriate accounting treatment of the Capital
Accounts maintained for tax purposes.
(d) In the event an Member transfers an Interest in accordance
with the terms of this Agreement, the transferee shall succeed to the Capital
Account of the transferor to the extent it relates to the transferred Interest.
3.6 RULES OF ADJUSTMENT OF CAPITAL ACCOUNTS. The Capital Account of
each Member shall be increased by:
(i) such Member's cash contributions to the LLC;
(ii) the agreed fair market value of property contributed by such
Member (net of liabilities secured by such contributed property that the
LLC is considered to assume or take subject to under Code Section 752); and
(iii) all items of Net Profits allocated to such Member pursuant to
Article IV or other provisions of this Agreement.
(b) The Capital Account of each Member shall be decreased by:
(i) the amount of cash distributed to such Member;
(ii) the agreed fair market value of all actual and deemed
distributions of property made to such Member pursuant to this Agreement
(net of liabilities secured by such distributed property that the Member is
considered to assume or take subject to under Code Section 752); and
(iii) Net Loss allocated to such Member pursuant to Article IV or
other provisions of this Agreement.
(c) The provisions of this Agreement relating to the maintenance
of Capital Accounts are intended to comply with Regulations Section
1.704-1(b)(2)(iv), and shall be interpreted and applied in a manner consistent
with such Regulations Section. To the extent such
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provisions are inconsistent with such Regulations Section or are incomplete with
respect thereto, Capital Accounts shall be maintained in accordance with such
Regulations Section.
3.7 ADMISSION OF ADDITIONAL MEMBERS. The Board of Managers may admit one
or more Persons as additional Members ("Additional Members"). Each Additional
Member shall: (i) agree to be bound by the provisions of this Agreement; (ii)
execute and deliver such documents as the Board of Managers deems appropriate in
connection therewith; and (iii) contribute to the LLC the agreed upon Capital
Contribution in exchange for Units.
3.8 REVALUATION. Upon the admission of Additional Members, the Capital
Accounts of the Members shall be increased or decreased, as the case may be, to
reflect the gross asset values of the LLC's assets pursuant to Regulation
Section 1.704-1(b)(2)(iv)(g). The amount of any such increase or decrease shall
be allocated among the Members as if such increase or decrease constituted
income or loss, respectively, in accordance with the allocation provisions set
forth in Article IV.
ARTICLE IV.
ALLOCATION AND DISTRIBUTIONS
4.1 ALLOCATION OF NET PROFITS AND LOSSES. Except as otherwise provided in
this Article IV, Net Profits and Net Loss of the LLC in each Fiscal Year shall
be allocated among the Members in accordance with the following:
(a) Net Profits shall be allocated among the Members as follows:
(i) first, to each of the Members until the cumulative Net Profits
allocated to such Member pursuant to this Section 4.1(a) is equal to the
cumulative Net Loss allocated to the Member pursuant to Section 4.1(b) for
any prior period;
(ii) thereafter, to the Members in accordance with their respective
Percentage Interests.
(b) Except as otherwise provided in this Article IV, Net Loss
shall be allocated among the Members as follows:
(i) first, to offset any Net Profits allocated pursuant to Section
4.1(a) hereof not otherwise reduced by a prior allocation of Net Losses
(pro rata in proportion to their shares of Net Profits being offset); and
(ii) thereafter to the Members in accordance with their respective
Percentage Interests.
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(c) If a Member would at any time receive, but for this Section
4.1(c), an allocation of deduction, loss, or expenditure that would cause or
increase a deficit balance in such Member's Capital Account in excess of any
amount of such deficit balance that the Member is obligated to restore or deemed
obligated to restore (as determined in accordance with Treasury Regulations
Section 1.704-1(b)(2)(ii)(c)), then the portion of such allocation that would
cause or increase such deficit Capital Account balance shall be specially
allocated to the other Members, if any, with positive Capital Account balances
in proportion to such balances. The loss limitation under this Section 4.1(c)
is intended to comply with Treasury Regulation Section 1.704-1(b)(2)(ii)(d),
including the reductions described in subparagraphs (4), (5) and (6) therein.
Any special allocation of items of deduction, loss, or expenditure pursuant to
this Section 4.1(c) shall be taken into account in computing subsequent
allocations pursuant to this Article IV, so that the net amount of any items so
allocated and all other items of income, gain, loss and deduction allocated to
each Member pursuant to this Article IV shall, to the extent possible, and as
soon as possible, be equal to the net amount that would have been allocated to
each Member pursuant to the provisions of this Article IV as if special
allocations pursuant to this Section 4.1(c) had not been made.
4.2 QUALIFIED INCOME OFFSET. If in any Fiscal Year an Member receives an
adjustment, allocation or distribution described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of LLC income and gain shall be
specially allocated to each such Member in an amount and manner sufficient to
eliminate, to the extent required by the Treasury Regulations, the Capital
Account deficit of such Member as quickly as possible provided that an
allocation pursuant to this Section 4.2 shall be made only if and to the extent
that such Member would have a Capital Account deficit after all other
allocations provided for in this Article IV have been tentatively made as if
this Section 4.2 were not in the Agreement. This Section 4.2 is intended to
qualify and be construed as a "qualified income offset" within the meaning of
Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith.
4.3 MINIMUM GAIN CHARGEBACK. If there is a net decrease in LLC Minimum
Gain during a Fiscal Year, each Member will be allocated, before any other
allocation under this Article IV, items of income and gain for such Fiscal Year
(and if necessary, subsequent years) in proportion to and to the extent of an
amount equal to such Member's share of the net decrease in LLC Minimum Gain
determined in accordance with Regulations Section 1.704-2(g)(2). This Section
4.3 is intended to comply with, and shall be interpreted consistently with, the
"minimum gain chargeback" provisions of Regulations Section 1.704-2(f).
4.4 MEMBER NONRECOURSE DEBT MINIMUM GAIN CHARGEBACK. Notwithstanding any
other provision of this Article IV, but except Section 4.3, if there is a net
decrease in Member Nonrecourse Debt Minimum Gain attributable to an Member
Nonrecourse Debt during any Fiscal Year of the LLC, each Member who has a share
of the Member Nonrecourse Debt Minimum Gain attributable to such Member
Nonrecourse Debt, determined in accordance with Treasury Regulations Section
1.704-2(i)(5), shall be specially allocated items of LLC income and gain for
such year (and, if necessary, subsequent years) in an amount equal to such
Member's share of the net decrease in Member Nonrecourse Debt Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
Regulations Section 1.704-2(i)(4). Allocations
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pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The items to
be so allocated shall be determined in accordance with Regulations Section
1.704-2(i)(4). This Section 4.4 is intended to comply with a minimum gain
chargeback requirement of that Section of the Regulations and shall be
interpreted consistently therewith.
4.5 MEMBER NONRECOURSE DEDUCTIONS. Any Member Nonrecourse Deductions for
any Fiscal Year or other period shall be specially allocated to the Member who
bears (or is deemed to bear) the economic risk of loss with respect to the
Member Nonrecourse Debt to which such Member Nonrecourse Deductions are
attributable in accordance with Regulations Section 1.704-2(i)(2).
4.6 SPECIAL ALLOCATIONS. Any special allocations of items of Net Profits
pursuant to Sections 4.3, 4.4 and 4.5 shall be taken into account in computing
subsequent allocations of Net Profits pursuant to Section 4.1, so that the net
amount of any items so allocated and the gain, loss and any other item allocated
to each Member pursuant to Section 4.1 shall, to the extent possible, be equal
to the net amount that would have been allocated to each such Member pursuant to
the provisions of this Article if such special allocations had not occurred.
4.7 FEES TO MEMBERS OR AFFILIATES. Notwithstanding the provisions of
Section 4.1, in the event that any fees, interest, or other amounts paid to any
Member or any Affiliate thereof pursuant to this Agreement or any other
agreement between the LLC and any Member or Affiliate thereof providing for the
payment of such amount, and deducted by the LLC in reliance on Section 707(a)
and/or 707(c) of the Code, are disallowed as deductions to the LLC on its
federal income tax return and are treated as LLC distributions, then:
(a) the Net Profits or Net Loss, as the case may be, for the
Fiscal Year in which such fees, interest, or other amounts were paid shall be
increased or decreased, as the case may be, by the amount of such fees,
interest, or other amounts that are treated as LLC distributions; and
(b) there shall be allocated to the Member to which (or to whose
Affiliate) such fees, interest, or other amounts were paid, prior to the
allocations pursuant to Section 4.1, an amount of gross income for the Fiscal
Year equal to the amount of such fees, interest, or other amounts that are
treated as LLC distributions.
4.8 SECTION 704(C) ALLOCATION. Any item of income, gain, loss, and
deduction with respect to any property (other than cash) that has been
contributed by an Member to the capital of the LLC and which is required or
permitted to be allocated to such Member for income tax purposes under Section
704(c) of the Code so as to take into account the variation between the tax
basis of such property and its fair market value at the time of its contribution
shall be allocated to such Member solely for income tax purposes in the manner
so required or permitted.
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ARTICLE V.
DISTRIBUTIONS OF AVAILABLE CASH FLOW
5.1 AVAILABLE CASH FLOW. The timing and amount of all distributions of
Available Cash Flow of the LLC shall be determined by the Managers. Except as
provided in Sections 9.2 and 9.3, all distributions of Available Cash Flow shall
be made to the Members pro rata in accordance with their respective Percentage
Interests at the time of the distribution.
ARTICLE VI.
MANAGEMENT
6.1 MANAGERS. (a) The LLC shall be managed by a Board of Managers
consisting of seven (7) Managers (individually a "MANAGER" or collectively, the
"MANAGERS") or such other number (but in no event fewer than five) as may be
established by (x) agreement of Members holding Units representing an aggregate
Percentage Interest in excess of 50%, which Members must include both CNET and
NBC Multimedia, (y) NBC Multimedia in its discretion after the exercise of the
NBC Option in an amount that results in the NBC Holders owning more Units than
the CNET Holders or (z) CNET in its discretion if the NBC Option terminates
without being exercised in an amount that results in the NBC Holders owning more
Units than the CNET Holders. Two Managers shall be appointed by CNET as long as
CNET and its Permitted Transferees own in the aggregate Units representing a
Percentage Interest of at least 10% and the remainder of the Managers shall be
appointed by NBC Multimedia and/or its assignees (which may include transferees
of its Units); PROVIDED that in the event the number of Managers is adjusted,
NBC Multimedia shall in all cases have the right to appoint a majority of the
Managers and, PROVIDED FURTHER that in the event NBC Multimedia assigns its
right to designate any Manager to any Person other than a Permitted Transferee
of NBC Multimedia, CNET will thereafter have the right to designate a number of
Managers equal to the product of the aggregate Percentage Interest of CNET and
its Permitted Transferees multiplied by the total number of Managers (rounded to
the nearest whole number, but in no event less than one or, if the aggregate
Percentage Interest of CNET and its Permitted Transferees is at least 10%, two).
Anything in this Section 6.1(a) to the contrary notwithstanding, in the event
that the NBC Option terminates without being exercised in full, each of CNET and
NBC Multimedia will thereafter have the right to designate a number of Managers
equal to the product of the aggregate Adjusted Percentage Interest of such
Member and its Permitted Transferees multiplied by the total number of Managers
(in each case rounded to the nearest whole number, but in no event less than
one). Each of CNET and NBC Multimedia shall have the right to designate
replacements of those Managers appointed by it, and each Member agrees to vote
its Interest and any Interests which it controls in favor of the designees of
CNET and NBC Multimedia. The initial Managers shall be Tom Rogers, Marty
Yudkovitz, Scott Sassa, Neil Braun and Mark Begor as NBC's appointees and Halsey
Minor, Shelby Bonnie, Tom Melcher and Douglas Woodrum as CNET's appointees. The
Managers shall appoint by majority vote one of the Managers to preside at
meetings of the Board of Managers.
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(b) The Board of Managers has, subject to the control of the
Members, general supervision, direction and control of the business of the LLC.
The Board of Managers shall have the general powers and duties typically vested
in the board of directors of a corporation and all other powers and duties over
the LLC and its business except as expressly provided elsewhere in this
Agreement. The Managers shall comply with applicable law and their fiduciary
obligations to the LLC and the Members (which fiduciary obligations will not be
affected by any expiration of CNET's rights under Section 6.3). Pursuant to
their discretion to do so under this Section 6.1, the Members hereby delegate to
each of the Managers the nonexclusive power and authority to act as an agent of
the LLC and, in such capacity, to bind the LLC in the ordinary course of the
LLC's business and to execute any and all documents to be signed by the LLC.
(c) Except as otherwise set forth in this Agreement, an action or
decision of the Board of Managers shall require the consent or vote of a
majority of the Managers. A majority of the total number of incumbent Managers
shall be necessary to constitute a quorum for the transaction of business at any
meeting of the Board of Managers, and except as otherwise provided in this
Agreement or by the Statute, the action of a majority of the Managers present at
any meeting at which there is a quorum, when duly assembled, is valid. A
meeting at which a quorum is initially present may continue to transact
business, notwithstanding the withdrawal of Managers, if any action taken is
approved by a majority of the required quorum for such meeting. No Member,
acting solely in its capacity as a Member, shall have the power and authority to
act for and bind the LLC unless such matter has been approved by the Managers as
set forth herein.
(d) Meetings of the Board of Managers shall be held at the
principal office of NBC, CNET or the LLC, unless some other place is designated
in the notice of the meeting. Any Manager may participate in a meeting through
use of a conference telephone, video conference or similar communication
equipment so long as all Managers participating in such a meeting can hear one
another. Accurate minutes of any meeting of the Board of Managers shall be
maintained by the Officer designated by the Board of Managers for that purpose.
(e) Special meetings of the Board of Managers for any purpose may
be called at any time by the person selected to preside at meetings of the Board
of Managers. Unless waived by the Board of Managers, at least three business
days notice of the time and place of any meeting of the Board of Managers shall
be delivered personally to each of the Managers or personally communicated to
them by an officer of the LLC by telephone, and confirmed in writing by
facsimile, or communicated by Federal Express or other comparable overnight
courier service (receipt requested). Notice shall be transmitted to the last
known facsimile number or address of the Manager as shown on the records of the
LLC. Such notice as above provided shall be considered due, legal and personal
notice to such Manager. With respect to a special meeting which has not been
duly called or noticed pursuant to the foregoing provisions, all transactions
carried out at the meeting are as valid as if had at a meeting regularly called
and noticed if: (i) all Managers are present at the meeting, and sign a written
consent to the holding of such meeting, (ii) if a majority of the Managers are
present and if those not present sign a waiver of notice of such meeting or a
consent to holding the meeting or an approval of the minutes thereof, whether
prior to or after the holding of such meeting, which waiver, consent or approval
shall be filed with
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the other records of the LLC or (iii) if a Manager attends a meeting without
notice and does not protest prior to the meeting or at its commencement that
notice was not given to him or her.
(f) Any action required or permitted to be taken by the Managers
may be taken without a meeting and will have the same force and effect as if
taken by a vote of Managers at a meeting properly called and notice, if
authorized by a writing signed individually or collectively by all, but not less
than all, the Managers. Such consent shall be filed with the records of the
LLC.
6.2 OFFICERS. (a) The officers of the LLC (the "OFFICERS") shall include
a chief executive officer, chief operating officer, chief financial officer and
a controller. The LLC may also have such other officers as the Board of
Managers in its discretion appoint or whom may be appointed by the other
Officers if specifically authorized to do so by the Board of Managers, all of
whom shall be considered "Officers" for all purposes of this Agreement.
(b) The chief executive officer of the LLC shall, subject to the
general direction and control of the Board of Managers, have overall
responsibility for the management of the day-to-day operations of the LLC and
will be empowered to and will engage in all appropriate and necessary activities
to accomplish the purposes of the LLC as set forth herein. At NBC's request,
CNET will make available (at no cost to the LLC) its chief executive officer,
Halsey Minor, or another senior executive officer of CNET nominated by CNET, to
serve as the initial chief executive officer of the LLC until the Board of
Managers selects a regular full-time chief executive officer, which is expected
to occur within one year after the date hereof. The initial chief executive
officer may continue to serve as an officer of CNET and to perform services for
CNET with a portion of his business time, provided that he or she devotes the
necessary time and attention to the business of the LLC. Prior to an Initial
Public Offering, the regular full-time chief executive officer and the chief
operating office, chief financial officer and controller of the LLC will be
appointed by NBC (subject to the reasonable approval of CNET). Unless otherwise
determined by the Board of Managers, among the powers and duties of the chief
financial officer will be to have final authority (not subject to the direction
or control of the chief executive officer or chief operating officer) and
control with respect to all matters relating to the LLC's rights and obligations
relating to CNET under the Transition and Technology Sharing Agreement (as
defined in the Contribution Agreement).
(c) Each of the Officers are hereby each designated as an
authorized person, within the meaning of the Act, to execute, deliver and file
the certificate of formation of the LLC (and any amendments and/or restatements
thereof) and any other certificates (and any amendments and/or restatements
thereof) necessary for the LLC to qualify to do business in a jurisdiction in
which the LLC may wish to conduct business. Pursuant to their discretion to do
so, the Members hereby delegate to each of the Officers the nonexclusive power
and authority to act as an agent of the LLC and, in such capacity, to bind the
LLC in the ordinary course of the LLC's business and to execute any and all
documents to be signed by the LLC.
6.3 CNET VETO RIGHTS. The LLC will not take any of the following action
without (i) the approval of the Board of Managers pursuant to Section 6.1(c) and
(ii) prior to the earlier of
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(x) an Initial Public Offering, (y) NBC's exercise of the NBC Call or (z) the
fifth anniversary of the Closing, subject to Section 7.5(a), the approval of at
least one Manager appointed by CNET (which approval may be given as part of the
approval of the Board of Managers pursuant to Section 6.1(c)):
(a) directly or indirectly or through any Subsidiary conduct any
business other than the Business of the LLC;
(b) amend this Agreement;
(c) merge or consolidate with or into any other Person;
(d) sell, transfer or otherwise dispose of all or substantially
all of the Property; PROVIDED that a pledge of such Property (and foreclosure
thereon) may be made without any such approval to secure any Indebtedness
permitted under the exception contained in Section 6.3(h) below to any Person
not an Affiliate of the LLC;
(e) authorize or issue any new Interests except (i) pursuant to
the NBC Option, (ii) pursuant to any employee "stock" plan, "phantom stock" plan
or option plan or (iii) "stock", "phantom stock" or option to individual
employees of the LLC;
(f) effect the termination, winding-up, liquidation, dissolution
or voluntary bankruptcy of the LLC;
(g) convert the LLC to corporate form pursuant to Section 7.9
hereof;
(h) incur any Indebtedness, including without limitation in the
ordinary course of business; or
(i) commit or agree to do any of the foregoing.
The approval of any of the matters set forth in this Section 6.3 by the
Board of Managers in accordance with Section 6.1(c) and this Section 6.3 shall
constitute all action necessary for the LLC to take such action and, subject to
Section 6.5(b), no vote or other action of the Members will be required to
authorize such matter, PROVIDED that prior to the earlier of (A) expiration of
the time period set forth in clause (i) of the first sentence of this Section
and (B) termination of the NBC Option without the NBC Option being exercised in
full, none of the actions set forth in clauses (a) through (g) will be taken
without NBC Multimedia's prior written consent. Subject to Section 6.5(b) each
of the Members will take any action with respect to their Units that may be
required to effect any matter approved pursuant to this Section 6.3.
6.4 BUDGET. (a) The Initial Members have agreed upon an initial
business plan for the LLC and a budget for the LLC (a "BUDGET") for the period
commencing July 1, 1998, copies of which are attached hereto as Exhibit 6.4 (the
"INITIAL BUDGET"). All future Budgets shall be substantially in the form of
Exhibit 6.4 unless otherwise agreed by the Board of Managers. Not
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less than 60 days prior to the end of each fiscal year, the Officers shall
submit to the Board of Managers a proposed Budget for the next fiscal year.
(b) The Members acknowledge that they currently anticipate that,
subject to the terms and conditions of this Section 6.4(b), additional financing
required by the LLC may be funded by Indebtedness having the terms set forth on
Schedule 6.4(b) hereto and, to the extent not inconsistent with SCHEDULE 6.4(b),
such additional terms as may be approved by the Board of Managers. NBC agrees
that, pursuant to a guarantee in form and substance reasonably satisfactory to
NBC, NBC or one of its Affiliates will guarantee up to the Maximum Guaranteed
Amount of such Indebtedness to the extent (and only to the extent) such
guaranteed Indebtedness is (i) necessary to cover operating cash requirements of
the LLC or obligations described in clause (z) of the definition of Maximum
Guaranteed Amount, (ii) provided for in the Initial Budget or a subsequent
Budget approved by the Board of Managers and (iii) on the terms set forth on
SCHEDULE 6.4(b) hereto and such other terms as are reasonably acceptable to NBC;
PROVIDED that the Members acknowledge and agree that, unless otherwise agreed to
by NBC in its sole discretion, any such guarantees shall terminate (and NBC
shall have no further obligations or liabilities thereunder) upon the closing of
(A) a purchase of NBC's Interests in the LLC pursuant to Section 7.5 hereof or
(B) an Initial Public Offering. The provisions of this Section 6.4(b) are
solely for the benefit of the LLC and no creditor of the LLC shall have any
rights arising out of NBC's obligations to the LLC hereunder. In addition, the
LLC and each Member acknowledges and agrees that NBC and its Affiliates will not
have any obligations or liabilities arising out of or relating to any
Indebtedness of the LLC except as expressly provided herein.
6.5 RELATIONSHIP WITH MEMBERS. (a) Except as provided in this
Agreement or any other written agreement, the LLC shall pay no compensation to
any Member for their services to the LLC except services provided by Members who
are individuals in their capacities as bona fide employees of the LLC.
(b) Except as provided in the Implementing Agreements (as defined
in the Contribution Agreement), the LLC will not enter into any transaction with
NBC or any Affiliate of NBC unless (i) such transaction is on terms no less
favorable to the LLC than it would obtain in a comparable arm's length
transaction with a third party that is not NBC or an Affiliate of NBC or (ii)
such transaction is approved by CNET, such approval to not be unreasonably
withheld. Except as provided in the Implementing Agreements, the LLC will not
enter into any transaction with CNET or any Affiliate of CNET unless (A) such
transaction is on terms no less favorable to the LLC than it would obtain in a
comparable arm's length transaction with a third party that is not CNET or an
Affiliate of CNET or (B) such transaction is approved by NBC Multimedia, such
approval to not be unreasonably withheld.
6.6 EXPENSE REIMBURSEMENT. The LLC shall reimburse the Members for all
expenses paid by them on behalf of the LLC as approved from time to time by the
Managers, including all costs and expenses of operating and conducting the
Business of the LLC including without limitation payments to the LLC's
attorneys, auditors, consultants and other outside advisors; expenses associated
with the LLC's financial statements and reports and any required tax returns,
statements and filings; premiums in connection with liability insurance for the
LLC and any other
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Persons managing the LLC; and costs and expenses associated with the Dissolution
of the LLC. The LLC shall promptly reimburse the Members, the Tax Matters
Partner and any of their respective Affiliates to the extent that any such
expenses have been paid by such entities. Anything in this Section 6.6 to the
contrary notwithstanding, this Section 6.6 will not apply to expenses incurred
by Members in their capacities as employees of the LLC, which expenses will be
reimbursed to the extent provided by, and in accordance with, the LLC's policies
with respect to employees.
6.7 MEMBERS MEETINGS. Meetings of the Members may be called at any time
by any Member or Members with an aggregate Percentage Interest of not less than
fifteen percent (15%). Each Member shall have a number of votes equal to the
number of Units held by such Member, provided that if, pursuant to the Statute
or the terms of this Agreement, a Member is not entitled to vote on a specific
matter, then such Member's number of votes and Units shall not be considered for
purposes of determining whether approval of the Members has been obtained, in
respect of such specific matter. A vote of a majority of the outstanding Units
is required to approve any matter unless another vote is expressly provided for
in this Agreement or by Statute, PROVIDED that (a) for as long as CNET and its
Permitted Transferees hold in the aggregate at lest 5% of the outstanding Units,
the approval of CNET will also be required and (b) for as long as NBC Multimedia
and its Permitted Transferees hold in the aggregate at least 5% of the
outstanding Units the approval of NBC Interactive will also be required. Any
action which may be taken at any meeting of Members may be taken without a
meeting and without prior notice if a consent in writing, setting forth the
action so taken shall be signed by Members holding in the aggregate the number
of Units equal to or greater than the number required to approve such actions.
6.8 OBJECTIVE OF MANAGEMENT. The objective of management of the LLC will
be to maximize the value of the LLC's equity.
6.9 CONDUCT OF BUSINESS. The LLC shall adopt and maintain at all times
policies that correspond to GE's integrity policies as notified in writing to
the LLC from time to time.
ARTICLE VII.
TRANSFERS OF INTEREST AND CONVERSION
7.1 GENERAL; RESTRICTIONS ON TRANSFERS. (a) All Transfers of
Interests shall be effected by a Transfer of the Unit(s) evidencing such
Interests. The transferring Member will provide written notice of such Transfer
to the LLC and upon receipt of such notice Schedule 1.1 shall be amended to
reflect any Transfer effected in accordance with this Agreement.
(b) No Member shall sell, transfer, hypothecate, encumber or
assign ("TRANSFER"), directly or indirectly, all or any of its Units to any
Person (a "TRANSFEREE") (i) without delivering to the LLC a written agreement in
form and substance reasonably satisfactory to the Board of Managers executed by
the Transferee (including any Permitted Transferee that is
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not already bound by the terms of this Agreement) to be bound by the terms of
this Agreement, provided that this clause shall not apply to a pledge pursuant
to SECTION 7.1(c)(ii) or SECTION 7.1(d)(ii), (ii) except in compliance with all
applicable federal and state securities laws, (iii) if such Transfer would
terminate the LLC for federal income tax purposes and (iv) to the extent
prohibited under this Section 7.1.
(c) Prior to the earlier of (x) the closing of an Initial Public
Offering and (y) the five year anniversary of the Closing Date, no NBC Holder
will Transfer all or any of its Units (or related Interests) except as follows:
(i) any Transfer to a Permitted Transferee; (ii) the bona fide pledge of any
Unit to a financial institution securing bona fide indebtedness for money
borrowed advanced by such financial institution in the ordinary course of
business; (iii) at any time after exercise of the NBC Option in an amount that
results in the NBC Holders owning more Units than the CNET Holders, any Transfer
of Units to any Person, PROVIDED that immediately following such Transfer either
(x) NBC Multimedia and its Permitted Transferees own in the aggregate at least
30% of the outstanding Units and have the right to designate a majority of the
Board of Managers or (y) NBC Multimedia and its Permitted Transferees own in the
aggregate at least 40% of the outstanding Units; or (iv) at any time after
termination of the NBC Option without exercise in an amount that results in the
NBC Holders owning more Units than the CNET Holders, any Transfer of Units to
any Person, PROVIDED that immediately following such Transfer NBC Multimedia and
its Permitted Transferees own in the aggregate at least 3,656,250 Units. Any
Transfer pursuant to clause (iii) or clause (iv) prior to the completion of an
Initial Public Offering will be subject to Section 7.6.
(d) Prior to the earlier of (x) the completion of an Initial
Public Offering and (y) the five year anniversary of the Closing Date, no CNET
Holder will Transfer all or any of its Units (or related Interests) except as
follows: (i) any Transfer to a Permitted Transferee; (ii) the bona fide pledge
of any Unit to a financial institution securing bona fide indebtedness for money
borrowed advanced by such financial institution in the ordinary course of
business; and (iii) Transfers to any Person, PROVIDED that following such
Transfer CNET and its Permitted Transferees own in the aggregate at least 12.5%
of the outstanding Units at Closing (assuming exercise of the NBC Option, unless
the Transfer occurs after the termination of the NBC Option without exercise in
full, in which event you assume exercise of the NBC Option only to the extent
actually exercised prior to its termination). Anything in the immediately
preceding sentence to the contrary notwithstanding, prior to the exercise or
termination of the NBC Call, CNET will at all times hold (and CNET may not
Transfer) a number of Units equal to the number of Call Units at such time. Any
Transfer pursuant to clause (iii) prior to the completion of an Initial Public
Offering will be subject to Section 7.6. In addition, CNET may not Transfer any
of its rights under Sections 6.1 and 6.3 hereof.
(e) Any Transfer or attempted Transfer by a Member in violation of
this Section 7.1 shall be null and void and of no force or effect whatever.
Each Member hereby further agrees to hold the LLC and each Member wholly and
completely harmless from any cost, liability, or damage (including liabilities
for income taxes and costs of enforcing this indemnity) incurred by any of such
indemnified Persons as a result of a Transfer or an attempted Transfer in
violation of this Agreement.
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(f) For the avoidance of doubt, it is understood and agreed that
the LLC may impose additional transfer restrictions with respect to newly-issued
Units in connection with the issuance of such Units (or options or other rights
to acquire Units).
7.2 DISTRIBUTION AMONG MEMBERS. Upon the occurrence of a Permitted
Transfer of an Interest during any Fiscal Year, Profits, Losses, each item
thereof, and all other items attributable to such Interest for such Fiscal Year
shall be divided and allocated between the transferor and the transferee by
taking into account their varying interests during the Fiscal Year in accordance
with Code Section 706(d), using any conventions permitted by law and selected by
the Chief Financial Officer of the LLC. All distributions on or before the date
of a Permitted Transfer shall be made to the transferor, and all distributions
thereafter shall be made to the transferee. Solely for purposes of making such
allocations and distributions, the LLC shall recognize a Permitted Transfer upon
the Chief Financial Officer's receipt of (i) written notice stating the date
such Interest was transferred and such other information as the Chief Financial
Officer may reasonably require and (ii) the written agreement to be executed by
the Transferee agreeing to be bound by the terms of this Agreement pursuant to
the requirements of Section 7.1 hereof. The Chief Financial Officer and the LLC
shall incur no liability for making allocations and distributions in accordance
with the provisions of this Section 7.2 whether or not the Chief Financial
Officer or the LLC has knowledge of any Transfer of ownership of any Interest.
7.3 NBC OPTION. (a) At any time prior to the third anniversary of the
date hereof (the "OPTION EXERCISE PERIOD") (provided that if on such third
anniversary a Buy/Sell process is pending pursuant to Section 7.5 (i.e. NBC
Multimedia has delivered a First NBC Notice and the applicable CNET Veto has not
been rescinded nor has a purchase and sale of Interests occurred under Section
7.5), the Option Exercise Period will be extended until 20 days after a valid
rescission of the CNET Veto or 20 days after the closing of the relevant
purchase and sale (as applicable)) NBC Multimedia shall have the option (the
"NBC OPTION") to purchase from the LLC 14,805,556 newly issued Units (the
"OPTION UNITS") for an aggregate purchase price of $31,635,802 (the "OPTION
PRICE"). In the event the LLC has been converted to corporate form pursuant to
Section 7.9 hereof prior to the exercise by NBC Multimedia of the NBC Option,
the corporate successor to the LLC will, in exchange for the NBC Option
hereunder, issue an option to NBC Multimedia to purchase a number of shares of
capital stock of such corporate successor as would have been issued in exchange
for the Option Units had they been issued prior to such conversion to corporate
form for an aggregate exercise price of $31,655,802, such option to be
exercisable during the Option Exercise Period and otherwise on terms reasonably
acceptable to NBC Multimedia and CNET.
(b) If NBC Multimedia wishes to exercise the NBC Option, NBC
Multimedia shall provide five (5) days prior written notice to the LLC. The
closing with respect to any exercise of the NBC Option shall take place at the
principal office of the LLC on the fifth day after exercise by NBC Multimedia of
the NBC Option, PROVIDED that all orders, consents and approvals of Governmental
Authorities legally required for the closing of such sale shall have been
obtained and be in effect. Payment of the Option Price to the LLC shall be by
certified check or immediately available funds against the delivery of a duly
executed assignment of the Units so
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purchased, and such Units shall be delivered to NBC free and clear of all Liens
of any nature whatsoever. The NBC Option may be exercised by NBC at any time
and from time to time during the Option Exercise Period in whole or in part, in
which event the Option Price for such partial exercise will be determined on a
pro rata basis. The proceeds from any exercise of the NBC Option will be used
solely to repay Indebtedness guaranteed by NBC in accordance with Section 6.4(b)
until such Indebtedness is reduced to zero.
7.4 NBC CALL. (a) At any time during the period commencing on the
fourth anniversary of the date hereof and ending on the fifth anniversary of the
date hereof (the "CALL EXERCISE PERIOD") (provided that if on such fifth
anniversary a Buy/Sell process is pending pursuant to Section 7.5 (i.e. NBC
Multimedia has delivered a First NBC Notice and the applicable CNET Veto has not
been rescinded nor has a purchase and sale of Interests occurred under Section
7.5), the Call Exercise Period will be extended until 20 days after a valid
rescission of the CNET Veto or 20 days after the closing of the relevant
purchase and sale (as applicable)), NBC Multimedia shall have the right (the
"NBC CALL") to purchase a number of Units equal to the number of Call Units at
the time of the closing of the purchase of Units pursuant to the NBC Call;
PROVIDED that in the event the LLC has been converted to corporate form pursuant
to Section 7.9 hereof prior to the exercise by NBC Multimedia of the NBC Call,
NBC Multimedia shall have the right to purchase from CNET all the corresponding
amount of equity security or securities of the newly-formed corporation into
which such Units were converted (including any additional securities issued as a
result of subsequent stock splits or other similar adjustments to such
corresponding amount of equity security or securities) and the "Call Units"
shall refer thereto and CNET will at all times continue to own (and not
Transfer) a sufficient number of such securities to satisfy its obligations
hereunder. If NBC Multimedia wishes to exercise the NBC Call, NBC shall provide
thirty (30) days prior written notice to CNET. The purchase price for the Call
Units shall equal eighty percent (80%) of the Fair Market Value of the Call
Units as of the date of NBC's notice of exercise of the NBC Call, payable as set
forth in Section 7.4(c). The NBC Call may be exercised by NBC Multimedia only
once, and only in whole and not in part.
(b) For purposes of Section 7.4(a), "FAIR MARKET VALUE" of the
Call Units as of any exercise date shall be determined as follows:
(i) Following an Initial Public Offering, the "Fair Market Value"
shall be based on the average closing prices of the Securities subject to
the NBC Call quoted on the Nasdaq Stock Market or other principal
securities exchange on which such Securities are listed, for the sixty (60)
trading days prior to such exercise date.
(ii) prior to an Initial Public Offering, the "Fair Market Value"
shall be equal to the fair market value of the Call Units as determined in
good faith by NBC Multimedia and CNET, subject to Section 7.4(b)(iii)
below. For purpose of this Section 7.4(b)(ii) and Section 7.4(b)(iii), the
fair market value of the Call Units shall be determined as if all of the
outstanding Units were being sold in a single transaction and the proceeds
of such sale distributed to the Members in accordance with their respective
Percentage Interests.
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(iii) In the event that NBC Multimedia and CNET fail to agree on the
"Fair Market Value" within sixty (60) days of such exercise date pursuant
to Section 7.4(b)(ii) above, then each Member shall, within fifteen (15)
days of the expiration of such 60-day period, submit in writing to a
nationally recognized investment banking firm not having any substantial
relation with either Member and reasonably acceptable to each Member (an
"INDEPENDENT FIRM"), a proposed "Fair Market Value" together with
documentation supporting such Fair Market Value (each such submission, a
"PROPOSED FMV"). If the difference between the two Proposed FMVs is less
than or equal to ten percent (10%) of the higher Proposed FMV, the "Fair
Market Value" shall be the average of the two Proposed FMVs. In all other
cases, the Independent Firm shall determine, within fifteen (15) days of
receipt of the Proposed FMVs and supporting documentation, a fair market
value for the Call Units, and the Proposed FMV closest to such the fair
market value determined by the Independent Firm shall be the "Fair Market
Value" and shall be final and binding on the parties for all purposes
hereof. In the event that the Members fail to agree on an Independent Firm
within fifteen (15) days of the expiration of such 60-day period, each of
the Members shall select a nationally-recognized investment banking firm,
and the two investment banking firms proposed by the Members shall select a
third nationally-recognized investment banking firm to serve as the
Independent Firm, and the Members shall be required to submit their
Proposed FMV's to such Independent Firm within fifteen (15) days
thereafter. Failure by either Member to submit a Proposed FMV to the
Independent Firm (or failure to propose an investment banking firm as the
Independent Firm) shall, following receipt of written notice by the failing
Member and a 15-day cure period thereafter, be deemed to result in the
selection of the Proposed FMV or the proposed Independent Firm, as the case
may be, of the non-defaulting Member.
(c) The closing with respect to any exercise of the NBC Call shall
take place at the principal office of the LLC on the tenth business day after
final determination of Fair Market Value as provided in Section 7.4(b) hereof,
PROVIDED that all orders, consents and approvals of Governmental Authorities
legally required for the closing of such sale shall have been obtained and be in
effect. At such closing, NBC shall deliver (i) cash or a certified check or
checks in the appropriate amount or (ii) at its option, common stock of NBC or a
parent of NBC, against the delivery of a duly executed assignment of the Call
Units so purchased; PROVIDED that (1) such common stock is listed on the Nasdaq
Stock Market or another national securities exchange at the time of the closing
under this Section 7.4(c), (2) the value of such common stock shall be based on
the average closing prices of such common stock on the principal exchange on
which such common stock is listed during the thirty (30) days prior to the
closing under this Section 7.4(c) and (3) promptly (but in any event no later
than 10 days) following the closing under this Section 7.4(c), NBC or NBC's
parent (as applicable) shall file a shelf registration statement with the
Securities and Exchange Commission to register such shares for resale, shall use
its best efforts to have such registration statement declared effective as soon
as practicable thereafter and shall enter into a registration rights agreement
with the CNET with respect to such common stock in the form of Exhibit 7.4(c)
hereto. The Call Units shall be delivered to NBC free and clear of all Liens of
any nature whatsoever.
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7.5 SALE IN THE EVENT OF A VETO. (a) In the event that the Manager
designees of CNET fail to approve any action approved by a majority of the Board
of Managers and the LLC is prohibited from taking such action (a "CNET VETO")
either (i) pursuant to Section 6.3(c), 6.3(d) or 6.3(e) at any time prior to the
first anniversary of the date hereof unless such CNET Veto concerned an action
proposed to be taken with NBC or any Affiliate of NBC, (ii) pursuant to Section
6.3(h) hereof at any time prior to the first anniversary of the date hereof or
(iii) pursuant to any subsection of Section 6.3 at any time after the first
anniversary of the date hereof, NBC Multimedia shall have the right to propose
the sale of all of the NBC Holders' or the CNET Holders' Interests and the NBC
Option and NBC Call (in each case if not previously exercised or terminated) as
set forth in this Section 7.5(a) (the "FIRST VALUATION RIGHT"). If NBC
Multimedia wishes to exercise its First Valuation Right upon the exercise of a
CNET Veto, NBC Multimedia shall provide written notice to CNET of such exercise
(a "FIRST NBC NOTICE") within fifty (50) days of the relevant CNET Veto. If NBC
Multimedia exercises its First Valuation Right, CNET may retract the CNET Veto
and terminate NBC's First Valuation Right with respect to such CNET Veto
(provided that such termination shall not in any way affect and NBC Multimedia
shall retain all rights pursuant to this Section 7.5 with respect to any future
CNET Veto) by providing NBC Multimedia written notice thereof no later than five
(5) days after receipt of a First NBC Notice, PROVIDED that CNET may only
retract a maximum of two CNET Vetoes in any calendar year. In the event that
CNET retracts a CNET Veto in accordance with the immediately preceding sentence,
the matter that was the subject of the CNET Veto shall be deemed approved for
all purposes of Section 6.3. No later than ten (10) days after the delivery of
a First NBC Notice, NBC Multimedia shall deliver a written notice to CNET (an
"NBC VALUATION NOTICE") setting forth the Buy/Sell Valuation. If NBC Multimedia
does not provide CNET with a First Valuation Notice in a timely manner in
accordance with this Section 7.5(a), all rights of NBC Multimedia pursuant to
this Section 7.5 with respect to such CNET Veto shall terminate, PROVIDED that
such termination shall not in any way affect and NBC Multimedia shall retain all
rights pursuant to this Section 7.5 with respect to any future CNET Veto. The
First Valuation Notice shall constitute (A) an irrevocable offer by each of the
NBC Holders to sell to CNET (x) all the NBC Holders' Interests, at a purchase
price per Unit equal to the NBC Buy/Sell Valuation Price, (y) the NBC Option (if
not previously exercised in full or terminated) for a cash purchase price equal
to the NBC Option Valuation and (z) the NBC Call (if not previously exercised or
terminated) for a cash purchase price equal to the NBC Call Valuation and (B) an
irrevocable offer by NBC Multimedia to purchase all the CNET Holders' Interests
at a cash purchase price per Unit equal to the CNET Buy/Sell Valuation Price.
CNET shall have 30 days from receipt of the NBC Valuation Notice (the "CNET
EXERCISE PERIOD") to provide irrevocable written notice to NBC Multimedia (a
"CNET EXERCISE NOTICE") that it exercises either CNET's right to purchase or the
CNET Holders right to sell as described in (A) or (B) above, as the case may be,
of the preceding sentence and any determination by CNET will be final and
binding on all CNET Holders. If CNET delivers a CNET Exercise Notice, then such
CNET Exercise Notice will, subject to the terms of this Section 7.5, constitute
a binding agreement among the CNET Holders and the NBC Holders to effect the
purchases and sales provided in this Section 7.5. If CNET fails to deliver a
CNET Exercise Notice, then CNET shall be irrevocably deemed to have elected for
each of the CNET Holders to sell their Interests to NBC Multimedia in accordance
with this Section 7.5 and, subject to the terms of this Section 7.5, a binding
agreement will exist among the CNET Holders and the NBC Holders to effect such
purchase and sale.
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(b) For purposes hereof, "BUY/SELL VALUATION" means an aggregate
value for all outstanding Units of the LLC. Based upon the Buy/Sell Valuation,
the NBC Buy/Sell Valuation Price and CNET Buy/Sell Valuation Price will be
determined as follows:
(i) The Buy/Sell Valuation is divided by the number of outstanding
Units to get the "PRELIMINARY BUY/SELL PER UNIT VALUATION." The
Preliminary Buy/Sell Per Unit Valuation is then multiplied (A) by the
number of outstanding Units held by CNET Holders to get the "AGGREGATE CNET
VALUATION" and (B) by the number of outstanding Units held by NBC Holders
to get the "AGGREGATE NBC VALUATION", in each case subject to adjustment in
clauses (ii) and (iii) below."
(ii) If the NBC Option has been previously exercised in full or has
terminated without exercise, then no adjustments are made to account for
the NBC Option. If the NBC Option has not been previously exercised in
full or terminated and the Preliminary Buy/Sell Per Unit Valuation is equal
to or less than the NBC Option exercise price per Unit, then no adjustments
are made to account for the NBC Option. If the NBC Option has not been
previously exercised in full or terminated and the Buy/Sell Per Unit
Valuation determined pursuant to clause (i) above is greater than the NBC
Option exercise price per Unit, then the following adjustments are made:
The Buy/Sell Valuation is increased by an amount equal to the aggregate
exercise price of the unexercised NBC Option (the "OPTION REVISED BUY/SELL
VALUATION"). The Option Revised Buy/Sell Valuation is then divided by the
sum of (x) the number of outstanding Units plus (y) the Units issuable upon
exercise of the NBC Option to get the "OPTION REVISED BUY/SELL PER UNIT
VALUATION." The Option Revised Buy/Sell Per Unit Valuation is then
multiplied (A) by the number of outstanding Units held by CNET Holders to
get the "ADJUSTED AGGREGATE CNET VALUATION" and (B) by the number of
outstanding Units held by the NBC Holders to get the "ADJUSTED AGGREGATE
NBC VALUATION."
(iii) If the NBC Call has been exercised or terminated without
exercise, then no adjustments are made to account for the NBC Call. If the
NBC Call has not been previously exercised or terminated, then the
Aggregate CNET Valuation as determined by clause (i) and adjusted pursuant
to clause (ii) (if applicable) is reduced by an amount equal to the product
of (x) 0.20 multiplied by (y) the Preliminary Buy/Sell Per Unit Valuation
or the Preliminary Option Revised Buy/Sell Per Unit Valuation (as
applicable) multiplied by (z) the number of Call Units.
(iv) For purposes of Section 7.5(a), the "NBC BUY/SELL VALUATION
PRICE" equals the amount obtained by dividing (x) the Aggregate NBC
Valuation (determined in accordance with clause (i) above and as adjusted
pursuant to clause (ii) above (if applicable)) by (y) the number of
outstanding Units held by the NBC Holders.
(v) For purposes of Section 7.5(a), the "CNET BUY/SELL VALUATION
PRICE" equals the amount obtained by dividing (x) the Aggregate CNET
Valuation (determined in
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accordance with clause (i) above and as adjusted pursuant to clause (ii)
and/or clause (iii) above (if applicable)) by (y) the number of outstanding
Units held by the CNET Holders.
(vi) For purposes of Section 7.5(a), the NBC Option Valuation
equals the sum of (x) the number of Units for which the NBC Option is then
exercisable multiplied by (y) the Option Revised Buy/Sell Per Unit
Valuation MINUS the exercise price per Unit pursuant to the NBC Option.
(vii) For purposes of Section 7.5(a), the NBC Call Valuation equals
the amount, if any, by which the Aggregate CNET Valuation is reduced
pursuant to clause (iii) above.
(c) The closing of any sale of Units and other rights pursuant to
this Section 7.5 shall take place at the principal office of the LLC on the 60th
day after NBC Multimedia's receipt of the CNET Exercise Notice (or, if no CNET
Exercise Notice is delivered, the expiration of the 30 day period for delivering
such CNET Exercise Notice) (the "TRIGGER DATE"), PROVIDED, that all material
orders, consents and approvals of Governmental Authorities legally required for
the closing of such sale shall have been obtained and be in effect. At such
closing, the purchasing Member shall deliver, at its option, either (A) cash or
a certified check or checks in the appropriate amount (unless other
consideration has been mutually agreed upon by the CNET Holders and the NBC
Holders) or (B) common stock as provided below, to the selling Members against
the delivery of a duly executed assignment of the Interest (and, if applicable,
other rights) so purchased. The selling Members shall deliver the Interests
(and, if applicable, the NBC Option and NBC Call) to the purchasing Member free
and clear of all Liens of any nature whatsoever. In lieu of paying cash, NBC
Multimedia or CNET (as applicable) may deliver common stock of such Member or a
parent of such purchasing Member having a value (determined as provided below)
equal to the purchase price, PROVIDED that (1) such common stock is listed on
the Nasdaq Stock Market or another securities exchange at the time of closing
under this Section 7.5(c), (2) the value of such common stock shall be based on
the average closing price of such common stock on the principal exchange on
which such common stock is listed during the forty (40) trading days ending on
the 20th trading day after receipt of the NBC Valuation Notice, (3) promptly
following (but in no event later than 10 days) the closing under this Section
7.5(c), the purchasing Member shall file a shelf registration statement with the
Securities and Exchange Commission to register such shares for resale, shall use
its best efforts to have such registration statement declared effective as soon
as practicable thereafter and at the closing shall enter into a registration
rights agreement with the selling Members with respect to such common stock in
the form of Exhibit 7.4(c) hereto and (4) the party electing to pay in stock
notifies the other in the CNET Exercise Notice (in the case of CNET) or within
five days of the Trigger Date (in the case of NBC Multimedia). Notwithstanding
the foregoing, if the purchase price is going to be paid in common stock and the
issuance of such common stock requires stockholder approval under applicable law
or the rules of the principal stock exchange on which such stock is listed then
(x) provided that the provisions in clause (y) below are satisfied, the closing
of the purchase will be conditioned on obtaining the required stockholder
approval and the closing will not occur until the latter of the date specified
in the first sentence of this Section 7.5(c) or the second Business day after
such stockholder approval is obtained, (y) prior to electing to pay in common
stock the Person issuing the common stock and its Affiliates must obtain
irrevocable proxies approving such issuance from
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any stockholder that together with his or its Affiliates beneficially owns 10%
or more of the common stock (other than institutional holders who are Schedule
13G filers with respect to the relevant common stock) and at all times the
issuer of the common stock and its Affiliates must use their best efforts to
obtain the required stockholder approval and (z) if such stockholder approval is
not obtained, the other Member (CNET or NBC Multimedia, as applicable) shall
have an option, exercisable by delivering written notice with 30 days of the
relevant stockholder vote, to purchase the Units and any related rights of the
CNET Holders (in the case of NBC Multimedia) or the NBC Holders (in the case of
CNET) based on the initial Buy/Sell Valuation and otherwise on the terms of this
Section 7.5. If CNET is the purchasing entity under this Section 7.5, then at
the closing of the purchase CNET will cause either (A) all outstanding
indebtedness of the LLC that is guaranteed by NBC or its Affiliate to be repaid
and NBC or such Affiliate to be released from all obligations and liabilities
relating thereto or (B) NBC or its Affiliate to otherwise be released from all
obligations and liabilities relating to such guarantees and Indebtedness (and in
either case, NBC will be released from all obligations and liabilities under
Section 6.4(b)).
(d) NBC Multimedia (or its designees on the LLC Board of Managers)
will notify the CNET designees on the Board of Managers at least five days prior
to any vote of the Board of Managers if NBC Multimedia believes a CNET Veto will
cause it to deliver a First NBC Notice, PROVIDED that such notice will not
obligate NBC Multimedia to actually deliver a First NBC Notice.
7.6 TAG-ALONG RIGHTS. (a) With respect to any proposed Transfer of LLC
Interests by a CNET Holder or a NBC Holder pursuant to clause (iii) or (iv) of
Section 7.1(c) or clause (iii) of Section 7.1(d) prior to an Initial Public
Offering, the Member proposing such Transfer (the "TRANSFERRING MEMBER") shall
have the obligation, and each CNET Holder, if the Transferring Member is a NBC
Holder, or each NBC Holder if the Transferring Member is a CNET Holder (the
"OTHER MEMBERS"), who is not then in breach of this Agreement, shall have the
right, to require the proposed transferee to purchase from each such Other
Members number of Units equal to the product (rounded to the nearest whole
number) of (x) the Adjusted Percentage Interest of such Other Member and (y) the
number of Units proposed to be sold in the contemplated sale, and at the same
price per Unit and upon the same terms and conditions as to be paid and given to
the Transferring Members, PROVIDED that in order to be entitled to exercise
their right to sell Unit to the proposed transferee pursuant to this Section
7.6, the Other Members must agree to make substantially the same
representations, warranties, covenants and indemnities and other similar
agreements as the Transferring Members agree to make in connection with the
proposed transfer of Units of the Transferring Members. Each Transferring
Member shall give notice to the Other Members of each proposed Transfer giving
rise to the rights of the Other Members set forth in the first sentence of this
Section 7.6 at least 20 days prior to the proposed consummation of such
Transfer, setting forth the name of the Transferring Member, the number of Units
proposed to be so transferred, the name and address of the proposed transferee,
the proposed amount of consideration therefor and terms and conditions agreed to
by the proposed transferee, the number of Units each Other Member may sell to
such proposed transferee (in accordance with the first sentence of this Section
7.6), and a representation that the proposed transferee has been informed of the
"tag-along" rights provided for in this Section 7.6 and has agreed to purchase
Units in accordance with the terms hereof. The tag-along rights provided by
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this Section 7.6 must be exercised by an Other Member within 15 days following
receipt of the notice required by the preceding sentence, by delivery of a
written irrevocable notice to the Transferring Members indicating such other
Member's exercise of its rights and specifying the amount of Units (up to the
maximum amount of Units owned by such Other Member required to be purchased by
the proposed transferee pursuant to the first sentence of this Section 7.6) it
desires to sell. The Transferring Members shall be entitled under this Section
7.6 to transfer to the proposed transferee the amount of Units equal to the
difference between the number referred to in clause (b) above and the aggregate
amount of Units set forth in the written notices, if any, delivered by the Other
Members pursuant to the preceding sentence. If the proposed transferee fails to
purchase Units from any Other Member that has properly exercised its tag-along
rights, then the Transferring Members shall not be permitted to make the
proposed Transfer, and any such attempted Transfer shall be void and of no
effect.
(b) If the Other Members exercise their rights under Section
7.7(a), the closing of the purchase of the Units with respect to which such
rights have been exercised shall take place concurrently with the closing of the
sale of the Transferring Member's LLC Interests.
7.7 DRAG ALONG RIGHTS. If at any time (x) after the exercise in full or
termination of the NBC Option and (y) prior to an Initial Public Offering, one
or more Members (the "MAJORITY MEMBERS") enter into an agreement to consummate a
transaction constituting a sale of all of their Units to a Person other than
CNET, NBC or any of their respective Affiliates and the Units to be sold by such
Majority Members constitute a majority of the outstanding Units (a "THIRD-PARTY
SALE"), then upon the written demand of the Majority Members, the remaining
Members shall agree to sell their Units in the Third Party Sale on the same
terms and conditions as agreed to by the Majority Members, and each Member shall
consent to and raise no objections to the proposed transaction and will take all
other actions necessary or desirable to cause the consummation of such
Third-Party Sale on the terms proposed by the Majority Members. Such actions
shall include voting all LLC Interests in favor of any action of the LLC
relating to such Third-Party Sale.
7.8 CONVERSION TO CORPORATE FORM. (a) In the event that the Board of
Managers shall determine, subject to Section 6.3, that the business of the LLC
should be conducted in the form of a corporation rather than a limited liability
company so that an Initial Public Offering can occur, the Managers shall have
the power, subject to Section 6.3, to incorporate the LLC or take such other
action as it may deem advisable in light of such changed conditions, including,
without limitation, creating one or more subsidiaries of the LLC and
contributing to such subsidiaries any or all of the assets and liabilities of
the LLC and distributing the capital stock of such subsidiary or subsidiaries
pro rata to the Members. In connection with any such incorporation of the LLC,
the Members shall receive, in exchange for their Interests and related Units,
shares of capital stock of such corporation or its subsidiaries having the same
relative economic interest in such corporation or subsidiaries as is set forth
in this Agreement as among the holders of Interests in such LLC, subject in each
case to modifications to the provisions of Section 6.1 to conform to the
provisions relating to actions of shareholders and a board of directors set
forth in the Delaware General Corporation Law, and which shares of capital stock
will be subject to the NBC Option and NBC Call as provided in Sections 7.3 and
7.4 hereof. At the time of such conversion, the Members
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shall enter into a mutually acceptable shareholders agreement providing for (i)
rights of approval over actions by the board of directors substantially
equivalent to the rights of approval over actions of the Managers set forth in
Sections 6.1, 6.2 and 6.3 hereof and (ii) restrictions on transfer and rights
with respect to the NBC Option, NBC Call, sale in the event of exercise of a
CNET Veto, right of first refusal, tag-along and drag-along rights set forth in
Sections 7.1 through 7.8 hereof; provided that such restrictions shall not apply
to sales in broadly disseminated public offerings subject to registration rights
pursuant to the registration rights agreement referred to in Section 7.9(b)
hereof.
(b) Prior to taking such action to incorporate the LLC, the
Managers shall submit to the Members, and the Members agree to approve in the
form approved by the Board of Managers, subject to Section 6.3, the proposed
forms of a certificate or articles of incorporation, by-laws, stockholders'
agreement and any other governing documents proposed to be established for such
corporation and its subsidiaries, if any. In addition, each of the Members
agrees to take all action necessary with respect to their Units and Interests in
order to approve any conversion to corporate form in accordance with this
Section 7.8. Upon conversion to corporate form, the corporate successor to the
LLC shall enter into a registration rights agreement with each of the Members
with respect to the equity securities of such corporate successor substantially
in the form of Exhibit 7.9(b).
ARTICLE VIII.
BOOKS, RECORDS, REPORTS AND BANK ACCOUNTS
8.1 BOOKS AND RECORDS; AUDIT. (a) The LLC shall cause books and
records of the LLC to be maintained in accordance with generally accepted
accounting principles, and shall give reports to the Members in accordance with
prudent business practices and the Statute. There shall be kept at the
principal office of the LLC, as well as at the office of record of the LLC, if
different, all information required to be maintained by the LLC pursuant to the
Statute.
(b) Each Member that, together with its Affiliates, owns at least
5% of the outstanding Units (a "5% MEMBER") shall have the right upon reasonable
request, for purposes reasonably related to the interest of that 5% Member, to
inspect and copy during normal business hours any of the LLC books, records and
reports required to be maintained in accordance with Section 8.1(a). Such right
may be exercised by the 5% Member, or by that 5% Member's agent or attorney.
The determination of the Managers as to adjustments to the financial reports,
books, records and returns of the LLC, in the absence of fraud or negligence,
shall be final and binding upon the LLC and all of the Members.
8.2 ACCOUNTING. (a) Within 60 days after the end of each fiscal
quarter and within 120 days after the close of each Fiscal Year of the LLC, the
LLC shall cause to be prepared and submitted to each Member (i) the balance
sheet as of the end of such period and a statement of income or loss and a
statement of cash flows for such period and (ii) in the case of any Fiscal Year,
an opinion of a nationally recognized accounting firm based upon their audit of
the financial
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statements referred to in the preceding clause (i). Within 120 days after the
end of each Fiscal Year, the LLC shall provide to the Members all information
necessary for them to complete federal and state income tax returns.
(b) For financial reporting purposes, the books and records of the
LLC shall be kept on the accrual method of accounting applied in a consistent
manner and shall reflect all transactions of the LLC and be appropriate and
adequate for the purposes of the LLC.
(c) To the extent permitted by the Code, the Regulations or other
applicable law and regulations, the LLC may elect to use a method of accounting
that permits accelerated deductions.
(d) In case of a Transfer of all or part of the Interest of any
Member, the LLC may elect, pursuant to Section 734, 743 and 754 of the Code to
adjust the basis of the assets of the LLC.
8.3 BANK ACCOUNTS. The bank accounts of the LLC shall be maintained in
such banking institutions as the Managers or the authorized Officers shall
determine.
8.4 TAX MATTERS. (a) NBC Multimedia shall be designated as "Tax
Matters Partner" (as defined in Code section 6231) (the "TAX MATTERS PARTNER"),
to represent the LLC (at the LLC's expense) in connection with all examination
of the LLC's affairs by tax authorities, including resulting judicial and
administrative proceedings, and to expend LLC funds for professional services
and costs associated therewith. In its capacity as Tax Matters Partner, the
designated Person shall oversee the LLC tax affairs in the overall best
interests of the LLC as he may reasonably determine.
(b) The Tax Matters Partner on behalf of the LLC may make all
elections for federal income tax purposes.
(c) The Members are aware of the income tax consequences of the
allocations made by this Agreement and hereby agrees to be bound by the
provisions of this Section 8.4 in reporting their shares of the LLC income and
loss for income tax purposes.
ARTICLE IX.
TERMINATION AND DISSOLUTION
9.1 DISSOLUTION. (a) The LLC shall be dissolved upon the occurrence
of:
(i) the determination of the Board of Managers, to dissolve the
LLC; or
(ii) the written approval to dissolve the LLC by Members holding a
majority of the outstanding Units, PROVIDED that (a) for as long as CNET
and its Permitted Transferees
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hold in the aggregate at least 5% of the outstanding Units the approval of
CNET will also be required and (b) for as long as NBC Multimedia and its
Permitted Transferees hold in the aggregate at least 5% of the outstanding
Units the approval of NBC Interactive will also be required, in each case
subject to Section 6.3.
(b) The withdrawal, resignation, expulsion, bankruptcy or
dissolution of a Member or the occurrence of any other event which terminated
the Member's continued membership in the LLC shall not result in the dissolution
of the LLC.
(c) As soon as possible after the occurrence of any of the events
specified in Section 9.1(a) above, the LLC shall make any filings required by
the Statute and shall cease to carry on its business, except insofar as may be
necessary for the winding-up of its business, but the LLC's separate existence
shall continue until the certificate of cancellation of the Certificate of
Formation has been filed with the Secretary of State or until a decree
dissolving the LLC has been entered by a court of competent jurisdiction.
9.2 DISTRIBUTION OF NET PROCEEDS. During the winding-up period, the
Members shall continue to divide Net Profits and Losses and Available Cash Flow
in the same manner and the same priorities as provided for in Articles IV and V
hereof. The proceeds from the liquidation of Property shall be applied in the
following order:
(a) To the payment of creditors (including expenses of winding up
and payments to any present or former Members who have made loans or advances to
the LLC) in the order of priority as provided by law;
(b) To the Members in accordance with the positive balance in
their respective Capital Accounts after adjustments for all allocations of Net
Profits and Net Loss during the Fiscal Year in which dissolution of the LLC
occurs. Notwithstanding the provisions of Section 4.1 of the Agreement, Net
Profits and Net Loss of the LLC resulting from the sale or other disposition of
all or substantially all of the LLC assets or otherwise associated with the
liquidation of the LLC shall be allocated in a manner designed, to the extent
possible, to cause the Capital Account balance of each Member to equal the
amount that would be distributed to such Member if all of the LLC Assets were
distributed to the Members in accordance with their respective Percentage
Interests at the time of the distribution.
9.3 DISTRIBUTION OF PROPERTY. Distributions of LLC assets other than cash
pursuant to Section 9.2 shall be treated as a distribution of cash equal to the
fair market value of the Property as of the date of distribution, less any
liabilities to which the Property is subject or which the distributee Member
assumes upon distribution. Capital Accounts will be credited with a deemed
allocable share of gain or loss upon distribution pursuant to Section 4.1
hereof. The amount of the deemed gain shall equal the difference between the
fair market value of the Property distributed and the adjusted tax basis of the
Property as determined for federal income tax purposes.
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ARTICLE X.
INDEMNIFICATION
10.1 INDEMNIFICATION OF THE MEMBERS. The LLC shall indemnify and hold
harmless the Managers, the Officers, the Members, their Affiliates and their
respective officers, directors, employees and agents and the heirs, executors,
successors and assigns of each of the foregoing (individually, an "INDEMNITEE")
from and against any and all losses, claims, demands, costs, damages,
liabilities, joint and several, expenses of any nature (including reasonable
attorneys' fees and disbursements), judgments, fines, settlements and other
amounts arising from any and all claims, demands, actions, suits or proceedings,
whether civil, criminal, administrative or investigative, in which the
Indemnitee was involved or may be involved, or threatened to be involved, as a
party or otherwise, arising out of or in connection with the business of the
LLC, regardless of whether the Indemnitee continues to be an Officer, a Member,
an Affiliate, or an officer, director, employee or agent of the Member at the
time any such liability or expense is paid or incurred, to the fullest extent
permitted by the Statute and all other applicable laws; PROVIDED, that an
Indemnitee shall be entitled to indemnification hereunder only to the extent
that such Indemnitee's conduct did not constitute bad faith, willful misconduct,
gross negligence or a material breach of this Agreement. The termination of any
proceeding by settlement, judgment, order, conviction, or upon a plea of NOLO
CONTENDERE or its equivalent shall not, of itself, create a presumption that
such Indemnitee's conduct constituted bad faith, willful misconduct, gross
negligence or a material breach of this Agreement. The right of any Indemnitee
to the indemnification provided herein shall be cumulative of, and in addition
to, any and all rights to which such Indemnitee may otherwise be entitled by
contract or as a matter of law or equity and shall extend to such Indemnitee's
successors, assigns and legal representatives. The provisions of this Article X
shall in no way alter, amend or limit the indemnification obligations of the
Members under the Contribution Agreement, including without limitation the
obligations of CNET with respect to "Retained Liabilities" as defined in the
Contribution Agreement, and to the extent that a Member is obligated under the
Contribution Agreement to provide any indemnification for any "Losses and
Expenses" (as defined in the Contribution Agreement), any indemnity of such
Member under this Article X with respect to such "Losses and Expenses" shall not
apply.
10.2 EXPENSES. Expenses incurred by an Indemnitee in defending any
claim, demand, action, suit or proceeding subject to Section 10.1 shall, from
time to time, be advanced by the LLC prior to the final disposition of such
claim, demand, action, suit or proceeding upon receipt by the LLC of an
undertaking reasonably acceptable in form and substance to the Board of Managers
by or on behalf of the Indemnitee to repay such amount if it shall be determined
that such Person is not entitled to be indemnified as authorized in Section
10.1.
10.3 INDEMNIFICATION RIGHTS NON-EXCLUSIVE. The Indemnification provided
by Section 10.1 shall be in addition to any other rights to which those
indemnified may be entitled under any agreement, vote of the Members holding
Interests, as a matter of law or equity or otherwise, both as to action in the
Indemnitee's capacity as a Member, as an Affiliate or as an officer, director,
employee or agent of a Member and as to any action in another capacity, and
shall continue as to
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an Indemnitee who has ceased to serve in such capacity and shall inure to the
benefit of the heirs, successors, assigns and administrators of the Indemnitee.
10.4 ERRORS AND OMISSIONS INSURANCE. The LLC may purchase and maintain
insurance, at the LLC's expenses, on behalf of the Members and such other
Persons as the Managers or the authorized Officers shall determine, against any
liability that may be asserted against, or any expense that may be incurred by,
such Person in connection with the activities of the LLC and/or the Members'
acts or omissions as the Members of the LLC regardless of whether the LLC would
have the power to indemnify such Person against such liability under the
provisions of this Agreement.
10.5 ASSETS OF THE LLC. Any indemnification under Section 10.1 shall be
satisfied solely out of the assets of the LLC. No Member shall be subject to
personal liability or required to fund or cause to be funded any obligation by
reason of these indemnification provisions.
ARTICLE XI.
[RESERVED]
ARTICLE XII.
MISCELLANEOUS PROVISIONS
12.1 INTEGRATION; AMENDMENTS. This Agreement contains the entire
agreement of the Members, and supersedes all prior written and oral agreement's
understandings and negotiations, with regard to the matters contained herein.
12.2 AMENDMENTS. Subject to Section 6.3 (b), this Agreement may be
adopted, altered, amended or repealed and a new limited liability company
agreement may be adopted by the Members who hold, in the aggregate, a majority
of the outstanding Units, provided that the last sentence of Section 5.1 and
Sections 3.4, 6.5(b), 7.3, 7.4, 7.5, 7.7, and 7.8 and this Section 12.2 cannot
be altered, amended or repealed without the written consent of both NBC
Multimedia and CNET and PROVIDED FURTHER that (a) for as long as CNET and its
Permitted Transferees hold in the aggregate at least 5% of the outstanding Units
the approval of CNET will also be required for the amendment of any other
Section and (b) for as long as NBC Multimedia and its Permitted Transferees hold
in the aggregate at least 5% of the outstanding Units the approval of NBC
Multimedia will also be required for the amendment of any other Section.
12.3 SURVIVAL; BINDING EFFECT. Each Member's respective rights and
obligations hereunder may not be assigned, transferred, pledged, or encumbered,
in any manner, direct or indirect, contingent or otherwise, in whole or in part,
voluntarily, without the prior written consent of the other Members, except to
their Affiliates, PROVIDED that no such assignment will relieve the assigning
party of any of its obligations hereunder, and PROVIDED FURTHER that the
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foregoing restriction shall not apply to any assignment by operation of law to
any successor Person in any merger or consolidation. This Agreement shall be
binding upon, and inure to the benefit of, all the parties and their respective
successors, legal representatives and assigns permitted in accordance with this
Section 12.3.
12.4 SEVERABILITY. In the event any Section, or any sentence within any
Section, is declared by a court of competent jurisdiction to be void or
unenforceable, such sentence or Section shall be deemed severed from the
remainder of this Agreement and the balance of this Agreement shall remain in
full force and effect.
12.5 NOTIFICATION OR NOTICES. Except for notices to be given under
Article VI for purposes of meetings of Members, any notice in connection with
this Agreement shall be in writing and shall be delivered by air courier or by
facsimile at the addresses or facsimile numbers given below. If notice is given
by: (a) air courier, notice shall be deemed given when recorded on the records
on the air courier as received by the receiving party; or (b) facsimile, notice
shall be deemed given upon transmission, if on a business day and during
business hours in the country of receipt; otherwise, notice shall be deemed to
have been given at 9:00 A.M. on the next Business Day in the country of receipt.
If to NBC:
National Broadcasting Company, Inc.
30 Rockefeller Plaza
New York, New York 10112
Attn.: Marty Yudkovitz, President Interactive Media
Facsimile: (212) 664-5561
with a copy to:
National Broadcasting Company, Inc.
30 Rockefeller Plaza
New York, New York 10112
Attn.: Richard Cotton, Executive Vice President & General Counsel
Facsimile: (212) 664-2648
If to CNET:
CNET, Inc.
150 Chestnut Street
San Francisco, CA 94111
Attention: President
Facsimile: 415-395-9330
With a copy to:
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Hughes & Luce, L.L.P.
1717 Main Street, Suite 2800
Dallas, Texas 75201
Attention: Jon L. Mosle, III
Facsimile: 214-939-5849
If to any other Member, to the address set forth for such Member on the
books and records of the LLC.
12.6 SECTION HEADINGS. The captions of the Articles or Sections in this
Agreement are for convenience only and in no way define, limit, extend or
describe the scope or intent of any of the provisions hereof, shall not be
deemed part of this Agreement and shall not be used in construing or
interpreting this Agreement.
12.7 GOVERNING LAW; SUBMISSION TO JURISDICTION: WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT AND ALL COLLATERAL MATTERS RELATING HERETO SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
(b) Each of the parties hereby irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this agreement, to the non-exclusive general
jurisdiction of the Courts of the State of New York in New York County, the
Courts of the United States of America for the Southern District of New
York in New York County, and appellate courts from any thereof;
(ii) consents that any such action or proceeding may be brought
in such courts, and waives any objection that it may now or hereafter have
to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and agrees
not to plead or claim the same to the extent permitted by applicable law;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the party, as the case may be, at its address set forth in
Section 9.1 or at such other address of which the other party shall have
been notified pursuant thereto;
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction for recognition and enforcement of
any judgment or if jurisdiction in the courts referenced in paragraph (i)
hereof is not available despite the intentions of the parties hereto; and
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(v) waives trial by jury in any litigation in any court with
respect to, in connection with, or arising out of this Agreement, or any
Implementing Agreement, or any other instrument or document delivered
pursuant hereto, or any other claim or dispute howsoever arising, to which
the parties are party. This waiver is informed and freely made.
12.8 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
12.9 FURTHER ACTIONS. Each of the Members agrees to execute,
acknowledge and deliver such additional documents, and take such further
actions, as may reasonably be required from time to time to carry out each of
the provisions, and the intent, of this Agreement, and every agreement or
document relating hereto, or entered into in connection herewith.
12.10 WAIVER. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute a waiver of any such breach or any other covenant, duty, agreement or
condition.
12.11 PARTITION. The Members agree that the Property that the LLC may
own or have an interest in is not suitable for partition. Each of the Members
hereby irrevocably waives any and all rights that it may have to maintain any
action for partition of any Property the LLC may at any time have an interest
in.
12.12 THIRD PARTY BENEFICIARIES. There are no third party beneficiaries
of this Agreement except any Persons as may be entitled to the benefits of
Section 10.1 hereof.
12.13 COUNTERPARTS. This Agreement may be executed in several
counterparts, and all counterparts so executed shall constitute one Agreement,
binding on all of the parties hereto, notwithstanding that all of the parties
are not signatories to the original or the same counterpart.
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IN WITNESS WHEREOF, the parties hereto have hereunto executed this
Agreement as of the date first written above.
NBC MULTIMEDIA, INC.
By /s/ Martin Yudkovitz
----------------------------
Name: Martin Yudkovitz
Title: President
CNET, INC.
By /s/ Shelby Bonnie
----------------------------
Name: Shelby Bonnie
Title: Chief Operating Officer and
Executive Vice President
EXHIBITS
Exhibit 1.1 Outstanding Units
Exhibit 6.4(a) Initial Budget
Exhibit 7.4(c) Registration Rights Agreement
Exhibit 7.9(b) Registration Rights Agreement
SCHEDULES
Schedule 6.4(b) Terms of Guaranteed Indebtedness
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EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is entered into as of June
4, 1998 by and among CNET, Inc., a Delaware corporation (the "Company"), and
National Broadcasting Company, Inc. (the "Purchaser"). The Company desires to
sell, and the Purchaser desires to purchase, an aggregate of 812,800 shares (the
"Shares") of the Company's common stock, $.0001 par value per share (the "Common
Stock"), on the terms and subject to the conditions set forth herein.
Accordingly, the Company and the Purchaser hereby agree as follows:
1. AGREEMENT TO PURCHASE. At the Closing (as defined below), and subject
to the terms and conditions set forth in this Agreement, the Purchaser will
purchase the Shares from the Company, and the Company will issue and sell the
Shares to the Purchaser, for an aggregate purchase price of $26,212,800 ($32.25
per Share).
2. CLOSING. The closing of the purchase and sale of the Shares hereunder
(the "Stock Closing") shall occur simultaneously with the closing (the "LLC
Closing") under the Contribution Agreement, of even date herewith, between the
Company, Purchaser and Snap! LLC (the "Contribution Agreement") or, if later,
three business days after the HSR Condition (as defined below) has been
satisfied. Upon payment of the purchase price for the Shares, by wire transfer
of immediately available funds to an account specified by the Company, the
Company will deliver to the Purchaser a certificate or certificates representing
such Shares, registered in the name of the Purchaser.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants, as of the date hereof and as of the Closing Date, as follows:
(a) The Company is duly organized, validly existing and in good
standing under the laws of the State of Delaware. Such party has all the
requisite power and authority to enter into this Agreement and to perform its
obligations hereunder.
(b) The Company has taken all corporate action required to authorize
the execution and delivery of this Agreement and the performance of its
obligations hereunder, including the issuance of the Shares, and this Agreement
has been duly executed and delivered by the Company and constitutes a valid and
legally binding obligation of the Company. When issued to and paid for by the
Purchaser in accordance with the terms of this Agreement, the Shares will be
duly and validly issued, fully paid and nonassessable, and the issuance of the
Shares will not be subject to any preemptive or similar rights that have not
been waived.
(c) As of the date of this Agreement, the authorized and outstanding
capitalization of the Company consists of (i) a total of 5,000,000 authorized
shares of preferred stock, $.01 par value per share (the "Preferred Stock"),
none of which is issued or outstanding, and (ii) a total of 50,000,000
authorized shares of Common Stock, of which 15,477,292 shares were issued and
outstanding as of the close of business on May 31, 1998. All of such
outstanding shares are validly issued, fully paid and nonassessable, and none of
such outstanding shares was
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issued in violation of any preemptive rights. In addition to the foregoing, as
of May 31, 1998, warrants and options to purchase a total of 3,210,890 shares of
Common Stock are outstanding, and the Company is authorized to grant additional
options to purchase up to 1,344,616 additional shares of Common Stock pursuant
to its existing stock option plans. Otherwise, there are not outstanding any
options, warrants or similar agreements for the purchase from the Company of any
shares of its capital stock or any securities convertible into or ultimately
exchangeable or exercisable for any shares of the Company's capital stock.
(d) Neither the sale of the Shares hereunder nor the performance of
the Company's other obligations under this Agreement will violate, conflict
with, result in a breach of or constitute a default (or an event that, with
notice or lapse of time, would constitute a default) under (i) the certificate
of incorporation or bylaws of the Company; (ii) any decree, judgment, order or
determination of any court, governmental agency or body, or any arbitrator
having jurisdiction over the Company or any of the Company's assets; (iii) any
law, rule or regulation applicable to the Company; or (iv) the terms of any
material agreement by which the Company is bound or to which any property of the
Company is subject.
(e) Neither the Company nor any person acting on behalf of the
Company has offered or sold any of the Shares by any form of general
solicitation or general advertising. The Company has offered the Shares for
sale only to the Purchaser. The sale of the Shares by the Company is not part
of a plan or scheme to evade the registration requirements of the Securities
Act.
(f) The Company's Annual Report on Form 10-K for the year ended
December 31, 1997, the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998, all Current Reports on Form 8-K filed by the Company since
December 31, 1997, and the Company's definitive proxy statement for its 1998
annual meeting of stockholders (collectively, the "Disclosure Documents"), as of
the respective dates thereof, do not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading.
(g) The financial statements of the Company included in each of the
Disclosure Documents, including the schedules and notes thereto, comply in all
material respects with the requirements of the Securities Act or the Securities
Exchange Act of 1934, as amended, (as applicable) fairly present the financial
condition and results of operations and cash flows of the Company and its
subsidiaries at the respective dates and for the respective periods indicated
and have been prepared in accordance with generally accepted accounting
principles consistently applied throughout such periods.
(h) As of the date hereof and as of the date of the LLC Closing,
since March 31, 1998, there has been no material adverse change in the
properties, business, results of operations or condition (financial or
otherwise) of the Company and its subsidiaries, taken as a whole.
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4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants, as of the date hereof and as of the Closing, as
follows:
(a) The Purchaser is acquiring the Shares for its own account for
investment purposes and not with a view to the distribution thereof within the
meaning of the Securities Act.
(b) The Purchaser understands that the Shares constitute "restricted
securities" within the meaning of Rule 144 under the Securities Act and may not
be sold, pledged or otherwise disposed of unless they are subsequently
registered under the Securities Act and applicable state securities laws or
unless an exemption from registration is available.
(c) The Purchaser is an "accredited investor" within the meaning of
Rule 501 under the Act.
(d) No consent, approval, authorization or order of any court,
governmental agency or body or arbitrator having jurisdiction over the Purchaser
or of the Purchaser's affiliates is required for the execution of this Agreement
or the performance of the Purchaser's obligations hereunder, including, without
limitation, the purchase of the Shares from the Company.
(e) The Purchaser has taken, or prior to the Closing will have taken,
all corporate or partnership action (as applicable) required to authorize the
execution and delivery of this Agreement and the performance of its obligations
hereunder.
5. CONDITIONS TO CLOSING. The obligations hereunder of the Company and
the Purchaser shall be subject to and conditioned upon (a) the closing under the
Contribution Agreement, (b) the accuracy of the representations and warranties
of the other as of the date hereof and as of the Closing Date, as if such
representations and warranties had been made on and as of such dates (except
with respect to representations and warranties that, by their terms, are made as
of a different date, which must be accurate as of such date), and (c) the
performance by the other of its obligations hereunder that are required to be
performed at or prior to the Closing, and (d) the expiration or early
termination of any required waiting period applicable to the purchase of the
Shares hereunder pursuant to the Hart Scott Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Condition"). For purposes of clarity, the parties
acknowledge and agree that any adverse change in the condition of the Company
following the LLC Closing date will not affect the Purchaser's obligation to
complete the Closing hereunder. The Company and the Purchaser will make all
filings and take all reasonable actions within their respective control required
in order to satisfy the HSR Condition; provided that neither party will be
required to dispose of or agree to hold separate any assets or business
operations or to agree to any restriction on its business activities in
connection therewith. This Agreement shall terminate automatically upon any
termination of the Contribution Agreement prior to the LLC Closing, and either
party may terminate this Agreement if the Closing hereunder has not occurred by
July 31, 1998.
6. MISCELLANEOUS.
(a) The terms and conditions of this Agreement represent the entire
agreement between the parties with respect to the subject matter hereof and
supersede any prior agreements
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<PAGE>
or understandings, whether written or oral, between the parties respecting such
subject matter. This Agreement may be modified only in a writing signed by the
party against whom such modification is to be enforced.
(b) The Purchaser may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Company, and the
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchaser.
(c) This Agreement shall be construed and enforced in accordance with
the laws of the state of New York applicable to agreements between residents of
New York wholly executed and wholly performed therein.
(d) This Agreement may be executed in one or more counterparts, and
such counterparts shall together constitute one and the same agreement.
IN WITNESSES WHEREOF, the parties have entered into this Agreement as of
the date first set forth above.
CNET, INC.
By: /s/ Halsey Minor
------------------------
Name Halsey Minor
------------------------
Title: Chairman, President, and
Chief Executive Officer
------------------------
NATIONAL BROADCASTING COMPANY, INC.
By: /s/ Thomas Rogers
------------------------
Name Thomas Rogers
------------------------
Title: Executive Vice President
------------------------
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EXHIBIT 99.1
Thursday July 9, 9:29 pm Eastern Time
CNET and NBC Complete Formation of Snap!
SAN FRANCISCO, July 9 /PRNewswire/ -- CNET, Inc. (Nasdaq: CNWK - news) reported
today that CNET and NBC Multimedia, Inc. completed the formation of Snap! LLC,
which will operate the Snap! Internet portal service previously operated as a
division of CNET. Initially, Snap! LLC will be owned 81% by CNET and 19% by NBC
Multimedia, but NBC Multimedia has an option to increase its ownership stake in
the new venture to 60%. NBC also completed its previously announced purchase of
812,800 shares of CNET's common stock for an aggregate purchase price of $26.2
million.
Halsey Minor, CEO and President of CNET, also will serve as CEO of Snap! for the
immediate future and will continue to be responsible for the overall operation
of the service. Tom Rogers, President NBC Cable and Business Development and
Executive Vice President, NBC; Marty Yudkovitz, President NBC Interactive Media;
Scott Sassa, President NBC Television Stations and Neil Braun, President, NBC
Television Network all will assume seats on the Snap! Board of Directors,
comprising the majority of the Board.
This acquisition and joint venture between NBC, the leading broadcast network,
and CNET, the Internet's leading content network, will redefine the crucial
Internet portal market, providing Snap! with top brand association, media core
competencies, advertiser connections, marketing and a level of promotion that is
unprecedented in the Internet portal market.
CNET, Inc. is at the leading edge of media companies, producing a branded
Internet network and television programming for both targeted and general
audiences. Online and on television, CNET is the leading authority on computers,
the Internet and digital technologies. CNET's network of sites is consistently
ranked as the Internet's #1 content network in terms of both audience size and
revenue, serving millions of users each day. CNET's television programs air on
USA Network, the Sci-Fi Channel and in national syndication, reaching an
estimated weekly audience of over eight million viewers. CNET, in partnership
with NBC, also is the publisher of Snap!, a search and navigation service for
all Internet users.
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