Research Agreement DTD 10/22/99

RESEARCH AGREEMENT


THIS AGREEMENT is made as of October 22, 1999 between HARRIS INTERACTIVE INC., a Delaware corporation with offices at 135 Corporate Woods, Rochester, New York 14623 ("HI"), and YOUNG & RUBICAM INC., a Delaware corporation with offices at 285 Madison Avenue, New York, New York 10017 ("Y&R").


WHEREAS, HI conducts market research and polling, using among other methods Internet based data collection, and


WHEREAS, Y&R desires to assure continued access to HI research services,


NOW THEREFORE, in consideration of the mutual agreements contained herein and other good and valuable consideration, HI and Y&R hereby agree as follows:


1. Definitions. For purposes of this Agreement, the following capitalized terms shall have the following meanings:


"Affiliate" of any particular Person means any other Person controlling, controlled by or under common control with such particular Person, where "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person whether through the ownership of voting securities, by contract, or otherwise, partners or former partners, and members or former members.


"Confidential Information" shall have the meaning given to it in Section 14 of this Agreement.


"Confirmation" shall have the meaning given to it in Section 2(b) of this Agreement.


"Custom Research" shall have the meaning given to it in Section 2(a) of this Agreement.


"Fully Diluted Basis" shall mean the number of common shares actually outstanding, the number of common shares into which the then outstanding shares of all classes of preferred stock could be fully converted if fully converted on the given date, and the number of common shares which could be obtained through the exercise or conversion of all other rights, options and convertible securities outstanding or reserved for issuance on the given date (whether or not vested).


"Internet Revenue" shall mean Revenue earned as a result of Services by HI in which (i) a majority of the research or other information gathering activities in connection with such Services were conducted by means of the Internet or (ii) fifty percent (50%) or more of surveys completed in connection with such Services were collected over the Internet.


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"IPO" means the initial completed, underwritten offering by HI of HI common stock to the public pursuant to an effective registration statement under the Securities Act, as then in effect, or any comparable statement under any similar federal statute then in force.


"IPO Price" shall mean the initial price per share of HI common stock established by the underwriters at the time of closing of the IPO.


"Lien" shall mean any mortgage, pledge, hypothecation, assignment, deposit arrangement, security interest, encumbrance, lien, preference in the nature of security, or charge of any kind (including, without limitation, any conditional sale or other title retention agreement or lease in the nature thereof), any sale of receivables with recourse against the seller or any Affiliate, any filing or agreement to file a financing statement as debtor under the Uniform Commercial Code or any similar statute other than to reflect ownership by a third Person of property leased to a party under a lease which is not in the nature of a conditional sale or title retention agreement or any subordination arrangement, and any agreement to give or make any of the foregoing.


"Minimum Internet Revenue" shall mean Internet Revenue within the periods and in the amounts shown on Exhibit A attached to this Agreement.


"Minimum Total Revenue" shall mean total Revenue within the periods and in the amounts shown on Exhibit A attached to this Agreement.


"Multi-Client Product(s)" shall have the meaning given to it in Section 2(a) of this Agreement.


"Non-Internet Revenue" shall mean Revenue which is not Internet Revenue.


"Pre-IPO Price" shall mean $200,000,000 (or $150,000,000 if an IPO is not closed on or before June 30, 2000) divided by the number of outstanding common shares of HI on a Fully Diluted Basis at the applicable time.


"Public Offering" shall mean any offering by HI (or any other holder) of HI Common Stock to the public pursuant to an effective registration statement under the Securities Act, as then in effect, or any comparable statement under any similar federal statute then in force.


"Quarter" shall mean a calendar quarter, provided, however, that the first quarter shall be deemed to include the period commencing the date of this Agreement and ending March 31, 2000.


"Revenue" shall mean revenue earned by HI resulting from the performance of Services for Y&R (and its subsidiaries and divisions) and Y&R Clients not including pass-through charges for respondent incentives and project travel specifically approved by Y&R and Y&R Clients.


"Securities Act" shall mean the Securities Act of 1933, as in effect on the date hereof and as hereafter amended.


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"Securities Exchange Act" shall mean the Securities Exchange Act of 1934, as in effect on the date hereof and as hereafter amended.


"Service Request" shall have the meaning given to it in Section 2(b) of this Agreement.


"Services" shall have the meaning given to it in Section 2(a) of this Agreement.


"Shares" shall mean the common shares of HI issued from time to time to Y&R pursuant to Section 6(a) of this Agreement.


"Standard Terms" shall have the meaning given to it in Section 3(c) of this Agreement.


"Y&R Client" shall mean all current and future clients of Y&R or its subsidiaries and divisions and clients which become former clients after the date hereof. Notwithstanding the foregoing or anything else to the contrary contained in this Agreement, Revenue earned by HI as a result of Services provided for clients set forth on Exhibit C hereto (each of which generated in excess of $500,000 in revenue for HI in the twelve months ending June 30, 1999) (the "Primary Joint Clients") shall not be included as Revenue for purposes of the Commission calculations under Section 6 hereof unless in the reasonable judgment of HI such Revenues have been generated principally as a result of Y&R (or a Y&R subsidiary or division) referring such Primary Joint Client to HI or were generated as a result of the Y&R relationship and further, all Revenue earned by HI as a result of Services provided for clients of both Y&R (or its subsidiaries or divisions) and HI, other than those which are Primary Joint Clients (such other clients, the "Secondary Joint Clients"), shall be included for purposes of the Commission calculations under Section 6 hereof unless HI can clearly demonstrate in a manner reasonably satisfactory to Y&R that such Revenues have been generated principally as a result of the internal activities of HI or an HI Affiliate (other than Y&R or its subsidiaries or divisions to the extent that Y&R or its subsidiaries or divisions could be deemed an Affiliate) referring such Secondary Joint Client to HI. Clients of HI may be added to Exhibit C on each July 1 during the term of this Agreement, upon the mutual agreement of HI and Y&R, which agreement shall not be unreasonably withheld, provided that, (i) no client which has generated Revenue which has been included for purposes of Commission calculations under Section 6 may be added to Exhibit C, and (ii) no client may be added to Exhibit C unless such client has generated in excess of the greater of two percent (2%) of HI gross revenue, or $1,000,000, in Revenue for HI in the preceding fiscal year of HI.


2. Services.


(a) Subject to the terms and conditions of this Agreement, Y&R (and its subsidiaries and divisions) may request, or arrange for Y&R Clients to request, any services currently or in the future offered by HI ("Services") including among others (i) custom research, including any research products and Services tailored to meet the needs of a particular client ("Custom Research"), and (ii) subscriptions for or purchases of multi-client research products, including any product produced or offered as part of HI's regular offerings to multiple clients on a subscription basis ("Multi-Client Products").


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(b) HI agrees to perform, and cause each of its subsidiaries to perform, Services requested pursuant to Section 2(a) hereof. All such Services shall be performed in a manner consistent with, and which will not violate the terms of, any contract or agreement between Y&R and Y&R Clients provided that the applicable terms of such contract or agreement have been made known to HI by Y&R (or any Y&R subsidiary or division) in writing in advance of or at the time Y&R (or any Y&R subsidiary or division) arranges for the applicable Services. Notwithstanding the foregoing, in the event that HI, in its reasonable good faith judgment, determines that its performance of Services hereunder would violate or conflict with the terms of any Y&R Client contract, HI shall promptly notify Y&R in writing (which notice shall specify the potential violation or conflict and the reason therefor) and Y&R shall have the opportunity to withdraw the request for the applicable Services. HI agrees to perform (and cause its subsidiaries to perform) all Services in a workmanlike and professional manner by employees of HI (or its subsidiaries), and in the case of Custom Research, in accordance with the specifications contained in the request for Services (the "Service Request") as confirmed by HI ("Confirmation") or contained in any document executed in connection with Section 2(e) hereof as any such Service Request, document, or Confirmation may be subsequently amended by mutual agreement of the parties thereto. With respect to requests for Multi-Client Products, HI shall provide the Services (including subscription deliveries) related to such Multi-Client Products at the times, and on the terms customarily offered by HI to its clients including the terms of the HI standard subscription agreement related to the particular study. HI shall provide the same pricing to each respective Y&R Client as HI would provide to such Y&R Client if such Y&R Client contracted with HI for Services absent the Y&R relationship, but in no case higher than similarly situated clients including providing the benefit of volume based or other discounts, refunds, or rebates received by similarly situated clients.


(c) Y&R and Y&R Clients shall have the right to terminate any particular request for Services, in whole or in part, if (i) HI or its subsidiaries fail to satisfactorily perform their obligations under this Section and as provided elsewhere in this Agreement with respect to such Services which failure continues after five (5) business days notice of same from Y&R (or any Y&R subsidiary or division) or respective Y&R Client, or (ii) any Y&R Client cancels or terminates, in whole or in part, its request for Services covered by any Service Request delivered to HI, (iii) in the reasonable and good faith judgment of Y&R, the continued performance of any Services by HI or its subsidiaries is not in the best interest of any Y&R Client, or (iv) as provided in Section 3(a). Any such termination shall be effective immediately upon delivery of notice to HI, but in the case of termination due to subsections (ii), (iii), and (iv) HI shall be entitled to recover from Y&R costs previously agreed or incurred and which are not otherwise cancelable or refundable and payment for Services performed to the date of termination, as well as any reasonable expenses of winding up or termination of the project; provided that the aggregate of all of the foregoing costs, fees and expenses shall not exceed the agreed upon amount of fees payable to HI had the particular request for Services not been terminated early. HI shall provide receipts or other written documentation of any costs, fees and/or expenses to be paid in connection with any such termination.


(d) HI will designate an account representative reasonably acceptable to Y&R to oversee and manage the performance and delivery of Services requested by Y&R, its subsidiaries and divisions, or any Y&R Client as the case may be, hereunder. Among other responsibilities, the


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account representative will make every reasonable effort to assure that Services requested by Y&R, Y&R subsidiaries and divisions, and Y&R Clients are delivered in a timely manner and that requests for Services by Y&R, Y&R subsidiaries and divisions, and Y&R Clients receive a priority commensurate with the volume of Services purchased hereunder.


(e) HI's Standard Terms of Engagement ("Standard Terms") as currently in effect are attached to this Agreement as Exhibit B. HI will provide Y&R copies of any updates to such Standard Terms promptly after they are adopted. HI shall provide a copy of the Standard Terms to Y&R, Y&R's subsidiaries and divisions, and Y&R Clients each time a request for Services is made and such Standard Terms shall be taken into account in preparation of the applicable Service Request and Confirmation or other document executed pursuant to this Section 2(e), but may be revised by agreement of the parties. Y&R, Y&R's divisions and subsidiaries, and Y&R Clients, as the case may be, and HI shall each execute and deliver or cause to be executed and delivered to the other at such times and places as shall reasonably be agreed to, such Service Requests, Confirmations, customer subscription agreements, or other instruments or agreements which such parties reasonably deem advisable for the purpose of memorializing the provision of Services hereunder. All Services provided hereunder shall be charged and paid for in accordance with Sections 2 and 3 hereof.


(f) Y&R may release to third parties data or analysis produced as part of Custom Research performed by HI pursuant to this Agreement but only if it (i) is accompanied by the HI trademark or other HI product identifier included with the data or analysis provided under this Agreement, and (ii) is accompanied by the HI disclaimers substantially similar to the disclaimers originally delivered by HI with such data or analysis.


(g) Y&R and Y&R's subsidiaries and divisions may release to Y&R, its divisions and subsidiaries, and Y&R Clients, as the case may be, but not to other third parties (unless HI consents to such release), data or analysis produced as part of a Multi-Client Product provided that (i) the material is accompanied by the HI trademark or HI branding in a manner reasonably satisfactory to HI, (ii) the release is accompanied by HI disclaimers contained in the subscription agreement executed in connection with the study, (iii) the release is not a public distribution or release unless expressly permitted by this Agreement or another agreement signed by HI, and (iv) the applicable subscription fee is paid for each additional Y&R Client use of the Multi-Client Product and the Y&R Client agrees to be bound by the subscription agreement related to the particular study. Notwithstanding the foregoing, on a Multi-Client Product by Multi-Client Product basis, HI will arrange to provide limited ("top line") results to Y&R at no additional charge for unrestricted use in sales presentations to Y&R Clients and potential Y&R Clients. Such results, when shared with Y&R Clients or potential clients shall be attributed to HI or otherwise bear the HI trademark or branding.


3. Cost Estimates/Payment for Services.


(a) At the time Y&R, any Y&R subsidiary or division, or any Y&R Client requests Custom Services from HI, HI shall provide a cost estimate for the Services, based upon the best HI pricing that would be charged to similarly situated clients including in all cases providing the benefit of volume based or other discounts, refunds, or rebates received by similarly situated clients.


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If Y&R, the applicable subsidiary or division, or the Y&R Client elects to proceed with the project at the quoted price, HI will perform the Services and will invoice Y&R, its applicable subsidiary or division, or the Y&R Client as applicable for the Services as performed, but not exceeding the cost estimate. If the scope (including among others incidence rates and questionnaire length) of any particular project is changed by Y&R, any Y&R subsidiary or division, or Y&R Client, and such change increases the cost of performing such Services, HI will immediately notify Y&R, its subsidiary or division, or the Y&R Client and discuss the cost implications. HI reserves the right to change the total quoted amount (but not the rate) to the extent that the change in the scope of the project increases the cost, but in such case Y&R, its subsidiaries and divisions, or the Y&R Client, as applicable, may elect to proceed with the original project scope or terminate the project under Section 2(c). If the scope (including among others incidence rates and questionnaire length) of any particular project is changed by Y&R, any Y&R subsidiary or division, or Y&R Client, and such change decreases the cost of performing such Services, HI will immediately notify Y&R, its subsidiary or division, or the Y&R Client and will decrease the project cost accordingly unless HI in good faith determines that such decreased scope makes completion of the project impractical or uneconomical and immediately advises Y&R of the same, in which case Y&R may choose to terminate the project under Section 2(c). Purchase and use of Multi-Client Products by Y&R, Y&R subsidiaries and divisions, and Y&R Clients shall be subject to the same pricing that HI would charge other similarly situated clients including in all cases providing the benefit of volume based or other discounts, refunds, or rebates received by similarly situated clients.


(b) In full consideration of Services performed by HI hereunder and subject to Section 3(a), (i) to the extent such Services were requested by Y&R on its own behalf, Y&R shall pay HI the invoiced amount for such Services, and (ii) to the extent the Services were requested by Y&R acting as agent for a disclosed Y&R Client, or were requested by a Y&R Client, HI shall invoice the Y&R Client for the Services, provided that, upon request of HI, Y&R shall provide reasonable cooperation to HI in the collection of delinquent invoices from Y&R Clients for whom, Y&R, acting as agent, arranged for Services. Invoices shall be due thirty (30) days after re ...