LETTER OF INTENT
EXHIBIT
10.1
This
letter of intent (“LOI”) dated October 7, 2005 (the “Effective Date”), sets
forth the general terms of an agreement by and between MLB Advanced Media,
L.P.,
a Delaware limited partnership (“BAM”) and CenterStaging Musical Productions,
Inc., a California corporation (“CenterStaging”). When fully executed by BAM and
CenterStaging, this LOI shall constitute a binding and enforceable agreement
between the parties hereto effective as of the Effective Date. BAM
and
CenterStaging agree to use commercially reasonable efforts to negotiate in
good
faith and to execute a definitive agreement (the “Definitive Agreement”)
consistent with the terms and conditions hereof promptly following the execution
of this LOI, containing representations, warranties, covenants, conditions
and
indemnities customary for agreements of the scope contemplated herein, in a
form
and substance reasonably satisfactory to CenterStaging and BAM.
| I. |
Scope;
Term.
|
| A) |
Scope;
Exclusivity.
CenterStaging has selected BAM to provide on an exclusive basis certain
Interactive Media-related services during the Term, with respect
to: (i)
CenterStaging’s websites - i.e., Xxxxxxxxxx.xxx (the “Rehearsals Website”)
and XxxxxxXxxxxxx.xxx (the “XxxxxxXxxxxxx.xxx Website”) and any other
websites owned or controlled by CenterStaging as of the Effective
Date and
throughout the Term (all such Websites collectively, the “CenterStaging
Websites”), (ii) CenterStaging’s entire library of audiovisual and/or
audio-only recordings of performances by artists and performers prior
to
the Effective Date, and (iii) all audiovisual and/or audio-only content
that shall be recorded, produced and/or developed by CenterStaging
at any
location during the Term; provided that, the parties acknowledge
that,
while CenterStaging shall use commercially reasonable best efforts
to
obtain all necessary rights and clearances for use by BAM of the
content
described in subsections (ii) and (iii) above, CenterStaging may
not
obtain such rights and clearances for all content described in such
subsections (collectively, the “CenterStaging Content,” and together with
“the CenterStaging Websites,” the “CenterStaging Properties”). BAM is
entering into this LOI in reliance: (i) on CenterStaging’s making
available to BAM for exploitation via Interactive Media CenterStaging’s
extensive pre-existing library of content and the continuing participation
of artists and performers in making available their performances
for
recording by CenterStaging and exploitation by BAM via Interactive
Media
hereunder; and (ii) that the execution, delivery and performance
of this
Agreement will not conflict with or result in a breach or violation
of any
of the terms or provisions or constitute a default under any material
agreement to which CenterStaging is bound for such content that is
controlled by CenterStaging, except to the extent that any breach,
violation or default by CenterStaging is caused by BAM’s use of the
CenterStaging Properties not in accordance with this LOI. For purposes
of
this LOI, “Interactive Media” shall mean PC-based Internet,
wireless/mobile, satellite, IPTV and all other interactive media
now known
or hereafter devised.
|
| B) |
Territory.
Worldwide.
|
| C) |
Term;
Termination. The Term of the LOI shall be five (5) years commencing
on the
Effective Date, renewable as set forth in the Definitive Agreement.
For
purposes of this LOI, “Year 1” shall be the one-year period beginning on
the Effective Date, and each respective year thereafter of the Term
shall
be deemed “Year 2,” “Year 3,” “Year 4,” and “Year 5”. Prior to the end of
Year 5, the parties may mutually agree in writing to extend the Term
for
an additional five (5) year period. Except as otherwise set forth
herein,
this LOI may be terminated by either party immediately upon notice
to the
other party if the other party breaches any of its obligations in
any
material respect, which breach is not remedied within thirty (30)
days
following written notice to the breaching
party.
|
Portions
marked with {***} have been omitted pursuant to a Request for Confidential
Treatment and were filed separately with the Commission.
| D) |
Additional
Exclusivity. Provided that CenterStaging complies with its exclusivity
obligations set forth in Section I(A) above, during the Term BAM
agrees
not to operate any website with the specific purpose of providing
live or
archived music rehearsals content, other than the CenterStaging Websites.
Subject only to the foregoing obligation, BAM shall retain the right
to
provide Interactive Media services of any kind to any one (1) or
more
artists, bands, record labels and/or any other entertainment or music
entity.
|
| II. |
Certain
BAM Responsibilities.
|
Throughout
the Term, BAM shall have the exclusive right and responsibility to execute
the
following, at its expense (except as otherwise noted), in addition to such
other
responsibilities as set forth in the Definitive Agreement:
| A) |
Build,
host, operate, generate revenues in connection with and provide marketing
support for the CenterStaging Websites and applicable
content;
|
| B) |
Provide
Interactive Media management expertise for all CenterStaging Content
during the Term and manage all opportunities (including, without
limitation, by way of third party syndication deals) in an effort
to
maximize all revenue across all Interactive Media for the CenterStaging
Content; provided that CenterStaging shall have final approval rights
over
any such opportunity, such approval not to be unreasonably withheld,
conditioned or delayed;
|
| C) |
Provide
marketing support and customer service for Interactive Media-related
aspects of the CenterStaging
Properties;
|
| D) |
Provide
sponsorship and advertising sales support for the CenterStaging
Properties;
|
| E) |
Oversee
merchandise production and fulfillment for the CenterStaging
Properties;
|
| F) |
Build
and operate online merchandise store with respect to the CenterStaging
Properties; and
|
| G) |
Provide
ticketing services (as needed) with respect to the CenterStaging
Properties.
|
| H) |
Provided
that CenterStaging fulfills its obligations set forth in this Agreement,
BAM shall perform the services contemplated hereunder at a level
no less
than the level employed by BAM in connection with the XXX.xxx
portal.
|
| III. |
Certain
CenterStaging Responsibilities.
Throughout the Term, CenterStaging shall be responsible for the following,
at its expense (except as otherwise noted), in addition to such other
responsibilities set forth in the Definitive Agreement; provided
however,
that in limited circumstances upon notice to CenterStaging BAM may,
in its
discretion, elect to undertake any one or more of the following
responsibilities on its own behalf:
|
2
| A) |
Secure
all talent in connection with the CenterStaging
Properties;
|
| B) |
Record
all video-based CenterStaging Content in High Definition (except
in
non-studio settings where HD equipment is not readily
available);
|
| C) |
Record
all audio-based CenterStaging Content in 5.1 / 7.1 surround mixes
or in
stereo (i.e., left/right) (e.g., in non-studio settings where surround
equipment is not readily available, or in connection with select
rehearsals where only stereo microphones are
employed);
|
| D) |
Produce
and edit all programming, except as otherwise mutually agreed by
the
parties hereto;
|
| E) |
Acquire
all necessary approvals and clearances from artist/artist management,
record company, publishers, etc., as further described
below;
|
| F) |
Obtain,
handle, and secure all rights acquisitions, licensing, clearances,
performance payments, etc., as further described
below
|
| G) |
Provide
all rehearsal and production facilities in Los Angeles, New York
City,
Pennsylvania, and other locations under development and/or consideration
by CenterStaging; and
|
| H) |
Supply
the CenterStaging Content to BAM for use hereunder in a form, format
and
frequency to be determined by the parties hereto; provided that on
a
quarterly basis CenterStaging must provide BAM an average of no less
than
fifteen (15) hours of fresh CenterStaging Content for which all rights
necessary for BAM to stream and/or provide for download by end users
of
such content via the CenterStaging Websites are secured and cleared
by
CenterStaging as set forth herein.
|
| IV. |
Economics.
|
| A) |
BAM
shall be responsible for any and all costs associated with the creation
and operation of the Interactive Media components of the CenterStaging
Properties including, but not limited to, bandwidth and
hosting.
|
| B) |
CenterStaging
shall be responsible for any and all costs associated with providing
talent and content to the CenterStaging Properties including, but
not
limited to, licensing fees (e.g., ASCAP, BMI, et al.) and recording
costs.
|
| C) |
The
parties shall share all operating cash flow generated hereunder,
net of
COGS (as defined below), as follows: Year 1: {***} for BAM and {***}
for
CenterStaging; Year 2: {***} for BAM and {***} for CenterStaging;
Year 3:
{***} for BAM and {***} for CenterStaging; Year 4: {***} for BAM
and {***}
for CenterStaging; and Year 5: {***} for BAM and {***} for CenterStaging,
to be paid by BAM to CenterStaging on a monthly basis in
arrears.
|
| D) |
The
parties anticipate that revenues shall be generated hereunder via
Interactive Media in connection with the CenterStaging Properties
in areas
including, but not limited to the following, each of which shall
be
subject to the CenterStaging’s and BAM’s mutual approval, not to be
unreasonably withheld, and that of the applicable artists and/or
other
content supplier, solely to the extent that the revenue opportunity
is
conditioned upon the approval of any such third
party:
|
| i. |
Paid
Content Distribution.
|
| 1. |
Subscription,
pay-per-view, and other (b2c) distribution and sales of premium content
(e.g., downloadable and/or streamed audio, video, sound recordings,
full
songs, music, short form videos, albums, DVDs, full-length movies,
trailers, screensavers, interactive games, wireless ringtones, wallpaper,
etc.; and
|
3
| 2. |
Licensing,
distribution, and carriage relationships with portals, high speed
data
providers, wireless carriers, content providers, content distributors,
and
other content syndicators and/or aggregators.
|
| 3. |
To
the extent that any CenterStaging Content is offered first via Interactive
Media (e.g., the CenterStaging Websites) and subsequently offered
via
non-Interactive Media (e.g., cable or over-the-air television), then
any
cash flow generated by such content via such non-Interactive Media
channels shall be subject to the cash flow share set forth in Section
IV.C
above.
|
| ii. |
E-Commerce.
Sales via Interactive Media of clothing, books, CDs, DVDs, live concert
recordings, rehearsal recordings, studio recordings, VIP experience
packages, memorabilia, auction, digital/hardware devices, etc. To
avoid
doubt, CenterStaging retains the right to produce and sell hard-goods
based upon the CenterStaging Content (e.g., DVDs, books, etc.) via
non-Interactive Media retail
channels.
|
| iii. |
Sponsorship
& Advertising.
The parties anticipate selling presenting and “powered by” sponsorships
(e.g., Xxxxxxxxxx.xxx, powered by [sponsor]), sponsorships of particular
Interactive Media-based features and events (e.g., “Pepsi Roadcase
Production Series”), consumer promotions (e.g., Verizon “Before-the-Tour”
Ticket Sweepstakes); sponsored votes and polls, and advertising in
appropriate locations throughout the CenterStaging Properties and/or
in
connection with third party websites/channels etc. in, on or through
which
the CenterStaging Properties are delivered or
distributed.
|
| iv. |
Ticketing.
Sales via Interactive Media of tickets to concerts, live tapings,
production rehearsals, VIP experience packages, or any other events,
etc.
|
In
connection with each of the foregoing revenue-generating areas, Costs of Goods
Sold (“COGS”) shall mean, collectively, the following costs and expenses: with
respect to: (i) Paid Content Distribution: costs of streaming concerts, events,
and the like to end users for viewing on a live, real-time basis; provided
that
“COGS” shall not include such streaming costs for viewing on an archived basis;
(ii) E-Commerce: wholesale costs of merchandise, taxes, actual freight, delivery
and/or handling charges, discounts, rebates, chargebacks, vouchers and/or other
compensation to unrelated resellers or customers; (iii) Sponsorship and
Advertising: mandatory, substantiated unrelated third party advertisement
commissions; and (iv) Ticketing: ticket face value, taxes, actual freight,
delivery and/or handling charges. To avoid doubt, COGS shall not include either
party’s capital expenditures, working capital requirements, internal human
resource costs, overhead, operating or real estate costs, except as otherwise
set forth in the previous sentence.
| E) |
BAM
shall be entitled to warrants to purchase shares of the common stock
of
Knight Xxxxxx, Inc., the parent company of CenterStaging, in three
tranches, as follows: (a) upon the earlier of execution of the Definitive
Agreement or December 31, 2005 (the "First Vesting Date"), warrants
to
purchase 800,000 shares (i.e., the first tranche) at an exercise
price of
$2.50 (b) provided the agreement between CenterStaging and BAM shall
not
have been terminated, warrants to purchase up to an additional 850,000
shares at an exercise price equal to the fifteen-day trailing average
market share price of the common stock as of the last day of the
month
during which CenterStaging’s annual gross revenues equal or
exceed $75,000,000 (the "Second Vesting Date"), and (c) provided the
agreement between CenterStaging and BAM shall not have been terminated,
warrants to purchase up to an additional 850,000 shares at an exercise
price equal to the fifteen-day trailing average market share price
of the
common stock as of the last day of the month during which CenterStaging's
annual gross revenues equal or exceed $125,000,000 (the "Third
Vesting Date"). MLBAM shall have a period of three (3) years from
each of
the foregoing Vesting Dates in order to elect to exercise such warrants.
The other terms of the warrants will be set forth in the Definitive
Agreement.
|
4
| V. |
Clearances/Releases.
At
its expense, CenterStaging must obtain all releases, licenses (e.g.,
ASCAP, BMI, et al.), clearances, permits and all other rights necessary
to
display, perform, publish, transmit, distribute, reproduce, and otherwise
use all names, trademarks, logos, likenesses, photographs, musical
compositions, sound recordings, video recordings, film footage, artwork,
audio, video, sound recordings/musical compositions synchronized
to
images, rights of publicity, and all other works contained within
and in
connection with the CenterStaging Content fixed in any and all media
(collectively, the “Licensed Content”) for use or sale as contemplated by
this Agreement, and shall provide written confirmation that it has
obtained the foregoing in each case. CenterStaging shall indemnify
BAM
from any third-party claim arising from BAM’s exploitation of any Licensed
Content.
|
| VI. |
Content
Ownership.
Subject to the parties’ revenue sharing set forth
above:
|
| A) |
BAM
shall own an undivided one hundred (100%) percent interest in all
right,
title and interest in all applications, technologies, business methods
and
processes, computer software, servers, tools, concepts, know-how,
techniques, and the like, used in connection with BAM’s development,
operation and/or maintenance of the CenterStaging Properties pursuant
hereto.
|
| B) |
Notwithstanding
the foregoing, CenterStaging shall retain an undivided one hundred
(100%)
percent ownership interest in all copyright and other intellectual
property rights in and to the Licensed Content, including but not
limited
to, recording contracts, professional names and likenesses, domain
names,
trademarks, logos, musical compositions, publishing, performance
rights,
and rights of publicity.
|
| C) |
The
parties shall jointly own all user data submitted in connection with
the
CenterStaging Websites and via any other Interactive Media, and shall
use
such data in accordance with all applicable laws and
regulations.
|
| VII. |
Miscellaneous.
|
| A) |
Confidentiality.
CenterStaging and BAM acknowledge and agree that the terms of this
LOI and
the Definitive Agreement are and shall remain confidential and shall
not
be disclosed to any third party, without the prior written approval
of the
other party, unless otherwise required by a governmental entity,
a court
of law, or by the Office of the Commissioner of Major League Baseball
in
connection with the approval of the Definitive
Agreement.
|
5
| B) |
No
Joint Venture.
This LOI shall not create a joint venture, partnership, principal-agent,
employer-employee or similar relationship between CenterStaging and
BAM.
|
| C) |
Amendment/Waiver.
This LOI, or any term thereof, may only be modified, amended or waived
by
a written instrument duly executed by both parties, and a failure
of
either party to enforce any term of this LOI shall not constitute
a waiver
by that party of such term or any other term of this
LOI.
|
| D) |
Binding
Effect. The
parties agree that until such time as the Definitive Agreement has
been
fully executed and delivered, that the terms and conditions of this
LOI
shall be binding and enforceable against the parties, and that the
terms
and conditions as set forth herein shall control unless and until
such
term and conditions are superseded by the fully executed Definitive
Agreement.
|
| E) |
Governing
Law/Jurisdiction.
The validity, construction, and enforceability of this LOI shall
be
governed by the laws of the State of New York applicable to contracts
entered into and performed entirely within that
State.
|
| F) |
Reservation
of Rights.
All rights not expressly granted by either party pursuant to this
LOI are
expressly reserved to that party.
|
Dated:
October 7, 2005
AGREED
AND ACCEPTED:
MLB
ADVANCED MEDIA, L.P.
By
Its
General Partner, MLB Advanced Media, Inc.
By:
_____________________________
Name:
Title:
CENTERSTAGING
MUSICAL PRODUCTIONS, INC.
By:
_____________________________
Name:
Title:
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