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EXHIBIT 10.1
August 13, 2000
Venture Soft Co., Ltd.
Imperial Tower 14th Floor
0-0-0 Xxxxxxxxxxxxx
Xxxxxxx Xx, Xxxxx 000-0000
Xxxxx
Gentlemen:
This letter agreement sets forth the principal terms of an agreement
between Xxxx Xxx Media, Inc. ("SLM") and Venture Soft Co., Ltd. ("VS"),
regarding the creation of a joint venture to become the premiere distributor of
original and co-created branded content in Japan and Korea (the "Territory") by
capitalizing on the strengths of VS as the dominant anime and manga creator and
distributor in the Territory and SLM as a dominant creator of globally branded
super-hero franchises in the U.S. The joint venture to be created hereby is
tentatively named "Xxxx Xxx Japan."
The purpose of this joint venture is intended to result in the creation of
a company that is expected to become a publicly traded company in Japan that is
dedicated to:
(a) building, maintaining, marketing and promoting SLM's Japanese and
Korean language "home" Internet site as a premiere site for delivering
content on the Internet.
(b) re-purposing Webisodes for exploitation in the Japanese and Korean
language, including translations, dubbing, etc.
(c) licensing, marketing and promoting SLM's various properties in Japan
and Korea, including licenses for toys, apparel and other offline
property utilization.
(d) jointly developing original super hero and animated character
properties for online and offline exploitation with VS.
Exhibit A to this letter agreement (the "Term Sheet") sets forth the
principal terms upon which the parties will proceed to negotiate definitive
documentation regarding the formation of Xxxx Xxx Japan. Until such time as
definitive documentation is completed, the terms of this letter agreement
(including the exhibits hereto) shall govern the relationship between the
parties with respect to the subject matter hereof. Each of the parties
acknowledges that the terms of this letter agreement do not comprise all of the
details of the definitive documents, and that all of the terms contained herein
will be
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implemented in accordance with the further review of the parties' legal,
accounting and tax advisors.
After the signing of this memorandum of understanding, each party will
permit the financial, accounting, legal and consulting representatives of the
other party to conduct an investigation and evaluation of its businesses, will
provide such assistance as is reasonably requested and will give access at
reasonable times to information related to the assets and operation of its
business. Each party shall maintain confidentiality about any information
provided by the other and each shall use such information solely in the
furtherance of the business objectives described in this letter. In no event
shall either party make any public disclosure of any information provided by the
other except to its own employees and advisors who are given access to such
information as part of their participation in the review process. Such employees
and advisors shall be appropriately notified that such information is being
disclosed to them in confidence and in accordance with this letter of intent.
Please indicated your agreement by executing this letter agreement
below and returning it to me.
Very truly yours,
XXXX XXX MEDIA, INC.
By: /s/ XXXXXXX XXXXXXXX
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Xxxxxxx Xxxxxxxx
President and Chief Executive Officer
ACKNOWLEDGED AND AGREED
THIS 13th DAY OF AUGUST 2000
VENTURE SOFT CO., LTD.
By: /s/ TENDO OTO
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Name: Tendo Oto
Title: President
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EXHIBIT A
XXXX XXX MEDIA/VENTURE SOFT
JOINT VENTURE TERM SHEET
XXXX XXX JAPAN
FORMATION: Corporation organized in Japan (subject to tax, legal
and accounting advice) ("SLM Japan"). Corporation will have
two classes of stock. The capital stock outstanding initially
owned as follows:
50%(of which 100 shares
will be preferred stock) Xxxx Xxx Media, Inc. ("SLM") 50%
Venture Soft Co., Ltd. ("VS")
SLM's preferred stock, will pay dividends from SLM Japan's
earnings and profits at a rate to be agreed upon by the
parties.
INITIAL CAPITAL: Initial capitalization will be $500,000, contributed pro
rata by SLM and VS in cash or in common stock. In addition,
SLM shall contribute all of its wholly owned intellectual
property (trademarks, copyrights, etc.) currently in existence
(e.g. The 7th Portal, The Accuser and The Drifter) or created
in the future FOR THE EXCLUSIVE USE IN THE TERRITORY (as
defined below), subject to any licenses already in place with
respect to such intellectual property and VS will contribute
office space on a rent-free basis for use by SLM Japan during
its incubation.
SUBSEQUENT
CAPITAL: VS will assist in locating suitable Japanese investors for
SLM Japan. It is the intention of the parties that the initial
new investors will acquire up to 20% of VS's interest in the
SLM Japan, in a manner that results in the proceeds of such
sale being ultimately contributed to SLM Japan and with the
ultimate ownership interest to be as follows:
50% SLM
30% VS
20% Other investors
PURPOSE: SLM Japan will act as a premiere distributor of original and
co-created branded content in Japan and Korea.
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LICENSE
AGREEMENT: SLM will enter into a long-term, exclusive license agreement
with SLM Japan, granting an exclusive license for Japan and
Korea (the "Territory"), with an option for SLM Japan to
acquire similar rights in China and other Asian countries
based upon performance targets and royalty rates to be
negotiated in good faith at the time such option is exercised.
The License Agreement will entitle SLM Japan to display SLM's
co-created content (e.g. Backstreet Project and Starship)
through the Internet, as well as allow SLM Japan ability to
sublicense content through licensing and merchandising in the
Territory. Royalty payments due to SLM under the license
agreement to be determined by the parties.
SLM shall also agree to use its best efforts to exclusively
license all future co-created content to SLM Japan for use in
the Territory. Such licenses will be subject to any
restrictions applicable to SLM with respect to such acquired
or co-created properties (e.g. licenses previously granted
with respect to a property by a seller, consent/management
rights retained by a co-creator).
GOVERNANCE: SLM Japan's board will initially consist of seven members,
four designated SLM and three designated by VS (which
designations rights will continue following SLM Japan's IPO to
the greatest extent permitted by applicable law). In addition,
at least 3 of such directors (2 of the VS designees and 1 of
the SLM designees) shall be Japanese "residents" as such term
is defined under Japanese law. In general, action may be
approved by a majority of the sitting directors. In addition,
SLM shall have the right to appoint a Chairman of the Board
that is reasonably acceptable to VS and VS will have the right
to appoint the Chief Executive Officer that is reasonably
acceptable to SLM. The Board of Directors will designate a
conflicts committee comprised of directors that are not
designated by SLM which shall be charged with reviewing and
approving any transaction between SLM Japan and SLM for so
long as SLM has the right to appoint a majority of the members
of the board.
Extraordinary Events (as defined below) require approval of at
least one of the directors designated by each of SLM and VS.
Extraordinary Events include the following:
_ amendment to the organizational documents of SLM Japan;
_ any merger of SLM Japan or any sale of a material amount
(greater than 35% of book value or revenues) of assets
of SLM Japan;
_ any entry of voluntary bankruptcy or seeking similar
creditor relief;
_ any dissolution, liquidation or winding up of SLM Japan.
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PREEMPTIVE
RIGHTS: The Investors shall have the right to participate, pro
rata, in any sale of capital stock of SLM Japan for cash on
the same terms as any other party purchasing.
TRANSFERABILITY: Prior to the initial public offering, SLM and VS may only
transfer their shares (other than transfers made to a
wholly-owned subsidiary or transfers made by operation of law
in connection with a party acquiring a majority interest in
either such party or any pledge of such shares as security for
a loan) pursuant to the following procedure:
(1) the selling party must send a notice to the other party
indicating its intention to sell, the number of shares
to be sold, and the price at which such shares are to be
sold;
(2) the non-selling party will have 30 days to indicate its
desire to purchase all (but not less than all) of the
selling party's stock;
(3) if the non-selling party indicates a desire to purchase
more shares than, the closing for such purchase shall
occur not more than 60 days following the date of the
original notice; and
(4) if the non-selling party does not elect to purchase any
shares, the selling party may sell such shares to a
third party so long as such sale (a) is for cash or
marketable securities, (b) is for no less than the price
set forth in the notice, and (c) closes within 120 days
of the date of the original notice.
In addition, each party's interest will be subject to
customary tag-along and drag-along provisions.
TERMINATION: The board designation rights, officer appointment rights and
preemptive rights of each party will terminate following an
IPO if such party fails to retain at least 20% of the
fully-diluted common stock of SLM Japan.
EMPLOYEE STOCK
OPTIONS: SLM Japan may issue up to __% of its common stock to employees
in the form of stock options or restricted stock awards,
provided that these grants are made (a) for not less than fair
market value (as determined by the board of directors in good
faith) and (b) are subject to vesting over not less than a
four-year period. In addition, all stock options or shares of
capital stock issued to employees shall be subject to
appropriate buy back rights, rights of first refusal and other
appropriate transfer restrictions.
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AUDITING: SLM Japan shall designate a Big 5 accounting firm to audit SLM
Japan's financial statements annually. In addition, prior to
an IPO, SLM Japan will be required to deliver unaudited
quarterly financial statements to each of the parties within
30 days following the end of each quarter and annual audited
financials and an annual budget within 90 days of the end of
each fiscal year.
CONFIDENTIALITY: SLM Japan and each of the parties shall use their respective
best efforts to ensure that any proprietary technology or
know-how of SLM Japan and the any of the parties which comes
into the possession of a party hereto shall remain
confidential to the greatest extent permitted by law.
