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EXHIBIT 10.12
PROMOTION AGREEMENT
1. This Promotion Agreement (the "Agreement") is dated as of May 18, 1998
between CNET, Inc. ("CNET") and FreeShop International, Inc. (the
"Company"). Pursuant to this Agreement, CNET will provide various
links, placements and other online promotions (collectively, the
"Promotions") from Snap! Online and SEARCH.COM and will provide
advertising media ("Advertising") to the Company to assist the Company
in promoting its products and services and facilitating the sale of
products to potential buyers through its Internet site. CNET will be
compensated by the Company for providing the Promotions and
Advertising. Accordingly, the parties hereby agree as follows:
2. Background.
2.1 The Company. The Company operates an electronic retailing
operation through its Internet site located at
www.freeshop.com (together with any successors or derivatives
to such site, the "Company Site"). Through the Company Site,
the Company distributes and sells or facilitates the
distribution and sale of various products and services, either
directly or as an agent for third party vendors. All products
and services offered for distribution or sale through the
Company Site are referred to as the "Products."
2.2 CNET. CNET produces television programs and operates a network
of Internet sites on the World Wide Web. For purposes of this
Agreement, the "CNET Sites" refer to the sites referenced in
Section 3.3 and Exhibit A.
3. CNET's Obligations.
3.1 Advertising media. CNET will provide Advertising media to the
Company during the Term on the CNET Sites and at the rates
described in Exhibit A.
3.2 Retail Promotions. CNET will provide various retail Promotions
on Snap! Online and SEARCH.COM, which may include text/HTML or
graphical Promotions that include embedded links to co-branded
pages on CNET Sites or the Company Site.
3.3 Placement of Promotions. CNET will determine the location and
type of each Promotion displayed on Snap! Online and
SEARCH.COM and may phase in certain types of Promotions as
they are developed. CNET currently intends to display
Promotions consisting of text/HTML links, pre-filled with an
appropriate query string or link ("Pre-Filled Links"), as set
forth in this Section.
3.3.1 On SEARCH.COM, CNET intends to display a Pre-Filled
Link on all category doors and on the search query
pages as appropriate and mutually agreed upon.
3.3.2 On the home version of Snap! Online and all partner
versions with partner approval, CNET intends to
display a Pre-Filled Link to Snap! Shopping's Free
Stuff page above the fold on the front door at least
25%
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of the time and on pages related to Snap! Shopping as
appropriate and mutually agreed upon. The Company
will also serve as the sole "Anchor Tenant" for Snap!
Shopping's Free Stuff! page (or equivalent page if
subsequently renamed). As Anchor Tenant, the Company
will receive prominent Graphical Promotions above the
"fold" on the Free Stuff! page. For the purposes of
clarity, the "fold" is defined as the visible portion
of the screen on a standard 640 x 480 screen size.
3.4 Design and Production of Promotions. The Company will design
any graphics required for the Promotions and provide
pre-filled query strings or links for all of the Pre-Filled
Links, with reasonable assistance from CNET, and the Company
will supply digital copies of such graphics and other
materials to CNET. CNET will be responsible for incorporating
the Promotions into the CNET Sites and for ensuring that the
Promotions are accessible to users of the CNET Sites
("Users").
3.5 Reporting. Within 30 days after the end of each month during
the Term, CNET will provide a report to the Company indicating
the number of impressions of Promotions displayed on the CNET
Sites during such month. CNET will also provide standard
"real-time" reporting for media Advertising.
3.6 Investment. One hundred twenty days after the date of this
Agreement and on the first scheduled closing date of each
subsequent equity financing by the Company (each such date
being an "Investment Date"), CNET will purchase a
Participating Amount (as defined below) of the Company's
equity securities on the same terms and conditions, including
price, as the Company is then closing the sale of such
securities to other investors; provided, that if an Investment
Date does not occur within nine months after the immediately
prior Investment Date (a "Prior Investment Date"), then one
business day after the end of the nine month period CNET will
purchase a Participating Amount of the same type of equity
securities as were sold to CNET on the Prior Investment Date
at the same price per share (subject to adjustment for stock
dividends, combinations or splits with respect to such
securities) at which the Company last sold securities. For
purposes of this Section 3.6, "Participating Amount" means
such dollar amount as will bring CNET's aggregate purchases of
the Company's equity securities, after its then current
purchase, to an amount equal to 20% of all amounts paid or
payable to CNET by the Company under the terms of this
Agreement on or before the end of the calendar month which
includes the Investment Date. CNET will execute the same
purchase documentation as other investors in connection with
each purchase. The Company will have no obligation to sell
equity securities to CNET on an Investment Date unless the
Company reasonably determines that such sale to CNET is in
compliance with all applicable state and federal securities
laws.
4. The Company's Obligations:
4.1 Operation of Company Site. The Company will be responsible for
ensuring that each link embedded within a Promotion takes the
User to the appropriate area within the Company Site, and that
the Company Site functions with reasonable
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reliability and in a commercially reasonable manner throughout
the Term. In particular, the Company agrees that the Company
Site will comply with the performance standards set forth in
Exhibit B throughout the Term. Any failure by the Company to
comply with this paragraph will be deemed to be a material
breach of this Agreement.
4.2 Reporting. Within 30 days after the end of each month during
the Term, the Company will provide a report to CNET indicating
the aggregate number of referrals from Promotions on the CNET
Sites to the Company Site during such month and the resulting
number of buyers for which the Company has received payment
("CNET Sales"). CNET Sales includes lead generation offers for
which FreeShop receives a "per lead" fee and excludes any
advertising including banners, promotions or other advertising
fees received by the Company. CNET and the Company will agree
on technical procedures to allow the easy and accurate
tracking and reporting of CNET Sales. The Company will make
this information available in a manner that allows CNET and
the Company to understand the performance of the various
Promotions.
4.3 Cash Consideration.
4.3.1 For each month during the Term, the Company will
purchase at least $100,000 of Advertising media on
the CNET Sites identified in Exhibit A, at the rates
(expressed as Net CPM) identified for such CNET Sites
in Exhibit A. CNET will guarantee the availability of
at least $100,000 worth of this media at these rates.
Payments under this paragraph for a particular month
will be due within 30 days after the end of such
month.
4.3.2 For each month of the Term, the Company will pay CNET
$.50 for each CNET Sale except CNET Sales for which
the Company receives less than $.80 per sale. In the
case that the revenue to Company from a CNET Sale is
less than $.80, Company will instead pay CNET 50% of
lead generation revenue received on that CNET Sale.
Such payments will be based on the reports prepared
by the Company under Section 4.2 (although CNET may
challenge such reports as contemplated by Section
10.5). Payments under this paragraph for a particular
month will be due within 30 days after the end of
such month.
4.4 User Information. At least once each calendar quarter, the
Company will deliver to CNET aggregate data collected as a
result of the CNET Sales, including but not limited to,
demographic data, buying behavior as measured by conversion to
sale, frequency of purchasing, and average order size, and a
comparison to the average for the Company to the extent such
information is collected by the Company. The Company and CNET
agree to best efforts to evaluate the possible transfer of
additional per user information to CNET on such terms and for
such purposes as the parties may agree. To the extent
provided, all such information will be provided by the Company
to CNET at no charge. Additionally, the Company and CNET will
conduct a review at least once per quarter to discuss the
Company's business model and the way in which leads are
collected and sold in order to ensure that the CNET Sales is
an accurate reflection of the usage
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of the leads.
5. Term and Termination. The term of this Agreement (the "Term") will
begin on May 18, 1998 and end on the first anniversary of the date of
this Agreement; provided that (a) either party may terminate this
Agreement, effective at any time after the first three months of the
Term, by giving 30 days' written notice of termination to the other
party, and (b) either party may terminate this Agreement at any time by
giving written notice of termination to the other party, if the other
party commits a material breach of its obligations hereunder that is
not cured within 30 days after notice thereof from the non-breaching
party. The provisions of Sections 8, 9 and 10, as well as any
obligations arising prior to expiration or termination, will survive
any expiration or termination of the Term.
6. Exclusivity. For purposes of this agreement "Competing Free Product
Retailer " means any company (other than the Company and CNET and their
respective affiliates) that is engaged primarily in the retail
distribution and sale, through the Internet, of products and services
that are offered without any initial payment required with the
exclusion of software products and classifieds. During the Term, CNET
will not enter into any agreements under which CNET receives
consideration from a Competing Free Product Retailer for displaying
permanent links to or other fixed promotions for such Competing Free
Product Retailer on any CNET Site provided that the foregoing will not
restrict the display of standard advertisements for any Competing Free
Product Retailer. The parties acknowledge that the foregoing will not
prevent CNET from displaying text links and other references to
Competing Free Product Retailers as reasonably necessary to provide
appropriate editorial and search related services on the CNET Sites or
within the context of standard advertising promotions.
7. Trademark Licenses.
7.1 The Company hereby grants to CNET a non-exclusive, revocable,
royalty-free license, effective as long as this Agreement is
in effect, to use, display and publish any of the Company's
trademarks, tradenames, service marks and logos ("Company
Marks") that may be delivered by the Company to CNET expressly
for inclusion in the Promotions, solely for use in connection
with the Promotions. Any use of the Company Marks by CNET must
comply with any reasonable usage guidelines communicated by
the Company to CNET from time to time. Nothing contained in
this Agreement will give CNET any right, title or interest in
or to the Company Marks or the goodwill associated therewith,
except for the limited usage rights expressly provided above.
CNET acknowledges and agrees that, as between the Company and
CNET, the Company is the sole owner of all rights in and to
the Company Marks.
7.2 CNET hereby grants to Company a non-exclusive, revocable,
royalty-free license, effective as long as this Agreement is
in effect, to use, display and publish any of the CNET's
trademarks, tradenames, service marks and logos ("CNET Marks")
that may be delivered by CNET to the Company expressly for
inclusion in the Snap! co-branded Company store. Any use of
the CNET Marks by Company must comply with any reasonable
usage guidelines communicated by CNET to the Company from time
to time. Nothing contained in this
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Agreement will give the Company any right, title or interest
in or to the CNET Marks or the goodwill associated therewith,
except for the limited usage rights expressly provided above.
The Company acknowledges and agrees that, as between the
Company and CNET, CNET is the sole owner of all rights in and
to the CNET Marks.
7.3 The Company hereby represents and warrants to CNET that the
Company has, and will have throughout the Term, all necessary
rights in and to the Company Marks to grant CNET the licenses
and usage rights contemplated by this Agreement without
violating the rights of any third party. CNET hereby
represents and warrants to the Company that CNET has, and will
have throughout the Term, all necessary rights in and to the
CNET Marks to grant the Company the licenses and usage rights
contemplated by this Agreement without violating the rights of
any third party.
8. Responsibility for the Company Products. The Company acknowledges and
agrees that, as between the Company and CNET, the Company will be
solely responsible for any claims or other losses associated with or
resulting from the marketing or operation of the Company Site or the
offer, distribution or sale of any Products by the Company or in
connection with the Company Site. CNET is not authorized to make, and
agrees not to make, any representations or warranties concerning the
Products, except to the extent (if any) contained within Promotions
delivered to CNET by the Company.
9. Mutual Indemnification.
9.1 Indemnification by CNET. CNET shall indemnify and hold the
Company harmless from and against any costs, losses,
liabilities and expenses, including all court costs,
reasonable expenses and reasonable attorney's fees
(collectively, "Losses") that the Company may suffer, incur or
be subjected to by reason of any legal action, proceeding,
arbitration or other claim by a third party, whether commenced
or threatened, arising out of or as a result of (a) any breach
or alleged breach by CNET of its representations, warranties
or covenants hereunder; or (b) the operation of the CNET Sites
(except in cases where the Company is required to indemnify
CNET under the following paragraph), including claims of
infringement or misappropriation of intellectual property
rights.
9.2 Indemnification by the Company. The Company shall indemnify
and hold CNET harmless from and against any Losses that CNET
may suffer, incur or be subjected to by reason of any legal
action, proceeding, arbitration or other claim by a third
party, whether commenced or threatened, arising out of or as a
result of (a) any breach or alleged breach by the Company of
its representations, warranties or covenants hereunder; (b)
the use by CNET of the Company Marks or any content provided
by the Company to CNET expressly for display in connection
with or as part of the Promotions, including claims of
infringement or misappropriation of intellectual property
rights; or (c) the operation of the Company Site or the offer,
distribution or sale of the Products by the Company or in
connection with the Company Site.
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9.3 Indemnification Procedures. If any party entitled to
indemnification under this section (an "Indemnified Party")
makes an indemnification request to the other, the Indemnified
Party shall permit the other party (the "Indemnifying Party")
to control the defense, disposition or settlement of the
matter at its own expense; provided that the Indemnifying
Party shall not, without the consent of the Indemnified Party
enter into any settlement or agree to any disposition that
imposes an obligation on the Indemnified Party that is not
wholly discharged or dischargeable by the Indemnifying Party,
or imposes any conditions or obligations on the Indemnified
Party other than the payment of monies that are readily
measurable for purposes of determining the monetary
indemnification or reimbursement obligations of Indemnifying
Party. The Indemnified Party shall notify Indemnifying Party
promptly of any claim for which Indemnifying Party is
responsible and shall cooperate with Indemnifying Party in
every commercially reasonable way to facilitate defense of any
such claim; provided that the Indemnified Party's failure to
notify Indemnifying Party shall not diminish Indemnifying
Party's obligations under this Section except to the extent
that Indemnifying Party is materially prejudiced as a result
of such failure. An Indemnified Party shall at all times have
the option to participate in any matter or litigation through
counsel of its own selection and at its own expense.
10. Miscellaneous.
10.1 LIMITATION OF DAMAGES. NEITHER PARTY WILL BE LIABLE FOR ANY
SPECIAL, INDIRECT, CONSEQUENTIAL OR INCIDENTAL DAMAGES ARISING
OUT OF OR RELATED TO THIS AGREEMENT, HOWEVER CAUSED AND ON ANY
THEORY OF LIABILITY (INCLUDING NEGLIGENCE), AND EVEN IF SUCH
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
10.2 Assignment. This Agreement may not be assigned by either
party, except (a) to the transferee of substantially all of
the business operations of such party (whether by asset sale,
stock sale, merger or otherwise) or (b) to any entity that
controls, is controlled by or is under common control with
such party.
10.3 Relationship of Parties. This Agreement will not be construed
to create a joint venture, partnership or the relationship of
principal and agent between the parties hereto, nor to impose
upon either party any obligations for any losses, debts or
other obligations incurred by the other party except as
expressly set forth herein.
10.4 Entire Agreement. This Agreement constitutes and contains the
entire agreement between the parties with respect to the
subject matter hereof and supersedes any prior oral or written
agreements. This Agreement may not be amended except in
writing signed by both parties. Each party acknowledges and
agrees that the other has not made any representations,
warranties or agreements of any kind, except as expressly set
forth herein.
10.5 Audit Rights. Each party will have the right to engage an
independent third party to audit the books and records of the
other party relevant to the calculation of
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Retail Impressions or CNET Sales, upon reasonable notice and
during normal business hours, and the other party will provide
reasonable cooperation in connection with any such audit. The
party requesting the audit will pay all expenses of the
auditor unless the audit reveals an underpayment by the other
party of more than 5%, in which case the other party will
reimburse all reasonable expenses of the auditor.
10.6 Applicable Law. This Agreement will be construed in accordance
with and governed by the laws of the State of California,
without regard to principles of conflicts of law.
10.7 Press Release. Each party may issue a press release concerning
the business relationship contemplated by this Agreement, and
each party will provide an appropriate quote from one of its
senior executive officers for use in the other party's
release. The Company agrees that CNET's press release may
disclose the total consideration payable to CNET hereunder.
Each party will provide the other with a reasonable
opportunity to review and comment on its press release.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the date first written above.
CNET, INC. FreeShop International, Inc.
By: /s/ MARTIN GREEN By: /s/ TIM CHOATE
--------------------------------- -------------------------------
Martin Green Tim Choate
Title: Vice President Title: President & CEO
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EXHIBIT A
ADVERTISING MEDIA
For each of the first 12 calendar months of the Term, the Company will purchase
a minimum of $100,000 of Advertising media on the following sites, and CNET will
sell such Advertising media at the Net CPM's indicated for such sites:
CNET ADVERTISING MEDIA NET CPM
DOWNLOAD.COM business banners $ 29.75
DOWNLOAD.COM business window $ 29.75
DOWNLOAD.COM business title download $ 35.70
DOWNLOAD.COM development tools banners $ 29.75
DOWNLOAD.COM development tools window $ 29.75
DOWNLOAD.COM development tools title download $ 35.70
DOWNLOAD.COM education banners $ 19.83
DOWNLOAD.COM education window $ 19.83
DOWNLOAD.COM education title download $ 32.73
DOWNLOAD.COM games banners $ 14.88
DOWNLOAD.COM games window $ 14.88
DOWNLOAD.COM games title download $ 32.73
DOWNLOAD.COM home & personal banners $ 19.83
DOWNLOAD.COM home & personal window $ 19.83
DOWNLOAD.COM home & personal title download $ 32.73
DOWNLOAD.COM Internet banners $ 19.83
DOWNLOAD.COM Internet window $ 19.83
DOWNLOAD.COM Internet title download $ 32.73
DOWNLOAD.COM multimedia & design banners $ 29.75
DOWNLOAD.COM multimedia & design window $ 29.75
DOWNLOAD.COM multimedia & design title download $ 35.70
DOWNLOAD.COM utilities banners $ 19.83
DOWNLOAD.COM utilities window $ 19.83
DOWNLOAD.COM utilities title download $ 32.73
Snap! Run-of-site banners $ 11.90
Snap! Shopping banners $ 29.75
Snap! Keyword search $ 32.73
SEARCH.COM frontdoor portal $ 3.97
SEARCH.COM keywords $ 32.73
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Additionally, for each of the first 12 calendar months of the Term, CNET will
provide the following Advertising media to the Company at no cost:
CNET ADVERTISING MEDIA IMPRESSIONS PER MONTH
DOWNLOAD.COM run-of-site banners 800,000
Snap! run-of-site banners 1,000,000
SEARCH.COM run-of-site banners 1,250,000
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EXHIBIT B
PERFORMANCE STANDARDS
The Company Site and the Company's related operations must comply with the
following performance standards throughout the Term
1. The Company Site will be operational and functional in all material
respects (i.e. capable of displaying information, receiving purchases
and conducting transactions as contemplated in the ordinary course of
business). The Company shall use commercially reasonable efforts to
maintain the functionality of the Site. Should, the Company Site fail
to be operational and functional in all material respects, then for the
period of time during such failure, CNET may remove the Retail
Promotions without breaching the terms of this agreement and without
any negative financial consequence to CNET.
2. Without limiting the effect of 1, the Company shall provide to Users
coming to the Company Site from the Promotions at least the same level
of service as is offered to users coming directly to the Company Site
or from agreements with other distribution partners.
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AMENDMENT TO PROMOTION AGREEMENT
This Amendment to Promotion Agreement (the "Amendment") is dated to be effective
as of June 30, 1998 between CNET, Inc. ("CNET") and FreeShop International, Inc.
(the "Company"). CNET and the Company entered into a Promotion Agreement dated
as of May 18, 1998 (the "Original Agreement" and, as amended hereby, the
"Agreement"). Capitalization terms used in this Amendment and not otherwise
defined have the meanings assigned to such terms in the Original Agreement.
CNET and the Company desire to amend the Original Agreement as set forth in this
Amendment. According, CNET and the Company hereby agree as follows:
1. Section 4.3.1 of the Original Agreement is hereby amended and restated
in its entirety as follows:
"4.3.1 During June, July, August, September, October, November and
December of 1998, the Company will purchase at least $100,000,
$50,000, $200,000, $100,000, $100,000 and $100,000, respectively,
of Advertising media on the CNET Sites identified in Exhibit A.
During January 1999 and for each subsequent month of the Term,
the Company will purchase at least $100,000 of Advertising media
on the CNET Sites identified in Exhibit A. The foregoing
Advertising media will be purchased at the rates (expressed as
Net CPM) identified for such CNET Sites in Exhibit A. CNET will
guarantee the availability of at least these minimum amounts of
media at these rates. Payments under this paragraph for a
particular month will be due within 30 days after the end of such
month."
2. The first sentence of Section 3.6 of the Original Agreement is hereby
amended by replacing the phrase "One hundred twenty days after the date
of this Agreement" with the phrase "On September 30, 1998".
3. Section 5 of the Original Agreement is hereby amended by replacing
clause (a) thereof with the following: "(a) either party may terminate
this Agreement, effective at any time on or after October 1, 1998, by
giving 30 days' written notice of termination to the other party".
4. Except as expressly set forth in this Agreement, the Original Agreement
remains in full force and effect in accordance with its terms.
References in the Original Agreement to the "Agreement" are hereby
amended to refer to the Original Agreement, as amended by this
Amendment. This Amendment and the Original Agreement constitute and
contain the entire agreement between the parties with respect to the
subject matter hereof and thereof and supersede any prior oral or
written agreements. This Amendment will be construed in accordance with
and governed by the laws of the State of California, without regard to
principles of conflicts of law.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the date first written above.
CNET, INC. FREESHOP INTERNATIONAL, INC.
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By: /s/ MARTIN GREEN By: /s/ TIM CHOATE
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Title: Vice President Title: President & CEO
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SECOND AMENDMENT TO PROMOTION AGREEMENT
This Second Amendment to Promotion Agreement (the "Amendment") is dated to be
effective as of September 30, 1998 between CNET Inc. ("CNET") and FreeShop
International, Inc. (the "Company"). CNET and the Company entered into a
Promotion Agreement dated as of May 18, 1998, which was amended pursuant to an
Amendment to Promotion Agreement dated as of June 30, 1998 (as so amended, the
"Original Agreement" and, as further amended hereby, the "Agreement").
Capitalized terms used in this Amendment and not otherwise defined have the
meanings assigned to such terms in the Original Agreement.
CNET and the Company desire to amend the Original Agreement as set forth in this
Amendment. Accordingly, CNET and the Company hereby agree as follows:
1. Section 4.3.1 of the Original Agreement is hereby amended and restated
in its entirety as follows:
"4.3.1 During June, July, August and September of 1998, the Company will
purchase at least $100,000, $50,000, $50,000 and $200,000, respectively,
of Advertising media on the CNET Sites identified in Exhibit A. During
October 1998 and for each subsequent month of the Term, the Company will
purchase at least $50,000 of Advertising media on the CNET Sites
identified in Exhibit A. The foregoing Advertising media will be
purchased at the rates (expressed as Net CPM) identified for such CNET
Sites in Exhibit A. CNET will guarantee the availability of at least
these minimum amounts of media at these rates. Payments under this
paragraph for a particular month will be due within 30 days after the
end of such month."
2. Section 5 of the Original Agreement is hereby amended by replacing
clause (a) thereof with the following: "(a) either party may terminate
this Agreement, effective at any time on or after January 1, 1999, by
giving 30 days' written notice of termination to the other party".
3. The last paragraph of Exhibit A of the Original Agreement, which relates
to Advertising to be provided to the Company at no cost, is hereby
amended and restated in its entirety as follows:
"Additionally, for each of the first 12 calendar months of the
Term, CNET will provide the following Advertising media to the
Company at no cost:
CNET ADVERTISING MEDIA IMPRESSIONS PER MONTH
DOWNLOAD.COM run-of-site banners 266,667
Snap! Run-of-site banners 333,333
SEARCH.COM run-of-site banners 416,667"
4. Except as expressly set forth in this Amendment, the Original Agreement
remains in full force and effect in accordance with its terms.
References in the Original Agreement to the "Agreement" are hereby
amended to refer to the Original Agreement, as amended by this
Amendment. This Amendment and the Original Agreement constitute and
contain the entire agreement between the parties with respect to the
subject matter hereof and thereof and supersede any prior oral or
written agreements. This Amendment will be construed in accordance with
and governed by the laws of the State of California, without regard to
principles of conflicts of law.
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CNET, INC. FREESHOP INTERNATIONAL, INC.
By: /s/ MARTIN GREEN By: /s/ TIM CHOATE
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Title: Vice President Title: President & CEO
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