Music Industry Development League (MIDL), Inc.

Principles of Corporate Governance

An Ethical Board, CEO and Management. The business of MIDL Inc. (the “Company”) is carried out by its employees under the direction and supervision of its Chief Executive Officer (“CEO”).  The business shall be managed under the direction of the board of directors (“Board”).  In accordance with Texas law, the role of the directors is to exercise their business judgment in the best interests of the Company.  This role includes:

·         review of the Company’s performance, strategies and major decisions;

·         oversight of the Company’s compliance with legal and regulatory requirements and the integrity of its financial statements;

·         oversight of management, including performance evaluation and succession planning for key management roles; and

·         oversight of compensation for the CEO, key executives and the Board, as well as oversight of compensation policies and programs for all employees.

Chairman. The CEO serves as Chairman of the Board.  This serves the Company well, and the independent directors have many opportunities to have a significant influence on the structure and functioning of the Board. 

Board Size. As set forth in the By-Laws of the Company (“By-Laws”), the Board has the power to fix the number of directors by resolution.  In fixing the number, the Board will be guided by the principle that a properly functioning Board is small enough to promote substantive discussions in which each member can actively participate, and large enough to offer diversity of background and expertise.  The Board will consider whether it is of the appropriate size as part of its annual performance evaluation.

Director Qualification Standards. In selecting directors, the Board generally seeks individuals with skills and backgrounds that will complement those of other directors and maximize the diversity and effectiveness of the Board as a whole.  Directors should be of the highest integrity and well-respected in their fields, with superb judgment and the ability to learn the Company’s business and express informed, useful and constructive views.  In reviewing the qualifications of prospective directors, the Board will consider such factors as it deems appropriate in light of these guidelines, which may include judgment, skill, diversity, experience with businesses and other organizations of comparable size, the interplay of the candidate’s experience with the experience of the other Board members, and the extent to which any candidate would be a desirable addition to the Board and any committees of the Board.  In general, the Board seeks individuals who are knowledgeable in fields including finance, international business, marketing, information technology, human resources and consumer products.  All members of the Audit Committee must be financially literate and at least one member must have accounting or related financial management expertise and be an audit committee financial expert as defined in Item 401(h) of Regulation S-K of the Securities and Exchange Commission ("SEC"), or any successor provision.

Directors Who Change Job Status. It is not the sense of the Board that a director who retires from or changes the position held when he or she joined the Board should necessarily leave the Board. It is appropriate, however, for the Board to review the continued appropriateness of Board membership under these changed circumstances. Therefore, any director who retires from or has a material change in responsibility or position with the primary entity by which the director was employed at the time of his or her election to the Board shall offer to submit a letter of resignation to the Nominating and Public Responsibility Committee for its consideration. The Nominating and Public Responsibility Committee will make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken.

Director Orientation and Continuing Education. New directors will be provided with an orientation by management of the Company which will include information about the Company’s business, strategic plans, significant financial, accounting and risk management issues, compliance programs, business conduct, ethics policies and corporate governance guidelines.

Directors are encouraged to attend from time to time education programs related to their service on the Board in order to maintain an appropriate level of expertise and knowledge to properly discharge their duties. Directors shall be credited for attendance at educational programs in furtherance of their professional responsibilities and education directly related to service on the Board. The Company shall reimburse a director for all reasonable out of pocket expenses incurred by a director in attending such programs.

The Board’s Responsibilities. The board’s primary duties are to oversee the chief executive officer who, with senior management, runs the company on a daily basis, and to monitor management’s performance, on behalf of shareholders. Effective corporate directors are diligent monitors, but not managers, of business operations. Directors also should be effective counselors to management. The board should be knowledgeable concerning trends in the company’s business and is responsible for understanding and approving the company’s principal activities and for monitoring the effectiveness of their implementation.

Director Compensation. MIDL’s directors should be motivated through appropriate and competitive incentives to focus on continuing to achieve value for the company’s shareholders. Director compensation should be geared toward retaining a clearly superior board. Including equity as part of directors’ compensation helps align the interests of directors with those of MIDL’s other shareholders, and a meaningful portion of a director’s compensation should be in the form of long-term equity.

Time Requirements. Serving on MIDL’s board requires significant time and attention. Directors must spend the time needed and meet as often as necessary to properly discharge their responsibilities.

Board Agenda, Meetings, Materials, Information and Presentations.  The Chairman of the Board, with input from senior members of management [and the Presiding Director], establishes the agenda for each Board meeting. A schedule of agenda subjects to be discussed for the ensuing year is issued at the beginning of each year (to the degree these can be foreseen). Each director is free to suggest the inclusion of item(s) on the agenda.

Information that is important to the Board’s understanding of the business is distributed in writing to the Board generally five to seven days before the Board meets, although this is not a strict standard, so as to allow for unusual circumstances. Management should ensure that material is brief and to the point while still providing the desired information.

As a general rule, meeting time is reserved for discussion. Presentations on specific subjects are forwarded to the directors in advance so that directors may prepare, meeting time may be conserved, and discussion time may be focused. However, it is recognized that there may be occasions when an important issue arises without time for written background materials to circulate or the subject matter is not appropriate for written materials, such that more presentation time will be required.

The independent directors should, as they deem appropriate, meet in regularly scheduled executive sessions and will designate, and publicly disclose the name of, the director who will preside at those sessions. It is the current policy of the board that the presiding director will be rotated as the board sees fit.

All Directors are expected to attend the Annual Meeting of Shareholders absent unusual circumstances.

Board Interaction With Shareholders and Others/Annual Meetings.  Generally, the Chairman of the Board/Chief Executive Officer communicate, as appropriate, on behalf of the Company with shareholders, investors, employees, customers, suppliers, the press and others. Directors should forward any requests they receive for communication, comment or information related to the Company to the Chairman/Chief Executive Officer. Directors are expected to take special care in this regard in light of confidentiality requirements and laws prohibiting insider trading, tipping and selective disclosure.

Board Committees. After consultation with the Chairman of the Board/Chief Executive Officer, and with consideration of the desires of individual directors, the Governance Committee recommends to the Board, for Board approval, the appointment of directors to various committees and the appointment of committee chairmen.

Access to Management and Independent Advisors. The board may have access to any member of management to discuss any subject any time it wishes. Absent highly unusual circumstances, the CEO should be made aware of such discussions. The board is entitled to rely on advice from outside advisors, although the board should assess the qualifications of those upon whom it relies and the processes they use to reach their decisions and recommendations, and should hold advisors accountable.

Annual Performance Evaluations. The board should conduct a self-evaluation at least annually to determine whether it and its committees are functioning effectively.  The Governance Committee assists the Board developing and implementing this evaluation process.

Committee Responsibilities and Charters. The company shall have an Audit Committee, an Executive Compensation Committee and a Nominating and Public Responsibility Committee, each of which shall be comprised entirely of “independent directors,” as determined by the board under the criteria of the New York Stock Exchange, within the time specified in the August 1, 2002 Corporate Governance Rule Proposals of the NYSE Corporate Accountability and Listing Standards Committee. Each committee shall have a written charter; the Board has approved and endorsed the current charters of each committee. Committees should keep the full board informed of their activities.

Management Succession. Succession planning should include policies and principles for performance reviews. The board or a committee should identify the qualities necessary for members of senior management and should periodically monitor and review the development and progression of potential internal candidates against these standards. The board should consider policies for succession and transitional leadership in the event of an emergency or the retirement, incapacity or death of the CEO.

Management Responsibility. MIDL’s senior management, led by the CEO, is responsible for the day-to-day operations of the company, for properly informing the board of the status of such operations, and for identifying and managing the risks that MIDL undertakes in the course of carrying out its business. The company’s CEO and senior management generally should take the lead in planning for strategy and principal actions. They should identify and develop appropriate plans for the company, present those plans to the board, and implement the plans once board review is completed.

Employees, Diversity, Compensation and Benefits. Employee involvement is critical to achieving the company’s goals. Success comes from relying upon the collective knowledge and skills of people at all levels of responsibility and from offering a diverse environment where opportunity is based on merit. The company will continue its successful efforts to gain and maintain diversity among its employees and management and to provide them with compensation and benefits that are appropriate given the nature of MIDL’s business and the individual’s responsibilities and geographic location.

Financial Controls and Reporting. It is senior management’s responsibility to put in place and supervise the operation of systems that fairly present the financial condition and results of operations of the company, and to make the timely disclosures investors need to permit them to assess the financial and business soundness and risks of the company. The board and its audit committee should continue to take reasonable steps to be comfortable that the company’s financial statements and other disclosures accurately present to shareholders the company’s financial condition and results of operations. It is the responsibility of MIDL’s board, through its audit committee and subject to approval by shareholders at the annual meeting, to engage an independent accounting firm that will audit the financial statements prepared by management and issue an opinion on those statements based on generally accepted accounting principles. It is the responsibility of the independent accounting firm to ensure that it is in fact independent, is without conflicts of interest, employs highly competent staff, and carries out its work in accordance with generally accepted auditing standards. It is also the responsibility of the independent accounting firm to inform the company’s board, through the audit committee, of any concerns the auditor may have about the appropriateness or quality of significant accounting treatments or business transactions that affect the fair presentation of MIDL’s financial condition and results of operations, or weaknesses in internal control systems.

The First Amendment. As an entertainment, media, and service company one of MIDL’s key principles is to defend the integrity of the First Amendment. A key responsibility of its board and management is to protect the integrity of MIDL’s news, information and operations. Only then can the company successfully serve its customers and its shareholders. MIDL’s policy of responsible local editorial autonomy is a cornerstone of these efforts.

Corporate Governance Guidelines.  The Governance Committee reviews these Guidelines annually and recommends amendment to the Board as necessary.

These Guidelines are posted on the Company’s website.

Communicating With The Board.  Shareholders are invited to communicate to the Board or its

periodically review such efforts to gain reasonable assurance committees by writing to the Corporate Governance and Nominating Committee care of the Corporate Secretary.

Good Citizenship. MIDL will continue to be a good citizen of the local, national, and international communities in which it does business. The company will contribute to the communities in which it operates by making charitable contributions directly or through the MIDL non-profit foundation. MIDL’s management will continue to take reasonable steps to develop, implement, and maintain effective legal compliance programs, and the Board should that they are effective.