Exhibit 99.2
LIMITED PARTNERSHIP AGREEMENT
THIS LIMITED PARTNERSHIP
AGREEMENT IS MADE AS OF THE 12 th DAY OF
JANUARY, 2005
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AMONG:
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TRAFFIX EZ LTD. , a
corporation incorporated under the laws of the Province of Quebec,
hereinafter referred to as the
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“General
Partner”
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AND:
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MADACY sp INC. , a
corporation incorporated under the laws of Canada, hereinafter
referred to as
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“Madacy
Partner”
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AND:
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TRAFFIX SP-EZ ULC,
an unlimited liability company incorporated under the laws of the
Province of Nova Scotia, hereinafter referred to as
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“Traffix
Partner”
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(Madacy Partner and
Traffix Partner, hereinafter collectively referred to as the
“Special Partners” and individually as a “Special
Partner” and the Special Partners and the General Partner
hereinafter collectively referred to as the “Partners”
and individually as a “Partner”)
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1.
WHEREAS the General Partner and the Special Partners have
agreed to constitute a limited partnership among them
(“Limited Partnership”) pursuant to the provisions of
Articles 2236 and following of the Civil Code of Quebec whereof the General
Partner shall be the sole general partner and the Special Partners
shall be the sole limited or special partners, such Limited
Partnership to be known as “EZ-Tracks, L.P.”;
FINAL
VERSION
2.
WHEREAS the Limited
Partnership shall be formed for the purposes of:
(a)
carrying on a direct marketing internet-based entertainment
business under the trade name “EZ-Tracks” including the
carrying on of any activity necessary or incidental to achieve the
same (the “Core Business”) as well as any other
business that the Limited Partnership may, from time to time, elect
to carry on (collectively, including the Core Business, the
“Business”);
(b)
entering into a marketing and services agreement (the
“Marketing Agreement”) with Traffix Music, Inc., a
corporation organized under the laws of Delaware, USA
(“Traffix Music”) and Madacy Entertainment Group
Limited (“Madacyco”), each as independent contractors,
for the purposes, inter
alia , of: (i) the Limited Partnership acquiring
from Madacyco a non-exclusive license (“License”) to
those Madacy Songs and Masters that Madacyco has the right to
license for downloading and is entitled to make available to the
Limited Partnership; (ii) the Limited Partnership acquiring
from Traffix Music a non-exclusive license to the Program;
(iii) the creation, maintenance and hosting of Websites by Traffix
Music on behalf of the Limited Partnership (the ownership of which
shall vest exclusively and irrevocably in the Limited Partnership);
(iv) the continuation, maintenance, development and enhancement by
Traffix Music of the Program; (v) the granting of various
rights to the Limited Partnership, Madacyco and Traffix Music to
use the Program and the Websites as are provided therefor under the
Marketing Agreement; and (v) the provision of such services
by such parties to the Limited Partnership so as to enable the
Limited Partnership to carry on the Business;
(c)
encouraging the development of new revenue sources consistent with
the Business; and
(d)
carrying on any activity necessary incidental to any of the
foregoing.
3.
WHEREAS the General
Partner and the Special Partners wish to enter into the present
Agreement for the purpose of setting forth their respective rights
and obligations under the terms and conditions hereinafter set
forth and provided;
NOW, THEREFORE , in
consideration of the mutual covenants set forth herein, and for
other good and valuable consideration, the receipt and sufficiency
whereof which are hereby acknowledged, the Partners agree as
follows:
1.
PREAMBLE
1.1
The preamble hereto shall constitute and form an integral part
hereof as though herein recited in full and at length.
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2.
DEFINITIONS AND INTERPRETATION
2.1
In addition to the words and phrases defined in the recitals or
elsewhere in this Agreement, as used in this Agreement, in any
amendment hereof, in any documents to be executed and
delivered pursuant to this Agreement and in any documents executed
and delivered in connection with the completion of the transactions
contemplated herein, unless the context otherwise requires, the
following words and phrases shall have the following meanings,
respectively:
2.1.1
“Affiliate” means, with respect to a Person, any other
Person, directly or indirectly controlling, controlled by or under
common control with such Person.
2.1.2
“Agreement” means this Limited Partnership Agreement,
as amended or re-stated from time to time.
2.1.3
Auditors” mean the auditors of the Limited Partnership, who
shall be determined from time to time by the General Partner.
2.1.4
“Available Cash Flow” means the term defined as such in
Section 6.1 hereof.
2.1.5
“Bank” means any Schedule I Canadian Chartered
Bank or a nationally recognized money center bank in the United
States from time to time selected and approved by the Limited
Partnership to serve as the Partnership’s principal
bank(s).
2.1.6
“Business” means the term defined as such in the
preamble hereto.
2.1.7
“Business Day” means a day, other than a Saturday or
Sunday and other than a day which falls on a legal or statutory
holiday in the Province of Quebec or on a Canadian or United States
statutory holiday.
2.1.8
“Capital Account” means the capital account described
in Section 5.1 hereof.
2.1.9
“Capital Contributions” of a Partner means the capital
contributed from time to time by a Partner to the Limited
Partnership.
2.1.10
“Commencement Loan” means each of the loans to be made
by the Special Partners to the Limited Partnership as are provided
in Section 5.6 hereof.
2.1.11
“Civil Code” means the Civil Code in force in the
Province of Quebec, as the same may be amended, re-enacted and
replaced from time to time.
2.1.12
“Database” means the term defined as such in the
Marketing Agreement;
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2.1.13
“Defaulter” means the term defined as such in
Section 11.1 hereof.
2.1.14
“Documents” means the term defined as such in
Section 7.1 hereof.
2.1.15
“Enterprise Value” means the term defined as such in
Section 9.4 hereof.
2.1.16
“Events of Default” means the term defined as such in
Section 11.1 hereof.
2.1.17
“Exempt Sales” means the term defined as such in the
Marketing Agreement.
2.1.18
“Fiscal Year” shall mean the twelve-month period ending
on December 31; provided, however, that the first Fiscal Year
shall be the period beginning on the date the Limited Partnership
comes into existence and ending on December 31, 2004,
and the last Fiscal Year shall end immediately prior to the time
the Limited Partnership is liquidated and terminated. To the
extent any computation or other provision hereof provides for an
action to be taken on a Fiscal Year basis, an appropriate proration
or other adjustment shall be made in respect of the first or final
Fiscal Year to reflect that such period is less than a full
calendar year period.
2.1.19
“General Partner” means Traffix EZ Ltd. and its
permitted successors and assigns.
2.1.20
“Gross Revenues” means, for any period, the amount of
all revenues and receipts received by the Limited Partnership from
all sources for such period including, but not limited to such
amounts as the Limited Partnership may receive pursuant to the
Marketing Agreement. Gross Revenues shall include without
duplication: (i) Website Sales, Websites’ Database
Sales and New Revenue Source Sales and shall include, for greater
certainty, all revenues generated by the Limited Partnership from
the use of, or related to, the Program, the Websites or the
Database (other than Exempt Sales), and, for greater certainty,
shall not include any revenues achieved by any Partner where such
revenues have no connection to or with the Program, the Websites or
the Database; (ii) proceeds generated from the sale,
exchange, refinancing, expropriation, condemnation or other
dispositions of all or any portion of assets of the Limited
Partnership less, as applicable, an amount required to discharge
any liability of the Limited Partnership attributable to the
portion of the assets disposed of or to repay any existing
financing; (iii) proceeds of insurance policies less an amount
required to repair or replace any assets of the Limited Partnership
damaged or destroyed and (iv) proceeds obtained in respect of
damage awards or settlement less an amount required to repair or
replace any assets of the Limited Partnership damaged or
destroyed.
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2.1.21
“Imputed Value” means the term defined as such in
Section 9.4 hereof.
2.1.22
“Initial Capital Contributions” means the amounts
initially to be contributed by the Partners to the Limited
Partnership as set forth in Section 5.2 hereof.
2.1.23
“Interest” or “Interest in the Limited
Partnership” means, with respect to a Partner at the relevant
time, all of the rights of such Partner to a percentage interest in
the Limited Partnership, including the right to receive
distributions, profits and losses and the percentage of the assets
and rights of the Limited Partnership that such Partner would be
entitled to receive in accordance with the provisions of this
Agreement were the assets and rights of the Limited Partnership
sold and the net proceeds of sale distributed to the persons
entitled thereto at such time.
2.1.24
“Law” means any applicable federal, provincial and
municipal statute, rule, regulation, ordinance, code and the like
which are in full force and effect, including the Civil Code.
2.1.25
“Limited Partnership” means the partnership created by
virtue of this Agreement.
2.1.26
“Madacy Channel” means the term defined as such in the
Marketing Agreement;
2.1.27
“Madacy Participation Notice” means the term defined as
such in Section 9.4 hereof.
2.1.28
“Madacy Songs” means the term defined as such in the
Marketing Agreement;
2.1.29
“Major Decisions” means each of the following:
(a)
consenting to the amendment or modification of any provision of
this Agreement;
(b)
dissolving the Limited Partnership, except as otherwise provided
hereunder;
(c)
removing the General Partner and electing a replacement general
partner;
(d)
waiving any default on the part of the General Partner as the
Limited Partners may determine;
(e)
extending the term of this Agreement;
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(f)
the sale, transfer, disposition or any other alienation of the
Business or of all or a material portion of all of the assets of
the Limited Partnership or the granting of an option for same;
(g)
the mortgage, hypothecation, pledge, charge or encumbrance or other
cession by way of security of all or a material portion of all of
the assets of the Limited Partnership;
(h)
the acquisition by the Limited Partnership of any interest in any
other business howsoever carried on, the entering into of any
partnership, venture or the creation of a subsidiary;
(i)
the approval of the annual operating and capital budgets of the
Limited Partnership and any material modifications to such budgets
and incurring of expenditures not provided for in such
budgets;
(j)
the raising of additional capital for the Limited Partnership
(including bank borrowings and equipment financing) and the terms
and conditions of such borrowings and equipment financing;
(k)
any determination to take any action or activity not directly or
indirectly related to the carrying on of the Core Business;
(l)
any change in the accounting policies of the General Partner or the
Limited Partnership other than as may be required under generally
accepted accounting principles;
(m)
in the determination of “Available Cash Flow”, the
amount to be retained as a reserve for the payment of foreseen or
unforeseen costs, expenses, obligations or liabilities in excess of
ten percent (10%) of the amount of those Gross Revenues remaining
after deduction of the amounts referred to in Sections 6.1(a), (b)
and (c);
(n)
the incurring of any capital expenditures in any Fiscal Year in
excess of twenty percent (20%) of the value of the liquid assets of
the Limited Partnership;
(o)
any decision to embark upon any activity in respect to which New
Revenue Source Commissions are to be paid;
(p)
any decision which at the time taken could reasonably be expected
to have a material adverse effect on the Business.
2.1.30
“Marketing Agreement” means the term defined as such in
the second paragraph of the preamble hereto.
2.1.31
“Masters” means the term defined as such in the
Marketing Agreement.
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2.1.32
“New Revenue Source Sales” means the term defined as
such in the Marketing Agreement.
2.1.33
“Non-Defaulter” means the term defined as such in
Section 11.2 hereof.
2.1.34
“Partners” shall mean the parties to this Agreement and
any other Persons from time to time admitted as a Partner to the
Limited Partnership.
2.1.35
“Partnership EBITDA” means the term defined as such in
Section 9.4 hereof.
2.1.36
“Person” means an individual, partnership, firm,
limited liability company, corporation, trust, estate or other
entity.
2.1.37
“Prime Rate” means the per annum interest rate, in
effect from time to time, quoted by the Limited Partnership’s
bankers, as its reference rate with respect to: (a)
commercial loans in Canadian dollars made in Canada to its Canadian
commercial borrowers where the amount in respect to which
“Prime Rate” is relevant is denominated in Canadian
currency; and (b) commercial loans in United States dollars
made in the United States to its United States commercial borrowers
where the amount in respect to which “Prime Rate” is
relevant is denominated in United States currency.
2.1.38
“Program” means the term defined as such in the
Marketing Agreement.
2.1.39
“Proprietary Business” means the term defined as such
in the Marketing Agreement.
2.1.40
“Publishing” means the term defined as such in the
Marketing Agreement.
2.1.41
“Publishing/Royalties Shortfall” means the term defined
as such in Section 5.6 hereof.
2.1.42
“Purchaser” means the term defined as such in
Section 9.4 hereof.
2.1.43
“Residual Partnership Interest” means:
(a)
with respect to the Madacy Partner – 49.5%;
(b)
with respect to the Traffix Partner – 50.5%;
provided, however, “Residual Partnership
Interest” means fifty percent (50%) with respect to each of
the Madacy Partner and the Traffix Partner in respect of any
income, gain or proceeds obtained or realized in connection with
the sale of the Business or a sale of substantially all of the
assets or rights of the Limited Partnership.
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2.1.44
“Royalties” means the term defined as such in the
Marketing Agreement.
2.1.45
“Special Partners” means the Madacy Partner and the
Traffix Partner, collectively.
2.1.46
“Traffix” means Traffix, Inc., a corporation organized
under the laws of Delaware;
2.1.47
“Traffix Sale” means the term defined as such in
Section 9.4 hereof.
2.1.48
“Traffix Participation Notice” means the term defined
as such in Section 9.4 hereof.
2.1.49
“Traffix EBITDA” means the term defined as such in
Section 9.4 hereof.
2.1.50
“Transfer” means the term defined as such in
Section 9.1 hereof.
2.1.51
“Website Sales” means the sale (whether through
download or otherwise) to a third party of any product or service
sold or supplied by the Limited Partnership on the Websites.
2.1.52
“Websites” means the term defined as such in the
Marketing Agreement.
2.1.53
“Websites’ Database Sales” means any revenues
received by or on behalf of the Limited Partnership pursuant to or
associated with, a sale of a third party’s products and/or
services resulting from the use of the Database provided, however,
that the Limited Partnership shall not permit any use of the
Database (or permit any third party to use the Database) for any
purposes which is competitive with the business of online music
downloads or a Proprietary Business.
2.2
This Agreement shall be governed by and construed in accordance
with the laws of the Province of Quebec, and the laws of Canada
applicable therein.
2.3
In this Agreement:
(a)
unless otherwise specified, all references to money amounts are in
United States currency;
(b)
the descriptive headings of articles and sections are inserted
solely for convenience of reference and are not intended as
complete or accurate descriptions of the content of such articles
or sections;
(c)
unless otherwise specified, time periods within or following which
any payment is to be made or any act is to be done shall be
calculated by excluding the day on which the period commences and
including the day on which the period ends and by extending
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the
period to the next Business Day following if the last day of the
period is not a Business Day;
(d)
whenever any payment is to be made or action to be taken under this
Agreement is required to be made or taken on a day other than a
Business Day, such payment shall be made or action taken on the
next Business Day following such day;
(e)
the expressions “this Agreement”, “these
presents”, “herein”, “hereby”,
“hereunder”, “hereof” and similar
expressions mean and refer to this Agreement as a whole and not
merely as to the specific section, clause or paragraph in which the
respective word appears, unless the context requires
otherwise;
(f)
reference in this Agreement to any gender, masculine, feminine or
neuter, shall be deemed to be reference to the others, and the
singular shall be deemed to include the plural and vice versa,
unless the context otherwise requires.
2.4
Notwithstanding any provision of law or custom to the contrary,
each Special Partner and its Affiliates shall have the absolute
right to engage in other businesses and other ventures for its own
individual profit (including those specifically provided for in the
Marketing Agreement) and shall have absolutely no liability to
account to the Limited Partnership or to the other Special Partner
by reason thereof. No Special Partner, by reason of this
Agreement, shall have any interest in any other property owned by
the other Special Partner or in any other business, venture or
project engaged in by the other Partner whether or not similar to
the Business. Notwithstanding the foregoing, during the term
hereof but subject to the terms and conditions of the Marketing
Agreement, no Special Partner either directly or indirectly whether
through an Affiliate or otherwise may enter into any other
relationship which is identical or materially similar to the
Business.
3.
ORGANIZATION AND PURPOSE OF LIMITED
PARTNERSHIP
3.1
The Partners do hereby constitute themselves the Limited
Partnership as and from the date hereof under the laws of the
Province of Quebec and subject to the provisions of this Agreement,
the whole for the purposes stated in the second paragraph of the
preamble hereto.
3.2
The Limited Partnership shall bear the name mentioned in the first
paragraph of the preamble hereto.
3.3
Each Partner shall participate in the profits and losses of the
Limited Partnership in accordance with the provisions of
Section 6.4 hereof.
3.4
Profits and losses of the Limited Partnership shall be calculated
in accordance with generally accepted accounting principles
applicable in Canada on a consistent basis.
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3.5
Subject to the provision of Law and any specific assumption of
liability hereunder, the liability of each Special Partner for the
debts, liabilities and obligations of the Limited Partnership is
limited to the amounts outstanding in such Partner’s capital
account. A Limited Partner shall have no further personal
liability for such debts, liabilities and obligations of the
Limited Partnership, and shall not be required to repay to the
Limited Partnership, any Partner or to any creditor of the Limited
Partnership, any portion or all of any capital previously returned
or any negative balance of its capital account.
3.6
Save as provided hereunder, no Partner shall be entitled to
withdraw, in whole or in part, the Capital Contributions made by
such Partner or to receive any distribution from the Limited
Partnership.
3.7
The head office and mailing address of the Limited Partnership
shall at all times be the head office of the General Partner and
may change from time to time by the General Partner giving written
notice to such effect to all of the Limited Partners. The
General Partner shall maintain its principal office in Quebec,
Canada.
3.8
To the extent that it has not already done so, as soon as
practicable following the execution hereof, the General Partner
shall cause to be executed and filed such declarations, instruments
and documents as may be required by Law to evidence the creation of
the Limited Partnership. The General Partner shall, in
accordance with the provisions of this Agreement and to the extent
required by Law cause to be filed similar declarations to record
any additional amounts of capital contributed or agreed or required
to be contributed by the Special Partners, from time to time, and
otherwise as required by Law. The General Partner and each
Special Partner shall execute and deliver as promptly as possible
any documents that may be necessary or desirable to accomplish the
purposes of this Agreement or to comply with applicable laws which
may govern the Limited Partnership. The General Partner shall
take all necessary actions on the basis of information available to
it in order to maintain the status of the Limited Partnership as a
limited partnership.
3.9
The Limited Partnership has been formed for the purposes of
carrying on all activities relating to the Business. The
Limited Partnership shall not carry on any other business.
The Limited Partnership shall have the power to do any and every
act and anything necessary, proper, convenient or incidental to the
accomplishment of its purposes and the operation of the
Business.
3.10
The rights, assets and agreements in relation to the business of
the Limited Partnership including, without limitation, the legal
title to the assets of the Limited Partnership shall be held in the
name of the Limited Partnership at all times unless otherwise
directed by the Limited Partnership.
3.11
The Special Partners shall comply with the provisions of all Laws
governing the Limited Partnership and they shall not take any
action which will jeopardize or eliminate the status of the Limited
Partnership as a limited partnership. Without limiting the
generality of the foregoing, each Special Partner shall, on
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reasonable request by
the General Partner, promptly execute all certificates,
declarations, instruments and documents necessary to comply with
any law or regulation of any jurisdiction in Canada in regard to
the formation, operation, dissolution and continuance of the
Limited Partnership.
4.
TERM
4.1
The Limited Partnership shall commence as of the date of filing of
the registration of the Limited Partnership pursuant to the
Act Respecting the Legal
Publicity of Sole Proprietorships, Partnerships and Legal
Persons (Quebec) and shall continue for a term which is
coincidental to the term of the Marketing Agreement (as the term of
the Marketing Agreement may be extended or renewed from time to
time), subject to the provisions of Section 12 hereof.
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