Encoding Services Agreement - Emusic.com Inc. and Encoding.com
E-Music.com 6/30/99 Confidential Quotation
[LOGO OF ENCODING.COM]
Al David
Emusic.com, Inc.
Encoding.com would like to validate our strong desire to have a strategic and
long-term relationship with Emusic.com by delivering what we believe to be a
very compelling proposal. The below proposal is intended to encompass all of
Emusic's encoding for a period of 1-year and is designed with a full partnership
in mind. Please note that the pricing you are being offered here is confidential
to E-music and the terms herein should not be disclosed to any third party.
The terms of this agreement are good until the last day of June 1999.
You will notice in the pricing section that we have given you [*] prices for the
encoding of [*] CDs initially and all ongoing volumes for a period of one-year.
Also pricing for Windows Media encoding has been added here as well at a very
reasonable rate.
Encoding Requirements
Please review this document carefully and let me know if there are sections that
are unclear or if we are missing some pressing details.
The following are your requirements, as we understand them.
. Support for the highest quality encoding from [*] format into [*] formats.
Encoding of [*] CDs into [*] formats, [*]. Possible support for [*].
. [*] files will be encoded using the [*].
. [*] samples will be encoded into [*].
. [*] samples will be captured [*] seconds into a song unless otherwise
requested. [*].
. Scanning of cover art into at least [*] formats. [*] at a frame size to be
determined.
. Receive media from labels and generate an electronic package slip for E-
music.com for rectification purposes.
. Tracking of all media that is shipped to encoding.com without a packing slip
by our internal tracking number, UOC and album title.
. Data entry for all [*] CDs to be used for meta data entry, naming, and cross
reference to web site.
. Deliveries of media back to E-music.com [*].
. Require dedicated capacity in the encoding.com lab in an ongoing capacity for
projects that can not yield the normal 2-4 week lead-time.
[*] Confidential Treatment Request
Quotation valid through June 1999
<PAGE>
E-Music.com 6/30/99 Confidential Quotation
Digitization & Encoding Services; Data Work, and Scanning
Encoding
encoding.com is in a phase in our company culture where the partnerships we make
are as important as anything. By this we are prepared to jump into this
partnership with both feet and offer you the same strategic pricing for your
initial encoding project as all ongoing encoding work.
Please find below a brief description of the two opportunities available to you.
Pricing Short: Please also see contingencies below.
Straight customer/client relationship.
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Encoding- MP3 and RA Scanning Data
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Initial [*]CDs [*] [*] [*]
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1-year ongoing [*] [*] [*]
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Earn out opportunity: with the below opportunity you can save upwards of [*] off
the initial encoding project for a [*] royalty on all online sales of media we
encoded for a period of [*].
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Encoding- MP3 and RA Scanning Data
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Initial [*] CDs [*] [*] [*]
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1-year ongoing [*] [*] [*]
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We are not concerned with which option you choose, but we did want to give you a
way to defer your pricing even more if appropriate.
Initial [*]CDs (material):
The following are conditions of this very strategic pricing for your initial [*]
CDs.
. Work order is executed and a PO generated for the initial amount by June 30th
1999.
. Jointly Sponsored press release announcing project and partnership
. Minimum annual commitment of [*] CDs for a period of 1-year. This will be
dedicated capacity that will be priority access for E-Music.
. Link exchange where appropriate
. Possible other promotional or marketing events
. [*] downloads for all encoding.com employees for a period of 6-months.
Specifics:
Set-up per CD: [*]
Database integration: [*]
Material Warehousing
6 months from 1st shipment [*]
Encoding cost per track/song
[*] file: [*]
[*] [*]
Total for [*] Tracks: [*]
[*] tracks per CD on average
We will work with you over the next week to put in place a delivery schedule for
this deployment.
*If not executed by June 30th 1999 the price of [*] will apply for per track
encoding.
[*] Confidential Treatment Request
Quotation valid through June 1999
<PAGE>
E-Music.com 6/30/99 Confidential Quotation
Data Entry
Encoding.com has put in place a very robust data entry process and management
software. Over the past year we have created custom databases for a number of
clients with similar needs as your own. The following is our understanding of
your data entry requirements and the pricing that we are able to offer to
implement these. [*] The following are based on our ability to enter data for
[*] CDs per hour per data entry employee.
Please also note that we have looked in the past at the use of the [*] as a tool
for propagating meta fields in our clients databases. [*].
Caveat: When encoding.com is given an electronic packing slip for the CDs we
are receiving the data entry costs associated with those CDs will be [*] per CD.
Fields to be captured:
[*]
Format for export: [*]
Cost per CD: [*]
Total Costs for [*] CDs: [*]*
* this number will be less if [*]
Scans
Encoding.com has the ability to scan cover art for E-Music.com as part of our
normal fulfillment process. For this project we will capture [*] formats as
follows:
[*]
Costs per scan: [*]
Costs for [*] scans: [*]
List price is [*] and [*] additional format..
[*] Confidential Treatment Request
Quotation valid through June 1999
<PAGE>
E-Music.com 6/30/99 Confidential Quotation
We will deliver the image files to you on CDR or DLT depending on your
requirements. Sometimes we have found that it is easier to manage the audio
files on CDR depending on your usage. We will work with you on this.
Fulfillment and Delivery
Fulfillment and delivery is how we return your media to you or to your hosting
provider. The options here are via DAT, CDR, or FTP. We don't recommend FTP
because of timeliness for this amount of data.
DLT delivery media for [*] CDs worth of compressed media and cover art.
Approximately [*] of data to be delivered
[*] can fit on an individual DLT
[*] needed; @ [*] per DLT
Delivery Costs: [*]
CDR Delivery: [*]
We will work with your operations teams to put in place a structure for how we
deliver, store and retrieve media to and for E-music.
Summary:
We are very interested in working with you on this project. We believe that we
are the only choice in the industry that can handle these volumes of audio
encoding. Please let me know what other information you need from me and I will
work to provide it. These prices are valid through June 1999.
Initial [*] CD encoding project
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Item Count Your Costs Total
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Encoding [*] Songs into [*] [*] [*]
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[*] Encoding [*] [*]
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Data Entry [*] CDs ([*]fields) [*] [*]
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Scans [*] [*] [*]
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Delivery [*] DLT [*] [*]
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CDR ongoing [*]
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Total Project [*]
Costs
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1-year volume commitment: Additional Volume.
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Item Count Your Costs Total
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Encoding [*] songs into [*] [*] [*]
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[*] encoding [*] [*]
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Data Entry [*] CDs ([*]fields) [*] [*]
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Scans [*] [*] [*]
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Delivery [*] DLT [*] [*]
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CDR ongoing [*]
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Total Project [*]
Costs
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[*] Confidential Treatment Request
Quotation valid through June 1999
<PAGE>
E-Music.com 6/30/99 Confidential Quotation
* Contingent on this work-order being signed by June 30th 1999. Otherwise the
ongoing pricing schedules will be applied.
Ongoing Work:
Contingent on the signing of this work agreement we will work with Emusic.com to
put in place a structure and a process for handling all mass ongoing encoding
work for Emusic.com as well as how we will reserve dedicated lab time. In
signing this document Emusic.com asserts its willingness to enter into an
agreement of this nature.
The following is the pricing that we are able to offer Emusic.com for this
ongoing work as stated earlier.
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Encoding- MP3, RA, Scanning Data
and Windows Media
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[*] ongoing [*] [*] [*] per CD
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Ongoing volumes are estimated at [*] tracks [*].
Terms and Conditions
The primary terms of our agreement require that you guarantee to have the rights
to the content and we agree not to use the content for other purposes without
your approval. We require a [*] deposit on all contracted work. The balance will
be invoiced monthly against the past months work.
1. CONTROLLING TERMS. Pricing is valid until June 31st 1999 and are valid for
a period of one year from the execution of this document. The terms and
conditions of sale contained herein shall apply to all provisions of encoding
services and related services by encoding.com, Inc. ("encoding.com") and to all
purchase orders or other offers accepted by encoding.com related thereto
(collectively, the "Service"). These terms and conditions may in some instances
conflict with or add to some of the terms and conditions affixed to the purchase
order or the procurement document issued by the Customer. In such case, the
terms and conditions contained herein shall govern exclusively and ACCEPTANCE OF
CUSTOMER'S ORDER IS EXPRESSLY CONDITIONED UPON CUSTOMER'S ACCEPTANCE OF THE
TERMS AND CONDITIONS CONTAINED HEREIN irrespective of whether the Customer
accepts these conditions by oral or written acknowledgment, by implication or by
acceptance of or payment for the provision of the Service ordered hereunder
based on the content, materials and/or elements (collectively, the "Content")
provided to encoding.com by Customer.
2. TERMS OF PAYMENT. Payment must be made in US dollars and may be made in
cash, cashier's check, money order, travelers checks, check drawn on local bank
or Visa / MasterCard. All COD orders must be paid for and picked up Monday
through Friday between the hours of 9:00 AM and 5:00 PM. Credit terms are net 15
days. Interest at the maximum rate allowed by law will be charged on all
accounts not paid within 30 days unless previous arrangements have been made
with the encoding.com. ANY CLAIMS FOR ADJUSTMENT IN CONNECTION WITH AN INVOICE
MUST BE PRESENTED IN WRITING WITHIN 10 DAYS OF THE DATE OF THE INVOICE IN
QUESTION.
3. PRICES; LIENS. Prices for the Service are those shown on the face of this
acknowledgment, provided, however, that if such prices are based on the purchase
of a minimum quantity of Service and Customer fails to purchase such minimum
quantity, encoding.com has the right to collect from Customer the difference
between the price paid by Customer for the Service purchased and encoding.com's
standard price for such Service in quantity actually purchased by Customer.
encoding.com shall have a lien and security interest on tapes, CDs, files and
other property delivered by Customer to encoding.com and/or made by encoding.com
therefrom for the balance of any account due us by the Customer, including
collection and attorney's fees. Customer hereby authorizes encoding.com to
execute and file, on Customer's behalf, a financing or other statement
evidencing this security interest. When necessary, Customer agrees to execute
necessary documentation for perfecting such security interest.
4. SHIPPING. If encoding.com provides shipping and handling services for
Customer's materials, surcharges will apply. Shipping and delivery dates are
approximate. In no event, for any reason whether or not beyond encoding.com's
control, shall encoding.com be liable to Customer or any other party for any
losses, damages or liability for delay in delivery of shipped materials; nor
shall any delay in delivery of shipped materials constitute grounds for
cancellation of Customer's work order.
5. DELIVERY. The delivery dates set forth on this acknowledgment are
approximate only, and encoding.com is not liable for any damages to Customer,
nor shall encoding.com be in breach of its obligations to the Customer, because
of any delivery made within a reasonable time after the stated delivery date.
encoding.com may by written notice to Customer change any delivery date, and
such date shall become the agreed upon delivery date unless Customer objects to
such date in writing delivered to encoding.com within ten (10) days of receipt
of encoding.com's notice. encoding.com shall not be liable for any late
delivery caused by the failure of the Customer to provide in a timely manner any
necessary information to affect such delivery.
6. FORCE MAJEURE. encoding.com is not liable for any failure to deliver, or
delay in the delivery of, any Service due to a cause beyond its control,
including but not limited to acts of God, fires, typhoons, earthquakes, labor
disputes, governmental actions or inability to obtain materials, components,
energy, encoding facilities, or transportation. In the event of any such delay,
the data of delivery or performance hereunder shall be extended by a period
equal to the time lost by reason of such delay. If encoding.com's production is
curtailed for any of the above reasons, encoding.com may allocate its production
among its various customers. Such allocation shall be in a commercially fair
and reasonable manner.
7. STORAGE. It is the Customer's responsibility to arrange for removal of
materials from encoding.com at the completion of each project. At the
Customer's request, encoding.com will store tapes and Content for a maximum of
60 days. encoding.com reserves the right to ship tapes and/or Content to the
Customer, freight collect, at the conclusion of the 60 day period or to charge a
storage fee or to otherwise dispose of the materials.
8. RIGHT TO REFUSE SERVICE. encoding.com reserves the right to refuse service
and/or process any Content which encoding.com, in its sole discretion, deems
unlawful, pornographic, degrading, likely to incite prejudice or passion or
otherwise inappropriate.
9. CUSTOMER WARRANTIES. Customer represents and warrants that (a) Customer has
sufficient rights in the Content to use it in the manner contemplated by this
acknowledgment, (b) the Content does not infringe upon or violate any patent,
copyright, trade secret, trademark or other intellectual property right of any
third party or any obscenity law or other applicable law, rule or regulation in
any jurisdiction in which the Content may be viewed or retrieved, (c)
encoding.com's
[*] Confidential Treatment Request
Quotation valid through June 1999
<PAGE>
E-Music.com 6/30/99 Confidential Quotation
provision of the Service and/or hosting of the Content hereunder
will not infringe upon or violate any patent, copyright, trade secret, trademark
or other intellectual property right of any third party, including but not
limited to any and all performance license rights, mechanical license rights,
synchronization license rights and rights under the Digital Performance Right in
Sound Recordings Act of 1995, or any obscenity law or other applicable law, rule
or regulation in any jurisdiction in which the Content can be viewed or
retrieved, and (d) the Content and encoding.com's provision of the Service on
behalf of Customer is not for any illegal, obscene, offensive or immoral
purpose.
10. ENCODING.COM LIMITED WARRANTY; LIMITED LIABILITY; EXCLUSION OF
CONSEQUENTIAL DAMAGES. It is understood and agreed that the Customer's
materials are transported, received, processed, used and stored at Customer's
risk. ENCODING.COM SHALL NOT BE LIABLE FOR ANY LOST PROFITS OR OTHER DAMAGES
CAUSED BY THE LOSS, DAMAGE OR DESTRUCTION OF MATERIALS BELONGING TO THE CUSTOMER
OR ANY OTHER PERSON WHILE IN TRANSIT OR POSSESSION OF ENCODING.COM UNLESS CAUSED
BY THE NEGLIGENCE OF ENCODING.COM IN WHICH EVENT, THE LIABILITY OF ENCODING.COM
SHALL BE LIMITED TO THE REPLACEMENT OF A SIMILAR QUANTITY OF BLANK TAPE OR
MAGNETIC OR OPTICAL MEDIA TO THE MATERIALS WHICH WERE LOST, DAMAGED OR
DESTROYED. EXCEPT FOR SUCH REPLACEMENT, ENCODING.COM SHALL HAVE NO FURTHER
LIABILITY REGARDING THE LOSS, DAMAGE OR DESTRUCTION OF SUCH MATERIALS.
ENCODING.COM SHALL NOT BE LIABLE TO CUSTOMER OR ANY OTHER PERSON FOR ANY ACT OR
OMISSION OF ANY PERSON SELECTED BY ENCODING.COM TO PERFORM SERVICES OR FURNISH
MATERIALS TO CUSTOMER. IF MATERIALS FURNISHED BY ENCODING.COM ARE FOUND TO BE
DEFECTIVE IN MANUFACTURE, ENCODING.COM SHALL REPLACE SUCH MATERIALS WITH A
SIMILAR QUANTITY OF BLANK TAPE, OR MAGNETIC OR OPTICAL MEDIA, PROVIDED THE
CUSTOMER NOTIFIES ENCODING.COM IN WRITING WITHIN THIRTY DAYS AFTER SHIPMENT OF
SUCH DEFECT. EXCEPT FOR SUCH REPLACEMENT, ENCODING.COM SHALL HAVE NO FURTHER
LIABILITY IN CONNECTION WITH SUCH DEFECTIVE MATERIALS. ENCODING.COM MAKES NO
WARRANTY, EXPRESSED OR IMPLIED WITH RESPECT TO THE MATERIALS OR SERVICES
PROVIDED IT ASSUMES NO RESPONSIBILITY FOR THE CHARACTER OR QUALITY OF MATERIALS
OR SERVICES PROVIDED BY IT. ENCODING.COM EXPRESSLY DISCLAIMS ALL WARRANTIES
EXPRESSED OR IMPLIED, STATUTORY OR OTHERWISE, INCLUDING ANY IMPLIED WARRANTY OR
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. ALL WARRANTIES WITH RESPECT
TO THE SERVICE ARE STRICTLY LIMITED TO THOSE SET FORTH IN THIS ACKNOWLEDGMENT.
IN NO EVENT WILL ENCODING.COM BE LIABLE TO THE CUSTOMER FOR ANY CONSEQUENTIAL,
INDIRECT, SPECIAL, OR INCIDENTAL DAMAGES EVEN IF ENCODING.COM HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES. NOTWITHSTANDING THE FOREGOING, ENCODING.COM
MAKES NO REPRESENTATION OR WARRANTIES OF ANY TYPE WHATSOEVER REGARDING THE
HOSTING OF ANY CONTENT ON ITS NETWORK OR ANY SUBCONTRACTOR'S OR OTHER PARTY'S
NETWORK OR THE PERFORMANCE OR RELIABILITY OF ANY SUCH NETWORK, OR ANY CONNECTION
TO, TRANSMISSION OVER, RESULTS OF OR USE OF ANY NETWORK CONNECTION OR FACILITIES
PROVIDED (OR FAILED TO BE PROVIDED) UNDER THIS ACKNOWLEDGMENT AND ENCODING.COM
MAKES NO WARRANTY WHATSOEVER FOR PRODUCTS OR SERVICES NOT ACTUALLY PRODUCED OR
PROVIDED BY ENCODING.COM.
11. INDEMNIFICATION BY CUSTOMER. Customer agrees to defend, protect, indemnify
and hold encoding.com harmless from and against all claims of any kind, whether
based in contract, in tort (including negligence or strict liability), or
resulting from (a) services provided by encoding.com on behalf of Customer
hereunder, except for any damages arising exclusively out of any material breach
of this acknowledgment by encoding.com, (b) any use by encoding.com of any data
or files provided by Customer to encoding.com under this acknowledgment, (c) any
breach by Customer of this acknowledgment, including without limitation any
failure by Customer to observe or satisfy any terms or conditions of this
acknowledgment, (d) any violation of any applicable federal, state or local laws
with regard to the transmission and use of information and content, including
laws related to privacy, publicity, the Communications Decency Act of 1996,
arising out of the Customer Content, (e) any infringement of any United States
or other patent, trademark, copyright, trade secret or other intellectual
property right, including but not limited to any and all performance license
rights, mechanical license rights, synchronization license rights and rights
under the Digital Performance Right in Sound Recordings Act of 1995, relating to
the Content supplied by Customer to encoding.com or the Services provided
hereunder, or (f) otherwise for any losses, expenses, damages and liabilities,
direct, indirect, special or consequential which may arise out of Customer's
use, distribution or sale of goods or services covered hereby except those
caused solely by the sole gross negligence of encoding.com.
12. ACKNOWLEDGMENT. Customer acknowledges that encoding.com, in its sole
discretion, may subcontract all or part of the hosting services to be provided
hereunder. CUSTOMER FURTHER ACKNOWLEDGES THAT ENCODING.COM WILL HAVE NO
LIABILITY FOR THE FAILURE OF ANY NETWORK OR SERVER IN CONNECTION WITH THE
HOSTING OF ANY CONTENT.
13. ORDER CANCELLATION. If an order for the Service is canceled, Customer must
pay for orders scheduled for delivery or performance within ninety (90) days of
encoding.com's receipt of cancellation notice.
14. MISCELLANEOUS. Any waiver by encoding.com of any default by the Customer
hereunder shall not be deemed to be a continuing waiver of such default or a
waiver of any other default or of any of the terms and conditions of this
acknowledgment. The terms and conditions of this acknowledgment may not be
superseded, modified, or amended except in a writing stating that it is a
modification and signed by an authorized representative of each party hereto,
provided, however, that encoding.com may modify the specifications of the
Service provided hereunder if the modification does not change the form, fit or
function of the Service. This acknowledgment (not including any of the terms
and conditions of the Customer's purchase order or any similar document issued
by Customer), constitutes the entire agreement between the Customer and
encoding.com with regard to the Service listed on the face of this
acknowledgment, and expressly supersedes and replaces any prior or
contemporaneous agreements, written or oral, relating to such goods or services.
This acknowledgment is governed by, construed and enforced in accordance with
the laws of the State of Washington, without regard to conflict of laws
provisions. Both parties agree that any litigation or arbitration between the
parties shall take place in King County, Washington, and both parties waive any
objection to personal jurisdiction or venue in any forum located in that county.
In any suit or action brought to enforce any term, condition or covenant of this
acknowledgment or to recover damages arising from any breach of the
acknowledgment, the losing party shall pay the prevailing party's reasonable
attorneys' fees and all other costs and expenses which may be incurred by the
prevailing party in any suit, action or in any reviews or appeals therefrom.
ACKNOWLEDGED AND AGREED:
E-music.com
By: /s/ Joseph Howell
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Its: Chief Financial Officer
[*] Confidential Treatment Request
Quotation valid through June 1999
<PAGE>
E-Music.com 6/30/99 Confidential Quotation
Rider to encoding.com Terms and Conditions
The following changes will be applied to the attached encoding.com Terms and
Conditions.
1. Payment terms:
Insert: EMusic agrees to pay encoding.com [*] of the total project costs in
advance as called out by the contract. encoding.com will invoice EMusic for [*]
of the total amount of this project in the amount of [*] immediately net 0 and
an additional [*] on the last billing cycle of September.
During the first [*] of the project, encoding.com will invoice EMusic normally
outside of this [*] down payment. EMusic will pay these invoices per the terms
of the agreement. During the second [*] of the project the down payment that was
made by EMusic will be applied to encoding.com invoices.
2. Data Entry Rider:
The attached form outlines in detail the fields that need to be captured by
encoding.com in the data entry portion of the encoding process. The fields that
are called out are also defined so each item is clear for all data entry people
across all CDs in the project.
Also-The data fields that are called out in the attached sheet are different
than the ones that were called out in the original proposal. Some of these are
different because of differences in how we defined a parameter and others
because new requirements became available. As such the new pricing will be as
follows but WILL NOT affect the total value of the contract;
Old Pricing per CD: [*] per CD for data entry.
New Pricing per CD: [*] per CD for data entry.
Pricing is based on an estimate of a [*] increase in the amount of time needed
to capture the meta information currently requested and a mark up of the old
price of [*].
Encoding.com and EMusic will review these prices and structure every [*] as
appropriate to ensure that significant costs are not being endured in either
direction.
/s/ Al David June 30, 1999
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Signature Al David--Sr. Director, Operations Date
(Minister of the Digital Bit)
Accepted by encoding.com
/s/ Todd Hinders June 30, 1999
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Todd Hinders--Minister of Entertainment Date:
[*] Confidential Treatment Request
Quotation valid through June 1999