-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Iy41l5hYyRD2XMtEo2BMURjEONpZVQ2kAWOMRXCmi2qZzF31A1B4AI06Tt9qO8Xl hqXTbNAdNzRDNTzXiPCUdg== 0001012870-98-001693.txt : 19980629 0001012870-98-001693.hdr.sgml : 19980629 ACCESSION NUMBER: 0001012870-98-001693 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 19980626 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CITYSEARCH INC CENTRAL INDEX KEY: 0001006637 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 954546874 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: SEC FILE NUMBER: 333-57437 FILM NUMBER: 98655339 BUSINESS ADDRESS: STREET 1: 4502 DYER STREET CITY: LA CRESCENTA STATE: CA ZIP: 91214 BUSINESS PHONE: 6264050050 MAIL ADDRESS: STREET 1: 790 E COLORADO BLVD STREET 2: SUITE 200 CITY: PASADENA STATE: CA ZIP: 91101 S-1/A 1 AMENDMENT #1 TO FORM S-1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 26, 1998 REGISTRATION NO. 333-57437 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- AMENDMENT NO.1 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------- CITYSEARCH, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ---------------- DELAWARE 7375 95-4546874 (STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.) INCORPORATION OR ---------------- ORGANIZATION) CITYSEARCH, INC. 790 E. COLORADO BOULEVARD, SUITE 200 PASADENA, CA 91101 (626) 405-0050 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ---------------- CHARLES CONN CHIEF EXECUTIVE OFFICER CITYSEARCH, INC. 790 E. COLORADO BOULEVARD, SUITE 200 PASADENA, CA 91101 (626) 405-0050 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ---------------- COPIES TO: LARRY W. SONSINI GLEN R. VAN LIGTEN JOHN T. SHERIDAN CRAIG E. SHERMAN NAN H. KIM ADAM J. ROSENBERG WILSON SONSINI GOODRICH & ROSATI VENTURE LAW GROUP PROFESSIONAL CORPORATION A PROFESSIONAL CORPORATION 650 PAGE MILL ROAD 2800 SAND HILL ROAD PALO ALTO, CA 94304 MENLO PARK, CA 94025 (650) 493-9300 (650) 854-4488 ---------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. ---------------- If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [_] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] ---------------- CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
PROPOSED MAXIMUM TITLE OF EACH PROPOSED MAXIMUM AGGREGATE AMOUNT OF CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(1)(2) FEE - ------------------------------------------------------------------------------------- Common Stock, $.01 par value................. $ $50,000,000 $14,750(3)
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (1)Includes shares that the Underwriters have the option to purchase to cover over-allotments, if any. (2)Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(a) promulgated under the Securities Act of 1933, as amended. (3) Previously paid in connection with the Registration Statement filed on June 22, 1998. ---------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. ================================================================================ PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the costs and expenses, other than underwriting discounts, commissions and certain accountable expenses, payable by the Company in connection with the sale of Common Stock being registered. All amounts are estimates except the SEC registration fee and the NASD filing fee. SEC Registration Fee................................................ $14,750 NASD Filing Fee..................................................... 5,500 Nasdaq Listing Fee.................................................. Printing Fees and Expenses.......................................... Legal Fees and Expenses............................................. Accounting Fees and Expenses........................................ Blue Sky Fees and Expenses.......................................... Transfer Agent and Registrar Fees................................... Miscellaneous....................................................... ------- Total............................................................. $ =======
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145 of the Delaware General Corporation Law permits a corporation to include in its charter documents, and in agreements between the corporation and its directors and officers, provisions expanding the scope of indemnification beyond that specifically provided by the current law. The Registrant's Restated Certificate of Incorporation provides for the indemnification of directors to the fullest extent permissible under Delaware law. The Registrant's Bylaws provide for the indemnification of officers, directors and third parties acting on behalf of the Registrant if such person acted in good faith and in a manner reasonably believed to be in and not opposed to the best interest of the Registrant, and, with respect to any criminal action or proceeding, the indemnified party had no reason to believe his conduct was unlawful. The Registrant has entered into indemnification agreements with its directors and executive officers, in addition to indemnification provided for in the Registrant's Bylaws, and intends to enter into indemnification agreements with any new directors and executive officers in the future. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES Since inception of Registrant (September 20, 1995), the Registrant has issued and sold the following unregistered securities: (1) From September 20, 1995 to June 1, 1998, Registrant granted options to purchase 4,614,011 shares of Common Stock pursuant to its 1996 Stock Option Plan at exercise prices ranging from $.10 to $5.50. (2) From September 20, 1995 to June 1, 1998, Registrant issued and sold an aggregate of 1,233,160 shares of Common Stock to its employees, directors and consultants upon exercise of stock options granted pursuant to its 1996 Stock Option Plan at exercise prices ranging from $.10 to $3.00 for an aggregate consideration of $220,990.70. (3) In September 1995; at Registrant formation, Registrant issued and sold 6,622,857 shares of Common Stock to William Gross for an aggregate cash consideration of $5,000 and for services provided to the Company. II-1 (4) In October 1995, Registrant issued and sold an aggregate of 4,233,500 shares of its Common Stock for an aggregate cash consideration of $84,670. These shares were issued to the following key founding employees: Charles Conn, III; Thomas Layton; Jeffrey Brewer; Kristen Ding; Caskey Dickson; David Holtz; Tamar Halpern; Brad Haugaard; Taylor Wescoatt; Linda Gross; Karen DeDea; Lee Husiuk and Michael Radford. (5) From November 1995 to December 1995, Registrant issued and sold an aggregate 1,791,173 shares of Series A Preferred Stock for an aggregate cash consideration of approximately $1.6 million. Shares of Series A Preferred Stock were issued to the following: David M. Balkin; Robert McLean; Morris Ventures; Robert W. Shaw, Jr.; Philip E. Berney; WS Investment Company 95B; William N. Melton; Stuart Cohen; Robert Kavner; Edwin C. Cohen; Peter R. Bleyleben; Steven Spielberg; Gerald Breslauer; Barry S. Volpert; Pando Associates, Ltd.; John Wylie; Jeffrey Glynn and Victoria Jo Edwards, Co-Trustees of the Edwards Family Trust of 1995; Charles R. Conn, II; Taylor Wescoatt; North American Trust Co., TTEE FBO L&W Dickson #410280. (6) In June 1996, Registrant issued an aggregate 157,074 shares of Series B Preferred Stock at $3.4665 per share as part consideration for the acquisition of MetroBeat, Inc. Such shares were issued to the following shareholders of MetroBeat, Inc.: Mark Davies and Joshua White. (7) From May 1996 to July 1996, Registrant issued and sold an aggregate 3,261,024 shares of Series C Preferred Stock for an aggregate cash consideration of approximately $11.3 million. Shares of Series C Preferred Stock were issued to the following: GS Capital Partners II, L.P; GS Capital Partners II Offshore, L.P.; Goldman, Sachs & Co. Verwaltungs GmbH; The Goldman Sachs Group, L.P.; AT&T Venture Fund I, L.P.; AT&T Venture Fund II, L.P.; Steven Spielberg; Edwin C. Cohen; Pamela C. Alexander; Barry S. Volpert; Alexander Communications, Inc.; Jeffrey G. Edwards; IRA MSTC Custodian; Morris Ventures; Byters; David White; Robert W. Shaw, Jr.; Charles R. Conn, II; The Pacific Bank, N.A., Trustee E. Keith Thomson IRA; Michael Barton; Eric Higgs; Mark Lewyn; Emily Martin; Douglas M. McPherson; Ted Meisel. (8) From December 1996 to October 1997, Registrant issued and sold an aggregate 4,430,313 shares of Series D Preferred Stock for an aggregate cash consideration of approximately $28.0 million and for services provided to the Company. Such shares of Series D Preferred Stock were issued to the following: GS Capital Partners II, L.P.; GS Capital Partners II Offshore, L.P.; Goldman, Sachs & Co. Verwaltungs GmbH; Stone Street Fund 1996, L.P.; Bridge Street Fund 1996, L.P.; Edwin C. Cohen; EnCompass Group, Inc.; Michael Barton; Mark Lewyn; Brian A. Goler; Emily Bloomfield; Bradley Ramberg; Lamar Rutherford; Kristen Brown; James R. McGovern; AnneMarie Weibel; Debra J. Wilkens; Francesca Colloredo-Mansfeld; Kathryn Takach; Byters; Comcast CitySearch, Inc.; Far West Capital Partners, L.P.; Robert McLean; Morris Ventures; Steven Spielberg; David White; CPQ Holdings, Inc.; Intel Corporation; Bayview Investors, Ltd.; Toronto Star Newspapers Limited; AT&T Venture Fund I, L.P.; AT&T Venture Fund II, L.P.; Bill Gross' idealab!; Alexander Communications, Inc.; The Times Mirror Company; Paul S. Larsen; ServiceMaster Venture Fund L.L.C.; Digital Ink Company and Korn/Ferry International. (9) In June 1997, Registrant issued an aggregate 68,274 shares of Series B Preferred Stock at $6.5251 per share as additional consideration for the acquisition of Metro Beat, Inc. Such shares were issued to the following shareholders of MetroBeat, Inc.: Mark Davies and Joshua White. (10) In November 1997, Registrant issued and sold an aggregate 4,714,286 shares of Series E Preferred Stock for an aggregate cash consideration of approximately $33.0 million. Such shares of Series E Preferred Stock were issued to the following: USA Networks, Inc.; Comcast CitySearch, Inc.; Far West Capital Partners, LP; Intel Corporation; Endurance Fund; Gary Lauder; The Thomas and Janet Unterman Living Trust dated 12/30/94; East Peak Partners; Margaret L. Taylor; David A. Duffield Trust dated 7/14/88; Orchid & Co.; Digital Ink Company; Global Retail Partners, L.P.; DLJ Diversified Partners, L.P.; GRP Partners, L.P.; Global Retail Partners Funding, Inc.; DLJ First ESC L.P. and Schibsted ASA. II-2 NationsBanc Montgomery Securities LLC ("NationsBanc") acted as placement agent. As consideration for such services, Registrant paid NationsBanc $1,546,182 in cash and issued a warrant to purchase 94,286 shares of Series E Preferred Stock, which terms and conditions are described in item (11) below. (11) In November 1997, as part consideration for services provided as placement agent, Registrant issued to NationsBanc a warrant to purchase 94,286 shares of Series E Preferred Stock. The warrant is exercisable at any time at an exercise price equal to $8.75 per share and any unexercised portion of the warrant is automatically convertible immediately prior to the closing of this offering. (12) In May 1998, Registrant issued an sold an aggregate 1,000,000 shares of Series E Preferred Stock for an aggregate cash consideration of approximately $7.0 million. Such shares of Series E Preferred Stock were issued to the following: USA Networks, Inc. and American Express Travel Related Services, Inc. The sales of the securities described in Items 15(1) and 15(2) were deemed to be exempt from registration under the Securities Act in reliance on Rule 701 promulgated under Section 3(b) of the Securities Act as transactions pursuant to compensatory benefit plans and contracts relating to compensation as provided under such Rule 701. The sale of the securities described in Items 15(3) through 15(12) were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act, or Regulation D promulgated thereunder, as transactions by an issuer not involving a public offering. The recipients of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates and other instruments issued in such transactions. All recipients either receive adequate information about the Registrant or had access, through employment or other relationships, to such information. II-3 ITEM 16. EXHIBITS (a) Exhibits 1.1** Form of Underwriting Agreement. 2.1 +Agreement and Plan of Reorganization, among Registrant, MS Acquisition Corporation, MetroBeat, Inc., Mark Davies and Joshua White, dated May 31, 1996. 3.1** Restated Certificate of Incorporation, as currently in effect. 3.2* Restated Certificate of Incorporation, to be filed prior to the consummation of the offering. 3.3* Restated Certificate of Incorporation, to be filed immediately following the consummation of the offering. 3.4 Bylaws, as currently in effect. 3.5** Restated Bylaws, to be effective upon the closing of the offering. 4.1* Specimen Common Stock Certificate. 4.2** Sixth Amended and Restated Stockholders' Agreement by and among Registrant and certain stockholders of the Registrant, dated May 26, 1998. 5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation, as to the legality of the securities being registered. 10.1** Form of Indemnification Agreement for directors and officers. 10.2* 1996 Stock Plan and form of agreement thereunder. 10.3* 1998 Employee Stock Purchase Plan. 10.4* 1998 Director Option Plan. 10.5 +License Agreement between Registrant and Perly, Inc., dated March 9, 1996. 10.6 +Marketing Agreement between Registrant and American Express Travel Related Services Company, Inc., dated May 26, 1998. 10.7** Employment Agreement between Registrant and Charles Conn, dated May 9, 1996. 10.8 +Partnership Agreement between Metroland Printing, Publishing & Distributing Ltd. 1217554 Ontario Inc., Registrant and Torstar Corporation, dated February 17, 1997. 10.9 +License and Services Agreement between Registrant and 1217554 Ontario Inc., dated February 17, 1997. 10.10 +Noncompetition Agreement between Registrant, 1217554 Ontario Inc., Torstar Corporation and Metroland Printing, Publishing & Distributing Ltd., dated February 17, 1997. 10.11 +Assignment Agreement between Registrant, 1217554 Ontario Inc., and Toronto Star CitySearch, dated February 17, 1997. 10.12* Lease Agreement by and between Registrant and West End Land Development Co., L.P., dated November 7, 1996. 10.13* Standard Form of Lease, Aeriel Center Executive Park, between Pizzagalli Investment Company and Registrant, dated May 8, 1996. 10.14* Standard Office Lease between Registrant and Sage Realty Corporation, dated May 6, 1997. 10.15* Standard Office Lease between Registrant and H. Naito Corporation, dated March 6, 1997. 10.16* Standard Office Lease between Registrant and Brazos Austin Centre, Ltd., dated August 15, 1996. 10.17* Standard Office Lease between Registrant and Judge Building Group, dated September 10, 1996. 10.18* Standard Office Lease between Registrant and Sobel Building Development, dated May 31, 1996. 10.19* Standard Office Lease between Registrant and BPG Pasadena, L.L.C. (later assigned to Spieker Properties), dated September 30, 1996. 10.20 Lease Agreement between Registrant and Secured Properties Investors II, L.P., dated May 13, 1998. 10.21** Amended and Restated Voting Agreement by and among Registrant and certain stockholders of Registrant, dated November 12, 1997. 10.22 Employment Agreement between Registrant and Thomas Layton, dated July 2,1997. 21.1** Subsidiaries of the Registrant. 23.1** Consent of Independent Auditors. 23.2* Consent of Counsel (included in Exhibit 5.1). 24.1** Power of Attorney. 27.1** Financial Data Schedule (available in EDGAR format only).
(b) Schedules Schedule II--Valuation and Qualifying Accounts - -------- * To be filed by amendment. ** Previously filed. + Confidential treatment requested. II-4 ITEM 17. UNDERTAKINGS The Registrant hereby undertakes to provide the Underwriters at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of the Registrant pursuant to the provisions described in Item 14 above, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933, and will be governed by the final adjudication of such issue. The undersigned Registrant undertakes that: (1) for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus as filed as part of the registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective, and (2) for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-5 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE REGISTRANT HAS DULY CAUSED THIS AMENDMENT TO THE REGISTRATION STATEMENT ON FORM S-1 TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF PASADENA, STATE OF CALIFORNIA, ON THE 26 DAY OF JUNE, 1998. CITYSEARCH, INC. /s/ Charles Conn By___________________________________ CHARLES CONN CHIEF EXECUTIVE OFFICER PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED SIGNATURE TITLE DATE /s/ Charles Conn Chief Executive June 26, 1998 - ------------------------------------- Officer and CHARLES CONN Director (Principal Executive Officer) /s/ Bradley Ramberg Chief Financial June 26, 1998 - ------------------------------------- Officer and Vice BRADLEY RAMBERG President, Finance and Administration and Secretary (Principal Financial Officer and Principal Accounting Officer) * President, Chief June 26, 1998 - ------------------------------------- Operating Officer, THOMAS LAYTON Treasurer and Director II-6 SIGNATURE TITLE DATE * Director June 26, 1998 - ------------------------------------- GERALD BRESLAUER Director - ------------------------------------- BARRY DILLER * Director June 26, 1998 - ------------------------------------- JOSEPH GLEBERMAN * Director June 26, 1998 - ------------------------------------- WILLIAM GROSS * Director June 26, 1998 - ------------------------------------- ROBERT KAVNER Director - ------------------------------------- ALAN SPOON * Director June 26, 1998 - ------------------------------------- YVES SISTERON * Director June 26, 1998 - ------------------------------------- THOMAS UNTERMAN /s/ Charles Conn By: _________________________________ CHARLES CONN ATTORNEY-IN-FACT II-7 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION ----------- ----------- 1.1** Form of Underwriting Agreement. 2.1 +Agreement and Plan of Reorganization, among Registrant, MS Acquisition Corporation, MetroBeat, Inc., Mark Davies and Joshua White, dated May 31, 1996. 3.1** Restated Certificate of Incorporation, as currently in effect. 3.2* Restated Certificate of Incorporation, to be filed prior to the consummation of the offering. 3.3* Restated Certificate of Incorporation, to be filed immediately following the consummation of the offering. 3.4 Bylaws, as currently in effect. 3.5** Restated Bylaws, to be effective upon the closing of the offering. 4.1* Specimen Common Stock Certificate. 4.2** Sixth Amended and Restated Stockholders' Agreement by and among Registrant and certain stockholders of the Registrant, dated May 26, 1998. 5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation, as to the legality of the securities being registered. 10.1** Form of Indemnification Agreement for directors and officers. 10.2* 1996 Stock Plan and form of agreement thereunder. 10.3* 1998 Employee Stock Purchase Plan. 10.4* 1998 Director Option Plan. 10.5 +License Agreement between Registrant and Perly, Inc., dated March 9, 1996. 10.6 +Marketing Agreement between Registrant and American Express Travel Related Services Company, Inc., dated May 26, 1998. 10.7** Employment Agreement between Registrant and Charles Conn, dated May 9, 1996. 10.8 +Partnership Agreement between Metroland Printing, Publishing & Distributing Ltd. 1217554 Ontario Inc., Registrant and Torstar Corporation, dated February 17, 1997. 10.9 +License and Services Agreement between Registrant and 1217554 Ontario Inc., dated February 17, 1997. 10.10 +Noncompetition Agreement between Registrant, 1217554 Ontario Inc., Torstar Corporation and Metroland Printing, Publishing & Distributing Ltd., dated February 17, 1997. 10.11 +Assignment Agreement between Registrant, 1217554 Ontario Inc., and Toronto Star CitySearch, dated February 17, 1997. 10.12* Lease Agreement by and between Registrant and West End Land Development Co., L.P., dated November 7, 1996. 10.13* Standard Form of Lease, Aeriel Center Executive Park, between Pizzagalli Investment Company and Registrant, dated May 8, 1996. 10.14* Standard Office Lease between Registrant and Sage Realty Corporation, dated May 6, 1997. 10.15* Standard Office Lease between Registrant and H. Naito Corporation, dated March 6, 1997. 10.16* Standard Office Lease between Registrant and Brazos Austin Centre, Ltd., dated August 15, 1996. 10.17* Standard Office Lease between Registrant and Judge Building Group, dated September 10, 1996. 10.18* Standard Office Lease between Registrant and Sobel Building Development, dated May 31, 1996. 10.19* Standard Office Lease between Registrant and BPG Pasadena, L.L.C. (later assigned to Spieker Properties), dated September 30, 1996. 10.20 Lease Agreement between Registrant and Secured Properties Investors II, L.P., dated May 13, 1998. 10.21** Amended and Restated Voting Agreement by and among Registrant and certain stockholders of Registrant, dated November 12, 1997. 10.22 Employment Agreement between Registrant and Thomas Layton, dated July 2,1997. 21.1** Subsidiaries of the Registrant. 23.1** Consent of Independent Auditors. 23.2* Consent of Counsel (included in Exhibit 5.1). 24.1** Power of Attorney. 27.1** Financial Data Schedule (available in EDGAR format only).
(b) Schedules Schedule II--Valuation and Qualifying Accounts - -------- * To be filed by amendment. ** Previously filed. + Confidential treatment requested. EX-2.1 2 AGREEMENT & PLAN OF REORGANIZATION EXHIBIT 2.1 AGREEMENT AND PLAN OF REORGANIZATION BY AND AMONG PERFECTMARKET, INC. MB ACQUISITION CORPORATION METROBEAT, INC. MARK DAVIES AND JOSHUA WHITE MAY 31, 1996 - ------------------ [*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. TABLE OF CONTENTS
PAGE ---- SECTION 1 - THE MERGER.......................................................... 1 1.1 Merger.............................................................. 1 1.2 Effective Time of the Merger........................................ 1 1.3 Closing............................................................. 1 1.4 Effects of the Merger............................................... 2 1.5 Certificate of Incorporation; Bylaws; Directors; Officers........... 2 1.6 Taking of Necessary Action.......................................... 2 SECTION 2 - EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; SURRENDER OF CERTIFICATES................. 2 2.1 Consideration; Payment.............................................. 2 2.2 Effect on Capital Stock of Sub...................................... 3 2.3 Surrender of Certificates........................................... 6 SECTION 3 - REPRESENTATIONS AND WARRANTIES OF METROBEAT......................... 7 3.1 Organization, Standing and Power.................................... 8 3.2 Capital Structure................................................... 8 3.3 Authority........................................................... 9 3.4 Financial Statements................................................ 10 3.5 Inventory........................................................... 10 3.6 Receivables......................................................... 11 3.7 Compliance with Law................................................. 11 3.8 No Defaults......................................................... 11 3.9 Litigation.......................................................... 12 3.10 No Material Adverse Effect.......................................... 12 3.11 Absence of Undisclosed Liabilities.................................. 13 3.12 Information Supplied................................................ 13 3.13 Certain Agreements.................................................. 14 3.14 Plans............................................................... 14 3.15 Major Contracts..................................................... 14 3.16 Taxes............................................................... 16 3.17 Interests of Officers............................................... 17 3.18 Technology.......................................................... 18 3.19 Restrictions on Business Activities................................. 19 3.20 Title to Properties: Absence of Liens and Encumbrances: Condition of Equipment.............................................. 20 3.21 Governmental Authorizations and Licenses............................ 20
3.22 Environmental Matters............................................... 20 3.23 Insurance........................................................... 21 3.24 Labor Matters....................................................... 21 3.25 Customers; Backlog; Returns and Complaints.......................... 21 3.26 Employees........................................................... 22 3.27 Questionable Payments............................................... 22 3.28 Import/Export....................................................... 22 3.29 Brokers; Finders.................................................... 22 3.30 Disclosure.......................................................... 22 SECTION 4 - REPRESENTATIONS AND WARRANTIES OF PERFECTMARKET AND SUB............................................... 23 4.1 Organization; Standing and Power.................................... 23 4.2 Capitalization of PerfectMarket..................................... 23 4.3 Authority........................................................... 24 4.4 Financial Statements................................................ 25 4.5 Compliance with Law................................................. 25 4.6 No Defaults......................................................... 25 4.7 Litigation.......................................................... 26 4.8 No Material Adverse Effect.......................................... 26 4.9 Absence of Undisclosed Liabilities.................................. 26 4.10 Technology.......................................................... 26 4.11 Governmental Authorizations and Licenses............................ 27 4.12 Environmental Matters............................................... 27 4.13 Labor Matters....................................................... 28 4.15 Import/Export....................................................... 28 4.16 Brokers; Finders.................................................... 28 4.17 Disclosure.......................................................... 28 SECTION 5 - CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME; ADDITIONAL AGREEMENTS............................................... 29 5.1 Conduct of Business of MetroBeat.................................... 29 5.2 Exclusivity; Acquisition Proposals.................................. 31 5.3 MetroBeat Shareholders' Approval.................................... 31 5.4 Notification of Certain Matters..................................... 32 5.5 Consents............................................................ 32 5.6 Reasonable Efforts.................................................. 32 5.7 Public Announcements................................................ 33 5.8 Tax Returns and Income Tax Liability................................ 33 5.9 Support of Event Listings Business.................................. 34
-ii- 5.10 Payment of Liabilities.............................................. 34 5.11 Payment of Legal Expenses........................................... 34 5.12 "MetroBeat" Mark.................................................... 34 SECTION 6 - CONDITIONS PRECEDENT................................................ 35 6.1 Conditions to Each Party's Obligation to Effect the Merger.......... 35 6.2 Conditions to Obligations of PerfectMarket and Sub.................. 35 6.3 Conditions to Obligations of MetroBeat.............................. 37 SECTION 7 - INDEMNIFICATION..................................................... 37 7.1 Indemnification..................................................... 37 7.2 Procedures.......................................................... 38 7.3 Right of Set-Off.................................................... 38 7.4 Survival of Representations, Warranties and Covenants............... 38 SECTION 8 - TERMINATION......................................................... 39 8.1 Termination......................................................... 39 8.2 Expenses............................................................ 39 8.3 Procedure and Effect of Termination................................. 39 SECTION 9 - GENERAL PROVISIONS.................................................. 40 9.1 Amendment........................................................... 40 9.2 Extension; Waiver................................................... 40 9.3 Arbitration......................................................... 40 9.4 Notices............................................................. 41 9.5 Broker's or Finder's Fees........................................... 42 9.6 Interpretation...................................................... 42 9.7 Counterparts........................................................ 42 9.8 Entire Agreement.................................................... 42 9.9 No Transfer......................................................... 42 9.10 Severability........................................................ 42 9.11 Other Remedies...................................................... 42 9.12 Further Assurances.................................................. 43 9.13 Absence of Third-Party Beneficiary Rights........................... 43 9.14 Mutual Drafting..................................................... 43 9.15 Governing Law....................................................... 43 9.16 Employees........................................................... 43
-iii- EXHIBITS Exhibit A Plan of Merger Exhibit B Certificate of Merger Exhibit C Restated Certificate of Incorporation of PerfectMarket Exhibit D MetroBeat Disclosure Schedule Exhibit E PerfectMarket Disclosure Schedule Exhibit F Form of Opinion of Counsel to MetroBeat Exhibit G Form of FIRPTA Notification Letter and Form of Notice Exhibit H Form of Employment and Noncompetition Agreement Exhibit I Form of Shareholder's Representation Statement -iv- SCHEDULES 3.1 Qualifications to do Business 3.2(c) Capital Structure 3.3(b) Third-Party Consents 3.6 Accounts Receivable 3.7 Compliance with Laws 3.9 Litigation 3.14 Employee Benefit Plans 3.15 Major Contracts 3.18(a) MetroBeat Intellectual Property Rights 3.18(b) Third-Party Intellectual Property Rights 3.18(c) MetroBeat's standard end-user license agreements 3.20 Real Property 3.23 Insurance 3.25 Significant Customers 3.26 Employees 5.1 Conduct of Business -v- AGREEMENT AND PLAN OF REORGANIZATION THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is dated as of May 31, 1996 among PERFECTMARKET, INC., a Delaware corporation ("PerfectMarket"), MB ACQUISITION CORPORATION, a New York corporation and a wholly-owned subsidiary of PerfectMarket ("Sub"), METROBEAT, INC., a New York corporation ("MetroBeat"), Mark Davies (the "Principal Shareholder") and Joshua White. RECITAL The Boards of Directors of PerfectMarket, MetroBeat and Sub have each approved the terms and conditions of the acquisition of MetroBeat by PerfectMarket to be effected by the merger of Sub with and into MetroBeat, pursuant to the terms and subject to the conditions of this Agreement in accordance with the New York Business Corporation Law. NOW THEREFORE, in consideration of the premises and mutual covenants and agreements contained in this Agreement, PerfectMarket, Sub, MetroBeat and the Principal Shareholder agree as follows: SECTION 1. THE MERGER A. MERGER. Subject to the terms and conditions of this Agreement, the ------ Plan of Merger in substantially the form attached hereto as Exhibit A (the "Plan --------- of Merger") and the Certificate of Merger in substantially the form attached hereto as Exhibit B (the "Certificate of Merger"), Sub will be merged with and --------- into MetroBeat (the "Merger") in accordance with the applicable provisions of the New York Business Corporation Law (the "New York Statute"). The Plan of Merger provides for the mode of consummating the Merger. The Certificate of Merger shall be executed by the parties thereto concurrently with the execution of this Agreement. B. EFFECTIVE TIME OF THE MERGER. Subject to the provisions of this ---------------------------- Agreement and the Plan of Merger, the Certificate of Merger and the required certificates, if any, shall be duly filed in accordance with the New York Secretary of State in accordance with the New York Statute simultaneous with or as soon as practicable following the Closing (as defined in Section 1.3 below). The Merger shall become effective (the "Effective Time") upon the filing of the Certificate of Merger with the New York Secretary of State (as defined in Section 1.3 below) and as provided under the New York Statute. C. CLOSING. Unless this Agreement shall have been terminated pursuant to ------- Section 8, the closing of the Merger (the "Closing") will take place at 10:00 a.m. Pacific Standard Time on June 19, 1996 (the "Closing Date") or, if the closing conditions contained in Section 6 are not satisfied or waived on or prior to such date, the first business day after satisfaction or waiver of all such conditions, at the offices of Wilson, Sonsini, Goodrich & Rosati, Professional Corporation, 650 Page Mill Road, Palo Alto, California 94304, unless a different date or place is agreed to in writing by the parties. D. EFFECTS OF THE MERGER. Subject to the terms and conditions of this --------------------- Agreement and the Certificate of Merger, at the Effective Time: (i) the separate existence of Sub shall cease and Sub shall be merged with and into MetroBeat (Sub and MetroBeat are sometimes referred to as the "Constituent Corporations," and MetroBeat after the Merger is sometimes referred to as the "Surviving Corporation"), and (ii) the Merger shall have all the effects provided by the New York Statute, this Agreement and the Certificate of Merger. E. CERTIFICATE OF INCORPORATION; BYLAWS; DIRECTORS; OFFICERS. At the --------------------------------------------------------- Effective Time, (i) the Certificate of Incorporation of MetroBeat, as amended and substantially in the form attached to the Plan of Merger as Exhibit A, shall --------- be the Certificate of Incorporation of the Surviving Corporation, until altered, amended or repealed as provided in the New York Statute; (ii) the Bylaws of Sub, as in effect immediately prior to the Effective Time, shall be the Bylaws of the Surviving Corporation, until thereafter duly altered, amended or repealed as provided in the New York Statute or in the Certificate of Incorporation or Bylaws of the Surviving Corporation; (iii) the directors of Sub immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation and will hold office from the Effective Time until their respective successors are duly elected or appointed and qualified in the manner provided in the Certificate of Incorporation and Bylaws of the Surviving Corporation, as such instruments may be amended from time to time, either before or after the Effective Time, or as otherwise provided by law; and (iv) the officers of Sub at the Effective Time shall be the initial officers of the Surviving Corporation. F. TAKING OF NECESSARY ACTION. Prior to the Effective Time, the parties -------------------------- shall take, or cause to be taken, all such reasonable actions as may be necessary or appropriate in order to effect, as expeditiously as reasonably practicable, the Merger. SECTION 2 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; SURRENDER OF CERTIFICATES A. CONSIDERATION; PAYMENT. In consideration of the transactions ---------------------- contemplated hereby, PerfectMarket has agreed to pay an aggregate of $[*] in the form of Series B Preferred Stock, par value $ 0.01 per share, of PerfectMarket (the "Series B Preferred") and/or cash (the "Aggregate Consideration"), pursuant to the terms and subject to the conditions set forth in this Agreement. The Series B Preferred shall have the rights, preferences and privileges set forth in the Restated Certificate of Incorporation of PerfectMarket, substantially in the form attached hereto as Exhibit C (the --------- "Restated Certificate"). - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -2- B. EFFECT ON CAPITAL STOCK OF SUB. At the Effective Time by virtue of ------------------------------ the Merger and without any action on the part of the holders of any shares of capital stock of MetroBeat: i. Capital Stock of Sub. Each issued and outstanding share of -------------------- capital stock of Sub shall be converted into one share of Common Stock, $.001 par value, of the Surviving Corporation. Each stock certificate of Sub evidencing ownership of any such shares shall continue to evidence ownership of such shares of capital stock of the Surviving Corporation. ii. Cancellation of Certain Shares of Capital Stock of MetroBeat. ------------------------------------------------------------ All shares of capital stock of MetroBeat ("MetroBeat Capital Stock") that are owned directly or indirectly by MetroBeat or any subsidiary of MetroBeat shall, by virtue of the Merger and without any action on the part of MetroBeat or any subsidiary of MetroBeat, be canceled, and no consideration shall be delivered in exchange therefor. iii. Effect on MetroBeat Capital Stock. Each share of MetroBeat --------------------------------- Capital Stock (other than shares canceled pursuant to Section 2.2(b)) that is issued and outstanding immediately prior to the Effective Time, shall, subject to Section 2.2(f) and (g) below, be automatically canceled and extinguished and be converted into the right to receive an amount equal to the Aggregate Consideration divided by the number of shares of MetroBeat Capital Stock issued and outstanding as of the Effective Time. iv. Cancellation of Other Equity Securities. Except as otherwise --------------------------------------- provided in this Agreement, all shares of and all options to acquire shares of capital stock or other equity securities of MetroBeat other than MetroBeat Capital Stock shall be canceled as of the Effective Time without consideration received in exchange therefor. v. Payment of the Aggregate Consideration. -------------------------------------- (1) Subject to Section 2.2(e)(iii) below, the Aggregate Consideration to be paid by PerfectMarket pursuant to the Merger shall be [*] (2) The Final Payment shall be paid by PerfectMarket either in the form of Series B Preferred and/or cash. At least [*], each of PerfectMarket, on the one hand, and Shareholder's Agent (as defined in Section 7.2), on the other hand, shall elect the form of consideration (cash or Series B Preferred (or if after the closing of an IPO as defined in Section - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -3- 2.2(e)(iv) below, Common Stock)) comprising 50% of the Final Payment. If any portion of the Final Payment is elected to be made in cash, such cash payment shall be secured by a number of shares of Series B Preferred equal to the value of such cash payment (the value of such Series B Preferred to be calculated in accordance with Section 2.2(e)(v)). (3) PerfectMarket shall issue a minimum of [*] shares and a maximum of [*] shares of its capital stock (as adjusted for stock splits, stock dividends and similar recapitalizations of PerfectMarket) to the shareholders of MetroBeat pursuant to this Section 2.2. If the shareholders elect cash for any portion of the Final Payment pursuant to Section 2.2(e)(ii), then both the minimum of [*] shares and the maximum of [*] shares shall be reduced by the number of shares equal to such minimum or maximum multiplied by the percentage equal to the amount of the cash payment elected by the shareholders as the numerator, and $[*] million as the denominator. Such an adjustment shall not be applicable to any portion of the Final Payment PerfectMarket elects to make in cash. At the time PerfectMarket shall be obligated to deliver a cumulative aggregate amount to the shareholders of MetroBeat of [*] shares of capital stock in accordance with the provisions of this Section 2.2(e), all payment obligations of PerfectMarket in excess of such amount shall immediately terminate. In the event that PerfectMarket's payment obligations as calculated through the Final Payment shall be less than [*] shares of capital stock, PerfectMarket shall issue as part of the Final Payment such additional number of shares of capital stock as required such that the cumulative aggregate shares issued pursuant to this Section 2.2(e) shall equal [*] shares. (4) Notwithstanding anything to the contrary in this Agreement, in the event that PerfectMarket closes an initial public offering (an "IPO") of its Common Stock, par value $0.01 per share (the "PM Common Stock"), then PerfectMarket may, in its sole discretion (A) accelerate any portion or all of the Aggregate Consideration not yet due to the shareholders of MetroBeat pursuant to this Agreement, and/or (B) issue shares of PM Common Stock instead of Series B Preferred under this Section 2.2(e); provided, however, that in the -------- ------- event such IPO closes prior to the First Anniversary, 50% of the First and Second Deferred and Final Payments shall be accelerated to the IPO closing date, in the event such IPO closes after the First Anniversary but before the Second Anniversary, 50% of the Second Deferred and Final Payments shall be accelerated to the IPO closing date and in the event such IPO closes after the Second Anniversary but before the Third Anniversary, 50% of the Final Payment shall be accelerated to the IPO closing date. (5) The valuation of the Series B Preferred (or PM Common Stock if applicable) shall be determined as follows: (a) If the PM Common Stock is traded or quoted on a national securities exchange or the Nasdaq National Market, the per share valuation of the PM Common Stock shall be the average of the closing prices of the PM Common Stock as quoted on the exchange or the Nasdaq National Market for the ten day period ending on the day before the applicable Payment Date. (b) If the Payment Date is the date of the closing of a PerfectMarket IPO, the valuation shall equal the price to the public of PM Common Stock in the IPO; - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -4- (c) If (A) or (B) above do not apply and PerfectMarket shall have closed a Preferred Stock financing within 90 days of the Payment Date, the per share valuation will equal the purchase price of such Preferred Stock; and (d) If none of (A), (B) or (C) apply, the parties shall negotiate in good faith the valuation of the Series B Preferred. If PerfectMarket and the Shareholders' Agent are unable to agree on the valuation as of the Payment Date, then the valuation, which valuation shall be based on fair market value, shall be set by an independent appraiser agreed to by PerfectMarket and the Shareholders' Agent. If PerfectMarket and the Shareholders' Agent cannot agree on an appraiser within 30 days after the Payment Date, each of PerfectMarket and Shareholders' Agent shall pick one appraiser and these two appraisers shall pick a third appraiser to determine the valuation. Any appraiser chosen under this provision shall be one of the six largest accounting firms in the U.S. (a "Big Six Accounting Firm"), or an internationally known valuation firm with expertise in determining the valuation of companies such as PerfectMarket. In the event of such arbitration, PerfectMarket and Shareholders' Agent agree that (x) the last completed Preferred Stock financing of PerfectMarket, if it shall have occurred within 24 months of the Payment Date, shall be a minimum price for determining the valuation by the appraisers and (y) PerfectMarket shall pay two- thirds of the cost of the appraisal and the shareholders of MetroBeat shall pay one-third of such cost, provided, however, (I) that PerfectMarket shall pay all -------- ------- of the shareholders' portion of the appraisal cost to the extent such portion exceeds $25,000, and (II) unless otherwise prohibited by law, the shareholders may elect to have PerfectMarket pay the shareholders' portion of the cost of the appraisal above $5,000 (the "Reimbursable Amount") and, in such event, the shareholders shall deliver to PerfectMarket a number of shares of capital stock of PerfectMarket the fair market value of which shall equal the Reimbursable Amount (as determined by the appraisal described above). In the event the per share valuation is determined in accordance with this Section 2.2(e)(D), the Payment Date shall be postponed until ten (10) days after a final determination of the valuation. vi. Fractional Shares. No fractional shares of Series B Preferred or ----------------- PM Common Stock, as the case may be, shall be issued, but in lieu thereof each holder of shares of MetroBeat Common Stock who would otherwise be entitled to receive a fraction of a share of Series B Preferred or PM Common Stock, as the case may be, shall receive from PerfectMarket an amount of cash equal to the per share valuation of the Series B Preferred or PM Common Stock, as the case may be, as determined in Section 2.2(e) above multiplied by the fraction of a share of Series B Preferred or PM Common Stock, as the case may be, to which such holder would otherwise be entitled. The fractional share interests of each shareholder shall be aggregated, so that no shareholder shall receive cash in an amount greater than the value of one full share of Series B Preferred or PM Common Stock, as the case may be. vii. Dissenters' Rights. Any shares of MetroBeat Capital Stock held ------------------ by a holder who has properly exercised dissenters' rights for such shares in accordance with the New York Statute and who, as of the Effective Time, has not effectively withdrawn or lost such dissenters' rights ("Dissenting Shares") shall not be converted into the right to receive the consideration set forth in Section 2, but shall instead be converted into the right to receive such consideration as may be determined to be due with -5- respect to such Dissenting Shares pursuant to the New York Statute. MetroBeat agrees that, except with the prior written consent of PerfectMarket, or as required under the New York Statute, it will not voluntarily make any payment with respect to, or settle or offer to settle, any such purchase demand. If after the Effective Time any Dissenting Shares shall lose their status as Dissenting Shares, PerfectMarket shall deliver, upon surrender by such shareholder of a certificate or certificates representing shares of MetroBeat Capital Stock in accordance with Section 2.3(c), the amount of consideration to which the holder thereof would otherwise be entitled under Section 2.2. viii. Relinquishment of Shares. In the event the Principal ------------------------ Shareholder voluntarily terminates his employment with PerfectMarket or its subsidiary, as the case may be, prior to 24 months following the Closing, as set forth pursuant to the terms of the Employment and Noncompetition Agreement in the form attached hereto as Exhibit F, [*] In the event PerfectMarket is precluded by applicable law from accepting the return of such consideration at such time, such consideration shall be held in escrow by a third-party selected by PerfectMarket and shall be returned to PerfectMarket at the earliest date permitted under applicable law. C. SURRENDER OF CERTIFICATES. ------------------------- i. Exchange Agent. PerfectMarket shall act as Exchange Agent (the -------------- "Exchange Agent") in the Merger. Prior to the Closing Date, MetroBeat shall deliver to the Exchange Agent specific instructions to be followed by Exchange Agent, and Exchange Agent shall have no liability for acting in accordance with those instructions. ii. PerfectMarket to Provide the Aggregate Consideration. On the ---------------------------------------------------- Closing Date, PerfectMarket shall set aside the Aggregate Consideration for exchange in accordance with Section 2.2 and the Plan of Merger, through such reasonable procedures as PerfectMarket may adopt. iii. Exchange Procedures. Prior to the Closing Date, the Exchange ------------------- Agent or MetroBeat, as PerfectMarket and MetroBeat shall agree, shall mail to each holder of record of certificate(s) or other documents which represent MetroBeat Capital Stock (the "Certificates"), to be converted into the Aggregate Consideration pursuant to Section 2.2(c) hereof and the Plan of Merger: (i) a letter of transmittal (which shall specify that, with respect to the Certificates, delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -6- the Exchange Agent and shall be in such form and have such other provisions as PerfectMarket may reasonably specify); and (ii) instructions for use in effecting the surrender of the Certificates. Upon surrender of a Certificate for cancellation to the Exchange Agent or to such other agent or agents as may be appointed by PerfectMarket, together with such letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor that portion of the Aggregate Consideration with respect to the MetroBeat Capital Stock properly covered by such Certificate as to which such holder is entitled pursuant to Section 2.2(c) and the Plan of Merger. Certificates so surrendered pursuant to this Section 2.3 shall be canceled at the Effective Time (if not otherwise canceled or terminated in accordance with their terms). In the event of a transfer of ownership of MetroBeat Capital Stock which is not registered on the transfer records of MetroBeat, the appropriate Aggregate Consideration may be delivered to a transferee if the Certificate representing such transferred security is presented to the Exchange Agent and accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid. Until surrendered as contemplated by this Section 2.3, each Certificate shall be deemed at any time after the Effective Time to represent solely the right to receive upon such surrender that portion of the Aggregate Consideration (without interest and subject to applicable withholding, escheat, and other laws) to which such holder is entitled. iv. No Further Ownership Rights in Capital Stock of MetroBeat. The --------------------------------------------------------- amounts paid in respect of MetroBeat Capital Stock in accordance with the terms of this Agreement and the Plan of Merger shall be deemed to have been delivered in full satisfaction of all rights pertaining thereto, and following the Effective Time, holders of the Certificates shall have no further rights to, or ownership in, shares of capital stock of MetroBeat. There shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of MetroBeat Capital Stock which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged in accordance with the terms of this Agreement and the Plan of Merger. v. No Liability. Notwithstanding anything to the contrary in this ------------ Section 2.3, none of the Exchange Agent, the Surviving Corporation or any party hereto shall be liable to a holder of shares of the capital stock of MetroBeat for any amount paid to a public official pursuant to any applicable abandoned property, escheat or similar law. vi. Lost, Stolen or Destroyed Certificates. In the event any -------------------------------------- certificates evidencing shares of MetroBeat Capital Stock shall have been lost, stolen or destroyed, the Exchange Agent shall issue in exchange for such lost, stolen or destroyed Certificates, upon the making of an affidavit in a form reasonably satisfactory to PerfectMarket of that fact by the holder thereof, such consideration as may be required pursuant to Section 2.2(c). SECTION 3 REPRESENTATIONS AND WARRANTIES OF METROBEAT -7- Except as disclosed in the disclosure schedule attached as Exhibit C which --------- identifies by section and subsection number any exception to a representation and warranty in this Section 3 as well as the basis for any such exception (the "MetroBeat Disclosure Schedule"), each of MetroBeat and the Principal Shareholder represents and warrants to PerfectMarket and Sub as follows: A. ORGANIZATION, STANDING AND POWER. MetroBeat is a corporation duly -------------------------------- organized and validly and legally existing under the laws of New York and has all requisite power and authority to own, operate and lease its properties and to carry on its business as now being conducted. MetroBeat is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect (as defined below). Schedule 3.1 sets forth a true and complete list of the states and foreign - ------------ countries where MetroBeat is qualified as a foreign corporation. MetroBeat has no subsidiaries or affiliated companies and does not otherwise own or control, directly or indirectly, any equity interest in any partnership, corporation, joint venture, business association or other entity and has no loans to any partnership, corporation, joint venture, business association or other entity. MetroBeat has delivered to PerfectMarket complete and correct copies of its Certificate of Incorporation and Bylaws, in each case as amended to the date hereof, and has delivered or made available to PerfectMarket copies of its corporate minute books which include all minutes of MetroBeat's directors' and shareholders' meetings and a stock ledger setting forth the record ownership of all outstanding shares of MetroBeat Capital Stock. The term "Material Adverse Effect" means any change, event or effect that is materially adverse to the business, assets (including intangible assets), liabilities, financial condition, results of operations or prospects of MetroBeat, or Perfect Market, as the context requires. B. CAPITAL STRUCTURE. ----------------- i. The authorized capital stock of MetroBeat consists of 200 shares of Common Stock, no par value ("MetroBeat Common Stock"). There are issued and outstanding 198 shares of MetroBeat Common Stock. All outstanding shares of MetroBeat Common Stock are validly issued, fully paid and nonassessable and not subject to preemptive rights created by statute, or by MetroBeat's Certificate of Incorporation or Bylaws, each as in effect immediately prior to the Effective Time, or by any agreement to which MetroBeat is a party or by which MetroBeat may be bound. ii. Other than as described in this Section 3.2, there are no outstanding shares of MetroBeat Common Stock, preferred stock or any other equity securities of MetroBeat, and there are no options, warrants, calls, conversion rights, commitments or agreements of any character to which MetroBeat or the Principal Shareholder is a party or by which MetroBeat or the Principal Shareholder may be bound that do or may obligate MetroBeat to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of MetroBeat Common Stock, preferred stock or other equity securities or that do or may obligate MetroBeat to grant, extend or enter into any such option, warrant, call, conversion right, commitment or agreement. There are no outstanding arrangements, agreements, commitments or understandings of any kind affecting or relating to the voting, issuance, purchase, redemption, repurchase or transfer of any capital stock of MetroBeat or any other securities of MetroBeat. Other than as provided in or contemplated by this Agreement, MetroBeat and the Principal Shareholder have not, -8- and prior to the Effective Time will not, become party to or subject to any contract or obligation wherein any person has a right or option to purchase or acquire any rights in any additional capital stock or securities of MetroBeat. iii. Schedule 3.2(c) contains a complete and accurate list of, and the --------------- number of shares owned of record by, the holders of outstanding MetroBeat Common Stock. As of the Balance Sheet Date (as defined in Section 3.4), no shares of MetroBeat Common Stock held by certain persons were subject to repurchase upon termination of employment. iv. As of the Effective Time, there shall be no shares of capital stock of MetroBeat or options or other rights therefor outstanding or in existence other than those held by PerfectMarket. C. AUTHORITY. --------- i. MetroBeat has all requisite corporate power and authority to enter into this Agreement and the Certificate of Merger and to perform its obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Certificate of Merger, the performance by MetroBeat of its obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action on the part of MetroBeat, including approval by its Board of Directors and shareholders. The Principal Shareholder has full power and authority to execute and deliver this Agreement, to perform such shareholder's obligations under this Agreement, and to consummate the transactions contemplated by this Agreement and the Certificate of Merger. The Principal Shareholder has full power and authority to vote the outstanding shares of MetroBeat Common Stock held by such shareholder to approve this Agreement, the Plan of Merger, the Certificate of Merger and the transactions contemplated hereby and thereby, and will vote all of such shares to approve this Agreement, the Plan of Merger, the Certificate of Merger and the transactions contemplated hereby and thereby in compliance with all applicable laws, and the Certificate of Incorporation and Bylaws of MetroBeat. This Agreement is a legal, valid and binding obligation of each of MetroBeat and the Principal Shareholder, enforceable against MetroBeat and the Principal Shareholder in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, or other similar laws affecting the enforcement of creditors' rights generally and except that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefor may be brought. The Certificate of Merger, when delivered by the parties thereto, will be a legal, valid and binding obligation of MetroBeat enforceable against MetroBeat in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, or other similar laws affecting the enforcement of creditors' rights generally and except that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefore may be brought. The only vote of the holders of any class or series of MetroBeat Capital Stock necessary to approve this Agreement, the Plan of Merger, the Certificate of Merger and the transactions contemplated hereby and thereby was the affirmative vote of the holders of a majority of the outstanding shares of MetroBeat Common Stock. -9- ii. The execution and delivery of this Agreement does not, and the execution and delivery of the Certificate of Merger and the consummation of the transactions contemplated hereby and thereby will not, conflict with or result in any violation of any statute, law, rule, regulation, judgment, order, decree, or ordinance applicable to MetroBeat or its properties or assets or the Principal Shareholder, or conflict with or result in any breach or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a benefit under, or result in the creation of a lien or encumbrance on any of the properties or assets of MetroBeat pursuant to (i) any provision of the Certificate of Incorporation or Bylaws of MetroBeat or (ii) any agreement, contract, note, mortgage, indenture, lease instrument, permit, concession, franchise or license to which MetroBeat is a party or by which MetroBeat or any of its property or assets may be bound or affected. Schedule 3.3(b) lists all --------------- consents, waivers, and approvals under any of MetroBeat's agreements, contracts, licenses or leases required to be obtained in connection with the consummation of the transactions contemplated hereby and by the Plan of Merger and the Certificate of Merger ("MetroBeat Third-Party Consents"). Copies of such MetroBeat Third-Party Consents will be delivered by MetroBeat to PerfectMarket prior to the Closing. iii. No consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency, commission, regulatory authority or other governmental authority or instrumentality, whether domestic or foreign (a "Governmental Entity"), is required by or with respect to MetroBeat or the Principal Shareholder in connection with the execution and delivery of this Agreement and the Certificate of Merger by MetroBeat or the consummation by MetroBeat of the transactions contemplated hereby or thereby, except for (i) the filing of the Certificate of Merger and officers' certificates with the New York Secretary of State and appropriate documents with the relevant authorities of other states in which MetroBeat is qualified to do business and (ii) such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the Merger. D. FINANCIAL STATEMENTS. MetroBeat has furnished or made available to -------------------- PerfectMarket its financial statements for the fiscal year ended on December 31, 1995, including the balance sheet of MetroBeat, and the related statement of operations, cash flows and shareholders' equity (collectively, the "MetroBeat Year-End Financial Statements") and MetroBeat's financial statements as of April 30, 1996, including a balance sheet of MetroBeat (the "Interim Balance Sheet") as of April 30, 1996 (the "Balance Sheet Date") and the related statement of income, retained earnings and, cash flows (the "Interim Financial Statements") (the Interim Financial Statements together with the MetroBeat Year-End Financial Statements are collectively referred to as the "MetroBeat Financial Statements"). The MetroBeat Financial Statements have been prepared in accordance with generally accepted accounting principles ("GAAP") consistently applied and fairly present the financial position of MetroBeat as of the dates thereof and the results of its operations and cash flows for the periods then ended, except that the Interim Financial Statements do not contain any footnote disclosure required by GAAP. There has been no change in MetroBeat's accounting policies, except as described in the notes to the MetroBeat Financial Statements. -10- E. INVENTORY. The inventories of MetroBeat shown on the Interim Balance --------- Sheet ("Inventories") were valued at cost or market, whichever is lower, with adequate allowances for excess and obsolete materials and materials below standard quality, in accordance with GAAP consistently applied. The quality and quantity of the Inventories are such that the Inventories are readily usable and saleable in the normal course of business of MetroBeat, except such amounts as are reserved on the Interim Balance Sheet in accordance with GAAP consistently applied and in accordance with the past practice of MetroBeat. All items included in such Inventories are owned by MetroBeat, except for sales made subsequent to the Balance Sheet Date in the ordinary course of business, for all of which either the purchaser has made full payment or the purchaser is obligated to make payment and such obligation is an asset of MetroBeat in accordance with GAAP consistently applied. Schedule 3.5 lists all Inventories ------------ materially in excess of reasonable estimated requirements for MetroBeat based on current operations for the next three months. F. RECEIVABLES. The receivables shown on the Interim Balance Sheet arose ----------- in the ordinary course of business and have been collected or are collectible in the book amounts thereof, less an amount not in excess of the allowance for doubtful accounts provided for in such balance sheet. Allowances for doubtful accounts and warranty returns are adequate and have been prepared in accordance with GAAP consistently applied and in accordance with the past practices of MetroBeat. The receivables of MetroBeat arising after the Balance Sheet Date and prior to the Effective Time arose or will arise in the ordinary course of business and have been collected or are collectible in the book amounts thereof, less allowances for doubtful accounts and warranty returns determined in accordance with the past practices of MetroBeat. None of the receivables of MetroBeat is subject to any material claim of offset, recoupment, set off or counterclaim and neither MetroBeat nor the Principal Shareholder has any knowledge of any specific facts or circumstances (whether asserted or unasserted) that could give rise to any such claim. No amount of receivables are contingent upon the performance by MetroBeat of any obligation or contract. No person has any lien on any of such receivables and no agreement for deduction or discount has been made with respect to any of such receivables. Schedule 3.6 ------------ sets forth an aging of accounts receivable of MetroBeat as of the Balance Sheet Date in the aggregate and by customer (0-30 days, 31-60 days, 60-90 days and greater than 90 days), and indicates for each category the respective amounts of allowances for doubtful accounts and warranty returns and the amounts of accounts receivable within each category which are subject to warranty claims in the aggregate. Prior to the date of this Agreement, MetroBeat has provided PerfectMarket with information regarding amounts of accounts receivable which are subject to warranty claims by customer and has made available detailed information regarding warranty claims made within the last year, including the type and amounts of such claims. Schedule 3.6 lists pending authorized product ------------ returns. G. COMPLIANCE WITH LAW. MetroBeat is in compliance and has conducted its ------------------- business so as to comply with all laws, rules and regulations, judgments, decrees or orders of any Governmental Entity applicable to its operations or with respect to which compliance is a condition of engaging in the business thereof. There are no judgments or orders, injunctions, decrees, stipulations or awards (whether rendered by a court or administrative agency or by arbitration) against MetroBeat or against any of its properties or businesses. Without limiting the generality of the foregoing, MetroBeat has not violated any United States and foreign import and export control laws and regulations, export licensing laws and -11- regulations and customs regulations (including its obligations under the Foreign Corrupt Practices Act) applicable to MetroBeat. MetroBeat has not been cited by the United States Department of Commerce, the United States Customs Service or any other relevant Governmental Entity for any violation of United States laws or regulations relating to importing or exporting of products, materials or services. Schedule 3.7 contains a summary of any violation of, or conflict with, ------------ any applicable statute, law, rule, regulation, ruling, order, judgment or decree of which such Governmental Entity has notified MetroBeat, including any of the foregoing relating to Environmental Laws (as defined in Section 3.22(c) below). H. NO DEFAULTS. MetroBeat is not, nor has it or the Principal ----------- Shareholder received notice that MetroBeat is or would be with the passage of time, (a) in violation of any provision of its Certificate of Incorporation or Bylaws or (b) in default or violation of any term, condition or provision of (i) any judgment, decree, order, injunction or stipulation applicable to MetroBeat or (ii) any agreement, note, mortgage, indenture, contract, lease or instrument, permit, concession, franchise or license to which MetroBeat is a party or by which MetroBeat or its properties or assets may be bound. I. LITIGATION. There is no action, suit, proceeding, claim, arbitration ---------- or investigation pending or, to the knowledge of MetroBeat and the Principal Shareholder, threatened, against MetroBeat or the Principal Shareholder, or which in any manner challenges or seeks to prevent, enjoin, alter or delay any of the transactions contemplated hereby. Schedule 3.9 sets forth with respect ------------ to each pending action, suit, proceeding, claim, arbitration or investigation to which MetroBeat is a party, the forum, the parties thereto, a brief description of the subject matter thereof and the amount of damages claimed. Neither MetroBeat nor the Principal Shareholder is aware of any reasonable basis for any other such litigation. MetroBeat has delivered or made available to PerfectMarket correct and complete copies of all correspondence prepared by its counsel for MetroBeat's independent public accountants in connection with all completed audits or reviews of MetroBeat's financial statements and any such correspondence since the date of the last such audit or review. Schedule 3.9 ------------ accurately describes all product liability claims made against MetroBeat since inception. J. NO MATERIAL ADVERSE EFFECT. Since the Balance Sheet Date, MetroBeat -------------------------- has conducted its business in the ordinary course and there has not occurred: i. Any Material Adverse Effect; ii. Any amendments or changes in the Certificate of Incorporation or Bylaws of MetroBeat; iii. Any damage, destruction or loss, whether covered by insurance or not, materially and adversely affecting any of the properties or businesses of MetroBeat; iv. Any issuance, redemption, repurchase or other acquisition of shares of capital stock of MetroBeat, or any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to the capital stock of MetroBeat; -12- v. Any increase in or modification of the compensation or benefits payable or to become payable by MetroBeat to any of its directors or employees; vi. Any increase in or modification of any bonus, pension, insurance or other employee benefit plan, payment or arrangement (including the granting of stock options, restricted stock awards or stock appreciation rights) made to, for or with any of its employees; vii. Any sale of the property or assets of MetroBeat individually in excess of $5,000 or in the aggregate in excess of $10,000 other than inventory sales in the ordinary course of business consistent with past practice; viii. Any alteration in any term of any outstanding security of MetroBeat; ix. Any (A) incurrence, assumption or guarantee by MetroBeat of any debt for borrowed money; (B) issuance or sale of any securities convertible into or exchangeable for debt securities of MetroBeat; or (C) issuance or sale of options or other rights to acquire from MetroBeat, directly or indirectly, debt securities of MetroBeat or any securities convertible into or exchangeable for any such debt securities; x. Any creation or assumption by MetroBeat of any mortgage, pledge, security interest or lien or other encumbrance on any asset (other than liens arising in the ordinary course of MetroBeat's business which in the aggregate are not material and liens for taxes not yet due and payable); xi. Any making of any loan, advance or capital contribution to, or investment in, any person other than (A) travel loans or advances made in the ordinary course of business of MetroBeat and (B) other loans and advances in an aggregate amount which does not exceed $10,000 outstanding at any time; xii. Any entry into, amendment of, relinquishment, termination or nonrenewal by MetroBeat of any contract, lease transaction, commitment or other right or obligation other than in the ordinary course of business consistent with past practice; xiii. Any transfer or grant of a right under the MetroBeat Intellectual Property Rights (as defined in Section 3.18) other than those transferred or granted in the ordinary course of business consistent with past practice; xiv. Any labor dispute, other than routine individual grievances, or any activity or proceeding by a labor union or representative thereof to organize any employees of MetroBeat; xv. Any violation of or conflict with any applicable laws, statutes, orders, rules and regulations promulgated or judgment entered by any Governmental Entity which, individually or in the aggregate, materially and adversely affects (or, insofar as MetroBeat or the Principal Shareholder know, might reasonably be expected to materially and adversely affect) MetroBeat; or -13- xvi. Any agreement or arrangement made by MetroBeat or the Principal Shareholder to take any action which, if taken prior to the date hereof, would have made any representation or warranty set forth in this Section 3.10 untrue or incorrect as of the date when made. K. ABSENCE OF UNDISCLOSED LIABILITIES. MetroBeat has no material ---------------------------------- liabilities or obligations (whether absolute, accrued, contingent or otherwise and whether or not determined or determinable) except liabilities or obligations (i) adequately provided for in the Interim Balance Sheet or (ii) incurred in the ordinary course of business consistent with past practice and which are not, individually or in the aggregate, material to MetroBeat. MetroBeat shall provide PerfectMarket with a schedule of all outstanding liabilities as of the Closing Date. L. INFORMATION SUPPLIED. The materials to be prepared for use in -------------------- soliciting approval of the Merger by MetroBeat's shareholders as described in Section 5.3 and other solicitation materials relating to the Merger, on the date on which MetroBeat mails such materials to its shareholders and at all times from such date up to and including the Effective Time, will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, and will comply in all respects with all applicable federal and state securities law requirements. M. CERTAIN AGREEMENTS. Neither the execution and delivery of this ------------------ Agreement or the Certificate of Merger nor the consummation of the transactions contemplated hereby or thereby will (a) result in any payment (including severance, unemployment compensation, golden parachute, bonus or otherwise) becoming due to any director or employee of MetroBeat under any Plan (as defined in Section 3.14) or otherwise, (b) materially increase any benefits otherwise payable under any Plan, or (c) result in the acceleration of the time of payment or vesting of any such benefits. 3.14 PLANS. All employee compensation, incentive, fringe or benefit ----- plans, programs, policies, commitments or other arrangements (whether or not set forth in a written document) covering any active, former or retired employee or consultant of MetroBeat, or with respect to which MetroBeat has or may in the future have liability, are listed on Schedule 3.14 (the "Plans"). To the extent ------------- applicable, the Plans comply with the requirements of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and the Code, and no Plan is an "employee pension plan" within the meaning of Section 3 of ERISA, nor is any Plan intended to be qualified under Section 401(a) of the Code. MetroBeat has furnished or made available to PerfectMarket copies of the most recent Internal Revenue Service letters and Forms 5500 with respect to any such Plan. No Plan is covered by Title IV of ERISA or Section 412 of the Code. Neither MetroBeat nor any officer or director of MetroBeat has incurred any liability or penalty under Section 4975 through 4980B of the Code or Title 1 of ERISA. Each Plan has been maintained and administered in all material respects in compliance with its terms and with the requirements prescribed by and all statutes, orders, rules and regulations, including but not limited to ERISA and the Code, which are applicable to such Plans. No suit, action or other litigation (excluding claims for benefits incurred in the ordinary course of Plan activities) has been brought, or to the best knowledge of MetroBeat and the Principal Shareholder is threatened, against or with respect to any such -14- Plan. All contributions, reserves or premium payments required to be made or accrued as of the date hereof to the Plans have been made or accrued. Schedule -------- 3.14 includes a listing of the accrued vacation liability of the Company as of - ---- the Balance Sheet Date. O. MAJOR CONTRACTS. Schedule 3.15 lists and describes: --------------- ------------- i. Any union contract or any employment or consulting contract or arrangement providing for future compensation, written or oral, with any officer, consultant, director or employee which is not terminable by MetroBeat on 30 days' notice or less without penalty or obligation to make payments related to such termination; ii. Any plan, contract or arrangement, whether written or oral, providing for bonuses, pensions, deferred compensation, severance pay or benefits, retirement payments, profit-sharing or the like; iii. Any joint venture contract or arrangement or any other agreement currently in effect which has involved or is expect to involve a sharing of profits with other persons; iv. Any existing OEM agreement, distribution agreement, volume purchase agreement, or other similar agreement (but excluding individual customer purchase orders) in which the annual amount involved in fiscal 1995 exceeded or is expected to exceed in fiscal 1996 $10,000 in aggregate amount or pursuant to which MetroBeat has granted or received most favored nation pricing provisions or exclusive marketing rights related to any product, group of products or territory; v. Any current individual customer purchase order for the sale of goods or services in excess of $15,000; vi. Any lease for real or personal property in which the amount of payments which MetroBeat is required to make on an annual basis exceeds $10,000; vii. Except for trade indebtedness incurred in the ordinary course of business, any instrument evidencing or related in any way to indebtedness incurred in the acquisition of companies or other entities or indebtedness for borrowed money by way of direct loan, sale of debt securities, purchase money obligation, conditional sale, guarantee, leasehold obligations or otherwise; viii. Any license agreement, either as licensor or licensee (excluding nonexclusive software licenses granted to customers or end-users in the ordinary course of business); ix. Any contract containing covenants purporting to limit the freedom of MetroBeat to compete in any line of business in any geographic area; x. Any agreement of indemnification other than those entered in connection with the sale of MetroBeat products in the ordinary course of business; -15- xi. Any agreement, contract or commitment relating to capital expenditures and which involve future payments individually in excess of $5,000 or in the aggregate in excess of $10,000 by MetroBeat; xii. Any agreements, contracts or commitments relating to the disposition or acquisition of any assets (other than Inventory) which involve payments individually in excess of $5,000 or in the aggregate in excess of $10,000 by MetroBeat; xiii. Any purchase orders or contracts for the purchase of raw materials which involve payments individually in excess of $5,000 or in the aggregate in excess of $10,000; xiv. Any agreement, contract or commitment relating to the disposition or acquisition by MetroBeat of any Intellectual Property Rights; or xv. Any other agreement, contract or commitment which is material to MetroBeat. Each agreement, contract, mortgage, indenture, plan, lease, instrument, permit, concession, franchise, arrangement, license and commitment listed on the Schedule 3.15 (the "Major Contracts") is valid and binding on MetroBeat, and is in full force and effect, and neither MetroBeat nor, to the best knowledge of MetroBeat and the Principal Shareholder, any other party thereto, has breached, any provision of, or is in default under the terms of, any such Major Contract. No such Major Contract contains any material liquidated damages, penalty or similar provision. MetroBeat does not intend to cancel, withdraw, modify or amend any such Major Contract and, to the best knowledge of MetroBeat and the Principal Shareholder, no party to any such contract, agreement or instrument intends to cancel, withdraw, modify or amend any such Major Contract. P TAXES. ----- i. All Tax (as defined below in Section 3.16(e)) returns, statements, reports and forms (including estimated Tax returns and reports and information returns and reports) required to be filed with any Taxing Authority (as defined below) with respect to any Taxable period ending on or before the Effective Time, by or on behalf of MetroBeat (collectively, the "MetroBeat Returns"), have been or will be filed when due (including any extensions of such due date), and all amounts shown due thereon on or before the Effective Time have been or will be paid on or before such date. The Interim Balance Sheet (i) fully accrues all actual and contingent liabilities for Taxes with respect to all periods through the Balance Sheet Date and MetroBeat has not and will not incur any Tax liability in excess of the amount reflected on the Interim Balance Sheet with respect to such periods, and (ii) properly accrues in accordance with GAAP all liabilities for Taxes payable after the Balance Sheet Date with respect to all transactions and events occurring on or prior to such date. All information set forth in the notes to the MetroBeat Year-End Financial Statements relating to Tax matters is true, complete and accurate in all material respects. -16- ii. No material Tax liability has been incurred since the Balance Sheet Date other than in the ordinary course of business and adequate provision has been or will be made for all Tax liabilities incurred since that date in accordance with GAAP on at least a quarterly basis. MetroBeat has withheld and paid to the applicable financial institution or Taxing Authority all amounts required to be withheld. All MetroBeat Returns filed with respect to Taxable years of MetroBeat through the Taxable year ended December 31, 1995, in the case of the United States, have been examined and closed or are MetroBeat Returns with respect to which the applicable period for assessment under applicable law, after giving effect to extensions or waivers, has expired. Neither MetroBeat nor any member of any affiliated or combined group of which MetroBeat has been a member has granted any extension or waiver of the limitation period applicable to any MetroBeat Returns. iii. There is no material claim, audit, action, suit, proceeding, or investigation now pending or, threatened against or with respect to MetroBeat in respect of any Tax or assessment. No notice of deficiency or similar document of any Taxing Authority has been received by MetroBeat, and there are no liabilities for Taxes (including liabilities for interest, additions to tax and penalties thereon and related expenses) with respect to the issues that have been raised (and are currently pending) by any Tax Authority that could, if determined adversely to MetroBeat, materially and adversely affect the liability of MetroBeat for Taxes. Neither MetroBeat, nor any person on behalf of MetroBeat, has entered into nor will it enter into any agreement or consent pursuant to Section 341(f) of the Code. There are no liens for Taxes upon the assets of MetroBeat except liens for current Taxes not yet due. Except as may be required as a result of the Merger, MetroBeat has not been or will not be required to include any material adjustment in Taxable income for any Tax period (or portion thereof) ending on or after the Closing pursuant to Section 481 or 263A of the Code or any comparable provision under state or foreign Tax laws as a result of transactions, events or accounting methods employed prior to the Closing. iv. There is no contract, agreement, plan or arrangement, including, but not limited to, the provisions of this Agreement, covering any employee or independent contractor or former employee or independent contractor of MetroBeat that, individually or collectively, could give rise to the payment of any amount that would not be deductible pursuant to Section 280G, 162 or 404 of the Code. Other than pursuant to this Agreement, MetroBeat is not a party to or bound by (or will prior to the Effective Time become a party to or bound by) any tax indemnity, tax sharing or tax allocation agreement (whether written, unwritten or arising under operation of federal law as a result of being a member of a group filing consolidated tax returns, under operation of certain state laws as a result of being a member of a unitary group, or under comparable laws of other states or foreign jurisdictions) which includes a party other than MetroBeat. None of the assets of MetroBeat (i) is property that MetroBeat is required to treat as owned by any other person pursuant to the so-called "safe harbor lease" provisions of former Section 168(f)(8) of the Code, (ii) directly or indirectly secures any debt the interest on which is tax exempt under Section 103(a) of the Code or (iii) is "tax exempt use property" within the meaning of Section 168(h) of the Code. MetroBeat has not participated in (nor will prior to the Effective Time participate in) an international boycott within the meaning of Section 999 of the Code. MetroBeat has previously provided or made available to PerfectMarket true and correct copies of all material Tax Returns, and, as reasonably requested by PerfectMarket, prior to or following the date hereof, -17- information statements, reports, work papers, Tax opinions and memoranda and other Tax data and documents. v. For purposes of this Agreement, the term "Tax" (and, with correlative meaning, "Taxes" and "Taxable") means (i) any net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, environmental or windfall profit tax, custom, duty or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or any penalty, addition to tax or additional amount imposed by any Governmental Entity (a "Taxing Authority") responsible for the imposition of any such tax (domestic or foreign), (ii) any liability for the payment of any amounts of the type described in clause (i) as a result of being a member of an affiliated, consolidated, combined or unitary group for any Taxable period and (iii) any liability for the payment of any amounts of the type described in clause (i) or (ii) as a result of any express or implied obligation to indemnify any other person. Q INTERESTS OF OFFICERS. Neither the Principal Shareholder nor any of --------------------- MetroBeat's other officers or directors have any interest, either directly or indirectly, in any property, real or personal, tangible or intangible, used in or pertaining to MetroBeat's business, including any interest in the Intellectual Property Rights (as defined in Section 3.18(a) below), except for rights as a shareholder, and except for rights under any Plan. No employee, shareholder, officer or director of MetroBeat, or their spouses or children, is indebted to MetroBeat, nor is MetroBeat indebted to any of them. -18- R TECHNOLOGY. ---------- i. MetroBeat owns, or is licensed or otherwise entitled to exercise all rights under or with respect to all patents, trademarks, trade names, service marks, copyrights, and any applications therefor, formulae, processes, designs, schematics, compositions, ideas, technology, know-how and tangible or intangible proprietary information, trade secrets or materials employed in the operation of the business of MetroBeat as currently conducted or as currently proposed to be conducted (the "Intellectual Property Rights"). MetroBeat has entered into a confidentiality and invention assignment agreement, in the form previously provided to PerfectMarket, with each of its officers, directors, employees and consultants providing MetroBeat, to the extent permitted by applicable law, with title and ownership to Intellectual Property Rights conceived, developed, reduced to practice by or at the direction of such person, solely or jointly, during the period of employment by MetroBeat. Schedule -------- 3.18(a) lists all MetroBeat patents, trademarks, works of authorship, registered - ------- and unregistered copyrights, registered and unregistered trademarks, trade names and service marks, and any applications therefor, which relate to or are a part of MetroBeat's products or services (the "MetroBeat Intellectual Property Rights"), and specifies the jurisdictions in which each such issuance and registration has been filed, including the respective registration or application numbers, together with a list of all of MetroBeat's currently marketed software products and an indication as to which, if any, of such software products have been registered for copyright protection with the United States Copyright Office and any foreign offices. Without in any manner limiting the foregoing, MetroBeat represents that it has filed for trademark registration in the United States for the name "MetroBeat", that it has received confirmation of receipt of such filing, and that it has conducted a trademark search that showed the "MetroBeat" mark clear of prior registration or use. ii. Schedule 3.18(b) includes and specifically identifies all third- ---------------- party patents, trademarks, works of authorship, registered and unregistered copyrights, registered and unregistered trademarks, trade names and service marks, and any applications therefor (the "Third-Party Intellectual Property Rights") which are incorporated in, are, or form a part of, any MetroBeat product or service. Schedule 3.18(b) lists (i) any requests MetroBeat has ---------------- received to make any such registration, including the identity of the requestor and the item requested to be so registered, and the jurisdiction for which such request has been made; (ii) all material licenses, sublicenses and other agreements as to which MetroBeat is a party and pursuant to which any person is authorized to use any MetroBeat Intellectual Property Rights or any trade secret material to MetroBeat; and (iii) all material licenses, sublicenses and other agreements as to which MetroBeat is a party and pursuant to which MetroBeat is authorized to use any Third-Party Intellectual Property Rights, or trade secret of a third party in or as any product or service, and includes the identity of all parties thereto and a description and statement as to the status of the applicable royalty thereof. Schedule 3.18(c) includes copies of MetroBeat's ---------------- standard end-user license agreements and lists all other agreements with respect to which MetroBeat indemnifies third parties against intellectual property infringement. MetroBeat is not, nor as a result of the execution and delivery of this Agreement or the performance of MetroBeat's obligations hereunder will be, in violation of any license, sublicense or other agreement applicable to it. MetroBeat is the sole and exclusive owner or licensee of, with all right, -19- title and interest in and to (free and clear of any liens or encumbrances), the Intellectual Property Rights, and has sole and exclusive rights in respect thereof, and is not contractually obligated to pay any compensation to any third party. After the Closing, the Surviving Corporation will own or have the exclusive right to use, sell, license and dispose of and the exclusive right to bring actions for infringement of and otherwise exercise all Intellectual Property Rights. iii. No claims with respect to the Intellectual Property Rights have been asserted, have been threatened or are likely to be threatened, by any person. In addition, no grounds exist for any claims now or in the future (i) to the effect that any business of MetroBeat as currently conducted or proposed to be conducted infringes on or misappropriates any patents, works of authorship, registered and unregistered copyrights, registered and unregistered trademarks, trade name, service marks, trade secrets, tangible and intangible proprietary information and technical knowhow and any applications therefor in which a third party has any rights or (ii) challenging the ownership, validity or effectiveness of any of the Intellectual Property Rights. No MetroBeat Intellectual Property Right is subject to any lien, encumbrance or other secured interest. MetroBeat does not know of any fact that would render the MetroBeat Intellectual Property Rights invalid. There is no material unauthorized use, infringement or misappropriation of any of the MetroBeat Intellectual Property Rights by any third party, including any present or former employee of MetroBeat. There is no material unauthorized use, infringement or misappropriation of any of the Third-Party Intellectual Property Rights by MetroBeat or by any third party, including any present or former employee of MetroBeat. No Intellectual Property Right is subject to any outstanding order, judgment, decree, stipulation or agreement restricting in any manner the licensing or exploitation thereof by MetroBeat. Except for end-user object code license agreements for MetroBeat's products executed in the ordinary course of business, without alteration or amendment of any material term therein, and in accordance with MetroBeat's past practices (true and correct copies of the forms of these agreements are attached as part of Schedule 3.18(c)), MetroBeat has not ---------------- entered into any agreement to indemnify any other person against any charge of infringement relating to any Intellectual Property Right. No employee of MetroBeat is in violation of any term of any confidentiality or invention assignment agreement, employment contract (whether written or verbal), patent disclosure agreement or any other contract or agreement relating to the relationship of any such employee with MetroBeat or any other party (including prior employers) because of the nature of the business conducted or proposed to be conducted by MetroBeat. S RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement, ----------------------------------- judgment, injunction, order or decree binding upon MetroBeat or which has or could reasonably be expected to have the effect of prohibiting or materially impairing any business practice of MetroBeat, any acquisition of property by MetroBeat or the conduct of business of MetroBeat as currently conducted or as currently proposed to be conducted. -20- T TITLE TO PROPERTIES: ABSENCE OF LIENS AND ENCUMBRANCES: CONDITION OF -------------------------------------------------------------------- EQUIPMENT. - --------- i. Schedule 3.20 sets forth a true and complete list of all real ------------- property owned or leased by MetroBeat and summarizes all material lease terms, including the aggregate annual rental or other fees payable, the length of all leases and the number of extensions available. ii. MetroBeat has good and valid title to, or, in the case of leased properties and assets, valid leasehold interests in, all of its tangible properties and assets, real, personal and mixed, used in its business, free and clear of any liens (other than liens for Taxes that are not yet delinquent), charges, pledges, security interests or other encumbrances, except for such imperfections of title and encumbrances, if any, which are not substantial in character, amount or extent, and which do not materially detract from the value, or interfere with the present use, of the property subject thereto or affected thereby. iii. MetroBeat has previously provided PerfectMarket with a listing of the machinery and equipment (the "Equipment") owned or leased by MetroBeat as of the Balance Sheet Date. The Equipment is, taken as a whole, (i) adequate for the conduct of the business of MetroBeat consistent with its past practice, (ii) suitable for the uses to which it is currently employed, (iii) in good operating condition, subject to normal wear and tear, (iv) regularly and properly maintained, (v) not obsolete, dangerous or in need of renewal or replacement, except for renewal or replacement in the ordinary course of business, and (vi) free from any material defects. U GOVERNMENTAL AUTHORIZATIONS AND LICENSES. MetroBeat is the holder ---------------------------------------- of all licenses, authorizations, permits, concessions, certificates and other franchises of any Governmental Entity required to operate its business (collectively, the "Licenses") and is in compliance with the terms, conditions, limitations, restrictions, standards, prohibitions, requirements and obligations of such Licenses. The Licenses are in full force and effect. There is not now pending, or to the best knowledge of MetroBeat and the Principal Shareholder is there threatened in writing, any action, suit, investigation or proceeding against MetroBeat before any Governmental Entity with respect to the Licenses, nor is there any issued or outstanding notice, order or complaint with respect to the violation by MetroBeat of the terms of any License or any rule or regulation applicable thereto. V ENVIRONMENTAL MATTERS. --------------------- i. No substance that is regulated by any Governmental Entity or that has been designated by any Governmental Entity to be radioactive, toxic, hazardous or otherwise a danger to health or the environment (a "Hazardous Material") is present in, on or under any property that MetroBeat has at any time owned, operated, occupied or leased. ii. MetroBeat does not and has not transported, stored, used, manufactured, released or exposed its employees or any other person to any Hazardous Material in violation of any applicable statute, rule, regulation, order or law. -21- iii. No permits, consents, waivers, exemptions, licenses, approvals and other authorizations are required to be obtained by it under the laws of any Governmental Entity relating to land use, public and employee health and safety, pollution or protection of the environment (collectively, "Environmental Laws"). MetroBeat is in compliance in all material respects with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in the Environmental Laws or contained in any regulation, code, plan, order, decree, judgment, notice or demand letter issued, entered, promulgated or approved thereunder. Neither MetroBeat nor the Principal Shareholder has received any notice and is not aware of any past or present condition or practice of the businesses conducted by MetroBeat which forms or could be reasonably expected to form the basis of any material claim, action, suit, proceeding, hearing or investigation against MetroBeat, arising out of the manufacture, processing, distribution, use, treatment, storage, spill, disposal, transport, or handling, or the emission, discharge, release or threatened release into the environment, of any Hazardous Material by MetroBeat. W INSURANCE. Schedule 3.23 lists and summarizes all insurance policies --------- ------------- and fidelity or surety bonds covering the assets, business, equipment, properties, operations of MetroBeat, or the employees, officers and directors of MetroBeat, their termination dates and the amounts of coverage under each such policy and bond of MetroBeat. MetroBeat has not been refused any requested insurance coverage. All premiums payable under all such policies and bonds have been paid and MetroBeat is otherwise in full compliance with the terms of such policies and bonds (or other policies and bonds providing substantially similar insurance coverage). Such policies of insurance and bonds are of the type and in amounts customarily carried by persons conducting businesses similar to that of MetroBeat. Neither MetroBeat nor the Principal Shareholder knows of any threatened termination of, or material premium increase with respect to, any of such policies. X LABOR MATTERS. MetroBeat is in compliance in all material respects ------------- with all currently applicable laws and regulations respecting employment, discrimination in employment, terms and conditions of employment and wages and hours and occupational safety and health and employment practices, and is not engaged in any unfair labor practice. Neither MetroBeat nor the Principal Shareholder has received any notice from any Governmental Entity, and, there has not been asserted before any Governmental Entity, any claim, action or proceeding to which MetroBeat is a party or involving MetroBeat, and there is neither pending nor, to MetroBeat's and the Principal Shareholder's best knowledge, threatened any investigation or hearing concerning MetroBeat arising out of or based upon any such laws, regulations or practices. Y CUSTOMERS; BACKLOG; RETURNS AND COMPLAINTS. Schedule 3.25 sets ------------------------------------------ ------------- forth the customers of MetroBeat from January 1, 1995 to the date hereof which purchased MetroBeat's products or consulting services in aggregate amounts in excess of $15,000 ("Significant Customers"). As of the date hereof, MetroBeat has no material backlog of customer orders. MetroBeat has not received any customer complaints concerning its products and/or services which complaints it has not been able to address to the satisfaction of the complainant within a commercially reasonable length of time after MetroBeat received notice of such complaint, nor has it had any of its products returned by a purchaser -22- thereof except for normal warranty returns consistent with past history and those returns that would not result in a reversal of any revenue by MetroBeat. Z EMPLOYEES. Schedule 3.26 identifies all MetroBeat employees and --------- ------------- sets forth the job title and responsibilities of each such employee. MetroBeat has previously provided to PerfectMarket a schedule setting forth the cash compensation of the employees listed on Schedule 3.26 during the period from ------------- January 1, 1995 to December 31, 1995 and from January 1, 1996 to the Balance Sheet Date. None of such employees has indicated to MetroBeat or the Principal Shareholder that he or she has a present intention to resign or retire. AA QUESTIONABLE PAYMENTS. None of MetroBeat, the Principal Shareholder --------------------- nor any director, officer or other employee of MetroBeat has: (i) made any payments or provided services or other favors in the United States of America or in any foreign country in order to obtain preferential treatment or consideration by any Governmental Entity with respect to any aspect of the business of MetroBeat; or (ii) made any political contributions which would not be lawful under the laws of the United States (including the Foreign Corrupt Practices Act) or the foreign country in which such payments were made. None of MetroBeat, the Principal Shareholder nor any director, officer or other employee of MetroBeat nor, to MetroBeat's or the Principal Shareholder's best knowledge, any supplier of MetroBeat has been the subject of any inquiry or investigation by any Governmental Entity in connection with payments or benefits or other favors to or for the benefit of any governmental or armed services official, agent, representative or employee with respect to any aspect of the business of MetroBeat or with respect to any political contribution. BB IMPORT/EXPORT. MetroBeat has not violated any United States and ------------- foreign import and export control laws and regulations, export licensing laws and regulations and customs regulations applicable to MetroBeat. MetroBeat has not been cited by the United States Department of Commerce, the United States Customs Service or any other relevant Governmental Entity for any material violation of United States laws or regulations relating to importing or exporting of products, materials or services. All goods imported into the United States or any other country by MetroBeat ("Imported Goods") have with such exceptions as are not material to MetroBeat been properly valued and classified in accordance with applicable tariff laws, rules and regulations and all proper duties, tariffs or excise taxes have been paid with respect to the Imported Goods. No penalties have been assessed, asserted or claimed with respect to any Imported Goods. All Imported Goods have been properly marked as to country of origin, content and material. CC BROKERS; FINDERS. MetroBeat has made no commitments to pay any ---------------- broker's or finder's fee or any similar commission or fee in connection with any of the transactions contemplated by this Agreement, the Plan of Merger or the Certificate of Merger ("Broker's or Finder's Fee") to any agent, broker, investment banker or other firm or person. DD DISCLOSURE. No representation or warranty made by MetroBeat or the ---------- Principal Shareholder in this Agreement, nor any financial statement, other written financial information or schedule, certificate, schedule or exhibit prepared and furnished or to be prepared and furnished by MetroBeat, the Principal Shareholder or its representatives pursuant hereto or in connection with the -23- transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained herein or therein not misleading in light of the circumstances under which they were furnished. There is no event, fact or condition that has caused, or that reasonably could be expected to cause, a Material Adverse Effect, that has not been set forth in this Agreement or the MetroBeat Disclosure Schedule. The financial projections relating to MetroBeat which were delivered to PerfectMarket prior to the date of this Agreement ("Financial Projections") were prepared by MetroBeat in good faith based upon assumptions MetroBeat believes to be reasonable. MetroBeat is not aware of any fact or information that would lead MetroBeat to believe that the Financial Projections are misleading in any material respect. SECTION 4 REPRESENTATIONS AND WARRANTIES OF PERFECTMARKET AND SUB Except as disclosed in the disclosure schedule attached as Exhibit D which --------- identifies by section and subsection number any exception to representation and warranty in this Section 3 as well as the basis for any such exception (the "PerfectMarket Disclosure Schedule"), each of PerfectMarket and Sub represents and warrants to MetroBeat as follows: A ORGANIZATION; STANDING AND POWER. Each of PerfectMarket and Sub is a -------------------------------- corporation legally and validly existing under the laws of its state of incorporation and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. PerfectMarket is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect. PerfectMarket has no direct or indirect subsidiaries or affiliated companies (other than Sub) and does not otherwise own or control, directly or indirectly, any equity interest in any partnership, corporation, joint venture business association or other entity and has no loans to any partnership, corporation, joint venture, business association or other entity. PerfectMarket has delivered to MetroBeat complete and correct copies of its Certificate of Incorporation and Bylaws, in each case as amended to the date hereof. B CAPITALIZATION OF PERFECTMARKET. Upon the filing of the Restated -------------------------------- Certificate of Incorporation, the authorized capital Stock of PerfectMarket shall consist of 25,000,000 shares of PM Common Stock, of which 8,740,357 shares are currently issued and outstanding, 1,791,178 shares of Series A Preferred Stock, par value $0.01 per share, of which 1,791,178 shares are currently issued and outstanding, [*] shares of Series B Preferred, none of which shares shall be issued and outstanding and 3,190,540 shares of Series C Preferred Stock, par value $0.01 per share, up to which 3,190,540 shares shall be issued outstanding. The authorized capital Stock of MB Acquisition Corporation consists of 1,000 shares of Common Stock, par value $0.01 per share, of which 1,000 shares are issued and outstanding and owned beneficially and of record by PerfectMarket. In addition, PerfectMarket has authorized 2,500,000 shares of Common Stock under its 1996 Stock Option Plan. The Series B Preferred or PM Common Stock, as the case may be, to be delivered by PerfectMarket at each Payment Date will be duly authorized, validly issued shares of stock of PerfectMarket, fully paid and - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -24- nonassessable. All of the shares of Series B Preferred or PM Common Stock to be issued to the Principal Shareholder in accordance herewith will be offered, issued, sold and delivered by PerfectMarket in compliance with all applicable state and federal laws concerning the issuance of securities and none of such shares were or will be issued in violation of the preemptive rights of any shareholder of PerfectMarket. In the event the Principal Shareholder were to own 300,000 shares of capital stock of PerfectMarket as of the date hereof, there would be no more than four active members of the Company's; management team who own more outstanding shares of PerfectMarket (on an as converted to Common Stock basis) as of the date hereof. C AUTHORITY. --------- i. Each of PerfectMarket and Sub has all requisite corporate power and authority to enter into this Agreement and the Certificate of Merger and to perform its obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Certificate of Merger, the performance by each of PerfectMarket and Sub of its obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action on the part of PerfectMarket and Sub, including approval by their Board of Directors and shareholders. Each of PerfectMarket and Sub has full power and authority to execute and deliver this Agreement, to perform their obligations under this Agreement, and to consummate the transactions contemplated by this Agreement, the Plan of Merger and the Certificate of Merger. This Agreement is a legal, valid and binding obligation of each of PerfectMarket and Sub, enforceable against PerfectMarket and Sub in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, or other similar laws affecting the enforcement of creditors' rights generally and except that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefor may be brought. The Certificate of Merger, when delivered by the parties thereto, will be a legal, valid and binding obligation of Sub enforceable against Sub in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, or other similar laws affecting the enforcement of creditors' rights generally and except that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefore may be brought. ii. The execution and delivery of this Agreement does not, and the execution and delivery of the Certificate of Merger and the consummation of the transactions contemplated hereby and thereby will not, conflict with or result in any violation of any statute, law, rule, regulation, judgment, order, decree, or ordinance applicable to PerfectMarket or Sub or their properties or assets, or conflict with or result in any breach or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a benefit under, or result in the creation of a lien or encumbrance on any of the properties or assets of PerfectMarket pursuant to (i) any provision of the Certificate of Incorporation or Bylaws of PerfectMarket or (ii) any agreement, contract, note, mortgage, indenture, lease instrument, permit, concession, franchise or license to which PerfectMarket is a party or by which PerfectMarket or any of its property or assets may be bound or affected. -25- iii. No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity, is required by or with respect to PerfectMarket or Sub in connection with the execution and delivery of this Agreement and the Certificate of Merger by PerfectMarket or Sub or the consummation by PerfectMarket or Sub of the transactions contemplated hereby or thereby, except for (i) the filing of the Certificate of Merger and officers' certificates with the New York Secretary of State and (ii) such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the Merger. D FINANCIAL STATEMENTS. -------------------- i. PerfectMarket has furnished or made available to MetroBeat the compiled financial statements from the year ended December 31, 1995 (the "PerfectMarket Balance Sheet Date")(the "PerfectMarket Year-End Financial Statements"). PerfectMarket has also furnished or made available to MetroBeat PerfectMarket's internal cash-based financial statements for the quarter ended March 31, 1996 (the "PerfectMarket Interim Financial Statements" and collectively with PerfectMarket Year-End Financial Statements, the "PerfectMarket Financial Statements") including a Balance Sheet as of March 31, 1996. The PerfectMarket Financial Statements (i) are complete and correct in all material respects, (ii) fairly present the financial condition of the PerfectMarket of the date of the balance sheet contained therein, and the statement of operations contained therein accurately presents the operating results of PerfectMarket during the period indicated therein, (iii) are in accordance with the books and records of PerfectMarket, and (iv) with respect to the PerfectMarket Year-End Financial Statements only, have been prepared in accordance with generally accepted accounting principles consistently applied except that footnote disclosures contemplated by generally accepted accounting principles are not provided. ii. Except as set forth in the PerfectMarket Financial Statements, the PerfectMarket has no material liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent to the PerfectMarket Balance Sheet Date and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in the PerfectMarket Financial Statements, which, in both cases, individually or in the aggregate, are not material to the financial condition or operating results of PerfectMarket. E COMPLIANCE WITH LAW. PerfectMarket is in compliance and has conducted ------------------- its business so as to comply with all laws, rules and regulations, judgments, decrees or orders of any Governmental Entity applicable to its operations or with respect to which compliance is a condition of engaging in the business thereof. There are no judgments or orders, injunctions, decrees, stipulations or awards (whether rendered by a court or administrative agency or by arbitration) against PerfectMarket or against any of its properties or businesses. Without limiting the generality of the foregoing, PerfectMarket has not violated any United States and foreign import and export control laws and regulations, export licensing laws and regulations and customs regulations (including its obligations under the Foreign Corrupt Practices Act) applicable to PerfectMarket. PerfectMarket has not been cited by the United States -26- Department of Commerce, the United States Customs Service or any other relevant Governmental Entity for any violation of United States laws or regulations relating to importing or exporting of products, materials or services. F NO DEFAULTS. PerfectMarket is not, (a) in violation of any provision ----------- of its Certificate of Incorporation or Bylaws or (b) in default or violation of any term, condition or provision of (i) any judgment, decree, order, injunction or stipulation applicable to PerfectMarket or (ii) any agreement, note, mortgage, indenture, contract, lease or instrument, permit, concession, franchise or license to which PerfectMarket is a party or by which PerfectMarket or its properties or assets may be bound. G LITIGATION. There is no action, suit, proceeding, claim, arbitration ---------- or investigation pending or, to the knowledge of PerfectMarket, threatened, against PerfectMarket, or which in any manner challenges or seeks to prevent, enjoin, alter or delay any of the transactions contemplated hereby. PerfectMarket is not aware of any reasonable basis for any other such litigation. H NO MATERIAL ADVERSE EFFECT. Since the Balance Sheet Date, -------------------------- PerfectMarket has conducted its business in the ordinary course and there has not occurred any Material Adverse Effect. I ABSENCE OF UNDISCLOSED LIABILITIES. PerfectMarket has no material ---------------------------------- liabilities or obligations (whether absolute, accrued, contingent or otherwise and whether or not determined or determinable) except liabilities or obligations (i) adequately provided for in the PerfectMarket Year End Financial Statements or (ii) incurred in the ordinary course of business consistent with past practice since the PerfectMarket Balance Sheet Date. J TECHNOLOGY. ---------- i. PerfectMarket owns, or is licensed or otherwise entitled to exercise all rights under or with respect to all patents, trademarks, trade names, service marks, copyrights, and any applications therefor, formulae, processes, designs, schematics, compositions, ideas, technology, know-how and tangible or intangible proprietary information, trade secrets or materials employed in the operation of the business of PerfectMarket as currently conducted or as currently proposed to be conducted (the "PerfectMarket Intellectual Property Rights"). PerfectMarket has entered into a confidentiality and invention assignment agreement, with each of its officers, directors, employees and consultants providing PerfectMarket, to the extent permitted by applicable law, with title and ownership to PerfectMarket Intellectual Property Rights conceived, developed, reduced to practice by or at the direction of such person, solely or jointly, during the period of employment by PerfectMarket. ii. PerfectMarket is not, nor as a result of the execution and delivery of this Agreement or the performance of PerfectMarket's obligations hereunder will be, in violation of any license, sublicense or other agreement applicable to it. PerfectMarket is the sole and exclusive owner or licensee of, with all right, title and interest in and to (free and clear of any liens or encumbrances), the PerfectMarket Intellectual Property Rights, and has sole and exclusive rights in respect thereof, and is not contractually obligated to pay any compensation to any third party. -27- iii. No claims with respect to the PerfectMarket Intellectual Property Rights have been asserted, have been threatened or are likely to be threatened, by any person. In addition, no grounds exist for any claims now or in the future (i) to the effect that any business of PerfectMarket as currently conducted or proposed to be conducted infringes on or misappropriates any patents, works of authorship, registered and unregistered copyrights, registered and unregistered trademarks, trade name, service marks, trade secrets, tangible and intangible proprietary information and technical knowhow and any applications therefor in which a third party has any rights or (ii) challenging the ownership, validity or effectiveness of any of the PerfectMarket Intellectual Property Rights. No PerfectMarket Intellectual Property Right is subject to any lien, encumbrance or other secured interest. PerfectMarket does not know of any fact that would render the PerfectMarket Intellectual Property Rights invalid. There is no material unauthorized use, infringement or misappropriation of any of the PerfectMarket Intellectual Property Rights by any third party, including any present or former employee of PerfectMarket. No PerfectMarket Intellectual Property Right is subject to any outstanding order, judgment, decree, stipulation or agreement restricting in any manner the licensing or exploitation thereof by PerfectMarket. No employee of PerfectMarket is in violation of any term of any confidentiality or invention assignment agreement, employment contract (whether written or verbal), patent disclosure agreement or any other contract or agreement relating to the relationship of any such employee with PerfectMarket or any other party (including prior employers) because of the nature of the business conducted or proposed to be conducted by PerfectMarket. K GOVERNMENTAL AUTHORIZATIONS AND LICENSES. ---------------------------------------- PerfectMarket is the holder of all licenses, authorizations, permits, concessions, certificates and other franchises of any Governmental Entity required to operate its business (collectively, the "PerfectMarket Licenses") and is in compliance with the terms, conditions, limitations, restrictions, standards, prohibitions, requirements and obligations of such PerfectMarket Licenses. The PerfectMarket Licenses are in full force and effect. There is not now pending, or to the best knowledge of PerfectMarket is there threatened in writing, any action, suit, investigation or proceeding against PerfectMarket before any Governmental Entity with respect to the Licenses, nor is there any issued or outstanding notice, order or complaint with respect to the violation by PerfectMarket of the terms of any License or any rule or regulation applicable thereto. L ENVIRONMENTAL MATTERS. --------------------- i. No Hazardous Material is present in, on or under any property that PerfectMarket has at any time owned, operated, occupied or leased. ii. PerfectMarket does not and has not transported, stored, used, manufactured, released or exposed its employees or any other person to any Hazardous Material in violation of any applicable statute, rule, regulation, order or law. iii. No permits, consents, waivers, exemptions, licenses, approvals and other authorizations are required to be obtained by it under Environmental Laws. PerfectMarket is in compliance in all material respects with all other limitations, restrictions, conditions, standards, -28- prohibitions, requirements, obligations, schedules and timetables contained in the Environmental Laws or contained in any regulation, code, plan, order, decree, judgment, notice or demand letter issued, entered, promulgated or approved thereunder. PerfectMarket has not received any notice and is not aware of any past or present condition or practice of the businesses conducted by PerfectMarket which forms or could be reasonably expected to form the basis of any material claim, action, suit, proceeding, hearing or investigation against PerfectMarket, arising out of the manufacture, processing, distribution, use, treatment, storage, spill, disposal, transport, or handling, or the emission, discharge, release or threatened release into the environment, of any Hazardous Material by PerfectMarket.. M LABOR MATTERS. PerfectMarket is in compliance in all material ------------- respects with all currently applicable laws and regulations respecting employment, discrimination in employment, terms and conditions of employment and wages and hours and occupational safety and health and employment practices, and is not engaged in any unfair labor practice. PerfectMarket has not received any notice from any Governmental Entity, and, there has not been asserted before any Governmental Entity, any claim, action or proceeding to which PerfectMarket is a party or involving PerfectMarket, and there is neither pending nor, to PerfectMarket's best knowledge, threatened any investigation or hearing concerning PerfectMarket arising out of or based upon any such laws, regulations or practices. N QUESTIONABLE PAYMENTS. Neither PerfectMarket nor any director, --------------------- officer or other employee of PerfectMarket has: (i) made any payments or provided services or other favors in the United States of America or in any foreign country in order to obtain preferential treatment or consideration by any Governmental Entity with respect to any aspect of the business of PerfectMarket; or (ii) made any political contributions which would not be lawful under the laws of the United States (including the Foreign Corrupt Practices Act) or the foreign country in which such payments were made. None of Neither PerfectMarket, nor any director, officer or other employee of PerfectMarket nor, to PerfectMarket's or the best knowledge, any supplier of PerfectMarket has been the subject of any inquiry or investigation by any Governmental Entity in connection with payments or benefits or other favors to or for the benefit of any governmental or armed services official, agent, representative or employee with respect to any aspect of the business of PerfectMarket or with respect to any political contribution. O IMPORT/EXPORT. PerfectMarket has not violated any United States and ------------- foreign import and export control laws and regulations, export licensing laws and regulations and customs regulations applicable to PerfectMarket. PerfectMarket has not been cited by the United States Department of Commerce, the United States Customs Service or any other relevant Governmental Entity for any material violation of United States laws or regulations relating to importing or exporting of products, materials or services. All goods imported into the United States or any other country by PerfectMarket ("Perfect Market Imported Goods") have with such exceptions as are not material to PerfectMarket been properly valued and classified in accordance with applicable tariff laws, rules and regulations and all proper duties, tariffs or excise taxes have been paid with respect to the PerfectMarket Imported Goods. No penalties have been assessed, asserted or claimed with respect to any PerfectMarket Imported Goods. All PerfectMarket Imported Goods have been properly marked as to country of origin, content and material. -29- P BROKERS; FINDERS. PerfectMarket has made no commitments to pay any ---------------- Broker's or Finder's fee to any agent, broker, investment banker or other firm or person. Q DISCLOSURE. No representation or warranty made by PerfectMarket, ---------- nor any financial statement, other written financial information or schedule, certificate, schedule or exhibit prepared and furnished or to be prepared and furnished by PerfectMarket, Sub or their representatives pursuant hereto or in connection with the transactions contemplated hereby, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements or facts contained herein or therein not misleading in light of the circumstances under which they were furnished. There is no event, fact or condition that has caused, or that reasonably could be expected to cause, a Material Adverse Effect, that has not been set forth in this Agreement or the MetroBeat Disclosure Schedule. SECTION 5 CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME; ADDITIONAL AGREEMENTS A CONDUCT OF BUSINESS OF METROBEAT. During the period from the date of -------------------------------- this Agreement and continuing until the earlier of the termination of this Agreement or the Effective Time, MetroBeat shall carry on its business in the usual, regular and ordinary course in substantially the same manner as conducted prior to the date of this Agreement and, to the extent consistent with such business, use all commercially reasonable efforts consistent with past practice and policies to preserve intact its present business organization, keep available the services of its present officers and key employees and preserve its relationships with customers, suppliers, distributors, licensors, licensees, and others having business dealings with it, with the objective that its goodwill and ongoing business shall be unimpaired at the Effective Time. MetroBeat shall promptly notify PerfectMarket of any event or occurrence not in the ordinary course of business of MetroBeat, and any event which has had, or could reasonably be expected to have, a Material Adverse Effect, subject to MetroBeat's continuing operating losses consistent with its operating plan as provided to PerfectMarket. Except as expressly contemplated by this Agreement or as set forth on Schedule 5.1, MetroBeat shall not, without the prior written ------------ consent of PerfectMarket: i. Declare or pay any dividends on or make any other distributions (whether in cash, stock or property) in respect of any of its capital stock, or split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, or repurchase or otherwise acquire, directly or indirectly, any shares of its capital stock; ii. Issue, deliver or sell, authorize or propose the issuance, delivery or sale of, or purchase or propose the purchase of, any shares of its capital stock or securities convertible into, or subscriptions, rights, warrants or options to acquire, or other agreements or commitments of any character obligating it to issue any such shares or other convertible securities or authorize or propose any change in its equity capitalization; -30- iii. Solicit approval for or effect any amendments to MetroBeat's Certificate of Incorporation or Bylaws; iv. Acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire any assets which are material, individually or in the aggregate, to MetroBeat; v. Sell, lease, license, pledge or otherwise dispose of or encumber any of its properties or assets except in the ordinary course of business consistent with past practice (including any indebtedness owed to it or any claims held by it); vi. Incur any indebtedness for borrowed money or guarantee any such indebtedness or issue or sell any debt securities or guarantee, endorse or otherwise become responsible for the obligations of others, or make loans or advances; vii. Pay, discharge or satisfy in an amount in excess of $5,000 in any one case any claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction in the ordinary course of business consistent with past practice of liabilities reflected or reserved against in the MetroBeat's Financial Statements or those incurred after the Balance Sheet Date in the ordinary course of business; vii. Adopt or amend any Plan, enter into or amend any employment, severance or termination contract with or pay any special bonus or special remuneration, including any severance or termination pay to, any director, employee or consultant, or increase the salaries or wage rates of its employees; ix. Commence a lawsuit other than for the routine collection of bills; x. Except for end-user licenses granted in the ordinary course of business, transfer to any person or create entitlement to any rights to the MetroBeat Intellectual Property Rights or enter into or amend any agreements pursuant to which any other party is granted marketing or other similar rights of any type or scope with respect to any products of MetroBeat; xi. Violate, amend or otherwise modify the terms of any of MetroBeat's material contracts binding on MetroBeat set forth in Schedule 3.15; ------------- xii. Revalue any of its assets, including writing down the value of inventory or writing off notes or accounts receivable other than in the ordinary course of business and consistent with past practice; -31- xiii. Make any Tax election other than in the ordinary course of business and consistent with past practice, change any Tax election, adopt any Tax accounting method other than in the ordinary course of business and consistent with past practice, change any tax accounting method, file any Tax return (other than any estimated tax returns, payroll tax returns or sale tax returns or other returns in the ordinary course of business) or any amendment to a Tax return, enter into any closing agreement, settle any Tax claim or assessment, or consent to any Tax claim or assessment, without the prior written consent of PerfectMarket, which consent will not be unreasonably withheld; xiv. Engage in any activities or transactions that are outside the ordinary course of its business consistent with past practice; xv. Fail to pay or otherwise satisfy its monetary obligations as they become due, except such as are being contested in good faith; or waive or commit to waive any rights of substantial value; or cancel, materially amend or renew any insurance policy; xvi. Pay or agree to pay any bonuses out of the ordinary course of business to any employee, officer, consultant, director or other agent of MetroBeat; or xvii. Take, or agree (in writing or otherwise) to take, any of the actions described in Sections 5.1(a) through (p) above, or any action which would make any of the representations or warranties of MetroBeat contained in this Agreement untrue or incorrect or result in any of the conditions to the Merger set forth in Section 6 not being satisfied. B. EXCLUSIVITY; ACQUISITION PROPOSALS. Unless and until this Agreement ---------------------------------- shall have been terminated by either party pursuant to Section 8.1, neither MetroBeat nor the Principal Shareholder shall, directly or indirectly, through any officer, director, shareholder, employee, representative, agent or otherwise, solicit, initiate, entertain or encourage any proposals or offers from any third party relating to any possible acquisition of MetroBeat or any of its subsidiaries (whether by way of merger, purchase of capital stock, purchase of assets or otherwise) (an "Alternative Acquisition"), or engage in any sale of equity interests in MetroBeat's (other than pursuant to the exercise of outstanding options or warrants) (an "Equity Transaction"); nor will MetroBeat participate in any negotiations regarding, or furnish to any person any information with respect to, or otherwise cooperate with, facilitate or encourage any effort or attempt by any person to do or seek any Alternative Acquisition or Equity Transaction. In addition, (a) MetroBeat will maintain the confidentiality of its confidential information, including information with respect to its financial and operating condition, and (b) without PerfectMarket's written consent, MetroBeat and its representatives will not disclose to any other person (other than its accountants, lawyers and other professional advisers) the nature of the discussions or negotiations taking place concerning the proposed transaction involving the parties or any of the terms, conditions or other facts with respect thereto (including the status thereof). In the event MetroBeat or the Principal Shareholder receive from any third party any offer or indication of interest (whether made in writing or otherwise) regarding an Alternative Transaction or an Equity Transaction, or any request for information about MetroBeat with respect to any of the foregoing, then MetroBeat shall promptly communicate to PerfectMarket the material terms of each such offer, indication of interest, or request, including the -32- identity of the third party. The Principal Shareholder further agrees not to transfer, sell, exchange, pledge or otherwise dispose of or encumber any shares of MetroBeat Common Stock or to discuss, negotiate, or make any offer or agreement relating thereto, at any time prior to the earliest to occur of the termination of this Agreement and the Effective Time. C. METROBEAT SHAREHOLDERS' APPROVAL. MetroBeat shall either (i) call a -------------------------------- meeting of its shareholders (the "Shareholders' Meeting") to be held as promptly as practicable (the date on which such meeting is scheduled is referred to as the "Shareholders' Meeting Date") or (ii) solicit shareholder approval by written consent in accordance with applicable law, for the purpose of obtaining the shareholder approval required in connection with the transactions contemplated hereby, by the Plan of Merger and the Certificate of Merger, and shall use its best efforts to obtain such approval. If a Shareholders' meeting is called, MetroBeat shall not change the Shareholders' Meeting Date without the prior written consent of PerfectMarket, nor shall MetroBeat adjourn the Shareholders' Meeting without the prior consent of PerfectMarket, unless such adjournment is due to the lack of a quorum, in which case the Chairman of the Shareholders' Meeting shall announce at such meeting the time and place of the adjourned meeting. As soon as practicable after the execution of this Agreement, MetroBeat shall prepare and distribute to its shareholders a Proxy or Information Statement for purposes of soliciting the approval of the shareholders of MetroBeat of this Agreement, the Plan of Merger or the Certificate of Merger and the transactions contemplated hereby and thereby. MetroBeat shall use its best efforts to cause the Proxy or Information Statement to comply with applicable federal and state securities law requirements. The Proxy or Information Statement shall be subject to prior review and approval by PerfectMarket. The Proxy or Information Statement shall contain the unanimous recommendation of the Board of Directors of MetroBeat that the MetroBeat shareholders approve the Merger and this Agreement and the conclusion of the Board of Directors that the terms and conditions of the Merger are fair and reasonable to the shareholders of MetroBeat. D. NOTIFICATION OF CERTAIN MATTERS. MetroBeat and the Principal ------------------------------- Shareholder shall give prompt notice to PerfectMarket, and PerfectMarket and Sub shall give prompt notice to MetroBeat, of the occurrence, or pending or threatened occurrence or failure to occur, of any event, which occurrence or failure to occur would be likely to cause (a) any representation or warranty contained in this Agreement to be untrue or inaccurate at any time from the date of this Agreement to the Effective Time, or (b) any material failure of MetroBeat or PerfectMarket and Sub (as the case may be), or of any officer, director, employee or agent thereof, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under this Agreement. Each party shall use all reasonable efforts to prevent or promptly remedy such breach or inaccuracy. E. CONSENTS. Each of PerfectMarket and MetroBeat shall promptly apply -------- for or otherwise seek, and use all reasonable efforts to obtain, all consents and approvals, including all MetroBeat Third-Party Consents, required to be obtained by it for the consummation of the Merger and the transactions contemplated by this Agreement and to enable the Surviving Corporation to conduct and operate the business of MetroBeat substantially as presently conducted and as contemplated to be conducted. F. REASONABLE EFFORTS. ------------------ -33- i. MetroBeat and the Principal Shareholder shall each use its or his reasonable efforts to effect the transactions contemplated hereby and to fulfill and cause to be fulfilled the conditions to Closing under this Agreement. MetroBeat shall take all reasonable actions necessary to comply promptly with all legal requirements which may be imposed on MetroBeat with respect to the Merger and will promptly cooperate with and furnish information to PerfectMarket in connection with any such requirements imposed upon PerfectMarket, Sub or any other subsidiary of PerfectMarket in connection with the Merger. MetroBeat shall take all reasonable actions to obtain (and to cooperate with PerfectMarket and its subsidiaries in obtaining) any consent, authorization, order or approval of, or any exemption by, any Governmental Entity, required to be obtained or made by MetroBeat (or by PerfectMarket or its subsidiaries) in connection with the Merger or the taking of any action contemplated thereby, by this Agreement, by the Plan of Merger or the Certificate of Merger, and to defend all lawsuits or other legal proceedings challenging this Agreement, the Plan of Merger or the Certificate of Merger, or the consummation of the transactions contemplated hereby and thereby, to lift or rescind any injunction or restraining order or other order adversely affecting the ability or the parties to consummate the transactions contemplated hereby and thereby, and to effect all necessary registrations and filings and submissions or information required by any Governmental Entity, and to fulfill all conditions to this Agreement. ii. Each of PerfectMarket and Sub shall take all reasonable actions necessary to comply promptly with all legal requirements which may be imposed on them with respect to the Merger and will promptly cooperate with and furnish information to MetroBeat and the Principal Shareholder in connection with any such requirement imposed upon MetroBeat in connection with the Merger. PerfectMarket and Sub shall take all reasonable actions to obtain (and to cooperate with MetroBeat in obtaining) any consent, authorization, order or approval of, or exemption by, any Governmental Entity required to be obtained or made by PerfectMarket or any of its subsidiaries (or by MetroBeat) in connection with the Merger or the taking of any action contemplated by this Agreement, by the Plan of Merger or the Certificate of Merger, and to defend all lawsuits or other legal proceedings challenging this Agreement or the consummation of the transactions contemplated hereby and by the Plan of Merger and the Certificate of Merger, to lift or rescind any injunction or restraining order or other order adversely affecting the ability of the parties to consummate the transactions contemplated hereby and by the Plan of Merger and the Certificate of Merger, and to effect all necessary registrations and filings and submissions of information requested by any Governmental Entity, and to fulfill all conditions to this Agreement. G. PUBLIC ANNOUNCEMENTS. Each party will consult in advance with the -------------------- other concerning the timing and content of any announcements, press releases and public statements concerning the Merger and will not make any such announcement, release or statement without the other's consent; provided, however, that -------- ------- PerfectMarket may make any public statement concerning the Merger without MetroBeat's consent if, in the opinion of counsel for PerfectMarket, such statement or announcement is required or advisable to comply with applicable law. -34- H. TAX RETURNS AND INCOME TAX LIABILITY. The Principal Shareholder shall ------------------------------------ timely file all federal and state income tax returns for taxable periods ending on or prior to the Effective Time and have paid or will pay all Taxes attributable to such periods. Such returns will be prepared and filed in accordance with applicable law and in a manner consistent with past practices and shall be subject to review and approval by PerfectMarket. After the Effective Time, PerfectMarket and MetroBeat, on the one hand, and the former shareholders of MetroBeat, on the other hand, will make available to the other, as reasonably requested, all information, records or documents relating to the liability for Taxes of MetroBeat for all periods prior to or including the Effective Time and will preserve such information, records or documents until the expiration of any applicable statute of limitations or extensions thereof. -35- I. SUPPORT OF EVENT LISTINGS BUSINESS. After the Closing, PerfectMarket ---------------------------------- agrees to commit to providing to the MetroBeat operations design, technical and marketing resources, including an initial agreement by PerfectMarket to provide $1.5 million in funding for the events listing business. In connection therewith, PerfectMarket acknowledges that it intends, after the Closing, to perform the following: i. to spend not less than $5,000 per month for a period of four months and up to $10,000 per month in both Los Angeles and San Francisco in fiscal 1996 to set the ground work for future entry in those markets, including performing the photography and site information collection to reduce the time necessary to launch an events listing service, if PerfectMarket so determines, in those markets; ii. to provide up to $75,000 in order to complete the development, testing and debugging of MetroBeat 2.0 and to put the MetroBeat service on a faster computer platform, and provide reasonably necessary computer support and database administration to accomplish this objective; iii. to support with PerfectMarket staff the design and interface design for the development of MetroBeat 2.0 and an integrated MetroBeat/PerfectMarket offering; and iv. to cooperate with the Principal Shareholder in the development of a dynamic event listings in markets targeted by PerfectMarket in its sole discretion. J. PAYMENT OF LIABILITIES. Within thirty (30) days after the ---------------------- Closing, PerfectMarket agrees to pay the liabilities of MetroBeat to Davies, Joshua White and the American Broadcasting Corporation in the aggregate amount not to exceed $[*]. K. PAYMENT OF LEGAL EXPENSES. Within thirty (30) days after the ------------------------- Closing, PerfectMarket agrees to pay the reasonable legal expenses of MetroBeat incurred by it in connection with the transactions contemplated by this Agreement, the Plan of Merger and the Certificate of Merger. L. "METROBEAT" MARK. In the event that the Principal Shareholder's ---------------- employment is terminated by either party for any reason under the Employment Agreement, PerfectMarket shall assign the mark "MetroBeat" to the Principal Shareholder on the first anniversary of such termination, provided, that, -------- ---- PerfectMarket shall have failed to use such mark for at least three years prior thereto. - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -36- SECTION 6 CONDITIONS PRECEDENT A. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The ---------------------------------------------------------- respective obligation of each party to effect the Merger shall be subject to the satisfaction prior to the Closing of the following conditions: i. Shareholder Approval. This Agreement, the Plan of Merger and -------------------- the Certificate of Merger and all the transactions contemplated hereby and thereby shall have been approved and adopted by the affirmative vote of the holders of the outstanding shares of MetroBeat Common Stock as required by applicable law and by MetroBeat's Certificate of Incorporation and Bylaws. ii. Legal Action. No temporary restraining order, preliminary ------------ injunction or permanent injunction or other order preventing the consummation of the Merger or the transactions contemplated by this Agreement shall have been issued by any Governmental Entity and remain in effect, and no litigation seeking the issuance of such an order or injunction, or seeking relief against MetroBeat, the Surviving Corporation or PerfectMarket if the Merger is consummated, shall be pending which, in the good faith judgment of MetroBeat's or PerfectMarket's Board of Directors (acting upon the written opinion of their respective outside counsel) has a reasonable probability of resulting in such order, injunction or relief and such order, injunction or relief would have a Material Adverse Effect on MetroBeat. In the event any such order or injunction shall have been issued, each party agrees to use commercially reasonable efforts to have any such order or injunction lifted. iii. Statutes. No action shall have been taken, and no statute, -------- rule, regulation or order shall have been enacted, promulgated or issued or deemed applicable to the Merger by any Governmental Entity which would (i) make the consummation of the Merger illegal, (ii) prohibit PerfectMarket's or MetroBeat's ownership or operation of all or a material portion of the business or assets of MetroBeat, or PerfectMarket and its subsidiaries taken as a whole, or compel PerfectMarket or MetroBeat to dispose of or hold separate all or a material portion of the business or assets of MetroBeat, or PerfectMarket and its subsidiaries taken as a whole, as a result of the Merger or (iii) render PerfectMarket, Sub, MetroBeat or the Principal Shareholder unable to consummate the Merger. iv. Financing PerfectMarket shall have closed its next round of --------- equity financing. B. CONDITIONS TO OBLIGATIONS OF PERFECTMARKET AND SUB. The obligations -------------------------------------------------- of PerfectMarket and Sub to effect the Merger are subject to the satisfaction of the following conditions, unless waived by PerfectMarket and Sub: i. Representations and Warranties. The representations and ------------------------------ warranties of MetroBeat and the Principal Shareholder set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date, and PerfectMarket shall -37- have received a certificate signed by the Principal Shareholder in his individual capacity and each of the President and Treasurer of MetroBeat on behalf of MetroBeat to such effect on the Closing Date. ii. No Material Adverse Effect. There shall have been no Material -------------------------- Adverse Effect on MetroBeat from the date of this Agreement through the Closing Date, and PerfectMarket shall have received a certificate signed by the Principal Shareholder in his individual capacity and each of the President and Treasurer of MetroBeat on behalf of MetroBeat to such effect on the Closing Date. iii. Opinion of Counsel to MetroBeat. PerfectMarket shall have ------------------------------- received written opinions dated as of the Closing Date of Rosalind Lichter or Jed Alpert, counsel to MetroBeat, substantially in the form attached as Exhibit ------- E hereto. - - iv. Performance of Obligations of MetroBeat. MetroBeat and the --------------------------------------- Principal Shareholder shall have performed all obligations and covenants required to be performed by it under this Agreement, the Plan of Merger and the Certificate of Merger prior to the Closing Date, and PerfectMarket shall have received a certificate signed by the Principal Shareholder in his individual capacity and each of the President and Treasurer of MetroBeat on behalf of MetroBeat to such effect on the Closing Date. v. Approvals and Consents. All authorizations, consents, orders or ---------------------- approvals of, or declarations or filings with, any Governmental Entity necessary for the consummation of the transactions contemplated by this Agreement shall have been filed, occurred or been obtained, and PerfectMarket shall have received duly executed copies of all MetroBeat Third-Party Consents in form and substance satisfactory to PerfectMarket. vi. FIRPTA. PerfectMarket shall have received a properly executed ------ Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA") Notification Letter, which states that shares of capital stock of MetroBeat do not constitute "United States real property interests" under Section 897(c) of the Code, for purposes of satisfying PerfectMarket's obligations under Treasury Regulation Section 1.1445-2(c)(3). In addition, simultaneously with delivery of such Notification Letter, MetroBeat shall have provided to PerfectMarket a form of notice to the Internal Revenue Service in accordance with the requirements of Treasury Regulation Section 1.897-2(h)(2) along with written authorization for PerfectMarket to deliver such notice to the Internal Revenue Service on behalf of MetroBeat. Such FIRPTA Notification Letter and form of notice shall be in substantially the form attached hereto as Exhibit F. --------- vii. Resignation of Officers and Directors. The officers and directors ------------------------------------- of MetroBeat in office immediately prior to the Effective Time shall have resigned as officers and directors of the Surviving Corporation effective as of the Effective Time. viii. Employment Agreements. All employment agreements entered into by --------------------- MetroBeat with any of its employees shall have been terminated in full and be of no further force and -38- effect as of the Effective Time and no payments shall be due thereunder. Such terminations shall be pursuant to documentation reasonably satisfactory to PerfectMarket . ix. Employee Retention. PerfectMarket shall be satisfied in its sole ------------------ discretion (exercised reasonably and in good faith) that a sufficient core group of employees (including the Principal Shareholder) at MetroBeat are ready, willing and able to remain with MetroBeat and PerfectMarket following the transaction to enable the continued operation of MetroBeat's business. x. Employment and Noncompetition Agreement. PerfectMarket shall have --------------------------------------- received the executed employment and noncompetition agreement, substantially in the form attached hereto as Exhibit G (the "Employment Agreement"), of the --------- Principal Shareholder. xi. Shareholder's Representation Statement. All shareholders of -------------------------------------- MetroBeat shall have executed and delivered a Shareholder's Representation Statement, substantially in the form attached hereto as Exhibit H. --------- xii. Hells Kitchen Systems. PerfectMarket shall have received --------------------- clarification to its satisfaction of the status of Hells Kitchen Systems, Inc. as a shareholder of MetroBeat . C. CONDITIONS TO OBLIGATIONS OF METROBEAT. The obligation of MetroBeat -------------------------------------- to effect the Merger is subject to the satisfaction of the following conditions, unless waived by MetroBeat: i. Representations and Warranties. The representations and ------------------------------ warranties of PerfectMarket and Sub set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date. MetroBeat shall have received a certificate signed by an officer of each of PerfectMarket and Sub to such effect on the Closing Date. ii. Performance of Obligations of PerfectMarket and Sub. --------------------------------------------------- PerfectMarket and Sub shall have performed all obligations and covenants required to be performed by them under this Agreement, the Plan of Merger and the Certificate of Merger prior to the Closing Date, and MetroBeat shall have received a certificate signed by an officer of PerfectMarket to such effect on the Closing Date. iii. Approvals and Consents. All authorizations, consents, orders or ---------------------- approvals of, or declarations or filings with, any Governmental Entity necessary for the consummation of the transactions contemplated by this Agreement shall have been filed, occurred or been obtained. iv. No Material Adverse Effect. There shall have been no Material -------------------------- Adverse Effect on PerfectMarket from the date of this Agreement through the Closing Date, and MetroBeat shall have received a certificate signed by the Chief Executive Officer of PerfectMarket to such effect on the Closing Date. -39- SECTION 7 INDEMNIFICATION A. INDEMNIFICATION. From and after the Closing Date, PerfectMarket, Sub --------------- and the Surviving Corporation, and the respective officers, directors, employees, shareholders, assigns and successors and the affiliates of the foregoing persons and entities (individually, an "Indemnified Person" and collectively,"Indemnified Persons"), shall be held harmless from and against and in respect of any and all claims, demands, lawsuits, actions, causes of actions, administrative proceedings (including informal proceedings), losses, assessments, costs, damages, punitive damages, judgments, liabilities (including sums paid in settlement of claims), penalties, fines, interest (including interest from the date of such damages), and costs and expenses including reasonable legal fees and disbursements of every kind, nature and description (collectively "Damages") that arise or result from or relate to, directly or indirectly, any breach of any of the representations, warranties, and covenants given or made by MetroBeat and the Principal Shareholder in this Agreement or any certificate, document, or instrument delivered by or on behalf of MetroBeat pursuant hereto. B. PROCEDURES. The Indemnified Person shall promptly notify Mr. Mark ---------- Davies, as agent of the shareholders of MetroBeat hereunder (the "Shareholder's Agent"), in writing of the existence of any claim, demand or other matter (a "Claim") involving Damages to which the indemnification obligations in this Section 7 would apply. The Shareholders' Agent and each Indemnified Person agrees to cooperate with the other in determining the validity of any such Claim. If such Claim relates to a claim or demand asserted by a third party, the Shareholders' Agent shall have the right at its expense to employ counsel to defend such claim or demand and the Indemnified Person shall have the right at its expense, but not the obligation, to participate in the defense of any such claim or demand. So long as the Shareholders' Agent is defending such Claim in good faith, the Indemnified Person will not settle such claim or demand without the consent of the Shareholders' Agent, which consent shall not be unreasonably withheld. The Indemnified Person shall make available to the Shareholders' Agent all records and other materials reasonably required by it in contesting a claim or demand asserted by a third party against the Indemnified Person and shall cooperate in the defense thereof. C. RIGHT OF SET-OFF. To the extent, but only to the extent, that any ---------------- Indemnified Person would be entitled to indemnification for Damages under this Section 7, PerfectMarket shall have an express right of set-off of such Damages against any future obligations of PerfectMarket to make any payments under this Agreement to the former shareholders of MetroBeat. In the event that on a Payment Date there are Claims pending under this Section 7, the payment to be made on such Payment Date shall be deferred, to the extent of such pending Claims, until resolution of such pending Claims. The Company agrees that it shall first seek to recover indemnification for any Damages under this Section 7 by seeking to secure shares of Series B Preferred issued to the former shareholders of MetroBeat pursuant to this Agreement and thereafter to seek recovery against any other assets of such shareholders. D. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. For purposes ----------------------------------------------------- of asserting Claims under this Section 7, all representations, warranties and covenants made by MetroBeat in or pursuant to this Agreement or in any document delivered pursuant hereto will survive the Closing and -40- will remain in effect until (i) the First Anniversary or (ii) with respect to the representations, warranties and covenants set out in Section 3.16 (Taxes) and Section 3.22 (Environmental Matters), until expiration of the applicable statute of limitations; provided, however, that the indemnification obligations under this Section 7 shall continue in effect after the applicable termination date with respect to any Claim pending as of such date until the final resolution of any such pending Claim. All representations, warranties and covenants made by PerfectMarket pursuant to this Agreement or in any document delivered pursuant hereto shall survive for a period of one year after the Closing. SECTION 8. TERMINATION A. TERMINATION. ----------- i. This Agreement may be terminated at any time prior to the Effective Time: (1 by mutual agreement of the Boards of Directors of PerfectMarket and MetroBeat; (2 by PerfectMarket on or after the tenth business day following delivery of written notice thereof to MetroBeat, if there has been a material breach by MetroBeat or the Principal Shareholder of any representation, warranty, covenant or agreement set forth in this Agreement on the part of MetroBeat that remains uncured as of such sixth business day; (3 by MetroBeat on or after the tenth business day following delivery of written notice thereof to PerfectMarket, if there has been a material breach by PerfectMarket or Sub of any representation, warranty, covenant or agreement set forth in this Agreement on the part of PerfectMarket or Sub that remains uncured as of such sixth business day; (4 by PerfectMarket or MetroBeat, if the Merger shall not have been consummated on or before July 31, 1996; or (5 by PerfectMarket or MetroBeat if any permanent injunction or other order of a court or other competent authority preventing the Merger shall have become final and nonappealable. ii. Where action is taken to terminate this Agreement pursuant to this Section 8.1, it shall be sufficient for such action to be authorized by the Board of Directors of the party taking such action. B. EXPENSES. Whether or not the Merger is consummated, except as -------- otherwise set forth herein all costs and expenses incurred in connection with this Agreement, the Plan of Merger, the Certificate of Merger and the transactions contemplated hereby and thereby shall be paid by the party incurring such expense. -41- C. PROCEDURE AND EFFECT OF TERMINATION. In the event of termination of ----------------------------------- this Agreement as provided in this Section 8, the terminating party shall provide written notice of such termination to the other party and the provisions of this Agreement shall forthwith become void, except that the agreements contained or referred to in the Non-Disclosure Agreement and in Sections 3.29 (Brokers; Finders), 4.5 (Brokers; Finders), 5.7 (Public Announcements), 8 (Termination) and 9 (General Provisions) of this Agreement shall survive. Notwithstanding the foregoing, in the event of a termination of this Agreement by any party hereto, nothing herein shall limit the remedies at law or in equity of any party with respect to any breaches hereof by any other party. SECTION 9 GENERAL PROVISIONS A. AMENDMENT. This Agreement may be amended by the parties hereto at any --------- time prior to the Closing, provided that, no amendment shall be made which by law requires the further approval of the shareholders of MetroBeat without obtaining such further approval. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. B. EXTENSION; WAIVER. At any time prior to the Effective Time, each of ----------------- MetroBeat and PerfectMarket, by action taken by its Board of Directors, may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of the other, (ii) waive any inaccuracies in the representations and warranties made to it contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any of the agreements or conditions for the benefit of it contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. C. ARBITRATION. All disputes or controversies (whether of law or fact) ----------- of any nature whatsoever arising from or relating to this Agreement and the transactions contemplated hereby shall be decided by arbitration by the American Arbitration Association (the "Association") in accordance with the Commercial Arbitration Rules of the Association. The arbitrators shall be selected as follows: PerfectMarket and the Shareholders' Agent shall, within 30 days of the date of demand by either party for arbitration, each select one independent, qualified arbitrator and the two arbitrators so selected shall select the third arbitrator within 30 days after their appointment as party arbitrators. Each party reserves the right to object to any individual arbitrator who shall be employed by or affiliated with a competing organization. In the event objection is made, the Association shall resolve any dispute regarding the propriety of an individual arbitrator acting in that capacity. The parties shall each bear the expenses of the arbitrator chosen by it, and shall bear one-half the expenses of the independent arbitrator. Hearings in the proceeding shall commence within 120 days of the selection of the neutral arbitrator. Arbitration shall take place in Los Angeles County, California. At the request of vote, shall be able to decree any and all relief of an equitable and legal nature, including but not limited to such relief as a temporary restraining order, a temporary and/or a permanent injunction, and shall also be able to award damages, with or without an accounting and costs. The decree or award rendered by the arbitrators may be entered as a final and binding judgment in any court having jurisdiction thereof. Reasonable notice of the time and place of arbitration shall be given to all persons, other than the parties, as shall be required by law, in which case such persons or those authorized representatives shall have the right to attend and/or participate in all the arbitration hearings in such manner as the law shall require. The resolution of conflicts procedures set forth in this Section 9.3 are the parties' sole and exclusive methods for resolving disputes arising out of this Agreement. Except as expressly set forth above, the parties agree to waive all rights to commence any action in law or equity arising out of this Agreement.The arbitrators shall be entitled to award the costs and expenses of the arbitration proceeding (including the arbitrators' fees and attorneys' fees) to the prevailing party. D. NOTICES. All notices and other communications hereunder shall be in ------- writing and shall be deemed given if delivered personally or mailed by registered or certified mail (return receipt requested) or sent by telecopy, confirmation received, to the parties at the following addresses and telecopy numbers (or at such other address or number for a party as shall be specified by like notice): i. If to PerfectMarket or Sub, to: PerfectMarket, Inc. 4502 Dyer Street, Suite 201 La Cresenta, CA 91214 Attn.: Charles Conn Telecopy No.: (818) 542-3837 Telephone No.: (818) 542-3820 with a copy to: Wilson, Sonsini, Goodrich & Rosati 650 Page Mill Road Palo Alto, California 94304 Attn: Larry W. Sonsini, Esq. Telecopy No.: (415) 493-6811 Telephone No.: (415) 493-9300 -43- ii. if to MetroBeat or the Principal Shareholder, to: MetroBeat, Inc. 225 Lafayette Street New York, NY 10012 Attn: Mark Davies Telecopy No.: (212) 925-1399 Telephone No.: (212) 925-1426 with a copy to: Rosalind Lichter Law Offices of Rosalind Lichter 375 Greenwich Street New York, New York 10013 Telecopy No.: (212) 941-4076 Telephone No.: (212) 941-4075 E. BROKER'S OR FINDER'S FEES. MetroBeat agrees to indemnify ------------------------- PerfectMarket and Sub for any Broker's or Finder's Fees incurred by MetroBeat or any Shareholder in connection with the transactions contemplated by this Agreement, the Plan of Merger and the Certificate of Merger. PerfectMarket agrees to indemnify MetroBeat and the Principal Shareholder for any Broker's or Finder's Fees incurred by PerfectMarket or Sub in connection with the transactions contemplated by this Agreement, the Plan of Merger and the Certificate of Merger. F. INTERPRETATION. When a reference is made in this Agreement to -------------- Sections, Schedules or Exhibits, such references shall be to a Section of or Schedule or Exhibit to this Agreement unless otherwise indicated. The words "include," "includes" and "including" when used herein shall be deemed in each case to be followed by the words "without limitation." The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. G. COUNTERPARTS. This Agreement may be executed in one or more ------------ counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party. H. ENTIRE AGREEMENT. This Agreement (including the Exhibits and the ---------------- Schedules), the Non-Disclosure Agreement and the documents and instruments and other agreements among the parties delivered pursuant hereto constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and are not intended to confer upon any other person any rights or remedies hereunder except as otherwise expressly provided herein. -44- I. NO TRANSFER. This Agreement and the rights and obligations set forth ----------- herein may not be transferred or assigned by operation of law or otherwise without the consent of each party hereto, provided that Sub may assign all or any portion of its rights hereunder to any other newly-formed, wholly-owned subsidiary of PerfectMarket. This Agreement is binding upon and will inure to the benefit of the parties hereto and their respective successors and permitted assigns. J. SEVERABILITY. If any provision of this Agreement, or the ------------ application thereof, will for any reason and to any extent be invalid or unenforceable, the remainder of this Agreement and application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of the void or unenforceable provision. K. Other Remedies. Except as otherwise provided herein, any and -------------- all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby or by law or equity on such party; and the exercise of any one remedy will not preclude the exercise of any other. L. FURTHER ASSURANCES. Each party agrees to cooperate fully with ------------------ the other parties and to execute such further instruments, documents and agreements and to give such further written assurances as may be reasonably requested by any other party to evidence and reflect the transactions described herein and contemplated hereby and to carry into effect the intents and purposes of this Agreement. M. ABSENCE OF THIRD-PARTY BENEFICIARY RIGHTS. No provision of ----------------------------------------- this Agreement is intended, nor will be interpreted, to provide or create any third-party beneficiary rights or any other rights of any kind in any client, customer, affiliate, shareholder, employee, partner or any party hereto or any other person or entity, and all provisions hereof will be personal solely between the parties to this Agreement. N. MUTUAL DRAFTING. This Agreement is the joint product of --------------- PerfectMarket and MetroBeat, and each provision of this Agreement has been subject to the mutual consultation, negotiation and agreement of PerfectMarket and MetroBeat, and shall not be construed for or against any party hereto. O. GOVERNING LAW. This Agreement shall be governed in all ------------- respects, including validity, interpretation and effect, by the laws of the State of New York (without giving effect to its choice of law principles). P. EMPLOYEES. The Company agrees that the employees of MetroBeat, --------- for so long as they remain employees of PerfectMarket or any subsidiary of PerfectMarket subsequent to the Closing, shall be entitled to benefits (including stock options) comparable to the benefits received by other employees of PefectMarket or such subsidiaries who hold positions of comparable levels. -45- IN WITNESS WHEREOF, PerfectMarket, Sub and MetroBeat have caused this Agreement to be signed by their respective officers thereunto duly authorized, and the Principal Shareholder have signed this Agreement in their respective individual capacities, all as of the date first written above. PERFECTMARKET, INC. By:_____________________________________ Name: Title: MB ACQUISITION CORPORATION By:_____________________________________ Name: Title: METROBEAT, INC. By:_____________________________________ Name: Title: PRINCIPAL SHAREHOLDER ________________________________________ Mark Davies Joshua White -46- CERTIFICATE OF MERGER OF MB ACQUISITION CORPORATION A NEW YORK CORPORATION, INTO METROBEAT, INC. A NEW YORK CORPORATION UNDER SECTION 904 OF THE BUSINESS CORPORATION LAW ARTICLE I A. The names of the constituent corporations are MB Acquisition Corporation (the "Merged Corporation" or "Sub") and MetroBeat, Inc. ("MetroBeat") B. The surviving corporation shall be MetroBeat and following the Merger its name shall be MetroBeat, Inc. Metrobeat, as it exists from and after the effective time of the Merger shall be referred to as the "Surviving Corporation" C. As to the Merged Corporation, the number of shares outstanding which are entitled to vote on the merger is as follows: Common Stock 1,000 shares outstanding D. As to Metrobeat, the number of shares of outstanding which are entitled to vote on the merger is as follows: Common Stock 198 shares outstanding E. At the effective time of the Merger, the Articles of Incorporation of MetroBeat, Inc. prior to the effective time shall be the Articles of Incorporation of the Surviving Corporation. ARTICLE II A. The effective date of the merger shall be the date of filing of this certificate of merger. ARTICLE III A. The certificate of incorporation of Sub was filed by the Department of State of the State of New York on May 8, 1996. B. The certificate of incorporation of MetroBeat was filed by the Department of State of the State of New York on May 2, 1995. ARTICLE IV A. The merger was approved by Action of Unanimous Written Consent of the Board of Directors of Sub on May 21, 1996 and by Action by Written Consent of Sole Stockholder of Sub on May 21, 1996. B. The merger was approved by Action of Unanimous Written Consent of the Board of Directors of MetroBeat on May 20, 1996 and by Written Consent of the Shareholders of MetroBeat on May 20, 1996. C. This Certificate of Merger may be signed in counterparts. -2- We affirm the statements contained herein as true under penalties of perjury. Executed on June 21, 1996 MB ACQUISITION CORPORATION a New York corporation By: /s/ Charles Conn --------------------------------- Name: Charles Conn Title: President By: /s/ Jeffrey Brewer --------------------------------- Name: Jeffrey Brewer Title: Secretary METROBEAT, INC. a New York corporation By: /s/ Mark Davies -------------------------------- Name: Mark Davies Title: President By: /s/ Joshua White -------------------------------- Name: Joshua White Title: Secretary CORRECTED AND RESTATED CERTIFICATE OF INCORPORATION OF PERFECTMARKET, INC. A DELAWARE CORPORATION PerfectMarket, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of Delaware, hereby corrects the previously filed Restated Certificate of Incorporation as follows: (i) the phrase "thirty million, four hundred thirty nine thousand, seven hundred eighteen (30,439,718)" in the third and fourth lines of the first paragraph of Article IV shall be deleted and the phrase "thirty million, four hundred thirty one thousand, seven hundred eighteen (30,431,718)" shall be inserted in lieu thereof; (ii) the phrase "five million, four hundred thirty nine thousand seven hundred eighteen (5,439,718)" in the fifth and sixth line of the first paragraph of Article IV shall be deleted and the phrase "five million, four hundred thirty one thousand, seven hundred eighteen (5,431,718)" shall be inserted in lieu thereof; and (iii) the number "3,198,540" in the third line of the second paragraph of Article IV shall be deleted and the phrase "3,190,540" shall be inserted in lieu thereof. The Corrected and Restated Certificate of Incorporation shall read as follows: EXHIBIT C --------- RESTATED CERTIFICATE OF INCORPORATION OF PERFECTMARKET, INC. A DELAWARE CORPORATION PerfectMarket, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of Delaware (the "Corporation"), does hereby certify as follows: FIRST: The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on September 20, 1995, amended by the Certificate of Amendment of Certificate of Incorporation filed with the Secretary of State of the State of Delaware on November 27, 1995. SECOND: This Restated Certificate of Incorporation has been duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware by the Board of Directors of the Corporation. THIRD: This Restated Certificate of Incorporation was approved by written consent of the stockholders pursuant to Section 228 of the General Corporation Law of the State of Delaware. FOURTH: The Restated Certificate of Incorporation, of this Corporation is amended and restated in its entirety to read as follows: I. The name of the Corporation is PerfectMarket, Inc.. II. The address of the Corporation's registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. III. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. IV. The Corporation is authorized to issue two classes of stock to be designated, respectively, "Common Stock" and "Preferred Stock" all of which shall have a par value of $0.01 per share. The total number of shares which the Corporation is authorized to issue is thirty million, four hundred thirty one thousand, seven hundred eighteen (30,431,718) shares. Twenty five million (25,000,000) shares shall be Common Stock and five million, four hundred thirty one thousand seven hundred eighteen (5,431,718) shares shall be Preferred Stock. 1,791,178 shares of Preferred Stock shall be designated "Series A Preferred Stock" (hereinafter "Series A Preferred"), [*] shares of Preferred Stock shall be designated "Series B Preferred Stock" (hereinafter "Series B Preferred"), and 3,190,540 shares of Preferred Stock shall be designated "Series C Preferred Stock" (hereinafter "Series C Preferred" and together with the Series A Preferred and Series B Preferred, the "Preferred Stock"). The rights, preferences, restrictions and other matters relating to the Preferred Stock are as follows: 1. LIQUIDATION PREFERENCE. (a) At any time, in the event of any of ---------------------- the following occurrences (a "Transaction"): (i) Any dissolution of the Corporation, followed by the liquidation and winding up of the Corporation; (ii) Any liquidation or winding up of the Corporation as a result of a bankruptcy, reorganization or similar proceeding; (iii) Any foreclosure by creditors of the Corporation on all or substantially all of the assets or equity interests in the Corporation; or (iv) An acquisition, merger or consolidation of the Corporation in which more than 50% of the outstanding capital stock of the Company is being acquired for cash and the price per share of Common Stock (on a fully diluted basis) is below the Conversion Price (as defined in Section 2 below) then in effect; the Corporation shall take appropriate steps in connection with such Transaction to ensure that the assets of the Corporation available for distribution shall be distributed at the closing of the Transaction in the order and priority as follows: - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. (i) the holders of the Preferred Stock shall receive ratably (based on their respective preference amounts) an amount per share equal to the price for which such share of Preferred Stock was originally issued, as adjusted for any stock dividends, combinations or splits with respect to such shares, plus any declared and unpaid dividends on the Preferred Stock; and (ii) all remaining assets available for distribution shall be distributed pro rata among the holders of the Common Stock based on the number of shares held by each. If upon the occurrence of a Transaction, the assets and funds thus distributed among the holders of Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amount, then the entire assets and funds of the Corporation legally available for distribution shall be distributed ratably among the holders of Preferred Stock in proportion to the liquidation preference amount each holder is otherwise entitled. (b) With respect to any Transaction, if the consideration received by the Corporation is other than cash, its value will be deemed its fair market value. Any securities shall be valued as follows: (i) Securities not subject to investment letter or other similar restrictions on free marketability: (A) If traded on a securities exchange or through Nasdaq, the value shall be deemed to be the average of the closing prices of the securities on such exchange over the thirty-day period ending three (3) days prior to the closing; (B) If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the thirty-day period ending three (3) days prior to the closing; and (C) If there is no active public market, the value shall be the fair market value thereof, as mutually determined by the Corporation and the holders of at least a majority of the voting power of all then outstanding shares of Preferred Stock. (ii) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder's status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (i)(A), (B) or (C) to reflect the approximate fair market value thereof, as mutually determined by the Corporation and the holders of at least a majority of the voting power of all then outstanding shares of such Preferred Stock. (c) In the event the requirements of this Section 1 are not complied with, this Corporation shall forthwith either: 3 (i) cause such closing to be postponed until such time as the requirements of this Section 1 have been complied with; or (ii) cancel such Transaction, in which event the rights, preferences and privileges of the holders of the Preferred Stock shall revert to and be the same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to in Section 1(d) hereof. (d) The Corporation shall give each holder of record of Preferred Stock written notice of such impending Transaction not later than twenty (20) days prior to the stockholder's meeting called to approve such Transaction, or twenty (20) days prior to the closing of such Transaction, whichever is earlier, and shall also notify such holders in writing of the final approval of such Transaction. The first of such notices shall describe the material terms and conditions of the impending Transaction and the provisions of this Section 1, and the Corporation shall thereafter give such holders prompt notice of any material changes. The Transaction shall in no event take place sooner than twenty (20) days after the Corporation has given the first notice provided for herein or sooner than ten (10) days after the Corporation has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders of Preferred Stock that are entitled to such notice rights or similar notice rights and that represent at least a majority of the voting power of all then outstanding shares of such Preferred Stock. 2. CONVERSION. The holders of the Preferred Stock have conversion ---------- rights as follows (the "Conversion Rights"): (a) Right to Convert. Each share of Preferred Stock shall be ---------------- convertible, at the option of the holder thereof, at any time after the date of issuance of such share, at the office of the Corporation or any transfer agent for the Preferred Stock, into such number of fully paid and nonassessable shares of Common Stock as is determined: in the case of the Series A Preferred, by dividing $0.90446 by the Series A Conversion Price, determined as hereinafter provided, in effect at the time of the conversion; in the case of the Series B Preferred, by dividing $3.4665 by the Series B Conversion Price, determined as hereinafter provided, in effect at the time of the conversion; and in the case of Series C Preferred, by dividing $3.4665 by the Series C Conversion Price, determined as hereinafter provided, in effect at the time of the conversion. The price at which shares of Common Stock shall be deliverable upon conversion of the Series A Preferred (the "Series A Conversion Price") shall initially be $0.90446 per share of Common Stock. The price at which shares of Common Stock shall be deliverable upon conversion of the Series B Preferred (the "Series B Conversion Price") shall initially be $3.4665 per share of Common Stock. The price at which shares of Common Stock shall be deliverable upon conversion of the Series C Preferred (the "Series C Conversion Price") shall initially be $3.4665 per share of Common Stock. The term "Conversion Price," as used herein shall refer to the respective Conversion Price of each series of Preferred Stock. Each such Conversion Price shall be subject to adjustment as hereinafter provided. Upon conversion, all declared and unpaid dividends on the Preferred Stock shall be paid, to the extent funds are legally available therefor, either in cash or in shares of Common Stock of the Corporation, at the election of the Corporation, wherein the shares of Common Stock 4 shall be valued at the fair market value at the time of such conversion, as determined in good faith by the Board. (b) Automatic Conversion. Each share of Preferred Stock shall -------------------- automatically be converted into shares of Common Stock at the then effective Conversion Price upon: (i) the closing of a firm underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of shares of the Corporation's Common Stock with an aggregate net proceeds (after deduction of underwriter's discounts and commissions and offering expenses) to the Company of not less than $20,000,000, the price per share to the public of which was not less than $7.70 per share (a "Qualified IPO"); or (ii) the written election of holders of not less than a majority of the then outstanding Preferred Stock and a majority of the then outstanding Series C Preferred. In the event of the automatic conversion of the Preferred Stock upon a public offering as aforesaid, the person(s) entitled to receive the Common Stock issuable upon such conversion of Preferred Stock shall not be deemed to have converted such Preferred Stock until immediately prior to the closing of such sale of securities. (c) Mechanics of Conversion. No fractional shares of Common Stock ----------------------- shall be issued upon conversion of Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled (after aggregating all shares of Preferred Stock held by such holder such that the maximum number of whole shares of Common Stock is issued to such holder upon conversion), the Corporation shall pay cash equal to such fraction multiplied by the then fair market value of a share of Common Stock. Before any holder of Preferred Stock shall be entitled to convert the same into full shares of Common Stock and to receive certificates therefor, such holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for the Preferred Stock, and shall give written notice to the Corporation at such office that such holder elects to convert the same; provided, however, that in the event of an automatic conversion pursuant to paragraph (b) hereof, the outstanding shares of Preferred Stock shall be converted automatically without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Corporation or its transfer agent, and provided further that the Corporation shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such automatic conversion unless the certificates evidencing such shares of Preferred Stock are either delivered to the Corporation or its transfer agent as provided above, or the holder notifies the Corporation or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection with such certificates. The Corporation shall, as soon as practicable after such delivery, or after such agreement and indemnification, issue and deliver at such office to such holder of Preferred Stock, a certificate or certificates for the number of shares of Common Stock to which the holder shall be entitled as aforesaid and a check payable to the holder in the amount of any cash amounts payable as the result of a conversion into fractional shares of Common Stock. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the 5 shares of Preferred Stock to be converted, or, in the case of automatic conversion, on the date of closing of the offering or the date of written election to convert, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date. (d) Adjustments of the Conversion Price. ----------------------------------- (i) If the number of shares of Common Stock outstanding at any time after the date upon which any shares of Series C Preferred were first issued (the "Original Issue Date") is increased by split or subdivision of the outstanding shares of Common Stock or the receipt by holders of Common Stock of a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as "Common Stock Equivalents") without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend distribution, split or subdivision if no record date is fixed), the number of shares of Common Stock issuable on conversion of each share of Preferred Stock shall be increased in proportion to such increase in outstanding shares. (ii) If the number of shares of Common Stock outstanding at any time after the Original Issue Date is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the number of shares of Common Stock issuable on conversion of each share of Preferred Stock shall be decreased in proportion to such decrease in outstanding shares. (iii) If at any time or from time to time the Corporation distributes to all holders of the Corporation evidences of indebtedness or assets of the Corporation (other than cash dividends), the holders of the Preferred Stock shall thereafter be entitled to receive upon conversion of the Preferred Stock the amount of such evidences of indebtedness or assets of the Corporation as such holders of Preferred Stock would have been entitled to receive had they converted their shares of Preferred Stock into shares of Common Stock immediately prior to such distribution. (e) Adjustments for Certain Corporate Transactions. If the Common Stock ---------------------------------------------- issuable upon conversion of the Preferred Stock shall be changed into the same or a different number of shares of any other class or classes of stock of the Corporation or another corporation, whether by merger, consolidation, sale of all or substantially all of the assets of the Corporation, liquidation, capital reorganization, reclassification or otherwise (other than a dividend, subdivision, combination or consolidation of shares provided for above) (a "Reorganization"), the Conversion Price then in effect shall, concurrently with the effectiveness of such Reorganization, be proportionately adjusted such that the Preferred Stock shall be convertible into, in lieu of the number of shares of Common Stock which the holders would otherwise have been entitled to receive, a number of shares of such other class or classes of stock of the Corporation or other 6 corporation, as the case may be, equivalent to the number of shares of Common Stock that would have been subject to receipt by the holders upon conversion of such shares of Preferred Stock immediately before such Reorganization. Furthermore, in the event of an acquisition, merger or consolidation of the Corporation whereby the Corporation's stockholders of record immediately prior to such acquisition, merger or consolidation hold less than 50% of the voting power of the surviving entity immediately after such acquisition, merger or consolidation and (i) such acquisition, merger or consolidation shall be effected in such a way that the holders of the Corporation's Common Stock shall be entitled to receive stock, securities or assets other than cash and (ii) the surviving entity is not subject to the periodic reporting requirements of Sections 12(g) or 15(d) of the Securities Act of 1934, as amended, immediately after such acquisition, merger or consolidation, appropriate provisions shall be made with respect to the rights and interests of holders of Preferred Stock to the end that the rights, preferences and privileges of the Preferred Stock as set forth in this Restated Certificate, as applicable (including without limitation provisions for adjustments of the Conversion Price), shall thereafter be incorporated into any shares of stock or securities thereafter deliverable upon the exercise of such conversion rights. (f) Adjustment of Series C Conversion Price. Upon conversion of any --------------------------------------- shares of Series C Preferred to Common Stock in accordance with this Section 2, the Series C Conversion price shall be adjusted to the extent necessary to an amount equal to the following: Series C Conversion Price = $45 million -------------------------------------- Measurement Shares plus Option Shares For purposes of this Section 2(f), (i) the term "Measurement Shares" shall equal 10,690,196 shares of Common Stock (as adjusted for stock splits, stock dividends or similar recapitalizations after the Original Issue Date) and (ii) the term "Option Shares" shall equal the 2,291,181 shares of Common Stock issuable upon exercise of stock options ("Original Issue Date Options") outstanding as of the Original Issue Date less such number of Option Shares that were subject to Original Issue Date Options that were canceled as a result of the termination of employment or consulting services on or prior to the date of conversion of the Series C Preferred (as adjusted for stock splits, stock dividends or similar recapitalizations after the Original Issue Date). (g) No Fractional Shares as to Adjustments. No fractional shares shall -------------------------------------- be issued upon the conversion of any share or shares of the Preferred Stock, and the number of shares of Common Stock to be issued shall be rounded down to the nearest whole share. Whether fractional shares are issuable upon such conversion shall be determined on the basis of the total number of shares of Preferred Stock the holder is at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion. (h) No Impairment. The Corporation will not, by amendment of its ------------- Restated Certificate of Incorporation or through any Reorganization, issue or sell securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in 7 the carrying out of all the provisions of this Section 2 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Preferred Stock against impairment. (i) Certificate as to Adjustments. Upon the occurrence of each ----------------------------- adjustment of the Conversion Price pursuant to this Section 2, the Corporation at its expense shall promptly compute such adjustment in accordance with the terms hereof and furnish to each holder of Preferred Stock a certificate setting forth such adjustment and showing in detail the facts upon which such adjustment is based. The Corporation shall, upon the written request at any time of any holder of Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Conversion Price at the time in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of such holder's shares of Preferred Stock. 3. MANDATORY REDEMPTION. -------------------- (a) The Corporation shall redeem, from any source of funds legally available therefor, all then outstanding shares of Series C Preferred on the ten-year anniversary date (the "Redemption Date") of the Original Issue Date. The Corporation shall effect such redemption on the Redemption Date by paying in exchange for the outstanding shares of Series C Preferred Stock cash in the amount equal to the liquidation value of such shares pursuant to Section 1 above (the "Redemption Price"). (b) At least fifteen (15) but no more than thirty (30) days prior to the Redemption Date, written notice shall be mailed, first class postage prepaid, to each holder of record (at the close of business on the business day next preceding the day on which notice is given) of the Series C Preferred, at the address last shown on the records of the Corporation for such holder, notifying such holder of the redemption to be effected, specifying the Redemption Date, the Redemption Price, the place at which payment may be obtained and calling upon such holder to surrender to the Corporation, in the manner and at the place designated, his or her certificate or certificates representing the Series C Preferred (the "Redemption Notice"). Except as provided in Section 3(c) below, on or after the Redemption Date, each holder of Series C Preferred shall surrender to the Corporation the certificate or certificates representing such shares, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price of such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be canceled. (c) From and after the Redemption Date, unless there shall have been a default in the payment of the Redemption Price, all rights of the holders of shares of Series C Preferred (except the right to receive the Redemption Price without interest upon surrender of their certificate or certificates) shall cease with respect to such shares, and such shares shall not thereafter be transferred on the books of the Corporation or be deemed to be outstanding for any purpose whatsoever. If the funds of the Corporation legally available for redemption of shares of Series C Preferred on the 8 Redemption Date are insufficient to redeem the total number of shares of Series C Preferred, those funds which are legally available will be used to redeem the maximum possible number of such shares ratably among the holders of Series C Preferred based on their holdings of Series C Preferred. The shares of Series C Preferred not redeemed shall remain outstanding and entitled to all the rights and preferences provided herein. At any time thereafter when additional funds of the Corporation are legally available for the redemption of shares of Series C Preferred such funds will immediately be used to redeem the balance of the shares to the extent of such additional funds until all shares of Series C Preferred are redeemed. (d) At least ten days prior to the Redemption Date, the Corporation shall deposit the Redemption Price of all shares of Series C Preferred with a bank or trust corporation having aggregate capital and surplus in excess of $100,000,000 as a trust fund for the benefit of the respective holders of the Series C Preferred, with irrevocable instructions and authority to the bank or trust corporation to pay the Redemption Price for such shares to their respective holders on or after the Redemption Date upon receipt of notification from the Corporation that such holder has surrendered his or her share certificate to the Corporation pursuant to Section 3(b) above. As of the Redemption Date, the deposit shall constitute full payment of the shares to their holders, and from and after the Redemption Date the shares of Series C Preferred shall be redeemed and shall be deemed to be no longer outstanding, and the holders thereof shall cease to be stockholders with respect to such shares and shall have no rights with respect thereto except the rights to receive from the bank or trust corporation payment of the Redemption Price of the shares, without interest, upon surrender of their certificates therefor. Such instructions shall also provide that any moneys deposited by the Corporation pursuant to this Section 3(d) for the redemption of shares thereafter converted into shares of the Corporation's Common Stock pursuant to Section 2 hereof prior to the Redemption Date shall be returned to the Corporation forthwith upon such conversion. The balance of any moneys deposited by the Corporation pursuant to this Section 3(d) remaining unclaimed at the expiration of two years following the Redemption Date shall thereafter be returned to the Corporation upon its request expressed in a resolution of its Board of Directors. (e) Notwithstanding anything to the contrary in this Section 3, in the event the Corporation is precluded by applicable law from redeeming any of the Series C Preferred hereunder, the Corporation shall redeem such Series C Preferred at the earliest date permitted under applicable law. (f) The provisions of this Section 3 shall terminate upon the closing of a Qualified IPO. 4. VOTING RIGHTS. ------------- (a) General. Except as otherwise provided herein or required by law, ------- the holder of each share of Common Stock issued and outstanding shall have one vote and the holder of each share of Preferred Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which such share of Preferred Stock could be converted at the record date for 9 determination of the stockholders entitled to vote on such matters, or, if no such record date is established, at the date such vote is taken or any written consent of stockholders is solicited, such votes to be counted together with all other shares of stock of the Corporation having a general voting power and not separately as a class. Holders of Common Stock and Preferred Stock shall be entitled to notice of any stockholders' meeting in accordance with the Bylaws of the Corporation. Fractional votes by the holders of Preferred Stock shall not, however, be permitted and any fractional voting rights shall (after aggregating all shares into which shares of Preferred Stock held by each holder could be converted) be rounded to the nearest whole number. (b) The holders of Series C Preferred voting together as a separate class shall have the right to elect one (1) member of the Board of Directors until the earlier of (i) a Qualified IPO or (ii) at such time as the outstanding Series C Preferred (including shares of Common Stock issuable upon conversion of the Series C Preferred) shall be less than five percent (5%) of the then outstanding Common Stock of the Company (including shares of Common Stock issuable upon conversion, exchange or exercise of securities convertible into or exercisable for or exchangeable for Common Stock). In the event that the Board of Directors is increased after the Original Issue Date to a number of members greater than ten (10), then for purposes of the preceding sentence, the holders of Series C Preferred voting together as a separate class shall have the right (i) to elect two (2) members of the Board of Directors so long as the total number shall be between 11 and 13 and (iii) to elect a number of directors equivalent to the number of directors that could be elected by the holders of Series C Preferred by cumulative voting in the event the total number of directors exceeds 13. (c) Protective Provisions. So long as any shares of Series C Preferred --------------------- remain outstanding, the Corporation shall not, without the vote or written consent of not less than a majority of such outstanding shares of Series C Preferred voting together as a single class: (i) Increase or decrease the total number of authorized shares of Series C Preferred; (ii) Alter or change by amendment to this Restated Certificate of Incorporation or otherwise the terms and provisions of the Series C Preferred or any other terms so as to affect adversely the rights, preferences or privileges of the Series C Preferred; or (iii) Create or issue any new shares or any other securities convertible into equity securities of the Corporation having a preference senior to the Series C Preferred with respect to voting, dividends, redemption or upon liquidation. 5. STATUS OF CONVERTED STOCK. In case any shares of Preferred Stock shall ------------------------- be converted pursuant to Section 2 hereof, the shares so converted shall be canceled and shall not be issuable by the Corporation. From time to time, this Restated Certificate of Incorporation shall be appropriately revised to reflect the corresponding reduction in the Corporation's authorized capital stock. 10 V. The Board is expressly authorized to make, alter or repeal Bylaws of the Corporation, but the stockholders may make additional Bylaws and may alter or repeal any Bylaw whether adopted by them or otherwise. VI. Elections of directors need not be by written ballot except and to the extent provided in the Bylaws of the Corporation. VII. (a) To the fullest extent permitted by the Delaware General Corporation Law as the same exists or as may hereafter be amended, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. (b) The Corporation shall indemnify to the fullest extent permitted by law any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he, his testator or intestate is or was a director, officer or employee of the Corporation or any predecessor of the Corporation or serves or served at any other enterprise as a director, officer or employee at the request of the Corporation or any predecessor to the Corporation. (c) Neither any amendment nor repeal of this Article VII, nor the adoption of any provision of the Corporation's Restated Certificate of Incorporation inconsistent with this Article VII, shall eliminate or reduce the effect of this Article VII in respect of any matter occurring, or any action or proceeding accruing or arising or that, but for this Article VII, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision. FIFTH: That thereafter, pursuant to a resolution of its Board of Directors, the foregoing resolutions were submitted to the stockholders of the Corporation for their approval by written consent in accordance with Section 228 of the General Corporation Law of the State of Delaware, by which written consent the necessary number of shares as required by statute were voted in favor of the amendment. SIXTH: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. SEVENTH: That written notice of said amendment was duly given to the stockholders of this corporation who did not consent in writing to the foregoing resolutions. 11 IN WITNESS WHEREOF, PerfectMarket, Inc. has caused this Restated Certificate of Incorporation to be signed by its President and Chief Executive Officer and attested to by its Secretary this ______ day of May, 1996. _____________________________________ Charles Conn President and Chief Executive Officer ATTEST: Jeffrey Brewer Secretary 13 METROBEAT, INC. 225 Lafayette Street New York, New York 10012 June 7, 1996 Assistant Commissioner (International) Director, Office of Compliance OP:I:C:E:666 950 L'Enfant Plaza South, S.W. COMSAT Building Washington, D.C. 20024 Re: Notice Required Under Treasury Regulation Section 1.897-2(h)(2) --------------------------------------------------------------- Gentlemen: At the request of PerfectMarket, Inc. ("PerfectMarket"), in connection with their acquisition of MetroBeat, Inc. ("MetroBeat"), we provided the attached statement to PerfectMarket on June 7, 1996. (i) This notice is provided pursuant to the requirements of Treasury Regulation Section 1.897-2(h)(2); (ii) The following information relates to the corporation providing the notice: Name MetroBeat, Inc. Address 225 Lafayette Street New York, New York 10012 Taxpayer Identification Number (iii) The attached statement was not requested by a foreign interest holder. It was voluntarily provided by MetroBeat in response to a request from PerfectMarket in accordance with Treasury Regulation Section 1.1445-2(c)(3)(i). The following information relates to PerfectMarket which requested the attached statement: Name PerfectMarket, Inc. Address 4502 Dyer Street, Suite 201 La Cresenta, CA 91214 Taxpayer Identification Number 95-4546874 (iv) The interest in question (capital stock and rights to acquire capital stock of MetroBeat) is not a U.S. real property interest. Under penalties of perjury, the undersigned declares that the above notice (including the attachment hereto) is correct to my knowledge and belief. Sincerely, Mark Davies President Enclosure EMPLOYMENT AND NONCOMPETITION AGREEMENT Agreement made on June 21, 1996, between PerfectMarket, Inc., a Delaware corporation (the "Company"), and Mark Davies ("Executive") and for purposes of Sections 1(d)(i) and 1(e) only, Joshua White (the "Shareholder"). RECITALS -------- A. The Company, MetroBeat, Inc., a New York corporation ("MetroBeat"), MB Acquisition Corporation, a New York corporation and wholly-owned subsidiary of the Company ("Sub"), and the Executive have executed and delivered an Agreement and Plan of Reorganization dated May 31, 1996 (the "Reorganization Agreement"), providing for the acquisition of MetroBeat by the Company which became effective on the date hereof pursuant to a merger of Sub with and into MetroBeat. B. The Company and Executive desire to enter into certain agreements providing for Executive's employment with the Company on the terms hereinafter set forth. NOW THEREFORE, in consideration of the premises and mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Employment. The Company agrees to employ Executive and Executive ---------- accepts such employment for the period beginning as of the date hereof and ending upon the earlier of (i) termination pursuant to paragraph 1(d) or 1(e) hereof or (ii) the date two (2) years from the date of this Agreement (the "Employment Period"). (a) Services. During the Employment Period, Executive will render -------- such services of an executive and administrative character to the Company and its affiliates as the Chief Executive Officer, President or Chief Operating Officer (or any officer of the Company who reports directly to any such person)(collectively, the "Senior Officers") may from time to time direct. Executive will devote his best efforts and substantially all of his business time and attention (except for vacation periods and reasonable periods of illness or other incapacity) to the business of the Company and its affiliates and will faithfully and diligently carry out such duties and have such responsibilities as are customary among persons employed in substantially similar capacities for similar companies. Executive will report to the Chief Executive Officer, or such other officer designated by the Chief Executive Officer, and shall faithfully and diligently comply with all of its reasonable and lawful directives. For purposes of this Agreement, the term "affiliates" means any corporation, limited partnership, limited liability company or other entity engaged in the same business as the Company or a related business, which is controlled by or under common control with the Company. (b) Salary. During the Employment Period and thereafter as provided ------ in paragraph (d) below, the Company will pay Executive a base salary at the rate of not less than $[*] per annum (or such higher amount as the Board may ------------- establish from time to time). Executive's salary will be consistent with other officers of the Company with a similar level of responsibility and performance. Executive's base salary for any partial year will be prorated based upon the number of days elapsed in such year and will be payable in accordance with the Company's customary payroll practices. (c) Benefits. In addition to the compensation described above in -------- this paragraph 1, Executive will be entitled during the Employment Period to the following benefits: (i) such health insurance and other benefits as are available from time to time to the executive officers employees generally; (ii) vacation, sick leave and personal time in accordance with the Company's vacation and absence policies as in effect from time to time; (iii) reimbursement, upon submission of documentation in accordance with the Company's regular expense policies, for reasonable business expenses incurred on the Company's behalf by Executive; and (iv) participation in any savings plan, 401(k) plan, profit sharing plan or pension plan as the Company may establish in the future for the Company's salaried employees generally. (d) Termination. Executive's employment with the Company will ----------- continue until terminated by Executive's death, disability which cannot be reasonably accommodated, or termination of Executive's employment pursuant to any of the following provisions: (i) Termination by the Company without Cause; ----------------------------------------- Constructive Termination. The Company may at any time ------------------------ terminate Executive's employment without Cause (as defined below) by giving Executive notice of the effective date of termination (which effective date may be the date of such notice). In the event of such termination or a Constructive Termination (as defined below), the Company shall be obligated to pay Executive continuing payments of base salary in accordance with paragraph (b) above at the rate in effect at the effective date of such termination for a period of twelve (12) months following the effective date of such termination (the "Salary Severance") and Executive and the other former shareholders of MetroBeat shall receive any remaining payments due to them under Section - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 2.2(e) of the Reorganization Agreement (without regard to Section 2.2(h) thereto) (the "Merger Payments"); provided that, in the event that Executive breaches any of the representations, warranties and covenants set forth in paragraphs 2 and 4 below, (x) with respect to the Salary Severance, the Company will have no further obligation to make payments of the base salary following knowledge of such breach and may pursue all other available remedies, and the Executive shall be obligated to repay the Company the amount of Salary Severance within ten (10) days following delivery by the Company to Executive of written confirmation of such breach, and (y) (if the termination occurs within 24 months after the date hereof), with respect to the Merger Payments, Section 2.2(h) of the Reorganization Agreement shall apply and the Shareholder shall be obligated to return to the Company any shares required to be returned as set forth in said Section 2.2(h) of the Reorganization Agreement. As used in this Agreement, "Constructive Termination" shall mean the termination of Executive's employment by Executive if, during the Employment Period, one or more of the following events have occurred: (A) without Executive's express written consent, the assignment to Executive of any duties or the reduction of Executive's duties, either of which results in a significant diminution in Executive's position or responsibilities with the Company in effect immediately prior to such assignment, or the removal of Executive from such position and responsibilities; or (B) any material breach by the Company of any material provision of this Agreement. (ii) Termination by the Company for Cause. A majority of ------------------------------------ the Board shall have the right to terminate Executive's employment at any time for any of the following reasons (each of which is referred to herein as "Cause") by giving Executive written notice of the Cause and Executive shall have fifteen (15) days from the receipt of such notice to cure such Cause, to the extent such cause is curable. If the cause is not cured within fifteen days or the Cause is not curable, the Company shall give Executive written notice of the effective date of termination (which effective date may be the date of such notice): (A) the willful breach of any provision of paragraphs 1(a), 2 or 4 (including but not limited to a refusal to follow reasonable and lawful directives of the Board of Directors or the Senior Officers); -3- (B) any act of fraud or dishonesty with respect to any aspect of the Company's or any affiliate's business; (C) continued use of illegal drugs; (D) as a result of Executive's gross negligence or willful misconduct, Executive shall violate, or cause the Company to violate, any applicable federal or state securities or banking law or regulation and as a result of such violation, shall become, or shall cause the company or any affiliate to become the subject of any legal action or administrative proceeding seeking an injunction from further violations or a suspension of any right or privilege; (E) as a result of Executive's gross negligence or willful misconduct, Executive shall commit any act that causes, or shall knowingly fail to take reasonable and appropriate action to prevent, any material injury to the financial condition or business reputation of the Company or any affiliate; or (F) indictment for a felony. If a majority of the Board terminates Executive's employment for any of the reasons set forth above in this paragraph 1(d)(ii), the Company shall have no further obligations hereunder from and after the effective date of termination and shall have all other rights and remedies available under this or any other agreement and at law or in equity. (e) Voluntary Termination by Executive. In the event that ---------------------------------- Executive's employment with the Company is terminated by Executive (except as set forth in paragraph 1(d)(i)), the Company shall have no further obligations hereunder from and after the date of such termination. Upon termination of Executive's employment under this Section 1(e) within the Employment Period, Executive and the Shareholder shall relinquish their right to receive certain shares of the Company's capital stock or return shares to the Company, as the case may be, pursuant to Section 2.2(h) of the Reorganization Agreement. 2. Nondisclosure. During the Employment Period and thereafter, Executive ------------- shall not, without the prior written consent of the Board of Directors, disclose or use for any purpose (except in the course of his employment under this Agreement and in furtherance of the business of the Company or any of its affiliates or subsidiaries) any confidential or proprietary data of the Company. As an express condition of Executive's employment with the Company, Executive agrees to execute confidentiality agreements as requested by the Company, including but not limited to the Company's form of Employee Inventions and Confidentiality Agreement which is attached hereto as Exhibit A and incorporated --------- herein by reference. -4- 3. Other Businesses. During the Employment Period, Executive agrees that ---------------- he will not, directly or indirectly except with the express written consent of the Board, become engaged in, render services for, or permit his name to be used in connection with, or directly or indirectly counsel or consult with, any business other than the business of the Company and its affiliates. 4. Noncompetition. -------------- (a) Executive agrees that, with respect to the Current Restricted Business (as defined on Exhibit B hereto): --------- (i) During the term he performs services for the Company and for a period of [*] after the termination thereof (for any reason), he will not interfere with the relationship of the Company and any employee, agent or representative. (ii) During the term he performs services for the Company and for a period of [*] after the termination thereof (for any reason), he will not directly or indirectly interfere with the relationships of the Company with customers, dealers, distributors, vendors or sources of supply. (iii) Executive further agrees that during the term he performs services for the Company and for a period of [*] after the termination thereof (for any reason) he will not directly or indirectly own, manage, operate, control, be employed by, participate in, or be connected in any manner with the ownership, management, operation or control of, any Current Restricted Business worldwide. (b) Executive agrees that, with respect to an Alternative Restricted Business (as defined on Exhibit B hereto): --------- (i) During the term he performs services for the Company and for a period of [*] after the termination thereof (for any reason), he will not interfere with the relationship of the Company and any employee, agent or representative. (ii) During the term he performs services for the Company and for a period of [*] after the termination thereof (for any reason), he will not directly or indirectly interfere with the relationships of the Company with customers, dealers, distributors, vendors or sources of supply. (iii) Executive further agrees that during the term he performs services for the Company and for a period of [*] after the termination thereof (for any reason) he will not directly or indirectly own, manage, - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -5- operate, control, be employed by, participate in, or be connected in any manner with the ownership, management, operation or control of, any Alternative Restricted Business worldwide. (c) After discussing the matter with Executive, the Company shall have the right, subject to applicable law, to inform any other third party that the Company reasonably believes to be, or to be contemplating, participating with Executive or receiving from Executive assistance in violation of this Agreement, of the terms of this Agreement and of the rights of the Company hereunder, and that participation by any such third party with Executive in activities in violation of this Section 4 may give rise to claims by the Company against such third party. 5. Right of First Offer. -------------------- (a) If, during the two (2) year period from the date thereof, the Company shall desire to effect a sale, disposition or other transfer (a "Transfer") of the New York operations of the Company consisting of the business of MetroBeat as currently being, or as may in the future be, conducted (the "New York Operations"), then the Company shall first submit a notice (the "Offering Notice") to the Executive specifying all of the material terms of the proposed Transfer, including the price being requested and the name and address of the proposed transferee (if any). (b) Within 15 days after receipt of an Offering Notice, Executive shall give notice to the Company stating whether Executive elects to acquire all of the New York Operations on the terms set forth in the Offering Notice. If Executive does not elect to acquire all of the New York Operations on the terms set forth in the Offering Notice, the Company may, for a period of 180 days from the end of such 15-day period, effect a Transfer of the New York Operations to a third party on terms no more favorable than the terms set forth in the Offering Notice. If the Company fails to effect such a Transfer to a third party within such 180-day period, the Company shall thereafter be required to submit another Offering Notice in order to effect any Transfer of the New York Operations under this Section 5. (c) The right of first offer set forth in this Section 5 shall be nonassignable by Executive. (d) Notwithstanding anything to the contrary in this Section 5, Perfect Market shall not be under any obligation to effect a Transfer. 6. Termination of Agreement. This Agreement shall terminate on the ------------------------ second anniversary of the date hereof. 7. General Provisions. ------------------ (a) Notices. Any notice provided for in this Agreement must be in ------- writing and must be either personally delivered, or mailed by first class mail (postage prepaid and return -6- receipt requested) or sent by reputable overnight courier service, to the recipient at the address below indicated: To the Company: PerfectMarket, Inc. 4502 Dyer Street, Suite 201 LaCresenta, CA 91214 Attn: Chief Executive Officer To Executive: At Executive's last known address as listed with the Company or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement will be deemed to have been given when so delivered or sent or if mailed, five days after so mailed. (b) Severability. Whenever possible, each provision of this ------------ Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision in any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein except that any court having jurisdiction shall have the power to reduce the duration, area or scope of such invalid, illegal or unenforceable provision and, in its reduced form, it shall be enforceable. (c) Complete Agreement. This Agreement (with all exhibits hereto) ------------------ and the Reorganization Agreement, which agreement is incorporated herein by reference, embodies the complete agreement and understanding between the parties and supersedes and preempts any prior understandings, agreements or representations by or between the parties, written or oral, which may have related to the subject matter hereof in any way. (d) Successors and Assigns. This Agreement is intended to bind and ---------------------- inure to the benefit of and be enforceable by Executive and the Company [and, with respect to Sections 1(d)(i) and 1(e), the Shareholder], except that Executive may not assign any of his rights or obligations under this Agreement. The Company may assign its rights under this Agreement, as security, to any lender to the Company, and in the event of a sale of the stock, or substantially all of the stock, of the Company, or consolidation or merger of the Company into another corporation -7- or entity, or the sale of substantially all of the operating assets of the Company to another corporation, entity or individual, the Company may assign its rights and obligations under this Agreement to its successor-in-interest, in which event such successor-in-interest shall be deemed to have acquired all rights and assumed all obligations of the Company hereunder. (e) CHOICE OF LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION, ------------- VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF CALIFORNIA. (f) Remedies. Each of the parties to this Agreement will be entitled -------- to enforce his or its rights under this Agreement specifically, to recover damages (including, without limitation, reasonable fees and expenses of counsel) by reason of any breach of any provision of this Agreement and to exercise all other rights existing in his or its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach or threatened breach of the provisions of this Agreement and that any party may in his or its sole discretion apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. (g) Amendments and Waivers. Any provision of this Agreement may be ---------------------- amended or waived only with the prior written consent of Executive and a majority of the Board. (h) Absence of Conflicting Agreements. Executive hereby warrants and --------------------------------- covenants that his employment by the Company does not result in a breach of the terms, conditions or provisions of any agreement to which Executive is subject. (i) Survival. No termination of Executive's employment by either or -------- both parties shall reduce or terminate Executive's covenants and agreements in paragraphs 2 and 4. -8- IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered on the day and year first above written. PERFECTMARKET, INC. By:____________________________ Name: Charles Conn Title: President EXECUTIVE _______________________________ Mark Davies SHAREHOLDER _______________________________ Joshua White (EMPLOYMENT AGREEMENT SIGNATURE PAGE - MARK DAVIES) -9- EXHIBIT A EMPLOYEE INVENTIONS AND CONFIDENTIALITY AGREEMENT -10- EXHIBIT B DEFINITIONS OF CURRENT RESTRICTED BUSINESS AND ALTERNATIVE RESTRICTED BUSINESS As used in Section 4, the term "Current Restricted Business" shall mean the business of providing business directory listings, events listings and community and civic information in electronic form or any other business in which the Company actively engages as of the date of this Agreement. As used in Section 4, the term "Alternative Restricted Business" shall mean any business in which the Company may actively engage from time to time during the Employment Period, but which is not included in the definition of Current Restricted Business above. -11- EXHIBIT I --------- INVESTMENT REPRESENTATION STATEMENT Pursuant to the Agreement and Plan of Reorganization by and among PerfectMarket, Inc., a Delaware corporation ("PerfectMarket"), MB Acquisition Corporation, a New York corporation and wholly-owned subsidiary of PerfectMarket ("Sub"), MetroBeat, Inc., a New York corporation ("MetroBeat"), and a shareholder of MetroBeat, PerfectMarket is acquiring MetroBeat in a merger of Sub with and into MetroBeat (the "Merger") and the former shareholders of MetroBeat are acquiring certain securities of PerfectMarket and rights to acquire securities (the "Securities") of PerfectMarket upon the occurrence of certain events. In connection with the acquisition of the Securities in the Merger, the undersigned shareholder of MetroBeat (the "Shareholder") represents to PerfectMarket as follows: (a) Shareholder is aware of PerfectMarket's business affairs and financial condition and has acquired sufficient information about PerfectMarket to reach an informed and knowledgeable decision to acquire the Securities. Shareholder is acquiring these Securities for investment for Shareholder's own account only and not with a view to, or for resale in connection with, any "distribution" thereof within the meaning of the Securities Act of 1933, as amended (the "Securities Act"). (b) Shareholder acknowledges and understands that the Securities constitute "restricted securities" under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Shareholder's investment intent as expressed herein. In this connection, Shareholder understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Shareholder's representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. Shareholder further understands that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Shareholder further understands that no public market currently exists for the securities of PerfectMarket, and that even if a public market exists at the time the Shareholder wishes to sell the Securities, PerfectMarket may not be satisfying the current public information requirements of Rule 144 as promulgated under the Securities Act. Shareholder further acknowledges and understands that PerfectMarket is under no obligation to register the Securities. Shareholder understands that the certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel satisfactory to PerfectMarket and any other legend required under applicable state securities laws. (c) Shareholder is familiar with the provisions of Rule 144 which, in substance, permit limited public resale of "restricted securities" acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions set forth in Rule 144, which requires the resale to occur not less than two years after the later of the date the Securities were sold by PerfectMarket or the date the Securities were sold by an affiliate of PerfectMarket, within the meaning of Rule 144; and, in the case of acquisition of the Securities by an affiliate, or by a non-affiliate who subsequently holds the Securities less than three years. (e) Shareholder further understands that in the event all of the applicable requirements of Rule 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rules 144 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Shareholder understands that no assurances can be given that any such other registration exemption will be available in such event. Signature of Shareholder: /s/ Mark Davies ___________________________________ Date: June 12, 1996 (c) Shareholder is familiar with the provisions of Rule 144 which, in substance, permit limited public resale of "restricted securities" acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions set forth in Rule 144, which requires the resale to occur not less than two years after the later of the date the Securities were sold by PerfectMarket or the date the Securities were sold by an affiliate of PerfectMarket, within the meaning of Rule 144; and, in the case of acquisition of the Securities by an affiliate, or by a non-affiliate who subsequently holds the Securities less than three years. (e) Shareholder further understands that in the event all of the applicable requirements of Rule 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rules 144 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Shareholder understands that no assurances can be given that any such other registration exemption will be available in such event. Signature of Shareholder: /s/ Joshua White ___________________________________ Date: June 5, 1996 AMENDMENT #1 TO AGREEMENT AND PLAN OF REORGANIZATION This Amendment (the "Amendment") to the Agreement and Plan of Reorganization, dated May 31, 1996, by and among PerfectMarket, Inc., a Delaware corporation ("PerfectMarket"), MB Acquisition Corporation, a New York corporation ("MB Acquisition"), MetroBeat, Inc., a New York corporation ("MetroBeat"), Mark Davies and Joshua White (the "Agreement"), is made as of June 21, 1996 among the same parties. RECITAL ------- WHEREAS, the parties entered into the Agreement pursuant to which MB Acquisition shall be merged with and into MetroBeat such that MetroBeat becomes a wholly-owned subsidiary of PerfectMarket; and WHEREAS, the Agreement provided for the issuance by PerfectMarket of Series B Preferred Stock and/or cash with an aggregate value of [*] ("Purchase Price"); and WHEREAS, the parties desire to amend the Agreement to provide that the Purchase Price shall be decreased to [*]. NOW, THEREFORE, in consideration of the foregoing, the parties agree as follows: 1. AMENDMENTS TO THE AGREEMENT. The parties hereby agree that the --------------------------- Agreement shall be amended as follows: 1.1 Amendment to Section 2.2(e)(i). Section 2.2(e)(i) of the ------------------------------ Agreement shall be deleted in its entirety and the following shall be substituted in lieu thereof: "(i) Subject to Section 2.2(e)(iii) below, the Aggregate Consideration to be paid by PerfectMarket pursuant to the Merger shall [*]." - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 1.2 Amendment to Section 2.2(e)(iii). Section 2.2(e)(iii) -------------------------------- of the Agreement shall be deleted in its entirety and the following shall be substituted in lieu thereof. "(i) PerfectMarket shall issue a minimum of [*] shares and a maximum of [*] shares of its capital stock (as adjusted for stock splits, stock dividends and similar recapitalizations of PerfectMarket) to the shareholders of MetroBeat pursuant to this Section 2.2. If the shareholders elect cash for any portion of the Final Payment pursuant to Section 2.2(e)(ii), then both the minimum of [*] shares and the maximum of [*] shares shall be reduced by the number of shares equal to such minimum or maximum multiplied by the percentage equal to the amount of the cash payment elected by the shareholders as the numerator, and $[*] as the denominator. Such an adjustment shall not be applicable to any portion of the Final Payment PerfectMarket elects to make in cash. At the time PerfectMarket shall be obligated to deliver a cumulative aggregate amount to the shareholders of MetroBeat of [*] shares of capital stock in accordance with the provisions of this Section 2.2(e), all payment obligations of PerfectMarket in excess of such amount shall immediately terminate. In the event that PerfectMarket's payment obligations as calculated through the Final Payment shall be less than [*] shares of capital stock, PerfectMarket shall issue as part of the Final Payment such additional number of shares of capital stock as required such that the cumulative aggregate shares issued pursuant to this Section 2.2(e) shall equal [*] shares." 1.3 Amendment to Section 5.10. Section 5.10 of the Agreement ------------------------- shall be deleted in its entirety and the following shall be substituted in lieu thereof: "Within thirty (30) days after the Closing, PerfectMarket agrees to pay the liabilities of MetroBeat to Davies, Joshua White and the American Broadcasting Corporation in the aggregate amount not to exceed $[*] 2. MISCELLANEOUS. ------------- 2.1 Successors and Assigns. Except as otherwise expressly ---------------------- provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto. 2.2 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND ------------- CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS ENTERED INTO AND WHOLLY TO BE PERFORMED WITHIN THE STATE OF CALIFORNIA BY CALIFORNIA RESIDENTS. 2.3 Waivers and Amendments. The rights and obligations of ---------------------- the parties under this Agreement may be amended, waived or discharged (either generally or in a particular instance, either retroactively or prospectively, and either for a specified period of time or indefinitely) only by a written instrument effecting such amendment, waiver or discharge signed by the Company and by Purchasers holding at least a majority of the Shares. Any amendment or waiver effected in - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -2- accordance with this paragraph shall be binding upon each holder of any securities purchased under this Agreement at the time outstanding (including securities into which such securities are convertible), each future holder of all such securities and the Company. 2.4 Titles and Subtitles. The titles of the paragraphs and -------------------- subparagraphs of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. 2.5 Severability of this Agreement. If any provision of this ------------------------------ Agreement shall be judicially determined to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 2.6 Delays or Omissions. It is agreed that no delay or omission to ------------------- exercise any right, power or remedy accruing to any party upon any breach or default of any other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach or default, or any acquiescence therein, or of any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character of any breach or default under this Agreement, or any waiver of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in writing and that all remedies, either under this Agreement, by law or otherwise, shall be cumulative and not alternative. 2.7 Counterparts. This Agreement may be executed in any number of ------------ counterparts, each of which shall be an original, but all of which together shall constitute one instrument. -3- IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first written above. PERFECTMARKET, INC. By: /s/ Charles Conn, III ----------------------------------------- Charles Conn, President and Chief Executive Officer MB ACQUISITION CORPORATION By: /s/ Charles Conn, III ----------------------------------------- Charles Conn, President METROBEAT, INC. By: /s/ Mark Davies ----------------------------------------- Mark Davies, President PRINCIPAL SHAREHOLDER /s/ Mark Davies -------------------------------------------- Mark Davies /s/ Joshua White -------------------------------------------- Joshua White [AMENDMENT] -4- EX-3.4 3 BYLAWS, AS CURRENTLY IN EFFECT EXHIBIT 3.4 BYLAWS OF PERFECTMARKET, INC. a Delaware corporation TABLE OF CONTENTS -----------------
Page ---- ARTICLE I OFFICES................................................ 1 Section 1.01 Registered Office.............................. 1 Section 1.02 Principal Office............................... 1 Section 1.03 Other Offices.................................. 1 ARTICLE II MEETINGS OF STOCKHOLDERS.............................. 1 Section 2.01 Annual Meetings................................ 1 Section 2.02 Special Meetings............................... 1 Section 2.03 Place of Meetings.............................. 2 Section 2.04 Notice of Meetings............................. 2 Section 2.05 Quorum......................................... 2 Section 2.06 Voting......................................... 2 Section 2.07 List of Stockholders........................... 3 Section 2.08 Inspector of Election.......................... 3 Section 2.09 Stockholder Action Without Meeting............. 4 ARTICLE III BOARD OF DIRECTORS................................... 4 Section 3.01 General Powers................................. 4 Section 3.02 Number......................................... 4 Section 3.03 Election of Directors.......................... 4 Section 3.04 Resignations................................... 4 Section 3.05 Vacancies...................................... 4 Section 3.06 Place of Meeting; Telephone Conference Meeting. 5 Section 3.07 First Meeting.................................. 5
i TABLE OF CONTENTS (Con't.) --------------------------
Page ---- Section 3.08 Regular Meetings.............................. 5 Section 3.09 Special Meetings.............................. 5 Section 3.10 Quorum and Action............................. 6 Section 3.11 Action by Consent............................. 6 Section 3.12 Compensation.................................. 6 Section 3.13 Committees.................................... 6 Section 3.14 Officers of the Board......................... 6 ARTICLE IV OFFICERS............................................. 7 Section 4.01 Officers...................................... 7 Section 4.02 Election...................................... 7 Section 4.03 Subordinate Officers.......................... 7 Section 4.04 Removal and Resignation....................... 7 Section 4.05 Vacancies..................................... 7 Section 4.06 President/Chief Executive Officer............. 7 Section 4.07 Vice President................................ 8 Section 4.08 Secretary..................................... 8 Section 4.09 Treasurer..................................... 8 ARTICLE V CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC......... 9 Section 5.01 Execution of Contracts........................ 9 Section 5.02 Checks, Drafts, Etc........................... 9 Section 5.03 Deposit....................................... 9
ii TABLE OF CONTENTS (Con't.) --------------------------
Page ---- Section 5.04 General and Special Bank Accounts............. 9 ARTICLE VI SHARES AND THEIR TRANSFER............................ 9 Section 6.01 Certificates for Stock........................ 9 Section 6.02 Transfer of Stock............................. 10 Section 6.03 Regulations................................... 10 Section 6.04 Lost, Stolen, Destroyed and Mutilated Certificates.................................... 10 Section 6.05 Record Date................................... 10 Section 6.06 Representation of Shares of Other Corporations 10 ARTICLE VII INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS................................. 11 Section 7.01 Agents, Proceedings, and Expenses............. 11 Section 7.02 Indemnification............................... 11 Section 7.03 Advance of Expenses........................... 11 Section 7.04 Other Contractual Rights...................... 11 Section 7.05 Limitations................................... 12 Section 7.06 Insurance..................................... 12 Section 7.07 Fiduciaries of Corporate Employee Benefit Plan.............................................. 12 ARTICLE VIII MISCELLANEOUS...................................... 12 Section 8.01 Seal.......................................... 12 Section 8.02 Waiver of Notices............................. 12 Section 8.03 Loans and Guaranties.......................... 12 Section 8.04 Gender........................................ 12
iii TABLE OF CONTENTS (Con't) -------------------------
Page ---- Section 8.05 Amendments..................................... 13 CERTIFICATE OF SECRETARY......................................... 14
iv BYLAWS of PERFECTMARKET, INC. a Delaware corporation ARTICLE I OFFICES Section 1.01 Registered Office. The registered office of PerfectMarket, ---------- ------ Inc. (hereinafter called the "Corporation") shall be at the following place in the State of Delaware, or at such other place in the State of Delaware as shall be designated by the Board of Directors (hereinafter called the "Board") from time to time: c/o Incorporating Services, Ltd. 15 East North Street Dover, Delaware 19901 Section 1.02 Principal Office. The principal office for the transaction of ---------------- the business of the Corporation shall be located at 4502 Dyer Street, La Crescenta, California 91214, or at such other place as designated by the Board from time to time. Section 1.03 Other Offices. The Corporation may also have an office or ------------- offices at such other place or places, either within or without the State of Delaware, as the Board may from time to time determine or as the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 2.01 Annual Meetings. Annual meetings of the stockholders of the --------------- Corporation for the purpose of electing directors and for the transaction of such other proper business as may come before such meetings may be held at such time, date and place as the Board shall determine by resolution. In the absence of any such resolution by the Board, the annual meeting of the stockholders of the Corporation shall be held at the principal office of the Corporation, on the second Tuesday in April, at the hour of 10:00 a.m. Section 2.02 Special Meetings. Special meetings of the stockholders of the ---------------- Corporation for any purpose or purposes may be called at any time by the Board or by a committee of the Board which has been duly designated by the Board and whose powers and authority, as provided in a resolution of the Board or in the Bylaws, include the power to call such meetings, but such special meetings may not be called by any other person or persons; provided, however, that if and to the extent that any special meeting of stockholders may be called by any other person or persons specified in any provisions of the Certificate of Incorporation or any amendment thereto or any certificate filed under Section 151(g) of the General Corporation Law of Delaware (or its successor statute as in effect from time to time here- 1 after), then such special meeting may also be called by the person or persons, in the manner, at the time and for the purposes so specified. Section 2.03 Place of Meetings. All meetings of the stockholders shall be ----------------- held at such places, within or without the State of Delaware, as may from time to time be designated by the person or persons calling the respective meetings and specified in the respective notices or waivers of notice thereof. Section 2.04 Notice of Meetings. Except as otherwise required by law, ------------------ notice of each meeting of the stockholders, whether annual or special, shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder of record entitled to vote at such meeting by delivering a typewritten or printed notice thereof to him personally, or by depositing such notice in the United States mail, in a postage prepaid envelope, directed to him at his address furnished by him to the Secretary of the Corporation for such purpose or, if he shall not have furnished to the Secretary his address for such purpose, then at his address last known to the Secretary, or by transmitting a notice thereof to him at such address by telegraph, telecopy, cable or wireless. Except as otherwise expressly required by law, no publication of any notice of a meeting of the stockholders shall be required. Every notice of a meeting of the stockholders shall state the place, date and hour of the meeting, and, in the case of a special meeting shall also state the purpose or purposes for which the meeting is called. Except as otherwise expressly required by law, notice of any adjourned meeting of the stockholders need not be given if the time and place thereof are announced at the meeting at which the adjournment is taken. Section 2.05 Quorum. The holders of record of a majority in voting interest ------ of the shares of stock of the Corporation entitled to be voted, present in person or by proxy, shall constitute a quorum for the transaction of business at any meeting of the stockholders of the Corporation or any adjournment thereof. The stockholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. In the absence of a quorum at any meeting or any adjournment thereof, a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat or, in the absence therefrom of all the stockholders, any officer entitled to preside at or to act as secretary of such meeting may adjourn such meeting from time to time. At any such adjourned meeting at which a quorum is present any business may be transacted which might have been transacted at the meeting as originally called. Section 2.06 Voting. ------ (a) At each meeting of the stockholders, each stockholder shall be entitled to vote in person or by proxy such share or fractional share of the stock of the Corporation which has voting rights on the matter in question and which shall have been held by him and registered in his name on the books of the Corporation: (i) on the date fixed pursuant to Section 6.05 of these Bylaws as the record date for the determination of stockholders entitled to notice of and to vote at such meeting; or (ii) if no such record date shall have been so fixed, then (A) at the close of business on the day next preceding the day on which notice of the meeting shall be given, or (B) if notice of the 2 meeting shall be waived, at the close of business on the day next preceding the day on which the meeting shall be held. (b) Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors in such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes. Persons holding stock of the Corporation in a fiduciary capacity shall be entitled to vote such stock. Persons whose stock is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the Corporation he shall have expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent such stock and vote thereon. Stock having voting power standing of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or with respect to which two or more persons have the same fiduciary relationship, shall be voted in accordance with the provisions of the General Corporation Law of Delaware. (c) Any such voting rights may be exercised by the stockholder entitled thereto in person or by his proxy appointed by an instrument in writing, subscribed by such stockholder or by his attorney thereunto authorized and delivered to the secretary of the meeting; provided, however, that no proxy shall be voted or acted upon after three years from its date unless said proxy shall provide for a longer period. The attendance at any meeting of a stockholder who may theretofore have given a proxy shall not have the effect of revoking the same unless he shall in writing so notify the secretary of the meeting prior to the voting of the proxy. At any meeting of the stockholders all matters, except as otherwise provided in the Certificate of Incorporation, in these Bylaws or by law, shall be decided by the vote of a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat and thereon. The stockholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. The vote at any meeting of the stockholders on any question need not be by ballot, unless so directed by the chairman of the meeting. On a vote by ballot, each ballot shall be signed by the stockholder voting, or by his proxy if there be such proxy, and it shall state the number of shares voted. Section 2.07 List of Stockholders. The Secretary of the Corporation shall -------------------- prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the entire duration thereof, and may be inspected by any stockholder who is present. Section 2.08 Inspector of Election. If at any meeting of the stockholders a --------- -- -------- vote by written ballot shall be taken on any question, the chairman of such meeting may appoint an inspector or inspectors of election to act with respect to such vote. Each inspector so appointed shall first subscribe an oath faithfully to execute the duties of an inspector at such meeting with strict impartiality and according to the best of his ability. Such inspectors shall decide upon the qualification of the voters and shall report the number of shares represented at the meeting and entitled to vote on such question, shall conduct and 3 accept the votes, and, when the voting is completed, shall ascertain and report the number of shares voted respectively for and against the question. Reports of the inspectors shall be in writing and subscribed and delivered by them to the Secretary of the Corporation. Inspectors need not be stockholders of the Corporation, and any officer of the Corporation may be an inspector on any question other than a vote for or against a proposal in which he shall have a material interest. Section 2.09 Stockholder Action Without Meeting. Any action required by the ---------------------------------- General Corporation Law of Delaware to be taken at any annual or special meeting of the stockholders, or any action which may be taken at any annual or special meeting of stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing setting forth the action so taken shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE III BOARD OF DIRECTORS Section 3.01 General Powers. The property, business and affairs of the -------------- Corporation shall be managed by or under the direction of the Board, which may exercise all of the powers of the Corporation, except such as are by the Certificate of Incorporation, by these Bylaws or by law conferred upon or reserved to the stockholders. Section 3.02 Number. The authorized number of directors of the Corporation ------ shall be three until changed by an amendment to this Section made pursuant to the provisions of Article VIII, Section 8.05 of these Bylaws, subject to the provisions of the General Corporation Law of Delaware. Directors need not be stockholders in the Corporation. Section 3.03 Election of Directors. The directors shall be elected by the --------------------- stockholders of the Corporation, and at each election the persons receiving the greatest number of votes, up to the number of directors then to be elected, shall be the persons then elected. The election of directors is subject to the provisions contained in the Certificate of Incorporation and relating thereto, including any provisions for a classified board. Section 3.04 Resignations. Any director of the Corporation may resign at ------------ any time by giving written notice to the Board or to the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time is not specified, it shall take effect immediately upon its receipt; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 3.05 Vacancies. Except as otherwise provided in the Certificate of --------- Incorporation or the Shareholders Agreement, any vacancy in the Board, whether because of death, resignation, disqualification, an increase in the number of directors, or any other cause, may be filled by vote of the majority of the remaining directors, although less than a quorum, or by a sole remaining director. Each director so chosen to fill a vacancy shall hold office until his successor shall have been elected and shall 4 qualify or until he shall resign or shall have been removed. No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of his term of office. Upon the resignation of one or more directors from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided hereinabove in the filling of other vacancies. Section 3.06 Place of Meeting: Telephone Conference Meeting. The Board may -------- ------------------------------------- hold any of its meetings at such place or places within or without the State of Delaware as the Board may from time to time by resolution designate or as shall be designated by the person or persons calling the meeting or in the notice or waiver of notice of any such meeting. Directors may participate in any regular or special meeting of the Board by means of conference telephone or similar communications equipment pursuant to which all persons participating in the meeting of the Board can hear each other, and such participation shall constitute presence in person at such meeting. Section 3.07 First Meeting. The Board shall meet as soon as practicable ----- ------- after each annual election of directors and notice of such first meeting shall not be required. Section 3.08 Regular Meetings. Regular meetings of the Board may be held at ---------------- such times as the Board shall from time to time by resolution determine. If any day fixed for a meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting shall be held at the same hour and place on the next succeeding business day which is not a legal holiday. Except as provided by law, notice of regular meetings need not be given. Section 3.09 Special Meetings. ---------------- (a) Special meetings of the Board may be called at any time by the Chairman of the Board, the President/Chief Executive Officer or any Vice President or the Secretary or by any two (2) directors, to be held at the principal office of the Corporation, or at such other place or places, within or without the State of Delaware, as the person or persons calling the meeting may designate. (b) Notice of the time and place of special meetings shall be given to each director either: (i) by mailing or otherwise sending to him a written notice of such. meeting, charges prepaid, addressed to him at his address as it is shown upon the records of the Corporation, or if it is not so shown on such records or is not readily ascertainable, at the place in which the meetings of the directors are regularly held, at least seventy-two (72) hours prior to the time of the holding of such meeting; or (ii) by orally communicating the time and place of the special meeting to him at least forty-eight (48) hours prior to the time of the holding of such meeting. Either of the notices as above provided shall be due, legal and personal notice to such director. (c) Whenever notice is required to be given, either to a stockholder or a director, under any provision of the General Corporation Law of Delaware, the Certificate of Incorporation or these Bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting, whether in person or by proxy, shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any 5 business because the meeting is not lawfully called or convened. Neither the business to be transacted nor the purpose of any regular or special meeting of directors or committee of directors need be specified in any written waiver of notice. All such waivers shall be filed with the corporate records or made a part of the minutes of the meeting. Section 3.10 Quorum and Action. Except as otherwise provided in these ----------------- Bylaws or by law, the presence of all of the authorized number of directors shall be required to constitute a quorum for the transaction of business at any meeting of the Board, and all matters shall be decided at any such meeting, a quorum being present, by the affirmative votes of all of the directors present. In the absence of a quorum, a majority of directors present at any meeting may adjourn the same from time to time until a quorum shall be present. Notice of any adjourned meeting need not be given. The directors shall act only as a Board, and the individual directors shall have no power as such. Section 3.11 Action by Consent. Any action required or permitted to be ----------------- taken at any meeting of the Board or of any committee thereof may be taken without a meeting if a written consent thereto is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or such committee. Such action by written consent shall have the same force and effect as the unanimous vote of such directors. Section 3.12 Compensation. No stated salary need be paid to directors, as ------------ such, for their services but, as fixed from time to time by resolution of the Board, the directors may receive directors' fees, compensation and reimbursement for expenses for attendance at directors' meetings, for serving on committees and for discharging their duties; provided that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Section 3.13 Committees. ---------- (a) The Board may, by its unanimous resolution, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have any power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the Bylaws of the Corporation; and unless the resolution of the Board expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Any such committee shall keep written minutes of its meetings and report the same to the Board when required. (b) The presence of all of the members of any such committee shall constitute a quorum for the transaction of business. Every act or decision done or made by said committee shall be authorized by unanimous resolution of the members thereof. Section 3.14 Officers of the Board. The Board may have a Chairman of the --------------------- Board. The Chairman of the Board may be appointed from time to time by the Board and the powers and duties of such Chairman shall be as so provided by the Board from time to time. 6 ARTICLE IV OFFICERS Section 4.01 Officers. The officers of the Corporation shall be a -------- President/Chief Executive Officer, a Secretary and a Treasurer. The Corporation may also have, at the discretion of the Board, a Chairman of the Board, one or more Vice Presidents, one or more Assistant Vice Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers and such other officers as may be appointed in accordance with the provisions of Section 4.03 of these Bylaws. One person may hold two or more offices. The salaries of all officers of the Corporation shall be fixed by the Board. Section 4.02 Election. The officers of the Corporation, except such -------- officers as may be appointed in accordance with the provisions of Section 4.03 or Section 4.05 of these Bylaws, shall be chosen annually by the Board, and each shall hold his or her office until he or she shall resign or shall be removed or shall be otherwise disqualified to serve, or until his or her successor shall be elected and qualified. Section 4.03 Subordinate Officers. The Board may appoint, or may authorize ----------- -------- the President/Chief Executive Officer or Chairman of the Board to appoint, such other officers as the business of the Corporation may require, each of whom shall have such authority and perform such duties as are provided in these Bylaws or as the Board or the President/Chief Executive Officer or Chairman of the Board from time to time may specify, and shall hold office until he or she shall resign or shall be removed or otherwise disqualified to serve. Section 4.04 Removal and Resignation. ----------------------- (a) Any officer may be removed, with or without cause, by a majority of the directors at the time in office, at any regular or special meeting of the Board, or, except in case of an officer chosen by the Board, by the President/Chief Executive Officer or Chairman of the Board upon whom such power of removal may be conferred by the Board. (b) Any officer may resign at any time by giving written notice to the Board, the Chairman of the Board, the President/Chief Executive Officer or the Secretary of the Corporation. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 4.05 Vacancies. A vacancy in any office because of death, --------- resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these Bylaws for the regular appointments to such office. Section 4.06 President/Chief Executive Officer. Subject to such supervisory --------------- ----------------- powers, if any, as may be given by the Board to the Chairman of the Board, if there be such an officer, the President/Chief Executive Officer shall, subject to the control of the Board, have general supervision, direction, and control of the business and the officers of the Corporation. The President/Chief Executive Officer shall preside at all meetings of the stockholders and, in the absence of the Chairman of the Board, at all meetings of the Board. The President/Chief Executive Officer shall have the general powers and duties 7 of management usually vested in the office of President/Chief Executive Officer of a Corporation, and shall have such other powers and duties as may be prescribed by the Board or the Bylaws. Section 4.07 Vice President. The Vice President(s), if any, shall exercise -------------- and perform such powers and duties with respect to the administration of the business and affairs of the Corporation as from time to time may be assigned to each of them by the President/Chief Executive Officer, by the Board or as is prescribed by these Bylaws. In the absence or disability of the President/Chief Executive Officer, the Vice Presidents, in order of their rank as fixed by the Board, or if not ranked, the Vice President designated by the Board, shall perform all of the duties of the President/Chief Executive Officer and when so acting shall have all of the powers of and be subject to all the restrictions upon the President/Chief Executive Officer. Section 4.08 Secretary. --------- (a) The Secretary shall keep, or cause to be kept, a book of minutes at the principal office for the transaction of the business of the Corporation, or such other place as the Board may order, of all meetings of directors and stockholders, with the time and place of holding, whether regular or special, and if special, how authorized and the notice thereof given, the names of those present at directors' meetings, the number of shares present or represented at stockholders' meetings and the proceedings thereof. (b) The Secretary shall keep, or cause to be kept, at the principal office for the transaction of the business of the Corporation or at the office of the Corporation's transfer agent, a share register, or a duplicate share register, showing the names of the stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation. (c) The Secretary shall give, or cause to be given, notice of all the meetings of the stockholders and of the Board required by these Bylaws or by law to be given, and he shall keep the seal of the Corporation in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board or these Bylaws. If for any reason the Secretary shall fail to give notice of any special meeting of the Board called by one or more of the persons identified in Section 3.09 of these Bylaws, or if he shall fail to give notice of any special meeting of the stockholders called by one or more of the persons identified in Section 2.02 of these Bylaws, then any such person or persons may give notice of any such special meeting. Section 4.09 Treasurer. --------- (a) The Treasurer, who may be referred to as the "Chief Financial Officer", shall keep and maintain or cause to be kept and maintained, adequate and correct accounts of the properties and business transactions of the Corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, surplus and shares. Any surplus, including earned surplus, paid-in surplus and surplus arising from a reduction of capital, shall be classified according to source and shown in a separate account. The books of account at all reasonable times shall be open to inspection by any director. (b) The Treasurer shall deposit all moneys and other valuables in the name and to the credit of the Corporation with such depositories as may be designated by the Board. He shall disburse the funds 8 of the Corporation as may be ordered by the Board, shall render to the President/Chief Executive Officer and to the directors, whenever they request it, an account of all of his transactions as Treasurer and of the financial condition of the Corporation, and shall have such other powers and perform such other duties as may be prescribed by the Board or these Bylaws. ARTICLE V CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC. Section 5.01 Execution of Contracts. The Board, except as otherwise ---------------------- provided in these Bylaws, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name and on behalf of the Corporation, and such authority may be general or confined to specific instances. Unless so authorized by the Board or by these Bylaws, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or in any amount. Section 5.02 Checks. Drafts. Etc. All checks, drafts or other orders for ------------------- payment of money, notes or other evidence of indebtedness, issued in the name of or payable to the Corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the Board. Each such person shall give such bond, if any, as the Board may require. Section 5.03 DEPOSITS. All funds of the Corporation not otherwise employed -------- shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board may select, or as may be selected by any officer or officers, assistant or assistants, agent or agents, attorney or attorneys, of the Corporation to whom such power shall have been delegated by the Board. For the purpose of deposit and for the purpose of collection for the account of the Corporation, the President/Chief Executive Officer, any Vice President or the Treasurer (or any other officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation who shall be determined by the Board from time to time) may endorse, assign and deliver checks, drafts and other orders for the payment of money which are payable to the order of the Corporation. Section 5.04 General and Special Bank Accounts. The Board may from time to --------------------------------- time authorize the opening and keeping of general and special bank accounts with such banks, trust companies or other depositories as the Board may select or as may be selected by an officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation to whom such power shall have been delegated by the Board. The Board may make such special rules and regulations with respect to such bank accounts, not inconsistent with the provisions of these Bylaws, as it may deem expedient. ARTICLE VI SHARES AND THEIR TRANSFER Section 6.01 Certificates for Stock. Every owner of stock of the ---------------------- Corporation shall be entitled to have a certificate or certificates, in such form as the Board shall prescribe, certifying the number and class of shares of the stock of the Corporation owned by him. The certificates representing shares of such stock shall be numbered in the order in which they shall be issued and shall be signed in the name of the Corporation by the Chairman of the Board, the President/Chief Executive Officer or a Vice 9 President and by the Secretary or an Assistant Secretary or by the Treasurer or an Assistant Treasurer. Any or all of the signatures on the certificates may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon any such certificate shall thereafter have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may nevertheless be issued by the Corporation with the same effect as though the person who signed such certificate, or whose facsimile signature shall have been placed thereupon, were such officer, transfer agent or registrar at the date of issue. A record shall be kept of the respective names of the persons, firms or corporations owning the stock represented by such certificates, the number and class of shares represented by such certificates, respectively, and the respective dates thereof, and in case of cancellation, the respective dates of cancellation. Every certificate surrendered to the Corporation for exchange or transfer shall be cancelled, and no new certificate or certificates shall be issued in exchange for any existing certificate until such existing certificate shall have been so cancelled, except in cases provided for in Section 6.04 of these Bylaws. Section 6.02 Transfer of Stock. Transfer of shares of stock of the ----------------- Corporation shall be made only on the books of the Corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary, or with a transfer clerk or a transfer agent appointed as provided in Section 6.03 of these Bylaws, and upon surrender of the certificate or certificates for such shares properly endorsed and the payment of all taxes thereon. The person in whose name shares of stock stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. Whenever any transfer of shares shall be made for collateral security, and not absolutely, such fact shall be stated expressly in the entry of transfer if, when the certificate or certificates shall be presented to the Corporation for transfer, both the tansferor and the transferee request the Corporation to do so. Section 6.03 Regulations. The Board may make such rules and regulations as ----------- it may deem expedient, not inconsistent with these Bylaws, concerning the issue, transfer and registration of certificates for shares of the stock of the Corporation. The Board may appoint, or authorize any officer or officers to appoint, one or more transfer clerks or one or more transfer agents and one or more registrars, and may require all certificates for stock to bear the signature or signatures of any of them. Section 6.04 Lost, Stolen, Destroyed and Mutilated Certificates. In any -------------------------------------------------- case of loss, theft, destruction, or mutilation of any certificate of stock, another may be issued in its place upon proof of such loss, theft, destruction, or mutilation and upon the giving of a bond of indemnity to the Corporation in such form and in such sums as the Board may direct; provided, however, that a new certificate may be issued without requiring any bond when, in the judgment of the Board, it is proper to do so. Section 6.05 Record Date. In order that the Corporation may determine the ----------- stockholders entitled to notice of or to vote at any meeting of the stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any other change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. If, in any case involving the determination of stockholders for any purpose other than notice of or voting at a meeting of stockholders, the Board shall not fix such a record date, the record date for determining stockholders for such purpose shall be the close of business on the day on which the Board shall adopt the resolution relating thereto. A determination of stockholders entitled to notice 10 of or to vote at a meeting of stockholders shall apply to any adjournment of such meeting; provided, however, that the Board may fix a new record date for the adjourned meeting. Section 6.06 Representation of Shares of Other Corporations. The ---------------------------------------------- President/Chief Executive Officer or any Vice President and the Secretary or any Assistant Secretary of this Corporation are authorized to vote, represent and exercise on behalf of this Corporation all rights incident to all shares of any other corporation or corporations standing in the name of this Corporation. The authority herein granted to said officers to vote or represent on behalf of this Corporation any and all shares held by this Corporation in any other corporation or corporations may be exercised either by such officers in person or by any person authorized so to do by proxy or power of attorney duly executed by said officers. ARTICLE VII INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS Section 7.01 Agents. Proceedings. and Expenses. For the purposes of this --------------------------------- Article: (i) "agent" means any person who is or was a director, officer, employee, or other agent of this Corporation, or is or was serving at the request of this Corporation as a director, officer, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust or other enterprise, or was a director, officer, employee, or agent of a foreign or domestic corporation which was a predecessor corporation of this Corporation or of another enterprise at the request of such predecessor corporation; "proceeding" means any threatened, pending or completed action or proceeding, whether civil, criminal, administrative, or investigative; and (ii) "expenses" includes, without limitation, attorneys' fees and any expenses of establishing a right to indemnification under Sections 7.02 or 7.03 of this Article. Section 7.02 Indemnification. Except where and to the extent prohibited by --------------- the Delaware General Corporation Law or by the Certificate of Incorporation, this Corporation shall indemnify any person who was or is a party, or is threatened to be made a party, to any proceeding by reason of the fact that such person is or was an agent of this Corporation, against expenses, judgments, fines, settlements and other amounts, including attorney fees and costs, actually and reasonably incurred in connection with such proceeding regardless of whether the proceeding is brought by any third party or by or in the right of this Corporation, to the broadest extent permissible by Delaware law. Further, this Corporation eliminates the personal liability of each member of its Board and each officer to the Corporation or its stockholders for monetary damages for breach of fiduciary duty, to the fullest extent permitted by Section 145 of the General Corporation Law of Delaware, as the same may be amended and supplemented. The Corporation shall to the fullest extent permitted by said section indemnify each member of the Board and each officer from and against any and all of the expenses, liabilities or other matters referred to in or covered in Article VII of these Bylaws. Section 7.03 Advance of Expenses. To the maximum extent permissible by the ------------------- Delaware General Corporation Law and the Certificate of Incorporation of this Corporation, expenses incurred in defending any proceeding shall be advanced by this Corporation prior to the final disposition of such proceeding upon receipt of an undertaking by or on behalf of the agent to repay the amount of the advance if it shall be determined ultimately that the agent is not entitled to be indemnified as authorized in this Article. 11 Section 7.04 Other Contractual Rights. The indemnification provided by this ------------------------ Article VII shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any agreement, vote of stockholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office. The rights to indemnity hereunder shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of the person. Nothing contained in this Article shall affect any right to indemnification to which persons other than directors and officers of this Corporation or any subsidiary hereof may be entitled by contract or otherwise. Section 7.05 Limitations. No indemnification or advance shall be made under ----------- this Article in any circumstance where it appears: (i) that it would be inconsistent with a provision of an agreement to which the indemnitee is a party and which was in effect at the time of the accrual of the alleged cause of action asserted in the proceeding in which the expenses were incurred or other amounts were paid, which prohibits or otherwise limits indemnification; or (ii) that it would be inconsistent with any condition expressly imposed by a court in approving a settlement. Section 7.06 Insurance. Upon and in the event of a determination by the --------- Board of this Corporation to purchase such insurance, this Corporation shall have the power to purchase and maintain insurance on behalf of any agent of the Corporation against any liability asserted against or incurred by the agent in such capacity or arising out of the agent's status as such whether or not this Corporation would have the power to indemnify the agent against that liability under the provisions of this Article VII. Section 7.07 Fiduciaries of Corporate Employee Benefit Plan. This Article ---------------------------------------------- does not apply to any proceeding against any trustee, investment manager, or other fiduciary of an employee benefit plan in that person's capacity as such, even though that person may also be an agent of the Corporation as defined in Section 7.01 of this Article. This Corporation shall have power to indemnify such a trustee, investment manager or other fiduciary to the maximum extent permitted by Delaware law. ARTICLE VIII MISCELLANEOUS Section 8.01 Seal. The Board shall provide a corporate seal, which shall be ---- in the form of a circle and shall bear the name of the Corporation and words and figures showing that the Corporation was incorporated in the State of Delaware and showing the year of incorporation. Section 8.02 Waiver of Notices. Whenever notice is required to be given by ----------------- these Bylaws or the Certificate of Incorporation or by law, the person entitled to said notice may waive such notice in writing, either before or after the time stated therein, and such waiver shall be deemed equivalent to notice. Section 8.03 Loans and Guaranties. The Corporation may lend money to, or -------------------- guarantee any obligation of, and otherwise assist any officer or other employee of the Corporation or of its subsidiaries, including any officer who is a director, whenever, in the judgment of the Board, such loan, guaranty or assistance may reasonably be expected to benefit the Corporation. The loan, guaranty, or other assistance may be with or without interest, and may be unsecured or secured in such manner as the Board shall approve, including, without limitation, a pledge of shares of stock of the Corporation. 12 Section 8.04 Gender. All personal pronouns used in these Bylaws shall ------ include the other genders, whether used in the masculine, feminine or neuter gender, and the singular shall include the plural, and vice versa, whenever and as often as may be appropriate. Section 8.05 Amendments. Except as provided in this Section 8.05 of these ---------- Bylaws, these Bylaws, or any of them, may be rescinded, altered, amended or repealed, and new Bylaws may be made (i) by the Board, by vote of a majority of the number of directors then in office as directors, acting at any meeting of the Board or (ii) by the stockholders, by the vote of a majority of the outstanding shares of voting stock of the Corporation, at an annual meeting of stockholders, without previous notice, or at any special meeting of stockholders, provided that notice of such proposed amendment, modification, repeal or adoption is given in the notice of special meeting; provided, however, that Section 3.02 of these Bylaws can only be amended if that Section as amended would not conflict with the Corporation's Certificate of Incorporation and that Sections 7.02, 7.03 and 7.04 of these Bylaws can only be amended if such Sections as amended would pertain only to prospective acts. Except as provided in this Section 8.05, any Bylaw made or altered by the stockholders may be altered or repealed by the Board or may be altered or repealed by the stockholders. 13 CERTIFICATE OF SECRETARY The undersigned hereby certifies as follows: (1) That the undersigned is the duly elected and acting Secretary of PerfectMarket, Inc., a Delaware corporation (the "Corporation"); (2) That the foregoing Bylaws constitute the Bylaws of the Corporation as duly adopted by the Written Consent of the Sole Incorporator, dated September 21, 1995; and (3) That the foregoing Bylaws constitute the Bylaws of the Corporation as duly approved and adopted by the Unanimous Written Consent in Lieu of the Organizational Meeting of the Board of Directors, dated as of 9-22, 1995. IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of the Corporation this 22nd day of Sept, 1995. /s/ Jeffrey Brewer ---------------------------- Jeffrey Brewer, Secretary 14 CERTIFICATE OF AMENDMENT OF BYLAWS OF CITYSEARCH, INC. Effective as of December 15, 1995 The following amendment to the Corporation's Bylaws were approved by the Corporation's Board of Directors on December 15, 1995, to read in its entirety as follows: "Section 3.02 Number. The authorized number of directors of the Corporation ------ shall be five until changed by an amendment to this Section made pursuant to the provisions of Article VIII, Section 8.05 of these Bylaws, subject to the provisions of the General Corporation Law of Delaware. Directors need not be stockholders of the Corporation." CERTIFICATE OF AMENDMENT OF BYLAWS OF CITYSEARCH, INC. Effective as of May 13, 1996 The following amendment to the Corporation's Bylaws were approved by the Corporation's Board of Directors on May 13, 1996, to read in its entirety as follows: "Section 3.02 Number. The authorized number of directors of the Corporation ------ shall be seven until changed by an amendment to this Section made pursuant to the provisions of Article VIII, Section 8.05 of these Bylaws, subject to the provisions of the General Corporation Law of Delaware. Directors need not be stockholders of the Corporation." CERTIFICATE OF AMENDMENT OF BYLAWS OF CITYSEARCH, INC. Effective as of June 23, 1997 The following amendment to the Corporation's Bylaws were approved by the Corporation's Board of Directors on June 23, 1997, to read in its entirety as follows: "Section 3.02 Number. The authorized number of directors of the Corporation ------ shall be eight until changed by an amendment to this Section made pursuant to the provisions of Article VIII, Section 8.05 of these Bylaws, subject to the provisions of the General Corporation Law of Delaware. Directors need not be stockholders of the Corporation." CERTIFICATE OF AMENDMENT OF BYLAWS OF CITYSEARCH, INC. Effective as of December 8, 1997 The following amendment to the Corporation's Bylaws were approved by the Corporation's Board of Directors on December 8, 1997, to read in its entirety as follows: "Section 3.02 Number. The authorized number of directors of the Corporation ------ shall be eleven until changed by an amendment to this Section made pursuant to the provisions of Article VIII, Section 8.05 of these Bylaws, subject to the provisions of the General Corporation Law of Delaware. Directors need not be stockholders of the Corporation." EX-10.5 4 LICENSE AGREEMENT WITH PERLY, INC. EXHIBIT 10.5 LICENSE AGREEMENT ----------------- THIS LICENSE AGREEMENT made and effective this 9th day of March, 1996 BETWEEN: PERLY INC., of 345 Adelaide Street West, Suite 400, Toronto, Ontario M5V 1R5 ("Perly") AND: PERFECT MARKET INC., of 4502 Dyer Street, Suite 201, La Crescenta, California, U.S.A. 91214 ("Perfect") BACKGROUND - ---------- A. Perly is the owner of U.S. trademark and service mark registration no. 1.706.303 registered August 11, 1992, and is the owner of non-U.S trademark and service mark no. 617598 registered February 23, 1990 for CITISEARCH, for computer programs in the field of geographic information and data bases containing geographic information, and for consulting services in the field of geographic information. B. Perfect wishes to use the trademark CITYSEARCH as a trademark for providing on the Internet listings of businesses, attractions and facilities and their locations (including maps), as well as current events and community information for the public and wishes to have a license from Perly for such use. 1. Perly hereby grants to Perfect a license, subject to the terms of this agreement, to use the mark CITYSEARCH [*]. The license will be worldwide except for Canada, subject to notices and payments of fees as set forth below. Perly agrees not to license any user other than Perfect for a service similar to that of Perfect. Perfect agrees that Perly may utilize the mark itself and/or may license a user that is associated or affiliated with Perly. 2. As partial consideration for the grant of this license. Perfect will pay Perly a sum of [*] (all sums mentioned herein are in U.S. dollars) concurrently with signing of this agreement by both parties. In addition, Perfect will within 10 days from receipt of invoices therefor from Perly, pay to Perly the out-of-pocket expenses incurred by Perly in relation to the subject matter of this agreement, including Perly's costs relating to the preparation of this agreement, and Perly's costs in relation to any work performed concerning any trademark applications or registrations which Perly reasonably believes are necessary or desirable to improve or obtain protection in any place for the mark CITYSEARCH relating to this license. Perly agrees to notify Perfect if on any occasion its above-mentioned costs exceed $4,000. - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -2- 3. Perfect's license will be effective without further payment other than as specified above, for Internet listings as specified above in the city of Pasadena, California and for the U.S. metropolitan area as defined by the U.S. Census Bureau which contains Pasadena. [*] 4. If Perfect wishes to make its license effective in any country outside the U.S. (excluding Canada), Perfect will so notify Perly and will pay Perly the sum of $1,000.00 for each country outside the U.S. Upon Perly's receipt of such notice and payment, and subject to the terms of this agreement and applicable law, Perfect's license for the country in question will become effective. 5. Perfect will use the mark CITYSEARCH [*] All such listings and their manner of provision will be of a high quality and standard which will be subject to Perly's approval, such approval not unreasonably to be withheld. Perfect will notify Perly of any substantial change in the above mentioned Internet service or associated material. Perfect may use the name CitySearch in its corporate name or trade style. 6. Perfect shall in its use of the CITYSEARCH trademark publish such trademark notice or notices, and in such matter, as Perly may from time to time request. The standard for Perly's trademark notice request shall be that such notifications are readable and reasonable. 7. Perfect will defend, indemnify and hold Perly harmless against all claims, actions and suits brought against Perly and which result from, relate to or arise from Perfect's activities under this license. 8. Perfect agrees that it will not use or advertise any word, design, mark or name which is, or any part of which is, the same as, similar to or confusingly similar with the mark CITYSEARCH except as specifically permitted under this agreement. 9. Perfect acknowledges that the mark CITISEARCH and CITYSEARCH are and shall at all times be solely the property of Perly, and that its use of the mark CITYSEARCH enures to the benefit of Perly, and Perfect agrees that it will not directly or indirectly do or cause to be done, whether by commission or omission, any act which may in any way jeopardize or adversely affect the validity or distinctiveness of such marks or the title of Perly thereto, and Perfect agrees that it will without charge to Perly, upon request by Perly or its representatives, do all things and execute all documents that may at any time be necessary or desirable to ensure the validity and distinctiveness of the mark CITISEARCH and CITYSEARCH and to ensure the title of Perly thereto for all countries. 10. It is understood that Perly does not provide any warranties concerning the trade marks licensed hereunder or Perfect's right to use such trade marks in any place, other than Perly's own covenant not to complain of such use by Perfect so long as Perfect complies in all respect with the terms of this agreement. Perly warrants that Perly is the sole and exclusive owner of the mark, free of all liens and encumbrances; there are no claims, judgements or settlements to be paid by Perly or pending claims or litigation relating to the mark. - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -3- 11. Perfect agrees that Perly shall have the right of first refusal to supply maps or mapping software for use in its service provided that the price and quality of Perly's offerings shall be at least equal to Perfect's current or proposed supplier. This right shall be subject to any previous agreement or contract with Perfect and a third party. Perly shall have the onus to advise Perfect when it has maps or map software where Perfect is operating. 12. The term of this license shall be [*] from its date, subject to earlier termination and to renewal as set forth below. 13. Perfect shall have the right to renew this agreement on the same terms and conditions as those set forth here within for successive periods of one year each by notice given to Perly at least 45 days before the expiry this agreement or any renewal, and upon payment by Perfect to Perly of a Paymment of [*] for each one year renewal, but no such renewal shall be effective if Perfect is in breach of any term of this agreement, either at time of notice or renewal. 14. If Perfect breaches this agreement, and if such breach is not remedied within 45 days after notice of the breach is given by Perly to Perfect, then Perly may terminate this agreement including any renewal thereof. 15. This agreement and any renewal thereof shall terminate if Perfect becomes bankrupt or insolvent, or makes an assignment for the benefit of creditors, or if all or any part of its business is placed in the hands of a receiver or trustee, or if it seeks the benefit of any statute for the protection of creditors or fails to meet its debts in general as they become due, or if it ceases for a continuous period of six months to use the mark CITYSEARCH for the Internet listings in question. 16. Perfect agrees that on termination or expiry of this agreement, it will promptly cease use of the mark CITYSEARCH and will not thereafter use or advertise the mark CITYSEARCH or any word, design, trademark or trade name which is, or any part of which is, similar to or confusingly similar with the mark CITISEARCH or CITYSEARCH, whether as a part of its corporate name or otherwise. 17. It is agreed that clauses 7.9 and 16 will survive the termination or expiry of this agreement and will remain in full force and effect at all times. 18. All notices given under this agreement will be considered properly given if they are sent by facsimile, courier, or registered or certified mail to the addresses of the parties as set forth above or to such other addresses as the parties may in writing advise. Notices sent by facsimile or courier will be considered given when received. Notices sent by registered or certified mail will be considered given seven business days after being mailed if there is no postal interruption in effect which would delay their delivery. 19. [*] - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -4- 20. This agreement shall be governed by the laws of Ontario, Canada and all disputes relating to the subject matter thereof shall be resolved by appropriate tribunals in Ontario, Canada, whose decisions will be binding on the parties. 21. This agreement will be binding upon and will enure to the benefit of the parties and their respective permitted successors and assigns. IN WITNESS OF WHICH the parties have duly executed this agreement under the hands of their properly authorized officers. PERLY INC. By: [SIGNATURE ILLEGIBLE] ----------------------- Title: President PERFECTMARKET INC. By: /s/ Charles Conn III ----------------------- Title: President & CEO Amendment of License Recitals: 1. Perly Inc. ("Perly") and PerfectMarket Inc. (predecessor to CitySearch Inc., "CS", collectively the "Parties," executed that certain license agreement dated March 9, 1996 (the "License"), whose subject matter is the trademark "CITYSEARCH" described more fully therein (the "Mark"). 2. Perly is the owner of registration number 365856 for the trademark "CITYSEARCH" and recresents that this is a valid registration. 3. The Parties wish to amend the License to include Canada. Therefore, 1. The License is hereby amended as follows: a. Paragraph 1, line 4: "except for Canada" is deleted. b. Paragraph 4, line 2: "(excluding Canada)" is deleted. 2. The Parties acknowledge that the purpose of this amendment is for Perly to grant CS a license to use the Mark in Canada pursuant to the terms and conditions contained in the License. 3. In partial consideration for this amendment CS agrees to pay to Perly a sum of U.S. [*], receipt of which is hereby acknowledged. 4. The parties acknowledge that the U.S. [*] payment will satisfy all payment obligations with respect to Canada pursuant to paragraph 4 of the License. 5. If the Parties further amend the License with respect to any terms and conditions therein including, but not limited to assigning the Mark to CS, the U.S. [*] amount will be applied toward CS's payment obligations, if any, under the further amendment. 6. The Parties will take all necessary actions with respect to the Canadian Trademark Office to record or otherwise validate the License and this amendment, including, without limitation, the filing, at CS's expense, of a Canadian application for the Mark, provided that no such Canadian application will be filed earlier than one month from the date hereof without CS's consent. Perly, Inc. CitySearch Inc. By: [SIGNATURE ILLEGIBLE] By: /s/ Charles Conn III --------------------- --------------------- Its: President Its: Chief Executive Officer --------------------- Date:Mar 14 1997 Date: 18 March 1997 -------------------- -------------------- - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. EX-10.6 5 MARKETING AGREEMENT EXHIBIT 10.6 EXECUTION COPY MARKETING AGREEMENT This Marketing Agreement (this "Agreement") is entered into this 26th day of May 1998, by and between CITYSEARCH, INC., a Delaware corporation ("Company"), and AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC., a New York corporation ("AMEX"). WHEREAS, Company is engaged in, among other things, the business of promoting, selling and providing to merchant establishments services associated with the World Wide Web (the "Web") Internet sites; and WHEREAS, Company and AMEX are parties to that certain Series E Preferred Stock Purchase Agreement and related exhibits; WHEREAS, AMEX desires to have offered, and to participate with Company in the offering of the Service (as defined below), to certain of AMEX's current and future merchants that accept the charge, credit, stored value, smart and other cards offered for use and acceptance on the American Express network (the "AMEX Merchant Customers") on the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the mutual promises and covenants contained in this Agreement, the parties hereto agree as follows: 1. THE SERVICE: ------------ (a) AMEX hereby retains Company, and Company hereby agrees, to provide AMEX Merchant Customers with a development and hosting service for AMEX Merchant InfoSites (as defined in subsection (b) below) and with the ability to offer certain promotions over the Web (such service as offered or modified by Company from time to time, the "Basic Service;" the Basic Service as offered on the date hereof is more specifically described in Exhibit A hereto), with changes and enhancements thereto --------- as developed by Company from time to time specifically for AMEX and approved by AMEX and Company (such changes and enhancements, the "Enhancements"; the Basic Service and such Enhancements, collectively the "Service"). The Service shall accord with the terms of this Agreement. The Enhancements (including by way of example additional services, reduced pricing or incentive offers) will be exclusively offered to AMEX Merchant Customers as described in Section 7(a)(i). AMEX reserves the right, subject to the Company's systems capabilities, not to include any Enhancement to AMEX Merchant Customers identified by AMEX. AMEX will consult with the Company from time to time as to procedures for excluding Enhancements for particular AMEX Merchant Customers. - -------------- [*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -1- (b) The Service shall include, without limitation, the Company's production and delivery via the Web of comprehensive local city guides which will provide, to consumers who access the Company's Web sites (together with the Company's national home page, the "Company Local Sites") or Web sites that are offered by Company's licensees that are permitted to participate in the Service (the "Partner-Led Market Sites"; and together with the Company Local Sites, the "CitySearch Web Sites"), up-to-date localized information regarding arts and entertainment, community activities and events, recreation, and news. The Company, in connection with the Service, shall create and host for AMEX Merchant Customers custom Web sites ("AMEX Merchant InfoSites"), which will be linked to the appropriate Company Local Sites. Company shall use commercially reasonable efforts to have AMEX Merchant InfoSites linked to appropriate Partner-Led Market Sites as requested by AMEX. (c) AMEX Merchant InfoSites shall contain, at AMEX's election, trademarks or service marks of AMEX in a manner determined by AMEX. The design and location of such trademarks or service marks shall be appropriate in relation to the design and graphical user interface as the parties shall agree. Without limiting the foregoing, the AMEX Merchant InfoSites shall contain such messages and such trademarks as the parties shall reasonably determine. (d) AMEX shall determine the eligibility of AMEX Merchant Customers that may enroll in the Service, provided that Company shall be entitled to comment on and approve such eligibility criteria, which approval shall not be unreasonably withheld. 2. E-COMMERCE: ---------- (a) As used herein: (i) "AMEX E-Commerce Software" shall mean collectively, the High-End E-Commerce Software and the Low-End E-Commerce Software; (ii) "Commercially Viable" shall describe products and services that are generally commercially available and that are competitive in price and functionality with comparable products or services offered by third parties. (iii) "E-Commerce Authorization" shall mean the process via the Web for receiving approval from AMEX and other credit, charge, debit, stored valued and smart card issuers of E-Commerce Transactions pursuant to applicable card acceptance agreements between AMEX or such other issuers and Merchant Enrollees; (iv) "E-Commerce Processor" shall mean the agent on behalf of each Merchant Enrollee that processes the E-Commerce Authorizations; -2- (v) "E-Commerce Transaction" shall mean, collectively, the High-End E-Commerce Transaction and the "Low-End" E-Commerce Transaction; (vi) "High-End E-Commerce Software" shall mean the software, owned or licensed by AMEX, which provides "high-end" E-Commerce Transaction capabilities to the AMEX Merchant InfoSites, the Company Local Sites and certain permitted Partner-Led Market Sites. Certain current requirements of such "high-end" capabilities, which may be modified from time to time, are set forth on Exhibit B hereto; --------- (vii) "High-End E-Commerce Transaction" shall mean any purchase of goods or services from a Merchant Enrollee by Cardholders (as defined in Section 3(a)(i)) or any other holders of credit, charge, debit, stored valued and smart cards via the Web that utilizes the High-End E-Commerce Software. Such purchase shall be made from any AMEX Merchant InfoSite, any Company Local Site or any participating Partner-Led Market Site; (viii)"Low-End E-Commerce Software" shall mean the electronic commerce software owned or licensed by AMEX, which provides "low-end" E- Commerce Transaction capabilities to the AMEX Merchant InfoSites, the Company Local Sites and any participating Partner-Led Market Sites. Certain current requirements of such "low-end" capabilities, which may be modified from time to time, are set forth on Exhibit C hereto. --------- (ix) "Low-End E-Commerce Transaction" shall mean any purchase of goods or services from a Merchant Enrollee by Cardholders or any other holders of credit, charge, debit, stored valued and smart cards via the Web that utilizes the Low-End E-Commerce Software. Such purchase shall be made from any AMEX Merchant InfoSite, any Company Local Site or any Partner-Led Market Site; (x) "Merchant Enrollee" shall mean any AMEX Merchant Customer that enrolls in the Service. (b) Company agrees to develop an electronic commerce capability for the Service which will allow individuals who access any Company Local Site, any AMEX Merchant InfoSites, or participating Partner-Led Market Sites, to conduct E-Commerce Transactions. Upon execution of an E- Commerce Transaction (e.g., submission of all data necessary to complete such transaction), a message shall be displayed, in a form and content reasonably requested by AMEX, which shall indicate that such E-Commerce Transaction is being processed by AMEX. (c) [*] --- (i) E-Commerce Processor [*] - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -3- [*] During the term of this Agreement, AMEX E-Commerce Processor pricing, taking into account all related fees, and functionality will be comparable to pricing and functionality for competing processor services. - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -4- (ii) High-End [*]. (A) [*] The design and location of the message or icon shall be appropriate in relation to the design and graphical user interface as agreed by the parties. (B) Provided that AMEX has committed to market the Service to AMEX Merchant Customers in addition to those identified in Section 4(b)(ii) hereof after the commencement of the third year of this Agreement, then the provisions of subsection (c)(ii)(A) hereof shall extend for so long as AMEX continues to market the Service to AMEX Merchant Customers at levels no less than those described in Section 4(b)(ii) on an annual basis. (iii) Low-End [*]. If Company chooses to offer a Low-End E- Commerce Software solution to any merchant customer of the Company, then Company shall give AMEX written notification thereof. AMEX shall have sixty (60) days from the date of its receipt of such notice to provide Company with a commercially viable Low-End E-Commerce Software solution to offer to AMEX Merchant Customers and other merchant customers of Company. (A) [*] (B) [*] - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -5- [*] No AMEX Merchant Enrollee that uses a third party E- Commerce Software solution selected by the Company in accordance with the terms of this subsection (iii)(B) shall be required to terminate its low-end software solution relationship with such third party. (C) [*] (d) [*] (e) Company agrees to promote to its licensees the AMEX E-Commerce Software and AMEX's capabilities as the E-Commerce Processor. Company agrees to use commercially reasonable efforts to induce its licensees that own or operate the Partner-Led Market Sites to utilize the AMEX E-Commerce Software and to utilize AMEX as the exclusive E-Commerce Processor. Company agrees to notify its potential licensees of Company's relationship with AMEX, to provide AMEX with introductions to such licensees, to facilitate technical discussions with such licensees regarding the E-Commerce Software and E-Commerce Processor capabilities, and to participate in meetings with such potential licensees and AMEX at AMEX's reasonable request. (f) Company agrees to negotiate in good faith with AMEX the definitive terms of the Merchant Hosting and Distribution License Agreement in connection with the licensing by Company of the AMEX E-Commerce Software. Furthermore each Merchant Enrollee that desires to allow its customers to conduct E-Commerce Transactions shall execute and deliver a license agreement, in a form provided by AMEX, in connection with the sub-licensing from Company of the AMEX E-Commerce Software. (g) During the term of the Agreement, AMEX agrees to provide to Company the AMEX E-Commerce Software and the E-Commerce Processor that AMEX makes generally available to the public. [*] - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -6- [*] (h) Nothing in this Section 2 shall be construed to limit Company's ability to offer online transaction capabilities provided by third parties, retailers, merchandisers to its customers or users or to provide links to other web sites outside of the Company's platform that provides E-Commerce Transaction capabilities. 3. PROMOTIONAL SITE: ---------------- (a) As used herein: (i) "AMEX Merchant Offer" shall mean each specific offer listed in the Promotional Site and the National Promotional Site from AMEX Merchant Customers exclusively to holders ("Cardholders") of a charge, credit, debit or stored value card issued by AMEX or its licensee and accepted on the AMEX network (the "AMEX Card") and requiring payment using an AMEX Card. Such offers shall include, without limitation, price discounts and free or discounted products; (ii) "National Promotional Site" shall mean a web page or web pages that may or may not be developed, maintained or hosted by the Company, which web page or web pages are designed to collect and display, on a national (rather than local) level, AMEX Merchant Offers for presentation to Cardholders; (iii) "Promotional Site" shall mean a web page or web pages located exclusively within the Company Site, developed and maintained by the Company for the purpose of presenting AMEX Merchant Offers to Cardholders. (b) AMEX will make commercially reasonable efforts to publish AMEX Merchant Offers solicited by AMEX in the Promotional Site. (c) AMEX Merchant Offers that are solicited by Company shall appear in the Promotional Site and AMEX will make commercially reasonable efforts to publish such Company solicited AMEX Merchant Offers in the National Promotional Site. (d) The following AMEX Merchant Offers will link back to the Promotional Site or to the related AMEX Merchant InfoSite unless the related AMEX Merchant Customer elects otherwise: any AMEX Merchant Offer that is (i) solicited by AMEX and (ii) derived from an AMEX Merchant Customer that is located in a market in which the Company has a Company Local Site which is located on the National Promotional Site. (e) The Company agrees to develop the Promotional Site and make the related AMEX Merchant Offers accessible to Cardholders, which may include, without limitation, - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -7- Cardholders who conduct E-Commerce Transactions. The Company agrees to use commercially reasonable efforts to develop the Promotional Site within six (6) months of AMEX's written notice to Company of AMEX's desire to launch such Promotional Site. The Promotional Site shall be branded prominently with an AMEX trademark as selected by AMEX and agreed to by Company. Company agrees to post on the home page of the appropriate Company Local Site an icon that shall hypertext link to the Promotional Site. AMEX agrees to place an icon and hypertext link on pages of the National Promotional Site as the parties shall agree. (f) The Company agrees to grant AMEX an option for the Company to develop a National Promotional Site where AMEX Merchant Offers may be published and available to Cardholders, which may include, without limitation, Cardholders who conduct E-Commerce Transactions. The Company agrees to use commercially reasonable efforts to develop such National Promotional Site within six (6) months of AMEX's written notice to Company of AMEX's desire to launch such National Promotional Site. Upon receipt of such notice, Company agrees to negotiate in good faith with AMEX on additional terms, conditions and fees for the Company's development of the National Promotional Site. The National Promotional Site shall be branded prominently with an AMEX trademark as selected by AMEX and agreed to by Company. (g) If Company creates a site (the "Similar Site") similar to the Promotional Site and a Merchant Enrollee posts an offer or promotion in both the Similar Site and the Promotional Site, then Company agrees to use commercially reasonable efforts to assure that such offer or promotion posted in the Similar Site shall not have terms more favorable than the AMEX Merchant Offer posted in the Promotional Site. 4. PROMOTION OF THE SERVICE: ------------------------- (a) AMEX and Company shall promote the Service to AMEX Merchant Customers by participating in promotional programs (as defined below) in the manner and to the extent provided in this Agreement. From time-to-time during the term of this Agreement AMEX may engage in other solicitation activities relating to the Service. (b) Programs: --------- (i) The parties acknowledge that they intend to offer the Service during the term of this Agreement through various promotional programs and channels as the parties shall mutually agree ("Programs"). All marketing and other promotional materials (including without limitation, solicitation, fulfillment, customer service and retention materials) developed hereunder in connection with any Program or the Service shall be referred to as "Promotional Materials." In the event of a disagreement, AMEX shall have the final controlling rights on all marketing and promotion of the Service (including but not limited to presentation, copy, format, design, script development, etc.) so long as such marketing and promotion do not violate any contracts, laws or -8- regulations. The timing and scope (i.e., size and frequency of solicitations) will be mutually approved by both parties, which approval shall not unreasonably withheld. (ii) The initial Program shall involve the marketing of the Service, including without limitation the delivery of Promotional Materials, to one hundred thousand (100,000) AMEX Merchant Customers located in geographic areas in which Company operates the Basic Service. Such Program shall commence no later than ninety (90) days from the date hereof. AMEX shall identify such AMEX Merchant Customers in accordance with criteria that AMEX shall identify to Company. (c) Promotional Materials: Company and AMEX shall prepare Promotional --------------------- Materials for the Service. Such materials shall be designed to solicit Merchant Enrollees. The Company shall be solely responsible for verifying the accuracy of all statements relating to the Service contained in the Promotional Materials. (d) Performance Standards: Company shall fulfill the requirements set --------------------- forth in the following exhibits attached hereto and made a part hereof: Exhibit A Description of the Basic Service --------- Exhibit D Financial Arrangement --------- Exhibit E Customer Service --------- The requirements set forth in the foregoing shall be deemed the performance standards (the "Performance Standards") hereunder. The parties hereto agree and acknowledge that the failure of the Company to fulfill the requirements of the Performance Standards shall constitute a material breach of this Agreement. (e) Solicitation and Selection of AMEX Merchant Customers. ------------------------------------------------------ (i) AMEX shall provide to Company a list of AMEX Merchant Customers which Company may solicit for enrollment in the Service. Such solicitation shall be conducted by Company in person by the Company's sales force or by any other method mutually approved by the parties. Each proposed Merchant Enrollee shall execute a Service agreement in the form of Schedule 1 hereto as amended ---------- from time to time and as approved by AMEX. (ii) Company shall provide to AMEX the sales materials used by Company or its agents to solicit AMEX Merchant Customers. All such materials shall be subject to AMEX's review and comment and shall not be used if, in AMEX's sole discretion, the materials are deemed unacceptable. (f) Costs and Expenses: ------------------- (vi) Except as set forth in subsection (ii) below, all costs and expenses associated with a -9- Program or the Service, including without limitation costs and expenses related to merchant solicitations, AMEX Merchant InfoSite creation and development, market research, market tests, public relations, list development, ad agency fees, software development and Customer Service, whether incurred by the Company or reasonably incurred by AMEX in connection with its obligations hereunder, shall be payable by the Company. Any reimbursable amounts incurred by AMEX shall conform with the requirements set forth in subsection (A) below or otherwise as approved by Company in writing. Any amounts incurred by AMEX shall be invoiced to the Company, with reasonable documentary support for the amounts stated therein, and paid by Company within thirty (30) days of its receipt thereof. [*] (A) Reimbursable costs and expenses incurred by AMEX shall conform with the following: postage, printing and creative development fees (including without limitation fees for creative agencies) not to exceed [*] per year and market research expenses not to exceed [*] per year. Without limiting the foregoing, AMEX agrees to make reasonably commercial efforts to inform Company of AMEX's proposed expenditure of amounts greater than $5,000 that are reimbursable hereunder. (ii) AMEX shall be responsible for costs and expenses incurred by AMEX in connection with any direct mail or telemarketing solicitations of AMEX Merchant Customers. (iii) AMEX shall invoice to Company any amounts reimbursable by Company hereunder, with reasonable documentary support for the amounts stated therein. Company shall pay such amounts within thirty (30) days of its receipt thereof. Company shall pay interest at the rate of eighteen percent (18%) per annum on all such amounts paid after the due date, and a penalty of five percent (5%) of such amounts due that is not received by AMEX within thirty (30) days of the original due date. (g) AMEX's Sponsorship Commitments. AMEX agrees to spend a minimum of [*] within 90 days of the execution of this Agreement with Company in connection with advertising and sponsorship Programs, which may include, but not be limited to, banners, content sponsorships, contests and other service promotions. AMEX and Company will jointly determine the nature of the advertising expenditure including, but not limited to, specific programming, markets, sponsorships, banner campaigns, etc. The advertising will be priced favorably to AMEX at discounted rates relative to other Company advertisers of similar size and nature, and as mutually agreed upon by both parties. [*] Dedicated account support, campaign management and post-sales follow- up and tracking reports will be provided to AMEX by Company on a timely basis. [*] - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -10- [*] 5. CUSTOMER SERVICE: ---------------- (a) The Company agrees to provide customer service ("Customer Service") to AMEX Merchant Customers in accordance with the standards set forth on Exhibit E hereto. --------- (b) Customer Service shall be provided to AMEX Merchant Customers for the term of their respective enrollment in the Service. [*] (c) The Company shall provide AMEX with the following reports, at the time and in the form and substance mutually agreed upon by the parties hereto. (i) AMEX Merchant Customer report including: (A) total number of Merchant Enrollees; (B) Merchant Enrollees' names; (C) Merchant Enrollees' Merchant Account numbers; (D) Merchant Enrollees' dates of enrollment; (ii) Revenue report setting forth revenues generated by the Service; (iii) Customer Service report including: (A) number of AMEX Merchant Customers contacting Customer Service, (B) wait/response time for telephone, and (C) length of telephone calls; (iv) Attrition report including: (A) total number of the Merchant Enrollees that cancel their enrollment in the Service; (B) reasons disclosed to Company for such AMEX Merchant Customers' discontinuing their respective enrollment in the use of the Service; and (C) date of cancellation by such Merchant Enrollees. The report required by (i) above shall be provided on a weekly basis for the first three (3) months of the Service thereafter it shall be provided on a monthly basis. The report required by (iv) above shall be provided on a quarterly basis. The other reports described above will be provided to AMEX on a monthly basis or as otherwise jointly agreed by AMEX and the Company. 6. FINANCIAL ARRANGEMENT: ---------------------- - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -11- (a) AMEX Merchant Customers enrolling in the Service shall be charged the price or prices determined by Company and approved by AMEX (the "Enrollment Fees"). Company shall be responsible for billing and collecting all Enrollment Fees. Such Enrollment Fees will be billed by invoice, automatic debit from a demand deposit account, or, when available, to the AMEX Merchant Customers' American Express Corporate Purchasing Card account. Payment schedules and procedures will be set forth in detail on Exhibit D. --------- (b) Company understands that it will be responsible for paying any charges incurred in connection with the Acceptance Agreements (as defined in Section 13(d) below), including the payment of any discount fees payable thereunder. (Any revenues to AMEX generated by the terms of the Acceptance Agreements shall not be calculated as part of the gross revenues for purposes of Exhibit D hereto.) --------- [*] (iii) During the term of this Agreement, AMEX shall be the preferred travel agency and financial services sponsor of the Service, the AMEX Merchant InfoSites and the Company's Local Sites. Company agrees to promote AMEX as such preferred sponsor in the manner reasonably requested by AMEX and as appropriate for the AMEX sponsorship commitment. The Company will make commercially reasonable efforts to notify AMEX of sponsorship opportunities in other areas and to grant AMEX a right of first refusal to sponsor such other areas on terms no less favorable than the sponsorship opportunities the Company proposes to grant to a third party. The foregoing shall not be construed to restrict Company from accepting banner - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -12- advertisements or regional sponsorships from third party travel agencies or financial services providers. (b) For the Benefit of Company. -------------------------- (i) As used herein: (A) "Non-Solicitation Period" shall mean the six (6) month period commencing on the date AMEX drops mail in connection a Service Promotion; (B) "Service Promotion" shall mean the direct mail solicitation, billing statement inserts and proactive telemarketing solicitation of AMEX Merchant Customers for enrollment in the Service; (C) "Similar Service" shall mean a product or service substantially similar to the Service or the Basic Service and offered by Microsoft Sidewalk, Digital City, Cox Interactive Media or the New York Times Company. (ii) [*] (iii) AMEX agrees to use commercially reasonable efforts to have the AMEX proprietary sales force which markets to AMEX Merchant Customers Web-related products and services to include the Service in its schedule of available products. AMEX shall use such efforts only in markets where the Company operates a Company Local Site or in a Partner-Led Market Site participating with AMEX pursuant to this Agreement. Furthermore, AMEX shall use such efforts in connection with its sales efforts and inbound sales calls. (iv) AMEX agrees to identify the Service as the AMEX sponsored online local guide and service which develops and hosts merchant Web sites. AMEX agrees to coordinate with Company on the specific language in connection with such identification and the Company's preferential status. Furthermore, AMEX shall use such efforts in connection with its proprietary sales force efforts and inbound sales calls. (v) The rights of Company under this Section 7(b) shall be subject to the terms set forth in Section 2(c)(iii)(C) hereof. 8. ADVERTISEMENTS. Company agrees to comply with the Advertisement Policy set -------------- forth in Exhibit F hereto. --------- 9. INDEMNIFICATION AND HOLD HARMLESS: ---------------------------------- - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -13- (a) Each party hereto (an "Indemnitor") shall indemnify and hold harmless the other party, its parent, subsidiaries, affiliates successors, assignees, directors, officers, agents and employees (each an "Indemnitee") from and against any loss, damage, cost, expense, liability, and settlement, including without limitation, any reasonable attorney fees and court costs (each of the foregoing a "Claim") reasonably incurred by any Indemnitee which Claim arises out of or in connection with (i) the intentional or negligent act or omission of the Indemnitor or its officers, directors, employees, contractors or agents (collectively, the "Agents") in the course of the performance of Indemnitor's duties and obligations under this Agreement; (ii) the failure of Indemnitor or its Agents, as the case may be, to comply with the terms of this Agreement; or (iii) the failure of Indemnitor (including without limitation its Agents who perform on behalf of Indemnitor hereunder) to comply with its obligations under any and all laws, rules, or regulations applicable to Indemnitor, its Agent or the Service, as the case may be. (b) Each Indemnitee seeking indemnification under this Agreement shall give prompt notice to Indemnitor along with such Indemnitee's request for indemnification, of any Claim for which it is seeking indemnification. The parties understand and further agree that no settlement of an indemnified Claim shall be made by an Indemnitee without the concurrence of Indemnitor. Indemnitor shall control the settlement or defense of any Claim; provided, however, that the Indemnitee may, at its cost, engage its own attorneys. The Indemnitee will fully cooperate with Indemnitor to enable it to fulfill its obligations with respect to such Claim. (c) IN NO EVENT WILL EITHER PARTY HERETO BE RESPONSIBLE FOR ANY INCIDENTAL, INDIRECT, CONSEQUENTIAL, SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES OF ANY KIND, INCLUDING WITHOUT LIMITATION LOST REVENUES, LOSS OF PROFITS OR LOSS OF BUSINESS. (d) The provisions of this Section 9 shall survive the termination of this Agreement. 10. PUBLICITY: Except as may be required by law, no party hereto shall ---------- issue advertising, promotional activity, press or publicity release relating to the Service or this Agreement without securing the prior written consent of such other party. 11. CONFIDENTIALITY: ---------------- (a) Company and AMEX acknowledge that as a result of the performance of their respective responsibilities under this Agreement, AMEX will obtain access to confidential and proprietary information of the Company and Company shall obtain access to confidential and proprietary information concerning Cardholders, AMEX's business, customers, methodologies and strategies (all such information herein the "Confidential Information"). All such Confidential Information of the other party shall be deemed to be confidential and proprietary unless such Confidential Information: (i) is clearly intended for public distribution by AMEX, in the case of AMEX Confidential Information, or by -14- Company, in the case of Company's Confidential Information; (ii) is known by the receiving party prior to its receipt thereof; (iii) is lawfully obtained by the receiving party from a third party; or (iv) is independently developed by the receiving party without use of any portion of such Confidential Information which can be reasonably demonstrated by written record. (b) This Agreement, including all exhibits and schedules hereto, is hereby designated as confidential within the meaning of this Section 11 and shall not be disclosed to a third party unless disclosure is required by government regulation or court order. (c) Company and AMEX shall not use any of the other party's Confidential Information for any purpose other than to perform their respective responsibilities under this Agreement. Company and AMEX shall each take the same measures to protect the Confidential Information of the other party received by it as it prudentially should take with respect to its own Confidential Information, including, but not limited to, instructing its employees, vendors, agents, and independent contractors (excluding only those retained to provide the Service) of the foregoing and requiring them to be bound by appropriate confidentiality agreements. (d) AMEX shall have all rights and interests to the list of AMEX Merchant Customers and the information contained thereon. Company (i) shall not solicit AMEX Merchant Customers for any reason other than in accordance with the terms of this Agreement or as requested by AMEX in writing and (ii) may neither communicate with, nor permit its licensee or designee to communicate with, Merchant Enrollees other than in accordance with the terms of this Agreement without the prior written consent of AMEX. Notwithstanding the foregoing, the Company may market products and services to, or communicate with, its own merchant customers and potential merchant customers provided that the source of the information used by the Company to market to or communicate with such merchant customer or potential merchant customer is neither AMEX nor the lists provided by or on behalf of AMEX under this Agreement. (e) It is understood and agreed by the parties hereto that all files of Merchant Enrollees supplied to the Company in connection with the Service (including, but not limited to, the master file tape for the Service) are and always have been the exclusive property of AMEX, and will be turned over to AMEX, at no cost to AMEX, upon termination of this Agreement. (f) Nothing in this Agreement shall be deemed to prevent Company or AMEX from providing information to their respective independent contractors who are retained to assist in the performance of such party's obligations hereunder provided that the conditions set forth herein are complied with by such party and its independent contractors and such independent contractors are not competitors of the other party. -15- (g) Each party acknowledges that irreparable injury would be caused to the other party in the event of unauthorized use of such other party's confidential information, and agrees that preliminary and permanent injunctive relief would be appropriate in the event of breach of this Section 11. (h) Upon termination or expiration of this Agreement and at the request and option of AMEX or Company, as the case may be, each of AMEX and Company agrees promptly (i) to return the confidential information of the other party to such party or (ii) destroy the confidential information of the other party and acknowledge in a sworn affidavit that all such confidential information has been destroyed. (i) Section 11 in its entirety, shall survive the termination of this Agreement. 12. DATA AND RECORDS: Acknowledging the confidentiality of AMEX Merchant ----------------- Customer data, Company hereby agrees to the terms of the AMEX Data Access Document attached hereto as Exhibit G and the AMEX Merchant Customer Data --------- and Data Related Rights schedule attached hereto as Exhibit I the terms of --------- which are hereby incorporated herein and made a part hereof. Company will comply with the exhibits entitled Security attached hereto as Exhibit J and --------- AMEX Audit Rights attached hereto as Exhibit K, the terms of both are --------- incorporated herein by reference and made a part hereof. In the event Company uses the services of third party vendors, representatives or subcontractors, Company shall be responsible for ensuring their compliance with the terms of this Agreement, and shall ensure that all such vendors, representatives or subcontractors execute the Non-Disclosure Agreement substantially similar to that attached hereto as Exhibit L. With respect to --------- access of AMEX data via a computer, Company's employees and agents will follow the Terminal Rules set forth in Exhibit M. --------- 13. REPRESENTATIONS, WARRANTIES & COVENANTS: ---------------------------------------- (a) Each party hereto represents and warrants that it has full power and authority to execute this Agreement and to take all actions required by, and to perform the agreements contained in, this Agreement, and that each party's respective obligations under this Agreement do not conflict with its obligations under any other agreement by which the such party is bound. (b) Each party represents, warrants and covenants that the performance of its respective obligations under this Agreement in connection with the Service complies and will comply with all applicable federal, state, local and foreign laws and regulations. (c) Each party represents, warrants and covenants that each of its respective employees assigned to perform services with respect to the Service has and will have the skill and background to perform such assigned services in a competent and professional manner, and to act in compliance with all applicable laws and regulations. -16- (d) Company represents, warrants and covenants that it is and shall continue to be during the terms of this Agreement a party in good standing to (i) a card acceptance agreement with AMEX (the "Retail Acceptance Agreement") for the acceptance of the American Express(R) Cards and (ii) a corporate purchasing card acceptance agreement with AMEX (the CPC Acceptance Agreement"; and together with the Retail Acceptance Agreement, the "Acceptance Agreements") for the acceptance of the American Express(R) Corporate Purchasing Cards. (e) Company covenants that the Service shall comply with AMEX's policies, as amended from time to time, relating to privacy of customer data. Attached hereto as Exhibit N is a copy of AMEX's online privacy --------- policies in effect on the date hereof. 14.TRADEMARKS: Notwithstanding any other provision of this Agreement, neither ---------- party shall have the right to use the other party's registered or unregistered trademarks, service marks, or trade names, or to refer to the other party directly or indirectly, in connection with any product, promotion or publication without the prior written approval of that party. 15.INTELLECTUAL PROPERTY OWNERSHIP: -------------------------------- (a) As used herein "Developed Materials" shall mean, hereunder, all inventions, methods, techniques, works of authorship, computer software, computer upgrades, computer programs, service providers, vendors information, training materials, telemarketing scripts, computer screens, reports, data, any other proprietary or confidential information made, created, developed or written hereunder and other intellectual property created, developed or written in accordance with the activities contemplated hereunder. In the event any Developed Material (i) is fully paid for by AMEX and Company has not provided material creative or developmental input therein (including without limitation provision of proprietary or confidential information), then such Developed Material shall be deemed the sole property of AMEX and any use thereof by Company shall require consent thereto by AMEX; (ii) is substantially paid for by AMEX and Company has had material creative or developmental input therein (including without limitation provision of proprietary or confidential information), then such Developed Material shall be deemed the property of AMEX with Company having a non- exclusive, royalty-free right of use thereof; (iii) is substantially paid for by Company and AMEX has had material creative or developmental input therein (including without limitation provision of proprietary or confidential information), then such Developed Material shall be deemed the property of Company with AMEX having a non-exclusive, royalty-free right of use thereof; and (iv) is fully paid for by Company and AMEX has not provided material creative or developmental input therein (including without limitation provision of proprietary or confidential information), then such Developed Material shall be deemed the sole property of Company and any use thereof by AMEX shall require consent thereto by Company. As used herein, "AMEX Property" shall mean the Developed Material as described in (i) and (ii) above; "Company Property" shall mean the Developed Material as described in (iii) and (iv) above. -17- (b) All Developed Materials shall be deemed Confidential Data and Information and subject to the confidentiality provisions of this Agreement. (c) Nothing herein shall be construed to restrict, impair or deprive Company or AMEX of any of their respective rights or proprietary interests in technology or products that existed prior to and independent of the performance of their respective obligations hereunder. 16. INTELLECTUAL PROPERTY INFRINGEMENT ---------------------------------- (a) Each party agrees to defend and/or handle at its own expense, any claim or action against the other party or its affiliates (including without limitation, its parent, subsidiaries, officers and directors) for any actual or alleged infringement of any intellectual or industrial property right, including, without limitation, trademarks, service marks, patents, copyrights, misappropriation of trade secrets or any similar proprietary rights, based upon the Service or any portion thereof furnished or utilized by such party or based on the other party's use thereof. Each party further agrees to indemnify and hold the other party and its affiliates harmless from and against any and all liabilities, losses, costs, damages and expenses (including reasonable attorneys' fees) associated with any such claim or action. Each indemnifying party shall have the sole right to conduct the defense of any such claim or action and all negotiations for its settlement or compromise, unless otherwise mutually agreed to in writing. (b) If any portions of the Service become, or in Company's opinion are likely to become, the subject of any claim or action as described in subsection (a) above, then, Company, at its expense may either: (i) procure for AMEX the right to continue using same as contemplated hereunder; (ii) modify same to render same non-infringing (provided such modification does not adversely affect the use of the Service as contemplated hereunder); or (iii) to AMEX's satisfaction, replace same with equally suitable, functionally equivalent, compatible, non- infringing products, materials or services. 17. NOTICES: All notices, consents, requests, instructions, approvals, and -------- other communications made, required or permitted hereunder (each herein, a "Notice") shall be given in writing and delivered to the receiving party to its respective address set forth below (i) by personal delivery to the individual identified below, (ii) by certified or registered mail (return receipt requested), or (iii) by a nationally recognized courier. The effective date of such Notice shall be deemed to be the date upon which any such Notice is personally received by the addressee. Any party hereto may change its address set forth below by written notice to the other party hereto in accordance with the terms of this Section: (a) If to AMEX: American Express Travel Related Services Company, Inc. American Express Tower -18- 3 World Financial Center New York, New York 10285-4221 Attn: Pierric Beckert Vice President Interactive Enterprise Development American Express Relationship Services Copy to: American Express Travel Related Services Company, Inc. General Counsel's Office American Express Tower 3 World Financial Center New York, New York 10285-4909 Attn: Francis M. Caesar Counsel for AERS (b) If to Company: CitySearch, Inc. 790 East Colorado Boulevard Suite 200 Pasadena, California 91101 Attn: Charles Conn III -19- Copy to: CitySearch, Inc. 790 East Colorado Boulevard Suite 200 Pasadena, California 91101 Attn: Douglas McPherson Chief Legal Officer 18. TERM AND TERMINATION: --------------------- (a) This Agreement shall take effect upon the date hereof (the "Effective Date"), and continue until [*] (including any renewal period as provided herein, the "Expiration Date") unless earlier terminated in accordance with this Section. (b) Early Termination: In accordance with the following, this Agreement ----------------- may be terminated by either party prior to the Expiration Date: (i) In the event that the other party commits a material breach or default under this Agreement which breach is not cured by the breaching party thirty (30) days from the receipt of notice to cure the breach from the non-breaching party, then the non- breaching party may terminate this Agreement in its discretion at any time after such thirty (30) day period; provided that if such cure cannot be accomplished within such thirty (30) day period, then, with the non-breaching party's consent which shall not be unreasonably withheld, such period shall be extended for such reasonable additional period as shall be necessary to effect such cure, so long as the party shall have commenced such cure within such thirty (30) day period and shall thereafter proceed diligently to complete the cure. (ii) In the event (1) of a sale or distribution of all or substantially all of the assets of Company or a sale or distribution of sufficient stock (other than pursuant to a public offering) of Company to effect a change in control or (2) that Company or its affiliate enters into the business of providing financial services or provides a financial product or service substantially similar to any of AMEX's financial products or services, AMEX may, in its sole discretion, terminate this Agreement immediately. In the event that AMEX terminates this Agreement pursuant to the preceding sentence of this Section, Company shall reimburse AMEX for reasonable out-of-pocket expenses (not to exceed $100,000) incurred in transferring all data contained within the AMEX Merchant InfoSites (excluding Company Property) at AMEX's election, to another vendor of AMEX or to AMEX itself. The expenses described in the foregoing shall include costs associated with consultants retained by AMEX in connection with such termination. Furthermore, the costs associated with Company's obligations in Section 11(e) shall not be applied against the $100,000 cap stated herein. - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -20- (iii) Either party may terminate this Agreement with immediate effect: (1) upon the institution by the other party of proceedings to be adjudicated a bankrupt or insolvent, or the consent by the other party to institution of bankruptcy or insolvency proceedings against it or the filing by the other party of a petition or answer or consent seeking reorganization or release under the Federal Bankruptcy Code, or any other applicable Federal or state law, or the consent by the other party to the filing of any such petition or the appointment of a receiver, liquidator, assignee, trustee, or other similar official of the other party or of any substantial part of its property, or the making by the other party of an assignment for the benefit of creditors, or the admission in writing by the other party of an assignment for the benefit of creditors, or the admission in writing by the other party of its inability to pay its debts generally as they become due or the taking of corporate action by the other party in furtherance of any such actions; (2) if, within 60 days after the commencement of an action against the other party seeking any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar relief under any present or future law or regulation, such action shall not have been dismissed or all orders or proceedings thereunder affecting the operations or the business of the other party stayed, or if the stay of any such order or proceeding shall thereafter be set aside; or if, within 60 days after the appointment without the consent or acquiescence of the other party of any trustee, receiver or liquidator or similar official of the other party, or of all or any substantial part of the property of the other party, such appointment shall not have been vacated. (c) Transfer Assistance: Upon the termination of this Agreement due to an -------------------- event described in Section 18(b)(i), where the material breach relates to the Company's obligations under this Agreement, Section 18(b)(ii) or Section 18(b)(iii), where the events described therein occur with respect to Company, Company shall, upon AMEX's request, provide the following assistance: (i) continue to provide the Service to the extent requested by AMEX in accordance with the Performance Standards for the remainder of all Merchant Enrollees' enrollment period up to one (1) year provided that Company has been paid for such enrollment period; (ii) provide such assistance ("Transfer Assistance") as reasonably requested by AMEX to transfer the Service to another vendor or to AMEX itself during a one- hundred eighty (180) day period following the effective date of the termination of the Agreement; (iii) answer AMEX Merchant Customers' questions regarding the Services as mutually agreed on an as needed basis; and (iv) deliver to AMEX any remaining AMEX-owned reports and documentation still in Company's possession, or at AMEX's direction, destroy all AMEX data and information in the Company's possession. The above referenced Transfer Assistance shall be provided at AMEX's expense unless otherwise provided herein or the termination is due to a material breach by Company. (d) Certain Post-Termination Rights and Obligations. ----------------------------------------------- (i) As used herein "Post-Termination Period" shall mean the one (1) year period following termination of this Agreement so long as such termination is not due to an -21- event described in the following sections: 18(b)(i), where the material breach relates to the Company's obligations under this Agreement; 18(b)(ii); or 18(b)(iii), where the events described therein occur with respect to Company. During the Post-Termination Period: (A) AMEX and Company agree that Company shall continue to provide the Service to Merchant Enrollees in accordance with the terms and conditions of this Agreement; the term of the Agreement shall be deemed extended through the expiration of the Post-Termination Period with respect to the Merchant Enrollees. Any and all solicitations by Company under this Agreement for new enrollments in the Service shall cease immediately prior to the commencement of the Post-Termination Period; (B) Company may, but is not obligated to, renew the enrollment of any Merchant Enrollee, provided that no term of such renewal enrollment shall extend for more than a twelve (12) month period. [*] (C) AMEX shall not solicit Merchant Enrollees to enroll in a service that is substantially similar to the Service. (ii) For a period of five (5) years following the termination of the Agreement, Company agrees not to promote or sponsor an AMEX Competitor on any AMEX Merchant InfoSite, regardless of whether such AMEX Merchant InfoSite is hosted or maintained by Company. As used herein, "AMEX Competitor" shall mean an entity engaged in the issuance or promotion of Charge Card Products or is engaged in the financial services business. (iii) Upon expiration of the Post-Termination Period, Company's obligations to brand any portion of the AMEX Merchant InfoSite with an AMEX trademark shall cease. 19. MISCELLANEOUS: -------------- (a) Headings: Headings stated in this Agreement are for convenience of --------- reference only and are not intended as a summary of such sections and do not affect, limit, modify, or construe the contents thereof. - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -22- (b) 21/st/ Century. No later than December, 1998, Company shall (i) -------------- manage and manipulate data in connection with the Service involving all dates from the 20/th/ and 21/st/ centuries without functional or data abnormality related to such dates; (ii) manage and manipulate data in connection with the Service involving all dates from the 20/th/ and 21/st/ centuries without inaccurate results related to such dates; (iii) have user interfaces and data fields in connection with the Service formatted to distinguish between dates from the 20/th/ and 21/st/ centuries; and (iv) represent all data in connection with the Service to include indications of the millennium, century, and decade as well as the actual year. (c) Counterparts. This Agreement may be executed in any number of ------------ counterparts, each of which shall constitute an original, but all of which together shall constitute one instrument notwithstanding that all parties are not signatories to the same counterparts. (d) Informal Resolution and Arbitration. ----------------------------------- (i) With the exception of the disputes arising under the provisions of Section 11 hereof, if that there is a dispute between the parties relating to this Agreement, the parties agree the party claiming the dispute will provide written notice of the dispute to the other party. Within thirty (30) days after receipt of the written notice, AMEX and Company will each appoint a representative with full authority to negotiate a resolution of the dispute and meet as often as is necessary in a good faith effort to resolve the dispute without the necessity of a formal meeting. In the event that representatives are unable to resolve the dispute within ninety (90) days of the date of the written notice, said dispute shall be submitted to mandatory and binding arbitration as provided below in Section 19(e)(ii). (ii) To initiate the arbitration, the disputing party shall notify the other party in writing which shall describe in reasonable detail the nature of the dispute, state the amount of the claim, specify the requested relief and name an arbitrator who has been licensed to practice law in the U.S. for at least ten years, is not an employee of AMEX or Company or an employee of an affiliate of either AMEX or Company, is experienced in representing clients in connection with commercial agreements and is impartial, neutral, disinterested, unbiased and bound by the Rules of Ethics of the ABA and AAA for neutral arbitrators and shall not have ex parte communications with the parties (Basic Qualifications). Within fifteen (15) days after the other party's receipt of the Arbitration Demand, such other party shall file and serve on the disputing party a written statement answering the claims set forth in the Arbitration Demand and including any affirmative defenses of such party, asserting any counterclaim which shall describe in reasonable detail the nature of the dispute relating to the counterclaim, and state the amount of the counterclaim and specify the requested relief and name the second arbitrator satisfying the Basic Qualifications. Within fifteen (15) days thereafter, the two party selected arbitrators shall select a third neutral arbitrator from a list provided by the AAA of potential arbitrators who satisfy the Basic Qualifications and who have no past or present relationship with the parties or their counsel except as disclosed in writing to and approved by the parties. The -23- third arbitrator selected by the two party appointed arbitrator shall serve and have sole responsibility as the "case manager". Within forty-five (45) days after the arbitration panel has been appointed, the case manager shall meet with the parties and their counsel to agree to a case management agreement which shall include the arbitration panel's commitment that they have sufficient time available for the handling of the dispute to final disposal within one hundred eighty (180) days. The arbitration will be heard by a panel of the three arbitrators so chosen and decisions of a majority of the members of the arbitration panel shall be final and subject to the provisions of Section 11 hereof. The arbitration panel shall have the power and authority and is instructed to exclude evidence on grounds of prejudice, immateriality and/or redundancy and no ruling by the arbitrator rejecting evidence on such ground shall be a ground for vacating the arbitration award. (iii) Any controversy, dispute, disagreement or claim arising out of or relating to this Agreement, or any alleged breach thereof, or the subject matter thereof, shall be settled exclusively by binding arbitration, as described in above in subparagraphs (i) and (ii), which shall be conducted in New York, New York. The arbitration panel is specifically authorized to render partial or full summary judgment as provided by the Federal Rules of Civil Procedure. In the event full or partial summary judgment is granted, the non-prevailing party may not raise as a basis for a motion to vacate an award that the Arbitration Panel failed or refused to consider evidence of bearing on the dismissed claim or issue. The Federal Rules of Civil Procedure shall apply to all discovery pursuant to the arbitration process and the Federal Rules of Evidence and Subpoena shall apply to the arbitration hearing. The party bringing a particular claim or asserting an affirmative defense shall have the burden of proof with respect to thereto. The arbitration proceeding and all testimony, filings, documents and information relating to or presented during the arbitration proceedings shall be deemed to be information subject to the confidentiality provisions of the Agreement. The arbitration panel will have no power or authority under the Commercial Arbitration Rules of the AAA or otherwise, to relieve the parties from their agreement hereunder to arbitrate or otherwise to amend or disregard any provision of the Agreement, including without limitation the provisions of this Section 19(d), except that the parties hereto expressly agree that claims pursuant to Section 11(g) hereof will not be subject to the requirements of this Section 19(d). (iv) Should an arbitrator refuse or be unable to proceed with arbitration proceedings, he/she shall be replaced by the party who selected such arbitrator or if such arbitrator was selected by the two party appointed arbitrators, by such two party appointed arbitrators selecting a new third arbitrator in accordance with the basic qualifications. (v) Any award rendered by the arbitration panel will be final, conclusive and binding upon the parties and any judgment hereon may be entered and enforced in any court of competent jurisdiction. -24- (vi) Each party will bear a pro rata share of all fees, costs and expenses of the arbitrators, and notwithstanding any law to the contrary, each party will bear all fees, costs and expenses of its own attorneys, experts and witnesses; provided, however that in connection with any judicial proceeding to compel arbitration pursuant to this agreement or to confirm, vacate or enforce any award rendered by the arbitration panel, the prevailing party in such proceeding will be entitled to recover reasonable attorneys fees and expenses incurred in connection with such proceeding, in addition to any other relief to which it may be entitled. (f) New York Law: This Agreement shall be governed by and in accordance ------------- with the laws of the State of New York, without reference to its conflict of laws principles. (g) Independent Contractor Status And Authority. ------------------------------------------- (i) Company agrees and acknowledges that in its performance of its obligations under this Agreement, Company is an independent contractor of AMEX. Company is solely responsible for its own activities. Company has no authority to make commitments or enter into contracts on behalf of, bind or otherwise obligate AMEX in any manner whatsoever except as expressly stated in this Agreement. (ii) Since Company is an independent contractor and not an agent of AMEX, Company represents, warrants and agrees that it shall be liable for all taxes, withholdings, and imposts of any nature applicable to the payment of compensation, whether current or deferred, for the work performed on Company's behalf in accordance with Company's obligations hereunder. Furthermore, Company will indemnify and hold AMEX harmless for any such taxes, withholding or imposts for which AMEX may be determined to be liable. (h) Non-Waiver; Cumulative Rights: No failure or delay (in whole or in ------------------------------ part) on the part of any party to exercise any right or remedy hereunder shall or operate as a waiver thereof or effect any other right or remedy. All rights and remedies hereunder are cumulative and are not exclusive of any other rights or remedies provided hereunder or by law. (i) Severability: If any provision contained in this Agreement is or ------------- becomes invalid, illegal, or unenforceable in whole or in part, such invalidity, legality, or unenforceability shall not affect the remaining provisions and portions of this Agreement. (j) Assignment: This Agreement may not be assigned by either party without the prior written consent of the other party. (k) No Creation of Partnership. This Agreement shall not be construed to -------------------------- create or constitute a partnership for tax or other purposes. -25- (l) Sales Tax. Company, and not AMEX, is the seller of the services --------- hereunder. Company is responsible for collecting and remitting to the appropriate jurisdiction any and all applicable sales or use taxes and shall fully indemnify and hold AMEX harmless for any sales, use or similar transaction taxes that are assessed, whether against AMEX or Company, with respect to such sales. (m) Access to AMEX Merchant Customer Lists. The access provided by AMEX -------------------------------------- to Company of certain lists of AMEX Merchant Customers shall be provided to Company at no additional charge. (n) Entire Agreement: This Agreement constitutes the entire Agreement ----------------- between the parties with respect to the subject matter hereof and supersedes all prior contemporaneous oral or written understandings or Agreements among the parties which relate to the subject matter hereof. No modification or amendment of this Agreement or any of its provisions shall be binding upon any party unless made in writing and duly executed by authorized representatives of all parties. IN WITNESS WHEREOF, AMEX and Company, intending to be legally bound by the terms of this Agreement, have caused this Agreement to be executed by their duly authorized representatives as of the date and year first above written. AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC. By:_________________________________ Name: Pierric Beckert Title: Vice President Interactive Enterprise Development American Express Relationship Services By:_________________________________ Name: Paul Dottle Title: Vice President Establishment Services CITYSEARCH, INC. By:_________________________________ -26- Name: Charles Conn Title: CEO -27- EXHIBIT A --------- DESCRIPTION OF THE BASIC SERVICE -------------------------------- The Basic Service - ----------------- Company produces and delivers comprehensive local city guides on the Web at its Web site, www.citysearch.com, providing up-to-date information regarding arts and entertainment, community activities and events, recreation, businesses and news/sports/weather to consumers in major metropolitan areas. Each local city guide consists of original content developed and designed specifically for the Web by the Company and its licensees. The Company creates custom-built Web sites ("InfoSites") for local businesses, aggregates them in a local city environment and provides consumers the ability to regularly update and expand the sites according to customer preferences. By enabling consumers to search, sort and filter information and engage in interactive relationships, the Basic Service offers local and regional businesses the opportunity to reach and interact with targeted audiences in a cost-effective manner. The Basic Service is built in cooperation with the community, and in partnership with local government, community and volunteer associations, business and professional groups, educational institutions and local media companies. Services to Consumers - --------------------- Company provides events, community, business and news information in a complete and current guide to a local city at no charge to consumers. For example, the Basic Service lists restaurants, music, movies, theater, volunteer information, children's activities, gift ideas, entertainment, local getaway ideas, physicians, pets, shopping and short features. The information and the interface have been designed to cater to a broad range of interests in an easily navigable, intuitive format. Company has developed technology which enables consumers to perform sophisticated search functions and allows filtering for their personal interests, with e-mail delivery. The information can be searched, sorted and filtered by keyword, time and geography. For example, if a consumer in San Francisco wants to locate a traditional Italian restaurant in North Beach neighborhood, he could access the San Francisco site and type in the keywords "Italian restaurant" in the "What Are You Looking For" box and click on "North Beach" at the "Area" prompt. The Basic Service would return all Italian restaurants in North Beach. At the consumer's discretion, the search result could be sorted by InfoSite size, alphabetically or by category and viewed as either a list or map. The list view provides each restaurant's name, address, telephone number and, if the restaurant has purchased an InfoSite, provides the number of pages purchased. The map view displays each restaurant's name and location. For restaurants that have purchased InfoSites, the consumer can click on the restaurant's name or icon to find additional information. -28- By using the Basic Service, consumers can search main shopping areas navigable maps, community organizations and vendors can be contacted via e-mail, and consumers can engage in the chat and bulletin board discussions with individuals such as local public officials and celebrities. Consumers may also access video streams from local television stations, including recent news, weather and traffic. The Company is continuing to develop a local platform for electronic commerce, including ticketing, reservations, sales event notifications, electronic coupons, newsletters and other transactions. Value Proposition to Business Customers - --------------------------------------- The Company creates and hosts InfoSites for local businesses and organizations for a monthly fee. Company believes it offers an attractive value proposition for local businesses. For an initial fee ranging from $60 to $650 per month, the Company provides a turn-key solution for businesses to establish a Web presence including design, layout, photography, posting of updated information, hosting and maintenance. Business customers are able to provide a targeted audience with updated information about their stores and services including pictures, prices, store location, live entertainment, weekly specials or sales and other relevant information. Electronic delivery enables the service to be provided at a fraction of the cost of paper-based media. The Company's efficient, proprietary site design tools and significant production economies enable it to build customized multi-paged Web sites without charging customers an up-front fee. Furthermore, the Company encourages frequent information updates by offering business customers a certain number of free updates each month. This is in contrast to yellow pages and similar forms of advertising which print infrequently and do not allow for regular information updates. By building and hosting custom Web sites in its local city guide environment, Company provides business customers a cost effective way to establish a meaningful presence on the Web. In addition, the Company offers a number of additional benefits to customers. By aggregating a business customer's InfoSite with those of numerous other businesses in a comprehensive local city guide, Company provides categorical and geographic context to a business customer's Web presence rather than allowing it to "free-float" in cyberspace. Business customers, moreover, receive free promotion of their InfoSite as part of the Basic Service. Company's business customers receive usage reports, e-mail functionality to enable consumers and businesses to communicate with each other, community sponsorship opportunities and access to an expanded base of potential buyers including tourists and mail order users. The Company is also developing the system as a platform for electronic commerce, including ticketing, reservations, sales events notifications, electronic coupons, newsletters and other transactions). -29- EXHIBIT B --------- HIGH-END CAPABILITIES --------------------- [*] - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -30- EXHIBIT C --------- LOW-END CAPABILITIES -------------------- [*] - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -31- [*] - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -32- EXHIBIT D --------- FINANCIAL ARRANGEMENT --------------------- [*] - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -33- EXHIBIT E --------- CUSTOMER SERVICE [*] - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -34- [*] - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -35- [*] - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -36- EXHIBIT F --------- ADVERTISEMENT POLICY -------------------- 1. Advertisements on the AMEX Merchant InfoSites, any portion of the Service or the CitySearch Web Sites (to the extent such CitySearch Web Sites are branded with an AMEX trademark), shall not: (a) Contain any unlawful, harmful, threatening, abusive, harassing, defamatory, vulgar, obscene, profane, hateful, racially, ethnically or otherwise objectionable material of any kind, including, but not limited to, any material which encourages conduct that would constitute a criminal offense, give rise to civil liability or otherwise violate any applicable local, state, national or international law. (b) Contain personal attacks on a company or individual. (c) Offer unauthorized downloads of any copyrighted or private information. (d) Purport to be from someone other than the author. (e) Violate applicable law, including but not limited to any FTC or unfair advertising rules, regulations, and laws. 2. The Company agrees to provide AMEX with a quarterly list of advertisers and services offered through the AMEX Merchant InfoSites and the CitySearch Web pages (to the extent such CitySearch Web pages are branded with an AMEX trademark). 3. The parties reserve the right at any time to exclude any specific advertisers and advertisements in the AMEX Merchant InfoSites, the Service and the CitySearch Web Sites (to the extent such CitySearch Web Sites are branded with an AMEX trademark), including any promotional materials related thereto, by written notice to each other. -37- EXHIBIT G --------- AMEX DATA ACCESS DOCUMENT ------------------------- Information Security Requirements - --------------------------------- The following are provided as minimum requirements or guidelines only. GENERAL - ------- [*] Company agrees to abide by the Privacy Principles as adopted by AMEX for itself from time to time. Those requirements are currently as follows: 1. COLLECT ONLY CUSTOMER INFORMATION THAT IS NEEDED, AND TELL CUSTOMERS HOW IT WILL BE USED. Limit the collection of information about customers to what is needed to be known to administer their accounts, to provide customer services, to offer new products and services, and to fulfill any legal and regulatory requirements. Tell customers about the general uses of the information collected about them, and will provide additional explanation if customers request it. 2. GIVE CUSTOMERS CHOICES ABOUT HOW THEIR DATA WILL BE USED. On a regular basis, give customers the option to decide whether or not they wish to have their names removed from lists used for mail, telephone and online marketing. These "opt-out" choices include product and service offers from AMEX and those made in conjunction with AMEX's business partners. 3. ENSURE INFORMATION QUALITY. Use advanced technology and well-defined employee practices to help ensure that customer data are processed promptly, accurately and completely. Require high standards of quality from the consumer reporting agencies and others who provide information about prospective customers. 4. USE INFORMATION SECURITY SAFEGUARDS. - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -38- Access to customer data is limited to those who specifically need it to conduct their business responsibilities. Use security techniques designed to protect customer data -- especially when certain data are used by employees and business partners to fulfill customer services. 5. LIMIT THE RELEASE OF CUSTOMER INFORMATION. In addition to providing customers with the opportunity to "opt out" of marketing offers, information is released only with the customers' consent or request, or when required to do so by law or other regulatory authority. When a court order or subpoena requires release of information, customer is notified promptly to give the customer an opportunity to exercise his or her legal rights. The only exceptions to this policy are when notifying the customer is prohibited by court order or law, or cases in which fraud and/or criminal activity is suspected. 6. BE RESPONSIVE TO CUSTOMERS' REQUESTS FOR EXPLANATIONS. If an application for services is denied or a customer's relationship is ended, to the extent permitted by applicable laws, an explanation is provided, if requested. The reasons for the action taken is stated and the information upon which the decision was based, unless the issue involves potential criminal activity. Medical information about an applicant for insurance, or an insured individual, may be disclosed to a physician designated by the customer rather than to the customer directly. 7. EXTEND THESE PRIVACY PRINCIPLES TO BUSINESS RELATIONSHIPS. AMEX expects the companies selected as business partners to honor AMEX's Privacy Principles in the handling of customer information. These include companies which (a) assist in providing services to AMEX customers; (b) supply AMEX with information for identifying or evaluating prospective customers; or (c) are given the opportunity to send mailings to approved AMEX customer lists. In selecting business partners, consider the accuracy and quality of the data they provide, how they respond to consumer complaints and whether or not they provide "opt out" choices for those whose information they process. 8. HOLD EMPLOYEES RESPONSIBLE FOR THESE PRIVACY PRINCIPLES. Each employee is personally responsible for maintaining consumer confidence in the company. Provide training and communications programs designed to educate employees about the meaning and requirements of these Privacy Principles. Conduct internal audits and commission outside-expert reviews of compliance with the Privacy Principles and the specific policies and practices that support the Principles. Disregard of these Privacy Principles shall be deemed a breach of the Agreement and cause for termination pursuant to the terms thereof. [*] - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -39- CARDMEMBER PRIVACY - ------------------ [*] EMPLOYEE RESPONSIBILITIES - ------------------------- [*] SECURITY ADMINISTRATION AND RESPONSIBILITIES - -------------------------------------------- [*] SYSTEM SECURITY - --------------- [*] - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -40- [*] - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -41- EXHIBIT H --------- [INTENTIONALLY OMITTED] -42- EXHIBIT I --------- CUSTOMER DATA AND DATA-RELATED RIGHTS ------------------------------------- 1. Limited Access to AMEX Merchant Customer Data. Company shall have limited --------------------------------------------- access to certain Card Member data including AMEX Merchant Customer account number, address and other relevant information (the "AMEX Merchant Customer Data") solely for the purposes of investigating and monitoring the handling of cases and related customer services for particular AMEX Programs and plans to be determined by the parties hereto. AMEX shall have the sole responsibility of overseeing all security standards and requirements as set forth by AMEX in relation to the AMEX Merchant Customer Data in Company's possession. Company shall insure that all standards and requirements will meet AMEX's full and reasonable satisfaction. 2. Data and Reports ---------------- Ownership of AMEX Data. All data and information submitted to Company by AMEX in - ---------------------- connection with the Services (the "AMEX Data") is and shall remain the property of AMEX. The AMEX Data shall: (1) not be used by Company other than in connection with providing or analyzing the Services, (2) not be disclosed, sold, assigned, leased or otherwise provided to third parties by Company; and (3) not be commercially exploited by or on behalf of Company, its employees or agents except as provided in this Agreement. Company shall take all appropriate actions to safeguard the AMEX Data. The database of Enrolled AMEX Merchant Customers shall remain the sole property of AMEX. Return of Data. Upon request by AMEX upon the termination or expiration of this - -------------- Agreement, Company shall (1) promptly return to AMEX, in a format agreed upon by the parties hereto and on the media reasonably requested by AMEX, all AMEX Data and/or (2) erase or destroy under the supervision of AMEX, all AMEX Data in Company possession. Accuracy of Data. As part of the Services, each party shall be responsible for - ---------------- the accuracy and completeness of the data and information submitted by a party to the other and any errors in and with respect to data and information submitted to the other. Each party shall promptly correct any errors or inaccuracies in the data or information prepared by one party and submitted to the other. Corrections of Errors. As part of the Service, Company shall promptly correct - --------------------- any errors or inaccuracies made known to them either through their own sources or made known to them by AMEX in the AMEX Data. AMEX shall be responsible for (1) the accuracy and completeness of the AMEX Data submitted by AMEX to Company and (2) any errors in and with respect to data obtained from Company caused by inaccurate or incomplete AMEX Data. -43- EXHIBIT J --------- SECURITY -------- 1. Safety and Security Procedures: [*] - ------------------------------------ 2. Logical Security Controls: [*] - ------------------------------ 3. Authorized Access: [*] - ----------------------- - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -44- 4. Security Relating to Competitors: [*] - -------------------------------------- 5. Disaster Recovery: [*] - ----------------------- - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -45- EXHIBIT K AMEX AUDIT RIGHTS ----------------- Company shall keep all documents (excluding credit and monitoring reports) relating to services provided under this Agreement for a period of three (3) years or longer as required by applicable law. Unless otherwise instructed by AMEX, Company shall promptly deliver all such documents to AMEX upon the termination of this Agreement. AMEX shall have the right, during normal business hours and with 24 hour notice to Company, to visit Company's operations center to (i) monitor telephone conversations between Company customer service representatives and AMEX Merchant Customers/AMEX Merchant Customers to the extent permitted by and in accordance with applicable law, and (ii) to audit Company's Service Locations and files for the services described in this Agreement and otherwise relating to Company's performance of its obligations under this Agreement. Upon AMEX's request, Company shall also cooperate with AMEX in developing the telecommunications systems necessary to enable AMEX to conduct such telephone monitoring at any time from AMEX's New York headquarters or other reasonable remote location(s) to the extent permitted by and in accordance with applicable law. In the event such systems are developed, AMEX may conduct such remote monitoring at any time to the extent permitted by and in accordance with applicable law and to the extent AMEX will cover the cost to develop the necessary telecommunications systems, AMEX shall cover those costs that are reasonable and appropriate. AMEX shall have the right, without notice, to perform a Data Security review of Company's security controls as they relate to the physical security and protection of AMEX Confidential data/system access. -46- EXHIBIT L --------- NON DISCLOSURE AGREEMENT ------------------------ [Subcontractor/Agent/Representative Name] ("Receiving Party") agrees that Receiving Party is aware that American Express Travel Related Services Company, Inc. ("AMEX") and ________________________ ("Company") have entered into a Marketing Agreement ("Agreement") that imposes certain obligations on Company, some of which are specifically set forth below. Receiving Party understands that as part of obligations under the Marketing Agreement, Company is required to obtain this written agreement from Receiving Party to further ensure understanding and compliance with these obligations. In consideration of Receiving Party's future assignment and/or responsibilities in connection with Company's performance under the Marketing Agreement, Receiving Party hereby acknowledges, represents and confirms to Company and AMEX as follows: (a) Receiving Party has read the provisions of this Non-Disclosure Agreement, understands each of them, agrees to them, and knows of no agreements, obligations or restrictions which prevent or prohibit Receiving Party from complying with them; (b) Receiving Party shall receive and maintain all AMEX information and perform services in a manner consistent with these obligations; and (c) Receiving Party agrees not to, directly or indirectly, engage in or assist others to engage in, any activity or conduct which violates the provisions of this Non-Disclosure Agreement. 1. General Obligations. All confidential or proprietary information and ------------------- documentation ("Confidential Information" (including the terms of this Non- ------------------------ Disclosure Agreement, the AMEX Data and the Software) relating to AMEX (including without limitation AMEX's customers, partners and clients) shall be held in confidence by Receiving Party to the same extent and in at least the same manner as AMEX protects its own confidential or proprietary information and as recommended as a result of any facility audits or reviews. Receiving Party shall not disclose, publish, release, transfer or otherwise make available Confidential Information in any form to, or for the use or benefit of, any person or entity without AMEX's express written consent. Receiving Party shall, however, be permitted to disclose relevant aspects of the Confidential Information to its officers, agents, subcontractors and employees and to the officers, agents, subcontractors and employees of its corporate affiliates or subsidiaries to the extent that such disclosure is reasonably necessary for the performance of its duties and obligations to Company under the Marketing Agreement; provided, that Company shall take all reasonable measures to ensure that the Confidential Information is not disclosed or duplicated in contravention of the provisions of this Non-Disclosure Agreement by such officers, agents, subcontractors and employees. The obligations in this Section ------- 1 shall not restrict any disclosure by Receiving Party pursuant to any - - applicable law, or by order of any court or government agency (provided that Receiving Party shall give prompt notice to AMEX of such order) and shall not apply with respect to information which (a) is developed by Receiving Party without violating AMEX's proprietary and confidential rights, (b) is or becomes publicly known (other than through unauthorized disclosure), (c) is disclosed by AMEX to a third-party free of any obligation of confidentiality, is already known by the Receiving Party without an obligation of confidentiality other than pursuant to this Non-Disclosure Agreement or any confidentiality agreements entered into before the effective date of the Marketing Agreement, or (d) is rightfully received by Receiving Party free of any obligation of confidentiality. 2. Unauthorized Acts. Receiving Party shall: (a) notify AMEX promptly of any ----------------- material unauthorized possession, use or knowledge, or attempt thereof, of the Confidential Information by any person or -47- entity which may become known to such party, (b) promptly furnish to AMEX full details of the unauthorized possession, use or knowledge, or attempt thereof, and use reasonable efforts to investigate and prevent the recurrence of any unauthorized possession, use or knowledge, or attempt thereof, of the Confidential Information, (c) use reasonable efforts to cooperate with AMEX in any litigation and investigation against third parties deemed necessary by AMEX to protect its proprietary and confidential rights and (d) promptly use all reasonable efforts to prevent a recurrence of any such unauthorized possession, use or knowledge of the Confidential Information. Receiving Party shall bear the cost it incurs as a result of compliance with this Section 2. --------- 3. Receiving Party agrees that if Receiving Party threatens to or actually breaches or fails to observe any of the obligations set forth in this Non- Disclosure Agreement, AMEX and Company shall be subject to irreparable harm which shall not be adequately satisfied by damages. Receiving Party therefore agrees that Company or AMEX shall be entitled to an injunction and/or any other remedies permitted, to ensure and enforce Receiving Party's compliance with these obligations; provided, however, that no specification herein of any particularly legal or equitable remedy shall be construed as a waiver, prohibition or limitation of any legal or equitable remedies. By: ________________________________ Name: ______________________________ (Type, Stamp or Print) Title: _____________________________ Date: ______________________________ Witness: ___________________________ -48- EXHIBIT M --------- ________________________________________________________________________________ [LOGO OF AMERICAN EXPRESS APPEARS HERE] TERMINAL RULES AND REGULATIONS ________________________________________________________________________________ Part of our mission is to make changes and adjustments to various AMEX Merchant Customer accounts. This is done through the use of our computer system. The use of this system is extremely critical. There are a few very specific rules and regulations that go along with working with the computer system. These rules must be followed in detail by every employee who is involved with the computer system. Therefore, you are being shown the rules and regulations so that you understand how the system works. It is very important that you understand and comply with the following operating rules and regulations. MAINTENANCE CHANGES TO CARDMEMBER ACCOUNTS. [*] USE OF YOUR PASSWORD AND IDENTIFICATION NUMBER [*] - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -49- [*] MONITORING [*] UNAUTHORIZED ACCESS/VIEWING OF ACCOUNTS [*] IMPORTANCE OF THE RULES AND REGULATIONS [*] ACKNOWLEDGMENT I have read and understand the above regulations and agree to comply with them. _________________________ __________________________________________________ Employee Signature Print Name Date - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -50- EXHIBIT N --------- AMERICAN EXPRESS CUSTOMER INTERNET PRIVACY STATEMENT Protecting your privacy is important to us. We hope the following statement will help you understand how American Express collects, uses and safeguards the personal information you provide to us on our website. . Security -------- . Information Collection ---------------------- . Information Use --------------- . Declining Email Offers ---------------------- Set Email Preferences - set, review or change preferences regarding --------------------- the type email offers you do not want to receive. . Children -------- . Company Commitment to Privacy ----------------------------- ___________________________________________________________________________ SECURITY When you send confidential personal account data to us on an American Express website, we require that a "secure session" first be established using Secure Socket Layer (SET), or Secure Electronic Transactions (SET) when that is fully available. For further information about SSL, SET and the safety and confidentiality of personal data transmissions over the Internet, please read our Security Q & A. -------------- INFORMATION COLLECTION When you BROWSE any American Express website, you do so anonymously. Personal information including your email address is NOT collected. Some of our websites, however, may request that you VOLUNTARILY supply us with personal information, including your email address and account number [if you are an American Express Cardmember or InvestDirect user], for purposes such as correspondence, site registration, checking your bill or investments online, making a purchase, or participating in online surveys. Like many other commercial websites, the American Express website may utilize a standard technology called a "cookie" to collect information about how our site is used. Please read About Cookies for more information. ------------- INFORMATION USE If you provide us with your email address, or have done so in the past, we may upon occasion send you email offers. We may use information you have given us to, for example, provide a service, ensure proper billing, measure consumer interest in our various services and inform you about -51- products and services. These offers may be based on information you provided in your initial transaction with us, in surveys, from information that may indicate purchasing preferences and lifestyle, as well as information available from external sources, such as census bureau data. Primarily, these email offers will come from American Express. We may also, upon occasion, share email addresses with certain establishments that accept the American Express Card, or with other well-established companies so that they can send you product and service offers that may be of interest. All offers are carefully developed to ensure that they meet our standards. Our goal is to target offers to people who we believe will find them of value. The lists used to send you product and service offers are developed and managed under strict conditions designed to safeguard the security and privacy of customer personal information. For an illustration of the types of offers we may provide with our business partners exclusively to American Express Cardmembers, please view American Express Special Offers. ------------------------------- Please note that our free email service, AMEXMAIL, as well as our financial services websites, AMERICAN EXPRESS FINANCIAL ADVISORS and AMERICAN EXPRESS FINANCIAL DIRECT, do not share email addresses with any company outside of ------ American Express. DECLINING EMAIL OFFERS American Express provides customers with an easy means to decline receiving email offers. Although most customers tell us they appreciate receiving notice of these carefully designed opportunities, we recognize the importance of providing you with choices. At any time, you may request to discontinue receiving these offers from us by simply replying to the email and informing us of your preferences. All email offers that you receive from American Express will inform you of how to decline receiving further email offers. Additionally, you may Set Email --------- Preferences to notify us of your preferences regarding the type of email offers - ----------- you do not want to receive, and you may also review and change preferences you have previously set. CHILDREN American Express does not knowingly solicit data from children, and we do not knowingly market to children. COMPANY COMMITMENT TO PRIVACY In keeping with our long-standing leadership in consumer privacy protection, American Express is actively involved with current industry initiatives to preserve individual privacy rights on the Internet and in all aspects of electronic commerce. For additional information about our commitment to protecting the privacy of our customers both online and offline, please read the American Express Customer ------------------------- Privacy Principles. 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All OTHER earlier versions of AOL browsers do not support cookies, and therefore cannot authenticate you as a registered user on American Express websites that involve sending or receiving personal account information. -54- SCHEDULE 1 ---------- FORM OF SERVICE AGREEMENT -55- EX-10.8 6 PARTNERSHIP AGREEMENT EXHIBIT 10.8 PARTNERSHIP AGREEMENT BETWEEN METROLAND PRINTING, PUBLISHING & DISTRIBUTING LTD. AND 1217554 ONTARIO INC. AND CITYSEARCH, INC AND TORSTAR CORPORATION MADE AS OF FEBRUARY 17, 1997 - ------------ [*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. TABLE OF CONTENTS ----------------- ARTICLE ONE - INTERPRETATION 2 1.01 Definitions 2 1.02 Headings 5 1.03 Extended Meanings 5 1.04 Accounting Principles 5 1.05 Currency 5 ARTICLE TWO - FORMATION OF PARTNERSHIP 6 2.01 Formation 6 2.02 Business 6 2.03 Name 6 2.04 Authority 6 2.05 Activities 6 2.06 California Franchise Disclaimer 7 2.07 Ownership of Partners 7 ARTICLE THREE - PLACE OF PARTNERSHIP BUSINESS 7 3.01 Location 7 3.02 Qualification 7 ARTICLE FOUR - MANAGEMENT 8 4.01 Executive Committee 8 4.02 Responsibilities 8 4.03 Compensation 9 4.04 Chairperson 9 4.05 Secretary 9 4.06 Quorum 9 4.07 Voting 9 4.08 Procedures 9 4.09 Unanimous Approval of Matters 11 4.10 Signed Instruments in Lieu of Meeting 12 4.11 No Personal Liability 12 4.12 Execution of Instruments 13 ARTICLE FIVE - ACCOUNTING AND FINANCIAL STATEMENTS 13 5.01 Books and Records 13 5.02 Auditors 13 5.03 Financial Statements 13 5.04 Fiscal Year End 14
-ii- ARTICLE SIX - CONTRIBUTIONS, OTHER FINANCING, ALLOCATIONS AND DISTRIBUTIONS 14 6.01 Classes of Accounts 14 6.02 Initial Capital Contributions 14 6.03 Additional Partnership Financing 15 6.04 Further Capital Contributions 15 6.05 Income and Losses 16 6.06 Partnership Distributions 16 6.07 Required Expansion Funds 16 6.08 Excluded Torstar Assets 16 6.09 Torstar Service Fees 17 6.10 Back Office Software 17 ARTICLE SEVEN - COVENANTS 17 7.01 Covenants 17 ARTICLE EIGHT - TRANSFER OF PARTNERSHIP INTEREST 18 8.01 No Transfer 15 8.02 Right of First Refusal 18 8.03 Events of Default 20 8.04 Allocation in Event of Transfer 22 ARTICLE NINE - TERMINATION. DISSOLUTION AND NON-COMPETITION 23 9.01 Term 23 9.02 Dissolution 23 9.03 Non-Competition 23 ARTICLE TEN - INSURANCE 24 10.01 Insurance 24 ARTICLE ELEVEN - GENERAL 24 11.01 Further Assurances 24 11.02 Public Announcements 25 11.03 Dispute Resolution 25 11.04 Benefit of the Agreement 25 11.05 Entire Agreement 25 11.06 Currency 25 11.07 Amendment and Waiver 26 11.08 Assignment 26 11.09 Notices 26 11.10 Governing Law 27
PARTNERSHIP AGREEMENT --------------------- THIS AGREEMENT made as of February 17, 1997; B E T W E E N: METROLAND PRINTING, PUBLISHING & DISTRIBUTING LTD., a corporation incorporated under the laws of Ontario (hereinafter referred to as "Metroland") OF THE FIRST PART. - and - 1217554 ONTARIO INC.. a corporation incorporated under the laws of Ontario (hereinafter referred to as "CitySearch, Ontario"), OF THE SECOND PART. - and - CITYSEARCH, INC., a corporation incorporated under the Laws of Delaware (hereinafter referred to as "CitySearch, U.S.A.") OF THE THIRD PART. - and - TORSTAR CORPORATION, a corporation incorporated, under the laws of Ontario (hereinafter referred to as "Torstar") OF THE FOURTH PART. WHEREAS Metroland and CitySearch Ontario wish to enter into a general partnership for the purpose of establishing a CitySearch Information Service (as hereinafter defined), upon and subject to the terms and conditions of this Agreement; AND WHEREAS CitySearch U.S.A. and Torstar are parties to this Agreement solely for the purpose of giving the representations and warranties provided for in Section 2.07; NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the premises and the covenants and agreements herein contained. the parties hereto agree as follows: ARTICLE ONE - INTERPRETATION ---------------------------- 1.01 DEFINITIONS ----------- In this Agreement, unless something in the subject matter or context is inconsistent therewith: (a) "Affiliate" means an affiliate of a party as determined by the provisions of the Business Corporations Act (Ontario) as now enacted or as the same may be from time to time amended, re-enacted or replaced; (b) "Agreement" means this agreement and all amendments made hereto by written agreement between the parties hereto. (c) "Ancillary Agreements" means the License and Services Agreement, the Assignment Agreement and the Non-Competition Agreement, each made as of the date hereof: (d) "Annual Budget" has the meaning set forth in Section 4.02; (e) "Auditors" means the auditors appointed pursuant to Section 5.02; (f) "Business Day" means a day other than a Saturday, Sunday or statutory holiday in Ontario or California; (g) "Capital" means the amount of cash or the value of all property contributed to the capital of the Partnership pursuant to the provisions hereof. (h) "Capital Account" of a Partner means an account to which is credited or debited all Capital contributions received from and Capital distributions made, respectively, to such Partner, in accordance with the provisions of Section 6.01; (i) "Chairperson" means the individual appointed pursuant to Section 4.04; (j) "CitySearch Information Service" has the meaning ascribed thereto in the License and Services Agreement; (k) "Content" has the meaning ascribed thereto in the License and Services Agreement; (l) "Current Account" of a Partner means an account to which is credited or debited the net income or net loss, respectively, of the Partnership allocated to such Partner in accordance with the provisions of Section 6.01; (m) "Direct Competitor" of Metroland shall mean a person whose business is primarily involved in newspaper or electronic publishing in the Exclusive Territory and a Direct Competitor of CitySearch Ontario shall mean a person whose business competes directly With that of CitySearch Ontario. CitySearch U.S.A. or any of their respective Affiliates involved in electronic publishing; (n) "Exclusive Territory" means the territory so marked in Schedule A hereto together with any portion of the Extended Territory to the extent it shall be deemed to be part of the Exclusive Territory in accordance with Section 9.03; (o) "Executive Committee" means the Executive Committee constituted pursuant to Section 4.01; (p) "Extended Territory" means the [*] territories so marked in Schedule A hereto except co the extent that any portion thereof has been deemed to be part of the Exclusive Territory in accordance with Section 9.03; (q) "Free Cash Flow" means, in respect of any particular period, an amount determined as follows: [*] - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -4- [*] (r) "Launch" means giving written notice (a "Launch Notice"), in the case of a Launch by the Partnership, to CitySearch Ontario or, in the case of a Launch by an entity affiliated with CitySearch Ontario or any Affiliate of CitySearch U.S.A., to the Partnership, of a date when a CitySearch Information Service will be accessible to the public for a particular region not more than 150 days from the date of such notice and -"Launched" and "Launching" shall have corresponding meanings: (s) "License and Services Agreement" means an agreement made as of even date herewith between CitySearch U.S.A. and CitySearch Ontario providing for the licensing to CitySearch Ontario of certain software, technology and knowhow; (t) "Non-Competition Agreement" means an agreement made as of even date herewith between Torstar, CitySearch U.S.A., CitySearch Ontario and Metroland; (u) "Partners" means Metroland and CitySearch Ontario, together with such other persons who may become parties to this Agreement; (v) "Partnership" means the general partnership constituted by this Agreement: (w) "Partnership Business" means the provision of a CitySearch Information Service and any change made thereto pursuant to Section 4.09; (x) "Partnership Interest" has the meaning, subject to adjustment pursuant to Section 6.03(2), set forth on Schedule B; (y) "Representatives" means the persons who are appointed from time to time by a Partner pursuant to Section 4.01 which, in the case of a Partner who is an individual. may be the Partner; (z) "Required Expansion Funds" means that amount of the Partnership's revenues which are determined to be applied to fund the Partnership's expansion; (aa) "Secretary" means the individual appointed pursuant to Section 4.05; and - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -5- (bb) "Working Capital" means [*] 1.02 HEADINGS -------- The division of this Agreement into Articles and Sections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. The terms "this Agreement", "hereof", "hereunder" and similar expressions refer to this Agreement and not to any particular Article. Section or other portion hereof and include any agreement supplemental hereto. Unless something in the subject matter or context is inconsistent therewith, references herein to Articles and Sections are to Articles and Sections of this Agreement. 1.03 EXTENDED MEANINGS ----------------- In this Agreement words importing the singular number only shall include the plural and vice versa, words importing any gender shall include all genders and words importing persons shall include individuals, partnerships, associations, trusts, unincorporated organizations and corporations. 1.04 ACCOUNTING PRINCIPLES --------------------- Wherever in this Agreement reference is made to a calculation to be made in accordance with generally accepted accounting principles, such reference shall be deemed to be to the generally accepted accounting principles from time to time approved by the Canadian Institute of Chartered Accountants, or any successor institute, applicable as at the date on which such calculation is made or required to be made. Wherever in this Agreement reference is made to a calculation to be made in accordance with United States generally accepted accounting principles, such reference shall be deemed to be to the generally accepted accounting principles from time to time approved by the American Institute of Certified Public Accountants, or any successor institute, applicable as at the date on which such calculation is made or is required to be made. 1.05 CURRENCY -------- All references to currency herein are to lawful money of Canada. - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -6- ARTICLE TWO - FORMATION OF PARTNERSHIP -------------------------------------- 2.01 FORMATION --------- The Partners hereby constitute themselves a general partnership for the purpose of carrying on the Partnership Business. To the extent not otherwise provided for herein, the Partnership shall be governed by the provisions of the Partnerships Act (Ontario) as now enacted or as the same may be from time to time amended, re-enacted or replaced. 2.02 BUSINESS -------- The Partnership shall not carry on any business other than the Partnership Business and no assets of the Partnership shall be used by any Partner for any purpose other than the Partnership Business. 2.03 NAME ---- (1) The name of the Partnership shall be Toronto Star CitySearch. The Partnership's CitySearch Information Service shall, subject to Section 2.03(2), be co branded to include the Toronto Star name and logo, the logo of CitySearch U.S.A. and, subject to satisfactory resolution of any relevant trademark disputes, the CitySearch name. (2) The Partnership's obligation under Section 2.03(l) to co-brand by including the logo of CitySearch U.S.A. and the CitySearch name shall be suspended during any period in which it is determined that the CitySearch Information Services offered by CitySearch U.S.A. have materially deteriorated from the standard of such services offered as of the date of this Agreement. Such co-branding obligation shall recommence at such time as it is determined that the CitySearch Information Services offered by CitySearch U.S.A. again meet the standard of such services offered as of the date of this Agreement. All such determinations must be made unanimously by the Representatives or by an arbitrator in accordance with the provisions of Section 11.03. 2.04 AUTHORITY --------- Except as otherwise provided herein no Partner shall have any authority to act for, or assume any obligation or responsibility on behalf of, any other Partner or the Partnership. 2.05 ACTIVITIES ---------- Each Partner shall act in good faith toward, and in the best interests of, the Partnership and shall devote such time as may be required to fulfill the obligations assumed -7- by the Partner in this Agreement. Except as otherwise provided in Section 9.03 and subject to such activities not causing a breach of this Agreement, each Partner may engage in any other business or activity outside the Partnership Business. 2.06 CALIFORNIA FRANCHISE DISCLAIMER ------------------------------- The parties agree that neither this Agreement nor the business relationship established hereunder will be construed as granting a franchise. The parties warrant to one another that they have consulted counsel in reviewing and negotiating this Agreement and have concluded that no business plan or franchise fees are conveyed or provided for in this Agreement or otherwise by the relationship established hereby or by the relationship between the parties. 2.07 OWNERSHIP OF PARTNERS --------------------- (1) CitySearch U.S.A. represents and warrants to Torstar and Metroland that it is the beneficial and registered owner of all of the outstanding shares of CitySearch Ontario. Subject to the terms of this Agreement. CitySearch U.S.A. covenants to ensure that the Partnership Interest held by CitySearch Ontario continues to be held by a direct or indirect wholly-owned subsidiary of CitySearch U.S.A. (2) Torstar represents and warrants to CitySearch U.S.A. and CitySearch Ontario that it is the beneficial and registered owner of all of the outstanding shares of Toronto Star Newspapers Limited, which is the beneficial and registered owner of all of the outstanding shares of Metroland. Subject to the terms of this Agreement, Torstar covenants to ensure that the Partnership Interest held by Metroland continues to be held by a direct or indirect wholly- owned subsidiary of Torstar. ARTICLE THREE - PLACE OF PARTNERSHIP BUSINESS --------------------------------------------- 3.01 LOCATION -------- The principal place of business shall be at 1 Yonge Street, in the City of Toronto in the Province of Ontario, M5E IE6, or as may otherwise be unanimously agreed by the Partners, and the books and records of accounts of the Partnership shall be kept in such location. 3.02 QUALIFICATION ------------- To the extent required by any applicable law, the Partnership and each Partner shall qualify to carry on the Partnership Business where the Partnership Business is to be carried on from time to time and shall maintain such registrations as may be necessary to lawfully carry on the Partnership Business. -8- ARTICLE FOUR - MANAGEMENT ------------------------- 4.01 EXECUTIVE COMMITTEE ------------------- (1) The Executive Committee shall consist of [*] Representatives. Upon execution of this Agreement, each Partner shall appoint the number of individuals as its Representatives set forth opposite its name below: PARTNER NO. OF REPRESENTATIVES ------- ---------------------- Metroland [*] CitySearch Ontario [*] From time to time, on written notice to the other Partners, a Partner may replace any of its Representatives. The names of the Representatives shall be entered in the records of the Partnership. (2) Each Partner shall obtain the written undertaking of each of its Representatives: (a) to act and vote as a Representative in order that the purpose, intent and provisions of this Agreement shall be carried out; (b) to act honestly, in good faith and in the best interests of the Partnership: and (c) to exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in the circumstances. 4.02 RESPONSIBILITIES ---------------- Subject to Section 4.09, the Executive Committee shall manage the business and affairs of the Partnership. The Executive Committee may empower such persons as it deems appropriate (including, without limitation, any Partner) to bind and commit the Partnership in connection with the Partnership Business or any part thereof. [*] - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -9- 4.03 COMPENSATION ------------ The Representatives shall serve in that capacity without compensation provided that each shall be reimbursed by the Partnership for their reasonable costs and out-of-pocket expenses in connection with the performance of their duties hereunder. 4.04 CHAIRPERSON ----------- The Representatives shall elect from among themselves a Chairperson at the first meeting of the Executive Committee and thereafter annually at the first meeting of the Executive Committee in each year and such Chairperson shall serve until a successor is elected. The Chairperson shall preside at all meetings of the Executive Committee if present, and if not present, the Representatives shall elect an alternative Chairperson from among themselves to preside at the meeting. 4.05 SECRETARY --------- At the first meeting of the Executive Committee the Representatives shall appoint a Secretary of meetings of the Executive Committee, who need not be a Representative. The Secretary shall keep records of all proceedings and decisions of the Executive Committee and the Partners and distribute copies thereof to each Representative and to each Partner promptly thereafter, and keep copies of all correspondence and documentation received and sent by the Representatives and Partners and each Partner shall have the right to examine the same and take copies thereof. 4.06 QUORUM ------ [*] 4.07 VOTING ------ Each Representative shall have one vote on each matter to be decided at a meeting of the Executive Committee and each matter shall be decided, unless otherwise specifically provided herein, by a majority of the votes cast on the question. The proceedings at each meeting shall be evidenced by minutes signed by the Chairperson and Secretary. 4.08 PROCEDURES ---------- Meetings of the Executive Committee shall be governed by the following: - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -10- (a) meetings of the Executive Committee (i) shall be held at least quarterly: and (ii) may be held any other time and, unless otherwise agreed by the Representatives, shall be called by any two Representatives upon not less than 10 Business Days prior notice and held at the principal office of the Partnership or at such other location as may be agreed by the Partners: (b) notice of any meeting of the Executive Committee shall be sent to each Partner and to each Representative as last recorded in the books of the Partnership; such notice shall be accompanied by an agenda prepared by the Chairperson or the other Representatives calling the meeting, as the case may be, that sets forth those matters to be considered at the meeting; (c) with the unanimous approval of the Representatives present at any meeting of the Executives Committee (or, if all of the Representatives are present, the approval of a majority of the Representatives), the business conducted at such meeting may include business in addition to that set out in the agenda: (d) provision may be made by the Partners for the holding of regular meetings in addition to the meetings contemplated in Section 4.08(a)(i) at a specified place and time on specified Business Days of specified months, and provided that each Partner and each Representative last recorded in the books of the Partnership has been sent notice setting forth the particulars of such regular meetings, no further or other notice shall be required for the calling thereof and the transaction of business thereat at such a meeting, any such meeting however shall be preceded by an agenda to be forwarded to the Partners and Representatives in accordance with the time limits prescribed in Section 4.08(a); (e) subject to prior notice of such meeting in the normal manner as is required by this Agreement, meetings of the Executive Committee may be conducted by means of telephone or other communications facilities as permit all persons participating in the meeting to hear each other, and a Partner's Representative participating in such a meeting by such means is deemed present at that meeting; and (f) no notice calling a meeting of the Executive Committee shall be required if all the Representatives are present or those absent have waived notice in writing of such meeting in advance. -11- 4.09 UNANIMOUS APPROVAL OF MATTERS ----------------------------- Notwithstanding any of the other provisions hereof, the following matters shall require the prior unanimous approval of the Partners: (a) any material change in the Partnership Business or in the name of the Partnership; (b) the entering into or amendment of any agreement with third parties except as otherwise permitted hereunder: (c) the purchase or sale of any assets from or to the Partnership or the provision of services to the Partnership by any Partner or a related person to any Partner (as the term "related person" is defined in the Income Tax Act (Canada)), except (i) pursuant to the License Agreement, (ii) in an amount not exceeding $1,000 or (iii) as otherwise permitted herein; (d) the sale of any assets of the Partnership or the purchase of any assets by the Partnership with an aggregate price in excess of $100,000 other than as may be approved in the Annual Budget; (e) any arrangement for the sharing of profits or any joint venture with any person; (f) the merger or other reorganization of the Partnership with any person or the acquisition by the Partnership of any business; (g) the admission of a new Partner unless in accordance with visions of Section 8.02; (h) other than as may be approved in the Annual Budget, borrowing of any money in excess of the aggregate principal amount of $100,000.00, the giving of any security or the making or incurring of any capital expenditures which, in the aggregate, are in excess of $100,000.00 in any year; (i) the making of any decision to Launch or carry on a CitySearch Information Service to standards that are not equal to the Quality Standards (as defined in the License and Services Agreement) or to use any navigation layouts or hierarchical maps inconsistent with those established from time to time by CitySearch U.S.A.; (j) the making of any amendments to this Agreement; -12- (k) initiating or settling any material litigation involving the Partnership Business or any of its assets or undertaking; (1) other than as may be approved in the Annual Budget, the entering into contracts with a value or which result in obligations over the term thereof greater than $200,000.00; (m) the approval of the following management team positions for the Partnership Business: General Manager, Head of Operations, Head of Marketing, Head of Sales, Head of Community, Head of Content, Head of Technology and Head of Design; (n) the removal or replacement of the Auditors during their term of appointment. and (o) the carrying on of the Partnership Business other than in the Exclusive Territory or the Extended Territory. 4.10 SIGNED INSTRUMENTS IN LIEU OF MEETING ------------------------------------- Any matter to be decided by the Executive Committee or the Partners may be passed by resolution signed by each of the Representatives or Partners, as the case may be. Any resolution so signed is as valid and effective as if passed at a meeting duly called, constituted and held for that purpose. 4.11 NO PERSONAL LIABILITY --------------------- No Representative shall incur any personal liability pursuant to Partnership activities conducted by the Representative in accordance with the undertaking referred to in Section 4.01(2). The Partnership shall indemnify Representatives and all employees of the Partnership and their heirs and legal representatives against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by them in respect of any civil, criminal or administrative action or proceeding to which such person is made a party by reason of being or having served in such capacity if: (a) such person acted honestly and in good faith with a view to the best interests of the Partnership, and (b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, such person had reasonable grounds for believing that his or her conduct was lawful -13- and whether or not such person is still serving in such capacity at the time of such action or judgment. 4.12 EXECUTION OF INSTRUMENTS ------------------------ Contracts, documents or instruments in writing referred to in Section 4.09 which require the approval of all Partners shall be signed by at least one Representative of each Partner. All other contracts, documents or instruments in writing requiring execution by the Partnership may be signed in such manner as is approved by the Executive Committee. All contracts, documents and instruments in writing so signed shall be binding upon the Partnership without further authorization or formality. The Executive Committee is authorized from time to time by resolution to appoint any Partner or Representative or any other person to sign and deliver on behalf of the Partnership either contracts, documents or instruments in writing generally or specific contracts, documents or instruments in writing. Without limiting the generality of the foregoing, all contracts, documents or instruments requiring execution by the Partnership and involving expenditures of less than $10,000 (other than those specified in Section 4.09 as requiring the approval of all Partners) may be signed by any General Manager of the Partnership. ARTICLE FIVE - ACCOUNTING AND FINANCIAL STATEMENTS -------------------------------------------------- 5.01 BOOKS AND RECORDS ----------------- The books and records of accounts of the Partnership shall reflect all Partnership transactions. Such books and records shall be maintained at the principal place of business of the Partnership and shall be open to examination during normal business hours by any Partner. Representative or, at the expense of a Partner, by an independent accountant selected by a Partner. 5.02 AUDITORS -------- Ernst & Young shall be appointed the Auditors unless, prior to the appointment of any other person as Auditors all of the Partners have consented in writing to such person being appointed. 5.03 FINANCIAL STATEMENTS -------------------- (1) As soon as practicable after the end of each month but no later than 15 days thereafter, financial statements shall be prepared by the Partnership, for and as of the end of such month, in accordance with generally accepted accounting principles consistently applied, and such financial statements shall show the assets and the liabilities of the Partnership, all income and revenue received and receivable and all expenses, costs and charges incurred and paid or payable by the Partnership in respect of such month, with the -14- resulting net profit or loss of the Partnership in respect of such month, and shall also show the amounts standing to the credit of each Partner hereto in respect of its Capital Account and Current Account, all in accordance with the provisions herein contained. As soon as practicable at the end of each fiscal year of the Partnership but no more than 30 days thereafter, like financial statements shall be prepared for and as of the end of such fiscal year. As soon as practicable at the end of each fiscal year of the Partnership and no later than 90 days thereafter, audited financial statements shall be prepared for the Partnership at the expense of the Partnership. All financial statements referred to in this Section 5.03 will be accompanied by a restatement to United States generally accepted accounting principles, which restatement shall be prepared at the expense of the Partnership. (2) Any financial statements prepared and certified by the Auditors as herein provided shall be final, binding and conclusive among the Partners in the absence of manifest error. 5.04 FISCAL YEAR END --------------- The fiscal year end of the Partnership shall be December 31. ARTICLE SIX - CONTRIBUTIONS, OTHER FINANCING, --------------------------------------------- ALLOCATIONS AND DISTRIBUTIONS ----------------------------- 6.01 CLASSES OF ACCOUNTS ------------------- [*] 6.02 INITIAL CAPITAL CONTRIBUTIONS ----------------------------- Not later than the close of business on the Business Day following the date of this Agreement, the Partners shall make Capital contributions to the Partnership as follows: - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -15- [*] 6.03 ADDITIONAL PARTNERSHIP FINANCING -------------------------------- (1) It is the intention of the Partners that additional Capital contributions required for the Partnership be identified and provided for in the Annual Budget. By the close of business on the Last Business Day of each fiscal quarter, the Partners agree to make any additional Capital contributions, on a [*]% by Metroland [*]% by CitySearch Ontario basis, which are specified in the Annual Budget as being required for the fiscal quarter following the next succeeding fiscal quarter. In addition, the Executive Committee shall have the authority to determine, on a quarterly basis, the amount of any additional required Capital contributions not identified in the Annual Budget which are in the best interest of the Partnership. Such additional Capital contributions determined by the Executive Committee as being required in a particular fiscal quarter shall not exceed [*]% of the Capital contributions specified in the Annual Budget for such fiscal quarter. The Partners agree to make additional Capital contributions, on a [*]% by Metroland and [*]% by CitySearch Ontario basis, by the close of business on the second Business Day following a capital call by the Executive Committee. After the Partnership's Free Cash Flow has been positive for [*], it is the intention of the Partners that, to the greatest extent possible, funds necessary to carry on the Partnership Business shall be obtained from the cash flow of the Partnership. (2) In the event that any Partner fails to make a Capital contribution required pursuant to Section 6.03(l), the Executive Committee shall cause Schedule B to be amended to appropriately reflect a pro rata adjustment to the Partnership Interests of the Partners. 6.04 FURTHER CAPITAL CONTRIBUTIONS ----------------------------- Subject to Section 6.03, no Partner shall make any further Capital contributions to the Partnership except with the unanimous agreement of the other Partners. - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -16- 6.05 INCOME AND LOSSES ----------------- Income and losses of the Partnership shall be determined in accordance with the Income Tax Act (Canada). All net income and net losses of the Partnership shall be shared by and allocated for accounting and income tax purposes to the Partners as follows: (a) all net income of the Partnership shall be shared by and allocated to the Partners in proportion to their respective Partnership Interests: (b) all net losses of the Partnership shall be allocated to Metroland until it has been allocated cumulative net losses equal to $[*], and thereafter all net losses of the Partnership shall be shared by the Partners and allocated [*]% to Metroland and [*]% to CitySearch Ontario 6.06 PARTNERSHIP DISTRIBUTIONS ------------------------- (1) Except as otherwise expressly provided in this Agreement, Capital shall only be returned to the Partners with the unanimous approval of all of the Partners. (2) Unless otherwise agreed by the Partners, all cash flow of the Partnership shall be distributed to the Partners once the Partnership's Free Cash Flow has been positive for [*]. Prior to such time, no cash flow of the Partnership shall be distributed. After such time, CitySearch Ontario shall be entitled to draw an amount of Free Cash Flow equal to [*] and thereafter the Partners shall be entitled to draw any Free Cash Flow in respect of a fiscal quarter of the Partnership at the end of such fiscal quarter in proportion to their respective Partnership Interests. 6.07 REQUIRED EXPANSION FUNDS ------------------------ The Required Expansion Funds shall be determined by the unanimous agreement of the Partners until such time as CitySearch Ontario has received an amount of Free Cash Flow equal to the cash portion of its initial Capital Contribution pursuant to Section 6.02, and thereafter shall be specified in the Annual Budget, provided that the Executive Committee shall have the authority to require deviations from the Annual Budget by up to [*]% in any particular year. 6.08 EXCLUDED TORSTAR ASSETS ----------------------- The Partners acknowledge that Metroland and Torstar Electronic Publishing Ltd. ("TEP"), an affiliate of Torstar, have built and currently offer in both the Exclusive Territory and the Extended Territory certain electronic offerings. The Partners recognize that some combination of such electronic offerings with the Partnership Business may be to - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -17- the mutual advantage of Metroland, TEP and the Partnership. In the event of such a contribution, details of which are subject to negotiation, the Partners intend that: (a) the revenues from TEP's and Metroland's currently existing business will be excluded from the circulation of the Partnership's income and Free Cash Flow: and (b) the Partnership will share in a portion of any revenues of Metroland or TEP related to products or services jointly developed with the Partnership. 6.09 TORSTAR SERVICE FEES -------------------- To the extent that Torstar or any of its Affiliates provide services to the Partnership, such services shall be paid for on a cost plus basis in accordance with the cost plus schedule set out in Schedule E to the License and Services Agreement. 6.10 BACK OFFICE SOFTWARE -------------------- The Partners acknowledge that the Partnership may wish to acquire the right to use certain "back office" software in conjunction with its CitySearch Information Service. Such software is partly owned by CitySearch U.S.A. and partly owned by certain third parties. In order to facilitate the use by the Partnership of that part of the software which is owned by CitySearch U.S.A., CitySearch U.S.A. shall use all commercially reasonable efforts to grant, within 30 days, a license to such third party or parties on an "as is" basis for the use of such part of the software. If desired by the Partnership, CitySearch U.S.A. will request that such third party or parties enter into a license and sublicense agreement with the Partnership for the use of the software, such agreement to be negotiated between the Partnership and such third party or parties and be on terms mutually agreeable to each of them. ARTICLE SEVEN - COVENANTS ------------------------- 7.01 COVENANTS --------- Each Partner covenants that, throughout the term of this Agreement, the Partner shall: (a) ensure its continued qualification under the laws of its jurisdiction of incorporation and such jurisdictions where the Partnership conducts the Partnership Business to the extent it is reasonably within its power to do so; (b) subject to the rights and obligation of the Partners pursuant to the License Agreement, the Partners agree not to disclose or use any confidential or proprietary information of the other Partner or any of its Affiliates or of the Partnership to which it may have access or have disclosed to it by virtue of the Partnership, except for the purposes of the Partnership and shall ensure -18- that all persons to whom any such information is disclosed is bound by a duty of confidence with respect thereto: (c) not permit any security interest, encumbrance, pledge or other similar claim co exist on its Partnership Interest or its interest in any property of the Partnership: (d) at all times duly and punctually pay and discharge separate and private debts and engagements whether present or future and keep the Partnership and the other Partners indemnified therefrom and from all actions, proceedings, costs, claims, demands, damages and expenses in respect thereof; and (e) maintain its Canadian resident status for purposes of the Income Tax Act (Canada). ARTICLE EIGHT - TRANSFER OF PARTNERSHIP INTEREST ------------------------------------------------ 8.01 NO TRANSFER ----------- (1) Except as expressly provided herein, a Partner shall not sell, transfer, assign, pledge, charge or in any other way dispose of or encumber its Partnership Interest without the prior written consent of the other Partners. (2) Subject to such Affiliate agreeing to be bound by and becoming a party to this Agreement, each Partner shall be entitled to sell and transfer its Partnership Interest herein to an Affiliate of such Partner and shall provide the other Partner with notice in writing of any such sale and transfer as soon as practicable after such sale and transfer, but in any event in not more than two Business Days following the sale and transfer. 8.02 RIGHT OF FIRST REFUSAL ---------------------- (1) Before accepting an offer (an "Offer") to purchase all or any of a Partner's Partnership Interest, such Partner (hereinafter in this Section 8.02 referred to as the "Offeror") shall give notice (hereinafter in this Section 8.02 referred to as the "Notice") of the terms and price of the Offer (such price being hereinafter in this Section 8.02 referred to as the "Purchase Price") to the Partnership and to the other Partners. (2) Upon the Notice being given, the other Partners (hereinafter in this Section 8.02 sometimes collectively referred to as the "Offerees" and sometimes individually referred to as an "Offeree") shall have the right to purchase all, but not less than all, of the Partnership Interest of the Offeror for the Purchase Price. The Offerees shall be entitled to purchase the Partnership Interest of the Offeror pro rata based upon the percentage of the -19- Partnership Interests beneficially owned by the Offerees or to purchase in such ocher proportion as the Offerees may agree in writing. (3) Within 30 Business Days of having been given the Notice, each Offeree who desires to purchase all of the Partnership Interest of the Offeror that it is entitled to purchase in accordance with the provisions of Section 8.02(2) shall give notice to the Offeror, to the Partnership and to the other Offerees. If any Offeree does not give such notice, the Partnership Interest of the Offeror that it had been entitled to purchase (hereinafter in this Section 8.02(3) referred to as the "Rejected Interest") may instead be purchased by the Offerees who did give such notice, pro rata based upon the percentages of the Partnership Interests beneficially owned by such Offerees as between themselves or in such other proportion as such Offerees may agree in writing, and, within five Business Days of the expiry of the 30 Business Day period specified in this Section 8.02(3), each Offeree who desires to purchase all of the Rejected Interest that it is entitled to purchase in accordance with the provisions of this Section 8.02(3) shall give an additional notice to the Offeror, to the Partnership and to the other Offerees. If any Offeree entitled to give the said additional notice does not do so, the Rejected Interest that it had been entitled to purchase may instead be purchased by the Offerees who did give such notice, and so on from time to time until the Offerees are willing to purchase all of the Partnership Interest of the Offeror or until they are not willing to purchase any more. If the Offerees are willing to purchase all, but not less than all, of the Partnership Interest of the Offeror, the transaction of purchase and sale shall be completed in accordance with the terms set out in the Notice. (4) If the Offeror makes default in transferring its Partnership Interest to the Offerees in accordance with the terms set out in the Notice, the Secretary of the Partnership is authorized and directed to receive the purchase money and to thereupon cause the names of the Offerees to be entered in the registers of the Partnership as the holders of the Partnership Interests purchasable by them. The said purchase money shall be held in trust by the Partnership on behalf of the Offeror and not commingled with the Partnership's assets, except that any interest thereon shall be for the account of the Partnership. The receipt by the Secretary of the Partnership for the purchase money shall be a good discharge to the Offerees and, after their names have been entered in the registers of the Partnership in exercise of the aforesaid power, the validity of the proceedings shall not be subject to question by any person. On such registration, the Offeror shall cease to have any right to or in respect of the Partnership Interest of the Offeror except the right to receive, without interest, the purchase price received by the Secretary of the Partnership. (5) If the Offerees do not give notice in accordance with the provisions of Section 8.02(3) that they are willing to purchase all of the Partnership Interest of the Offeror, the rights of the Offerees, subject as hereinafter provided, to purchase the Partnership Interest of the Offeror shall forthwith cease and determine and the Offeror -20- may, within four months after the expiry of the 30 Business Day period or five Business Day periods, as the case may be, specified in Section 8.02(3), accept the Offer, provided that the person to whom its Partnership Interest is to be sold agrees prior to such transaction to be bound by this Agreement and to become a party hereto in place of the Offeror with respect to the Partnership Interest of the Offeror. If the Offer is not accepted within such four month period on such terms, the rights of the Offerees pursuant to this Section 8.02 shall again take effect and so on from time to time. (6) [*] (7) [*] 8.03 EVENTS OF DEFAULT ----------------- (1) In any of the following events: (a) any Partner is in breach of a covenant in Article, Seven and, if such breach is capable of being remedied, such breach is not remedied within 5 days after notice has been given to such Partner specifying such breach; (b) [*] (c) a process of execution is issued against the Partnership Interest of any Partner and such execution is not released or vacated within the shorter of a period of 30 days or such shorter period as would permit the Partnership Interest to be sold; (d) any Partner makes an assignment for the benefit of creditors of any material portion of its assets or is in bankruptcy or is adjudged bankrupt or insolvent within the meaning of the Bankruptcy and Insolvency Act (Canada); or (e) substantially all of the assets of any Partners are seized or otherwise attached by anyone pursuant to any legal process or other means, including distress, execution or any other step or proceeding with similar effect and the same is not released or vacated within the shorter of a period of 30 days - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -21- or such shorter period as would permit such property or any part thereof to be sold pursuant thereto, the Partners (the "Offerees"), other than the Partner referred to in Sections 8.03 (a) to (d) (the "Defaulting Partner"), shall have the right to purchase all, but not less than all, of the Partnership Interest beneficially owned by the Defaulting Partner (the "Offered Interest"). (2) The Offerees shall be entitled to purchase the Offered Interest pro rata based upon the percentage of the Partnership Interests beneficially owned by the Offerees or to purchase in such other proportion as the Offerees may agree in writing. (3) The price of the Offered Interest, unless the Partners otherwise agree in writing within 15 Business Days of notice of the date of the event referred to in Section 8.03(l), shall be an amount equal to the fair value (taking into account, among other things, the markets, cash flow and prospects of the Partnership) of the Offered Interest (the "Purchase Price") as determined by an internationally recognized accounting firm, business valuator or investment bank (the "Third Party Valuator") agreed to by the Partners as at the end of the fiscal quarter of the Partnership immediately preceding the fiscal quarter in which the event referred to in Section 8.03(1) occurred. Such determination shall be made in writing and given to all of the Partners and to the Partnership within 30 Business Days of notice of the date of the event referred to in Section 8.03(1) or as soon thereafter as may be reasonably possible. (4) The report of the Third Party Valuator when delivered to the Partners and to the Partnership, shall be conclusive and binding upon all parties. (5) Within 10 Business Days of having been given the Third Party Valuator's report of the Purchase Price, each Offeree who desires to purchase all of the Offered Interest that it is entitled to purchase in accordance with the provisions of Section 8.03(2) shall give notice to the Defaulting Partner, to the Partnership and to the other Offerees. If any Offeree does not give such notice, the portion of the Offered Interest that it had been entitled to purchase (the "Rejected Interest") may instead be purchased by the Offerees who did give such notice, pro rata based upon the percentages of the Partnership Interests beneficially owned by such Offerees as between themselves or in such other proportion as such Offerees may agree in writing, and, within five Business Days of the expiry of the 10 Business Day period specified in this Section 8.03(5), each Offeree who desires to purchase all of the Rejected Interest that it is entitled to purchase in accordance with the provisions of this Section 8.03(5) shall give an additional notice to the Defaulting Partner, to the Partnership and to the other Offerees. If any Offeree entitled to give the said additional notice does not do so, the Rejected Interest that it had been entitled to purchase may instead be purchased by the Offerees who did give such notice, pro rata based upon the percentages of the Partnership Interests beneficially owned by such Offerees as between themselves or in such other proportion as such Offerees may agree in writing, and so on -22- from time to time until the Offerees are willing to purchase all of the Offered Interest or until they are not willing to purchase any more. If the Offerees are willing to purchase all, but not less than all, of the Offered Interest, the transaction of purchase and sale shall be completed within 20 Business Days of the expiry of the 10 Business Day period or five Business Day period, as the case may be, specified in this Section 8.03(5). The transaction shall be completed at the Partnership's principal office where transfer of the Offered Interest shall be made by the Defaulting Partner with good title. free and clear of all liens, charges, encumbrances and any other rights of others, against payment by certified cheque by the Offerees. (6) If the Defaulting Partner makes default in transferring the Offered Interest to the Offerees as provided for in this Section 8.03, the Secretary of the Partnership is authorized and directed to receive the purchase money and thereupon to cause the names of the purchasing Offerees to be entered in the registers of the Partnership as the holders of the portion of the Partnership Interest purchasable by them. The said purchase money shall be held in trust by the Partnership on behalf of the Defaulting Partner and not commingled with the Partnership's assets, except that any interest accruing thereon shall be for the account of the Partnership. The receipt by the Secretary of the Partnership for the purchase money shall be a good discharge to the Offerees and, after their names have been entered in the registers of the Partnership in exercise of the aforesaid power, the validity of the proceedings shall not be subject to question by any person. On such registration, the Defaulting Partner shall cease to have any right to or in respect of the Offered Interest except the right to receive, without interest, the purchase price received by the Secretary of the Partnership. (7) If the Offerees do not give notice in accordance with the provisions of this Section 8.03 that they are willing to purchase all of the Offered Interest or complete the purchase of the Offered Interest as provided therein, the rights of the Offerees, except as hereinafter provided, to purchase the Offered Interest shall forthwith cease and determine but any Offeree may, except in respect of a default under Section 8.03(l)(b), within 20 Business Days of the expiry of the applicable time period referred to in Section 8.03(5), give notice to the Defaulting Partner, the Partnership and the other Offerees requiring the dissolution Of the Partnership. 8.04 ALLOCATION IN EVENT OF TRANSFER ------------------------------- If a Partnership Interest is transferred in accordance with the terms of this Agreement, all items of income, gain, loss, deduction and credit of the Partnership shall be allocated between the periods before and after the transfer by a "closing of the books" method. As of the date of such transfer, the transferee shall succeed to the Capital Account of the transferor Partner with respect to the transferred Partnership Interest. This Section 8.04 shall apply for purposes of computing a Partner's Capital Account. -23- ARTICLE NINE - TERMINATION, DISSOLUTION AND NON-COMPETITION ----------------------------------------------------------- 9.01 TERM ---- The Partnership created by this Agreement shall begin on the date hereof and shall continue [*] 9.02 DISSOLUTION ----------- (1) The Partnership shall only be dissolved (a) upon agreement in writing of all the Partners; or (b) if any Partner gives a notice requiring dissolution pursuant to Section 8.03(7). (2) Upon dissolution of the Partnership, a full and general account shall be taken of the assets, credits, debts and liabilities of the Partnership and of the transactions and dealings thereof and with all convenient speed such assets and credits shall be sold, realized and got in and the proceeds applied as follows: (a) firstly, in paying and discharging the debts and liabilities of the Partnership to the persons who are not Partners and the expenses of and incidental to the dissolution of the Partnership; (b) secondly, in paying to each Partner any unpaid debts and liabilities (including any unpaid net profits) which may be due to it; (c) thirdly, in paying to each Partner an amount equal to any credit balance in its Capital Account limited, in the case of CitySearch Ontario, to the balance in such account which relates to a cash contribution; and (d) fourthly, the balance, if any, of such proceeds shall be divided between the Partners proportionately to their Partnership Interests. (3) On dissolution of the Partnership, the Executive Committee shall act as the receiver of the Partnership. If the Executive Committee shall be unable or unwilling to so act, the Partners may appoint some other appropriate person as receiver of the Partnership. 9.03 NON-COMPETITION --------------- (1) Subject to Section 9.03(3) or any agreement in writing of the parties, the Partnership Business shall be restricted to offering a CitySearch Information Service with - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -24- Content pertaining solely to the Exclusive Territory. The Partners hereby undertake and agree to be bound by their respective obligations under the Non- Competition Agreement. (2) [*] (3) [*] ARTICLE TEN - INSURANCE ----------------------- 10.01 INSURANCE --------- Unless the Partners otherwise agree, the Partnership shall maintain insurance in respect of its business, operations and activities, and the other assets of the Partnership of such types and in such amounts as the Executive Committee deems advisable including, without limitation, third party liability insurance and product liability insurance, both during the operation of the Partnership Business and until any dissolution is completed. ARTICLE ELEVEN - GENERAL ------------------------ 11.01 FURTHER ASSURANCES ------------------ Each Partner shall from time to time execute and deliver all such further documents and instruments and do all acts and things as the other Partners or the Executive - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -25- Committee may reasonably require to effectively carry out or better evidence or perfect the full intent and meaning of this Agreement. 11.02 PUBLIC ANNOUNCEMENTS -------------------- Subject to applicable law or stock exchange regulation, no public announcement or press release primarily concerning the Partnership shall be made by any Partner without the prior consent and joint approval of the other Partners. If a Partner wishes to issue a press release primarily concerning the Partnership it shall provide a draft thereof (or the portion thereof relating to the Partnership) to the other Partners as soon as a draft is available and shall consider any reasonable comments of the other Partners with respect to the press release provided that such comments are provided forthwith upon receipt of the draft. Any failure to provide comment with respect to a draft press release shall be deemed to constitute consent to the release thereof. 11.03 DISPUTE RESOLUTION ------------------ Any dispute, disagreement, controversy, question or claim arising out of or relating to this Agreement (a "Dispute"), other than a Dispute relating to confidential information or intellectual property rights of either Partner, must be conclusively settled by submission to arbitration in accordance with the rules provided in Schedule "B" hereto. 11.04 BENEFIT OF THE AGREEMENT ------------------------ This Agreement shall enure to the benefit of and be binding upon the respective heirs, executors, administrators, successors and permitted assigns of the parties hereto. 11.05 ENTIRE AGREEMENT ---------------- This Agreement and the Ancillary Agreements constitute the entire agreement between the parties hereto with respect to the subject matter hereof and cancels and supersedes any prior understandings and agreements between the parties hereto with respect thereto. There are no representations, warranties, terms, conditions, undertakings or collateral agreements, express, implied or statutory, between the parties other than as expressly set forth in this Agreement or the Ancilliary Agreements. 11.06 CURRENCY -------- Unless otherwise provided herein, all reference to currency shall be to Canadian dollars. -26- 11.07 AMENDMENT AND WAIVER -------------------- No modification of or amendment to this Agreement shall be valid or binding unless set forth in writing and duly executed by the parties hereto and no waiver of any breach of any term or provision of this Agreement shall be effective or binding unless made in writing and signed by the party purporting to give the same and, unless otherwise provided, shall be limited to the specific breach waived. 11.08 ASSIGNMENT ---------- Except as may be expressly provided in this Agreement, no Partner may assign its rights or obligations under this Agreement without the prior written consent of the other Partners. 11.09 NOTICES ------- Any demand, notice or other communication to be given in connection with this Agreement shall be given in writing and shall be given by personal delivery or by transmittal by electronic means of communication addressed to the recipient as follows: To Metroland or Torstar: c/o Torstar Corporation 1 Yonge Street Toronto, Ontario M5E 1P9 Fax No.: (416) 869-4183 Attention: General Counsel --------- with a copy to: Toronto Star Newspapers Limited 1 Yonge Street Toronto, Ontario M5E 1E6 Fax No.: (416) 869-4762 Attention: Vice-President, Strategic Planning --------- -27- To CitySearch Ontario or CitySearch U.S.A.: c/o CitySearch, Inc. 790 East Colorado Boulevard Suite 200 Pasadena, California 91 101 U. S. A. Fax No.: (818) 405-9929 Attention: Bradley Ramberg, Chief Financial Officer --------- or to such other address, electronic communication number or individual as may be designated by notice given by any Partner to the others. Any communication shall be conclusively deemed to have been given on the day of actual delivery thereof if such day is a Business Day and the communication is delivered or transmitted during the normal business hours of the recipient and on the Business Day during which normal business hours next occur if given after such hours on any day. 11.10 GOVERNING LAW ------------- This Agreement shall be governed by and construed in accordance With the laws of the Province of Ontario and the laws of Canada applicable therein. IN WITNESS WHEREOF the Partners have executed this Agreement. METROLAND PRINTING, PUBLISHING & DISTRIBUTING LTD. Per: /s/ Signature Illegible 1217554 ONTARIO INC. Per: /s/ Signature Illegible CITYSEARCH, INC, Per: /s/ Signature Illegible TORSTAR CORPORATION Per: /s/ Signature Illegible Schedule A EXCLUSIVE TERRITORY/EXTENDED TERRITORY -------------------------------------- [*] - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. Schedule B PARTNERSHIP INTEREST -------------------- Metroland [*]% CitySearch Ontario [*]% - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. EX-10.9 7 LICENSE & SERVICES AGREEMENT EXHIBIT 10.9 LICENSE AND SERVICES AGREEMENT BETWEEN CITYSEARCH INCORPORATED AND 1217554 ONTARIO INC. MADE AS OF FEBRUARY 17, 1997 - -------------------- [*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. TABLE OF CONTENTS
ARTICLE ONE - INTERPRETATION ---------------------------- 1.01 Definitions................................................... 2 1.02 Headings...................................................... 6 1.03 Extended Meanings............................................. 6 1.04 Accounting Principles......................................... 6 1.05 Currency...................................................... 6 1.06 Schedules..................................................... 7 ARTICLE TWO - LICENSE TO CITYSEARCH SYSTEMS ------------------------------------------- 2.01 License to CitySearch Systems................................. 7 2.02 License to CitySearch Documentation........................... 8 ARTICLE THREE - SERVICES ------------------------ 3.01 Delivery of Materials......................................... 8 3.02 Training Service.............................................. 8 3.03 Consulting Service............................................ 8 3.04 Customization Service......................................... 8 3.05 Responsibilities of Licensee.................................. 9 ARTICLE FOUR - FEES AND EXPENSES -------------------------------- 4.01 License....................................................... 10 4.02 Initial Service Fee........................................... 10 4.03 Additional Service Fees....................................... 11 4.04 Invoicing..................................................... 11 4.05 Expenses...................................................... 11 4.06 Taxes......................................................... 11 4.07 Disputed Payments............................................. 12 ARTICLE FIVE - INTELLECTUAL PROPERTY RIGHTS ------------------------------------------- 5.01 Ownership of CitySearch Systems............................... 12 5.02 Ownership of Content.......................................... 12 5.03 Ownership of Work Product..................................... 13 5.04 Disclosure of Licensee Improvements........................... 14 5.05 Disclosure of Licensor Improvements........................... 14 5.06 Source Codes.................................................. 14
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ARTICLE SIX - TRADE-MARKS AND QUALITY STANDARDS ----------------------------------------------- 6.01 Grant of License to Trade-Marks.............................. 17 6.02 Ownership of Trade-Marks..................................... 17 6.03 Restrictions on Use of the Trade-Marks....................... 17 6.04 Quality Standards............................................ 17 ARTICLE SEVEN - PROPRIETARY RIGHTS AND CONFIDENTIAL INFORMATION ---------------------------- 7.01 Duty of Confidence........................................... 19 7.02 Protection of Proprietary Rights............................. 20 7.03 Inspection by Licensor....................................... 20 7.04 Third Party Information...................................... 21 7.05 Loss of Confidential Information............................. 21 7.06 Enforcement of Confidentiality Obligation.................... 21 ARTICLE EIGHT - INFRINGEMENT ---------------------------- 8.01 Prosecution of Infringement Claims........................... 21 8.02 Licensor's Defence of Infringement Claims.................... 22 8.03 Licensee's Defence of Infringement Claims.................... 23 ARTICLE NINE - WARRANTIES AND DISCLAIMERS ----------------------------------------- 9.01 Warranty..................................................... 24 9.02 Electronic Access............................................ 25 9.03 Disclaimer of Warranty....................................... 25 9.04 Limit of Liability........................................... 25 9.05 Limitation Period............................................ 27 9.06 California Franchise Disclaimer.............................. 27 ARTICLE TEN - TERM AND TERMINATION ---------------------------------- 10.01 Term........................................................ 27 10.02 Termination................................................. 27 10.03 Effect of Termination by Licensor........................... 28 10.04 Return of Intellectual Property............................. 28 10.05 Survival.................................................... 29
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10.06 Sale of Partnership Interest................................ 30 ARTICLE ELEVEN - GENERAL ------------------------ 11.01 Further Assurances.......................................... 31 11.02 Public Announcements........................................ 31 11.03 Dispute Resolution.......................................... 32 11.04 Entire Agreement............................................ 32 11.05 Force Majeure............................................... 32 11.06 Amendment and Waiver........................................ 32 11.07 Assignment.................................................. 33 11.08 Notices..................................................... 33 11.09 Governing Law............................................... 34
LICENSE AND SERVICES AGREEMENT ------------------------------ THIS AGREEMENT made as of February 17, 1997; B E T W E E N: CITYSEARCH INCORPORATED, a corporation incorporated under the laws of Delaware (hereinafter referred to as "Licensor") OF THE FIRST PART. - and - 1217554 ONTARIO INC., a corporation incorporated under the laws of Ontario (hereinafter referred to as "Licensee"), OF THE SECOND PART. WHEREAS Licensor is engaged in the business of providing CitySearch Information Services (as defined below) in the United States and elsewhere; AND WHEREAS Toronto Star CitySearch (the "Partnership") a general partnership between Metroland Printing, Publishing & Distributing Ltd. ("Metroland"), a subsidiary of Torstar Corporation and Licensee has been formed to carry on a CitySearch Information Service in the Exclusive Territory (as defined below); AND WHEREAS Licensee is a wholly-owned subsidiary of Licensor and has requested Licensor to grant to it the License and to provide it with the Services to enable the Partnership to establish and operate a CitySearch Information Service in the Exclusive Territory; AND WHEREAS Licensee intends to assign this Agreement to the Partnership as part of its capital contribution towards the Partnership and Licensor is prepared to agree to such assignment, upon and subject to the terms and conditions of this Agreement; NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the issuance to Licensor of fifty (50) common shares of Licensee and the premises and the covenants and agreements herein contained, the parties hereto agree as follows; -2- ARTICLE ONE - INTERPRETATION ---------------------------- 1.01 DEFINITIONS ----------- In this Agreement (a) "Access Event" has the meaning ascribed to it in Section 5.06(a). (b) "Additional Service Fees" shall have the meaning ascribed to it in Section 4.03. (c) "Affiliate" means an affiliate of a party as determined by the provisions of the Business Corporations Act (Ontario) as now enacted or as the same may be from time to time amended, re- enacted or replaced. (d) "Agreement" means this agreement, the schedules hereto annexed and all amendments made hereto by written agreement between the parties hereto. (e) "Business Day" means a day other than a Saturday, Sunday or statutory holiday in Ontario or California. (f) "CitySearch Business Systems" means the methods of operation procedures and standards to implement, maintain, market and advertise a CitySearch Information Service, described in Schedule B and all Licensor Improvements thereto. (g) "CitySearch Documentation" means documentation, however recorded, which forms part of and which describes the CitySearch Business Systems and CitySearch Technology Systems and which are provided by Licensor to Licensee hereunder. For the avoidance of doubt the term "CitySearch Documentation" does not include any of the Licensed Programs. (h) "CitySearch Information Service" means an online service of providing Content related to restaurants, entertainment, retail establishments, community events and other services pertaining to a particular city or geographic region which uses the CitySearch Systems. (i) "CitySearch Systems" means the CitySearch Technology Systems. CitySearch Business Systems, and related CitySearch Documentation. -3- (j) "CitySearch Technology Systems" means the proprietary software and tools described in Schedule A and database structures text and artwork formats, computer and human interfaces, databases and other Intellectual Property related thereto and all Licensor Improvements thereto. (k) "Competing Business" has the meaning ascribed to it in the Partnership Agreement. (1) "Confidential Information" means the confidential, secret or proprietary information of one party (the "Disclosing Party"), including technical, financial, and business information and software of the Disclosing Party which has been or may hereafter be disclosed, directly or indirectly to the other party (the "Recipient"), either orally, in writing or in any other material form. (m) "Consulting Service" means the consulting assistance described in Section 3.03. (n) "Content" with respect to a CitySearch Information Service includes all information, databases, advertisements, text, sound, photographic images, video and other content which is displayed or accessible to a consumer using the service. For the avoidance of doubt, the term "Content" does not include any CitySearch System or any Improvement thereto. (o) "Customization Service" means the service described in Section 3.04. (p) "Direct Competitor" has the meaning ascribed to it in the Partnership Agreement. (q) "Designated Location" means the location(s) described in Schedule C at which the CitySearch Systems must be used and includes such replacement locations in the Exclusive Territory owned or controlled by Licensee or any of its Affiliates which are notified to Licensor in writing by Licensee. (r) "Effective Date" means the date first set out above. (s) "Escrow Agreement" means the agreement described in Section 5.06(a). (t) "Event of Default" has the meaning ascribed to it in Section 10.02(a). -4- (u) "Exclusive Territory" shall have the meaning ascribed to it in the Partnership Agreement. (v) "Improvements" means, in relation to any technology or Intellectual Property, changes, modifications improvements, enhancements, additions and adaptations to, and derivative works based upon or derived from, the technology or intellectual Property. (w) "Initial Service Fee" shall have the meaning ascribed to it in Section 4.02. (x) "Intellectual Property" means all intellectual and industrial property including without limitation all works in which copyright subsists or may subsist (such as computer programs, designs and documentation, data structures, audio-visual displays, databases, and designs), methods, operational procedures, specialized techniques, processes, formula, know- how, trade secrets and confidential information, and discoveries and inventions. (y) "Intellectual Property Rights" includes all trade-mark rights and trademarks and trade names, patents, copyrights, industrial design rights, design rights, integrated circuit topography rights, rights in trade secrets, confidential information and know-how, applications and registrations for the foregoing, and other proprietary rights including privacy rights, moral rights, publicity rights, neighbouring rights, and rights of a similar nature. (z) "Jointly Owned Work Products" means the Work Products described in Section 5.03 (b). (aa) "Launch" means the date when the Toronto CitySearch Information Service will be accessible to the public and "Launched" shall have a corresponding meaning. (bb) "License" means the license rights conferred upon Licensee pursuant to Article 2 and Sections 5.06(b) and 6.01. (cc) "Licensed Programs" means the computer programs forming part of the CitySearch Technology Systems described in Schedule A. (dd) "Licensed Trade-Marks" means the words, symbols, icons, logos, trade-marks and other indicia of origin described in Schedule D. -5- (ee) "Licensee Improvements" means the Licensee Owned Work Products, the Jointly Owned, Work Products to the extent created by Licensee, and the Source Modifications. (ff) "Licensee Owned Work Products" means the Work Products described in Section 5.03(a). (gg) "Licensor Improvements" means Improvements made by Licensor to the CitySearch Systems which are owned or controlled by Licensor and, which are made generally available by Licensor to its Affiliates and other persons to whom it has granted licenses to use the CitySearch Systems to carry on a CitySearch Information Service during the term of this Agreement. (hh) "Licensor Owned Work Products" means the Work Products described in Section 5.03(e) (ii) "Non-Competition Agreement" means an agreement as of even date herewith between Metroland, Licensor, Licensee, and Torstar Corporation. (jj) "Partnership Agreement" means an agreement made as of even date herewith between Licensee and Metroland. (kk) "Partnership Interest" shall have the meaning ascribed thereto in the Partnership Agreement, (ll) "Quality Standards" has the meaning ascribed thereto in Section 6.04. (mm) "Services" means Services which are provided by Licensor to Licensee under this Agreement. (nn) "Source Modifications" has the meaning ascribed thereto in Section 5.06(b). (oo) "Toronto Star CitySearch Information Service" means a CitySearch Information Service which contains Content related solely to the Exclusive Territory as set out in Section 2.01(c). (pp) "Training Services" means the training services described in Section 3.02. -6- (qq) "Work Product" means Intellectual Property (other than trade- marks) originated or developed by either party either alone or with the assistance of the other party pursuant to this Agreement. 1.02 HEADINGS -------- The division of this Agreement into Articles and Sections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. The terms "this Agreement", "hereof", "hereunder" and similar expressions refer to this Agreement and not to any particular Article, Section or other portion hereof and include any agreement supplemental hereto. Unless something in the subject matter or context is inconsistent therewith, references herein to Articles and Sections are to Articles and Sections of this Agreement. 1.03 EXTENDED MEANINGS ----------------- In this Agreement words importing the singular number only shall include the plural and vice versa, words importing any gender shall include all genders and words importing persons shall include individuals, partnerships, associations, trusts, unincorporated organizations and corporations. The terms "provision" and "provisions" refer to terms, conditions, provisions, covenants, obligations, undertakings, warranties and representations in this Agreement. The term "includes" or "including" or "such as" shall be construed as meaning "includes without limitation", "including without limitation" and "such as without limitation", as the case may be. 1.04 ACCOUNTING PRINCIPLES --------------------- Wherever in this Agreement reference is made to a calculation to be made in accordance with generally accepted accounting principles, such reference shall be deemed to be to the generally accepted accounting principles from time to time approved by the Canadian Institute of Chartered Accountants, or any successor institute, applicable as at the date on which such calculation is made or required to be made. Wherever in this Agreement reference is made to a calculation to be made in accordance with United States generally accepted accounting principles, such reference shall be deemed to be to the generally accepted accounting principles from time to time approved by the American Institute of Certified Public Accountants, or any successor institute, applicable as at the date on which such calculation is made or is required to be made. 1.05 CURRENCY -------- All references to currency herein are to lawful money of Canada. Any conversion of funds required to enable payments to be made or calculated in Canadian dollars shall be converted at the spot buying rate for such funds quoted by the Canadian Imperial -7- Bank of Commerce at its office in Toronto at approximately noon on the business day immediately preceding the due date of the payment or calculation, as the case may be. 1.06 SCHEDULES --------- The Schedules To This Agreement Are As Follows; Schedule A - CitySearch Technology Systems Schedule B - CitySearch Business Systems Schedule C - Designated Locations Schedule D - Licensed Trade-Marks Schedule E - Cost Plus Fee Schedule Schedule F - Assignment Agreement ARTICLE TWO - LICENSE TO CITYSEARCH SYSTEMS -------------------------------------------- 2.01 LICENSE TO CITYSEARCH SYSTEMS ----------------------------- (a) Subject to the provisions of this Agreement including the provisions of Article 10, Licensor hereby grants to Licensee and Licensee hereby accepts from Licensor a [*] license to use the CitySearch Systems in the Exclusive Territory solely for the purpose of establishing and operating the Toronto Star CitySearch Information Service. Notwithstanding the foregoing, the Licensor reserves the right to, and to authorize other persons to, use the CitySearch Systems at a site or sites in the Exclusive Territory for the purpose of operating or establishing CitySearch Information Services for a territory outside the Exclusive Territory. (b) The Licensed Programs may be reproduced solely to (i) install same on computers located at the Designated Location, (ii) for processing of the machine instructions, statements or data therein, and (iii) as may be necessary for archival and backup purposes in accordance with Licensee's Written archival and backup policies. (c) The CitySearch Systems may be used only as set out in this Agreement and Licensee agrees not to make any copies or use thereof other than as expressly permitted herein. Without limiting the generality of the foregoing, Licensee agrees to use the CitySearch Systems only in the Exclusive Territory, at the Designated Location, and for the purpose of providing a CitySearch Information Service with Content related solely to the Exclusive Territory. The parties agree that particular Content that relates primarily to the Exclusive Territory but which also refers to a place or places outside of the Exclusive Territory will be considered to be Content related solely to the Exclusive Territory. Licensee agrees not to use the CitySearch Systems for the purpose of providing any service other than the Toronto Star City Search Information Service. - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -8- 2.02 LICENSE TO CITYSEARCH DOCUMENTATION ----------------------------------- CitySearch Documentation provided in machine readable form may be printed and used solely for the purpose of establishing and operating the Toronto Star CitySearch Information Service. No other reproduction or use of the CitySearch Documentation is permitted. ARTICLE THREE - SERVICES ------------------------ 3.01 DELIVERY OF MATERIALS --------------------- Licensor agrees to deliver to Licensee by no later than 120 days following the Effective Date, a technology information package containing a copy of the materials described in Schedules A and B made generally available by Licensor to its Affliliates and other persons to, whom it has granted licenses to use the CitySearch Systems to assist them in establishing and operating a CitySearch Information Service. Except as agreed to pursuant to this Article 3, Licensor shall not be required to create any computer programs, documentation or other Intellectual Property for delivery to or use by Licensee. 3.02 TRAINING SERVICE ---------------- Upon the request of Licensee, Licensor agrees to permit employees of Licensee to attend and participate in management workshops and planning sessions, sales training sessions and other training sessions provided by Licensor to its own staff in the course of carrying on its CitySearch Information Service business (the "Training Services"). 3.03 CONSULTING SERVICE ------------------ Licensor agrees to provide consulting assistance to Licensee to update the financial model for the Toronto Star CitySearch Information Service. Licensor also agrees to provide Licensee with other consulting services as reasonably requested by Licensee (subject to availability of staff of Licensor) related to the CitySearch Systems and the Toronto Star CitySearch Information Service (all consulting assistance and service provided by CitySearch pursuant to this Section 3.03 is referred to here as the "Consulting Service"). 3.04 CUSTOMIZATION SERVICE --------------------- (a) The parties acknowledge that there may be a need to customize the CitySearch Technology Systems to adapt same for use in the Toronto Star CitySearch Information Service such as, for example, customization of interfaces, design tools, mapping of geographic data and of spellings, phrases and colloquialisms to conform to norms in the Exclusive Territory. (Any such customization service provided by Licensor is referred to here -9- as the "Customization Service"). Licensee shall initiate a request for Customization Service by submitting a request for Customization Service to Licensor (the "Request"). Each Request shall contain a description of the specific Customization Service and the CitySearch System Technology which is the subject of the Request (the "Project"). (b) Licensor shall submit within a reasonable period of time a reply to Licensee's Request (the "Work Plan"). Where applicable the Work Plan will include the following: (i) a description of the Customization Service to be performed and the CitySearch Technology Systems to be customized; (ii) acceptance tests or means proposed for testing the Systems delivered at the completion of the Project; (iii) an implementation schedule which shows the time frames for all stages of the Project's development and completion; and where the costs of the Project will not be paid for in accordance with the fees schedule set out in Schedule E, the costs of the Project and a schedule of payments to be made during or at the completion of the Project. For larger Projects, the Work Plan may provide for a development program of several stages, such stages, for example, being the production of specifications and completions of the development of custom changes. If the Customization Service to be provided will be paid for on a cost plus basis the Work Plan shall, unless otherwise agreed to by the parties, contain an estimate of the time and cost for all phases as well as an estimate of the time and cost for the first phase of the Project. (c) Neither party shall be bound to proceed with any Project until the parties have agreed in writing to the terms of the applicable Work Plan: Licensor and Licensee shall negotiate in good faith the terms of each Work Plan. At Licensor's discretion, Licensor may notify Licensee that it does not desire to perform Customization Service requested by Licensee pursuant to Section 3.04(b). Upon receipt of such notice, or in the event the parties are unable to agree on the terms of a Work Plan after negotiating same in good faith. Licensee shall he entitled to obtain access to the Source Materials necessary to perform the work which is the subject of the Request, subject to the provisions of Section 5.06 and the Escrow Agreement. (d) Licensee shall assist Licensor in the performance of the Customization Service by making available all equipment, software, documentation and data, information and personnel described in a Work Plan on a timely basis. Licensee shall also ensure that those of its personnel who are assigned to assist Licensor are familiar with Licensee's requirements and have the expertise and capabilities necessary to permit Licensor to undertake and complete the Services. 3.05 RESPONSIBILITIES OF LICENSEE ---------------------------- Licensee acknowledges that Licensor shall not be required to: (i) use its site production management staff and resources to develop or operate the Toronto Star CitySearch Information Service; -10- (ii) provide any Training Service, Consulting Service or Customization Service for any CitySearch Information Service other than the Toronto Star CitySearch Information Service; (iii) deploy any of its personnel or resources to provide any services that could substantially change Licensor's own priorities such as writing additional manuals or scheduling additional training that ordinarily would not have been provided by Licensor in the course of conducting its business in the United States; (iv) developing or providing any Content; (v) providing any of Licensor's back office support systems such as sales tracking, site creation tracking, billing and customer services; (vi) providing access to or use of any of Licensor's databases, servers or other computer or communications hardware or software, except as provided in Schedule A; (vii) purchase, lease, license or otherwise provide any hardware or software, other than as set forth in Schedule A; or (viii) furnish or license to Licensee any third party software such as Informix/Illustra, Etak, Perly, Photoshop, Microsoft Word, SQL Server, Windows 95 and Windows NT, or networking software such TCP/IP. ARTICLE FOUR - FEES AND EXPENSES -------------------------------- 4.01 LICENSE ------- The parties acknowledge that the License has a value of [*] and that Licensee has issued to Licensor [*] of Licensee in consideration for the grant of the License. 4.02 INITIAL SERVICE FEE ------------------- Licensee shall pay to Licensor a [*] service fee (the "Initial Service Fee") of [*] with respect to Services to be provided by Licensor under this Agreement. The Initial Service Fee shall be paid on the Effective Date. - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -11- 4.03 ADDITIONAL SERVICE FEES ----------------------- Licensee shall pay to Licensor service fees with respect to Customization Services, Training Services and Consulting Services. Except as provided to the contrary in any Work Plan, the said services shall be paid for on a cost plus basis in accordance with the cost plus schedule of Licensor set out in Schedule E (the "Additional Service Fees"). In consideration of the payment by Licensee to Licensor of the Initial Service Fee, Licensor hereby waives its right to be paid [*] of Additional Service Fees. 4.04 INVOICING --------- Except as otherwise set forth in a Work Plan, any Additional Service Fees billed to Licensee will be invoiced regularly once a month in arrears and will be due and payable within forty-five (45) days of receipt by Licensee. Any sum due to Licensor that is not paid when due shall bear interest from the due date thereof to the date of payment at the prime rate plus tWo percent (2%) per annum, calculated and payable monthly. For the purpose of this section, the term "prime rate means at any time the rate per annum, commonly known as the prime rate, announced by the Canadian Imperial Bank of Commerce from time to time, being its reference rate in effect for determining interest rates on Canadian dollar commercial loans made at Toronto. 4.05 EXPENSES -------- Licensee agrees to reimburse Licensor for all expenses incurred by it in connection with travel (including airfare and hotel accommodation) pertaining to providing Services to Licensee hereunder. The amount to which Licensor shall be entitled to be reimbursed for travel shall not exceed amounts which have been approved in advance by Licensee, or amounts generally approved by Metroland for travel, from time to time, whichever is the greater. Licensee also agrees to reimburse Licensor for any costs or expenses incurred by it in connection to rent or lease dedicated communication lines between Licensor and Licensee, and other out-of-pocket expenses such as expenses for discs, tapes, and other magnetic media provided by Licensor to Licensee. 4.06 TAXES ----- All payments to be made to Licensor under this Agreement are exclusive of all taxes and Licensee shall pay any sales, use, goods and services, personal property, consumption, value added, or other tax and any duties or tariffs that now exist or which may arise in the future related to this Agreement or the performance of the Services or otherwise, except for tax based on the income of Licensor. Licensee shall be entitled to deduct withholding taxes which may be imposed by any governmental authority in Canada with - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -12- respect to Services performed in Canada otherwise due to Licensor; provided, however, that no such deduction shall be taken unless Licensee makes payment to the government authority responsible for the collection of such taxes within 30 days of the month following the month in which the payments are made to Licensor hereunder. Not less frequently than once each year during the term of this Agreement and during the year immediately following the termination of this Agreement, Licensee shall forward to Licensor a copy of any and all correspondence filed with governmental authorities directly relating to the reporting and/or payment of withholding taxes clue on account of payments made to Licensor hereunder Licensee shall provide to Licensor such reasonable assistance as Licensor may request in connection with any claim by Licensor for a credit or refund of such withholding taxes. 4.07 DISPUTED PAYMENTS ----------------- [*] ARTICLE FIVE - INTELLECTUAL PROPERTY RIGHTS ------------------------------------------- 5.01 OWNERSHIP OF CITYSEARCH SYSTEMS ------------------------------- Nothing herein shall transfer or convey or operate so as to grant to Licensee any right, title or interest to all or any part of the CitySearch Systems or any of the Licensed Trade-Marks. 5.02 OWNERSHIP OF CONTENT -------------------- Nothing herein shall transfer or convey or operate so as to grant to Licensor any right, title or interest to all or any part of the Content developed by Licensee for use as part of the Toronto Star CitySearch Information Service. - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -13- 5.03 OWNERSHIP OF WORK PRODUCTS -------------------------- Except as otherwise specifically provided in a Work Plan, ownership of Work Products and the Intellectual Property Rights therein shall be as follows; (a) With respect to Work Products developed and prepared solely by Licensee during the term of this Agreement and which are not Improvements to the CitySearch Systems (the "Licensee Owned Work Products"), the Intellectual Property Rights therein shall be and remain the exclusive property of Licensee. Licensee shall disclose to Licensor the Licensee Owned Work Products and shall, if requested to do so by Licensor, negotiate in good faith with Licensor a license to use and to enable Affiliates and other licensees of Licensor to use the Licensee Owned Work Products in consideration of the payment to Licensee of a reasonable license fee. (b) With respect to Work Products which are: (i) developed and prepared solely by Licensee during the term of this Agreement or during any period in which the License in respect of the CitySearch Systems conferred by Article 2 shall survive termination of the Agreement, and which are Improvements to the CitySearch Systems, or (ii) developed and prepared jointly by Licensor and Licensee during the term or following the termination of this Agreement including Work Products developed and prepared by Licensor or jointly by Licensor and Licensee in the course of performing Customization Service (the "Jointly Owned Work Products"), the Intellectual Property Rights therein shall be jointly owned by Licensor and Licensee as tenants-in-common. (c) Licensee agrees that during the term of this Agreement and thereafter for as long as any copyright or other Intellectual Property Right subsists in Canada or the United States in the Jointly Owned Work Products that it will not itself, and it will not authorize or permit any other person to, use the Jointly Owned Work Products to provide, operate, manage or carry on a Competing Business to the business of Licensor. Further, Licensee agrees that it will not make any grant including any grant of any interest or license in the Jointly Owned Work Products to any person without obtaining the agreement of such person that it will not itself and that it will not authorize or permit any other person to use the Jointly Owned Work Products to provide, operate, manage or carry on a Competing Business to the business of Licensor. The aforesaid restrictions shall not operate, however, following the termination of this Agreement so as to prevent Licensee from using the Jointly Owned Work Products to carry on a CitySearch Information Service pertaining to any geographic region in the Province of Ontario other than the Ottawa-Carleton region. Subject to the foregoing and to Licensee's obligations under the Non-Competition Agreement. Licensee shall have the right to, and to authorize others to, make changes, modifications and enhancements (but not other adaptations or derivative works which Licensee agrees not to make) to the Jointly Owned Work Products and to reproduce and commercially exploit same without any obligation to obtain the consent of or to account to Licensor with respect to the -14- said activities. The parties agree that any changes, modifications or enhancements made to the Jointly Owned Work Products by Licensee during the term of this Agreement or during any period in which the License in respect of the CitySearch Systems conferred by Article 2 shall survive a termination of the Agreement, shall be considered to be Jointly Owned Work Products. Provided, however, nothing in this Section 5.03 authorizes Licensee to use or reproduce any CitySearch Systems or to commercially exploit or embed same in connection with the commercial exploitation of the Jointly Owned Work Products. The parties agree that Improvements made to the Jointly Owned Work Products by Licensor shall be considered to be Licensor Owned Work Products. (d) Subject to Licensor's obligations under the Non-Competition Agreement, Licensor shall have the right to, and to authorize others to, make Improvements to the Jointly Owned Work Products and to reproduce and commercially exploit same without any obligation to obtain the consent of or to account to Licensee with respect to the said activities. (e) With respect to all Work Products developed and prepared solely by Licensor during the term of this Agreement (the "Licensor Owned Work Products"), the Intellectual Property Rights therein shall be and remain the exclusive property of Licensor. Such Work Products shall be considered to be CitySearch Systems for all purposes herein which Licensee shall have the right to use pursuant to Article 2 during the term of this Agreement. 5.04 DISCLOSURE OF LICENSEE IMPROVEMENTS ----------------------------------- Licensee will promptly inform Licensor of any and all Licensee Improvements. Upon request, Licensee agrees to furnish Licensor with copies of all Intellectual Property including source codes and technical documentation related thereto, provided, however, that Licensee shall not be required to deliver to Licensor the source codes to Licensee Owned Work Products unless Licensee agrees to do so pursuant to an agreement reached by the parties pursuant to Section 5.03(a). 5.05 DISCLOSURE OF LICENSOR IMPROVEMENTS ----------------------------------- Licensor will promptly inform Licensee of Licensor Improvements. Upon request, Licensor will furnish Licensee with copies of the Intellectual Property related thereto. 5.06 SOURCE CODES ------------ (a) Except as may be otherwise provided in a Work Plan, Licensor shall not be required to disclose to Licensee the source codes, models, or other high level language versions of any computer programs forming part of the CitySearch Systems. [*] - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -15- [*] - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -16- [*] (e) Licensee acknowledges and agrees that Licensor will suffer irreparable injury if Licensee breaches any of the provisions of this Section 5.06 and that the damages suffered by Licensor would be an inadequate remedy in respect of such breach. Licensee hereby agrees in advance, that in the event of such breach, that Licensor shall be entitled in addition to such other remedies, damages and relief as may be available under applicable law. - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -17- [*] ARTICLE SIX - TRADE-MARKS AND QUALITY STANDARDS ----------------------------------------------- 6.01 GRANT OF lICENSE TO TRADE-MARKS ------------------------------- (a) Licensor hereby grants to Licensee, and Licensee hereby accepts from Licensor, a personal, non-exclusive, non-transferable license during the term of this Agreement to use the Licensed Trade-Marks solely in conjunction with the Toronto Star CitySearch Information Service. (b) During the term of this Agreement, Licensor agrees not to use the Licensed Trade-Marks in conjunction with a CitySearch Information Service pertaining to the Exclusive Territory or to license any other person to do so, without Licensee's prior written consent. However, nothing herein shall prevent Licensor or persons authorized by Licensor from using the Licensed Trade-Marks to market, advertise or promote the Toronto Star CitySearch Information Service or to operate other CitySearch Information Services. 6.02 OWNERSHIP OF TRADE-MARKS ------------------------ Licensee acknowledges that all goodwill associated with Licensee's use of the Licensed Trade-Marks will enure to the exclusive benefit of Licensor Licensee agrees that it will not challenge the validity or ownership or Licensor's right to use the Licensed Trade-Marks. Licensee also agrees that it will not apply for registration of any of the Licensed Trade-Marks, or any substantially similar mark, in the Exclusive Territory or outside the Exclusive Territory, either during or after the term of this Agreement. 6.03 RESTRICTIONS ON USE OF THE TRADE-MARKS -------------------------------------- Licensee agrees to comply with all instructions and requirements provided by Licensor in writing to Licensee with respect to the use of the Licensed Trade-Marks from time to time. Licensee will not make any use of the Licensed Trade-Marks including any use over any network until Licensor has approved such use in writing. Licensee agrees not to use the Licensed Trade- Marks, or any variation thereof, as a corporate name or trade name of Licensee or any affiliate of Licensee, without Licensor's prior written consent. 6.04 QUALITY STANDARDS ----------------- (a) Licensee acknowledges that high standards of quality are required for the operation of the Toronto Star CitySearch Information Service to maintain the good public image and reputation of the Licensed Trade-Marks and the business of Licensor and Licensee - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -18- agrees to maintain such standards. Without limiting the generality of the foregoing, Licensee agrees: (i) to comply with all policies, standards and specifications established from time to time by Licensor and notified to Licensee in writing for the establishment and operation of a CitySearch Information Service including those related to navigational layouts, hierarchical maps and the use of trade-marks and logos; (ii) to implement and enforce the policies and procedures adopted by Torstar Corporation for the operation of its electronic publishing business and those of its Affiliates (or replacement policies and procedures agreed to in writing by the parties) (the "Offensive Content Standards"); to ensure that the Content which is displayed or accessible to consumer(s) using the Toronto CitySearch Information Service will not be obscene, indecent, pornographic or offensive or be defamatory of any person, or infringe upon or violate any Intellectual Property Right of any person; and, to promptly delete from the service any such Content or Content which contravenes the Offensive Content Standards; (iii) that the Toronto Star CitySearch Information Service will be available to consumers 7 days a week, 24 hours a day, subject only to scheduled maintenance and system failures which could not have been reasonably avoided by Licensee; (iv) to conduct the Toronto Star CitySearch Information Service in a manner that will reflect favourably on the good name and reputation of Licensor and its business of providing CitySearch Information Services, and refrain from engaging in any unfair, or deceptive trade practice, or unethical business practice whatever, or practice that could unfavourably reflect upon Licensor or the CitySearch Information Services provided by Licensor; and (v) to comply with all applicable laws, regulations, and ordinances and obtain all necessary licenses, permits and consents pertaining to or required for the establishment and operation of the Toronto Star CitySearch Information Service including consents from persons with any Intellectual Property Right in any Content used or displayed in the provision of the Toronto -19- Star Information Service (the requirements set out in this Section 6.04(a) are referred to here as the "Quality Standards"). (b) Prior to Launching the Toronto Star CitySearch Inforrmation Service. Licensee shall demonstrate to the reasonable satisfaction of Licensor that the service meets all of the Quality Standards. (c) Licensor, either by itself or through third parties, shall have the right to test the Toronto Star CitySearch Information Service provided from time to time by Licensee. In connection with the foregoing, Licensee agrees to provide Licensor with access to the Designated Locations from which the service is provided, subject to the reasonable security and confidentiality requirements of Licensee. In the event the Quality Standards are not complied with, Licensee, if requested to do so in writing by Licensor, shall cease to use the Licensed Trade-Marks until such time as Licensee can demonstrate to the reasonable satisfaction of Licensor that the service meets or exceeds the Quality Standards, if Licensor shall have given written notice to Licensee describing in reasonable detail the failures of the Toronto Star CitySearch Service to meet the Quality Standards and such breach shall not have been remedied by Licensee within thirty (30) days after receipt of such written notice. (d) Licensee assumes all responsibility and liability for loss or damage caused by or attributable to the Toronto Star CitySearch Information Service, however caused, Licensee agrees to indemnify and hold harmless Licensor and its Affiliates and their officers, directors, employees and agents from any and all claims, damages, liabilities and costs. including reasonable legal fees and disbursements, which Licensor or any of the said persons shall suffer or incur as a result of the failure of Licensee to meet the Quality Standards or the operation of the Toronto Star CitySearch Information Service. Notwithstanding the foregoing. Licensee shall not be responsible for, and shall have no liability to indemnify Licensor hereunder for, any claim, damage, liability or cost to the extent that it is caused by Licensor or the failure of the CitySearch Systems to operate as described in Section 9.01. ARTICLE SEVEN - PROPRIETARY RIGHTS AND CONFIDENTIAL INFORMATION ---------------------------- 7.01 DUTY OF CONFIDENCE ------------------ (A) Each of Licensee and Licensor acknowledges that Confidential Information will be exchanged between them pursuant to this Agreement. Each of Licensee and Licensor shall use no less than the same means it uses to protect its similar confidential and proprietary information, but in any event not less than commercially reasonable means, to prevent the disclosure and to protect the confidentiality of the Confidential Information of the other. Each of Licensee and Licensor agrees that, except as provided herein, it will not -20- use the Confidential Information of the other except for the purposes of this Agreement and as authorized herein. (b) Licensee shall not disclose, provide, or make the CitySearch Systems or any part thereof available in any form or medium to any person except to its employees, and to contractors and consultants of Licensee approved in writing by Licensor with a need for access to enable Licensee to exercise its license rights under this Agreement, All persons to whom access is given shall execute a confidentiality agreement in a form to be approved by Licensor. (c) Notwithstanding section 7.01(a), the Recipient of Confidential Information may use or disclose the Confidential Information to the extent that the Recipient can show that such Confidential Information is (i) already known by the Recipient without an obligation of confidentiality (ii) publicly known or becomes publicly known through no unauthorized act of the Recipient, (iii) rightfully received from a third party, (iv) independently developed by the Recipient without use of the information of the Disclosing Party (v) approved by the Disclosing Party for disclosure, or (vi) required to be disclosed pursuant to a requirement of a governmental agency or law so long as the Recipient provides the other party with notice of such requirement prior to any such disclosure and takes all reasonable steps available to maintain the information in confidence. 7.02 PROTECTION OF PROPRIETARY RIGHTS -------------------------------- (a) On all authorized copies of the CitySearch Systems and Source Materials Licensee shall make and include all proprietary, copyright, patent, trade-mark, design right and trade secret legends and alphanumeric codes, in the same form and location as the legends appearing on the CitySearch Systems and Source Materials. Further, Licensee shall not remove any proprietary, copyright, patent, trade-mark, design right or trade secret legends from the CitySearch Systems or Source Materials. (b) Licensee agrees not to disassemble, decompile, translate or convert into human readable form or into another computer language, reconstruct or decrypt, or reverse engineer, all or any part of the CitySearch Systems. 7.03 INSPECTION BY LICENSOR ---------------------- Licensee agrees to provide Licensor with reasonable access to the Designated Locations where the CitySearch Systems and Source Materials are used for the purpose of enabling Licensor to verify that the CitySearch Systems and Source Materials are and have been Used in compliance with the provisions of this Agreement. Licensor agrees to give Licensee reasonable notice of its intention to make the aforesaid investigation. -21- 7.04 THIRD PARTY INFORMATION ----------------------- Neither Licensee nor Licensor shall disclose to the other any proprietary, confidential, secret, or private information of any third person which It is under a duty not to disclose. 7.05 LOSS OF CONFIDENTIAL INFORMATION -------------------------------- In the event of any unauthorized disc disclosure or loss of, or inability to account for, Confidential Information of the Disclosing Party, the Recipient will notify the Disclosing Party immediately. 7.06 ENFORCEMENT OF CONFIDENTIALITY OBLIGATION --------------------------------------------- Each of Licensee and Licensor acknowledges and agrees that irreparable injury may result to the other if it breaches the provisions of this Article and that damages may be an inadequate remedy in respect of such breach. Each of Licensee and Licensor hereby agree in advance that, in the event of such breach, the other of them shall be entitled, in addition to such other remedies, damages and relief as ANY be available under applicable law, to the granting of injunctive relief in such party's favour. ARTICLE EIGHT - INFRINGEMENT ---------------------------- 8.01 PROSECUTION OF INFRINGEMENT CLAIMS ---------------------------------- (a) The parties shall as soon as possible notify each other in writing of any actual, alleged, or threatened infringements or other unauthorized uses of the CitySearch Systems or the Licensed Trade-Marks in conjunction with a CitySearch Information Service pertaining to the Exclusive Territory (the foregoing are referred to here as "Infringements") of which they become aware. Licensor may, but is not required to, take any and all actions, legal or otherwise, which are necessary to terminate or prevent Infringements. Licensee shall have the right to be kept informed of the status and progress of all actions instituted by Licensor pursuant to this section 8.01(a). Licensee agrees to comply with all reasonable requests for assistance from Licensor in connection with Infringements. Licensor agrees to reimburse Licensee for its costs of providing such assistance, provided that Licensee gives Licensor a written estimate of the costs to he incurred and provided further that the costs for which reimbursement are sought do not exceed the estimate. Licensor shall bear all expenses of all actions which it initiates pursuant to this section 8.01(a). -22- (b) If Licensor does not institute an action within thirty (30) days after receiving notice from Licensee of an Infringement and a request by Licensee to commence an action to terminate the Infringement itself, then Licensee may institute an action with respect thereto only upon receiving the prior written consent of Licensor, which consent will not be unreasonably refused. Licensee agrees that if any of the Licensed Trade-Marks are not owned by Licensor that Licensor may not be able to consent to Licensee's instituting any action with respect thereto. Licensee shall have no right hereunder to commence any action with respect to any Infringements which do not pertain to the use of the CitySearch Systems or the Licensed Trade-Marks, in connection with a CitySearch Information System pertaining to the Exclusive Territory. Licensor shall have the right to be kept informed of the status and progress of all such actions instituted by Licensee pursuant to this section 8.01(b). Licensee shall bear all the expenses of all actions which it initiates pursuant to this Section 8.01(b) including without limitation all legal fees and disbursements which Licensor may incur in connection with such actions regardless of whether Licensor is a party to such action and Licensee shall indemnify and hold Licensor harmless with respect to such costs. Licensor agrees to comply with all reasonable requests for assistance from Licensee in connection with actions instituted by Licensee under this Section. Licensee agrees to reimburse Licensor for its costs of providing such assistance, provided that Licensor gives Licensee a written estimate of the costs to be incurred and provided further that the costs for which reimbursement are sought do not exceed the estimate. (c) In the event Licensee and Licensor jointly agree to institute an action to terminate or prevent Infringements, Licensee and Licensor shall jointly control any such proceedings and shall develop mutually satisfactory procedures for prosecuting the said action. (d) Unless otherwise provided for herein, any recoveries or settlement fees received from suits or settlements involving an action initiated pursuant to section 8.01(a) or (b) shall be paid to the party which initiated such suit or action in accordance with Section 8.01(a) or (b), and shall be for such party's own use and benefit. Any recoveries or settlement fees received from suits or settlements involving an action initiated pursuant to section 8.01(c) shall, unless otherwise agreed to by the parties in writing, be to the joint benefit of Licensor and Licensee after payment of all expenses (including all legal fees). 8.02 LICENSOR'S DEFENCE OF INFRINGEMENT CLAIMS ----------------------------------------- (a) Licensor will defend or (at its option) settle, any claim or action brought against Licensee to the extent that it is based on a claim that the CitySearch Systems infringes any copyright, patent, trade secret, trademark or contractual right enforceable in Canada or the United States of any third person (a "Claim") and indemnify Licensee against damages and costs awarded against Licensee by a court of competent jurisdiction by final order from which the appeal is taken or the time for appealing has expired; provided that Licensee notifies Licensor promptly in writing of same; and provided further that Licensee permits Licensor thereof to defend, compromise or settle the Claim, and at Licensor's expense provides all -23- available information assistance and authority to enable Licensor to do so. Licensor shall be responsible for paying for any compromises or settlements with respect to Claims, provided that Licensor shall not be liable to reimburse Licensee for any compromise or settlement made by Licensee without Licensor's prior written consent. Licensor shall not be liable to reimnburse License for any legal fees or expenses incurred by Licensee in connection with any Claim. Licensee shall have no authority to settle any Claim on behalf of Licensor. (b) Should the CitySearch Systems or any part thereof become, or in Licensor's sole opinion be likely to become, the subject of a claim of infringement, misappropriation, or violation of any Intellectual Property Right (an "Infringement Claim") Licensor shall (i) procure for Licensee, at no cost to Licensee the right to continue to use the CitySearch System or component which is the subject of the Infringement Claim, (ii) replace or modify the CitySearch System (or the component thereof which is the subject of the Infringement Claim) at no cost to Licensee with a functionally equivalent system or component, or (iii) if none of the forgoing alternatives are reasonably practical in Licensor's sole judgement, if requested to do so by Licensee remove the component that is the subject of the Infringement Claim and refund all license fees paid by Licensee related to such component. (c) Licensor shall have no liability for any Claim to the extent that it is based on (i) the use of other than the latest release and version of any Intellectual Property provided to Licensee, (ii) the use or combination of the CitySearch Systems with software, hardware or any other product not provided by Licensor or recommended or approved in writing by Licensor, or (iii) any Licensee Improvement to the CitySearch Systems or use of the CitySearch Systems other than as authorized herein or as described or recommended by Licensor in the CitySearch Documentation. (d) Except as expressly provided herein, this Section 8.02 states the entire liability of Licensor and Licensee's sole remedies with respect to any Infringement Claim. 8.03 LICENSEE'S DEFENCE OF INFRINGEMENT CLAIMS ----------------------------------------- (a) Licensee will defend or (at its option) settle, any claim or action brought against Licensor to the extent that it is based upon a claim that any Licensee Improvement or Content displayed or accessible to consumers using the Toronto CitySearch Information Service infringes or violates an Intellectual Property Right or contractual right enforceable in Canada or the United States (a "Claim") of any third person and indemnifies Licensor against damages and costs awarded against Licensor by a court of competent jurisdiction by final order from which no appeal is taken or the time for appealing has expired, provided that Licensor notifies Licensee promptly in writing of same; and provided further that Licensor permits Licensee to defend, compromise or settle the Claim and at Licensee's expense provides all available information, assistance and authority to enable Licensee to do so. Licensee shall be responsible for paying for any compromises or settlements with respect to -24- Claims, provided that Licensee shall not be liable to reimburse Licensor for any compromise or settlement made by Licensor without Licensee's prior written consent. Licensee shall also not be liable to reimburse Licensor for any legal fees or expenses incurred by Licensor in connection with any Claims. Licensor shall have no authority to settle any Claim on behalf of Licensee. (b) Licensee shall have no liability for any Claim to the extent that it is based on any Improvement made by Licensor to the Licensee Improvement or Content or for the use thereof other than related to a CitySearch Information Service. (c) Except as otherwise provided herein, this Section 8.03 states the entire liability of Licensee and Licensor's sole remedies with respect to any Claim. ARTICLE NINE - WARRANTIES AND DISCLAIMERS ----------------------------------------- 9.01 WARRANTY -------- (a) During the term of this Agreement, Licensor will make commercially reasonable efforts to correct or provide Licensee with a workaround for the failure of the CitySearch Systems to conform in all material respects to the description thereof in the CitySearch Documentation and provide Licensee with replacement media in the event there are defects in materials or workmanship in the media upon which the CitySearch Systems are provided. Licensor shall have no obligations under this Section 9.01 with respect to any changes, modifications or enhancements made by Licensee to the CitySearch Systems or to any part of the CitySearch Systems affected by any such changes, modifications or enhancements, except as may be specifically agreed to by Licensor and Licensee in a Work Plan or other agreement of the parties in writing. (b) Licensor Warrants to Licensee that all Services will be performed with reasonable skill and care and by persons qualified to provide the Services. Licensor also warrants that to its knowledge, the Licensed Programs do not contain any viruses, locks or codes which are intended to interfere with their use. (c) In the event of Licensor's material failure to comply with its obligations under Section 9.01(a) that results in the Toronto Star CitySearch System being unavailable to the public after the Launch and Licensee having given written notice of same to Licensor in sufficient detail to enable Licensor to reproduce the problems experienced by Licensee. Licensor agrees that if such problems are not substantially remedied (or a work-around provided to Licensee therefor) within two (2) days following receipt of the notice, that Licensor will, if requested to do so by Licensee and subject to Licensor's security and confidentiality requirements, permit up to two (2) members of Licensee's technical staff to -25- access the Source Materials pertaining to the problem at the business premises of Licensor to assist Licensor in resolving the problem. 9.02 ELECTRONIC ACCESS ----------------- Licensee agrees to provide Licensor with access to the computer upon which the CitySearch Systems are installed, used, or accessed, to perform its obligations hereunder, subject to compliance with Licensee's security and confidentiality policies. Access to the said systems shall include access by physical and direct remote electronic access means. To facilitate such access, Licensee agrees to establish and maintain, at its own expense, during the term of this Agreement all reasonable communication equipment and related software and other items reasonably requested by Licensor to enable Licensor to access and use the said systems. The remote electronic access shall be available at all times (twenty-four (24) hours seven (7) days a week), except for scheduled maintenance and downtimes due to failures of the systems. Licensee shall also reimburse Licensor for its costs of establishing and maintaining electronic links with Licensee including without limitation any equipment purchased by Licensor specifically to provide Services to Licensee hereunder and, monthly line charges. 9.03 DISCLAIMER OF WARRANTY ---------------------- (A) LICENSOR EXPRESSLY DISCLAIMS ALL REPRESENTATIONS, WARRANTIES AND CONDITIONS EXPRESS OR IMPLIED NOT CONTAINED HEREIN, INCLUDING REPRESENTATIONS, WARRANTIES AND CONDITIONS OF QUALITY, PERFORMANCE, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE AND THOSE ARISING BY STATUTE OR OTHERWISE IN LAW OR FROM A COURSE OF DEALING OR USE OF TRADE. LICENSOR DOES NOT REPRESENT OR WARRANT THAT (I) THE OPERATION OF THE CITYSEARCH SYSTEMS WILL BE ERROR FREE OR UNINTERRUPTED OR (II) ALL PROGRAMMING ERRORS CAN BE CORRECTED OR FOUND IN ORDER TO BE CORRECTED. (b) Licensee is responsible for taking precautionary measures to prevent the loss or destruction of Content such as, for example, making regular backups and verifying the results obtained from using the CitySearch Systems. 9.04 LIMIT OF LIABILITY ------------------ (a) For breach or default by Licensor of any of the provisions of this Agreement, or in respect of any claim arising herefrom or related hereto, Licensor's entire liability, regardless of the form of action, whether based on contract or tort, including negligence, shall be [*] - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -26- [*] (B) IN NO EVENT WILL EITHER PARTY BE LIABLE FOR SPECIAL, INCIDENTAL, INDIRECT, OR CONSEQUENTIAL LOSS OR DAMAGE, LOST BUSINESS REVENUE, LOSS OF PROFITS, LOSS OF DATA, FAILURE TO REALIZE EXPECTED PROFITS OR SAVINGS OR ANY CLAIM AGAINST THE OTHER PARTY BY ANY OTHER PERSON (EVEN IF THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF ANY SUCH LOSS OR DAMAGE). THE LIMITATION OF LIABILITY IN THIS SECTION 9.04(B) SHALL NOT APPLY TO ANY CLAIM TO THE EXTENT THAT THE CLAIM IS BASED UPON A BREACH OR DEFAULT BY LICENSEE OF ARTICLES 2, 5, OR 6, OR SECTIONS 7.01, 7.02, OR 8.03. THE LIMITATION OF LIABILITY IN THIS SECTION 9.04(B) SHALL NOT APPLY TO ANY CLAIM TO THE EXTENT THAT THE CLAIM IS BASED UPON A BREACH OR DEFAULT BY LICENSOR OF SECTIONS 5.06(A) (LICENSOR'S REFUSAL TO ESTABLISH AN ESCROW AGREEMENT WITH AN INDEPENDENT SOURCE CODE AGENT AS REQUIRED IN SECTION 5.06(A)) 7.01 OR 8.02. (C) LICENSOR SHALL BE LIABLE TO LICENSEE AS EXPRESSLY PROVIDED IN THIS AGREEMENT BUT SHALL HAVE NO OTHER OBLIGATION, DUTY, OR LIABILITY WHATSOEVER IN CONTRACT, TORT OR OTHERWISE TO LICENSEE INCLUDING ANY LIABILITY FOR NEGLIGENCE, THE LIMITATIONS, EXCLUSIONS AND DISCLAIMERS IN THIS AGREEMENT SHALL APPLY IRRESPECTIVE OF THE NATURE OF THE CAUSE OF ACTION, DEMAND, OR ACTION BY LICENSEE, INCLUDING BUT NOT LIMITED TO BREACH OF CONTRACT, NEGLIGENCE, TORT, OR ANY OTHER LEGAL THEORY AND SHALL SURVIVE A FUNDAMENTAL BREACH OR BREACHES OR THE FAILURE OF THE ESSENTIAL PURPOSE OF THIS AGREEMENT OR OF ANY REMEDY CONTAINED HEREIN. - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -27- 9.05 LIMITATION PERIOD ----------------- Neither party may bring an action, regardless of form, arising out of or related to this Agreement more than [*] after the cause of action has arisen or the date of discovery of such cause, whichever is later. 9.06 CALIFORNIA FRANCHISE DISCLAIMER ------------------------------- The parties agree that neither this Agreement nor the business relationship established hereunder will be construed as granting a franchise. The parties warrant to one another that they have consulted counsel in reviewing and negotiating this Agreement and have concluded that no business plan or franchise fees are conveyed or provided for in this Agreement or otherwise by the relationship established hereby or by the relationship between the parties. ARTICLE TEN - TERM AND TERMINATION ---------------------------------- 10.01 TERM ---- The term of this Agreement shall commence on the Effective Date and shall continue until [*] 10.02 TERMINATION ----------- (a) This Agreement may be terminated (each ground for termination below is referred to here as an "Event of Default"): (i) at any time by mutual written consent of Licensee and Licensor; (ii) by notice from one party to the other in the event the other party becomes insolvent, makes an assignment for the benefit of its creditors, ceases operation, a receiver is appointed for the other party or its property, or the other party becomes subject to bankruptcy or receivership proceedings; (iii) by a party immediately upon notice to the other party in the event of any material breach or default by the other party of any provision in this Agreement, if the party shall have given written notice to the other party of such breach or default and such breach or default shall not have been remedied within thirty (30) days after receipt of such written notice; - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -28- (iv) by a party effective immediately upon notice to the other party in the event of a material breach of the provisions of Article 7 by the other party, if the party shall have given written notice to the other party of such material breach and such material breach shall not have been remedied within ten (10) days after receipt of such written notice: (v) by Licensor in the event Licensee or Torstar Corporation is in breach of the Non-Competition Agreement and such breach has not been remedied within thirty (30) days after receipt of such written notice or by Licensee in the event Licensor or 1217554 Ontario Inc. is in breach of the Non-competition Agreement and such breach has not been remedied within thirty (30) days after receipt of such written notice; or (vi) by Licensor upon written notice to Licensee in the event Licensee's use of CitySearch Systems or Source Materials or any part thereof exceeds the License granted to Licensee or is in contravention of any of the provisions of Article 2 or Article 6 or Section 5.06, if such use or contravention has not been remedied with twenty (20) days after receipt of such written notice. (b) The failure of any party to terminate this Agreement for any of the reasons specified in Section 10.02, or in this Agreement, shall not in any way be deemed a waiver of such party's rights in respect thereof or otherwise limit its rights to enforce the obligations of the other party hereunder. 10.03 EFFECT OF TERMINATION BY LICENSOR --------------------------------- Upon the termination of this Agreement by Licensor pursuant to Section 10.02 or by the parties pursuant to Section 10.02(i), the rights, powers, privileges, and licenses including the License granted to Licensee shall immediately terminate. Without limiting the generality of the foregoing, upon any such termination, Licensee shall have no right to continue to use the CitySearch Systems, to receive or use any Licensor Improvements, or to use the Licensed Trade-marks. 10.04 RETURN OF INTELLECTUAL PROPERTY ------------------------------- Subject to the provisions of Section 10.05(b), upon the termination of this Agreement, Licensee shall cease all use of the CitySearch Systems (including the Source Materials) and Licensee shall return to Licensor all of Licensor's Confidential Information (including Source Materials) and CitySearch Systems in its possession, power or control. -29- 10.05 SURVIVAL -------- (a) The termination of this Agreement by Licensor under Section 10.02 or by the parties pursuant to Section 10.02(i) shall not limit or otherwise affect the respective rights and obligations of the parties under Articles 4, 7 and 9 and Sections 5.03, 6.02, 6.03, 6.04(d), 10.03, 10.04, 11.01, 11.03, 12.02, or 12.03 or any other right or obligation of the parties hereunder accrued prior to the date of the termination. (b) The termination of this Agreement by Licensee under Section 10.02 shall not limit or otherwise affect the respective rights and obligations of the parties under Articles 4, 7 and 9 and Sections 5.03, 5.04, 5.06, 6.02, 6.03, 6.04(d), 8.03, 11.01, 11.03, 12.02, or 12.03 or any other rights and obligations of the parties hereunder accrued prior to the date of the termination. Further, and notwithstanding any termination of this Agreement by Licensee pursuant to Section 10.02 (the date of the occurrence of any such event is referred to here as the "Licensee Termination Date"), the following shall occur: (i) the License in respect of the CitySearch System conferred by Article 2 shall continue with respect to the version and release thereof delivered to Licensee as of the Licensee Termination Date subject to the provisions and restrictions set out in Article 2 related to the use of the CitySearch Systems; (ii) Licensee shall have no right to receive or use any Licensor Improvements made after the Licensee Termination Date; (iii) Licensee's License to use the Licensed Trade-Marks shall terminate. Licensor's obligations under Section 6.01(b) shall terminate, and Licensee shall make no further use of any of the Licensed Trade-Marks other than for the minimum period, not to exceed thirty (30) days, which is necessary for Licensee to remove all reference to the Licensed Trade-Marks from the Toronto Star CitySearch Information Service (provided that the Quality Standards shall be met during this period); (iv) Licensee's License to use the CitySearch Systems conferred by Section 2.01 shall become non-exclusive and Licensor, subject to the restrictions contained in the Non-Competition Agreement, shall be entitled to, and may authorize third persons to, use the CitySearch Systems in the Exclusive Territory or outside thereof for the purpose of establishing and operating a CitySearch Information Service; -30- (v) Licensor shall have no further obligations to Licensee hereunder to provide any Services, or to provide Licensee with the warranty support described in Section 9.01; (vi) Licensee shall not have any right to take or continue any action against any person for the infringement of any Intellectual Property Right in connection with the use of the CitySearch Systems or the Licensed Trade-Marks; and (vii) Licensor shall be entitled to terminate any of the rights of Licensee which pursuant to this Section 10.05(b) shall have expressly survived a termination of this Agreement by Licensee pursuant to Section 10.02(a), upon the occurrence of an Event of Default which would have entitled Licensor to terminate this Agreement pursuant to Section 10.02(a) and the provisions of Section 10.05(a) shall apply mutatis mutandis upon the termination of the said rights. 10.06 SALE OF PARTNERSHIP INTEREST ---------------------------- Upon the sale by Licensor of its Partnership Interest pursuant to Section 8.02 or Section 8.03 of the Partnership Agreement, or upon the dissolution of the Partnership pursuant to Section 8.03(7) of the Partnership Agreement by reason of an event of default by CitySearch U.S.A. as described in Section 8.03(1) of the Partnership Agreement (the date of the occurrence of any such event is referred to here as the "Sale Date"), the following shall occur: (i) the License in respect of the CitySearch System conferred by Article 2 shall continue with respect to the version and release thereof delivered to Licensee as of the Sale Date, subject to the provisions and restrictions set out in Article 2 related to the use of the CitySearch Systems; (ii) Subject to Sub-section (v) below, Licensee shall have no right to receive or to use any Licensor Improvements made after the Sale Date; (iii) Licensee's License to use the Licensed Trade-Marks shall terminate. Licensor's obligations under Section 6.01(b) shall terminate, and Licensee shall make no further use of any of the Licensed Trade-Marks, other than for the minimum period, not to exceed thirty (30) days, which is necessary for Licensee to remove all reference to the Licensed Trade-Marks from the -31- Toronto Star CitySearch Information Service (provided that the Quality Standards shall be met during this period); (iv) Licensee's License to use the CitySearch Systems conferred by Article 2 shall become non-exclusive and Licensor, subject to the restrictions contained in the Non-Competition Agreement, shall be entitled to, and may authorize third persons to, use the CitySearch Systems in the Exclusive Territory or outside thereof for the purpose of establishing and operating a CitySearch Information Service; (v) Licensor shall have no further obligations to Licensee hereunder to provide any Services, or to provide Licensee with the warranty support described in Section 9.01; however, upon being requested to do so by Licensee, Licensor agrees to negotiate with Licensee in good faith a renewal of the said obligations and a license to use Licensor Improvements developed after the Sale Date upon terms to be mutually agreed upon by the parties including terms pertaining to the payment of reasonable license fees for the use of Licensor Improvements and for the provision of Services, provided that Licensor shall have no obligation to enter into any such agreement in the event Licensor has ceased to or has plans to cease to operate CitySearch Information Services; and (vi) the provisions of Sections 3.01-3.04, 6.01, 6.04(a), 8.01 (other than Licensee's obligations to assist Licensor), 9.01 and 9.02 shall cease to apply. ARTICLE ELEVEN - GENERAL ------------------------ 11.01 FURTHER ASSURANCES ------------------ Each party shall from time to time execute and deliver all such further documents and instruments and do all acts and things as the other party may reasonably require (at the requesting party's expense) to effectively carry out or better evidence or perfect the full intent and meaning of this Agreement. 11.02 PUBLIC ANNOUNCEMENTS -------------------- Subject to applicable law or stock exchange regulation, no public announcement or press release concerning this Agreement shall be made by any party without the prior -32- consent and joint approval of the other party. If a party wishes to issue a press release it shall provide a draft thereof to the other party at least three days prior to its intended release and shall consider the reasonable comments of the other party with respect to the press release. Any failure to provide comment within a period of thirty (30) days with respect to a draft press release shall be deemed to constitute consent to the release thereof. 11.03 DISPUTE RESOLUTION ------------------ Any dispute, disagreement, controversy, question or claim arising out of or relating to this Agreement shall be settled in accordance with the provisions of Section 11.03 (Dispute Resolution) of the Partnership Agreement. 11.04 ENTIRE AGREEMENT ---------------- This Agreement together with the Partnership Agreement, the Non- Competition Agreement and the Assignment Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and cancels and supersedes any prior understandings and agreements between the parties hereto with respect thereto. There are no representations, warranties, terms, conditions, undertakings or collateral agreements, express, implied or statutory, between the parties other than as expressly set forth in this Agreement. 11.05 FORCE MAJEURE ------------- If the performance of this Agreement, or any obligation thereunder except the making of payments hereunder is prevented, restricted, or interfered with by reason of; fire, flood, earthquake, explosion or other casualty or accident or act of God; strikes or labour disputes; inability to procure or obtain delivery of parts, supplies, power, equipment or software from suppliers, war or other violence; any law, order, regulation, ordinance, demand or requirement of any governmental authority; or any other act or condition whatsoever beyond the reasonable control of the affected party, the party so affected, upon giving prompt notice to the other party, shall be excused from such performance to the extent of such prevention, restriction or interference; provided, however, that the party so affected shall take all commercially reasonable steps to avoid or remove such cause of non-performance and shall resume performance hereunder with dispatch whenever such causes are removed. 11.06 AMENDMENT AND WAIVER -------------------- No modification of or amendment to this Agreement shall be valid or binding unless set forth in writing and duly executed by the parties hereto and no waiver of any breach of any term or provision of this Agreement shall be effective or binding unless made in writing and signed by the party purporting to give the same and, unless otherwise provided, shall be limited to the specific breach waived. -33- 11.O7 ASSIGNMENT ---------- [*] This Agreement shall enure to the benefit of and be binding upon the successors and permitted assigns of the parties. Either party may also assign this Agreement with the prior written consent of the other party. 11.08 NOTICES ------- Any demand, notice or other communication to be given in connection with this Agreement shall be given in writing and shall be given by personal delivery or by transmittal by electronic means of communication addressed to the recipient as follows: To Licensee: c/o Torstar Corporation 1 Yonge Street Toronto, Ontario M5E 1P9 Fax No.: (416) 869-4183 Attention: General Counsel ---------- with a copy to: Toronto Star Newspapers Limited 1 Yonge Street Toronto, Ontario M5E 1E6 Fax No.: (416) 869-4762 Attention: Vice-President, Strategic Planning ---------- To Licensor: 790 East Colorado Boulevard Suite 200 Pasadena, California 91101 - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -34- U.S.A. Fax No.: (818) 405-9929 Attention: Bradley Ramberg, Chief Financial Officer --------- or to such other address, electronic communication number or individual as may be designated by notice given by any party to the other. Any communication shall be conclusively deemed to have been given on the day or actual delivery thereof if such day is a Business Day and the communication is delivered or transmitted during the normal business hours of the recipient and on the Business Day during which normal business hours next occur if given after such hours on any day. 11.09 GOVERNING LAW ------------- This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. IN WITNESS WHEREOF the parties have executed this Agreement. CITYSEARCH INCORPORATED Per: [SIGNATURE ILLEGIBLE] ------------------------------- 1217554 ONTARIO INC. Per: [SIGNATURE ILLEGIBLE] ------------------------------- SCHEDULE A CITYSEARCH TECHNOLOGY SYSTEMS CITYSEARCH TECHNOLOGY SYSTEMS - ----------------------------- The CitySearch Technology Systems are composed of four systems: the CitySearch client CityServer the CitySearch Staging Server CityWorks These systems form a CitySearch technology infrastructure which supports content management and on-line delivery mechanisms. Licensee will have access to hardware configuration documentation and initial setup support for all CitySearch Technology Systems. Licensee will be responsible for acquiring, configuring all third party hardware and software components required by the CitySearch Systems before the actual delivery and setup of the CitySearch Systems begins. Licensee understands that the CitySearch Systems are not "shrink wrapped" and will require significant setup time and tailoring for Exclusive Territory. Customization Service activities are likely to include but not be limited to: . Canadian editorial content such as record categorization model and associated keywords/synonyms. . Canadian interface " look and feel". . Acquisition and incorporation of telephone directory listings data for the Exclusive Territory. . Acquisition and incorporation of mapping data and associated rendering, server and geocoding software related to the Exclusive Territory. The actual components and configuration of the CitySearch Systems will change over time in response to market conditions, externally available hardware and software, and internally generated improvements. The CitySearch Systems delivered to Licensee initially will be based upon those used in the San Francisco deployment. The following is a summary of the CitySearch Technology Systems components to be delivered to Licensee: CitySearch Client - ----------------- -2- CitySearch Interface: This is the interface the user sees and includes icons, - -------------------- buttons, the CitySearch map and other graphic design elements. This is the interface through which the user initiates tasks to be performed by the CityServer. The CitySearch Client application is capable of initiating keyword, spatial and temporal search on the CitySearch database resident on the CityServer. This proprietary search interface is included as part of the CitySearch interface. CityServer - ---------- Proprietary Server Components: CityServer consists of a collection of custom - ----------------------------- server software modules which provide the core functionality for the on-line delivery of the CitySearch application. The proprietary components manage communications between the CitySearch client application, the Informix/Illustra database and the CitySearch Staging server. Customized front end to the Informix/Illustra database: CitySearch has chosen to use Informix/Illustra, an object relational database which provides features including text, web, 2D and geo-spacial DataBlades (an Illustra technical term) as well as proprietary temporal search components developed by CitySearch. Subject to the provisions of Article 10, any Licensor Improvements to the proprietary software developed by CitySearch designed to be used with Informix/Illustra will be delivered to Licensee. The Informix/Illustra database licenses must be sublicensed from Licensor in consideration of the payment by Licensee to Licensor of the license fee payable to third parties plus expenses of Licensor in entering into the sublicense agreement. CitySearch Staging Server. - ------------------------- Proprietary Server Software: The CitySearch Staging Server is a collection of - --------------------------- proprietary software modules which provide server support for the development and maintenance of the CitySearch service for one or more markets. The CitySearch Staging Server manages communications between the CityServer, the Informix/Illustra database and components of the City works system. Customization of the Informix/Illustra database: CitySearch has chosen to build - ----------------------------------------------- the CitySearch Staging Server around Informix/Illustra, an object relational database. The Informix/Illustra database licenses must he acquired pursuant to a sublicense from Licensor in consideration of the payment by Licensee to Licensor of the license fee payable to third parties plus expenses of Licensor in entering into the sublicense agreement. -3- Subject to the provisions of Article 12 of the Agreement, any Licensor's Improvements to the proprietary software developed by CitySearch designed to be used with Informix/Illustra will be delivered to Licensee. City works: - ----------- Content Creation and Maintenance: The City works system includes tools and - -------------------------------- support software needed to create and maintain the content of the CitySearch system. Most of the tools run under Windows 95 or Windows NT on PC platforms. The proprietary tools InfoWorks and SiteWorks operate in conjunction with third party software (Photoshop and Word, for example). The PC platforms, TCP/IP networking components, operating systems, and required third party software need to be obtained and configured by Licensee before City works can be put in place. Other tools such as EditWorks are used in conjunction with a local database in order to generate and maintain editorial content. The local database requires the Windows NT Server operating system and SQL Server. SCHEDULE B CITYSEARCH BUSINESS SYSTEMS CITYSEARCH BUSINESS SYSTEMS - --------------------------- CitySearch has developed a scalable business model to enable rapid adoption of the service. Licensee will have full access to the CitySearch consumer and vendor roll-out plan aimed at building a durable franchise. Specifically, the business systems made available to Licensee will include the following components (much of which is embedded in staff member's experience base). Community selection approach: CitySearch has developed a statistically weighted - ---------------------------- model of the US which "weights" nearly one hundred cities (through CitySearch developed value criterion) as to their potential for the CitySearch service The methodology and weighting used in this model will, in most cases also apply in the Exclusive Territory. Market segmentation/prioritization approach: This approach helps determine which - ------------------------------------------- suburbs and shopping areas to cover within a target market, and in what order. Categorization of community information: This involves market prioritization for - --------------------------------------- certain high leverage categories such as entertainment, education, government, health/human services, sports/recreation, arts and culture. The CitySearch philosophy involves providing comprehensive coverage of both community and business information in a dense local area, and attempts to insures that the information is meaningful and easy to use for the end user. City organization approach: CitySearch will provide its approach to how to work - -------------------------- with various organizations within a community. CitySearch will advise as to how Licensee first establishes sponsorships from the important merchant associations and government groups. Statistics/surveys and accompanying methodology: Statistical data has been - ----------------------------------------------- accumulated and continues to be accumulated on existing CitySearch markets. In addition, CitySearch has conducted numerous focus groups and consumer surveys around information content, user interfaces, search functionality, and other essential subjects. This documentation will be provided to Licensee. Sales force training, techniques and approaches: CitySearch has organized a - ----------------------------------------------- fluid sales team structure to maximize speed of entry and capture. This commissioned, flexible sales force is supported by a custom designed training program and a demo-assisted sales process. CitySearch will provide education as to its methods of operating the sales force training through secondments of the Exclusive Territory staff to the US, supplemented by appropriate telephone/e- mail interaction. SCHEDULE C DESIGNATED LOCATIONS 1 Yonge Street, Toronto, Ontario SCHEDULE D LICENSED TRADE-MARKS The Licensed Trade-Marks are as follows: The following CitySearch Logo: [LOGO APPEARS HERE] In the event Licensor becomes the owner of or acquires license rights to use the trade-marks "CitySearch" in Canada, the said trade-mark, upon notice from Licensor to Licensee shall be deemed to be included in this Schedule D. SCHEDULE E COST PLUS FEE SCHEDULE Calculation Methodology: - ----------------------- Source ------ Employee Salary actual, at time of billing Overhead actual, at time of billing (based on generally applied CitySearch formulae) Benefits 30% of salary Equipment Costs actual, at time of billing (based on generally applied CitySearch formulae) Total Costs sum of above Administrative Fee 2.5% of Total Costs ------------------- Total cost + fee Total Costs + Administrative fee EXAMPLES OF CALCULATION AT 11/30/96, FOR ILLUSTRATIVE PURPOSES ONLY -2-
=================================================================================================================================== EXAMPLE - FOR ILLUSTRATIVE PURPOSES ONLY FOR WORK PERFORMED IN THE USA * - ---------------------------------------------------------------------------------------------------------------------------------- TECHNICAL RANGE PER YEAR RANGE PER hour *** - ---------------------------------------------------------------------------------------------------------------------------------- ITEM LOW/BASE HIGH Low/Base High - ---------------------------------------------------------------------------------------------------------------------------------- Employee Salary ** - ---------------------------------------------------------------------------------------------------------------------------------- Technical $ 96,000 $ 144,000 $ 46 $ 69 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Overhead 22266 22266 11 11 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Benefits 30% 28800 43200 14 21 - ----------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Equipment 25938 25938 12 12 - ----------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Total Cost $173,004 $ 235,404 $ 83 $113 - ----------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Administrative Fee 30% 51901 70621 25 34 - ----------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Total Cost + Fee $224,906 $ 306,026 $108 $147 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- =================================================================================================================================== EXAMPLE - FOR ILLUSTRATIVE PURPOSES ONLY - ----------------------------------------------------------------------------------------------------------------------------------- Design Range per year Range per hour - ----------------------------------------------------------------------------------------------------------------------------------- Item LOW/BASE HIGH LOW/BASE High - ----------------------------------------------------------------------------------------------------------------------------------- Employee Salary * * - -----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ Design $ 54,000 $ 90,000 $ 26 $ 43 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Overhead 22266 22266 11 11 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Benefits 30% 16200 21000 8 13 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Equipment 12872 12872 6 6 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Total Cost $105,338 $152,138 $ 51 $ 73 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Administrative Fee 30% 31601 45641 14 22 - ----------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------------ Total Cost + Fee $136,939 $197,779 $ 66 $ 95 - -----------------------------------------------------------------------------------------------------------------------------------
* All amounts in U S dollars. ** Salaries may vary from time to time. *** The range/per hour may vary from time to time based upon changes in salaries paid to employees. SCHEDULE F ASSIGNMENT AGREEMENT LICENSE AND SERVICES AGREEMENT AMENDING AGREEMENT ------------------------------------------------- THIS AGREEMENT made as of December 31, 1997; BETWEEN : CITYSEARCH, INC., a corporation incorporated under the laws of Delaware (hereinafter referred to as the "Licensor") OF THE FIRST PART, -and- CITYSEARCH CANADA INC., a corporation incorporated under the laws of Ontario (hereinafter referred to as the "Licensee") OF THE SECOND PART. WHEREAS the Licensor and the Licensee entered into a license and services agreement made as of February 17, 1997 (the "License Agreement ") with respect to the use by Licensee of the CitySearch Systems in the Exclusive Territory for the purpose of establishing and operating the Toronto Star CitySearch Information Service; AND WHEREAS the Licensor and Licensee desire to amend the terms of the License Agreement; NOW THEREFORE this agreement witnesses that, for good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged by each of the parties), the parties covenant and agree as follows: 1. The License Agreement is amended by deleting in its entirety the fourth recital on page 1. 2. The License Agreement is amended by deleting in its entirety Section 4.01, 3. The License Agreement is amended by adding the following as a new section 4.08; "4.08 Annual Royalty Fee ------------------ Licensee shall pay to Licensor an annual royalty fee in an amount and on terms to be agreed upon by Licensee and Licensor by January 31, 1998." -2- 4. The License Agreement is amended by deleting the second sentence of section 11.07 and substituting the following therefor: "Licensee may grant a sublicense of its rights hereunder to the Partnership, either with or without the royalty obligation provided for in Section 4.08." 5. This agreement amends the License Agreement. This agreement and the License Agreement shall be read, interpreted, construed and have effect as, and shall constitute, one agreement with the same effect as if the amendments made by this agreement had been contained in the License Agreement as of the date of this agreement. All capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed thereto in the License Agreement. 6. This agreement and the amendments to the License Agreement contained herein shall be effective as of and from the date of this agreement. The License Agreement, as amended by this agreement, is hereby confirmed by Licensor and Licensee. 7. This agreement shall enure to the benefit of and be binding upon each of the Licensor and Licensee and their respective successors and permitted assigns. 8. This agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. 9. This agreement may be executed in counterparts. Each executed counterpart shall be deemed to be an original and all counterparts taken together shall constitute one and the same agreement. IN WITNESS WHEREOF the parties have executed this agreement as of the date first referred to above. CITYSEARCH, INC. Per: [SIGNATURE ILLEGIBLE] ----------------------------- CITYSEARCH CANADA INC. Per: [SIGNATURE ILLEGIBLE] ----------------------------- EX-10.10 8 NONCOMPETITION AGREEMENT EXHIBIT 10.10 NON-COMPETITION AGREEMENT BETWEEN CITYSEARCH, INC. AND 1217554 ONTARIO INC. AND TORSTAR CORPORATION AND METROLAND PRINTING, PUBLISHING & DISTRIBUTING LTD. MADE AS OF FEBRUARY 17,1997 - ------------- [*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. NON-COMPETITION AGREEMENT THIS AGREEMENT made as of February 17, 1997; BETWEEN: CITYSEARCH, INC., a corporation incorporated under the laws of Delaware (hereinafter referred to as "CitySearch U.S.A.") OF THE FIRST PART, - and - 1217554 ONTARIO INC., a corporation incorporated under the laws of Ontario (hereinafter referred to as "CitySearch Ontario") OF THE SECOND PART, - and - TORSTAR CORPORATION, a corporation incorporated under the laws of the Province of Ontario (hereinafter referred to as "TorStar") OF THE THIRD PART, - and - METROLAND PRINTING, PUBLISHING & DISTRIBUTING LTD.. a corporation incorporated under the laws of the Province of Ontario (hereinafter referred to as "Metroland") -2- OF THE FOURTH PART. WHEREAS CitySearch U.S.A. is engaged in the business of establishing and operating, either directly or through Affiliates, CitySearch Information Services; AND WHEREAS TorStar is engaged in the publication of newspapers and electronic publishing in the Exclusive Territory; AND WHEREAS CitySearch Ontario is an Affiliate of CitySearch U.S.A. and Metroland is an indirect subsidiary of TorStar; AND WHEREAS Metroland and CitySearch Ontario formed the general partnership Toronto Star CitySearch (the "Partnership") for the purpose of carrying on a CitySearch Information Service in the Exclusive Territory; AND WHEREAS Metroland and CitySearch Ontario entered into a partnership agreement made as of the date hereof (the "Partnership Agreement"); AND WHEREAS CitySearch U.S.A. and CitySearch Ontario are parties to a license and services agreement made as of the date hereof (the "License and Services Agreement), which agreement was assigned by CitySearch Ontario to the Partnership pursuant to an assignment agreement between CitySearch Ontario, Metroland and CitySearch U.S.A. entered into as of the date hereof (the "Assignment Agreement"); AND WHEREAS pursuant to the transactions described above, Metroland and TorStar will have access to extremely confidential and valuable information of CitySearch U.S.A. pertaining, inter alia, to its business and technology related to the establishment and operation of CitySearch Information Services; NOW THEREFORE THIS AGREEMENT WITNESSES that, for good and valuable consideration and the payment by each of the parties to the other of the sum of $1.00 of lawful money of Canada (the receipt and sufficiency of which consideration is hereby acknowledged by each of the parties), the parties agree as follows: ARTICLE ONE - INTERPRETATION ---------------------------- 1.01 DEFINITIONS ----------- In this Agreement, unless something in the subject matter or context is inconsistent therewith: -3- (a) "Affiliate" means an affiliate of a party as determined by the provisions of the Business Corporations Act (Ontario) as now enacted or as the same may be from time to time amended, re- enacted or replaced. (b) "Agreement" means this agreement and all amendments made hereto by written agreement between the parties hereto. (c) "CitySearch Information Service" means an online service of providing Content related to restaurants, entertainment, retail establishments, community events and other services pertaining to a particular city or geographic region, whether or not such service uses the CitySearch Systems or any part thereof. (d) "CitySearch Systems" has the meaning ascribed to it in the License and Services Agreement. (e) "Competing Business" means (i) in relation to CitySearch U.S.A. or CitySearch Ontario, a business or service which directly or indirectly carries on, engages in, or is concerned with or interested in a CitySearch Information Service or similar or competing on-line service pertaining to a city, region or other territory inside or outside of the Exclusive Territory, and (ii) in relation to TorStar or Metroland, a business or service which directly or indirectly carries on, engages in, or is concerned with or interested in a CitySearch Information Service or similar or competing on-line service pertaining to the Exclusive Territory. (f) "Confidential Information" has the meaning ascribed to it in the License and Services Agreement. (g) "Content" with respect to a CitySearch Information Service includes all information, databases, advertisements, text, sound, photographic images, video and other content which is displayed or accessible to a consumer using the service. (h) "Covenantee" means as the context requires one of the parties hereto to whom a covenant is made. (i) "Covenantor" means as the context requires one of the parties hereto and the term "Covenantors" means collectively each Covenantor. (j) "Direct Competitor" means (i) in relation to TorStar or Metroland, a person whose business is primarily involved in newspaper or electronic -4- publishing in the Exclusive Territory, and (ii) In relation to CitySearch U.S.A. or CitySearch Ontario, a person whose business competes directly with that of CitySearch U.S.A. or any Affiliate of CitySearch U.S.A. or CitySearch Ontario. (k) "Exclusive Territory" has the meaning ascribed to it in the Partnership Agreement. (1) "Improvement" has the meaning ascribed to it in the License and Services Agreement. (m) "Launch" has the meaning ascribed to it in the License and Services Agreement. (n) "Other Agreements" means the Partnership Agreement and the License and Services Agreement. (o) "Partnership Interest" has the meaning ascribed to it in the Partnership Agreement. (p) "Restricted Period" means the period commencing on the date hereof and expiring [*]. (q) "Toronto Star CitySearch Information Service" has the meanings ascribed to it in the License and Services Agreement. 1.02 HEADINGS -------- The division of this Agreement into Articles and Sections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. The terms "this Agreement", "hereof", "hereunder" and similar expressions refer to this Agreement and not to any particular Article, Section or other portion hereof and include any agreement supplemental hereto. Unless something in the subject matter or context is inconsistent therewith, references herein to Articles and Sections are to Articles and Sections of this Agreement. 1.03 EXTENDED MEANINGS ----------------- In this Agreement words importing the singular number only shall include the plural and vice versa, words importing any gender shall include all genders and words - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -5- importing persons shall include individuals, partnerships, associations, trusts, unincorporated organizations and corporations. The terms "provision" and "provisions" refer to terms, conditions, provisions, covenants, obligations, undertakings, warranties and representations in this Agreement. The term "Includes" or "including" or "such as" shall be construed as meaning "Includes without limitation", "including without limitation" and "such as without limitation", as the case may be. ARTICLE TWO - COVENANTS ----------------------- 2.01 COVENANTS OF METROLAND AND TORSTAR ---------------------------------- (a) Recognizing and acknowledging that the following undertakings, each of which shall be construed as a separate and several undertaking, are essential for the protection of the business, property, and proprietary rights of CitySearch U.S.A. and CitySearch Ontario. Metroland and TorStar undertake and agree jointly and severally to CitySearch U.S.A. and CitySearch Ontario that each such Covenantor will not, without the prior written consent of CitySearch U.S.A.: (i) in the Restricted Period, either alone or through an Affiliate or in partnership or in conjunction with any person or persons, as principal, agent, trustee, investor, consultant, shareholder, or in any other manner whatsoever, carry on, engage in, or be concerned with or interested in, or control or manage any Competing Business of CitySearch U.S.A. or CitySearch Ontario; and (ii) in the Restricted Period not, directly or indirectly, solicit for employment, or endeavor to employ or to retain as an independent contractor or agent, any person who is an employee of CitySearch U.S.A. or CitySearch Ontario or who provided any assistance or service to Metroland pursuant to the License and Services Agreement, or not offer to nor employ or retain as an independent contractor or agent any person who provided any assistance or services to Metroland pursuant to the License and Services Agreement for a period of six (6) months following such person's termination of employment With CitySearch U.S.A. or CitySearch Ontario. (b) The restriction contained in Section 2.01(a)(i) shall not prevent Metroland or TorStar or any Affiliate thereof: (i) during the period commencing on the date hereof and expiring thirty (30) days following the Launch of the Toronto Star CitySearch Information Service or September 1, 1997, whichever is the earlier. -6- from continuing to publish the "Totally Toronto" information service; however following the said date the said service shall be discontinued; (ii) [*] (iii) [*] 2.02 COVENANTS OF CITYSEARCH U.S.A. AND CITYSEARCH ONTARIO ----------------------------------------------------- Recognizing and acknowledging that the following undertakings, each of which shall be construed as a separate and several undertaking, are essential for the protection of the business, property, and proprietary rights of TorStar and Metroland, CitySearch U.S.A. and CitySearch Ontario undertake and agree jointly and severally to TorStar and Metroland that each such Covenantor will not, without the prior written consent of TorStar: (i) in the Restricted Period, either alone or through an Affiliate or in partnership or in conjunction with any person or persons, as principal, agent, trustee, investor, consultant, shareholder, or in any other manner whatsoever, carry on, engage in, or be concerned with or interested in, or control or manage, any Competing Business of TorStar or Metroland; and (ii) in the Restricted Period not, directly or indirectly, solicit for employment, or endeavor to employ or to retain as an independent contractor or agent, any person who is an employee of TorStar or Metroland or who interfaced With CitySearch U.S.A. to receive any assistance or service pursuant to the License and Services Agreement, or not offer to nor employ or retain as an independent contractor or agent any person who interfaced with CitySearch U.S.A. to receive any assistance or services pursuant to the License and Services Agreement for a period of six (6) months following such person's termination of employment with TorStar or Metroland. - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -7- 2.03 SALE OF PARTNERSHIP INTEREST ---------------------------- [*] 2.04 LIMITATION OF RESTRICTIONS -------------------------- The restrictions in Sections 2.01 or 2.02 shall not prevent any of the Covenantors from owning, directly or indirectly, an aggregate of not more than two percent (2%) of the issued shares of a corporation, the shares of which are listed on any recognized stock exchange or traded in the over-the-counter market in Canada or the United States, which carries on a Competing Business. 2.05 ACKNOWLEDGEMENT --------------- (a) Each of the Covenantors hereby acknowledges and agrees that each of the covenants in Sections 2.01, 2.02 and 2.03 are fair and reasonable and valid and are reasonably required for the protection of the interest and property of the Covenantee for whose benefit it was made and waives all defenses to the strict enforcement thereof. However, it is nevertheless agreed that if one or more of such covenants shall be judged to be void as going beyond what is reasonable in all of the circumstances for the protection of the interests of the Covenantee, but would be valid if part of the wording thereof were deleted or the period thereof reduced or the range of activities covered thereby reduced in scope, the said reduction shall be deemed to apply with such modifications as may be necessary to make them valid and effective and any such modifications shall not thereby affect the validity of any other covenant contained in this Agreement. (b) Each of the Covenantors acknowledges and agrees that any violation of any of the covenants made in this Agreement will cause irreparable damage or injury to the Covenantee for whose benefit it was made, the exact amount of which would be impossible to ascertain, and that, for such reason, the Covenantee should be entitled to obtain interim, interlocutory, and final injunctive relief restraining each Covenantor from breaking, and requiring each Covenantor to comply with, its obligations under this Agreement. Each Covenantor hereby acknowledges the importance to the Covenantee of the strict compliance with the terms of this Agreement and acknowledges that the Covenantee's interest in the strict enforcement thereof will outweigh the balance of convenience or harm which the Covenantor may suffer as a result of the strict enforcement of this Agreement. - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -8- 2.06 EQUITABLE RIGHTS ---------------- Nothing in this Agreement shall be construed as abrogating or diminishing any right of a party hereto at common law or in equity to restrain a breach of duty including without limitation any breach of trust, confidence or fiduciary duty. ARTICLE THREE - GENERAL ----------------------- 3.01 FURTHER ASSURANCES ------------------ Each party shall from time to time execute and deliver all such further documents and instruments and do all acts and things as the other party may reasonably require to effectively carry out or better evidence or perfect the full intent and meaning of this Agreement. 3.02 DISPUTE RESOLUTION ------------------ Any dispute, disagreement, controversy, question or claim arising out of or relating to this Agreement shall be settled in accordance with the provisions of Section 11.03 (Dispute Resolution) of the Partnership Agreement. 3.03 ENTIRE AGREEMENT ---------------- This Agreement and the Other Agreements constitute the entire agreement between the parties hereto with respect to the subject matter hereof and cancels and supersedes any prior understandings and agreements between the parties hereto with respect thereto. 3.04 AMENDMENT AND WAIVER -------------------- No modification of or amendment to this Agreement shall be valid or binding unless set forth in writing and duly executed by the parties hereto and no waiver of any breach of any term or provision of this Agreement shall be effective or binding unless made in writing and signed by the party purporting to give the same and, unless otherwise provided, shall be limited to the specific breach waived. 3.05 GOVERNING LAW ------------- This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. -9- IN WITNESS WHEREOF the parties have executed this Agreement. CITYSEARCH, INC. Per: /s/ Charles R. Conn III Name: /s/ Charles R. Conn 3rd Title: CEO 1217554 ONTARIO INC. Per: /s/ Charles R. Conn III Name: Charles R. Conn 3rd Title: Director TORSTAR CORPORATION Per: /s/ David Galloway Name: David Galloway Title: Pres. & CEO METROLAND PRINTING, PUBLISHING & DISTRIBUTING LTD. Per: /s/ R. J. Steacy Name: R. J. Steacy Title: Assistant Secretary EX-10.11 9 ASSIGNMENT AGREEMENT EXHIBIT 10.11 ASSIGNMENT AGREEMENT THIS AGREEMENT made as of February 17, 1997; B E T W E E N: CITYSEARCH, INC., a corporation incorporated under the laws of Delaware (hereinafter referred to as "CitySearch U.S.A.") OF THE FIRST PART, - and - 1217554 ONTARIO INC., a corporation incorporated under the laws of Ontario (hereinafter referred to as "CitySearch Ontario") OF THE SECOND PART, - and - TORONTO STAR CITYSEARCH, a general partnership formed under the laws of the province of Ontario (hereinafter referred to as "the Partnership") OF THE THIRD PART. WHEREAS CitySearch U.S.A. and CitySearch Ontario are parties to a license and services agreement made as of the date hereof (the "License and Services Agreement"): - ----------------- [*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -2- AND WHEREAS CitySearch Ontario desires to assign the License and Services Agreement to the Partnership and the Partnership desires to receive an assignment of the License and Services Agreement: NOW THEREFORE, for good and valuable consideration (the adequacy and receipt of which consideration is hereby acknowledged by each of the parties), the parties covenant and agree as follows: ARTICLE ONE - ASSIGNMENT 1.01 ASSIGNMENT ---------- (a) CitySearch Ontario hereby sells, transfers and assigns to the Partnership all of its right, title and interest in and to the License and Services Agreement and the Partnership hereby assumes all of the rights, obligations and liabilities of CitySearch Ontario under the License and Services Agreement. Such sale, transfer and assignment by CitySearch Ontario shall be treated as a contribution to the Partnership in an amount equal to its fair market value, which the parties acknowledges is [*] (b) The Partnership covenants to CitySearch U.S.A. that it will assume, duly discharge, perform and observe all of the liabilities, obligations, duties and responsibilities of CitySearch Ontario under or by virtue of or in respect of the License and Services Agreement. 1.02 CONSENT OF CITYSEARCH U.S.A. ---------------------------- CitySearch U.S.A. hereby consents to the assignment of the License and Services Agreement to the Partnership. CitySearch U.S.A. and the Partnership agree that (i) the Partnership shall stand in the place and stead of CitySearch Ontario, (ii) CitySearch U.S.A. may fully enforce the License and Services Agreement against the Partnership as if it was an original party to the License and Services Agreement, (iii) the Partnership may fully enforce the License and Services Agreement against CitySearch U.S.A. as if the Partnership was an original party to the License and Services Agreement, and (iv) CitySearch Ontario is released from all of its obligations under or with respect to the License and Services Agreement. 1.03 ACKNOWLEDGEMENT --------------- The Partnership acknowledges that there is an obligation under the License and Services Agreement binding upon it to pay CitySearch U.S.A. the Initial Service Fee (as that term is defined in the License and Services Agreement) of [*] - ------------- [*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. -3- ARTICLE TWO - GENERAL 2.01 ENUREMENT --------- This Agreement shall enure to the benefit of and be binding upon the parties, their respective administrators, successors and permitted assigns. 2.02 FURTHER ASSURANCES ------------------ Each party shall from time to time execute and deliver all such further documents and instruments and do all acts and things as the other party may reasonably require to effectively carry out or better evidence or perfect the full intent and meaning of this Agreement. 2.03 DISPUTES -------- Any dispute, disagreement, controversy, question or claim arising out of or relating to this Agreement must be conclusively settled by submission to arbitration in accordance with the procedure described in the Partnership Agreement between CitySearch Ontario and Metroland Printing, Publishing & Distributing Ltd. made as of the date hereof. 2.04 ENTIRE AGREEMENT ---------------- This Agreement constitutes the entire Agreement between the parties hereto with respect to the subject matter hereof and cancels and supersedes any prior understandings and agreements between the parties hereto with respect thereto. 2.05 MODIFICATION OF AGREEMENT ------------------------- No modification of or amendment to this Agreement shall be valid or binding unless set forth in writing and duly executed by the parties hereto and no waiver of any breach of any term or provision of this Agreement shall be effective or binding unless made in writing and signed by the party purporting to give the same and, unless otherwise provided, shall be limited to the specific breach waived. 2.06 GOVERNING LAW ------------- This Agreement shall be governed by and construed in accordance with the laws of the province of Ontario and the laws of Canada applicable therein. -4- IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. CITYSEARCH, INC. Per: /s/ Charles R. Conn III ------------------------------- Name: /s/ Charles R. Conn 3rd ------------------------------ Title: CEO ----------------------------- 1217554 ONTARIO INC. Per: /s/ Charles R. Conn III ------------------------------- Name: /s/ Charles R. Conn 3rd ------------------------------- Title: Director ----------------------------- TORONTO STAR CITYSEARCH by Metroland Printing, Publishing & Distributing Ltd. Per: /s/ David Galloway ------------------------------- Name: /s/ David Galloway ------------------------------ TITLE: Director ----------------------------- EX-10.20 10 LEASE AGREEMENT WITH SECURED PROPERTIES EXHIBIT 10.20 LEASE AGREEMENT --------------- THIS LEASE AGREEMENT (the "Lease") is made and entered into as of the 13 -- day of MAY, 1998 by and between Secured Properties Investors II, L.P., having a --- ---- mailing address of Two Paces Ferry West, Suite 1600, 2727 Paces Ferry Road, Attn. JAMESTOWN Management Corporation, Atlanta, Georgia 30339 ("Landlord")and City Search Inc., a Delaware corporation,having a mailing address of 790 E. -------- ------ Colorado Blvd, Suite 200 Pasadena CA, 91101 ("Tenant"). - ------------------------------------------- RECITALS: -------- In consideration of the rent to be paid, the mutual covenants and agreements herein contained and other good and valuable considerations, the receipt and legal sufficiency of which are hereby acknowledged by the parties hereto, Landlord hereby leases and rents to Tenant, and Tenant hereby leases and rents from Landlord, the "Demised Premises" hereinafter described upon the terms, provisions and conditions hereinafter set forth: 1. DEMISED PREMISES: Landlord hereby leases and rents to Tenant and ---------------- Tenant hereby leases and rents from Landlord, that certain rental space (hereinafter referred to as the "Demised Premises") containing approximately 7,880 square feet, shown outlined in red on the Building Plan attached hereto as Exhibit "A," made a part hereof by reference and pertaining to a multi-tenant building and related improvements (hereinafter referred to as the "Project") which is on a tract of land (hereinafter referred to as the "Building Site") fronting Triangle Drive in the Research Triangle Park, Durham County, North Carolina and as described on Exhibit "B" attached hereto; together with the nonexclusive license to use in connection with other tenants of the Project, all of the parking areas, driveways, sidewalks and other common facilities made available by Landlord from time to time to the Project, all subject to such reasonable rules and regulations as may be prescribed by Landlord from time to time. 2. IMPROVEMENTS AND DELIVERY OF DEMISED PREMISES: Landlord represents --------------------------------------------- that it will cause the Demised Premises to be constructed thereon substantially in accord with the Design Plans and specifications attached hereto as Exhibit "C" and incorporated herein by reference. Finished Design Plans and specifications (hereinafter referred to as the "Final Plans") 'for the Demised Premises shall be prepared by Tenant's architect and consented to by Landlord, which consent shall not be unreasonably withheld. The Final Plans for the Demised Premises shall comply with all laws, ordinances, decrees, orders, rules and regulations of any lawful authority, agency or governmental unit having jurisdiction over the Demised Premises and Landlord's consent to the Final Plans shall not be construed as a representation that the Final Plans are sufficient for any purpose. The date on which Landlord has completed construction of the Demised Premises and obtained a certificate of Occupancy for the Demised Premises shall be referred to herein as the "Completion Date." Landlord shall provide notice to Tenant thirty (30) days before the Completion Date. Landlord agrees to use due diligence in completing construction of the Demised Premises as soon as possible after the date Tenant delivers the Final Plans to Landlord. Landlord shall not be responsible for delay(s) caused by or resulting from strikes, unavailability of materials, casualty, acts of God, or any other matter(s) beyond its control, and the Completion Date shall be automatically extended for the period(s) of time caused by such delay(s). If Landlord, due to circumstances beyond its reasonable control, is unable to substantially complete construction of the Demised Premises within one hundred eighty (180) days after the date Tenant delivers the Final Plans to Landlord, this Lease may be terminated at the option of Landlord or Tenant. Such options shall be exercised, if at all, by delivery of not less than 30 days advance notice of same to the other party and, upon any such termination, neither party shall have any rights against the other. Completion of the Demised Premises shall not include punch-list items that may be completed after Tenant takes occupancy. All improvements constructed by Landlord pursuant to this paragraph shall remain the property of Landlord. At any time after the execution of this Lease and prior to the Completion Date, Tenant, its agents and contractors, shall have the privilege of entering upon the Demised Premises at their sole risk for the purpose of taking measurements, making tenant improvements, and for any other purpose expressly permitted by Landlord; provided, however, such entry shall not interfere with, hinder, obstruct or delay the progress of construction by Landlord of the Project. Upon final completion of the Demised Premises, Landlord shall furnish Tenant a certificate of occupancy from the appropriate governmental authority having jurisdiction. Upon receipt of this item, Tenant agrees that it accepts the Demised Premises "as is" and pursuant to Section 9 hereof, Tenant agrees to take full responsibility for the Demised Premises. In connection with Landlord's construction obligation, Landlord shall pay a tenant improvement allowance not to exceed $66,980.00 (the "Construction Allowance"), for the improvements referenced herein, including preparation of Final Plans, architectural and engineering fees, attorneys' fees, permit costs and actual hard construction costs. In no event shall Landlord be obligated to pay any amount for the improvements referenced herein which exceeds the Construction Allowance. Any unused portion of the Construction Allowance shall be deemed forfeited by Tenant. All facilities furnished to the Project and designated for the general use, in common, of occupants of the Project (including Tenant hereunder, its officers, agents, employees and business guests) including, but not limited to, parking areas, streets, sidewalks, canopies, roadways, shelters, driveways, landscaped areas and other similar facilities (herein called "common facilities"), shall be subject at all times to the right of Landlord to change from time to time the area, level, location, and arrangement of such common facilities, to restrict parking by tenants, their employees, and business guests to designated parking areas, and to make all reasonable rules and regulations and do such further things from time to time as in Landlord's sole discretion may be necessary or appropriate regarding said common facilities. 2 3. TERM AND OPTION TO RENEW: The initial term of this Lease (the "Initial ------------------------ Term") shall begin on the Completion Date and shall end at 12:00 o'clock midnight on the date five years from the Completion Date, In addition to the Initial Term, and provided Tenant is not in default under any of the terms, provisions or conditions of this Lease, Tenant shall have one option to renew (the "Option") the term of this Lease for a period of five years (the "Option Period") at the rental for each Option Period specified in Section 4 hereof, such Option to renew being exercisable by written notice to Landlord not less than 180 days prior to the end of the Initial Term. (The Initial Term together with any Option Period is collectively referred to as the "Lease Term.") Time is of the essence with respect to the time of exercise of each option to renew and any failure to renew shall extinguish all subsequent renewal options. 4. RENTAL: Tenant shall pay to Landlord for the use and occupancy of the ------ Demised Premises during the first year of Initial Term an initial annual rental of $9.75 per square foot, payable in equal monthly installments of $6,402.50 in advance on or before the first day of each and every month beginning on the Completion Date. During the remainder of the Lease Term, base rent shall increase by three percent per year, effective on each 12-month anniversary date of the Completion Date. All rental payments provided herein shall be payable to Landlord, until notice to the contrary is given by Landlord. Tenant shall have no right to offset against rent hereunder. Any payment of rent not received on or before the first day of the month shall incur a late fee equal to fifty dollars ($50.00). In addition, any amounts of rent not paid when due hereunder shall bear interest at the rate of ten percent (10%) per annum from the date due until paid in full. As security for the faithful performance by Tenant throughout the term, and any extensions or renewals thereof, of all the terms and conditions of the Lease on the part of Tenant, Tenant shall deposit with Landlord the sum of $6,402.50 (the "Security Deposit") on the date Tenant executes and delivers this Lease to Landlord. Such amount shall be returned to Tenant, without interest, after the expiration of the Lease Term, provided Tenant has fully and faithfully observed and performed all of the terms, covenants, agreements, warranties and conditions hereof on its part to be observed and performed. Landlord shall have the right to apply all or any part of the Security Deposit toward the cure of any default of Tenant. If all or any part of said security deposit is so applied by Landlord, then Tenant shall immediately pay to Landlord an amount sufficient to return said security deposit to the balance on deposit with Landlord prior to said application, Neither Landlord nor its agents shall be required to keep the Security Deposit separate from their general accounts, it being agreed that the Security Deposit may be commingled with other funds of Landlord or of its agents. It is further agreed and acknowledged by Tenant that Landlord or its agents shall have the right to deposit the Security Deposit in an interest- bearing account, and all interest accrued on the Security Deposit shall belong to Landlord and will be retained by Landlord as its property. 5. USE OF DEMISED PREMISES: Tenant shall use the Demised Premises only ----------------------- for general office purposes and shall not use or store any environmental contaminants, as defined by either state of federal law, on the Demised Premises, other than janitorial supplies and other 3 substances commonly used for office purposes. Tenant shall comply with all laws, ordinances, decrees, orders, rules, and regulations of any lawful authority, agency or governmental unit having jurisdiction over the Demised Premises. However, Tenant shall not, by reason of such compliance, be required to make any repairs or alterations to the Demised Premises unless such repairs or alterations are required by Tenant's particular use of the Demised Premises. Tenant shall save the Landlord harmless from penalties, fines, costs, expenses or damages resulting from any failure of the Tenant to perform its obligations under this Section. Tenant shall not do any act or follow any practices in or about the Demised Premises which shall constitute a nuisance or detract from or impair the reputation of the Project. Without limiting the generality of the foregoing, Tenant shall make such arrangements for the storage and timely disposition of all garbage and refuse as may be required in order to keep the Demised Premises in a neat and orderly condition, clean and free from rubbish, dirt, snow and ice, and shall not cause disturbing or offensive odors, fumes, or gases or any smoke, dust, steam or vapors, or any loud or disturbing noise or vibrations to be emitted from the Demised Premises. Tenant understands and acknowledges that the Demised Premises are part of the Research Triangle Park and are subject to special zoning requirements and regulations under the Durham County Zoning Ordinance (the "Zoning Ordinance"). Tenant represents to Landlord that Tenant has conducted its own independent investigation of the Zoning Ordinance as same relates to Tenant's intended use and occupancy of the Demised Premises, and Tenant has satisfied itself that its intended use and occupancy of the Demised Premises will not violate the Zoning Ordinance. 6. TAXES: Tenant covenants and agrees to pay promptly all Taxes affecting ----- the Demised Premises which are now or may hereafter be imposed or assessed upon the Demised Premises, except as otherwise expressly provided for in this Lease. The word "Taxes" shall mean (i) all real estate taxes, payable (adjusted after protest or litigation, if any) for any part of the Lease Term, exclusive of penalties or discounts, on the Project, (ii) any taxes which shall be levied in lieu of any real estate taxes, (iii) any special assessments for benefits on the Project (except any payable in whole or in part during the base year for taxes) and (iv) the expense of contesting the amount or validity of any such Taxes, charges or assessments, such expense to be applicable to the period of the item contested (Landlord hereby exclusively reserving the right to contest same). With respect to any Taxes for which the Demised Premises are not separately assessed. Tenant shall pay its proportionate share ("Tenant's Proportionate Share"), which will be determined by dividing the total number of square feet of the Demised Premises by the total number of square feet of rentable floor area of the entire Project. Landlord shall not be required to pay any taxes or assessments of any nature imposed or assessed upon fixtures, equipment, machinery, merchandise or other property installed in the Demised Premises or brought thereon by Tenant or at Tenant's direction, but such shall be the obligation of Tenant, and Tenant agrees that it will promptly pay all such taxes or assessments before they become delinquent. Tenant shall pay to Landlord in monthly installments on the same day that rent is due hereunder, an amount equal to one-twelfth (1/12th) of the Taxes due hereunder, as estimated by 4 Landlord in good faith from time to time. As soon as practical after the close of each callender year during the Lease Term, Landlord shall furnish a statement in writing to Tenants specifying the actual amount due by Tenant in respect of Taxes. In the event the total of the monthly payment theretofore made by Tenant under this Section for such year exceeds the actual amount due, then the excess shall be applied pro rata as a credit on the monthly installments thereafter coming due, In the event that the total monthly payments made by Tenants under this Section is less than the actual amounts due, any such deficiency shall be due and payable by Tenant to Landlord within 10 days after Tenant's receipt of such statement. 7. FIRE AND EXTENDED COVERAGE INSURANCE: Landlord will maintain and pay ------------------------------------ for "all-risk" and "named perils" coverage in an amount at least equal to the value of the Project. Tenant will provide and pay for all insurance on its own contents in the Demised Premises. Tenant shall pay a proportionate share (said "proportionate share" to be determined in the same manner as "Tenant's Proportionate Share" under Section 6 hereof) of the insurance premium provided for in this Section, due in monthly installments as estimated by Landlord. 8. LANDLORD'S COVENANT TO REPAIR AND REPLACE: In the event it becomes ----------------------------------------- necessary during the Lease Term to repair utility lines prior to the point of entry into the Demised Premises, roof, exterior walls, or structural members, including foundation and subflooring, of the Demised Premises, Landlord shall make such repairs or replacements at its sole cost and expense within a reasonable time after demand to do so by Tenant, unless such repairs or replacements are required as a result of the negligence, misconduct or intentional acts or omissions of Tenant, its employees, invitees or licensees, and in that event such necessary repairs or replacements shall be made at Tenant's sole expense. Provided Landlord's work does not unreasonably interfere with Tenant's use of the Demised Premises, Landlord shall repair and replace the IIVAC systems within the Demised Premises, as necessary, after termination of Tenant's obligation to perform such work as provided in Paragraph 9. 9. TENANT'S COVENANT TO REPAIR AND MAINTAIN: Except as expressly ---------------------------------------- provided in Section 8 hereof, Tenant will, at its own expense, keep and maintain in good order and repair, and replace as necessary, during the Lease Term all parts of the Demised Premises, including the plumbing, wiring, electrical systems, heating systems, air conditioning systems and equipment and machinery constituting fixtures, unless any of such repairs are required by the negligence of Landlord, in which case such repairs shall be made at Landlord's expense; and Tenant will, upon termination or expiration of this Lease, deliver the Demised Premises to the Landlord in as good condition as they were when received by it, excepting only normal wear and tear, acts of God and repairs required to be made by Landlord pursuant to the provisions of Section 11 hereof. Tenant shall bear the expense of any trash, janitorial and/or cleaning services necessary to maintain the Demised Premises in the condition required by this Lease. In addition, Tenant shall bear a proportionate share (said "proportionate share" to be determined in the same manner as "Tenant's Proportionate Share" under Section 6 hereof) of the cost of any maintenance 5 or cleaning services necessary to maintain the common areas in the condition required by this Lease. Landlord shall deliver space at occupancy with a fully operational HVAC system. After tenant takes possession of the space, Tenant shall be obligated to repair and replace the HVAC system within the Demised Premises up to $1,000 in any given year, each year commencing on the anniversary of the Completion Date. Tenant's obligations hereunder shall be cumulative, but Tenant's obligation to repair the HVAC system shall not exceed $5,000 over the life of the Lease Term. Tenant agrees to keep in force throughout the Lease Term, at its expense, a standard maintenance agreement on all HVAC equipment serving the Demised Premises from a vendor approved by Landlord and to provide a copy of the maintenance agreement to Landlord accompanied by proof of payment of the service fee therefor, Repairs to the HVAC system shall be tested and approved by the approved HVAC maintenance vendor. 10. ALTERATIONS BY TENANT: Except for structural work, for which --------------------- Landlord's consent shall be required (at Landlord's sole and absolute discretion), Tenant may at any time during the Lease Term (if Tenant shall not then be in default), at its own expense, make non-structural alterations, additions or improvements ("Alterations") upon or to the interior of the Demised Premises, as Tenant deems desirable, without Landlord's consent, provided that such Alterations: shall be performed in a good and workmanlike manner, in conformity with applicable building codes and governmental laws and requirements; do not endanger or in any way impair the structural integrity of the Demised Premises; and cost in the aggregate no more than $5,000.00. Such Alterations, when made, become the property of Landlord and shall remain upon and be surrendered with the Demised Premises as a part thereof at the expiration of the Lease Term. Landlord shall have no obligation (other than its obligation to incorporate into the Demised Premises the improvements shown on the Final Plans) to make any alterations, improvements or repairs to the Demised Premises. 11. DAMAGE OR DESTRUCTION OF DEMISED PREMISES: If the Demised Premises ----------------------------------------- shall be damaged by fire or other casualty, but are not thereby rendered untenantable in whole or in part in Landlord's reasonable opinion, Landlord shall without unreasonable delay, cause such damage to be repaired within one hundred eighty (180) days, and the rental shall not be abated. In the event the Demised Premises shall be destroyed or damaged and rendered untenantable, Landlord may, at its option, terminate this Lease by notice to Tenant, provided that: such notice shall be delivered to Tenant within sixty (60) days of the destructive event and such termination shall not affect any rights theretofore accrued to Landlord hereunder because of prior defaults of Tenant. Except as herein provided, there shall be no obligation on Landlord to repair or rebuild in case of fire or other casualty, in the event of damage or destruction not covered by the insurance required of Landlord herein. In the event Landlord elects not to repair or rebuild the Demised Premises, Tenant shall have the right, on ten (10) days notice, to terminate this Lease. If Landlord elects to repair or rebuild the Demised Premises and the anticipated period for 6 substantial completion of such repair and rebuilding exceeds (i) two hundred and seventy (270) days, or (ii) the end of the Initial Term (or the end of the Option Period, if applicable), Tenant shall have the right, on ten (10) days notice, to terminate this Lease. Tenant's rental and all other charges under this Lease shall be fully abated during any time period when the Demised Premises are destroyed or damaged and rendered untenantable. If Tenant is able to occupy and does occupy a portion of the Premises during such time period, rental and other charges under this Lease shall be shared only for the portion of the Demised Premises not occupied by Tenant. 12. MUTUAL WAIVER OF SUBROGATION: Tenant and Landlord each hereby waive, ---------------------------- and shall cause their respective insurers to similarly waive, any and all rights of recovery against the other, or against the officers, employees, partners, agents and representatives of the other, for loss of or damage to the property of the waiving party or the property under its control, to the extent such loss or damage is (or would have been) insured against under any insurance policy carried or required to be carried) by Landlord or Tenant hereunder. 13. TRADE FIXTURES AND EQUIPMENT: Any trade fixtures or equipment ---------------------------- (collectively, the "fixtures") installed in or attached to the Demised Premises by or at the expense of the Tenant shall remain the property of Tenant, provided it is not then in default hereunder, Tenant shall have the right to remove any and all of such fixtures; provided, however, that in such event Tenant shall -------- ------- restore the Demised Premises to substantially the same condition in which they were at the time Tenant took possession, ordinary wear and tear excepted. Any such fixtures not removed at or prior to such termination shall be and become the property of Landlord. 14. UTILITIES: During the Lease Term, the Tenant shall pay for all --------- electricity, gas, heat, air conditioning, water, sewerage, janitorial services, garbage disposal and other utilities or services relating to its use and/or occupancy of the Demised Premises. Landlord shall have no duty or responsibility to Tenant for the stoppage or interruption of such utilities or services. Landlord hereby confirms that the Demised Premises currently are served by electricity, gas, heat, air conditioning and water, Tenant shall be permitted to bring ISDN, T-1 or other necessary telecommunications facilities to the Demised Premises, provided that: all of such work shall be done at Tenant's cost and expense and Tenant indemnifies Landlord for any damages incurred by Landlord with respect to such work. 15. SIGNS AND ADVERTISING: In order to preserve the overall architectural --------------------- continuity and aesthetic harmony of the Project, Tenant may install only such signs, marquees, billboards, outside lighting fixtures and/or other decorations on the Demised Premises as may from time to time be approved in writing by Landlord, such approval not to be unreasonably withheld, and as shall not damage or impair the attractiveness of the Project; provided, however that the care -------- ------- and maintenance of such signs shall be the sole responsibility of Tenant and Tenant also must obtain the consent of the Research Triangle Foundation. 7 16. INDEMNIFICATION AND PUBLIC LIABILITY INSURANCE: Tenant indemnifies and ---------------------------------------------- holds Landlord harmless from any injury or damage to Landlord or its agents or employees and from any and all liability for injury to third persons or damage to the property of third persons, including cost, expenses, and reasonable counsel fees, while lawfully upon the Demised Premises occurring by reason of any negligent act or omission of Tenant, its agents, or employees. Tenant shall, at all times during the term hereof, keep in force at its own expense in such amounts and with such companies as shall from time to time be acceptable to Landlord (and to any lender having mortgage interest in the Demised Premises) and naming as insured both Landlord and Tenant: public liability insurance with minimum limits of $2,000,000.00 on account of bodily injury or death of one or more persons, and $1,000,000,00 on account of damage to property; and fire insurance with extended coverage equal to the replacement cost of Tenant's betterments, improvements and contents on or in the Demised Premises to the extent of such betterments, improvements, and contents. Tenant will furnish to Landlord at least five (5) working days prior to the Completion Date, copies of policies or certificates of insurance evidencing the coverages required by this Lease. All policies required hereunder shall provide for waiver of subrogation and shall contain an endorsement providing that the insurer will not cancel or materially change the coverage of said policy or policies without first giving thirty (30) days' prior written notice thereof to Landlord. Landlord will furnish to Tenant within five (5) days of the Completion Date evidence of the indemnification and liability insurance carried by the Landlord, 17. LANDLORD'S RIGHT OF ENTRY: The Landlord and those persons authorized ------------------------- by it shall have the right to enter upon the Demised Premises at all reasonable times during the Lease Term for the purposes of inspection, and to show the Demised Premises to prospective tenants, purchasers and/or lenders provided Landlord has given Tenant at least twenty-four (24) hour notice. 18. EMINENT DOMAIN: If more than twenty percent (20%) of the Building Site -------------- or any portion of the Demised Premises is taken under the power of eminent domain (including any conveyance made in lieu thereof) and such taking shall make the operation of Tenant's business on the Demised Premises unfeasible, then Tenant shall have the right to terminate this Lease by giving Landlord written notice of such termination within thirty (30) days after such taking; and if Tenant does not so elect to terminate this Lease, Landlord, at its own expense, will repair and restore the Demised Premises to tenantable condition, and the rental to be paid by Tenant hereunder shall be proportionately and equitably reduced. All compensation awarded for any taking (or the proceeds of private sale in lieu thereof) whether for the whole or a part of the Demised Premises, shall be the property of the Landlord, and Tenant hereby assigns all of its interest in any such award to Landlord; provided, however, Landlord shall have no interest -------- ------- in any award made to Tenant for loss of business or for the taking of Tenant's fixtures and other property within the Demised Premises if a separate award for such items is made to Tenant. 8 19. EVENTS OF DEFAULT: If any one or more of the following events ("Events ----------------- of Default") shall occur; a. if the Tenant shall default in the payment when due of any rental or other sum of money specified hereunder to be paid by Tenant five days after written notice of same; or b. if Tenant shall default in the performance of any other of the terms, conditions, or covenants contained in this Lease to be performed or observed by it and Tenant does not remedy such default within thirty days after written notice thereof; or c. if the Tenant shall become bankrupt or insolvent; or d. if the Tenant shall vacate, fail to operate in or abandon the Demised Premises or any substantial part thereof or suffer the Lease to be taken under any writ of execution and such writ is not vacated or set aside within fifteen (15) days; Then in the case of any one or more of such Events of Default, Landlord will have the right to terminate and cancel this Lease; to the full extent allowed by law, the right to place a lien on Tenant's personal property located at the Demised Premises; or, without excluding other rights or remedies that it may have, Landlord shall have the immediate right of reentry and may remove all persons and properties from the Demised Premises and dispose of such property as it deems fit, all without resort to legal process and without being deemed guilty of trespass, or becoming liable for any loss or damage which may be occasioned thereby. If the Landlord should elect to reenter as herein provided, or should it take possession pursuant to legal proceedings, it may either terminate this Lease or it may from time to time without terminating this Lease, make such alterations and repairs as may be necessary or appropriate in order to relet the Demised Premises, and relet the Demised Premises for such term and at such rental and upon such other terms and conditions as the Landlord may deem advisable. No such reentry or taking possession of the Demised Premises by the Landlord shall be construed as an election to terminate this Lease unless a written notice of such intention is given by the Landlord to the Tenant at the time of such reentry; but, notwithstanding any such reentry or reletting without termination, the Landlord may at any time thereafter elect to terminate this Lease for such previous breach. In the event of any termination by Landlord, whether before or after reentry, Landlord may recover from the Tenant damages incurred by reason of such breach, including without limitation, the out-of-pocket costs and expenses incurred by Landlord in recovering the Demised Premises. Tenant shall remain liable to the Landlord for the rental hereinabove specified until the expiration of the term of the Lease or earlier termination date, less the rentals actually received by Landlord from any reletting. Landlord shall not be liable to Tenant for rentals received from any reletting in excess of the rental specified in this Lease. 20. SUBORDINATION: Tenant shall, upon request by Landlord, subject and ------------- subordinate all or any of its rights under this Lease to any and all mortgages and deeds of trust 9 now existing or hereafter placed on the property of which the Premises are a part, Tenant agrees that this Lease shall remain in full force and effect notwithstanding any default or foreclosure under any such mortgage or deed of trust and that it will attorn to the mortgagee, trustee or beneficiary of such mortgage or deed of trust and their successors or assigns and to the purchaser or assignee under such foreclosure. Tenant will, upon request by Landlord, execute and deliver to Landlord or to any other person designated by Landlord any instrument or instruments required to give effect to the provisions of this Section. In conjunction therewith, Landlord shall use its best efforts to obtain a non-disturbance agreement acceptable to Tenant. 21. ASSIGNING, MORTGAGING, SUBLETTING: Tenant agrees not to assign, --------------------------------- sublet, mortgage, pledge or encumber this Lease in whole or in part, without first obtaining the written consent of Landlord, which consent shall not be unreasonably withheld. Tenant agrees that, in the event of any such assignment, mortgaging or subletting made with the written consent of Landlord as aforesaid, Tenant will nevertheless remain primarily liable for the performance of all of the terms, conditions and covenants of this Lease on its part to observe, comply with or perform. This Lease is binding on all successors and assigns. 22. ESTOPPEL CERTIFICATE: Within ten (10) days after request therefor by --------------------- Landlord or any mortgagee or trustee, Tenant shall deliver in form recordable in the office of the Register of Deeds of Durham County, North Carolina, a certificate in form satisfactory to Landlord and directed to the proposed mortgagee, purchaser or other transferee, and/or to Landlord, certifying any facts that are then true with respect to this Lease, including, without limitation (if such be the case), that this Lease is in full force and effect, that no default exists on the part of Landlord or Tenant under the Lease, that Tenant is in possession, that Tenant has commenced the payment of rent, and that there are no defenses or offsets claimed by Tenant with respect to the rentals under the Lease. 23. ADDITIONAL, COVENANTS OF TENANT. Tenant covenants and agrees to do all ------------------------------- things necessary to prevent the filing of any mechanics' or other liens against the Demised Premises or any part thereof by reason of work. labor, services or materials supplied or claimed to have been supplied to Tenant, or anyone holding the Demised Premises or any part thereof, through or under Tenant. If any such lien shall at any time be filed against Tenant's interest in the Demised Premises, Tenant shall either cause the same to be discharged of record within twenty (20) days after the date of filing of the same, or, if Tenant, in Tenant's discretion and in good faith, determines that such lien should be contested, shall furnish such security as may be necessary or required to prevent any foreclosure proceedings against Tenant's interest in the Demised Premises during the pendency of such contest. If Tenant shall fail to discharge such lien within such period or fail to furish such security, then, in addition to any other rights or remedies of Landlord resulting from Tenant's default, Landlord may, but shall not be obligated to, discharge the same either by paying the amount claimed to be due (in which event Tenant shall immediately reimburse Landlord for all sums so paid by Landlord and all costs and expenses incurred by Landlord in connection with the performance of such act together with interest on the aggregate of such sums, costs and expenses at the maximum legal rate payable by corporate 10 borrowers under North Carolina law at the time of Tenant's failure, but in no event more than 15% per annum) or by procuring the discharge of such lien by giving security or in such other manner as is, or may be, prescribed by law. Nothing contained herein shall imply any consent or agreement on the part of Landlord to subject Landlord's estate to liability under any mechanics' or other lien law. 24. FORCE MAJEURE: In the event that Landlord or Tenant shall be delayed, ------------- hindered or prevented from the performance of any act required hereunder, by reason of governmental restrictions, scarcity of labor or materials, strikes, fire, or any other reason beyond its reasonable control, the performance of such act shall be excused for the period of delay, and the period of the performance of any such act shall be extended for the period necessary to complete performance after the end of the period of such delay. Notwithstanding anything herein contained to the contrary, the provisions of this Section shall not be applicable to Tenant's obligation to pay rent or any other sum, monies, costs, charges or expenses required to be paid by Tenant on and subsequent to the Completion Date. 25. REMEDIES CUMULATIVE -- NONWAIVER: No remedy herein or otherwise -------------------------------- conferred upon or reserved to Landlord shall be considered exclusive of any other remedy, but the same shall be distinct, separate and cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute and every power and remedy given by this Lease to Landlord may be exercised from time to time as often as occasion may arise, or as may be deemed expedient. No course of dealing between Landlord and Tenant, or delay or omission of Landlord to exercise any right or power arising from any default on the part of the Tenant shall impair any such right or power, or shall be construed to be a waiver of any such default or an acquiescence thereto. 26. LIABILITY AND INDEMNITY: Landlord shall not have any liability to ----------------------- Tenant or any of Tenant's officers, employees or agents for any damage or injury to person or property, or both, directly or indirectly caused by or arising from, in whole or in part, any act or failure to act of Landlord or any of Landlord's employees or agents, unless such damage or injury is the direct result of the negligence of Landlord or the failure of the Project to comply with applicable local, state, and federal regulations, including but not limited to the Americans With Disabilities Act, provided such was enacted subsequent to the delivery of Final Plans. Landlord shall have no personal liability with respect to any of the provisions of this Lease. If Landlord is in default with respect to its obligations under this Lease, Tenant shall look solely to the equity of Landlord in and to the Demised Premises for satisfaction of Tenant's remedies, if any. It is expressly understood and agreed that Landlord's liability under the terms of this Lease shall in no event exceed the amount of its interest in and to the Demised Premises. Such exculpation of personal liability is absolute and without exception whatsoever. All personal property brought into the Demised Premises by Tenant, or Tenant's employees, agents, or business visitors, shall be at the risk of Tenant only, and Landlord shall not be liable for theft thereof or any damage thereto occasioned by any act of co- tenants, occupants, invitees or other users of the Improvements or any other person. 11 Moreover, during the Lease Term, Tenant shall pay, and shall protect, indemnify and hold harmless Landlord and Landlord's beneficiaries, employees and agents from, against and in respect of, all liabilities, damages, losses, costs, expenses (including all reasonable attorneys' fees and expenses of Landlord), causes of action, suits, claims, demands and judgments of any nature whatsoever arising out of, by reason of or in connection with the Lease. 27. HOLDING OVER: If Tenant remains in possession of the Demised ------------ Premises or any part thereof after the expiration of the Lease Term, with Landlord's acquiescence and without any written agreement between the parties, Tenant shall be only a tenant at will and there shall be no renewal of this Lease or any exercise of the Option by operation of law. 28. NOTICES: Any notice provided for herein shall be deemed to have been ------- sufficiently served if the same shall be in writing and placed in the United States mail, via certified mail or registered mail, return receipt requested, with postage prepaid and in the proper amount, and addressed as shown on page one (1), with a copy to A. Summey Orr III, Esq., Holland & Knight, LLP, 1201 West Peachtree, N,E., Suite 2000, One Atlantic Center, Atlanta, Georgia 30309- 3400 and Douglas McPherson, CitySearch, 790 E, Colorado Blvd., Suite 200, Pasadena, California 91101. The address of both Landlord and Tenant and the person, if any, to whose attention a notice or copy of same shall be directed, may be changed or added from time to time by either party serving written notice upon the other, in the above-prescribed manner. 29. NATURE AND EXTENT OF AGREEMENT: This instrument contains the complete ------------------------------ agreement of the parties regarding the terms and conditions of the lease of the Demised Premises, and there are no oral or written conditions, terms, understandings or other agreements pertaining thereto which have not been incorporated herein. This instrument creates only the relationship of Landlord and Tenant between the parties hereto as to the Demised Premises; and nothing herein shall in any way be construed to impose upon either party hereto any obligations or restrictions not herein expressly set forth. The laws of the State of North Carolina shall govern the validity, interpretation, performance and enforcement of this Lease. Notwithstanding that this Lease was drafted by Landlord, in the event of any ambiguous provisions hereof, there shall be no presumption in favor of either Landlord or Tenant. 30. BINDING EFFECT: This Lease shall be binding upon and shall inure to -------------- the benefit of the parties hereto and their respective successors and assigns during the Lease Term. 31. ATTORNEYS' FEES: If either party commences an action against the other --------------- party arising out of or in connection with this Lease, the prevailing party shall be entitled to have and recover from the losing party reasonable attorneys' fees and costs of suit. Notwithstanding, Tenant shall be responsible for Landlord's attorney's fees in any suit or threatened suit by Landlord to collect rent. 12 32. BROKERS: Tenant represents that it has not engaged a broker in ------- connection with this Lease, other than Thomas Commercial, Inc., which will not be owed a separate commission from Landlord (other than its participating share from Landlord's broker), and agrees to indemnify and hold Landlord harmless from any claim made by a broker with respect to this Lease. 33. CAPTIONS AND HEADINGS: The captions and headings throughout this Lease --------------------- are for convenience and reference only, and the words contained therein shall in no way be held or deemed to define, limit, describe, explain, modify, amplify or add to the interpretation, construction, or meaning of any provision of or the scope or intent of this Lease or in any way affect this Lease. 34. HAZARDOUS MATERIALS: Landlord agrees to defend, indemnify and hold ------------------- harmless Tenant, its officers, directors, employees and agents from and against any and all liability, loss, suits, claims, actions, causes of action, proceedings, demands, costs, penalties, fines and expenses, including without limitation attorney's fees, consultant's fees, litigation costs and cleanup costs asserted against or incurred by Tenant at any time and from time to time by reason of or arising out of the generation, storage, treatment, handling, transportation, disposal or release, other than by Tenant or any of its agents, of any Hazardous Materials, as such term is defined by North Carolina law, at or upon the Project. 35. AUTHORITY: The parties executing this Lease hereby represent and --------- warrant that they have all necessary power and authority to execute and deliver this Lease on behalf of the Landlord and Tenant, respectively. 36. QUIET ENJOYMENT. Landlord covenants that upon Tenant's paying the rent --------------- and performing each of Tenant's covenants hereunder, Tenant may peaceably and quietly have, hold, and enjoy the Demised Premises, subject to the terms and conditions of this Lease. 13 IN WITNESS WHEREOF, the parties hereto have caused these presents to be executed in their corporate names and their corporate seals hereto affixed, all in pursuance of authority duly given by their respective Boards of Directors, as of the day and year first above written. SECURED PROPERTIES INVESTORS II, L.P. By: JAMESTOWN [SIGNATURE ILLEGIBLE] By:---------------------------- __________________ Secretary CITYSEARCH, INC. [SIGNATURE ILLEGIBLE] Name:------------------------ Chief Legal Officer Title:----------------------- [CORPORATE SEAL] [SIGNATURE ILLEGIBLE] - --------------------- Secretary 14 STATE OF _______________ COUNTY OF ______________ This ___ day of ________________ , 19__, personally came before me _______________________ who being by me duly sworn, says that he is __________________________ of _________________________________________ that the seal affixed to the foregoing instrument in writing is the corporate seal of the Corporation, and that said writing was signed and sealed by him in behalf of said Corporation, by its authority duly given, and the said _________________ acknowledged the said writing to be the act and deed of said Corporation. _________________________ Notary Public My Commission Expires: _____________________ [NOTARY SEAL] EXHIBIT "A" ----------- [PLAN APPEARS HERE] EXHIBIT "B" ----------- BEING that certain acre tract of land fronting Service Drive, in the Research Triangle Park, Durham County, North Carolina, as described on that certain survey dated December 5, 1979, and prepared by Boney & Associates, Inc. of Raleigh, North Carolina and being recorded in Book of Maps 95 at Page 199 in the office of the Register of Deeds, Durham County, North Carolina. EXHIBIT "C" ----------- [LETTERHEAD OF PRIME BUILDING COMPANY APPEARS HERE] April 14, 1998 Mr. Rob Czyzewski Operations Manager Citysearch.com 3000 Aerial Center Parkway, Suite 140 Morrisville, NC 27560 Dear Rob: Prime Building is pleased to offer the following budget estimate for your proposed relocation to the MET building at 5 Triangle Drive in RTP. Our price is based on my site visit with Lee Clyburn last week and the single page floor plan I received from your office. Lump sum total at this stage is Sixty nine thousand two hundred fifty three dollars ($69,253.00). Once a building permit is secured, we estimate a 4 week construction schedule. In the meantime, I would be happy to provide carpet, paint and wallcovering samples for your review. Attached please find a detailed cost estimate with assumptions and clarifications for your review. Contact me at the office should you have any additional questions. Respectfully, /s/ Charles Zevenhuizen Charles Zevenhuizen Project Estimator citysearch.com Cost Breakdown April 14, 1998 Field Administration-supervision, truck and mileage, phone and pager, $ 5,500.00 - --------------------- equipment rental, dumpster and debris removal, general cleaning Architectural and Engineering--- allowance for design services $ 8,000.00 - --------------------------------- Demolition - remove indicated walls, doors and frames, floor coverings, $ 6,884.00 - ------------ old cabinetry, necessary ceiling tile and grid, old VWC in restrooms Cabinetry- new kitchen and conference room cabinets as shown, new $ 5,540.00 - ---------- laminate countertops in restrooms Doors, Frames, Hardware- install (2) reused doors in locations shown $ 100.00 - ----------------------- Drywall- build new walls as shown,'repair existing walls, repair old $ 1,988.00 - ------- door and window locations Acoustical Ceilings- replace grid on right 1/3 of building, replace tile as $ 3,2O0.00 - --------------------- needed Carpet and Base- $14.00/sy direct glue down carpet in all areas except $ 15,750.00 - ---------------- restrooms, breakroom and vault Paint and Wallcovering- paint existing walls with (1) coat flat latex, paint $ 5,770.00 - ----------------------- new walls with (2) coats flat latex, install new vinyl wallcovering in restrooms, touch up existing doors Plumbing- provide new stainless steel sink in conference room, reinstall $ 700.00 - -------- existing sink in breakroom and bathrooms HVAC- allowance to relocate existing grills and thermostats $ 1,200.00 - ------ Electrical- rewire lights after new ceiling installation, add (10) duplex $ 3,900.0O - ----------- receptacles, relocate fire alarm, install (5) power poles, add (10) data/com boxes, sensor for small conference room lighting Final Cleaning- prior to tenant occupancy $ 975.00 - -------------- ------------ Sub-total $ 59,507.00 Taxes $ 2,041.00 Insurance, Permit $ 285.00 OH&P $ 7,420.00 ------------ TOTAL $ 69,253.00
Please note the following exclusions: brick cleaning, interior blinds, fire sprinklers, appliances, carpet squares in small conference room, tele/comm installation, electrical service upgrades, any item not specifically listed above LEASEHOLD IMPROVEMENT AGREEMENT This Leasehold Improvement Agreement ("Improvement Agreement") is dated for reference purposes only as May 13, 1998, and is made by and between Secured Properties Investors II, L.P. ("Landlord") and CitySearch, Inc, ("Tenant") as part of that certain Lease of even date herewith between them, affecting that real property commonly known as 5 Triangle Drive, Durham County, North Carolina (the "Lease"). The following provisions are hereby added to the Lease and in the event of conflict between this Improvement Agreement and the Lease, this Improvement Agreement shall prevail: SECTION 1 DEFINITIONS 1.1 Definitions. All capitalized terms in this Improvement Agreement ----------- shall have the meaning defined in the Lease. Wherever used in this Improvement Agreement, the following terms are defined as follows: 1.1.1 "Allowance" is the maximum amount Landlord is required to pay toward Construction Cost of the Improvements, which amount is $66,980.00. 1.1.2 "Architect(s)" collectively means The Smith Sinnett Associates, P.A., and all other architects, structural engineers, mechanical engineers and the other design professionals as are needed to design the Improvements, each of whom shall be duly licensed by the State of North Carolina and in good professional standing. 1.1.3 "Applicable Laws and Restrictions" means all laws (including without limitation the Americans With Disabilities Act), building codes, ordinances, regulations, title covenants, conditions, and restrictions, and casualty underwriters requirements applicable to the premises and the improvements. 1.1.4 The "Building" is the multi-tenant building in which the Demised Premises are situated. 1.1.5 "Contractor(s)" means Prime Building Co. and all other general contractors, design-build contractors, subcontractors, and material suppliers who provide labor and materials for construction of the Improvements. To the extent required by Applicable Laws and Restrictions, each Contractor shall be duly licensed by the State of North Carolina and in good professional standing. 1.1.6 "Construction Cost" means all of the following: a. fees paid by Landlord to Architect(s) for services required by this Improvement Agreement; b. fees paid by Landlord for engineering fees for construction of the Improvements; c. fees of governmental and quasi-governmental agencies for Permits; d. payments to Contractor(s) for labor, materials, and equipment. 1 1.1.7 "Construction Documents" are the Design Plans and the Final Plans 1.1.8 "Construction Schedule" is the schedule for commencement, prosecution and Substantial Completion of the Improvements. 1.1.9 "Improvements" are the alterations, modifications and improvement described on the Final Plans which will be constructed pursuant to this Improvement Agreement. 1.1.10 "Landlord's Work" is the construction of all of the Improvements 1.1.11 "Landlord's Representative" is Ben Gainey or such other person as the Landlord shall designate in writing to Tenant as its authorized representative for the purposes of administering this improvement Agreement. 1.1.12 "Permits" are those permits approvals and consents of governmental authorities and third parties having jurisdiction over the work which are required for commencement and completion of the Improvements. 1.1.13 "Substantial Completion" or "Substantially Completed" is defined in Section 5.1. The "Substantial Completion Date" is the date the Improvements are Substantially Completed. 1.1.14 "Scheduled Completion Date" is the scheduled date for Substantial Completion of the Improvements. 1.1.15 "Tenant's Representative" is Robb Czyzewski or such other person as the Tenant shall designate in writing to Landlord as its authorized representative for the purposes of administering this Improvement Agreement. 1.1.16 "Tenant's Work" is limited to the installation of the Tenant's trade fixtures, furnishings, and equipment in the premises alter completion of the Landlord's Work. SECTION 2 DESIGNATION OF REPRESENTATIVE 2.1 Designation of Representative. Landlord and Tenant hereby respectively ----------------------------- appoint the Landlord's Representative and the Tenant's Representative as its sole representative for the purposes of this Improvement Agreement. Until replaced by written notice, the Landlord's Representative and the Tenant's Representative will have the full authority and responsibility to act on behalf of Landlord and Tenant respectively, as required in this Improvement Agreement. SECTION 3 CONTRACT DOCUMENTS & PERMITS 3.1 Retention of Architects and Delivery of Final Plans. Tenant shall --------------------------------------------------- direct and Landlord shall pay for the services of the Architect(s) to prepare the finished Design Plans and 2 specifications for the Improvements (the "Final Plans"). The Final Plans shall be based upon and consistent with the Design Plans and specifications attached to the Lease as Exhibit C and subject to approval by Landlord, which approval shall not be unreasonably withheld, denied or delayed. 3.2 Preparation and Approval of Cost Estimate and Construction Schedule. ------------------------------------------------------------------- Immediately following approval of the Final Plans, Landlord shall cause the Architect to prepare a preliminary Cost Estimate and Construction Schedule. Landlord and Tenant shall review the Cost Estimate and the Construction Schedule and promptly deliver to the other party and to the Architect(s) the party's written approval or disapproval thereof. If the Cost Estimate or Construction Schedule is disapproved in any respect, the parties shall confer and negotiate in good faith to reach written agreement. Landlord's and Tenant's approval of the Cost Estimate or the Construction Schedule shall not be unreasonably withheld, denied or delayed, provided, however, that (I) Tenant may deny approval in its sole discretion of any Cost Estimate which exceeds $66,980.00, and (2) Landlord or Tenant may deny approval of any Construction Schedule which calls for a Substantial Completion Date of more than 180 days after the date Tenant first delivered the Final Plans to Landlord. Any disapproval by Landlord or Tenant shall be accompanied by a written statement of the disapproved item, the reasons for disapproval and the specific changes required to make the item acceptable. If a party's written notice of disapproval is not delivered within 10 days from delivery of the Cost Estimate or the Construction Schedule, approval shall be deemed given. If the Cost Estimate or Construction Schedule is disapproved as provided herein, the parties shall confer and negotiate in good faith to reach written agreement. 3.3 Application for Approvals. Landlord shall submit the Final Plans to ------------------------- all appropriate governmental agencies and third parties for issuance of the Permits required for the construction of the Improvements and occupancy by Tenant of the Improvements for its intended use. Landlord shall use all reasonable efforts to obtain the Permits on or before the date specified for same in the Contract Schedule, Landlord shall not be responsible for any delay or denial of a Permit which is beyond its reasonable control. 3.4 Changes to Final Plans. The Final Plans may be modified only by a ---------------------- written "Change Order" executed by Landlord and Tenant, which clearly describes (i) the change, (ii) the party required to perform the change, (iii) the party required to pay for the change, and (iv) any revision of the Construction Schedule occasioned by the change. Neither Landlord nor Tenant shall unreasonably deny, withhold or delay its approval of a change, whether requested by a party or required by an Applicable Law or Restriction. 3.5 Delay of Substantial Completion Date. Upon any delay in the ------------------------------------ Substantial Completion Date beyond 180 days after the date when the Final Plans, Cost Estimate and Construction Schedule are all approved, which is due to circumstances beyond the reasonable control of Landlord, either Landlord or Tenant may terminate this Lease. 3 SECTION 4 PERFORMANCE OF THE WORK 4.1 Selection of Contractor(s) and Suppliers. Construction of the ---------------------------------------- Landlord's Work shall be performed under the direction of Landlord and by Contractor(s) selected by Landlord. 4.2 Commencement and Completion of Improvements. When all Permits have ------------------------------------------- been obtained, Landlord shall cause its Contractor(s) to commence and to thereafter diligently prosecute the construction of the Landlord's Work so that the Landlord's Work will be Substantially Completed on or before the Scheduled Completion Date. 4,3 Standards for Performance of Work. Landlord shall cause the ---------------------------------- Landlord's Work to be constructed by well-trained, adequately supervised workers, in a good and workmanlike manner, free from design, material and workmanship defects in accordance with all Construction Documents. Tenant shall comply, and shall cause its Contractor to comply with the reasonable rules and regulations promulgated by Landlord for the performance and scheduling of the Tenant's Work. The parties shall cooperated in good faith to schedule, coordinate, and perform Landlord's Work and Tenant's Work. SECTION 5 COMPLETION OF THE WORK 5.1 Inspection, Substantial Completion & Punchlist. Tenant's ----------------------------------------------- Representative and Architect shall have the right to enter the Demised Premises at all reasonable times for the purpose of inspecting the progress of the work. Landlord's Work shall be deemed "Substantially Completed" or in "Substantial Completion" when (i) construction of the Improvements has been completed and all incomplete or defective Landlord's Work which interferes with Tenant's use of the Demised Premises has been remedied; (ii) the Architect has certified that the Landlord's Work has been constructed in accordance with the Final Plans, (iii) all necessary governmental approvals for occupancy of the Demised Premises and the Improvements have been obtained, including a Certificate of Occupancy; and (iv) all utilities are hooked up and available for use. Landlord shall notify Tenant when the Landlord's Work is Substantially Completed and the Tenant's Representative, Landlord's Representative, and the Architect(s) shall immediately inspect the Landlord's Work and prepare a written list of any defective an incomplete work (the "Punchlist"). Tenant may augment the Punchlist at any time on or before 20 days following the Substantial Completion Date. Landlord shall promptly remedy all Punchlist items. Notwithstanding the foregoing, (1) Tenant's failure to specify any defect on the Punchlist shall not waive any obligation of the Landlord to complete the Improvements in accordance with this Improvement Agreement, and (2) Landlord shall not be obligated to pay more than the Allowance. SECTION 6 PAYMENT OF CONSTRUCTION COST 6.1 Duty to Pay Construction Cost. Landlord shall pay the Construction ------------------------------ Cost of the Improvements, up to an amount equal to the Allowance. Tenant shall pay any remainder of such 4 Construction Cost and Tenant shall pay the entire cost of Tenant's Work, without reimbursement by Landlord. 6.2 Notice of Non-Responsibility. Tenant shall provide Landlord with at ---------------------------- least 10 days prior written notice for commencement of the Tenant's Work, in order to permit the Landlord to post and record such Notices of non- Responsibility and other instruments as may be necessary to protect the Landlord and its property from claims by Contractor's for unpaid costs and other liabilities associated with the Tenant's Work. SECTION 7 RISK OF LOSS 7.1 Casualty. If the Building is damaged or destroyed prior to the -------- Completion Date, Landlord and Tenant shall have the right to terminate this Lease, if, in the reasonable opinion of the Architect(s), the Building cannot be restored and the Improvements Substantially Completed within 180 days after Tenant first delivers the Final Plans to Landlord. If the Building is damaged or destroyed and the Lease is not terminated pursuant to this Section, Landlord shall promptly and diligently complete repair of the Building and construction of the Improvements. IN WITNESS WHEREOF, the Landlord and Tenant have executed this Improvement Agreement, intending to be bound thereby as of the date first above written. Landlord Tenant Secured Properties Investors II, L.P. CitySearch, Inc. /s/ Douglas McPherson By___________________________________ By--------------------------- Douglas McPherson Name:________________________________ Name:------------------------ Chief Legal Officer Title:_______________________________ Title:----------------------- 5 EX-10.22 11 EMPLOYMENT AGREEMENT WITH THOMAS LAYTON EXHIBIT 10.22 PERFECTMARKET, INC. EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement") is entered into between PERFECTMARKET, INC., ("PMI"), a Delaware corporation, and Thomas Layton ("Employee"). PMI and Employee agree, in consideration for each others' promises as described in this Agreement, as follows: 1. Position and Duties. PMI agrees to hire Employee, initially in the ------------------- position of Chief Operating Officer and Vice President of Sales and Marketing, and Employee accepts such employment. Employee agrees to perform any and all services as are required by PMI, and agrees to perform such services at the time and in the manner so designated by PMI. Employee agrees to devote Employee's full time and energy toward the performance of the duties and responsibilities assigned to Employee, which may be changed at any time and from time and time. Employee further agrees to at all times abide by the policies, procedures and directions of PMI. 2. Compensation. In exchange for Employee consenting to this Agreement, ------------ PMI agrees to employ Employee pursuant to the terms hereof, and to compensate Employee for such employment. Employee's compensation, and benefits if any, shall be as agreed by PMI and Employee. PMI may adjust said salary from time to time in its sole discretion, in view of changes in Employees's job duties and responsibilities. Employees's job performance, financial considerations of PMI, and other similar business factors. 3. Insurance. Employee agrees to provide PMI with a certificate of --------- automobile liability insurance covering any vehicle that Employee intends or actually uses during the course of his employment with PMI in the performance of his duties and responsibilities. Such insurance coverage must meet the minimum coverage required by state law. 4. Safety Procedures. Employee agrees to abide by all procedures, ----------------- practices, guidelines and directions of PMI relating to safety. Failure to comply with such procedures, practices, guidelines and directions may result in termination. 5. Termination of Employment. Employee understands and agrees that ------------------------- Employee is employed "at will." This means that either Employer or PMI may terminate Employee's employment with PMI at any time, for any reason, with or without cause or notice. No express or implied agreement contrary to this at-will employment provision exists between Employee and PMI. In the event that Employee is terminated, Employee will receive salary continuation pay of full-salary for the first three months after termination, and half-salary for the second three months after termination, until Employee is employed by a recognized company, but in no case more than six months of salary continuation. 6. Inventions, Trade Secrets and Proprietary Information. Employee agrees ----------------------------------------------------- to execute and abide by PMI's Employee Inventions & Confidentiality Agreement. Any breach of that Agreement shall be a material breach of this Agreement. The obligations undertaken by Employee in the Inventions & Confidentiality Agreement shall survive termination of this Agreement. 7. Entire Agreement. This Agreement constitutes the sole and entire ---------------- agreement between the parties concerning Employee's employment, and supersedes any and all other agreements between them, whether oral or written, implied or express. There are no understandings or agreements between the parties which are not expressly set forth in this Agreement. Any modification to this Agreement will be effective only if in writing and if fully executed by Employee and the President of PMI. 8. SEVERABILITY. If any provision of this Agreement is held void or ------------ unenforceable for any reason, that provision shall be severed from the Agreement and all remaining Provisions shall be valid and fully enforceable. 9. Governing Law. This Agreement shall be construed, applied, ------------- interpreted and enforced in accordance with the laws of the State of California. EMPLOYEE HEREBY ACKNOWLEDGES THAT: (1) EMPLOYEE HAS READ THIS ENTIRE EMPLOYMENT, CONFIDENTIALITY & INVENTIONS AGREEMENT; (2) EMPLOYEE UNDERSTANDS THIS ENTIRE AGREEMENT AND HAS HAD AN OPPORTUNITY TO ASK QUESTIONS ABOUT IT BEFORE SIGNING IT; AND (3) EMPLOYEE UNDERSTANDS THAT THIS AGREEMENT IS THE SOLE AGREEMENT PERTAINING TO THE CONDITIONS, NATURE, TENURE AND/OR DURATION OF THE PARTIES' EMPLOYMENT RELATIONSHIP. Employee: Thomas Layton - ------------------------------ Please Print Name /s/ Thomas Layton 7/2/97 - ------------------------------ ------------ Employee's Signature Date PERFECTMARKET. INC. By: /s/ Charles Conn III --------------------------- ------------ Charles Conn, President Date -----END PRIVACY-ENHANCED MESSAGE-----