As filed with the Securities and Exchange Commission on June 8, 1999
(Commission File No. 000-26085)
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------------------------------
FORM 10/A-1
GENERAL FORM FOR REGISTRATION OF SECURITIES
Under Section 12(b) or (g)
of the Securities Exchange Act of 1934
AMERICAN INTERACTIVE MEDIA, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 88-0233444
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
611 BROADWAY, SUITE 308
NEW YORK, NEW YORK 10012
(Address of Principal Executive Office) (Zip Code)
-------------------------------------------------------
Registrant's telephone number, including area code: (212) 539-0700
-------------------------------------------------------
SECURITIES TO BE REGISTERED UNDER SECTION 12(b) OF THE ACT: None
SECURITIES TO BE REGISTERED UNDER SECTION 12(g) OF THE ACT:
Common Stock, $0.001 Par Value
(Title of Class)
================================================================================
<PAGE>
Item 15. FINANCIAL STATEMENTS AND EXHIBITS
(b) Exhibit List
Exhibit
Number Description of Exhibit
- ------ ----------------------
2.1 Agreement and Plan of Merger dated September 26, 1997 among
American Interactive Media, Inc., AIME Merger Corp. and WebFeat,
Inc.*+
3.1 Certificate of Incorporation of Registrant*
3.2 By-laws of Registrant*
4.1 Floating Rate Convertible Secured Debenture dated December 4,
1997*
4.2 Floating Rate Convertible Secured Debenture dated February 3,
1998*
4.3 Securities Purchase Agreement dated December 3, 1997 between
Hollinger Digital, Inc. and American Interactive Media, Inc., as
amended by a Consent and Waiver between Hollinger Digital, Inc.
and American Interactive Media, Inc. dated as of November 16,
1998*
4.4 Consent and Waiver Agreement dated November 16, 1998 by and among
Hollinger Digital, Inc., Pioneer Ventures Associates Limited
Partnership and American Interactive Media, Inc.*
4.5 Pledge and Security Agreement dated December 4, 1997 by and among
American Interactive Media, Inc. and Hollinger Digital, Inc.*
4.6 Certificate of Designation of Series A Senior Convertible
Preferred Stock of American Interactive Media, Inc., dated
November 16, 1998 as filed with the Delaware Secretary of State
on November 16, 1998*
9.1 Voting Trust and Stockholders' Agreement dated January 1, 1997 by
and among WebFeat, Inc., Mark Graff and the Stockholders (as
defined therein)*
9.2 Voting and Shareholders Agreement dated as of November 16, 1998
by and among Pioneer Ventures Associates Limited Partnership and
the Principal Shareholders of American Interactive Media, Inc.
(as defined therein)*
9.3 Shareholders Agreement dated as of November 16, 1998 by and among
Hollinger Digital, Inc., Pioneer Ventures Associates Limited
Partnership and Mark Graff*
10.1 Employment Agreement dated as of October 10, 1997 by and among
Peter B. Yunich and American Interactive Media, Inc.*
10.2 Separation Agreement dated as of August 28, 1998 by and among
Peter B. Yunich and American Interactive Media, Inc.*
10.3 Employment Agreement dated October 10, 1997 by and among Mark
Graff and American Interactive Media, Inc.*
10.4 1999 Stock Incentive Option Plan*
<PAGE>
10.5 Investment Agreement dated November 16, 1998 by and between
Pioneer Ventures Limited Partnership and American Interactive
Media, Inc.*
10.6 AIM Stock Agreement dated as of December 30, 1998 by and among
American Interactive Media, Inc. and Bid.Com International Inc.**
10.7 AIM License Agreement dated as of December 30, 1998, by and among
American Interactive Media, Inc. and Bid.Com International Inc.**
10.8 Operating Agreement of AIM/New Tech LLC dated as of August 27,
1998 by and among AIM/New Tech LLC, New Tech Entertainment, LLC
and American Interactive Media, Inc.
10.9 Common Stock Purchase Option dated December 4, 1997 issued to
Hollinger Digital, Inc.*
10.10 Warrant dated December 4, 1997 issued to Hollinger Digital,
Inc.*
10.11 Warrant dated November 16, 1998 issued to Pioneer Ventures
Associates Limited Partnership*
10.12 Warrant dated November 16, 1998 issued to Ventures Management
Partners LLC*
16.1 Letter re change in certifying accountant*
27 Financial Data Schedule*
- -------------------------
* Previously filed
** Confidential treatment has been requested as to portions of this exhibit
+ Schedules have been omitted and will be furnished upon request
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
AMERICAN INTERACTIVE MEDIA, INC.
(Registrant)
Dated: June 8, 1999
By: /s/ Mark Graff
-------------------------------------
Name: Mark Graff
Title: President and Chief Executive
Officer
<PAGE>
EXHIBIT LIST
Exhibit Sequential
Number Description of Exhibit Page Number
- --------------------------------------------------------------------------------
2.1 Agreement and Plan of Merger dated September 26,
1997 among American Interactive Media, Inc., AIME
Merger Corp. and WebFeat, Inc.*+
3.1 Certificate of Incorporation of the Registrant*
3.2 By-laws of the Registrant*
4.1 Floating Rate Convertible Secured Debenture dated
December 4, 1997*
4.2 Floating Rate Convertible Secured Debenture dated
February 3, 1998*
4.3 Securities Purchase Agreement dated December 3,
1997 between Hollinger Digital, Inc. and American
Interactive Media, Inc., as amended by a Consent
and Waiver between Hollinger Digital, Inc. and
American Interactive Media, Inc. dated as of
November 16, 1998*
4.4 Consent and Waiver Agreement dated November 16,
1998 by and among Hollinger Digital, Inc., Pioneer
Ventures Associates Limited Partnership and
American Interactive Media, Inc.*
4.5 Pledge and Security Agreement dated December 4,
1997 by and among American Interactive Media, Inc.
and Hollinger Digital, Inc.*
4.6 Certificate of Designation of Series A Senior
Convertible Preferred Stock of American
Interactive Media, Inc., dated November 16, 1998
as filed with the Delaware Secretary of State on
November 16, 1998*
9.1 Voting Trust and Stockholders' Agreement dated
January 1, 1997 by and among WebFeat, Inc., Mark
Graff and the Stockholders (as defined therein)*
9.2 Voting and Shareholders Agreement dated as of
November 16, 1998 by and among Pioneer Ventures
Associates Limited Partnership and the Principal
Shareholders of American Interactive Media, Inc.
(as defined therein)*
9.3 Shareholders Agreement dated as of November 16,
1998 by and among Hollinger Digital, Inc., Pioneer
Ventures Associates Limited Partnership and Mark
Graff*
10.1 Employment Agreement dated as of October 10, 1997
by and among Peter B. Yunich and American
Interactive Media, Inc.*
10.2 Separation Agreement dated as of August 28, 1998
by and among Peter B. Yunich and American
Interactive Media, Inc.*
10.3 Employment Agreement dated October 10, 1997 by and
among Mark Graff and American Interactive Media,
Inc.*
10.4 1999 Stock Incentive Option Plan*
<PAGE>
10.5 Investment Agreement dated November 16, 1998 by
and between Pioneer Ventures Limited Partnership
and American Interactive Media, Inc.*
10.6 AIM Stock Agreement dated as of December 30, 1998
by and among American Interactive Media, Inc. and
Bid.Com International Inc. **
10.7 AIM License Agreement dated as of December 30,
1998, by and among American Interactive Media,
Inc. and Bid.Com International Inc. **
10.8 Operating Agreement of AIM/New Tech LLC dated as
of August 27, 1998 by and among AIM/New Tech LLC,
New Tech Entertainment, LLC and American
Interactive Media, Inc.
10.9 Common Stock Purchase Option dated December 4,
1997 issued to Hollinger Digital, Inc.*
10.10 Warrant dated December 4, 1997 issued to Hollinger
Digital, Inc.*
10.11 Warrant dated November 16, 1998 issued to Pioneer
Ventures Associates Limited Partnership*
10.12 Warrant dated November 16, 1998 issued to Ventures
Management Partners LLC*
16.1 Letter re change in certifying accountant*
27 Financial Data Schedule*
- --------
* Previously filed
** Confidential treatment has been requested as to portions of this exhibit
+ Schedules have been omitted and will be furnished upon request
AIM STOCK AGREEMENT
THIS AGREEMENT is made as of the 30th day of December, 1998 (the "Effective
Date") by and between BID.COM INTERNATIONAL INC., ("BID.COM"), a corporation
having a principal place of business at 6725 Airport Road, Suite 201,
Mississauga, Ontario, L4V 1V2 and AMERICAN INTERACTIVE MEDIA, INC. ("AIM"), a
corporation having a place of business at Suite 308, 611 Broadway, New York, NY,
10012.
BACKGROUND:
1. BID.COM has expertise in designing and operating online auctions.
2. AIM retained BID.COM to provide advice on establishing an AIM E-Commerce
Service as described below.
3. BID.COM has completed an assessment of AIM's network and infrastructure in
order to support the e-commerce technology of Bid.Com and set up a
demonstration site, at the request of AIM.
ARTICLE I
INTERPRETATION
1.1 In this Agreement, unless the context otherwise requires, each capitalized
term shall have the meanings indicated below.
"Agreement" means this Agreement and all schedules annexed to this
Agreement as the same may be amended from time to time in accordance with the
provisions hereof or thereof, "hereof'" "hereto" and "hereunder" and similar
expressions mean and refer to this Agreement and not to any particular article
or section; except where the context specifically requires, "Article" or
"Section" means and refers to the specified article or section of this
Agreement;
"AIM E-Commerce Service" means the service which will permit retail
consumers in the Territory including, without limitation, "small office home
office" customers ("SOHO") to access an online auction as currently operated by
BID.COM or its subsidiaries at the BID.COM Site by using their cable modems or
other television based on line enabling devices (or by way of any method of
internet access in the case of members of certain affinity groups and in house
networks produced and distributed by AIM) to participate in on-line auctions of
consumer goods and services, but excluding business to business and liquidation
applications;
"AIM Stock" means that number of common shares in the capital of AIM which
has an aggregate value of [Confidential information filed separately with the
SEC] valued at the average trading price of AIM stock on each of the twenty-one
(21) trading days prior to December 31,1998;
<PAGE>
"BID.COM Site" means the Web site at which BID.COM will operate its online
auction service provided for the AIM E-Commerce Service as currently found at
the URL "www.bid.com";
"Business Day" means any day from Monday to Friday inclusive, except
statutory or civic holidays observed in Toronto, Ontario;
"Effective Date" has the meaning attributed thereto on the face page of
this Agreement;
"Joint Venture" means the Delaware company to be established and owned by
AIM to provide the AIM E-Commerce Service;
"Parties" means BID.COM and AIM collectively and "Party" means either of
them;
"Person" includes an individual, company, corporation, partnership,
government or government agency, authority or entity howsoever designated or
constituted;
"Reasonable Best Efforts" means that a party shall comply with the
obligation to which the covenant to use Reasonable Best Efforts applies in all
cases where such party has the ultimate discretion, control and ability to do
so, and that such party shall use commercially reasonable efforts to comply with
such obligation in cases where such party does not have such ultimate
discretion, control and ability;
"Registration Rights Agreement" means the agreement to be entered into
between the Parties providing for registration of the AIM stock;
"Territory" means the United States of America as presently constituted.
1.2 Headings.
The use of headings in this Agreement is for convenience of reference only
and shall not affect its interpretation.
1.3 Extended Meanings.
Words expressed in the singular include the plural and vice-versa and words
in one gender include all genders.
1.4 Entire Agreement.
This Agreement, and any agreements and other documents to be delivered
pursuant to it (including without limitation the Registration Rights
Agreement), constitutes the entire agreement between the Parties pertaining
to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, oral or written between the
Parties. The execution of this Agreement has not been induced by, nor do
either of the Parties rely upon or regard as material, any representations,
warranties, conditions,
-2-
<PAGE>
other agreements or acknowledgments not expressly made in this Agreement or
in the agreements and other documents to be delivered pursuant hereto.
1.5 Currency.
Unless otherwise indicated, all dollar amounts referred to in this
Agreement are in Canadian funds.
1.6 Invalidity.
If in any jurisdiction a provision contained in this Agreement is found by
a court of competent jurisdiction to be invalid, illegal or unenforceable
in any respect, the validity, legality or enforceability of the remaining
provisions contained herein, or of such provision in any other jurisdiction
affected or impaired thereby.
1.7 Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the Province of Ontario and the laws of Canada applicable therein
and shall be treated, in all respects, as an Ontario contract. The Parties
hereby irrevocably submit to the exclusive jurisdiction of the courts of
Ontario in respect of the subject matter hereof.
1.8 Consent.
Wherever any Party is required to obtain consent from another Party, such
consent shall not be unreasonably withheld or delayed.
ARTICLE II
2.1 Acknowledgment.
AIM acknowledges that BID.COM has completed the initial consulting
feasibility assessment and set up a demonstration site for the AIM
E-Commerce Service in accordance with its agreement in respect thereof and
to the satisfaction of AIM in all respects.
2.2 Aim Stock.
In consideration therefor, AIM shall forthwith issue to BID.COM the AIM
Stock and shall use its Reasonable Best Efforts to settle and execute the
Registration Rights Agreement by January 29, 1999, in default of which any
outstanding issues shall be submitted to and resolved by binding
arbitration in accordance with the process provided in Article 3 hereof.
-3-
<PAGE>
ARTICLE III
3.1 Option to Purchase.
Until the AIM Stock becomes freely trading on a United States Stock
Exchange (satisfactory to BID.COM) in the hands of BID.COM or its assigns
and maintains an aggregate market value of not less than [Confidential
information filed separately with the SEC] for a minimum of 30 consecutive
trading days on such exchange (as measured by the average trading price of
stock traded on each trading day) BID.COM shall have an option to acquire
[Confidential information filed separately with the SEC] of the issued
stock of the Joint Venture for [Confidential information filed separately
with the SEC]. Notwithstanding the foregoing, if BID.COM elects to exercise
the option, AIM shall have the ability to pay BID.COM [Confidential
information filed separately with the SEC] in which event the option of
BID.COM under this Section shall be at an end and BID.COM shall forthwith
surrender the AIM Stock for cancellation.
ARTICLE IV
4.1 Confidentiality.
Each Party (hereinafter in this Section, the "Receiving Party") covenants
with the other Party (hereinafter in this Section, the "Disclosing Party")
that it shall keep confidential the Confidential Information of the
Disclosing Party to which the Receiving Party obtains access as a
consequence of entering into this Agreement and that it will take all
reasonable precautions to protect such Confidential Information from any
use, disclosure or copying except as expressly authorized by this
Agreement. The Receiving Party shall implement such procedures as the
Disclosing Party may reasonably require from time to time to improve the
security of the Confidential Information of the Disclosing Party in its
possession. This Section shall survive the termination of the Agreement.
Upon termination of this Agreement, the Receiving Party shall, at the
choice of the Disclosing Party, either return to the Disclosing Party or
destroy all copies or partial copies of Confidential Information of the
Disclosing Party in any form which is in the possession of the Receiving
Party or under its control, and certify that all such Confidential
Information has been returned or otherwise destroyed.
ARTICLE V
ARBITRATION
5.1 Dispute Resolution Process.
If any dispute, disagreement, controversy or claim arising out of or
relating to this Agreement including, without limitation, its application,
interpretation, performance, breach, termination, enforcement or damages,
or remedies arising out of the breach of or non-compliance therewith, shall
be finally determined by arbitration before a single arbitrator to be
commenced and conducted in the English language in Toronto in accordance
with the Arbitration Act (Ontario). The Parties hereto agree that:
-4-
<PAGE>
(a) subject to mutual agreement between the Parties to the contrary, the
arbitrator shall be a person who is legally trained and trained as a
professional arbitrator and who has a minimum of five (5) years
experience in the licensing of computer software;
(b) the Parties shall agree on the identity of the arbitrator within 10
days of notice of reference to arbitration and in default thereof,
either Party may apply to a Judge of the Supreme Court of Ontario,
General Division, to appoint an arbitrator with the foregoing
qualifications;
(c) the Parties shall be required to make written submissions to the
arbitrator within 7 days of appointment and shall not be entitled to
make verbal representations or further submissions unless so requested
by the arbitrator. Any Party who does not comply with the foregoing
time period shall not be entitled to make any submissions without the
written approval of the other Party;
(d) the arbitrator shall be required to render his decision in writing
within 10 days of the period mentioned in Subsection 5.1(c);
(e) neither of the Parties shall apply to the Courts of Ontario or any
other jurisdiction to attempt to enjoin, delay, impede or otherwise
interfere with or limit the scope of the arbitration or the powers of
the arbitrator provided for in the Arbitration Act (Ontario)
(f) the award of the arbitrator shall be a final and conclusive award and
judgment with respect to all matters properly before the arbitral
tribunal in accordance with the Arbitration Act (Ontario) and neither
Party shall appeal such award in any manner whatever to any court,
tribunal or other authority; and
(g) the award of the arbitral tribunal may be entered and enforced by any
court in any jurisdiction having jurisdiction over the Parties hereto
or the subject matter of the award or the properties or assets of
either of the Parties hereto.
ARTICLE VI
GENERAL
6.1 Notice.
Any notice or other communication (a "Notice") required or permitted to be
given or made hereunder shall be in writing and shall be well and
sufficiently given or made if:
(a) delivered in person during normal business hours on a Business Day and
left with a receptionist or other responsible employee of the relevant
Party at the applicable address set forth below;
(b) sent by prepaid first class mail; or
-5-
<PAGE>
(c) sent by any electronic means of sending messages, including facsimile
transmission, which produces a paper record (an "Electronic
Transmission"), charges prepaid and confirmed by prepaid first class
mail;
in the case of a Notice to AIM addressed to it at:
American Interactive Media, Inc.
Suite 308, 611 Broadway
New York, New York 10012
Attention: Mark Graff
Fax No.: (212) 358-0189
with a copy to:
Curtis, Mallet-Prevost, Colt & Mosle
101 Park Avenue,
New York, New York,
101780061
Attention: Jeffrey N. Ostrager
Fax No.: (212) 697-1559
and in the case of a Notice to BID.COM addressed to it at:
BID.COM International Inc.
201 - 6725 Airport Road
Mississauga, Ontario
L4V 1V2
Attention: Paul Godin
Fax No.: (905) 672-7514
with a copy to:
Gowling, Strathy & Henderson
Barristers & Solicitors
Commerce Court West
Suite 4900
Toronto, Ontario
M5L 1J3
Attention: David Pamenter
Fax No.: (416) 862-7661
-6-
<PAGE>
Any Notice given or made in accordance with this Section 6.1 shall be deemed to
have been given or made and to have been received:
(a) on the day it was delivered, if delivered as aforesaid;
(b) on the fifth Business Day (excluding each day during which there
exists any general interruption of postal services due to strike,
lockout or other cause) after it was mailed, if mailed as aforesaid;
and
(c) on the day of sending if sent by Electronic Transmission during normal
business hours of the addressee on a Business Day and, if not, then on
the first Business Day after the sending thereof.
Either Party may from time to time change its address for notice by giving
Notice to other Party in accordance with the provisions of this Section
6.1.
6.2 Assignment.
Neither Party may assign its rights and obligations under this Agreement,
in whole or in part, without the prior consent in writing of the other and
any purported assignment made without that consent is void and of no effect
(save and except for an assignment as an incident of security taken in a
normal course financing transaction). No assignment of this Agreement shall
relieve either party from any obligation under this Agreement.
6.3 Binding on Successors.
This Agreement shall enure to the benefit of and be binding upon the
Parties and their respective successors and permitted assigns.
6.4 Further Assurances.
Each Party agrees that upon the written request of the other Party, it will
do all such acts and execute all such further documents, conveyances,
deeds, assignments, transfers and the like, and will cause the doing of all
such acts and will cause the execution of all such further documents as are
within its power to cause the doing or execution of, as any other Party
hereto may from time to time reasonably request be done and/or executed as
may be necessary or desirable to give effect to this Agreement.
6.5 Independent Contractors.
It is understood and agreed that in giving effect to this Agreement, no
Party shall be or be deemed a partner, agent or employee of another Party
for any purpose and that their relationship to each other shall be that of
independent contractors. Nothing in this Agreement shall constitute a
partnership or a joint venture between the Parties. No Party shall have the
right to enter into contracts or pledge the credit of or incur expenses of
liabilities on behalf of the other Party.
-7-
<PAGE>
6.6 Waiver.
A waiver by a Party hereto of any of its rights hereunder or of the
performance by the other Party of any of its obligations hereunder shall be
without prejudice to all of the other rights hereunder of the Party so
waiving and shall not constitute a waiver of any such other rights or, in
any other instance, of the rights so waived, or a waiver of the performance
by the other Party of any of its other obligations hereunder or of the
performance, in any other instance, of the obligations so waived. No waiver
shall be effective or binding upon a Party unless the same shall be
expressed in writing and executed by the Party to be bound.
6.7 Compliance With Law.
Each party shall, in the performance of this Agreement, fully comply with,
and abide by, all laws, regulations, regulatory rulings or directives,
court orders, and decisions of administrative tribunals of competent
jurisdiction, that may, in any manner or extent, concern, govern, or affect
either party's respective performance of, and obligations under, this
Agreement.
6.8 Interpretation.
This Agreement has been negotiated by the parties hereto and their
respective counsel and shall be fairly interpreted in accordance with its
terms and without any rules of construction relating to which party drafted
the Agreement being applied in favour or against either party.
6.9 Effective Date.
This Agreement shall not become a valid and binding contract unless and
until each party has duly executed and delivered this Agreement. For
greater certainty, there shall be no agreement, whether oral, written,
express, implied or otherwise notwithstanding any performance between the
parties concerning the subject matter of this document, including, without
limitation, by course of conduct, doctrine of part performance, or
otherwise.
6.10 Amendment.
No amendment of any provision of this Agreement shall be effective unless
such amendment is embodied in a written agreement which is: (i) expressly
stated to be intended to amend this Agreement; and (ii) executed by two
authorized signing officers of AIM and an authorized officer of BID.COM.
For greater certainty, the parties acknowledge and agree that no
representations, warranties, conditions, covenants or other statements or
commitments, whether made orally, in writing, by course of conduct or
otherwise, and whether made prior to the Effective Date of this Agreement
or thereafter, shall be binding on either of the parties.
-8-
<PAGE>
6.11 Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the Province of Ontario and the laws of Canada applicable therein
and shall be treated, in all respects, as an Ontario contract. The parties
hereby: (i) irrevocably submit to the exclusive jurisdiction of the courts
of Ontario in respect of the subject matter hereof; (ii) consent to service
of process being effected upon the other party by registered mail sent to
the address set forth in section 6.1 hereof; (iii) agree not to seek,
request, claim or pursue trial by jury; and (iv) agree not to seek,
request, claim or pursue any right, claim, or entitlement to any punitive
or exemplary damages whatsoever.
IN WITNESS WHEREOF this Agreement is executed by the Parties as of the date
first written, above.
BID.COM INTERNATIONAL INC.
By:
------------------------------
(Duly Authorized Officer)
By:
------------------------------
(Duly Authorized Officer)
AMERICAN INTERACTIVE MEDIA, INC.
By:
------------------------------
(Duly Authorized Officer)
By:
------------------------------
(Duly Authorized Officer)
-9-
AIM LICENSE AGREEMENT
THIS AGREEMENT is made as of the 30th day of December, 1998 (the "Effective
Date") by and between BID.COM INTERNATIONAL INC., ("BID.COM"), a corporation
having a principal place of business at 6725 Airport Road, Suite 201,
Mississauga, Ontario, L4V 1V2 and AMERICAN INTERACTIVE MEDIA, INC. ("AIM"), a
corporation having a place of business at Suite 308, 611 Broadway, New York, NY,
10012.
BACKGROUND:
1. BID.COM has developed, and has all necessary rights in, certain electronic
auction software, technology and services (collectively, the "BID.COM
Technology" as that term is more fully described in Article I).
2. BID.COM uses a portion of the BID.COM Technology to operate an online auction
service over the Internet provided at BID.COM's website found at URL
"www.bid.com".
3. AIM wishes to acquire from BID.COM a non-exclusive license to use and
commercially exploit the BID.COM Technology to permit cable and broadcast
network television customers and certain affinity group members and in-house
networks produced and distributed by AIM in the United States and (subject to
the prior written consent of Rogers Media Inc.) in Canada to access a co-branded
online auction for retail consumers, as more specifically described herein.
NOW THEREFORE in consideration of the premises, the mutual covenants contained
in this Agreement, and other good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged), the Parties agree as follows:
ARTICLE I
INTERPRETATION
1.1 Definitions.
In this Agreement, unless the context otherwise requires, each capitalized term
shall have the meanings indicated below.
"Agreement" means this License and Services Agreement and all schedules annexed
to this Agreement as the same may be amended from time to time in accordance
with the provisions hereof or thereof, "hereof" "hereto" and "hereunder" and
similar expressions mean and refer to this Agreement and not to any particular
article or section; except where the context specifically requires, "Article" or
"Section" means and refers to the specified article or section of this
Agreement;
"AIM E-Commerce Service" means the service to be operated pursuant to this
Agreement which will permit retail consumers in the Territory including, without
limitation, "small office home office" customers ("SOHO") to access an online
auction as currently operated by
<PAGE>
BID.COM or its subsidiaries at the BID.COM site by using their cable modems or
other television based on line enabling devices (or by way of any method of
internet access in the case of members of certain affinity groups and in house
networks produced and distributed by AIM) to participate in on-line auctions of
consumer goods and services, but excluding business to business and liquidation
applications;
"BID.COM Site" means the Web site at which BID.COM will operate its online
auction service provided for the AIM E-Commerce Service as currently found at
the URL "www.bid.com";
"BID.COM Technology" means the technology (including cybermall software) and
know-how owned by BID.COM in respect of the provision of on-line auction
services generally (and including all Intellectual Property Rights therein), as
more particularly described in Schedules "A" and "I";
"Business Day" means any day from Monday to Friday inclusive, except statutory
or civic holidays observed in Toronto, Ontario;
"Confidential Information" means all information relating to either Party or to
such Party's business, products, sales, customers, trade secrets, technology or
financial position to which access is obtained or granted hereunder, which is
treated by the disclosing Party as being confidential provided, however, that
Confidential Information of the disclosing Party shall not include any data or
information which the receiving Party can demonstrate:
(i) is or becomes publicly available through no fault of the receiving
Party;
(ii) is already in the rightful possession of the receiving Party prior to
its receipt from the other Party;
(iii) is independently developed by the receiving Party;
(iv) is rightfully obtained by the receiving Party from a third party not
subject to an obligation of confidentiality;
(v) is disclosed with the written consent of the disclosing Party whose
information it is; or
(vi) is disclosed pursuant to court order or other legal compulsion,
provided the receiving Party gives the disclosing Party prompt notice
of any such requirement to afford the disclosing Party an opportunity
to obtain a protective order;
"Customer Profile" means all information and data relating to a customer of the
AIM E-Commerce Service, including, without limitation: (i) name, address, e-mail
address, telephone number, and any other personal or demographic information
relating to such customer; (ii) all information and data relating to the
purchase of goods and services by such customer; and (iii)
-2-
<PAGE>
any other information relating to such customer's behavior collected while such
customer accesses the AIM E-Commerce Service;
"Data" has the meaning attributed to such term in Section 5.5;
"Deliverables" means the whole of the activities, services, materials, software,
matters and things required to be done, delivered or performed by BID.COM in
accordance with the terms of this Agreement, including the Software,
Documentation and Services and including all other rights and things, tangible
or intangible, including Intellectual Property Rights to be provided hereunder
including, without limitation, any of the foregoing as described in Schedule
"A";
"Effective Date" has the meaning attributed thereto on the face page of this
Agreement;
"Intellectual Property Rights" means (A) any and all proprietary rights provided
under (i) patent law, (ii) copyright law, (iii) trademark law, (iv) design
patent or industrial design law, (v) semi- conductor chip or mask work law, or
(vi) any other statutory provision or common law principle applicable to this
Agreement or the BID.COM Technology including trade secret law, which may
provide a right in either (a) ideas, formulae, algorithms, concepts, inventions
or know-how generally, or (b) the expression or use of such ideas, formulae,
algorithms, concepts, inventions or know-how; and (B) any and all applications,
registrations, licenses, sub-licenses, franchises, agreements or any other
evidence of a right in any of the foregoing;
"Joint Venture" means the Delaware company to be established and owned by AIM to
provide the AIM E-Commerce Service to third parties on the terms provided in
this Agreement;
"Net Revenue" means the sum of:
(i) aggregate revenue earned by the Parties and the Joint Venture in
connection with the operation of the AIM E- Commerce Service
(including all shipping and handling costs paid by retail customers),
net of sales, use, goods and services, and other similar taxes imposed
by any federal, provincial, municipal or other governmental authority;
and
(ii) aggregate revenue earned by the Parties and the Joint Venture in
connection with the sale of products and services by them to customers
of the AIM E-Commerce Service as part of its database marketing
operations, and not through the AIM E-Commerce Service (including all
shipping costs paid by retail customers), net of sales, use, goods and
services, and other similar taxes imposed by any federal, state,
provincial, municipal or other governmental authority,
less cost of goods or services sold (as invoiced by the supplier of such
products or services, but net of all taxes invoiced by such supplier), ISP
carrier costs, credit card transaction fees paid to or deducted by third
parties, duties, the cost of shipping and handling, and credits for returned
goods, services or bad debts (including shipping and restocking costs, if
applicable). Net
-3-
<PAGE>
Revenue shall be calculated in accordance with generally accepted accounting
principles applied in Canada on a consistent basis;
"Net Promotional Revenue" means aggregate revenue and benefits earned by the
Parties and the Joint Venture from sales of advertising or sponsorship,
licensing fees, use of Data or from any other source whatsoever, directly or
indirectly related to the AIM E-Commerce Service, net of all sales, use, goods
and services and other similar taxes imposed by any federal, state, provincial,
municipal or other governmental authority, agency commissions and bad debts. Net
Promotional Revenue shall be calculated in accordance with generally accepted
accounting principles applied in Canada on a consistent basis;
"Parties" means BID.COM and AIM collectively and "Party" means either of them;
"Person" includes an individual, company, corporation, partnership, government
or government agency, authority or entity howsoever designated or constituted;
"Reasonable Best Efforts" means that a party shall comply with the obligation to
which the covenant to use Reasonable Best Efforts applies in all cases where
such party has the ultimate discretion, control and ability to do so, and that
such party shall use commercially reasonable efforts to comply with such
obligation in cases where such party does not have such ultimate discretion,
control and ability;
"Software" means that computer software being provided to AIM by BID.COM
hereunder to meet AIM's Requirements, including any modifications or
improvements to the Software (whether developed by BID.COM, AIM, the Joint
Venture or otherwise);
"Source Code Materials" means:
(1) a complete copy of the source code version of all software required to
allow AIM to independently operate, maintain and support the AIM E-Commerce
Service including the Software, appropriately labeled to denote the version
or release thereof, and the currency date thereof, in each of:
(i) machine-readable form on machine-readable storage medium suitable for
long term storage and compatible with the Software as then being used
by AIM and which, when compiled, will produce the object code version
of the Software; and
(ii) human-readable form with annotations in English on bond paper suitable
for long term archival storage; and
(2) a complete copy, in English, on bond paper, suitable for long term archival
storage, and appropriately labeled to describe the contents thereof, of all
applicable Documentation and other explanatory materials including
programmer's notes, technical or otherwise, for the Software as may be
required by AIM, using a competent computer programmer possessing ordinary
skills and experience, to further develop, maintain and operate such
-4-
<PAGE>
software without further recourse to BID.COM including, but not necessarily
limited to, general flow-charts, input and output layouts, field
descriptions, volumes and sort sequence, data dictionary, file layouts,
processing requirements and calculation formula and the details of all
algorithms;
"Term", "Initial Term" and "Subsequent Term" have the meanings ascribed in
Section 6.1(a);
"Territory" means the United States of America as presently constituted.
1.2 Schedules.
The following are the schedules attached to and forming part of this Agreement:
Schedule "A" - BID.COM Technology (including Third Party Technology)
Schedule "B" - AIM's Requirements
Schedule "C" - Customer Service Standards
Schedule "D" - Response Times
Schedule "E" - Source Code Trust Agreement
Schedule "F" - Site Activity Reporting Requirements
Schedule "G" - Net Revenue Reports
Schedule "H" - Net Promotional Revenue Reports
Schedule "I" - BID.COM Marks
1.3 Headings.
The use of headings in this Agreement is for convenience of reference only and
shall not affect its interpretation.
1.4 Extended Meanings.
Words expressed in the singular include the plural and vice-versa and words in
one gender include all genders.
1.5 Entire Agreement.
This Agreement, and any agreements and other documents to be delivered pursuant
to it constitutes the entire agreement between the Parties pertaining to the
subject matter hereof and supersedes all prior agreements, understandings,
negotiations and discussions, oral or written between the Parties. The execution
of this Agreement has not been induced by, nor do either of the Parties rely
upon or regard as material, any representations, warranties, conditions, other
agreements or acknowledgments not expressly made in this Agreement or in the
agreements and other documents to be delivered pursuant hereto.
1.6 Currency.
-5-
<PAGE>
Unless otherwise indicated, all dollar amounts referred to in this Agreement are
in Canadian funds.
1.7 Invalidity.
If in any jurisdiction a provision contained in this Agreement is found by a
court of competent jurisdiction to be invalid, illegal or unenforceable in any
respect, the validity, legality or enforceability of the remaining provisions
contained herein, or of such provision in any other jurisdiction affected or
impaired thereby.
1.8 Governing Law.
This Agreement shall be governed by and construed in accordance with the laws of
the Province of Ontario and the laws of Canada applicable therein and shall be
treated, in all respects, as an Ontario contract. The Parties hereby irrevocably
submit to the exclusive jurisdiction of the courts of Ontario in respect of the
subject matter hereof.
1.9 Provision of Services.
For the purposes of this Agreement, references to the sale of products through
the AIM E-Commerce Service shall be deemed to include the provision of services
as well.
1.10 Consent
Wherever any Party is required to obtain consent from another Party, such
consent shall not be unreasonably withheld or delayed.
ARTICLE II
USE OF AIM E-COMMERCE SERVICE
2.1 AIM E-Commerce Service
Subject to the terms of this Agreement, BID.COM hereby grants to AIM the
non-exclusive right to use and commercially exploit the BID.COM Technology to
operate the AIM E-Commerce Service through the Joint Venture for customers of
cable and television broadcast networks, for subscribers to its own cable and
television broadcast networks, for customized auctions exclusive to affinity
groups, and for the same applications, to launch a video streaming version
thereof. BID.COM may in its discretion, on request and subject to such further
or other terms as may be appropriate in the view of BID.COM, permit AIM to offer
all or any of such services to retail cable and television broadcast network
users in Canada. AIM and BID.COM acknowledge that the prior written consent of
Rogers Media Inc. may be required to operate any part of the AIM E-Commerce
-6-
<PAGE>
Service or to use some or all of the BID.COM Technology (including the BID.COM
Marks) in Canada. AIM shall exercise the rights granted hereunder solely through
the Joint Venture unless: (i) BID.COM breaches its obligations to operate the
AIM E-Commerce Service following the acquisition by AIM of the Joint Venture by
the exercise of its option to purchase the Joint Venture; or (ii) BID.COM
prevents the Joint Venture from exercising the rights granted hereunder on
behalf of AIM following the acquisition by AIM of the Joint Venture by the
exercise of its option to purchase the Joint Venture; or (iii) there is an
occurrence of a Release Condition within the meaning given to that phrase in the
Source Code Trust Agreement.
2.2 BID.COM/AIM Auction Network
AIM through the Joint Venture, will create new BID.COM branded user interfaces
for the AIM E-Commerce Service. The interfaces shall feature a BID.COM trademark
or brand as BID.COM may elect which shall appear on all screen views and
promotional material as a sub-brand.
2.3 Operation of AIM E-Commerce Service.
BID.COM shall operate the AIM E-Commerce Service for the Joint Venture in
accordance with the provisions of this Agreement. Except for those obligations
which AIM shall perform set out in Article 3 hereof, BID.COM shall be
responsible for all aspects of operating the AIM E-Commerce Service. Without
limiting the generality of the foregoing, BID.COM shall, at its expense:
(i) have sole responsibility for supplying the inventory of products and
services which will be offered as part of the AIM E-Commerce Service.
BID.COM acknowledges that affinity groups may wish to offer unique goods
or service. AIM acknowledges and agrees that BID.COM shall maintain
ultimate discretion with respect to the choice of products and services
which will be included as part of the AIM E-Commerce Service.
(ii) comply with AIM's Requirements attached as Schedule "B" hereto;
(iii) comply with the Customer Service Standards attached as Schedule "C"
hereto;
(iv) provide tracking reports in accordance with Schedule "D" hereto;
(v) be responsible for the fulfillment of all purchases of products and
services sold by it through the AIM E-Commerce Service;
(vi) be responsible for the processing of all credit card purchases of
products and services through the AIM E-Commerce Service; and
(vii) comply with the site activity reporting requirements set out in Schedule
"F" hereto.
-7-
<PAGE>
2.4 Joint Venture
Forthwith after execution of this Agreement, AIM shall incorporate a Delaware
corporation as a wholly owned subsidiary which shall thereupon execute an
addendum to this Agreement in form and content satisfactory to BID.COM whereby
the Joint Venture and AIM shall agree to be jointly and severally responsible to
BID.COM for the performance of AIM's obligations and liabilities under the
Agreement.
2.5 Promotion of Auction E-Commerce Service
AIM shall operate the Joint Venture in accordance with the provisions of this
Agreement. AIM shall be responsible for content, creation, advertising,
promotional activity, distribution and sales of the AIM E-Commerce Service.
Without limiting the generality of the foregoing, AIM shall:
(i) have sole responsibility for promoting the AIM E-Commerce and securing
cable and television broadcast network and affinity group customers;
(ii) support and finance the operations of the Joint Venture as required under
this Agreement;
(iii) sell up to 100% of the banner advertisements on the AIM E-Commerce
Service;
(iv) in co-ordination with BID.COM, integrate the BID.COM Technology into the
Joint Venture interfaces including developing all necessary links to the
BID.COM Site; and
(v) be responsible for the ongoing creative and entertainment content of the
Joint Venture interfaces, on a cost pass through basis.
2.6 Management of Joint Venture
AIM shall ensure that the Joint Venture is managed in accordance with the
following:
(i) the business of the Joint Venture shall be restricted to the functions
provided for in this Agreement;
(ii) no transfer, assignment, mortgage, charge or pledge shall be permitted or
any equity securities, warrants, options or other rights to acquire equity or
other voting rights in respect of the Joint Venture without the prior written
consent of BID.COM which may be withheld in its absolute discretion, except for
any of the foregoing which are necessary for AIM to comply with its present
agreements with Hollinger Digital Inc.;
-8-
<PAGE>
(iii) BID.COM is (or in the event BID.COM exercises its option to purchase the
Joint Venture, BID.COM and AIM are) granted a security interest (second in
priority only to the existing security interest in favour of Hollinger Digital
Inc.) in form and content satisfactory to BID.COM in all assets of the Joint
Venture to secure the performance of the Joint Venture's obligations hereunder;
(iv) each of BID.COM and AIM shall have equal representation on the board of
directors of the Joint Venture, which shall be chaired by an arm's length person
mutually satisfactory to AIM and BID.COM;
(v) key financial and management decisions shall require the prior written
approval of both AIM and BID.COM including without limitation any issue or
transfer of stock or rights or options to acquire stock; all borrowing whether
secured or not; the implementation and any changes to an annual business plan;
the terms and conditions for acquiring goods or services from persons not at
arm's length to the parties; the terms and conditions of retaining senior
employees or consultants; the terms and conditions of contracts with users of
the AIM E-Commerce Service and any other transaction which is or may be material
to the operations of the Joint Venture (BID.COM acknowledges that certain
decisions may also require approval of Hollinger Digital Inc. or Pioneer
Ventures Associates Limited Partnership pursuant to existing agreements):
(vi) BID.COM shall fund the Joint Venture to the extent of [Confidential
information filed separately with the SEC] in above the line costs (meaning
talent, director and line producers) and AIM shall fund the Joint Venture for
[Confidential information filed separately with the SEC] below the line costs
(meaning all infrastructure costs required to get the job done) and
[Confidential information filed separately with the SEC] above the line costs to
create a promotional tape of the AIM E-Commerce Service; and
(vii) additional agreed ongoing promotional costs of the Joint Venture shall be
funded [Confidential information filed separately with the SEC] by the parties.
2.7 Payment and Effective Date
In consideration for the grant of the License herein, AIM agrees to share the
Net Promotional Revenue and Net Revenue as provided in Section 4.2. The parties
agree this Agreement is effective December 30,1998
ARTICLE III
RIGHT TO USE BID.COM TECHNOLOGY
3.1 Acknowledgment of Title.
(1) AIM acknowledges that ownership of the BID.COM Technology and any
customization or enhancements as used in the AIM E-Commerce Service shall
remain with BID.COM.
-9-
<PAGE>
(2) AIM shall take all reasonable precautions to prevent third parties from
using the BID.COM Technology in any way that would constitute a breach of
this Agreement.
3.2 Restriction on Business
During the Term of this Agreement AIM agrees that neither it nor any entity
which controls, is controlled by or is under common control with it will
directly or indirectly use, promote, invest in, or otherwise support in any
manner, any cable or television broadcast network auction properties for the
Term or any renewal thereof.
ARTICLE IV
SERVICES
4.1 Additional Services.
If AIM requests the inclusions of specific functionality or customization
changes to the BID.COM Technology, BID.COM will use reasonable efforts to assist
AIM, on terms to be mutually agreed upon by the Parties. Such AIM-specific
enhancements will be provided by BID.COM on a cost pass through basis, plus
reasonable out-of pocket expenses and all applicable taxes.
4.2 Allocation of Revenue.
(i) BID.COM shall pay AIM [Confidential information filed separately with the
SEC] of the Net Revenue. BID.COM shall invoice and collect all Net
Revenue. Net Revenue shall be aggregated on a monthly basis, and BID.COM
shall pay AIM [Confidential information filed separately with the SEC] of
the Net Revenue within fifteen (15) days of the end of each month.
BID.COM shall complete a Net Revenue Report in the form attached hereto
as Schedule "G" for each applicable payment period and shall remit each
such report along with each payment due hereunder.
(ii) AIM shall pay BID.COM [Confidential information filed separately with the
SEC] of the Net Promotional Revenue. AIM shall invoice and collect all
Net Promotional Revenue. Net Promotional Revenue shall be aggregated on a
monthly basis, and AIM shall pay BID.COM [Confidential information filed
separately with the SEC] of the Net Promotional Revenue within fifteen
(15) days of the end of each month. AIM shall complete a Net Promotional
Revenue Report in the form attached hereto as Schedule "H" for each
applicable payment period and shall remit each such report along with
each payment due hereunder.
-10-
<PAGE>
(iii) Notwithstanding the foregoing provisions of Section 4.2 at such time as
the AIM stock issued to BID.COM pursuant to the AIM Stock Agreement of
even date herewith (the "AIM Stock") becomes freely trading on a United
States exchange satisfactory to BID.COM in the hands of BID.COM or its
assigns and maintains an aggregate market value of not less than
[Confidential information filed separately with the SEC] for a minimum of
30 consecutive trading days on such exchange (as measured by the average
trading price of stock traded on each of such trading days), AIM shall
become entitled to a [Confidential information filed separately with the
SEC] share of future Net Revenue and Net Promotional Revenue until the
aggregate of cumulative Net Revenue and Net Promotional Revenue received
by AIM from the Effective Date equals [Confidential information filed
separately with the SEC] whereupon all such revenues thereafter shall be
shared [Confidential information filed separately with the SEC].
(iv) All other gross margin derived by AIM or the Joint Venture from marketing
BID.COM services in the cable and television broadcast network industry
in the Territory, including without limitation, from marketing to
affinity groups, shall be shared between AIM and BID.COM on a
[Confidential information filed separately with the SEC] basis net of
mutually agreed out of pocket and third party costs, and paid monthly
within fifteen (15) days of the end of each month.
4.3 Audit.
AIM shall keep accurate books and records of all revenues received by AIM and
all information regarding deductions made to calculate Net Promotional Revenues.
BID.COM shall keep accurate books and records of all revenues received by
BID.COM and all information regarding deductions made to calculate Net Revenues.
Each party has the right, acting reasonably, to audit the books and records of
the other party during normal business hours in respect of financial obligations
under this Agreement. If such audit discloses underpayment by the other party,
the other party shall pay such underpayment forthwith, together with interest
from the date the payment was due until such amount is paid. If an audit
discloses an underpayment of 5% or more, the party in default shall reimburse
the other party on demand for the reasonable out of pocket costs incurred in
conducting such audit.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND INDEMNITIES
5.1 Warranty and Indemnity re: Authority, Title and Proprietary Rights.
(1) BID.COM represents and warrants that it has the right to grant the license
hereby granted and that BID.COM has the right to provide the AIM E-Commerce
Service.
(2) BID.COM agrees to defend and indemnify AIM and hold it harmless from all
losses, claims, damages or liabilities, including court costs and legal
fees, in connection with or arising out of any claim asserted against AIM
based upon a contention that the AIM E-Commerce
-11-
<PAGE>
Service, the BID.COM Technology or the Software or any of the Deliverables,
or any portion thereof used by AIM or the Joint Venture within the scope of
this Agreement infringe the Intellectual Property Rights of any third Party
provided that:
(i) AIM or the Joint Venture promptly notify BID.COM in writing of the
claim and of all material developments in connection with such claim
and provides all assistance otherwise reasonably requested by
BID.COM;
(ii) BID.COM has the right to control, at its own expense, the defence
and all related settlement negotiations (AIM has the right to
participate at its own expense);
(iii) AIM or the Joint Venture does not pay or settle any such claim
without the express written consent of BID.COM; and
(iv) the claim in respect of which indemnity is sought does not arise out
of or in connection with any unauthorized use of the BID.COM
Technology by AIM.
In addition, if the BID.COM Technology, any of the Deliverables, or any portion
thereof is held to constitute an infringement of another Person's rights, and
use thereof is enjoined, or BID.COM enters into a settlement of the claim which
includes an agreement to refrain from the use thereof, BID.COM shall, at its
election and expense, either:
(A) procure the right to use the infringing element thereof;
(B) procure the right to an element which performs the same function
without any material loss of functionality; or
(C) replace or modify the element thereof so that the infringing portion
is no longer infringing and still performs the same function without
any material loss of functionality;
and shall make every reasonable effort to correct the situation with minimal
effect upon the operations of AIM or AIM affiliates.
5.2 General Limitation on Liability.
UNDER NO CIRCUMSTANCES WILL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR
INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES (EVEN IF THAT
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES) ARISING FROM BREACH
OF THE AGREEMENT, THE USE OR INABILITY TO USE THE BID.COM TECHNOLOGY, THE AIM
E-COMMERCE SERVICE, THE SOFTWARE, OR ARISING FROM ANY OTHER PROVISION OF THIS
AGREEMENT, SUCH AS, BUT NOT LIMITED TO, LOSS OF REVENUE OR ANTICIPATED PROFITS
OR LOST BUSINESS (COLLECTIVELY, "DISCLAIMED DAMAGES"); PROVIDED THAT EACH SUCH
PARTY WILL REMAIN LIABLE TO THE OTHER PARTY TO THE EXTENT ANY DISCLAIMED
-12-
<PAGE>
DAMAGES ARE CLAIMED BY A THIRD PARTY AND ARE SUBJECT TO INDEMNIFICATION PURSUANT
TO SECTION 5.1(2) ABOVE. EXCEPT AS PROVIDED IN SECTION 5.1(2), NEITHER PARTY
WILL BE LIABLE TO THE OTHER PARTY FOR MORE THAN $250,000 PROVIDED THAT EACH
PARTY WILL REMAIN LIABLE FOR THE AGGREGATE AMOUNT OF ANY PAYMENT OBLIGATIONS
OWED TO THE OTHER PARTY.
5.3 Provision of Source Code Materials.
AIM may subscribe, at its own expense, to the existing Source Code Escrow
Agreement attached as Schedule "D" and deposited with Data Securities
International, Inc. which provides for the release to AIM of the source code for
the BID.COM Technology for use as provided in Section 2.1 if (i) BID.COM
voluntarily declares bankruptcy, becomes insolvent or ceases the operation of
its business; or (ii) BID.COM materially fails to maintain or operate the
BID.COM Technology or the AIM E-Commerce Service; or (iii) BID.COM is in
continuing material breach of this Agreement.
5.4 Confidentiality.
Each Party (hereinafter in this Section, the "Receiving Party") covenants with
the other Party (hereinafter in this Section, the "Disclosing Party") that it
shall keep confidential the Confidential Information of the Disclosing Party to
which the Receiving Party obtains access as a consequence of entering into this
Agreement and that it will take all reasonable precautions to protect such
Confidential Information from any use, disclosure or copying except as expressly
authorized by this Agreement. The Receiving Party shall implement such
procedures as the Disclosing Party may reasonably require from time to time to
improve the security of the Confidential Information of the Disclosing Party in
its possession. This Section shall survive the termination of the Agreement.
Upon termination of this Agreement, the Receiving Party shall, at the choice of
the Disclosing Party, either return to the Disclosing Party or destroy all
copies or partial copies of Confidential Information of the Disclosing Party in
any form which is in the possession of the Receiving Party or under its control,
and certify that all such Confidential Information has been returned or
otherwise destroyed.
5.5 Use of Data.
(1) BID.COM retains ownership of the BID.COM Technology, but to the extent
permitted by applicable law and subject to any restrictions imposed by
customers of the Joint Venture or subscribers agrees to allow AIM access to
and, subject to the restrictions below, use of any and all Data pertaining
to the purchase and sale of goods or services by United States Television
subscribers (the "Data"). All Data is the property of BID.COM.
(2) BID.COM shall provide AIM with monthly usage reports that tracks all
elements necessary to allocate revenues in the forms set out in Schedule
"E" and will make all payments required pursuant to such reports within 15
days of each month end. BID.COM agrees that it also provide, on a best
efforts basis, information as to how cable
-13-
<PAGE>
and television broadcast network users of the BID.COM Technology are
navigating through the BID.COM Online Auction.
(3) AIM covenants that:
(i) it will not use the Data to operate a competitive auction service
during the Term of this Agreement or any extension thereof or for one
year thereafter; and
(ii) it will not allow third parties to use the Data for any purpose
without the prior written approval of BID.COM.
5.6 Ownership of the Software and Online Auction Trade-mark.
AIM acknowledges that the Software constitutes commercially valuable trade
secrets and proprietary data of BID.COM and is Confidential Information and that
no provision of this Agreement shall be construed to convey title in the
Software, any of BID.COM's Intellectual Property Rights or the BID.COM URL.
5.7 AIM-Specific Enhancements.
If AIM requests that BID.COM develop an AIM-Specific Enhancement, the parties
will mutually agree in writing to terms and conditions respecting the
development of such AIM-Specific Enhancement, including, without limitation,
terms and conditions relating to each parties' respective ownership and
exploitation rights in such AIM-Specific Enhancement. The parties acknowledge
and agree that their respective ownership and exploitation rights in each
AIM-Specific Enhancement shall be determined in accordance with the following
principles:
(i) if an AIM-Specific Enhancement can be used as a severable, standalone
component, then AIM shall own all right, title and interest in and to such
AIM-Specific Enhancement, and BID.COM shall be granted perpetual,
royalty-free license rights to use sub-license, exploit and reproduce such
AIM-Specific Enhancement, provided that BID.COM may not transfer or license
such AIM-Specific Enhancement to any third party (other than its
Affiliates) without the prior written consent of AIM.
(ii) if an AIM-Specific Enhancement is integrated into the BID.COM Technology,
the BID.COM Site or the AIM E-Commerce Service in such a way that it cannot
reasonably be used as a severable, standalone component, then BID.COM shall
own all right, title and interest in and to such AIM-Specific Enhancement,
and AIM shall be granted perpetual, royalty-free license rights to use,
sub-license, exploit and reproduce such AIM-Specific Enhancement
internally, provided that AIM may not transfer or license such AIM-Specific
Enhancement to any third party without the prior written consent of
BID.COM.
-14-
<PAGE>
5.8 Limitation on Warranties.
Except for those warranties otherwise provided herein, neither Party makes any
warranties or representations, and there are no conditions, express or implied,
in fact or in law, including without limitation, the implied warranties or
conditions of merchantable quality and fitness for a particular purpose and
those arising by statute or otherwise in law or from a course of dealing or
usage of trade.
ARTICLE VI
DEFAULT AND TERMINATION
6.1 Term.
(1) This Agreement shall commence on the Effective Date and shall continue,
subject to early termination in accordance with the terms hereof, until
June 30, 2001 (the "Initial Term"). Thereafter, the Agreement may be
renewed at the option of AIM (at the end of the Initial Term and the next
following two subsequent Terms, for additional one year periods
("Subsequent Terms") provided the last of the Term and Subsequent Terms
shall expire no later than June 30, 2003. All Renewals shall be subject to
agreement or allocation of Net Revenue and Net Promotional Revenue for the
ensuing Subsequent Term and in default of agreement, the parties shall
submit the determination of such allocation to arbitration pursuant to
Article VII unless either party elects to terminate at least 90 days before
the end of the then current Term.
(2) The extension of the Term of the Agreement into a Subsequent Term shall be
conditional upon the Parties, during the ninety (90) days prior to the end
of the Initial Term, negotiating and agreeing on reasonable values for
renewal metrics for the upcoming Subsequent Term. If the Parties are unable
to reach such an agreement, the Parties agree that they will submit the
determination of such allocation to binding arbitration in accordance with
the terms of Article VII unless either party elects to terminate this
Agreement unless by providing written notice to the other party at least
ninety (90) days prior to the end of the then current term, stating its
intention to terminate the Agreement at the end of such term.
6.2 Termination.
Subject to the time frames set out below, this Agreement may be terminated
forthwith by notice to the either Party on written notice upon the occurrence of
an event of default by the other Party. Each of the following constitutes an
event of default for the purposes of this Agreement:
-15-
<PAGE>
(i) if a Party fails to perform any material obligation set forth in
this Agreement and such default, in the case of a default which is
remediable, continues for a period of thirty (30) days after written
notice of such failure has been given by the non-defaulting Party;
(ii) if a Party declares bankruptcy or becomes insolvent or ceases the
operation of its business without a successor acceptable to the
other Party;
(iii) if a Party decides to permanently exit the on line auction business;
or
(iv) AIM or the Joint Venture fails to establish the AIM E-Commerce
Service as a viable business or if the AIM Stock does not become
freely trading in the hands of BID.COM or its assigns within twelve
(12) months of the Effective Date.
6.3 Survival.
For a period of ninety (90) days after this Agreement is terminated or expires,
all operative terms of this Agreement with respect to the allocation of Net
Revenue and Net Promotional Revenue will remain in full force and effect and
(except for termination as provided in section 6.2 (ii), (iii) or (iv) in which
event there shall be no survival period) AIM shall retain the right to use the
AIM E-Commerce Service and the BID.COM Technology in the same manner it was
entitled to use them as of the date of termination. At the end of a period of
ninety (90) days, AIM will cease to have any right to use the BID.COM Technology
or the AIM E-Commerce Service and BID.COM will cooperate with AIM in a mutually
agreed transition schedule to a new technology. Except as otherwise provided
herein, the terms of Articles II, III and VII shall survive any termination or
expiry of this Agreement and shall continue in force thereafter for the period
contemplated by the Agreement. Other provisions of this Agreement which, by the
nature of the rights or obligations set out therein, might reasonably be
expected to be intended to so survive, shall survive termination or expiry of
this Agreement until they are satisfied or by their nature expire.
ARTICLE VII
ARBITRATION
7.1 Dispute Resolution Process.
If any dispute, disagreement, controversy or claim arising out of or relating to
this Agreement including, without limitation, its application, interpretation,
performance, breach, termination, enforcement or damages, or remedies arising
out of the breach of or non-compliance therewith, shall be finally determined by
arbitration before a single arbitrator to be commenced and conducted in the
English language in Toronto in accordance with the Arbitration Act (Ontario).
The Parties hereto agree that:
-16-
<PAGE>
(1) subject to mutual agreement between the Parties to the contrary, the
arbitrator shall be a person who is legally trained and trained as a
professional arbitrator and who has a minimum of five (5) years experience
in the licensing of computer software;
(2) the Parties shall agree on the identity of the arbitrator within 10 days of
notice of reference to arbitration and in default thereof, either Party may
apply to a Judge of the Supreme Court of Ontario, General Division, to
appoint an arbitrator with the foregoing qualifications;
(3) the Parties shall be required to make written submissions to the arbitrator
within 7 days of appointment and shall not be entitled to make verbal
representations or further submissions unless so requested by the
arbitrator. Any Party who does not comply with the foregoing time period
shall not be entitled to make any submissions without the written approval
of the other Party;
(4) the arbitrator shall be required to render his decision in writing within
10 days of the period mentioned in Subsection 7.1(c);
(5) neither of the Parties shall apply to the Courts of Ontario or any other
jurisdiction to attempt to enjoin, delay, impede or otherwise interfere
with or limit the scope of the arbitration or the powers of the arbitrator
provided for in the Arbitration Act (Ontario)
(6) the award of the arbitrator shall be a final and conclusive award and
judgment with respect to all matters properly before the arbitral tribunal
in accordance with the Arbitration Act (Ontario) and neither Party shall
appeal such award in any manner whatever to any court, tribunal or other
authority; and
(7) the award of the arbitral tribunal may be entered and enforced by any court
in any jurisdiction having jurisdiction over the Parties hereto or the
subject matter of the award or the properties or assets of either of the
Parties hereto.
ARTICLE VIII
MANAGEMENT AND REPORTING
8.1 Management.
The Parties each agree to designate an individual known as a Project Manager
from their respective companies with adequate authority and full technical
competence to deal with matters relating to the implementation of the
Deliverables. Specifically, Project Managers will, on behalf of their respective
Parties, in accordance with the spirit of this Agreement, use reasonable efforts
to coordinate the provision of the AIM E-Commerce Service. Upon such
designations, each of BID.COM and AIM shall concurrently provide the other with
details with respect to its Project Manager, including name, address and
telephone number, and each of BID.COM and AIM may
-17-
<PAGE>
from time to time change its Project Manager with the consent of the other which
will not be unreasonably withheld or delayed.
8.2 Reports.
(1) Subject to Section 5.5, Data obtained in connection with the AIM E-Commerce
Service will be shared with AIM by BID.COM to generate co-marketing
opportunities with BID.COM, such as (i) customer name; (ii) address; (iii)
e-mail address; (iv) registered credit card information; and (v) purchase
history.
(2) To the extent permitted by applicable law and subject to any restrictions
imposed by contract, Data and information obtained by the Joint Venture and
AIM in promoting the Joint Venture and the AIM E-Commerce Service shall be
shared with BID.COM for the purposes described in the preceding section.
(3) BID.COM will maintain its ownership of the BID.COM Technology, databases
and customer information provided on a voluntary basis to AIM.
(4) The Parties further agree that they will, on request, provide such
information as to weekly or other periodic activity relating to the AIM
E-Commerce Service as is readily available and as can be generated without
unreasonable disruption of business.
ARTICLE IX
GENERAL
9.1 Notice.
Any notice or other communication (a "Notice") required or permitted to be given
or made hereunder shall be in writing and shall be well and sufficiently given
or made if:
(1) delivered in person during normal business hours on a Business Day and left
with a receptionist or other responsible employee of the relevant Party at
the applicable address set forth below;
(2) sent by prepaid first class mail; or
(3) sent by any electronic means of sending messages, including facsimile
transmission, which produces a paper record (an "Electronic Transmission"),
charges prepaid and confirmed by prepaid first class mail;
in the case of a Notice to AIM addressed to it at:
American Interactive Media, Inc.
Suite 308, 611 Broadway
New York, New York 10012
-18-
<PAGE>
Attention: Mark Graff
Fax No.: (212) 358-0189
with a copy to:
Curtis, Mallet-Prevost, Colt & Mosle
101 Park Avenue,
New York, New York,
101780061
Attention: Jeffrey N. Ostrager
Fax No.: (212) 697-1559
and in the case of a Notice to BID.COM addressed to it at:
BID.COM International Inc.
201 - 6725 Airport Road
Mississauga, Ontario
L4V 1V2
Attention: Paul Godin
Fax No.: (905) 672-7514
with a copy to:
Gowling, Strathy & Henderson
Barristers & Solicitors
Commerce Court West
Suite 4900
Toronto, Ontario
M5L 1J3
Attention: David Pamenter
Fax No.: (416) 862-7661
Any Notice given or made in accordance with this Section 9.1 shall be deemed to
have been given or made and to have been received:
(a) on the day it was delivered, if delivered as aforesaid;
(b) on the fifth Business Day (excluding each day during which there exists any
general interruption of postal services due to strike, lockout or other cause)
after it was mailed, if mailed as aforesaid; and
-19-
<PAGE>
(c) on the day of sending if sent by Electronic Transmission during normal
business hours of the addressee on a Business Day and, if not, then on the first
Business Day after the sending thereof.
Either Party may from time to time change its address for notice by giving
Notice to other Party in accordance with the provisions of this Section 9.1.
9.2 Assignment.
Neither Party may assign its rights and obligations under this Agreement, in
whole or in part, without the prior consent in writing of the other and any
purported assignment made without that consent is void and of no effect (save
and except for an assignment as an incident of security taken in a normal course
financing transaction). No assignment of this Agreement shall relieve either
party from any obligation under this Agreement.
9.3 Binding on Successors.
This Agreement shall enure to the benefit of and be binding upon the Parties and
their respective successors and permitted assigns.
9.4 Further Assurances.
Each Party agrees that upon the written request of the other Party, it will do
all such acts and execute all such further documents, conveyances, deeds,
assignments, transfers and the like, and will cause the doing of all such acts
and will cause the execution of all such further documents as are within its
power to cause the doing or execution of, as any other Party hereto may from
time to time reasonably request be done and/or executed as may be necessary or
desirable to give effect to this Agreement.
9.5 Independent Contractors.
It is understood and agreed that in giving effect to this Agreement, no Party
shall be or be deemed a partner, agent or employee of another Party for any
purpose and that their relationship to each other shall be that of independent
contractors. Nothing in this Agreement shall constitute a partnership or a joint
venture between the Parties. No Party shall have the right to enter into
contracts or pledge the credit of or incur expenses of liabilities on behalf of
the other Party.
9.6 Waiver.
A waiver by a Party hereto of any of its rights hereunder or of the performance
by the other Party of any of its obligations hereunder shall be without
prejudice to all of the other rights hereunder of the Party so waiving and shall
not constitute a waiver of any such other rights or, in any other instance, of
the rights so waived, or a waiver of the performance by the other Party of any
of its other obligations hereunder or of the performance, in any other instance,
of the obligations so waived. No waiver shall be effective or binding upon a
Party unless the same shall be expressed in writing and executed by the Party to
be bound.
-20-
<PAGE>
9.7 Compliance With Law.
Each party shall, in the performance of this Agreement, fully comply with, and
abide by, all laws, regulations, regulatory rulings or directives, court orders,
and decisions of administrative tribunals of competent jurisdiction, that may,
in any manner or extent, concern, govern, or affect either party's respective
performance of, and obligations under, this Agreement.
9.8 Interpretation.
This Agreement has been negotiated by the parties hereto and their respective
counsel and shall be fairly interpreted in accordance with its terms and without
any rules of construction relating to which party drafted the Agreement being
applied in favour or against either party.
9.9 Effective Date.
This Agreement shall not become a valid and binding contract unless and until
each party has duly executed and delivered this Agreement. For greater
certainty, there shall be no agreement, whether oral, written, express, implied
or otherwise notwithstanding any performance between the parties concerning the
subject matter of this document, including, without limitation, by course of
conduct, doctrine of part performance, or otherwise.
9.10 Amendment.
No amendment of any provision of this Agreement shall be effective unless such
amendment is embodied in a written agreement which is: (i) expressly stated to
be intended to amend this Agreement; and (ii) executed by two authorized signing
officers of AIM and an authorized officer of BID.COM. For greater certainty, the
parties acknowledge and agree that no representations, warranties, conditions,
covenants or other statements or commitments, whether made orally, in writing,
by course of conduct or otherwise, and whether made prior to the Effective Date
of this Agreement or thereafter, shall be binding on either of the parties.
-21-
<PAGE>
9.11 Governing Law.
This Agreement shall be governed by and construed in accordance with the laws of
the Province of Ontario and the laws of Canada applicable therein and shall be
treated, in all respects, as an Ontario contract. The parties hereby: (i)
irrevocably submit to the exclusive jurisdiction of the courts of Ontario in
respect of the subject matter hereof; (ii) consent to service of process being
effected upon the other party by registered mail sent to the address set forth
in section 8.1 hereof; (iii) agree not to seek, request, claim or pursue trial
by jury; and (iv) agree not to seek, request, claim or pursue any right, claim,
or entitlement to any punitive or exemplary damages whatsoever.
IN WITNESS WHEREOF this Agreement is executed by the Parties as of the date
first written, above.
BID.COM INTERNATIONAL INC.
By: ________________________________
(Duly Authorized Officer)
By: ________________________________
(Duly Authorized Officer)
AMERICAN INTERACTIVE MEDIA, INC.
By: ________________________________
(Duly Authorized Officer)
By: ________________________________
(Duly Authorized Officer)
-22-
<PAGE>
SCHEDULE "A"
BID.COM Technology (including Third Party Technology)
<PAGE>
ILI Bid.com Modules
Database: [Confidential information filed
separately with the SEC]
Business Services: "
Data Services: "
Dynmic Export: "
Order Processing
Administrator: "
Credit Card: "
Order Business Services: "
Utilities
Category Builder: "
AdRotatorGenerator: "
AssetMgmt: "
DB Services: "
Notification: "
Supporting S/W: "
Web: "
ILI Bid.com Modules (Dutch)
Business Services: "
Data Services: "
Dutcher Server: "
Dutch Client: "
Internet Web: "
Admin Web: "
<PAGE>
Top Bid Auction
[Confidential information filed separately with the Commission]
<TABLE>
<CAPTION>
[Confidential information filed 01-19-98 9:12p [Confidential information filed
separately with the SEC] separately with the SEC]
<S> <C> <C> <C>
" 03-06-98 8:19p "
" 03-17-98 3:21p "
" 01-04-98 12:49a "
" 01-19-98 4:05p "
" 04-09-98 8:00p "
" 06-10-98 1:05p "
" 01-04-98 12:49a "
" 03-18-98 11:53a "
" 06-29-98 12:06p "
" 01-21-98 10:53p "
" 06-23-98 8:53a "
" 06-23-98 10:25a "
" 01-19-98 4:05p "
" 01-19-98 4:05p "
" 01-19-98 5:25a "
" 01-04-98 12:49a "
" 04-15-98 5:45a "
" 07-02-98 12:01p "
" 01-23-98 2:36p "
" 06-21-98 10:17p "
" 06-17-98 3:31p "
" 04-15-98 3:03p "
" 06-15-98 11:04a "
" 01-04-98 12:49a "
" 01-04-98 12:49a "
" 01-19-98 9:20p "
" 01-04-98 12:49a "
" 01-26-98 7:58a "
" 03-17-98 3:21p "
" 03-17-98 3:21p "
" 05-04-98 12:15p "
" 07-14-98 11:54a "
" 06-04-98 7:22p "
" 02-25-98 10:51a "
" 05-04-98 7:19p "
" 06-19-98 6:31p "
" 04-15-98 5:45a "
" 01-24-98 6:33p "
" 04-15-98 5:45a "
" 04-17-98 4:45p "
" 01-19-98 4:47a "
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
" 02-10-98 2:21p "
" 05-07-98 10:14a "
" 03-28-98 10:15a "
" 02-02-98 9:49p "
" 01-19-98 9:32p "
" 01-09-98 1:52p "
" 02-10-98 8:11a "
" 04-08-98 2:58p "
" 02-07-98 1:29p "
" 01-30-98 8:56a "
" 03-03-98 6:15p "
" 02-01-98 5:11p "
" 01-19-98 8:31a "
" 01-19-98 4:05p "
" 01-24-98 6:52p "
" 03-04-98 7:58p "
" 01-20-98 11:00a "
" 01-19-98 9:29p "
" 04-22-98 7:45a "
" 01-04-98 12:49a "
" 04-15-98 5:45a "
" 01-20-98 11:04a "
" 01-04-98 12:49a "
" 06-19-98 9:23a "
" 06-30-98 12:49p "
" 06-10-98 7:30a "
" 01-04-98 12:49a "
" 01-04-98 12:49a "
" "
" 06-24-98 7:02a "
" "
" 02-07-98 1:56p "
" 05-26-98 7:06p "
" 03-30-98 10:29p "
" 03-06-98 8:02p "
" 06-14-98 10:09p "
" 03-06-98 8:02p "
" 06-15-98 7:51p "
" 06-24-98 3:09p "
" 06-03-98 10:01p "
" 06-29-98 7:21p "
" 03-06-98 8:03p "
" 06-09-98 11:08a "
" 03-25-98 1:28p "
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
" 03-06-98 8:04p "
" 05-04-98 10:41a "
" 06-17-98 10:09p "
" 06-27-98 10:03p "
" 03-27-98 10:11p "
" 06-30-98 10:09p "
" 06-23-98 7:27p "
" 04-06-98 7:34p "
" 04-17-98 7:47a "
" "
" 02-07-98 1:56p "
" 06-12-98 12:39p "
" 03-06-98 7:56p "
" 06-15-98 7:33p "
" 05-29-98 7:26p "
" 06-29-98 7:20p "
" 05-15-98 8:52a "
" 05-30-98 8:55p "
" 03-16-98 5:10p "
" 03-16-98 5:29p "
" 04-27-98 10:33p "
" 06-23-98 11:14a "
" 06-04-98 7:32a "
" 05-14-98 7:30p "
" 05-14-98 7:27p "
" 06-18-98 12:17a "
" 06-21-98 6:35p "
" 06-30-98 10:21p "
" 06-24-98 1:09p "
" "
" 06-21-98 9:50p "
" 03-02-98 2:56p "
" 04-15-98 6:57a "
" 06-29-98 7:08a "
" 01-26-98 7:58a "
" 03-02-98 2:54p "
" 06-30-98 10:08p "
" 07-02-98 1:04p "
" 01-26-98 7:58a "
" 07-01-98 6:00p "
" 01-19-98 4:30a "
" 04-13-98 11:08a "
" 01-04-98 12:49a "
" 01-19-98 4:05p "
" "
" 06-23-98 12:14p "
" 01-04-98 12:50a "
" "
" 06-15-98 4:57p "
" "
" 01-19-98 4:05p "
" 04-09-98 7:21a "
" 01-29-98 5:40p "
" "
" 04-15-98 5:45a "
" 01-04-98 12:49a "
" 03-10-98 5:10p "
" 06-01-98 2:39p "
" 01-04-98 12:49a "
" 01-04-98 12:49a "
" 07-03-98 1:42p "
" 01-04-98 12:49a "
" 01-04-98 12:49a "
" 02-07-98 12:14p "
" 02-09-98 8:08a "
" 01-30-98 11:45a "
" 01-04-98 12:49a "
" 06-01-98 2:27p "
" 04-15-98 5:45a "
" 01-04-98 12:49a "
" "
" 06-19-98 12:52p "
" "
</TABLE>
<PAGE>
Dutch Auction
[Confidential information filed separately with the SEC]
[Confidential information filed separately
with the SEC]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
[Confidential information filed 05-26-98 8:49a [Confidential information filed
separately with the SEC] separately with the SEC]
" 07-08-98 7:17a "
" 05-26-98 9;12a "
" 05-27-98 1:57p "
" 05-22-98 11:51a "
" "
"
" 05-26-98 7:40a "
" 05-28-98 11:50a "
" 05-20-98 12:01p "
" 05-27-98 1:19p "
" 06-03-98 8:27a "
" 05-27-98 12:40p "
" 05-27-98 1:22p "
" 05-27-98 12:51p "
" 05-27-98 2:37p "
" 05-27-98 1:21p "
" 05-22-98 3:45p "
" 05-28-98 11:50a "
" 05-26-98 8:08a "
"
"
" 07-09-98 8:06a "
" 04-30-98 1:54p "
" 07-09-98 9:41a "
" 07-08-98 11:02a "
" 05-27-98 6:15p "
" 07-08-98 7:18a "
"
</TABLE>
<PAGE>
Bid.com Commerce Site
List of Third Party Tools Incorporated Into Application
1) [Confidential information filed separately with the SEC]
2) [Confidential information filed separately with the SEC]
3) [Confidential information filed separately with the SEC]
4) [Confidential information filed separately with the SEC]
5) [Confidential information filed separately with the SEC]
6) [Confidential information filed separately with the SEC]
7) [Confidential information filed separately with the SEC]
8) [Confidential information filed separately with the SEC]
9) [Confidential information filed separately with the SEC]
10) [Confidential information filed separately with the SEC]
11) [Confidential information filed separately with the SEC]
12) [Confidential information filed separately with the SEC]
13) [Confidential information filed separately with the SEC]
14) [Confidential information filed separately with the SEC]
15) [Confidential information filed separately with the SEC]
<PAGE>
SCHEDULE "B"
AIM's Requirements
B.1 Preparation and Delivery of AIM's Requirements. AIM and BID.COM covenant and
agree to negotiate in good faith to execute an amendment to this Agreement (the
"Amendment") within thirty (30) days of the Effective Date in order to complete
this Schedule "B" in a manner acceptable to both parties. The Amendment shall
contain detailed performance requirements and specifications for the Television
E-Commerce Service.
B.2 Escalation. In the event that the Amendment has not been executed within
thirty (30) days of the Effective Date, the parties shall review disputes and
use their good faith efforts to complete the Amendment within an additional
thirty (30) day period. If the Amendment has not been completed within such
additional (30) day period, outstanding disputes or issues relating to the
Amendment shall be submitted to dispute resolution in accordance with Article
VII of this Agreement.
<PAGE>
SCHEDULE "C"
Customer Service Standards
BID.COM shall, at a minimum, comply with the following customer service
standards in its operation of the Television E-Commerce Service.
C.1 Logistics
BID.COM shall"
1. appoint sufficient numbers of dedicated employees to provide e-mail online
customer service;
2. receive and respond to email and customer inquiries within two (2) business
days of receipt;
3. install a toll free phone line and communicate the toll free phone number in
the online "Customer Service" area of the BID.COM Site;
4. ensure the ability to handle customer service volumes in excess of 25% of
average daily order volumes;
5. monitor the Television E-Commerce Service to minimize out of stock
merchandise;
6. post all customer service policies in an online "Customer Service" area of
the BID.COM Site which includes the following information and policies: shipping
information, return policies, product warranties and contact information; and
7. post security and privacy policies in an online "Customer Service" area of
the BID.COM Site.
C.2 Process and Fulfillment
In fulfilling purchases by customers of the Television E-Commerce Service,
BID.COM shall:
1. process electronic orders within (2) business days of receipt;
2. provide customers with an order confirmation which includes order status (in
stock, temporary back order or out of stock), expected delivery times and total
cost (including all shipping and taxes) within two (2) business days of receipt;
3. ship products at the price displayed and without substitutions, unless such
substitutions are authorized by the customer;
4. deliver all merchandise in appropriate packaging;
<PAGE>
5. ensure all packages arrive undamaged, well packed and neat (barring shipping
damage);
6. permit the return of defective or damaged goods to the manufacturers under
warranty; and
7. permit the return of other goods within 30 days of delivery, less a 15%
restocking fee with chronic abuse exclusions.
<PAGE>
SCHEDULE "D"
Response Times
D.1 BID.COM shall respond to any report that the BID.COM Technology, the
Television Commerce Service or the BID.COM Site is failing to meet AIM's
Requirements, and shall correct such failure, within the time frames set out in
Section D.2 of this Schedule "D." The severity of any particular failure shall
be reasonably determined by AIM, and communicated to BID.COM, based on the
following definitions:
Severity 1: total inability to use any material part of the BID.COM
Technology, the E-Commerce Service or the BID.COM Site, resulting
in a critical impact on user objectives.
Severity 2: ability to use the BID.COM Technology, the Television E-Commerce
Service or the BID.COM Site, but user operation is severely
restricted.
Severity 3: ability to use the BID.COM Technology, the Television E-Commerce
Service or the BID.COM Site; failures relate to functions which
are not critical to overall user operations.
Severity 4: failure has been bypassed or temporarily corrected and is not
affecting customer operations.
D.2 BID.COM shall correct failures of the BID.COM Technology, the Television
E-Commerce Service and the BID.COM Site in order to comply with AIM's
Requirements within the following time frames:
Severity 1: within 24 hours of notification by AIM
Severity 2: within 48 hours of notification by AIM
Severity 3: within 15 days of notification by AIM
Severity 4: within 120 days of notification by AIM
<PAGE>
SCHEDULE "E"
Source Code Trust Agreement
<PAGE>
MASTER PREFERRED ESCROW AGREEMENT
Master Number __________
This Agreement is effective February 12, 1997 among Data Securities
International, Inc.("DSV"), Internet Liquidators International Inc.
("Depositor"), and any additional party signing the Acceptance Form attached to
this Agreement ("Preferred Beneficiary") who collectively may be referred to in
this Agreement as "the parties."
A. Depositor and Preferred Beneficiary have entered or will enter into a
license agreement in the form attached to such Preferred Beneficiary's
Acceptance Form regarding certain proprietary technology of Depositor
(referred to in this Agreement as "Preferred Beneficiary").
B. Depositor desires to avoid disclosure of its proprietary technology except
under certain limited circumstances.
C. The availability of the proprietary technology of Depositor is critical to
Preferred Beneficiary in the conduct of its business and, therefore,
Preferred Beneficiary needs access to the proprietary technology under
certain limited circumstances.
D. Depositor and Preferred Beneficiary desire to establish an escrow with DSI
to provide for the retention, administration and controlled access of
certain proprietary technology materials of Depositor.
ARTICLE 1 -DEPOSITS
1.1 Obligation to Make Deposit. Upon the signing of this Agreement by the
parties, including the signing of the Acceptance Form, Depositor shall deliver
to DSI the proprietary information and other materials identified on an Exhibit
A. DSI shall have no obligation with respect to the preparation, signing or
delivery of Exhibit A.
1.2 Identification of Tangible Media. Prior to the delivery of the deposit
materials to DSI, Depositor shall conspicuously label for identification each
document, magnetic tape, disk, or other tangible media upon which the deposit
materials are written or stored. Additionally, Depositor shall complete Exhibit
B to this Agreement by listing each such tangible media by the item label
description, the type of media and the quantity. The Exhibit B must be signed by
Depositor and delivered to DSI with the deposit materials. Unless and until
Depositor makes the initial deposit with DSI, DSI shall have no obligation with
respect to this Agreement, except the obligation to notify the parties regarding
the status of the deposit account as required in Section 2.2 below.
1.3 Deposit Inspection. When DSI receives the deposit materials and the Exhibit
B, DSI will give a receipt for the deposit materials to the Depositor in the
form provided by the Depositor and conduct a deposit inspection by visually
matching the labeling of the tangible
<PAGE>
media containing the deposit materials to the item descriptions and quantity
listed on the Exhibit B. In addition to the deposit inspection, Preferred
Beneficiary may elect to cause a verification of the deposit materials in
accordance with Section 1.6 below.
1.4 Acceptance of Deposit. At completion of the deposit inspection, if DSI
determines that the labeling of the tangible media matches the item descriptions
and quantity on Exhibit B, DSI will date and sign the Exhibit B and deliver a
copy thereof to Depositor and Preferred Beneficiary. If DSI determines that the
labeling does not match the item descriptions or quantity on the Exhibit B, DSI
will (a) note the discrepancies in writing on the Exhibit B; (b) date and sign
the Exhibit B with the exceptions noted, and (c) provide a copy of the Exhibit B
to Depositor and Preferred Beneficiary. DSI's acceptance of the deposit occurs
upon the signing of the Exhibit B by DSI. Delivery of the signed Exhibit B to
Preferred Beneficiary is Preferred Beneficiary's notice that the deposit
materials have been received and accepted by DSI.
1.5 Depositor's Representations. Depositor represents as follows:
(a) Depositor lawfully possesses all of the deposit materials deposited
with DSI;
(b) With respect to all of the deposit materials Depositor has the right
and authority to grant to DSI and Preferred Beneficiary the rights as
provided in this Agreement;
(c) The deposit materials are not subject to any lien or other encumbrance
other than encumbrances arising in the ordinary cause of Depositor's
business;
(d) The deposit materials consist of the proprietary information and other
materials identified in Exhibit A; and
(e) The deposit materials are readable and useable in their current form
or, if the deposit materials are encrypted, the decryption tools and
decryption keys have also been deposited.
1.6 Verification. Preferred Beneficiary shall have the right, at Preferred
Beneficiary's expense. to cause a verification of any deposit materials. A
verification determines, in different levels of detail, the accuracy,
completeness. sufficiency and quality of the deposit materials. If a
verification is elected after the deposit materials have been delivered to DSI,
then only DSI, or at DSI's election an independent person or company selected
and supervised by DSI, may perform the verification.
1.7 Deposit Updates. Unless otherwise provided by the license agreement,
Depositor shall update the deposit materials within 60 days of each release of a
new version of the product which is subject to the license agreement. Such
updates will be added to the existing deposit. All deposit updates shall be
listed on a new Exhibit B and the new Exhibit B shall be signed by Depositor.
Each Exhibit B will be held and maintained separately within the escrow account.
An independent record will be created which will document the activity for each
Exhibit B. The
<PAGE>
processing of all deposit updates shall be in accordance with Sections 1.2
through 1.6 above. All references in this Agreement to the deposit materials
shall include the initial deposit materials and any updates.
1.8 Removal of Deposit Materials. The deposit materials may be removed and/or
exchanged only on written instructions signed by Depositor and Preferred
Beneficiary, or as otherwise provided in this Agreement.
ARTICLE 2 -- CONFIDENTIALITY AND RECORD KEEPING
2.1 Confidentiality. DSI shall maintain the deposit materials in a secure,
environmentally safe, locked facility in the greater Toronto area which is
accessible only to authorized representatives of DSI. DSI shall have the
obligation to reasonably protect the confidentiality of the deposit materials.
Except as provided in this Agreement, DSI shall not disclose, transfer, make
available, or use the deposit materials. DSI shall not disclose the content of
this Agreement to any third party. If DSI receives a subpoena or other order of
a court or other judicial tribunal pertaining to the disclosure or release of
the deposit materials, DSI will immediately notify the parties to this
Agreement. It shall be the responsibility of Depositor and/or Preferred
Beneficiary to challenge any such order; provided, however, that DSI does not
waive its rights to present its position with respect to any such order. DSI
will not be required to disobey any court or other judicial tribunal order. (See
Section 7.5 below for notices of requested orders.)
2.2 Status Reports. DSI will issue to Depositor and Preferred Beneficiary a
report profiling the account history at least semi-annually. DSI may provide
copies of the account history pertaining to this Agreement upon the request of
any party to this Agreement.
2.3 Audit Rights. During the term of this Agreement, Depositor and Preferred
Beneficiary shall each have the right to inspect the written records of DSI
pertaining to this Agreement. Any inspection shall be held during normal
business hours and following reasonable prior notice.
ARTICLE 3 - GRANT OF RIGHTS TO DSI
3.1 Title to Physical Copies of Deposited Materials.
(a) Depositor transfers to DSI in trust all legal title in and to the
physical copies of the deposit materials provided to DSI from time to time
in accordance with the terms of this Agreement. It is acknowledged by the
parties hereto that such transfer by Depositor to DSI under this Section is
not intended to, nor does it, transfer any intellectual property or other
intangible rights in the deposit materials. DSI agrees to hold the deposit
materials in trust for Depositor and Preferred Beneficiary as provided in
this Agreement.
The expression "in trust" is intended to refer strictly to the issue of
ownership of the deposit materials and not to the level of care which must
be taken by DSI in performing its duties under this Agreement. The duties
of DSI are strictly contractual in nature
<PAGE>
and are as set out in this Agreement. It is not intended that DSI is to
have the fiduciary duty of a trustee.
3.2 Right to Make Copies. DSI shall have the right to make copies of the deposit
materials as reasonably necessary to perform this Agreement. DSI shall copy all
copyright, nondisclosure. and other proprietary notices and titles contained on
the deposit materials onto any copies made by DSI. With all deposit materials
submitted to DSI, Depositor shall provide any and all instructions as may be
necessary to duplicate the deposit materials including but not limited to the
hardware and/or software needed
3.3 Right to Transfer Upon Release. Depositor hereby grants to DSI the right to
transfer deposit materials to Preferred Beneficiary upon any release of the
deposit materials for use by Preferred Beneficiary in accordance with Section
4.5. Except upon such a release or as otherwise provided in this Agreement, DSI
shall not transfer the deposit materials.
ARTICLE 4 - RELEASE OF DEPOSIT
4.1 Release Conditions. As used in this Agreement, "Release Conditions" shall
mean the following:
(a) voluntary bankruptcy of Depositor;
(b) involuntary bankruptcy provided that the Depositor is not in good
faith diligently taking steps to contest or set aside such process,
(c) if Depositor becomes insolvent and ceases to continue to carry on its
business;
(d) if Depositor ceases the operation of its business and the business is
not continued by a successor acceptable to the Preferred Beneficiary,
acting reasonably; and
(e) any additional release conditions identified on the attached
Acceptance Form.
4.2 Filing For Release. If Preferred Beneficiary believes in good faith that a
Release Condition has occurred, Preferred Beneficiary may provide to DSI written
notice of the occurrence of the Release Condition and a request for the release
of the deposit materials. Upon receipt of such notice, DSI shall deliver a copy
of the notice to Depositor.
4.3 Contrary Instructions. From the date DSI delivers the notice requesting
release of the deposit materials, if the Release Condition is one defined in 4.
1 (b), 4. 1 (d) or 4. 1 (e) Depositor shall have ten business days to deliver to
DSI Contrary Instructions. If the Release Condition is one defined in 4. 1 (a)
or (c), DSI shall release the deposit materials pursuant to Section 4.4 within
48 hours of giving notice to the Depositor under Section 4.2. "Contrary
Instructions" shall mean the written representation by Depositor that a Release
Condition has not occurred or has been cured. Upon receipt of Contrary
Instructions, DSI shall deliver a copy to Preferred
<PAGE>
Beneficiary. Additionally, DSI shall notify both Depositor and Preferred
Beneficiary that there is a dispute to be resolved pursuant to the Dispute
Resolution section of this Agreement (Section 7.3). Subject to Section 5.2, DSI
will continue to store the deposit materials without release pending (a) joint
instructions from Depositor and Preferred Beneficiary, (b) resolution pursuant
to the Dispute Resolution provisions, or (c) order of a court.
4.4 Release of Deposit. If DSI does not receive Contrary Instructions from the
Depositor, DSI is authorized to release the deposit materials to the Preferred
Beneficiary or, if more than one beneficiary is registered to the deposit
materials, to release a copy of the deposit materials to the Preferred
Beneficiary who gave notice under Section 4.2. However, DSI or DSI's authorized
representative is entitled to receive any fees due DSI or DSI's authorized
representative before making the release. This Agreement will terminate with
respect to the Preferred Beneficiary giving notice under Section 4.2 upon the
release of the deposit materials held by DSI.
4.5 Right to Use Following Release. Unless otherwise provided in the license
agreement, upon release of the deposit materials in accordance with this Article
4, Preferred Beneficiary shall have the right to use the deposit materials for
the sole purpose of continuing the benefits afforded to Preferred Beneficiary by
the license agreement. Preferred Beneficiary shall be obligated to maintain the
confidentiality of the released deposit materials.
ARTICLE 5 - TERM AND TERMINATION
5.1 Term of Agreement. The initial term of this Agreement is for a period of one
year. Thereafter, this Agreement shall automatically renew from year-to-year
unless (a) Depositor and Preferred Beneficiary jointly instruct DSI in writing
that the Agreement is terminated, or (b) the Agreement is terminated by DSI for
nonpayment in accordance with Section 5.2. If the Acceptance Form has been
signed at a date later than this Agreement, the initial term of the Acceptance
Form will be for one year with subsequent terms to be adjusted to match the
anniversary date of this Agreement. If the deposit materials are subject to
another escrow agreement with DSI, DSI reserves the right, after the initial one
year term, to adjust the anniversary date of this Agreement to match the then
prevailing anniversary date of such other escrow arrangements.
5.2 Termination for Nonpayment. In the event of the nonpayment of fees owed to
DSI or DSI's authorized representative, DSI shall provide written notice of
delinquency to the parties to this Agreement affected by such delinquency. Any
such party shall have the right to make the payment to DSI or DSI's authorized
representative to cure the default. If the past due payment is not received in
full by DSI or DSI's authorized representative within one month of the date of
such notice, then at anytime thereafter DSI shall have the right to terminate
this Agreement to the extent it relates to the delinquent party by sending
written notice of termination to such affected parties. DSI shall have no
obligation to take any action under this Agreement so long as any payment due to
DSI or DSI's authorized representative remains unpaid.
<PAGE>
5.3 Disposition of Deposit Materials Upon Termination. Upon termination of this
Agreement by joint instruction of Depositor and each Preferred Beneficiary, DSI
shall return the deposit materials to the Depositor. Upon termination for
nonpayment, DSI shall return the deposit materials to the Depositor. DSI shall
have no obligation to return or destroy the deposit materials if the deposit
materials are subject to another escrow agreement with DSI.
5.4 Survival of Terms Following Termination. Upon termination of this Agreement,
the following provisions of this Agreement shall survive:
(a) Depositor's Representations (Section 1.5);
(b) The obligations of confidentiality with respect to the deposit
materials;
(c) The rights granted in the sections entitled Right to Transfer Upon
Release (Section 3.3) and Right to Use Following Release (Section
4.5), if a release of the deposit materials has occurred prior to
termination;
(d) The obligation to pay DSI or DSI's authorized representative any fees
and expenses due;
(e) The provisions of Article 7; and
(f) Any provisions in this Agreement which specifically state they survive
the termination or expiration of this Agreement.
5.5 Alternative to DSI. If this Agreement terminates, Depositor and Preferred
Beneficiary agree, at Preferred Beneficiary's request, to appoint a new agent by
mutual agreement. If Depositor and Preferred Beneficiary cannot agree, Preferred
Beneficiary shall appoint a trust company or other company specializing in the
escrow business as the agent provided that such company has appropriate storage
facilities located in or around Toronto and agrees to store the deposited
materials there in accordance with the terms of this Agreement. The new agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named hereunder, without any further assurance,
conveyance, act or deed.
ARTICLE 6 - DSI'S FEES
6.1 Fee Schedule. DSI or DSI's authorized representative is entitled to be paid
its standard fees and expenses applicable to the services provided. DSI or DSI's
authorized representative shall notify the party responsible for payment of
DSI's fees at least 90 days prior to any increase in fees. For any service not
listed on DSI's standard fee schedule, DSI or DSI's authorized representative
will provide a quote prior to rendering the service.
6.2 Payment Terms. DSI shall not be required to perform any service unless the
payment for such service and any outstanding balances owed to DSI or DSI's
authorized representative
<PAGE>
are paid in full. All other fees are due upon receipt of invoice. If invoiced
fees are not paid, DSI may terminate this Agreement in accordance with Section
5.2. Late fees on past due amounts shall accrue at the rate of one and one-half
percent per month (18% per annum) from the date of the invoice.
ARTICLE 7 - LIABILITY AND DISPUTES
7.1 Right to Rely on Instructions. DSI may act in reliance upon any instruction,
instrument, or signature reasonably believed by DSI to be genuine. DSI may
assume that any employee of a party to this Agreement who gives any written
notice. request, or instruction has the authority to do so. DSI shall not be
responsible for failure to act as a result of causes beyond the reasonable
control of DSI, subject to Section 2. 1.
7.2 Indemnification. DSI shall be responsible to perform its obligations under
this Agreement and to act in a reasonable and prudent manner with regard to this
escrow arrangement. Provided DSI has acted in the manner stated in the preceding
sentence, Depositor and Preferred Beneficiary each agree to indemnify, defend
and hold harmless DSI from any and all claims, actions, damages, arbitration
fees and expenses, costs, attorney's fees and other liabilities incurred by DSI
relating in any way to this escrow arrangement.
7.3 Dispute Resolution. Any dispute, difference or question arising among any of
the parties concerning the construction, meaning, effect or implementation of
this Agreement or any part hereof will be settled by a single arbitrator
mutually agreed upon by the parties, or failing agreement, an arbitrator
appointed pursuant to the Arbitration Act (Ontario) or similar legislation. The
decision of such arbitrator appointed pursuant to this Agreement or such Act
will be final and binding on the parties and no appeal will lie therefrom.
7.4 Controlling Law. This Agreement is to be governed and construed in
accordance with the laws of the Province of Ontario except any laws which would
refer any matter to the laws of another jurisdiction. All parties irrevocably
attorn to the exclusive jurisdiction of the Courts of Ontario in respect of the
subject matter hereof.
7.5 Notice of Requested Order. If any party intends to obtain an order from the
arbitrator or any court of competent jurisdiction which may direct DSI to take,
or refrain from taking any action, that party shall:
(a) Give DSI at least two business days' prior notice of the hearing;
(b) Include in any such order that, as a precondition to DSI's obligation,
DSI or DSI's authorized representative be paid in full for any past due
fees and be paid for the reasonable value of the services to be rendered
pursuant to such order: and
<PAGE>
(c) Ensure that DSI not be required to deliver the original (as opposed to
a copy) of the deposit materials if DSI may need to retain the original in
its possession to fulfill any of its other escrow duties.
ARTICLE 8 - GENERAL PROVISIONS
8.1 Entire Agreement. This Agreement, which includes the Acceptance Form and the
Exhibits described herein, embodies the entire understanding between all of the
parties with respect to its subject matter and supersedes all previous
communications. representations or understandings, either oral or written. No
amendment or modification of this Agreement shall be valid or binding unless
signed by all the parties hereto, except that Exhibit A need not be signed by
DSI, Exhibit B need not be signed by Preferred Beneficiary and the Acceptance
Form need only be signed by the parties identified therein.
8.2 Notices. All notices, invoices, payments, deposits and other documents and
communications shall be given to the parties at the addresses specified in the
attached Exhibit C and Acceptance Form. It shall be the responsibility of the
parties to notify each other as provided in this Section in the event of a
change of address. The parties shall have the right to rely on the last known
address of the other parties. Unless otherwise provided in this Agreement, all
documents and communications may be delivered by First Class mail.
8.3 Severability. In the event any provision of this Agreement is found to be
invalid, voidable or unenforceable, the parties agree that unless it materially
affects the entire intent and purpose of this Agreement, such invalidity,
voidability or unenforceability shall affect neither the validity of this
Agreement nor the remaining provisions herein, and the provision in question
shall be deemed to be replaced with a valid and enforceable provision most
closely reflecting the intent and purpose of the original provision.
8.4 Successors. This Agreement shall be binding upon and shall inure to the
benefit of the successors and assigns of the parties. However, DSI shall have no
obligation in performing this Agreement to recognize any successor or assign of
Depositor or Preferred Beneficiary unless DSI receives clear, authoritative and
conclusive written evidence of the change of parties.
Data Securities International, Inc. Internet Liquidators International Inc.
By:_________________________________ By:___________________________________
Name:_______________________________ Name: ________________________________
Title:______________________________ Title_________________________________
Date:_______________________________ Date: ________________________________
By:_________________________________ By: _________________________________
<PAGE>
ACCEPTANCE FORM
Account Number _____________________
American Interactive Media, Inc., hereby (i) acknowledges that it is a Preferred
Beneficiary referred to in the Master Preferred Escrow Agreement effective with
Data Securities International, Inc. as the escrow agent and Bid.Com
International Inc. (formerly Internet Liquidators International, Inc.) as the
Depositor, (ii) agrees to be bound by all provisions of such Agreement, and
(iii) agrees that in addition to the Release Conditions set forth in section 4.1
of this Agreement, a further Release Condition shall exist if the Depositor is
in continuing material breach of the E-Commerce and Promotion Services Agreement
attached hereto as Schedule "A".
American Interactive Media, Inc.
By:_____________________
Name:___________________
Title:__________________
Date:___________________
Notices and communications should be Invoices should be addressed to:
addressed to:
Company Name: __________________________ _____________________________
Address: __________________________ _____________________________
__________________________ _____________________________
__________________________ _____________________________
__________________________ _____________________________
Designated Contact: __________________________ _____________________________
Telephone: __________________________ _____________________________
Facsimile: __________________________ _____________________________
<PAGE>
EXHIBIT A
MATERIALS TO BE DEPOSITED
Account Number ______________________
Depositor represents to Preferred beneficiary that deposit materials delivered
to DSI shall consist of the following:
Internet Liquidators Inc. - Code Module Listing
<TABLE>
<CAPTION>
[Confidential information filed [Confidential information filed [Confidential information filed
separately with the SEC] separately with the SEC] separately with the SEC]
<S> <C> <C>
" " "
" " "
" " "
" " "
" " "
" " "
" " "
" " "
" " "
" " "
" " "
" " "
" " "
" " "
" " "
" " "
" " "
" " "
" " "
" " "
" " "
" " "
" " "
" " "
" " "
" " "
" " "
" " "
</TABLE>
BID.COM International Inc.
Depositor Preferred Beneficiary
By:_____________________________ __________________________________
Name:___________________________ __________________________________
Title:____________________________ __________________________________
<PAGE>
__________________________________
Date:____________________________ __________________________________
I certify for Depositor that the above described deposit DSI has inspected and
accepted the above materials materials have been transmitted to DSI: (any
exception are noted above):
Signature:____________________________ Signature:______________________
Print Name:__________________________ Print Name:_____________________
Date:________________________________ Date:___________________________
Exhibit B
Send materials to: DSI, 9555 Chesapeake Drive, #200, San Diego, CA 92123
<PAGE>
EXHIBIT B
DESCRIPTION OF DEPOSIT MATERIALS
Depositor Company Name: Bid.com International Inc.
-----------------------------------------
Account Number:
-----------------------------------------
PRODUCT DESCRIPTION:
Product Name: [Confidential information Version: [Confidential
filed separately with the information filed
SEC] separately with the SEC]
Operating System: [Confidential information filed separately with the SEC]
Hardware Platform: [Confidential information filed separately with the SEC]
DEPOSIT COPYING INFORMATION:
Hardware required: [Confidential information filed separately with the SEC]
Software required: [Confidential information filed separately with the SEC]
DEPOSIT MATERIAL DESCRIPTION:
Qty Media Type & Size Label Description of Separate Item
- --------------------------------------------------------------------------------
(Excluding documentation)
Disk 3.5" or ________
1X DAT tape 4mm No Documentation
CD-ROM
Data Cartridge Tape DAT
24I
TK 70 or _______ tape
Magnetic tape _______
Documentation No Documentation
Other: ____________
<PAGE>
Listing Of Bid.Com Source Components
ILI Bid.com Modules
Databases: [Confidential information filed separately with the SEC]
Business Services: "
Data Services: "
Dynamic Export: "
Order Processing "
Administrator: "
Credit Card: "
Order Business Services: "
Utilities:
Category Builder: "
AdRotatorGenerator "
AssetMgmt: "
DB Services: "
Notification: "
Supporting S/W: "
Web: "
ILI Bid.com Modules (Dutch)
Business Services: "
Data Services: "
Dutch Server: "
Dutch Client: "
Internet Web: "
Admin Web: "
<PAGE>
SCHEDULE "F"
Site Activity Reporting Requirements
Pursuant to subsection 2.3(VII) of this Agreement, BID.COM shall deliver the
following site activity information to AIM with the frequency indicated below:
F.1 Daily Reports
1. number of page views.
F.2 Monthly Reports
1. Number of unique visitors;
2. top 15 domain names from which television traffic to the BID.COM Site
originated;
3. number of unique visits by product category offered;
4. average visit duration;
5. number of transactions;
6. average transaction value;
7. number of transactions by category;
8. number of transactions by product.
F.3 Additional Reports
In addition, BID.COM shall deliver the following site activity information as
indicated below:
1. purchase history of repeat visitors on a semi-annual basis;
2. advertising statistical reports at the request of AIM; and
3. other statistics as mutually agreed by the parties.
<PAGE>
SCHEDULE "G"
Net Revenue Reports
<PAGE>
<TABLE>
<CAPTION>
====================================================
Quarter
SUMMARY Month 1 Month 2 Month 3 Total
====================================================
<S> <C> <C> <C> <C>
(a) Sales Revenues XXX XXX XXX XXX
(b) Sales Returns and Allowances (XXX) (XXX) (XXX) (XXX)
(c) Cost of Goods Sold (XXX) (XXX) (XXX) (XXX)
Shipping and Handling Costs (XXX) (XXX) (XXX) (XXX)
Credit Card Fees (XXX) (XXX) (XXX) (XXX)
--------- --------- --------- ---------
Gross Margin XXX XXX XXX XXX
Less Revenue Share (XXX) (XXX) (XXX) (XXX)
--------- --------- --------- ---------
Net Margin XXX XXX XXX XXX
--------- --------- --------- ---------
TOP BID AUCTION DETAIL
Product Sales Top Bid Auction XXX XXX XXX XXX (a)
Shipping & Handling Sales Top Bid Auction XXX XXX XXX XXX (a)
Sales Return & Allowances Top Bid Auction (XXX) (XXX) (XXX) (XXX)(b)
Cost of Goods Sold Top Bid Auction (XXX) (XXX) (XXX) (XXX)(c)
--------- --------- --------- ---------
Gross Margin XXX XXX XXX XXX
--------- --------- --------- ---------
DUTCH AUCTION DETAIL
Product Sales Dutch Auction XXX XXX XXX XXX (a)
Shipping & Handling Sales Dutch Auction XXX XXX XXX XXX (a)
Sales Returns & Allowances Dutch Auction (XXX) (XXX) (XXX) (XXX)(b)
--------- --------- --------- ---------
Cost of Goods Sold Dutch Auction (XXX) (XXX) (XXX) (XXX)(c)
--------- --------- --------- ---------
DIRECT SALES DETAIL
Product Sales Direct XXX XXX XXX XXX (a)
Shipping & Handling Sales Direct XXX XXX XXX XXX (a)
Sales Returns & Allowances Direct (XXX) (XXX) (XXX) (XXX)(b)
Cost of Goods Sold Direct (XXX) (XXX) (XXX) (XXX)(c)
--------- --------- --------- ---------
Gross Margin XXX XXX XXX XXX
--------- --------- --------- ---------
</TABLE>
<PAGE>
SCHEDULE "H"
Net Promotional Revenue Reports
Pursuant to subsection 5.1(ii) of this Agreement, AIM shall provide a report of
Net Promotional Revenue to BID.COM in a format similar to the following: For the
calendar quarter beginning ____________, 19_____ and ending ___________, 19
____.
- ------------------------------------------------------------------------------
Advertiser Status Amount Paid
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Total Advertising Revenue $XX,XXX.XX
- ------------------------------------------------------------------------------
Total Net Promotional Revenue earned by AIM $XX,XXX.XX
Share of Net Promotional Revenue due to BID.COM $XXX.XX
<PAGE>
SCHEDULE "I"
BID.COM Marks
The BID.COM Marks licensed to AIM pursuant to this Agreement include:
1. BID.COM;
2. BID.COM + Design;
3. any derivations or modified versions incorporating the word BID.COM; and
4. any other marks mutually agreed between the parties.
OPERATING AGREEMENT
OF
AIM/NEW TECH LLC
A Delaware Limited Liability Company
OPERATING AGREEMENT OF AIM/NEW TECH LLC dated as of August 27, 1998 (this
"Agreement") by, among and between AIM/NEW TECH LLC, a Delaware limited
liability company (the "Company"), NEW TECH ENTERTAINMENT, LLC, a Delaware
limited liability company ("New Tech") and AMERICAN INTERACTIVE MEDIA, INC., a
Delaware corporation ("AIM" or "Management", and together with New Tech
collectively referred to as the "Members" and each individually as a "Member").
W I T N E S S E T H:
WHEREAS, as of the date hereof the Members have organized the Company as a
Delaware limited liability company pursuant to the Limited Liability Company Act
of the State of Delaware, as amended, Title 6, ss.ss. 18-101 et seq. (the
"Act"); and
WHEREAS, the Members and the Company desire to enter into this Agreement in
order to state the terms and conditions of the ongoing operation and management
of the Company.
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein and intending to be legally bound hereby, the Members and the
Company hereby agree as follows:
I. FORMATION
1.1 Formation; Name; Office. As of the date hereof, the Members have formed
the Company under and pursuant to the Act to be conducted under the name
"AIM/NEW TECH LLC". The business office of the Company shall be at 611 Broadway,
Suite 308, New York, New York 10012, or at such other place or places within the
New York metropolitan area as the Manager (as defined in Section 5.1 of this
Agreement) may from time to time designate or is otherwise agreed to by the
Members.
1.2 Purposes. The purposes for which the Company has been formed are:
(a) to develop, produce, distribute, license, lease, sell or otherwise deal
in and exploit, whether directly or indirectly, the entertainment productions
and information program ("Projects") set forth on Schedule A, as such Schedule
may be amended from time to time, for distribution on the Internet and to
exploit as appropriate any and all ancillary rights thereto, worldwide in
perpetuity, in any and all forms and media in or by any manner, method, device
(now known or hereafter devised) including but not limited to the Internet,
internet access appliances or services; over-the-air, network, direct-to-home,
subscription, pay-per-view, master antenna, multi-point closed circuit,
interactive or cable television; home video devices; other
<PAGE>
computer-related media which may be embodied in or delivered through magnetic,
digital, optical or laser-based software, CD-ROM, interactive software; compact
discs, optical discs, audio and audio-visual cassettes and discs, electronic
video recordings, holograms, ROM Card, silicon chip, on-line transmission to
computers, and on-line transmission to computer connected television or monitors
in the home or office; motion pictures, films and tapes for exhibition in all
media and in all gauges, whether for theatrical exhibition or for sale, lease or
license;
(b) to negotiate, execute and enter into and perform any and all contracts
and agreements necessary or desirable for, or otherwise related to, the
operation or management of the Company or the development, production,
distribution, leasing, licensing, merchandising or other exploitation of the
Projects;
(c) to accomplish any lawful business whatsoever or which shall at any time
appear conducive, to or expedient for, the protection or benefit of the Company
and its assets;
(d) to engage in any lawful act or activity for which a limited liability
company may be formed under the Act; and
(e) to engage in all activities necessary, customary, convenient or
incident to any of the foregoing.
1.3 Duration. The term of existence of the Company commenced on August 27,
1998 and shall end on December 31, 2048, unless the Company is earlier dissolved
in accordance with either the terms of this Agreement or the Act (the "Term").
1.4 Resident Office and Resident Agent. The registered office and resident
agent of the Company shall be as designated in the Certificate of Formation of
the Company (the "Certificate") or any amendment thereof. The registered office
and/or the resident agent may be changed from time to time by the Manager, upon
prior written notice to New Tech, in accordance with the Act. If the resident
agent shall ever resign, then the Manager shall promptly appoint a successor,
resident, agent and shall file an appropriate amendment to the Certificate.
1.5 Minimum Number of Members. At no time shall there be fewer than two (2)
Members.
II. CAPITAL CONTRIBUTIONS, LIABILITY AND AUTHORITY
2.1 Initial Commitments and Contributions.
(a) The percentage interest ("Percentage Interest"), initial capital
contribution and address of each Member are set forth on Schedule B hereto.
(b) Simultaneously with the execution and delivery of this Agreement, New
Tech shall deliver such documentation, including operating agreements, or other
agreements, in a form reasonably acceptable to AIM, relating to each project
("Project Operating Agreements") as New Tech shall have obtained at that time
(collectively, the "Escrow Documents"), and AIM shall deliver the funds
referenced in Sections 2.1(e) and 5.7(g) to Herrick, Feinstein LLP, as escrow
agent (the "Escrow Agent") pursuant to an escrow agreement in substantially the
form
-2-
<PAGE>
attached hereto as referenced in Sections 2.1(e) and all monthly installments as
they become due referenced in 5.7(g) to New Tech upon execution, delivery and
approval by AIM of a Project Operating Agreement for each of the five (5)
Projects referenced in 2.1(d), which Agreements shall be delivered to the Escrow
Agent within six (6) months of the execution and delivery of this Agreement. If
New Tech shall fail to deliver to the Escrow Agent a Project Operating Agreement
for each of such five (5) Projects, AIM may, at its option, terminate this
Agreement and shall have no further obligations or liabilities hereunder or, in
the alternative, AIM may elect to accept less than all the Project Operating
Agreements and reduce its payments therefor on a pro rata basis.
(c) Subject to Section 2.1(b), simultaneously with the execution and
delivery of this Agreement, New Tech shall, subject to Section 5.12 and the
Third Party Agreements, transfer, assign, to the extent currently assignable,
and otherwise contribute and convey to the Company any and all of its right,
title and interest in and to the projects and any story concepts, outlines,
music, text and graphics related to each Project and all ancillary rights
related thereto in the manner, form and method described in Section 1.2(a) and
all intellectual property, copyright, merchandising, licensing and promotional
rights derivative thereof (the "Rights"). New Tech, with the Manager's
cooperation when necessary, shall, subject to the Third Party Agreements (as
defined in Section 4.1), execute and deliver any and all necessary instruments,
assignments, or other documents required by Manager to vest all of New Tech's
right, title and interest in and to the Projects and related Rights in the
Company's name.
(d) Subject to Section 2.1(b), simultaneously with the execution and
delivery of this Agreement, New Tech shall obtain and deliver to the Company the
valid, effective signed assignments to the Company of the following five (5)
Projects:
Biz Buzz
Romance Land
Crimebeat
Stork Club
Cartoonland
(e) Subject to Section 2.1(b), simultaneously with the execution and
delivery of this Agreement (i) the Manager shall advance to the Company ONE
HUNDRED THOUSAND 00/100 DOLLARS ($100,000.00) in immediately available funds and
(ii) the Company shall pay New Tech such advanced amount as partial
reimbursement of costs incurred to date by New Tech in connection with the
development of the Projects; provided, however, that neither the Manager nor the
Company shall have any further obligations to reimburse New Tech for such costs
unless in accordance with a budget approved pursuant to this Agreement.
(f) No interest shall accrue on any capital contribution.
-3-
<PAGE>
2.2 Additional Contributions. No Member shall be obligated to make any
additional capital contribution to the Company.
2.3 Members' Liability. Except as otherwise provided in this Agreement, the
liability of the Members, as such, shall be limited to the amount of capital
contributions that the Members have made to the Company.
2.4 Uses of Capital Contributions. Any funds received by the Company
pursuant to this Article II shall be utilized by the Company for Company
purposes as determined by the Manager.
2.5 Withdrawal of Capital. Unless the prior written consent of the Members
shall have been obtained, no Member shall have the right to withdraw any part of
such Member's capital contributions prior to the liquidation and termination of
the Company pursuant to Article XI of this Agreement.
2.6 Source of Distributions. No Member, Manager or other Related Party (as
defined in Section 13.1 of this Agreement) shall be personally liable for the
return of the capital contributions of any other Member, or any portion thereof,
it being expressly understood that any such return shall be made solely from the
Company's assets.
III. TITLE TO THE PROPERTY OF THE COMPANY
3.1 Title to Property. Title to any and all property, real or personal,
tangible or intangible, owned by or leased to the Company shall be held in the
name of the Company.
3.2 Copyrights. Subject to any rights, obligations or provisions of any
Project Operating Agreement or Third Party Agreement, as described in Sections
4.1 and 4.2, Management and New Tech shall take all actions necessary to secure
and maintain copyrights in the name of the Company for each Project acquired,
produced and otherwise exploited by the Company. Upon liquidation and
termination of the Company, any and all copyrights existing in the name of the
Company shall be assigned, transferred and conveyed into the joint ownership of
New Tech and the Manager and all proceeds shall be shared one-half (1/2) to New
Tech and one-half (1/2) to the Manager, free and clear of any encumbrances or,
upon mutual consent of New Tech and the Manager, sold with profits from such
sale to be distributed equally between New Tech and the Manager in accordance
with Section 11.3. Notwithstanding the foregoing, any licenses granted by the
Company to third party users prior to the liquidation and termination of the
Company, shall remain in full force and effect pursuant to their terms.
3.3 Intellectual Property Rights. Subject to the reversion rights of New
Tech pursuant to Section 5.12, all of the program content developed in
connection with or arising out of the development and production of any Project
shall be (subject to the Third Party Agreements) the exclusive property of the
Company, including (a) the ultimate title of any program and any working titles,
(b) any other elements which are or could be the subject of trademarks,
tradenames, or copyrights; and (c) the script, story lines, episode themes,
characters, personas, set designs, costumes, and ideas for all of the foregoing
which are developed and/or made known to the Company by any means.
-4-
<PAGE>
IV. REPRESENTATIONS, WARRANTIES AND COVENANTS
4.1 Transfer of Rights and Assets. New Tech represents and warrants to the
Company and each Member that it owns and is transferring, assigning or otherwise
conveying all right, title and interest in and to the Projects and the Rights to
the Company free and clear of any claim, charge, lien, pledge, security
interest, transfer restriction, encumbrance, or other restriction or limitation
whatsoever created or caused by New Tech or of which New Tech has knowledge, but
subject to certain underlying rights agreements ("Third Party Agreements")
described in Section 4.2. New Tech further represents and warrants that it has
created the projects either alone or together with parties to the Third Party
Agreements.
4.2 Third Party Agreements. Development, production and distribution of
each project by the Company is subject to certain limited liability company
operating agreements, joint venture agreements restrictions, conditions and
terms of the Third Party Agreements. New Tech represents and warrants that the
Third Party Agreements set forth in Schedule D are valid, subsisting and in full
force and effect and that there are no defaults thereunder and covenants that it
shall use its best efforts to assist the Manager to effectuate commercially
reasonable amendments to the Third Party Agreements as the Manager shall deem
necessary and desirable.
4.3 Full Power and Authority. Each Member represents and warrants that it
has the full power and authority to execute, deliver and perform this Agreement.
V. MANAGEMENT OF THE COMPANY; POWERS AND DUTIES OF THE MANAGER; CONFLICTS OF
INTEREST; COMPENSATION OF MEMBERS; COSTS
5.1 Management of Business.
(a) The Company shall be managed by a manager (the "Manager") who shall be
designated by the Members in accordance with Section 5.1(b) of this Agreement.
(b) The Members hereby appoint Management as the Manager to serve for the
Term. The address of the Manager is set forth on Schedule E attached hereto.
(c) If at any time there is no Manager, any decision delegated herein to
the Manager shall be decided by unanimous consent of the Members.
5.2 General Powers of Manager. Subject to the terms and provisions of
Sections 5.7(f) and 7.4 of this Agreement, consistent with Approved Project
Budget(s) and an Approved Annual Budget and otherwise not inconsistent with the
provisions of this Agreement, any and all decisions concerning the day-to-day
business and affairs of the Company shall be made by the Manager.
5.3 Duties and Rights of the Manager and New Tech.
(a) The Manager has the power, on behalf of the Company, to do all things
necessary or convenient to carry out the business and affairs of the Company.
The Manager shall, with the advice and consent of New Tech, supervise the
operation, management, conduct
-5-
<PAGE>
and control of the development, production and distribution phases of each
Project and the overall day-to-day operation of, and matters relating to, the
Company or its properties.
(b) The Manager shall be responsible for the creation, development and
maintenance of Internet sites for the Projects, hiring and compensation of
personnel necessary to effectuate the foregoing and for the distribution of the
Projects on the Internet and all television media. Manager shall provide to New
Tech, to the extent reasonably practicable, to have meaningful creative
interface regarding the projects and consultations with respect to any works,
negotiations or transactions in progress, the development of all projects, and
the management and operation of the Company.
(c) The Manager and New Tech shall devote, on a non-exclusive basis, such
of their time and attention to the business and affairs of the Company and shall
provide their expertise and know-how in the development and production of
programming content for Internet broadcast use, including, but not limited to,
their business, professional and talent contacts (including individual artists
and performing groups) to the extent such contracts would prove useful to the
Company in the development, production and exploitation of the projects as shall
be reasonably necessary to effectuate the Company's business and purpose.
(d) New Tech shall provide consulting services for the creative design of
each Internet site and shall be responsible for seeking network television
and/or syndication of the Projects.
5.4 Conflicts of Interest. The fact that a Manager, a Member or any other
Related Party is directly or indirectly interested in or connected with any
person, firm or corporation employed by the Company or from whom the Company may
buy merchandise, services or other property shall not prohibit the Manager from
employing, or from dealing with, such Member, Manager or other Related Party on
behalf of the Company, if the compensation, price or fee therefor is comparable
and competitive with the compensation, price or fee therefor chargeable by an
unaffiliated person who is rendering comparable services or selling or leasing
comparable goods to entities conducting businesses similar to that conducted by
the Company.
5.5 Engaging in Other Activities. Notwithstanding any provision contained
in this Agreement to the contrary and the fact that the Company shall have the
exclusive right to exploit each Project listed on Schedule A, each Member may
engage in, acquire and possess, without accountability to the Company or other
Members, any calling, business, profession, investment or interest independently
or with others, including, but not limited to, the acquisition, ownership,
financing, leasing, operation, management or development of any interests in any
business or asset even if competitive with that of the Company.
5.6 Compensation of Members and the Manager. Unless expressly provided
herein to the contrary, no Member shall be entitled to any compensation for such
Member's services to the Company unless otherwise determined by the mutual
consent of the Members.
5.7 Budgets, Advances, Operating Costs and Expenses.
(a) The Manager shall submit a detailed production and distribution budget,
and updates and revisions thereto, for each Project and an annual operating
budget for the
-7-
<PAGE>
Company (upon approval, each an "Approved Project Budget" and an "Approved
Annual Budget," respectively) to New Tech for approval, which approval shall not
be unreasonably withheld.
(b) On or before December 31, 1998, New Tech shall use its best efforts to
obtain and deliver to the Company the valid, effective signed assignments to the
Company of the following four (4) Projects, or mutually agreed upon substitute
projects:
Sci-Fi Universe
Pop City
I Need Help
Platinum (Over 50)
Upon the delivery of each such assignment, the Manager shall advance to the
Company TWENTY-FIVE THOUSAND 00/100 DOLLARS ($25,000.00) in immediately
available funds. Upon receipt by the Company from the Manager of such advance,
the Company shall pay New Tech such advanced amount as partial reimbursement of
costs incurred by New Tech in connection with the development of the Projects;
provided, however, that neither the Manager nor the Company shall have further
obligations to reimburse New Tech for any additional reimbursement of such costs
unless in accordance with a budget approved pursuant to this Agreement. So long
as New Tech shall have used its best efforts to obtain and delivery such
assignments, New Tech's failure to obtain and deliver one or more of such
assignments shall not be deemed to be a breach of this Agreement; provided that
the Manager shall not be obligated to advance and the Company shall not be
obligated to pay the TWENTY-FIVE THOUSAND 00/100 DOLLARS ($25,000.00) to New
Tech for any assignment related to any Project which is not obtained and
delivered to the Company by New Tech.
(c) The Manager shall advance funds to the Company sufficient to cover all
costs and expenses of the operations of the Company, including but not limited
to, the supplying of the personnel, management, office space and production
materials and facilities reasonably required (either at the Manager's existing
facilities at 611 Broadway, New York, New York, or other mutually agreeable
space) and related overhead costs, including but not limited to, office
supplies, telephone services, utilities, reception and secretarial services.
(d) The Manager shall also advance funds to cover expenses incurred by the
Company in connection with the creation, production, marketing and promotion of
the Projects and legal and accounting expenses.
(e) The advances provided by the Manager described in Sections 2.1(e),
5.7(b), 5.7(c), 5.7(d) and 5.7(g) shall be subject to recoupment by Manager on a
first priority basis as expenses of the Company prior to the allocation of Net
Profits among Members or otherwise. Any advances required to be supplied by
Manager pursuant to this Section 5.7 shall be provided on a timely, "as
required" basis.
-8-
<PAGE>
(f) Unless, and to the extent, provided for in an Approved Project Budget
or an Approved Annual Budget, neither the Manager nor New Tech without the prior
written consent of the other shall (i) incur any debt, obligation or other
liability on behalf of the Company, (ii) borrow any monies from or lend any
monies to the Company, (iii) accept or endorse any commercial paper, (iv) make
use of any of the Company's credit, property or assets, (v) assign, transfer, or
otherwise convey any rights or delegate any duties arising out of any contract,
agreement, commitment or understanding to which the Company is a party or has
agreed to be bound, or (vi) solely liable for any debt incurred or other
obligation assumed by such Member in excess of an Approved project Budget, an
approved Annual Project or in violation of any tem or provision of this
Agreement, without any right to contribution from another Member.
(g) Subject to Section 2.1(b), the Manager shall advance to the Company
funds necessary for the Company to pay New Tech a consulting fee of $240,000 per
year for non-exclusive consulting services to the Company for the initial two
(2) years of this Agreement. The consulting fee will be payable monthly in
advance in equal installments, with the first payment due upon the execution and
delivery of this Agreement. New Tech shall cause Herman Rush, Gail Sonnenschein
and/or Howard Sonnenschein and such other employees and agents of New Tech, as
it determines, to provide such consulting services.
5.8 Production Credits. Gail Sonnenschein, Howard Sonnenschein, Herman Rush
and other AIM personnel as shall be determined by AIM not to exceed three
persons shall each be accorded equal credits as "Executive Producer" or
"Executive Consultant" as each may elect; the Members shall each be accorded
equal credits as a `Production Company"; and the Company shall receive a
"Production" credit, on the site screen, video, print or tape production of each
Project.
5.9 Subsidiaries. The Company shall establish for each Project, a
wholly-owned entity, in either corporate or limited liability company form, as
the Manager and New Tech shall so agree. The Company shall grant an exclusive
license to such wholly-owned entity to use and exploit any and all copyrighted
material and any other Rights and Assets relating to that Project.
5.10 Right of First Refusal.
(a) The Management shall have, at any time, the right of first refusal to
acquire all rights to develop, produce, distribute, lease, license or otherwise
deal in and exploit any and all entertainment productions and information
programs and all ancillary rights thereto, created or obtained by New Tech for
use on the Internet (the "New Project"), as a new project of the Company.
Notwithstanding the immediately preceding sentence, the right of first refusal
shall not apply to those productions or programs listed on Schedule F which
previously have been presented to the Manager for inclusion on Schedule A and
which the Manager has rejected.
(b) Prior to discussing or negotiating with any third party with respect to
a New Project, New Tech shall first notify in writing and discuss and negotiate
exclusively and in good faith with the Manager with respect to the terms and
conditions upon which the Manager may acquire rights to the New Project,
including any ancillary rights thereto for a thirty (30) day
-8-
<PAGE>
period following receipt by the Manager of New Tech's notice (the "First Refusal
Negotiations Period").
If after the First Refusal Negotiations Period, no agreement is reached
between New Tech and the Manager with respect to the foregoing, then New Tech
shall have the right to enter into negotiations with any other third party with
respect to the New Project; provided, that New Tech shall not enter into any
agreement with any such third party without first delivering to the Manager a
written notice of all material terms and conditions of the offer if any to such
third party. Such notice shall constitute an exclusive, irrevocable offer (the
"Offer") to contract with the Manager on such terms and conditions as set forth
in the Offer; and the Manager shall have a period of ten (10) business days in
which to accept the Offer. If the Manager does not accept the Offer, New Tech
may then enter into an agreement with such third party during the sixty (60)
business day period (the "Contract Period") following expiration of such ten
(10) business days, upon the same terms and conditions as included in the Offer.
If New Tech has not contracted with a third party on or before conclusion of the
Contract Period, upon the same terms and conditions as included in the Offer,
then all rights granted to the Manager pursuant to this Section 5.10 shall
remain in effect with respect to such New Project. The failure of the manager to
accept or match any offer shall not cancel, terminate, or act as a waiver of,
any of the Manager's rights under this Section 5.10 with respect to future New
Projects.
(c) In the event that the Manager exercises its right of first refusal
described in this Section 5.10, such New Project shall be listed on Schedule A
and accordingly, shall be subject to all of the terms and conditions of this
Agreement.
5.11 Reimbursement of Expenses. The Company shall reimburse each of the
Members and the Manager for reasonable business expenses incurred in connection
with either party's activities conducted on behalf of the Company; provided,
however, that prior to reimbursing any Member for such reasonable business
expenses, the Manager may require such Member to submit receipts and any other
reasonably requested documentation to verify such expenses.
5.12 Reversion. In the event that the end of the initial six (6) months
from the date the Company receives (i) a valid, effective signed assignment for
such Project from New Tech pursuant to Sections 2.1(d) and 5.7(b) and (ii) a
valid, effective signed assignment (or similar acknowledgment, joint venture
agreement or definitive understanding which shall vest in the Company all rights
necessary to exploit such Project) from any third party having rights in such
Project, the Manager has failed, or thereafter fails, to use its good faith best
efforts as commercially reasonable, and to expend funds in accordance with the
Approved Project Budget, to develop and produce a Project towards an operating
Internet site or other commercial exploitation as contemplated herein, all
rights in and to such unproduced and inoperative Project shall immediately
revert to New Tech. New Tech shall then have the sole and absolute right to
develop, produce, distribute and exploit such Project and shall have no further
obligations to the Company or the Manager with respect to such Project, except
that the Manager shall be entitled to recover from the first gross revenues of
each such project all of the Manager's out of pocket expenses incurred in
connection with such Project and any agreements of New Tech with a third party
for such reverted Project shall provide for such priority recoupment.
-9-
<PAGE>
5.13 Authorized Representatives and Consents. The Manager and New Tech
shall each appoint the authorized representatives listed on Schedule E to whom
all necessary consents or approvals which may be required under this Agreement
shall be addressed and may be granted. Any consent required hereunder shall not
be withheld except if in good faith and for commercially reasonable and
non-arbitrary reasons.
5.14 Executive Personnel. In the event that both Mark Graff and William
Zaccheo are no longer associated with the Manager, the Manager agrees to provide
substitute executives with comparable abilities and experience.
VI. CONFIDENTIALITY
6.1 Confidentiality. Each of the Members shall use its best efforts to
safeguard the secrecy and confidentiality of all Confidential and Proprietary
Information (as defined below) of the Company and shall not disclose, directly
or indirectly, any of the foregoing to any third party nor use Confidential and
Proprietary Information for any purpose except for the benefit of the Company
except: (i) information which at the time of disclosure is part of the public
knowledge or literature and is readily accessible to such third party through no
act of a member; provided that any combination of features shall not be deemed
within this exception merely because individual features are part of the public
knowledge or literature and readily accessible to such third party, but only if
the combination itself and its principle of operation are part of the public
knowledge or literature and are readily accessible to such third party; (ii)
information required by law to be disclosed; or (iii) as otherwise may be
permitted by the terms of this Agreement.
6.2 Confidential and Proprietary Information. "Confidential and Proprietary
Information" shall mean all confidential and proprietary information of the
Company, including, without limitation, all technical and creative processes and
information relating to or concerning the Projects or the Company, all tangible
and intangible property owned by, or licensed to, or otherwise used by the
Company or its affiliates including, without limitation, ideas, concepts,
designs, music, graphics, text, methods, techniques, projects, programs,
computer software, databases, copyrights, trademarks, trade names, service
names, service marks, logos and proprietary rights relating thereto, marketing,
licensing and distribution strategies, plans or projections, royalty or
licensing arrangements, and all other business related information which ahs not
been publicly disclosed by the Company or its affiliates, whether such
information is in written, graphic, recorded, photographic or electronic data.
Any person who has or may have access to Confidential Information shall agree to
be bound by and comply with the confidentiality provisions of this Article VI.
VII. MEETINGS AND VOTING OF MEMBERS; ACTIONS REQUIRING MEMBERSHIP APPROVAL
7.1 Meetings of Members. Meetings of the Members may be called at any time
by the Manager or by any of the Members. Upon receipt of a written request
either in person or by certified mail that a meeting is to be held and stating
the purposes of the meeting, the Manager shall provide all of the Members,
within ten (10) days after receipt of said request, written notice (either in
person or by certified mail) of the meeting and the purposes of such meeting. No
meeting shall be held less than five (5) nor more than sixty (60) days after
notice thereof;
-10-
<PAGE>
provided, however, that any Member may, with respect to itself, waive the notice
requirements herein set forth.
7.2 Voting by Members. Whenever under this Agreement the consent or
approval of a Member is required, the Member or Manager requesting the same
shall solicit such consent or approval by a notice given in accordance with
Section 15.4 of this Agreement or at a meeting held by the Members.
7.3 Action by Written Consent Without a Meeting. Any action required or
permitted to be taken at an annual or special meeting of the Members may be
taken without a meeting, without prior notice, and without a vote, if consents
in writing, setting forth the action so taken, are assigned by the Members
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all Membership Interests
entitled to vote on the action were present and voted. Every written consent
shall bear the date and signature of each Member who signs the consent.
7.4 Actions Requiring Membership Approval. Except as expressly set forth in
this Agreement, no act shall be taken, sum expended, decision made, obligation
incurred or power exercised by the Manager on behalf of the Company except with
the unanimous consent of all of the Members including, without limitation, the
following matters:
(a) The admission of additional Members to the Company or the creation of a
new class of members or membership interest in the Company;
(b) The sale of all or substantially all of the assets and property of the
Company; and
(c) Any merger, consolidation or reorganization of the Company with another
entity.
VIII. ACCOUNTING PROVISIONS
8.1 Fiscal and Taxable Year. The fiscal and taxable year of the Company
shall be the calendar year.
8.2 Books and Accounts.
(a) Complete and accurate books and accounts shall be kept and maintained
for the Company at the Company's principal place of business or at such other
place as the Manager shall select. Such books and accounts shall be kept for
fiscal and tax purposes on the cash or accrual basis, as the Manager shall
determine, and shall include separate accounts for each Member. A list of the
names and addresses of the Members shall be maintained as part of the books and
records of the Company. Each Member or such member's duly authorized
representatives, at such Member's own expense and upon delivering advance
written notice to the Company, shall at all reasonable times have access to, and
may inspect and make copies of, such books and accounts and any other records of
the Company.
-11-
<PAGE>
(b) All funds received by the Company shall be deposited in the name of the
Company in such bank account or accounts as the Manager may designate from time
to time, and withdrawals therefrom shall be made upon the signature of the
Manager or upon such other signature or signatures on behalf of the Company as
the Manager may designate from time to time. In the discretion of the Manager,
all deposits and other funds not needed in the operation of the Company's
business may be deposited in interest-bearing bank accounts, in money market
funds, or invested in treasury bills, certificates of deposit, U.S. government
security-backed repurchase agreements or similar short-term money market
instruments, or funds investing in any of the foregoing or similar types of
short-term investments.
8.3 Financial Reports.
(a) The Manager shall endeavor to cause the Company to provide each Member
on or about April 1 of each year, with financial statements including a balance
sheet and the related statements of income and changes in Company capital and
changes in financial position for the prior year.
(b) The Manager shall cause to be prepared after the end of each taxable
year of the Company and filed, on or before their respective due dates (as the
same may be extended), all federal and state income tax returns of the Company
for such taxable year and shall take all action as may be necessary to permit
the Company's regular accountants to prepare and timely file such returns. Form
1065 (Schedule K-1) shall be sent to each Member after the end of each taxable
year reflecting the Member's pro rata share of income, loss, credit and
deductions for such taxable year.
8.4 Tax Elections. Management shall be the Company's Tax Matters Partner
within the meaning of Section 6231 of the Internal Revenue Code of 1986, as
amended (the "Code").
8.5 Expenses. To the extent practicable, all expenses of the Company shall
be billed directly to, and be paid by, the Company.
IX. ADMISSION OF SUBSTITUTE MEMBERS; TRANSFER BY A MEMBER; DISABILITY OF A
MEMBER; CONTINUATION OF THE COMPANY
9.1 Admission of Substitute Members. Upon the prior written consent (which
consent may be granted or withheld for any reason or no reason) of all of the
Members, the Manager shall admit to the Company as a substitute member any
person or entity who shall have acquired all or any portion of the Membership
Interest of one or more Members pursuant to a written assignment, provided that
the provisions of this Article IX shall have been complied with.
9.2 Transfer of a Member's Interest.
(a) A Member may not, without the prior written consent of all of the
Members, sell, transfer, assign or otherwise dispose of, or permit, voluntarily
or involuntarily, any security interest, pledge, mortgage, lien, charge,
encumbrance, adverse claim, preferential arrangement or restriction of any kind
(collectively an "Encumbrance") upon, all or any portion of such Member's
Interest in the Company. Any such purported sale, transfer, assignment or
-12-
<PAGE>
other disposition or Encumbrance of a Member's Interest (hereinafter
collectively referred to as a "Transfer") without such consent shall be void and
shall not bind the Company. If all of the Members have consented to the
Transfer, such Transfer may be made only if (i) the provisions of Section 9.3 of
this Agreement do not otherwise prohibit the Transfer, (ii) a duly executed and
acknowledged counterpart of the instrument effecting such Transfer in form and
substance satisfactory to the Members shall have been delivered to Members, and
the assignor shall have indicated such intention of substitution in the
instrument effecting such Transfer, (iii) the assignee shall have expressly
agreed to be bound by the provisions of this Agreement and to assume all of the
obligations imposed upon Members hereunder, (iv) the assignor and the assignee
shall have executed or delivered such other instruments as the Members may deem
necessary or desirable to effectuate such admission, including, but not limited
to, an opinion of counsel that the Transfer complies with the registration
provision of the Securities Act of 1933, as amended (the "Securities Act") and
any applicable securities or "Blue Sky" law of any state or other jurisdiction,
or an exemption therefrom, and (v) the assignor or assignee shall have paid all
reasonable expenses and legal fees relating to the Transfer and, if all of the
Members so permit, the assignee's admission as a Member, including, but not
limited to, the cost of any required counsel's opinion and of preparing, filing
and publishing any amendment to the Certificate necessary to effect such
admission.
(b) The consent of the Members shall not be required for a Transfer of all
or a part of a Member's economic interest in Company distributions, for no
consideration, to a third party or to a trustee for the benefit of the assignor,
provided that such Transfer is otherwise made in accordance with and subject to
the provisions of Section 9.2(a) of this Agreement and this Section 9.2(b).
However, such assignee shall not be admitted as a substitute Member without the
consent of all of the Members. Any transferee of a Member's Interest in the
Company who is not admitted to the Company as a substitute Member shall be
entitled to receive, to the extent assigned, the distributions to which the
assigning Member would be entitled, but shall have no right to participate in
the management and affairs of the Company, exercise any voting or other rights
of a Member or be entitled to become a Member.
9.3 Further Limitations on Transfers of Members' Interests. In no event may
a Transfer be made if the Transfer would result in (i) the termination of the
Company as a limited liability company for federal income tax purposes pursuant
to Section 708(b)(1)(B) of the Code, or (ii) the dissolution of the Company
pursuant to the Act; and, if so attempted, the Transfer shall be void and shall
not bind the Company. In making the determination whether a Transfer will result
in such a termination, the Members may require the assignee to furnish at such
assignee's expense an opinion of counsel passing on this issue. In no event may
a Transfer be made to (and no substitute Member shall be admitted to the Company
who is) a person below the age of twenty-one (21) years (or the local age of
majority, if higher) or a person who has been adjudged to be insane or
incompetent, and any purported Transfer to any such person shall be void and
shall not bind the Company. As a condition of recognizing a Transfer, the
Manager may require such proof of age and competency of the assignee as the
Members may deem necessary.
9.4 Disability of a Member. Upon the dissolution, retirement, withdrawal,
bankruptcy or termination of a Member or the making by a Member of an assignment
for the benefit of creditors or any other event which terminates the continued
membership of a Member in the Company (each of the foregoing being herein called
a "Disabling Event"), the Company
-13-
<PAGE>
shall be dissolved; unless within ninety (90) days after the occurrence of a
Disabling Event with respect to any Member, all of the surviving Members consent
to continue the business of the Company pursuant to Section 9.5 of this
Agreement and to the admission of one or more Members as necessary and the
appointment of one or more Managers as necessary.
9.5 Continuation of the Company. If the Company is continued following a
Disabling Event with respect to any Member or the Manager, any substitute Member
or Manager shall assume and shall be bound by the provisions of this Agreement.
For the purposes of this Agreement, unless the context otherwise requires: (i)
any substitute Member, upon compliance with the provisions of this Article IX
and such individual's or entity's admission as a Member, shall be included
within the meaning of the term "Member"; and (ii) any substitute Manager, upon
compliance with the provisions of this Article IX and such individual's or
entity's admission as the Manager, shall be included within the meaning of the
term "Manager."
9.6 Affiliates. No provision of this Agreement shall restrict in any way
the Transfer of any Membership Interest to another Member, or to an entity in
which the transferor owns or controls a minimum fifty percent (50%) interest.
X. DISTRIBUTION AND ALLOCATIONS
10.1 Definitions. As used in this Agreement, the following terms shall have
the following meanings:
(a) "Capital Account" means, with respect to any Member, the Capital
Account maintained for such Member in accordance with the following provisions:
(i) To each Member's Capital Account there shall be credited (A) such
Member's Capital Contributions, and (B) the amount of any Company
liabilities assumed by such Member or which are secured by any property
distributed to such Member. The principal amount of a promissory note which
is not readily traded on an established securities market and which is
contributed to the Company by the maker of the note (or a Member related to
the maker of the note within the meaning of Regulations Section
1.704-1(b)(2)(ii)(c)) shall not be included in the Capital Account of any
Member until the Company makes a taxable disposition of the note or until
(and to the extent) principal payments are made on the note, all in
accordance with Regulations Section 1.704-1(b)(2)(iv)(d)(2);
(ii) To each Member's Capital Account there shall be debited (A) the
amount of money and the Gross Asset Value of any property distributed to
such Member pursuant to any provision of this Agreement, (B) such Member's
distributive share of Losses and (C) the amount of any liabilities of such
Member assumed by the Company or which are secured by any property
contributed by such Member to the Company;
(iii) In the event of a Transfer of Interests in accordance with the
terms of this Agreement, the transferee shall succeed to the Capital
Account of the transferor to the extent it relates to the Transfer of
Interests; and
-14-
<PAGE>
(iv) In determining the amount of any liability for purposes of
subparagraphs (i) and (ii) above there shall be taken into account Code
Section 752(c) and any other applicable provisions of the Code and
Regulations.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Regulations. In the event the Manager shall determine that
it is prudent to modify the manner in which the Capital Accounts, or any debits
or credits thereto (including, without limitation, debits or credits relating to
liabilities which are secured by contributed or distributed property or which
are assumed by the Company or any Members) are computed in order to comply with
such Regulations, the Manager may make such modification, provided that it is
not likely to have a material effect on the amounts distributed to any Person
pursuant to Article XI hereof upon the dissolution of the Company. The Manager
also shall (i) make any adjustments that are necessary or appropriate to
maintain equality between the Capital Accounts of the Members and the amount of
capital reflected on the Company's balance sheet, as computed for book purposes,
in accordance with Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any
appropriate modifications in the event unanticipated events might otherwise
cause this Agreement not to comply with Regulations Section 1.704-1(b).
(b) "Gross Asset Value" means with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by a Member
to the Company shall be the gross fair market value of such asset, as
determined by the Manager provided that the initial Gross Asset Values of
the assets contributed to the Company pursuant to Section 2.1 hereof shall
be as set forth in such section;
(ii) The Gross Asset Values of all Company assets shall be adjusted to
equal their respective gross fair market values (taking Code Section
7701(g) into account), as determined by the Manager as of the following
times: (A) the acquisition of an additional interest in the Company by any
new or existing Member in exchange for more than a de minimis Capital
Contribution; (B) the distribution by the Company to a Member of more than
a de minimis amount of Company property as consideration for an interest in
the Company; and (C) the liquidation of the Company within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), provided that an adjustment
described in clauses (A) and (B) of this paragraph shall be made only if
the Manager reasonably determines that such adjustment is necessary to
reflect the relative economic interests of the Members in the Company;
(iii) The Gross Asset Value of any item of Company assets distributed
to any Member shall be adjusted to equal the gross fair market value
(taking Code Section 7701(g) into account) of such asset on the date of
distribution as determined by the Manager; and
(iv) The Gross Asset Values of Company assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code
-15-
<PAGE>
Section 734(b) or Code Section 743(b), but only to the extent that such
adjustments are taken into account in determining Capital Accounts pursuant
to Regulations Section 1.704-1(b)(2)(iv)(m) and subparagraph (vi) of the
definition of "Profits" and "Losses"; provided, however, that Gross Asset
Values shall not be adjusted pursuant to this subparagraph (iv) to the
extent that an adjustment pursuant to subparagraph (ii) is required in
connection with a transaction that would otherwise result in an adjustment
pursuant to this subparagraph (iv).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
subparagraph (ii) or (iv), such Gross Asset Value shall thereafter be adjusted
by the depreciation taken into account with respect to such asset, for purposes
of computing Profits and Losses.
(c) "Losses" has the meaning set forth in the definition of "Profits" and
"Losses."
(d) "Profits" and "Losses" mean, for each taxable year, an amount equal to
the Company's taxable income or loss for such taxable year, determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments (without duplication):
(i) Any income of the Company that is exempt from federal income tax
and not otherwise taken into account in computing Profits or Losses
pursuant to this definition of "Profits" and "Losses" shall be added to
such taxable income or loss;
(ii) Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant
to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into
account in computing Profits or Losses pursuant to this definition of
"Profits" and "Losses" shall be subtracted from such taxable income or
loss;
(iii) In the event the Gross Asset Value of any Company asset is
adjusted pursuant to subparagraphs (ii) or (iii) of the definition of Gross
Asset Value, the amount of such adjustment shall be treated as an item of
gain (if the adjustment increases the Gross Asset Value of the asset) or an
item of loss (if the adjustment decreases the Gross Asset Value of the
asset) from the disposition of such asset and shall be taken into account
for purposes of computing Profits or Losses;
(iv) Gain or loss resulting from any disposition of property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the property
disposed of, notwithstanding that the adjusted tax basis of such property
differs from its Gross Asset Value;
(v) If the Gross Asset Value of an asset differs from its adjusted
basis for federal income tax purposes, in lieu of the depreciation,
amortization, and other cost recovery deductions taken into account in
computing such taxable income or loss, there shall be taken into account
depreciation in an amount which bears the same ratio to such beginning
Gross Asset Value as the federal income tax depreciation, amortization, or
-16-
<PAGE>
other cost recovery deduction for such taxable year bears to such beginning
adjusted tax basis; provided, however, that if the adjusted basis for
federal income tax purposes of an asset at the beginning of such taxable
year is zero, depreciation shall be determined with reference to such
beginning Gross Asset Value using any reasonable method selected by the
Manager;
(vi) To the extent an adjustment to the adjusted to adjusted tax basis
of any Company asset pursuant to Code Section 734(b) or Code Section 743(b)
is required, pursuant to Regulations Section 1.704-(b)(2)(iv)(m)(2) or (4),
to be taken into account in determining Capital Accounts as a result of a
distribution other than in liquidation of a Member's interest in the
Company, the amount of such adjustment shall be treated as an item of gain
(if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis) from the disposition of such asset and
shall be taken into account for purposes of computing Profits or Losses and
shall be specially allocated to the Member or Members to whom such
adjustment relates.
(e) "Regulation" means the income tax regulations promulgated from time to
time by the U.S. Department of the Treasury.
10.2 Distributions of Net Cash Flow. Except as otherwise required by this
Agreement or by law, Net Cash Flow (as defined) shall be distributed, at such
times as the Manager shall determine (but at least annually) to the Members in
accordance with their respective Percentage Interests.
(a) "Net Cash Flow" means the gross cash proceeds paid less any debts and
liabilities of the Company less the portion thereof used to pay or establish
reserves for all Company expenses, debt payments, capital improvements,
replacements, and contingencies, all as determined by the Manager, provided,
however, that such reserves shall not cause the amount of any distribution of
Net Cash Flow to be insufficient for each Member to pay its income tax
liability. "Net Cash Flow" shall not be reduced by depreciation, amortization,
cost recovery deductions, or similar allowances, but shall be increased by any
reductions of reserves previously established pursuant to the first sentence of
this definition.
10.3 Allocation of Profits and Losses.
(a) Subject to Section 5.7(e), Profits and Losses shall be allocated among
the Members in accordance with their respective Percentage Interests.
10.4 No Return of Distributions. No Member shall have any obligation to
refund to the Company any amount that shall have been distributed to such Member
pursuant to this Agreement, subject, however, to the rights of any third party
creditor under law.
10.5 Allocations between Assignor and Assignee Members. In the case of a
Transfer, the assignor and assignee shall each be entitled to receive
distributions of Net Cash Flow and allocations of Net Profits or Net Losses as
follows:
-17-
<PAGE>
(a) Unless the assignor and assignee agree to the contrary and shall so
provide in the instrument effecting the Transfer, distributions shall be made to
the person owning the Member's Membership Interest on the date of the
distribution; and
(b) Profits or Losses shall be allocated by the number of days of the
fiscal year each person held the Member's Interests.
10.6 Tax Credits. Any Company tax credits shall be allocated among the
Members in proportion to their respective Percentage Interests.
10.7 Deficit Capital Accounts. Except as otherwise provided herein or under
the Act, no Member shall be required at any time to make up any deficit in such
Member's Capital Account.
10.8 Tax Allocations: Code Section 704(c).
In accordance with Code Section 704(c) and the Regulations thereunder,
income, gain, loss, and deduction with respect to any property contributed to
the capital of the Company shall, solely for tax purposes, be allocated among
the Members so as to take account of any variation between the adjusted basis of
such property to the Company for federal income tax purposes and its initial
Gross Asset Value (computed in accordance with the definition of Gross Asset
Value) using such method as the Manager shall select.
In the event the Gross Asset Value of any Company asset is adjusted
pursuant to subparagraph (ii) of the definition of Gross Asset Value, subsequent
allocations of income, gain, loss, and deduction with respect to such asset
shall take account of any variation between the adjusted basis of such asset for
federal income tax purposes and its Gross Asset Value in the same manner as
under Code Section 704(c) and the Regulations thereunder.
Any elections or other decisions relating to such allocation shall be made
by the Manager in any manner that reasonably reflects the purpose and intention
of this Agreement. Allocations pursuant to this Section 10.8 are solely for
purposes of federal, state, and local taxes and shall not affect, or in any way
be taken into account in computing, any Member's Capital Account or share of
Profits, Losses, other items, or distributions pursuant to any provision of this
Agreement.
XI. LIQUIDATION AND TERMINATION OF THE COMPANY
11.1 General. The Company may liquidate and terminate its operations upon
(i) unanimous consent of all the Members, or (ii) a material breach of this
Agreement by a Member, which breach is not cured within fifteen (15) business
days after written notice of such breach from the non-defaulting Member. The
right of termination of the non-defaulting Member is not intended to release the
defaulting Member from any obligations or liabilities which it may have to the
non-defaulting Member, whether pursuant to the provisions of this Agreement or
at law or in equity, whether or not the non-defaulting Member elects to
terminate. Upon the termination of the Company (unless the Company is continued
pursuant to Sections 9.4 and 9.5 of this Agreement), the Company shall be
liquidated in accordance with this Article XI and the Act. The liquidation shall
be conducted and supervised by the Manager, or if there shall be no
-18-
<PAGE>
Manager, by a person who shall be designated for such purpose by all of the
Members (the Manager or person for such purpose so designated being herein
referred to as the "Liquidating Agent"). The Liquidating Agent shall have all of
the rights and powers with respect to the assets and liabilities of the Company
in connection with the liquidation and termination of the Company that the
Manager would have with respect to the assets and liabilities of the Company
during the term of the Company. Without limiting the foregoing, the Liquidating
Agent is hereby expressly authorized and empowered to execute and deliver any
and all documents necessary or desirable to effectuate the liquidation and
termination of the Company and the transfer of any asset or liability of the
Company. The Liquidating Agent shall have the right from time to time, by
revocable powers of attorney, to delegate to one (1) or more persons any or all
of such rights and powers and such authority and power to execute and deliver
documents, and, in connection therewith, to fix the reasonable compensation of
each such person, which compensation shall be charged as an expense of
liquidation. The Liquidating Agent is also expressly authorized to distribute
the Company's property to the Members subject to liens.
11.2 Statements on Termination. Each Member shall be furnished with a
statement prepared by the Company's regular accountants setting forth the assets
and liabilities of the Company as of the date of complete liquidation, and each
Member's share thereof. Upon compliance with the distribution plan set forth in
Section 11.3 of this Agreement, the Members shall cease to be such, and the
Liquidating Agent shall execute, acknowledge and cause to be filed where
appropriate under law Certificate of Dissolution of the Company.
11.3 Priority on Liquidation. The Liquidating Agent shall, to the extent
feasible and subject to Section 3.2, liquidate the assets of the Company as
promptly as shall be practicable. To the extent the proceeds are sufficient
therefor, as the Liquidating Agent shall deem appropriate, the proceeds of such
liquidation shall be applied in the following order of priority:
(a) to pay the costs of all unpaid operating expenses;
(b) to pay the costs and expenses of the liquidation and termination;
(c) to pay the matured or fixed debts and liabilities of the Company;
(d) to establish any reserve that the Liquidating Agent may deem necessary
for any contingent, unmatured or unforeseen liability of the Company; and
(e) to distribute the balance, if any, to the Members in the proportion to
their respective Percentage Interests.
11.4 Distribution of Non-Liquid Assets. If the Liquidating Agent shall
determine that it is not practicable to liquidate all of the assets of the
Company subject to Section 3.2, then the Liquidating Agent shall cause the fair
market value of the assets not so liquidated to be determined by appraisal by an
independent appraiser. Such assets, as so appraised, shall be retained or
distributed by the Liquidating Agent as follows:
(a) The Liquidating Agent shall retain assets having a fair market value
equal to the amount, if any, by which the net proceeds of liquidated assets are
insufficient to satisfy the debts and liabilities of the Company (other than any
debt or liability for which neither the
-19-
<PAGE>
Company nor the Members are personally liable), to pay the costs and expenses of
the dissolution and liquidation, and to establish reserves, all subject to the
provisions of Section 11.3 of this Agreement. The foregoing shall not be
construed, however, to prohibit the Liquidating Agent from distributing,
pursuant to Section 11.4(b) of this Agreement, property subject to liens at the
value of the Company's equity therein.
(b) The remaining assets (including, without limitation, receivables, if
any) shall be distributed to the Members by way of undivided interests therein
in such proportions as shall be equal to the respective amounts to which each
Member is entitled pursuant to Section 11.3(e) of this Agreement. If, in the
judgement of the Liquidating Agent, it shall not be practicable to distribute to
each Member an undivided aliquot share of each asset, the Liquidating Agent may
allocate and distribute specific assets to one or more Members as
tenants-in-common as the Liquidating Agent shall determine to be fair and
equitable, taking into consideration, inter alia, the basis for tax purposes of
each asset distributed.
(c) Nothing contained in this Article XI or elsewhere in this Agreement is
intended to cause any in-kind distributions to be treated as sales for value.
11.5 Orderly Liquidation. A reasonable time shall be allowed for the
orderly liquidation of the assets of the Company and the discharge of
liabilities to creditors so as to minimize the losses normally attendant upon a
liquidation.
11.6 Deficit upon Liquidation. Except as otherwise provided herein, upon
liquidation no Member or other Related Party shall be liable to the Company for
any deficit in any Member's Capital Account, nor shall such deficit be deemed an
asset of the Company. Nothing herein shall limit the liability of a Member under
the Act.
XII. LOANS AND ADVANCES BY MEMBERS
If any Member or Related Party of such Member shall loan or advance any
funds to the Company (other than the capital contributions provided for in
Article II of this Agreement), such loan or advance shall not be deemed a
contribution to the capital of the Company and shall not in any respect increase
such Member's interest in the Company. Such loan or advance shall constitute an
obligation and liability of the Company. Unless otherwise agreed in writing
between the Members and the Company, the Members and the other Related Parties
shall not have personal obligation or liability for the repayment of such loans
and the same shall be collectible only from Company assets. Any reference in
this Agreement to the payment of debts, obligations or liabilities of the
Company shall be deemed to include any such loans from a Member or Related Party
of such Member, and, to the extent that law and agreements to which the Company
is a party or is subject permit, and to the extent that the terms of such loans
may require, such loans from a Member or Related Party of such Member shall be
paid ahead of other general debts, obligations and liabilities of the Company.
XIII. INDEMNIFICATION OF THE MANAGER, MEMBERS, OFFICERS, TRUSTEES, EMPLOYEES AND
AFFILIATES
13.1 Claims. Except as otherwise provided in this Article XIII, the
Company, or its receiver or trustee, shall pay all judgments and claims asserted
by anyone (a "Claimant") against,
-20-
<PAGE>
and shall indemnify and hold harmless, the Manager and each Member, and each
member, manager, officer, director, shareholder, partner, trustee, employee,
agent, representative and other retained persons of the Manager and each Member,
and each member, manager, officer, director, shareholder, partner, trustee,
beneficiary, employee, agent, representative and other retained persons of any
of the foregoing or any direct or indirect affiliate of any of the foregoing
(collectively the "Related Parties" and individually a "Related Party") from and
against, any liability or damage to a Claimant, incurred by reason of any act
performed or omitted to be performed by any Related Party in connection with the
business of the Company, including, without limitation, reasonably attorneys'
fees and disbursements incurred by any Related Party in connection with the
defense of any action based on any such act or omission.
13.2 Procedure. Upon a Related Party's discovery of any claim by a third
party which, if sustained, would be subject to indemnification pursuant to
Section 13.1 of this Agreement, the Related Party shall give prompt notice to
the Company of such claim, provided, however, that the failure of the Related
Party to so promptly notify the Company of such claim shall not relieve the
Company of any indemnification obligation under this Agreement unless the
Company shall have been substantially prejudiced thereby. Unless the Related
Party shall, in its sole discretion, agree in writing to assume and control the
defense of any action for which indemnification may be sought, the Company shall
assume and control such defense, in which event the Related Party shall have the
right to retain its own counsel in each jurisdiction for which the Related Party
determines counsel is required, at the expense of the Company. If the Company
shall fail or refuse to undertake the defense within fifteen (15) days after
receiving notice that a claim has been made, the Related Party shall have the
right (but not the obligation) to assume the defense of such claim in such
manner as it deems appropriate until the Company shall, with the consent of the
Related Party, assume control of such defense, and the Company shall indemnify
the Related Party pursuant to Section 13.1 of this Agreement from and against
the costs and expenses of such defense. The party hereto handling the defense of
an action shall keep the other party hereto fully informed at all times of the
status of the claim. Neither the Company nor the Related Party, when handling
the defense of a claim for which indemnification may be sought by the Related
Party, shall settle such claim without the consent of the other party (which
consent shall not be unreasonably withheld or delayed) unless such settlement
shall (i) impose no additional liability or obligation upon such party (or its
members, managers, officers, directors, shareholders, partners, trustees,
beneficiaries, employees, agents and representatives or any direct or indirect
affiliate of any of the foregoing) whose consent would otherwise be required and
(ii) where the Company is handling the defense and settlement of the claim,
provide the Related Party with a general release with respect to the subject
claim.
13.3 Member's Claims. Except as otherwise provided in this Article XIII, in
any action by a Member against a Related Party, including a Company derivative
suit, the Company shall indemnify and hold harmless each Related Party from and
against any liability or damage incurred by any of them, including, without
limitation, reasonable attorneys' fees and disbursements incurred in defense of
such action.
13.4 Expenses. In any matter with respect to which a Related Party may be
entitled to indemnification from the Company pursuant to this Article XIII, the
Company shall, to the extent not prohibited by applicable law, advance to the
Related Party, pending the final disposition of such matter, all costs and
expenses which the Related Party may incur in such matter, including,
-21-
<PAGE>
without limitation, all attorneys' fees and disbursements, court costs and the
fees and disbursements of accountants, other experts and consultants.
13.5 Limitations on Indemnification. Notwithstanding Sections 13.1 or 13.3
of this Agreement, no Related Party shall be entitled to indemnification from
any liability imposed by fraud, bad faith, willful neglect or gross negligence.
Under no circumstances shall any Related Party be personally liable in respect
of any indemnification obligation set forth in this Article XIII.
13.6 Manager's Liability to Company and Members. The Manager, solely in its
capacity as such, shall not be liable to the Company or to the Members for any
act or omission or breach of duty unless a judgment or other final adjudication
adverse to the Manager establishes that the Manager's acts or omissions were in
bad faith or involved intentional misconduct or a knowing violation of law or
that the Manager personally gained in fact a financial profit or other advantage
to which the Manager was not legally entitled.
13.7 Member's Liability. A Member shall be liable to the Company and the
other Members for breach of any representation, warranty or covenant made
pursuant to this Agreement and shall indemnify and hold harmless the Company and
the other Members from and against any liability or damage incurred by any of
them as a result of such breach or misrepresentation, including, without
limitation, reasonable attorneys' fees and disbursements incurred in defense of
such action (whether between any of the Members or otherwise).
XIV. POWER OF ATTORNEY
14.1 General. Each Member irrevocably constitutes and appoints the Manager
and the Liquidating Agent, or any one of them, with full power of substitution,
the true and lawful attorney of such Member to execute, acknowledge, swear to
and file any of the following:
(a) any certificate or other instrument (x) that may be required to be
filed by the Company under the laws of the United States, the State of Delaware
or any other state in which any of the Members reside or in which the Company
engages in business or (y) which the Manager deems advisable to file;
(b) any document that may be required to effectuate the liquidation or
termination of the Company; and
(c) any amendment to this Agreement, the Certificate or the foregoing
certificates, instruments or documents necessary to effect any change permitted
under Section 15.8 of this Agreement or to reflect any change in the ownership
of interests in the Company, or otherwise as expressly provided in this
Agreement.
It is expressly acknowledged by each Member that foregoing power of
attorney is coupled with an interest and shall survive the disability of such
Member or a Transfer by such Member, provided, however, that if such Member
shall make a Transfer of all of such Member's Membership Interest and the
assignee shall, in accordance with the provisions of Article IX of this
Agreement, become a successor Member, such power of attorney shall survive the
Transfer
-22-
<PAGE>
only for the purpose of executing, acknowledging, swearing to and filing any and
all instruments necessary to effectuate such substitution.
Each Member hereby agrees to execute concurrently herewith or upon five (5)
days' prior written notice, a special power of attorney containing the
substantive provisions of this Agreement in form satisfactory to the Manager.
14.2 Successor Members. A power of attorney similar to that contained in
Section 14.1 of this Agreement shall be one of the instruments that the
successor Member may be required to execute, acknowledge and swear to pursuant
to Section 9.2 of this Agreement.
14.3 Additional Power of Attorney. Upon the admission of a successor
Manager or upon the liquidation or termination of the Company, the Members, at
the request of the Manager or any of such successor Manager or the Liquidating
Agent, shall execute, acknowledge and swear to and deliver a new power of
attorney, similar to that described in Section 14.1 of this Agreement, in favor
of any such successors or the Liquidating Agent.
XV. MISCELLANEOUS PROVISIONS
15.1 Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration before
three (3) arbitrators in the City, County and State of New York in accordance
with the then-current rules and procedures of the American Arbitration
Association. The decision rendered by such arbitrators(s) may be entered in any
court having jurisdiction thereof.
15.2 Investment Intent. Each Member represents that such Member has
acquired such Member's Membership Interest for such Member's own account, for
investment and not with a view to the distribution or resale thereof and
understands that (i) such Member's Membership Interest has not been registered
under the Securities Act or any applicable securities or "blue sky" law of any
state or other jurisdiction; and (ii) a Transfer may not be made unless the
transferring Member's Membership Interest is registered under such laws or any
exemption from such registration is available, and such Member complies with the
applicable provisions of this Agreement.
15.3 Oral Modification/Non-Waiver. This Agreement constitutes the entire
agreement and understanding among the parties hereto. No waiver or modification
of the provisions of this Agreement shall be valid unless it is in writing and
signed by the parties hereto. No waiver by any party of any right hereunder or
of any failure to perform or breach hereof by any other party shall constitute
or be deemed a waiver of any other right hereunder or of any other failure to
perform a breach hereof by the same or any other Member.
15.4 Notices. All notices, demands, consents and other communications
permitted or required to be given hereunder shall be in writing and shall be
deemed given when deposited in the Unites States mail, and sent either in
registered or certified form, return receipt requested, postage prepaid, or when
delivered to an overnight courier company, charges prepaid, addressed as
follows:
-23-
<PAGE>
(i) If to Company:
AIM/NEW TECH LLC
611 Broadway, Suite 308
New York, New York 10012
Attn:
with a copy to:
Michael Heitner, Esq.
Herrick, Feinstein LLP
2 Park Avenue
New York, New York 10016
(ii) if to Manager:
AMERICAN INTERACTIVE MEDIA, INC.
611 Broadway, Suite 308
New York, New York 10012
Attn: Mark Graff
with a copy to:
Michael Heitner, Esq.
Herrick, Feinstein LLP
2 Park Avenue
New York, New York 10016
(iii) if to New Tech:
NEW TECH ENTERTAINMENT, LLC
345 N. Maple Drive, Suite 297
Beverly Hills, CA 90210
Attn: Herman Rush
with a copy to:
Henry Bregstein, Esq.
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
15.5 Captions. The captions used herein are intended for convenience of
reference only, shall not constitute any part of this Agreement and shall not
modify or affect in any manner the meaning or interpretation of any of the
provisions of this Agreement.
-24-
<PAGE>
15.6 Pronouns. All pronouns and any variation thereof shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person or persons may require.
15.7 Execution. This Agreement may be executed in counterparts, and as so
executed shall constitute one agreement binding on the Company and the Members.
15.8 Amendments. This Agreement may be amended only by the unanimous
written consent of all of the Members.
15.9 Binding Effect. Except as otherwise provided herein, this Agreement
shall be binding upon and shall inure to the benefit of the respective legal
representatives and permitted successors and assigns of the parties hereto.
15.10 Separability. In case any one or more of the provisions contained in
this Agreement or any application thereof shall be deemed invalid, illegal or
unenforceable in any respect, such affected provisions shall be construed and
deemed rewritten so as to be enforceable to the maximum extent permitted by law,
thereby implementing to the maximum extent possible, the intent of the parties
hereto, and the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby.
15.11 Further Assurances. The Members and the Manager will execute and
deliver such further instruments and documents and do such further acts and
things as may be required to carry out the intent and purposes of this
Agreement.
15.12 No Third Party Beneficiaries. Except as is otherwise specifically
provided for in this Agreement or as may otherwise be specifically agreed in
writing by all of the Members and the Manager, the provisions of this Agreement
are not intended to be for the benefit of any creditor or other person (other
than a Related Party or a Member or the Manager in such Member's or Manager's
capacity as a Member or Manager, respectively) to whom any debts, liabilities,
or obligations are owed by (or who otherwise has any claim against) the Company
or any of the Members, the Manager or any Related Party; and no such creditor or
other person shall obtain any benefit from such provisions or shall, by reason
of any such foregoing provision, make any claim in respect of any debt,
liability, or obligation against the Company, any of the Members, the Manager or
any Related Party.
-25-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
AIM/NEW TECH LLC
By: AMERICAN INTERACTIVE MEDIA, INC.,
its Manager
By: /s/ Mark Graff
----------------------------------------
Name: Mark Graff
Title:
MEMBERS:
NEW TECH ENTERTAINMENT, LLC
By: FIRST INTERNET INNOVATIONS, INC.,
a Managing Member
By: /s/ Herman Rush
----------------------------------------
Name: Herman Rush
Title: President
By: STARDUST ENTERTAINMENT, INC.,
a Managing Manager
By: /s/ Gail Sonnenschein
----------------------------------------
Name: Gail Sonnenschein
Title: President
By: /s/ Howard Sonnenschein
----------------------------------------
Name: Howard Sonnenschein
Title: Vice President
AMERICAN INTERACTIVE MEDIA, INC.
By: /s/ Mark Graff
--------------------------------------------
Name: Mark Graff
Title: President
-26-
<PAGE>
STATE OF ________________________ )
: ss.:
COUNTY OF _______________________ )
On the ___ day of August 1998, before me personally came Herman Rush, to me
known, who, being by me duly sworn did depose and say that he has an address at
345 N. Maple Drive, Suite 297, Beverly Hills, California 90210; that he is
President of FIRST INTERNET INNOVATIONS, INC., a Managing Member of NEW TECH
ENTERTAINMENT, LLC, a Delaware limited liability company, and that he executed
the foregoing instrument on behalf of said company.
------------------------------------
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this ___ day of August, 1998, before me personally came Mark Graff, to
me known, who, being by me duly sworn did depose and say that he has an address
at 611 Broadway, Suite 308, New York, New York 10012; that he is the President
of AMERICAN INTERACTIVE MEDIA, INC., a New York corporation; and that he
executed the foregoing instrument on behalf of said corporation.
------------------------------------
Notary Public
-27-
<PAGE>
SCHEDULE A
Projects
Romance Land
Pop City
Sci-Fi Universe
Crimebeat
I Need Help
Stork Club
Cartoonland
Platinum
Biz Buzz
<PAGE>
SCHEDULE B
Names, Addresses, Percentage
Interest and Initial Capital Contribution
of Each Member
Name and Address of Percentage of Initial Capital
Member Interests Contribution
------------------- ------------- ---------------
American Interactive Media, Inc. 50% $1,000.00
611 Broadway
Suite 308
New York, New York 10012
New Tech Entertainment, LLC 50% $1,000.00
345 North Maple Drive
Suite 297
Beverly Hills, California 90210 ___ __________
100% $2,000.00
=== =========
<PAGE>
SCHEDULE D
Third Party Agreements
1. I Need Help (Letter Agreement dated March 5, 1998. Re: Creation of a Joint
Venture between New Tech Entertainment, LLC and Montel Productions, Inc.);
2. Platinum/Stork Club (Letter Agreement dated January 2, 1996. Re: Creation
of a Joint Venture between Alvin Cooperman Productions, Inc. and Rush
Associates, Inc., together with the Assignment to New Tech Productions,
Inc.);
3. Biz Buzz (Entertainment Career Opportunities LLC Operating Agreement dated
as of October 24, 1997);
4. Pop City (Letter Agreement dated June 13, 1996 between Dick Clark
Productions, Inc. and New Tech Productions, Inc.);
5. Crimebeat (Joint Venture Agreement dated August 14, 1996 between
Grosso-Jacobson Productions, Inc. and New Tech Production, Inc.);
6. Sci-Fi Universe (Letter Agreement dated August 14, 1996. Re: Creation of a
Joint Venture between New Tech Productions, Inc. and Melis Productions,
Inc.);
7. Cartoonland (Operating Agreement of Scheimer/New Tech Productions, LLC);
and
8. Romance Land (Joint Venture Agreement dated October 15, 1997 between Alan
Wagner Productions, Inc. d/b/a Boardwalk Entertainment and New Tech
Productions, Inc.).
<PAGE>
SCHEDULE E
Name and Address of the Authorized
Representatives of each Member
AIM
- ---
Mr. Mark Graff
American Interactive Media, Inc.
611 Broadway
Suite 308
New York, New York 10012
Mr. William Zaccheo
1618 North Fairfax Avenue
Los Angeles, California 90046
New Tech
- --------
Mr. Herman Rush
New Tech Entertainment, LLC
345 North Maple Drive
Suite 297
Beverly Hills, California 90210
Ms. Gail Sonnenschein
31 West 56th Street
New York, New York 10019
Mr. Howard Sonnenschein
31 West 56th Street
New York, New York 10019
<PAGE>
SCHEDULE F
Rejected Projects
Great Women
The Great America
One Times Square
Las Vegas World
