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EXHIBIT 10.6
STRATEGIC ALLIANCE AGREEMENT
This Strategic Alliance Agreement (this "Agreement"), dated as of
October 10, 1997 (the "Effective Date"), is by and between INTERVU INC., a
Delaware corporation, ("InterVU"), and NBC MULTIMEDIA, INC., a Delaware
corporation ("NBC").
RECITALS
A. Concurrently with the execution and delivery of this Agreement, and
pursuant to the terms and conditions of that certain Stock Purchase Agreement of
even date herewith (the "Stock Purchase Agreement") by and between InterVU and
the National Broadcasting Company, Inc. ("NBCI"), which is NBC's parent company,
InterVU shall issue and NBCI shall subscribe for and purchase 1,280,000 shares
(the "Purchased Shares") of preferred stock of InterVU, Series G.
B. As a condition to such issuance of the Purchased Shares by InterVU,
and the purchase thereof by NBCI, the parties wish to enter into this Agreement
pursuant to which, and subject to the terms and conditions set forth below,
InterVU shall be the exclusive provider of technology and services for the
distribution of, and audio/visual presentation to users of, entertainment (i.e.,
excluding sports, news and other non-entertainment programming) audio/video
content (including audio only portions) by means of the Internet (as defined
below), the distribution of which audio/video content (including audio only
portions) are Controlled (as defined below) by NBC.
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein set forth, the parties hereto agree as follows:
AGREEMENT
SECTION 1 - DEFINITIONS
Certain Definitions. The following terms, as used herein, have
the following meanings:
"Adult Video Content" shall mean any audio and/or video material which
is pornographic or which contains nudity, explicit sexual material or depictions
of sexual acts any of which is beyond that normally broadcast over the NBC
Television Network.
"Common Stock" shall mean the common stock of InterVU, par value $.001
per share.
"Control" shall mean, with respect to any distribution channel or
source of any content, the ability to control, and the actual control, including
the final approval right, of the presentation of content on such distribution
channel or source.
"Initial Public Offering" shall mean the first public offering of Common
Stock to the general public which is effected pursuant to a registration
statement filed with, and declared effective by, the Securities and Exchange
Commission under the Securities Act of 1933, as amended, and the rules
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and regulations promulgated thereunder, the aggregate proceeds of which exceed
Ten Million Dollars ($10,000,000).
"Internet" shall mean (i) the distributed interactive computer network
commonly referred to as the internet, and (ii) any other interactive on-line or
distributed computer network distribution methods in their current form as of
the date hereof, including, without limitation, America Online, @Home, Road
Runner, CompuServe and Prodigy, that is supported by the InterVU Delivery
System. The term Internet shall not include any traditional analog or digital
broadcast or distribution medium (e.g., traditional analog or digital broadcast
and digital or analog cable or satellite transmission) by which television,
film, other audio/visual or textual programming is disseminated to viewers.
"InterVU Logo" shall mean that registered design trademark of InterVU
that is indicated on Exhibit A hereto or such other trademarks, service marks,
designs or logos as InterVU may designate.
"InterVU Site" shall mean, collectively, the World Wide Web site that
has as its universal resource locator (URL) "xxx.xxxxxxx.xxx" and such other
Internet sources, sites or "areas" as may be Controlled by InterVU hereafter.
"InterVU Delivery Centers" shall mean the Internet file servers
Controlled by InterVU that are used together with the InterVU Delivery System
for the distribution of audio/video content (including audio only portions) to
users over the Internet.
"InterVU Delivery System" shall mean the on-demand audio/video content
(including audio only portions) transmission and distribution network system
developed by InterVU and more fully described on Exhibit B hereto.
"MSNBC" shall mean MSNBC Interactive News L.L.C., MSNBC Cable L.L.C. or
any entity which is a successor of the business of such entities.
"NBC Internet Sites" shall mean the world wide site operated by NBC with
the URL address of xxx.xxx.xxx ("XXX.xxx") and those aspects of the NBC
Interactive Neighborhood syndication platform which are Controlled by NBC
("NBC-IN").
"Revenue Sharing Area" shall mean a new "area" to be created and placed
by NBC upon XXX.xxx in connection with this Agreement, including all pages, HTML
documents or other screens or interfaces within such "area", which will be
designed solely to allow (a) the distribution, transmission or making available
for downloading NBC Audio/Video Clips, (b) the promotion, marketing or
advertising of the availability of NBC Audio/Video Clips for distribution,
transmission or downloading, and/or (c) the promotion, marketing or advertising
of the NBC/InterVU business relationship and which will be mutually agreed upon
by the parties. In addition, if the parties are able to mutually agree upon any
additional Internet sites or "areas" which have the characteristics described in
the previous sentence, then each such new site or "area" shall also be
considered a Revenue Sharing Area for purposes hereof.
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1.1 Other definitions. The following terms shall have the meanings
defined for such terms in the Sections set forth below:
Term Section
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Costs 3.1.1
InterVU Advertising 5.1
Net Revenues 4.2
NBC Audio/Video Clip 2.1
Prepayment 4.4
Production Costs 4.4
Referral Fees 5.2.2
Revised Standards 2.4.2
SECTION 2 - DELIVERY OF SERVICES
2.1 Preparation, Delivery of Content. NBC shall create digital versions
of all entertainment (i.e., excluding sports, news and other non-entertainment
programming) audio/video content (including audio only portions) that it desires
to make available for downloading, to distribute or to transmit via NBC Internet
Sites ("NBC Audio/Video Clip"), provided that for a period of six (6) months
following the Effective Date InterVU shall provide such digitization services
required to create digital versions of the NBC Audio/Video Clips, up to a
maximum of fifty (50) one-minute video clips per month of encoding (per format),
the expense of which shall be included as a Cost within the cost sharing
provisions of Section 3.1. NBC shall determine the data format (e.g., MPEG or
ASF ) in which the NBC Audio/Video Clip shall be transmitted and, if applicable,
the video viewing software products with which the NBC Audio/Video Clip shall be
compatible (e.g., "Real Video" or "NetShow"); provided, however, that such NBC
Audio/Video Clip shall be compatible with, and shall be capable of being
distributed from and viewed by means of, the InterVU Delivery System from
InterVU Delivery Centers as long as InterVU supports any data format and/or
video viewing software products reasonably required by NBC within a reasonable
time after new versions of such products are released, including the streaming
products of the following entities: Apple, Real Networks, Macromedia, Microsoft,
VDO, Vivo Software and VXtreme. InterVU shall provide technical assistance to
NBC in connection with the digitization of the NBC Audio/Video Clip by NBC
including without limitation providing a description of any needed technical
standards or other specifications and providing a reasonable amount of training
for the NBC personnel who will be responsible for such digitization. InterVU
agrees that it shall provide NBC with a designated InterVU employee who will be
made reasonably available to NBC's technical and other personnel in connection
with the activities described herein.
2.2 Placement of NBC Audio/Video Clips. Subject to Section 2.5, NBC may
from time to time make NBC Audio/Video Clips available to users over the
Internet from such Internet sources as NBC elects as set forth in this Section
2.2.
2.2.1 NBC shall from time to time provide copies of all NBC
Audio/Video Clips to InterVU for distribution to, and storage at, each
of the InterVU Delivery Centers. InterVU may distribute additional
copies of NBC Audio/Video Clips to, and store at, additional
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InterVU Delivery Centers as they are made available for access via the
Internet. In the event that any existing NBC Audio/Video Clip is
changed, NBC shall provided updated or replacement copies for such NBC
Audio/Video Clip, whereafter InterVU shall within a reasonably prompt
period, not to exceed thirty (30) minutes from the time of InterVU's
receipt thereof (or such later time as NBC may specify), make any and
all such updated or replacement NBC Audio/Video Clips available from all
of the then-available InterVU Delivery Centers. In addition, during the
time period when InterVU is providing digitization services pursuant to
Section 2.1, InterVU shall both digitize any updated and replacement NBC
Audio/Video Clips specifically indicated by NBC and make such updated or
replacement NBC Audio/Video Clips available from all of the
then-available InterVU Delivery Centers within a time period not to
exceed one (1) business day (or such later time as NBC may specify). NBC
shall determine, and shall provide sufficiently detailed information to
InterVU describing, the schedule of when each of such NBC Audio/Video
Clips shall be made accessible to users.
2.2.2 NBC shall, in its sole discretion but subject only to
Section 6.1, determine what materials and content shall be incorporated
into the NBC Audio/Video Clips. NBC may at any time and from time to
time, direct InterVU to remove, restrict or prevent access to any NBC
Audio/Video Clip by means of the InterVU Delivery System.
2.3 Delivery Services. InterVU shall store the NBC Audio/Video Clips at
each of the InterVU Delivery Centers as set forth above and shall transmit the
NBC Audio/Video Clips on demand to users via the Internet in response to
requests from such users. The InterVU Delivery System shall provide a successful
user connection rate of at least, or greater than, ninety-eight percent (98%),
and from time to time, InterVU shall provide verification to NBC of such rate
within a reasonable time period following a request therefor from NBC. As of the
date hereof, the InterVU Delivery System shall, in addition to any
specifications set forth within the body of this Agreement, conform to the
specifications set forth on Exhibit B hereto, provided, however, that NBC
acknowledges that such specifications shall be subject to change as long as the
overall level of quality of the services provided by InterVU hereunder,
including, but not limited to, the capacity levels and user connection success
rates, is not reduced.
2.4 Maintenance, Support.
2.4.1 InterVU Delivery Centers. Subject only to Section 3,
InterVU shall be solely responsible for the design, maintenance,
support, upkeep and administration of the InterVU Delivery Centers.
2.4.2 InterVU Delivery System. Subject only to Section 3,
InterVU shall be solely responsible for the design, maintenance,
support, upkeep and administration of the InterVU Delivery System.
InterVU may update, upgrade and/or revise the InterVU Delivery System at
any time in its sole discretion. In the event of any such update,
upgrade or revision, InterVU shall provide NBC with a description of any
needed technical standards or other specifications (the "Revised
Standards") that will thereafter be required by NBC in order to ensure
that subsequent NBC Audio/Video Clips are compatible with the InterVU
Delivery System; provided, however, that such Revised Standards must
give NBC the ability to provide NBC Audio/Video Clips using any of the
formats and/or software described in
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Section 2.1 and must retain the overall level of quality of the services
provided by InterVU hereunder, including, but not limited to, the
capacity levels and user connection success rates, and if the imposition
of such Revised Standards would require NBC to assume any additional
costs in connection with its activities described herein, the parties
shall mutually agree upon how such additional NBC costs will be shared
between the parties.
2.5 Restrictions. Without limiting any of the other terms or conditions
set forth in this Agreement, NBC shall not make, and InterVU shall not be
required to make, any NBC Audio/Video Clip stored at an InterVU Delivery Center
or utilizing the InterVU Delivery System accessible from any source or other
distribution channel other than on the Internet.
2.6 Exclusivity. Except as otherwise provided in this Agreement or
unless otherwise agreed by InterVU in writing in advance, during the Exclusive
Term (as hereinafter defined) NBC will not make available for transmission over
the Internet any entertainment (i.e., excluding sports, news and
non-entertainment programming) audio/video content (including audio only
portions), other than audio/video content, including clips and digital files, of
less than 5 seconds if measured by duration or of some other reasonably small
number of bytes if measured by file size, in any audio/visual format to users
via NBC Internet Sites unless such entertainment audio/video content is being
made available for transmission over the Internet pursuant to this Agreement;
provided, however, that the parties acknowledge that this Section 2.6 shall in
no way prevent NBC from providing NBC Audio/Video Clips or any other kind of
entertainment audio/video clips or other materials for unrestricted use on, or
distribution via, any Internet site or "area" which is not an NBC Internet Site.
If InterVU is unable to provide the services described herein to NBC for a
period of more than twenty-four (24) hours or is unable to provide the amount
and level of service required by NBC at any time, including, but not limited to,
the number of concurrent audio/video streams required by NBC, then
notwithstanding the terms hereof, NBC may obtain such services from any third
party until such time as InterVU is able to adequately provide such services
(following a reasonable transition period from the third party back to InterVU)
or NBC terminates this Agreement as provided in Section 2.8.5 below. In
addition, while NBC agrees that it will use commercially reasonable efforts to
utilize InterVU's services as described herein in connection with all of its
activities involving the transmission over the Internet of entertainment
audio/video content via NBC Internet Sites as required above, if any of the type
of distributors described in the definition of "Internet" above cannot or refuse
to permit NBC to utilize InterVU's services in connection with their particular
distribution method or InterVU is not able to provide such services in
connection with such particular distribution method at a level of quality
reasonably comparable to that of other relevant third party providers, then NBC
shall not be bound by the terms of this Section 2.6 in connection with such
distribution method.
2.7 Exclusive Term. The term of this Agreement (the "Exclusive Term")
shall be the period beginning on the Effective Date and ending on the second
anniversary of the Effective Date, provided, however that if certain mutually
agreed cost and revenue goals are established and met, then the Exclusive Term
shall be automatically extended until the fourth anniversary of the Effective
Date. The parties shall meet and consult with one another in good faith and
shall make good faith efforts to determine such cost and revenue goals on or
before the first anniversary of the Effective Date.
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2.8 Early Termination.
2.8.1 Prior to an Initial Public Offering. During the Exclusive
Term and prior to the consummation of an Initial Public Offering, NBC
may terminate this Agreement without cause by giving ninety (90) days
prior written notice to InterVU. Any such notice must be accompanied by,
and actual termination of this Agreement at the end of the ninety (90)
days shall be expressly conditioned upon, NBCI's or NBC's return, for no
compensation, of the following number of Purchased Shares in the
following periods: (i) all 1,280,000 of the Purchased Shares, if notice
is given in months one (1) through six (6) of the Exclusive Term; (ii)
900,000 of the Purchased Shares, if notice is given in months seven (7)
through twelve (12) of the Exclusive Term, (iii) 380,000 of the
Purchased Shares, if notice is given in months thirteen (13) through
twenty-four (24) of the Exclusive Term and (iv) no Purchased Shares, if
notice is given after month twenty-four (24) of the Exclusive Term if
such term is extended as provided herein; provided, however, that
neither NBCI nor NBC shall be required to return any such Purchased
Shares until such date as NBC receives all of the Prepayments owed
pursuant to Sections 4.4 and 4.5.1.
2.8.2 Following an Initial Public Offering. Any time after the
date on which InterVU consummates an Initial Public Offering which is
during the Exclusive Term, NBC may terminate this Agreement without
cause by giving ninety (90) days prior written notice to InterVU. Any
such notice must be accompanied by, and actual termination of this
Agreement at the end of the ninety (90) days shall be expressly
conditioned upon, NBCI's or NBC's return, for no compensation, of either
(i) all of the shares of InterVU Common Stock held by each party, or
both parties, if such termination becomes effective prior to the date
which is three (3) months following the Effective Date and NBC has not
for at least a three (3) month period complied with the intent of this
Agreement or, at a minimum, displayed a button or link containing a copy
of the InterVU Logo somewhere on XXX.xxx, the location of which shall be
selected by NBC in its sole discretion, or (ii) 600,000 shares of
InterVU Common Stock if such termination becomes effective at any other
time during the first two (2) years of the Exclusive Term; provided,
however, that neither NBCI nor NBC shall be required to return any such
Common Stock until such date as NBC receives all of the Prepayments owed
pursuant to Sections 4.4 and 4.5.1.
2.8.3 Following a Material Breach by NBC. In the event that NBC
commits a material breach of this Agreement, InterVU shall provide NBC
with written notice of such breach, and if NBC fails to cure such breach
within thirty (30) days of receipt of such written notice, this
Agreement shall immediately terminate at the end of such cure period.
Upon a termination pursuant to this Section 2.8.3, NBC shall return the
Purchased Shares, if any, which it would have been otherwise required to
return pursuant to the terms of Section 2.8.1 or Section 2.8.2,
whichever is relevant. This right of termination shall be in addition to
all other rights and remedies at law or in equity.
2.8.4 Following a Material Breach by InterVU. In the event that
(i) the services provided by InterVU hereunder materially decline below
industry standards or fail to conform to the specifications in Exhibit B
hereto or any Revised Standards or (ii) InterVU provides any audio/video
material other than NBC Audio/Video Clips to NBC's users or provides any
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NBC Audio/Video Clips in a manner not approved by NBC, NBC shall notify
InterVU of such fact in writing, and if InterVU fails to cure such
problem in a manner which is reasonably satisfactory to NBC within ten
(10) business days of its receipt of such written notice and such
failure to cure is not due to circumstances beyond the Control of
InterVU, this Agreement shall immediately terminate at the end of such
cure period. In the event that InterVU commits any other material breach
of this Agreement not described above, which breach is material, NBC
shall provide InterVU with written notice of such breach, and if InterVU
fails to cure such breach within thirty (30) days of its receipt of such
written notice, this Agreement shall immediately terminate at the end of
such cure period. Upon a termination pursuant to the terms of this
Section 2.8.4, NBC shall not be required to return the Purchased Shares,
if any, which it would have been otherwise been required to return
pursuant to the terms of Section 2.8.1 or 2.8.2. This right of
termination shall be in addition to all other rights and remedies at law
or in equity.
2.9 Adult Video Content.
2.9.1 Distribution. InterVU represents and warrants that the
InterVU Delivery Centers and the InterVU Delivery System are not
currently used, and shall not be used in the future, in connection with
the encoding or distribution of Adult Video Content. If InterVU allows
the InterVU Delivery Centers and/or the InterVU Delivery System to be
used to encode and/or distribute any Adult Video Content, about which
InterVU has notice of any kind, then it shall immediately provide NBC
with written notice of such fact which notice shall be effective as of
the date described in Section 8.10. In addition, if NBC determines, in
its sole discretion, that the InterVU Delivery Centers and/or the
InterVU Delivery System are being used to encode and/or distribute Adult
Video Content, then NBC shall notify InterVU of such fact which notice
shall be effective as of the date described in Section 8.10. In either
case, InterVU shall have five business (5) days from the effective date
of such notice to discontinue such encoding and/or distribution to NBC's
satisfaction. If InterVU fails to do so within such time and if, at such
time, whether pursuant to the Stock Purchase Agreement, an effective
registration statement or Rule 144 (i) NBCI or NBC, as the case may be,
may not immediately sell all of the Purchased Shares or Conversion
Shares held by it or (ii) NBC is precluded from immediately selling all
of the Common Stock purchased by it in the Directed Offering (as all
such terms are defined in the Stock Purchase Agreement), then such
failure shall constitute a breach of this Section 2.9.1, and NBC shall
have the option of exercising the remedies set forth below in Section
2.9.2.
2.9.2 Remedies. InterVU hereby acknowledges the extreme
importance to NBC and NBCI of InterVU's agreement not to permit the
encoding or distribution of Adult Video Content as described herein.
Therefore, the parties agree that money damages, which the parties agree
would be substantial and irreparable, would not be a sufficient remedy
for any breach by InterVU of the terms of Section 2.9.1, and NBC shall
be entitled to, and InterVU shall not oppose, specific performance and
immediate injunctive relief, as well as any other appropriate equitable
relief, in connection therewith without the requirement of posting a
bond or other security. In addition to any of the applicable indemnity
obligations described in Section 7.2, InterVU agrees that it shall
reimburse NBC for any and all reasonable legal or other costs and
expenses incurred by NBC in
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connection with NBC's seeking and/or obtaining such specific performance
or injunction as described in this Section 2.9.2. The remedies described
in this Section 2.9.2 shall not be deemed to be the exclusive remedies
for a breach of Section 2.9.1 by InterVU, but shall be in addition to
all other remedies available at law or in equity to the parties hereto.
SECTION 3 - COST SHARING
3.1 Cost Sharing, Contribution.
3.1.1 Prior to an Initial Public Offering. Beginning on the
Effective Date and prior to the consummation of an Initial Public
Offering, InterVU shall bear the cost of servicing NBC as described
herein, including without limitation all out of pocket expenses and
man-hours plus an allocation of related overhead which shall be deemed
to be equal to twenty percent (20%) of the total out of pocket expenses
and man hours (the "Costs") incurred during each calendar month, up to a
maximum aggregate amount of $10,000 per month (representing, as of the
Effective Date, the approximate Cost of delivering at least 100
gigabytes). If additional delivery capacity or other InterVU services
are needed, InterVU shall notify NBC in writing, and InterVU and NBC
shall negotiate in good faith the percentage of such Costs to be paid by
each party if NBC chooses to continue to provide NBC Audio/Video Clips
during such month. InterVU may elect not to expend more than $10,000 per
month on Costs; however, upon such election, NBC shall be permitted to
use additional delivery services from third parties notwithstanding the
exclusivity provisions of Section 2.6 herein.
3.1.2 Following an Initial Public Offering. For each full
calendar month, or pro rated portion thereof, beginning on date on which
InterVU consummates an Initial Public Offering, NBC shall reimburse
InterVU for the Costs, if any, actually incurred by InterVU in
connection with the actual delivery of NBC Audio/Video Clips as
described hereunder during each calendar month; provided, however, that
NBC shall only be required to reimburse Costs in excess of $10,000 per
month in the aggregate if either (i) such Costs are approved by NBC in
writing in advance or (ii) are incurred by InterVU in connection with
projects, operations or activities that have been approved by NBC in
advance in a writing which describes the amount of additional Costs
which will be incurred in connection with such projects, operations or
activities.
3.1.3 Nature of Payments. All payments of Costs hereunder shall
be in addition to all other payment obligations between the parties.
3.2 Accounting Records.
3.2.1 Invoicing. With respect to all Costs that are to be
reimbursed by NBC pursuant to Section 3.1 or standard rates that are to
be paid by NBC pursuant to Section 4.3, InterVU shall deliver an invoice
to NBC with respect to such amounts within ten (10) days after the end
of the monthly accounting period in which such Costs were incurred or to
which such standard rates apply and NBC shall pay such invoices within
forty-five (45) days after receipt of such invoice from InterVU. Any
failure by NBC to pay the amounts set forth in an invoice shall be a
material breach of this Agreement in the event that NBC does not cure
such failure in full within thirty (30) days of receipt of written
notice of such breach.
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3.2.2 Audit. NBC shall have the right, at its expense and on
thirty (30) days written notice, to have an independent certified public
accountant audit the records of InterVU to verify the information stated
on the monthly invoice. Records subject to audit under this Section
3.2.2 shall extend no more than three (3) years prior to the request
date. If such audit indicates an overbilling by InterVU, InterVU shall
promptly reimburse NBC for the amount overbilled. If such overbillings
are greater than five percent (5%) of the total invoice amount, pursuant
to Section 3.1 above, with respect to such audited periods, InterVU
shall also reimburse NBC for the cost of the audit. NBC may exercise its
right to audit no more than once per year or once per quarter for the
four quarters following any quarter in which an audit indicated an
overbilling of greater than five percent (5%). Audit scheduling shall be
by mutual agreement (which agreement shall not be unreasonably withheld)
and must be completed within ten (10) working days. Copies of all audit
reports shall be furnished to both InterVU and NBC and shall be
considered confidential information of InterVU.
SECTION 4 - REVENUE SHARING AND ADVERTISING COSTS
4.1 Incorporation of NBC Audio/Video Clips into Sites. Subject to
Section 2.5, NBC may make the NBC Audio/Video Clips available to users over the
Internet from such Internet sources as NBC elects.
4.2 Revenue Sharing. InterVU shall be entitled to receive, and NBC shall
pay to InterVU within forty-five (45) days of the end of each quarterly
accounting period, thirty percent (30%) of the total of all actual NBC receipts
in cash from advertising, transactions and subscriptions directly attributable
to any Revenue Sharing Area less discounts, bad debts, sales taxes, actual
returns, agency commissions, and all out of pocket expenses and man-hours
directly incurred in connection with creating (other than expenses related to
the creation of any relevant web site), selling and fulfilling such advertising,
transactions and subscriptions ("Net Revenues"). In addition, if NBC receives
any barter from third parties, that is not barter that the parties reasonably
agree accrues to the benefit of the Revenue Sharing Area, in exchange for
placing advertising or promotional material in any Revenue Sharing Area ("Barter
Ads"), then NBC shall use reasonable efforts to first attempt to share thirty
percent (30%) of such Barter Ads with InterVU if permissible, and then, to the
extent that NBC cannot do so, to provide InterVU with an amount of comparable
advertising or promotion on the NBC Internet Sites or on any Internet site on
which NBC Controls the placement of advertising and makes available to InterVU
for the purposes hereof so that InterVU receives total Barter Ads equal to
thirty percent (30%) of the total amount of Barter Ads provided to third
parties.
4.3 Election to Pay Standard Rates. With regard to any Internet source,
site or "area" that would otherwise be a Revenue Sharing Area, NBC may elect, at
any time, for any such site to pay for InterVU's service at video service
delivery rates which are at least as favorable as the most favorable video
service delivery rates offered to any other third party by InterVU, other than
certain short term (i.e, no more than six (6) month) promotional video service
delivery rates offered by InterVU from time to time, and such site shall
thereafter no longer be subject to revenue sharing pursuant to Section 4.2
hereof.
4.4 Production Cost and Advertising Contribution. Upon the completion of
the events described in Section 2 of the Stock Purchase Agreement, InterVU shall
become fully obligated to
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pay to NBC a total of Two Million Dollars ($2,000,000) in a series of
non-refundable payments to NBC (the "Prepayments") as described below in Section
4.5 as payment for and prepayment of (i) the costs of producing and operating
the Revenue Sharing Area (the "Production Costs") both prior to and following
the date of the events described in Section 2 of the Stock Purchase Agreement
which Production Costs may include, but shall not be limited to, costs related
to NBC's fully-loaded personnel costs, out of pocket costs, costs for content
needed for the Revenue Sharing Area, reasonable allocated overhead costs and a
management fee to be paid to NBC in return for its services equal to twenty
percent (20%) of all production and operation costs and/or (ii) the costs of
advertising and promotions, including any expenses related thereto, to be placed
by InterVU for its own use from NBC for placement on the NBC Internet Sites or
for placement on any Internet site on which NBC Controls the placement of
advertising and makes available to InterVU for the purposes hereof (the "InterVU
Advertising") over a three (3) year period following the date of payment
thereof. Placement of InterVU Advertising on NBC Internet Sites shall be subject
to the availability of inventory thereon, compliance with NBC's standard terms,
conditions and policies, a requirement that all pre-paid amounts be utilized
within a three (3) year period, and the completion of the events described in
Section 2 of the Stock Purchase Agreement, provided that NBC shall not be
required to provide any such InterVU Advertising at any particular time if NBC
has already fully earned the total amount of Prepayments actually made to NBC by
InterVU up to such time. The parties agree that the InterVU Advertising, and any
expense related thereto, shall be valued at NBC's customary rates offered to
third party advertisers as in effect at the time that such InterVU Advertising
is displayed, provided that certain short term (i.e, no more than six (6) month)
promotional rates offered by NBC from time to time shall not be considered when
determining such customary rates. InterVU's obligation to make the Prepayments,
and NBC's obligation to provide InterVU Advertising and/or incur Production
Costs up to the amount of the Prepayment shall survive the termination of this
Agreement.
4.5 Payments and Accounting Records.
4.5.1 Payment of Prepayments. InterVU shall be obligated to make
the following payments to NBC in connection with the Prepayments on the
indicated dates: Seven Hundred and Fifty Thousand Dollars ($750,000)
immediately upon the completion of a Directed Offering; Five Hundred
Thousand Dollars ($500,000) upon the end of the first calendar quarter
occurring after the successful completion of the Directed Offering
(regardless of the actual amount of time between the Directed Offering
and the end of the quarter); Five Hundred Thousand Dollars ($500,000)
upon the end of the second calendar quarter occurring after the
successful completion of the Directed Offering; and Two Hundred and
Fifty Thousand Dollars ($250,000) upon the end of the third calendar
quarter occurring after the successful completion of the Directed
Offering; provided, however that if this Agreement is terminated for any
reason all unpaid Prepayments shall become immediately due and payable
to NBC.
4.5.2 Quarterly Reports. NBC shall maintain complete and
accurate records of all information necessary to calculate the Net
Revenues, the Production Costs and the price of any InterVU Advertising
as well as the expenses related thereto run during such quarter,
including without limitation copies of all invoices, billing records and
payment records. NBC shall submit a report to InterVU containing the
above information with each quarterly
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payment, if any, to InterVU. Such report shall also reflect the amount
of the Prepayment, if any, that has been earned by NBC over such quarter
in connection with the Production Costs and the InterVU advertising.
4.5.3 Audit. InterVU shall have the right, at its expense and on
thirty (30) days written notice, to have an independent certified public
accountant audit the records of NBC to verify the information provided
in the quarterly reports. Records subject to audit under this Section
4.5.2 shall extend no more than three (3) years prior to the request
date. If such audit indicates an underpayment or overbilling by NBC, NBC
shall promptly make the necessary corrective payments. If such
underpayments or overbillings are greater than five percent (5%) of the
shared revenues or xxxxxxxx that were required to have been paid,
pursuant to Section 4.2 or 4.4 above, with respect to such audited
periods, NBC shall also reimburse InterVU for the cost of the audit.
InterVU may exercise its right to audit no more than once per year or
once per quarter for the four quarters following any quarter in which an
audit indicated an underpayment or overbilling of greater than five
percent (5%). Audit scheduling shall be by mutual agreement (which
agreement shall not be unreasonably withheld) and must be completed
within ten (10) working days. Copies of all audit reports shall be
furnished to both NBC and InterVU and shall be considered confidential
information of NBC.
SECTION 5 - PROMOTIONAL OBLIGATIONS
5.1 Promotional Obligations of NBC.
5.1.1 Promotion. NBC shall use commercially reasonable efforts
to promote InterVU, the InterVU Delivery Centers and the InterVU
Delivery System in conjunction with Internet advertising promotions
involving InterVU's dissemination of NBC Audio/Video Clips over the
Internet wherever NBC believes, in its reasonable discretion, that it is
appropriate. Any button or link by which an user may initiate the
downloading and viewing of an NBC Audio/Video Clips on an NBC Internet
Site shall (i) include on or nearby (i.e., on the same page) such button
or link a copy of the InterVU Logo which shall be in a form and size to
be mutually agreed upon by the parties and which shall be a link to the
InterVU Site, and (ii) conform to any reasonable technical
specifications provided by InterVU with respect to compatibility with
the InterVU Delivery System (e.g., information necessary for an user to
access the appropriate InterVU Delivery Center as determined by the
InterVU Delivery System).
5.1.2 Referral. For a period of two (2) years after the
Effective Date, NBC shall use commercially reasonable efforts to
introduce InterVU, the InterVU Delivery Centers and the InterVU Delivery
System to the television stations associated with the NBC Television
Network and to refer other programming opportunities for the Internet to
InterVU to the extent that NBC believes, in its reasonable discretion,
such introductions or referrals are appropriate. For each such referral,
NBC shall receive a commission from InterVU for a period of two (2)
years after the commencement of a service relationship between InterVU
and the company referred to InterVU by NBC, in an amount equal to ten
percent (10%) of
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InterVU's video delivery service revenue (but not production fees)
generated from such referral (the "Referral Fees").
5.2 Promotional Obligations of InterVU.
5.2.1 NBC Link. NBC authorizes InterVU to, and InterVU shall,
include on the multimedia manager of the InterVU Site an "NBC" icon
which links to the World Wide Web site that has as its universal
resource locator (URL) "xxx.xxx.xxx".
5.2.2 Advertising. For a period of four (4) years after the
Effective Date, InterVU shall use commercially reasonable efforts to
offer NBC the right to place video advertising InterVU procures for the
InterVU Site and other web sites serviced by InterVU on the NBC Internet
Sites in exchange for payments to NBC at InterVU's customary rates and
terms.
5.3 Accounting Records.
5.3.1 Quarterly Reports. InterVU shall maintain complete and
accurate records of all information necessary to calculate the Referral
Fees and any amounts owed by InterVU pursuant to Section 5.3.2,
including without limitation copies of all invoices, billing records and
payment records with respect to the service fees incurred by entities
referred to InterVU by NBC and any advertising provided by NBC for which
InterVU owes payment. InterVU shall submit a report to NBC containing
the above information with each quarterly payment to NBC.
5.3.2 Audit. NBC shall have the right, at its expense and on
thirty (30) days written notice, to have an independent certified public
accountant audit the records of InterVU to verify the information
provided in the monthly reports. Records subject to audit under this
Section 5.3.2 shall extend no more than three (3) years prior to the
request date. If such audit indicates an underpayment by InterVU,
InterVU shall promptly make the necessary corrective payments. If such
underpayments are greater than five percent (5%) of the shared revenues
that were required to have been paid, pursuant to Sections 5.2.2 or
5.3.1 above, with respect to such audited periods, InterVU shall also
reimburse NBC for the cost of the audit. NBC may exercise its right to
audit no more than once per year or once per quarter for the four
quarters following any quarter in which an audit indicated an
underpayment of greater than five percent (5%). Audit scheduling shall
be by mutual agreement (which agreement shall not be unreasonably
withheld) and must be completed within ten (10) working days. Copies of
all audit reports shall be furnished to both NBC and InterVU and shall
be considered confidential information of InterVU.
SECTION 6 - REPRESENTATIONS AND WARRANTIES; LIMITATIONS
6.1 NBC's Representation and Warranty. NBC hereby represents and
warrants to InterVU, as of Effective Date, as of each date on which NBC
continues or adds new or modified NBC Audio/Video Clips to be hosted by use of
the InterVU Delivery Centers and the InterVU Delivery System, and as of each
date on which the Exclusive Term of this Agreement is actually extended pursuant
to Section 2.7 above, that, to the best of NBC's knowledge, none of the NBC
Audio/Video Clips (i) violate any international, United States, foreign, state,
local or other applicable law,
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regulation, rule or order of any applicable regulatory authority or court of
competent jurisdiction, (ii) infringe or constitute the unauthorized use of any
patent right, copyright, trademark, service xxxx, trade name or other
intellectual property right of any third party, (iii) constitute, are based on
or involve the misappropriation of any trade secret or other intellectual
property right of any third party, or (iv) are used for or involve any
defamatory, threatening or obscene purpose.
6.2 InterVU's Representation and Warranty. InterVU hereby represents and
warrants to NBC, as of Effective Date, as of each date on which NBC continues or
adds new or modified NBC Audio/Video Clips to be hosted by use of the InterVU
Delivery Centers and the InterVU Delivery System, and as of each date on which
the Exclusive Term of this Agreement is actually extended pursuant to Section
2.7 above, that, to the best of InterVU's knowledge, neither the InterVU
Delivery Center nor the InterVU Delivery System (i) violate any international,
United States, foreign, state, local or other applicable law, regulation, rule
or order of any applicable regulatory authority or court of competent
jurisdiction, (ii) infringe or constitute the unauthorized use of any patent
right, copyright, trademark, service xxxx, trade name or other intellectual
property right of any third party, (iii) constitute, are based on or involve the
misappropriation of any trade secret or other intellectual property right of any
third party, (iv) are used for or involve any defamatory, threatening or obscene
purpose, (v) will contain computer viruses and material crash bugs in any form
or (vi) will adversely affect the operation of the NBC Internet Sites in any
material manner. In addition, InterVU also represents and warrants to NBC at all
times during the Exclusive Term of this Agreement that the InterVU Delivery
Centers and the InterVU Delivery System (i) will be operated and maintained with
professional diligence and skill and in a manner consistent with high industry
standards and (ii) will operate substantially as described in this Agreement,
including Exhibit B hereto and any Revised Standards.
6.3 LIMITATION OF LIABILITY. THE LIABILITY OF EITHER PARTY FOR ANY
BREACH OF ITS OBLIGATIONS UNDER THIS AGREEMENT OR OTHERWISE RELATING TO THIS
AGREEMENT SHALL BE LIMITED TO THE AGGREGATE AMOUNTS ACTUALLY PAID BY NBC TO
INTERVU UNDER THIS AGREEMENT EXCEPT UNDER THE INDEMNITY PROVISIONS OF SECTION
7.1 AND 7.2 BELOW. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY
FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT OR PUNITIVE DAMAGES ARISING OUT OF
OR IN RELATION TO THIS AGREEMENT. EXCEPT FOR THE PAYMENT OF ANY MONIES OWED
UNDER THIS AGREEMENT, NEITHER PARTY SHALL BE HELD LIABLE OR RESPONSIBLE TO THE
OTHER PARTY, NOR BE DEEMED TO HAVE DEFAULTED UNDER OR BREACHED THIS AGREEMENT,
FOR FAILURE OR DELAY IN FULFILLING OR PERFORMING ANY TERM OF THIS AGREEMENT TO
THE EXTENT, AND FOR SO LONG AS, SUCH FAILURE OR DELAY IS CAUSED BY OR RESULTS
FROM CAUSES BEYOND THE REASONABLE CONTROL OF THE AFFECTED PARTY INCLUDING BUT
NOT LIMITED TO FIRE, EARTHQUAKES, FLOODS, EMBARGOES, WAR, ACTS OF WAR (WHETHER
WAR BE DECLARED OR NOT), INSURRECTIONS, RIOTS, CIVIL COMMOTIONS, STRIKES,
LOCKOUTS, OR OTHER LABOR DISTURBANCES, ACTS OF GOD, ACTS, OMISSIONS OR DELAYS IN
ACTING BY ANY GOVERNMENTAL AUTHORITY OR THE OTHER PARTY.
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SECTION 7 - INDEMNIFICATION
7.1 Indemnity. NBC shall defend, indemnify and hold harmless InterVU and
its affiliates, directors, employees, agents, shareholders and subcontractors
against any and all claims, losses, liabilities, damages and expenses (including
reasonable attorneys' fees and costs) which it or they may suffer or incur in
connection with any actual or threatened claim, demand, action or other
proceeding by any third party (including governmental authority) arising from or
relating to (i) any misrepresentation or breach of warranty by NBC hereunder, or
(ii) the breach by NBC of any obligation hereunder.
7.2 Indemnity. InterVU shall defend, indemnify and hold harmless NBC and
its affiliates, directors, employees, agents, shareholders and subcontractors
against any and all claims, losses, liabilities, damages and expenses (including
reasonable attorneys' fees and costs) which it or they may suffer or incur in
connection with any actual or threatened claim, demand, action or other
proceeding by any third party (including governmental authority) arising from or
relating to (i) any misrepresentation or breach of warranty by InterVU
hereunder, or (ii) the breach by InterVU of any obligation hereunder.
SECTION 8 - MISCELLANEOUS
8.1 Service Usage Statistics. InterVU shall obtain the prior written
permission of NBC, which permission shall not be unreasonably withheld, in order
to distribute usage statistics of NBC Internet Sites to selected recipients, and
such permission shall be conditioned upon InterVU's agreement not to identify
NBC by name.
8.2 Use of Name. Subject to Section 8.4, InterVU shall have the right to
use the name of NBC for InterVU's own promotional use with prior written
authorization by NBC except as required by law.
8.3 No Historical Archival of Content. While InterVU backs up its server
computers as a regular part of its internal systems administration, the InterVU
Delivery Centers are for hosting and displaying of customers' audio/video
content, including NBC Audio/Video Clips. InterVU advises NBC that, except as
required to provide the services described herein, it does not provide or
guarantee any storage or backup of NBC's Audio/Video Clips after the date on
which NBC directs InterVU to cease providing such NBC Audio/Video Clips. NBC is
responsible for providing any storage, backup and archival history support with
respect to the NBC's Audio/Video Clips, whether created by NBC or for NBC by a
different party.
8.4 Intellectual Property Rights. NBC's use of the InterVU Logo and
InterVU's use of any NBC trademarks, as authorized under this Agreement, shall
be subject to review and prior written consent by InterVU and NBC, respectively.
All use by NBC of the InterVU Logo shall inure to the benefit of InterVU and NBC
shall not obtain any ownership interests in the InterVU Logo. All use by InterVU
of any NBC trademarks shall inure to the benefit of NBC and InterVU shall not
obtain any ownership interests in any NBC trademarks. Any use by one party
("Using Party") of the trademarks of the other party ("Owning Party") shall be
subject to the Owning Party's then-applicable policies that have been disclosed
to the Using Party regarding the use,
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appearance and affixation of such marks and the quality of any materials or
products to which such marks are affixed. Upon request, the Using Party shall
provide the Owning Party with representative copies of any materials or products
to which the trademarks are affixed. The Owning Party shall have the right upon
thirty (30) days' prior written notice to terminate the Using Party's rights to
use the Owning Party's trademarks in the event that any such policy regarding
the use, appearance and affixation of such marks, or the quality of any
materials or products to which such marks are affixed, is being materially
breached by the Using Party, which breach is not cured within such thirty (30)
day period. Except as provided in this Agreement, no party shall, as a result of
this Agreement, obtain any ownership interest or other right in any patents,
pending patent applications, trade secrets, copyrights, trademarks, trade names
or other intellectual property rights of the other party.
8.5 Independent Contractors. The parties acknowledge that InterVU and
NBC are independent contractors, and that nothing in this Agreement shall be
construed to create a joint venture, partnership or agency relationship between
them.
8.6 No Assignment. Neither party shall assign, transfer or otherwise
dispose of this Agreement or any interest therein, whether voluntarily, by
operation of law or otherwise, except to an entity wholly owned by or which
wholly owns such party, without the express written consent of the other party.
Each party shall give express written notice to the other party of any permitted
assignment, transfer or other disposition, and the permitted assignee or
transferee shall expressly agree in writing to be bound by the terms and
conditions hereof.
8.7 Choice of Law. This Agreement shall be governed by and construed
under the internal laws of the State of California, without reference to
principles of conflict of laws or choice of law.
8.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.9 Headings. The headings and captions used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting
this Agreement. All references in this Agreement to sections, paragraphs,
exhibits and schedules shall, unless otherwise provided, refer to sections and
paragraphs hereof and exhibits and schedules attached hereto, all of which
exhibits and schedules are incorporated herein by this reference.
8.10 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or
twenty-four (24) hours after delivery to a courier service or upon deposit with
the United States Post Office, by registered or certified mail, postage prepaid
and addressed to each party to be notified at the address indicated for such
party at the address specified on the signature page, or at such other address
as any party may designate by giving ten (10) days advance written notice to all
other parties.
8.11 Survival. Sections 1, 2.9, 4.4, 4.5, 6, 7 and 8 will survive the
expiration or termination of this Agreement.
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8.12 Waiver/Modification: No modification or amendment to, or waiver of,
this Agreement will be binding and valid unless it is in writing and executed by
the party against whom enforcement is sought. No waiver of a breach of any
provision of this Agreement or of any default hereunder shall be deemed a waiver
of any other breach or default of this Agreement.
8.13 Entire Agreement. This Agreement, together with all exhibits and
schedules hereto, constitutes the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and all
prior negotiations, correspondence, agreements, understandings duties or
obligations between the parties with respect to the subject matter hereof other
than the Non-disclosure and Confidentiality Agreement and the Stock Purchase
Agreement.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, each party has caused this Agreement to be duly
executed on its behalf to be effective as of the date set forth above.
INTERVU INC., NBC MULTIMEDIA, INC.,
a Delaware corporation a Delaware corporation
By: /s/ Xxxxx X. Xxxxxx By: /s/ Xxxxxx Sonatis
---------------------------------- -------------------------------
Name: Xxxxx X. Xxxxxx Name: Xxxxxx Sonatis
-------------------------------- -------------------------------
Title: Chief Executive Officer Title: Vice President
------------------------------- -------------------------------
Address for Notice: Address for Notice:
000 Xxxxx Xxxxx Xx Xxxxx 00 Xxxxxxxxxxx Xxxxx
Xxxxxx Xxxxx, XX 00000 Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxx Attn: Legal Department
Fax: (000) 000-0000
with a copy to:
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxxx
Fax: (000) 000-0000
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