MEMORANDUM OF AGREEMENT
THIS MEMORANDUM OF AGREEMENT (together with the Exhibits and Annexes
attached hereto, this "MOA") is made and entered into as of this 14th day of
December, 2002 (the "MOA Effective Date") by and among America Online Latin
America, Inc., a Delaware corporation ("AOLA"), AOL Brasil Ltda., a Brazilian
limited liability quota company ("AOLB"), and Banco Itau S.A., a Brazilian
bank ("Itau") (each a "Party" and together the "Parties"), to amend and modify
the Strategic Interactive Services and Marketing Agreement dated June 12,
2000, as heretofore amended, by and among the Parties (including the exhibits
thereto, the "SMA").
WHEREAS, pursuant to the terms of the SMA, the Parties market a
co-branded version of the AOLB Service to Itau Customers;
WHEREAS, the Parties have agreed to amend and modify the SMA as
outlined in this MOA; and
WHEREAS, as of the MOA Effective Date, the Parties desire to
undertake the marketing activities and other obligations described in Exhibit
A;
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
representations, warranties, covenants and agreements contained herein, and
intending to be legally bound, AOLA, AOLB and Itau hereby agree as follows:
1. Binding Nature of this MOA; Entire Agreement. This MOA constitutes
a valid and binding agreement, enforceable in accordance with the terms hereof
against AOLA, AOLB and Itau. As of the MOA Effective Date, the Parties shall
perform their respective obligations under the SMA, as it is amended by this
MOA. The terms of this MOA supersede and amend the provisions of the SMA to
the extent set forth herein, and to the extent that the terms hereof conflict
with the terms of the SMA. The representations, warranties, covenants and
agreements of the Parties contained in the SMA shall remain in full force and
effect to the extent not inconsistent with the terms of this MOA. In the event
of any conflict between the rights or obligations of a Party under this MOA
and the SMA, this MOA shall govern the rights or obligations of such Party. In
all other respects the provisions of the SMA shall continue to govern the
business relationship among the Parties, and nothing contained in this MOA
should be interpreted as invalidating the SMA. This MOA sets forth the entire
agreement, and supersedes any and all prior documents or agreements of the
Parties (other than those terms of the SMA that do not conflict herewith),
with respect to the subject matter of this MOA, including, without limitation,
the "Summary of Itau & AOLA Negotiation" that was used by the Parties as a
basis for discussion.
2. Intention to Formally Amend the SMA. Each of the Parties agrees to
negotiate in good faith, for a period of ninety (90) days or such longer
period as the Parties may mutually agree, with respect to amending and
restating the SMA, including, without limitation, the Marketing Plan,
Technical Operating Plan and the Finance Plan contained therein, to (a)
incorporate the terms and conditions contained in this MOA, and (b)
incorporate any other amendments on which the Parties may mutually agree.
Neither (x) the agreement to negotiate contained in this Section 2 of the MOA,
nor (y) any failure or inability to reach an agreement on any such amendment
to the SMA, shall affect in any way the validity, enforceability or binding
nature of the obligations contained in this MOA or the fact that this MOA
supersedes the SMA to the extent that the terms hereof and thereof are
inconsistent.
3. Marketing Obligations.
(a) The Parties hereby agree to undertake and perform, in lieu of the
marketing activities called for under the SMA prior to the fifth Anniversary
Date, the marketing and other obligations and to pay the amounts set forth in
Exhibit A, as may be further detailed in the Marketing Plans agreed upon by
the Parties from time to time. Notwithstanding Section 2.1.2 of the SMA, (i)
Itau's marketing obligations under the SMA as amended by this MOA shall not be
in Itau's discretion except when expressly provided herein, (ii) any Marketing
Plans shall be jointly created and agreed upon by the Parties before any such
Marketing Plans are effective, and (iii) Itau shall be obligated to spend the
amounts, and commit the resources, described in Exhibit A. Notwithstanding
Section 6.1 of the SMA, all marketing materials shall be subject to the
approval of the Parties except as expressly provided otherwise herein.
Notwithstanding anything to the contrary in the SMA, the Marketing Committee's
sole responsibility shall be to jointly review and agree upon those marketing
obligations that call for the approval of all Parties. For the avoidance of
doubt, notwithstanding this MOA, Itau shall continue to have the obligation to
engage in a commercially reasonable level of marketing after the expiration of
the five-year period after the Launch Date, as required by Section 2.1.2 of
the SMA.
(b) Notwithstanding the definition of "Material Marketing Breach"
contained in the SMA, the term "Material Marketing Breach" shall mean a
circumstance whereby Itau is obligated, or would have been obligated in the
absence of the annual caps specified in Sections 5(a)(iii), 5(a)(iv) and
5(b)(ii) of Exhibit A (and for the purposes of the calculation excluding the
120% factor used in calculating the Distribution Payments and Promoters
Payments), with respect to any two of the immediately preceding four Quarters,
to make Marketing Payments to AOLB of more than 50% of the maximum potential
Marketing Payments for each of such two Quarters, where the maximum potential
Marketing Payments for any Quarter shall be the maximum Marketing Payment Itau
would have been liable to make if it had failed to perform all of its
obligations in such Quarter (excluding for the purposes of the calculation the
120% factor used in calculating the CD Distribution Payment and Promoters
Payments).
4. Second Anniversary Reference Payment and Minimum Marketing
Commitments. As of the MOA Effective Date, Itau shall have no obligation to
make (i) any Reference Payment to AOLA or AOLB with respect to the second
Anniversary Date (whether pursuant to Section 8 of the SMA or otherwise), or
(ii) any payment with respect to any failure to meet the Minimum Marketing
Commitments relating to the period from the first Anniversary Date to the MOA
Effective Date. AOLA and AOLB hereby irrevocably waive any claim with respect
to any such payments.
5. Reference Payments. The Parties agree that Itau shall pay the
Reference Payments and Marketing Payments described in Exhibit A (if due) in
lieu of any Reference Payments that would have been due under the SMA after
the MOA Effective Date in the absence of this MOA.
6. Verified Members. Notwithstanding any provision of the SMA, as of
the MOA Effective Date, Itau shall have no rights against AOLA or AOLB related
to Itau's obligation to achieve any particular number of Verified Members and
Itau shall have no obligation to achieve any particular number of Verified
Members for any purpose, and any right, obligation, liability or other
contingency relating directly to the failure to achieve any particular number
of Verified Members, including any rights and remedies AOLA and/or AOLB may
have been able to exercise based on any particular number of Verified Members,
shall be deemed void and of no effect. Nothing in this Article 6 shall be
deemed to make void or of no effect the provisions of Article 5 of Exhibit A
to this MOA.
7. Termination of Exclusivity. Notwithstanding the provisions of
Section 8.4 of the SMA, neither AOLA nor AOLB will have the right to elect to
release the AOLB Parties from their obligations under Section 7.1 or 2.3 of
the SMA or Itau from its obligations under Section 2.3 based on the number of
total cumulative Verified Members. Instead, AOLA and/or AOLB shall have the
right to release the AOLB Parties from their obligations under Section 7.1 and
2.3 of the SMA or Itau from its obligations under Section 2.3 in accordance
with the procedure set forth in Section 8.4 of the SMA if; on (i) the third
Anniversary Date, the Itau Revenue Percentage is equal to or less than 10%;
(ii) the fourth Anniversary Date, the Itau Revenue Percentage is equal to or
less than 12%; and (iii) the fifth Anniversary Date, the Itau Revenue
Percentage is equal to or less than 14%.
8. Termination Fee. If Itau is obligated to make a payment of a
Termination Fee, then the amount Itau shall owe, in lieu of the amount that
would have been due under the SMA in absence of this MOA, shall be: (i) if the
Trigger Date occurs before the second Anniversary Date, the sum of US$
70,000,000.00; (ii) if the Trigger Date occurs on or after the second
Anniversary Date and before the third Anniversary Date, the sum of
US$40,000,000.00, plus the result of US$ 30,000,000.00 multiplied by a
fraction, the numerator of which is the number of days from the Trigger Date
to the third Anniversary Date and the denominator of which is 365; (iii) if
the Trigger Date occurs on or after the third Anniversary Date and before the
fourth Anniversary Date, the sum of US$ 15,000,000.00, plus the result of US$
25,000,000.00 multiplied by a fraction, the numerator of which is the number
of days from the Trigger Date to the fourth Anniversary Date and the
denominator of which is 365; or (iv) if the Trigger Date occurs on or after
the fourth Anniversary Date and before the fifth Anniversary Date, the result
of US$ 15,000,000.00 multiplied by a fraction, the numerator of which is the
number of days from the Trigger Date to the fifth Anniversary Date and the
denominator of which is 365. The amount of the Termination Fee shall be
reduced by the amount of any Reference Payment or Marketing Payment Itau has
generated and paid to AOLA or AOLB after the Trigger Date. In addition, in
such circumstances where Itau is obligated to pay a Termination Fee, Itau
shall be required to pay a Type I Pro-Rata Reference Payment up to the Trigger
Date.
9. Acceleration Payment. If Itau is obligated to make an Acceleration
Payment (including a Type I Acceleration Payment or a Type II Acceleration
Payment), then the amount Itau shall owe, in lieu of the amount that would
have been due under the SMA in the absence of this MOA, shall be the sum of
(i) the amount of the Reference Payment that would have been due for the
Anniversary Year in which the Trigger Date occurred calculated using the
Revenue Elements generated and incurred during the period from the last
Anniversary Date to the Trigger Date, (ii) the Reference Payments that would
be due but for the termination of the SMA for any Anniversary Dates subsequent
to the Trigger Date calculated (without duplication of the amount under item
(i)) using the Itau Revenue Percentage determined in accordance with item (i),
(iii) for the Anniversary Year in which the Trigger Date occurs, the maximum
Marketing Payments that could be due in such Anniversary Year less any
Marketing Payments actually made in such Anniversary Year, and (iv) the
maximum Marketing Payments that could be due in any subsequent Anniversary
Years.
10. Pro-Rata Reference Payment. If Itau is obligated to make a
Pro-Rata Reference Payment (including a Type I Pro-Rata Reference Payment or a
Type II Pro-Rata Reference Payment), then the amount Itau shall owe, in lieu
of the amount that would have been due under the SMA in the absence of this
MOA, shall be equal to the sum of (A) the product of (i) a Reference Payment
for the Anniversary Year in which a Trigger Date occurs calculated using the
Revenue Elements generated and incurred during the period from the last
Anniversary Date to the Trigger Date, and (ii) a fraction, the numerator of
which is the number of days from the last Anniversary Date to the Trigger Date
and the denominator of which is 365, and (B) all Marketing Payments, if any,
that would be due for that Quarter calculated for the period beginning on the
first day of the Quarter and ending on the Trigger Date.
11. Fifth Anniversary Date. For the avoidance of doubt, under no
circumstances shall Itau be obligated to pay any Termination Fee, Acceleration
Payment or Pro-Rata Reference Payment if (i) in the case of an Acceleration
Payment or a Pro-Rata Reference Payment, the Trigger Date occurs after the
fifth Anniversary Date or (ii) in the case of a Termination Fee, the date of
the Material Breach giving rise to termination occurs after the fifth
Anniversary Date.
12. Release of Notes. AOLA and AOLB shall, within five (5) Business
Days after the MOA Effective Date, take any action necessary promptly to
release or cause the Escrow Agent (as defined below) promptly to release each
of the First Anniversary Reference Payment Note (Brazil), the First
Anniversary Reference Payment Note (Caymans), First Anniversary Termination
Fee Note (Brazil), First Anniversary Termination Fee Note (Caymans), Second
Anniversary Reference Payment Note (Brazil) and the Second Anniversary
Reference Payment Note (Caymans).
13. Replacement Notes. The Parties hereby agree to take any action
necessary to cause the Escrow Agent to deliver to Itau the Second Anniversary
Termination Fee Note (Brazil), Second Anniversary Termination Fee Note
(Cayman), Third Anniversary Reference Payment Note (Brazil), Third Anniversary
Reference Payment Note (Cayman), Third Anniversary Termination Fee Note
(Brazil), Third Anniversary Termination Fee Note (Cayman), Fourth Anniversary
Reference Payment Note (Brazil), Fourth Anniversary Reference Payment Note
(Caymans), Fourth Anniversary Termination Fee Note (Brazil), Fourth
Anniversary Termination Fee Note (Cayman), Fifth Anniversary Reference Payment
Note (Brazil), Fifth Anniversary Reference Payment Note (Caymans), Fifth
Anniversary Termination Fee Note (Brazil) and Fifth Anniversary Termination
Fee Note (Cayman), promptly after delivery by Itau of replacement notes (the
"Replacement Notes") to the Escrow Agent that are exactly the same as the
Reference Payment Notes (Brazil), Reference Payment Notes (Caymans),
Termination Fee Notes (Brazil) and Termination Fee Notes (Cayman) identified
in this Section 13 and the Reference Payment Notes (Brazil), Reference Payment
Notes (Caymans), Termination Fee Notes (Brazil) and Termination Fee Notes
(Cayman) attached to the Escrow Agreement as Exhibit A, Exhibit B, Exhibit C
and Exhibit D, except that the dates of such Replacement Notes shall be dated
the MOA Effective Date and the maximum principal amount of such Replacement
Notes shall be $26 million in the case of the Third Anniversary Reference
Payment Notes (Brazil) and Third Anniversary Reference Payment Notes (Cayman),
$21 million in the case of the Fourth Anniversary Reference Payment Notes
(Brazil) and Fourth Anniversary Reference Payment Notes (Cayman), $13 million
in the case of the Fifth Anniversary Reference Payment Notes (Brazil) and
Fifth Anniversary Reference Payment Notes (Cayman), $70 million in the case of
the Second Anniversary Termination Fee Notes (Brazil), Second Anniversary
Termination Fee Notes (Cayman), Third Anniversary Termination Fee Notes
(Brazil) and Third Anniversary Termination Fee Notes (Cayman) (which shall
replace the respective Second Anniversary Termination Fee Notes and Third
Anniversary Termination Fee Notes), $40 million in the case of the Fourth
Anniversary Termination Fee Notes (Brazil) and Fourth Anniversary Termination
Fee Notes (Cayman), and $15 million in the case of the Fifth Anniversary
Termination Fee Notes (Brazil) and Fifth Anniversary Termination Fee Notes
(Cayman). Before replacing such notes, the Parties shall undertake any action
necessary to ensure that the Replacement Notes are treated by the Escrow Agent
in exactly the same manner as the notes they replaced would be treated under
the Escrow Agreement. For the avoidance of doubt, the Replacement Notes shall
be treated under the Escrow Agreement (the "Escrow Agreement"), dated as of
August 11, 2000, by and among The Bank of New York, as escrow agent (the
"Escrow Agent"), as if they were the same as the notes they replaced.
14. Anniversary Date. The Parties hereby agree that, notwithstanding
the definition of "Anniversary Date" set forth in the SMA, after the MOA
Effective Date, "Anniversary Date" shall mean the date that is 100 days after
the MOA Effective Date (which date is the "second Anniversary Date") and each
successive one year anniversary of such date. For the avoidance of doubt,
nothing in this MOA is intended to change the date of the first Anniversary
Date.
15. Termination for Bankruptcy, Insolvency and Related Events. In the
event that Itau experiences any of the events in clauses (a) through (d) of
the first sentence of Section 11.9 of the SMA, AOLB's sole and exclusive
remedy shall be that a Type II Acceleration Payment shall become immediately
due and payable by Itau to AOLB. Upon payment of such Acceleration Payment,
Itau shall be relieved of its obligation to pay any Reference Payments or
Marketing Payments for Anniversary Dates which occur after the Termination
Date. In the event that AOLB experiences any of the events in clauses (a)
through (d) of the first sentence of Section 11.9 of the SMA, Itau shall be
relieved of its obligation to pay any Reference Payments, Termination Fee,
Marketing Payments, Acceleration Payments or Pro Rata Reference Payments after
the Termination Date, except a Type II Pro-Rata Reference Payment for the
Anniversary Year in which the Termination Date occurs which shall be due and
payable by Itau to AOLB within ten (10) Business Days.
16. AOLB/Itau Subscriber. The Parties hereby agree that,
notwithstanding the definition of "AOLB/Itau Subscriber" set forth in the SMA,
after the MOA Effective Date "AOLB/Itau Subscriber" shall mean either (a) a
subscriber that was an AOLB/Itau Subscriber (as that term is defined in the
SMA) prior to the MOA Effective Date, or (b) a subscriber to the Co-Branded
Service that has registered for a plan described in Section 1(b) or Section
1(e) of Exhibit A (or such other plan as may be agreed between the Parties) in
accordance with the procedures set forth in Section 1(c) of Exhibit A (or such
other procedure as may be agreed to by the Parties), in each case whose
account has not been cancelled or terminated as a result of a violation of the
Terms of Service or at the direction of Itau.
17. Publicity. As permitted by Section 6 of the SMA, the Parties
shall issue a jointly agreed press release no later than 8:00 AM Eastern
Standard Time on the second business day following the MOA Effective Date
(Tuesday, December 17, 2002). In addition thereto, and for the avoidance of
doubt, each party shall be permitted to make any necessary disclosure required
by securities laws in the United States or Brazil or by the exchange or market
on which such Party's shares are listed or traded.
18. Governing Law. This MOA shall be governed by and construed and
interpreted in accordance with the laws of the State of New York, without
reference to the conflict of laws provisions thereof except for N.Y. G.O.L.
▇▇.▇▇. 5-1401 and 5-1402.
19. Severability. Any provision of this MOA which is held invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining provisions hereof
in such jurisdiction or rendering that or any other provision of this MOA
invalid, illegal or unenforceable in any other jurisdiction.
20. Costs and Expenses. Each of the Parties shall be responsible for
and pay all costs and expenses, including the fees of attorneys, accountants
and other professionals, that it incurs in connection with the drafting and
negotiation of this MOA, including the costs and expenses associated with
obtaining any necessary governmental approvals.
21. No Waiver of Rights. No failure or delay on the part of any Party
in the exercise of any power or right hereunder shall operate as a waiver
thereof. No single or partial exercise of any right or power hereunder shall
operate as a waiver of such right or of any other right or power. The waiver
by any Party of a breach of any provision of this MOA shall not operate or be
construed as a waiver of any other or subsequent breach hereunder. All rights
and remedies existing under this MOA are cumulative with, and not exclusive
of, any rights or remedies otherwise available.
22. Governmental Consents and Filings. Each Party shall use its
commercially reasonable efforts to obtain all required governmental consents
and make all governmental filings that may be necessary in connection with
this MOA.
23. Company Approvals. Each of the Parties represents and warrants
that it has full corporate power and authority to execute and deliver this
MOA, that this MOA has been duly authorized by all necessary corporate action
on the part of such Party and that when executed and delivered by each such
Party, this MOA will constitute a valid and legally binding obligation of such
Party enforceable against such Party in accordance with its terms.
24. Commercial Disputes. The Parties will act in good faith and use
commercially reasonable efforts to reach agreement with regard to any terms in
this MOA that require the Parties to cooperate or to reach mutual agreement.
If any dispute, controversy or disagreement (each a "Disagreement") relating
to such terms arises that cannot be promptly resolved by the Parties, either
party may submit the Disagreement to the Marketing Committee for resolution.
If the Marketing Committee is unable to amicably resolve the Disagreement in
three Business Days following submission of the Disagreement to the Marketing
Committee, the Disagreement will be escalated on the Business Day following
the last day of such three day period to the Management Committee for
resolution in a period of three Business Days. If the Management Committee is
unable to amicably resolve the Disagreement in the three Business Day period
following submission of the Disagreement to the Management Committee, the
Disagreement will be escalated to the President of AOLB and the Executive
Director of Itau responsible for marketing on the Business Day following the
last day of such three Business Day period for resolution in a period of three
Business Days. If such persons are unable to amicably resolve the Disagreement
in the three Business Day period following submission of the Disagreement, the
Disagreement will be escalated to the President and Chief Executive Officer of
AOLA and the Executive Director of Itau responsible for the business
relationship with AOLB (presently ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇) on the Business Day
following the last day of such three Business Day period for resolution in a
period of three Business Days.
25. Disputes; Continued Performance.
(a) Any dispute, controversy or claim arising out of or relating to
this MOA (including, without limitation, claims that a party has not acted in
good faith and used commercially reasonable efforts to reach agreement with
regard to any terms in this MOA that require the parties to cooperate or to
reach mutual agreement) shall be submitted to arbitration in accordance with
Article 13 of the SMA; provided, however, that the arbitrators shall not have
the authority to alter or amend any term of this MOA or resolve any
disagreements in a manner inconsistent with the terms of this MOA. As provided
in Section 13.8 of the SMA, the Parties shall continue to perform their
obligations under the SMA and this MOA during the pendency of any arbitral or
mediation proceeding.
(b) In the event that, after following the procedures set forth in
Section 24, the Parties are unable to reach mutual agreement with regard to
any terms in Exhibit A that require the parties to cooperate or to reach
mutual agreement with respect to the marketing activities described in Exhibit
A, and a party refers such Dispute to arbitration, then Forty Five Day
Arbitration shall apply provided, however, that the arbitrators shall not have
the authority to alter or amend any term of this MOA or resolve any
disagreements in a manner inconsistent with the terms of this MOA. Such a
Dispute may be resolved ex aequo et ▇▇▇▇ in the discretion of the arbitrators,
and in the event (x) an award is granted in favor of Itau, then Itau shall
undertake the marketing activities that were the subject of such Dispute in
accordance with such award and as provided in Exhibit A and AOLB shall have
the right to direct Itau, in writing, not to undertake such activities and if
so directed Itau shall not undertake such activities, provided that Itau shall
be relieved of any obligation to pay any Marketing Payment that would have
been required if Itau had not undertaken such marketing activities that were
the subject of such Dispute; or (y) an award is granted in favor of AOLB, then
Itau shall undertake the marketing activities that were the subject of such
Dispute in accordance with such award and as provided in Exhibit A, provided,
however, that either Party may elect to not have Itau undertake such marketing
activities (in either case by providing written notice to the other), in which
case Itau shall pay the Marketing Payment for the marketing activities that
were the subject of such Dispute. Notwithstanding Section 24, any marketing
activities requiring the agreement of the Parties that are directly impacted
by the subject matter of a Dispute resolved in accordance with this Section 25
shall be stayed pending the resolution of such Dispute, and if such marketing
activities are stayed until after the fifth Anniversary Date, then
notwithstanding anything to the contrary (other than this Section 25), such
marketing activities shall be performed after the fifth Anniversary Date.
26. Counterparts and Facsimiles. This MOA may be executed in one or
more counterparts, all of which shall collectively be effective as one single
original. This MOA may be signed via facsimile signature with the same binding
effect as a signed original.
27. Headings. The descriptive headings contained in this MOA are
inserted for convenience only and do not constitute a part of this MOA.
References in this MOA, or one of its Exhibits or Annexes to a Section or
Article shall mean such Section or Article in the MOA, or such Exhibit or
Annex, unless stated otherwise.
28. Definitions. Unless separately defined in this MOA, all
capitalized terms used herein shall have the same meaning given to them in the
SMA.
29. Rules of Construction. In the event that any conflict arises
between this Memorandum of Agreement, the Exhibits attached hereto and any
Annexes attached hereto, any arbitrator or court (if applicable) shall resolve
such conflict by according priority of construction first to this Memorandum
of Agreement, second to the Exhibits attached hereto and third to the Annexes
attached hereto. In no event will any Marketing Plan be effective to modify
this MOA except by means of a formal amendment to this MOA expressly to that
effect. In the event of any conflict between any Marketing Plan and this MOA,
this MOA shall prevail over the Marketing Plan.
30. Indemnity Procedures. If a Party entitled to indemnification
pursuant to Sections 2(a)(v) or 2(b)(vii) of Exhibit A (the "Indemnified
Party") becomes aware of any claim, action, suit, investigation, arbitration
or other proceeding (each an "Action") for which the other Party is obligated
to indemnify the Indemnified Party, the Indemnified Party will give the other
Party (the "Indemnifying Party") prompt written notice of such Action. Such
notice will (i) provide the basis on which indemnification is being asserted
and (ii) be accompanied by copies of all relevant pleadings, demands, and
other papers related to the Action and in the possession of the Indemnified
Party. The Indemnified Party will, to the extent possible under law (i)
request the dismissal of the lawsuit on the grounds that it was filed against
an improper party (parte ilegitima); or, (ii) in the event such Indemnified
Party does not succeed in such attempt, the Indemnified Party will seek to
cause the Indemnifying Party to be joined to the law suit (denunciacao da
lide), according to Articles 70 to 76 of the Brazilian Civil Procedural Code.
In the event the Indemnified Party does not succeed in any of the
abovementioned attempts, it will actively defend against such Action in a
commercially reasonable manner, and shall bear all costs and expenses of the
defense of such Action, including legal fees. The Indemnified Party shall be
promptly indemnified for any claims, losses, damages and awards (but not any
costs and expenses of the defense of such Action, including legal fees) in
accordance with the provisions of Sections 2(a)(v) or 2(b)(vii) of Exhibit A,
as applicable. In the event the Indemnified Party and the Indemnifying Party
are deemed co-defendants in such Action, they will cooperate, at their own
expense, with each other in the defense against such Action. Neither Party
shall compromise or settle any Action without the prior written consent of the
other Parties hereunder, such consent not to be unreasonably withheld, delayed
or denied. The amount to be indemnified shall be adjusted by the CDI
(Certificado de Deposito Interbancario) from the date of the disbursement by
the Indemnified Party to the date of the effective reimbursement by the
Indemnifying Party. For the purposes of this MOA, "CDI" means the interest
rate applicable to the Interbank Deposit Certificate, calculated by the daily
average rate of interbank deposits denominated "Taxa DI - operacoes extra
grupo", expressed in an annual percentage, based on a 252-day year, daily
published by Brazilian Custody and Financial Liquidation of Securities Center
(CETIP).
[Signatures Follow on Next Page]
Exhibit A
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1. Marketing Efforts.
a. Marketing Plans. From the MOA Effective Date through the
fifth Anniversary Date, the Parties will conduct their marketing
efforts with respect to the Co-Branded Service in accordance with
the SMA as amended by this MOA and Marketing Plans to be jointly
agreed upon and signed by the Marketing Committee pursuant to the
SMA as amended by this MOA. The Marketing Plans may further detail
Itau's obligations set forth in this MOA, with the cooperation of
AOLB as necessary, to make Itau bank branches available for and
otherwise facilitate the marketing activities contemplated by this
MOA. Any Marketing Plan or changes to a Marketing Plan shall be
subject to the approval of the Marketing Committee before any
marketing activities described therein may be undertaken, provided
that, if the Parties are unable to reach agreement in any
Marketing Plan with respect to the implementation of any marketing
activities described in this Exhibit A that requires the agreement
of the Parties, and such dispute is submitted to the dispute
resolution procedures described in Sections 24 and 25 of the body
of the MOA, then those marketing activities that are directly
impacted by the subject matter of such Dispute shall be stayed
pending the resolution of such Dispute.
b. Price Plans; Free Trial Period; Discontinuance of Free Hours.
AOLB may, in its discretion, set the price for subscriptions to
the AOLB Service. Except as provided otherwise in Section 1(e)
with respect to certain existing AOLB/Itau Subscribers, from the
MOA Effective Date through the remainder of the Term, the only
subscription plans available for the Co-Branded Service shall be
those available for the AOLB Service, and the price for such
subscription plans to the Co-Branded Service shall be: (i) for an
unlimited hours access subscription plan, the then-standard price
for the AOLB Service, less a discount of 20% off the then-standard
price, which discount shall be provided by and on the account of
AOLB, and (ii) for all other then-standard subscription plans
available for the AOLB Service, the price for such subscription
plan without any price discount (except as AOLB may permit in its
discretion). Any changes AOLB may implement from time to time to
the monthly subscription price for the AOLB Service shall apply to
the price for the Co-Branded Service using the formula for
determining the subscription prices for the Co-Branded Service set
forth above. Any discounts provided for herein to the then-current
or then-standard price shall mean the price as may be adjusted by
the immediately preceding sentence.
Any AOLB/Itau Subscriber to any price plan may select among other
price plans offered by AOLB to AOLB/Itau Subscribers by using the
Keyword "cobranca" when available or by calling the AOLB call
center.
Such price plans will provide for a free trial period of one month
(or such shorter period as AOLB determines in its discretion);
provided, that if AOLB offers a free trial period for the AOLB
Service that is longer than one month with respect to any price
plan in any promotion with a third party (other than promotions
with a third party that are (i) Other Qualifying Promotions, (ii)
OEM promotions, (iii) not offered for more than one month and that
do not involve mass media as described in clause (x) of the
definition of "Other Qualifying Promotion" below, (iv) targeted to
classes of consumers based on their social needs or charitable
purposes, such as schools, school children, handicapped consumers
and underprivileged consumers, and (v) fully subsidized by a third
party partner), then potential AOLB/Itau Subscribers will be
offered the same longer free trial period with respect to such
price plan (for as long as the other promotion lasts). For
purposes of clause (v) above, the Parties agree that any Affiliate
of AOLA or AOLB shall not be considered a "third party."
AOLB will apply to potential AOLB/Itau Subscribers who previously
were subscribers to the AOLB Service the same restrictions on free
trial periods upon re-registration as AOLB applies to its
potential subscriber base generally.
For any free trial plan offered for the AOLB Service that is
longer than one month and that is fully subsidized by a third
party partner, AOLB shall promptly after the launch of such plan
notify Itau of the details of such plan and Itau may, within 30
days of such notification, elect by notifying AOLB in writing to
fully subsidize a substantially similar offer to potential
AOLB/Itau Subscribers for the same price AOLB charges such third
party (but, for unlimited access plans, for no more than AOLB's
then-standard price plan with the 20% discount described herein),
for the same time period (both the duration of the free trial and
the duration that the offer is available) and subject to any other
limitations for such offer, including any limitations on the
number of potential subscribers that may accept such offer. Itau
shall launch such subsidized promotion within the 30-day period
following its written notice to AOLB of its intent to subsidize
the promotion, provided that the period shall be extended, if
necessary, until such time as AOLB provides Itau with any
technical conditions that are necessary for such launch that AOLB
offered to the third party.
"Other Qualifying Promotion", as used in clause (i) above, means
an offer of the AOLB Service where (x) such offer does not involve
television, radio, newspapers or magazines (mass media), provided
that AOLB may promote such offer in newspaper or magazine inserts
or advertisements that primarily promote the products or services
offered by such third party, (y) such offer is designed to
principally target customers of the third party with which the
promotion is made, and (z) the monthly fee (less any applicable
discounts) for subscribing to the AOLB Service in response to such
offer, when multiplied by the result of 18 minus the number of
months of the related free trial period, is more than the
then-current price for the similar price plan of the Co-Branded
Service (after the 20% discount described above if applicable)
multiplied by the result of 18 minus the number of months in the
free trial period then being offered for the Co-Branded Service
price plan.
Except as otherwise set forth in this MOA, notwithstanding those
sections of the SMA obligating Itau to pay for certain free hours,
Itau shall not be obligated to pay, nor shall it be permitted to
pay, on behalf of any AOLB/Itau Subscribers, directly or
indirectly, any free hours subsidy (including the payments for
free hours provided in Section 2.1.3 and elsewhere in the SMA) for
the Co-Branded Service. In addition, Sections 3, 4 and 5 of the
Finance Plan of the SMA are hereby terminated and of no further
force or effect. Itau shall not offer to any AOLB/Itau Subscriber
a subscription to the Co-Branded Service for a price other than
those prices described in Section 1(b), except (i) as expressly
agreed otherwise by the Parties in a future Marketing Plan
(including a fully subsidized offer for an extended free trial as
described above in this Section) and (ii) with respect to the
following classes of AOLB/Itau Subscribers:
(1) Itau employees, for whom the price will be a 30% discount
to the then-standard unlimited access price plan for the
AOLB Service. AOLB may raise this discount percentage at its
discretion. At Itau's discretion, Itau may pay directly to
AOLB none, 50% or 100% of the discounted price on behalf of
the employees, and the employees will be responsible for the
balance, if any. The Parties will work together to determine
the feasibility and desirability of having employees pay
AOLB directly. AOLB, in its discretion, may offer greater
discounts, limited access plans or other plans to specific
segments of the Itau employee base. Itau shall not be
responsible for any non-payment by its employees (other than
any portion of the price Itau may agree to pay pursuant to
this Section).
(2) Itau Private Bank customers (but only those Itau elects
to designate and limited to ten thousand customers), for
whom Itau shall pay directly to AOLB the subscription fee
described in Section 1(b) above.
The Parties may market, offer and promote the Co-Branded Service
to the Itau Customers identified in subsection (b) of the
definition of "Itau Customers" in the SMA subject to the
limitations of this Section; provided, however, that such Itau
Customers shall not be entitled to any discount off the price of
the AOLB Service. Notwithstanding the foregoing, if such Itau
Customers later meet the requirements of subsection (a) of such
definition, then Itau may so inform AOLB in writing in a form to
be agreed upon by the Parties, and such Itau Customers shall be
entitled to the applicable price discount (if any) on the
subscription price for the Co-Branded Service beginning with the
billing cycle following receipt of the notice by AOLB. AOLB will
provide to Itau the same level of information regarding these
subscribers as AOLB is required to provide with respect to other
AOLB/Itau Subscribers.
c. Registration Process. Registration for the Co-Branded
Service shall only be permitted by one of the following three
methods (each of which is described in more detail in Article 2 of
this Exhibit A): (i) installation of the Customized Client by the
potential AOLB/Itau Subscriber using a CD-ROM provided by AOLB or
Itau as described elsewhere herein, (ii) in-person at an Itau
branch, and (iii) Sign-up by Phone ("SUBP") if AOLB elects to
offer SUBP for the AOLB Service, provided that Itau may not
promote SUBP registration or any phone numbers associated
therewith unless AOLB has pre-approved such promotion in writing.
If in the future AOLB develops other registration methods, AOLB
and Itau will discuss the need to include such new methods in the
list of potential registration methods. The registration process
will be based upon the registration process for the AOLB Service.
Any Itau Customer that registers for the Co-Branded Service shall
be provided a special Itau promotion code that such Customer shall
be required to input (or in the case of SUBP, that the telephone
operator will input) as part of the registration process.
In the case of registrations by the methods described in clauses
(i) and (ii), the registration screens will contain, among other
screens, the following: (A) the subscription price and the length
of the free trial period (clearly stating that, beginning
immediately after the end of the free trial period, the monthly
charges will be collected in advance); (B) the available payment
options (direct debit or credit card are the payment options
although AOLB may, in its discretion, hereafter provide fewer,
additional or different payment methods provided that AOLB shall
offer the direct debit method to AOLB/Itau Subscribers throughout
the Term); (C) a requirement that the potential AOLB/Itau
Subscriber read and accept the Terms of Service during
registration; and (D) a notice that subscription to the Co-Branded
Service is subject to validation by Itau. In addition, subject to
applicable laws and regulations, for those AOLB/Itau Subscribers
who have subscribed to an unlimited access plan and who have
elected direct debit as the form of payment, Itau shall note the
20% discount as part of the AOLB debit entry in their account
statements.
In the case of SUBP, the registration will be accomplished in two
phases. In the first phase, the Itau Customer will call the AOLB
call center and will provide his or her details to the AOLB
attendant who will complete the registration of a Co-Branded
Service account on behalf of the Itau Customer. The AOLB attendant
will inform the Itau Customer (i) of the price and the length of
the free trial period (clearly stating that, beginning immediately
after the end of the free trial period, the monthly charges will
be collected in advance), (ii) of the payment options (direct
debit or credit cards are the payment options although AOLB may,
in its discretion, hereafter provide fewer, additional or
different payment methods provided that AOLB shall offer the
direct debit method to AOLB/Itau Subscribers throughout the Term),
and (iii) that the Itau Customer will be required to read and
accept the Terms of Service. Once this initial process is
completed, (i) the account shall be activated so that it is
accessible by the Itau Customer from any computer that has an AOL
browser, (ii) the Itau Customer will be deemed an AOLB/Itau
Subscriber for the purposes of the SMA, and (iii) if the AOLB/Itau
Subscriber does not have a computer with an AOL browser, AOLB will
ship a copy of the Customized Client or the AOLB Client to such
AOLB/Itau Subscriber, at AOLB's expense. In the second phase, the
AOLB/Itau Subscriber will, in the first login, be prompted to read
and accept the Terms of Service through a pop-up screen. It is
understood by the Parties that any CD-ROMs containing the
Customized Client shipped by AOLB pursuant to sub-section (iii)
above shall reduce the aggregate amount of the CD-ROMs (or
interactive marketing) that Itau is required to Distribute or
direct mail (or purchase) pursuant to Section 2 and Section 3 of
this Exhibit A.
If any Itau Customer who subscribes to the Co-Branded Service
after the MOA Effective Date requests in writing (within ten (10)
days after such Itau Customer is first billed for the subscription
(i.e., the first ▇▇▇▇ after any free trial period)) the
cancellation of his or her subscription and the reimbursement of
the first subscription fee, Itau and AOLB agree that Itau shall
provide such reimbursement immediately and shall charge back AOLB
for such reimbursement as set forth in Section 10.2.5 of the SMA.
Upon such cancellation and reimbursement by Itau, AOLB shall have
the right to take all appropriate actions to terminate such
Subscriber's account immediately and to take any such other
actions with regard to such account as it deems reasonable in
accordance with the policies applied to AOLB Members. Regardless
of the payment methods available during the registration process,
after registration AOLB shall make available to all AOLB/Itau
Subscribers the same payment methods as are available to
subscribers to the AOLB Service.
In addition, Itau Customers who are current subscribers to the
AOLB Service, that are identified in subsection (a) of the
definition of "Itau Customers" in the SMA, who enter an Itau bank
branch and who express to a Promoter an interest in the Co-Branded
Service will be directed by the Promoter (or, in Itau's
discretion, by Itau employees if no Promoter is deployed to such
bank branch) to call the AOLB call center for purposes of enabling
AOLB to attempt to cause the Itau Customer to migrate to the
Co-Branded Service. Such AOLB Subscribers who migrate to the
Co-Branded Service will not be entitled to a new free trial period
and will be counted as a registration from the commencement of the
billing cycle immediately following the date on which the AOLB
Subscriber migrates. No subscriber to the AOLB Service may be
migrated to the Co-Branded Service unless Itau verifies such
subscriber as an Itau Customer as provided below and such
subscriber is identified in subsection (a) of the definition of
"Itau Customers" in the SMA.
Verification and validation will be done on all registrants to the
Co-Branded Service. AOLB will send a file to Itau daily, which
will identify all registrants that register with the Itau
promotion code. Itau will review this file and respond to AOLB
within ten (10) days with (x) a list that identifies each
registrant as either persons who meet subsection (a) of the
definition of Itau Customers, or registrants who do not so meet
such subsection and consequently shall not be entitled to the 20%
discount and (y) if direct debit from an Itau account is the
payment method, the branch number and the account number so that
AOLB can process the collection at the billing cycle of each
AOLB/Itau Subscriber. AOLB shall make available boleto bancario as
a payment method only when an Itau Customer does not elect credit
card or direct debit as the means of payment. Itau further agrees
to inform AOLB of when it is not possible for an AOLB/Itau
Subscriber to use direct debit as a means of payment and AOLB
shall inform such AOLB/Itau Subscriber that it must choose a
different method of payment.
In order to guarantee the quality of the billing information of
AOLB/Itau Subscribers that elect boleto bancario as the means of
payment, AOLB may block the access to the Co-Branded Service of,
and if applicable cancel the accounts of such AOLB/Itau
Subscribers in order to process the validation of billing address
and CPF of the AOLB/Itau Subscriber in accordance with the
policies applied to AOLB Members. After the initial validation of
a registrant, changes to the payment method will be processed by
using the Keyword "cobranca" when available or by calling the AOLB
call center.
The Parties will use good faith efforts to study, within sixty
(60) days of the MOA Effective Date, the development of a new
methodology and process for verification and validation of
AOLB/Itau Subscribers. If the Parties do not agree on a
methodology and process, the current validation/verification
methodology will remain unchanged. In addition, Itau will study
whether, but shall have no obligation, to provide the systems and
databases to support online validation of the registration of Itau
Customers for all registration methods and real-time verification
of such Itau Customers.
d. Banking Benefits. Itau will make available, beginning within
thirty (30) days of the MOA Effective Date, exclusively to all
AOLB/Itau Subscribers, at no cost to the AOLB/Itau Subscribers, at
least two banking benefits, as well as additional benefits that
shall be developed by Itau, the type of which will be at Itau's
discretion, but which benefit shall be subject to AOLB's approval
(not to be unreasonably withheld) before being made available to
the AOLB/Itau Subscribers. Such benefits shall begin with the
following two benefits: (i) special Itau e-mail services,
including the provision of certain account information (excluding
account statement information) sent via AOLB's e-mail system and
(ii) AOLB/Itau Subscribers will be able to conduct higher value
transactions online than do other Itau Customers. Itau may provide
these banking benefits to customers other than the AOLB/Itau
Subscribers so long as it (x) charges such other customers for
these banking benefits or (y) provides an additional benefit
exclusively to AOLB/Itau Subscribers in accordance with the
foregoing. Itau may discontinue any benefit in its discretion,
provided that (i) it continues to offer at least two (2) other
banking benefits exclusively to all AOLB/Itau Subscribers in
accordance with the foregoing, and (ii) AOLB/Itau Subscribers will
be able to conduct higher value transactions online (which benefit
will count toward the number in clause (i)) until such time as
Itau reasonably concludes that the Co-Branded Service does not
provide better security for Itau online banking services than does
another ISP Product. In connection with Itau's marketing
obligations hereunder, the Co-Branded Service shall be marketed
and promoted as the premier and the principal means of accessing
Itau's interactive Financial Services and related Content by means
of ISP Products. Until such time as Itau reasonably concludes that
the Co-Branded Service does not provide better security for Itau
online banking services than does another ISP Product, Itau shall
include in such communication a statement that Itau will allow
AOLB/ Itau Subscribers to conduct higher value transactions online
than do other Itau Customers because of the higher level of
security offered by the direct access through the Co-Branded
Service. Notwithstanding anything in the foregoing to the
contrary, Itau shall be entitled to provide to Private Banking
customers, free of charge, any benefits described above as being
exclusive to AOLB/Itau Subscribers.
e. Existing Member Base. During the last six (6) Contract
Months (as defined below) of the seven (7) Contract Month period
beginning on the MOA Effective Date, with respect to each
AOLB/Itau Subscriber existing as of the MOA Effective Date, the
Parties shall (x) transition such AOLB/Itau Subscriber to a plan
for the Co-Branded Service that does not include any subsidy by
Itau or (y) terminate such AOLB/Itau Subscriber, all as is
described in more detail below, provided that any AOLB/Itau
Subscriber granted a written offer before the MOA Effective Date
for any subsidy that does not terminate within seven (7) Contract
Months after the MOA Effective Date shall continue to receive such
subsidy pursuant to the terms of such offer until the expiration
of such offer and Itau shall continue to pay for such subsidy as
provided in (i) and (ii) below, provided further, that no such
pre-existing offer may be renewed without the prior written
consent of AOLB. The form of all communications described below
(as opposed to the content which shall be determined in accordance
with this Section 1(e)) shall be agreed upon by the Parties.
"Contract Month" shall mean a period extending from a specified
day to (but not including) the corresponding day of the next month
(e.g., January 6th to February 5th), and subsequent Contract
Months shall be measured from the same day of the month (e.g.,
February 6th to March 5th and so on).
(i) All AOLB/Itau Subscribers that either (A) (i) have
registered prior to the MOA Effective Date, (ii) have not
accessed the Co-Branded Service at any time during the
ninety (90) day period ending on the MOA Effective Date, and
(iii) are not subscribers to a paid plan (each, an "Inactive
AOLB/Itau Subscriber") or (B)(i) have registered prior to
the MOA Effective Date, (ii) are not Inactive AOLB/Itau
Subscribers, and (iii) are not subscribers to a paid plan,
will receive from Itau at its expense, and at AOLB's
direction, at least one and no more than three printed (or
telephone, at AOLB's option and expense) communications as
follows. The first communication shall inform such AOLB/Itau
Subscribers that the free hours plan will no longer be
offered by Itau and that if they wish to continue to use the
Co-Branded Service, they may subscribe to the unlimited
price plan described in Section 1(b) of this Exhibit A
before the end of Itau's then-current free hours offer for
such AOLB/Itau Subscriber. Subsequent communications may be
the same or similar, or, if the AOLB/Itau Subscriber elects
not to accept the offer for the unlimited paid plan with the
discount, the communications may offer other standard AOLB
plans to such AOLB/Itau Subscribers that AOLB, in its
discretion, may elect to offer with or without any discount.
In any case, at least the final offer (which, in AOLB's
discretion may be the first, second or third communication
but which must be sent to the AOLB/Itau Subscriber, if
practicable, at least thirty (30) days before the end of
Itau's then-current free-hours offer) sent to each such
AOLB/Itau Subscriber shall note that if he or she does not
subscribe to one of the offered plans, the AOLB/Itau
Subscriber's account will be terminated at the later of (x)
thirty (30) days after the date of such final offer, and (y)
at the end of Itau's then-current free hours offer, if
applicable, and such AOLB/Itau Subscriber's account shall so
be terminated if such offer is not accepted, provided that
in no circumstances shall such AOLB/Itau Subscriber's
account be permitted to stay active seven (7) Contract
Months after the MOA Effective Date except as provided in
this Section 1(e). For any such AOLB/Itau Subscribers who
are still benefiting from the free trial period as of the
MOA Effective Date, such communications will be sent only
after the end of such free trial period. During the period
before such AOLB/Itau Subscribers have been terminated or
agreed to one of the plans offered pursuant to this Section
1(e), Itau shall pay to AOLB (x) in the case of AOLB/Itau
Subscribers that have not accessed the Co-Branded Service
during the billing cycle, R$0,11 (eleven cents of reais) per
Subscriber per month within ten (10) days after invoice
thereof and (y) in the case AOLB/Itau Subscribers that have
accessed the Co-Branded Service during the billing cycle,
the rate calculated as set forth in the Third Amendment to
the SMA.
(ii) For each AOLB/Itau Subscriber that is not described in
Section 1(e)(i) above that registered for the Co-Branded
Service prior to the MOA Effective Date, Itau shall pay
(unless it elects otherwise as provided below) the entire
difference between (A) the price for the then-current plan
(with the 20% discount in the case of the unlimited hours
plan) for the AOLB Service most closely resembling the plan
for which such AOLB/Itau Subscriber is registered, and (B)
the amount such AOLB/Itau Subscriber is obligated to pay,
provided that AOLB will not cancel the structure of any
price plan offered during the seven (7) Contract Month
period after the MOA Effective Date; and provided further
that AOLB shall be permitted in its discretion, subject to
Section 1(b), to increase or decrease the price at which
such plan is offered. For the avoidance of doubt, AOLB shall
be paid the full subscription price (with the 20% discount
in the case of the unlimited hours plan) for the Co-Branded
Service, part from the AOLB/Itau Subscriber and the
remainder from Itau. Itau shall pay such amounts monthly in
accordance with the procedures in the SMA for the payment of
free hours (i.e., those procedures governing the timing and
method of payment, but not the sections governing the amount
of payments due). The Parties will coordinate communications
to those AOLB/Itau Subscribers who are participating in a
paid plan that is not the unlimited plan, for purposes of
trying to induce them to subscribe to the unlimited price
plan. For any such AOLB/Itau Subscriber that Itau elects not
to pay such amount, Itau shall so notify AOLB in writing
and, beginning in the next billing cycle for such AOLB/Itau
Subscriber, such AOLB/Itau Subscriber shall be treated as if
they were subject to Section 1(e)(i) above.
The provisions of this Section (e) shall not apply to the classes
of AOLB/Itau Subscribers provided for in Section 1(b)(1) and (2).
2. Subscriber Acquisition Efforts: AOLB and Itau shall engage in
the following three types of subscriber acquisition efforts for
the Co-Branded Service: "In-Branch," "Direct Mail" and, at
AOLB's discretion, "SUBP."
a. In-Branch Efforts. The Parties shall deploy a program
for the acquisition of new AOLB/Itau Subscribers inside Itau bank
branches. The Parties will jointly approve the Marketing and
Communication Materials in accordance with Section 3(a) of this
Exhibit A. The program shall contain the following elements:
(i) Branch selection. The initial branches and rollout
schedule will be as set forth on Annex 1. In addition, Annex
1 shall set forth the maximum number of Promoters that shall
be permitted in each Itau branch. The initial number of
branches may not be decreased and the maximum number of
Promoters for any branch may not be increased without the
agreement of the Parties; provided, (a) that Itau at its
discretion may reduce the number of branches without the
consent of AOLB so long as there are always 100 more
positions available for Promoters in branches than the
number determined by the Total Performance Criteria, and (b)
that any reduction in the maximum number of Promoters per
branch will be effective only after the number of Promoters
for the next Quarter has been determined.
(ii) Management. The in-branch program will be managed by AOLB.
AOLB will contract, maintain and dismiss, as employees of
AOLB or as third-party contractors (at AOLB's option), and
arrange for the training (as described on Annex 2) of
individuals who will work in Itau bank branches (x)
marketing the Co-Branded Service to Itau Customers
("Promoters") and (y) as supervisors for the Promoters
("Supervisors"). The list of qualifications of the Promoters
and the Supervisors, including the range of fixed
compensation wages, are described on Annex 2, which may
change from time to time upon the agreement of the Parties.
AOLB may hire or cause to be hired Promoters and Supervisors
with overall qualifications reasonably consistent with the
qualifications attached as Annex 2 without any additional
approval from Itau. The Parties shall adjust such wage range
annually by an amount agreed upon by the Parties. If the
Parties are unable to agree then the wages shall be adjusted
by the rate set by the applicable collective bargaining
agreement or, in the absence of such an agreement, by an
amount equal to the change in the official governmental
consumer inflation rate from the prior year to the
then-current year. Unless the Parties agree otherwise, the
contracting and/or hiring of such in branch Promoters and/or
Supervisors will take place after the receipt of competitive
bids from at least three of the following employment or
contracting agencies: [**], [**], [**] and [**]. This list
of acceptable employment or contracting agencies shall be
valid for one year and thereafter any revisions to this list
of acceptable employment or contracting agencies shall be
subject to the mutual agreement of the Parties. AOLB will
make the final decision as to which employment or
contracting agency it will use for the project, based on a
combination of cost, quality and past experience with the
employment or contracting agencies. Notwithstanding the
foregoing, without Itau's written consent, AOLB may not
award the contract to any employment or contracting agency
whose bid projected costs more than twenty percent (20%)
above the lowest-cost bid AOLB received during the bidding
process. In the event that AOLB decides to contract
Promoters and/or Supervisors through an employment or
contracting agency, AOLB shall use commercially reasonable
efforts to verify whether such employment or contracting
agency complies with Brazilian labor laws regarding payment
of wages and related charges as described in Annex 2 in its
relationship with such Promoters and Supervisors; provided
that the failure to undertake such efforts shall not be
deemed a breach of this MOA.
(iii) Expenses. Itau will reimburse AOLB for the actual expenses
listed in (A) and (B) below which relate to the in-branch
marketing activities (in addition to those related to the
CD-ROMs, as described below). Furthermore, Itau will
reimburse or directly pay all actual costs listed in (C),
(D), (E), (F), (G) and (H) below, which relate to the
in-branch marketing activities.
(A) All costs of AOLB with respect to Promoters,
including all fees charged by an agency for the same
in case AOLB contracts with such agency to provide
Promoters as third-party contractors; provided that,
solely for the purposes of this reimbursement, Itau
may notify AOLB that it will not permit AOLB to deploy
the full number of Promoters that AOLB is entitled to
deploy hereunder. Such notice shall state the number
of Promoters that Itau will allow AOLB to deploy and
for how long such number shall apply (but subject to
any reduction in the number of Promoters to be
deployed pursuant to Section 2(b), not less than 60
(sixty) days). Starting fifteen (15) days after the
provision of such notice, Itau shall only be required
to reimburse AOLB for the number of Promoters stated
in such notice, it being acknowledged that if the
number of promoters deployed pursuant to such notice
is less than the maximum number of promoters that AOLB
has the right to deploy pursuant to Section 2(b)(i) or
(ii), as applicable, AOLB will entitled to a Promoter
Payment in accordance with Section 5(a)(ii);
(B) All costs of AOLB with respect to 1 Supervisor
for each 7 branches staffed with Promoters, including
all fees charged by an agency for the same in case
AOLB contracts with such agency to provide Supervisors
as third-party contractors;
(C) All training costs for the items described on
Annex 2;
(D) All costs of uniforms (1 new kit per Quarter, per
Promoter as agreed by the Parties);
(E) All costs for the following point of purchase
materials: (i) materials used to advertise the
availability of the promotions in the branches,
including banners, posters, displays, etc., and (ii)
other materials to entice customers, such as business
cards, mouse pads, and welcome kits (not to exceed
R$3.50 per created account);
(F) All cost for hardware (CPU, keyboard, monitor
and mouse). Any other hardware shall be further
discussed and agreed upon;
(G) All costs of installing and maintaining
telephone lines or other computer network connections;
and
(H) All costs of creating and installing kiosks.
AOLB shall not hire such Promoters and Supervisors directly
until AOLB has received at least three bids from the
employment or contracting agencies identified in Section
2(a)(ii). In the event AOLB hires Promoters and Supervisors
directly, Itau's obligation to reimburse AOLB for (A) and
(B) above shall not exceed the cost that would have been
reimbursable if AOLB had hired them through an employment or
contracting agency that could have been selected after
following the procedures described in Section 2(a)(ii) of
this Exhibit A.
With respect to item (B) above, the number of Supervisors
shall be adjusted in accordance with the number of branches
each Quarter.
The logistics for items (A) through (C) will be arranged by
AOLB and will be paid by Itau to AOLB pursuant to an invoice
(which invoice will be paid by Itau within ten (10) days of
receipt and will include any additional taxes paid or owed
by AOLB as required by law), as the Parties will determine.
It is understood and intended by the Parties hereto that the
allocation of Promoters and Supervisors in Itau's bank
branches pursuant to this Section shall not establish any
employer-employee relationship between Itau and such
Promoters and Supervisors.
The logistics of items (D) and (E) will be arranged and paid
by Itau after a joint agreement by the Parties on the best
provider and with respect to the items described in item E
above, on the quantity of materials to be purchased. AOLB
shall direct Itau to purchase the items described in item
(E)(ii) above, and if, after the use of such items is
discontinued at AOLB's direction, the surplus inventory of
such items exceeds 10% of the amount actually distributed,
then AOLB shall reimburse Itau for the items in excess of
10% at Itau's actual cost. Itau shall deliver such surplus
inventory to AOLB, at AOLB's expense, which shall thereafter
be the owner of such items.
The logistics of items (F) through (H) will be arranged by
Itau and will be paid directly by Itau.
With respect to the compensation of Promoters and
Supervisors, on average the total variable compensation paid
to them shall not exceed 15% of the total fixed compensation
paid to them (and AOLB shall have the discretion to allocate
the variable portion as either monetary payments or
non-monetary incentives). In addition, for the avoidance of
doubt, Itau will be responsible for the costs of each
Promoter for the period beginning when such Promoter is
hired for deployment at the branches until the Promoter is
removed from the branches (e.g., in the event that the
number of Promoters from one Quarter to the next Quarter
increases, Itau will be responsible for the cost of the
additional Promoters only from the time the Promoter is
actually hired), provided that if the time period between
hiring and deployment exceeds fifteen (15) days, Itau shall
not be responsible for the cost between the end of the
15-day period and the time of deployment; conversely, if the
number of Promoters is decreased from one Quarter to the
next Quarter, Itau will be responsible for the cost of the
"excess Promoters" until it is determined how many Promoters
will be deployed for the subsequent Quarter and thereafter
for ten (10) days (or until each such Promoter is removed if
sooner but never exceeding the first thirty (30) days of the
then-current Quarter unless the failure to remove such
Promoter is a result of failure to comply with the terms of
this MOA). In the event there is a good faith dispute
between the Parties regarding the number of Promoters to be
deployed or removed, the Parties shall cooperate in good
faith to reach a prompt resolution of the matter in
accordance with Sections 24 and 25 of the body of the MOA.
(iv) In-Branch CD-ROM Distribution. AOLB has the right to require
from time to time in writing the Distribution of up to an
aggregate of [**] CD-ROMs to Itau's bank branches as
directed by AOLB on the following schedule: (A) [**] for the
period from the MOA Effective Date through the second
Anniversary Date (provided that AOLB has deployed the
Promoters for such period as described herein), (B) [**],
for the period from the second Anniversary Date through the
third Anniversary Date, (C) [**], for the period from the
third Anniversary Date through the fourth Anniversary Date,
and (D) [**], for the period from the fourth Anniversary
Date through the fifth Anniversary Date. Notwithstanding the
foregoing, AOLB in its discretion may increase or decrease
the required quantity of CD-ROMs for Distribution for any
Anniversary Year by up to 20% with any such increase or
decrease deducted or added, as applicable, to the required
Distribution for the following period, provided that some or
all of the CD-ROMs scheduled to be Distributed during the
100 Days may be transferred, at AOLB's discretion, to the
third Anniversary Year. Except as provided otherwise in
Section 25(b) of the body of this MOA, in no event will AOLB
have the right to require that the Distribution of any
CD-ROMs be effected by Itau after the fifth Anniversary
Date. The Parties may mutually agree to quantity increases
or decreases in excess of 20% per Anniversary Year.
For the purposes of the MOA and this Exhibit A,
"Distribution" or "Distribute" shall mean (A) for bank
branches without Promoters, picking up from Itau's
Distribution Center and delivering to such branches such
number of CD-ROMs (previously delivered by AOLB to Itau's
Distribution Center) that is specified in written
instructions provided by AOLB to Itau pursuant to this
Section, (B) paying the CD-ROM Costs for the production of
CD-ROMs for Distribution both in branches with and without
Promoters, (C) either (i) for branches with Promoters,
permitting Promoters to give out such CD-ROMs to Itau
Customers in Itau bank branches, or (ii) for branches
without Promoters, making CD-ROMs available to Itau
Customers (including but not limited to through take-one
displays located in the customer circulation area), and (D)
such other activities as are reasonably necessary to achieve
(A) through (C) above.
Such CD-ROMs will be provided to Itau Customers by Promoters
in those branches that have Promoters, and by Itau personnel
in those branches without Promoters, with the allocation
between such branches as directed by AOLB. In the event [**]
CD-ROMs are not Distributed to Itau Customers in the 100
Days because there are not a sufficient number of Promoters
to reasonably enable such Distribution to Itau Customers,
then with respect to that quantity of CD-ROMs not so
Distributed in such period as a result of the shortage of
Promoters, Itau shall have no liability for such failure.
In addition, AOLB may (A) reduce or increase the number of
CD-ROMs for in-branch Distribution in any given year and
consequently increase or reduce by the same amount the
number of CD-ROMs that are directed to direct mail (as
provided in Section 2(c)(ii)) limited to 20% of the amounts
described in Sections 2(a)(iv) and 2(c)(i) in this Exhibit A
(unless the Parties agree to a higher percentage) or (B)
elect to use some of the CD-ROMs intended for Distribution
or direct mailing in any given year as part of the SUBP
program for potential AOLB/Itau Subscribers; provided in
each case that such CD-ROMs shall still be deducted from the
total amount of CD-ROMs Itau is required to Distribute or
direct mail, as applicable, under this Exhibit A. AOLB shall
not have the foregoing right with respect to any CD-ROMs for
which Itau has incurred production costs following and as a
result of AOLB's written direction to Distribute such
CD-ROMs. Notwithstanding anything to the contrary herein, in
the event that AOLB increases the number of CD-ROMs directed
to direct mail as set forth in this paragraph, AOLB shall be
solely responsible for any postage costs related thereto.
Nothing herein shall limit Itau's right to purchase, at its
cost, from AOLB, additional CD-ROMs, subject to the other
terms and conditions of this MOA, and such CD-ROMs shall not
count towards Itau's Distribution and/or direct mailing
obligations as described in this MOA. Nothing in this MOA
shall be interpreted as requiring Itau to purchase such
CD-ROMs as provided herein from AOLB.
At least thirty (30) days prior to the beginning of each
Quarter, AOLB shall provide Itau with an estimate of the
number of CD-ROMs AOLB desires to allocate for Distribution
at each Itau branch and for direct mailing. Thereafter, at
least thirty (30) days prior to the end of the Quarter, AOLB
shall provide to Itau in writing the quantity of CD-ROMs to
be Distributed and direct-mailed in such Quarter. Itau shall
be responsible for all costs related to the production,
Distribution and direct mailing of the CD-ROMs (including
those it elects voluntarily to distribute), including,
without limitation, (A) the cost of producing such CD-ROMs
(provided that the amount Itau is obligated to pay per
CD-ROM shall not be greater than the cost AOLB would have to
pay if it ordered the CD-ROMs for its use from a producer
selected by AOLB in accordance with an agreement with or a
quote from such producer), (B) the cost of shipping such
CD-ROMs up to the point of delivery to the Itau Distribution
Center (in the case of direct mailing and with respect to
CD-ROMs for Distribution in those Itau branches without
Promoters) or to AOLB's contracted promotional agency in
each city (in the case of in-branch Distribution) and
handling, (C) backer cards, (D) labels and postage (with
respect to those CD-ROMs that are direct mailed), and (E) an
administration fee equal to 15% of all of AOLB's costs for
items (A) through (C) above ((A) through (E) collectively,
the "CD-ROM Cost"). AOLB shall provide all CD-ROMs for
Distribution and/or direct mailing in each Quarter at least
thirty (30) days prior to the end of such Quarter.
AOLB will have the right at any time and from time
to time to direct that Itau, in lieu of
Distributing some or all of the quantity of CD-ROMs
described in this Section 2(a)(iv), purchase
interactive marketing on the AOLB Service or the
Co-Branded Service during the period in which Itau
would have Distributed the CD-ROMs. The price of
the interactive marketing will be an amount
equivalent to the aggregate CD-ROM Costs that would
have been incurred by Itau (except mailing costs)
if the CD-ROMs and related materials had been
ordered and Distributed. For this purpose, the
CD-ROM Costs will be based on the applicable amount
(on a per-CD-ROM basis) that was actually incurred
with respect to the lot of CD-ROMs that was
purchased most immediately prior to the time for
which the calculation is to be made. Itau may
only be required to pay for interactive marketing
with respect to each Quarter relating to the
following maximum number of CD-ROMs:
(1) for each of the first, second and third
Quarters of each Anniversary Year, the result of:
(i) one-third of the maximum number of CD-ROMs that
AOLB could require Itau to Distribute in such
Anniversary Year (including any number of CD-ROMs
that has been reallocated from another Anniversary
Year as provided herein), less (ii) the number of
CD-ROMs actually Distributed by Itau in such
Quarter; and
(2) for the fourth Quarter of each
Anniversary Year, the remaining CD-ROMs AOLB could
require Itau to Distribute in the applicable
Anniversary Year (including any number of CD-ROMs
that has been reallocated from another Anniversary
Year as provided herein).
For the avoidance of doubt, in no event may AOLB direct Itau
to purchase interactive marketing in lieu of the in-branch
Distribution of CD-ROMs as required hereunder for an
Anniversary Year in an amount greater than the number of
CD-ROMs required to be Distributed in-branch during an
Anniversary Year (including any number of CD-ROMs that has
been reallocated from another Anniversary Year as provided
herein). Notwithstanding the 20% discount set forth in
Section 12.1.4 of the SMA, such interactive marketing shall
be purchased at the then-prevailing rate card rates.
Notwithstanding the foregoing, if AOLB directs Itau to
Distribute a certain number of CD-ROMs in any given Quarter,
once Itau has incurred any costs in connection with such
CD-ROMs, following and as a result of AOLB's written
direction to Distribute such CD-ROMs, AOLB may not reduce
this number or require Itau to re-allocate any or all of
such CD-ROM Costs to interactive marketing purchases.
As used in this MOA, the term "CD-ROMs" shall refer to
CD-ROMs containing the Customized Client, unless the context
requires otherwise.
(v) Branch Environment Guidelines. In implementing the
in-branch program, the Parties acknowledge that it is
important that (i) Itau Customers who enter the branches
perceive the kiosk and promotional materials as naturally
integrated into the branch environment and as an endorsement
by AOLB and Itau of the Co-Branded Service and the Itau
Bankline service, and (ii) the activities of the Promoters
respect the existing dynamic of the branch environment and
minimize any adverse impact on branch activities (to be part
of training). Accordingly, during any period in which a
Promoter is present in an Itau bank branch, Itau shall
install in such branches a kiosk and promotional signage,
and, to keep the kiosks and signage consistent with overall
Itau marketing policy, Itau will be in charge of defining
(i) promotional signage size and positioning (provided that
the size of any promotional materials advertising the
Co-Branded Service in any bank branch will be at least 0.7
square meters) and (ii) the location and size of the kiosks
within Itau's branches. Each Promoter will be provided
scripts for interacting with Itau Customers that are jointly
developed and approved by Itau and AOLB.
AOLA and AOLB shall be responsible (for purposes of
Brazilian laws) and shall indemnify Itau for any claims,
losses, awards or damages involving injury or damage to the
extent caused by a Promoter or Supervisor to Itau property
or to an Itau Customer or his/her property, except to the
extent the act or omission giving rise to such claim, loss
or damage was authorized by any Itau branch manager (Gerente
Titular, Gerente de Conta or Gerente Operacional) or by any
other person acting at the direction of these managers to
authorize such act or omission by the Promoter or
Supervisor. Itau shall be responsible (for purposes of
Brazilian laws) and shall indemnify AOLA and AOLB for any
claims, losses, awards or damages to the extent not caused
by Promoters and/or Supervisors carrying out the in-branch
marketing activities provided for in this MOA, except to the
extent AOLA and AOLB are responsible and are obligated to
indemnify Itau pursuant to the foregoing sentence.
b. Promoters.
(i) Initial Promoters. From the MOA Effective Date to March 24,
2003 (such period, the "100 Days") and from March 25, 2003
through June 24, 2003 (such period, "Quarter Zero" and
together with the 100 Days, the "Initial Period"), AOLB will
have the right to place up to [**]-([**]} Promoters in Itau
branches subject to the restrictions set forth in Annex 1.
Itau will have no obligation to pay for those Promoters who
are not actually deployed in Itau's bank branches during
such period (it being understood that, for the purposes of
this sentence, Promoters shall be considered deployed for
the 15-day period provided for in Section 2(a)(iii) whether
or not such Promoters are placed in bank branches, and shall
not be considered deployed thereafter until such Promoter is
actually deployed in a bank branch). In addition, to the
extent Itau delays the deployment of the initial Promoters,
AOLB may require Itau to purchase interactive marketing with
a price equal to the sum of (x) (A) the number of Promoters
delayed, multiplied by (B) a fraction the numerator of which
is the number of days delayed and the denominator of which
is the number of days such Promoter would have been in a
branch during the Initial Period, multiplied by (C) the
average per Promoter "all in costs" (i.e., all costs
identified in items (A) of Section 2(a)(iii)) that were
expended by Itau during the Initial Period, and (y) the
costs of additional Supervisors (i.e., all costs identified
in item (B) of Section 2(a)(iii)) that would have been
deployed if such delayed Promoters had been deployed.
(ii) Future Number of Promoters. For each three-Contract Month
period (the "New Quarter") that begins after Quarter Zero
(hereinafter referred to as Quarters 1 to 11), the number of
Promoters to be deployed in the Itau branches shall be the
greater of (A) the number of Promoters guaranteed by Itau
for the New Quarter pursuant to subsection (iii) below and
(B) the number of Promoters determined by the Total
Performance Criteria as set forth in subsection (iv) below,
but in no event more than [**] Promoters in any Quarter.
Notwithstanding the foregoing, the number of Promoters AOLB
shall be entitled to place in Itau branches shall not
decrease until thirty (30) days after the end of the
previous Quarter (or until each such Promoter is removed
from the Itau bank branch if sooner). AOLB shall remove any
excess Promoters within such thirty (30) days, and Itau
shall be obligated to pay for all Promoters and Supervisors
for such period. Any reference to "Quarters" in this MOA
shall mean any one of Quarters Zero to 11.
(iii) Guaranteed Promoters. The number of Promoters guaranteed
by Itau independently of the Total Performance Criteria is
as follows: Quarter 1-[**] Promoters; Quarters 2 and 3- [**];
Quarters 4, 5, 6, and 7- [**]; and Quarters 8, 9, 10 and 11-
[**].
(iv) Total Performance Criteria. The Total Performance Criteria
determines the number of Promoters for a New Quarter as a
function of the performance in the Prior Quarter (as
hereinafter defined), as set forth in the following formula:
NP = Qualifying Registrants
Minimum Production Level
Where
"NP" means the number of Promoters for a New Quarter
"Minimum Production Level" means the expected production for
the Prior Quarter
o For Quarters Zero, 1, 2 and 3: the product
obtained by multiplying [**] and the number
of Working Days in the last two Contract
Months of the applicable quarter
o For Quarters 4, 5, 6 and 7: the product
obtained by multiplying [**] and the number
of Working Days in the last two Contract
Months of the applicable quarter
o For Quarters 8, 9 and 10: the product
obtained by multiplying [**] and the number
of Working Days in the last two Contract
Months of the applicable quarter
"Working Days" means all weekdays (Monday through Friday) on
which the branches are open for business during normal
business hours.
"Qualifying Registrants" means the sum of: (i) the lesser of
(A) the number of Itau Customers who became AOLB/Itau
Subscribers pursuant to the in-branch subscription efforts
of this Section 2 during the last Contract Month of the
three-Contract Month period immediately prior to the New
Quarter for which the calculation is being made (the "Prior
Quarter"), whether or not such Itau Customers remained
AOLB/Itau Subscribers at the end of the Prior Quarter, and
(B) the Turnover Limit for the Prior Quarter, and (ii) Itau
Customers who become AOLB/Itau Subscribers pursuant to the
in-branch subscription efforts of this Section 2 during the
second Contract Month of the Prior Quarter and make a
payment (or for which Itau makes or is required to make a
payment) either during the last Contract Month of the Prior
Quarter or within the first 20 days of the New Quarter. If
it cannot be determined if an individual has made a payment
by such 20th day due to a delay by Itau in providing AOLB
with the information required by AOLB to make such
determination, the individual will be deemed to have made a
timely payment. In addition, to the extent Itau delays the
deployment of Promoters or notifies AOLB pursuant to Section
2(a)(iii)(A), Qualifying Registrants shall also include an
additional amount equal to the number of Promoters delayed
or reduced multiplied by the average number of AOLB/Itau
Subscribers acquired by the Promoters in the Prior Quarter.
"Turnover Limit" means the quotient obtained by dividing (x)
the total number of AOLB/Itau Subscribers who register
pursuant to the in-branch subscription efforts of this
Section 2 during the last Contract Month of the Prior
Quarter and who remain AOLB/Itau Subscribers as of the last
day of such Contract Month, by (y) the result of (A) one
minus (B) the product obtained by multiplying [**] and
Average Turnover for the Prior Quarter.
"Average Turnover" means one minus the quotient obtained by
dividing (x) the sum of (A) the number of AOLB/Itau
Subscribers who registered pursuant to the in-branch
subscription efforts of this Section 2 during the first
Contract Month of the Prior Quarter and who remain AOLB/Itau
Subscribers as of the last day of such Contract Month and
(B) the number of AOLB/Itau Subscribers who register
pursuant to the in-branch subscription efforts of this
Section 2 during the second Contract Month of the Prior
Quarter and who remain AOLB/Itau Subscribers as of the last
day of such Contract Month, by (y) the sum of (A) the number
of AOLB/Itau Subscribers who registered pursuant to the
in-branch subscription efforts of this Section 2 during the
first Contract Month of the Prior Quarter (regardless of
whether or not they remain AOLB/Itau Subscribers as of the
last day of such Contract Month) and (B) the number of
AOLB/Itau Subscribers who register pursuant to the in-branch
subscription efforts of this Section 2 during the second
Contract Month of the Prior Quarter (regardless of whether
they remain AOLB/Itau Subscribers as of the last day of such
Contract Month).
(v) Allocation of Promoters Among Branches. For the
Initial Period, Promoters will be placed in the branches as
directed by AOLB, subject to the restrictions set forth in
Annex 1. At all times following such Initial Period, AOLB
will have the discretion to allocate Promoters among the
branches, subject to (A) the restrictions set forth in Annex
1, and (B) the maximum number of Promoters for each branch,
as determined based on the Allocation Number, as described
below. If Itau opens new branches, it will inform AOLB of
the maximum number of Promoters that can be active in such
new branches. If Promoters are removed from a branch
pursuant to this Section (other than Promoters removed from
a branch pursuant to subsections (viii) or (ix)), AOLB may
not increase the number of Promoters in that branch in the
next New Quarter.
"Allocation Number" for any New Quarter means the quotient
obtained by dividing (A) the total number of Qualifying
Registrants for each branch in the Prior Quarter, by (B) the
product obtained by multiplying (1) the total number of
Working Days worked by Promoters in the branch in the last
two Contract Months of the Prior Quarter and (2) [**].
If the Allocation Number for a branch is greater than or
equal to 3, AOLB can allocate up to the maximum number of
Promoters set forth in Annex 1 to such branch.
If the Allocation Number is less than 3 but greater than or
equal to 2 and the number of Promoters in the Prior Quarter
was (i) 3, then AOLB may allocate no more than 2 Promoters
to such branch; (ii) 2 or 1, then AOLB may allocate up to
the maximum number of Promoters set forth in Annex 1 to such
branch.
If the Allocation Number is less than 2 but greater than or
equal to 1 and the number of Promoters in the Prior Quarter
was (i) 3 or 2, then AOLB may allocate 1 Promoter to such
branch; (ii) 1, then AOLB may allocate up to the maximum
number of Promoters set forth in Annex 1 to such branch.
If the Allocation Number is less than 1 then no Promoters
can be allocated to the branch.
(vi) Additional Promoters or Interactive Marketing Purchase.
For any given New Quarter (Quarters 1 to 11) if the number
of Promoters calculated by the Total Performance Criteria
("Required Promoters") is less than the number of Promoters
guaranteed by Itau, AOLB will have the option to (A) require
the deployment of up to the number of Promoters guaranteed
by Itau or (B) require Itau to purchase interactive
marketing on the AOLB Service or the Co-Branded Service
during the then-current Quarter. The price of the
interactive marketing purchase will be an amount equal to
the sum of (x) the product of (1) the number of Promoters
guaranteed by Itau, minus the total number of Promoters that
AOLB elects to deploy, and (2) the average per Promoter "all
in costs" (i.e., all costs identified in item (A) of Section
2(a)(iii) expended by Itau during the Prior Quarter pursuant
to Section 2(a)(iii)) and (y) the costs of additional
Supervisors (i.e., all costs identified in item (B) of
Section 2(a)(iii) that would have been required if AOLB had
exercised the option (A) above deploying the additional
number of Promoters guaranteed by Itau). Notwithstanding the
20% discount set forth in Section 12.1.4 of the SMA, all
such interactive marketing shall be purchased at the
then-prevailing card rates.
(vii) Indemnity. AOLA and AOLB shall be responsible (for
purposes of Brazilian laws) and shall indemnify Itau for any
claims, losses, awards or damages arising out of any claims
by Promoters or Supervisors for wages, benefits and related
labor matters, including, without limitation, claims
resulting from the non-compliance with Brazilian labor laws
or any action by any governmental authority or union that
may result in a similar outcome, subject to the following
two sentences. Itau shall bear the costs of any losses,
awards or damages arising out of any claims by Promoters or
Supervisors that such Promoters and/or Supervisors are
employees of Itau, provided that such costs are limited to
(i) the difference in wages, benefits and related labor
matters directly related to the fact that such Promoters or
Supervisors are deemed banking employees; and (ii) penalties
and interest directly related to the fact that such
Promoters or Supervisors are deemed banking employees. Itau
shall be responsible (for purposes of Brazilian laws) and
shall indemnify AOLA or AOLB for any disbursement related to
such losses, awards or damages arising out of claims by
Promoters or Supervisors that such Promoters and/or
Supervisors are employees of Itau, subject to the
limitations of the preceding sentence.
(viii) Duties of Promoters. The Promoters will be instructed
to mention to Itau Customers the Itau banking features
offered to AOLB/Itau Subscribers and will be instructed not
to market or distribute CD-ROMs for the AOLB Service (as
opposed to CD-ROMs for the Co-Branded Service) within the
branches. In the event that a Promoter does not mention such
Itau banking features when appropriate or distributes
CD-ROMs for the AOLB Service (as opposed to CD-ROMs for the
Co-Branded Service), the Promoter will be subject to removal
from Itau bank branches, at Itau's discretion, within thirty
(30) days upon written notice to AOLB stating the reason for
requesting such removal, provided that if in this period the
Promoter thereafter engages in further activity that would
permit his/her removal pursuant to this Section, such
Promoter shall be removed immediately. AOLB shall not deploy
the removed Promoter in any Itau branch, but may replace the
removed Promoter with another Promoter. In the event that a
Promoter is removed pursuant to this Section and is not
replaced by AOLB, such Promoter shall nevertheless be
counted as deployed for the purpose of calculating whether
the guaranteed number of Promoters has been deployed
pursuant to Section 2(b)(iii).
(ix) Compliance with Itau Code and Guidelines. All Promoters
shall be subject to any Itau guidelines for ethics and
conduct applicable to Itau employees in Itau bank branches,
as specified in (i) Itau's Code of ethics, and (ii)
guidelines communicated to the Promoters during the training
programs. Itau shall provide a copy of the Code of ethics to
AOLB promptly after the MOA Effective Date, and promptly
thereafter at any time such guidelines Code is modified. In
the event that a Promoter's violation of these guidelines or
Code of ethics is deemed by Itau to be substantial, then
Itau shall inform AOLB in writing of such violation and the
Promoter will be subject to immediate removal from the
branches, at Itau's discretion, and AOLB may replace such
Promoter in the branch with another Promoter. In the event
such violation is deemed by Itau to be non-substantial, Itau
shall immediately notify AOLB of such violation in writing,
provided that if the Promoter who committed the violation
thereafter commits another non-substantial violation, such
Promoter shall immediately be removed from Itau bank
branches. AOLB may take action to cure such violation in 30
days or AOLB may replace such Promoter in the branch with
another Promoter.
c. Direct Mailing Efforts.
(i) Direct Mailing Objectives. Subject to AOLB's discretion
as limited by this Section 2(c), Itau shall engage in direct
mailing of CD-ROMs to Itau Customers who are not AOLB/Itau
Subscribers and who are not subscribers to the AOLB Service,
as described in Section 2(c)(ii) and according to the
following guidelines: (A) Itau Customers at the A and B
socioeconomic levels (as defined by Itau) will be the
primary target groups, (B) further segmentation based on
test results for specific areas and (C) a maximum of [**]
CD-ROMs per Itau Customer per year. In accordance with the
timing specified in Section 2(a)(iv), AOLB shall provide
Itau with the number of CD-ROMs necessary for the above
direct mailing at least thirty (30) days prior to the
expiration of the Quarter in which such direct mailing is to
take place. AOLB will also implement a test process that
includes, for each test, two test panels of 40,000 names
each. AOLB may implement as many test processes as it may
choose in its discretion. Itau shall either pay directly or
reimburse AOLB for the actual costs of the tests and the new
creatives for each test (in accordance with Section
3(e)(ii)), provided that if any creatives are used to offer
products or services other than the Co-Branded Service, AOLB
shall reimburse Itau for a proportional cost of such
creatives. The CD-ROMs used in such tests shall count
towards the CD-ROM direct mailing requirements specified in
Section 2(c)(ii).
(ii) Direct Mailing of CD-ROMs. AOLB has the right to require
Itau to engage in direct mailing, in accordance with Section
2(c)(i), from the MOA Effective Date through the fifth
Anniversary Date up to an aggregate of [**] CD-ROMs on the
following schedule: (A) [**], for the period from the MOA
Effective Date through the second Anniversary Date, (B)
[**], for the period from the second Anniversary Date
through the third Anniversary Date, (C) [**], for the period
from the third Anniversary Date through the fourth
Anniversary Date, and (D) [**], for the period from the
fourth Anniversary Date through the fifth Anniversary Date.
Notwithstanding the foregoing, AOLB in its discretion may
increase or decrease the required direct mailing number for
any Anniversary Year by up to 20% with any such increase or
decrease deducted or added, as applicable, to the required
direct mailing number for the following Anniversary Year,
provided that in no event will AOLB have the right to
require that the direct mailing of any CD-ROMs be effected
by Itau after the fifth Anniversary Date. Subject to the
foregoing parameters, Itau will engage in direct mailing of
the CD-ROMs at such times and in such amounts as are
designated by AOLB. AOLB, at its discretion, has the right
to reallocate CD-ROMs from Distribution to direct mailing,
as described in Section 2(a)(iv) of this Exhibit A. Itau
shall be responsible for CD-ROM Costs relating to the
production and direct mailing of the CD-ROMs as set forth in
Section 2(a)(iv) of this Exhibit A.
AOLB will have the right at any time and from time to time
to direct that Itau, in lieu of direct mailing a number of
CD-ROMs designated by AOLB (for which Itau has not yet
incurred any costs following and as a result of AOLB's
written direction to mail such CD-ROMs), purchase
interactive marketing on the AOLB Service and/or Co-Branded
Service during the period in which Itau would have engaged
in direct mailing of the CD-ROMs. The price of the
interactive marketing purchased in lieu of the direct
mailing of CD-ROMs will be an amount equivalent to the
aggregate CD-ROM Costs that would have been incurred by Itau
if the CD-ROMs and related materials had been ordered and
mailed. For this purpose, the CD-ROM Costs will be deemed to
be the applicable amount (on a per-CD-ROM basis) as were
actually incurred with respect to the lot of CD-ROMs that
were purchased immediately prior to the time for which the
calculation is to be made. The mailing costs will be
calculated based on the average historical CD-ROM mailing
cost in the most recent Contract Month in which Itau
performs such a mailing, except for the first such Contract
Month where the mailing cost will be R$0,30 (thirty cents of
real) per CD-ROM.
Itau may only be required to pay for interactive marketing
with respect to each Quarter relating to the following
maximum number of CD-ROMS:
(1) for each of the first, second and third
Quarters of each Anniversary Year, the result of: (i)
one-third of the maximum number of CD-ROMs that AOLB could
require Itau to direct mail in such Anniversary Year
(including any number of CD-ROMs that has been reallocated
from another Anniversary Year as provided herein), less (ii)
the number of CD-ROMs actually direct mailed by Itau in such
Quarter; and
(2) for the fourth Quarter of each Anniversary
Year, the remaining CD-ROMs AOLB could require Itau to
direct mail in the applicable Anniversary Year (including
any number of CD-ROMs that has been reallocated from another
Anniversary Year as provided herein).
For the avoidance of doubt, in no event may AOLB direct Itau
to purchase interactive marketing for an Anniversary Year in
an amount greater than the number of CD-ROMs required to be
direct mailed during an Anniversary Year. Notwithstanding
the 20% discount set forth in Section 12.1.4 of the SMA,
such interactive marketing shall be purchased at the
then-prevailing rate card rates. Notwithstanding the
foregoing, if AOLB directs Itau to direct mail a certain
number of CD-ROMs in any given quarter, once Itau has
incurred any costs in connection with such CD-ROMs,
following and as a result of AOLB's written direction to
mail such CD-ROMs, AOLB may not reduce this number or
require Itau to re-allocate any or all of such CD-ROM Costs
to interactive marketing purchases.
(iii) AOLB shall be deemed to have fully satisfied its CD-ROM
production and distribution obligations pursuant to Sections
2(a)(iv) and 2(c) by producing the CD-ROMs required to be
Distributed and mailed pursuant to those Sections and
delivering such produced CD-ROMs to the applicable Itau
Distribution Center and/or bank branch in accordance with
the timing and procedures set forth in Section 2(a)(iv).
d. Sign Up By Phone. The television commercials described in
Section 3(b) may in AOLB's discretion, promote an AOLB call center
number by encouraging viewers to call and register with the
Co-Branded Service. With the exception of the production and
broadcast of the television commercials (the costs of which will
be borne by Itau as described in Section 3), AOLB will be
responsible for all costs related to the call center as well as
costs related to the SUBP (including, at AOLB's discretion, a
special telephone number).
3. Communication Strategy.
a. Principles. All advertising, merchandising and communication
materials to be generated in accordance with this MOA (including,
without limitation, television commercials ("TVCs"), point of
demonstration materials ("POP"), letters to clients, posters,
banners and the Itau Interactive Sites) (collectively, the
"Marketing and Communication Materials"), shall adhere to the
following principles:
(i) The online banking benefits described in Section
1(d) will be clearly communicated through all printed
materials (other than Advertising on newspapers and
magazines) and clearly communicated through online materials
pertinent to Itau's online banking services whenever the
Itau Interactive Site (▇▇▇.▇▇▇▇.▇▇▇.▇▇) or Itau's internet
banking services are available online.
(ii) Itau's endorsement of the AOLB Service in the
Marketing and Communication Materials shall comply with
Annex 3 to this Exhibit A.
(iii) All Marketing and Communication Materials shall be
jointly approved by the Parties in accordance with the
following:
(A) The Marketing Committee will be in charge of
approving all Marketing and Communication
Materials before they are produced.
(B) The Marketing Committee will approve: (I) the
creative briefings provided to the agency, (II) the
creative alternatives to be considered and
(III) the media plans.
(C) In the event the Marketing Committee does not reach
an Agreement on any of the Marketing and Communication
Materials, the Parties shall resolve the issue as
provided in Section 24 of the body of this MOA.
b. Television Commercials. Itau, at its cost, shall produce in
each of 2003, 2004 and 2005, [**] TVCs ([**] in total)
promoting the Co-Branded Service, and shall cause them to be
broadcast in Brazil in the [**] of each of those years. The
TVCs shall be developed, produced and broadcast in
accordance with a media plan that will be jointly approved
by the Parties. The media plan shall provide for national
broadcasting of such TVCs that is expected to generate at
least [**] ([**]) national target ratings points ("TRPs")
(considering as its target the AB25+ TV viewers, as such
term is understood by major Brazilian media companies) for
each TVC. AOLB may separately, at its own expense, broadcast
such TVCs provided that Itau approves AOLB's separate media
plan (which approval shall not be unreasonably withheld or
delayed), and provided further that AOLB does not alter the
TVCs and makes any royalty, guild or other required payments
to third parties (i.e., artists and rights holders) to the
extent such royalty payments are required above and beyond
the payments made to broadcast the TVCs by Itau as provided
above, and AOLB shall get the benefit of any royalty
payments Itau may have already made in connection with
broadcasting the TVCs (i.e., AOLB shall have no obligation
to make any pro-rata payments to Itau or otherwise reimburse
Itau for any rights for which it has paid in connection with
broadcasting the TVCs). Itau will bear all out-of-pocket
costs associated with the development, production and
broadcast of the TVCs. TVCs will be produced and aired
according to the following principles:
(i) The TVCs will be Co-Branded and shall have equal time
and space allocated to each brand in order to guarantee
visibility and awareness of both brands.
(ii) The TVCs will promote the Co-Branded Service as provided
in Section 3(a)(ii) above.
(iii) At AOLB's discretion, all TVCs and all other Itau printed
materials related to online banking (at Itau's discretion),
may present a call to action (e.g. "call now and
subscribe.........") showing a phone number designated by
AOLB (if available).
(iv) Itau shall use existing AOLB advertising concepts,
messages and images as a reference for the creation of the
TVCs, in order to create communications synergy between AOLB
and Itau campaigns.
(v) The approval process for the TVCs will be as follows
and at Itau's cost:
(A) Following the approval by the Marketing
Committee of at least three creative
alternatives for a particular TVC, these
alternatives will be tested in focus groups
interviews ("FGIs") by an institute
designated by Itau, from the following list:
(i) Escritorio de Pesquisa e Planejamento
▇▇▇▇▇ ▇▇▇▇▇, (ii) ▇▇▇▇▇▇▇ Associados, (iii)
SP Marketing - ABACO, (iv) ▇▇▇▇▇▇ ▇▇▇▇
Consultoria e Estrategia e (v) ▇▇▇▇ Aldrighi
Consultoria, to ensure that the TVC performs
in the manner contemplated by the Marketing
Committee.
(B) Once an FGI is carried out the parties will
choose the best creative route based on the
FGI. If there is no approved creative route,
then the process will restart. The approved
creative route will be tested by the then
current AOL quantitative methodology (which
currently is CRT, a Time Research
Methodology).
(C) Once the CRT is completed, the decision as to
the final creative alternative (the choice of
which will be based on the CRT) will be based
on the following metrics: (I) Convincingness,
(II) Intent to purchase, (III) Advertising
message (as agreed on in the previous
briefing) and, (IV) Enjoyability. The Parties
shall mutually agree on the initial target
CRT ("Initial CRT"). The following rules
shall apply for any TVC to be approved for
production: (i) for the first TVC, the CRT
shall be greater than or equal to the Initial
CRT; (ii) for the second TVC, the CRT shall
be greater than or equal to the average
between the Initial CRT and the CRT measured
for the first TVC; and (iii) for the
subsequent TVCs, the CRTs shall be greater
than or equal to 95% of the average of the
CRTs measured for all previous TVCs.
(vi) Compliance with these requirements (the airing of
the commercials and compliance with the media plan
agreed-upon by the Parties) will be verified by a checking
institute designated by Itau at Itau's cost; provided, that
AOLB at its own cost may elect to designate its own checking
institute. If the institute observes that the amount of time
the commercials were aired is not consistent with the media
plan, then Itau shall air the commercials as necessary to
make up for any shortfall.
c. Other Creative Materials. Other creative materials (i.e.,
all Marketing and Communications Material other than
TVCs, POPs, backer cards and any other material not
related to Advertising on television, radio, newspapers
and magazines) should be extensions of the TVC creative
and must be approved in advance by the Marketing
Committee.
d. Media Plan. The media plan shall be approved by the
Marketing Committee, and the following guidelines shall
be followed:
(i) The media plan should be coordinated with AOLB's
media plan for the respective period to avoid (i)
overload in the AOLB call center or (ii) airing the
TVCs required hereunder and AOLB TVCs at the same
TV program break.
(ii) The media plan should concentrate no less than 60%
of the TRPs in the two principal open television
channels (broadcasting) in terms of major average
audience for the previous two full calendar months
preceding the broadcast of TVC.
(iii) All TRPs should be concentrated in open TV channels.
(iv) The target should be an audience of social economic
level AB25+.
(v) The TVCs should be broadcast in national media.
e. Production of the Marketing Materials.
(i) The advertising agency designated by Itau will be
responsible for producing the TVCs and other mass market
materials.
(ii) The creation of backer cards, booklets, leaflets and other
marketing and promotional material related to the Co-Branded
Service that accompany CD-ROMs and POPs will be
responsibility of the advertising agency designated by AOLB.
The production (e.g., volume, etc.) of these materials will
be jointly agreed to by Itau and AOLB. AOLB will submit to
Itau the agency costs prior to the job execution. Such costs
may be presented on a per job or on a monthly fee basis. If
Itau reasonably considers such costs too high, Itau may use
its own marketing agency to propose new creatives.
(iii) The agency used to create the posters, banners, web site
advertisements and letters will be designated by
Itau; provided that for the creation of the letters,
AOLB will have the right to participate in the
briefing meeting with the agency.
(iv) The creation of other marketing will be the responsibility
of a jointly approved agency. If the Parties do not agree on
the agency, then each Party will have its own agency (and
each Party shall pay its respective agency's costs) work on
the briefings and will jointly select the final approach.
f. AOL Keywords. AOL Keywords for Itau will be communicated
on all printed Marketing and Communications Materials pertaining
to online banking (e.g., booklets), on the television commercials
described in Section 3(b) and, at Itau's discretion (and with
AOLB's consent), on other media material. The Parties shall
jointly develop a list of AOL Keywords to be used in connection
with the marketing contemplated in this MOA. The AOL Keyword
"Itau" shall be used until the Parties agree upon additional or
other AOL Keywords.
4. Reference Payments.
The calculation of the Reference Payments that may be due under
the SMA for the third Anniversary Date, the fourth Anniversary
Date and the fifth Anniversary Date are hereby amended as
described below. For the purposes of this MOA and the SMA,
"Reference Payment" shall have the meaning given such term in
Section 4(a) of this Exhibit A.
a. Revenue Targets.
In the event that, on any of the third Anniversary Date,
fourth Anniversary Date or fifth Anniversary Date, the
Itau Revenue Percentage is less than the Target Revenue
Percentage for that Anniversary Date (as set forth in the
table below), then Itau shall make a Reference Payment to
AOLB in accordance with the procedures of Article 8 of
the SMA (but not based on the amounts set forth in the
SMA).
As of the MOA Effective Date, the "Reference Payment" for
the third, fourth and fifth Anniversary Dates shall be
calculated using the following formula:
Reference Payment = MRP x (Target Revenue Percentage - Itau Revenue
Percentage)
Target Revenue Percentage
Where:
"MRP" means the Maximum Reference Payment as set forth in
the table below.
"Target Revenue Percentage" means the percentage
(expressed as a decimal) set forth in the table below.
"Itau Revenue Percentage" with respect to any Anniversary
Date means the quotient obtained by dividing (i) the sum
of (A) the product obtained by multiplying (1) the Itau
Ending Member Share by (2) the difference between AOLB
Total Revenues and the sum of elements "▇," "▇" and "E"
in the definition of Revenue Elements for the Applicable
Period, and (B) the sum of elements "B" through "F" in
the definition of Revenue Elements for the Applicable
Period, by (ii) the sum of AOLB Total Revenues for the
Applicable Period and the sum of elements "C", "D" and
"F" in the definition of Revenue Elements for the
Applicable Period.
"Itau Ending Member Share" means, for any Anniversary
Date, the quotient obtained by dividing (i) the total
number of Ending Members of the Co-Branded Service by
(ii) the total number of Ending Members of the Combined
Services.
"Ending Members" as used in this definition refers to the
number of AOLB/Itau Subscribers or registered members of
the Combined Services, as the case may be, on the
applicable Anniversary Date.
"AOLB Total Revenues" means, for any period, the amount
of revenue AOLB receives for that period directly related
to the Combined Services, but excluding Reference Payment
Interactive Marketing to the extent it would otherwise
constitute revenue for that period. For the avoidance of
doubt, AOLB Total Revenues does not include elements "C",
"D" or "F" in the definition of Revenue Elements.
"Revenue Elements" means: (A) the amount of revenue AOLB
receives for subscriptions to the AOLB Service, (B) the
amount of revenue AOLB receives for subscriptions to the
Co-Branded Service from Itau Customers, (C) the sum of
the value of the following, which Itau is required to pay
directly to AOLB: (x) the free hours used by AOLB/Itau
Subscribers, (y) the fee payable with respect to inactive
AOLB/Itau Subscribers and (z) any extended free trial
period subsidized by Itau pursuant to Section 1(b), (D)
the value of free hours or AOL packages paid by Itau for
its employees or private banking customers, (E) the
amount of interactive marketing purchased by Itau,
including, but not limited to banners, pop-ups,
sponsorships, CD-ROM production administration fee and
interactive marketing actually purchased by Itau in its
discretion or at the option of AOLB in lieu of the
Distribution or direct mailing of CD-ROMs, or the
deployment of additional Promoters, but in all cases
excluding Reference Payment Interactive Marketing, and
(F) if the number of Required Promoters is less than the
number of Promoters guaranteed by Itau pursuant to
Section 2(b)(iii), the incremental costs actually
incurred by Itau in excess of the cost of the Required
Promoters (if any), as a result of AOLB election to
deploy Promoters numbering in excess of the number of
Required Promoters. Each Revenue Element described above
is exclusive of all other Revenue Elements; that is,
revenue that is included in "A" above shall not be deemed
included in "B" through "F", and likewise for each other
Revenue Element.
"Applicable Period" means, for any Anniversary Date, the
12 Contract Month period ending on that Anniversary Date.
"Reference Payment Interactive Marketing" means the price
of interactive marketing that is purchased by Itau
pursuant to Section 5(a)(i), as a consequence of not
meeting a CD-ROM Distribution or direct mailing target.
-----------------------------------------------------------------------------
Year Target Revenue Percentage Maximum Reference Payment (MRP)
(TRP)
-----------------------------------------------------------------------------
third 39% US$11 million
Anniversary
Date
-----------------------------------------------------------------------------
fourth 46% US$6 million
Anniversary
Date
-----------------------------------------------------------------------------
fifth 56% US$3 million
Anniversary
Date
-----------------------------------------------------------------------------
AOLB shall provide, within the first 20 days after the end of each calendar
month, a monthly report, showing the Itau Revenue Percentage, each of the
Revenue Elements, the Ending Member Share and the AOLB Total Revenues. For the
avoidance of doubt, such report shall be deemed the Confidential Information
of AOLB.
5. Marketing Payments. For purposes of this MOA, the term "Marketing
Payment" shall mean the TVC/Media Payment (as defined below), together with
the Promoter and Distribution Payment (as defined below) and the Banking
Benefits Payment (as defined below).
a. Marketing Commitments.
(i) CD-ROM Distribution/Interactive Marketing. If Itau
does not comply with its obligations to make in-branch
Distributions pursuant to Section 2(a)(iv) or direct
mailings pursuant to Section 2(c)(ii) (including, but not
limited to the purchase of interactive marketing on the AOLB
Service or Co-Branded Service if so directed by AOLB), AOLB
will collect from Itau, and Itau shall pay, an amount equal
to 120% of the CD-ROM Cost relating to the CD-ROMs not
Distributed, direct mailed, or, if applicable, interactive
marketing not purchased as required (the "CD Distribution
Payment"). Notwithstanding the above, the number of CD-ROMs
containing the Customized Client allocated through SUBP
shall count towards Itau's obligations under Section
2(a)(iv) and Section 2(c)(ii). The determination as to
whether Itau has complied with its obligations shall be made
at the end of every Quarter and at the end of the 100 Days,
and any payment due therefor shall be made within ten (10)
days of the calculation thereof.
(ii) Promoters. In the event that the maximum number of
Promoters that AOLB has the right pursuant to Section
2(b)(i) or (ii), as applicable, subject to the provisions of
Sections 6(b) and 6(c), to deploy for any period are not
deployed, either because Itau fails to permit the deployment
of such Promoters, provides the notice to AOLB pursuant to
Section 2(a)(iii)(A), fails to undertake all its obligations
set forth in Sections 2(a)(iii) and 2(a)(v), unreasonably
interferes with Promoter's efforts to conduct their
in-branch activities as provided for in Section 2(a) of this
Exhibit A, or fails to make available the quantity of bank
branches for deployment of Promoters set forth in Section
2(a)(v), Itau shall pay to AOLB an amount equal to the sum
of (x) (A) the average "all in cost" to employ a Promoter in
the relevant period (i.e., all costs identified in item (A)
of Section 2(a)(iii) during the relevant Quarter averaged on
a per Promoter actually deployed basis, or the costs
identified in item (A) of Section 2(a)(iii) per Promoter
that would have been incurred if no Promoters were actually
deployed), multiplied by (B) the number of Promoters not
actually deployed that AOLB had the right to deploy during
such period, and (y) the costs of additional Supervisors
(i.e., all costs identified in item (B) of Section
2(a)(iii)) that would have been deployed if such delayed
Promoters had been deployed; and the result of the sum of
(x) and (y) shall be multiplied by 120% (the "Promoters
Payment," and together with the CD Distribution Payment, the
"Promoter and Distribution Payment"), provided, that the
failure to make sufficient CD-ROMs available in Itau's bank
branches shall not be deemed to constitute the failure to
provide the conditions necessary for the Promoters to
conduct their in-branch activities for purposes of this
Section 5(a)(ii). The determination as to whether the full
number of Promoters have been deployed shall be made at the
end of every Quarter and at the end of the 100 Days, and any
payment due therefor shall be made within ten (10) days of
the calculation thereof.
(iii) Cap. Notwithstanding anything herein to the contrary,
the aggregate Promoter and Distribution Payment due from
Itau to AOLB in any Anniversary Year (or in the case of the
third Anniversary Year, the period consisting of the third
Anniversary Year and the 100 Days) shall not exceed (i) US$
11,830,000.00 in the third Anniversary Year and the 100
Days, (ii) US$ 11,830,000.00 in the fourth Anniversary Year,
and (iii) US$ 6,830,000.00 in the fifth Anniversary Year.
(iv) Banking Benefits. Subject to the thirty-day grace period
provided for in Section 1(d), in the event that Itau fails
to provide, for more than an aggregate of five days, whether
or not consecutive, during the relevant Quarter, the banking
benefits to the AOLB/ Itau Subscribers or fails to promote
the banking benefits in each case as required pursuant to
Section 1(d), Itau shall pay to AOLB US$ [**] (the
"Banking Benefits Payment") (with a maximum of one such
payment for the Quarter in which such failure occurs). For
the avoidance of doubt, any failure to provide or promote
the banking benefits as a result of any Force Majeure Event
as defined in the SMA shall be excluded from the five-day
calculation specified herein. The determination as to
whether Itau has failed to provide the required banking
benefits to AOLB/Itau Subscribers shall be made at the end
of every Quarter and at the end of the 100 Days, and any
payment due therefor shall be made within ten (10) days of
the calculation thereof.
b. TV/Media.
(i) Payments.
(A) If the Parties fail to agree upon a TVC and (i)
an award is granted in favor of AOLB (after
submitting to Sections 24 and 25 of the MOA) and
either Itau or AOLB decides not to undertake the
TVC production and broadcast it (which each Party
shall have the right to decide) in accordance with
the award and Exhibit A, Itau shall pay AOLB the
average cost of production of such TVC and the
average cost to broadcast nationally such TVC
targeted to achieve [**] TRPs, such average costs to
be calculated based on the estimate provided by
two advertising agencies (one designated by AOLB
and one designated by Itau) (the "TVC/Media
Payment" ), or (ii) an award is granted in favor of
Itau (after submitting to Sections 24 and 25 of the
MOA) and AOLB requires Itau not to undertake the
TVC production and broadcasting (which AOLB shall
have the right to require), then Itau shall be
released from the obligation to pay a TVC/Media
Payment in relation to such TVC;
(B) If the Parties fail to agree upon a media plan
and (i) an award is granted in favor of AOLB (after
submitting to Sections 24 and 25 of the MOA) and
either Itau decides not to undertake the media plan
(which Itau shall have the right to decide) or AOLB
reasonably requires Itau not to undertake such media
plan (which AOLB shall have the right to require),
then Itau shall pay AOLB the TVC/Media Payment
related to such TVC, provided that if such request
was unreasonable, then Itau shall be released from
the obligation to pay such TVC/Media Payment; or
(ii) an award is granted in favor of Itau (after
submitting to Sections 24 and 25 of the MOA) and
AOLB requires Itau not to undertake the media plan
(which AOLB shall have the right to require), then
Itau shall be released from the obligation to pay a
TVC/Media Payment in relation to such TVC;
(C) If Itau complies with a material portion of the
jointly approved media plan but fails to comply
with the entire jointly approved media plan, then
Itau shall pay to AOLB the cost of broadcasting
such TVC as defined by the shortfall of the jointly
approved media plan or if Itau fails to comply with
all or a material portion of the jointly approved
media plan, then Itau shall pay to AOLB a TVC/Media
Payment related to such TVC; provided in either
case that if a commercial is produced and broadcast
but the TV channel company fails to broadcast all
or a part of the media plan, Itau will be released
of the applicable TVC/Media Payment if the
shortfall is broadcast in the next Quarter.
In its reasoned written decision the arbitrator
shall provide for which Part the award was granted
in favor.
The determination as to whether Itau has complied
with its obligations shall be made at the end of
every Quarter, and any payment due therefore shall
be made at the later of (A) ten (10) days from the
calculation thereof and (B) if the decision
rendered pursuant to Section 25 is rendered after
the end of the relevant Quarter, promptly upon such
decision.
(ii) Cap. In no event will the aggregate amount of the
TVC/Media Payment made pursuant to clause (i)
exceed US$ [**] million per annum.
c. Treated as Reference Payments.
(i) To the extent applicable and not inconsistent with the
provisions of this MOA, Sections 8.2.3, 8.2.4, 8.2.5, 8.2.6, 8.3,
10.2.2, 10.3. 10.4 and 10.7 and Article 9 and the definition of
Material Payment Breach in the SMA shall apply to the Marketing
Payments payable pursuant to this Section 5 as if such Marketing
Payments were "Reference Payments". For the avoidance of doubt, it
is understood by the Parties that the amount of the Replacements
Notes delivered pursuant to this MOA will include the Marketing
Payments amounts payable pursuant to this Section 5, and that the
Replacement Notes for the Reference Payments Notes (Brazil) and
Reference Payments Notes (Cayman) shall be released to AOLB in
accordance with the SMA if any Marketing Payment is not made to
AOLB when due and payable. In the event any Marketing Payments
amounts are payable pursuant to this Section 5 for any Anniversary
Date, the corresponding Reference Payment Notes (Brazil) and
Reference Payment Notes (Cayman) shall not be released to Itau
until such Marketing Payments amounts payable pursuant to this
Section have been paid in full by Itau.
(ii) All Marketing Payment payments made pursuant to this Section
5 shall be made in accordance with the payment provisions of
Section 10.2.2, 10.3. 10.4 and 10.7 of the SMA. To the extent
applicable, for purposes of the foregoing payment provisions, any
references to "Reference Payments" in the foregoing provisions
shall include the Marketing Payments payable pursuant to this
Section 5.
d. Payments in General. Any payment due hereunder, whether to
AOLA or AOLB, shall be deemed to be a payment to either AOLA or
AOLB as designated by AOLA in its discretion.
e. Acknowledgement of the Parties. The Parties acknowledge
(A) that a breach of an obligation by Itau giving rise to a
Marketing Payment would cause AOLA and AOLB damage, including
without limitation denying AOLB the benefits afforded AOLB by
virtue of Itau's access to Itau Customers by means of Distributing
CD-ROMs in Itau's branches and direct mailing CD-ROMs to Itau
Customers as provided herein, which as a group may be accessed
directly only by Itau (and not by any other entity, including AOLA
and AOLB), and consequently is not available to AOLB without
Itau's participation in the marketing activities, (B) it would be
difficult or impossible to determine actual damages in the event
of such a breach, (C) the amount of Marketing Payments specified
in this Section 5 are a reasonable estimate of the actual damages
that AOLA and AOLB would suffer if the marketing commitments are
not conducted as required by this MOA, and (D) such amount of
Marketing Payments is not a penalty. The Parties further
acknowledge that the totality of their rights and obligations
under this MOA, the SMA and the Related Agreements, including the
number of Shares issued to Itau on the Effective Date (as such
term is defined in the SMA), have been determined based on the
performance of the marketing obligations under the SMA, as amended
herein, and the failure to perform the marketing obligations
hereunder, unless rectified, will result in AOLA and AOLB
receiving less value from the MOA, the SMA and the Related
Agreements than contemplated by the Parties. Accordingly, AOLB
shall be entitled to receive the Marketing Payments as provided in
this Section 5 as the sole and exclusive remedy for AOLA and AOLB
for any failure by Itau to perform any obligation that results in
a Marketing Payment under Section 5(a) or 5(b), except for any
remedy provided in the SMA that provides for the payment of any
Termination Fee, Acceleration Payment or Pro-Rata Reference
Payment required by the terms of the SMA. For the avoidance of
doubt, it is understood by the Parties that this exclusive remedy,
and Itau's obligation to make Marketing Payments, shall not affect
Itau's obligation to make other payments described herein, or
relieve Itau from its obligation to reimburse AOLB for any
actually incurred costs and expenses subject to reimbursement
hereunder, including, without limitation, the CD-ROM Costs, the
costs associated with in-branch promotion, the costs associated
with AOLB's or an agency's employment of Promoters and Supervisors
and the amounts due for AOLB/Itau Subscribers as set forth in
Section 1(e).
6. Regulatory Matters.
(a) In the event that laws, regulations or rules of the Brazilian
government or governmental agencies, including the Brazilian
Central Bank, prohibit Itau from (i) offering non-bank products
inside its branches (and pursuant to the applicable rules the
Co-Branded Service is considered a non-bank product) or, (ii)
carrying-out any in-branch marketing activities as provided for in
this MOA (collectively a "Regulatory Event"), then Itau will be
released from all obligations prohibited as a result of such
Regulatory Event ("Prohibited Obligations") after the date of the
Regulatory Event ("Regulatory Event Date"). In the event a
Regulatory Event results in all of or a material portion of Itau's
in-branch marketing obligations under Sections 2(a) and (b) of
this Exhibit A being deemed Prohibited Obligations, the Target
Revenue Percentage shall be deemed to be zero for the remaining
term of the SMA.
In consideration for such release, Itau shall pay AOLB the sum
of (A) the product of (i) a Reference Payment for the Anniversary
Year in which such Regulatory Event occurs calculated using the
Revenue Elements generated and incurred during the period from the
last Anniversary Date to the Regulatory Event Date occurred, and
(ii) a fraction, the numerator of which is the number of days from
the last Anniversary Date to the Regulatory Event Date, and the
denominator of which is 365, (B) if, in the absence of the release
in the foregoing paragraph, the failure to perform a Prohibited
Obligation(s) would result in any Marketing Payment, any such
Marketing Payment that would be due for the Quarter in which the
Regulatory Event Date occurs calculated based on Itau's
performance of the Prohibited Obligation(s) during the period
beginning on the first day of the Quarter and ending on the
Regulatory Event Date, and (C) the maximum Marketing Payment
related to the Prohibited Obligation(s) that could be due for
those Quarters commencing after the Regulatory Event Date.
In addition, if the Target Revenue Percentage is deemed to be
zero due to such Regulatory Event, then AOLB shall have the
option, after such Regulatory Event, to release Itau from all of
Itau `s marketing obligations hereunder, including without
limitation, those obligations set forth in Sections 1(a), 1(d), 2,
3 and 5. In consideration for such release, Itau shall pay to AOLB
the maximum Marketing Payments that could be due for those
Quarters commencing after the exercise of such option.
(b) If any Brazilian judicial authority of competent jurisdiction
determines that all Promoters and/or Supervisors deployed in Itau
bank branches are deemed banking employees for purposes of
determining the wages and benefits of Promoters and/or
Supervisors, but not that such Promoters or Supervisors must be
hired by or otherwise become employees of Itau, then, within
twenty days of AOLB's receipt of written notice of such judicial
determination from Itau, AOLB shall notify Itau in writing that it
will either (i) bear one-half of the additional incremental
expenses of the Promoters and Supervisors that are a direct result
of such determination (and Itau shall bear the other one-half of
such amount), or (ii) decrease the number of Promoters and
Supervisors required under this MOA (such decreased Promoters and
Supervisors, the "Decreased Promoters") such that the expenses
associated with the Decreased Promoters is equal to one half of
the additional incremental expenses that would have been incurred
by Itau as a direct result of such judicial determination without
such a reduction.
(c) An "Employee Labor Event" shall be deemed to have occurred
if any Brazilian judicial authority of competent jurisdiction
determines that all Promoters and/or Supervisors deployed in Itau
bank branches must be hired by or otherwise become employees of
Itau. At any time during the one-hundred twenty (120) day period
after the occurrence of the Employee Labor Event, Itau may elect
to accept such determination, in which case it shall promptly so
notify AOLB in writing, and AOLB within twenty (20) days after
such notice shall notify Itau in writing that (i) it will bear
one-half of the additional incremental expenses of the Promoters
and Supervisors that are a direct result of such determination
(and Itau shall bear the other one-half of such amount), or (ii)
that it will decrease the number of Promoters and Supervisors
required under this MOA (such decreased Promoters and Supervisors,
the "Decreased Promoters") such that the expenses associated with
the Decreased Promoters is equal to one half of the additional
incremental expenses that would have been incurred by Itau as a
direct result of such Employee Labor Event without such a
reduction.
Immediately after the occurrence of the Employee Labor Event,
Itau shall (i) promptly notify AOLB of such judicial
determination, (ii) pursue the applicable avenues of appealing or
overturning any such determination (unless it elects to accept
such determination in accordance with the immediately preceding
paragraph), and (iii) continue to provide all in-branch marketing
activities described in this Exhibit A for a period of one-hundred
twenty (120) days after the occurrence of such Employee Labor
Event, unless prohibited by such judicial determination, in which
case Itau shall continue to reimburse AOLB for the actual expenses
listed in Section 2(a)(iii) (A) and (B) of this Exhibit A for the
remaining period of the one-hundred twenty (120) days after the
occurrence of such Employee Labor Event. If after pursuing the
applicable avenues of appealing or overturning any such
determination Itau has not successfully overturned such
determination within one-hundred twenty (120) days after the
occurrence of such Employee Labor Event, then Itau shall have the
option, exercisable within twenty (20) days after such 120th day,
to be released from all in-branch obligations under this MOA other
than Distribution of CD-ROMs and pay to AOLB: (A) all Promoters
Payments, if any, that would be due for the Quarter in which the
Employee Labor Event occurs, calculated based on Itau's
performance of its obligations during the period beginning on the
first day of the Quarter and ending on the day one-hundred twenty
(120) days after such Employee Labor Event, and (B) the maximum
Promoters Payments that could be due for those Quarters after the
day one-hundred twenty (120) days after such Employee Labor Event;
provided that AOLB shall have the option to relieve Itau of all
its obligations in this Exhibit A (including, without limitation,
all of its marketing obligations hereunder and any obligation to
pay future Reference Payments, Marketing Payments, Termination
Fee, Pro Rata Reference Payments or Acceleration Payments), and
require Itau to pay to AOLB an Acceleration Payment where, for the
purpose of calculating such Acceleration Payment, the day AOLB
notifies Itau it is relieved of all of its obligations in this
Exhibit A is deemed the Trigger Date.
If Itau does not or ceases to pursue the applicable avenues of
appealing or overturning any such determination (except as a
result of its successful overturning of such determination) at any
time during the one-hundred twenty (120) day period after the
occurrence of the Employee Labor Event, then the Parties will
promptly retain a mutually agreeable Brazilian labor counsel to
determine, within ten (10) days from the date when the parties
hire such counsel, whether there is no reasonable prospect of
successfully appealing such determination; provided, that, in no
event will the Parties retain counsel that does not agree in
advance to render a definitive decision as to whether or not there
was a reasonable prospect of successfully appealing such
determination. If such Brazilian labor counsel concludes there was
a reasonable prospect of successfully appealing such
determination, then AOLB shall have the option, exercisable within
one hundred twenty (120) days after such labor counsel informs the
Parties of its conclusion, to relieve Itau of all its obligations
in this Exhibit A (including, without limitation, all of its
marketing obligations hereunder and any obligation to pay future
Reference Payments, Marketing Payments, Acceleration Payments or
Pro Rata Reference Payments), and require Itau to pay to AOLB a
Termination Fee where, for the purpose of calculating such
Termination Fee, the date of the occurrence of the Employee Labor
Event is deemed the Trigger Date. If such Brazilian labor counsel
concludes there was no reasonable prospect of successfully
appealing such determination, then Itau shall have the option,
exercisable within twenty (20) days after such labor counsel
informs the Parties of its conclusion, to be released from all
in-branch obligations under this MOA other than Distribution of
CD-ROMs and pay to AOLB: (A) all Promoters Payments, if any, that
would be due for the Quarter in which the Employee Labor Event
occurs, calculated based on Itau's performance of its obligations
during the period beginning on the first day of the Quarter and
ending on the day one-hundred twenty (120) days after such
Employee Labor Event, and (B) the maximum Promoters Payments that
could be due for those Quarters after the day one-hundred twenty
(120) days after such Employee Labor Event; provided that AOLB
shall have the option to relieve Itau of all its obligations in
this Exhibit A (including, without limitation, all of its
marketing obligations hereunder and any obligation to pay future
Reference Payments, Marketing Payments, Termination Fee or Pro
Rata Reference Payments), and require Itau to pay to AOLB an
Acceleration Payment where, for the purpose of calculating such
Acceleration Payment, the day AOLB notifies Itau it is relieved of
all of its obligations in this Exhibit A is deemed the Trigger
Date.