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ArtistDirect LLC Agreement 11-15-1990

ARTISTDIRECT - CISNEROS 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"), Cisneros

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 $250,000 per year for the period from the Execution Date

through the first (1st) anniversary of the Commencement Date and (ii) $262,500

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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(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 United States, Mexico, Central America, South America, 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"

mark, 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 Mark. 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 mark 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.

 

 

 

11

<PAGE> 12

 

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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<PAGE> 13

 

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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<PAGE> 14

 

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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<PAGE> 15

 

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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<PAGE> 16

 

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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<PAGE> 17

 

(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.

 

 

 

 

17

<PAGE> 18

 

(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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<PAGE> 20

 

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.

 

11.1. 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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<PAGE> 21

 

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.

 

11.1.1. 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.

 

11.1.2. 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.

 

11.2. 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).

 

 

 

 

 

22

<PAGE> 23

 

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), Marc P. Geiger and

Donald Muller .

 

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.

 

 

 

 

 

23

<PAGE> 24

 

15. Dispute Resolution.

 

15.1. 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 Hubbell Law Directory will be eligible to

be selected as an arbitrator.

 

15.2. 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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<PAGE> 25

 

16. Currency; Payments.

 

Except where otherwise expressly provided to the contrary in the

Superseding Agreements:

 

16.1. 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.

 

16.2. 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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<PAGE> 26

 

16.3. 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 Hart-Scott-Rodino 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.

 

18.1. Expenses.

 

18.1.1. 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.

 

18.1.2. 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.

 

18.2. 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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<PAGE> 27

 

18.3. 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.

 

18.4. 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.

 

18.5. 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.

 

18.6. Representations and Warranties: Limitation of Liability

 

18.6.1. 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.

 

18.6.2. 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.

 

18.6.3. 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

 

 

 

27

<PAGE> 28

 

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.

 

18.6.4. 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.

 

18.7. 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.

 

18.8. Waivers, Remedies Cumulative, Amendments.

 

18.8.1. 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.

 

18.8.2. The rights and remedies herein provided are

cumulative and not exclusive of any rights and remedies provided by law.

 

18.8.3. 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.

 

18.9. 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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<PAGE> 29

 

if to AD:

 

17835 Ventura Boulevard

Suite 310

Encino, CA 91316

Attention: Keith Yokomoto

Fax: (818) 758-8722

 

with a copy to:

 

Lenard & Gonzalez LLP

1900 Avenue of the Stars

25th Floor

Los Angeles, CA 90067

Attention: Allen D. Lenard, Esq.

Fax: (310) 552-0740

 

if to CTG:

 

c/o Cisneros Television Group

404 Washington Avenue

Miami Beach, FL

Attn: Director of Legal and Business Affairs

Fax: (305) 531-9446

 

with a copy to:

 

Greenberg Glusker Fields Claman &

Machtinger LLP

1900 Avenue of the Stars

Suite 2100

Los Angeles, CA 90067

Attn: Glenn Dryfoos, Esq.

Fax Number: (310) 553-0687

 

or to such other address, or facsimiles transmission number as the relevant

addressee may hereafter by notice hereunder substitute.

 

 

 

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<PAGE> 30

 

18.10. Indemnity.

 

18.10.1. 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.

 

18.10.2. 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.

 

18.10.3. 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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<PAGE> 31

 

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.

 

18.10.4. 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.

 

18.10.5. 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.

 

18.10.6. 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.

 

18.11. 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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<PAGE> 32

 

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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<PAGE> 33

 

18.12. 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/ KEITH YOKOMOTO

------------------------------

Name: Keith Yokomoto

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/ KEITH YOKOMOTO

-------------------------------- ----------------------------------

Name: Name: Keith Yokomoto

Title: Title: President and COO

 

 

As to Sections 4.5 and 4.6

 

"CTSI"

Cisneros Television Services, Inc.

 

 

By: /s/ [ILLEGIBLE]

--------------------------------

Name:

Title:

 

 

 

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<PAGE> 34

 

EXHIBIT "A"

 

BUSINESS PLAN AND ANNUAL BUDGET

 

See attached.

 

[***]

 

----------------

[***] Confidential treatment has been requested for bracketed portion. The

confidential redacted portion has been omitted and filed separately with the

Securities and Exchange Commission.

 

 

 

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<PAGE> 35

 

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.

 

 

 

35

<PAGE> 36

 

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

 

 

PROPOSED BREAKDOWN OF $39M (5 YEARS)

 

 

 

PROMO [***]*

ROS AD TIME [***]*

 

ESTIMATED YEARLY AVERAGES

--------------------------------

PROMO ROS SPOTS

AMOUNT AMOUNT

CABLE PROPERTIES (per month) [***]*

---------------- ----------- ---------

[***] [***]*

[***] [***]*

[***] [***]*

HTV [***] [***]*

INFINITO [***] [***]*

LOCOMOTION [***] [***]*

PLAYBOY TV [***] [***]*

MUCHMUSIC [***] [***]*

I-SAT [***] [***]*

UNISERIES [***] [***]*

SPACE [***] [***]*

 

 

------------

* 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.

 

 

 

36

<PAGE> 37

 

EXHIBIT "D"

 

INVESTMENT BANKERS

 

 

 

 

1. Goldman Sachs

 

2. Morgan Stanley

 

3. Salomon Smith Barney

 

4. Lehman Brothers

 

5. Merrill Lynch

 

6. Bear Stearns

 

7. Deutsche Bank Alex Brown

 

8. Donaldson Lufkin & Jenrette

 

9. Paine Webber

 

10. BancBoston Robertson Stephens

 

11. Banc of America Securities

 

12. Credit Suisse First Boston

 

13. UBS (Warburg Dillon Read)

 

14. Thomas Weisel Partners

 

 

 

37