CONFIDENTIAL
AGREEMENT
This amended and restated agreement (this "Agreement") dated December 23, 2007
among XXXX Partners LLC, a Delaware limited liability company ("XXXX", "we" or
"us") on behalf of funds and accounts under its management and control, CT-100
Holdings, LLC, ("CT-100") an entity formed and controlled by Spark Capital, L.P.
and its affiliates ("Spark"), Alex Interactive Media, LLC ("AIM"), Xxxx Xxxxx
("Xxxxx") and Velocity Interactive Management, LLC ("Velocity") relating to
investments in and activities related to CNET Networks, Inc. ("CNET") amends and
restates the letter agreement, dated December 3, 2007, among certain of such
parties.
AIM ADVISORY
AND CONSULTING
SERVICES; FEES: AIM's employee Gardi will provide financial and
operational advisory and consulting services and such
services as may be otherwise agreed (all such services
being referred to herein as the "Services") to XXXX and
CT-100 under the terms and conditions described herein.
For purposes of this agreement, the term "AIM" shall
include Gardi, and accordingly, the representations and
covenants contained herein which are made by and are
binding on AIM shall also be deemed made by and shall be
personally binding on Gardi. All references to payments,
refunds and other consideration or expenses contained
herein shall not be interpreted as creating financial
rights or obligations with respect to both AIM and Gardi
but shall create only collective rights or obligations.
AIM will provide the Services to XXXX and CT-100 in
connection with existing or potential investments made by
funds, accounts or other affiliated entities managed by
XXXX or its affiliates (each a "XXXX Fund" and
collectively the "XXXX Funds") and CT-100 (CT-100 and any
existing or potential investments made by funds, accounts
or other affiliated entities managed by Spark or its
affiliates collectively referred to herein as each a
"CT-100 Fund" and collectively the "CT-100 Funds") in the
securities of CNET. AIM agrees that the Services (and any
related services relating to CNET) shall be exclusive to
XXXX and CT-100 until the earlier of termination of
Services (as provided for below), provided that AIM will
be free to enter into or continue other consulting
arrangements provided that any such arrangements do not
prevent or materially detract from AIM's provision of the
Services to XXXX and CT-100. AIM and Gardi each represent
that as of the date of this agreement neither AIM nor
Gardi, respectively, are a party to any contract or
agreement which will or may restrict in any way AIM's or
Gardi's, respectively, ability to fully perform the
Services as set forth in this agreement.
As a fee for the Services (the "Consulting Fee"), AIM
shall receive four quarterly payments of $25,000, with the
first installment being paid promptly after execution of
this agreement and thereafter promptly after the end of
each ninety (90) day period following the date of this
agreement until four such payments have been made (for
total maximum payments of $100,000), provided that any
quarterly payment shall be refundable in full if this
agreement is terminated by AIM within forty-five (45) days
after such payment
1
and shall be subject to reduction as described below. The
obligation of such quarterly payments shall be borne pro
rata by XXXX and CT-100 based on the proportionate value
of the Designated Investments (as defined below) held by
each of them.
The previous three paragraphs shall survive until the
earlier of (i) notice from XXXX to AIM that it is
terminating the Services (which notice shall provide
whether or not such termination is for Cause) and (ii)
such time as no XXXX Fund or CT-100 shall hold any
investment in CNET. "Cause" shall mean AIM's fraud,
willful misconduct, material breach of AIM's obligations
hereunder or material violation by AIM of applicable laws,
Gardi's refusal to serve as a nominee for the board of
directors of CNET or as a member of the board of directors
of CNET (unless XXXX or CT-100, as applicable, is in
material breach of this agreement which breach shall not
have been cured within five (5) days notice from AIM to
the applicable party), provided that any such breach if
capable of being cured shall not have been cured within
five (5) days notice from XXXX or CT-100, as applicable,
to AIM. CT-100 may request that XXXX terminate the
provision of the Services for Cause as provided for in
this paragraph, which request shall not be unreasonably
denied. XXXX shall consult with CT-100 prior to
terminating the Services pursuant to clause (i) of this
paragraph.
The Consulting Fee shall be refunded and shall be promptly
repaid by AIM pro-rata to XXXX and CT-100 (based on the
ratio XXXX and CT-100 paid such amounts) to the extent of:
(i) CNET Proceeds (as defined below) and (ii) the Profit
Participation (as defined below), provided that the total
amount of such repayments shall not exceed the total of
all payments made to AIM pursuant to the third paragraph
of this section, and provided further that any such
refunded amounts will not be included in the calculation
of any Drawdown Amount (as defined below). Notwithstanding
the foregoing, in lieu of refunding CT-100's share of such
payments, CT-100 may provide for a reduction in the Profit
Participation paid by it to AIM equal to the amount of
such payments to be refunded under this paragraph. "CNET
Proceeds" shall mean any after-tax proceeds (using an
assumed combined federal and state tax rate of 40%)
received by AIM as compensation for service on the board
of directors of CNET including directors' fees and the
value of any vested and exercisable option grants,
restricted stock unit grants or stock grants which for
purposes hereof shall have the same value accorded to them
as in the annual proxy filed by CNET disclosing such
grants, provided that such repayment shall not be due
until such proxy has been made publicly available. The
obligations of this paragraph shall survive any
termination of this agreement.
DESIGNATED
INVESTMENTS: For investments in CNET ("Designated Investments") made by
any XXXX Fund during the term of this agreement:
(i) Gardi shall no later than January 30, 2008 co-invest
(subject to the provisions below) at least $1 million
with personal funds in equity
2
securities of CNET or options on or other derivatives
of such securities (based upon the cash cost of
acquisition including trading commissions) through
the purchase of such securities from a XXXX Fund or
XXXX Funds to be designated by XXXX. Xxxxx agrees to
hold such investment (excluding the exercise of
options to promptly purchase longer-dated options)
until the earlier of (i) the disposition of all or a
portion of the consolidated Designated Investment by
the applicable XXXX Fund or XXXX Funds, other than
pursuant to the Option Agreement, as defined below,
(provided that if the applicable XXXX Fund or XXXX
Funds dispose of less than all of such Designated
Investment, other than pursuant to the Option
Agreement, AIM may sell a pro rata portion), (ii) the
commencement of CNET's next annual meeting of
shareholders and (iii) the date that XXXX notifies
any other party or publicly announces that it has
ceased to pursue or continue the making of any
proposals to CNET regarding the conduct of its
business or related matters or the conduct of any
proxy contest involving CNET, in each case following
the commencement of such efforts if so commenced,
provided that Gardi may continue to hold such
investment beyond such period. Gardi may make such
investment through AIM or another entity.
(ii) CT-100 shall no later than January 30, 2008 co-invest
(subject to the provisions below) $20 million in
stock of CNET (based upon the cash cost of
acquisition of CNET securities including trading
commissions) through the purchase of such stock from
a XXXX Fund or XXXX Funds to be designated by XXXX.
CT-100 agrees to hold such investment until the
earlier of (i) the disposition of all or a portion of
the consolidated Designated Investment by the
applicable XXXX Fund or XXXX Funds, other than
pursuant to the Option Agreement, as defined below,
(provided that if the applicable XXXX Fund or XXXX
Funds dispose of less than all of such Designated
Investment, other than pursuant to the Option
Agreement, CT-100 may sell a pro rata portion), (ii)
the commencement of CNET's next annual meeting of
shareholders and (iii) the date that XXXX notifies
any other party or publicly announces that it has
ceased to pursue or continue the making of any
proposals to CNET regarding the conduct of its
business or related matters or the conduct of any
proxy contest involving CNET, in each case following
the commencement of such efforts if so commenced,
provided that CT-100 may continue to hold such
investment beyond such period.
Co-investments covered by the preceding paragraphs
("Co-investments") will be made in coordination with XXXX,
who will conduct the trading in such investments, with any
open market purchases (but excluding the purchases by AIM
and CT-100 referred to in (i) and (ii), respectively,
above) and sales to be distributed pro rata between any
XXXX Fund, CT-100 and AIM (or any entity in which AIM's
investments may be held). XXXX will ensure that the
average cost paid by AIM and CT-100 with respect to the
purchases referred to in (i) and (ii), respectively, above
is equal to the average of (i) JANA's average cost
3
as of December 3, 2007 and (ii) the average closing price
of CNET's common stock for the ten trading days prior to
December 3, 2007, provided that should JANA's average cost
become lower during the term of this agreement as a result
of additional purchases by any XXXX Fund, XXXX shall
refund the difference between such lower average cost and
such amount to CT-100 and Gardi pro rata. On any day on
which sales or other disposition of CNET securities are
made by any XXXX Fund, XXXX shall use commercially
reasonable efforts to notify CT-100 and AIM of such sales
in advance and shall allocate such sales between such XXXX
Funds, CT-100 and AIM pro rata unless CT-100 or AIM, as
applicable, request otherwise following such notice. With
respect to any such co-investments, CT-100 and AIM will
each consult with XXXX and provide necessary information
so that we may comply with any applicable disclosure or
other obligations which may result from such investment,
and XXXX shall prepare and complete any required
disclosures including all regulatory filings related
thereto. CT-100 and AIM each agree that CT-100 and AIM,
respectively, will not invest in any security or option or
derivative related to such security following such
consultation if XXXX so requests, provided that such
request is reasonably based upon applicable regulatory
considerations, disclosures or restrictions.
With respect to any Designated Investment made by any XXXX
Fund and any CT-100 Fund prior to termination of the
Services and/or termination of this agreement or within
(i) one (1) year of termination of the Services by XXXX
(as provided for above under "AIM Advisory And Consulting
Services; Fees") other than for Cause or termination of
this agreement as provided for under "Term", if such
termination of the Services or this agreement occurs prior
to the first anniversary of this agreement or (ii) six (6)
months of termination of the Services by XXXX (as provided
for above under "AIM Advisory And Consulting Services;
Fees") other than for Cause or termination of this
agreement as provided for under "Term", if such
termination of the Services or this agreement occurs
following the first anniversary of this agreement and
prior to the third anniversary of this agreement, upon the
realization of any cash proceeds (or receipt of non-cash
consideration including the value of any securities
received in exchange for such Designated Investment) by
any XXXX Fund or CT-100 Fund, as applicable, (excluding
(i) the exercise of options to promptly purchase
longer-dated options or any other closing out of a
derivative position followed by the prompt creation of
another investment position and (ii) shares sold pursuant
to the Option Agreement, as defined below) the value of
which net of third party out of pocket expenses to the
extent exclusively related to the Designated Investment or
investment by CT-100 Fund, as applicable, exceeds an 8%
internal rate of return on such XXXX Fund's or CT-100
Fund's, as applicable, total investment (the "Hurdle"),
AIM shall receive 100% of such proceeds until AIM has
received cumulative distributions (the "Catch-up
Distributions") equal to 9% of the sum of (i) the Hurdle
and (ii) the Catch-up Distributions, after which AIM will
receive 9% of any remaining distributions of net profits
(net of third party out of pocket expenses) with the
remainder of such distributions going to the applicable
XXXX Fund or XXXX Funds or CT-100 or CT-100 Funds, as
applicable (the "Profit Participation");
4
provided, however, that if at any time after the third
anniversary of this agreement to the extent any such XXXX
Fund or CT-100 Funds, as applicable, shall not have
disposed of such Designated Investment or investment by
CT-100 Fund, at AIM's request each will be deemed for
purposes of this paragraph to have disposed of an amount
designated by AIM in such request (provided that such
designation shall be for a pro rata amount for each XXXX
Fund and CT-100 Funds based on their respective holdings)
and AIM will be paid promptly in cash in accordance with
this paragraph, provided that AIM may make no more than
three (3) such requests. Any consulting fee or other
compensation which is paid to any potential third party
board nominee who is not an employee of any party (or
their affiliates) to this agreement (or any party who
becomes a party to this or a substantially similar
agreement with AIM to provide the Services) shall reduce
the Profit Participation by an amount equal to such
compensation. The obligations of this paragraph shall
survive termination of the Services and/or this agreement
unless the termination of Services is made by XXXX for
Cause or is made by AIM.
Upon each of the first and second anniversary of this
agreement, provided that the XXXX Funds and CT-100 Funds
shall continue to hold in the aggregate at least fifty
(50) percent of the consolidated Designated Investment
(calculated by reference to the date on which such XXXX
Funds and CT-100 Funds held in the aggregate the greatest
number of CNET shares during the first year of this
agreement), AIM shall be entitled to request prompt
payment (divided pro-rata between the XXXX Funds and
CT-100 Funds based on the proportionate value of the
Designated Investments held by them) of an amount in cash
(each, a "Drawdown Amount"), if positive, equal to (i)
$100,000 minus (ii) the sum of all fees or other
compensation owed to AIM for the calendar year
corresponding to such request pursuant to any other
consulting, advisory or similar agreement or arrangement
(excluding this agreement and excluding amounts paid to
you by Spark) and the estimated cash compensation received
or to be received by AIM during such calendar year for
service on the board of directors of CNET, provided,
however, that no such payment shall be made unless the
amount of the Profit Participation, if it were to be paid
on the date of any such request and excluding any Profit
Participation payments previously made, but as otherwise
calculated in accordance with the paragraph above, would
equal or exceed such requested amount. All Drawdown
Amounts will be deducted from the Profit Participation. A
certified statement setting forth the information set
forth in clause (ii) of the first sentence of this
paragraph shall be provided by AIM to us at the time any
request for funds pursuant to this paragraph is made. For
purposes of such statement, any estimates regarding fees
or other compensation to be received by AIM shall be
reasonably agreed between the parties.
VELOCITY INVESTMENT Concurrent with the execution of this Agreement, Velocity
and XXXX shall enter into the option agreement attached as
Exhibit A hereto (the "Option Agreement"). Velocity agrees
to hold the shares acquired pursuant to the Option
Agreement, if any, as well as any CNET shares acquired
during the term of this Agreement, until the earlier of
(i) the disposition of all or a portion
5
of the consolidated Designated Investment by the
applicable XXXX Fund or XXXX Funds (provided that if the
applicable XXXX Fund or XXXX Funds dispose of less than
all of such Designated Investment, Velocity may sell a pro
rata portion), (ii) the commencement of CNET's next annual
meeting of shareholders (expected to occur by the end of
June, 2008) and (iii) the date that XXXX notifies any
other party or publicly announces that it has ceased to
pursue or continue the making of any proposals to CNET
regarding the conduct of its business or related matters
or the conduct of any proxy contest involving CNET, in
each case following the commencement of such efforts if so
commenced, provided that Velocity may continue to hold
such investment beyond such period. With respect to any
such investments, Velocity will consult with XXXX and
provide necessary information so that we may comply with
any applicable disclosure or other obligations which may
result from such investment, and XXXX shall prepare and
complete any required disclosures including all regulatory
filings related thereto. Velocity agrees that it will not
invest in any security or option or derivative related to
such security following such consultation if XXXX so
requests, provided that such request is reasonably based
upon applicable regulatory considerations, disclosures or
restrictions.
COMMUNICATIONS: All public statements, regulatory filings or
communications, contacts with management and related
activity including selection of potential nominees for the
board of directors of CNET and the conduct of any proxy
contest with respect to CNET will be made and conducted by
XXXX following reasonable consultation with CT-100, AIM
and Velocity, provided that this provision shall terminate
automatically with respect to Gardi, Velocity and any
employee of Spark should Gardi, Velocity or such employee,
as applicable, be elected or appointed to the Board of
Directors of CNET. XXXX will seek CT-100's, AIM's and
Velocity's input with respect to all such matters and will
use all reasonable efforts to select individuals
acceptable to all parties. Notwithstanding anything herein
to the contrary, the consultation and input provisions of
this paragraph shall only be applicable to Velocity should
it exercise its right to purchase CNET shares pursuant to
the Option Agreement or purchases an equivalent number of
CNET shares in the open market.
AIM EXPENSES: It is contemplated that AIM's ordinary travel, overhead
and other expenses incurred in connection with the
Services will be covered by AIM. Any pre-approved
extraordinary expenses, including for pre-approved travel
outside of New York City, and other pre-approved expenses
will be reimbursed by XXXX, CT-100 and Velocity pro rata
based on the proportionate value of the Designated
Investments held by each during the term of this Agreement
(calculated using the greatest number of shares held by
each party during the term of this Agreement).
Notwithstanding anything herein to the contrary, Velocity
shall only be responsible for its pro rata share of such
expenses in the event Velocity purchases CNET stock either
in the open market or pursuant to the Option Agreement.
OTHER EXPENSES: Except as otherwise provided herein, each party shall be
responsible for paying all of its own costs and expenses
incurred in connection with the transactions
6
contemplated by this agreement. Notwithstanding the
foregoing, the Profit Participation and all reasonable
out-of-pocket third party expenses related to any proxy
contest with respect to CNET (including, without
limitation, filing fees, proxy advisory and printing
expenses) and any related litigation shall be shared by
the XXXX Funds, CT-100 and Velocity pro rata based on the
proportionate value of the Designated Investments held by
each during the term of this Agreement (calculated using
the greatest number of shares held by each party during
the term of this Agreement), and each party shall promptly
upon request reimburse a party who pays such expenses
directly for its pro rata share of such expenses.
Notwithstanding anything herein to the contrary, Velocity
shall only be responsible for its pro rata share of such
expenses in the event Velocity purchases CNET stock either
in the open market or pursuant to the Option Agreement.
INDEMNIFICATION: XXXX and CT-100 agree to indemnify AIM, including AIM's
members, principals or officers, including Gardi (each of
the foregoing, an "Indemnitee"), against expenses
(including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by AIM
in connection with any action, suit, arbitration or
proceeding, whether civil, criminal, administrative or
investigative, in which any Indemnitee becomes involved,
as a party or otherwise, or in which any Indemnitee may be
threatened, either during the term of this agreement or
thereafter, relating to or arising out of the activities
undertaken hereunder, relating to CNET, relating to the
Services, or otherwise relating to or arising out of this
agreement, including by serving as a member of the Board
of Directors, or any committee thereof, of any company
PROVIDED, HOWEVER that such indemnification will not apply
to any such expenses or liabilities (i) to the extent
paid, or acknowledged to be payable, directly to or on
behalf of AIM, by either such company or by an insurance
carrier under a policy of officers' and directors'
liability insurance or (ii) incurred as a result of AIM's
intentional misconduct. In the event XXXX or CT-100 is
obligated hereunder to pay the expenses of any proceeding
against AIM, XXXX or CT-100, as applicable, shall be
entitled to assume the defense of such proceeding, with
counsel approved by AIM, which approval shall not be
unreasonably withheld or delayed, upon the delivery to AIM
by XXXX or CT-100, as applicable, of written notice of its
election so to do. The obligations of this paragraph will
survive termination of this agreement and will be borne
pro-rata based on the proportionate value of the
Designated Investments held by the XXXX Funds or CT-100.
CONFIDENTIALITY: Except as required by law, AIM agrees not to disclose,
either during the term of this agreement or at any time
thereafter, to any third person, any non-public
information obtained by AIM in the performance of AIM's
duties hereunder.
NOTICES: Notices to AIM shall be delivered to Alex Interactive
Media, LLC, Carnegie Hall Tower, 000 Xxxx 00xx Xxxxxx,
Xxxxx 00, Xxx Xxxx, XX 00000, with a copy to
Xxxx@xxxxxxxxxxxxxxxxxxxx.xxx. Notices to XXXX shall be
delivered to XXXX Partners LLC, 000 Xxxx Xxxxxx, Xxxxx
0000, Xxx Xxxx, Xxx Xxxx 00000, Attn: General Counsel.
Notices to CT-100 shall be delivered c/o Spark Capital,
000 Xxxxxxx Xxxxxx, 0xx Xxxxx, Xxxxxx, XX 00000. Notices
to Velocity shall be
7
delivered to Velocity Interactive Management, LLC, 000
Xxxxxx Xxxxxx, Xxxx Xxxx, XX 00000.
MISCELLANEOUS: AIM will be deemed for all purposes to be an independent
contractor and acknowledge that this agreement is not an
employment contract nor does it create a relationship of
employer and employee between XXXX or CT-100 and AIM.
Consequently, the fees paid hereunder shall not be deemed
to be wages, and therefore, shall not be subject to any
withholdings or deductions. Neither XXXX, CT-100 nor
Velocity shall be responsible for payment of any federal,
state and local income tax withholding, social security
taxes, workers' compensation coverage and unemployment
insurance, liability insurance, health or disability
insurance, retirement benefits or other welfare or pension
benefits.
This agreement may be amended only by an agreement in
writing signed by the parties. The agreement contains the
entire agreement between the parties with respect to the
subject matter of this agreement and supersedes all prior
agreements and understandings, oral or written, between
the parties with respect to the subject matter of this
agreement. The provisions of this section will survive
termination of this agreement. This agreement may be
executed in counterparts, each of which shall constitute
an original.
The parties each hereby irrevocably consent to the
jurisdiction of the courts of the State of New York for
all purposes in connection with any action or proceeding
which arises out of or relates to this agreement and agree
that any action instituted under this agreement shall be
brought only in the state courts of the State of New York.
This agreement shall be governed by and its provisions
construed in accordance with the laws of the State of New
York, as applied to contracts between New York residents
entered into and to be performed entirely within New York.
Nothing in this agreement shall be construed as creating a
joint venture, partnership or agency relationship or
taxable entity between or among the parties hereto.
LIMITATION ON
LIABILITY: Neither XXXX, CT-100 nor Velocity shall be entitled to
seek monetary damages under this agreement from Gardi or
AIM (nor any affiliate, shareholder, officer, director,
trustee or employee of AIM) in the aggregate in excess of
$1 million, other than for fraud or willful misconduct.
This limitation of liability is in addition to, and not in
limitation of, any limitation on liability provided by law
or by this agreement or any other agreement, contract or
instrument.
FURTHER ASSURANCES: Each party shall, and shall cause their respective
affiliates to, at the reasonable request of another party,
cooperate with such party by furnishing additional
information, executing and delivering additional documents
and instruments and undertaking such additional actions as
may be reasonably requested by
8
such other parties or its counsel to consummate the
transactions contemplated by this agreement, including
executing any documents required to be filed by the
parties hereto pursuant to any applicable securities laws.
TERM: Except as otherwise provided herein with respect to
particular provisions, this agreement shall survive until
the earlier of (i) the disposition of all or a portion of
the consolidated Designated Investment by the applicable
XXXX Fund or XXXX Funds, (ii) three months following
CNET's next annual meeting of shareholders and (iii) the
date that XXXX notifies any other party or publicly
announces that it has ceased to pursue or continue the
making of any proposals to CNET regarding the conduct of
its business or related matters or the conduct of any
proxy contest involving CNET, in each case following the
commencement of such efforts if so commenced.
[SIGNATURE PAGE FOLLOWS]
9
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
duly authorized officer of each party hereto as of the date first above written.
XXXX PARTNERS LLC
By: /s/ Xxxxxxxx Xxxxx
------------------------
Name: Xxxxxxxx Xxxxx
Title: Partner
CT-100 HOLDINGS, LLC
By: Spark Capital, L.P., its Managing Member
By: Spark Management Partners, LLC, its General Partner
By: /s/Xxxxx Xxxxxx
------------------------
Name: Xxxxx Xxxxxx
Title: Managing Member
ALEX INTERACTIVE MEDIA, LLC
By: /s/Xxxx Xxxxx
------------------------
Xxxx Xxxxx, Managing Member
XXXX XXXXX
By: /s/Xxxx Xxxxx
------------------------
Xxxx Xxxxx
VELOCITY INTERACTIVE MANAGEMENT, LLC
By: /s/Xxx Xxxxxx
------------------------
Xxx Xxxxxx, Authorized Signatory
10
EXHIBIT A
[Xxxxxx Option Agreement]
