Internet Game Development Agreement - Pearson Television Inc., Pearson Television Netherlands, Pearson Television Holdings Inc., Pearson Television North America Inc., Pearson Television Ltd. and E-Pub (Holdings) Ltd.
INTERNET GAME DEVELOPMENT AGREEMENT
This Internet Game Development Agreement (the "Agreement") is
effective as of January 12, 1999 (the "Effective Date"), by and between Pearson
Television, Inc. ("PTV Inc."), a New York corporation with its principal place
of business at 1325 Avenue of the Americas, New York, New York 10019; Pearson
Television Netherlands ("PTV Netherlands") a branch of Pearson Television France
EURL; Pearson Television Holdings, Inc.; Pearson Television North America, Inc.;
Pearson Television Limited, and their respective subsidiaries (collectively,
"Pearson"); and E-Pub (Holdings) Ltd. ("E-Pub"), a Bermuda corporation with its
principal place of business at 44 Church Street, Hamilton HM12 Bermuda.
WHEREAS, E-Pub develops, operates and maintains interactive games on
sites on the world-wide-web portion of the Internet currently located at the URL
(as hereinafter defined) "www.uproar" (with related web pages at other
URLs); and
WHEREAS, Pearson is the owner of certain television game shows and the
rights to develop derivative works based on such game shows and Pearson desires
to license to E-Pub the right to develop, and desires to cooperate with E-Pub
to develop, Internet Versions (as hereinafter defined) of certain specified
television game shows.
NOW, THEREFORE, for good and valuable consideration; the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Definitions. When used in this Agreement each of the following
shall have the following respective meanings:
1.1 "Advertising" shall include but shall not be limited to
sponsorships, promotions, banners (including banners that scroll along with text
and banners appearing between moving streams of headlines, so called "tickers"),
animated type, animated images, interactive trivia, pop-up windows, road blocks,
intermercials (animated commercials), interstitials, logo placements and other
relationships, materials or devices to be developed or agreed upon by the
parties and used on the Site or any Affiliate web sites.
1.2 "Affiliate" shall mean any corporation or other business entity
that directly or indirectly controls, is controlled by, or is under common
control with a party. Control means direct or indirect ownership of or other
beneficial interest in fifty percent (50%) or more of the voting stock, other
vesting interest, or income of a corporation or other business entity.
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1.3 "E-Pub Production and Marketing Information" shall mean
knowledge or information acquired, developed, or possessed by E-Pub (with the
right to disclose the same to others) at any time during the term of this
Agreement, or prior thereto, which relates to (i) the development, production
and marketing of the Licensed Internet Games; (ii) the integration of the
Licensed Internet Games into the Site; (iii) the design, hosting and maintenance
of the Site; (iv) the integration of advertising into the Site; (v) the
rotation of advertising throughout the Site, electronic commerce conducted on or
through the Site; (vi) the hyperlinking of the Site to other web sites; and
(vii) information acquired by Pearson from E-Pub pursuant to the financial and
business relationships established under this Agreement, as well as any
information pertaining to the marketing, advertising or sale of the Licensed
Internet Games as E-Pub may in its sole discretion choose to make available to
Pearson.
1.4 "Games" shall mean the television game shows (including Game
Show Formats) owned or controlled by Pearson, to which certain limited rights
are licensed to E-Pub under this Agreement.
1.5 "Game Show Format" shall mean rules, procedures, "look and
feel" and such other elements of the Games as Pearson shall make available to
E-Pub for development. The Game Show Format shall not include talent, guests, or
television advertisements (except in the event that any rights to such material
are explicitly granted to E-Pub in writing by Pearson) and Pearson shall make
reasonable efforts to include artwork, photographs, question banks from
previously televised shows, scripted celebrity banter and four episodes (not for
transmission via the Internet) of each Game for use in the development process.
1.6 "Local FF" shall mean a first-run English language
television show owned, produced and/or distributed by Pearson in a local
television market of any English speaking country which is based on or
substantially similar to that certain television game show known as Family
Feud.
1.7 "Local FF Internet Version" shall mean an Internet Version of a
Local FF.
1.8 "Local 100%" shall mean a first-run English language
television show owned, produced and/or distributed by Pearson in a local
television market of any English speaking country, which is based on or
substantially similar to that certain television game show known as 100%.
1.9 "Local 100% Internet Version" shall mean an Internet Version
of a Local 100%.
1.10 "Local Match Game" shall mean a first-run English language
television show owned, produced and/or distributed by Pearson in a local
television market of any English speaking country, which is based on or
substantially similar to that certain television game show known as Match Game.
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1.11 "Local Match Game Internet Version" shall mean an Internet
Version of a Local Match Game.
1.12 "Licensed Internet Games" shall mean collectively the Internet
Versions of the Games; namely, Family Feud; Match Game; and 100%, or such other
television game shows as may be substituted by Pearson pursuant to Section 3.2
of this Agreement.
1.13 "Internet Version" shall mean the authorized derivative work
based on a Game Show Format that is distributed via Internet Protocols
(including proprietary languages of Internet service providers such as, by way
of example and not by way of limitation, "Rainman") or other computer data
transmission systems for execution primarily on an Internet hosting server,
provided however that Internet Versions shall not include stand-alone hand-held
games, any other game-console platform, CD-Roms, enhanced television (including
without limitation play-along games) or any other broadcast or one-way
transmission system. Pearson reserves all other rights in the formats including
without limitation all television, video, non-theatric, video-on-demand and
near-video-on-demand, and all on-line rights other than those granted above,
including without limitation the right to promote other versions of the format
on-line whether on the Internet or otherwise, and to transmit video and/or audio
versions of the format on line. Pearson reserves the right to feature the
formats on Pearson web sites and on appropriate broadcaster sites.
1.14 "Licensed Marks" shall mean FAMILY FEUD, 100%. MATCH GAME and
BLANKETY BLANK as well as the trademarks, service marks and domain names that
are listed on the attached Exhibit B, as well as such other indicia of origin as
Pearson may from time to time designate by written notice served upon E-Pub.
1.15 "Coverage" shall mean the average quarterly percentage of
United States households (as reported by Nielsen Media Research ("Nielsen"))
that can receive a television show, whether via broadcast or cable transmission.
Pearson shall inform E-Pub from time to time and on no less than a monthly basis
of the coverage levels provided by Nielsen.
1.16 "Gross Revenue" shall mean all revenues received by E-Pub that
are directly related to the exploitation of the Licensed Internet Games
including without limitation (i) revenue from the sale of Advertising on pages
of the Uproar web site (along with all linked and related Uproar web pages, the
"Site") and affiliated web sites on which any of the Licensed Internet Games
appear; (ii) revenue from advertising linked to pages on which Licensed Internet
Games appear (such as jump pages or interstitials); (iii) subscription revenues;
and (iv) any commission or other revenue based on merchandise sales related to
the Licensed Internet Games; but excluding advertising agency commissions. Goods
or services received in barter arrangements shall not be included in Gross
Revenue, provided however that E-Pub shall not accept any Advertising on a
barter basis for the Licensed Internet Games without the prior written approval
of Pearson.
1.17 "Net Revenue" shall mean the Gross Revenue received by E-Pub
less; (i) [****] format royalty (of gross revenue) payable to PTV Netherlands;
(ii) site
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**** Represents material which has been redacted pursuant to a request for
confidential treatment pursuant to Rule 406 under the Securities Act of
1933, as amended. Omitted material for which confidential treatment has
been requested has been filed separately with the Securities and Exchange
Commission.
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maintenance costs of [****] per annum; (iii) prizes (not to exceed the greater
of [****] per month, per game or [****] of gross revenue); (iv) music and talent
(including clearance) cost for rights for use in the Licensed Internet Games
which have been negotiated for E-Pub by Pearson; (v) direct marketing costs;
(vi) question research and development (namely cost of sorting and selecting old
questions and developing new questions); (vii) traffic and usage research and
ratings related to the Licensed Internet Games; (viii) actual registration and
filing fees (if any) related to gaming; and (ix) sales commissions of [****]
payable to E-Pub.
1.18 "Television Broadcast Year" shall mean the period of twelve
(12) consecutive months during the Term (as defined in Section 2, below) of this
Agreement beginning on the launch date of any U.S. Local Television Show (as
hereinafter defined), and each subsequent Television Broadcast Year to begin at
the expiration of the preceding Television Broadcast Year.
1.19 "Pearson Production and Marketing Information" shall mean
knowledge or information acquired, developed, or possessed by Pearson (with the
right to disclose the same to others) at any time during the Term of this
Agreement, or prior thereto, which relates to the development, production and
marketing and distribution of the Licensed Internet Games and such other
information necessary for, or useful in, the production, development of the
Licensed Internet Games, as well as any knowledge or information pertaining to
the marketing, advertising, or sale of the Licensed Internet Games as Pearson,
in it sole discretion, may choose to make available to E-Pub.
1.20 "Territory" shall mean the entire world.
1.21 "UPROAR" shall mean an E-Pub service mark, U.S. service mark
Application Serial No. 75/370,336.
1.22 "URL" shall mean a Universal Resource Locator (which may or
may not include a domain name) used to access objects via the Internet.
1.23 "U.S. Local Television Show" shall mean a syndicated first-run
English language television show created, produced and/or distributed by
Pearson in U.S. television markets, which is based on or substantially similar
to a certain television game show known as Family Feud, 100% or Match Game.
2. Term. This Agreement shall be effective on the date of execution,
and shall continue until September 30, 2001. Pearson shall have the right to
extend such Initial Term one (1) time for three (3) additional Television
Broadcast Years (the "Extension Term") by notifying E-Pub to this effect at
least ninety (90) days prior to the expiration of the Initial Term.
3. Grant.
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**** Represents material which has been redacted pursuant to a request for
confidential treatment pursuant to Rule 406 under the Securities Act of
1933, as amended. Omitted material for which confidential treatment has
been requested has been filed separately with the Securities and Exchange
Commission.
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3.1 License. PTV Netherlands hereby grants to E-Pub and its
Affiliates (the "E-Pub Grantees"), during the Term of this Agreement, and
subject to the provisions hereof, the sole and exclusive worldwide right and
license to create, produce, copy, use, perform, display and transmit (via the
Internet) the English language Internet Versions of the Games (the "Licensed
Internet Games"), and to use the Licensed Marks with respect to the creation,
production, performance and display of the English language version of the
Licensed Internet Games, but only so long as such Licensed Internet Games are
made available on the world wide web portion of the Internet (the "Internet")
and produced in accordance with this Agreement. It is understood and agreed that
E-Pub shall use best efforts to launch the Licensed Internet Games so that they
are available to Users in accordance with the schedule set forth on Exhibit A.
3.2 Replacement Game Show Format. Notwithstanding the provisions of
Section 3.1 above, if either or both of the Games United States Local FF and
United States Local 100% do not have at least [****] Coverage during the
September 1999 to September 2000 and September 2000 to September 2001 television
broadcast seasons then: (i) from and after said television season where the
[****] distribution threshold was not met. PTV Netherlands shall grant to E-Pub
for either one (1) or two (2) Television Broadcast Years (depending on whether
the [****] threshold was missed for one (1) or two (2) seasons) the exclusive,
worldwide right and license to create, produce, copy, use, perform, display and
transmit via the Internet an English language Internet version of the next
television game show that Pearson syndicates in the United States. In this
regard, PTV Netherlands shall also grant to E-Pub the exclusive right and
license to use the marks associated with said syndicated game show, which shall
be added to Exhibit B and shall become Licensed Marks, in accordance with the
terms and conditions for the use of the other Licensed Marks pursuant to this
Agreement, and such other indicia of origin as PTV Netherlands in its sole
discretion may elect to provide; and (ii) the definition of Licensed Internet
Games shall include the said next syndicated televised game show; provided
however, if Pearson has no other television game show in syndication, PTV
Netherlands shall grant E-Pub the worldwide right and license to create, produce
and distribute an English language Internet Version of the television game show
Password. In the event that the foregoing provision 3.2 (ii) becomes effective,
PASSWORD shall be added to Exhibit B and shall become a Licensed Mark. E-Pub's
rights to the Game Show Formats, including the Game Show Format for such next
syndicated television game shall in no event extend beyond the Term of this
Agreement.
4. Communication of Production and Marketing Information. Beginning
upon the Effective Date of this Agreement, each party shall furnish, and from
time to time shall continue to furnish upon request, such Production and
Marketing Information (as defined in Sections 1.3 and 1.19) in its discretion,
may deem reasonably necessary or useful in view of the state of the development
of the business and nature and extent of the markets related to the Licensed
Internet Games. In this regard, Pearson agrees to use reasonable efforts to
obtain and secure for E-Pub the right to use, reuse, perform, display and
transmit over the Internet (with respect to the Licensed Internet Games),
questions previously used in televised episodes of Family Feud, 100% and Match
Game; provided that E-Pub shall pay any costs associated with such use of
previously televised questions (such costs to be deducted from Gross Revenue
pursuant to Section 1.17 of this Agreement). Pearson shall make reasonable
efforts to supply such Production and
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**** Represents material which has been redacted pursuant to a request for
confidential treatment pursuant to Rule 406 under the Securities Act of
1933, as amended. Omitted material for which confidential treatment has
been requested has been filed separately with the Securities and Exchange
Commission.
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Marketing Information in the form reasonably requested by E-Pub to enable E-Pub
to create, produce, host. serve and market the Licensed Internet Games on the
Internet as well as sell Advertising related to said Licensed Internet Games
throughout the Territory during the Term of this Agreement.
5. Licensed Internet Game Development and E-Pub Content.
5.1 Pearson Participation. E-Pub shall make reasonable efforts to
include Pearson in all major aspects (including, without limitation, all
business, design, editorial, and artistic processes) related to the development
of the Internet Versions of the Games. E-Pub shall make reasonable efforts to
notify Pearson in writing or by e-mail of all major meetings, tests, and
decisions related to the development process and to include at least one Pearson
employee (to be designated by Pearson) in all major meetings and discussions of
the business or creative development and maintenance of the Licensed Internet
Games and shall provide Pearson with the option of participating in (and provide
any non-confidential information which Pearson may reasonably request related
to) the process of developing and marketing the Site, provided however that all
written approvals of Preliminary Representations or Descriptions granted
pursuant to Section 5.4 shall be deemed final. Pearson shall, however, retain
the right, upon reasonable advance notice to E-Pub, to require changes or
replacements for any content or editorial elements of the Licensed Internet
Games that Pearson reasonably determines may devalue, degrade or diminish the
value of the Game Show Formats.
5.2 The Web Pages. Each local Licensed Internet Game will include a
multi-player game that is updated weekly, chat, e-mail, banners and click
through advertisements, the number, size, placement and content of which must be
approved in writing in advance by Pearson, and a local television show cross
promotion. In this regard, E-Pub shall use reasonable efforts to develop and
maintain customized web pages for the Licensed Internet Games that reasonably
meet or exceed the performance, technical and design standards of E-Pub's best
Internet games as agreed upon by the parties (the "Best Internet Games"). Said
Web Pages will include the Licensed Marks, and such other content as agreed to
by the parties hereto (the "Web Pages").
5.3 Specifications. E-Pub shall develop and submit to Pearson
specific and detailed preliminary representations of the Web Pages that will
achieve the business requirements described in Paragraph 5.1 above ("Preliminary
Representations") in accordance with the timetable set forth in Exhibit A
hereto. Such Preliminary Representations shall comprise text descriptions of
approximately one paragraph describing the content, questions, tone and
highlights of the Licensed Internet Games. Once Pearson approves the Preliminary
Representations, E-Pub shall prepare detailed descriptions ("Descriptions") for
each of the Licensed Internet Games. The Descriptions shall specify interactive
and multimedia components, graphic elements and content of each Web Page, as
well as, overall structure and hierarchy. Once Pearson or its representative
approves the Descriptions in writing, the Descriptions shall become the approved
specifications for the Licensed Internet Games (the "Specifications").
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5.4 Acceptance. If E-Pub has not been notified by Pearson in
writing of an adverse examination of either the Preliminary Representations or
Descriptions, within thirty (30) days after receipt by Pearson of the same,
such Preliminary Representation and/or Description shall be deemed accepted by
Pearson. In the event that Pearson rejects the Preliminary Representations or
Descriptions, E-Pub shall submit revised Preliminary Representations or
Descriptions for Pearson's review within twenty-one (21) days of receipt of
notice of such rejection. The process of review and revision shall continue
until Pearson has approved the Preliminary Representations or Descriptions in
writing. Once the Preliminary Representations or Descriptions have been approved
by Pearson in writing, they shall be deemed accepted and final.
5.5 Testing.
(a) Technical Testing. E-Pub shall conduct beta testing
for each Web Page to assure that each Web Page reasonably conforms to the
Specifications. E-Pub shall submit to Pearson in accordance with the timetable
set forth in Exhibit A, such digitized version(s) of the Web Pages as described
in the Specifications. E-Pub shall, at its sole cost, correct any Defect in any
Web Page reasonably identified by Pearson in writing within forty-eight (48)
hours after E-Pub's delivery of the same. "Defect(s)," for purposes of this
Agreement, means material non-compliance with the Specifications. Once Pearson
approves the digitized version, or modified digitized version, as the case may
be, E-Pub shall assemble the Web Pages into the Licensed Internet Games in a
manner that conforms in all material respects to the Specifications.
(b) Market Testing. E-Pub shall make reasonable efforts
to conduct such pre-launch market testing as the parties may reasonably deem
appropriate for each of the Licensed Internet Games.
5.6 Support. During the Term, E-Pub will provide technical
support to maintain the Web Pages of the same quality and frequency as provided
by E-Pub to maintain E-Pub's Best Internet Games as defined in Section 5.2 above
distributed by E-Pub on the URL uproar.com. Such support shall include e-mail
support for Users and a designated contact person for Pearson in the event that
Pearson is contacted by Users or in some way becomes aware of any problems with
the Licensed Internet Games.
5.7 Residence. The Licensed Internet Games shall reside on
E-Pub servers that shall be maintained and operated by E-Pub in accordance with
standards to be set forth on Exhibit C.
5.8 Creative Approval. Pearson shall retain the full right
to reasonably approve the creative and design aspects of the Licensed Internet
Games. As used in this Agreement. "Creative Approval" means all rights of final
approval over all aspects of the look, feel, sound and appearance of the
Licensed Internet Games as it relates to the User's experience of the Format.
Pearson shall have the right to veto any changes in design or implementation of
the Licensed Games that Pearson determines, in its sole discretion may devalue
or negatively affect general perceptions of the Game Show Formats or the
Licensed Marks.
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5.9 Material Deemed Objectionable by Pearson.
(a) In the event that Pearson finds offensive or
objectionable any game or other material on the Site or on any web site to which
Uproar links, Pearson shall notify E-Pub senior management. If E-Pub shall
concur, then E-Pub shall use reasonable efforts to modify or remove such
material or links.
(b) In the event that E-Pub does not agree to modify or
remove such material or links from Uproar, Pearson may request that the E-Pub
Board of Directors vote on whether such material or links are objectionable and
should be removed. The parties agree to accept and abide by the decision of the
Board of Directors.
(c) In the event that E-Pub develops or acquires a new
web site or other property that Pearson reasonably believes is likely to damage,
devalue or negatively affect the Pearson name because such property contains,
promotes or is associated with content deemed by Pearson to be objectionable,
Pearson shall notify E-Pub senior management and request that E-Pub change or
divest itself of such property.
(d) In the event that E-Pub does not accept or agree that
the material or property complained of by Pearson is likely to damage, devalue
or negatively affect the Pearson name, the parties shall submit the issue to
arbitration under the auspices and according to the rules of the American
Arbitration Association (AAA), the cost of such arbitration to be borne by
Pearson.
(e) In the event that the arbitrator(s) decide that the
material or property complained of by Pearson is damaging to or is likely to
damage, devalue or negatively affect the Pearson name, Pearson shall be released
from the provisions of Sections 16.3 (c)-(e), and shall have the right to
divest itself immediately of all of the Shares.
6. Marketing and Advertising Material.
6.1 Approval. E-Pub shall submit to Pearson, for approval in
the manner which Pearson shall direct, all advertising, and other material on
which the Licensed Marks appear, or are intended to be used in relation to the
Licensed Internet Games. Pearson agrees to examine such material as promptly
as feasible. If E-Pub has not been notified in writing by Pearson of an
adverse examination within thirty (30) days after dispatch of the material to
Pearson, such material shall be deemed satisfactory (for purposes of this
subparagraph "dispatch" shall mean facsimile delivery, overnight courier
delivery or mailed - air mail, postage prepaid). Should Pearson ever notify
E-Pub that any of the material is unacceptable, E-Pub shall replace or
amend to the satisfaction of Pearson such material not approved by Pearson.
Without detracting from the generality of the foregoing, the marketing
legends for use in association with the Licensed Internet Games which Pearson
considers appropriate in the circumstances would read: "Produced and
Distributed under License from Pearson Television" and on each Web Page:
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"Uproar in association with Pearson TV," along with the U.S. Local Television
Show logos or Pearson television logos.
6.2 Other Marks. Other than E-Pub's service mark UPROAR, and
the Licensed Marks, E-Pub shall not use any other service mark or trademark on
or in association with the Licensed Internet Games, and shall not use the
Licensed Marks in any medium other than the Internet without the prior written
approval of Pearson on or in connection with any other goods or service other
than the Licensed Internet Games. E-Pub specifically agrees not to produce, or
distribute, directly or indirectly, any other game, whose trademark, service
mark, trade name, URL or other designation is confusingly similar to the
Licensed Marks. The use of the Licensed Marks by E-Pub shall be exclusive in
respect to English Language Internet Games in the Territory.
7. Licensed Marks.
7.1 Recognition of Pearson's Rights. E-Pub recognizes
Pearson's ownership of the Licensed Marks and the validity of Pearson's
registrations thereof or applications therefor in the Territory and E-Pub will
not dispute or put at issue such ownership or validity. E-Pub shall not at any
time apply for or obtain the registration of any Licensed Mark in any country or
do or suffer to be done any act or thing which might in any way impair the
rights of Pearson in and to the Licensed Marks, and shall not claim any right or
interest in the Licensed Marks, except as such rights as are expressly granted
herein.
7.2 Impairment of Licensed Marks. E-Pub hereby covenants
that it will not directly or indirectly undertake any action anywhere which in
any manner might infringe, or impair the validity, scope, or title of Pearson in
the Licensed Marks, or any of them, or in any other trademarks, service marks or
URLs which may be owned by Pearson at any time during the Term, and E-Pub agrees
to cease using the Licensed Marks immediately upon expiration or termination of
this Agreement.
7.3 Protection of Licensed Marks. Pearson reserves the
right to prosecute and defend, at its own expense, all suits involving any of
the Licensed Marks and to take any action or proceedings that it deems desirable
for the protection thereof; and at Pearson's discretion may do so in its own
name or in the name of E-Pub, or in the joint names of Pearson and E-Pub, and
E-Pub shall claim no rights against Pearson as the result of any such action.
E-Pub agrees to notify Pearson promptly of any infringement of the Licensed
Marks or of any pending or threatened litigation involving such Licensed Marks.
E-Pub shall fully cooperate in any such litigation if requested by Pearson to do
so, provided however that Pearson shall pay E-Pub's reasonable attorney's fees
and out-of-pocket expenses associated with such litigation. E-Pub further agrees
that this license is personal to E-Pub and shall not be assigned or otherwise
transferred by E-Pub without the prior written consent of Pearson.
8. Covenants of Pearson.
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8.1 Promotion of www.uproar.com on Pearson Games. PTV Inc.
agrees to advertise and promote in the United States the Licensed Internet Games
in accordance with the following provisions and all applicable laws and
regulations. Commencing no later than September 30, 1999 (except as to the
obligations relating to 100% that are set forth in subsection 8.1 (f) below,
which commence no later than April 1, 1999), and provided that E-Pub has
launched the Licensed Internet Games in accordance with the schedule set forth
on Exhibit A, this marketing campaign shall include:
(a) Reasonable efforts to mention the URL
www.uproar.com by a host or in a voice-over at the close of each United States
Local FF, United States Local 100% and United States Local Match Game;
(b) Inclusion of www.uproar.com in the closing
credits of each US Local Television Show;
(c) Inclusion of www.uproar.com in all Major Press
Advertising relating to each US Local Television Show (as used herein, Major
Press Advertising shall mean any print advertising of 1/8 page or larger);
(d) Inclusion of www.uproar.com in all written
sales material, press kits. media guides, and sales and demonstration tapes for
each US Local Television Show;
(e) Reasonable efforts to include in each U.S.
Local Television Show, where possible, Uproar prizes, or sponsorship to include
prizes related to Uproar;
(f) Except as to Local 100% where launch will be no
later than April 1, 1999, Local FF and Local Match Game will, commencing no
later than September 30, 1999, include and contain a ten (10) second commercial
message promoting the URL www.uproar.com and referring to the name of the U.S.
Local Television Show at the end of each U.S. Local Television Show, such
message to be produced by E-Pub at its sole cost, consistent with PTV Inc.'s
technical and production standards, and in consultation with PTV Inc. In the
event that Local FF or Local 100% is not in syndication during a Television
Broadcast Year during the Initial Term, PTV Inc. shall include and contain a ten
(10) second commercial message promoting the URL www.uproar.com and referring to
the name of the U.S. Local Television Show at the end of such broadcast of
Pearson's next syndicated television show within the Term of the Agreement; and
(g) In those certain English language markets
outside the United States wherein a Licensed Internet Game has been launched,
Pearson Television Limited agrees to make reasonable efforts to advertise and
promote the Uproar URL consistent with local advertising standards and with
local law.
9. Selecting Internet Contestants for the Local Television
Shows. Pearson and E-Pub agree to cooperate with one another in good faith to
make reasonable efforts to ensure that at least twenty percent (20%) of the
prospective contestants who are offered an opportunity to
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audition for each U.S. Local Television Show are selected from eligible (as
defined by Pearson in its sole discretion) members of the Internet audience.
Neither party hereto will be obligated to pay or be responsible for any cost
connected with out-of-pocket, travel or living expenses for any contestant or
anyone auditioning to be a contestant on any U.S. Local Television Show.
10. E-Pub's Warranties. E-Pub hereby warrants and covenants
to Pearson as follows:
10.1 Warranty of Performance. The Licensed Internet
Games (and each individual Web Page) will be free from reproducible programming
errors and from defects in workmanship and materials, and will operate in
conformity with the performance capabilities and business requirements described
in the Specifications. If any non-conformities or material programming errors
are discovered, E-Pub shall promptly remedy them at no expense to Pearson. The
Licensed Internet Games shall be designed for use by individuals with limited or
general understanding of the Internet. E-Pub shall use reasonable efforts to
develop and maintain the Internet Games in a high quality so that the
performance of the Internet Games meets or exceeds the performance of the Best
Internet Games developed by E-Pub for the Site. E-Pub shall use reasonable
efforts to ensure that the design and look and feel of the Licensed Internet
Games shall be distinctive and that there are as many versions of the Licensed
Internet Games available (rotated as frequently) as for its Best Internet Games
(as defined in Section 5.2 herein) on Uproar.com. E-Pub shall make reasonable
efforts to make the look and feel of the Licensed Internet Games distinctive and
shall not use any editorial or design elements which are specific to the
Licensed Internet Games on other games it develops or uses on the Site or any
other Internet Site without the prior written approval of Pearson.
10.2 Warranty of Title. Except for the Licensed Marks
and materials provided by Pearson for use in connection with the Licensed
Internet Games (the "Pearson Materials"), E-Pub's trademarks, service marks,
URL's, software and all other materials used by E-Pub in connection with the
Licensed Internet Games (the "E-Pub Materials"), shall not infringe upon the
intellectual property rights of any third party, including without limitation,
claims of copyright infringement, trademark infringement, false designation of
origin, disparagement, violation of patent or shop rights, piracy or plagiarism.
E-Pub warrants that it owns or has the full right and authority to use all
materials used on the Site.
10.3 Warranty Against Disablement. No portion of the
Licensed Internet Games licensed hereunder will contain any protection feature
designed to prevent its use. This includes, without limitation, any computer
virus, worm, software lock, drop dead device, Trojan horse routine, trap door,
E-Pub bomb or any other codes or instructions that may be used to access,
modify, delete, damage or disable same once uploaded to any computer system.
10.4 Warranty of Expertise. E-Pub represents and
warrants that it has the technical and production knowledge necessary to
provide, and will provide, services required for the creation, production, and
distribution in connection with the Licensed Internet Games as contemplated
herein. In connection therewith, all of the services to be performed by E-Pub
hereunder will be rendered using sound, professional practices, and in a
competent and professional manner, by knowledgeable, trained and qualified
personnel. E-Pub acknowledges
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that Pearson is relying upon the skill and expertise of E-Pub for the
development, integration, maintenance and marketing of the Licensed Internet
Games.
10.5 Warranty of Millennium Compliance. E-Pub represents
and warrants that all Software supplied by E-Pub or obtained by E-Pub from a
third-party vendor and used in connection with the Licensed Internet Games on
the Site shall be Millennium Compliant. As used herein, "Millennium Compliant"
means that it can provide all of the following functions:
(a) handle date information before, during, and
after January 1, 2000, including but not limited to accepting date input,
providing date output, and performing calculations on dates or portions of
dates;
(b) function accurately and without interruption
before, during, and after January 1, 2000, without any change in operations
associated with the advent of the new century;
(c) respond to two-digit year-date input in a way
that resolves the ambiguity as to century in a disclosed, defined, and
predetermined manner, and
(d) store and provide output of date information in
ways that are unambiguous as to century.
10.6 Corporate Authority. E-Pub has the full right, power,
legal capacity and authority to enter into this Agreement and to carry out the
terms hereof.
10.7 No Conflicts. There are no undisclosed liens, claims,
encumbrances, legal proceedings, restrictions, agreements or understandings that
might materially conflict or interfere with, limit, or be inconsistent with or
otherwise affect any of the provisions of the Agreement or the enjoyment by
Pearson of any rights in the Licensed Internet Games or any elements thereof.
10.8 Technology Update. During the Term of this Agreement,
E-Pub shall, at no additional cost to Pearson, make reasonable efforts to ensure
that the Server, the Web Site and the Licensed Internet Games are maintained so
as to be compatible with, and accessible to, Users using the then-current
developments, versions and updates of Internet-related technology, within a
reasonable time after such technology becomes commercially available. Without
limitation of the foregoing, E-Pub agrees that at all times during the Term of
this Agreement, and at no extra cost to Pearson, the Licensed Internet Games
will be compliant with the most recent HTML specifications used on its Best
Internet Games.
10.9 New Technology. If during the Term E-Pub plans to
replace, enhance, upgrade or otherwise modify, the software or technology used
to produce, maintain, host or deliver any Internet Version of any game produced
for the Site in conjunction with any third party ("New Technology"), E-Pub
shall make reasonable efforts to make such New Technology available for use in
the Licensed Internet Games at the same time that such New Technology is used in
any other Internet Version of any E-Pub game.
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11. Pearson's Warranties. Pearson hereby warrants and covenants to
E-Pub as follows:
11.1 Licensed Pearson Materials. The use by E-Pub of such PTV
Netherlands Licensed Marks in any English-speaking country in the manner
contemplated by this Agreement shall not infringe upon any copyright, trademark,
patent, trade secret or other proprietary right. Pearson warrants that it owns
or has the full right and authority to use and license the Licensed Marks and
the Game Show Formats.
11.2 License of Pearson Content. The use of the Game Show Format,
the Pearson Materials, and/or use of any question by E-Pub as content provided
by Pearson hereunder used by E-Pub in the manner contemplated by this Agreement,
shall not infringe upon any copyright, patent, trade secret, trademark, right of
publicity, or privacy or other proprietary right.
11.3 Corporate Authority. Pearson has the full right, power, legal
capacity and authority to enter into this Agreement and to carry out the terms
hereof. Pearson Television Holdings, Inc., Pearson Television North America,
Inc., and Pearson Television Limited each agrees that where any obligation to be
undertaken hereunder is to be undertaken by one of its subsidiaries, that it
will ensure that such subsidiary undertakes such obligation.
11.4 No Conflicts. There are no undisclosed liens, claims,
encumbrances, legal proceedings, restrictions, agreements or understandings that
might materially conflict or interfere with, limit, or be inconsistent with or
otherwise affect any of the provisions of this Agreement or the enjoyment by
E-Pub of any of the rights granted to E-Pub by Pearson hereunder.
11.5 Warranted Marks. Pearson is the owner of the marks FAMILY
FEUD, 100%, MATCH GAME and BLANKETY BLANK, as well as the marks set forth on
Exhibit B (the "Warranted Marks"), together with the goodwill of the business
connected with the use of and symbolized by the registrations or applications
therefor. Such Warranted Marks and the registrations or applications therefor
exist and are subsisting and have not been abandoned, and to the best of
Pearson's knowledge no other firm, corporation, association or person has the
right to use such Warranted Marks in any English-speaking country either in
identical form thereof or in such near resemblance thereto as to be likely, when
used on or in association with the licensed Internet Versions of the Games, to
cause confusion or to cause mistake or to deceive.
12. Advertising and Promotion.
12.1 Volume of Sales. E-Pub agrees to expend its best efforts to
achieve a large and increasing volume of sales of Advertising on the Licensed
Internet Games in the Territory.
12.2 Promotion. E-Pub shall promote the Licensed Internet Games on
the Site via buttons and text links at least as often and as prominently as
E-Pub promotes any other game. E-Pub shall make reasonable efforts to place Game
Logos on the home page of the Site. E-Pub
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shall not incur any expenses relating to the marketing, promotion, or
advertising of the Licensed Internet Games for which Pearson shall in any way be
responsible, except where specific prior permission, in writing, shall have been
received from Pearson in each instance.
12.3 Production. E-Pub shall produce and distribute the Licensed
Internet Games in an ethical manner and with good taste. The production and
distribution of the Licensed Internet Games will reasonably comply with local
community standards of good taste and decency in all communities from which the
Licensed Internet Games may be accessed, with all applicable national and local
laws, rules and regulations in the Territory.
13. Advertising. E-Pub shall use its best efforts to sell Advertising
on each and every local Licensed Internet Game.
13.1. Net Revenue Split. The Net Revenue shall be split fifty
percent (50%) for E-Pub and [****] for PTV Netherlands.
13.2 Pearson Advertising. Payment for any advertising purchased by
Pearson on the Site or on any other Web site owned, controlled or operated by
E-Pub shall be offset against the Guaranteed Minimum (as defined below in
Section 14.3).
13.3 Pearson Advertising Purchases. Pearson shall purchase from
E-Pub $100,000 worth of online promotion during December 1998 to promote the
Pearson online and television properties. The cost-per-thousand impressions (the
"CPM") for this advertising will be $20, in keeping with fourth quarter peak
demand online Advertising rates. Pearson shall purchase from E-Pub $100,000
worth of online promotion during the first quarter of 1999 to promote the
Pearson online and television properties. The CPM for advertising purchased
during the first quarter of 1999 will be the discounted rate of [****]. Payment
for both purchases of online promotion will be offset against the Guaranteed
Minimum due to PTV Netherlands on 14 July 1999 (pursuant to Section 14.3 of this
Agreement) such that no cash will be exchanged in conjunction with the Pearson
Advertising Purchases.
14. Payments.
14.1 Format Royalty. No later than thirty (30) days after each
Television Broadcast Year quarter, E-Pub shall pay to PTV Netherlands fifteen
percent (15%) of Gross Revenues (less any taxes that E-Pub may be legally
required to withhold) as a royalty for the rights and license to use the Game
Show Formats.
14.2 Net Revenues. No later than thirty (30) days after each
Television Broadcast Year quarter, E-Pub shall pay PTV Netherlands its share (as
set forth in Section 13) of any Net Revenues received by E-Pub (less any taxes
that E-Pub may be legally required to withhold) during the previous Television
Broadcast Year quarter.
14.3 Guaranteed Minimum. During the Initial Term, E-Pub shall
guarantee payment to PTV Netherlands of $400,000.00 (the "Guaranteed Minimum"),
regardless of the
--------------
**** Represents material which has been redacted pursuant to a request for
confidential treatment pursuant to Rule 406 under the Securities Act of
1933, as amended. Omitted material for which confidential treatment has
been requested has been filed separately with the Securities and Exchange
Commission.
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amount of revenues received by E-Pub during such period. The Guaranteed Minimum
shall be paid in two installments as follows: (i) $200,000.00 on July 15, 1999
and (ii) $200,000.00 on July 15, 2000. Any payment made to PTV Netherlands
pursuant to Section 14.2 with respect to Net Revenues earned in a Television
Broadcast Year Quarter ending on or before September 30, 2001 shall be credited
against the Guaranteed Minimum. If the amount of PTV Netherlands's Net Revenue
earned during the Initial Term is greater than the Guaranteed Minimum, E-Pub
shall pay such amount to PTV Netherlands in accordance with Section 13.
14.4 Extension of Term. If the Initial Term is extended, E-Pub
shall pay PTV Netherlands its share of Net Revenues for the Extension Term in
accordance with Section 13.
14.5 Audit. Pearson shall have the right at its expense to audit
(or designate a third party to audit) E-Pub's books and records for the purpose
of verifying Gross and Net Revenue and operating expenses. Such audits shall be
made not more than once per year, on not less than ten (10) days written notice,
during regular business hours. If the auditor's figures reflect Net Revenue
higher than those reported by E-Pub, E-Pub shall pay the difference. If the
auditor's figures vary more than five percent (5%) or $1,000.00, whichever is
less, from the figures provided by E-Pub. E-Pub shall also pay the reasonable
cost of the audit. E-Pub shall not be obligated to keep said books and records
created hereunder for more than two (2) years after the expiration or expiration
of this Agreement, including any Extension Term.
15. Reporting.
15.1 Delay. In case of delay of seven (7) days or more by E-Pub in
making payments, interest at the rate of one and one-half percent (1.5%) per
month, assessed from the first day of the first month following such Television
Broadcast Year quarterly period, shall be due PTV Netherlands from E-Pub without
special notice.
15.2 Taxes. If required to do so by law, E-Pub may, after
consultation with PTV Netherlands, withhold from payments due PTV Netherlands
any taxes required to be paid in respect thereof, provided that any such
deductions for the payment of such taxes are supported by duly executed
receipts.
15.3 Records. E-Pub shall keep complete and accurate records of its
activities under this Agreement which shall be open to inspection by authorized
representatives of Pearson. In this regard, E-Pub shall render a quarterly
written report to Pearson. In said report E-Pub shall state the revenue and
costs with respect to each Licensed Internet Game.
16. E-Pub Securities.
16.1 Issuance of Shares by E-Pub. PTV Inc. hereby subscribes for
50,000 shares ("Pearson's Securities") of E-Pub Stock (as such term is defined
in Section 16.7 hereof). Pearson's Securities shall be issued in the form of one
or more Global Instrument Certificates (each a "Global Certificate") by the
Austrian Central Bank (the "Central Bank"), and delivered to a banking
institution, brokerage firm or other custodian authorized to hold such
securities
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under Austrian law which shall be appointed by PTV Inc. to hold such shares for
PTV Inc.'s benefit (the "Custodian"). Such delivery shall be made on, or as
close to as reasonably possible, the Effective Date of this Agreement but in no
event later than January 30, 1999, and PTV Inc. agrees to pay against delivery
of the Global Certificates representing the Pearson Securities, as follows:
(a) on the date of delivery of one or more Global Certificates
issued by the Central Bank to the Custodian in the aggregate amount of 500
shares of Pearson's Securities, PTV Inc. shall pay to E-Pub in consideration
therefor the US Dollar equivalent of 1,500,000 Austrian Schillings (the dollar
value of which shall be determined according to the applicable daily foreign
exchange rates set forth in the Wall Street Journal on the Effective Date); and
(b) on or about January 30, 1999, in consideration for the
rights granted under Sections 8.1(a) through 8.1(f) to E-Pub hereunder, E-Pub
shall cause the Central Bank to deliver to the Custodian one or more Global
Certificates in the aggregate amount of 49,500 shares of Pearson's Securities.
16.2 Issuance of Additional Shares by E-Pub.
(a) In the event that the United States Local Match Game
achieves a "household coverage" level of seventy percent (70%) in the U.S.
during the television broadcast season between September 1999 and September 2000
(the "First Objective"), E-Pub shall cause the Central Bank to deliver to the
Custodian, in consideration for Pearson's efforts in assisting E-Pub in
establishing the Licensed Internet Games, one or more Global Certificates in the
aggregate amount of 10,000 shares of E-Pub Stock (the "1999-2000 Shares"). E-Pub
shall cause the delivery of the 1999-2000 Shares to be made on, or as close to
as is reasonably possible, that certain date when Pearson achieves the First
Objective.
(b) In the event that the Local Match Game achieves a
"household coverage" level of 70% in the United States during the television
broadcast season between September 2000 and September 2001 (the "Second
Objective"), E-Pub shall cause the Central Bank to deliver to the Custodian, in
consideration for Pearson's efforts in assisting E-Pub in establishing the
Licensed Internet Games, one or more Global Certificates in the aggregate amount
of 10,000 shares of E-Pub Stock (the "2000-2001 Shares"). E-Pub shall cause the
delivery of the 2000-2001 Shares to be made on, or as close to as is reasonably
possible, that certain date when Pearson achieves the Second Objective.
16.3 Pearson's Warranties and Representations. Pearson hereby
represents and warrants to E-Pub. as follows:
(a) Pearson is acquiring Pearson's Securities, the 1999-2000
Shares and the 2000-2001 Shares (all of which are hereinafter collectively
referred to as the "Shares") solely for Pearson's own account.
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(b) Pearson has no intention of distributing or
reselling the Shares or any part thereof, or interest therein, in any
transaction which would be in violation of the applicable laws of any
governmental authority having jurisdiction over the issuance, transfer or sale
thereof.
(c) During the one year period commencing on the date
of issuance of Pearson's Securities, Pearson shall not publicly sell, transfer,
convey or otherwise dispose of all or any part of the Shares. If, after such one
year period, Pearson desires to publicly sell, transfer, convey or otherwise
dispose of all or any part of the One Year Restricted Securities (as such term
is hereinafter defined), Pearson may do so, provided that it fully complies
with all applicable laws and/or regulations of each governmental authority
having jurisdiction over the issuance, sale or other disposition thereof. If the
1999-2000 Shares shall be issued prior to the first anniversary of the date of
issuance of Pearson's Securities, the term "One Year Restricted Securities"
shall mean 35,000 shares of Pearson's Securities. If the 1999-2000 Shares
shall not be issued prior to the first anniversary of the date of issuance of
Pearson's Securities, the term "One Year Restricted Securities" shall mean
25,000 shares of Pearson's Securities.
(d) During the two year period commencing on the date
of issuance of Pearson's Securities, Pearson shall not publicly sell, transfer,
convey or otherwise dispose of all or any part of the balance of the Shares
remaining after deduction of the One Year Restricted Securities (all of which
are hereinafter collectively referred to as the "Two Year Restricted
Securities"). If, after such two year period, Pearson desires to publicly sell,
transfer, convey or otherwise dispose of all or any part of Two Year Restricted
Securities, Pearson may do so, provided that it fully complies with all
applicable laws and/or regulations of each governmental authority having
jurisdiction over the issuance, sale or other disposition thereof.
(e) During the two year period commencing on January
30, 1999, Pearson shall not purchase, in open market transactions, or otherwise,
an amount of shares of E-Pub Stock which, when added to the Shares and any
shares of E-Pub Stock beneficially held by any person or persons acting in
concert with Pearson, shall be greater than 20% of the total number of shares of
E-Pub Stock then outstanding.
16.4 Pearson's Board Representation. On or about January 30,
1999, E-Pub shall either expand the size of its Board of Directors, or cause a
vacancy to be created on its Board. Pearson shall thereupon have the right to
designate a person to be appointed to serve as a member of E-Pub's Board (the
"Pearson Appointee"), and upon providing E-Pub with the name of the Pearson
Appointee and the particulars about his or her background and experience, E-Pub
shall undertake all actions as shall be necessary to cause the Pearson Appointee
to be appointed to E-Pub's Board of Directors. If, during the Term (to include
at a minimum both the Initial Term and any Extension Term) of this Agreement,
E-Pub shall hold any meetings of its shareholders at which members of its Board
of Directors shall be elected, or shall seek the election of such directors in
some other permissible manner, E-Pub shall undertake all actions as shall be
necessary to cause the Pearson Appointee to be included among management's slate
of proposed directors, and E-Pub shall cause its officers who hold shares of
E-Pub securities to vote
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all of such shares respectively held by them in favor of the election of the
Pearson Appointee in each such instance.
16.5 E-Pub's Warranties and Representations. E-Pub represents
and warrants to Pearson as follows:
(a) Organization and Authority. E-Pub is a company
duly organized, validly existing and in good standing under the laws of Bermuda.
Set forth on Exhibit D is a list of jurisdictions in which E-Pub is qualified or
licensed to do business as a foreign corporation. E-Pub is duly qualified or
licensed and in good standing as a foreign corporation in each jurisdiction in
which (i) the nature of the business conducted by it or the character or
location of the properties owned or leased by it makes such qualification or
licensing necessary and (ii) the failure to so qualify would, if not remedied,
materially impair title to its properties or its rights to enforce contracts
against others or expose it to a material liability in any such jurisdiction.
E-Pub has all necessary corporate power and authority to own, lease and operate
all of its properties and assets and to carry on its businesses as now conducted
and as proposed to be conducted.
(b) E-Pub Capitalization. E-Pub has an authorized
share capital of IR(pound) 1,000,000 divided into 1,000,000 ordinary shares
having a par value of IR(pound) 1.00 each, of which 384,365 shares are issued
and outstanding. Each of the issued and outstanding shares of E-Pub Stock has
been duly authorized and validly issued, is fully paid and non-assessable and
was issued by E-Pub in compliance with all applicable securities laws and all
applicable rules and regulations thereunder. Except as set forth on Exhibit E or
as otherwise contemplated by this Agreement, there are no outstanding options,
warrants, convertible or exchangeable securities, subscription or other rights,
agreements or commitments to subscribe for or purchase or acquire from E-Pub any
securities of E-Pub nor any agreement or understanding to issue any such
instruments. Except as set forth on Exhibit E or as otherwise contemplated by
this Agreement, E-Pub has not reserved any shares of capital stock for issuance
upon the exercise or conversion of any of its securities. There are no
preemptive or other rights to subscribe for or to purchase, nor any restriction
upon the voting or transfer of, any shares of E-Pub Stock pursuant to the
Memorandum of Association or Bye-Laws of E-Pub or otherwise. E-Pub has delivered
to Pearson true, complete and correct copies of its Memorandum of Association
and Bye-Laws which are in full force and effect on the date of this Agreement.
(c) Subsidiaries. Set forth on Exhibit F are the only
corporations (the "Subsidiaries") with respect to which E-Pub beneficially owns,
directly or indirectly, any of the outstanding stock or other equity interests,
the holders of which are entitled to vote for the election of a majority of the
board of directors or other governing body. Each Subsidiary is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, which jurisdictions are set forth on Exhibit F. Each Subsidiary
has the corporate power and authority to own, lease and operate all of its
properties and assets and to carry on its business as now conducted and as
proposed to be conducted. Exhibit F sets forth the jurisdictions in which each
Subsidiary is qualified or licensed to do business as a foreign corporation.
Each Subsidiary is duly qualified or licensed and in good standing as a foreign
corporation in each jurisdiction in which (i) the nature of the business
conducted by it or the
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character or location of the properties owned or leased by it makes such
qualification necessary and (ii) the failure so to qualify would, if not
remedied, materially impair title to its properties or its rights to enforce
contracts against others or expose it to a material liability in any such
jurisdiction. Set forth on Exhibit F is a list of each partnership and joint
venture agreement or arrangement (such arrangements or entities created thereby,
the "'Joint Ventures") to which E-Pub or any Subsidiary is a party. E-Pub and
each Subsidiary has good title to all shares of stock or other equity interest
in the Subsidiaries and Joint Ventures owned by it, free and clear of all liens,
charges, encumbrances, equities and claims whatsoever, and subject to no
restrictions on transferability, except as such transferability may be
restricted by the provisions of applicable securities laws. The capitalization
of each Subsidiary and Joint Venture is set forth on Exhibit F.
(d) Financial Statements. E-Pub has furnished Pearson
with copies of the audited consolidated financial statements of E-Pub and the
Subsidiaries for each of the three fiscal years ended December 31, 1997,
including in each case a consolidated balance sheet, the related consolidated
statements of operations, stockholders' equity and of cash flows for the period
then ended, the accompanying notes, the report thereon of Coopers & Lybrand, and
the unaudited consolidated financial statements of E-Pub and the Subsidiaries
for each of the fiscal quarters of E-Pub ended March 31, 1998, June 30, 1998 and
September 31, 1998, consisting in each case solely of a consolidated statement
of operations. Such audited financial statements, and to the best knowledge of
E-Pub's Board of Directors, all such unaudited financial statements (i) were, as
of the respective dates thereof, correct and complete in all material respects
and were prepared from the books and records of E-Pub and the Subsidiaries, (ii)
were prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods covered ("GAAP"), (iii) as of the
respective dates thereof, reflected, and provided adequate reserves in respect
of, all liabilities of E-Pub and the Subsidiaries in accordance with GAAP,
including all contingent liabilities as of their respective dates, and (iv) as
of the respective dates thereof, presented fairly in all material respects the
consolidated financial condition of E-Pub and the Subsidiaries and the results
of their operations for the periods then ended.
(e) Disclosure Materials. E-Pub has disclosed to
Pearson all material information and provided all appropriate disclosure
materials concerning E-Pub and the E-Pub Stock: (i) which Pearson requested
E-Pub to provide; and (ii) necessary, in E-Pub's judgment, for Pearson to base
its decision to make the subscription in E-Pub Stock provided for herein. Such
material information and disclosure materials (the "Disclosure Materials")
includes those items set forth on Exhibit G. None of the information concerning
E-Pub, the Subsidiaries and the E-Pub Stock set forth in such Disclosure
Materials or incorporated therein by reference contains any untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading.
(f) Offering of the Securities. The offering and sale
of E-Pub Stock to Pearson provided for herein are made in accordance with, and
in full compliance with, all applicable securities laws, including all U.S.
Federal and state securities or blue sky laws. Neither E-Pub nor anyone acting
on its behalf has taken or will take any action which would
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subject the issuance and sale of the E-Pub Stock or any other securities of
E-Pub to the provisions of Section 5 of the U.S. Securities Act of 1933, as
amended (the "Securities Act"), and to the registration or qualification
requirements of any securities or blue sky laws of any applicable jurisdiction.
(g) The Securities. Upon issuance to Pearson of the
E-Pub Stock and payment therefor in accordance with the terms of this Agreement,
the E-Pub Stock will be duly authorized, validly issued, fully-paid and
nonassessable, and will have been issued by E-Pub in compliance with all
applicable laws and all applicable rules and regulations thereunder with no
personal liability attaching to the ownership thereof, and none of the E-Pub
Stock will be subject to any preemptive right or any lien, charge or encumbrance
or any other claim of any third party and Pearson will receive good title
thereto free and clear of all liens, charges, encumbrances, equities and claims
whatsoever.
16.6 Indemnification. E-Pub shall indemnify Pearson and hold
it harmless from and against: (i) any and all loss, liability, damage or
deficiency resulting from any misrepresentation, breach of warranty, negligent
or wrongful act, or nonfulfillment of any covenant or agreement on the part of
itself under the terms of this Agreement, any document or instrument executed by
such party in connection with this Agreement or in the Disclosure Materials;
(ii) any and all actions, suits, proceedings, claims, demands, assessments,
judgments, costs, and expenses including without limitation reasonable
attorney's fees and court costs incident to the foregoing clause (i), to the
extent any of the foregoing is not paid or reimbursed by insurance. Anything
contained in this Agreement to the contrary notwithstanding, E-Pub's obligation
to indemnify Pearson pursuant to the provisions of this Agreement shall not
exceed, in the aggregate, the sum of $5,000,000.
16.7 Definitions Related to Registration Rights. Unless the
context otherwise requires, the terms defined in this Section 16.7 shall have
the meanings herein specified for all purposes of this Agreement, applicable to
both the singular and plural forms of any of the terms herein defined.
(a) "Commission" means the United States Securities
and Exchange Commission.
(b) "E-Pub Stock" means, subject to the provisions of
Section 16.8 hereof, E-Pub's Ordinary Shares, par value IR(pound) 1.00 per
share.
(c) "Exchange Act" means the U.S. Securities Exchange
Act of 1934, as amended.
(d) "Holder" means the record or beneficial owner of
any Registrable Security.
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(e) "Holders of a Majority of the Registrable Securities" means
the Person or Persons who are the Holders of greater than 50% of the shares of
Registrable Securities then outstanding.
(f) "IPO" means E-Pub's initial public offering of securities
pursuant to an effective registration statement under the Securities Act.
(g) "Person" includes any natural person, corporation, trust,
association, company, partnership, joint venture and other entity and any
government, governmental agency, instrumentality or political subdivision.
(h) The terms "register," "registered" and "registration" refer
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act or the Exchange Act, and the declaration or
ordering of the effectiveness of such registration statement.
(i) "Registrable Securities" means (a) all E-Pub Stock purchased
or otherwise acquired by Pearson, and (b) any securities issued or issuable with
respect to the E-Pub Stock referred to in clause (a) above by way of a stock
dividend or stock split or in connection with a combination of shares,
reclassification, recapitalization, merger or consolidation or reorganization;
provided, however, that such shares of E-Pub Stock shall only be treated as
Registrable Securities if and so long as they (i) have not been sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction; or (ii) have not been sold in a transaction exempt from
the registration and prospectus delivery requirements of the Securities Act
under Section 4(l) thereof so that all transfer restrictions and restrictive
legends with respect to such E-Pub Stock are removed upon the consummation of
such sale and the seller and purchaser of such E-Pub Stock receive an opinion of
counsel for E-Pub which shall be in form and content reasonably satisfactory to
the seller and buyer and their respective counsel, to the effect that such E-Pub
Stock in the hands of the purchaser is freely transferable without restriction
or registration under the Securities Act in any public or private transaction.
(j) "Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act or any similar successor rule.
(k) "Securities Act" means the U.S. Securities Act of 1933, as
amended.
16.8 Pearson's E-Pub Stock Conversion Rights. In the event that (i)
E-Pub initially registers any security other than its Ordinary Shares, par value
IR(pound) 1.00 per share, under the Exchange Act, or (ii) before E-Pub registers
any of its securities, any Affiliate of E-Pub registers any security other than
E-Pub's Ordinary Shares under the Exchange Act, all of the Shares then held by
Pearson and/or any Affiliate of Pearson shall thereupon be deemed to have been
automatically converted into such number of shares of the identical security
then being registered by E-Pub or such E-Pub Affiliate as shall be necessary for
Pearson and such Affiliate or Affiliates of Pearson to hold, in the aggregate,
the precise percentage of the issued and
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outstanding shares of such securities as the percentage of the issued and
outstanding shares of E-Pub's Ordinary Shares that Pearson and such Affiliate
or Affiliates held immediately prior to the declaration of effectiveness of
the registration statement pertaining to such registration. In such event, the
term "E-Pub Stock" shall mean, for all purposes of this Agreement, the
securities into which such Ordinary Shares shall have been automatically
converted.
16.9 Pearson's Demand Reigistration Rights. If any registration
statement filed by E-Pub or any or its Affiliates under the Exchange Act shall
be declared effective by the Commission, then, subject to the provisions of
subsections (b), (c) and (d) of this Section 16.9, on two occasions only during
the period of three years following the expiration of the two year period
described in Section 16.3(d) hereof, the Holder or Holders (the "Requesting
Holder" or "Requesting Holders," as the case may be) of a Majority of the
Registrable Securities shall be entitled to request registration under the
Securities Act of at least such number of the shares of Registrable Securities
then held by them (a "Demand Registration"). Such request for registration must
specify the number of Registrable Securities requested to be registered, the
anticipated price per share for such offering and whether such registration is
to be in the form of an underwritten offering.
(a) Selection of Underwriter(s). If the Requesting Holder or
Requesting Holders, as the case may be, elect to have the offering of
Registrable Securities pursuant to the Demand Registration be in the form of an
underwritten offering, E-Pub shall use its best efforts to select and obtain the
investment banker or investment bankers and manager or managers reasonably
acceptable to Pearson to administer the offering.
(b) Priority on Underwritten Demand Registration. If the Demand
Registration is an underwritten offering and the managing underwriter thereof
advise E-Pub in writing that in its opinion the number of Registrable Securities
requested to be included in such offering exceeds the number of Registrable
Securities that can be sold therein without adversely affecting the
marketability of the offering, E-Pub will include in such registration the
number of Registrable Securities requested to be included that, in the opinion
of such managing underwriter, can be sold without adversely affecting the
marketability of the offering, allocated in proportion, as nearly as
practicable, to the respective number of shares of Registrable Securities held
by such Holders at the time of filing the registration statement. If all of the
Registrable Securities requested to be included in a Demand Registration have
been included, E-Pub shall be entitled to include that number of shares of its
unissued E-Pub Stock or other securities as are consented to by the managing
underwriter.
(c) Limitations on Demand Registration. Notwithstanding any other
provision in this Agreement, E-Pub shall not be required to effect the Demand
Registration (a) during the period of time during which its IPO Registration
Statement shall remain effective; (b) during the 12 consecutive months following
the effective date of a registration statement filed in connection with any
previous registration in which the Holders of Registrable Securities exercised
any piggyback rights pursuant to this Agreement; or (c) at any time when another
registration statement (other than on Form S-4, S-8 or a registration statement
on Form S-1 covering solely an employee benefit plan) of E-Pub (i) is reasonably
foreseen by E-Pub's Board
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of Directors to be filed with the Commission within 30 days after the date of
request for the Demand Registration, (ii) has been filed and not yet become
effective, or (iii) has become effective less than six months prior to the date
of the request for the Demand Registration.
(d) Special Audits. Notwithstanding any other provision of this
Agreement, E-Pub shall not be required to undergo or pay for any special audit
to effect a Demand Registration, and if such a special audit (other than its
normal fiscal year-end audits) would be required in order to file or effect a
registration statement hereunder, E-Pub shall be entitled to delay the filing or
effectiveness of such registration statement until a reasonable period of time
following completion of such audit in the ordinary course of E-Pub's business;
provided, however, that E-Pub shall not be entitled to delay the filing or
effectiveness of such registration statement if the Holders who have requested
registration of Registrable Securities shall agree to pay for the cost of such
audit.
16.10 Pearson's Piggyback Registration Rights. If (i) any registration
statement filed by E-Pub or any or its Affiliates under the Exchange Act shall
be declared effective by the Commission, and (ii) at any time during the period
of five years following the expiration of the two year period described in
Section 16.3(d) hereof, E-Pub shall determine to file a registration statement
under the Securities Act (other than an IPO registration statement or a
registration statement on Form S-4, S-8 or on Form S-1 covering solely an
employee benefit plan), E-Pub agrees promptly to give written notice of its
determination to all Holders. Upon the written request of a Holder given within
30 days after the receipt of such written notice from E-Pub, E-Pub agrees to use
its best efforts to cause all of such Holder's Registrable Securities to be
included in such registration statement and registered under the Securities Act,
all to the extent requisite to permit the sale or other disposition of the
Registrable Securities to be so registered. All registrations of Registrable
Securities referred to in this Section 16.10 may be referred to as "Piggyback
Registrations."
(a) Underwritten Piggyback Registration. If the registration of
which E-Pub gives written notice pursuant to Section 16.10 is for a public
offering involving an underwriting, E-Pub agrees to so advise the Holders as a
part of its written notice.
(b) Priority on Piggyback Registration. Notwithstanding any other
provision of this Section 16.10, if the managing underwriter of a Piggyback
Registration that is an underwritten distribution advises E-Pub and the Holders
participating in such Piggyback Registration in writing that, in its good faith
judgment, the number of shares of Registrable Securities requested to be
registered exceeds the number of shares of Registrable Securities which can be
sold in such offering without adversely affecting the marketability of the
offering, then (a) the number of shares of Registrable Securities so requested
to be included in the offering shall be reduced to that number of shares which
in the good faith judgment of the managing underwriter can be sold in such
offering, and (b) such reduced number of shares shall be allocated among all
participating Holders in proportion, as nearly as practicable, to the respective
number of shares of Registrable Securities held by such Holders at the time of
filing the registration statement; provided, however, that, in all events, the
shares to be issued by E-Pub shall have priority over the shares of Registrable
Securities requested to be registered.
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(c) Registration Procedures. If and as often as E-Pub is required by
the provisions of Sections 16.7(c) and (d) hereof to include shares of
Registrable Securities held by various Holders in a registration statement filed
under the Securities Act, E-Pub, as expeditiously as possible, agrees that it
shall:
(i) Registration Statement: Period of Effectiveness. In accordance
with the Securities Act and all applicable rules and regulations, prepare and
file with the Commission a registration statement with respect to such
securities and use its best efforts to cause such registration statement to
become and remain effective for a period of nine months (or, if such
registration statement has been filed on Form S-3, for a period of one year)
and prepare and file with the Commission such amendments and supplements to such
registration statement and the prospectus contained therein as may be necessary
to keep such registration statement effective and such registration statement
and prospectus accurate and complete during such period of time;
(ii) Underwriting Agreement. If the offering is to be underwritten
in whole or in part, enter into a written underwriting agreement in form and
substance reasonably satisfactory to the managing underwriter of the public
offering and E-Pub;
(iii) Copies of Registration Statement, Prospectus, Other
Documents. Furnish to the Holders of Registrable Securities participating in
such registration and to the underwriters of the securities being registered
such number of copies of the registration statement and each amendment and
supplement thereto, preliminary prospectus, final prospectus and such other
documents as such underwriters and Holders may reasonably request in order to
facilitate the public offering of such securities;
(iv) Blue Sky Qualification. Use its best efforts to register or
qualify the securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such participating Holders
and underwriters may reasonably request within twenty (20) days prior to the
original filing of such registration statement, except that E-Pub shall not for
any purpose be required to execute a general consent to service of process or to
qualify to do business as a foreign corporation in any jurisdiction where it is
not so qualified, or to subject itself to taxation in any such jurisdiction;
(v) Notification of Effectiveness and Filing. Notify the Holders
participating in such registration, promptly after it shall receive notice
thereof, of the date and time when such registration statement and each
post-effective amendment thereto has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed;
(vi) Preparation of Amendments and Supplements at Holders'
Request. Prepare and file with the Commission, promptly upon the request of any
such Holders, any amendments or supplements to such registration statement or
prospectus which, in the opinion of counsel for such Holders, is required under
the Securities Act or the rules and
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regulations thereunder in connection with the distribution of the Registrable
Securities by such Holders;
(vii) Correction of Statements or Omissions. Prepare and file
promptly with the Commission, and promptly notify such Holders of the filing of,
such amendments or supplements to such registration statement or prospectus as
may be necessary to correct any statements or omissions if, at the time when a
prospectus relating to such securities is required to be delivered under the
Securities Act, any event has occurred as the result of which any such
prospectus or any other prospectus as then in effect would include an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading;
(viii) Amendment of or Supplement to Non-Complying Registration
Statement or Prospectus. In case any of such Holders is required to deliver a
prospectus at a time when the prospectus then in circulation is not in
compliance with the Securities Act or the rules and regulations of the
Commission, prepare promptly upon request such amendments or supplements to
such registration statement and such prospectus as may be necessary in order for
such prospectus to comply with the requirements of the Securities Act and such
rules and regulations;
(ix) Stop Orders, Proceedings. Advise such Holders, promptly after
it shall receive notice or obtain knowledge thereof, of the issuance of any stop
order by the Commission suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for that purpose
and promptly use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal if such stop order should be issued; and
(x) Inspection. Make available for inspection upon request by any
Holder covered by such registration statement, by any managing underwriter of
any distribution to be effected pursuant to such registration statement and by
any attorney, accountant or other agent retained by any such Holder or any such
underwriter, all financial and other records, pertinent corporate documents and
properties of E-Pub, and cause all of E-Pub's officers, directors and employees
to supply all information reasonably requested by any such Holder, underwriter,
attorney, accountant or agent in connection with such registration statement.
16.11 Expenses. Subject to the provisions of Section 16.9(d), with
respect to the first inclusion of shares of Registrable Securities in a
registration statement pursuant to Section 16.9 hereof and all inclusions of
shares of Registrable Securities in a registration statement pursuant to Section
16.10 hereof, E-Pub agrees to bear all fees, costs and expenses of and
incidental to such registration and the public offering in connection therewith;
provided, however, that the Holders participating in any such registration agree
to bear their pro rata share of any applicable underwriting discount and
commissions. In the event of a second inclusion of shares of Registrable
Securities in a registration statement pursuant to Section 16.9 hereof, Pearson
agrees to bear all fees, costs and expenses of and incidental to such
registration and the public offering in connection therewith; provided, however,
that the Holders participating in any such registration agree to bear their pro
rata share of any applicable underwriting discount and
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commissions. The fees, costs and expenses of registration to be borne as
provided in the preceding two sentences shall include, without limitation, all
registration, filing, listing, and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for E-Pub, fees and disbursement of
counsel for the underwriter or underwriters, if any, of the securities to be
offered (if E-Pub and/or selling Holders who have requested registration of
their Registrable Securities are otherwise required to bear such fees and
disbursements), all legal fees and disbursements and other expenses of complying
with state securities or blue sky laws of any jurisdictions in which such
securities are to be registered or qualified, reasonable fees and disbursements
of one firm of counsel for the Holders who have requested registration of their
Registrable Securities, to be selected by the Holders of a majority of the
shares of Registrable Securities to be included in such registration, and the
premiums and other costs of policies of insurance against liability arising out
of such public offering.
16.12 Underwriting Agreements. In the event any Demand Registration or
Piggyback Registration under this Agreement is an underwritten offering, the
right of any Holder to participate therein, and the inclusion of such Holder's
Registrable Securities therein, shall be subject to such Holder's agreeing to
enter into, together with E-Pub, an underwriting agreement with and reasonably
satisfactory to the underwriter or underwriters selected by E-Pub for such
underwriting.
16.13 Indemnification.
(a) Indemnification by E-Pub. E-Pub hereby agrees to indemnify and
hold harmless each Holder (including Holder's officers, directors, legal
counsel, accountants, and controlling Persons) of Registrable Securities which
are included in a registration statement pursuant to the provisions of these
Sections 16.7 - 16.14 from and against, and agrees to reimburse such Holder with
respect to, any and all claims, actions (actual or threatened), demands, losses,
damages, liabilities, costs or expenses to which such Holder may become subject
under the Securities Act or otherwise, insofar as such claims, actions, demands,
losses, damages, liabilities, costs or expenses arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in such registration statement, any prospectus contained therein, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however, that
E-Pub will not be liable in any such case to the extent that any such claim,
action, demand, loss, damage, liability, cost or expense is caused by an untrue
statement or alleged untrue statement or omission or alleged omission so made in
strict conformity with written information furnished by such Holder specifically
for use in the preparation thereof.
(b) Indemnification by Holders. Each Holder of shares of
Registrable Securities which are to be included in a registration statement
pursuant to the provisions of these Sections 16.7 - 16.14 shall be required to
agree, severally and not jointly, as a condition of E-Pub's obligation to
prosecute such registration to completion, to indemnify and hold harmless E-Pub,
its officers, directors, legal counsel and accountants and each Person who
controls E-Pub
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within the meaning of the Securities Act, from and against, and agrees to
reimburse E-Pub, its officers, directors, legal counsel, accountants and
controlling Persons with respect to, any and all claims, actions, demands,
losses, damages, liabilities, costs or expenses to which E-Pub, its officers,
directors, legal counsel, accountants or such controlling Persons may become
subject under the Securities Act or otherwise, insofar as such claims, actions,
demands, losses, damages, liabilities, costs or expenses are caused by any
untrue statement of any material fact contained in such registration statement,
any prospectus contained therein or any amendment or supplement thereto, or are
caused by the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was so made in reliance upon
and in strict conformity with written information furnished by such Holder
specifically for use in the preparation thereof. Notwithstanding the foregoing,
no Holder shall be obligated hereunder to pay more than the net proceeds
realized by it upon its sale of Registrable Securities included in such
registration statement.
(c) Indemnification Procedure. Promptly after receipt by a party
indemnified pursuant to the provisions of Section 16.13(a) or (b) of notice of
the commencement of any action involving the subject matter of the foregoing
indemnity provisions, such indemnified party will, if a claim therefor is to be
made against the indemnifying party pursuant to Section 16.13(a) or (b),
notify the indemnifying party of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 16.13 and
shall not relieve the indemnifying party from liability under this Section 16.13
unless such indemnifying party is prejudiced by such omission. In case any such
action is brought against any indemnified party and it notifies the indemnifying
party of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any other
indemnifying parties similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party; provided, however, that if the
defendants in any such action include both the indemnified party and the
indemnifying party, and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel (in which case the indemnifying party shall not have
the right to direct the defense of such action on behalf of the indemnified
party or parties). Upon the permitted assumption by the indemnifying party of
the defense of such action, and approval by the indemnified party of counsel,
the indemnifying party shall not be liable to such indemnified party under
Section 16.3(a) or Section 16.3(b) for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof
(other than reasonable costs of investigation) unless: (a) the indemnified party
shall have employed separate counsel in connection with the assertion of legal
defenses in accordance with the proviso to the next preceding sentence; (b) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time;
(c) the indemnifying party and its counsel do not actively and vigorously pursue
the defense of such action; or (d) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party. No
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indemnifying party shall be liable to an indemnified party for any settlement of
any action or claim without the consent of the indemnifying party, and no
indemnifying party may unreasonably withhold its consent to any such settlement.
No indemnifying party will consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability with respect to such claim or litigation.
16.14 Contribution.
(a) If the indemnification provided for in Section 16.13(a) or
(b) is held by a court of competent jurisdiction to be unavailable to a party to
be indemnified with respect to any claims, actions, demands, losses, damages,
liabilities, costs or expenses referred to therein, then each indemnifying party
under any such Section, in lieu of indemnifying such indemnified party
thereunder, hereby agrees to contribute to the amount paid or payable by such
indemnified party as a result of such claims, actions, demands, losses, damages,
liabilities, costs or expenses in such proportion as is appropriate to reflect
the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or omissions
which resulted in such claims, actions, demands, losses, damages, liabilities,
costs or expense, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Notwithstanding the foregoing, the amount any Holder shall be obligated to
contribute pursuant to this Section 16.14 shall be limited to an amount equal to
the per share public offering price (less any underwriting discount and
commissions) multiplied by the number of shares of Registrable Securities sold
by such Holder pursuant to the registration statement which gives rise to such
obligation to contribute (less the aggregate amount of any damages which such
Holder has otherwise been required to pay in respect of such claim, action,
demand, loss, damage, liability, cost or expense or any substantially similar
claim, action, demand, loss, damage, liability, cost or expense arising from the
sale of such Registrable Securities).
(b) No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution pursuant to this Section 16.14 from any person who was not guilty
of such fraudulent misrepresentation.
16.15 Violation of Standstill Provisions - Divestiture. In the event
that Pearson, or any person acting in concert with Pearson, shall violate the
warranty and representation set forth in Section 16.3(e) hereof, it shall
immediately thereafter be required to divest itself of such number of shares of
E-Pub Stock as shall be necessary to reduce its holdings thereof to not more
than 20% of the total number of shares of E-Pub Stock then outstanding. The
shares of E-Pub Stock to be so divested shall not include any portion of the
Shares which, at the time of such divestiture, shall be subject to the
restrictions imposed by Section 16.3(c) or (d) hereof. If Pearson fails or
refuses, for any reason, to undertake such divestiture within five (5)
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business days after its receipt of notice from E-Pub demanding that it do so,
and/or if having timely commenced such divestiture, Pearson fails to complete
same within 30 days thereafter, E-Pub shall, in either of such events, be
entitled to commence judicial proceedings in the appropriate state or federal
courts in the State of New York seeking specific performance of the provisions
of this paragraph, and Pearson shall be obligated to pay all reasonable counsel
fees and disbursements incurred by E-Pub in connection therewith. Furthermore,
Pearson shall not be entitled to vote any of the Shares on any matter that shall
come before the holders of E-Pub Shares for a vote at any time while Pearson's
holdings of E-Pub Stock shall exceed 20% of the total number of shares of E-Pub
Stock then outstanding. Anything contained in this Section 16.15 to the contrary
notwithstanding, in the event that:
(a) any person or entity acting solely or in concert with any
other person or entity (other than Pearson or any affiliate of Pearson) shall
acquire 20% or more of the then issued and outstanding shares of E-Pub Stock
either in open market transactions, or pursuant to any tender offer or similar
transaction which shall not be endorsed or approved by E-Pub's Board of
Directors, the provisions of Sections 16.3(c), (d) and (e) of this Section
shall thereupon be deemed to have been terminated, but this Agreement shall
otherwise continue in full force and effect; and
(b) any person or entity acting solely or in concert with any
other person or entity (other than Pearson or any affiliate of Pearson) shall
acquire 20% or more of the then issued and outstanding shares of E-Pub Stock
from E-Pub and/or any affiliate of E-Pub, or pursuant to any tender offer or
similar transaction which shall be endorsed or approved by E-Pub's Board of
Directors, Pearson shall thereupon have the right, but not the obligation, to
terminate this Agreement. If Pearson elects to exercise such right of
termination, it shall do so by giving not less than 90 days' prior written
notice of termination to E-Pub.
16.16 Stop Transfer Instructions: Restrictive Legend, Upon original
issuance thereof, and until such time as the same is no longer required under
this Agreement, and/or the applicable requirements of the applicable laws and
regulations of each governmental authority having jurisdiction over the
issuance, sale, transfer or other disposition of the Shares:
(a) E-Pub shall issue "stop transfer" instructions to the
transfer agent of the E-Pub Stock, and such other instructions as E-Pub may deem
advisable to prevent the sale, assignment, transfer or other disposition of any
of the Shares;
(b) any certificate or certificates evidencing Pearson's
ownership of the Shares (and all certificates issued in exchange therefor or
substitution thereof) shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED OR OTHERWISE QUALIFIED FOR SALE BY THE HOLDER HEREOF
UNDER THE APPLICABLE LAWS AND/OR REGULATIONS OF ANY GOVERNMENTAL
AUTHORITY HAVING JURISDICTION
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WITH RESPECT THERETO. SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION
OR AN EXEMPTION THEREFROM UNDER SAID LAWS OR REGULATIONS"
and
(c) in the event that the transfer agent of the E-Pub Stock shall
fail or refuse for any reason to implement the "stop transfer" instructions set
forth in sub-section (a) hereof, or to place the legend set forth in sub-section
(b) hereof upon each of the Global Certificates evidencing the Shares, Pearson
shall enter into an escrow agreement with E-Pub and the Custodian which shall
provide that the Custodian shall hold all of the Shares in accordance with, and
subject to, the various restrictions and limitations on transfer of the Shares
imposed by Section 16 of this Agreement.
17. Indemnification.
17.1 Indemnification of E-Pub by Pearson against Certain
Liability. Pearson, at its own expense, shall indemnify, defend and hold
harmless E-Pub and its Affiliates and their officers, directors, employees and
agents (collectively, the "E-Pub Indemnitees"): (a) from and against all
demands, claims, threatened claims, actions or causes of action, assessments,
losses, damages, liabilities, costs and expenses, including without limitation,
interest, penalties and reasonable outside attorneys' fees and expenses which
shall be based upon a claim brought by a third party, that (1) E-Pub's use
pursuant to this Agreement (including any advertising or promotional use of such
materials) of the Licensed Marks in English speaking countries, the Game Show
Formats, or other Pearson Materials in the Territory (without the addition of
any E-Pub Materials) when used by E-Pub as contemplated in this Agreement
infringes any copyright, trademark, trade secret, rights of publicity or
privacy, or other proprietary right of any third party or is libelous or
slanderous; (2) if true, would constitute a breach of any of Pearson's
representations, warranties or agreements hereunder; (3) arises out of the
improper use or transmission by Pearson of the User Information and/or
Summarized User Data; (4) arises out of any Advertisement placed by Pearson on
the Site; or (5) arises out of the negligence or willful misconduct of Pearson.
Pearson shall have the right at all times, in its sole discretion, and at its,
sole cost, to retain or resume control of the conduct of the defense of any
matter to which the foregoing indemnity applies; (b) from and against any tax
liability of Pearson for which E-Pub and/or any Affiliate of E-Pub may have been
determined to have had a withholding obligation as a consequence of the issuance
pursuant hereto of Shares by E-Pub including any interest and/or penalties
relating thereto.
17.2 Repair or Replacement of Licensed Game Show. If a court of
competent jurisdiction imposes an injunction prohibiting E-Pub from continued
use of any Licensed Internet Game and/or Licensed Mark or portion thereof as a
result of material provided by Pearson, Pearson shall at Pearson's expense and
election and as approved by E-Pub:
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(a) Procure for E-Pub the right to continue to use the
material pursuant to this Agreement; or
(b) Replace or modify the infringing material in the
Licensed Internet Game and/or Licensed Mark, as the case may be, to make it
non-infringing, provided that the modifications or substitutions will not
materially and adversely affect the continued use or transmission of such
Licensed Internet Game on the Internet or lessen its utility to E-Pub (as
reasonably determined by E-Pub).
(c) If all Game Show Formats offered under the Agreement in
the United States are enjoined, then Pearson shall return to E-Pub for
cancellation the pro-rata amount of Pearson's Securities equal to the product
derived by multiplying the total number of shares by a fraction, the numerator
of which is the number of days remaining in the Initial Term, and the
denominator of which is the total number of days in the Initial Term.
17.3 Indemnification of Pearson by E-Pub against Certain
Liability. E-Pub, at its own expense, shall indemnify, defend and hold harmless
Pearson, its parent, subsidiaries and Affiliates, and its officers, directors,
employees and agents (collectively, the "Pearson Indemnitees"), from and against
all losses which shall be based upon a claim or threatened claim that (1)
E-Pub's or Pearson's use of any of the materials or services supplied or
obtained by E-Pub including, without limitation, the Site, the Software, and the
technology used to develop and maintain the Site and used by E-Pub as
contemplated in this Agreement infringes any copyright, trademark, trade secret,
rights of publicity or privacy, or other proprietary right of any third party or
is libelous or slanderous, (2) if true, would constitute a breach of any of
E-Pub representations, warranties or agreements hereunder; (3) arises out of the
negligence or willful misconduct of E-Pub; (4) arises out of a sweepstakes
conducted by E-Pub or a prize awarded by E-Pub in connection with any Licensed
Internet Game; (5) arises out of any activity of E-Pub in relation to the
Licensed Internet Games or the Site (including, without limitation, E-Pub's
collection of User Information or improper use or transmission of User
Information and/or Summarized User Data); (6) arises out of any hyperlink,
advertisement, or third-party material placed on the Site by E-Pub; (7) arises
out of the improper use, distribution or transfer of the Game Show Formats or
other Pearson Materials by E-Pub; or (8) any misuse of the Licensed Internet
Games or the Site by any User of which E-Pub had actual knowledge. E-Pub shall
have the right at all times, in its sole discretion and its sole cost, to retain
or resume control of the conduct of the defense of any matter to which the
foregoing indemnity applies.
18. Limitation of Liability.
18.1 Limitation of Liability. EXCEPT IN RELATION TO ANY BREACH OF
THE WARRANTIES SET FORTH IN SECTION 10.2 HEREUNDER, NEITHER PARTY SHALL BE
LIABLE TO THE OTHER FOR INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES
(EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES) SUCH
AS, BUT NOT LIMITED TO, LOSS OF REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, UNDER NO CIRCUMSTANCES SHALL
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EITHER PARTY BE LIABLE TO THE OTHER FOR ANY CLAIM ARISING OUT OF ANY
DOWNLOADING OR OTHER USE OF ANY OF THE LICENSED INTERNET GAMES BY USERS OF THE
LICENSED INTERNET GAMES.
18.2 Disclaimer. EXCEPT AS SET FORTH HEREIN, BOTH PARTIES HEREBY
SPECIFICALLY DISCLAIM ANY REPRESENTATIONS REGARDING THE LICENSED INTERNET GAMES,
INCLUDING ANY IMPLIED REPRESENTATION REGARDING MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE AND IMPLIED WARRANTIES ARISING FROM COURSE OF DEALING OR
COURSE OF PERFORMANCE. WITHOUT LIMITING THE FOREGOING, AND EXCEPT AS OTHERWISE
AGREED, NEITHER PARTY MAKES ANY WARRANTY THAT THE MATERIALS IT PROVIDES WILL BE
ERROR-FREE OR THAT USER ACCESS THERETO WILL BE UNINTERRUPTED.
18.3 Insurance. E-Pub shall obtain all necessary and adequate
insurance with respect to production, transmission, and hosting of the Licensed
Internet Games, including without limitation, liability insurance, workers'
compensation and errors and omissions insurance in amounts and with carriers
reasonably approved by Pearson, each with limits of at least one million
($1,000,000.00) dollars on account of any one occurrence and one million
($1.000,000.00) dollar for each occurrence of property damage. Pearson will be
named an additional insured in all such insurance policies and copies of such
policies and certificates of insurance (or Binders), shall be delivered to
Pearson within ten (10) days after issuance. Said certificates will include
provisions whereby fifteen (15) days notice must be received by Pearson prior to
coverage cancellation by either E-Pub or Insurer, or non-payment of premium by
E-Pub.
19. Confidentiality.
19.1 Confidentiality Obligations. Each party acknowledges that it
shall receive Confidential Information (as hereinafter defined) of the other
party relating to its technical, marketing, product and/or business affairs.
During the term of this Agreement and for a period of one (1) year thereafter,
all Confidential Information of the other party shall be held in strict
confidence and shall not be disclosed or used without the express written
consent of the other party, except as may be required by law. Each party shall
use reasonable measures and make reasonable efforts to provide protection for
the other party's Confidential Information including measures at least as strict
as such party uses to protect its own Confidential Information.
19.2 Confidentiality of this Transaction. Except as may be
required by law, regulation or rule, neither Party shall make any announcement
or other disclosure to any third party of the transaction contemplated by the
Agreement or any of the details of any of E-Pub's plans for the Licensed
Internet Games, the Games, or the Local Television Shows or any related products
or services, until such plans have actually been implemented, except with the
prior written consent of the other party. The form, substance and timing of any
announcement referring directly or indirectly to any of the Licensed Internet
Games, the Local Television Shows, or any related products or services, until
such plans have actually been implemented, except with the prior written consent
of the other party. The form, substance and timing of any
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announcement referring directly or indirectly to any of the Licensed Internet
Games, or the Games, by either party shall be subject to the prior written
approval of both parties, such consent not to be unreasonably withheld.
19.3 Confidential Information Defined. Confidential Information
shall mean and include the Production and Marketing Information of either party
and any information relating to or disclosed in the course of the performance of
this Agreement except for any information that (i) is or becomes generally
available to the public without breach of this Agreement; (ii) is in the
possession of a party prior to its disclosure by the other party; (iii) becomes
available from a third party not in breach of any obligation of confidentiality
to which such third party is subject; (iv) was independently developed by a
party; and (v) must be disclosed due to judicial or governmental requirement or
order, provided that, the party in receipt of the requirement or order has given
the other party notice of such requirement or order to permit the other party of
reasonable opportunity to object to the requirement or order or seek a
protective order or other appropriate remedy.
19.4 Public Information. Each party will submit to the other
party, for its prior written approval, which shall not be unreasonably withheld
or delayed, any public documents including without limitation, financial
documents, press releases or marketing, advertising or promotional materials
related to the activities described herein and/or referencing the other party
and/or its trade names, trademarks and service marks. Notwithstanding the
foregoing, either party may issue such documents as required by law or
regulation (and only to the extent that such information is required by law or
regulation) without the consent of the other party.
19.5 User Information.
(a) With respect to each of the Licensed Internet Games,
E-Pub will create a User registration page, which page will include optional
identification and demographic questions for each person who visits the Web page
containing a Licensed Internet Game (a "User"). The registration page will
contain an acknowledgment that information obtained as a result of such
questions will be shared by E-Pub with Pearson only and neither of them will
sell or otherwise disseminate the user's name or address to any unaffiliated
third party. All information collected will be used by E-Pub and Pearson solely
for their own internal use, except that Pearson and its Affiliates and local
television licensees may e-mail Users who do not object to receiving information
about the Games and related products.
(b) It is understood and agreed that E-Pub and Pearson will
not sell or othenwise disseminate any User's name, and that no User's name or
identifying information will be retained by E-Pub or Pearson if the User so
requests. Pearson will adhere and be bound by the obligations, if any, set forth
in the E-Pub privacy statement published on the URL uproar.com. E-Pub shall use
reasonable efforts to post site-specific privacy and data collection policies on
each of the different national versions of the Site (in the United States, the
United Kingdom, Canada and Australia).
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(c) E-Pub's data collection policy for each Site shall
include the creation and provision of notice to Users describing any demographic
and/or tracking information that is being collected (providing Users the option
of withholding or correcting such data). E-Pub shall provide the name and
address of a contact person to whom inquiries or complaints about data
collection may be addressed, and shall store all personally identifiable
information off-line in a secure environment.
(d) Any User registration name, and/or demographic
information collected in connection with the local Licensed Internet Games shall
be the exclusive property of E-Pub.
(e) Summarized User Data from all parts of the Site
(including data that compares traffic on the Licensed Internet Games to traffic
on other games on the Site) will be shared openly and continuously with Pearson
in a form and manner to be designated by Pearson. As used herein "Summarized
User Data" means the User data statistics, chat and e-mail information collected
and maintained from time to time by E-Pub pertaining to all parts of the Site.
Said Summarized User Data shall also contain traffic information pertaining to
how and where visitors enter the Licensed Internet Games.
20. General Provision.
20.1 Ownership of Certain Intellectual Property.
(a) Pearson acknowledges and agrees that E-Pub has and will
retain all rights, title, interest and ownership in and to all software
developed by E-Pub and used in the Licensed Internet Games (the "Software").
Pearson further acknowledges and agrees that the source code for the Software
constitutes Confidential Information (as defined in Section 19.3) of E-Pub
whether or not any portion thereof is or may be the subject of a valid copyright
or patent.
(b) Computer Programming. Subject to Section 20.1 (a) above,
all computer programming files developed or prepared by E-Pub in connection with
the Licensed Internet Games are the exclusive property of E-Pub (the "Code").
The parties specifically acknowledge and agree that E-Pub owns all rights with
respect to the domain name uproar.com.
(c) E-Pub acknowledges and agrees that Pearson owns and will
retain all rights, title, interest and ownership in and to the Game Show
Formats, the Games, the U.S. Local Television Shows and all other Pearson
Materials.
(d) Reversion of Rights. E-Pub acknowledges and agrees that
except for the Software and the Code, all artistic, editorial and design
elements (including without limitation "look and feel") and format-specific
questions created for the Licensed Internet Games which are based on, specific
to, or derivative or transformative works of, the Game Show Formats (the "Game
Content"), are and shall remain the property of Pearson. All rights, title and
interest therein shall revert to Pearson upon termination or expiration of this
license.
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(e) Post Termination License Agreement. Upon expiration or
termination of the Initial Term of this Agreement, Pearson shall have the right
to obtain from E-Pub an exclusive license for a term of no more than eighteen
(18) months to: (i) use the Software in executable form for a license fee of
$300.000, over the 18-month period; payable to E-Pub quarterly. and (ii) have
E-Pub host and serve the Internet Versions of the Games for a fee of $180,000.
payable to E-Pub monthly over the 18-month period, provided that Pearson agrees
to adhere to the E-Pub privacy statement. It is understood that (ii) above, is
contingent upon Pearson's election of (i) above. Upon termination, E-Pub shall
provide Pearson with e-mail addresses and all other User data collected during
the Term (including any Extension or Renewal Term) for Licensed Internet Game
Users and all other Users of the Site. Pearson and its Affiliates and local
television licensees shall retain the right, in perpetuity to e-mail any Users
whose e-mail addresses it obtains (and who "opt-in," or elect to permit their
e-mail addresses to be used) with information about the Games, the U.S. Local
Television Shows, and any other Pearson products or services.
(f) Transition Obligation. In the event that Pearson does not
choose to obtain the post-termination license described above, or upon
expiration or any termination of this Agreement by either party, E-Pub shall
provide all reasonably requested support in the transitioning of the hosting
services to Pearson or a third party vendor selected by Pearson in its sole
discretion, including without limitation, the transfer and any necessary
conversion of all software and Code, and consulting, regarding technology
hosting requirements. Pearson shall pay E-Pub for such services at its
then-current rates and shall pay all expenses incurred by E-Pub in supplying
such services.
20.2 Entire Agreement. This Agreement together with all Exhibits,
Specifications and attachments, if any, which are incorporated herein by
reference, is the sole and entire agreement between the parties relating to the
subject matter hereof. This Agreement supersedes all prior understandings,
agreements and documentation relating to such matter. No supplement,
modification, or amendment of this Agreement shall be binding, unless executed
in writing by both parties. In the event of a conflict between provisions of
this Agreement and any attached Exhibits, Specifications or other material, this
Agreement shall take precedence.
20.3 Assignment. Each party may assign this Agreement or all or
any part of its rights hereunder to an Affiliate or to any entity that succeeds
to all or substantially all of its capital stock, or that is otherwise its
successor in interest generally, and this Agreement shall inure to the benefit
of, and be binding upon such assignee or successor in interest, provided
however that in the event that any such assignee of E-Pub is divested by E-Pub,
this Agreement shall be re-assigned, prior to such divestment, to E-Pub or any
of its other Affiliates. Pearson shall during the Initial Term, have the right
to terminate this Agreement upon thirty (30) days written notice to E-Pub if
both Michael Simon and David Becker cease to be employed by E-Pub, or an
Affiliate of E-Pub which directly oversees Uproar, in full-time senior
management positions. Pearson shall, except as set forth above, have the right
to terminate this Agreement with thirty (330) days notice upon any change in
control of E-Pub (whether by merger, stock transfer or otherwise) provided that
Pearson shall notify E-Pub of its intention to terminate no later than ninety
(90) days after the date on which such change of control takes effect. For
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purposes of the preceding sentence, a "change in control" shall be deemed to
occur if: (i) any "person" (as such term is defined in the Securities Exchange
Act of 1934, as amended) other than E-Pub or any of its subsidiaries or a
trustee or any fiduciary holding securities under an employee benefit plan of
E-Pub or any of its subsidiaries, acting singly or in concert with one or more
other persons, acquires securities representing 50% or more of the combined
voting power of E-Pub's then outstanding securities: (ii) during any one year
period, individuals who at the beginning of such period constitute the Board of
Directors of E-Pub and any new director whose election by the Board of Directors
or nomination for election by E-Pub's shareholders was approved by a vote of at
least a majority of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof;
(iii) the shareholders of E-Pub approve a merger or consolidation of E-Pub with
any other corporation, other than (a) a merger or consolidation which would
result in the voting securities of E-Pub outstanding immediately prior thereto
continuing to represent, in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit plan of E-Pub or
any of its subsidiaries, at least 50% of the combined voting power of the voting
securities of E-Pub or such surviving entity outstanding immediately after such
merger or consolidation, or (b) a merger or consolidation effected to implement
a recapitalization of E-Pub (or similar transaction) in which no person acquires
more than 50% of the combined voting power of E-Pub's then outstanding
securities; or (iv) the shareholders approve a plan of complete liquidation of
E-Pub or an agreement for the sale or disposition by E-Pub of all or
substantially all of its assets.
20.4 Waiver. No term or provision of this Agreement shall be
deemed waived and no breach excused unless such waiver or consent is in writing
and signed by the party claimed to have waived or consented. A waiver by either
of the parties of any of the covenants, conditions or agreements to be performed
by the other hereunder shall not be construed to be a waiver of any succeeding
breach thereof.
20.5 Survival. The following provisions of this Agreement shall
survive the completion, expiration, termination or cancellation of this
Agreement: Sections 7, 10.1-10.8, 11, 14, 15, 16 (except 16.3(c)-(e)),
19.1-19.4, 19.5(b), 19.5(d), and 20.
20.6 Force Majeure. Neither party shall be liable for delay or
failure in the performance of its obligations hereunder if such delay or failure
arises from the occurrence of events beyond the reasonable control of such
party, which events could not have been prevented by the exercise of due care
and could not have been foreseen at the time of entering into this Agreement,
such as fire, explosion, flood, storm, acts of God, war, embargo, or riot,
provided that the party suffering the delay or failure and acts diligently to
remedy the cause of such delay or failure.
20.7 No Joint Venture. Nothing contained herein will be construed
as creating any partnership, joint venture or other form of joint enterprise
between the parties.
20.8 Independent Contractor. The parties acknowledge that E-Pub
will perform its obligations hereunder as an independent contractor. The manner
and method of performing
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such obligations will be under E-Pub's sole control and discretion. It is also
expressly understood that E-Pub employees and agents, if any, are not Pearson's
employees or agents, and have no authority to bind Pearson by contract or
otherwise.
20.9 Notice. All notices and other communications required or
permitted under this Agreement shall be deemed given when delivered
personally, or one day after being deposited with Federal Express or other
recognized overnight courier service, or five (5) days after being mailed by
registered or certified mail, postage prepaid, addressed as follows, or to such
other address as each party may designate in writing:
If to E-Pub:
E-Pub (Holdings) Ltd.
P.O. Box HM 1737
Hamilton HMGX, Bermuda
Facsimile: 011-441-292-8899
With a copy to:
Mr. David Becker
Uproar
375 West Broadway
New York. New York 10012
and
Hall Dickler Kent Friedman & Wood LLP
909 Third Avenue, 27th Floor
New York. New York 10022-9998
Attention: Gary H. Fechter, Esq.
If to Pearson:
Catherine Mackay
Executive Vice President
Operations
Pearson Television, Inc.
1325 Avenue of the Americas
New York, New York 10019
Facsimile: (212) 541-2950
e-mail: catherine.mackay@pearsontv.com
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With a copy to:
Paul Pavlis, Esq.
Executive Vice-President and General Counsel
Pearson Television, Inc.
2700 Colorado Avenue
Santa Monica, California 90404
Facsimile: (310) 255-4830
e-mail: paul.pavlis@us.pearsontv.com
20.10 Recruitment. During the term of this Agreement and for
eighteen (18) months thereafter, each party agrees not to solicit for employment
any employee of the other party who is or was involved in projects pursuant to
this Agreement.
20.11 Most Favored Nation. Should E-Pub negotiate an agreement with
any other entity which, in the reasonable opinion of Pearson, is, when taken as
a whole, more favorable to the third party than the terms of this Agreement,
Pearson shall have the option of adopting any more favorable term or terms of
such Agreement in place of any analogous term or terms of this Agreement. In
order to effectuate the purposes of this Agreement, E-Pub agrees to notify
Pearson immediately of any term of any agreement that E-Pub negotiates during
the term of this Agreement which might reasonably be considered more favorable
than the comparable terms in this Agreement. Pearson shall have the right to
approve any Material Agreement (for purposes of this Agreement, "Material
Agreement" shall mean an Agreement in which E-Pub receives consideration valued
at no less than one hundred thousand ($100,000 dollars) per annum with any
company supplying television game show formats to E-Pub, such approval not to be
unreasonably withheld.
20.12 Additional Rights of Pearson. In the event that E-Pub
develops a game site for any content aggregator. whether such a site is located
on the Internet or on any other computer network (such as AOL and Internet
search engines or portals), E-Pub shall make reasonable efforts to include the
Licensed Internet Games on such site no later than and on terms no less
favorable than those made available for any other computer games.
20.13 Applicable Law: Jurisdiction. This Agreement will be
governed by the laws of the State of New York without regard to its conflict of
laws principles. Both parties consent and agree that all legal proceedings
relating to the subject matter of this Agreement shall be maintained in courts
sitting within the State of York and both parties consent and agree that
jurisdiction and venue for such proceedings shall be exclusively with such
courts.
20.14 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute a single instrument.
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20.15 Facsimile Execution. This Agreement may be executed by
facsimile signatures by either party hereto and such signature shall be deemed
binding for all purposes hereof, without delivery of an original signature
being thereafter required.
20.16 Severability. If any provision of this Agreement is found
illegal or unenforceable, it will be enforced to the maximum extent permissible,
and the legality and enforceability of the other provisions of this Agreement
will not be affected.
20.17 Headings Not Controlling. The headings in this Agreement
are for reference purposes only and shall not be construed as a part of this
Agreement.
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IN WITNESS WHEREOF the parties have executed this Agreement by their
duly authorized representatives.
Pearson Television Holdings. Inc. E-Pub (Holdings) Ltd.
By: /s/ Greg Dyke By: /s/ Michael Simon
------------------------------- -----------------------------
Name: Greg Dyke Name: Michael Simon
------------------------------ -----------------------------
Title: Chief Executive Title: Chairman
------------------------------- -----------------------------
Date: 13/1/99 Date: January 12, 1999
------------------------------- -----------------------------
Pearson Television Limited
By: /s/ N. Humby
-------------------------------
Name: N. Humby
------------------------------
Title: Finance Director
-------------------------------
Date: 13/1/99
-------------------------------
Pearson Television North America, Inc.
By: /s/ Catherine Mackay
-------------------------------
Name: C. V. Mackay
------------------------------
Title: EVP, Operations
-------------------------------
Date: January 13, 1999
-------------------------------
Pearson Television, Inc.
By: /s/ Catherine Mackay
-------------------------------
Name: C. V. Mackay
------------------------------
Title: EVP, Operations
-------------------------------
Date: January 13, 1999
-------------------------------
Pearson Television Netherlands
By: /s/ Erik W. Wentges
-------------------------------
Name: Erik W. Wentges
------------------------------
Title: Director
-------------------------------
Date: 15-01-1999
-------------------------------
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EXHIBIT A
Game Production Schedule
Deadline Descripition
-------- ------------
Feb 1, 1999 100% Internet Version Preliminary Representation
Feb 15,1999 100% Internet Version Detailed Description
Mar 1, 1999 100% Beta Test
April 1, 1999 100% Launch
May 1, 1999 FF Internet Version Preliminary Representation
Match Game Internet Version Preliminary Representation
Jun 15, 1999 FF Internet Version Detailed Description
Match Game Internet Version Detailed Description
Aug 1, 1999 FF Internet Version Beta Test
Match Game Internet Version Beta Test
Sept 30, 1999 Match Game Launch
Sept 30, 1999 Family Feud Launch
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EXHIBIT B
The Licensed Marks
FAMILY FEUD (U.S. Registration)
FAMILY FORTUNES
MATCH GAME (U.S. Registration)
100% (U.S. Application)
BLANKETY BLANK (U.K. Registration)
familyfeud.com
familyfortunes.com
100percent.com
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EXHIBIT C
UPROAR Server Standards
1. UPROAR games are hosted on Servers capable of running the Internet
Protocol, TCP/IP.
2. Servers are connected to the Internet 24 hours a day, seven days a week.
3. Internet connections will be only made via Internet Service Providers who
can provide a minimum average uptime of 99%.
4. A Cisco Local Director or similar such device that provides multiple
fail-over and load balancing is used to connect Servers to the Internet.
5. All Servers have either remote reboot or auto-reboot capabilities.
6. Player account information is stored on RAID-5 or similar redundant disk
storage devices.
7. Servers are physically located in a facility with air conditioning and at
least temporary back-up power.
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EXHIBIT D
E-Pub (Holdings) Limited is not licensed to operate as a foreign corporation
in any jurisdictions.
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EXHIBIT E
An Employee Stock Ownership Plan (the "Plan") was established by resolutions
adopted by the Board of Directors of E-Pub (Holdings) Limited on July 27, 1997.
Pursuant to the Plan, up to 25,000 ordinary shares, par value (pound)l.00 each,
of E-Pub (Holdings) Limited may be issued. No shares have been issued under the
Plan. At present, one option to purchase 333 shares at an exercise price of
(pound)66.00 is outstanding.
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EXHIBIT F
E-Pub (Holdings) Ltd. has the following subsidiaries:
1. E-Pub Services Limited (Ireland) - capitalization IR(pound)279, 365
2. 2. E-Pub KFT. (Hungary) - capitalization HUF 2,000,000
3. 3. E-Pub, Inc. (United States) - capitalization $100
4. 4. E-Pub Limited (United Kingdom) - capitalization (pound)1000
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EXHIBIT G
Documents Received By Pearson From E-Pub
1. Software License, Services and Cooperation Agreement between E-Pub
(Holdings) Ltd. and Bertelsmann Infoline
2. E-Pub (Holdings) Limited: Organizational Documents
a. Certificate of Incorporation
b. Memorandum of Association of Company Limited by Shares
c. Certificate of Deposit of Memorandum of Association and Consent Granted
by the Minister
d. Notice of Address of Registered Office
e. Tax Assurance
f. Bye-Laws of E-Pub (Holdings) Limited
g. Foreign Exchange Letter
h. Global Instrument Certificate Agreement
3. Agreement between E-Pub (Holdings) Limited; Barclays Private Management
(Bermuda) Limited; Raiffeisen Zentralbank Osterreich AG; and
Oesterreichische Kontrollbank Aktiengesellschaft
4. Annex 1, Part 2: Terms and conditions for the administration of securities
abroad (German translation)
5. Annex 2
6. Conditions of the certificates
7. Share Certificates
8. Three Hungarian documents:
a. Alapito okirat modositasokkal egyseges szerkezetbe foglalva
b. Az eredmenykimutatashoz kapcsolodo adatok a kettos konyvvitelt vezeto
adoalanyok reszere
c. Egyszerusitett eves beszamolo
9. Option Deed
10. Deed of Adherence
11. Deed of Consent
12. Contract between E-Pub Services Limited and Somerset Ventures Central Europe
Limited
13. Charge over Intellectual Property Rights (dated 21 March 1996)
14. Deed of Amendment (dated 6 February 1997)
15. Deed of Release (dated 21 April 1997)
16. Articles of Association of E-Pub Services Limited
17. Supplemental Shareholders' Agreement (dated 21 April 1997)
18. Second Supplemental Subscription Agreement relating to E-Pub Services Ltd.
(dated November 1996)
19. Supplemental Subscription Agreement relating to E-Pub Services Ltd. (dated
10 September 1996)
20. Press Release from E-Pub (Holdings) Limited Announcing First Quarter 1998
Results
21. Press Release from E-Pub (Holdings) Limited Announcing Second Quarter 1998
Results
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22. Press Release from E-Pub (Holdings) Limited Announcing Third Quarter 1998
Results
23 E-Pub (Holdings) Limited and Subsidiaries Consolidated Financial Statements
(dated 31 December 1997)
24. Subscription and Shareholders' Agreement relating to E-Pub Services Limited
(dated 21 March 1996)
25. Resolution of E-Pub Services Limited (passed 21 March 1996)
26. Shareholders Agreement between Chase Systems Limited and New World
Publishing (dated 3 February 1995)
27. Memorandum and Articles of Association for E-Pub Services Limited
28. International Service Contract between E-Pub Services Limited and Michael
Simon (dated 1 January 1996)
29. International Service Contract between E-Pub Services Limited and Michael
Simon (dated January 1, 1996)
30. Software License Agreement between E-Pub (Holdings) Limited and Clevermedia
(dated February 16, 1998)
31. Partnership Agreement between E-Pub (Holdings) Limited and Clevermedia
(dated April 17, 1998)
32. Schedule of Insurance for E-Pub, Inc. (dated September 22,1998)
33. Letter Agreement between E-Pub Inc. and CNN Interactive (dated September 3,
1998)
34. Amendment No. 1 to Promotion and Online Distribution Agreement between
SportsLine USA, Inc. and E-Pub Services, Ltd. (dated July 1, 1998)
35. Promotion and Online Distribution Agreement between SportsLine USA, Inc. and
E-Pub Services, Ltd. (dated June 25, 1997)
36. Uproar Privacy Policy
37. Amended and Supplemental Complaint: Eddie Burgos and Dena Ann Burgos v.
Ellwell Associates LLC and E-Pub Inc.; Amended Answer, Cross-Claims and
Third-Party Complaint
38. Standard Form of Loft Lease between Ellwell Associates LLC and E-Pub Inc.
(dated April 2. 1997)
39. Rider to Lease between Ellwell Associates LLC and E-Pub Inc. (dated March
10, 1997)
40. Trade Marks Journal dated 11 November 1998, advertising the UK Trade Mark
Application No. 2159629 Uproar in Classes 9, 10, 16, 18, 21, 24, 34, 41 & 42
41. Letter of Trademark filing and Official Filing Receipt
42. Letter requesting trademark clarification
43. Power of attorney application for Trademark
44. Trademark applications for UPROAR.com in both England and the United States
45. Netgravity Adserver Network License Agreement between Netgravity Inc. and
E-Pub, Inc. (dated September 30, 1998)
46. Software Support Agreement between Netgravity. Inc. and E-Pub, Inc.
47. Memorandum and Articles of Association of E-Pub Limited
48. E-Pub (Holdings) Limited and Subsidiaries Consolidated Financial Statements
for the period ended 31 December 1997
49. E-Pub Limited Director's Report and Financial Statements for the period
ended 31 December 1997
50. E-Pub Services Limited Financial Statements Year Ended 31 December 1996
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51. Reports and Financial Statements - E-Pub Services Limited for the period
from 7 February 1995 to 31 December 1995
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EXHIBIT H
Pearson Disclosure
With respect to the Game Show Format of 100%, there is a pending dispute
regarding the similarity of such Format to the format of the newly created game
"Inquisition," broadcast on the Sony Game Show Channel. Pearson and Sony have
agreed to meet to explore an amicable resolution of this dispute.
50