PORTIONS OF THIS EXHIBIT WERE OMITTED AND HAVE BEEN FILED SEPARATELY WITH THE
SECRETARY OF THE COMMISSION PURSUANT TO THE REPORTING PERSONS' APPLICATION
REQUESTING CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE
ACT OF 1934.
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]
AOLB BRASIL LTDA.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
AMERICA ONLINE LATIN AMERICA, INC.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
BANCO ITAU S.A.
/s/ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ /s/ Heli ▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Name: Heli ▇▇ ▇▇▇▇▇▇▇
Title: Executive Vice-President Title: Managing Director
WITNESSES:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ dos ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇ dos ▇▇▇▇▇▇
▇.▇. #1859009-1 (SSP-SP)
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇.▇. #3972823-1 (SSP-RJ)
EXHIBIT A
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.
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* The portions of this exhibit indicated by [**] have been omitted and filed
separately with the Secretary of the Commission pursuant to the Reporting
Persons' application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.
(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 reasonable 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.
--------
* The portions of this exhibit indicated by [**] have been omitted and filed
separately with the Secretary of the Commission pursuant to the Reporting
Persons' application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.
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.
--------
* The portions of this exhibit indicated by [**] have been omitted and filed
separately with the Secretary of the Commission pursuant to the Reporting
Persons' application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.
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.
--------
* The portions of this exhibit indicated by [**] have been omitted and filed
separately with the Secretary of the Commission pursuant to the Reporting
Persons' application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.
(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:
--------
* The portions of this exhibit indicated by [**] have been omitted and filed
separately with the Secretary of the Commission pursuant to the Reporting
Persons' application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.
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
--------
* The portions of this exhibit indicated by [**] have been omitted and filed
separately with the Secretary of the Commission pursuant to the Reporting
Persons' application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.
"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) [**]*.
--------
* The portions of this exhibit indicated by [**] have been omitted and filed
separately with the Secretary of the Commission pursuant to the Reporting
Persons' application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.
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.
--------
* The portions of this exhibit indicated by [**] have been omitted and filed
separately with the Secretary of the Commission pursuant to the Reporting
Persons' application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.
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:
--------
* The portions of this exhibit indicated by [**] have been omitted and filed
separately with the Secretary of the Commission pursuant to the Reporting
Persons' application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.
(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 (TRP) MAXIMUM REFERENCE PAYMENT (MRP)
----------------------- ---------------------------------------- -----------------------------------------------
----------------------- ---------------------------------------- -----------------------------------------------
THIRD ANNIVERSARY DATE 39% US$11 million
----------------------- ---------------------------------------- -----------------------------------------------
----------------------- ---------------------------------------- -----------------------------------------------
FOURTH ANNIVERSARY 46% US$6 million
DATE
----------------------- ---------------------------------------- -----------------------------------------------
----------------------- ---------------------------------------- -----------------------------------------------
FIFTH ANNIVERSARY DATE 56% US$3 million
----------------------- ---------------------------------------- -----------------------------------------------
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.
--------
* The portions of this exhibit indicated by [**] have been omitted and filed
separately with the Secretary of the Commission pursuant to the Reporting
Persons' application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.
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.
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* The portions of this exhibit indicated by [**] have been omitted and filed
separately with the Secretary of the Commission pursuant to the Reporting
Persons' application requesting confidential treatment under Rule 24b-2 of the
Securities Exchange Act of 1934.
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.