Letter of Intent - Inktomi Corp. and HotWired Ventures LLC
LETTER OF INTENT
April 5, 1996
David A. Brewer
President
INKTOMI CORPORATION
2168 Shattuck Avenue, Suite 210
Berkeley, CA 94704
RE: SEARCH ENGINE SERVICE
This Letter of Intent is intended to summarize the principal terms of a
strategic relationship ("Strategic Partnership") between Inktomi Corporation
("Inktomi") and HotWired Ventures LLC ("HotWired"), pursuant to which the
parties will develop, implement, market and maintain an Internet
webcrawler/indexer search engine service, tentatively to be marketed as
"HotSearch, powered by Inktomi" (the "Search Engine"). The principal terms of
this Strategic Partnership are as follows:
1. INKTOMI'S DEVELOPMENT AND SUPPORT OBLIGATIONS. Inktomi, in
consultation with HotWired, will complete development of and provide its web
crawler/indexer search engine technology, consisting of Inktomi's proprietary
and in-licensed systems architecture and software and will implement the same
for the Search Engine (collectively, as implemented, the "Search Engine
Technology"), and will provide the Search Engine in accordance with the
Milestone Schedule set forth on Exhibit A attached hereto (the "Milestone
Schedule"). The Search Engine will perform the minimum functions set forth on
Exhibit B attached hereto, and Inktomi will develop and incorporate into the
Search Engine additional features and functions as mutually agreed by the
parties. During the term of the Strategic Partnership, Inktomi will provide
adequate ongoing technical support, maintenance and upgrades of the Search
Engine Technology, including second-line technical support to HotWired personnel
and Search Engine users. In addition, Inktomi will provide all required data
transmission capacity (bandwidth), disk storage and server capacity to host the
Search Engine. The code and other proprietary technology that are developed or
acquired by or on behalf of Inktomi and that comprise Inktomi's advertising
server shall be included in the definition of Inktomi's "Search Engine
Technology" hereunder.
2. HOTWIRED'S DEVELOPMENT AND SUPPORT OBLIGATIONS. HotWired, in
consultation with Inktomi, will develop and provide all editorial, graphics and
interface design for the Search Engine (collectively, the "Interface"), in
accordance with the Milestone Schedule. The interface design of the Search
Engine will be subject to the final approval of both parties. HotWired, in
consultation with Inktomi, will develop all online revenue streams and implement
all marketing and advertising sales for the Search Engine, in accordance with
the Milestone Schedule and subject to the marketing budget to be approved in
advance by the parties (the "Marketing Budget"). HotWired will commit the
minimum dedicated marketing/advertising personnel to the
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Search Engine as set forth on Exhibit B. Inktomi will not take any marketing
actions relating to the Search Engine (excluding customer relations activities)
without prior notification to HotWired. HotWired will use its reasonable best
efforts to obtain bartered advertising and other benefits for the Search Engine.
In addition, HotWired will provide adequate first-line customer support services
for the Search Engine.
3. MUTUAL EXCLUSIVITY.
(a) During the term of the Strategic Partnership, unless
Inktomi has an uncured breach of its performance obligations, without Inktomi's
prior written consent, HotWired will not sell or resell advertising for or
market, or enter into any arrangement to sell or resell advertising for or
market, any third party's search engine service except for * and (iii) search
engine services to be offered following the termination, if any, of the
Strategic Partnership.
(b) During the term of the Strategic Partnership, unless
HotWired has an uncured breach of its performance obligations, without
HotWired's prior written consent, Inktomi will not provide, sell or resell, or
enter into any arrangement to provide, sell or resell, any search engine service
except for * and (v) search engine services to be offered following the
termination, if any, of the Strategic Partnership.
(c) With respect to any search engine service described in
Section 3(a)(i) or 3(b)(iii), HotWired or Inktomi, as applicable, will first
notify and confer with the other party regarding such other party's potential
participation in such service at least fifteen (15) days prior to entering into
any binding arrangement with any third party regarding the same.
4. INTELLECTUAL PROPERTY AND ATTRIBUTION.
(a) Inktomi and its licensors will retain all right, title and
interest in and to the Search Engine Technology, including all modifications,
fixes and upgrades thereto and derivative works thereof, even if ideas or
suggestions made by HotWired are included into subsequent versions of the Search
Engine Technology. HotWired will retain all right, title and
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* Confidential Treatment Requested
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interest in and to the Interface, the code and other proprietary technology that
are developed or acquired by or on behalf of HotWired and that comprise
HotWired's advertising server (which is complementary to Inktomi's advertising
server), the Search Engine's domain name registration and the trademarks, trade
names, service marks and related logos (collectively, "Marks") used in
connection with the Search Engine (excluding Inktomi's proprietary Marks).
(b) Inktomi and HotWired will jointly own the
usage/demographic data generated by the Search Engine (the "Data") excluding Web
index data which will remain the sole property of Inktomi. Inktomi will provide
HotWired with copies of the logs generated by the Search Engine upon request.
(c) Each of Inktomi and HotWired will license to the other
party on a royalty-free, non-exclusive basis the right to use applicable Marks
for the purpose of fulfilling such party's obligations with respect to the
Search Engine.
(d) Both Inktomi and HotWired will receive equal credit and
attribution for developing and delivering the Search Engine. Inktomi will
receive specific attribution and copyright credit for the development of the
Search Engine Technology. The Interface and Marks used in connection with the
Search Engine will receive proper HotWired copyright credit or trademark
attribution, as applicable.
5. CROSS-MARKETING OPPORTUNITIES. HotWired and Inktomi will participate
in cross- marketing opportunities as appropriate. The goal of these arrangements
will be for each party to provide comparable services to the other such that no
direct compensation will be required. Such arrangements will include, without
limitation, the following:
(a) The Search Engine will include graphical links to the
HotWired World Wide Web site(s) and vice versa.
(b) The Search Engine will include graphical links to the
Inktomi World Wide Web site and vice versa.
6. REVENUE AND COST SPLITTING.
(a) HotWired will pay Inktomi royalties for the Search Engine
Technology and related support services as follows: (i) for each of the first
three months following the commercial Launch of the Search Engine (as defined in
the Milestone Schedule), a royalty equal to * of the net revenues; and (ii) for
each month thereafter, a royalty equal to * of the net revenues, provided,
however, that if the total net revenues for any such month are equal to less
than * , then Inktomi shall instead receive a royalty equal to the first *
thereof (or such lesser amount, if the net revenues for such month are equal to
less than * ) and HotWired shall retain the remainder for such month. "Net
revenues" shall mean gross advertising and/or subscription revenues actually
received, less agency discounts (typically 15%) and frequency discounts actually
payable, but before any commissions payable to HotWired's advertising sales
representatives. Revenues will include any
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* Confidential Treatment Requested.
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nonmonetary revenues received from barter transactions. In such event, the
corresponding royalties paid to Inktomi hereunder will be paid in kind. HotWired
will pay Inktomi royalties in arrears on a monthly basis.
(b) In the event that either party generates revenue from the
direct sale, rental or repurposing of any of the jointly-owned Data generated by
the Search Engine (e.g., a syndicated research study based in whole or in part
on such Data), then the net revenues received by such party that are allocable
to the contribution of the Search Engine Data to such endeavor will be shared
between the parties as follows: * to Inktomi and * to HotWired.
(c) Costs payable to third parties and which have been
approved by the parties pursuant to the Marketing Budget or otherwise (which
costs will exclude staff and overhead costs of the parties) will be paid
directly by HotWired and split between the parties as follows: Upon receipt of
any third party invoice, HotWired will invoice Inktomi for * of such costs, and
Inktomi will remit such payment to HotWired not less than ten (10) business days
prior to the stated third party due date on the invoice by check or wire
transfer to HotWired. In the event that any such amount due from Inktomi is more
than thirty (30) days past due, such amount will be deducted from royalties due
and payable to Inktomi.
(d) HotWired will keep complete and accurate records
pertaining to the revenue streams generated by the Search Engine. Such records
will be maintained for a two-year period following the year in which any
payments pertaining to such revenue streams were due. Inktomi will have the
right to examine HotWired's records from time to time but no more than once
annually to determine the correctness of any payment made under the Strategic
Partnership. Such examination shall be conducted at reasonable times during
HotWired's normal business hours and upon at least ten (10) days' advance notice
and in a manner so as not to interfere unreasonably with the conduct of
HotWired's business. If any such examination indicates that HotWired has
underpaid Inktomi by more than five percent (5%) of the aggregate payments due
for the period subject to such examination, Hotwired will reimburse Inktomi for
the cost of such examination.
7. TERM AND TERMINATION.
(a) The Strategic Partnership will initially have a five
(5) year term whose measurement will commence upon execution hereof, provided
that either party may propose changes to the terms of the Strategic Partnership
annually if it (i) notifies the other party at least thirty (30) days in
advance of any anniversary date and (ii) delivers a proposal to the other party
outlining each of its proposed changes to the Strategic Partnership no later
than twenty (20) days in advance of such anniversary date. If the parties do
not reach agreement with respect to the proposed changes by the close of
business on such anniversary date, then, at the option of the notifying party,
the Strategic Partnership may be terminated, such termination to be effective
ninety (90) days following such anniversary date.
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* Confidential Treatment Requested.
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(b) Either party may terminate the Strategic Partnership for
convenience (i.e. for any reason or no reason) during the term upon six (6)
months' prior written notice to the other party, subject to the provisions of
Section 8 below.
(c) Either party may terminate the Strategic Partnership upon
the material breach by the other party (without limitation, failure to meet a
milestone set forth on the Milestone Schedule will constitute a material
breach), if such breach remains uncured for thirty (30) days following written
notice to the breaching party.
8. POST-TERMINATION RIGHTS.
(a) Following any termination of the Strategic Partnership by
Inktomi for convenience subsequent to which Inktomi or its successor provides,
sells or resells a search engine substantially similar (i.e. in targeted market
and power/scope) to the Search Engine or following termination by either party
or its successor in connection with any acquisition of Inktomi or the Search
Engine Technology by an unaffiliated third party with a search engine business,
Inktomi or its successor will pay to HotWired an amount equal to the greater of:
(i) * of the Net Revenues generated by the Search
Engine during its last month of regular operations prior to the effective date
of termination; or
(ii) * of the Net Revenues generated by such
subsequent search engine service for each of the first three (3) months of
operation following the effective date of termination.
(b) Following any termination of the Strategic Partnership by
HotWired for convenience or following termination by either party or its
successor in connection with any acquisition of HotWired or HotWired's
advertising business by an unaffiliated third party, subsequent to which
HotWired or its successor sells or resells advertising for a search engine
substantially similar (i.e. in targeted market and power/scope) to the Search
Engine, HotWired or its successor will pay to Inktomi an amount equal to the
greater of:
(i) * of the Net Revenues generated by the Search
Engine during its last month of regular operations prior to the effective date
of termination; or
(ii) * of the Net Revenues generated by such
subsequent search engine service for each of the first three (3) months of
operation following the effective date of termination.
(c) Amounts payable by either party under this Section 8 will
be payable in one lump sum within one hundred twenty (120) days following the
effective date of termination.
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* Confidential Treatment Requested
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9. ADDITIONAL TERMS.
(a) Inktomi will provide to HotWired the information and Data
necessary to generate weekly reports, or the actual weekly reports (format and
content to be determined by the parties), for distribution to the Search
Engine's sponsors on all user traffic to the Search Engine. Both parties agree
to engage a third party auditor to verify the usage of the Search Engine and to
state usage in audited terms for advertisers, if necessary.
(b) HotWired and Inktomi currently have and will have no
relationship as agent and principal under the Strategic Partnership, including
without limitation in relation to advertising contracts. On all advertising
contracts entered into in connection with the Search Engine, HotWired will
reserve the right to terminate such contracts and pay back any sums on a pro
rata basis with Inktomi's approval, which will not be unreasonably withheld.
(i) "Confidential Information" of a party as used in
this Letter of Intent and any definitive Strategic Partnership agreements based
hereon shall mean any and all technical and non-technical information including
patent, copyright, trade secret, and proprietary information, techniques,
sketches, drawings, models, inventions, know-how, processed, apparatus,
equipment, algorithms, software programs, software source documents, and formula
related to the current, future and proposed products and services of such party,
and includes, without limitation, its respective information concerning
research, experimental work, development, design details and specifications,
engineering, financial information, procurement requirements, purchasing
manufacturing, customer and advertiser lists, business forecasts, sales and
merchandising and marketing plans and information. "Confidential Information"
also includes proprietary or confidential information of any third party that
may disclose such information to a party in the course of such party's business.
(ii) The parties agree that they will not make use
of, disseminate or in any way disclose Confidential Information of the other
party to any person, firm or business, except to the extent necessary to fulfill
the purposes contemplated by this Letter of Intent and any definitive Strategic
Partnership agreements based hereon and any purpose that other party may
hereafter authorize in writing. The parties agree that they shall treat all
Confidential Information of the other party with the same degree of care as they
accord to their own Confidential Information and the parties represent that they
exercise reasonable care to protect their own Confidential Information. Each
party will immediately give notice to the other party of any unauthorized use or
disclosure of such other party's Confidential Information. The parties agree to
assist each other in remedying any such unauthorized use or disclosure of the
other party's Confidential Information.
(iii) A party's obligations under paragraph (ii) with
respect to any portion of the other party's Confidential Information shall
terminate when such party can document that: (A) it was in the public domain at
or subsequent to the time it was communicated to the receiving party by the
other party through no fault of the receiving party; (B) it was rightfully in
the receiving party's possession free of any obligation of confidence at or
subsequent to the time it was communicated to the receiving party by the other
party; (C) it was
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developed by employees or agents of the receiving party independently of and
without reference to any information communicated between the parties; or (D)
the communication was in response to a valid order by a court or other
governmental body, was otherwise required by law, or was necessary to establish
the rights of either party under this Letter of Intent or under any definitive
Strategic Partnership agreements based hereon. These confidentiality obligations
will remain in effect for a period beginning upon execution hereof and ending
three (3) years following any termination of the Strategic Partnership.
(iv) The parties agree that all documents and other tangible
objects containing or representing Confidential Information of a party and all
copies thereof which are in the possession of the other party shall be and
remain the property of the disclosing party and upon any termination of the
Strategic Partnership between the parties shall be returned to such disclosing
party, or destroyed, within thirty (30) days.
(c) Neither party will be responsible for any delay or failure
to perform obligations under the Strategic Partnership, other than the
obligation to pay money, due to causes beyond the party's reasonable control,
including but not limited to acts of God, strikes or other labor disputes,
riots, acts of war, governmental regulations imposed after the fact, third party
communication line failures, power failures, fires or other disasters.
(d) Neither party will make any public disclosure of the
specific terms of the Strategic Partnership, except with the prior approval of
the other party, not to be unreasonably withheld. The parties will agree upon
the text of a press release regarding this Letter of Intent and will not make
any public disclosure of its existence before such press release becomes public.
(e) This Letter of Intent and the definitive agreements based
hereon will be governed by California law, without giving effect to conflicts of
laws principles, and will not be assignable without the other party's written
consent except to a party that acquires a majority of the equity securities or
voting interests or substantially all of the assets of the assigning party.
Subject to the foregoing, the terms of the Strategic Partnership will be fully
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns. The definitive agreements will contain
such additional terms and conditions, including but not limited to standard
warranties and cross-indemnities, as the parties shall agree.
It is the intention of Inktomi and HotWired to work expeditiously to
enter into one or more definitive agreements based on the foregoing terms.
Please sign and date this Letter of
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Intent in the space provided below to confirm Inktomi's intent to be bound by
the mutual agreements set forth herein and return a signed copy to the
undersigned.
Very truly yours,
HOTWIRED VENTURES LLC
/s/ ANDREW L. ANKER
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By: Andrew L. Anker
President
ACKNOWLEDGED AND AGREED:
INKTOMI CORPORATION
By: /s/ DAVID A. BREWER
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David A. Brewer
President
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EXHIBIT A
MILESTONE SCHEDULE
*
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* Confidential Treatment Requested.
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EXHIBIT B
MINIMUM FUNCTIONALITY AND COMMITMENTS
*
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* Confidential Treatment Requested.
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