EXHIBIT 13
AMENDED AND RESTATED
ESPN/STARWAVE
PARTNERSHIP AGREEMENT
THIS AMENDED AND RESTATED PARTNERSHIP AGREEMENT including the Exhibits
attached hereto (this "AGREEMENT") is entered into as of June 18, 1998 by and
between ESPN ONLINE INVESTMENTS, INC., a New York corporation ("ESPN PARTNER"),
a wholly-owned subsidiary of ESPN ENTERPRISES, INC., a Delaware corporation
("ESPN") and STARWAVE VENTURES, a Washington corporation ("STARWAVE PARTNER") a
wholly-owned subsidiary of STARWAVE CORPORATION, a Washington corporation
("STARWAVE"). This Agreement amends and restates in its entirety the Partnership
Agreement by and between the parties hereof entered into as of March 28, 1997
(the "Original Agreement"); provided that, this Agreement shall only become
effective upon the Effective Time, as defined in and pursuant to that certain
Agreement and Plan of Reorganization, of even date herewith, by and among
Infoseek Corporation, a California corporation, Infoseek Corporation, a Delaware
corporation, Starwave, and DEI and shall cease and be of no further force and
effect in the event that the Effective Time does not occur; and provided further
that, each of the parties hereto agrees not to terminate, amend or otherwise
alter this Agreement, or waive any of its rights hereunder, at any time prior to
immediately following the Effective Time. ESPN Partner and Starwave Partner are
each sometimes referred to herein as a "Partner" and, collectively, as
"Partners".
RECITALS
1. In connection with an investment in Starwave by DEI, ESPN Partner and
Starwave Partner entered into a partnership pursuant to the Original Agreement
to jointly develop, produce and exploit certain interactive media products, on
the terms and conditions contained herein and ESPN and Starwave entered into the
ESPN/Starwave Management and Services Agreement dated as of March 28, 1997 (the
"Original Service Agreement") to provide certain assets and services to the
Partnership in accordance with the terms and conditions set forth in the
Original Service Agreement.
2. Pursuant to an agreement and plan of reorganization and a stock and warrant
purchase agreement (collectively, the "Acquisition Agreements"), DEI has agreed
to acquire approximately a 43% interest in the voting equity of Infoseek
Corporation, a California corporation, subject to the terms and conditions set
forth in the Acquisition Agreements.
3. In connection with the transactions contemplated under the Acquisition
Agreements, the Partners desire to amend and restate the Original Agreement by
entering into this Agreement and Starwave agrees and ESPN agrees to cause ESPN,
its indirect wholly owned subsidiary, to amend and restate the Original
Agreement and Original Service Agreement in the form attached as Exhibit A.
THEREFORE, for good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, ESPN Partner and Starwave Partner hereby agree as
follows:
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1. DEFINITIONS
For purposes of this Agreement, the following terms have the following
meanings:
1.1 "ACT" means the New York Uniform Partnership Law, as amended from time
to time.
1.2 "ACTUAL CUMULATIVE FUNDING PERCENTAGE" means each Partner's total
actual cumulative funding divided by the total actual cumulative funding of both
Partners, expressed as a percentage.
1.3 "ADJUSTED CAPITAL ACCOUNT" means, with respect to a Partner, an
account with a balance (which may be a deficit balance) equal to the balance in
such Partner's Capital Account as of the end of the relevant year, after giving
effect to the following adjustments: (i) credit to such Capital Account any
amounts which such Partner is obligated to restore pursuant to any provision of
this Agreement or is deemed to be obligated to restore to the Partnership
pursuant to Regulations (S)(S) 1.704-2(g)(1) and 1.704-2(i)(5); and (ii) debit
to such Capital Account such Partner's share of items described in Regulations
(S)(S) 1.704-l(b)(2)(ii)(d)(4), (5) and (6). The foregoing definition of
Adjusted Capital Account is intended to comply with the provisions of
Regulations (S) 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.
1.4 "ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to a Partner,
the deficit balance, if any, in such Partner's Adjusted Capital Account.
1.5 "ADVISORY COMMITTEE" has the meaning set forth in Section 3.1.
1.6 "AFFILIATE" means, with respect to any person, any person directly or
indirectly through one or more intermediaries controlling, controlled by or
under common control with such person. Notwithstanding the foregoing, for
purposes of this Agreement, Starwave and Starwave Partner shall not be
considered as Affiliates of ESPN or DEI.
1.7 "ANNUAL BUSINESS PLAN" has the meaning specified in Section 3.6.
1.8 "ANNUAL FINANCIAL STATEMENTS" has the meaning specified in Section
3.7.
1.9 "ASSET VALUE" with respect to any Partnership asset means the
following:
(i) the fair market value as determined by an appraiser mutually
agreed to by the Partners of any asset contributed by a Partner to the
Partnership;
(ii) the fair market value as determined by an appraiser mutually
agreed to by the Partners on the date of distribution of any Partnership asset
distributed to any Partner; or
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(iii) the fair market value as determined by an appraiser mutually
agreed to by the Partners of all Partnership assets at the time of (a) the
admission of an additional Partner or (b) the liquidation of the Partnership
pursuant to Section 11.6.
1.10 "BROADBAND" means programming that requires transmission at data rates
which would enable real time, full screen, full motion video at equal to or
better than NTSC broadcast resolution.
1.11 "CAPITAL ACCOUNT" has the meaning set forth in Section 6.5.
1.12 "CASH EXPENDITURES" means, for any period, the actual amount of cash
expenditures and capital expenditures of the Partnership during such period.
1.13 "CLAIMS" has the meaning specified in Section 12.1.
1.14 "CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
1.15 "CONTENT" means audio and audio visual material, photographs, art
work, videos, graphics, text or sound recordings.
1.16 "COSTS" means all direct costs and allocated costs, whether incurred
by ESPN, DEI or Starwave in connection with the Service Agreement or by the
Partnership, that are associated with the development, production, hosting,
maintenance, operation, distribution and exploitation of the Sports Products.
1.17 "DISNEY MEMBER" has the meaning set forth in Section 3.3.
1.18 "ESPN CONTENT" means all Content that is 100% owned or controlled by
ESPN or its successors or assigns. For purposes of this Section 1.1, "control"
means the ability to grant the licenses set forth herein; provided however that
if such Content is subject to the payment of royalties or other consideration to
third parties, ESPN will notify Starwave in writing in advance and the
Partnership shall have the right, at its option, to include such Content in the
definition of ESPN Content.
1.19 "ESPN TRADEMARKS" means "ESPN", "ESPNET" the ESPN logo and the other
marks, trade names, trademarks, brands, names, personalities, logos and
representations thereof that are properties of ESPN or its Affiliates that
appear within the ESPN Content, Programming, Sports Products or any other
materials created in association with this Agreement and that ESPN or any of its
Affiliates owns or controls.
1.20 "FIXED MEDIA PRODUCTS" means multimedia content products developed for
distribution to end users on any platform (including, without limitation, MS-
DOS, Windows, Macintosh, Sega, Nintendo, CD-ROM, Sony Playstation and 3DO
systems) designed to be read on an electronic device but excluding such products
if they include a Narrowband-delivered
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component and such products would not be commercially competitive (as reasonably
determined in good faith by the Partners) without the inclusion of a Narrowband-
delivered component.
1.21 "FORCE MAJEURE EVENT" has the meaning specified in Section 13.5.
1.22 "FORECASTED CASH EXPENDITURES" means, for any period, the forecasted
cash expenses and capital expenditures of the Partnership during such period,
prepared in accordance with GAAP and consistent with the Restated Initial
Business Plan and Annual Business Plans.
1.23 "GAAP" means Generally Accepted Accounting Principles, according to
U.S. accounting practices.
1.24 "GAIN YEAR" has the meaning specified in Section 6.1(a)(ii).
1.25 "GENERAL MANAGER" means the general manager appointed in accordance
with Section 3.1 to manage the operations of the Sports Products.
1.26 "INFOSEEK MEMBER" has the meaning specified in Section 3.1.
1.27 "INTELLECTUAL PROPERTY RIGHTS" means any and all (by whatever name or
term known or designated) tangible and intangible and now known or hereafter
existing (a) rights associated with works of authorship throughout the universe,
including but not limited to copyrights, moral rights, and mask-works, (b)
trademark, service marks and trade name rights and similar rights, (c) trade
secret rights, (d) patents, designs, algorithms and other industrial property
rights, (e) all other intellectual and industrial property and proprietary
rights (of every kind and nature throughout the universe and however designated)
(including without limitation logos, character rights, "rental" rights and
rights to remuneration), whether arising by operation of law, contract, license
or otherwise, and (f) all registrations, applications, renewals, extensions,
continuations, divisions or reissues thereof now or hereafter in force
throughout the universe (including without limitation rights in any of the
foregoing).
1.28 "INTEREST" OR "PARTNERSHIP INTEREST" means the entire ownership
interest of a Partner in the Partnership.
1.29 "LOSS YEAR" has the meaning specified in Section 6.1(a)(i).
1.30 "NARROWBAND" means programming that does not require transmission at
data rates which would enable real time, full screen, full motion video at equal
to or better than NTSC broadcast resolution.
1.31 "NET INCOME" AND "NET LOSS" means for each fiscal year or other
period, the Partnership's taxable income or loss for such year or period
determined in accordance with (S)703(a) of the Code, including therein all items
of income, gain, loss or deduction required to be stated separately pursuant to
(S)703(a)(1) of the Code, with the following adjustments:
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(i) Any tax-exempt income of the Partnership described in
(S)705(a)(1)(B) of the Code which is not otherwise taken into account in
determining Net Income or Net Loss shall be included as if it were taxable
income or loss;
(ii) Any expenditures of the Partnership described in
(S)705(a)(2)(B) or treated as such expenditures under Regulation (S)1.704-
1(b)(2)(iv)(i) not otherwise taken into account in computing Net Income and Net
Loss shall be treated as deductible items;
(iii) Upon the occurrence of an event described in Section 1.9(ii) or
(iii), the difference between the asset basis and Asset Value as determined in
such provision shall be taken into account as gain or loss;
(iv) Gain or loss resulting from the disposition of property from
which gain or loss is recognized for federal income tax purposes shall be
determined with reference to the Asset Value of the property disposed of;
(v) Cost recovery deductions shall be determined based on the Asset
Value of property in lieu of such deductions used in computing such taxable
income or loss;
(vi) Any items which are specially allocated pursuant to Section 6.6
shall not be taken into account.
1.32 "PARTNER NONRECOURSE DEBT" has the meaning set forth in Regulations
(S) 1.704-2(b)(4).
1.33 "PARTNER NONRECOURSE DEBT MINIMUM GAIN" means an amount, with respect
to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that
would result if such Partner Nonrecourse Debt were treated as a Nonrecourse
liability (within the meaning of Regulations (S) 1.704-2(b)(3)), determined in
accordance with Regulations (S) 1.704-2(i)(3).
1.34 "PARTNER NONRECOURSE DEDUCTIONS" has the meaning set forth in
Regulations (S)(S) 1.704-2(i)(1) and 1.704-2(i)(2).
1.35 "PARTNERSHIP" means the general partnership formed by this Agreement.
1.36 "PARTNERSHIP MINIMUM GAIN" has the meaning set forth in Regulations
(S)(S) 1.704-2(b)(2) and 1.704-2(d).
1.37 "PERSON" means any individual, partnership, corporation, trust or
other entity.
1.38 "PORTAL PRODUCTS" means the internet portal service to be named "Go
Networks," or another name mutually agreed to between the Partners, developed
and produced by Infoseek utilizing the subject matter licensed under that
certain License Agreement between
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DEI and Infoseek of even date herewith, including but not limited to all
channels, sub-channels, sections, sites, features, services, utilities and
applications relating thereto.
1.39 "PROFIT PARTICIPATION" means the Partner's proportionate share of Net
Income, expressed as a percentage, in a gain year adjusted pursuant to Section
6.2.
1.40 "PROGRAMMING" means the programming included in the Sports Products
including, without limitation, all HTML, Java, and/or other formatted text
files, all related graphics files, animation files, data files, multimedia
files, modules, routines and objects, and the computer software and all of the
script or program files required to exploit such materials and that collectively
control the display of and end user interaction with the programming.
1.41 "PROMOTIONAL SERVICE AGREEMENT" means the agreement between American
Broadcasting Company and Infoseek, dated as of the date hereof.
1.42 "REGULATIONS" means the Income Tax Regulations promulgated under the
Code, as such regulations may be amended from time to time.
1.43 "RELATED PERSONS" has the meaning specified in Section 12.1.
1.44 "REMOTE ACCESS PRODUCTS" means Programming intended for distribution
by any Narrowband interactive transmission method. This definition excludes any
and all Programming that requires Broadband transmission and also excludes (a)
products developed for PDAs, pagers, screen phones and other future handheld
devices and (b) Fixed Media Products.
1.45 "REQUIRED CUMULATIVE FUNDING PERCENTAGE" means each Partner's total
cumulative funding if it were to have funded at its required cash contribution
amount in each year, divided by the total cumulative funding for both Partners
if each had funded at its required level in each year, expressed as a
percentage.
1.46 "RESTATED INITIAL BUSINESS PLAN" has the meaning specified in Section
3.6.
1.47 "REVENUES" means all revenues, as determined in accordance with GAAP,
including, without limitation, advertising, subscription, usage, merchandising,
licensing or other revenues derived from exploitation of the Sports Products,
the Technology owned by the Partnership or jointly by the Partners contained
therein or utilized in connection therewith or from any other Intellectual
Property Rights, Content or Programming owned by the Partnership or jointly by
the Partners but in all events excluding Portal Products revenues and Infoseek-
branded Search or Directory revenues. For the avoidance of doubt, any Revenues
derived from the first page seen by a viewer after a single click on a name,
logo, icon, link, headline or other content that is supplied by the Partnership
or one of the Partners, for use in the Sports Product. For example, if a user
clicks on the "Go Sports" channel within the Portal Products and the first page
to which the user is directed contains a Sports feature supplied by ESPN, after
the single
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click on the ESPN feature, the user is within the Sports Products and revenues
derived from such page shall be deemed Revenues hereunder.
1.48 "SEARCH OR DIRECTORY" means products, services, components or other
subject matter (a) for searching content such as searches of the World Wide Web,
directories, USENET News, or other databases, or (b) hierarchical listings of
sites or services, which listings are organized by categories.
1.49 "SERVICE AGREEMENT" means the Amended and Restated ESPN/Starwave
Management and Services Agreement attached hereto as Exhibit A.
1.50 "SPORTS PRODUCTS" means the Remote Access Products developed,
produced, marketed, distributed or otherwise exploited under this Agreement
containing professional or amateur sports Content, news or information.
1.51 "STANDARDS" means the written policy of standards and practices for
content and advertising that apply to the Sports Products under this Agreement,
attached as Exhibit B.
1.52 "STARWAVE TRADEMARKS" means "Starwave" and the other marks, trade
names, trademarks, brands, names, personalities, logos and representations
thereof that are properties of Starwave Partner or its Affiliates that appear
within the Sports Products or any other materials created in association with
this Agreement and that Starwave Partner owns or controls.
1.53 "TECHNOLOGY" means all software, hardware and middleware required or
appropriate to (i) transform the Content into the Programming, (ii) create,
modify or maintain the Programming, or (iii) deliver the Programming in an
online format.
1.54 "TERM" shall have the meaning set forth in Section 11.1.
1.55 "TERRITORY" means the United States and Canada.
1.56 "TRANSFER" means, as a noun, any voluntary or involuntary transfer,
sale, assignment, pledge, hypothecation, encumbrance or other disposition, and,
as a verb, voluntarily or involuntarily to transfer, sell, assign, pledge,
hypothecate, encumber or otherwise dispose of.
2. PARTNERSHIP
2.1 PARTNERSHIP NAME. The name of the Partnership shall be ESPN/Starwave
Partners, d/b/a EIV Venture or such other name as the Partners may from time to
time determine by mutual approval, and all business of the Partnership shall be
conducted under such name. Such name shall be the exclusive property of the
Partnership, and no Partner shall have any right to use, and each Partner agrees
that neither it nor its Affiliates shall use, such name or derivatives thereof
incorporating "ESPN" or "EIV"or "Starwave" other than as
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permitted by the mutual agreement of the Partners. The Partnership shall execute
and file and/or publish all assumed name statements and certificates required by
law to be filed and/or published in connection with the operation of the
Partnership.
2.2 PLACE OF BUSINESS. The principal place of business of the Partnership
shall be located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or at such
other place as the Partners may from time to time determine by mutual approval.
The Partnership may have such other or additional places of business or
headquarters as the Partners may from time to time designate.
2.3 PURPOSE. The purpose of the Partnership shall be to develop, produce,
market, distribute and otherwise exploit the Sports Products in the Territory.
Notwithstanding the foregoing, the Partners acknowledge that distribution of the
Sports Products on the Internet shall, by definition be on a worldwide basis;
provided, that it is the present intention of the Partners that the Partnership
shall not deploy the Programming on servers or other delivery systems that are
located outside the Territory. Notwithstanding the foregoing, if DEI determines
to develop, produce, market, distribute and otherwise exploit sports-related
Remote Access Products outside the Territory, the Disney Member will, when
possible, provide the Infoseek Member with a first offer to discuss in good
faith the possibility of delivering the Sports Products in additional countries
or regions or otherwise including the Partnership, Starwave Partner or Infoseek
as a partner or participant to any new sports-related Remote Access Products
that may be developed for any additional country or region; provided, that
Starwave Partner acknowledges that the worldwide business activities and
strategies of DEI and its Affiliates may preclude the participation of the
Partnership, Starwave Partner or Infoseek in any such sports-related Remote
Access Products.
2.4 AUTHORITY OF PARTNERS LIMITED. No Partner shall have any authority to
hold himself out as a general agent of another Partner or the Partnership in any
business activity other than that of the Partnership, and no Partner shall have
any authority to act for, or to assume any obligation or responsibility on
behalf of, any other Partner or the Partnership, except as expressly provided in
this Agreement or as authorized by the Partners. No Partner shall be liable to
third persons for Partnership losses, deficits, liabilities or obligations
except as expressly agreed to in writing by such Partner, unless the assets of
the Partnership shall first be exhausted. In any matter between the Partnership
on the one hand and either Partner on the other hand or in any matter between
the Partners, neither the Partnership nor any Partner shall be bound by the act
of a Partner unless such Partner is acting in accordance with the limitations
and provisions set forth in this Agreement. Except as otherwise expressly
provided herein, decisions of the Partnership shall be made by unanimous
approval of the Partners.
2.5 PARTITION. No Partner, nor any successor-in-interest to such Partner,
shall have the right, while this Agreement remains in effect, to have the
property of the Partnership partitioned or to file a complaint or institute any
proceeding at law or in equity to have the property of the Partnership
partitioned, and each Partner, on behalf of itself and its successors,
representatives and assigns, hereby waives any such right.
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3. GOVERNANCE
3.1 APPOINTMENT OF GENERAL MANAGER. The day-to-day operations of the
Sports Products will be managed by a General Manager nominated by DEI and
mutually appointed by the Partners. The General Manager shall report to the
Advisory Committee. The General Manager shall be a Partnership employee and
subject to termination by either the Starwave Member or the Disney Member. The
General Manager shall be located in New York City, or elsewhere in the event of
mutual agreement by the Advisory Committee. In the event of the termination or
resignation of a General Manager, the Disney Member shall have the right to
nominate candidates for a new General Manager; provided, that if three
successive nominees are not approved by the Advisory Committee, the Disney
Member shall have the sole right of approval for the subsequent nominee. This
process will be repeated in the event of any replacement of a General Manager.
Notwithstanding the foregoing, in the event that a General Manager is terminated
by the Starwave Member unilaterally, the Disney Member shall have the unilateral
right to appoint a replacement General Manager, subject to Starwave Partner's
subsequent rights to terminate the replacement General Manager. DEI agrees to
cause the Disney Member to use its reasonable good faith efforts to nominate
well qualified, "best available" candidates as General Manager candidates.
3.2 DUTIES OF GENERAL MANAGER. The General Manager shall implement the
Restated Initial Business Plan and subsequent Annual Business Plans and shall
exercise control over the day-to-day operations of the Partnership, including
editorial tactics, editorial strategy and creative development (subject to
Section 3.5(a)), production (technical or otherwise), distribution,
merchandising, advertising sales, affiliate relations (subject to Section
3.5(b)), and marketing and promotion (subject to Section 3.5(c)) of the Sports
Products, subject to the oversight and ultimate approval of the Advisory
Committee.
3.3 ADVISORY COMMITTEE. As of the Effective Time, Infoseek and Disney
will respectively appoint the Infoseek CEO and the Chairman of Buena Vista
Internet Group as the sole members (the "Infoseek Member" and the "Disney
Member" respectively) of an advisory committee (the "Advisory Committee"). Each
of Infoseek and Disney will have the right to replace its designee on the
Advisory Committee; provided, that Infoseek and Disney agree to consult with
each other prior to any such replacement. Any such replacement will be with an
officer of Infoseek or Disney, or their respective Affiliates, of similar
responsibilities and experience, to the extent possible. The Advisory Committee
shall oversee the management and operations of the Partnership, shall make
significant business decisions of the Partnership and shall participate
regularly in the overall supervision, direction and control of the Partnership
as set forth on Exhibit C (as amended as of the date hereof). The Advisory
Committee will meet monthly or as otherwise appropriate to discuss and advise
the General Manager on overall Sports Products key issues, and performance
within the parameters established in the Annual Business Plans. Except as
otherwise expressly provided herein, decisions of the Advisory Committee shall
be made by unanimous approval of the Infoseek Member and Disney Member.
3.4 ORGANIZATIONAL STRUCTURE. The Partners intend to staff the operations
of the Partnership in accordance with the Restated Initial Business Plan, as may
be modified from
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time to time upon the agreement of the Partners. Thereafter, the General Manager
(and the relevant senior employees) shall hire/fire/promote Partnership
employees at their discretion (subject to compliance with the Restated Initial
Business Plan and Annual Plans). Notwithstanding the foregoing, it is the
intention of the parties that the employees providing technology-related
services to the Partnership shall be primarily employed by Starwave and the
employees providing editorial-related services to the Partnership shall be
primarily employed by ESPN.
(a) CONTENT DEVELOPMENT/TRANSFORMATION/INTEGRATION.
(i) ESPN CONTENT. ESPN shall be responsible for the development
of ESPN Content for the Sports Products and for the transformation of ESPN
Content into Programming and integration of the Programming into the Sports
Products as set forth in the Service Agreement. The senior employee in such
group, who shall be an ESPN employee and subject to hiring/firing by ESPN, shall
report on a day-to-day basis to the General Manager, with direct reporting as
well to an ESPN designated executive for oversight of editorial and creative
aspects of such Content.
(ii) NON-ESPN CONTENT. The Partnership shall include a group of
employees responsible for the development of Content (other than ESPN Content)
for the Sports Products and for the transformation of such Content into
Programming and integration of the Programming into the Sports Products. The
senior employee in such group, who shall be an ESPN employee and subject to
hiring/firing by ESPN and firing by Starwave, and shall report on a day-to-day
basis to the General Manager, with direct reporting as well to an ESPN
designated executive for oversight of editorial and creative aspects of such
Content.
(b) ESPN NETWORK AFFILIATE RELATIONS. The Partnership shall include a
group of Partnership employees responsible for managing the relationship with
ESPN's affiliated television and radio stations, subject to Section 3.5(b). The
senior employee in such group shall report directly to the General Manager.
ESPN shall have veto power over the hiring/firing of such employee. ESPN shall,
from time to time, review the policies and practices of such group and assist
the General Manager in conforming such policies and practices with those used by
ESPN.
(c) ADVERTISING SALES.
(i) The Partnership may engage Starwave or any qualified third
party (including Affiliates) to provide representation services for advertising
sales for the Sports Products. The senior employee of any non-Affiliated party
providing representation services shall be subject to hiring/firing by either
Starwave or ESPN, shall report to the General Manager, with (1) a report to the
Disney Member on matters concerning group advertising sales in association with
Disney products and (2) a report to the Infoseek Member on matters concerning
group advertising sales in association with Infoseek products.
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(ii) The Advisory Committee shall mutually agree in writing on
the characteristics of all advertising that will appear with or in the Sports
Products, including without limitation, matters of price, content, size,
placement, quantity, frequency of changes, and identity of advertisers. The
Advisory Committee further shall mutually agree in writing on the "rate card"
for the advertising to be sold in connection with the Sports Products.
(iii) The General Manager and the advertising sales group shall
at all times comply with the Standards.
(iv) The Advisory Committee shall coordinate group advertising
sales for the Sports Products in association with DEI (which shall provide the
group advertising sales services in association with Disney products) and with
Infoseek (which shall provide the group advertising sales services in
association with Infoseek products) as set forth in the Service Agreement.
During the Term, such group advertising services may become a responsibility of
the Partnership or the Partners collectively, upon the mutual agreement of the
Partners.
(d) MARKETING/PROMOTION. The Partnership shall include a group of
Partnership employees responsible for marketing and promotion for the Sports
Products on Narrowband platforms and in other media, subject to Section 3.5(c).
The senior employee in such group shall be subject to hiring/firing by ESPN and
firing by Starwave and shall report directly to the General Manager. In
addition, ESPN shall provide marketing and promotion services for the Sports
Products in other media, as set forth in the Service Agreement, and in
accordance with the Promotional Services Agreement.
(e) FINANCE AND BUSINESS DEVELOPMENT. The Partnership shall include a
group of Partnership employees responsible for finance and business development
activities (including, without limitation, general and administrative
activities). Such group (and the General Manager) shall perform their
administrative and finance responsibilities in accordance with DEI's standards
of financial controls.
(f) BILLING, COLLECTION, CUSTOMER SERVICE. Starwave shall be
responsible for billing, collection, customer service and other "back office"
functions for the Partnership in accordance with the Service Agreement. During
the Term, such functions (or portions thereof) may become a responsibility of
the Partnership or the Partners collectively, upon the mutual agreement of the
Partners.
(g) TECHNOLOGY DEVELOPMENT AND MAINTENANCE. Starwave shall be
responsible for the technology development and maintenance relating to the
Sports Products in accordance with the Service Agreement. It is the present
intention of the parties that the preponderance of the technology development
and maintenance relating to the Sports Products shall be performed by Starwave.
The General Manager, in accordance with the Restated Initial Business Plan or
Annual Business Plans, may acquire or license additional or substitute
Technology (i) on an incidental and nonmaterial basis, (ii) if Starwave is in
breach of its material obligations under its agreements with the Partnership,
(iii) if the costs to the Partnership of acquiring or licensing Technology from
a third party are significantly less than
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the costs to the Partnership of acquiring or licensing such or similar
Technology from Starwave and such third-party Technology is fully scaleable and
compatible with other Technology used for the Sports Product and otherwise
appropriate for its intended uses, or (iv) if Starwave otherwise agrees. In
addition, the General Manager, in accordance with the Restated Initial Business
Plan or Annual Business Plans may acquire or license additional or substitute
Technology if, in the General Manager's reasonable opinion, the inability to so
acquire or license such Technology would have a material impact on the overall
quality and competitive position of the Sports Products. In such event, Starwave
shall have a three (3) day period to meet with the General Manager to attempt to
resolve the issues. If the issues have not been resolved in the three (3) day
period, the General Manager shall be entitled to present the issues to the
Partners for resolution based upon the mutual agreement of the Partners. During
the Term, such technology development and maintenance (or portions thereof) may
become a responsibility of the Partnership or the Partners collectively, upon
the mutual agreement of the Partners.
(h) HOSTING. Starwave shall be responsible for the hosting of the
Sports Products in accordance with the Service Agreement. During the Term, the
Partners may mutually agree to have the Partnership perform hosting functions
for the Sports Products, as may be approved in an Annual Business Plan or
otherwise as determined by the Partners. In addition, the General Manager may
utilize unaffiliated third parties to provide hosting of the Sports Products (i)
if the costs of any such hosting to the Partnership are significantly less than
the costs to the Partnership of such hosting services as charged by Starwave and
such third-party hosting is fully scaleable and compatible with the Technology
and hosting services provided for the Sports Products and otherwise appropriate,
(ii) Starwave is in breach of its material hosting obligations hereunder, or
(iii) if Starwave otherwise agrees.
(i) OTHER. The Partners shall mutually agree on whether any
additional necessary support for the development, production and delivery of the
Sports Products in any category other than as listed in this Agreement shall be
included as a responsibility of the Partnership or one or both Partners.
3.5 ESPN'S CONTROL.
(a) EDITORIAL AND CREATIVE. ESPN shall exercise sole and final
control over all editorial and creative aspects of the Sports Products and all
portions thereof.
(b) ESPN NETWORK AFFILIATE RELATIONS. ESPN shall exercise sole and
final control over all ESPN Network affiliate relations matters associated with
the Sports Products.
(c) MARKETING AND PROMOTIONS. ESPN shall exercise sole and final
control over all uses or references to any ESPN Trademark contained in marketing
and promotions associated with the Sports Products. Any use of an ESPN
Trademark by the Partnership or Starwave shall require the prior approval of
ESPN, which may be withheld at ESPN's sole discretion. ESPN shall cooperate in
good faith with the Partnership to agree on a templated use of ESPN Trademarks
from time to time to avoid recurrent approvals.
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(d) ADVERTISING SALES. The General Manager and the Partnership's
advertising sales group shall frequently consult with ESPN's advertising sales
executives in order to coordinate, when possible, advertising opportunities
among the Sports Products and ESPN products.
3.6 BUSINESS PLAN AND BUDGET.
(a) Prior to the date hereof, DEI and Starwave have agreed on a
restated three year business plan for the Sports Products, attached hereto as
Exhibit D (the "Restated Initial Business Plan"). At least thirty (30) days
prior to the beginning of each fiscal year (ending September 30) during the
Term, the General Manager shall prepare for the Partners' approval an annual
business plan and budget for the subsequent fiscal year (which shall include,
without limitation, a statement of Forecasted Cash Expenditures for such fiscal
year), utilizing the categories and methods established in the Restated Initial
Business Plan (i.e., spending requirements and limits, Revenue and operating
income targets)(each, an "Annual Business Plan and Budget"). If during the first
three years after the date hereof, an Annual Business Plan and Budget is not
mutually approved by the Partners by the beginning of a fiscal year, the
Partners shall continue to perform their obligations under this Agreement based
on the standards set forth in the Restated Initial Business Plan for the
corresponding year. After the first three years after the date hereof, if an
Annual Business Plan and Budget for any fiscal year are not mutually approved by
the Partners by the beginning of a fiscal year, the Partners shall continue to
perform their obligations under this Agreement based on the standards set forth
in the Annual Business Plan and Budget for the prior fiscal year, increased in
an amount equal to 50% of the increase in the projected Revenue growth for the
Partnership between the current fiscal year and the subsequent fiscal year (as
agreed between the Partners), provided, that if such projected Revenue growth is
a negative number, such aggregate amount shall be increased in an amount equal
to the percentage increase or decrease in the Consumer Price Index for Urban
Wage Earners and Clerical Workers [All Urban Consumers], U.S. City Average (1982
84 = 100) Unadjusted, all items index, published by the Bureau of Labor
Statistics, United States Department of Labor (the "CPI Factor") for the
preceding twelve-month period. In the event that the Partners cannot agree on
projected Revenue growth for the Partnership for a particular fiscal year, the
Annual Business Plan and Budget for such fiscal year shall be increased in an
amount equal to the actual growth rate in Revenues between the two prior fiscal
years. If such growth rate is a negative number, such Annual Business Plan and
Budget shall be adjusted by the CPI Factor. In each year, the Annual Business
Plan and Budget as adjusted as provided above shall be the baseline for any
adjustments for the subsequent year.
(b) Within fifteen (15) days prior to the beginning of each fiscal
quarter during the Term, the General Manager shall prepare for the Partners'
approval a statement of Forecasted Cash Expenditures and forecasted Revenues (as
agreed between the Partners) for such fiscal quarter. If any such statement is
not mutually approved by the Partners by the beginning of a fiscal quarter, (i)
if the fiscal quarter in question falls within the period reflected in the
Restated Initial Business Plan, then the Forecasted Cash Expenditures and
forecasted Revenues set forth therein for the applicable fiscal quarter
calculated from the annual amounts
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in the Annual Business Plan and Budget shall be applicable or (ii) if the fiscal
quarter in question is after the period reflected in the Restated Initial
Business Plan, then the Forecasted Cash Expenditures for such fiscal period will
be as follows: that fiscal quarter's forecasted Revenues is compared with the
Revenues in the same quarter from the prior year and a Revenue growth percentage
is calculated. 50% of this growth percentage is then applied to the Actual Cash
Expenditures for the same fiscal quarter from the prior year to determine the
Forecasted Cash Expenditures for the fiscal quarter under consideration. If the
Partners cannot agree on the Revenue growth percentage increase, then the prior
period Revenue growth percentage will be utilized as follows: 50% of the actual
year-over-year Revenue growth percentage achieved in the same quarter in the
prior year is calculated. The growth percentage is then applied to the Actual
Cash Expenditures for the same quarter from the prior year to determine the
Forecasted Cash Expenditures for the current quarter, provided, that if such
projected Revenue growth is a negative number, such aggregate amount shall be
increased in an amount equal to the percentage increase or decrease in the
Consumer Price Index for Urban Wage Earners and Clerical Workers [All Urban
Consumers], U.S. City Average (1982-84 = 100) Unadjusted, all items index,
published by the Bureau of Labor Statistics, United States Department of Labor
for the preceding twelve-month period. In each year, the Annual Business Plan
and Budget as adjusted as provided above shall be the baseline for any
adjustments for the subsequent year.
3.7 OTHER REPORTS. Within fifteen (15) days after the end of each fiscal
year during the Term, the General Manager shall prepare and deliver, with the
assistance of the Partners, unaudited twelve month profit and loss statements,
including detailed breakdowns of sources of Revenues and items of Costs for each
fiscal quarter as well as a statement of Net Cash Flow for such fiscal year
(collectively, the "Annual Financial Statements"). Within five (5) days after
the end of each fiscal quarter during the Term, the General Manager shall also
prepare and deliver, with the assistance of the Partners, unaudited quarterly
profit and loss statements, including detailed breakdowns of sources of Revenues
and items of Costs in such fiscal quarter and quarterly cash flow statements. In
addition, within ten (10) days prior to the start of any fiscal quarter, the
General Manager shall prepare and deliver quarterly forecasts, utilizing the
categories and methods established in the Restated Initial Business Plan. The
Partners acknowledge the importance of meeting the financial reporting deadlines
to ensure necessary financial and accounting compliance; provided, however, that
immaterial and infrequent failures to meet such deadlines shall not be
considered as material breaches of this Agreement.
4. STARWAVE, ESPN AND DEI OBLIGATIONS
During the Term, Starwave, ESPN and DEI shall have the obligations to the
Partnership set forth in the Service Agreement.
5. MERCHANDISING
DEI agrees to provide (or cause its Affiliates to provide) and the
Partnership agrees to purchase (subject to agreement on terms), e-commerce
services to the Partnership, including, without limitation, store design,
transaction processing, web hosting, inventory management, fulfillment and
customer service. In exchange for such services, the Partnership shall pay DEI
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its Costs (with the allocated costs to be mutually agreed) in providing such
services, plus a to-be-agreed markup on such Costs or a to-be-agreed upon
revenue share. In addition, DEI shall have joint ownership of all customer
information for use for its business purposes.
6. FINANCIAL PARTICIPATION
6.1 CAPITAL CONTRIBUTIONS.
(a) In accordance with the limits set forth in each Annual Business
Plan, the Partners shall make capital contributions at the start of each fiscal
quarter or from time to time as the Partners otherwise agree in accordance with
Forecasted Cash Expenditures:
(i) Starwave Partner shall make capital contributions in
sufficient amounts to provide for sixty percent (60%) of the Forecasted Cash
Expenditures and ESPN Partner shall make capital contributions in sufficient
amounts to provide for forty percent (40%) of the Forecasted Cash Expenditures
in any fiscal quarter during the Term in which Net Losses are expected to occur
(a "Loss Year").
(ii) Starwave Partner shall make capital contributions in
sufficient amounts to provide for fifty percent (50%) of the Forecasted Cash
Expenditures and ESPN Partner shall make capital contributions in sufficient
amounts to provide for fifty percent (50%) of the Forecasted Cash Expenditures
in any fiscal quarter during the Term in which Net Income is expected to occur
(a "Gain Year").
(b) Promptly upon the delivery of the Annual Financial Statements of
the Partnership, the Partners shall reconcile the differences, if any, between
the Forecasted Cash Expenditures and the Cash Expenditures as reflected in the
Annual Financial Statements, such that the total amount contributed by each
Partner with respect to a fiscal year is in accordance with the percentages
provided in Section 6.1(a) based on the Cash Expenditures with respect to such
fiscal year.
(c) To the extent that a Technology is developed by either Partner in
connection with this Agreement specifically for use in the development or
delivery of the Sports Products, the other Partner can elect, in its discretion
(but only at the time initial funding for the Technology is requested, unless
agreed to by the Partner developing such Technology), to provide its
proportionate share of the funding associated with such Technology, in which
event such Technology shall become jointly owned.
(d) For purposes of this Agreement, with respect to any capital asset
owned by a Partner and utilized in association with the Sports Products, either
Partner may charge the Partnership a fee for the use of such capital asset, in
accordance with limits set forth in the Initial Business Plan and Annual
Business Plan.
6.2 FAILURE TO MAKE CONTRIBUTIONS.
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(a) If any Partner fails to make any required cash contribution when
due pursuant to Section 6.1 (a "Nonfunding Partner"), the other Partner may, in
its discretion, elect to make a cash contribution in the amount of all or a
portion of the unfunded portion of the required contribution, in which event the
funding Partner's ("Funding Partner") Capital Account shall be adjusted as
follows: for every $1.00 of the unfunded portion of such required contribution
funded by the Funding Partner, the Funding Partner shall receive an increase of
$1.00 in its Capital Account.
(b) In addition, at the end of each fiscal year, each Partner's
Actual Cumulative Funding Percentage will be compared with its Required
Cumulative Funding Percentage. In the event that such Partner's Actual
Cumulative Funding Percentage is less than its Required Cumulative Funding
Percentage, such Partner's Profit Participation shall be adjusted at the
beginning of the next fiscal year such that the Nonfunding Partner's Profit
Participation will be (i) decreased 1 percentage point for each 1 percentage
point shortfall in the event the Nonfunding Partner's total cumulative funding
exceeds that of Funding Partner and (ii) will be decreased 2 percentage points
for every 1 percentage point (the "dilution ratio") in the event that the
Nonfunding Partner's total cumulative funding is less than that of the Funding
Partner. The Funding Partner will receive a corresponding increase in its Profit
Participation. An example is attached as Exhibit E.
(c) In any fiscal year in which the Starwave Partner's Profit
Participation falls below 25%, their control rights under this Agreement and the
Services Agreement shall be suspended, such that, for example, the Starwave
Partner shall not have a vote in any of the matters that previously required the
unanimous approval of the Advisory Committee. This right would be reinstated in
the event that Starwave Partner's Profit Participation again rises above 25%,
subject to subsequent suspension if Starwave Partner's Profit Participation
again falls below 25%.
(d) Prior to the end of the first fiscal year in which the
Partnership derives Net Income (i.e., as opposed to a Net Loss year), a
Nonfunding Partner shall be entitled to make capital contributions up to its
Required Cumulative Funding Percentage as well as additional funding necessary
to equalize the results of the cumulative overfunding by the Funding Partner at
the same dilution ratio (as defined above) and adjust its Profit Participation
upward; provided, however, at the end of the first fiscal year in which the
Partnership derives Net Income, while a Nonfunding Partner may make capital
contributions to maintain its Actual Cumulative Funding Percentage, it shall not
be entitled to make capital contributions to equalize the results of the
cumulative overfunding by the Funding Partner.
(e) In the event that Starwave Partner's Profit Participation falls
below 25% and Starwave Partner desires to fund a subsequent required cash
contribution and is unable to access capital on reasonable terms as determined
by the independent audit committee of the Board of Directors of Starwave Partner
given the Company's financial condition, and said terms would cause an adverse
impact on Starwave Partner's financial condition, Disney Partner will loan
Starwave Partner the necessary funds at an interest rate equal to the then prime
rate
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plus 1% for a twelve month term. If the loan is not repaid with accrued
interest thereon at the end of the twelve month period, such amounts will be
credited to Disney Partner's Capital Account and the Disney Partner's Actual
Cumulative Percentage would be adjusted at the beginning of the next fiscal year
as if Disney Partner had actually funded the Partnership instead of making the
loan to Starwave Partner.
6.3 ALLOCATIONS. After receipt of the Annual Financial Statements in any
fiscal year and subject to the special allocations of Section 6.6:
(a) ESPN Partner shall be allocated 40% of the Net Loss in any fiscal
year and 50% of the Net Income in any fiscal year.
(b) Starwave Partner shall be allocated 60% of the Net Loss in any
fiscal year and 50% of the Net Income in any fiscal year.
6.4 DISTRIBUTIONS. The Partnership shall make cash and/or asset
distributions at the end of each fiscal year upon receipt of the Annual
Financial Statements or when otherwise deemed appropriate by the Partners in the
same proportions as the cash contributions for each Partner in each fiscal year
attributable to such fiscal year.
6.5 CAPITAL ACCOUNTS. The Partnership shall maintain for each Partner a
single capital account (a "Capital Account") with respect to the Partner's
Partnership Interest in accordance with the regulations issued pursuant to Code
Section 704. The Capital Account of each Partner shall be maintained for such
Partner in accordance with the following provisions:
(a) To each Partner's Capital Account there shall be credited (i) the
amount of cash or the Asset Value contributed to the capital of the Partnership
by such Partner pursuant to any provision of this Agreement, (ii) the amounts of
such Partner's distributive share of Net Income allocated pursuant to Section
6.3 and any items in the nature of income or gain that are specially allocated
pursuant to Section 6.6, and (iii) the amount of any Partnership liabilities
that are assumed by such Partner.
(b) To each Partner's Capital Account there shall be debited (i) the
amount of cash or the Asset Value distributed to such Partner pursuant to any
provision of this Agreement, (ii) the amounts of such Partner's distributive
share of Net Loss allocated pursuant to Section 6.3 and any items in the nature
of expenses or losses that are specially allocated pursuant to Section 6.6, and
(iii) the amount of any liabilities of such Partner that are assumed by the
Partnership.
(c) In the event that all or a portion of a Partnership Interest is
Transferred in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent that it relates
to the Transferred interest.
(d) In determining the amount of any liability for purposes of
paragraphs (a) and (b) hereof, there shall be taken into account Code Section
752(c) and any other applicable
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provisions of the Code and Regulations. The foregoing provisions and the other
provisions of this Agreement relating to the maintenance of Capital Accounts are
intended to comply with Regulations (S)(S) 1.704-1(b) and 1.704-2 in order that
the allocations of Revenues and Costs under this Agreement are deemed to have
substantial economic effect, and shall be interpreted and applied in a manner
consistent with such Regulations. In the event that the Partners mutually
determine that it is prudent to modify the manner in which the Capital Accounts,
or any debits or credits thereto (including, without limitation, debits or
credits relating to liabilities which are secured by contributed or distributed
property or which are assumed by the Partnership or any Partner), are computed
in order to comply with such Regulations, the Partners may make such
modification, provided that it is not likely to have a significant effect on the
amounts distributable to any Partner hereunder upon the dissolution of the
Partnership.
6.6 SPECIAL ALLOCATIONS.
(a) PREFERRED RETURN. A Funding Partner shall be specially allocated
Net Income equal to 15% per annum on the funding provided on behalf of the
Nonfunding Partner (and not subsequently made up by the Nonfunding Partner)
until such time as the Nonfunding Partner contributes all of the remaining
unfunded amounts to the Partnership.
(b) RECONCILIATION OF CAPITAL ASSETS. At the end of the fifth fiscal
year of the Partnership (and each subsequent fifth fiscal year during the Term),
the Partners shall cause the Partnership to make a special allocation of Net
Income or Net Loss, if necessary, to ensure that cumulative deductions
attributable to capital assets are consistent with each Partner's financial
contribution with respect to such capital assets.
(c) REGULATORY ALLOCATIONS TO CAPITAL ACCOUNTS. The following special
allocations shall be made in the following order:
(i) MINIMUM GAIN CHARGEBACK. Except as otherwise provided in
Regulations (S) 1.704-2(f), notwithstanding any other provision of this Article
6, if there is a net decrease in Partnership Minimum Gain during any Partnership
year, each Partner shall be specially allocated items of Partnership income and
gain for such period (and, if necessary, subsequent periods) in an amount equal
to such Partner's share of the net decrease in Partnership Minimum Gain,
determined in accordance with Regulations (S) 1.704-2(g). Allocations pursuant
to the previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Partner. The items to be so allocated shall be
determined in accordance with Regulations (S)(S) 1.704-2(f)(6) and 1.704-
2(j)(2). This Section 6.6(c)(i) is intended to comply with the minimum gain
chargeback requirement in Regulations (S) 1.704-2(f) and shall be interpreted
consistently therewith.
(ii) PARTNER MINIMUM GAIN CHARGEBACK. Except as otherwise
provided in Regulations (S) 1.704-2(i)(4), notwithstanding any other provision
of this Article 6, if there is a net decrease in Partner Nonrecourse Debt
Minimum Gain attributable to a Partner Nonrecourse Debt during any fiscal
period, each Partner who has a share of the Partner Nonrecourse Debt Minimum
Gain attributable to such Partner Nonrecourse Debt, determined in
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accordance with Regulations 1.704-2(i)(5), shall be specially allocated items of
Partnership income and gain for such period (and, if necessary, subsequent
periods) in an amount equal to such Partner's share of the net decrease in
Partner Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse
Debt, determined in accordance with Regulations (S) 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amount required to be allocated to each Partner pursuant thereto. The items to
be so allocated shall be determined in accordance with Regulations (S)(S) 1.704-
2(i)(4) and 1.704-1(j)(2). This Section 6.6(c)(ii) is intended to comply with
the minimum gain chargeback requirement in Regulations (S) 1.704-2(i)(4) and
shall be interpreted consistently therewith.
(iii) CERTAIN SECTION 754 ADJUSTMENTS. To the extent an
adjustment to the adjusted tax basis of any Partnership asset pursuant to Code
Section 743(b), Code Section 732(d) or Code Section 734(b) is required to be
taken into account in determining Capital Accounts as the result of a
distribution to a Partner in complete liquidation of its interest in the
Partnership, pursuant to Regulations (S) 1.704-1(b)(2)(iv)(m), the amount of
such adjustment to Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially allocated to the
Partners in accordance with their interests in the Partnership as determined
under Regulations 1.704-1(b)(3) in the event Regulations (S) 1.704-
1(b)(2)(iv)(m)(2) applies, or to the Partner to whom such distribution was made
in the event Regulations (S) 1.704-1(b)(2)(iv)(m)(4) applies.
(iv) PARTNER NONRECOURSE DEDUCTIONS. Any Partner Nonrecourse
Deductions for any fiscal period shall be specially allocated to the Partner who
bears the economic risk of loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable in accordance with
Regulations (S) 1.704-2(i)(1).
6.7 OTHER CAPITAL ACCOUNT ALLOCATION RULES.
(a) ALLOCATIONS WHEN PERCENTAGE INTERESTS CHANGE. For purposes of
determining the Net Income or Net Loss allocable with respect to any period, Net
Income or Net Loss shall be determined on a daily, monthly or other basis, as
determined by the Partners using any permissible method under Code Section 706
and the Regulations thereunder.
(b) TAX REPORTING. The Partners are aware of the income tax
consequences of the allocations made by this Article 6 and hereby agree to be
bound by the provisions of this Agreement in reporting their shares of
Partnership income, gain, loss, deduction and expenses for income tax purposes.
6.8 TAX ALLOCATIONS: CODE SECTION 704(C).
(a) GENERALLY. Except as otherwise provided in this Section 6.8, each
item of Partnership income, gain, loss, deduction and expense shall be allocated
to the Partners consistent with the allocations to Capital Accounts provided for
in this Agreement. Any item of income, gain, loss, deduction or credit,
including depreciation recapture, with respect to any
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property (other than money) that has been contributed by a Partner to the
capital of the Partnership and which is required to be allocated to the Partners
for income tax purposes pursuant to Code Section 704(c) so as to take into
account the variation between the adjusted basis of such property for federal
income tax purposes and its fair market value at the time of contribution shall
be allocated to the Partners in the manner so required by Code Section 704(c)
and the Regulations thereunder.
(b) ELECTIONS. Any elections or other decisions relating to
allocations pursuant to this Section 6.8 shall be made by the Partners in any
manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 6.8 are solely for purposes of federal,
state and local income taxes.
6.9 INTEREST ON CAPITAL ACCOUNTS. Except as specifically provided herein,
no Partner shall be entitled to any interest on its Capital Account or its
contributions to the capital of the Partnership, nor shall any Partner have the
right to demand or receive the return of all or any part of its Capital Account
or its contributions to the capital of the Partnership.
6.10 AUDITS. The Partnership shall employ Price Waterhouse to prepare and
deliver to the Partners an audit of the Annual Financial Statements. In
addition, promptly upon written notice and during normal business hours, either
Partner may (and may employ third-party accounting firms for assistance), no
more often than twice each fiscal year and at its expense, audit, inspect and
take extracts and copies from the other Partner's records with respect to the
Sports Products subject to reasonable confidentiality protections for the other
Partner's records and information. Either Partner may (and may employ third-
party accounting firms for assistance) audit, inspect and take extracts and
copies from the records of the Partnership at any time during normal business
hours.
7. EXCLUSIVITY
7.1 STARWAVE PARTNER EXCLUSIVITY. During the Term and in the Territory,
and except for activities associated with the development, expansion and
commercialization of the sports Component of the Portal Products and Search or
Directory, Starwave Partner and its Affiliates shall not develop, distribute,
produce, or exploit or market or promote on-air, or, provide services of any
nature or provide a license or permit a third party to utilize any of their
respective Intellectual Property Rights with respect to any Remote Access
Products containing professional or amateur sports Content, news or information.
7.2 ESPN PARTNER EXCLUSIVITY. During the Term and in the Territory, and
except for activities associated with the development, expansion and
commercialization of the news Component of the Portal Products, ESPN Partner and
its Affiliates shall not develop, distribute, produce, exploit or provide
services of any nature or market or promote on-air or provide a license or
permit a third party to utilize any of their respective Intellectual Property
Rights with respect to any Remote Access Products containing professional or
amateur sports Content, news or information.
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7.3 NO OTHER RESTRICTIONS. Except as expressly set forth in this Section
7, neither ESPN Partner and its Affiliates, on the one hand, nor Starwave
Partner and its Affiliates, on the other hand, shall be subject to any
restrictions on the licensing, use, distribution or other exploitation of their
respective properties (including all Intellectual Property Rights therein), that
either Partner or any of its Affiliates own, control, have a license to, or in
which they have any other form of right, title or interest.
7.4 BROADBAND APPLICATIONS. For clarification purposes, ESPN Partner and
its Affiliates, on the one hand, and Starwave Partner and its Affiliates, on the
other hand, in their respective sole discretion, may develop, produce, exploit
or provide services of any nature with respect to programming designed
specifically for Broadband delivery (i.e., content that requires Broadband
transmission to satisfactorily deliver services to consumers). ESPN Partner
agrees to investigate (without any obligation) cooperation with Starwave Partner
in the development of products designed for Broadband delivery.
8. PROPRIETARY RIGHTS
The Partnership shall jointly own all the Technology, Content (other than
ESPN Content, if any) and Programming developed and funded by the Partnership or
jointly funded by the Partners pursuant to Section 6.1(c) during the Term for
the Sports Products. Ownership of Technology, Content and Programming funded by
Starwave or ESPN shall be governed as provided in the Service Agreement.
9. CONFIDENTIAL INFORMATION
The definition and use of each Partner's "Confidential Information" by the
other Partner shall be governed by the terms of that certain Mutual Non-
Disclosure Agreement between the Partners dated March 28, 1997.
10. REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION
10.1 WARRANTIES OF STARWAVE PARTNER. Starwave Partner represents and
warrants that (a) it has the right, power and authority to enter into this
Agreement and fully to perform its obligations under this Agreement; (b) the
making of this Agreement by it does not violate any agreement existing between
it and any other person or entity; (c) it complies, and at all times shall
comply, with all applicable laws, rules and regulations in effect at the time
services are performed pursuant to this Agreement pertaining to the subject
matter hereof; and (d) it shall not exercise any of the rights granted to it
under or pursuant to this Agreement in a manner that shall violate any
applicable law, rule or regulation.
10.2 INDEMNIFICATION OBLIGATIONS OF STARWAVE PARTNER. Starwave Partner
agrees to, and shall, indemnify, defend and hold harmless ESPN Partner and its
Affiliates and their respective directors, shareholders, officers, agents,
employees, successors and assigns from and against any and all claims, demands,
suits, judgments, damages, costs, losses, expenses (including reasonable
attorneys' fees and expenses) and other liabilities arising from actions
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brought by third parties in connection with or related to, directly or
indirectly, any breach or alleged breach of any of the representations or
warranties made by it under this Agreement. The foregoing obligations of
Starwave Partner shall be subject to (i) ESPN Partner giving Starwave Partner
sole control of the defense and/or settlement of any third party claims, and
(ii) ESPN Partner providing Starwave Partner with reasonable assistance and full
information at Starwave Partner's expense. ESPN Partner shall promptly notify
Starwave Partner of any such claim and Starwave Partner shall bear full
responsibility for the defense (including any settlements) of any such claims
(i) Starwave Partner shall keep ESPN Partner informed of, and consult with ESPN
Partner in connection with the progress of such litigation or settlement; and
(ii) Starwave Partner shall not have any right, without ESPN Partner's written
consent, to settle any such claim if such settlement arises from or is part of
any criminal action, suit or proceeding or contains a stipulation to or
admission or acknowledgment of, any liability or wrongdoing (whether in
contract, tort or otherwise) on the part of any ESPN Affiliate,
10.3 WARRANTIES OF ESPN PARTNER. ESPN Partner represents and warrants that
(a) it has the right, power and authority to enter into this Agreement, to grant
the licenses herein granted, and to fully perform its obligations under this
Agreement; (b) the making of this Agreement by it does not violate any agreement
existing between it and any other person or entity; (c) it complies, and at all
times shall comply, with all applicable laws, rules and regulations in effect at
the time services are performed pursuant to this Agreement pertaining to the
subject matter hereof; and (d) it shall not exercise any of the rights granted
to it under or pursuant to this Agreement in a manner that shall violate any
applicable law, rule or regulation.
10.4 INDEMNIFICATION OBLIGATIONS OF ESPN PARTNER. ESPN Partner agrees to,
and shall, indemnify, defend and hold harmless Starwave Partner and its
Affiliates, and its directors, shareholders, officers, agents, employees,
successors and assigns from and against any and all claims, demands, suits,
judgments, damages, costs, losses, expenses (including reasonable attorneys'
fees and expenses) and other liabilities arising from actions brought by third
parties, in connection with or related to, directly or indirectly, any breach
or alleged breach of the representations and warranties made by it under this
Agreement. Starwave Partner shall promptly notify ESPN Partner of any such
claim, and ESPN shall bear full responsibility for the defense of such claim
(including any settlements) provided however, that (i) ESPN Partner shall keep
Starwave Partner informed of and consult with Starwave Partner in connection
with the progress of such litigation or settlement; and (ii) ESPN Partner shall
not have any right, without Starwave Partner's written consent, to settle any
such claim if such settlement arises from or is part of any criminal action,
suit or proceeding or contains a stipulation to or admission or acknowledgment
of, any liability or wrongdoing (whether in contract, tort or otherwise) on the
part of Starwave Partner.
10.5 CHOICE OF COUNSEL AND PROTECTION OF RIGHTS. Each Partner shall have
the right, in its absolute discretion, to employ attorneys of its own choice and
to institute or defend any matter, claim, action or proceeding and to take any
other appropriate steps to protect its Intellectual Property Rights and all
rights and interest in and title to its web sites, technology, content and every
element thereof and, in that connection, to settle, compromise in good faith, or
in any other manner dispose of any matter, claim, action, or proceeding and to
satisfy any
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judgment that may be rendered, in any manner as such Partner in its sole
discretion may determine.
10.6 NO OTHER REPRESENTATIONS. Except for the representations and
warranties specifically set forth in this Agreement, each party makes no other
representations and warranties of any nature whatsoever to the other parties.
10.7 NO SPECIAL DAMAGES. NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED IN THIS AGREEMENT, EXCEPT FOR LIABILITY ARISING UNDER SECTIONS 10.2
AND 10.4, NO PARTY SHALL UNDER ANY CIRCUMSTANCES, BE LIABLE TO ANOTHER PARTY FOR
ANY CONSEQUENTIAL, INDIRECT, SPECIAL, INCIDENTAL OR EXEMPLARY DAMAGES (INCLUDING
WITHOUT LIMITATION, LOST PROFITS, LOSS OF ANTICIPATED BUSINESS, LOSS OF DATA OR
BUSINESS LOSSES) EVEN IF SUCH DAMAGES ARE FORESEEABLE AND EVEN IF THE BREACHING
PARTY HAS BEEN APPRISED OF THE LIKELIHOOD OF SUCH DAMAGES OCCURRING.
11. TERM AND TERMINATION
11.1 TERM. The term of this Agreement shall commence as of the Effective
Time and shall continue for a period of ten (10) years after the date of the
Effective Time, unless earlier terminated as set forth below (the "Term").
11.2 RENEWAL. Unless earlier terminated, the Partners shall begin renewal
negotiations in good faith beginning on the eight (8) year anniversary of the
Effective Time. If the Partners do not reach an agreement to extend this
Agreement on mutually acceptable terms within three hundred sixty (360) days
after negotiations begin, the exclusivity provisions contained in Sections 7.1
and 7.2 shall be deemed modified, with no action required of the Partners, to
permit either Partner to develop, produce, distribute, exploit or provide
services with respect to competitive Remote Access Products; provided, that
except for such modifications, this Agreement shall continue in full force and
effect until the expiration of the Term and, provided, further, neither Partner
may engage in such activities with respect to Sports Products then available to
consumers in any manner or available prior to the expiration of the Term. In
the event the exclusivity provisions contained in Sections 7.1 and 7.2 shall be
deemed modified, and either Partner develops, produces, distributes, exploits or
provides services with respect to Remote Access Products competitive with the
Sports Products, such Partner's Remote Access Products competitive with the
Sports Products shall be provided with a prominent position on the Sports
Products, via an above-the-fold link on the start page for the Sports Product,
until the end of the Term.
11.3 TERMINATION. Without prejudice to any other rights or remedies
available to the Partners, each Partner shall have the right, in its sole
discretion, to terminate this Agreement upon written notice to the other in the
event of the occurrence of one or more of the following:
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(a) The other Partner (or DEI or Infoseek) makes any assignment for
the benefit of creditors or files a petition in bankruptcy (provided, that with
respect to ESPN Partner's ability to terminate in the event that Starwave
Partner or Infoseek files a petition in bankruptcy, such petition shall have
been approved by a decision of the majority of Infoseek's Disinterested
Directors (as defined in that certain Governance Agreement by and between
Infoseek and DEI)) or is adjudged bankrupt or is placed in the hands of a
receiver;
(b) With respect to Starwave Partner's termination rights, if ESPN
Partner willfully misuses the Starwave Marks or with respect to ESPN Partner's
termination rights, Starwave Partner willfully misuses the ESPN Marks, and (i)
the willful misuse occurs repeatedly and in each case in material breach of this
Agreement, and (ii) the willful misuse occurs more than three (3) times in any
one year period ("Excepted Misuses"), and (iii) with respect to each such
willful misuse, the breaching Partner fails to Cure such misuse within sixty
(60) days after the nonbreaching Partner delivers written notice of the misuse
to the other Partner; provided however that (w) if the misuse consists of
displaying the ESPN Marks within the Sports Products in a manner such that the
appearance of the ESPN Marks does not conform to the requirements set forth
herein, and this misuse does not have a material adverse effect on ESPN Partner,
such misuse shall be excluded from the Excepted Misuses; and (x) if the Partner
misusing the Marks of the other Partner is using its best efforts to Cure the
misuse, the Cure period shall be extended for so long as such efforts are
exercised; and (y) if a willful misuse is Cured within forty eight (48) hours of
an officer of the breaching Partner being notified in writing of such misuse by
the nonbreaching Partner, such willful misuse shall not count toward the three
(3) Excepted Misuses set forth above; and (z) if a Partner has not willfully
misused the other Partner's Marks within any six (6) month period during the
term hereof, all misuses occurring prior to the commencement of such six (6)
month period shall not count toward the three (3) Excepted Misuses set forth
above. In the event that a Partner misuses the other Partner's Marks (whether
willfully or otherwise), the Partner that misused the Marks shall implement
commercially reasonable policies to address the prevention of the occurrence of
such misuse in the future.
For purposes of this Section 11.3(b), the following terms shall have the
following meanings:
(i) "Marks" shall mean ESPN Marks with respect to ESPN Partner or
Starwave Marks with respect to Starwave; and
(ii) "misuse" by Starwave of an ESPN Trademark shall mean a use of
the ESPN Marks in a manner which materially breaches the provisions set forth in
Section 6.1 or 6.2 of the Management and Services Agreement attached hereto as
Exhibit A, either directly by Starwave or by a third party licensed by Starwave
to use the Marks; and
(iii) "Cure" shall mean if the misuse is performed directly by a
Partner, correcting the display or misapplication of the other Partner's Marks,
or if the misuse is performed by a third party under license by a Partner,
terminating the license or purported rights granted by Partner to use such Marks
and using reasonable efforts to cause the third party to cease its misuse of the
other Partner's Marks.
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The Partners acknowledge and agree that the nature of Remote Access Products and
the Narrowband medium in general may result in a misuse of a Partner's Marks
being displayed in multiple locations and across multiple networks. For the
avoidance of doubt, if the same application of a ▇▇▇▇ is displayed multiple
times or in multiple places as a direct or indirect result of the Narrowband
medium or the manner in which Remote Access Products are operated, transmitted
or otherwise made available electronically, such repeated displays shall
constitute no more than one misuse for purposes of counting Excepted Misuses
hereunder.
(c) If the other Partner's Profit Participation is equal to or less
than 25% of the total Profit Participation and the Partnership sustains either
eight consecutive Net Loss fiscal quarters or ten total Net Loss fiscal
quarters; provided, that if the other Partner is Starwave Partner, ESPN Partner
shall not be able to terminate unless either Starwave Partner has not qualified
pursuant to Section 6.2(e) for a loan from ESPN Partner or such loan has been
treated as a Partnership capital contribution in accordance with its terms after
the expiration of the twelve (12) month period set forth in Section 6.2(e).
11.4 ADDITIONAL TERMINATION RIGHTS. [INTENTIONALLY OMITTED]
11.5 EFFECT OF TERMINATION. In the event of the expiration or termination
of this Agreement for any reason (including a material breach hereof), the
Partnership shall continue solely for the purposes of winding up its affairs in
an orderly manner, liquidating its assets (subject to Section 11.6) and
satisfying the claims of its creditors and Partners. No Partner shall take any
action that is inconsistent with, or not necessary to or appropriate for,
winding up the Partnership's business and affairs. The Partners shall be
responsible for overseeing the winding up and liquidation of the Partnership and
shall take full account of the Partnership's liabilities and property, and the
property of the Partnership shall be liquidated, and the proceeds therefrom, to
the extent sufficient therefor, shall be applied and distributed to the payment
and discharge of all of the Partnership's debts and liabilities to creditors of
the Partnership prior to distributions to the Partners pursuant to Section 11.6.
11.6 LIQUIDATING DISTRIBUTIONS. Upon the expiration or termination of this
Agreement, and after the payment and discharge of all of the Partnership's debts
and liabilities to third-party creditors, the Partnership shall liquidate and
distribute its assets in accordance with Capital Accounts; provided, that, the
Partners may elect to receive a distribution of the following assets (at their
respective Asset Values, without taking into consideration the values of the
associated ESPN Trademarks nor the values of any Technology, or other
development tools, software, hardware, middleware, or technical know-how
licensed to the Partnership by Starwave or its Affiliates) in lieu of a portion
of a cash distribution (except with respect to clauses (a) and (b) below, which
shall be distributed without giving effect to a reduction of any cash
distribution) and shall contribute cash to the Partnership as necessary to
provide that the assets of the Partnership are distributed in accordance with
Capital Accounts:
(a) ESPN Partner shall own the brand and name of the Sports Products
and all other descriptive names developed or used during the Term that contain
an ESPN
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Trademark and the Partnership and Starwave Partner shall assign to ESPN Partner
all of its right, title and interest in any registration or other indicator of
ownership and ESPN Partner shall own all URLs containing "ESPN" and any variant
thereof and the Partnership and Starwave Partner shall assign to ESPN Partner
all of its right, title and interest in any registration or other indicator of
ownership;
(b) As among Starwave Partner, DEI, and ESPN Partner and each of
their respective Affiliates, Starwave Partner shall own all Technology licensed
by Starwave Partner and its Affiliates to the Partnership in connection with the
operation of the Sports Products;
(c) With respect to in-kind distributions of assets of the
Partnership:
(i) ESPN Partner shall be entitled to receive as an in-kind
distribution, the assets (including personnel) of the affiliate relations group
(referenced in Section 3.4(b)) and all other editorial-related Content assets,
including personnel and content licenses;
(ii) Starwave Partner shall be entitled to receive as an in-
kind distribution, all remaining assets (other than customer lists) and
personnel of the Partnership including without limitation all Technology Assets
together with all technology licenses between Starwave or third parties and the
Partnership. For purposes of this Agreement, "Technology Assets" means all
technology-related assets of the Partnership or jointly owned by the Partnership
including without limitation all Programming, Technology, and other development
tools, software, hardware, middleware and technical know-how;
(iii) With respect to all such in-kind distributions, all assets
distributed shall be valued at their respective Asset Values (subject to the
parenthetical within the first sentence of Section 11.6 above) and the
Partnership and the assigning Partner shall assign to the other Partner all of
its respective right, title and interest in such assets, including employment
agreements;
(iv) The assigning Partner agrees to not solicit for hire or
hire any employee in any of the groups or performing functions associated with
the assets being distributed pursuant to this Section for a period of fifteen
(15) months starting from the date of the related in-kind distribution.
Upon the liquidation of the Partnership, if any Partner has a deficit
balance in its Capital Account (after giving effect to all contributions,
distributions and allocations for all fiscal periods, including the fiscal
period during which such liquidation occurs), such Partner shall be obligated to
contribute to the capital of the Partnership the amount necessary to restore the
Capital Account balance to zero as provided in Regulation 1.704-
1(b)(2)(ii)(b)(3).
11.7 PARTNERSHIP PROPERTY. Upon liquidation and after giving effect to
Section 11.6, the Partnership shall contribute all customer lists owned by the
Partnership to a California trust, with a mutually agreed trustee and both
Partners as equal beneficiaries. Such trust shall have a
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perpetual life (subject to termination for material breach or bankruptcy of a
Partner) and shall provide that each Partner shall have a perpetual royalty free
license to all customer lists owned by the Partnership (and transferred to the
trust). Neither Partner may provide the customer lists to third parties unless
mutually agreed. Notwithstanding the foregoing, the perpetual grant hereunder
shall be modified, if necessary, with respect to certain assets if such
perpetual grant would materially diminish the value of such assets as a matter
of law.
11.8 SURVIVAL. Unless otherwise specified, all obligations that accrue
prior to any expiration or termination of this Agreement shall survive such
expiration or termination. In addition, and without limiting the generality of
the preceding sentence, Sections 8, 9, 10, 11, 12, 13.1, 13.2, 13.4, 13.6, 13.7,
13.10, 13.11, 13.12, 13.13, 13.14 and 14 shall survive the expiration or
termination of this Agreement for any reason.
11.9 INJUNCTIVE RELIEF. Each Partner acknowledges and agrees that the
other Partner may be irreparably harmed by any material breach of this Agreement
by it. Therefore, each Partner agrees that in the event that it breaches any of
its obligations hereunder, the other Partner in addition to all other remedies
available to it under this Agreement, or at law or in equity, shall be entitled
to seek all forms of injunctive relief including decrees of specific
performance, without showing or proving that it sustained any actual damages and
without posting bond.
12. OTHER RIGHTS OF DUTIES AND RESTRICTIONS ON THE PARTNERS
12.1 INDEMNIFICATION. All costs, expenses, liabilities, obligations,
losses, damages, penalties, proceedings, actions, suits or claims of whatever
kind or nature which may be imposed on, incurred by, suffered by, or asserted
against the Partnership, any Partner or any Partner's respective Affiliates,
directors, officers and employees, in connection with the ownership or
management or operation of the business and affairs of the Partnership shall be
referred to as "Claims." The Partnership shall indemnify and hold harmless each
Partner and their respective Affiliates, directors, officers and employees
("Related Persons") for all Claims other than those caused by such Partner's or
such other Related Person's negligence, willful misconduct or breach of this
Agreement. Each Partner shall indemnify and hold harmless the Partnership and
each other Partner for all Claims sustained by any of them resulting from such
Partner's negligence, willful misconduct or breach of this Agreement.
12.2 CONTRIBUTION. In the event that any Partner shall pay in good faith
or become obligated to pay any proper obligation of the Partnership, such
Partner shall be entitled to contributions from the other Partners to the extent
necessary so that, after giving effect to such contributions, each Partner shall
bear no more than that part of such obligation which corresponds to its
respective Capital Contribution obligations at the time of the occurrence,
circumstances, events or conditions giving rise to the obligation.
13. GENERAL PROVISIONS
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13.1 NOTICES. All notices which either Partner or the Partnership is
required or may desire to serve upon the other Partner, DEI or the Partnership
shall be in writing and addressed as follows:
(a) if to ESPN Partner:
ESPN Online Investments, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
DOL Online Investments, Inc.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Disney Enterprises, Inc.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to DEI:
Disney Online
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
Disney Enterprises, Inc.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to Starwave Partner:
Starwave Corporation
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(d) if to the Partnership, c/o:
Starwave Corporation
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
ESPN Online Investments, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
DOL Online Investments, Inc.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any such notice may be served personally or by mail (postage prepaid),
facsimile (provided oral confirmation of receipt is immediately obtained and a
hard copy is concurrently
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sent by internationally commercially recognized overnight delivery service),
internationally commercially recognized overnight delivery service (such as
Federal Express or D.H.L.) or courier. Notice shall be deemed served upon
personal delivery or upon actual receipt. Either Partner or the Partnership may
change the address to which notices are to be delivered by written notice to the
other Partner and the Partnership served as provided in this Section 13.1.
13.2 ENTIRE AGREEMENT. This Agreement, together with the Exhibits attached
hereto and hereby incorporated herein by reference, constitutes the complete,
final and exclusive understanding and agreement between the Partners with
respect to the transactions contemplated, and supersedes any and all prior or
contemporaneous oral or written representation, understanding, agreement or
communication between the Partners concerning the subject matter hereof.
13.3 AMENDMENTS. All amendments or modifications of this Agreement shall
be binding upon the Partners so long as the same shall be in writing and
executed by each of the Partners hereto.
13.4 WAIVER. No waiver of any provision of this Agreement or any rights or
obligations of either Partner hereunder shall be effective, except pursuant to a
written instrument signed by the Partner waiving compliance, and any such waiver
shall be effective only in the specific instance and for the specific purpose
stated in such writing.
13.5 FORCE MAJEURE. Neither Partner nor the Partnership shall be deemed in
default hereunder, nor shall it hold the other Partner or the Partnership
responsible for, any cessation, interruption or delay in the performance of its
obligations hereunder due to causes beyond its reasonable control including, but
not limited to: earthquake, flood, fire, storm or other natural disaster, act of
God, labor controversy or threat thereof, civil disturbance or commotion,
disruption of the public markets, war or armed conflict (whether or not
officially declared) or the inability to obtain sufficient material, supplies,
labor, transportation, telecommunications, power or other essential commodity or
service required in the conduct of its business, any change in or the adoption
of any law, ordinance, rule, regulation, order, judgment or decree (each a
"Force Majeure Event") provided that the Partner relying upon this Section 13.5:
(a) shall have given the other Partner and the Partnership written notice
thereof promptly and, in any event, within five (5) days of discovery thereof
and (b) shall take all steps reasonably necessary under the circumstances to
mitigate the effects of the force majeure upon which such notice is based.
13.6 NO THIRD PARTNER BENEFICIARIES. Nothing in this Agreement is intended
or shall be construed to give any person, other than the Partners hereto, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision contained herein.
13.7 RESTRICTION ON TRANSFER.
(a) Neither Partner shall, directly or indirectly, Transfer all or any
portion of its Partnership Interest or any rights therein (whether voluntarily
or by operation of law) without
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the consent of the other Partner, which consent may be withheld by such Partner
in its sole and absolute discretion; provided, that ESPN Partner shall be
entitled to assign its Partnership Interest or any rights therein to any
Affiliate, provided that such Affiliate satisfies the conditions of paragraph
(b) below and shall remain an Affiliate of the Partner, unless it obtains the
prior written consent of the other Partner, which consent may be withheld in the
other Partner's sole discretion. Any Transfer or attempted transfer by any
Partner in violation of the preceding sentence shall be null and void and of no
force or effect whatsoever. No transferee of a Partner's Interest shall be
admitted as a substitute Partner without (i) the prior unanimous written consent
of the other Partners, which may be withheld by any such Partner in its sole and
absolute discretion and (ii) the receipt of any applicable regulatory consents
or approvals.
(b) A Transfer to an Affiliate shall be conditioned upon the
following:
(i) The transferor and transferee shall execute and deliver to
the Partnership such documents and instruments of conveyance as may be necessary
to effect such Transfer including, without limitation, the execution by the
transferee of a counterpart to this Agreement by which the transferee agrees to
all of the terms, obligations and provisions of this Agreement.
(ii) The Transfer shall not cause the Partnership to terminate
for federal income tax purposes and shall not have a material adverse income tax
consequence to the Partnership or the other Partner.
(c) Upon a merger, consolidation, reorganization, liquidation or
similar event affecting a Partner, its successor-in-interest will assure all
obligations of such Partner hereunder.
13.8 INSURANCE. The Partnership will purchase and maintain sufficient
product liability insurance to protect the Partners and the Partnership against
liability as a result of product liability claims made in connection with the
Sports Products.
13.9 PARTNERSHIP BANK ACCOUNTS AND FUNDS. The Partnership shall establish
bank accounts at such banks as may from time to time be designated by the
Partners. The Partnership's funds shall be invested in such manner as the
Partners deem appropriate with interest accruing to the Partnership. All bank
and other accounts shall be maintained in the Partnership's name. None of the
Partnership's funds shall be commingled with the funds of any Partner unless
previously approved in writing by the Partners. The Partners shall designate
the General Manager, as a signatory on the bank accounts of the Partnership to
accomplish more effectively the purposes of this Section 13.9.
13.10 CONSTRUCTION. This Agreement shall be fairly interpreted and
construed in accordance with its terms and without strict interpretation or
construction in favor of or against either Partner. Each Partner has had the
opportunity to consult with counsel in the negotiation of this Agreement.
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13.11 CAPTIONS AND HEADINGS. The section and subsection headings and
captions appearing in this Agreement are inserted only as a matter of
convenience and shall not be given any legal effect.
13.12 SEVERABILITY. If any restriction, covenant or provision of this
Agreement shall be adjudged by a court of competent jurisdiction to be void as
going beyond what is reasonable in all the circumstances for the protection of
the interests of the Partner seeking to enforce such restriction, covenant or
provision, such restriction, covenant or provision shall apply with such
modifications as may be necessary to make it valid and effective. In the event
that any provision of this Agreement should be found by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
shall not in any way be affected or impaired thereby.
13.13 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of New York. Any action arising out of or relating to this Agreement
shall be filed only in the courts of the State of California for the County of
Los Angeles, or the United States District Court for the Central District of
California. The parties hereby consent and submit to the personal jurisdiction
of such courts for the purposes of litigating any such action.
13.14 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original and all of which together shall constitute
one and the same instrument.
14. TAX MATTERS
14.1 PARTNERSHIP FOR TAX PURPOSES. The Partners intend to treat the
arrangement contemplated herein as a general partnership for tax purposes.
Accordingly, all transactions contemplated by this Agreement shall be
implemented in a manner that is consistent with such treatment.
14.2 PARTNERSHIP TAX YEAR. To the extent permitted by applicable tax law,
the Partnership's year end shall be September 30 for income tax purposes.
14.3 TAX MATTERS PARTNER. The Partners designate ESPN Partner as the tax
matters partner, pursuant to Section 6231 of the Code. To the extent permitted
by applicable tax law, actions taken by ESPN Partner in its capacity as the tax
matters partner shall require the prior joint approval of the Partners.
14.4 OVERSIGHT OF TAX MATTERS. The General Manager shall arrange for the
preparation and timely filing of all returns of Partnership income, gains,
losses, deductions, credits and other items necessary for federal, state and
local income tax purposes, shall provide copies of draft tax returns to each
Partner at least thirty days prior to filing the returns and shall use
reasonable good-faith efforts to furnish to the Partners within sixty days after
the close of each year of the Partnership the tax information reasonably
required for federal, state, and local income tax reporting purposes. The
General Manager shall use good-faith efforts to supply
-32-
each Partner with the information necessary to determine estimated tax payments
or any other information related to taxes reasonably requested by each Partner.
The classification, realization and recognition of income, gains, losses,
deductions, credits and other items shall be on the accrual method of accounting
for federal income tax purposes.
14.5 PARTNER SECTION 482 ADJUSTMENT. If the Internal Revenue Service
reallocates an item of income, deduction, or loss to a Partner or an Affiliate
pursuant to Section 482 of the Code or any similar rule or principle of law (a
"Partner Section 482 Allocation"), and the Partnership has a corresponding
correlative item of deduction, loss or income (as determined under Section
1.482-1(g) of the Regulations (the "Partnership Correlative Item"), such
Partnership Correlative Item shall be specially allocated to and reflected in
the Capital Account of the Partner that received (or whose Affiliate received)
such Partner Section 482 Allocation, and a corresponding contribution or
distribution shall likewise be deemed to have been made by or to such Partner.
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IN WITNESS WHEREOF, the duly authorized representatives of each Partner
have executed this Agreement as of the day and year first written above.
ESPN ONLINE INVESTMENTS, INC. STARWAVE VENTURES
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------- -------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President Title: Vice President
The undersigned parent corporations of the Partners agree to cause their
respective subsidiaries that are Partners (or other Affiliates, as necessary) to
fully perform their obligations hereunder. In addition, Disney Enterprises,
Inc. agrees to cause its Affiliates to provide to the Partnership all news-
related Content that is 100% owned by Disney Enterprises, Inc. and its
Affiliates, whether or not owned by ESPN, that may be necessary or useful in the
development and operation of the Sports Products and such Content shall be
deemed ESPN Content for purposes of this Agreement and the Services Agreement..
DISNEY ENTERPRISES, INC. INFOSEEK CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------- ------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇ Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Sr. Vice President Title: President and CEO
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