German Joint Venture Agreement

Exhibit 10.2
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AGREEMENT
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This Agreement is entered into effective as of May 1, 1997 (this "Agreement"), between BERTELSMANN INTERNET SERVICES GmbH, a company organized under the laws of Germany, having its principal office at Carl-Bertelsmann Strasse 161E, Gutersloh, Germany ("BIS") and LYCOS, INC., a corporation organized under the laws of the State of Delaware, having its principal office at 500 Old Connecticut Path, Framingham, Massachusetts, U.S.A. 01701 ("Lycos").


W I T N E S S E T H:
- - - - - - - - - -


WHEREAS, BIS and Lycos (collectively, the "Parties" and each a "Party") have agreed to jointly establish the Business (as defined in this Agreement) in accordance with the terms and conditions of this Agreement;


WHEREAS, the Parties wish to set forth the terms and conditions of their agreement;


NOW, THEREFORE, the Parties hereby agree as follows:


ARTICLE I


Definitions
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The following terms shall, for the purposes of this Agreement, have the following meanings, except as otherwise expressly provided herein (terms defined in the singular or the plural include the plural or the singular, as the case may be):


1.1 "Affiliate" shall mean, as to any Person, any other Person that, directly or indirectly, controls, is under common control with, or is controlled by, that Person. For purposes of this definition, "control" (including, with its correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise. For the sake of clarity, the Parties agree that Persons in which BAG possesses an interest and which offer the services of AOL in the Territory are not Affiliates of BAG or BIS (directly or indirectly) for so long as the ownership interest therein is equal to no more than fifty percent (50%).


1.2 "Agreement" shall mean this Agreement and any Schedules, Exhibits and Certificates attached to this Agreement.


1.3 "Aggregate Cap" shall have the meaning given to that term in Section 4.2(a).


1.4 "AOL" shall mean America Online, Inc.


1.5 "Appraised Value" shall have the meaning given to that term in Section 9.7.


1.6 "BAG" shall mean Bertelsmann AG, a company organized under the laws of Germany.


1.7 "Breakeven" shall mean positive cash flow from operating activities, less: (i) the sum of cash used in investing activities; and (ii) payments under capital lease obligations, as such items are reflected on a statement of cash flows prepared in accordance with U.S. generally accepted accounting principles (such terms having the meanings given in U.S. generally accepted accounting principles). The Joint Entities shall be deemed to have reached Breakeven on the last day of the fourth fiscal quarter if the foregoing definition is satisfied for each of four (4) full consecutive fiscal quarters for all Joint Entities on a consolidated basis even if all Joint Entities do not independently attain Breakeven (whether or not such period constitutes a calendar or fiscal year).


1.8 "Board of Directors" shall mean the Board of Directors (or its equivalent) of each Joint Entity.


1.9 "Business" shall have the meaning given to that term in Section 2.1.


1.10 "Business Day" shall mean any day on which commercial banks are not authorized or required to close in New York, New York, U.S.A. or Frankfurt-am- Main, Germany.


1.11 "Business Plan" shall mean: (i) the business plan attached hereto as Exhibit A, covering the period commencing on the date hereof and ending on June - --------- 30, 2001, for the Joint Entities to be established for the Core Countries, and (ii) after such period and in all other cases, an annual capital, revenue and expense plan, including a profit and loss statement and a statement of cash flows for a Joint Entity, together with a quarterly cash funding plan with dates of funding, plus marketing, operational and other business strategies, reflecting the financial objectives and requirements of each Joint Entity.


1.12 "CMU" shall mean Carnegie Mellon University.


1.13 "Competitive Activities" shall mean an activity of BAG or its Affiliates whereby funds are provided (either as loan or as capital) to a Competitor in connection with an equity or debt investment, license agreement, joint venture or other similar business relationship entered into with such Competitor in the Territory.


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1.14 "Competitor" shall mean an entity which is engaged in search or directory services via the internet and which is substantially similar to [*] as such entities are constituted on the date of this Agreement. The term "Competitor" shall not include an entity which was acquired as part of a larger acquisition involving operating assets in the book, media, music, television and printing industries, if BAG declares its intention to sell such offending portion of the acquired entity within twelve (12) months after the acquisition and BAG uses commercially reasonable efforts to consummate such sale.


1.15 "Content" shall mean either text or multimedia information which contains any combination of the following in digital form or such other forms as may become available in the future: text, graphics, video, sound, still images, or the like.


1.16 "Core Countries" shall have the meaning given to that term in Section 3.1(a).


1.17 "Deadlock Notice" shall mean a notice given by a Party to the other Party that the following conditions have been satisfied: [*]


1.18 "Determination Date" shall have the meaning given to that term in Section 4.4(a).


1.19 "Distributable Cash" shall mean, with respect to any relevant period, "positive cash flow" (determined by deducting from cash flow from operating activities the sum of cash used in investing activities and payments under capital lease obligations, as reflected on a statement of cash flows prepared in accordance with U.S. generally accepted accounting principles) but excluding funds from capital contributions or loans and further excluding a reserve, in an amount reasonably determined by the Steering Committee in its business judgment to be necessary or appropriate for cash disbursements (other than for repayment of principal under the Loan Facility) including, but not limited to, provision for the payment of all outstanding and unpaid current obligations of the Joint Entities as of such time and a reasonable reserve for unearned advertising revenues and licensing fees.


1.20 "Effective Date" shall have the meaning given to that term in Section 8.1.


1.21 "Escrow Agreement" shall mean that certain Escrow Agreement which shall be executed and delivered by Lycos and BIS at the time that the License Agreement is entered into with the first Joint Entity.


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1.22 "Failure Notice" shall mean a notice given by BIS, in its sole discretion, to terminate its funding obligations under this Agreement. Such Failure Notice may be given by BIS if the Joint Entities have not achieved [*] (as such terms are defined below) as of the end of the twelve (12) month period ending June 30, 1999. A Failure Notice may not be given prior to June 30, 1999 or if BIS is in default of its funding obligations. For purposes of the preceding, the terms "Revenues" and "Profits" shall have the normal accounting meaning given to such terms, provided that if such amounts are different due to
-------- accounting standards, then the said terms shall mean the average Revenues or Profits, as the case may be, under each of the U.S. and German generally accepted accounting principles.


1.23 "German Entity" shall have the meaning given to that term in Section 3.2.


1.24 "Governmental Body" shall mean any domestic or foreign national, state or municipal or other local government or multi-national body (including, but not limited to, the European Union), any subdivision, agency, commission or authority thereof, or any quasi-governmental or private body exercising any regulatory authority thereunder.


1.25 "Guarantee" shall mean that certain Guarantee from BAG to Lycos, dated the date hereof, annexed hereto as Exhibit B.
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1.26 "Joint Entity" shall mean any entity, juridical or non-juridical, which is established in the Territory, either at the time of execution of this Agreement or thereafter, pursuant to this Agreement, and which is owned, directly or indirectly, by the Parties in accordance with this Agreement.


1.27 "Launch" shall mean the date on which a Joint Entity has made services available to potential customers via the Internet.


1.28 "Linear Media Product" shall have the meaning given to that term in Section 1.41.


1.29 "Loan Facility" shall have the meaning given to that term in Section 4.2(c).


1.30 "Lycos License" shall have the meaning given to that term in Section 7.1.


1.31 "Lycos Searchservice" shall mean the Searchservice provided by Lycos in the United States comprised of the Licensed Software and Lycos Catalog as listed on Exhibit D, as the same may evolve in the future provided, however,
--------- -------- ------- that Lycos Searchservice shall not include any (i) technology, product, service or content which is not an enhancement of or derivative to the Licensed Software or Licensed Database unless the Joint Entities have specifically agreed to License such technology, product, service or content from Lycos, or (ii) Excluded Product or Excluded Service Content (as such terms are defined in the Lycos License).


1.32 "Object Code" shall mean: (i) machine executable programming instructions, substantially in binary form, which are intended to be directly executable by an operating system


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after suitable processing and linking, but without the intervening steps of compilation or assembly; or (ii) other executable code (e.g., programming instructions written in procedural or interpretive languages).


1.33 "Person" shall mean an individual, sole proprietorship, corporation, partnership, limited partnership, limited liability company, joint venture, trust, unincorporated organization, mutual company, joint stock company, estate, union, employee organization, bank, trust company, land trust, business trust or other organization, or a Governmental Body, or their equivalent under the applicable legal system.


1.34 "Prime Rate" shall mean with respect to any interest period, an interest rate per annum (rounded upward, if necessary, to the nearest whole multiple of one-sixteenth (1/16th) of one percent (1%)) of the offered rates for Deutsche Mark deposits for comparable amounts as the amount in question and for an interest period of three (3) months, as quoted on the DEMVIEW page of the Reuters Monitor System (or any successor thereto) as of approximately 11:00 a.m., Frankfurt time, on the day for which the relevant determination is made.


1.35 "Scandinavia License Agreement" shall mean that certain license agreement between Lycos and Posten Sverige, dated April 22, 1996, relating to the countries in Scandinavia.


1.36 "Searchservice" shall mean the provision via a managed public network of an advertiser supported search engine and navigational tools that take information input by a user and searches, filters and indexes information on the internet based on title, headings, a fixed amount of text and significant words to provide worldwide Web addresses to the user that relate to the input information.


1.37 "Significant Change in Control" as to a Party shall mean an acquisition by a third person (other than an Affiliate of such Party), of [*] within two (2) years after the date of this Agreement.


1.38 "Source Code" shall mean the human readable form of Object Code and related system documentation, including comments, procedural language and material useful for understanding, implementing and maintaining such instructions (for example, logic manuals, flow charts and principles of operation).


1.39 "Steering Committee" shall have the meaning given to that term in Section 2.4.


1.40 "Territory" shall mean all of the countries listed on Exhibit C,
--------- provided that, subject to Section 2.9. [*] - --------


1.41 "Traditional Media Service" shall mean the delivery or creation of movies, television shows, sporting events and other forms of entertainment products intended primarily to be viewed


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or experienced by consumers in uninterrupted fashion from beginning to end ("Linear Media Products") over ISDN, Cable, Satellite, fiber optics or other form of broadband media now known or hereafter developed. Traditional Media Service shall include, without limitation, delivery of Linear Media Products through television, pay television, pay per view, video on demand and near video on demand.


1.42 "Transfer" shall mean the direct or indirect sale, transfer, pledge, assignment or other disposition of or mortgage, hypothecation, or other encumbrance or permitting or suffering of any encumbrance of all or any part of the equity interests in any Joint Entity; provided, however, that the term "Transfer" shall not include the pledge of all or any part of the equity interest in any Joint Entity held by a Party to secure indebtedness of such Party owing to a lender so long as such lender agrees and acknowledges in writing, as part of such pledge, that the interests of such lender are, and shall at all times be, subject to the terms and conditions of this Agreement, and that such pledge (and the rights of the lender) is at all times subordinate to the rights of the other Party pursuant to this Agreement. No lender may foreclose on a pledge without complying with the provisions of Section 9.4.


ARTICLE II


Purpose and Scope of Agreement
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2.1 Purpose.
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(a) BIS and Lycos jointly undertake, within the Territory: (i) the establishment of a Searchservice (including searching, navigating and information providing) through one or more websites regardless whether such services are delivered via cable, telephone, satellite or otherwise and regardless whether the same is received or operated in conjunction with a television on a national/country or regional level and localized versions within each country or region in the Territory (the "Business") including, without limitation, Searchservices substantially similar to the Lycos Searchservice currently operating in the United States and as it may evolve in the future (but adapted to the local markets), and (ii) the procurement of advertising for the Searchservice. [*]


(b) In the event that the Business grows in a direction such that television becomes intertwined in one or more aspects of the Business, and BIS is restricted from approving expansion into such fields due to agreements entered into by one or more of its Affiliates (at this time or in the future), as confirmed in a certificate to such effect delivered by BIS to Lycos, then Lycos shall be permitted to engage in such fields without the participation of BIS after BIS has been given a reasonable period of time to obtain an appropriate release from its (or its Affiliates') obligations.


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(c) Except as explicitly set forth in this Agreement or in the License, neither BIS nor Lycos (or their respective Affiliates) shall have any obligation to the other to conduct business exclusively with the other Party, to offer business opportunities to the other party or to refrain from competition in any manner whatsoever regardless whether the Parties are jointly engaged in (or may also engage in) a particular activity at a particular time.


2.2 No Partnership.
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Nothing in this Agreement shall be construed as creating between the Parties a partnership, fiduciary or other similar relationship or a joint venture except as expressly provided for herein. Nothing in this Agreement shall create or imply any exclusive relationship or any obligation to inform the other Party, offer to the other Party (or any Joint Entity) or to include the other Party in any opportunity which may be available to one (1) of the Parties in the future, regardless of the relationship between such opportunity and the Business.


2.3 Overall Conduct of Business.
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(a) The Business shall be conducted through joint participation by the Parties in a series of independent entities to be established on a country by country or territory by territory basis, as defined by the Parties, as described in this Agreement and as the Parties may determine in the future.


(b) Each Party shall hold its interest in each Joint Entity either directly or through one or more Affiliates in accordance with Section 9.2. Each Party shall own fifty percent (50%) of the voting rights and economic interest in each Joint Entity unless the Parties mutually agree to allow another Person or Persons to participate in one or more Joint Entities.


(c) The Parties may, in the future, establish a joint holding or management company or other structure or structures through which to hold or manage their interests in the Joint Entities, subject to satisfaction of the tax and corporate objectives of each Party. If such a holding or management company is established, the functions of the Steering Committee (as defined below) shall be transferred to the holding or management company.


(d) No Party shall have the right to represent the other Party in negotiations with third parties. Subject to the prior explicit approval of the represented Party, no Party shall have the right to enter into an agreement with a third party for the account of the other Party or for their joint account, except as expressly provided herein. The Party entering such unauthorized agreement or causing such liability shall hold the other Party harmless for any claims raised by a third party.


2.4 Steering Committee.
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(a) For so long as the Parties do not establish a joint holding or management company to manage and coordinate the Joint Entities, the activities to be undertaken by the Parties


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as participants in the Joint Entities and as Parties to this Agreement shall be coordinated by a steering committee (the "Steering Committee") consisting of four (4) members ("Members").


[*]


(3) In addition to the other responsibilities delegated to the
Steering Committee by the Parties, the Steering Committee shall be
responsible for strategic planning with respect to the Business and
the creation and development of opportunities with respect to the
Business.


(b) Each Party may appoint, substitute or remove its Members, such appointment, substitution or removal to be effective upon notice to the other Party.


(c) The Chairman of the Steering Committee shall be selected from the Members appointed by [*], and such Person shall hold office until his successor is appointed. The Chairman shall convene and conduct meetings of the Steering Committee held pursuant to Section 2.5.


2.5 Meetings of the Steering Committee.
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(a) The following provisions shall be applicable to the meetings of the Steering Committee:


(1) The Steering Committee shall hold all meetings in English. Such
meetings shall be held at least quarterly.


(2) Any two (2) members of the Steering Committee may at any time call
for a special meeting of the Steering Committee upon five (5) Business
Days prior notice to the Members of the Steering Committee, specifying
the date and agenda of the meeting and requesting the other Party
immediately to specify the time and place of the meeting in accordance
with Section 2.5(a)(3). Such notice may be waived in writing before
or after such meeting or by attendance at such meeting. Either Party
may propose an agenda item for discussion at such meeting by written
notice to the other Party. In addition, any item which the Parties
agree to discuss at a Steering Committee meeting shall be considered
to be an agenda item at such meeting.


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(3) Regular meetings of the Steering Committee shall be alternated
between: (i) the principal offices of the European CEO, and (ii)
Framingham, Massachusetts, unless the Parties establish any other
place for meetings by mutual agreement. Special meetings shall be
held in the location and at the time specified (in accordance with
this subsection) by the Party which did not call the meeting.


(4) Members may participate in such meetings by means of a conference
telephone or similar means of communication if all persons
participating in the meeting are able to hear one another, and any
such Member shall be deemed to be present at such meeting. Any action
that may be taken at a meeting may also be taken by unanimous written
consent.


(5) At each meeting of the Steering Committee, one (1) Lycos Member
and one (1) BIS Member shall constitute a quorum.


(6) The Steering Committee shall act by the unanimous vote of: (i) the
Lycos Member(s) present at any meeting, which collectively shall cast
one (1) vote, and (ii) the BIS Member(s) present at any meeting, which
collectively shall cast one (1) vote.


(7) [*] [*]


(8) The Steering Committee shall have and may exercise such powers as
the Parties may delegate from time to time, and the authority of the
Steering Committee may be modified or terminated at any time by
agreement of the Parties.


(9) A representative of BIS shall keep minutes of meetings held in
Europe and a representative of Lycos shall keep minutes of meetings
held in the United States. Minutes shall be subject to written
approval by a representative of the Party who did not propose the
minutes. In the event the meeting is held neither in Europe nor the
United States, the Party whose turn it is to keep the minutes shall


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keep the minutes. All minutes shall be maintained in English and such
other language as may be required by local law.


(10) Meetings of the Steering Committee may be attended by guests
invited by the Members of the Steering Committee pursuant to the
unanimous approval of the Steering Committee. In the absence of
agreement, in addition to their respective Members, BIS and Lycos may
each invite individuals to attend Steering Committee meetings who are
either employees or professional advisors to either Lycos or BIS or
their respective Affiliates.


(b) Subject to Section 5.3 through 5.6 hereof, to the extent permitted by applicable law, during the term (as defined in Section 8.1 of this Agreement), the Parties shall delegate their voting rights as shareholders or partners in each of the Joint Entities to the Steering Committee and/or appoint the Steering Committee as their proxy in respect of all matters affecting each Joint Entity, provided that if the foregoing delegation is not permitted by the
-------- law applicable to a particular Joint Entity, the Parties shall exercise their voting or approval rights in each case in accordance with the agreement reached in the Steering Committee. If any delegation granted pursuant to this Agreement lapses due to applicable law, the Parties shall promptly renew such delegation during the term of this Agreement. To the extent permissible under local law, the Members shall have the right to be designated as board members in the Joint Entities.


2.6 European CEO.
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(a) As soon as possible after the execution and delivery of this Agreement, the Steering Committee shall appoint a European Chief Executive Officer (the "European CEO") who shall have the following duties and responsibilities:


(1) to prepare reports and recommendations for presentation to the
Steering Committee, including, without limitation, in respect of
decisions which require the approval of the shareholders or partners
of a Joint Entity;


(2) to prepare necessary Business Plans for each of the Joint
Entities for approval by the Steering Committee as well as such
overall strategic, marketing, advertising and other general plans
which require coordination by the Steering Committee;


(3) to prepare proposals for investment by the Steering Committee;


(4) to implement the resolutions of the Steering Committee;


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