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EXHIBIT 10.27
LETTER AGREEMENT
This Letter Agreement, dated as of February 17, 2000, evidences the
undersigneds' desire to enter into a two-year strategic alliance (the
"Alliance") among Iberoamerican Media Holdings Chile S.A., a Chilean company,
and/or its affiliates ("Iberoamerican"), Red de Television Chilevision S.A., a
Chilean company, and/or its affiliates ("Chilevision" and together with
Iberoamerican, "IRC") and El Sitio, Inc., a British Virgin Islands company,
and/or its affiliates ("El Sitio"). The Alliance shall commence on the date
hereof. It is the intent of the undersigned to negotiate and execute a final
definitive agreement that will incorporate the terms contained herein and such
other terms and conditions as the parties hereto shall mutually agree to
include, on or before March 15, 2000 (the "Agreement"). This Letter Agreement
is, and shall remain a binding agreement, inuring to the benefit of all parties,
until such time as the parties hereto execute the Agreement. The essential terms
and conditions are as follows:
1. Purpose. The purpose of this Letter Agreement and the
Agreement shall be as follows:
a. El Sitio shall assist IRC in the development of Web Sites (the
"Site(s)") for (i) several radio stations that are owned
and/or managed by Iberoamerican, including, but not limited,
to: "Rock & Pop," "Corazon," "Pudahuel," "Music One," "FM
Dos," "FM Hit," "Futuro" and "Aurora" and (ii) four additional
Web Sites for broadcast television stations managed by
Chilevision, known as "Chilevision." To the extent
Iberoamerican acquires additional radio stations after the
date of this Letter Agreement and during the term of the
Agreement, such stations shall be included as part of this
Letter Agreement and the Agreement (the current and future
radio and television stations hereinafter collectively
referred to as the "IRC Network").
b. Iberoamerican shall provide El Sitio with administrative,
accounting, legal (excluding litigation services, licenses
referred to in Section 4(b) below and copyrighting and
licensing referred to in Section 4(c)), human resource,
payroll and collection services; provided, however, that such
services will be limited to El Sitio's operations in Chile,
including, without limitation, with respect to the El Sitio
Site in Chile (the "ESC Site"). In accordance with this Letter
Agreement, IRC shall provide local content for the ESC Site.
2. IRC's Responsibilities. IRC shall have the following
obligations and responsibilities:
a. IRC shall use commercially reasonable efforts to
provide El Sitio with IRC's proprietary programming,
promotions, celebrities, local news and other
similarly situated content and materials (including
any similar content of any third party to which IRC
has the right to sublicense such content to El Sitio)
(the "IRC Content") for the development and
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promotion of the ESC Site to the extent such
programming, promotions, celebrities, local news and
other materials are available for use on the Site(s)
and to which IRC has the right to provide such IRC
Content to El Sitio. IRC shall not provide IRC
Content to any other Internet portal, site, network
or Internet service provider. In the event El Sitio
wishes to publicly perform any musical works or sound
recordings contained within the IRC Content on the
ESC Site, El Sitio will have to obtain a separate
license from IRC for such musical works and sound
recordings.
b. Subject to the provisions of Section 2.a above, IRC
shall cause its employees to provide IRC Content to
El Sitio on a timely basis for the development and
maintenance of the Site(s).
c. Throughout the term of this Letter Agreement and the
Agreement, any new stations developed or acquired by
IRC shall become subject to the terms hereof and of
the Agreement. In the event IRC develops or acquires
additional radio stations, or in the event that any
such station is sold or dissolved, the parties shall
in good faith adjust on an equitable basis the
compensation provided for in section 5 below.
d. Iberoamerican shall serve as the exclusive sales
agent for marketing and selling the advertising for
the Site(s) and the ESC Site within the Republic of
Chile, provided that El Sitio will have the right, in
its sole discretion, to object to the delivery of
reasonably objectionable advertisements on the ESC
Site which could damage El Sitio's image (e.g., guns
and pornography). Notwithstanding the foregoing, El
Sitio shall have the right to market and sell
advertising for the Site(s) and the ESC Site outside
the Republic of Chile. IRC shall be solely
responsible for establishing rate cards for the sale
of advertising on the Site(s), and El Sitio shall be
solely responsible for establishing rate cards for
advertising on the ESC Site. Iberoamerican shall not,
without the prior approval of El Sitio, make
discounts from the ESC Site rate cards or accept
barter arrangements with respect to advertising on
the ESC Site.
e. Iberoamerican shall provide El Sitio with office
space for the operation of El Sitio in Chile, the
location and size of which to be mutually agreed upon
by Iberoamerican and El Sitio, and which shall
measure approximately 110 square meters by 170 square
meters. Iberoamerican shall also provide office
furniture and equipment as deemed reasonably
necessary in the judgment of both parties.
f. Iberoamerican shall be solely in charge of all
billing and collection related to the sale of
advertising within the Republic of Chile and
generated from the Site(s) and the ESC Site;
provided, however, that said billing and collection
shall be made on behalf of El Sitio.
g. Iberoamerican shall be El Sitio's exclusive provider
of administrative, accounting, legal (excluding
litigation services, licenses referred to in
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Section 4(b) below and copyrighting and licensing
referred to in Section 4(c)), human resource, payroll
and collection services in the Republic of Chile;
provided, however, that such exclusive services will
be limited those services related to El Sitio's
operations in Chile, including, without limitation,
the ESC Site.
h. IRC shall hire personnel necessary for the provision
and updating of the IRC Content for the Sites, as IRC
reasonably determines.
3. El Sitio's Responsibilities. El Sitio shall have the following
obligations and responsibilities:
a. El Sitio shall not design any World Wide Web pages
for any competitor of IRC in the Republic of Chile.
b. Within sixty (60) days after the execution of this
Letter Agreement, El Sitio shall establish a Chilean
entity for the purposes of fulfilling its obligations
under this Letter Agreement and the Agreement. El
Sitio agrees to maintain corporate control of such
Chilean entity at all times during the term of the
Letter Agreement and the Agreement.
c. El Sitio shall be responsible for the development of
the Sites for each radio station of the IRC Network.
El Sitio's services hereunder will include web
design, hosting, housing and maintenance services.
Furthermore, El Sitio shall develop the ESC Site to
host local content in the Republic of Chile
(including IRC Content, El Sitio's global content and
other content) and with a focus on serving users
within the Republic of Chile. El Sitio will design
each Site to have links to and from the ESC Site.
Each Site shall be developed in such a manner that
they retain the "look and feel" of the radio stations
in the IRC Network while at the same time meeting the
standards and practices of El Sitio. Each Site shall
contain a border linking the Site(s) to the ESC Site
and other El Sitio properties. The "look and feel" of
the Site(s), as well as the borders, shall be
preapproved by IRC, which approval shall not be
unreasonably withheld, prior to the Launch Date, as
defined below. The ESC Site shall maintain the "look
and feel" of El Sitio properties. El Sitio shall host
the Site(s) on its servers and El Sitio shall use
commercially reasonable efforts to provide a level of
server capacity necessary for the effective operation
of the Site(s). El Sitio shall also provide mailbox
and e-mail features to the visitors of the Site(s).
All visitors to the Site(s) shall be deemed
registered users of and traffic for El Sitio. The
Parties agree that the Sites shall be the property of
IRC and the ESC Site shall be the property of El
Sitio. El Sitio shall use commercially reasonable
efforts to provide the support necessary for IRC to
audit traffic associated with the Site(s) (for
example, third party audits by entities such as
Double Click, I/PRO Xxxxxxx or some other similarly
situated entity), the timeliness and accuracy of
which shall be the sole responsibility of such
third-party provider.
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d. El Sitio shall use its best efforts to have the
Site(s), including the ESC Site, on-line and
operational on or before April 1, 2000 (the "Launch
Date").
e. El Sitio shall be responsible for hiring all
personnel necessary for the operation of El Sitio in
Chile. El Sitio shall be responsible for all expenses
incident to the office space provided by
Iberoamerican in Chile, including, but not limited
to, utilities, communications, electricity and other
similar expenses. El Sitio shall be responsible for
purchasing and maintaining the computers and
equipment necessary to perform the services
contemplated in this Letter Agreement and the
Agreement.
4. Other Agreements. The parties shall have the following
obligations and responsibilities:
a. With respect to the IRC Content, IRC shall be
responsible for developing materials for inclusion
into the Site(s). The parties shall cooperate with
each other in order to effectuate the transmission of
IRC Content into the Site(s) and the ESC Site. The
frequency and nature of updates to IRC Content by
IRC, as it relates to each Site hereunder, shall be
agreed upon by the parties in accordance with
commercially reasonable standards.
b. Each party shall be responsible for obtaining all
licenses and satisfying any and all other legal
requirements (including any costs associated
therewith) necessary to operate within their
respective jurisdictions.
c. Each party shall be responsible for copyrighting and
licensing their respective content (including any
costs associated therewith). The parties agree that
their respective trademarks and service marks (the
"Marks") shall remain the property of each party and
that no ownership rights to any such property shall
be transferred to the other party under this Letter
Agreement or the Agreement. All of the IRC Content
developed by IRC on the Site(s) shall be the property
of IRC. Each party grants to the other a
non-exclusive license to use such party's content,
trademarks or other properties throughout the term of
the Agreement, solely for use with respect to the
Site(s) and the ESC Site; provided, however, that
none of the parties shall use the others'
intellectual property in any way which could harm or
impair the value thereof. In addition, each party
shall use all reasonable skill and care in the
provision of any services pursuant to its use of
another party's Marks; shall comply with applicable
laws and regulations; and shall provide such services
at the standard of quality commensurate with those
provided by the party that owns the Xxxx in question.
At any time, a party may request information from
another party in order to verify such other party's
proper use of the party's Marks; provided, however,
that such party shall maintain all such information
received in strict confidence, shall not disclose any
such information to any other party and shall use
such information solely for the purposes of
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any such verification. The use of intellectual
property shall be consistent with the terms of this
Letter Agreement and the Agreement.
d. IRC and El Sitio shall work together on a good-faith
basis to develop a marketing campaign for the Site(s)
and the ESC Site, with the objective of increasing
traffic to the Site(s) and the ESC Site.
5. Compensation & Revenue Sharing. Iberoamerican and El Sitio
shall share in the net revenues collected on advertising sold within the Site(s)
and the ESC Site, calculated after subtracting (i) commercially reasonable sales
commissions (which shall not exceed 15%) actually incurred, (ii) commercially
reasonable advertising commissions (which shall not exceed 15%), to the extent
that such commissions are actually incurred to a third party not affiliated with
or employed by Iberoamerican, and (iii) taxes paid to any governmental authority
(hereinafter referred to as "Net Advertising Revenues"). Iberoamerican and El
Sitio shall share in the Net Advertising Revenues that Iberoamerican has
collected from clients, with 70 percent to be allocated to Iberoamerican and 30
percent to be allocated to El Sitio. Notwithstanding the foregoing,
Iberoamerican guarantees that El Sitio's share of Net Advertising Revenues for
year one and year two of this Letter Agreement and the Agreement shall not be
less than Three Hundred Thousand Dollars ($300,000.00 U.S.) and Six Hundred
Thousand Dollars ($600,000.00 U.S.), respectively (the "Guaranty Amounts"). In
the event El Sitio's share of Net Advertising Revenue shall be less than the
Guaranty Amounts, Iberoamerican shall pay El Sitio the difference in cash (or in
such other manner as mutually agreed upon by the parties at the end of the
relevant period).
In the event Iberoamerican sells advertising for other El Sitio sites,
Iberoamerican shall be entitled to and receive a commission of twenty-five
percent (25%) of all Net Advertising Revenues with respect to such advertising.
In the event El Sitio sells advertising for the Site(s), El Sitio shall receive
a commission of twenty-five percent (25%) of all Net Advertising Revenues with
respect to such advertising. All payments required hereunder shall be paid on a
quarterly basis. To ensure compliance with the terms of the Agreement, IRC shall
have the right, at its own expense, to direct an audit of all of the accounting
and sales books and records of El Sitio which are relevant to the Agreement;
provided, however, that IRC shall only be permitted to conduct such audits
during El Sitio's regular business hours and at a frequency no greater than once
per year during the Agreement and this Letter Agreement.
As partial consideration for the relationship established hereby,
thirty days following the execution of the Agreement El Sitio shall issue and
deliver to Iberoamerican One Million and 00/100 Dollars ($1,000,000 U.S.) Class
B preferred shares of El Sitio, with a value per share of $9.00, and shall issue
to Chilevision Five Hundred Thousand and 00/100 ($500,000 U.S.) with a value per
share of $9.00, provided that El Sitio had obtained the necessary waiver from
Credit Suisse First Boston Corporation, Xxxxxx Brothers Inc., Xxxxxxx Lynch,
Pierce, Xxxxxx & Xxxxx Incorporated, Xxxxxxx Xxxxx Barney Inc. and Wit Capital
Corporation, if applicable, for such issuance. El Sitio shall do its best
efforts to obtain from Credit Suisse First Boston Corporation, Xxxxxx Brothers
Inc., Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated, Xxxxxxx Xxxxx Barney
Inc. and Wit Capital Corporation, if necessary for purpose of the foregoing, a
waiver for the issuance of the Class B preferred shares herein referred during
the "lock up" period currently applicable with respect to the issuance of
capital stock by El Sitio resulting from El Sitio's initial public offering of
common stock. The Class B preferred shares of El Sitio granted herein to IRC
shall be "restricted stock" as defined in Rule 144 (d) under the Securities Act
of 1933, as
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amended (the "Securities Act") and cannot be disposed of by IRC for a period of
twelve (12) months after the date hereof or otherwise as required by U.S.
securities laws.
Iberoamerican shall pay El Sitio the amount of Twenty Thousand and
00/100 Dollars ($20,000.00 U.S.) per month for the web design and support
services contemplated in Section 3(c) herein. El Sitio shall pay Iberoamerican
the amount of Twenty Thousand and No/100 ($20,000.00 U.S.) on a monthly basis
for provision of the office space and administrative, marketing and legal
support as contemplated in Sections 2(e), (f) and (g) herein.
6. Confidentiality. IRC and El Sitio each agree to treat as
confidential and proprietary all information disclosed to each other in
connection with this Letter Agreement and the Agreement. Both parties shall use
commercially reasonable efforts to protect the confidentiality of any
proprietary information disclosed to the party by the other party. The parties
acknowledge that the documents and discussions may contain or have involved
customer or client records, processes, marketing plans, business ideas,
financial data, prices, advertising, future plans and any other information
which are valuable, special and unique assets. At no time during or after the
term of this Letter Agreement or the Agreement will any party use personally or
for profit any confidential or proprietary information of another party. Except
as required by law or legal process, no party shall disclose to any person,
firm, corporation, association or other entity for any reason or purpose
whatsoever, any confidential or proprietary information of another party.
7. Expenses. Each party will bear its own expenses in connection
with the preparation of this Letter Agreement and the Agreement; provided,
however, that any party instituting legal proceedings to enforce any provision
hereof (including those that survive termination of this letter agreement) or to
remedy any breach hereof, shall be entitled to recover reasonable attorney's
fees incurred in connection therewith, if that instituting party is successful
in any such proceedings.
8. Public Announcements. No party hereto will make any public
announcement or issue any press release or disclose to any other person (except
as otherwise provided herein) any information regarding this transaction, this
Letter Agreement, the Agreement or the subject matter hereof, without the prior
written consent of each other party hereto, unless otherwise required by law. El
Sitio shall however have the right to disclose the transactions contemplated
hereby and by the Agreement in any offering statement(s) or presentations to
third parties incident to its share offerings.
9. General.
a. Affiliates; Assignment and Amendments. Each party
agrees to cause its affiliates to take any action
necessary to permit such party to meet its
obligations hereunder. None of the parties to this
Letter Agreement shall assign its rights or
obligations hereunder without the prior written
consent of the other parties. No amendment,
modification or discharge of this Letter Agreement
shall be valid or binding unless agreed to in writing
by all of the parties hereto.
b. Governing Law and Submission to Jurisdiction. Without
regard to its principles of conflicts of laws, the
laws of the State of New York shall
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govern and control the validity, interpretation,
performance and enforcement of this Agreement. To the
extent permitted by law, the parties agree that all
actions or proceedings arising in connection with
this Agreement shall be tried and determined only in
the state and federal courts in the County of Xxx
Xxxx, Xxxxx xx Xxx Xxxx, Xxxxxx Xxxxxx of America,
and each party hereby submits to jurisdiction of the
state and federal courts located in the County of Xxx
Xxxx, Xxxxx xx Xxx Xxxx, Xxxxxx Xxxxxx of America.
c. Notices. Unless otherwise provided herein, all
notices, requests, consents and other communications
hereunder to any party shall be deemed to be
sufficient if contained in a written instrument
delivered in person or duly sent by first class,
registered, certified or overnight mail, postage
prepaid, or telecopied with a confirmation copy by
regular mail, or telecopied, as the case may be, to
such party at the address or telecopier number
provided herein, subject to written change by such
party:
(1) If to El Sitio:
Avenida Ing. Xxxxxx
0000 Xxxxxx Xxxxx, Xxxxxxxxx
Attention: Xxxxxx Xxxxxxx
Xxxxxxxxx Xxxxxxx
Telecopier: (011)(5411) 4339-3750
(2) If to Iberoamerican:
Xxxxxxxx Xxxxx 0000
Xxxxxx xx Xxxxxxxxxxx
Xxxxxxxx, Xxxxx
Attention:Gerencia General
Telecopier: (000) 000-0000
(3) If to Chilevision:
Xxxx Mate Xxxxxxxx 0000
Xxxxxxxx, Xxxxx
Attention:Gerencia General
Telecopier:(000) 000-0000
d. Severability. Any provision of this Letter Agreement
that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in
any other jurisdiction.
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IN WITNESS WHEREOF, the parties hereto, each being duly empowered and
authorized to do so, have duly executed this Agreement as of the date first
above written.
EL SITIO, INC.
By: /s/ Xxxxxx Xxxxxxx
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Name:
Title:
RED DE TELEVISION
CHILEVISION S.A.
By: /s/ Xxxxx Xxxx
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Name:
Title:
IBEROAMERICAN RADIO
HOLDINGS CHILE S.A.
By: /s/ Xxxxx Xxxx
---------------------
Name:
Title:
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