CHANNELSPACE ENTERTAINMENT, INC.
000 Xxxx Xxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
September 12, 2000
3D Xxxxxxxx.xxx d/b/a
O2, Essential Marketing Technologies
000 Xxxxxxxxxx Xxxx.
Marina Del Rey, CA 90292
Attention: Xxxxx Xxxxxxx, Chief Executive Officer
Re: Agreement to Acquire Technology for Shares
-------------------------------------------
Dear Xxxxx:
This letter sets forth our agreed upon terms for the acquisition of the
"electronic Content Management System" technology ("eCMS") from ChannelSpace
Entertainment, Inc., a Virginia corporation (or its assigns) ("CSEI"), by 3D
Xxxxxxxx.xxx d/b/a O2, Essential Marketing Technologies, a California
corporation ("O2") for shares of O2's voting common stock, which may be
unregistered and restricted upon issuance, but which are subject to certain
registration obligations, as well as certain related matters. This letter
agreement is binding when executed by both CSEI and O2 . The closing of the
acquisition will be evidenced by, but not subject to, our mutual agreement on
specific wording and completion of appropriate mutually agreeable transfer
documentation specifically setting forth the terms of this letter agreement, as
well as other provisions customary for this type of transaction (the "Technology
Transfer Documents"). If this letter agreement accurately sets forth the terms
of our agreement, we would appreciate your acknowledgment and acceptance of
these terms by signing and returning a copy of this letter agreement. We will
then proceed to prepare the Technology Transfer Documents and related
agreements.
Technology to be Transferred
----------------------------
CSEI shall transfer and assign to O2 all of its right, title and interest in the
source code, object code, documentation, architecture, schematics, plans,
modules, models, marketing campaigns and all other embodiments or related
intellectual property assets for the software technology known as eCMS, as
further described on Exhibit A hereto, and made a part hereof. The transfer
shall be made on an "as is" basis. Notwithstanding the foregoing, CSEI
represents and warrants that (i) it has not licensed or sold the eCMS technology
to any third party, and, as more fully set forth in the Related Assets and
Contracts section below, the eCMS technology does not contain or incorporate any
proprietary technology of any third party; (ii) that the eCMS technology has
been used solely for internal purposes with regard to CSEI's
"xxxxxxxxxxxxxxxxx.xxx" in the content management of all eight "folders" (with
Xxxxx Xxxxxxx, Chief Executive Officer
O2, Essential Marketing Technologies
September 12, 2000
Page 2
the exception of certain static features that do not change frequently, such as
headers, footers, tabs, introductory pages, price guide data load process and
vender data load process), as well as for the "Xxxxxxxxxxxxxxxx.xxx"; and (iii)
the written information presented at a July 13, 2000 presentation in Chesapeake,
Virginia by CSEI to O2 (as attached as Exhibit B hereto) reasonably represents
in all material respects the application of the eCMS technology for
"xxxxxxxxxxxxxxxxx.xxx". O2 acknowledges that, although the eCMS technology has
been used for the internal purposes of CSEI (as described in the previous
sentence), the eCMS technology will require additional development,
documentation and testing prior to the licensing of the eCMS technology to third
parties by O2 (or its assigns). The eCMS technology will be transferred to O2
free and clear of all liens and encumbrances (other than the licenses to be
granted by O2 to CSEI described herein), with a warranty as to title,
non-infringement and the above representation as to current usage. The
technology transfer will be evidenced by an assignment agreement.
Related Assets and Contracts
----------------------------
CSEI will transfer to O2 all tangible embodiments of the eCMS technology,
including without limitation, the medium containing the eCMS technology. Exhibit
C identifies the computer equipment and related items that CSEI will make
available for sale to O2. No later than ten (10) business days prior to the
scheduled closing, CSEI will provide to O2 CSEI's estimate of the fair market
value of each item on Exhibit C (and any liens or encumbrances to which any item
is subject). No later than five (5) business days prior to the scheduled closing
, O2 will notify CSEI as to which, if any, items on Exhibit C that O2 will
acquire for cash to be paid at the closing. O2 may reject any and all items on
Exhibit C in its sole discretion. Except as set forth on Exhibit C, the items
that O2 elects to purchase will be delivered free and clear of any liens and
encumbrance and will be evidenced by a bill of sale.
CSEI has no third party contracts or license agreements with respect to the eCMS
technology. The eCMS technology does not incorporate any other licensed
technology. As set forth on Exhibit A, the eCMS technology is designed on a
Microsoft Distributed Internet Architecture and is designed to be run on any
platform that supports Microsoft Component Object Model standard, although O2
and each licensee will need to license Microsoft Site Server commerce addition
software. Accordingly, there are no contracts to be assigned to O2 to provide it
with the full benefits of the technology assignment.
O2 has indicated its intention to make employment offers to Xxxx Xxxxxxxxx
(CSEI's current Chief Technology Officer), and one or more Senior Developers. In
addition, O2 has indicated its intention to enter into a transitional consulting
relationship with Xxxx Xxxxxx (CSEI's current Chief Executive Officer). CSEI
will cooperate fully with O2 to facilitate such contracts, including execution
of waivers and releases with respect to such CSEI employees hired by O2 as an
employee or retained as a transitional consultant. CSEI hereby acknowledges that
the employment by O2 of Xxxx Xxxxxxxxx pursuant to the letter agreement attached
as Exhibit D hereto is a condition to closing by O2. O2 agrees to execute
employment agreement in the form attached as Exhibit D hereto.
CSEI Licenses
-------------
O2 shall grant to CSEI three (3) royalty-free, one year licenses for the eCMS
technology (object code and available documentation), which licenses shall
include maintenance, support and each new release by O2 of a new version of the
eCMS technology that is offered to any other O2 licensee for the eCMS technology
on a "most favored client" pricing. Such licenses shall be used to support the
web-sites currently known as "Xxxxxxxxxxxxxxxx.xxx", "Xxxxxxxxxxxxx.xxx" and one
other site to be designated by CSEI. O2 shall transmit each upgrade in the
ordinary course of its distribution of upgrades or new versions to its other
licensees. Additionally, O2 shall grant to CSEI a royalty-free, perpetual source
Xxxxx Xxxxxxx, Chief Executive Officer
O2, Essential Marketing Technologies
September 12, 2000
Page 3
and object code license for use with its "xxxxxxxxxxxxxxxxx.xxx" website. O2
shall have no maintenance, upgrade or other ongoing obligation with respect to
the source code license. CSEI shall have the right to assign the licenses to one
or more third parties that acquire from CSEI any of the foregoing web-based
activities, but with no right to sublicense or sell independently. The forgoing
licenses to CSEI will be evidenced by license agreements, with no right to
sublicense or sell independently and excluding, in each case, all
representations and warranties by O2.
Closing Date Consideration
--------------------------
The initial consideration for the assignment of the eCMS technology and related
assets from CSEI to O2 shall be the issuance by O2 to CSEI (or its assigns) of
833,333.33 shares of O2 voting common stock (currently traded on the American
Stock Exchange under the symbol THD) (the "Initial Shares"), subject only to the
lock-up restrictions in the next paragraph and, if unregistered at the time of
issuance, also subject to the Securities Registration Obligations section below.
Subject to the lock-up restrictions described below, the delivery of the Initial
Shares shall be authorized for the closing date by instructions from O2 to its
transfer agent to issue the Initial Shares to CSEI, or its assigns. CSEI shall
provide a written letter of delivery instructions to O2 and its transfer agent
at least two (2) business days prior to the closing date designating the names
in which the Initial Shares shall be issued. If no instruction letter is
received, all the Initial Shares shall be issued to and delivered in the name of
CSEI.
Lock-up Restrictions
--------------------
The Initial Shares shall be marked and remain subject to a restriction from
public trading for the following periods:(i) all Initial Shares for six months
after the closing date; (ii) fifty thousand (50,000) shares shall become
unrestricted on the first day of each of the seventh through the twelfth month
after the closing date; and (iii) the remaining Initial Shares shall become
unrestricted on the first day of the thirteenth month after the closing date.
The foregoing restrictions shall expire prior to the end of such periods, if a
third party makes a tender offer or otherwise agrees to acquire substantially
all of the shares of voting common stock of O2. Notwithstanding such
restriction, CSEI shall be permitted to assign any of the Initial Shares
received by it, and other recipients of the Initial Shares shall be permitted to
assign any of the Initial Shares they receive, in one or more private
transactions, which transfers will be recorded on the books of O2 by its
transfer agent upon certification and indemnification by the transferor in
compliance with all applicable securities laws. In each case, any transferee
will be required to acknowledge and agree to the lock-up restriction in this
paragraph. As the restrictions lapse with respect to each group of the Initial
Shares, O2 shall cause its transfer agent to deliver to the then current
registered owners of such Initial Shares replacement certificates without
transfer legends against cancellation of the certificates with the legends. At
the end of each restricted period, O2 shall take all other actions reasonably
necessary to allow the unrestricted public trading of the unrestricted Initial
Shares, including any filings necessary under Federal and state securities laws
(see the Securities Registration Obligations section below).
Post-Closing Consideration
--------------------------
CSEI (or its assigns) shall be entitled to receive additional shares of O2
common stock on a quarterly basis for six quarters, beginning four months after
the closing. Such shares may be unregistered at the time of issuance, and if so,
the Securities Registration Obligations section below shall apply. The "value"
of the shares deliverable within thirty days after the end of each such quarter
shall equal the "gross revenues" of O2 (or its successors and assigns) with
respect to the eCMS technology (as it may be enhanced or modified from time to
time) for such three months. Whether or not such O2 Shares are registered upon
Xxxxx Xxxxxxx, Chief Executive Officer
O2, Essential Marketing Technologies
September 12, 2000
Page 4
issuance, the "value" of the O2 shares shall be determined by taking the sum of
the closing price of registered shares of the common stock for each trading day
during such three months, divided by the number of trading days during such
three-month period. The O2 shares of voting common stock shall be issued by the
transfer agent in the name of CSEI or its assigns, as provided by written
instructions from CSEI (or its successor).
For the purposes of this provision, O2 will use its commercially reasonable
efforts to market the eCMS technology as part of the O2 web-based tools during
the period set forth in the previous paragraph. O2 will not take any actions, or
fail to take any actions, that will materially impair the marketing of the eCMS
technology during the period set forth in the previous paragraph or that will
substantially impair the ability of CSEI to receive the post-closing
consideration set forth in the previous paragraph.
"Gross revenues" include all license fees, installation or other service fees
for which a contract is entered into during such quarter and, for this purpose,
maintenance fees for a twenty-four month period following the initial contract
with such licensee (collectively, "Licensee Revenue Stream"). To the extent that
the eCMS technology is licensed in connection with or in a combination with any
other software package, the "gross revenues" shall include the O2 "bundled
price" of the eCMS technology package and services provided. For this purpose,
the "bundled price" shall equal the list price of the Licensee Revenue Stream of
the eCMS Technology multiplied by the fraction of which the numerator is the
Licensee Revenue Stream for the "bundled" package of products and services, and
the denominator is the sum of the individual list prices of the Licensee Revenue
Stream for all the individual products and services in the "bundled" package.
For example, if the Licensee Revenue Stream for the eCMS technology is $60,000
and it is bundled with other O2 products and services with Licensee Revenue
Streams of $100,000, and the "bundled" package is licensed for a Licensee
Revenue Stream of $120,000, then the "gross revenues" will include $45,000
($60,000 x ($120,000/$160,000)). To the extent that O2 uses the eCMS technology
in any other "income" producing manner (e.g., service bureau, consulting,
portal, software rental, or bartered for other services, licenses or similar
consideration), such "income" shall be included in full in the computation of
"gross revenues" at the projected "income" levels from each such contract or
relationship for the first twelve months of such contract or relationship. In
any bartering situation, the "income" shall equal the vendor's prevailing price
of such services, licenses or other consideration acquired by barter.
Notwithstanding, the prior sentence, if such bartered services, licenses, or
other consideration received by O2 is not recognizable as "income" to O2 under
Generally Accepted Accounting Principals, then such bartered services, licenses,
or other consideration received by O2 shall be excluded from "gross revenues";
provided, however, that the maximum amount so excluded shall not in the
aggregate exceed the lesser of: (i) one percent (1%) of the total consideration
received by CSEI from O2 under this letter agreement; or (ii) $250,000. To the
extent that O2 sells or transfers the eCMS technology or any part thereof in an
arm's length transaction to a third party, the proceeds received from such sale
or transfer shall be considered "gross revenues".
The maximum "value" of shares deliverable to CSEI or its assigns pursuant to
this post-closing consideration paragraph shall not exceed an additional $12.5
million (measured at the "value" as to each separate delivery over the six
quarters), reduced by any set-offs permitted below.
Price Protection Consideration
------------------------------
The parties agreed to the number of Initial Shares on the expectation that the
public trading price of such shares was expected to increase during the eighteen
month period after the closing to at least $15 per share. In that regard, if the
"value" of the O2 registered shares of common stock (as determined in accordance
with the first paragraph of Post-Closing Consideration section above) does not
equal or exceed $15 per share for the "three month" period beginning fifteen
Xxxxx Xxxxxxx, Chief Executive Officer
O2, Essential Marketing Technologies
September 12, 2000
Page 5
months after the closing, O2 shall deliver to CSEI (or its assigns who received
any of the unrestricted Initial Shares at the end of the lock-up periods),
additional shares of O2 common stock which, if unregistered, will be subject to
(the Securities Registration Obligations section below. The number of additional
which, if unregistered will be subject to shares of O2 common stock deliverable
with respect to each Initial Share (that has not been returned pursuant to the
indemnification obligations below) shall equal (i) $15.00 minus the "value" as
determined for such quarter; (ii) divided by such "value". For example, if the
"value" equals $12.00, then ($15.00 - $12.00)/$12.00 = $3.00/12.00 = .25
additional share of O2 common stock issuable with respect to each Initial Share
of Common Stock, whether or not such Initial Share remains in the possession of
CSEI or any of its assigns (unless it has been returned to O2 pursuant to the
indemnification provisions below).
Liabilities
-----------
O2 will not assume any liability of any kind with respect to the eCMS technology
or related assets, other than the specific liabilities set forth on Exhibit C
with respect to such equipment that O2 elects to acquire, as set forth in the
Related Assets and Contracts section above.
Warranties and Set-Off
----------------------
O2 has agreed to acquire the eCMS technology on an "as is" basis. Except with
respect to title, non-infringement and current usage (as described above), CSEI
makes no representation or warranty as to the functionality, marketability,
fitness for a particular purpose or otherwise of the eCMS technology or the
related assets.
With respect solely to any third party claims challenging CSEI's warranty as to
title or non-infringement, CSEI and/or its assigns shall indemnify and hold O2,
and indirectly, its officers, directors, employees, agents, successors and
assigns, as well as its licensees, harmless with respect to all out of pocket
costs, payments, settlements, royalties imposed or amounts paid ("Losses")
related to such claims, limited to no more than Two Million Five Hundred
Thousand Dollars ($2,500,000) for the first year after closing and limited to no
more than Five Million Dollars ($5,000,000) during the second year after closing
and limited to losses incurred during the twenty-four (24) months after the
closing, with notice delivered to CSEI no later than twenty seven (27) months
after the closing. O2 shall notify CSEI and each of its assigns promptly after
receipt of any such claims and CSEI or its assigns shall have the right at its
or their own cost to defend or settle such actions.
For any Losses accruing during the first six months after closing, O2 shall be
entitled to a return of that number of shares of O2 common stock that have a
value equal to the Losses based on the greater of: (i)$15 per share of O2 common
stock, or (ii) the closing price of the O2 common stock on the settlement date
or date of final determination by arbitration, as provided below. For any Losses
accruing more than six months after closing, O2 shall first be payable by way of
a reduction in the amount of then currently owing and payable post closing
consideration. Following notification of such claim, a reasonable portion of any
then currently owing and payable remaining post closing consideration not
previously issued shall be deposited into escrow pending the results of such
claims or the determination by arbitration as provided below.
Except as provided in the preceding paragraphs in no event will CSEI or its
assigns, be liable to O2 or any other party, or any third party for any Losses
or claims arising out of or related to the eCMS technology, including any lost
revenue, lost profits, replacement goods, loss of technology, rights or
Xxxxx Xxxxxxx, Chief Executive Officer
O2, Essential Marketing Technologies
September 12, 2000
Page 6
services, incidental, punitive, exemplary, indirect or consequential damages,
loss of data, or interruption or loss of use or service of any equipment,
web-site or business activity, even if advised of the possibility of such
damages.
O2 covenants that it will not make any modifications, additional enhancements or
other changes to the eCMS technology in a manner that infringes the intellectual
property rights of any third party.
O2 has provided to CSEI its "Due Diligence Presentation" regarding its current
business operations and future business plans. O2 represents and warrants that
such "Due Diligence Presentation" sets forth in all material respects its
current business operations and its current expectations of its future business
plans.
Securities Registration Obligations
-----------------------------------
O2 agrees to authorize and reserve a sufficient number of shares of its common
stock for all the delivery requirements hereunder taking into account from time
to time the then current "value" of its common stock as determined in accordance
with the first paragraph of the Post-Closing Consideration section above.
O2 agrees that within thirty (30) days after the closing, it shall file a
registration statement on form S-3 or other applicable form for the Initial
Shares, which registration shall become effective no later than the end of six
months after the closing and, O2 shall thereafter take all actions and make all
filings required to keep the Initial Shares registered and freely tradeable. If
O2 fails to comply with the previous sentence, in addition to any other
consideration in this Letter Agreement, CSEI (or its assigns) shall be entitled
to receive Two Hundred and Fifty Thousand Dollars ($250,000) in "value" of
additional shares of O2 common stock as a penalty for failing to comply with the
registration obligations with respect to the Initial Shares. The issuance of the
additional shares pursuant to the previous sentence shall not relieve O2 of any
of its obligations under this section. The additional shares of O2 common stock
issuable as a penalty will be "valued" as determined in accordance with the
first paragraph of the Post-Closing Consideration section above for the three
month period ending on the six monthly anniversary of the closing date and shall
be delivered within ten (10) business days after such anniversary.
O2 agrees that the shares deliverable as: (i) post-closing consideration; (ii)
price protection consideration; and (iii) penalty shares (as described in the
preceding paragraph) hereunder, shall, in each instance, be either registered
and freely tradable when delivered, or, if not then registered and freely
tradeable, O2 agrees that within sixty (60) days after such delivery, such
shares shall be registered and freely tradeable pursuant to an effective
registration statement filed by O2 on form S-3 or other applicable form and that
O2 shall thereafter take all actions and make all filings required to keep these
shares registered and freely tradeable.
In addition to, and not in lieu of, the registration obligations set forth in
the preceding two paragraphs, O2 agrees that it will file a shelf registration,
as soon as it is eligible to do so, to register the maximum number of shares of
the O2 common stock that would be deliverable hereunder to CSEI or its assigns,
that are not already reserved, registered and freely tradeable, as well as for
the penalty shares described in the second paragraph of this section. For the
purpose of the preceding sentence, the maximum number of shares deliverable
hereunder will be based on the "value" of the O2 common stock as determined in
accordance with in the first paragraph of the Post-Closing Consideration section
above applied to both the maximum post-closing consideration of $12.5 million
and the price protection consideration determined at the end of the three
calendar month period immediately preceding the date of such shelf registration
(which shall be no more than thirty (30) days after the first opportunity to
make such filing). For example, if O2 is first able to file a shelf registration
during the seventh month after the closing and the "value" of the O2 common
stock for the three calendar months preceding such filing opportunity is
Xxxxx Xxxxxxx, Chief Executive Officer
O2, Essential Marketing Technologies
September 12, 2000
Page 7
determined to be $9.00 per share and only the Initial Shares have been
registered, O2 shall file a shelf registration covering (i) 1,388,889 shares,
with respect to the maximum post-closing consideration ($12,500,00/$9.00); and
(ii) 555,556 shares, with respect to the price protection consideration
((($15.00 - $9.00) x 833,333.33)/$9.00), as well as any covering any penalty
shares that have accrued and have not theretofore been registered.
To the extent that O2 makes any other filing to register any of its common stock
or other securities prior to the time when all shares of common stock delivered
or that may be deliverable hereunder to CSEI or its assigns have been fully
registered and effective, O2 shall: (i) include all unregistered O2 shares of
common stock issued to CSEI or its assigns in such registration statement;, (ii)
to the maximum extent allowable under applicable securities laws at such time,
register the maximum number of shares of O2 common stock that are potentially
issuable to CSEI or its assigns, in accordance with the calculation in the prior
paragraph, applied at the time of such registration; and (iii) O2 shall
thereafter take all actions and make all filings required to keep these shares
registered and freely tradeable.
Closing; Documentation; Cooperation
-----------------------------------
The Closing of the above agreed upon matters shall take place at the office of
O2 at the earlier of (i) a date specified by O2 which is no more than ten (10)
days after the Closing by O2 of its private placement of securities through its
current offering through H.C. Xxxxxxxxxx& Co., Inc.; or (ii) November 15, 2000;
in either case, at 10:00 a.m. Pacific time. The parties agree that time is of
the essence. At the closing, the parties shall execute such documents as they
mutually agree upon to evidence the terms of this letter agreement. If the
parties are unable to agree upon such documents, the transactions shall,
nonetheless, close on the terms set forth in this letter agreement. As stated
above, O2's closing obligations are conditioned on the employment of Xxxx
Xxxxxxxxx pursuant to the form of agreement attached as Exhibit D, as well as
the approval of such transaction by the Board of Directors of O2, which O2 shall
use its commercially reasonable efforts to obtain within ten (10) business days
of the execution of this Letter Agreement. If such consent of the O2 board is
not obtained within such time period, this letter agreement shall be null and
void and of no further force and effect. CSEI's closing obligations are
conditioned on the receipt of consent of its shareholders.
CSEI shall instruct its counsel to prepare drafts of the Technology Transfer
Documents to evidence the agreements in this binding letter agreement. The
parties agree to provide reasonable cooperation to facilitate the foregoing
agreements, including the provisions of certificates as to power, authority and
approvals, if any, or the lack of need for any approvals. CSEI may suggest
certain pre-closing changes to the foregoing agreements, including an assignment
of the eCMS technology and related assets to a wholly-owned subsidiary and/or
the transfer to O2 or its wholly-owned subsidiary of the stock of such
subsidiary, rather than the eCMS technology and related assets. O2 may propose
that it assign its rights under this Agreement, but not its obligations, to a
wholly-owed subsidiary. If either CSEI or O2 requests such changes as
contemplated in this paragraph, the other party will make reasonable effects to
accommodate such requests. Nonetheless, if such requested changes are not
accepted by the other party, the agreed upon transactions shall proceed as set
forth herein.
Interim Consulting Agreement
----------------------------
For the period from the date of this letter agreement to the closing date, CSEI
will provide the following four (4) individuals on a full-time consulting
engagement to O2: Xxxx Xxxxxx; Xxxx Xxxxxxxxx; Xxxx Xxxxxxxxxx and Xxxx Xxxxx.
Xxxxx Xxxxxxx, Chief Executive Officer
O2, Essential Marketing Technologies
September 12, 2000
Page 8
O2 shall pay a weekly consulting fee of Ten Thousand Dollars ($10,000), as well
as reimburse CSEI for all reasonable out-of-pocket travel and related expenses
on an accountable basis invoiced during the consulting period.
Confidentiality; Non-Compete
----------------------------
Except as advised by O2's securities counsel for compliance with applicable
securities laws, neither O2 nor CSEI will make any public announcement or
disclosure without prior written approval of the other party regarding the terms
of this letter agreement prior to the Closing. Each party agrees that the terms
of their current Confidentiality Agreement dated July 5, 2000 shall continue in
full force and effect, as a part of this letter agreement except for Section 7
thereof which is modified by the provisions in the Miscellaneous section below.
Notwithstanding the foregoing, each of CSEI and O2 shall be permitted to
disclose the existence of this letter agreement under terms of confidentiality
as necessary to secure any necessary approvals, or to their respective
investment bankers and/or creditors.
CSEI agrees as part of the technology transfer, that for a period of seven (7)
years, it will not develop, acquire or in any other way, directly or indirectly
compete with the eCMS technology being marketed by O2 (or its assigns).
Board Representation
--------------------
CSEI and its assigns shall be entitled to elect one (1) director to the Board of
Directors of O2 reasonably acceptable to O2. Additionally, CSEI shall be
entitled to designate one (1) non-voting observer to attend each O2 Board of
Directors meeting, which observer shall be reasonably acceptable to O2. If O2
has fully and completely complied with all of its obligations hereunder,
including without limitation its registration obligations, these rights shall
terminate at the later of (i) the end of the period during which CSEI or its
assigns are entitled to receive the post-closing consideration; or (ii) when the
shares of O2 common stock held by CSEI and its assigns constitute less than five
percent (5%) of the total number of issued and outstanding shares of O2 common
stock.
Miscellaneous
-------------
To the extent that the outstanding O2 shares of common stock are exchanged,
converted, or recapitalized into any other securities of O2 or any other entity,
the measurement of and amount of the consideration hereunder shall be adjusted
per share of O2 common stock to be received hereunder to reflect such exchange,
conversion or recapitalization. This provision shall apply to one or more
successive exchanges, conversions or recapitalizations.
O2 shall be solely responsible for any finders fee, fees and expenses to Del Mar
Consulting, Inc. and O2's legal counsel. CSEI shall be solely responsible for
any fees and expenses of Xxxxxx and Xxxxxx, P.C., Xxxxxxxxx, Xxxxxxxxx,
Xxxxxxxx, Cox and Xxxxx, P.C. and any of their affiliated entities.
Any disputes regarding this letter agreement, including without limitation, any
disputes regarding Losses and the right to set-off shall be resolved by binding
arbitration, in accordance with the rules of the American Arbitration
Association. If the dispute is taken to arbitration by CSEI, the arbitration
shall be conducted in Los Angeles, California. If the dispute is taken to
arbitration by O2, the arbitration shall be conducted in Richmond Virginia. The
prevailing party shall be entitled to reasonable attorney fees and costs of
arbitration, in the discretion of the arbitrator.
Xxxxx Xxxxxxx, Chief Executive Officer
O2, Essential Marketing Technologies
September 12, 2000
Page 9
Without regard to its choice or conflict of law provisions, the parties agree
that Delaware law should apply. This agreement constitutes the entire agreement
between the parties hereto with respect to subject matter hereof and supersedes
all prior oral and written discussions and understandings.
If the foregoing accurately sets forth our agreement, please sign below and
return a copy to my attention.
Sincerely,
CHANNELSPACE ENTERTAINMENT, INC.
By:
Title:
Date:
Acknowledged, Agreed and Accepted.
3D XXXXXXXX.XXX d/b/a
O2, Essential Marketing Technologies
By:
Title:
Date:
Xxxxx Xxxxxxx, Chief Executive Officer
O2, Essential Marketing Technologies
September 12, 2000
Page 10
Exhibit A
Description of eCMS Technology
------------------------------
eCMS Feature Summary
--------------------
Following is an overview of features included in each of eCMS' functional areas.
User Administration Module
--------------------------
eCMS employs user roles to manage system users and system access. Via the
Administration Module, the system manager controls individual user access for
both read only and read/write access for each of the functional areas of the
product. As such, the Web based system readily supports dispersed workgroups,
sequential and concurrent work processes, and selective managerial review, while
maintaining customizable levels of information security.
The User Administration Module provides the flexibility to:
Add, edit and delete user accounts as circumstances change. New users can be
granted access to the areas they require in less than five minutes. Likewise,
departing employees can be denied access to the system with equivalent ease.
Editing/updating individual user profiles for promotions, job responsibility
changes, relocations and other factors is also rapidly accomplished.
Add, edit and delete user roles. User roles are defined by the need to access
certain tiers of information. The system administrator can customize these tiers
in whatever groupings he/she desires. Role definition can be as dynamic or
static as an individual organization requires without the need for additional
programming by the system administrator.
Associate users to roles. Again, this is a process involving just a few
keystrokes. As such, relatively static organizations will only need to access
this module for personnel changes, but the system is still flexible enough to
readily support workgroup-oriented organizations, where individual roles and
responsibilities are constantly changing.
Perform searches for users. System administrators use the internal search tool
of the Administration Module to quickly access any of the aforementioned
components, to see all associations at a glance, and to update the listings as
required without exiting to a separate screen.
Content Module
--------------
The central functional tool of eCMS is the Content Module. The Content Module
manages multiple databases of information, both for the display of individual
items or elements, and for the combination of multiple elements into a single
"package" for display within a given window of time. Within the system, these
are referred to as classifications and content packages respectively. Here is an
explanation of both:
Xxxxx Xxxxxxx, Chief Executive Officer
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September 12, 2000
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Classification - A classification is any piece of information not bound by time.
Some examples of classifications are articles, store items, broadcast items
(both audio and video), database entries (such as dealer listings, reference
listings, related auctions, related websites, literally whatever type of
databases users want to incorporate), user defined searches and much more. Any
producer, or external user if desired, can use a search to find all relevant
classifications for a given topic in a matter of seconds.
Content Package - A content package is a specially created presentation of
multiple, related classifications, which also has a specific location or
locations to appear on the site, as well as start and end run dates associated
with it. Producers can create a feature package on any topic and associate
multiple related classifications to it, being limited only by the depth of
content resources one has in the various classifications. As an example, an
article on Superman might run with links to associated video from the old TV
series streaming on the server, to an audio interview with Xxxxxxxxxxx Xxxxxx
that is archived on the server, to multiple Superman items that users can
purchase (both from internal store vendors and external affiliate vendors, if
desired), to a pull quote from an internal or external message board, to related
auctions of superman items on internal or external affiliate sites, to a
slideshow of related pictures, to an interactive poll on who was the best
Superman, even to quizzes or contests. Finally, the package can be set to appear
on the site in a specific location for a specific period of time automatically.
Subsequently, if desired, users may still access these types of packages after
their initial run via a search engine function.
The flexibility afforded by the Content Module of eCMS provides webmasters,
producers and/or editors unlimited control in melding commerce and content, in
showcasing and cross-promoting various areas of the site, and in driving
multiple page views/impressions from a single article on a given topic in a
fashion that is both contextual and synergistic. Specific functionality
includes, among other things, the ability to:
Add, edit and delete classifications, allowing for easy management of multiple
databases of varied types of information/content resources
Associate classifications to content packages
Add, edit and delete content packages
Add, edit and delete a run date/location for packages
Perform content searches
Manage both internal and user submitted database entries/resource listings for
display on a Web site
Customize the layout of Feature Packages
Activate and de-activate content
Break associations between content without deleting the content from the system
Create associated slideshows, polls, quizzes and contests
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September 12, 2000
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Create linked "teases" to any area of the site
Develop and publish a Program Grid for 24 hour automated streaming of
audiovisual assets via a Broadcast Playlist. The Broadcast Playlist is a tool
that allows the production staff to create a playlist text file that is used by
the G2 servers for playing video in a pre-ordained sequence, or at specific
times in support of special events in addition to on-demand streaming, which is
always available.
Ad Manager Module
-----------------
The Ad Manager Module governs the display, rotation and administrative
management of both in house and externally provided client advertising including
multiple sizes of static and rotating banner ads, buttons, bars and text links,
as well as unlinked image-based advertisements for clients without a Web
presence. There are six different basic ad types. These are:
IMG - A clickable image
-----------------------
TEXT - A text-only ad
HTML - An ad that accepts HTML or DHTML code
NOCLICKING - An image that cannot be clicked upon
NETSHOW - Streaming video that can be clicked
ENLIVEN - Ad that uses Enliven technology.
The Ad Manager Module also includes the ability to:
Add, edit and delete client listings for easy management and display of all
contact information and contractual obligations.
Add, edit and delete campaigns. This is the organizational component of Ad
Manager for a given sequence of advertisements. In simpler terms, a campaign is
the "house" where multiple campaign items reside. Campaigns must have clearly
defined start and end dates.
Add, edit and delete campaign items. This is the primary unit of Ad Manager. A
campaign item is an individual advertisement and placement combination.
Specify the type of run. This defines whether the item is a paid advertisement
or a house ad. By default, paid ads take precedence over house ads in the
rotation. Define ad request parameters to manage delivery. One can manage by the
number of times an item is displayed (by impressions) or the number of items the
item is clicked (by click through) as required by the contract associated with
each particular vendor.
Set exposure limits for individual users. This parameter governs the maximum
number of times an item can be displayed to the site user. This filter precludes
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September 12, 2000
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inundating individual users with the same advertisement repeatedly. The settings
are None, so no filtering occurs, or numerical limits from one to three.
Specify the location(s) where an ad will appear. These are defined by the design
of the site itself, the sizes of the ads that run in those locations, and the
type of ad it is, whether a banner, button, etc. The system comes with several
pre-sets, which can be used, modified or added to in reflection of each site's
design considerations.
Generate reports for ad performance including impressions served, click through
rate achieved, revenue realized and so forth.
Store Module
------------
The Store Module manages the input and modification of store vendors and
products for a particular Web site, as well as all reporting associated with
those vendors. The system is capable of supporting in-store vendors, framed
external stores and affiliate relationships. The application also supports the
cross promotion of one product to another, regardless of source. The Store
Module provides the flexibility to:
Add, modify and delete vendors
Deactivate a vendor so that a vendor and its products do not display on the
Web site
Perform a vendor search
Add modify, and delete a product
Deactivate a product so that it does not display on the Web site
Perform a product search
Add, display (details and list), modify and delete a cross-promotion
Modify the category to which a product is assigned
Allow vendors to find orders for their products for fulfillment
Create a report for accounting to track revenues associated with each
transaction or series of transactions relative to a given vendor.
Auctions Module
---------------
The Auctions Module controls the management of auctions placed by the company on
external auction sites like Yahoo, determines which will appear on internal
sites for promotional or other purposes, and provides a full suite of reporting
functions for active, completed and ineffective auctions.
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September 12, 2000
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Customer Service Module
-----------------------
The Customer Service Module provides the tools for a Customer Care Specialist
(CCS) to respond to questions from our registered visitors to the Web site. It
has the flexibility to:
View a visitor's registration information, appraisal requests, store orders, and
store shopping cart items
Enable CCS representatives to add comments about an interaction with a
registered visitor
Activate or de-activate a visitor account
Black list a visitor account
Search for visitors
Search service orders
Search for store orders
List all service orders for a visitor
List all shopping cart items for a visitor
List all store orders for a visitor
List all CCS representative comments for a visitor
Display the details of a visitor service request and response
Display the details of a visitor store order.
Billable Services Module
------------------------
This example uses CollectingChannel's "eValueNet" appraisal service, but the
module could address any type of billable service. The Billable Services Module
consists of three areas. Here is an explanation for each:
eValueNet - Appraiser: Our appraisers use this area to appraise items in their
assigned category(s) and send the finished appraisal to the customer. This
system tracks the appraisals and has the ability to change the appraisal request
status as well as edit all appraisals.
eValueNet - Manager: This module provides the Appraisal Manager the ability to
track the appraisals through the appraisal process. The Manager area provides
the ability to modify the category for an appraisal request, change the
appraisal request status and edit all appraisals.
eValueNet - Accounting: This area provides the Accounting group the flexibility
to perform searches on appraisals based on key criteria like appraisal status,
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September 12, 2000
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file name, appraisal date and additional search criteria. Within the search
results, the CyberCash Order ID is displayed. This number is used to cross
reference the appraisal in the CyberCash system for billing purposes.
Additionally, the Affiliate listing function provides for the management of
contact information on all eValueNet affiliates, and the Appraisal Report
function tracks affiliate referrals which resulted in sales and allocates the
revenue associated with each for accounting purposes.
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O2, Essential Marketing Technologies
September 12, 2000
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EXHIBIT B
---------
Copy of July 13, 2000 Presentation by CSEI to O2
------------------------------------------------
Xxxxx Xxxxxxx, Chief Executive Officer
O2, Essential Marketing Technologies
September 12, 2000
Page 17
EXHIBIT C
---------
Computer Equipment and Related Assets
-------------------------------------
A) Server Specifications:
1) Dell PowerEdge 2300 2xPIII-450-256K 5x9.1G drives
Serial #1H5D3
2) Dell PowerEdge 2300 2xPIII-450-256K 5x9.1G drives
Serial #1H5D5
3) Dell PowerEdge 2300 2xPIII-450-512K 6x9.1G drives
Serial #1H5CB
B) Workstation Specifications:
1) Dell Optiplex GX1p PIII-500-256K
Serial #5D7YE
2) Dell Optiplex GX1p PIII-500-256K
Serial #5D7WE
3) Dell Optiplex GX1p PIII-500-256K
Serial #5D7YX
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September 12, 2000
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EXHIBIT D
---------
Employment Letter for Xxxx Xxxxxxxxx
------------------------------------
TO BE ATTACHED
