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EXHIBIT 10.40
ARTISTDIRECT - XXXXXXXX TELEVISION GROUP
MEMORANDUM OF UNDERSTANDING
(As of November 15, 1999)
1. Overview and Definitions.
1.1. This Memorandum of Understanding ("Agreement") sets forth the
terms for the formation, capitalization and operation of a Delaware limited
liability company (the "Company"), the members of which will be ARTISTdirect
Latin America, LLC, a Delaware limited liability company ("AD"), an affiliate of
ARTISTdirect, Inc., a Delaware corporation ("AD Parent") and Lakeport Overseas
Ltd., a British Virgin Islands corporation ("CTG"), an affiliate of Hampstead
Management Co., a British Virgin Islands corporation ("CTG Parent"), that will
be the vehicle for both AD and CTG to develop and conduct the "Service" as
defined in Section 1.2. [AD, together with its Affiliate Transferees (as defined
in Section 10.2.1); and CTG, together with its Affiliate Transferees (as defined
in Section 10.2.1) will each hereinafter be referred to individually as a
"Member" or "party" and collectively as the "Members" or "parties".] Pursuant to
Section 2 below, this Agreement will be binding upon execution by the parties.
1.2. The Company will develop customized music "portals" (the "Front
End Sites") which will be distributed through various media to individual
interactive communication devices, including but not limited to, any device
utilizing IP protocols for delivery to another device including personal
computers, hand-held devices and cellular phones, in the Spanish and Portuguese
languages (the "Service") in the Territory (as defined in Section 7.1). These
Front End Sites will be based on the structure and content of the ARTISTdirect
network, which includes the ARTISTdirect home page and the Ultimate Band List
and iMusic websites (the "AD Network") as it currently operates in the United
States and provides comprehensive music content, including streaming video and
audio and community features focused on the artists and music popular in a given
country or region. These Front End Sites will be linked to the existing AD
Network to provide users with access to even greater resources. In addition, the
Company may develop Spanish and Portuguese language translations of existing and
future AD Network content.
1.3. The Company will initially concentrate on the development and
launch of content-oriented sites with revenue derived from the sale of
advertising, promotions and sponsorships. The Company will have access to
existing AD e-commerce infrastructure to fulfill purchase orders received
through the Front End Sites; provided, however, that the Company will be
responsible for all transaction costs and expenses associated with such purchase
orders and their fulfillment. The Company will explore the development of
e-commerce opportunities for sale of the recorded music and music-related
merchandise, subject to the Company's ability to develop satisfactory
relationships for the local or regional procurement and fulfillment of such
goods and related customer support services.
1.4. For the purposes of this Agreement, "Person" means any general
partnership, limited partnership, corporation, limited liability company, joint
venture, trust, business trust, governmental
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agency, cooperative, association, individual or other entity, and the heirs,
executors, administrators, legal representatives, successors and assigns of such
Person, as the context may require. An "Affiliate" of a Person (the "subject
Person") will mean such other Person that is controlled by, controlling of, or
under common control with the subject Person. "Control," when used with respect
to a Person, means the right or power to direct the operation of such Person,
whether by ownership of voting securities, contract or otherwise. For the
purposes of this Agreement, "eCTG" (i.e., an entity to be formed by CTG Parent
or by an Affiliate of CTG Parent to hold direct or indirect investments in
Internet companies) will be deemed to be an Affiliate of CTG; furthermore, if
"eCTG" becomes the holder, directly or indirectly, of one hundred percent (100%)
of CTG's membership interests in the Company, then eCTG shall be deemed to be
CTG Parent.
1.5. Purposes. The purposes of the Company are to engage in any
activity and/or business for which limited liability companies may be formed
under applicable law and subject to the terms of this Agreement. The Company
will have all the powers necessary or convenient to effect any purpose for which
it is formed, including all powers granted under applicable law. However, except
as set forth in this Agreement, the Company will not enter into any transaction
or contract, or otherwise act, unless its actions are approved by the Management
Committee.
1.6. No State-Law Partnership. No provisions of this Agreement will be
deemed or construed to constitute the Company a partnership (including, without
limitation, a limited partnership) or joint venture, or any Member or Manager a
partner or joint venturer of or with any other Member or Manager, for any
purposes other than federal and state tax purposes.
1.7. No Fiduciary Duties. No fiduciary duty will be imposed upon any
Member by virtue of or in connection with this Agreement, and the Company and
each other Member, by their execution hereof, expressly accepts and acknowledges
the foregoing. EACH OF THE COMPANY AND EACH MEMBER, BY ITS EXECUTION HEREOF,
EXPRESSLY WAIVES ANY FIDUCIARY DUTY OR DUTIES THAT MAY BE IMPOSED ON ITS BEHALF
UPON ANY OTHER MEMBER IN CONNECTION WITH THIS AGREEMENT.
2. Superseding Agreements.
AD and CTG agree to use their respective good faith best efforts to
negotiate and execute more formal agreements (the "Superseding Agreements") as
soon as reasonably practicable, and the Members intend that such agreements will
be executed within sixty (60) days of the date hereof. Such agreements will
incorporate the terms of this Agreement and such other terms as the parties may
mutually agree. Until such agreements are executed, and if such agreements are
never executed, this Agreement, when executed by both AD and CTG, will
constitute a binding agreement between the Members with regard to all matters
covered herein. Specifically, any terms described herein to be included in a
Superseding Agreement will, until such Superseding Agreement is executed, and if
such Superseding Agreement is never executed, be fully operative as terms of
this Agreement.
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Upon execution of the Superseding Agreements, this Agreement will terminate and
be of no further force and effect. Superseding Agreements will include (i) the
Company Operating Agreement, (ii) License of AD Network on-line content, (iii)
License of MuchMusic, HTV and AEI programming, if necessary and subject to the
availability of such rights, (iv) License of the AD Marks and License of the CTG
Marks (see Sections 9.1 and 9.2), (v) Management Services Contract between the
Company and CTSI (see Section 4.5), and (vi) any additional agreements the
parties deem necessary to carry out the business of the Company.
3. Key Dates Defined and Transition Issues.
3.1. Key Dates.
3.1.1. Execution Date. The date on which the parties execute
and deliver this Agreement will be the "Execution Date." The parties anticipate
that the Execution Date will be on or about November 15, 1999.
3.1.2. Fiscal Year. The Fiscal Year for the Company will be
the calendar year. "Fiscal Year 1" will mean the first fiscal year of the
Company, "Fiscal Year 2" will mean the second fiscal year and so on.
3.1.3. Commencement Date. The date on which the Company
launches the Service.
4. Governance Provisions and Operating Responsibilities.
4.1. Management Committee. AD and CTG will be the managers of the
Company and will govern the Company through representatives to a management
committee (the "Management Committee"). The Management Committee will consist of
three (3) representatives of AD (the "AD Directors"), three (3) representatives
of CTG (the "CTG Directors") and three (3) Independent Directors (the AD
Directors and CTG Directors will be referred to collectively as the
"Non-Independent Directors). AD and CTG will each appoint one (1) of the
Independent Directors and those two (2) Independent Directors will appoint the
third (3rd) Independent Director whose appointment will be subject to the mutual
approval of AD and CTG. The AD Directors and the CTG Directors will collectively
vote the percentage interest of the Member appointing them and will collectively
exercise their respective Member's approval rights. If at any time and for
whatever reason either CTG or AD ceases to be a Member of the Company, it will
no longer be entitled to designate any representatives to the Management
Committee. In no event will either Member be entitled to appoint more than three
(3) persons in the aggregate per party to the Management Committee.
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4.2. Voting. All matters submitted to the Management Committee will be
determined on the basis of a majority in percentage interests of the Members, as
determined by a vote of the Non-Independent Directors; provided, however, that
subject to Section 10.3.3 below, the following matters will require the approval
of both the AD Directors and the CTG Directors: (i) any amendment to the
Superseding Agreements; (ii) any merger or other reorganization of the Company;
(iii) the issuance of additional interests in the Company whether by private
placement, public offering, or otherwise, subject to Section 14.2; (iv) any
distribution by the Company with respect to the interests therein other than
distributions of excess cash as provided in Section 12 (including, but not
limited to, any distribution of non-cash assets); (v) the appointment or removal
of the General Manager (as defined below); (vi) the approval of any Business
Plan (as defined below) or Annual Budget (as defined below) or taking actions
that are inconsistent with an approved Business Plan or Annual Budget, or which
are otherwise outside the ordinary course of business, including but not limited
to the incurrence of indebtedness in excess of the levels contemplated by the
applicable Business Plan or Annual Budget; (vii) the Company entering into any
business activities except as contemplated herein; (viii) any transaction with
an Affiliate of any Member (other than the Superseding Agreements); (ix) except
as expressly provided herein, the termination, dissolution or liquidation of the
Company, or the decision to cause the Company to file a bankruptcy petition or
make an assignment for the benefit of creditors; and (x) the selection of
outside auditors. Deadlocks of the Management Committee with respect to matters
(v), (vi), (ix) and (x) above will be resolved by a majority vote of the
Independent Directors.
4.3. General Manager. The Management Committee will delegate the
day-to-day management of the Company to a General Manager ("GM"). The GM's
duties will include: the supervision of all key functions of the Company
[including launching and managing the Service; content acquisition and
development; strategic planning; marketing; accounting and financial planning
(including responsibility for the preparation of Business Plans and Annual
Budgets); and legal and business affairs], the ability to hire and fire
employees (except employees with compensation packages worth more than $150,000
per year, in which case such hiring or termination must be approved by the
Management Committee); expending funds in accordance with the approved Business
Plan and Annual Budget; and reporting to the Management Committee on a regular
basis regarding the operations of the Company
4.4. Headquarters. The Company's headquarters will be located at the
offices of CTG in Miami Beach, Florida, or at a nearby location in the Miami
area.
4.5. Management Services. Pursuant to a contract, the term of which
shall commence on the Execution Date and terminate on the date which is the
second (2nd) anniversary of the Commencement Date (the "CTSI Term"), Xxxxxxxx
Television Services, Inc. ("CTSI") will provide the following functions on
behalf of the Company:
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4.5.1. Cash Management. Maintain one or more bank accounts
(the "Account") in trust for, and for the benefit of the Company, monitor and
collect accounts receivable and monitor and pay the Company's payables from and
out of collections. Within 45 days after the end of each calendar month during
the term of the Agreement, CTSI will provide the Company with a report listing
in detail all receipts into and disbursements from the Company's Account.
4.5.2. Accounting and Financial Reporting. Maintain general
ledger; prepare, on a periodic basis, all financial reports requested by the GM;
compile data required by the Company and its tax accountants for preparation of
the Company's tax returns and similar filings.
4.5.3. Human Resources. Administer payroll and benefits for
the Company's employees.
4.5.4. Facilities Management. Procure and maintain office and
facility space for the Company's administrative and operational functions;
provide janitorial and maintenance services; arrange the procurement,
installation, and maintenance of telephones, computers, telecopiers and other
business equipment required by the Company.
4.5.5. Extension of Term. The CTSI Term may be extended by
mutual agreement of CTSI and the Company. If the CTSI Term is not extended, CTSI
will facilitate the transition to a new management service provider.
4.6. CTSI Compensation. In consideration for the management and
back-office services to be provided by CTSI, the Company will pay to CTSI (i) a
fee at the rate of [***]* per year for the period from the Execution Date
through the first (1st) anniversary of the Commencement Date and (ii) [***]* for
the period from the first (1st) anniversary of the Commencement Date through the
second (2nd) Anniversary of the Commencement Date. To the extent any of the
services set forth in Section 4.5 above are provided by AD, AD will be entitled
to reimbursement on a cost plus basis and such services will be included as a
line item in the Business Plan.
4.7. Financial Reports/Audit Rights.
4.7.1. The General Manager will oversee the preparation of
regular periodic financial statements and annual financial statements to be
prepared in accordance with GAAP. The Company's books and records will be
audited annually by an independent nationally-recognized accounting firm.
4.7.2. The Company, at the request of the GM or AD, will have
the right to audit CTSI's books and records, as such books and records pertain
to the Company, once every twelve
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* Confidential treatment has been requested for the bracketed portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
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(12) months. The Company will give reasonable notice of its intent to audit and
the parties will attempt to schedule such audit so as not to unnecessarily
interfere with the operations of CTSI.
5. Business Plan/Annual Fiscal Year Budgets.
5.1. The Management Committee will agree to an initial 5-year business
plan for the Company prior to the Execution Date (the "Business Plan"). The
first Business Plan and Annual Budget (as defined below) are attached hereto as
Exhibit "A". The Business Plan is the financial model for the operation of the
Service and, subject to such changes thereto as approved by the Management
Committee, will be incorporated into the Operating Agreement. The Business Plan
will be updated annually and extended for an additional year, such that the
Business Plan will continue to have rolling five (5) years of coverage
throughout the term of the Company.
5.2. The Business Plan will be updated annually by individual budgets
for the Company (each, an "Annual Budget") for the coming Fiscal Year. The
General Manager will prepare the updated Business Plan and Annual Budget and
present it to the Management Committee for approval at least ninety (90) days
prior to the commencement of the applicable Fiscal Year. The approved Annual
Budget for a given Fiscal Year will supersede the data contained in the original
Business Plan for that Fiscal Year. In the event the Non-Independent Directors
fail to agree on a Business Plan or Annual Budget by a date no later than
seventy-five (75) days prior to the end of the then current Fiscal Year, the
Non-Independent Directors will negotiate in good faith for fifteen (15) business
days to resolve the deadlock. If such negotiations are not successful, then such
deadlocked matter will be determined by a majority vote of the Independent
Directors.
5.3. In the event the Members agree to develop or market the Service in
any additional region outside of the Territory, the Members agree that any
Business Plan or Annual Budget will segregate the data for each such region.
6. Term and Termination.
6.1. Term. The initial term of the Company will commence on the date
the Certificate of Formation is filed with the Secretary of State of Delaware
and will terminate on the earlier of the fiftieth (50th) anniversary of the
Company as provided in the Certificate of Formation or the earlier dissolution
of the Company pursuant to the terms hereof. The initial term will be
automatically renewable for additional 10-year periods, so long as the Company
is substantially meeting then current projections, as reflected in the
then-current Business Plan and Annual Budget.
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6.2. Dissolution Events. In addition to whatever other remedies it may
have, a Member may elect to terminate this Agreement and dissolve the Company by
notice in writing to the other Member upon or after the occurrence of any of the
following (each, a "Dissolution Event"):
6.2.1. The commission of one or more material breaches of this
Agreement by the other Member which are not capable of cure;
6.2.2. The commission of a material breach of this Agreement
by the other Member which is capable of cure (a "Curable Breach") which has not
been remedied within 30 days after the Member in breach was given notice in
writing by the other Member specifying the nature of such breach in reasonable
detail and requiring it to be cured; provided, however, that such 30-day period
will be extended for such additional periods as will be reasonably necessary if
the Curable Breach is incapable of cure within 30 days, and if during the 30-day
period the Member in breach has diligently endeavored to cure such breach and
for so long as it continues to do so;
6.2.3. The Bankruptcy (as defined below) of the Company or the
other Member, or the appointment of a trustee, receiver or similar person for
the Company or the other Member. "Bankruptcy" means, with respect to any Person,
the happening of any one or more of the following events: (a) a person (or, in
the case of any Person which is a partnership, any general partner thereof); (i)
makes an assignment for the benefit of creditors; (ii) files a voluntary
petition in bankruptcy; (iii) is adjudged bankrupt or insolvent, or there has
been entered against such Person (or general partner) an order for relief, in
any bankruptcy or insolvency proceedings; (iv) files a petition or answer
seeking in respect of such Person (or general partner) any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any statute, law or regulation; (v) files an answer of other
pleading admitting or failing to contest the material allegations of a petition
filed against such Person (or such general partner) in any proceeding of a
nature described above; or (vi) seeks, consents or acquiesces in the appointment
of a trustee, receiver or liquidator of such Person (or such general partners)
or of all or substantial part of such commencement of any proceeding against any
person (or such general partner) seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
statute, law or regulation, if such proceedings have not been dismissed, or
within ninety (90) days after the appointment without such Person's (or such
general partner's) consent or acquiescence of a trustee, receiver or liquidator
of the Person (or such general partner) or of all of any substantial part of
such Person's (or such general partner's) properties, if such appointment is not
vacated or stayed, or within ninety (90) days after the expiration of any such
stay, if such appointment is not vacated;
6.2.4. The failure of the other Member to fund a Mandatory
Capital Contribution and the expiration of the cure period provided in Section
10.3.2.2.
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6.3. Procedure for Dissolution Election. A Member electing to dissolve
the Company pursuant to Section 6.2 above will deliver written notice of such
election to the other Member and to the Company within sixty (60) days after the
occurrence of the Dissolution Event. In the case of a remediable breach or a
failure to fund a Mandatory Capital Contribution, the Dissolution Event will be
deemed to occur upon the expiration of the cure period for such breach or
failure, as the case may be.
6.4. Buy-Out Right. Upon the occurrence of an event of default of the
type described in Section 6.2 above, the non-defaulting Member (in lieu of
electing to dissolve the Company) may elect, within sixty (60) days of the date
of the event of default, to purchase the defaulting Member's interest in the
Company for a price equal to the "Fair Market Value" of the interest, less a
twenty percent (20%) discount. The "Fair Market Value" means the fair market
value which will be computed as set forth in the attached Exhibit "B". If prior
to the date which is the fifth anniversary of the Commencement Date ("the Fifth
Anniversary") a non-defaulting Member elects to purchase the defaulting Member's
interest, the defaulting Member's obligations with respect to Section 10.3.1.1
will continue until the Fifth Anniversary, and thereafter all then existing
licenses, including without limitation any trademark licenses, content licenses
and other intellectual property or proprietary information licenses, from the
defaulting Member to the Company will continue and remain in full force and
effect in accordance with the terms and conditions of such licenses, except that
such licenses will not include any rights in intellectual property, content or
other proprietary information developed or acquired by the defaulting Member
after the Fifth Anniversary. Notwithstanding the foregoing, all trademark
licenses will remain in effect on an exclusive basis until such licenses
automatically terminate upon the earlier of the dissolution of the Company as
set forth in Section 6.6 below or by such licenses' terms.
6.5. The Company will not terminate upon the dissolution or withdrawal
of any of its Members, unless the remaining Member so elects.
6.6. Effect of Dissolution. Upon dissolution of the Company, all rights
and licenses granted pursuant to this Agreement and all Superseding Agreements
will automatically terminate, except that such licenses and agreements will
remain in effect for a reasonable period of time, not to exceed six (6) months
so as to permit an orderly wind up of the Company. Unless the Members mutually
agree otherwise, upon termination and wind up of the Company's operations, the
remaining assets of the Company (after payment of all of the Company's
liabilities) will be liquidated and the proceeds will be distributed to the
Members in accordance with their then percentage ownership interest balances in
the Company. In the event a Member agrees to accept a distribution in kind of a
Company asset, the value of such asset will be mutually agreed-to by the
Members, and in the absence of such agreement will be determined by a
third-party appraiser with experience in valuing assets of that type.
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7. Territory.
7.1. The Company will distribute and market the Service to end-users
located in the Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxx Xxxxxxx, Xxxxx Xxxxxxx, the
Caribbean, and such other territories as the Members may mutually agree, in the
Spanish and Portuguese languages (the "Territory"). The parties acknowledge that
it may be possible for end-users outside the Territory to access the Service and
such access will not be deemed a breach by either party to this Agreement,
unless a party knowingly markets or promotes the Service to end-users located
outside the Territory.
7.2. If AD or any of its Affiliates develop and/or market an on-line
music business in Spain and/or Portugal (the "Iberia Business"), the Company
will grant a perpetual, fully-paid, royalty free, non-exclusive license for the
Company's on-line content and marketing materials to the Iberia Business;
provided, however, that if CTG does not have at least a twenty-five percent
(25%) ownership interest in the Iberia Business, then the Company's license of
such content and marketing materials will be subject to the approval of the
Non-Independent Directors, or, in the event of a deadlock, by the Independent
Directors and with no intent by the Management Committee to delay the
implementation of or frustrate the purpose of the Iberia Business.
8. Non-Competition.
"Noncompete Period" means with respect to each party the later of (i)
the date that is the Fifth Anniversary of the Commencement Date, or (ii) for so
long as such party is a Member plus one (1) year from the date such party ceases
to be a Member. During the Noncompete Period, neither CTG nor AD, except as set
forth in this Agreement, will engage in the operation, management or promotion
of a music portal service in the Spanish and/or Portuguese language(s) that is
substantially similar to the Service in the Territory (a "Competing Business").
During the Noncompete Period, the "CTG Pay Television Channels" will neither
contribute nor provide without consideration Promotional Support to a Competing
Business. For the purposes of this Agreement, "CTG Pay Television Channels"
means Space, I-Sat, Infinito, Jupiter, Uniseries, Locomotion, Cl@se, HTV,
MuchMusic, AEI, Playboy TV Latin America, AdultTVision and Venus.
9. Trademark.
9.1. AD Marks. AD grants to the Company an exclusive, fully-paid,
non-assessable and royalty-free, limited right and license to use the
"ARTISTdirect", "UBL" and "iMusic" marks, and certain other names, marks and
logos which are owned by AD and are currently used on, or are created in the
future and used on, the AD Network (the "AD Marks"), in the Territory only,
solely in connection with the operation, promotion and distribution of the
Service; provided, that any such use of the AD Marks, and the services offered
in connection with the AD Marks, will conform to AD's quality standards. Any
goodwill that should arise from such use will inure solely to the benefit
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of AD. The rights and license granted by AD to the Company will continue for so
long as the Company operates, promotes and distributes the Service. Should the
Company cease to operate, promote or distribute the Service, or notify AD of its
intention to cease use of the AD Marks, then the license granted herein to the
AD Marks will terminate. AD also explicitly reserves the right to terminate the
license to the AD Marks granted herein for a breach of this license. The Company
may not sub-license any AD Marks without the prior written consent of AD,
provided, however, that the Company may grant other parties the right to use the
AD Marks in connection with marketing/advertising activities for the Service
only. The Company will provide to AD copies of all such marketing/advertising
materials as reasonably requested by AD, and any such use of the AD Marks will
be subject to AD's approval. Should AD notify the Company in writing that it
does not approve of any such use of the AD Marks in any marketing/advertising
activities, then the Company will immediately cease such use of the AD Marks.
The Company agrees to cooperate with AD to facilitate AD's control of the use of
the AD Marks, and the quality of the services offered in connection with the AD
Marks. The Company agrees to display such trademark notices as are provided by
AD, and not to alter, obscure or delete any such notices. If AD disapproves of
any use of the AD Marks by the Company, AD will notify the Company in writing
and the Company will immediately cease such use of the AD Marks. The Company may
not use the AD Marks in combination with any other marks, names or logos, or
create derivative marks based on the AD Marks, without the prior approval of AD,
all of which, when approved, will be the property of AD, and will be licensed to
the Company by AD under the terms hereof. The Company will execute any documents
which AD deems desirable to secure AD's ownership in and protection of, any and
all such marks, including any assignments, recordations or licenses. Nothing
herein will be deemed to transfer or assign to the Company any right, title or
interest in or to the AD Marks, except for the limited license granted herein.
9.2. CTG Marks. CTG grants to the Company an exclusive, fully-paid,
non-assessable and royalty-free, limited right and license to use the "HTV"
xxxx, and all related marks and logos currently existing or created in the
future (the "CTG Marks"), in the Territory only, solely in connection with the
operation, promotion and distribution of the Service; provided that any such use
of the CTG Marks, and the services offered in connection with the CTG Marks,
will conform to CTG quality standards. Any goodwill that should arise from such
use will inure solely to the benefit of CTG. The rights and license granted by
CTG to the Company will continue for so long as the Company operates, promotes
and distributes the Service. Should the Company cease to operate, promote or
distribute the Service, or notify CTG of its intention to cease use of the CTG
Marks, then the license granted herein to the CTG Marks will terminate. CTG also
explicitly reserves the right to terminate the license to the CTG Marks granted
herein for a breach of this license. The Company may not sub-license any CTG
Marks without the prior written consent of CTG, provided, however, that the
Company may grant other parties the right to use the CTG marks in connection
with marketing/advertising activities for the Service only. The Company will
provide to CTG copies of all such marketing/advertising materials, as reasonably
requested by CTG, and any such use of the CTG Marks will be subject to CTG's
approval. Should CTG notify the Company in writing that it does not approve of
any such use of the CTG Marks in any marketing/advertising activities, then the
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Company will immediately cease such use of the CTG Marks. The Company agrees to
cooperate with CTG to facilitate CTG's control of the use of the CTG Marks, and
the quality of the services offered in connection with the CTG Marks. The
Company agrees to display such trademark notices as are provided by CTG, and not
to alter, obscure or delete any such notices. If CTG disapproves of any use of
the CTG Marks by the Company, CTG will notify the Company in writing and the
Company will immediately cease such use of the CTG Xxxx. The Company may not use
the CTG Marks in combination with any other marks, names or logos, or create
derivative marks based on the CTG Marks, without the prior approval of CTG, all
of which, when approved, will be the property of CTG, and will be licensed to
the Company by CTG under the terms hereof. The Company will execute any
documents which CTG deems desirable to secure CTG's ownership in and protection
of, any and all such marks, including any assignments, recordations or licenses.
Nothing herein will be deemed to transfer or assign to the Company any right,
title or interest in or to the CTG Marks, except for the limited license granted
herein. When and if the rights to license the [***]* trademarks [***]* with
respect to the Service become available, CTG will use commercially reasonable
best efforts to obtain such rights and license the [***]* to the Company on the
terms set forth in this Section 9.2, subject to the scope of CTG's license of
the [***]*.
9.3. Foreign Registration. The Company agrees not to apply to register,
or to register, the AD Marks or the CTG Marks in any country or jurisdiction
worldwide, or apply to register, or to register, in any country or jurisdiction
worldwide, any service marks, trademarks, trade names, domain names or other
designations that resemble or are likely to cause confusion with the AD Marks or
the CTG Marks, including any variation or translation of the AD Marks or the CTG
Marks, or any other trademark or service xxxx in combination with the AD Marks
or the CTG Marks. The Company will assist a requesting Member, as reasonably
requested at the requesting Member's cost, to register the Member's Marks in the
Territory in the name of such Member and will execute all documents necessary to
record the Company as a licensed user of such marks in the Territory.
9.4. Continuation of Licenses. For purposes of Section 365(n) of the
United States Bankruptcy Code, all licenses granted hereunder will be considered
licenses of rights to "intellectual property" as defined thereunder.
Notwithstanding any provision contained herein to the contrary, if the
applicable licensor under any proceeding under the United States Bankruptcy Code
and the trustee in bankruptcy of said licensor, or said licensor, as a debtor in
possession rightfully elects to reject this Agreement, the applicable licensee
may, pursuant to 11 U.S.C. Section 365(n)(1) and (2), retain any and all of said
licenses's rights hereunder, to the maximum extent permitted by law, subject to
said licensee's making the payments, if any, specified herein.
9.5. Cross-Promotion. The Members will cause the Company to provide
reasonable cross-promotion opportunities for the Members' respective other
business (e.g., promotion of the MuchMusic and HTV television channels and the
AD Network). In addition, AD Parent will provide reasonable cross-promotion
opportunities for the Company on the AD Network. AD Parent and the Company will
provide each other with quarterly traffic reports detailing the total number of
click-throughs of the other party's links. The parties will conduct a joint
quarterly review of the traffic reports and in the event that the reports
indicate an unequal amount of traffic being driven to the Company's Front End
Sites or the AD Network, the parties will work together in good
------------
* Confidential treatment has been requested for the bracketed portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
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faith to balance traffic by adjusting or including additional or more prominent
links or other features designed to balance traffic. The first reporting period
will begin on the date that is six (6) months from the Commencement Date and end
ninety (90) days later. Subsequent reporting periods will begin immediately
after the end of the then current reporting period.
10. Company Ownership and Capitalization.
10.1. Formation of the Company.
10.1.1. The Company will be organized as a limited liability
company under the laws of the state of Delaware. The Members intend that the
terms of the limited liability company be sufficient to qualify the Company to
be taxed as if it were a partnership.
10.1.2. The Company will initially be owned 50% by AD and 50%
by CTG.
10.1.3. The name of the Company will require the approval of
both Members.
10.2. Transfers of Interests and Change in Control.
10.2.1. Transfers to Affiliates. Either Member may transfer
all or a portion of its interest in the Company to one or more of its
Affiliates, without the consent of the other Member, provided, however, (i) that
such affiliate transferee ("Affiliate Transferee") agrees, in writing, to be
bound by this Agreement or by the Superseding Agreements, as the case may be,
and (ii) that such assignment will not relieve the transferring Member from its
obligations under this Agreement or the Superseding Agreements, as the case may
be.
10.2.2. Transfers to Third Parties. Except as set forth in
Section 10.2.1 above and subject to Section 10.2.3 below, neither Member may
transfer all or any portion of its ownership interest in the Company prior to
the third (3rd) anniversary of the Execution Date. On or after the third (3rd)
anniversary of the Execution Date, either Member may transfer all or a portion
of its ownership interest to a third party, subject to Section 10.2.3 below
(provided that such Member is not then in default with respect to any of its
obligations under this Agreement or any of the Superseding Agreements, as the
case may be), pursuant to the following mechanism:
10.2.2.1. A Member wishing to transfer all or part of its
interest (the "Offeror") must first offer, by written notice (the "Notice"), the
relevant portion of its interest in the Company to the other Member (the
"Offeree"). For a period of thirty (30) days after receipt of the Notice (the
"Notice Period"), the Offeror and Offeree will negotiate in good faith with
respect to the purchase by the Offeree of all or a portion of the Offeror's
interest in the Company and, if agreement with respect to the price and other
material terms is reached with respect to such interest in the Company, the
Offeror and Offeree will execute and deliver a binding memorandum with respect
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thereto (the "Memorandum"). If the Memorandum is not executed and delivered
prior to the expiration of the Notice Period, the Offeror may proceed in
accordance with Section 10.2.2.2.
(i) If the Offeror and Offeree execute and deliver
the Memorandum within the Notice Period , the Offeror will, within thirty (30)
days after such execution and delivery, execute such documents and instruments
reasonably required by Offeree to sell and transfer all or the applicable
portion of the Offeror's interest, as the case may be, in the Company to the
Offeree at the purchase price and on the other terms specified in the
Memorandum, and the closing of such sale will take place as soon as practicable
thereafter. At such closing, the Offeror will sell and transfer such interest in
the Company to the Offeree free and clear of any and all liens, mortgages,
pledges, security interest or other restrictions or encumbrances.
10.2.2.2. If the Offeror and Offeree are unable to consummate
the sale and purchase of the Offeror's interest pursuant to Section 10.2.2.1,
the Offeror may solicit offers from third parties. If the Offeror wishes to
accept any third party's offer, it will give the Offeree written notice of the
identity of the purchaser and the price and other terms of the purchaser's offer
(the "Last Chance Notice") not later than twenty (20) business days prior to the
consummation thereof. The Offeree will have the right, exercisable by written
notice (the "Last Chance Notice of Election") to the Offeror within ten (10)
business days after receipt of the Last Chance Notice ("Last Chance Period") to
substitute itself or its designee for such purchaser and purchase the Offeror's
interest in the Company by matching the offer from the purchaser; provided,
however, that if the third party offer includes non-cash consideration, the
Offeree may match such offer by paying cash in an amount equal to the Fair
Market Value of the total consideration of such third party offer. The failure
to deliver a Last Chance Notice of Election within the Last Chance Period will
permit the Offeror to consummate the sale to the third party. If the Offeror
does not consummate the sale by transferring its interest in the Company to the
third party as provided in this Section 10.2.2. within one hundred twenty (120)
days after the expiration of the Last Chance Period, any transfer by the Offeror
of its interest in the Company shall again be subject to the terms of this
Section 10.2.2.
10.2.2.3. If the mechanism set forth above in Sections
10.2.2.1 and 10.2.2.2 is triggered by a "Change in Control" (as defined Section
10.2.3) where (i) the Offeror is transferring directly or indirectly its
membership interests in the Company along with other assets; and (ii) for the
purpose of determining the amount of the Offeree's matching offer, the Offeror
and Offeree cannot agree on the allocation of the third party's offer between
the value of the Offeror's membership interests in the Company and the value of
the other assets being transferred by the Offeror, then such allocation shall be
determined by experts appointed pursuant to the same procedure regarding the
appointment of experts for a fair market valuation, as set forth in Exhibit "B"
attached hereto. Any time periods for providing notice, for accepting or
rejecting offers or for taking any other actions prescribed in Sections 10.2.2.1
and 10.2.2.2 will be reasonably extended to permit the experts to determine the
allocation.
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10.2.2.4. No Member may sell, assign, pledge, encumber or
dispose of, or otherwise transfer, whether voluntarily or by operation of law,
any portion of its ownership interest in the Company now or hereafter held by
such Member, except as provided above or with the prior written consent of all
other Members, which consent may be given or withheld by such other Members at
their sole and absolute discretion. Any purported transfer of any portion of an
ownership interest in violation of the provisions of this Agreement will be
wholly void and will not effectuate the transfer contemplated thereby.
10.2.2.5. Transfer: Management Committee, Voting.
Notwithstanding Sections 10.2.1 and 10.2.2 above, without the written consent of
the non-transferring Member, no transferee or all or any part of the Member's
interest in the Company will become a manager of the Company, have any right to
designate a representative to the Management Committee, or have any approval
rights pursuant to Section 4.1 and 4.2 above.
10.2.3. Change in Control. Except as provided in this Section 10.2.3, a
"Change in Control" of any Member or of any Person which Controls such Member
directly or indirectly (a "Member Parent") is (i) prohibited until the date
which is the third (3rd) anniversary of the Commencement Date; and (ii)
permissible thereafter, subject to the right of first negotiation and matching
rights set forth in Section 10.2.2 above. For purposes of this Agreement, a
"Change in Control" means (i) the disposition of all or substantially all of the
assets of, or equity interests in, a Member Parent to a third party unaffiliated
with such Member Parent, or (ii) any transaction or series of related
transactions (including without limitation any merger, reorganization,
consolidation or purchase of outstanding equity interests) resulting in the
transfer of fifty percent (50%) or more of the outstanding voting power of the
Member or of a Member Parent to a third party unaffiliated with such Member or
Member Parent. Notwithstanding the foregoing the following transfers will not be
considered a Change in Control for the purposes of this Agreement: (i) the
transfer, either directly or indirectly, by a Member Parent of its membership
interests in the Company ("Transferred Membership Interest") as long as the Fair
Market Value of the Transferred Membership Interest accounts for less than
twenty-five percent (25%) of the total Fair Market Value of the assets being
transferred by the Member Parent, (ii) the issuance of any Member Parent's
shares in a widely dispersed public offering, and (iii) any Change in Control at
the level, or higher, of AD Parent or CTG Parent. In the event of the transfer
of voting power of an entity, as distinguished from a direct transfer of assets,
the assets being transferred should be deemed to include all of the assets of
the entity (and of all of the entities of which it is a direct or indirect
Parent) whose voting power is being transferred.
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10.3. Capitalization.
10.3.1. Procedure for Capital Calls. When any capital
contribution is required pursuant to the terms of this Agreement or the Annual
Budget or Business Plan, the General Manager or either Member will give written
notice (a "Capital Call Notice") to each Member at least ten (10) business days
prior to the due date, stating: (i) the total capital to be contributed pursuant
to the then current Annual Budget or Business Plan; (ii) the pro rata amount
owed by each Member in accordance with their percentage interest; and (iii) the
date by when such amount is due. The Members will fund their capital
contributions in cash.
10.3.1.1. Initial Capitalization. To provide for the
initial capitalization of the Company, each Member will contribute the
following:
AD will contribute the following:
(i) An exclusive, non-transferable license to
the Company for so long as the Company operates the Service to (a) translate
into Spanish and Portuguese all content currently displayed on and distributed
through the AD Network and all content produced or acquired by AD in the future
for distribution through the AD Network (collectively, "AD Content") solely for
the operation, promotion, and distribution of the Front End Sites and the
Service in the Territory, (b) display and distribute such translated content on
and through the Internet solely in connection with the operation, promotion, and
distribution of the Service in the Territory, (c) use such translated content in
advertising, sponsorship, marketing materials, and promotion of the Front End
Sites and the Company directed to end-users located within the Territory, and
(d) display and distribute on and through the Front End Sites for distribution
in the Territory such specific elements of the English language version of the
AD Content as approved in advance by AD in its sole discretion. All of the
foregoing will be subject to the restrictions and limitations applicable to AD
under license agreements with third party providers of such AD Content. AD will
use its commercially reasonable efforts to obtain from third party licensors of
the AD Content all rights necessary in order to grant the foregoing rights. The
Company will not (1) use or reference any portion of the English language
version of the AD Content in any advertising, sponsorship, marketing materials
or promotion of the Company or (2) display the English language version of the
AD Content on any of the Front End Sites in a manner that is substantially
similar to the "look and feel" of any AD web site within the AD Network. As
between the Company and AD, AD will own all right, title and interest (except as
licensed herein) in and to the AD Content and all translations and localized
versions of the AD Content created by or on behalf of the Company.
Notwithstanding the foregoing, if AD licenses such translations of the AD
Content to an entity in which CTG does not have at least a twenty-five percent
(25%) ownership interest, AD will pay the Company a license fee for such
translated content subject to the approval of the Non-Independent Directors, or
in the event of a deadlock, by the Independent Directors. The Company agrees to
assign and does hereby assign to
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AD any and all right, title and interest that it may acquire in the AD Content
or any translation or localized version of the AD Content. Any and all amounts
payable by AD to third party licensors in connection with the granting of the
foregoing license or the Company's use of such licensed content will be
reimbursed by the Company subject to its prior approval of such expense.
(ii) A non-transferable license to use, for so long as
the Company operates the Service and for purposes of operating, maintaining and
enhancing the Front End Sites and the Service within the Territory, all
proprietary software solutions used by AD during the term of this Agreement in
connection with the AD Network, subject to the restrictions and limitations
applicable to AD under license agreements with third party licensors of such
proprietary software solutions, for:
(ii)(a) Site hosting
(ii)(b) Database management
(ii)(c) HTML page publishing
(ii)(d) Media streaming
(ii)(e) Digital downloading
(ii)(f) Chat
(ii)(g) Search engine
(ii)(h) Enterprise Resource Planning
(ii)(i) Ad serving
(ii)(j) Auctioning
(ii)(k) e-commerce
With respect to any and all amounts payable by AD to third party licensors in
connection with the granting of the foregoing license or the Company's use of
such licensed content: (i) AD will pay all amounts payable in connection with
the Pollstar and AMG content licenses and any and all payments required under
any other currently existing content and/or technology licenses, (ii) the
Company will either pay directly or reimburse, as applicable, AD for all future
amounts payable under such content and technology licenses as such amounts are
approved in the Business Plan as such Plan is amended from time to time, and
(iii) if the cost or part of the cost of acquiring a content license is a
license back to the licensor of the Company's translation of such content, the
Company will consent to such use.
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(iii) Integration of the Front End Sites with the
existing AD Network.
(iv) Marketing and promotion of the Front End Sites on
the existing AD Network for the English speaking Latin American audience.
(v) The infrastructure, office space, and technical
support necessary to provide customer support, accounting services, and product
fulfillment with third party providers, in connection with online purchases and
other e-commerce made by or through stores on the Front End Sites. For the
avoidance of doubt, gross revenue generated through e-commerce will be recorded
by the Company, and correspondingly, risks (e.g. credit card risks), reserves,
expenses, and transaction costs also will be recorded by the Company.
Any incremental direct costs or additional human resource costs incurred by AD
while assisting the Company with e-commerce and the establishment of the
e-commerce infrastructure, including but not limited to customer support,
accounting, and product fulfillment, and any incremental costs incurred by AD in
connection with the technical implementation, integration, or maintenance of the
Front End Sites will be reimbursed on a cost plus basis.
The parties agree that the foregoing contributions of AD have a value
of Fifty Five Million Dollars ($55,000,000).
CTG will contribute the following:
Content
(i) Coordination of CTG Affiliates otherwise engaged
in such businesses in the development and repurposing of existing and future
localized and global content, including acquisition, where available, and
streaming video and audio, generated by (a) HTV and (b) by [***]* (including
existing and future [***]* channels such as [***]* and [***]* if and when
the rights to such content become available for the Service.
(ii) A license to the existing programming and all
future programming developed for HTV, for so long as the Company operates the
Service, subject to all existing restrictions and license agreements
(collectively, the "CTG Content"). CTG will use commercially reasonable best
efforts to secure the rights to exploit the CTG Content and [***]*, if and when
such rights become available, on the Internet or any successor thereof.
(iii) Best efforts to facilitate access to [***]*.
(iv) All rights necessary to develop, operate,
maintain and update the HTV website and, if and when the rights become available
and subject to Section 9.2 above, the [***]* website.
------------
* Confidential treatment has been requested for the bracketed portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
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(v) Access to studio facilities on terms to be
negotiated.
Marketing
(vi) Promotional support for the Company in the form
of advertising inventory and other media via CTG affiliated or controlled
broadcast television, cable television, direct satellite and radio properties,
on a rotational basis, including Chiron placement, :15 and :30 second-spot
commercial inventory, scrolls and bumpers aimed at promoting page-views,
contests and promotions as needed by the Company ("Promotional Support"). CTG
will place a commercially reasonable percentage of the Promotional Support in
afternoon and evening primetime dayparts. On a quarterly basis, CTG will provide
the Company with a log of the Promotional Support provided to the Company during
the preceding period. CTG's initial contribution of Promotional Support will
have a value of Thirty Nine Million Dollars ($39,000,000), and any Promotional
Support provided by CTG to the Company with a value greater than Thirty Nine
Million Dollars ($39,000,000) will be paid for by the Company on terms to be
negotiated in good faith by the parties hereto. Attached to this Agreement as
Exhibit "C" is a schedule setting forth valuations for the Promotional Support
to be contributed by CTG to the Company.
The parties agree that the foregoing contributions of CTG have a value
of Fifty Five Million Dollars ($55,000,000).
10.3.2. Mandatory Capital Contributions. The Members will
contribute additional capital on a pro rata basis in accordance with their
respective initial percentage interests, up to an aggregate amount not to exceed
Forty Million Dollars ($40,000,000) (a "Mandatory Capital Contribution"). Each
Member's Mandatory Capital Contributions will be made pursuant to Section 10.3.1
above.
10.3.2.1. Failure to Make Mandatory Capital
Contributions. If a Member does not contribute a Mandatory Capital Contribution
within ten (10) business days following the due date of the Mandatory Capital
Contribution (a "Defaulting Member"), the General Manager will deliver a written
notice of such default to both Members, and the non-Defaulting Member may, at
any time after thirty (30) days from the date of delivery of the default notice
from the General Manager, elect any of the following remedies by giving written
notice to the Defaulting Member and the Company:
(i) Contribute and Dilute. The
non-Defaulting Member may contribute both its share and the Defaulting Member's
share of the Mandatory Capital Contribution. Upon such payment by the
non-Defaulting Member, the percentage interests of the Members will be
recalculated, with the amount of the entire Mandatory Capital Contribution made
by the non-Defaulting Member treated as the actual amount of such contribution
plus twenty percent (20%).
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(ii) Dissolution. The non-Defaulting Member
may elect to dissolve the Company pursuant to Section 6.2 above, in which event
the Company would be wound up, liquidated, and terminated.
(iii) Purchase Interest. The non-Defaulting
Member may elect to purchase the Defaulting Member's entire interest pursuant to
Section 6.4 above.
10.3.2.2. Right to Cure. At any time prior to the
delivery of a notice from a non-Defaulting Member of its election to invoke the
remedies set forth in Section 10.3.2.1 above, the Defaulting Member may cure by
contributing its delinquent Mandatory Capital Contributions plus interest at the
per annum rate equal to the Bank of America reference rate, as of the date such
cure payment is made, plus 2% (the "Effective Rate"), accruing from the date
each such delinquent Mandatory Capital Contribution was originally due.
10.3.2.3. Other Effects. Until a Defaulting Member has
cured its obligation to make a Mandatory Capital Contribution or the
non-Defaulting Member has elected to contribute the Defaulting Member's share of
the Mandatory Capital Contribution pursuant to Section 10.3.2.1(i) above, the
Defaulting Member will, in addition to the remedies described above, be subject
to the following:
(i) No Distributions. A Defaulting Member
will have no right to receive any distributions from the Company until the
non-Defaulting Member has first received distributions in an amount equal to the
Mandatory Capital Contributions contributed by the non-Defaulting Member, if
any, in excess of the Mandatory Capital Contributions made by the Defaulting
Member, plus interest at the Effective Rate.
(ii) No Voting. A Defaulting Member will
lose its voting and approval rights under the Certificate of Formation and this
Agreement until such time as the Defaulting Member cures the default or the
non-Defaulting Member contributes the Defaulting Member's share of the Capital
Contribution and dilutes the Defaulting Member's percentage interest.
(iii) No Participation in Management. The
Defaulting Member will lose its ability (whether as a Member, a manager or
through its designees to the Management Committee) to actively participate in
the management operation of the Company until such time as the Defaulting Member
cures the default or the non-Defaulting Member contributes the Defaulting
Member's share of the Capital Contribution and dilutes the Defaulting Member's
percentage interest.
10.3.2.4. Each Member acknowledges and agrees that the
remedies described in Section 10.3.2.1 bear a reasonable relationship to the
damages that the Members estimate may be suffered by the Company and the
non-Defaulting Member by reason of the failure of the Defaulting Member to make
Mandatory Capital Contributions and that the election of any or all of the above
remedies is not unreasonable under the circumstances existing as of the date
hereof.
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The enumeration of remedies herein or a party's election of such remedies will
not be deemed to constitute a waiver of any other legal or equitable rights or
remedies such party may have.
10.3.3. Additional Capital Contributions. To the extent
unanimously approved by the Management Committee, from time to time, the Members
may be permitted to make Additional Capital Contributions above the amounts of
the Mandatory Capital Contributions (each an "Additional Capital Contribution").
The Members will have the opportunity, but not obligation, to participate in
such Additional Capital Contributions on a pro rata basis in accordance with
their then current percentage interests. In the event a Member (a "Declining
Member") declines to make an Additional Capital Contribution, it will notify the
other Member and the Company in writing within ten (10) business days of
delivery of the Capital Call Notice requesting such Additional Capital
Contribution. Within ten (10) business days after receipt of notice from the
Declining Member, the non-Declining Member may elect to contribute both its
share and the Declining Member's share of the Additional Capital Contribution,
and thereafter, the percentage interests of the Members will be adjusted, on a
dollar-for-dollar basis, to reflect the new relative proportions of the capital
accounts of the Members. In the event that as a result of a failure to fund an
Additional Capital Contribution or Mandatory Capital Contribution, a Declining
Member's or Defaulting Member's ownership interest is diluted to less than 25%
(if there are two (2) non-affiliated members) or to less than 15% (if there are
three (3) or more non-affiliated members), the Declining Member or Defaulting
Member will lose all approval rights set forth in Section 4.2 above (until such
time as the Declining Member's or Defaulting Member's ownership interest
increases to more than fifteen percent (15%) or twenty-five percent (25%), as
the case may be), and the non-Declining or non-Defaulting Member may elect to
purchase the Declining or Defaulting Member's entire membership interest for a
price equal to the Fair Market Value of such interest, as determined in
accordance with the procedures set forth in Exhibit "B" attached hereto. For the
purposes of this Section 10.3.3, a Declining or Defaulting Member's ownership
interest will be inclusive of such Member's Affiliates' ownership interests in
the Company.
10.3.4. Capital Accounts. Each Member agrees that a single
capital account (each a "Capital Account") will be established and maintained
for each Member and will be credited, charged and otherwise adjusted in the
manner provided herein, subject to the regulations promulgated under Section
704(b) of the Internal Revenue Code of 1986, as amended. Except as set forth in
this Section, no Member will be entitled to receive any interest on its capital
contributions.
11. Use of the Company's End-User Database and Content.
11.4. Subject to Section 11.1.1 below, each Member will have a
perpetual, non-exclusive, non-transferable, limited license to use, for its own
internal business purposes, data relating to end-users of the Front End Sites
collected by the Company in the course of operating the Front End Sites. At each
Member's request, the Company will provide the requesting Member, via File
Transfer Protocol to an IP address designated by the requesting Member, such
end-user data within thirty (30)
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days following the commercial launch of the first of the Front End Sites and,
thereafter, the Company will provide the requesting Member with updates of such
data on a monthly basis. The requesting Member's use of end-user data provided
by the Company will at all times comply with all applicable laws and
regulations, privacy standards and the Company's published privacy policy, as
may be updated from time to time.
11.4.1. In consideration of the Company's license and delivery
of end-user data to the requesting Member, the requesting Member will pay the
Company a fee for every one thousand unique end-users for which the Company
receives complete data records, which fee will be determined by calculating the
average fee quoted by Yahoo, Lycos, and Excite for comparable use rights for one
thousand unique end-users' data records containing comparable information to the
Company's data records. A complete data record for an end-user will comprise, at
a minimum, the user's name, email address and, to the extent available, mailing
address, telephone number and Social Security number or other established form
of identification used in the country where the user is domiciled as such
information is submitted to the Company by the end-user. No fee will be payable
with respect to any end-user for whom the requesting Member already possesses
the minimum data record, or for any duplicate or update of a data record for
which the requesting Member has already paid a fee.
11.4.2. The Company will not sell, rent or otherwise make
available or allow others to sell, rent or otherwise make available to any third
party any data contained in the Company's end-user database, except as mutually
agreed by the Members.
11.5. The Company grants to AD a perpetual, non-exclusive,
non-transferable, royalty-free license to translate into English all content
produced or acquired by the Company (other than content licensed by AD) for
display on the Front End Sites (collectively, "Company Content") and (b)
distribute such translated Company Content through Web sites in the AD Network
and successor thereof, all subject to the restrictions and limitations
applicable to the Company pursuant to agreements with third party providers of
such Company Content. The Company will use its commercially reasonable efforts
to obtain from third party licensors of the Company Content all rights necessary
in order to grant the foregoing rights. As between the Company and AD, the
Company will own all right, title and interest (except as licensed herein) in
and to the Company Content and all translations and localized versions of the
Company Content created by or on behalf of AD. AD agrees to assign and does
hereby assign to the Company any and all right, title and interest that it may
acquire in the Company Content or any translation or localized version of the
Company Content. Any and all amounts payable by the Company to third party
licensors in connection with the granting of the foregoing license or AD's use
of such licensed content will be reimbursed by AD, subject, however, to AD's
prior approval of such expense.
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12. Distribution of Profits.
The Company will make distributions of operating profits on a quarterly
basis to each Member, in proportion to its percentage interests at the end of
that quarter. The Company will not withhold distributions except as necessary to
provide for the reasonable conduct of the Company's business as detailed in the
Business Plan (as modified by the Annual Budget for a given fiscal year).
13. AD's Obligation to Sign Artists.
13.1. During the thirty (30) days prior to the commencement of each of
the first five (5) Fiscal Years, the Management Committee will meet and mutually
select the following two (2) groups of recording artists: (i) twenty (20) of the
top recording artists (the "Website Selected Artists") from a blended list based
on MuchMusic's and HTV's play list (the "Blended List") and (ii) forty (40) of
the top recording artists (the "Content Selected Artists") from the Blended
List. The parties agree that overlap between the Website Selected Artists and
the Content Selected Artists is permissible. During each of the first five (5)
Fiscal Years, AD will (i) enter into Internet website agreements with at least
five (5) of the Website Selected Artists chosen with respect to the applicable
Fiscal Year ("Performance Target 1"); and (ii) AD will contribute or procure
content or customized content for at least ten (10) of the Content Selected
Artists (with five (5) of the ten (10) Content Selected Artists selected from
the top twenty (20) of the forty (40) Content Selected Artists) chosen with
respect to the applicable Fiscal Year ("Performance Target 2"). If AD signs up a
Website Selected Artist for an Internet website agreement and such website
agreement includes e-commerce and content rights, then AD will be deemed to have
signed such Website Selected Artist under Performance Target 1 AND as a Content
Selected Artist under Performance Target 2.
13.2. If AD fails to satisfy Performance Target 1 or Performance Target
2 for any Fiscal Year, CTG will have the right to decrease proportionately the
Promotional Support contributed to the Company as set forth in Section 10.3.1.1.
for the succeeding Fiscal Year. For example, (i) if in a given Fiscal Year, AD
satisfies Performance Target 1, but only signs five (5) Content Selected Artists
under Performance Target 2, then during the successive Fiscal Year, CTG has the
right to reduce its Promotional Support by 33.3% (i.e., 5 divided by 15), (ii)
if during a given Fiscal Year, AD signs four (4) Website Selected Artists under
Performance Target 1 and seven (7) Content Selected Artists under Performance
Target 2, then during the successive Fiscal Year, CTG has the right to reduce
its Promotional Support by 26.67% (i.e., (1 + 3) divided by 15).
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14. Roll-up: Initial Public Offering.
14.1. Provided CTG has not (i) failed to make a Mandatory Capital
Contribution without curing such failure pursuant to Section 10.3.2.2, (ii)
materially breached the Agreement or requirements of the Business Plan or Annual
Budget, or (iii) previously transferred fifty percent (50%) or more of its
ownership interest in the Company to a non-affiliated third party, then at any
time after the date thirty (30) months from the Execution Date, CTG will have
the right to cause its equity interest in the Company to be "rolled up" into AD
Parent (the "Roll-up Transaction") pursuant to the following: (a) the Company
and AD Parent will be valued pursuant to the Fair Market Value procedure set
forth in Exhibit "B"; (b) the Company will be merged into AD Parent; and (c) CTG
will receive AD Parent stock equal in value to CTG's then pro rata equity
interest in the Fair Market Value of the Company. For the purposes of this
Section 14, the AD Parent stock, and the stock of the Company if the Company is
publicly offering its shares, will be valued as of its average closing price for
the twenty (20) business days prior to the date AD receives written notice of
CTG's election to roll-up its equity interest in the Company.
14.1.1. In the event that a transaction described in Section
14.1 above is completed, CTG shall agree to a customary 180-day lock-up with
respect to the shares of AD Parent stock received in such transaction (the
"Roll-up Shares"). After the expiration of such period, CTG shall be permitted
to sell such shares from time to time, so long as CTG (i) receives net proceeds
from such sale(s) in any 90-day-period not in excess of the greater of (x) $25
million or (y) 1% of the then-current AD Parent market capitalization, in each
case pursuant to a valid exemption from registration of such shares or an
effective registration statement therefor; (ii) effects such sale through an
underwritten offering for which the lead underwriter is at least one of the
underwriters listed on Exhibit "D" attached hereto or is otherwise reasonably
acceptable to AD Parent; or (iii) AD Parent consents to such sale.
Notwithstanding anything herein to the contrary, AD shall not be obligated to
effect any registration for such shares which AD is not otherwise obligated to
do pursuant to the Third Amended and Restated Registration Rights Agreement by
and between AD Parent, Securityholders (as defined therein), Xxxx X. Xxxxxx and
Xxxxxx Xxxxxx .
14.2. At any time after the Execution Date of this Agreement, if any
two (2) of the approved investment banks listed on the attached Exhibit "D" or
such investment banks' successors present the Company with a plan to take the
Company through an initial public offering, either Member will have the right to
cause the Company to engage one (1) of the two (2) investment banks for such
purpose and the other Member will provide all cooperation, approvals, and
authorizations as may be necessary to consummate the proposed transaction on
terms that apply pro rata to the Members according to their percentage ownership
interest in the Company.
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15. Dispute Resolution.
15.9. Subject to the authority of the Independent Directors to resolve
deadlocks pursuant to this Agreement, in the event of any dispute or claim
arising out of or related to this Agreement, the parties agree to use best
efforts to resolve such dispute or claim on a consensual basis before commencing
an arbitration proceeding. Such best efforts will include an in-person meeting
between members of senior management of both parties. If the parties' best
efforts fail, any controversy or claim arising out of or relating to this
Agreement, its enforcement or interpretation, or because of an alleged breach,
default or misrepresentation in connection with any of its provisions, or
arising out of or relating in any way to the relationship between the parties,
will be determined by binding arbitration. The arbitration proceedings will be
held and conducted in accordance with California Code of Civil Procedure
Sections 1282-1284.2, with the power to grant equitable relief, including
injunctions and temporary restraining orders. California Code of Civil Procedure
Section 1283.05, which provides for certain discovery rights, will apply to any
such arbitration, and said code section is hereby incorporated by reference. In
reaching a decision, the arbitrator will have no authority to change, extend,
modify or suspend any of the terms of this Agreement. The arbitration will be
commenced and heard in Los Angeles County, California. The arbitrator will apply
the substantive law (and the law of remedies, if applicable) of California or
federal law, or both, as applicable to the claim(s) asserted. Judgment on the
award may be entered in any court of competent jurisdiction. The parties may
seek, from a court of competent jurisdiction, provisional remedies or injunctive
relief in support of their respective rights and remedies hereunder without
waiving any right to arbitration. However, the merits of any action that
involves such provisional remedies or injunctive relief, including, without
limitation, the terms of any permanent injunction, will be determined by
arbitration under this Section 15.1. If the parties do not agree upon an
arbitrator within ten (10) days after a written demand for arbitration is served
upon one party by the other, the arbitrator will be appointed pursuant to
Section 1281.6 of the California Code of Civil Procedure; provided, however,
that only persons who are retired Superior Court, California Appellate Court or
federal judges or lawyers admitted to the bar for at least twenty (20) years and
classified as "A-v" by the Martindale Xxxxxxx Law Directory will be eligible to
be selected as an arbitrator.
15.10. If any legal action, arbitration or other proceeding is brought
for the enforcement of this Agreement, or because of any alleged dispute,
breach, default or misrepresentation in connection with any of the provisions of
this Agreement, the successful or prevailing party will be entitled to recover
reasonable attorneys' fees and other costs incurred therein, in addition to any
other relief to which it or they may be entitled. The court or arbitrator will
consider, in determining the prevailing party, which party obtains relief which
most nearly reflects the remedy or relief which the parties sought.
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16. Currency; Payments.
Except where otherwise expressly provided to the contrary in the
Superseding Agreements:
16.11. All amounts due from either party to the other or from the
Company to a Member or Affiliate pursuant to this Agreement will be paid in U.S.
Dollars. If any portion of such payment is calculated on the basis of revenues
received in other currencies, such revenues will be calculated using the
exchange rate published in the Wall Street Journal as of the business day
immediately preceding the date on which the payment initially is due. Such
exchange rate will also apply to any portion of a payment which is permitted to
be deferred, regardless of whether such deferred payment is represented by a
promissory note or other instrument. If laws or currency regulations in the
Territory now or at any time during the term of this Agreement prohibit or
restrict any party ("payer") from paying any sums due to any other party
("payee"), payee may, in its sole and absolute discretion, elect to accept funds
in a currency other than United States dollars. If payee elects to accept funds
in a currency other than United States dollars, payee will notify payer of such
election and payer will deposit sums due payee in a bank or banks in the
Territory approved by payee or promptly pay such sums to such person or persons
in the Territory as the payee may designate in writing. In the event that,
pursuant to the legal requirements imposed upon payer by a duly-organized
governmental taxing authority, payer is required to withhold from the amount
payable to payee hereunder any sales, remittance, value added, turnover and/or
any other tax, levy and/or charge (collectively, "Required Taxes"), the
following shall apply: (i) payer shall only withhold from payment to payee the
minimum amount of such Required Taxes which must be paid to the taxing
authority; (ii) payer shall only withhold from payment to payee the actual
amount of such minimum Required Taxes which have been paid by payer to the
taxing authority; (iii) payer shall provide payee concurrently with, or promptly
after, the payment to payee of the applicable installment of the amount payable
hereunder, any official receipt issued by the taxing authority to the payer
certifying the amount and basis of such Required Taxes and the date upon which
payment of such Required Taxes was received by the taxing authority (or in the
absence of such a receipt, the payer shall furnish the foregoing information to
payee promptly after the payment); (iv) payer shall promptly refund to payee any
amount of the Required Taxes which was deducted or withheld from or offset
against any installment of the amounts payable hereunder which amount was
subsequently refunded or credited to payer; and (v) payer shall promptly refund
to payee any amount of the Required Taxes which was deducted or withheld from or
offset against any installment of the amounts payable to the payee hereunder to
the extent the payer has received or will receive a benefit (either directly or
indirectly) by or from such taxing authority for such amount.
16.12. All payments owing pursuant to this Agreement will be made by
wire transfer of immediately available funds, net of any withholding required by
applicable law. Each party will from time to time designate one or more accounts
into which such payments will be made and may designate one or more Affiliates
to receive such payments.
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16.13. Any payment hereunder not made when due, after a ten (10) day
grace period, will bear interest from the date due to and including the date of
payment in full at a rate equal to the Effective Rate as in effect on the date
payment was due.
17. HSR Filing.
By no later than November 24, 1999 (the "Filing Deadline"), the Members
will file notifications (with a request for early termination of the waiting
period) under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended, (the "HSR Act") in connection with the transactions contemplated hereby
and will respond as promptly as practicable to any inquiries of the Federal
Trade Commission (the "FTC"), the Antitrust Division of the Department of
Justice (the "DOJ") or any other applicable state or federal agency's request
for additional information or documentation in connection with antitrust matters
related to transactions contemplated by this Agreement. Each Member will bear
its costs and expenses and attorneys' fees relating to the HSR Act filings
(including one-half ( 1/2) of the HSR Act filing fee, if only one filing for the
transactions contemplated by this Agreement is required) and will, to the extent
necessary, provide appropriate information to the other party to coordinate and
permit the filing on or before the Filing Deadline. If, pursuant to the HSR Act,
the FTC or DOJ objects to the transactions contemplated by this Agreement, the
Members will negotiate in good faith with respect to restructuring the
transactions to address such objection. If (i) the Members fail to agree on a
restructuring or (ii) any applicable waiting period under the HSR Act has not
expired or been terminated by one hundred eighty (180) days from the Execution
Date, this Agreement will terminate of its own accord and the Members will not
have any further rights or obligations pursuant hereto.
18. Miscellaneous Provisions.
18.14. Expenses.
18.14.1. All legal and other expenses incurred by the Company
in connection with its formation will be paid by the Company and, to the extent
paid by either Member, will be reimbursed by the Company to such Member.
18.14.2. Subject to Section 18.1.1 above, each Member will be
responsible for legal fees incurred by the Member in connection with the
negotiation and execution of this Agreement and the Superseding Agreements.
18.15. Counterparts. This Agreement may be executed in several
counterparts, each of which will be deemed an original but all of which will
constitute one and the same.
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18.16. Partial Invalidity. Wherever possible, each provision hereof
will be interpreted in such manner as to be effective and valid under applicable
law, but in case any one or more of the provisions contained herein will, for
any reason, be held to be invalid, illegal or unenforceable in any respect, such
provision will be ineffective to the extent, but only to the extent, of such
invalidity, illegality or unenforceability without invalidating the remainder of
such invalid, illegal or unenforceable provision or provisions or any other
provisions hereof, unless such a construction would be unreasonable.
18.17. Binding Effect. Subject to the provisions of this Agreement
relating to transferability, this Agreement will be binding upon and will inure
to the benefit of the parties, and their respective distributees, heirs,
successors and assigns.
18.18. Further Assurances. In connection with this Agreement and the
transaction contemplated hereby, each Member will execute and deliver any
additional documents and instruments and perform any additional acts that may be
necessary or appropriate to effectuate and perform the provisions of this
Agreement and such transactions.
18.19. Representations and Warranties: Limitation of Liability
18.19.1. Authority. Each Member represents that (i) it has
full power and authority to enter into and perform this Agreement, (ii) the
Agreement is the valid and binding obligation of such Member, enforceable
against it in accordance with its terms, and (iii) the performance by such
Member of its obligations under this Agreement does not violate any law, rule or
regulation binding on such party, including any contractual rights of or
obligations to third parties, or such Member's charter documents.
18.19.2. Intellectual Property; Content. Each Member and its
Affiliates represent and warrant to the other and to the Company that the
intellectual property licensed or provided to the Company pursuant to this
Agreement, including any trademarks, copyrights, patents, software, content or
other confidential or proprietary information, when used pursuant to this
Agreement, does not infringe or violate any intellectual property right of any
third party, or violate any license or other agreement governing such
intellectual property; provided, however, that any and all representations and
warranties made by a Member or its Affiliates to the other with respect to
patent, software or other technology licenses shall be made to the best of such
Member's (or such Affiliate's) knowledge.
18.19.3. Limitation of Liability. Each Member acknowledges and
agrees that the other Member does not guarantee the accuracy, completeness,
timeliness or availability of the content or other proprietary or confidential
information provided to the Company, and that except for the willful misconduct
or gross negligence of a Member regarding any content or other proprietary or
confidential information provided to the Company, neither Member will have any
liability whatsoever for such content, or any reliance thereon. IN NO EVENT WILL
EITHER
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MEMBER HAVE ANY LIABILITY FOR LOST PROFITS, INDIRECT, CONSEQUENTIAL, SPECIAL OR
PUNITIVE DAMAGES, OF ANY KIND ARISING OUT OF OR ATTRIBUTABLE TO, OR RELATING TO
THIS AGREEMENT, OR ANY CONTENT OR OTHER PROPRIETARY OR CONFIDENTIAL INFORMATION
PROVIDED PURSUANT TO THIS AGREEMENT, EVEN IF ADVISED OF THE POSSIBILITY OF THE
SAME.
18.19.4. No Other Warranties. EXCEPT FOR THE WARRANTIES
EXPRESSLY PROVIDED FOR HEREIN, EACH MEMBER DISCLAIMS TO THE FULLEST EXTENT
ALLOWABLE UNDER APPLICABLE LAW, ALL OTHER WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE, REGARDING THE INTELLECTUAL PROPERTY, CONTENT,
SOFTWARE, AND OTHER PROPRIETARY OR CONFIDENTIAL INFORMATION PROVIDED TO THE
COMPANY, WHETHER OR NOT ADVISED OR AWARE OF ANY SUCH PURPOSE.
18.20. Assignment; No Third Party Beneficiary. Subject to Section 10.2,
no party hereto will assign its rights or delegate its obligations hereunder
without written consent of the other party except to an Affiliate of such party;
provided that no such assignment will relieve the assignor of its obligations.
The provisions of this Agreement are for the benefit only of the parties, and no
third party may seek to enforce or benefit from these provisions.
18.21. Waivers, Remedies Cumulative, Amendments.
18.21.1. No failure or delay by any of the parties hereto in
exercising any right, power or privilege under this Agreement will operate as a
waiver thereof nor will any single or partial exercise by any of the parties
hereto of any right, power or privilege preclude any further exercise thereof or
the exercise of any other right, power or privilege.
18.21.2. The rights and remedies herein provided are
cumulative and not exclusive of any rights and remedies provided by law.
18.21.3. No provision of this Agreement may be amended,
modified, waived, discharged or terminated, other than by the express written
agreement of the parties hereto nor may any breach of any provision of this
Agreement be waived or discharged except with the express written consent of the
party not in breach.
18.22. Notices. All notices, requests, demands and other communications
required to be given under this Agreement will be in writing and will
conclusively deemed to have been duly given (a) when hand delivered to the other
party, (b) the next business day if sent by a generally recognized overnight
courier services that provides written acknowledgment by the addressee of
receipt, or (c) when received, if sent by facsimile or other generally accepted
means of electronic transmission.
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if to AD:
00000 Xxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx
Fax: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxxxx LLP
1900 Avenue of the Stars
00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
if to CTG:
c/x Xxxxxxxx Television Group
000 Xxxxxxxxxx Xxxxxx
Xxxxx Xxxxx, XX
Attn: Director of Legal and Business Affairs
Fax: (000) 000-0000
with a copy to:
Xxxxxxxxx Glusker Fields Claman &
Machtinger LLP
0000 Xxxxxx xx xxx Xxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxx, Esq.
Fax Number: (000) 000-0000
or to such other address, or facsimiles transmission number as the relevant
addressee may hereafter by notice hereunder substitute.
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18.23. Indemnity.
18.23.1. By AD. Notwithstanding Section 18.6.3, AD will
indemnify and hold harmless CTG and its shareholders, managers, directors,
officers, employees, agents, representatives, Affiliates, successors and assigns
(collectively, the "CTG Indemnified Parties"), from and against all claims,
losses, damages (including loss of profits and consequential damages awarded to
unrelated third parties, if any, but excluding loss of profits and consequential
damages otherwise suffered by the CTG Indemnified Parties), expenses,
judgements, costs and liabilities (including reasonable attorneys' fees and
costs) incurred by the CTG Indemnified Parties arising from AD's breach of any
covenants, agreements, representations or warranties contained in this
Agreement.
18.23.2. By CTG. Notwithstanding Section 18.6.3, CTG will
indemnify and hold harmless AD and its managers, shareholders, directors,
officers, employees, agents, representatives, Affiliates, successors and assigns
(collectively, the "AD Indemnified Parties"), from and against all claims,
losses, damages (including loss of profits and consequential damages awarded to
unrelated third parties, if any, but excluding loss of profits and consequential
damages otherwise suffered by the AD Indemnified Parties), expenses, judgements,
costs and liabilities (including reasonable attorneys' fees and costs) incurred
by the AD Indemnified Parties arising from CTG's breach of any covenants,
agreements, representations or warranties contained in this Agreement.
18.23.3. If a claim by a third party is made against an
indemnified party, the indemnified party will promptly notify the indemnifying
party of such claim. Failure to so notify the indemnifying party will not
relieve the indemnifying party of any liability which the indemnifying party
might have, except to the extent that such failure materially prejudices the
indemnifying party's legal rights. The indemnifying party will have thirty (30)
days after receipt of such notice to undertake, conduct and control through
counsel of its own choosing (subject to the approval of the indemnified party,
such approval not to be unreasonably withheld) and at its expense, the
settlement or defense of such claim, and the indemnified party will cooperate
with the indemnifying party in connection therewith; provided, however, that (i)
the indemnifying party will permit the indemnified party to participate in such
settlement or defense through counsel chosen by the indemnified party, provided
that the fees and expenses of such counsel will be borne by the indemnified
party and (ii) the indemnifying party will reimburse the indemnified party for
the full amount of any loss resulting from such claim and all related expenses
incurred by the indemnified party within the limits of this Section 18.10 as
such are incurred. If the indemnifying party does not notify the indemnified
party within thirty (30) days after actual receipt of the indemnified party's
notice of a claim of indemnity hereunder that it elects to undertake the defense
thereof (which may be with a reservation of rights by such indemnifying party)
or so notifies the indemnified party but fails to undertake or maintain such
defense promptly and in good faith so that a default is threatened, the
indemnified party will promptly notify the indemnifying party whether it desires
to undertake the defense of such claim. If the indemnifying party does not
within ten (10) business days thereafter elect to undertake the defense thereof,
the indemnified party will have the right to contest, settle or compromise the
claim in the exercise of its reasonable judgment and without prejudice to
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the rights of the indemnified party to indemnification hereunder.
Notwithstanding anything contained herein, the indemnified party will not enter
into any settlement or compromise that provides for any remedy other than money
damages without the prior written approval of the indemnifying party, which
approval will not be unreasonably withheld.
18.23.4. Indemnification of Agents. The Company will indemnify
any Person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding by reason of the
fact that he or she is or was a Member, Management Committee member, General
Manager, officer, employee or other agent of the Company or that, being or
having been such a Member, Management Committee member, General Manager,
officer, employee or agent, he or she is or was serving at the request of the
Company as a manager, director, officer, employee or other agent of another
limited liability company, corporation, partnership, joint venture, trust or
other enterprise (all such persons being referred to hereinafter as an "agent"),
to the fullest extent permitted by applicable law in effect on the date hereof
and to such greater extent as applicable law may hereafter from time to time
permit.
18.23.5. Insurance. The Company will have the power to
purchase and maintain insurance on behalf of any Person who is or was an agent
of the Company against any liability asserted against such Person and incurred
by such Person in any such capacity, or arising out of such Person's status as
an agent, whether or not the Company would have the power to indemnify such
Person against such liability under the provisions of Section 18.10.4. or under
applicable law.
18.23.6. Notwithstanding anything in this Section 18.10 to the
contrary, neither Member will have any obligation to indemnify or advance
expenses to the other Member, or to the Company, either separately or together,
with respect to any third party claim, action, suit, proceeding, issue or matter
resulting from a breach of this Agreement by the other Member or the Company
including the use or distribution of any of the Company's or Members' Marks,
Content, or other licensed intellectual property other than as provided for
herein.
18.24. Confidentiality. Each Member (the "receiving Member"), its
respective Affiliates and the Company will (i) hold all information of a
confidential or proprietary nature that it receives regarding the customers,
business, finances, assets or affairs of the Company or the other Member or any
of its Affiliates ("Proprietary Information" of the disclosing party) in strict
confidence and will take reasonable precautions to protect Proprietary
Information of the disclosing party (including, without limitation, all
precautions that itself employs with respect to its own confidential materials),
(ii) not divulge any Proprietary Information of the disclosing party or any
information derived therefrom to any third party (except to employees,
contractors and consultants who have a legitimate need to know such information
and who have previously executed a written nondisclosure agreement which is then
in effect restricting the use and disclosure of confidential information that
the receiving Member receives from third parties), (iii) not make any use
whatsoever of Proprietary Information of the disclosing party except to the
extent permitted under this Agreement or to the extent necessary to perform its
obligations under this Agreement. Without granting any right or license, the
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restrictions set forth in clauses (i) - (iii) above will terminate on the date
five (5) years following the later of the termination of this Agreement, the
term of the Company, or the withdrawal of a Member, nor will such restrictions
apply to any information that the receiving Member can document (a) is or
becomes (through no improper action or inaction of such Member or any of its
Affiliates, agents, contractors, consultants or employees) generally available
to the public , or (b) was in its possession or known by it without restriction
on use or disclosure prior to receipt from the disclosing party or (c) was
rightfully disclosed to it by a third party without restriction on use or
disclosure, or (d) was independently developed without use of any Proprietary
Information of the disclosing party by employees of the receiving Member who
have had no access to such information. The receiving Member may make
disclosures required by law or court order provided the receiving Member so
notifies the disclosing party in writing as soon as practicable, uses diligent
efforts to limit disclosure and to obtain confidential treatment or a protective
order and has allowed the disclosing party to participate in the proceeding.
/ / /
/ / /
/ / /
/ / /
/ / /
/ / /
/ / /
/ / /
/ / /
/ / /
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18.25. This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all proposals,
oral or written, all negotiations, conversations, or discussions between the
parties and all past dealing or industry custom.
AGREED AND ACCEPTED:
"CTG" "AD"
Lakeport Overseas Ltd. ARTISTdirect Latin America, LLC
By ARTISTdirect International Holdings,
By: /s/ [ILLEGIBLE] LLC, its Member
--------------------------------
Name:
Title: By ARTISTdirect, Inc., its Member
By: /s/ XXXXX XXXXXXXX
------------------------------
Name: Xxxxx Xxxxxxxx
Title: President and COO
As to Section 10.2.3 As to Sections 9.5 and 10.2.3
"CTG Parent" "AD Parent"
Hampstead Management Co. ARTISTdirect, Inc.
By: /s/ [ILLEGIBLE] By: /s/ XXXXX XXXXXXXX __
-------------------------------- ----------------------------------
Name: Name: Xxxxx Xxxxxxxx
Title: Title: President and COO
As to Sections 4.5 and 4.6
"CTSI"
Xxxxxxxx Television Services, Inc.
By: /s/ [ILLEGIBLE]
--------------------------------
Name:
Title:
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EXHIBIT "A"
BUSINESS PLAN AND ANNUAL BUDGET
See attached.
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EXHIBIT "B"
FAIR MARKET VALUE PROCEDURE
As used in this Agreement, the term "Fair Market Value" will mean the
price at which a willing seller would sell and a willing buyer would buy the
asset for which the determination of value is being made, having full knowledge
of the facts, in an arm's length transaction without time constraints, and
without being under any compulsion to buy or sell. The Fair Market Value of a
fractional interest in an asset will be equal to the appropriate pro rata
portion of the Fair Market Value for the entire asset, without any further
reduction on account of the fractional ownership.
As soon as practicable after the receipt of any notice or the
occurrence of any event requiring the determination of the Fair Market Value of
the Company or other asset, the Members will confer and use their reasonable
best efforts to determine the same; however, if either Member will give notice
to the other Member requesting determination of such amount or value by
appraisal, or the parties have been unable to agree on the Fair Market Value,
then the parties will consult for the purpose of appointing a
mutually-acceptable qualified independent expert. If the Members are unable to
agree on an expert within a three-day period, each Member will select its own
expert, and the Fair Market Value will be (i) the average of the valuation of
each Member's experts; or (ii) if the higher valuation exceeds the lower
valuation by more than 15%, the two experts will pick a third expert (the "Third
Expert"), and the Fair Market Value will be the average of the valuation of the
Third Expert and the valuation of the expert whose valuation was closest to that
of the Third Expert.
The experts selected pursuant to this provision will not be affiliated
with any Member and will be an investment banker or other qualified person with
prior experience in appraising assets comparable to the asset at issue. If the
Members agree on an expert, then the Company will pay the fees and costs of the
appraisal; otherwise, each Member will pay the fees and costs of the expert it
selects and the fees and costs of the Third Expert will be split 50/50 between
the Members.
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EXHIBIT "C"
PROMOTIONAL SUPPORT
MEDIA & PROMOTIONAL BREAKOUT
Properties available for media, sponsorships, promotional tie-ins & programming
opportunities:
Cable/Pay TV Properties
HTV Pan-Regional 24 hour Latin music channel
INFINITO Pan-Regional documentary channel focusing on the mysteries of the universe
LOCOMOTION Pan-Regional animation channel for teens & young adults
MUCHMUSIC Southern Cone 24 hour music channel
I-SAT Music & Movie channel for teens and young adults
SPACE Blockbuster movie channel
UNISERIES Classic TV
[***]*
------------
* Confidential treatment has been requested for the bracketed portion. The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.
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EXHIBIT "D"
INVESTMENT BANKERS
1. Xxxxxxx Xxxxx
2. Xxxxxx Xxxxxxx
3. Xxxxxxx Xxxxx Xxxxxx
4. Xxxxxx Brothers
5. Xxxxxxx Xxxxx
6. Bear Xxxxxxx
7. Deutsche Bank Xxxx Xxxxx
8. Xxxxxxxxx Xxxxxx & Xxxxxxxx
9. Xxxxx Xxxxxx
10. BancBoston Xxxxxxxxx Xxxxxxxx
11. Banc of America Securities
12. Credit Suisse First Boston
13. UBS (Warburg Dillon Read)
14. Xxxxxx Xxxxxx Partners
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