Agency Agreement

PRODUCTION AND DISTRIBUTION AGREEMENT





THIS PRODUCTION AND DISTRIBUTION AGREEMENT ("Agreement") is dated May 6, 1996 and is between EARTHLINK NETWORK, INC., a California corporation ("EarthLink"), and NATIONAL MEDIA CORPORATION, a Delaware corporation ("National").



The parties wish to set forth in this Agreement the terms upon which EarthLink will grant to National certain rights to market and distribute EarthLink's proprietary EarthLink Network-Registered Trademark- TotalAccess-Trademark- Internet Access software for the Macintosh, Windows 95 and Windows 3.1 platforms (such software, as it presently exists and as it may hereafter be modified, collectively referred to as the "Software") and EarthLink's Internet Access Service (the "ELN Service"), all as more specifically set forth herein.



In consideration of the mutual promises and undertakings set forth herein, and intending to be legally bound hereby, the parties agree as follows:



1. LICENSE RIGHTS.



1.1 GRANT OF RIGHTS. Subject to all of the terms and conditions of this Agreement, EarthLink hereby grants to National the following rights (collectively, the "License Rights"), which National may exercise itself or through any one or more of its existing and future subsidiaries under its control:



(a) EXCLUSIVE MARKETING RIGHTS. The exclusive right to advertise, promote, market, sell and otherwise distribute the Software and the ELN Service throughout the United States, Canada and such other countries as the parties may from time to time agree (collectively, the "Territory") via airings, on broadcast, cable, satellite and all other forms of television transmission now existing or hereafter developed, of short-form (i.e. two minutes running time or less) direct response television programming; and



(b) USE OF INTELLECTUAL PROPERTY AND PROMOTIONAL MATERIALS. In connection with the exercise of its rights hereunder, and subject to the prior approval of EarthLink (which will not be unreasonably withheld or delayed), the nonexclusive right to: (a) use any and all trademarks, trade names, copyrights, trade secrets and other intellectual property rights which EarthLink may own or control with respect to the Software and the ELN Service (including, without limitation those specifically identified on Schedule I attached hereto), and (b) reproduce, copy and otherwise use any and all artwork, graphics and other promotional materials which EarthLink owns or controls with respect to the Software and the ELN Service ("EarthLink's Promotional Materials"), copies of all of which EarthLink shall provide to National as soon as practicable after the execution of this Agreement.



1.2 EXCEPTIONS TO EXCLUSIVITY.



(a) AMERICAN INTERACTIVE MEDIA. The parties acknowledge that, pursuant to preexisting contractual arrangements between EarthLink and American Interactive Media ("AIM"), EarthLink granted nonexclusive rights to AIM to market the Software and the ELN Service in the United States and Canada via short-form direct response television programming. EarthLink believes that AIM has









NMC.5/6/96



concluded and discontinued all such marketing efforts. Nonetheless, the License Rights shall in all events be subject to the valid exercise of such rights by AIM so long as AIM shall retain such rights.



(b) GUTHY RENKER CORPORATION. The parties acknowledge that EarthLink has previously granted certain nonexclusive rights to Guthy Renker Corporation ("GRC") to market the Software and the ELN Service when bundled with other products and services marketed by GRC, such rights to be formally acknowledged in writing pursuant to a Distribution Agreement dated on or about April 18, 1996 (the "GRC Distribution Agreement"). Accordingly, the License Rights shall in all events be subject to the valid exercise of the rights granted to GRC under the GRC Distribution Agreement for so long as GRC shall retain such rights.



1.3 LOSS OF EXCLUSIVITY. In the event that National fails, for a period of four consecutive weeks, to air the EarthLink Spots as contemplated by Sections 2.2(a) and (b) of this Agreement in any country within the Territory, then National's -rights -pursuant to Section 1.l of this Agreement shall cease being exclusive in such country, and EarthLink, by itself or through any licensee, may exercise such rights in such country concurrently with National's exercise of such rights.



2. PRODUCTION AND AIRING OF EARTHLINK SPOTS.



2.1 PRODUCTION OF EARTHLINK SPOTS. National, through its employees, agents and/or independent contractors, shall write, produce and edit two television direct response advertisements (collectively, the "EarthLink Spots"), one of approximately 15 seconds in length (the "Short Spot") and one of approximately 60 seconds in length (the "Long Spot"). National shall bear all costs incurred from and after the date of this Agreement in connection with the production, editing and airing of the EarthLink Spots. National shall consult with EarthLink with respect to the production of the EarthLink Spots, each of which shall be subject to EarthLink's approval, which shall neither be unreasonably withheld nor delayed. To that end, National shall provide EarthLink with a review copy of each preliminary version of each of the EarthLink Spots as promptly as practicable.



2.2 AIRING OF EARTHLINK SPOTS.



(a) SHORT SPOT. During the six-month period immediately following EarthLink's approval of the Short Spot, National shall take such steps as are necessary to add such Spot to the beginning or end of each 30- minute infomercial which National airs on television in the Territory. Following the conclusion of such six-month period, National shall air the Short Spot in conjunction with each 30-minute infomercial which National airs in the Territory for the balance of the term of this Agreement.



(b) LONG SPOT. As soon as practicable (but in any event not longer than 90 days) following EarthLink's approval of the Long Spot, National shall cause such Spot to be aired within the Territory not less than 50 times per week for the balance of the term of this Agreement.



(c) NATIONAL'S EXCLUSIVE (CONTROL). Except to the extent expressly set forth in Sections 2.2 hereof, National shall have exclusive control over and shall be responsible for the broadcast, performance and transmission of the EarthLink Spots within the Territory via broadcast, cable and satellite television, at such times, with such frequency, in such markets and on such networks and stations as National, in its sole judgment, shall determine. National shall have no liability whatsoever to EarthLink arising from or in connection with any action or determination made by National in the good faith exercise







NMC.5/6/96





of its business judgment regarding the foregoing matters. Notwithstanding anything to the contrary contained in this Section 2.2(d), National shall, as promptly as practicable upon the request of EarthLink, discontinue airing the EarthLink Spots in conjunction with any 30-minute infomercial which EarthLink, in its reasonable business judgment, concludes reflects unfavorably on EarthLink or its products and services.



2.3 SUBSTANTIATION AND DOCUMENTATION OF PRODUCT ATTRIBUTES. The EarthLink Spots shall be based upon such attributes of and claims made about the Software and the ELN Service as have been documented or substantiated to National's satisfaction. EarthLink shall be under a continuing obligation to provide (or cause to be provided), at As sole expense, all such documentation and substantiation as National shall determine may be necessary to facilitate compliance with all applicable laws governing the advertising and marketing of the Software and the ELN Service.



2.8. LICENSE OF FOOTAGE. EarthLink may, without fee, incorporate footage and still images created by or for National in the course of producing the EarthLink Spots into promotional materials to be exhibited at trade shows and other promotional events. EarthLink may further edit and modify such materials as it deems necessary for such purposes, subject to National's prior approval (which shall not be unreasonably withheld or delayed). National shall cooperate with EarthLink in making available all such materials as EarthLink shall reasonably request. National shall retain all right, title and interest in all such materials (and all modifications thereof) in accordance with the provisions of Section 5.2 hereof.



3. CERTAIN OBLIGATIONS OF EARTHLINK.



3.1 FULFILLMENT. EarthLink shall, at its sole expense, be responsible for all order processing, credit card processing, telemarketing, warehousing, fulfillment, customer service, and returns processing in connection with all orders for the Software and the ELN Service placed by customers who order in response to the EarthLink Spots (collectively, "National Customers"). EarthLink shall encode all copies of the Software which are distributed to National Customers with a special code identifying National as the source of the order therefor.



3.2 TECHNICAL SUPPORT. EarthLink shall, at its sole expense, provide technical support to all end users of the Software distributed to National Customers. Such technical support shall be consistent with the support provided to existing customers of EarthLink as of the date of this Agreement.



4. COMPENSATION.



4.1 FEE. EarthLink shall pay a fee to National with respect to each National Customer. Such fee shall be determined in accordance with either of the following methods, at the election of National, which shall be communicated to EarthLink in writing prior to the first airing of an EarthLink Spot:



(a) ONE-TIME PAYMENT. A one-time fee of $45.00 for each National Customer who subscribes to and pays in full for the ELN Service for at least 60 days from the date of registration; or



(b) PERIODIC PAYMENTS. A fee equal to 7% of EarthLink's gross receipts received from each National Customer, such fee to be payable to National for a period of five years from the date on which each such National Customer registers for the ELN Service.





NMC.5/6/96





4.2 WARRANTS.



(a) WARRANTS FOR EARTHLINK SP. EarthLink shall provide National with warrants to purchase 50,000 shares of EarthLink's common stock upon EarthLink's approval of the Short Spot and warrants to purchase an additional 50,0OO shares of EarthLink's common stock upon EarthLink's approval of the Long Spot. The exercise price for all such warrants shall be $4.88 per share.



(b) WARRANTS FOR NATIONAL CUSTOMERS. EarthLink shall provide National with warrants to purchase one share of EarthLink common stock for each National Customer who subscribes to and pays in full for the ELN Service for at least 60 days from the date of registration, up to a maximum of warrants for 600,000 shares of EarthLink common stock. The exercise price for all such warrants shall be $4.88 per share with respect to all warrants so earned on or before December 31, 1997 and the fair market value of EarthLink's common stock, as determined by EarthLink's Board of Directors, (or, if EarthLink's common stock is publicly traded, the then-applicable 30-day average closing price thereof) with respect to all warrants so earned from and after January 1, 1998.



(c) OTHER TERMS OF WARRANTS. All warrants provided to National hereunder shall be in form substantially similar to warrants provided to EarthLink's Board of Directors as of the date of this Agreement; PROVIDED, however, that all such warrants shall contain antidilution provisions reasonably acceptable to National.



4.3 RECORD KEEPING. REPORTING AND REMITTANCE. EarthLink shall maintain and retain complete and accurate records of all orders which are subject to the payment of fees and the issuance of warrants hereunder. So long as orders shall continue to be placed, and whether or not any payment of fees or issuance of warrants on such orders shall be due hereunder, EarthLink shall render to National on or before the thirtieth day following each month a true and correct accounting setting forth the following information for the preceding month: (i) total National Customers, (ii) gross receipts from National Customers, (iii) EarthLink's calculations determining the fees payable and warrants issuable on orders placed by National Customers (if any). Each such accounting shall be accompanied by the fees payable and the warrants issuable on orders so reported.



4.4 INSPECTION AND AUDIT RIGHTS. All records required to be kept pursuant to Section 4.3 hereof shall be made available for inspection by National (or its designee) at its expense during normal business hours upon reasonable prior notice (which in any event shall not be less than five business days). National may cause such records to be audited at its expense not more than once in any twelve-month period upon five business days prior notice to EarthLink; PROVIDED, however, that if any such audit shall show underpayment of fees or underissuance of war-rants due hereunder and such underpayment exceeds by more than 5% of the total amount actually due, then EarthLink shall bear the cost -of such audit and shall promptly pay all fees and issue all warrants determined by such audit to be due.



5. PROPRIETARY RIGHTS.



5.1 EARTHLINK'S INTELLECTUAL PROPERTY.



(a) GENERALLY. Subject to the rights granted to National hereunder, all right, title and interest (including, without limitation, all rights arising under the United States Trademark Act, 15 U.S.C. Section 1501 et seq. (the "Trademark Act"), the United States Copyright Act, 17 U.S.C. Section





NMC.5/6/96





et seq. (the "Copyright Act"), and all other applicable laws, rules and regulations) in and to the Software, the ELN Service, EarthLink's Promotional Materials and all patents, trademarks, trade names, copyrights and trade secrets licensed to National hereunder (collectively, EarthLink's Intellectual Property), is and shall remain the sole property of EarthLink. Neither National nor any third-party shall acquire any right, title or interest in EarthLink's Intellectual Property by virtue of this Agreement or otherwise, except to the extent expressly provided herein. Any unauthorized use of EarthLink's Intellectual Property by National or any third party shall be deemed an infringement of the rights of EarthLink therein. National shall not in any way or at any time dispute or attack the validity or harm or contest the rights of EarthLink in or to any of EarthLink's Intellectual Property. National shall display such notices as may be necessary or, in EarthLink's reasonable judgment, desirable in order to preserve and protect EarthLink's proprietary rights in EarthLink's Intellectual Property.



(b) USE OF TRADEMARKS. National acknowledges that some of the trademarks listed on Schedule I hereto are not owned by EarthLink and therefore are being sublicensed to National hereby. The trademarks licensed or sublicensed to National pursuant to this Agreement may be used by National only in connection with advertising EarthLink, the Software and the ELN Service and as a means of identifying EarthLink and its licensors as the sources of such products and services. Such trademarks may be used only in the form and manner specified in Schedule I hereto (as such schedule may from time to time be amended), and they may not be removed or altered in any way, whether by change of color, typeface, design or otherwise. Moreover, in order to insure the proper use of all such trademarks by National under this Agreement, all proposed usages of such trademarks by National shall be submitted to EarthLink for its prior review and approval.



5.2 NATIONAL'S INTELLECTUAL PROPERTY. All right, title and interest (including, without limitation, all rights arising under the Copyright Act, the Trademark Act and all other applicable laws, rules and regulations) in and to the entire editorial, visual, audio, and graphic content of all advertisements and promotional materials developed by National in connection with its activities under this Agreement, including, without limitation, (i) the EarthLink Spots and the performances recorded therein, (ii) all raw footage shot in the course of producing the EarthLink Spots ...