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REDACTED
EXHIBIT 10.27
ADNM MERCHANDISER AGREEMENT
This Agreement, dated as of June 7, 1999, between Winterland
Concessions Company, a California corporation, doing business as "Winterland"
("Merchandiser"), 0000 Xxxxxxx Xxxxx, Xxx Xxxxxxx, XX 00000, and ARTISTdirect
New Media, LLC ("ADNM"), 00000 Xxxxxxx Xxxx., Xxxxx 000, Xxxxxx, XX 00000, is
being entered into in light of the following:
A. Merchandiser is in the business of acquiring the right to use the
names, photographs and other likenesses, biographical material and other
personal identification (collectively, "Personal Identification") of musical
artists in connection with the manufacture and sale of merchandise and the
licensing of such rights to third parties.
B. ADNM is in the business of developing and operating Internet retail
storefronts for musical artists ("Artist Stores") that, among other things, sell
merchandise containing the Personal Identification of the applicable artist.
C. Merchandiser and ADNM are entering into this Agreement in order to
set forth the terms and conditions upon which Merchandiser has agreed to
accommodate ADNM in respect of developing and opening new Artist Stores
featuring Merchandiser Artists (as defined below) and in the operation thereof.
NOW, THEREFORE, in consideration of the foregoing and the mutual
benefits contained herein, the parties hereto agree as follows:
1. Term: The term of this Agreement (the "Term") shall be three (3)
years commencing on the date of this Agreement.
2. Signing Procedures:
(a) As used herein, "Merchandiser Artist" shall mean,
individually and collectively, each and every artist in respect of which
Merchandiser has the exclusive right (sometimes referred to herein as the
"Rights") to manufacture merchandise utilizing such artist's Personal
Identification (including any entity furnishing the Personal Identification of
such an artist). Merchandiser represents and warrants that (A) attached hereto
as Exhibit A is a true and complete list of Merchandiser Artists as of the
execution of this Agreement; and (B) the territory and duration of the Rights
set forth on said Exhibit A are true and complete.
(b) During the Term, Merchandiser agrees that, within a
reasonable period of time after Merchandiser enters into an agreement with
respect to a new Merchandiser Artist, Merchandiser shall notify ADNM of the
applicable artist name(s), territory and duration of Rights, if any. Upon such
notice, the applicable Merchandiser Artist shall be deemed added to said Exhibit
A.
(c) Merchandiser agrees to promptly notify ADNM if any of the
information on said Exhibit A should change during the Term, as well as soon as
the Rights in respect of an artist end (after which such artist shall be deemed
deleted from said Exhibit A.)
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(d) Said Exhibit A indicates with an asterisk (*) those
Merchandiser Artists in respect of which ADNM desires to enter into a Store
Agreement as of the execution of this Agreement. ADNM shall have the right from
time to time during the Term to notify Merchandiser that it desires to enter
into a Store Agreement with any other Merchandiser Artists. ADNM and
Merchandiser shall use their collective commercially reasonable efforts to cause
the applicable Merchandiser Artist to enter into an agreement with ADNM
substantially in the form attached hereto as Exhibit B, subject to any
modifications as the parties may mutually agree upon prior to the execution
thereof (a "Store Agreement").
(e) Merchandiser acknowledges that, prior to the execution
hereof, ADNM entered into agreements in respect of the development and operation
of Artist Stores for the artists set forth on Schedule A attached hereto
(individually and collectively, "Excluded Artists"). In respect of each Excluded
Artist, Merchandiser agrees (i) to continue to sell to ADNM (or the applicable
Excluded Artist or its furnishing company), for resale on the applicable Artist
Store and the UBL Store (as defined in paragraph 6 below), merchandise featuring
the Personal Identification of the applicable Excluded Artist on terms no less
favorable to ADNM than [***] terms; (ii) that [***] shall be payable with
respect to any such merchandise; (iii) that to the extent any Rights are needed
from Merchandiser to operate the applicable Artist Store, such Rights shall be
deemed granted to ADNM in consideration of ADNM entering into this Agreement;
and (iv) the Excluded Artists shall not be subject to this Agreement.
3. Sale of Merchandise Manufactured By or Under the Control of
Merchandiser: As used herein, the term "Merchandiser Product" means all
merchandise sold pursuant to a Store Agreement (whether through the applicable
Artist Store or the UBL Store) that is provided by or on behalf of Merchandiser
or a Sublicensee, as well as any "limited edition" or "one-of-a-kind" items of
merchandise sold pursuant to a Store Agreement (whether or not actually provided
by or on behalf or Merchandiser or a Sublicensee). During the term of each Store
Agreement (but only as long as Merchandiser has the Rights in respect of the
applicable Merchandiser Artist), Merchandiser agrees to sell to ADNM (or the
applicable Merchandiser Artist), for resale under the applicable Store
Agreement, Merchandiser Product manufactured by or under the control of
Merchandiser that contains the Personal Identification of the applicable
Merchandiser Artist upon the following terms:
(a) Merchandiser agrees to sell all such merchandise to ADNM at
[***]. Merchandiser represents and warrants that attached hereto as Exhibit C
are Merchandiser's [***] as of the execution of this Agreement. Upon notice from
Merchandiser to ADNM, Merchandiser shall have the right to change its [***]
hereunder, provided such changes apply to all of Merchandiser's customers and
that such changes shall only apply to Merchandiser Product ordered by ADNM after
its receipt of such notice from Merchandiser.
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Notwithstanding the foregoing, the parties agree and acknowledge that
Merchandiser may not have [***] for certain collectibles and limited edition
items, in which case the [***] shall be negotiated in good faith.
(b) Subject to paragraph 4 below, all such sales shall be on a
consignment basis [i.e., the applicable Merchandiser Product shall not be deemed
sold to ADNM until ADNM has received a verified order therefor from a customer
of an Artist Store (or the UBL Store), and ADNM shall have the right to return
to Merchandiser, for a full credit, any Merchandiser Product that is unsold or
has been returned by such a customer in accordance with the return policies of
the Artist Store (or the UBL Store, as applicable)]. Payment to Merchandiser
shall be made within [***] after the end of the month during which ADNM has sold
the applicable item of Merchandiser Product.
(c) ADNM and Merchandiser shall in their good faith business
judgment mutually determine on an item-by-item basis the amount of inventory
that Merchandiser will ship to the ADNM's fulfillment center(s) (the "Center").
In this regard, Merchandiser agrees that it will ship on a timely basis an
amount of Merchandiser Product reasonably sufficient to cover the anticipated
orders through the applicable Store. During the Term, ADNM agrees to provide
Merchandiser within [***] after the last day of each month (and at such other
times as Merchandiser reasonably requests, but no more frequently than [***]
during any [***] period of the Term), with a computer run of the inventory held
as of the end of the preceding month at the Center of Merchandiser Product
supplied by Merchandiser. Merchandiser shall have the right from time to time to
require ADNM to return inventory of Merchandiser Product that exceeds the
inventory level deemed likely to be sold within a reasonable period of time, as
mutually agreed among the parties.
(d) [***] shall pay all third party costs (including all
associated freight and insurance costs) of shipping the Merchandiser Product
supplied by Merchandiser to the Centers and returning any such unsold
Merchandiser Product from the Center to Merchandiser's closest warehouse to the
Center.
4. Sale of Merchandise Manufactured By or Under the Control of a
Sublicensee: As used herein, the term "Sublicensee" means any person or entity
who has obtained prior to the date of this Agreement, or during the Term
obtains, from Merchandiser the right to manufacture and distribute merchandise
bearing the Personal Identification of a Merchandiser Artist.
(a) During the term of each Store Agreement, Merchandiser shall
use its commercially reasonable efforts to cause each Sublicensee to sell on a
timely basis to ADNM (or the applicable Merchandiser Artist), for resale under
the applicable Store Agreement, Merchandiser Product manufactured by such
Sublicensee at no more than the Sublicensee's standard wholesale prices and
otherwise in accordance with the terms of paragraph 2(e) above (e.g., on a
consignment basis). Subject to paragraph 4(b) below, if, despite Merchandiser's
commercially reasonable efforts, a Sublicensee refuses to sell Merchandiser
Product on a consignment basis, Merchandiser shall use its commercially
reasonable efforts to cause such
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Sublicensee to agree that payment for the applicable Merchandiser Product will
not be due until at least [***] after the applicable Merchandiser Product is
received at the Center from the Sublicensee. Subject to paragraph 4(b) below,
if, despite Merchandiser's commercially reasonable efforts, a Sublicensee
refuses to sell Merchandiser Product on [***] terms, Merchandiser shall use its
commercially reasonable efforts to cause such Sublicensee to agree that payment
for the applicable Merchandiser Product will not be due until at least [***]
after the applicable Merchandiser Product is received at the Center from the
Sublicensee.
(b) If a Sublicensee refuses to sell Merchandiser Product to
ADNM (or the applicable Merchandiser Artist) on terms acceptable to ADNM,
Merchandiser may elect to purchase such Merchandiser Product from the
Sublicensee and sell such Merchandiser Product to ADNM in accordance with the
terms set forth in paragraph 3(b) above. If the Sublicensee or Merchandiser
furnishes a Sublicensee's merchandise to ADNM (or the applicable Merchandiser
Artist) on a consignment basis, then the License Fee with respect to such
Merchandiser Product shall be paid by ADNM to Merchandiser. If such Merchandise
Product is not supplied on a consignment basis (i.e., ADNM and/or the applicable
Merchandiser Artist do not have the right to return such Product against a full
credit), then, notwithstanding anything contained in this Agreement to the
contrary, the License Fee with respect to such Merchandiser Product shall be
paid by ADNM to the applicable Merchandiser Artist under the applicable Store
Agreement.
5. Winterland Store:
(a) During the Term, ADNM will design, develop, maintain and
operate for Merchandiser an Internet retail storefront for the sale of
merchandise containing the Personal Identification of certain Merchandiser
Artists to be mutually selected by ADNM and Merchandiser (the "Winterland
Store"), to be integrated with Merchandiser's web site currently located at
xxx.xxxxxxxxxx.xxx (the "Winterland Site"). ADNM will design and develop the
Winterland Store pursuant to a mutually approved design concept. ADNM shall be
solely responsible for all costs incurred by ADNM in connection with developing
the Winterland Store; however, Merchandiser agrees to cooperate with ADNM,
including by providing technical assistance and such other resources as may be
reasonably required, to integrate the Winterland Store into the existing
Winterland Site. Merchandiser shall provide ADNM with all photographs, graphics,
logos and similar items reasonably required by ADNM to create the Winterland
Store and readily available to Merchandiser promptly following ADNM's request
and at no cost to ADNM.
(b) During the Term, ADNM will host (i.e., provide the server
for) and maintain the Winterland Store, including by providing periodic source
code programming updates and improvements. In this regard, ADNM will use its
commercially reasonable efforts to correct any material "bug" or defect as soon
as reasonably possible after ADNM becomes aware of such material "bug" or
defect.
(c) ADNM and Merchandiser shall mutually approve the merchandise
to be sold over the Winterland Store. Merchandiser shall have the right to
approve the retail price of
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merchandise sold over the Winterland Store. ADNM (or its designee) shall process
all orders received from the Winterland Store and arrange to have the ordered
merchandise shipped to the customer (subject to availability).
(d) All merchandise to be offered for sale on the Winterland
Store shall be supplied to ADNM in accordance with the terms of paragraphs 2(e)
and 4 above. In addition, with respect to merchandise supplied by Merchandiser
or a Sublicensee and sold over the Winterland Store, ADNM agrees to account to
Merchandiser in the same manner as ADNM accounts to Merchandiser for
Merchandiser Product sold over an Artist Store (i.e., pursuant to paragraphs
8(b)(i)(A) and 8(b)(i)(C) below, but subject to the last sentence of paragraph
4(b) above). However, any merchandise containing the Personal Identification of
a Merchandiser Artist who is not subject to a Store Agreement that is offered
for sale on the Winterland Store and sold through the UBL Store shall not be
deemed a sale under this Agreement (i.e., shall not be subject to the License
Fee). Rather such sale shall be deemed a sale under the UBL Merchandiser
Agreement between Merchandiser and The Ultimate Band List, LLC being entered
into concurrently herewith (the "UBL Agreement").
(e) During the Term, ADNM shall handle all customer orders and
inquiries in respect of the Winterland Store, provide all necessary credit card
accounting and processing services and develop payment, delivery and refund
policies. To effect the foregoing, ADNM shall also provide an on-line and
toll-free telephone service center that will take orders and respond to customer
inquiries. On-line inquiries will be responded to within 24 hours of receipt and
the telephone service will be operational Mondays through Fridays from 9:00 a.m.
to 7:00 p.m. Pacific Time (excluding holidays) and will enable customers who
prefer not to place orders on-line to place orders by facsimile or telephone.
(f) As between ADNM and Merchandiser, Merchandiser will own the
customer database specifically identified with the Winterland Store (the
"Winterland Database"). However, ADNM will have the exclusive right during the
Term, subject to Merchandiser's consent in each instance, to administer and
license any third party uses of the Winterland Database, and to collect all
monies relating thereto accrued during the Term, regardless of when payable.
ADNM shall pay Merchandiser [***] of the "Gross Database Revenue," which means
the amount actually received by ADNM in respect of sales and other exploitations
of the Winterland Database, less all related Deductible Amounts.
(g) ADNM shall pay Merchandiser [***] of the "Gross Exploitation
Revenue," which means the amount actually received by ADNM in respect of
ancillary income from the Winterland Store, for example, income in respect of
advertising contained on the Winterland Store (e.g., hyperlinks to, and banners
and other advertisements for, other Internet web sites), less all agent
commissions and other related Deductible Amounts. Merchandiser shall have the
right to approve all such ancillary activities.
(h) As between ADNM and Merchandiser, Merchandiser shall be
solely responsible for all costs of marketing the Winterland Store, and ADNM
shall not incur any such
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costs without Merchandiser's written approval. If ADNM incurs any marketing
costs with Merchandiser's written approval, such costs shall be recoupable out
of all monies payable to Merchandiser under this Agreement, other than (i) the
wholesale purchase price for the Merchandiser Product and merchandise purchased
for sale through the Winterland Store and (ii) the monies payable under
paragraph 3(d) above.
(i) As between Merchandiser and ADNM, any and all artwork,
trademarks, logos, graphics, video, sound recordings, musical compositions,
text, data and other materials supplied by Merchandiser to ADNM in connection
with the Winterland Store, as well as the URL and the domain name or names
assigned to the Winterland Store (collectively, the "Winterland Content"), shall
remain Merchandiser's sole and exclusive property. Merchandiser hereby grants to
ADNM during the Term and throughout the universe a non-exclusive, royalty-free
license to use, copy, modify (with Merchandiser's consent), distribute, publicly
perform and display and otherwise exploit the Winterland Content and the
Personal Identification of each applicable Merchandiser Artist in connection
with the development, maintenance and operation of the Winterland Store and the
advertising and promotion thereof and of ADNM in connection with the Winterland
Store. No Winterland Content or the exploitation or use thereof or the sale of
any Merchandiser Product shall violate or infringe upon any common law or
statutory rights of any party, including contractual rights, copyrights, and
rights of privacy or publicity or shall defame any person or entity.
(j) As between Merchandiser and ADNM, any and all text,
graphics, audio, video, artwork and designs created by ADNM or its employees or
agents during the Term for use solely on the Winterland Store, including any
additions to or modifications of Winterland Content made by ADNM or its
employees or agents, (collectively, the "Developed Content"), shall be
Winterland's sole and exclusive property. All Developed Content shall be deemed
included in the license granted by Merchandiser under paragraph 5(i) above. Upon
Merchandiser's reasonable request and at Merchandiser's sole expense, ADNM shall
assist Merchandiser in the procurement and maintenance of Merchandiser's rights
in the Developed Content (including all intellectual property rights, whether
recognized currently or in the future).
(k) As between Merchandiser and ADNM, any and all commerce
technology, HTML formatting code, source and object code, programming code and
software, as well as all text, graphics, audio, video, artwork and designs
provided by ADNM in connection with this Agreement which does not constitute
Developed Content (collectively, the "ADNM Content") shall be ADNM's sole and
exclusive property. Notwithstanding the foregoing, upon the expiration of the
Term and provided Merchandiser is not in breach of this Agreement, ADNM shall
grant to Merchandiser a perpetual non-exclusive license throughout the universe
to use, modify, publicly perform and display all ADNM Content used in the
Winterland Store and owned and controlled by ADNM, solely in connection with
operating and maintaining the Winterland Store. In consideration of such
license, if Merchandiser elects to so utilize any such ADNM Content in
connection with the Winterland Store after the Term, Merchandiser agrees to pay,
or cause its licensee(s) to pay, ADNM a royalty equal to [***] of the gross
revenues earned in connection with the Winterland Store after the expiration of
the Term, but only for as long as
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Merchandiser continue to use any such ADNM Content. In this regard, Merchandiser
shall account in the same fashion and within the same time periods, and ADNM
shall be accorded the same examination rights and be subject to the same
limitations and restrictions, as apply with respect to Merchandiser's
accountings under paragraph 11 below. Nothing contained in this Agreement shall
impose upon ADNM any obligation whatsoever to provide Merchandiser with updates,
hosting, maintenance or support with respect to the Winterland Store or such
ADNM Content after the Term. Merchandiser shall not be entitled to use any name,
trademark or service xxxx of ADNM or its affiliates in any manner whatsoever
without obtaining the prior written consent of ADNM or the applicable affiliate
of ADNM.
(l) Merchandiser shall obtain all necessary third-party
clearances in connection with all Winterland Content and merchandise offered for
sale on the Winterland Store (including the payment of any associated fees,
royalties and other costs). If ADNM nevertheless shall pay, with Merchandiser's
approval, any third party clearance cost relating to the Winterland Store (which
ADNM is not obligated to do), all such amounts shall be deducted from any and
all monies otherwise payable to Merchandiser under this Agreement.
(m) ADNM represents and warrants that no exploitation or use by
ADNM or Merchandiser of the ADNM Content or Developed Content in accordance with
the terms of this Agreement shall violate or infringe upon any common law or
statutory rights of any party, including contractual rights, copyrights, and
rights of privacy or publicity. ADNM shall indemnify Merchandiser in accordance
with the terms of paragraph 14(c) below in respect of any claim contrary to the
foregoing; other than with respect to any claim subject to the foregoing
indemnity obligation, Merchandiser agrees that ADNM shall not be liable for any
special, consequential, incidental or indirect damages in connection with the
development or operation of the Winterland Store, however caused, under any
theory of liability.
6. UBL Store: Merchandiser agrees and acknowledges that ADNM may elect
to make available for sale on an Internet on-line store (the "UBL Store")
operated by a company affiliated with ADNM certain items of Merchandiser Product
offered for sale through an Artist Store.
7. Grant of Rights: With respect to each Store Agreement (and subject to
the terms and conditions set forth therein), Merchandiser shall be deemed to
have granted to ADNM, in consideration for the License Fee, the irrevocable
right and license, insofar as Merchandiser has such Rights and for the territory
Merchandiser has such Rights, during the term of such Store Agreement (but only
as long as Merchandiser has the Rights in respect of the applicable Merchandiser
Artist), to develop and operate the only "official" Internet store for the
applicable Merchandiser Artist, and the non-exclusive (subject to paragraph 12
below) right and license to utilize such Merchandiser Artist's Personal
Identification in connection with the applicable Artist Store.
8. License Fee:
(a) Unless otherwise provided in the applicable Store Agreement,
in consideration for the rights licensed pursuant to paragraph 7 above, ADNM
agrees to pay Merchandiser a License Fee with respect to all Merchandiser
Product sold at any time (including after the Term) under a Store Agreement,
subject to the last sentence of paragraph 4(b) above.
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(b) As used herein:
(i) "License Fee" shall mean [***] :
(A) [***] of the Adjusted Gross Merchandiser
Product Revenue with respect to Merchandiser Product (other than High-End
Collectibles) sold through an Artist Store and with respect to High-End
Collectibles sold through the UBL Store;
(B) [***] of the Adjusted Gross Merchandiser
Product Revenue with respect to Merchandiser Product (other than High-End
Collectibles) sold through the UBL Store; and
(C) [***] of the Adjusted Gross Merchandiser
Product Revenue with respect to High-End Collectibles sold through an Artist
Store.
(ii) "Adjusted Gross Merchandiser Product Revenue" shall
mean [***].
(iii) "Deductible Amounts" shall mean [***].
Merchandiser shall have the right to approve the amount of (A) third party
fulfillment fees (but only if such fees are in excess of the fees set forth on
Exhibit D attached hereto, (B) the third party service fees (other than credit
card fees), and (C) agent commissions, provided that once such approval is given
with respect to a particular artist, ADNM will not be obligated to obtain
Merchandiser's approval of any other third party fulfillment fees, third party
service fees or agent commissions for such Merchandiser Artist or any other
Merchandiser Artist so long as such fees or commissions, as the case my be, are
not in excess of the fees and commissions previously approved by Merchandiser.
Notwithstanding anything to the contrary contained herein, as between ADNM and
Merchandiser, [***] shall be solely responsible for all customer bad debts in
respect of Merchandiser Product shipped by ADNM (or its designee), including all
associated Deductible Amounts.
(iv) "High-End Collectibles" means any single item of
Merchandiser Product sold pursuant to a Store Agreement (whether through the
applicable Artist Store or the UBL Store) for a retail price in excess of [***].
(c) For the avoidance of doubt, Merchandiser agrees and
acknowledges that Artist Product will be sold on the Artist Stores and that no
License Fee shall be payable to Merchandiser in respect of any Artist Product.
As used herein, "Artist Product" means all merchandise and other products sold
pursuant to a Store Agreement (whether through the applicable Artist Store or
the UBL Store) other than Merchandiser Product (e.g., records, concert tickets,
etc.). During the period Merchandiser has the Rights to a particular
Merchandiser Artist that is party to a Store Agreement, ADNM shall advise
Merchandiser of ADNM's intention to sell on the applicable Artist Store any
Artist Product (other than records and concert tickets) within a reasonable
period of time prior to the intended sale.
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9. ARTISTdirect Warrant: In further consideration for Merchandiser
entering into and fully performing its obligations undertaken by Merchandiser in
this Agreement and under the UBL Agreement, promptly following the execution
hereof, ADNM shall cause ARTISTdirect, LLC to grant to Merchandiser a warrant
substantially in the form of Exhibit E attached hereto in exchange for the
payment by Merchandiser to ARTISTdirect, LLC of one hundred dollars ($100.00).
10. Execution Payment: In consideration of the rights granted and other
covenants and agreements made by Merchandiser in this Agreement and in the UBL
Agreement, ADNM agrees to pay to Merchandiser, upon the complete execution of
both this Agreement and the UBL Agreement, a one-time, non-returnable,
non-recoupable fee of [***].
11. Accountings:
(a) ADNM shall compute the License Fee payable to Merchandiser
and render an accounting statement to Merchandiser within thirty (30) days after
March 31, June 30, September 30 and December 31 for the three-month period
preceding March 31, June 30, September 30 or December 31, as the case may be.
Each such statement shall include an itemized breakdown of the sources of the
applicable revenue, Deductible Amounts and all other reductions in computing the
License Fee and shall be accompanied by the payment of the amount of the License
Fees, if any, earned by Merchandiser during the accounting period to which the
statement relates. With respect to the last two (2) accounting periods before
the end of the Term, ADNM shall be entitled to withhold from payments otherwise
due reasonable reserves against anticipated returns, rebates, credits,
cancellations and exchanges related to the Winterland Store, provided that such
reserves shall consistent with the average amount of actual returns, rebates,
credits, cancellations and exchanges during the accounting period concerned, and
provided further that all such reserves shall be liquidated with the first
accounting period after the Term.
(b) Merchandiser or a certified public accountant on
Merchandiser's behalf may, at ADNM's offices and at Merchandiser's expense,
examine ADNM's books and records relevant to the calculation of the License Fee
solely for the purposes of verifying the accuracy of statements rendered by ADNM
to Merchandiser. Such books and records may be examined as aforesaid only (i)
during ADNM's normal business hours, (ii) upon reasonable notice to ADNM, and
(iii) within two years after the date a statement is due hereunder. Further,
Merchandiser shall not have the right to examine such books and records more
frequently than once in any twelve month period or more than once with respect
to any particular statement. Each statement shall be deemed final and binding
upon Merchandiser as an account stated and shall not be subject to any claim or
objection by Merchandiser (A) unless Merchandiser notifies ADNM of
Merchandiser's specific written objection to the applicable statement, stating
the basis thereof in reasonable detail within two (2) years after the date such
statement is due hereunder, and (B) unless, within said two (2)-year period,
Merchandiser make proper service of process upon ADNM in a suit instituted in a
court of proper jurisdiction.
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12. Exclusivity:
(a) Insofar as ADNM is concerned, Merchandiser shall have the
right to sell and authorize others to sell merchandise containing a Merchandiser
Artist's Personal Identification over the Internet. However, during the Term,
Merchandiser shall not, without ADNM's consent, develop or maintain a web site,
or license or otherwise authorize any other web site provider to develop or
maintain a web site, that is identified solely with a single Merchandiser Artist
(e.g., a web site that is the "official" merchandise web site for a Merchandiser
Artist).
(b) Except with respect to collectibles and limited edition
items supplied by the Merchandiser Artist, records, and concert tickets, ADNM
agrees that, so long as Merchandiser has the Rights, ADNM shall not purchase
within the territory of Merchandiser's exclusivity merchandise bearing the
Personal Identification of a Merchandiser Artist from anyone other than
Merchandiser or a Sublicensee; provided that Merchandiser will consider in good
faith each request by ADNM and/or a Merchandiser Artist who is party to a Store
Agreement to manufacture, or cause the manufacture by a Sublicensee, of
merchandise not otherwise manufactured by Merchandiser or a Sublicensee. If
Merchandiser is unable to timely supply sufficient quantities of any item of
merchandise manufactured by or under the control of Merchandiser (it being
understood that merchandise manufactured by a Sublicensee shall not be deemed
manufactured under the control of Merchandiser) for sixty (60) consecutive days
then, without limiting any other right or remedy available to ADNM, ADNM shall
be entitled to make arrangements with another manufacturer for the manufacture
of such merchandise.
13. Tour Merchandising and Sublicensing Rights: During the Term, ADNM
agrees that it and its affiliates shall refrain from seeking from any artist (a)
tour merchandising rights, or (b) the right to sublicense merchandising rights
to third parties, or (c) the right to manufacture merchandise containing such
artist's Personal Identification.
14. Representations and Warranties; Indemnity:
(a) Each party hereto represents and warrants that: (i) it has
the full right, power and authority to enter into and to perform this Agreement;
(ii) it is not under any restriction or obligation that may or will impair such
party's full performance of this Agreement; and (iii) it shall not at any time
do or authorize any person or entity to do anything inconsistent with, or
anything that might diminish, impair or interfere with any of the other party's
rights hereunder.
(b) Merchandiser agrees to indemnify and hold ADNM and its
members, employees, attorneys, agents, successors, affiliates, assigns and
licensees harmless against any claim, liability, cost and expenses (including
attorneys' and accountants' fees reasonably incurred) in connection with any
breach or alleged breach of this Agreement by Merchandiser. In this regard, ADNM
shall not settle any claim without first notifying Merchandiser of the terms of
any proposed settlement and obtaining Merchandiser's consent thereto.
(c) ADNM agrees to indemnify and hold Merchandiser and its
members, employees, attorneys, agents, successors, affiliates, assigns and
licensees harmless against any claim, liability, cost and expenses (including
attorneys' and accountants' fees reasonably incurred) in connection with any
breach or alleged breach of this Agreement by ADNM. In this
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regard, Merchandiser shall not settle any claim without first notifying ADNM of
the terms of any proposed settlement and obtaining ADNM's consent thereto.
(d) Merchandiser acknowledges that ADNM is making no
representations and warranties concerning anticipated success of the Stores or
the Winterland Store, the amount of compensation payable to Merchandiser
hereunder, and/or the current or future value of ADNM or the warrants described
in paragraph 9 above. Likewise, ADNM acknowledges that Merchandiser is making no
representations and warranties concerning anticipated success of the Stores or
the Winterland Stores or the amount of compensation payable to ADNM with respect
thereto.
15. [***]
16. Notices; Approvals:
(a) All notices and payments to either party hereto shall be
sent to such party's address first mentioned herein, or such other address as a
party hereto may hereafter designate by notice to the other. All notices sent
under this Agreement must be in writing to be effective, and must be sent by a
third party messenger, by air courier service with a written acknowledgment of
receipt, by registered or certified mail, return receipt requested, or by
facsimile provided receipt is confirmed by telephone call to the recipient. The
date of personal delivery or faxing, or the date of delivery to a telegraph
office, as the case may be, of any such notice shall be deemed the date of the
giving thereof; and the date two (2) days following deposit with any air courier
service, or five (5) days following deposit with the United States Postal
Service, of any such notice shall be deemed the date of the giving thereof
(except, with respect to notices of change of address, the date of which will be
the date of receipt by the receiving party). Until ADNM notifies Merchandiser
otherwise, a copy of all notices hereunder to ADNM shall be simultaneously sent
as aforesaid to Xxxxxx & Xxxxxxxx LLP, 0000 Xxxxxx xx xxx Xxxxx, 00xx Xxxxx, Xxx
Xxxxxxx, XX 00000; Attention: Xxxxx X. Xxxxxx, Esq.
(b) No failure by a party hereto to perform any of its
obligations hereunder shall be deemed a breach of this Agreement, unless the
party claiming a breach has given the other party hereto notice of such alleged
breach in reasonable detail and such alleged breach is not cured within fifteen
(15) business days [five (5) business days for non-payments] after the giving of
such notice, provided that if it is not reasonably possible to cure such breach
within such time period, then such failure shall not be deemed a breach if
within such period such party commences the curing of such breach and cures such
breach within a reasonable period of time thereafter. The foregoing provisions
of this paragraph shall not delay or prohibit either party from seeking and
obtaining injunctive and other equitable relief.
(c) No consent or approval under this Agreement shall be
unreasonably withheld or delayed. With respect to consents and approvals of
Merchandiser required under this Agreement, ADNM may elect to request such
consent by notice to Merchandiser. If Merchandiser does not respond to such
notice within ten (10) business days thereafter, ADNM may give Merchandiser a
second notice making such request, and Merchandiser's consent or
----------
[***] Confidential treatment has been requested for the bracketed
portion. The confidential redacted portion has been omitted and filed
separately with the Securities and Exchange Commission.
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approval shall be deemed granted unless Merchandiser notifies ADNM to the
contrary, stating in reasonable detail the basis thereof, within five (5)
business days after such second notice.
17. Miscellaneous:
(a) All references to "this Agreement," "hereof," "herein" and
words of similar connotation include all exhibits attached hereto, unless
specified otherwise. This Agreement is intended by the parties hereto as a final
expression of their understanding and agreement with respect to the subject
matter hereof and as a complete and exclusive statement of the terms thereof;
this Agreement supersedes all prior and contemporaneous negotiations,
understandings, and agreements between the parties hereto with respect to the
subject matter hereof. The parties acknowledge and agree that neither party
hereto has made any representations or promises in connection with this
Agreement or the subject matter hereof not contained herein. Nothing in this
Agreement shall be construed to require the commission of any act contrary to
law, and wherever there is a conflict between any provisions of this Agreement
and any statute, law, ordinance, order or regulation contrary to which the
parties hereto have no legal right to contract, such statute, law, ordinance,
order or regulation shall prevail; provided that, in such event, (a) the
provision of this Agreement so affected shall be limited only to the extent
necessary to permit the compliance with the minimum legal requirements, (b) no
other provisions of this Agreement shall be affected thereby, and (c) all such
other provisions shall remain in full force and effect. The parties hereto shall
negotiate in good faith to replace any invalid, illegal or unenforceable
provision (the "Invalid Provision") with a valid provision, the effect of which
comes as close as possible to that of the Invalid Provision. This Agreement
cannot be canceled, modified, amended or waived, in part or in full, in any
manner except by an instrument in writing signed by the party to be charged. No
waiver by either party, whether expressed or implied, of any provision of this
Agreement or default hereunder shall affect such party's right to thereafter
enforce such provision or to exercise the right or remedy set forth in this
Agreement in the event of any other default, whether or not similar. Words in
the singular number shall include the plural, and vice versa. Whenever examples
are used in this Agreement with the words "including," "for example," "e.g.,"
"such as," "etc." or any derivation thereof, such examples are intended to be
illustrative and not in limitation thereof. The paragraph headings herein are
used solely for convenience and shall not be used in the interpretation or
construction of this Agreement.
(b) In entering into this Agreement and providing services
pursuant hereto, Merchandiser and ADNM each have and shall have the status of
independent contractors. Nothing herein contained shall contemplate or
constitute either party being an agent or employee of the other party, and
nothing herein shall constitute a partnership, joint venture or fiduciary
relationship between the parties.
(c) Neither party hereto shall, without the prior written
consent of the other party (not to be unreasonably withheld), assign this
Agreement, in whole or in part, to any person or entity other than a subsidiary,
affiliated or controlling entity, or to any person or entity owning or acquiring
a substantial portion of the stock or assets of such party hereto.
(d) This Agreement shall be deemed to have been entered into in
the State of California and the validity, interpretation and legal affect of
this Agreement shall be governed by the laws of the State of California
applicable to contracts entered into and performed entirely
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within the State of California. The courts located in the County of Los Angeles,
California (state and federal), only, will have jurisdiction of any controversy
regarding this Agreement; any action or other proceeding which involves such a
controversy will be brought in those courts, in California and not elsewhere.
18. (a) Each party to this Agreement expressly undertakes to retain in
confidence, and to require and cause its subsidiaries and affiliates and its and
their respective employees, contractors and agents to retain in confidence, all
information and know how transmitted to such party (the "Receiving Party") (i)
which the disclosing party hereunder (the "Disclosing Party") has identified in
writing as being proprietary and/or confidential or (ii) which the Receiving
Party reasonably should know, based upon the nature of the information being
disclosed, ought to be treated as confidential (collectively "Confidential
Information"). The Receiving Party will make no use of such Confidential
Information except as expressly authorized under this Agreement. Either party
may, however, disclose Confidential Information if required by law or legal
process, provided such party shall undertake to give the other reasonable notice
prior to such disclosure and shall comply with any applicable protective order
or equivalent.
(b) ADNM hereby specifically acknowledges and agrees that the terms
of the Rights applicable to each Merchandiser Artist constitute Confidential
Information of Merchandiser under this Agreement.
(c) Both parties acknowledge that unauthorized disclosure or use of
Confidential Information could cause irreparable harm and significant injury
which may be difficult to ascertain. Accordingly, both parties agree that the
aggrieved party will have the right to seek and obtain injunctive relief from
breaches of this paragraph 18, in addition to any other rights and remedies it
may have. Both parties agree that each has and shall retain ownership rights to
its own Confidential Information, and that upon expiration or termination of the
Term each party shall return and shall not retain the Confidential Information
of the other party.
(d) Notwithstanding anything in this paragraph 18 to the contrary,
Confidential Information shall not be construed to mean any information which
the Receiving Party can show: (i) is, or subsequently becomes, publicly
available other than as a result of the Receiving Party's breach of any
obligation owed to the Disclosing Party or a third party; (ii) became known to
the Receiving Party prior to the Disclosing Party's disclosure of such
information to the Receiving Party, (iii) became known to the Receiving Party
from a source other than the Disclosing Party other than as a result of such
source's breach of an obligation of confidentiality owed to the Disclosing
Party, (iv) is independently developed by the Receiving Party, or (v) has been
authorized for disclosure by the Disclosing Party.
(e) The provisions of this paragraph 18 shall survive termination
or expiration of the Term.
ARTISTdirect New Media, LLC Winterland Concessions Company,
a California corporation, doing
business as
"Winterland"
By: /s/ Xxxx X. Xxxxxx
---------------------------------
(an authorized signatory)
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By: /s/ [Illegible]
---------------------------------
(an authorized signatory)
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SCHEDULE A
EXCLUDED ARTISTS
Xxxxxxxxxx Xxxx
Led Zeppelin
Xxxxxxx Xxxxxx
Pantera
Xxxxxx
Xxx Zombie
Slayer
Stabbing Westward
Xxx Xxxxx
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EXHIBIT A
MERCHANDISER'S ARTISTS
Term of
Artist Agreement Territory Merchandiser's Rights
------ --------- --------- ---------------------
----------
* Artists with whom ARTISTdirect Stores, LLC desires to enter a Store Agreement.
x Artists for whom Winterland does not have the Rights.
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EXHIBIT B
ONLINE STORE AGREEMENT
THIS AGREEMENT, dated as of ____________, 19__, by and between ARTISTdirect New
Media, LLC ("ADNM"), 00000 Xxxxxxx Xxxx., Xxxxx 000, Xxxxxx, XX 00000, and
[Company Name] ("you"), c/o __________________________ is being entered into in
consideration of the mutual benefits and covenants contained in this Agreement.
1. Purpose: Subject to your approval rights in this Agreement, ADNM will
develop, maintain and operate an Internet web site for you relating to the
musical group professionally known as "[ArtistName]" ("Artist") and the members
of Artist, to be known as "The Official [ArtistName] Superstore" (the "Store").
The Store will provide Internet and other online access for online and offline
distribution of products and services ("Product"). It is intended that the
Product will include records, digital downloads (subject to the consent of
Artist's record company), merchandise, tickets, tour memorabilia, collectible
items and special or limited edition items not available from any other source,
and special bundled packages including any or all of the foregoing items.
2. Term: The term of this Agreement (the "Term") shall commence on the date set
forth above and shall extend for an initial contract period ending three (3)
years after the official launch of the Store. After the initial contract period,
the Term shall automatically continue for additional one (1) year contract
periods, subject to the following sentence. At any time between ninety (90) and
thirty (30) days prior to the expiration of any contract period of the Term,
either party may by notice to the other terminate the Term effective as of the
end of the then-current contract period.
3. Merchandiser Agreements.
(a) You are presently party to an agreement (the "Artist/Merchandiser
Agreement") with Winterland Concessions Company ("Merchandiser") pursuant to
which you have granted Merchandiser the exclusive right to manufacture (and
license the manufacture of) merchandise bearing the name, likenesses,
biographical material and other personal identification of Artist (collectively,
"Personal Identification") for sale through retail channels, including the right
to sell such merchandise to retailers who solely or primarily sell merchandise
via the Internet (the "Rights").
(b) ADNM represents and warrants that it is party to an agreement with
Merchandiser pursuant to which Merchandiser has (i) granted to ADNM any consents
and licenses that may be required from Merchandiser as a result of the
Artist/Merchandiser Agreement in connection with the sale of Product hereunder,
and (ii) agreed to supply (or cause the supply of) merchandise on a consignment
basis to ADNM for resale on the Store (the "ADNM/Merchandiser Agreement"). You
acknowledge that certain Product items may be manufactured by or under the
control of Merchandiser's sublicensees, and that Merchandiser may or may not be
able to offer such Product items to ADNM on a consignment basis. All Product
supplied to ADNM by
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Merchandiser (or its sublicensees) on a consignment basis is sometimes referred
to herein as "Merchandiser Product"; all other Product is sometimes referred to
herein as "Artist Product."
(c) If you (or Artist) enter into any agreement during the Term (of this
Agreement) pursuant to which you grant the Rights to any third party, you shall
cause such third party to grant to ADNM any consents and licenses that may be
required from such third party in connection with the sales of Product
hereunder. For the avoidance of doubt, no termination or expiration of the
Artist/Merchandiser Agreement or of the ADNM/Merchandiser Agreement shall affect
the Term (of this Agreement) or the rights granted to ADNM hereunder.
Accordingly, the only effect of either such termination or expiration will be
that the terms of this Agreement relating to Merchandiser Product will no longer
apply, and the terms of this Agreement relating to Artist Product will
thereafter apply to all Product hereunder.
4. Development; Hosting; Customer Service:
(a) ADNM will design and develop the Store, including the source code,
the Product catalog, and the commerce system, and will be solely responsible for
the costs of such design and development. You shall have the right to approve
the design of the Store, including its "look and feel." The parties hereto agree
to use commercially reasonable best efforts (i) to cause the beta version of the
Store to be completed within 60 days after the complete execution of this
Agreement, and (ii) to officially launch the Store within 90 days after such
execution.
(b) During the Term, ADNM will host (i.e., provide the server for) and
maintain the Store, including by providing periodic source code programming
updates and improvements in accordance with your reasonable requests. In this
regard, ADNM will use its commercially reasonable best efforts to correct any
material "bug" or defect as soon as reasonably possible after ADNM becomes aware
of such material "bug" or defect.
(c) ADNM shall handle all customer orders and inquiries, provide all
necessary credit card accounting and processing services and develop payment,
delivery and refund policies. To effect the foregoing, ADNM shall also provide
an on-line and toll-free telephone service center that will take orders and
respond to customer inquiries. On-line inquiries will be responded to within 24
hours of receipt and the telephone service will be operational Mondays through
Fridays from 9:00 a.m. to 7:00 p.m. Pacific Time (excluding holidays) and will
enable customers who prefer not to place orders on-line to place orders by
facsimile or telephone.
(d) Unless you and ADNM agree otherwise in writing, ADNM (or its
designee) shall process orders received from the Store and arrange to have the
ordered Product shipped to the customer (subject to Product availability).
(e) Within a reasonable time after your written request during the Term,
ADNM will, [***] design and develop a non-commerce Internet web site solely
related to Artist (the "Artist Site"), including the source code, or, if the
Artist Site already exists, ADNM will redesign and
----------
[***] Confidential treatment has been requested for the bracketed
portion. The confidential redacted portion has been omitted and filed
separately with the Securities and Exchange Commission.
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redevelop it for you. [***] will be solely responsible for the costs of such
design and development. You shall have the right to approve the design of the
Artist Site, including its "look and feel." During the Term, ADNM will host and
maintain the Artist Site, including by providing periodic source code
programming updates and improvements in accordance with your reasonable
requests.
5. Product Supply and Inventory:
(a) Product Selection: You will have the right to approve the Products
that are to be sold through the Store and the retail price of each Product item.
(b) Merchandiser Product: ADNM will be responsible for purchasing all
Merchandiser Product from Merchandiser and paying all related costs (including
directly associated freight and insurance costs) ("Product Costs"). As between
you and ADNM, ADNM will be solely responsible for all inventory of Merchandiser
Product.
(c) Artist Product:
(i) You and ADNM agree to cooperate with each other and use
their commercially reasonable best efforts to make the necessary arrangements
with the manufacturers, distributors and providers manufacturers, distributors
and providers of Artist Product ("Suppliers"), on mutually acceptable terms, to
ensure the timely supply of Artist Product in sufficient quantities to fulfill
Store customer orders. You will be responsible for purchasing all Artist Product
from the Suppliers and paying all related Product Costs. If ADNM should
nevertheless pay any Product Costs on your behalf (which ADNM is not obligated
to do), all such Product Costs will be deducted from any and all monies
otherwise payable to you hereunder and, to the extent ADNM is at any time unable
to do so, you agree to promptly reimburse ADNM for the excess upon demand. In
order to assist you with regard to the foregoing, ADNM will provide inventory
management services, taking into account such inventory levels as you and ADNM
may have mutually approved.
(ii) As between you and ADNM, you shall own and be solely
responsible for all Artist Product inventory. However, ADNM shall maintain (or
cause the applicable fulfillment center to maintain) at all times during the
Term insurance to protect you and ADNM from losses related to Artist Product
inventory damaged or otherwise lost while in the fulfillment center's
possession. The coverage terms of the insurance policy currently in effect are
set forth on Exhibit 1 attached to this Agreement.
(d) Upon the expiration of the Term, all Artist Product inventory for
which you have paid the Product Costs shall be shipped, at your sole cost and
expense, to a location designated or approved by you, which inventory shall be
free and clear of any encumbrances by ADNM or any third party deriving rights
through ADNM.
6. Product Sales and Store Revenues:
----------
[***] Confidential treatment has been requested for the bracketed
portion. The confidential redacted portion has been omitted and filed
separately with the Securities and Exchange Commission.
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(a) Merchandiser Product: Attached hereto as Exhibit 2 is an extract of
the ADNM/Merchandiser Agreement setting forth the license fee payable by ADNM to
Merchandiser in respect of Merchandiser Product sold hereunder. Company
acknowledges and agrees that it shall look solely to Merchandiser, and not to
ADNM, with respect to all monies due Company and/or Artist in respect of
Merchandiser Product sold hereunder.
(b) Artist Product:
(i) Upon ADNM's receipt of a verified order for a particular
item of Artist Product, ADNM shall purchase such item of Product from you. Upon
such purchase, title to such Product shall pass to ADNM and, as between you and
ADNM, ADNM will thereafter be responsible for the inventory of such Product
item.
(ii) ADNM shall pay you a purchase price equal to [***]of the
"Gross Artist Product Revenue," which means the amount [***]. The term
"Deductible Amounts" means [***]. A schedule setting forth the fulfillment fees
charged by the fulfillment center as of the date hereof is set forth on Exhibit
1 attached hereto.
(iii) Notwithstanding anything to the contrary contained herein,
as between ADNM and you, [***] shall be solely responsible for all Product Costs
and Deductible Amounts associated with customer bad debts in respect of Product
hereunder shipped by ADNM (or its designee).
(c) Records: Notwithstanding paragraphs 5(c) and 6(b) above,
phonorecords that are supplied by ADNM's designated fulfillment center for sale
through the Store ("Records") shall be purchased by ADNM directly from such
fulfillment center, and ADNM (or the fulfillment center) shall be solely
responsible for all related Product Costs (subject to the next sentence) and
inventory. ADNM shall pay you [***] of the "Net Record Revenue, which means
[***]. The term "Gross Record Revenue" means the [***]. For the avoidance of
doubt, if you elect to supply phonorecords directly to ADNM for sale through the
Store, such phonorecords shall be subject to paragraphs 5(c) and 6(b) above
rather than this paragraph 6(c).
(d) UBL Store: To the extent any merchandise offered for sale on an
Internet on-line store (the "UBL Store") operated by a company affiliated with
ADNM (the "UBL Affiliate") is readily available in the Store inventory, ADNM
agrees to cause the UBL Affiliate to utilize such inventory to fulfill orders
for such merchandise placed on the UBL Store. ADNM shall account to you pursuant
to the terms of this Agreement with respect to all such Artist Product sold
through the UBL Store, except that ADNM (or the UBL Affiliate) shall purchase
such Artist Product for a price equal to [***] of the applicable Gross Artist
Product Revenue, rather than the price set forth in paragraph 6(b)(ii) above.
Such Artist Product Revenue shall be computed "at the source" (i.e., [***]), and
shall be deemed received by ADNM for purposes of paragraph 6(g) below within 30
days after it is received by the UBL Affiliate. For the avoidance of doubt, no
merchandise or other products (including Records) that are obtained by the UBL
Affiliate from
----------
[***] Confidential treatment has been requested for the bracketed
portion. The confidential redacted portion has been omitted and filed
separately with the Securities and Exchange Commission.
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third party sources (i.e., other than from the Store's inventory) and sold on
the UBL Store shall be deemed to constitute Product subject to this Agreement.
(e) Database: As between ADNM and you, you will own the customer
database as specifically identified with the Store (the "Store Database"). ADNM
will maintain and update the Store Database during the Term, including by
inputting additional names and associated data compiled from contests and
similar activities of the Store. ADNM will also input into the Store Database
any supplemental data about the persons contained in the Store Database (such as
demographic and lifestyle information) that may be included, in other databases
owned, controlled or accessed by ADNM or the UBL Affiliate (collectively, the
"ADNM Database"), and may also seek to obtain such supplemental information
through data sharing arrangements with third parties. ADNM will attempt to
develop revenue sources in respect of the Store Database during the Term,
subject to your consent in each instance, and shall pay you [***] of the
associated "Gross Database Revenue" (i.e., [***]). ADNM will make the ADNM
Database available for mutually approved Store promotions during the Term, in
exchange for which you agree that ADNM may supplement the ADNM Database with
names and associated data (but specifically excluding any references to you,
Artist or the Store) derived from the Store Database. Neither you nor Artist
shall have any interest in and to the ADNM Database or any revenues that may be
generated in respect thereof.
(f) Other Revenues: ADNM shall pay you [***] of the "Gross Exploitation
Revenue," which means [***]. You shall have the right to approve all such
advertising and other activities.
(g) Accounting: The term "Gross Income" means, individually and
collectively, [***]. ADNM shall compute your share of Gross Income and render
statements thereof to you within 60 days after March 31, June 30, September 30
and December 31 for the preceding three-month period. ADNM shall deduct from
your share of Gross Income all chargeable amounts under this Agreement. Each
such statement shall include an itemized breakdown of the sources of the
applicable revenue and shall be accompanied by the payment of the amount of
monies, if any, earned by you during the accounting period to which the
statement relates. ADNM shall be entitled from time to time to withhold from
payments otherwise due reasonable reserves against anticipated returns, rebates,
credits, cancellations and exchanges, provided that such reserves shall be
liquidated within two accounting periods following their establishment. You or a
certified public accountant on your behalf may, at ADNM's offices and at your
expense, examine ADNM's books and records relevant to the calculation of your
share of Gross Income solely for the purposes of verifying the accuracy of
statements rendered by ADNM to you. Such books and records may be examined as
aforesaid only (i) during ADNM's normal business hours, (ii) upon reasonable
notice to ADNM, and (iii) within two years after the date a statement is
rendered hereunder. Further, you shall not have the right to examine such books
and records more frequently than once in any twelve month period or more than
once with respect to any particular statement. Each statement shall be deemed
final and binding upon you as an account stated and shall not be subject to any
claim or objection by you (A) unless you notify ADNM of
----------
[***] Confidential treatment has been requested for the bracketed
portion. The confidential redacted portion has been omitted and filed
separately with the Securities and Exchange Commission.
5
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your specific written objection to the applicable statement, stating the basis
thereof in reasonable detail within two years after the date such statement is
rendered hereunder, and (B) unless, within said two year period, you make proper
service of process upon ADNM in a suit instituted in a court of proper
jurisdiction.
7. Marketing.
(a) During the Term, ADNM shall cause the Ultimate Band List Internet
web site, located at xxx.xxx.xxx (the "UBL"), to contain a featured hyperlink
to, and prominently placed advertising for, the Store. Similarly, you agree that
ADNM may include on the Store a featured hyperlink to, and prominently placed
advertising for the UBL at no charge. Other marketing activities in respect of
the Store shall be subject to your approval, and may involve the development of
strategic relationships with, for example, other Internet web sites and/or
Artist's record company to create Store hyperlinks. Any third party marketing
costs incurred with your approval shall be deducted from any monies otherwise
payable to you hereunder (except to the extent deducted from monies otherwise
payable by ADNM to Merchandiser, it being understood that all marketing costs
shall be subject to allocation by ADNM, in ADNM's reasonable business judgment,
between you and Merchandiser taking into account whether the applicable costs
related to Merchandiser Product and/or Artist Product).
(b) You agree to use your commercially reasonable efforts to:
(i) Keep ADNM apprised of Artist's professional activities
(e.g., touring and recording) and provide ADNM reasonable access to Artist's
professional relationships (e.g., with tour promoters and record labels);
(ii) Cause the URL of the Store to be included on all
advertisements for Artist records released during the Term or for concerts to be
performed during the Term, and on the liner notes of Artist's records and
concert programs;
(iii) Provide ADNM with a minimum of [***] complimentary tickets
to each concert held by Artist during the Term to be given away in connection
with Store promotions;
(iv) Cause a minimum of [***] special or limited edition
Products to be the manufactured and supplied during the course of the Term for
sale exclusively on the Store, and not through any other source;
(v) Cause a minimum of [***] unique and/or collectible items of
Product to be sold through auctions conducted auctioned on the Store;
(vi) Cause Artist to autograph records from time to time for
sale or promotional use on the Store, provided Artist shall not be required to
autograph more than [***] records in the aggregate during the Term;
----------
[***] Confidential treatment has been requested for the bracketed
portion. The confidential redacted portion has been omitted and filed
separately with the Securities and Exchange Commission.
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(vii) Cause on-line events and/or sites featuring Artist or any
member of Artist (e.g., the official Internet web site of Artist's fan club, any
official Internet web site relating to any member of Artist, any on-line "chats"
featuring Artist or any member(s) of Artist, cybercasts of Artist's live
performances, interviews or other audiovisual programs featuring Artist or any
member(s) of Artist) to prominently feature, on both the front and main event
page(s), a hyperlink to, and banner advertising for, the Store;
(viii) Subject to Artist's other professional commitments, cause
Artist to be reasonably available during the Term for on-line "chats" hosted by
the Store.
8. Ownership; Grant of Rights; Post-Term Rights:
(a) Artist Content: As between you and ADNM, any and all artwork,
trademarks, logos, graphics, video, sound recordings, musical compositions,
text, data and other materials supplied by you to ADNM in connection with this
Agreement, as well as the URL and the domain name or names assigned to the Store
and/or the Artist Site (collectively, the "Artist Content"), shall remain your
sole and exclusive property. You hereby grant to ADNM during the Term and
throughout the universe (the "Territory") a non-exclusive, royalty-free license
to use, copy, modify (with your prior consent), distribute, publicly perform and
display and otherwise exploit the Artist Content in connection with the
development, maintenance and operation of the Store and/or the Artist Site and
the advertising and promotion of the Store and/or the Artist Site and of ADNM in
connection with the Store and/or the Artist Site.
(b) Developed Content: As between you and ADNM, any and all text,
graphics, audio, video, artwork and designs created by ADNM or its employees or
agents during the Term for use solely on the Store and/or the Artist Site,
including any additions to or modifications of Artist Content made by ADNM or
its employees or agents, (collectively, the "Developed Content"), shall be your
sole and exclusive property. All Developed Content shall be deemed included in
the license granted by you under paragraph 8(a) above.
(c) ADNM Content: As between you and ADNM, any and all commerce
technology, HTML formatting code, source and object code, programming code and
software, as well as all text, graphics, audio, video, artwork and designs
provided by ADNM in connection with this Agreement which does not constitute
Developed Content (collectively, the "ADNM Content") shall be ADNM's sole and
exclusive property.
(d) Post-Term Rights: Upon expiration of the Term, you shall continue to
have the ownership of or right to use, as applicable, the Artist Content and
Developed Content in accordance with the terms of this paragraph 8 free and
clear of any claim or encumbrance by ADNM or any third party deriving rights
through ADNM. Upon your request after the expiration of the Term, ADNM will
negotiate with you in good faith to: (i) license certain ADNM Content to you;
(ii) assist you in the transition of the Store and the Artist Site from any
third-party vendors or licensors used by ADNM to any entity or entities of your
choice to provide the same functions for you; and (iii) provide you with
updates, hosting, maintenance or support with respect to the Store or the Artist
Site. For the avoidance of doubt, you shall not be entitled to use any name,
trademark or service xxxx of ADNM or its affiliates in any manner
7
24
whatsoever without obtaining the prior written consent of ADNM or the applicable
affiliate of ADNM.
(e) Artist Identification: You hereby grant to ADNM the non-exclusive
right during the Term throughout the Territory to use the names of Artist and
Artist's tours, and the names and approved photographs and other approved
likenesses of the members of Artist, and any trademark or service xxxx owned by
you, Artist or any of your respective Affiliates ("Artist Identification"),
solely on the Store and/or the Artist Site and in advertisements and promotions
of the Store and for the Artist Site, and of ADNM in connection with the Store
and/or the Artist Site. In this regard, at no cost to ADNM, you agree to provide
ADNM with all photographs, graphics, logos and similar items reasonably required
by ADNM to create the Store and/or the Artist Site, and readily available to you
promptly following ADNM's request. For the avoidance of doubt, ADNM shall not
use the Artist Identification in any manner whatsoever after the Term without
obtaining your prior written consent.
(f) Inducement Terms and Guarantee: You shall cause the members of
Artist to execute the Inducement Terms and Guarantee attached to this Agreement
as Exhibit 3 concurrently with the execution of this Agreement.
9. Third Party Clearances: You shall obtain all necessary third-party clearances
in connection with all Artist Content and Product (including the payment of any
associated fees, royalties and other costs). Without limiting the generality of
the foregoing, with respect to all uses of musical compositions, sound
recordings and audiovisual productions in connection with the Store, you agree
to grant or cause Artist and/or any applicable third parties (e.g., music
publishers, record companies and performing rights societies) to grant to ADNM
any and all required rights. However, ADNM shall not use any particular sound
recording, musical composition or audiovisual production on the Store or the
Artist Site, or provide access to any feature or service on the Store or the
Artist Site which entails the public performance of music (e.g., live audio
streaming), except at your request or with your approval. If ADNM nevertheless
shall pay, with your approval, any third party clearance cost relating to the
Store and/or the Artist Site (which ADNM is not obligated to do), all such
amounts shall be deducted from any and all monies otherwise payable to you under
this Agreement (except to the extent deducted from monies otherwise payable by
ADNM to Merchandiser, it being understood that such costs shall be subject to
allocation by ADNM, in ADNM's reasonable business judgment, between you and
Merchandiser taking into account whether the applicable costs related to
Merchandiser Product and/or Artist Product).
10. Representations and Warranties: Indemnity:
(a) You represent and warrant as follows:
(i) You have the full right, power and authority to enter into
and to perform this Agreement and to grant to ADNM all rights and licenses set
forth in this Agreement. Neither you nor Artist are under any restriction or
obligation which may or will impair your full performance of this Agreement. No
Artist Content or the exploitation or use thereof or the sale of any Product
shall violate or infringe upon any common law or statutory rights of any party,
8
25
including contractual rights, copyrights, and rights of privacy or publicity or
shall defame any person or entity; and
(ii) ADNM shall have the exclusive right during the Term
throughout the Territory to develop and operate the only "official" Artist
on-line store (i.e., the only Internet web site authorized by Artist with
respect to products relating primarily to Artist and/or any member(s) of Artist
(acting in the capacity of Artist members, rather than in connection with any
member's professional endeavors unrelated to Artist). Accordingly, during the
Term, neither you, Artist nor any member of Artist shall grant any other person
or entity the right to develop and/or operate a web site that (A) pertains
primarily to Artist (B) sells products featuring the Artist identification and
(C) is promoted or otherwise officially sanctioned by Artist (e.g., by featuring
a hyperlink to such web site on the Artist Site).
(b) ADNM represents and warrants as follows: It has the full right,
power and authority to enter into and to perform this Agreement and to grant to
you all rights and licenses set forth in this agreement. No ADNM Content or
Developed Content, or the exploitation or use thereof in accordance with the
terms of this Agreement shall violate or infringe upon any common law or
statutory rights of any party, including contractual rights, copyrights, and
rights of privacy or publicity.
(c) You agree to indemnify and hold ADNM and its members, employees,
attorneys, agents, successors, assigns and licensees harmless against any claim,
liability, cost and expenses (including attorneys' and accountants' fees
reasonably incurred) in connection with any breach or alleged breach of this
Agreement by you. In this regard, ADNM shall not settle any claim without first
notifying you of the terms of any proposed settlement and obtaining your consent
thereto, provided you post within ten days after such notice, a bond,
satisfactory to ADNM in its reasonable discretion, to assure ADNM of
reimbursement for all damages, liabilities, costs and expenses (including legal
expenses and counsel fees reasonably incurred) that ADNM, in its reasonable
business judgment, incur as a result of such a claim. If you fail to post such a
bond, you shall be deemed to have consented to ADNM's settlement. You shall,
upon demand, pay the person or entity being indemnified hereunder for any
payment made or required to be made by such person or entity at any time
(including after the Term) in respect of any liability, damage, or expense to
which the foregoing indemnity relates. Without waiving any right or remedy
available to ADNM, if any such claim is made, ADNM shall have the right to
withhold monies otherwise payable to you under this Agreement in an amount
reasonably related to such claim and to deduct therefrom payments required under
this paragraph. ADNM shall not withhold monies otherwise payable to you after
you post a bond meeting the above-described conditions.
(d) (i) You acknowledge that ADNM is making no representations and
warranties concerning the anticipated success of the Store, the Artist Site
and/or the amount of compensation payable to you hereunder. You warrant,
represent and agree that neither you nor Artist nor any third party shall make
any claim, nor shall any liability be imposed upon ADNM based upon any claim,
that more sales could have been made or better business could have been done in
connection with the Store and/or the Artist Site than was actually made or done.
Except as may be specifically set forth herein, ADNM disclaims all other
warranties, whether express, implied or statutory, including the implied
warranties of merchantability and fitness for a
9
26
particular purpose. ADNM does not warrant that the Store, the Artist Site and/or
services herein will be error-free or without interruption.
(ii) You agree that ADNM shall not be liable for any special,
consequential, incidental or indirect damages in connection with or arising out
of this Agreement, however caused, under any theory of liability, including (i)
any loss of profits or loss of revenue resulting from the use of ADNM's services
and/or ADNM Content even if ADNM has been advised of the possibility thereof,
and/or (ii) any loss of data resulting from delays, non-deliveries,
mis-deliveries or service interruptions caused by either party.
11. Notices; Approvals:
(a) All notices, accounting statements and payments to either party
shall be sent to such party's address first mentioned in this Agreement, or such
other address as a party to this Agreement may hereafter designate by notice to
the other. All notices sent under this Agreement must be in writing to be
effective, and, except for statements and payments, must be sent by a third
party messenger, by air courier service with a written acknowledgment of
receipt, by registered or certified mail, return receipt requested, or through a
telegraph office. The date of personal delivery, of mailing or faxing, or the
date of delivery to a telegraph office, as the case may be, of any such notice
shall be deemed the date of the giving thereof (except, with respect to notices
of change of address, the date of which will be the date of receipt by the
receiving party). Until ADNM notifies you otherwise, a copy of all notices
hereunder to ADNM shall be simultaneously sent as aforesaid to Xxxxxx & Xxxxxxxx
LLP, 0000 Xxxxxx xx xxx Xxxxx, 00xx Xxxxx, Xxx Xxxxxxx, XX 00000; Attention:
Xxxxx X. Xxxxxx, Esq.
(b) No failure by any party to this Agreement to perform any of its
obligations hereunder shall be deemed a breach of this Agreement, unless the
other party has given notice of such alleged breach in reasonable detail and
such alleged breach is not cured within 30 days after the giving of such notice.
(c) No consent or approval under this Agreement shall be unreasonably
withheld or delayed. ADNM may elect to request a consent or approval by notice
to you, or may send you a notice reflecting the availability of a test site of
the Store embodying the materials for which approval is sought. In each
instance, your consent or approval shall be deemed granted unless you notify
ADNM to the contrary within five (5) business days after ADNM's sends the
aforesaid notice to you. No inadvertent failure by ADNM to obtain your consent
or approval shall be deemed a breach by ADNM of this Agreement, provided ADNM
shall use reasonable efforts to rectify such failure on a prospective basis
following receipt of notice from you specifying such failure. Notwithstanding
the provisions of paragraph 11(a) above, any notice described in this paragraph
11(c) may be sent by telecopier or electronic mail.
12. Miscellaneous:
(a) This Agreement is intended by the parties hereto as a final
expression of their understanding and agreement with respect to the subject
matter hereof and as a complete and exclusive statement of the terms thereof,
this Agreement supersedes all prior and contemporaneous negotiations,
understandings, and agreements between the parties hereto with
10
27
respect to the subject matter hereof. The parties acknowledge and agree that
neither party hereto has made any representations or promises in connection with
this Agreement or the subject matter hereof not contained herein. The parties
hereto shall negotiate in good faith to replace any invalid, illegal or
unenforceable provision (the "Invalid Provision") with a valid provision, the
effect of which comes as close as possible to that of the Invalid Provision.
This Agreement cannot be canceled, modified, amended or waived, in part or in
full, in any manner except by an instrument in writing signed by the party to be
charged. No waiver by either party hereto, whether expressed or implied, of any
provision of this Agreement or default hereunder shall affect such party's right
to thereafter enforce such provision or to exercise the right or remedy set
forth in this Agreement in the event of any other default, whether or not
similar. Words in the singular number shall include the plural, and vice versa.
Whenever examples are used in this Agreement with the words "including," `for
example," "e.g.," "such as," "etc." or any derivation thereof, such examples are
intended to be illustrative and not in limitation thereof. The paragraph
headings herein are used solely for convenience and shall not be used in the
interpretation or construction of this Agreement. All exhibits attached hereto
are incorporated into this Agreement by reference.
(b) In entering into this Agreement and providing services pursuant
hereto, you and ADNM each have and shall have the status of independent
contractors. Nothing herein contained shall contemplate or constitute either
party being an agent or employee of the other party, and nothing herein shall
constitute a partnership, joint venture or fiduciary relationship between the
parties.
(c) This Agreement shall be deemed to have been entered into in the
State of California and the validity, interpretation and legal affect of this
Agreement shall be governed by the laws of the State of California applicable to
contracts entered into and performed entirely within the State of California.
The courts located in California (state and federal), only, will have
jurisdiction of any controversy regarding this Agreement; any action or other
proceeding which involves such a controversy will be brought in those courts, in
California and not elsewhere.
ARTISTdirect New Media, LLC
a California limited liability company
By: ARTISTdirect, LLC [Company Name]
Its: Member a __________ Corporation
By: ___________________________
Its: ___________________________
By: ___________________________
Xxxx Xxxxxx
Its: Co-Chief Executive Officer
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By: ___________________________
Xxx Xxxxxx
Its: Co-Chief Executive Officer
12
29
EXHIBIT 1
SCHEDULE OF FULFILLMENT FEES
--------------------------------------- ---------------------------------------
Item Retail Price Fulfillment Fee
--------------------------------------- ---------------------------------------
[***] [***]
[***] [***]
[***] [***]
[***] [***]
--------------------------------------- ---------------------------------------
In addition, the following packaging costs are applicable:
--------------------------------------- ---------------------------------------
Box Size Packaging Cost
--------------------------------------- ---------------------------------------
[***] [***]
[***] [***]
[***] [***]
--------------------------------------- ---------------------------------------
SCHEDULE OF INSURANCE COVERAGE
ADNM currently carries property insurance with respect to all inventory
at the fulfillment center, covering up to $1,000,000 in damages (subject to
adjustments from time to time in accordance with then-current inventory value),
with a $5,000 deductible (except with respect to wind damage, for which the
deductible is $100,000). ADNM shall cause you to be named an additional insured
under said policy and provide you with a certificate of insurance to such
effect.
----------
[***] Confidential treatment has been requested for the bracketed
portion. The confidential redacted portion has been omitted and filed
separately with the Securities and Exchange Commission.
30
EXHIBIT 2
[ADNM/MERCHANDISE AGREEMENT - LICENSE FEE]
31
EXHIBIT 3
INDUCEMENT TERMS AND GUARANTEE
The undersigned hereby acknowledge that they have read and understand
all of the terms and conditions set forth in the agreement dated as of _________
___, 19___, by and (the "Agreement") by and between ARTISTdirect New Media, LLC
("ADNM") and [CompanyName] ("Company"), to which these Inducement Terms and
Guarantee are attached.
In consideration of Company's execution and delivery of the Agreement,
the benefit of which runs to the undersigned, the undersigned hereby represent,
warrant and agree, jointly and severally that:
1. Company has the right, insofar as the undersigned are concerned, to
enter into the Agreement and to assume all of the obligations, warranties and
undertakings to Company on the part of the undersigned contained therein, and
Company shall continue to have those rights until all of those obligations,
warranties and undertakings shall have been fully performed and discharged.
2. All of the representations, warranties and agreements on the part of
Company contained in the Agreement that concern Company and/or the undersigned
are and shall remain true and correct.
3. The undersigned shall fully and to the best of their abilities
perform and discharge all of the obligations, warranties and undertakings
contained in the Agreement insofar as the same are required of the undersigned
and to the extent Company has undertaken to cause the performance and discharge
by the undersigned of those obligations and undertakings, and the undersigned
further guarantee the full and faithful performance of all other obligations of
Company under the Agreement, it being agreed and acknowledged that such
guarantee shall be applicable regardless of whether, for any reason whatsoever,
notwithstanding the provisions of paragraph 1 above, Company shall cease to have
the right to perform the obligations, warranties and undertakings to ADNM on the
part of Company contained in the Agreement.
4. The undersigned agree to look solely to Company (and not to ADNM)
with respect to all monies payable to the undersigned in connection with the
Agreement.
5. ADNM may, in its own name, institute any action or proceeding against
the undersigned to enforce its rights under the Agreement and/or this agreement,
and ADNM shall be entitled to equitable relief, including injunctive relief, to
enforce the provisions of said agreements, without the necessity of first
resorting to or exhausting any rights or remedies against Company.
Dated as of _______ ___, 19___, by and
______________________
______________________
32
EXHIBIT C
MERCHANDISER'S STANDARD WHOLESALE PRICE LIST
MERCHANDISER'S STANDARD
WHOLESALE PRICE LIST
(as of June 11, 1999)
--------------------------------- ----------------
ITEM PRICE
--------------------------------- ----------------
T-shirt (adult) [***]
--------------------------------- ----------------
T-shirt (youth) [***]
--------------------------------- ----------------
Baby T [***]
--------------------------------- ----------------
Tank top (women's) [***]
--------------------------------- ----------------
Long-sleeve shirt [***]
(men's/women's)
--------------------------------- ----------------
Football jersey [***]
--------------------------------- ----------------
Tie-dye shirt [***]
--------------------------------- ----------------
Baseball jersey (men's) [***]
--------------------------------- ----------------
Baseball jersey (women's) [***]
--------------------------------- ----------------
Poly T (women's) [***]
--------------------------------- ----------------
Hats [***]
--------------------------------- ----------------
----------
[***] Confidential treatment has been requested for the bracketed
portion. The confidential redacted portion has been omitted and filed
separately with the Securities and Exchange Commission.
1
33
EXHIBIT D
PRE-APPROVED FULFILLMENT FEES
--------------------------------------- -----------------------------------
Item Retail Price Fulfillment Fee
--------------------------------------- -----------------------------------
[***] [***]
[***] [***]
[***] [***]
[***] [***]
--------------------------------------- -----------------------------------
IN ADDITION, THE FOLLOWING PACKAGING COSTS ARE APPLICABLE:
--------------------------------------- -----------------------------------
Box Size Packaging Cost
--------------------------------------- -----------------------------------
[***] [***]
[***] [***]
[***] [***]
--------------------------------------- -----------------------------------
----------
[***] Confidential treatment has been requested for the bracketed
portion. The confidential redacted portion has been omitted and filed
separately with the Securities and Exchange Commission.
1
34
EXHIBIT E
ARTISTDIRECT, LLC
WARRANT TO PURCHASE [***] COMMON UNITS
WARRANT NO. 1999-3
THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS
WARRANT MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS. THIS WARRANT IS FURTHER SUBJECT TO CERTAIN RESTRICTIONS
ON TRANSFER CONTAINED HEREIN AND IN THAT CERTAIN SECOND AMENDED AND RESTATED
OPERATING AGREEMENT OF ARTISTDIRECT, LLC, A CALIFORNIA LIMITED LIABILITY
COMPANY, DATED MAY 18, 1999, AS THE SAME MAY BE AMENDED FROM TIME TO TIME.
WARRANT TO PURCHASE
LIMITED LIABILITY COMPANY COMMON UNITS
This certifies that Winterland Concessions Company, a California
corporation, doing business as "Winterland" ("Merchandiser) is entitled, on or
after the date hereof, to become a Member in ARTISTdirect, LLC, a California
limited liability company (the "Company"), on and subject to the terms and
conditions contained herein and in the "Operating Agreement" (as defined below),
with the number of Common, Units in the Company set forth in Section 1 below, in
return for a capital contribution by Merchandiser to the Company of cash
consideration in an amount equal to One Dollar ($1.00) per Common Unit (subject
to adjustment as hereinafter provided, the "Warrant Price").
Except as otherwise specifically provided herein, terms used but not
otherwise defined herein shall have those meanings as set forth in that certain
Second Amended and Restated Operating Agreement of ARTISTdirect, LLC, dated May
18, 1999, as the same may be amended from time to time (the "Operating
Agreement"). A true and correct copy of the Operating Agreement is attached
hereto.
This Warrant is subject to the following terms and conditions:
1. Common Units Subject to Warrant: Vesting.
----------
[***] Confidential treatment has been requested for the bracketed
portion. The confidential redacted portion has been omitted and filed
separately with the Securities and Exchange Commission.
2
35
(a) Definitions.
(i) "ADNM" means ARTISTdirect New Media, LLC, a Subsidiary of
the Company;
(ii) "ADNM Merchandiser Agreement" means that certain
Merchandiser Agreement dated June 7, 1999 between ADNM and Merchandiser,
(iii) "ADNM Qualifying Revenue" means the "Adjusted Gross
Merchandiser Product Revenue" (as defined in the ADNM Merchandiser
Agreement), excluding, however, all amounts received in respect of
"Merchandiser Product" (as defined in the ADNM Merchandiser Agreement)
sold in respect of orders placed through the UBL Store.
(iv) "UBL" means The Ultimate Band List, LLC, a Subsidiary of
the Company;
(v) "UBL Merchandiser Agreement" means that certain Merchandiser
Agreement dated June 7, 1999 between UBL and Merchandiser;
(vi)"UBL Store" has the meaning ascribed thereto in the ADNM
Merchandiser Agreement;
(vii) "UBL Qualifying Terms" means on a consignment basis or on
terms requiring payment no earlier than the date ninety (90) days after
the receipt by UBL's fulfillment center(s) of the applicable product
items and UBL's receipt of an invoice from Merchandiser therefor;
(viii) "UBL Merchandiser Product" means merchandise provided to
UBL on UBL Qualifying Terms by either Merchandiser or any "Sublicensee"
(as defined in the UBL Merchandiser Agreement);
(ix) "UBL Gross Merchandiser Product Revenue" means the amount
actually received by UBL in respect of UBL Merchandiser Product sold to
customers who place orders through the UBL Store, including any directly
related shipping and handling revenues collected by UBL from such
customers;
(x) "UBL Deductible Amounts" means all third party costs
(including all associated freight and insurance costs) of shipping the
applicable merchandise to UBL's fulfillment center(s); all third party
fulfillment fees, third party warehouse charges and third party related
charges (e.g., box charges and return processing fees); sales, use and
value-added taxes; credit card and other third party service fees; agent
commissions; and any credits for returns, cancellations and exchanges;
provided, however that, in order for any of the foregoing to constitute
a "UBL Deductible Amount," it must be approved by Merchandiser in
accordance with the provisions of Section 8(b)(iii) of the ADNM
Merchandiser Agreement, if applicable.
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36
(xi) "UBL Qualifying Revenue" means UBL Gross Merchandiser
Product Revenue less the UBL Deductible Amounts; and
(xii) "Highest Sales" means the greatest aggregate ADNM
Qualifying Revenue and UBL Qualifying Revenue during any period of
twelve (12) consecutive calendar months of the term of each of the ADNM
Merchandiser Agreement and the UBL Merchandiser Agreement between June
7, 1999 and June 6, 2002);
(b) This Warrant may be exercised with respect to:
(i) [***] Common Units at any time on or before June 6, 2004;
and
(ii) an additional [***] Common Units if Highest Sales equal or
exceed [***]. In this regard, the Company shall notify Merchandiser
within sixty (60) days following the date upon which such level of
Highest Sales is achieved, if at all.
2. Term. Except for the rights conferred upon the Company pursuant to Section
7(a) below, this Warrant, and Merchandiser's right to exercise this Warrant,
shall terminate immediately upon the first to occur of the following:
(a) the close of business (i.e., 5:00 p.m., Los Angeles time) on June 6,
2007;
(b) the termination of the ADNM Merchandiser Agreement prior to the
expiration of the full term thereof either (i) by ADNM due to a material breach
thereof by Merchandiser, which breach remains uncured for the period specified
in Section 16(b) of the ADNM Merchandiser Agreement, or (ii) by Merchandiser
other than due to a material breach thereof by ADNM, which breach remains
uncured for the period specified in Section 16(b) of the ADNM Merchandiser
Agreement;
(c) the termination of the UBL Merchandiser Agreement prior to the
expiration of the full term thereof either (i) by UBL due to a material breach
thereof by Merchandiser, which breach remains uncured for the period specified
in Section 4(b) of the UBL Merchandiser Agreement, or (ii) by Merchandiser other
than due to a material breach thereof by UBL, which breach remains uncured for
the period specified in Section 4(b) of the UBL Merchandiser Agreement; or
(d) the breach by Merchandiser of any material provision of this
Warrant.
3. Method of Exercise; Payment; Issuance of New Warrant; Transfer and Exchange.
This Warrant may be exercised by Merchandiser, in whole or in part, by the
surrender of this Warrant, properly endorsed, at the principal office of the
Company at 00000 Xxxxxxx Xxxx., Xxxxx 000, Xxxxxx, XX 00000 (or at such other
location as the Company may advise Merchandiser in writing), and by (a) payment
to the Company in cash or immediately available funds of the Warrant Price of
the Common Units being purchased, and (b) delivery to the Company of a customary
investment letter executed by Merchandiser, representing and warranting that the
Common Units are being acquired for Merchandiser's own account, for investment
purposes only, and not with a view to the distribution, resale or other
distribution thereof, and acknowledging the issuance and transfer of the Common
Units are subject to the requirements of
4
37
federal and state securities laws. Merchandiser, in lieu of exercising this
Warrant for a specified number of Common Units (the "Exercised Units") and
paying the aggregate exercise price therefor (the "Exercise Price"), may elect
to receive a number of Common Units equal to the number of Exercised Units,
minus a number of Common Units having an aggregate "Fair Market Value" (as
defined below) equal to the Exercise Price. After any such election, the number
of Common Units covered by this Warrant shall be deemed automatically reduced by
the number of Exercised Units. For purposes of this Warrant, "Fair Market Value"
means (a) if the Common Units are then publicly traded, the closing sale price
of the Common Units on its principal stock exchange or market system (or the
average of the closing bid and asked prices, if closing sales prices are not
reported) for the ten (10) consecutive trading days immediately prior to the
date of any such "net exercise," or (b) in all other cases, as determined by the
Managers in their sole, good faith discretion. In the event of any exercise, or
any such "net exercise," of less than all of the rights represented by this
Warrant, the Company shall issue to Merchandiser a new warrant evidencing the
ability of Merchandiser to purchase the balance of the number of Common Units
from the Company, and shall deliver such warrant to Merchandiser promptly
following such partial exercise. The Company agrees that the Common Units
issuable to Merchandiser upon exercise of this Warrant shall be issued to
Merchandiser as of the close of business on the date on which all of the
above-described conditions to exercise have be satisfied. Merchandiser hereby
covenants and agrees that, upon Merchandiser's exercise of all or a portion of
this Warrant and Merchandisers making the applicable payment to the Company in
respect thereof, Merchandiser and the Common Units issued to Merchandiser with
respect to such exercise shall become subject to the terms and conditions of the
Operating Agreement, including without limitation, the obligation to sell Common
Units and the restrictions on transfer of Common Units contained therein. In
this regard, Merchandiser acknowledges that it shall only become a Member and be
entitled to the rights as a Member once Merchandiser validly exercises this
Warrant in accordance with the terms hereof and executes a signature page to the
Operating Agreement whereby it agrees to be bound by all of the terms thereof,
excluding the non-competition covenant contained in Section 3.10 thereof, from
which Merchandiser shall be exempted.
4. Due Authorization and Issuance. The Company covenants and agrees that any and
all of the Common Units issued to Merchandiser in accordance with the terms
hereof will, upon such issuance, be duly authorized, validly issued and free
from all preemptive rights of any holder of Common Units in the Company, free
and clear of all taxes, liens and charges with respect to such issuance. The
Company further covenants and agrees that, during the period within which this
Warrant may be exercised, the Company will take no action that would prohibit
the issuance of Common Units required to be issued in accordance with the terms
and conditions hereof on such exercise. The Company hereby represents and
warrants that, as of May 18, 1999, 1,370,558 Common Units represented a
fully-diluted Percentage equal to one and one-half percent (1.5%).
5. Fractional Common Units. No fractional Common Units shall be issued in
connection with any exercise hereunder but in lieu of such fractional Common
Units, the Company shall make a cash payment therefor upon the basis of the fair
market value of the Common Units, as determined by the Managers in their sole,
good faith discretion.
6. Certain Adjustments.
5
38
(a) If the outstanding Common Units are changed into or exchanged for a
different number or kind of securities of the Company or a successor entity
(including a `C-corporation" that becomes the successor or parent of the Company
in connection with a roll-up or similar exchange transaction in connection with
an initial public offering) through a capital reorganization or
reclassification, or if the number of outstanding Common Units is changed
through a split of Common Units, reverse split of Common Units or issuance of a
Common Unit dividend, then an appropriate adjustment shall be made by the
Company in (i) the number or kind of Common Units that may be purchased pursuant
to the exercise of this Warrant, and (ii) the number, exercise price, or kind of
securities subject to this Warrant. Any such adjustment in this Warrant,
however, shall be made without a change in the total price applicable to the
unexercised portion of this Warrant but with a corresponding adjustment in the
price for each Common Unit covered by this Warrant. In making such adjustments,
or in determining that no such adjustments are necessary, the Company may rely
upon the advice of counsel and accountants to the Company, and the determination
of the Company shall be binding.
(b) Upon (i) the dissolution, liquidation, or sale of all or
substantially all of the business, properties and assets of the Company, (ii)
any reorganization, merger, consolidation, sale or exchange of securities in
which the Company does not survive, (iii) any reorganization, merger,
consolidation, sale or exchange of securities in which the Company does survive
and any of the Company's members have the opportunity to receive cash,
securities of another entity and/or other property in exchange for their Common
Units (other than a "roll-up" or similar exchange transaction in connection with
an initial public offering), or (iv) any acquisition by any person or group (as
defined in Section 13(d)) of the Securities Exchange Act of 1934, as amended),
of beneficial ownership of more than fifty percent (50%) of the Company's then
outstanding Common Units (each of the events described in clauses (i), (ii),
(iii), or (iv) is referred to herein as an "Extraordinary Event"), this Warrant
shall terminate unless it survives the Extraordinary Event pursuant to Section
6(d) below.
(c) Merchandiser shall have the right until ten (10) days before the
effective date of any Extraordinary Event to exercise, in whole or in part, this
Warrant, but only to the extent to which it is exercisable pursuant to the
provisions hereof. In this regard, the Company shall notify Merchandiser in
writing of the Company's intent to engage in any Extraordinary Event on or
before the date (the "Notice Date") that is no less than twenty (20) days before
the effective date of such Extraordinary Event. In addition, notwithstanding
anything to the contrary contained herein, if an Extraordinary Event shall occur
during the term of the Merchandiser Agreement, then, solely for purposes of
determining the extent to which this Warrant is exercisable in accordance with
this Section 6(c), Highest Sales shall be determined either: (i) with reference
to each period of twelve (12) consecutive calendar months of the term of the
Merchandiser Agreement prior to the Notice Date; or (ii) if fewer than twelve
(12) months have elapsed since the commencement of the term of the Merchandiser
Agreement, on an annualized basis.
(d) If an Extraordinary Event occurs during the term of the Merchandiser
Agreement, then the Company shall be obligated to either, in its sole
discretion: (i) cause this Warrant to survive such Extraordinary Event or (ii)
cause the surviving entity (which may be the Company), or any other entity that,
after giving effect to the Extraordinary Event, owns, directly or indirectly,
fifty percent (50%) or more of the Company's then outstanding Common Units, to
tender to Merchandiser a substitute warrant to purchase units or other equity
interests in such
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entity containing terms and provisions substantially preserving, in the sole and
absolute, good faith discretion of the Company, the rights and benefits of this
Warrant to the extent then outstanding (a "Substitute Warrant"). If an
Extraordinary Event occurs after the term of the Merchandiser Agreement, in its
sole and absolute discretion, the Company may permit this Warrant to survive
such Extraordinary Event. In addition, if an Extraordinary Event occurs after
the term of the Merchandiser Agreement, in its sole and absolute discretion, the
surviving entity (which may be the Company), or another entity, may, but shall
not be so obligated, tender to Merchandiser a Substitute Warrant.
(e) The grant of this Warrant shall not affect in any way the right or
power of the Company to make adjustments, reclassification or changes in its
capital or business structures or to merge, consolidate, dissolve, or liquidate
or to sell or transfer all or any part of its business or assets or undertake
any other permitted limited liability company action.
(f) Upon the occurrence of each adjustment of this Warrant pursuant to
this Section 6, the Company at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and furnish to
Merchandiser a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Company shall, upon the written request of Merchandiser, furnish or cause to
be furnished to Merchandiser a like certificate setting forth: (i) such
adjustments and readjustments; (ii) the applicable Exercise Price at the time in
effect; and (iii) the number of Common Units, if any, and the amount, if any, of
other securities or property that at the time would be received upon the
exercise of this Warrant.
7. Payment of Taxes. The Company will pay all taxes (other than taxes based upon
income) and other governmental charges that may be imposed with respect to the
issue or delivery of Common Units upon exercise of this Warrant.
(a) Drag-Along Obligation. Notwithstanding anything to the contrary
contained herein, if the Managers find an acquirer for all or any portion of
their interest in the Company (whether such acquisition is by way of purchase of
assets or Common Units or successor equity securities, merger, recapitalization
or other form of transaction, and including, without limitation, a roll-up
transaction that is for the purpose of a reorganization among the Company and
its Affiliates), then, at the request of the Managers, Merchandiser shall sell
or otherwise transfer a corresponding portion of any Common Units (or successor
equity securities) then held by Merchandiser to such acquirer on the same terms
and conditions as apply to the sale or other transfer by the Managers.
Merchandiser further agrees timely to take such other actions as the Managers
may reasonably request in connection with the approval of the consummation of
such sale or other transfer, including, without limitation, voting in favor of
such sale or other transfer and waiving any dissenters' rights, executing such
agreements, powers of attorney, voting proxies or other documents and
instruments as may be necessary or desirable to consummate such sale or other
transfer, and, in the event that such sale or other transfer is structured as a
recapitalization, transferring and retaining such portion of Common Units (or
successor equity securities) and rights under this Warrant as may be requested
by the Managers.
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8. Transferability of Warrant. This Warrant may not be sold, conveyed,
transferred, alienated, donated, encumbered or otherwise disposed of by
Merchandiser and, accordingly, any purported such transaction shall be void ab
initio, of no force or effect.
9. Investment Representation. Merchandiser represents and warrants to the
Company that Merchandiser is acquiring this Warrant for Merchandiser's own
account for investment and not with a view to, or for resale in connection with
any distribution thereof. Merchandiser acknowledges that this Warrant and the
Common Units that may be purchased under this Warrant have not been registered
under the Securities Act, by reason of a specific exemption from the
registration provisions of the Securities Act that depends upon, among other
things, the bona fide nature of the investment intent of Merchandiser as
expressed herein.
10. Amendment and Waiver; Successors. This Warrant may only be amended or
supplemented, and any waiver or departure from the provisions hereof may only be
given, with the consent of the Managers and Merchandiser. All of the covenants
and provisions of this Warrant by or for the benefit of the Company and
Merchandiser shall bind and inure to the benefit of them and their respective
permitted successors and assigns hereunder.
11. Notices. All notices required by this Warrant to Merchandiser shall be sent
to Winterland Concessions Company, 0000 Xxxxxxx Xxxxx, Xxx Xxxxxxx, XX 00000, or
such other address as Merchandiser may hereafter designate by notice to the
Company. All notices sent under this Agreement to the Company or the Managers
shall be sent to the address indicated in Section 3 above. All notices required
by this Warrant must be in writing to be effective, and must be sent by a third
party messenger, by air courier service with a written acknowledgment of
receipt, by registered or certified mail, return receipt requested, or through a
telegraph office. The date of personal delivery, of mailing, or the date of
delivery to a telegraph office, as the case may be, of any such notice shall be
deemed the date of the giving thereof (except, with respect to notices of change
of address, the date of which will be the date of receipt by the receiving
party). Until the Company notifies Merchandiser otherwise, a copy of all notices
hereunder to the Company shall be simultaneously sent as aforesaid to Xxxxxx &
Xxxxxxxx LLP, 0000 Xxxxxx xx xxx Xxxxx, 00xx Xxxxx, Xxx Xxxxxxx, XX 00000;
Attention: Xxxxx X. Xxxxxx, Esq.
12. Descriptive Headings and Governing Law. The descriptive headings of the
several paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. This Warrant shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the laws
of the State of California.
13. Lost Warrant. The Managers and the Company represent and warrant to
Merchandiser that upon receipt of evidence reasonably satisfactory to the
Managers and the Company of the loss, theft, destruction, or mutilation of this
Warrant and, in the case of any such loss, theft or destruction upon receipt of
an indemnity reasonably satisfactory to the Managers and the Company, or in the
case of any such mutilation upon surrender and cancellation of such Warrant, the
Managers and the Company will make and deliver a new Warrant in lieu of the
lost, stolen, destroyed or mutilated Warrant.
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IN WITNESS WHEREOF, Merchandiser, the Company and the Managers have
caused this Warrant to be duly executed and issued as of June 7, 1999.
"COMPANY" "MERCHANDISER"
ARTISTdirect, LLC Winterland Concessions Company, a
California corporation, doing
business as "Winterland"
By: __________________________
Its: Co-Chief Executive Officer
By: ______________________________
(an authorized signatory)
"MANAGERS"
__________________________________
Xxxx Xxxxxx
__________________________________
Xxxxxx Xxxxxx
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