Services Agreement - Encoding.com Inc. and Valley Media Inc.
SERVICES AGREEMENT
This Services Agreement (this "Agreement") is executed as of this
17th day of December, 1999 (the "Effective Date") by and between encoding.com,
Inc., a Delaware corporation ("Encoding"), and Valley Media, Inc., a Delaware
corporation ("Valley").
RECITALS
A. Encoding offers services and applications for encoding,
optimizing and delivering audio and video content on the Internet.
B. Valley is a distributor of music and video entertainment
products.
C. Valley desires to obtain certain services from Encoding that
will allow Valley to include a digital music sampling service as part of the
consumer database it offers to its retail customers.
AGREEMENT
In consideration of the foregoing and the mutual promises and
covenants contained herein, and for other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, Valley and Encoding
hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following definitions
will apply:
1.1. The term "Confidential Information" means any information that one
party (the "Disclosing Party") furnishes or makes available to the
other party (the "Receiving Party") and all information related to
the business of one party (the "Disclosing Party") which the other
party (the "Receiving Party") acquires in the course of performing
its obligations under this Agreement; provided, however, that the
term "Confidential Information" does not include any information
that the Receiving Party can prove (a) is generally available to or
known by the public, (b) was available to or known by the Receiving
Party on a non-confidential basis prior to disclosure by the
Disclosing Party, (c) was independently developed for the Receiving
Party by persons who were not given access to the information
disclosed by the Disclosing Party, or (d) becomes generally known
to the public after the Effective Date through no act or omission
of the Receiving Party.
1.2. The term "Major Labels" means, collectively, [*], and (f) any
affiliate, division or subsidiary of any of the entities described
in parts (a) through (e) of this Section 1.2.
2. Inventory Loan. Valley maintains an inventory of compact discs containing
prerecorded music (each, a "CD" and, collectively, the "CDs"). Valley will
[*], one copy of each stock-keeping unit maintained by Valley among its
inventory of CDs during the term of this Agreement, including the original
artwork and packaging for each such CD (each, a "Loaned CD" and,
collectively, the "Loaned CDs"). Valley will deliver the Loaned CDs to
Encoding. Encoding will [*] in delivering the Loaned CDs. In addition,
Encoding will pay Valley a handling charge of [*] per Loaned CD delivered
to Encoding by Valley.
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3. Product Information File. Valley maintains an electronic data file
containing [*] for each recording contained in a CD in its inventory (the
"Product Information File"). Valley will deliver to Encoding, at [*]
charge, one electronic copy of the Product Information File. In addition,
during the term of this Agreement, Valley will deliver to Encoding daily
updates of the Product Information File ("PIF Updates") containing artist
and UPC information for recordings contained in CDs that have been added to
Valley's inventory since the original Product Information File or the last
PIF Update was delivered to Encoding by Valley, whichever was later. For
purposes of this Agreement, the term "Product Information File" means the
Product Information File as updated and/or amended by Encoding to
incorporate any and all PIF Updates. Valley will not be required to deliver
updates of the Product Information File to Encoding following the
termination or expiration of this Agreement unless the parties agree
otherwise.
4. Encoding of Loaned CDs.
4.1. For each recording contained in a Loaned CD (each, a "Recording"
and, collectively, the "Recordings"), Encoding will create a
storable electronic file containing a copy of that Recording in
digital form (each, a "Song File" and, collectively, the "Song
Files"). Encoding will create each Song File in a manner that will
allow that Song File to be encoded into each of the streaming and
downloading formats and at each of the data rates described in
Exhibit A hereto, which is incorporated herein by this reference.
Valley may amend Exhibit A from time to time to include additional
streaming and/or downloading formats and/or additional data rates,
and Encoding will create Song Files and Song Clips (as defined
below) for each Recording in such additional formats and/or at such
additional data rates in accordance with a schedule agreed upon by
both parties. Valley will [*] by Encoding in encoding the Loaned
CDs into such additional formats and/or at such additional data
rates pursuant to this Section 4.1.
4.2. From each Song File, Encoding will create a sound clip (each, a
"Song Clip" and, collectively, the "Song Clips") of a length, in
each of the formats and at each of the data rates described in
Exhibit B hereto, which is incorporated herein by this reference.
4.3. Encoding will link each Song Clip to that portion of the Product
Information File containing product information for the Recording
underlying the Song Clip, so that users of the Product Information
File [*] for a particular Recording will be able to [*].
4.4. Encoding will create a storable electronic file containing a copy
of the cover art of each Loaned CD in digital form (each, a "Cover
Art File" and, collectively, the "Cover Art Files". Encoding will
incorporate the Cover Art Files into the Product Information File
so that a digital image of the cover art for a Loaned CD will
appear on each screen viewed by a user of the Product Information
File that contains information regarding a Recording contained in
that Loaned CD.
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4.5. After Encoding has created Song Files and Song Clips for each
Recording contained in a Loaned CD, and created a Cover Art File
for that Loaned CD, Encoding will promptly return the Loaned CD to
Valley. Valley will [*] in delivering the returned Loaned CDs.
Encoding may return Loaned CDs without shrink-wrap, and Encoding
will use [*] efforts to have each returned Loaned CD in a condition
that would allow Valley to return the Loaned CD to the vendor from
which it was purchased without any refurbishment on Valley's part;
provided, however, if Encoding is not able to return a Loaned CDs
in such returnable condition, Encoding will pay [*] of Valley's
wholesale cost for any such Loaned CD.
4.6. Encoding will update and/or amend the Product Information File on a
daily basis to incorporate the information contained in any and all
PIF Updates.
4.7. If, in carrying out its responsibilities under this Agreement, but
without any separate obligation to do so, Encoding becomes aware of
a Recording that is contained in a Loaned CD [*].
4.8. Encoding will attempt to create a customized clip service that will
allow an artist or label to select the portion of a Recording by
that artist or label that is used to create a Song Clip for that
Recording. The artist or label would be required to bear the cost
related to the creation of any such customized Song Clip.
5. Music Sampling Service. Valley and Encoding will use the Product
Information File and the Song Clips to create a music sampling service (the
"Sampling Service") that will be sold or licensed to third parties.
Encoding and Valley each will have the right to sell or license the
Sampling Service to third parties; provided, however, that neither Encoding
nor Valley may sell, license or otherwise transfer the Sampling Service or
any portion thereof to [*]. Encoding and Valley will each be responsible
for collecting sales revenue and/or license fees from their respective
customers and/or licensees. During the term of this Agreement, Encoding and
Valley will each be entitled to [*] of any license fees received by the
other party for selling or licensing the Sampling Service, but only to the
extent [*]. Encoding will perform the following services to support the
Sampling Service:
5.1. Encoding will store the Song Clips on its business systems and use
those systems to stream the Song Clips to consumers using the
Sampling Service. In hosting and streaming the Sampling Service,
Encoding will maintain interface capabilities that are consistent
with industry standards. Encoding's right to host and stream the
Sampling Service on behalf of Valley under this Section 5.1. is not
exclusive, and Valley may retain other persons or entities to
perform such services in accordance with the following conditions.
Valley will notify Encoding in writing if it wishes to have hosting
and streaming services for the Sampling Service performed by a
person or entity other than Encoding (the "Third Party Service
Provider"). For a period of sixty (60) days following Encoding's
receipt of such notice, Valley and Encoding will negotiate in good
faith regarding Encoding's provision of such services instead of
the Third Party Service Provider. If, at the conclusion of such
sixty (60) day period, Valley and Encoding have not reached an
agreement for Encoding to perform such services after negotiating
in good faith, Valley will be permitted to retain the Third Party
Service Provider to perform such services.
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5.2. Encoding will collect the data described in Exhibit D hereto (the
"Consumer Data"), which is incorporated herein by this reference,
regarding the usage and purchasing habits of consumers that use the
Sampling Service.
6. Minimum Service Levels. In consideration of the capital expenditures that
will be incurred by Encoding in connection with this Agreement, which are
described in Section 7.1. below, Valley [*] that Encoding will receive
revenues from the Sampling Service of at least [*] during each three month
period (an "Installment Period") during the first twelve (12) months after
the Sampling Service becomes operational (the "Guaranteed Period") for a
total guaranteed payment of at least [*]. If Encoding does not receive
revenues from the Sampling Service of at least [*] during each Installment
Period during the Guaranteed Period, Valley will make a payment to Encoding
(each, a "Guaranteed Payment") within thirty (30) Days of the conclusion of
applicable Installment Period equal to the difference between [*] and the
amount of revenues actually received by Encoding from the Sampling Service
during the applicable Installment Period (the "Sampling Service Revenue");
provided, however, that Encoding will not be entitled to receive the
Guaranteed Payment if (a) the Sampling Service is not operational on or
before [*] if Valley has provided the Priority CDs (as defined below)
within 30 days of the Effective Date,or [*], which is incorporated herein
by this reference; provided, further, that Valley shall not be obligated to
make a Guaranteed Payment for a particular Installment Period if Encoding
has received an average of [*] from Guaranteed Payments and Sampling
Service Revenue and all Guaranteed Payments for the Installment Period in
question and each preceding Installment Period. For purposes of this
Section 6, the Sampling Service will become "operational" when Encoding has
created Song Files and Song Clips for the [*] Loaned CDs designated as
"Priority CDs" within 30 days of the Effective Date. For the purposes of
this Section 6, all references to "revenue" shall be revenue calculated in
accordance with U.S. GAAP.
7. Service Fees.
7.1. Capital Expenses. Encoding will pay all the necessary upfront
capital equipment charges necessary for the creation of the
Sampling Service which are estimated to total [*] and to include:
7.1.1. Facilities
7.1.2. Ripping Stations
7.1.3. Encoding Stations
7.1.4. Raid Online Storage
7.1.5. Nearline Storage System
7.1.6. Computer servers and Equipment
7.2. Shared Costs. In consideration of the services performed by
Encoding under this Agreement, Encoding and Valley will [*] the
costs of creating the Song Files and Song Clips. The costs will
include [*]. Encoding estimates these direct costs to total [*].
Therefore, Valley will pay Encoding a total of [*] on [*] for the
non-refundable expenses for setting up the Sampling Service. The
above estimates are fixed and in the event the actual costs for
this service increase or decrease, Valley will [*].
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7.3. Maintenance Costs. For the ongoing maintenance encoding of new
inventory for the Sampling Service, Valley and Encoding will [*]
the actual direct ongoing encoding costs estimated at the rate of
[*] per CD used in the Sampling Service. Therefore, Valley would
pay Encoding a service fee of [*] per such CD. These costs are
fixed through September 2000. In the event, the costs for
maintenance are determined to increase or decrease by [*] or
higher, the parties agree to renegotiate this clause and its fee
schedule in good faith. Encoding will invoice Valley on a monthly
basis that reflects the actual number of files added to the
Sampling Service inventory. Valley and Encoding will each pay [*]
of all shipping and handling charges to and from the Valley and
Encoding.com facilities.
7.4. Streaming Costs. Encoding will charge Valley [*] for the ongoing
streaming and hosting costs. [*] is defined as the [*] plus [*] of
the [*] plus [*].
8. Ownership and Rights upon Termination.
8.1. Loaned CDs.
8.1.1. The Loaned CDs are, and will at all times remain, Valley's
sole and exclusive property, and Valley will have the right to
demand the return of any or all of the Loaned CDs, with
Encoding and Valley to each pay [*] of the cost of such
return, including the original artwork and packaging for each
Loaned CD, at any time; provided, however, that, if at any
time any or all of the Loaned CDs (other than any Loaned CDs
purchased by Encoding pursuant to Section 9.2 of this
Agreement) are determined to be Encoding's property, Encoding
hereby grants Valley a security interest in such Loaned CDs.
8.1.2. Upon the expiration or termination of this Agreement,
Encoding will promptly return all of the Loaned CDs, including
the original artwork and packaging for each Loaned CD, with
Encoding and Valley to each pay [*] of the cost of such
return, to Valley (other than any Loaned CDs Encoding has
already returned to, or purchased from, Valley pursuant to
Section 9.2 of this Agreement).
8.2. Files and Clips.
8.2.1. The Song Clips, the Song Files and the Cover Art Files will
be, and will at all times remain, the sole and exclusive
property of Valley; provided, however, that, if at any time
any or all of the Song Files and/or the Song Clips and/or the
Cover Art Files are determined to be Encoding's property,
Encoding hereby grants Valley a security interest in such Song
Files and/or Song Clips and/or Cover Art Files .
8.2.2. The Product Information File and any and all PIF Updates
will be, and will at all times remain, the sole and exclusive
property of Valley; provided, however, that, if at any time
the Product Information File, any portion thereof, or any or
all of the PIF Updates are determined to be Encoding's
property, Encoding hereby grants Valley a security interest in
the Product Information File and/or such PIF Updates.
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8.2.3. Valley hereby grants Encoding a worldwide, perpetual,
irrevocable, nonexclusive license to use, store, modify, copy
and distribute the Product Information File, the PIF Updates,
the Song Clips, the Song Files and the cover Art Files. This
license will survive any termination or expiration of this
Agreement. Encoding will have the right to sublicense the
Product Information File, the PIF Updates, the Song Files, the
Song Clips and the Cover Art Files to any entity other than
[*].
8.2.4. Upon the expiration or termination of this Agreement, or at
any earlier time, upon demand by Valley, Encoding will
promptly deliver to Valley, [*], copies of all of the Song
Files, Song Clips and Cover Art Files in the formats
maintained hereunder; provided, however, if Valley terminates
this Agreement as a result of a breach of this Agreement by
Encoding pursuant to Section 18.2, Encoding shall [*].
8.3. Consumer Data. All of the Consumer Data will be, and will at all
times remain, the sole and exclusive property of Valley; provided,
however, that Valley will pay Encoding [*] all revenues received by
Valley through the sale, licensing or other commercial exploitation
of all or any portion of the Consumer Data during the term of this
Agreement.
9. Audiofile License and Deleted Product.
9.1. At the same time the parties enter into this Agreement, they will
enter into an Audiofile License Agreement substantially in the form
attached hereto as Exhibit F (the "Audiofile License"), which is
incorporated herein by this reference, pursuant to which Valley
will license its audiofile database ("Audiofile") to Encoding on a
royalty free basis during the term of this Agreement. If Valley is
notified by any of its suppliers that the supplier is deleting one
of the Loaned CDs from its catalog, Valley will post a deletion
notice regarding the Loaned CD on Audiofile, and Encoding will
return its copy of the Loaned CD to Valley on or before the Last
Customer Return Date stated in the deletion notice, with Encoding
and Valley to [*] of the cost of such return.
9.2. If Valley posts a deletion notice regarding a Loaned CD on
Audiofile and Audiofile is fully operational and accessible by
Encoding, and Encoding fails to return its copy of the Loaned CD to
Valley prior to the Last Customer Return Date stated in the
deletion notice, Encoding will purchase the Loaned CD from Valley
at Valley's wholesale price for the Loaned CD.
10. Initial Warrant Grant. Encoding will issue warrants for 325,000 shares of
Encoding common stock with a strike price of $10 per share and an exercise
period of 1 year (the "Initial Warrants"). The Initial Warrants will be
granted upon commencement of this agreement.
11. Rights Acquisition. Encoding will grant Valley an additional 325,000 on
the same terms and conditions as the Initial Warrants in consideration of
Valley's certification attached hereto as Exhibit G (the "Certificate"),
which is incorporated herein by this reference, regarding Valley's attempts
to [*]. The statements contained in the Certificate will constitute
representations and warranties of Valley under this Agreement. If Valley
enters into a definitive written agreement with [*] regarding the matters
set forth in the Certificate, Valley will provide a copy of such agreement
to Encoding.
12. Future Endeavors.
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12.1. Valley and Encoding will explore the possibility of a variety of
new offerings leveraging either the existing assets such as the
Song Files, Song Clips and/or the PIF for additional Internet Music
services including digital downloading services for Valley's
customers, Internet radio broadcasts, Internet or digital juke
boxes, "just-in-time" compact disc manufacturing; or offerings
leveraging other assets of Valley and Encoding.
12.2. Valley and Encoding agree that both parties will mutually agree
upon the appropriate business model for all new jointly created new
ventures. In such ventures as may occur, Encoding and Valley will
[*] but will attempt to structure the ventures so [*].
13. Representations and Warranties of Encoding. To induce Valley to enter into
this Agreement and to perform the transactions contemplated hereunder,
Encoding represents and warrants as follows:
13.1. Organization. Encoding is a corporation duly organized, validly
existing and in good standing under the laws of the state of
Delaware.
13.2. Authority; Consents and Approvals; No Violations. Encoding has
the full corporate power and authority and legal right to execute
and deliver this Agreement, and otherwise to perform its
obligations hereunder. This Agreement has been validly executed and
delivered by Encoding and will constitute a valid and binding
obligation of Encoding enforceable in accordance with its terms,
except to the extent such enforceability may be limited by the
effects of bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally, and by
the effect of general principles of equitable law, regardless of
whether such enforceability is considered in a proceeding in equity
or at law. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby do not and
will not violate any provision of Encoding's Certificate of
Incorporation or Bylaws, or violate, conflict with, result in a
breach of or constitute (with or without due notice, lapse of time
or both) a default under any agreement, license, contract,
franchise, permit, indenture, lease, or other instrument to which
Encoding is a party, or by which it or any of its assets are bound.
13.3. Performance Standards. Encoding will perform the services
described in Sections 4 and 5 of this Agreement in a professional
and workmanlike manner that is consistent with the highest
industry standards.
14. Representations and Warranties of Valley. To induce Encoding to enter
into this Agreement and to perform the transactions contemplated hereunder,
Valley represents and warrants as follows:
14.1. Organization. Valley is a corporation duly organized, validly
existing and in good standing under the laws of the state of
Delaware.
14.2. Authority; Consents and Approvals; No Violations. Valley has the
full corporate power and authority and legal right to execute and
deliver this Agreement, and otherwise to perform its obligations
hereunder. This Agreement has been validly executed and delivered
by Valley and will constitute a valid and binding obligation of
Valley enforceable in accordance with its terms, except to the
extent such enforceability may be limited by the effects of
bankruptcy, insolvency,
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reorganization, moratorium or other similar laws affecting
creditors' rights generally, and by the effect of general
principles of equitable law, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby do not and will not violate
any provision of Valley's Certificate of Incorporation or Bylaws or
violate, conflict with, result in a breach of or constitute (with
or without due notice, lapse of time or both) a default under any
agreement, license, contract, franchise, permit, indenture, lease,
or other instrument to which Valley is a party, or by which it or
any of its assets are bound.
15. Indemnification. Each party will, at all times, indemnify, defend and
hold the other party harmless from and against any and all third-party
claims, damages, liabilities, costs and expenses (including reasonable
attorney's fees) arising out of any breach or alleged breach by the
indemnifying party of any representation, warranty or obligation of such
party under this Agreement. In addition, each party will, at all times,
indemnify, defend and hold the other party harmless from and against any
and all third-party claims, damages, liabilities, costs and expenses
(including reasonable attorney's fees) arising out of any infringement or
alleged infringement of the patents, copyrights, trademarks or other
intellectual property rights of any third party that results from the
commercial use of the Sampling Service by the indemnifying party, any of
the indemnifying party's licensees, or any person or entity that has
purchased the Sampling Service, or any portion thereof, from the
indemnifying party.
16. Limitation on Damages. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE
OTHER FOR INDIRECT OR CONSEQUENTIAL DAMAGES, WHETHER OR NOT SUCH PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND REGARDLESS OF THE FORM
OF ACTION.
17. Confidential Information. Neither Encoding nor Valley may use any
Confidential Information of the other except as permitted under this
Agreement. In addition, neither Encoding nor Valley may disclose any
Confidential Information of the other unless (a) such disclosure is made to
the Disclosing Party's employees or agents on a "need to know" basis or (b)
such disclosure is required by law or legal process and the party from whom
such disclosure is required has given the other party prior notice of such
requirement and has cooperated with the non-Disclosing Party to oppose
disclosure. For purposes of this Agreement, any unauthorized use or
disclosure of Confidential Information by an employee or agent of either
party will be treated as an unauthorized disclosure by such party.
18. Term and Termination.
18.1. This Agreement will terminate on the third anniversary of the
Effective Date (the "Initial Termination Date"), unless both
parties provide a written amendment at least ninety (90) days prior
to the Initial Termination Date, in which case this Agreement will
be extended for an additional two years and will terminate upon the
fifth anniversary of the Effective Date.
18.2. Either party may terminate this Agreement if (i) the other party
materially breaches any of its obligations under this Agreement,
(ii) the non-breaching party sends written notice to the breaching
party describing the breach in reasonable detail, and (iii) the
breaching party does not cure the breach within thirty (30) days
following its receipt of such notice.
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18.3. Either party may terminate this Agreement if (i) the other party
becomes insolvent, or (ii) a petition is filed by or against the
other party under any bankruptcy or insolvency laws and, in the
event of any involuntary petition, the petition is not dismissed
within forty-five (45) days of the filing date.
18.4. The parties may terminate this Agreement by mutual consent through
a signed writing.
19. Press Release. Upon execution of this Agreement, Encoding and Valley
will issue a joint press release (the "Press Release") announcing the
execution of this Agreement and briefly describing the transactions
contemplated hereby. Neither party will issue the Press Release, nor any
other release concerning this Agreement or the transactions contemplated
hereby, without the other party's prior consent.
20. Miscellaneous
20.1. Assignment. Neither party may assign any of its rights under this
Agreement without the other party's prior written consent;
provided, however, that either party may assign its rights under
this Agreement to any affiliate of such party, any entity into
which such party is merged or any entity that purchases
substantially all of the assets of such party.
20.2. Further Assurances. In addition to the obligations required to be
performed by the parties hereto under the other provisions of this
Agreement, the parties agree to perform, without further
consideration, such other acts and to execute, file, acknowledge
and deliver such other instruments and documents, including without
limitation UCC-1 financing statements covering the Loaned CDs, the
Song Files, the Song Clips, the Product Information File and the
PIF Updates, as may be reasonably required to carry out the
provisions and purposes of this Agreement and to fully and properly
consummate the transactions contemplated hereby.
20.3. Amendment and Waiver. No amendment or modification of this
Agreement will be effective unless set forth in a writing signed by
an authorized representative of the party against which enforcement
of such amendment is sought. No waiver by a party of the other
party's obligation to comply with any provision of this Agreement
will be deemed or will constitute a waiver of the nonwaiving
party's obligation to comply with any other provision of this
Agreement or with the nonwaiving party's obligation to comply with
the waived provision on a subsequent occasion.
20.4. Arbitration. Any dispute or controversy arising between Encoding
and Valley regarding this Agreement will be submitted to
arbitration in the state of the defending party in accordance with
the rules then in effect of the American Arbitration Association.
Any award made by an arbitrator pursuant to this Section 20.4 will
be binding upon both parties in the absence of fraud and may be
entered in any court of competent jurisdiction.
20.5. Notices. Any notice to a party pursuant to this Agreement shall be
given by one of the following means: (a) certified or registered
United States mail, postage prepaid, (b) private courier or express
service requesting evidence of receipt as a part of its service, or
(c) by telecopy, with a copy also to
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be given by first class United States mail, postage prepaid, or by
any means permitted under parts (a) or (b) of this Section 20.5.
Notices shall be given to the parties at the following addressees:
If to Valley: Valley Media, Inc.
1280 Santa Anita Court
Woodland, California 95776
Attention: Sachin Adarkar
Fax Number: (530) 406-5231
If to Encoding: encoding.com, Inc.
414 Olive Way, 3rd Floor
Seattle, Washington 98101
Attention: CFO
Fax Number: 206-832-4001
with a mandatory copy to: Venture Law Group
4750 Carillon Point
Kirkland, WA 98033
Attention: John W. Robertson
Fax Number: (425) 739-8750
20.6. Binding Effect. Upon execution of this Agreement by all parties
hereto, this Agreement shall inure to the benefit of, and be
binding on and enforceable against, the parties and their
respective heirs, legal representatives, successors and permitted
assigns.
20.7. Entire Agreement. This Agreement, including the exhibits and
schedules hereto, together with the Audiofile License and the
Warrant, constitute the entire agreement and understanding between
the parties with respect to the subject matter hereof, and
supersede any prior or contemporaneous agreements or understandings
relating to the subject matter hereof, whether written or oral.
20.8. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of
which, taken together, will constitute one and the same instrument.
20.9. Attorneys' Fees. If any arbitration, legal action or other
proceeding is brought for the enforcement of this Agreement, or
because of an alleged dispute, breach, default or misrepresentation
in connection with any of the provisions of this Agreement, the
successful or prevailing party will be entitled to recover
reasonable attorneys' fees and other costs incurred in such action
or proceeding, in addition to any other relief to which it may be
entitled.
20.10. Survival. The provisions of Sections 1, 8.3, 15, 16, 17, and 20
will survive any termination or expiration of this Agreement.
20.11. Headings. The headings of the paragraphs and sections of this
Agreement are included for purposes of convenience only and shall
not affect the construction or interpretation of any provisions
hereunder.
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20.12. Partial Invalidity. The invalidity of any part or provision of this
Agreement will not affect the enforceability of the remainder of
this Agreement.
20.13. Governing Law. This Agreement will be governed by and construed in
accordance with the substantive laws of the State of California
applicable to contracts entered into and performed entirely within
that state.
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In witness whereof, the parties have executed this Services
Agreement as of the Effective Date.
Valley Media, Inc. encoding.com, Inc.
/s/ Sachin Adarkar /s/ David C. Bullis
____________________________ __________________________
By: By:
Its: Its:
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Exhibit A
---------
Song File Streaming Formats
---------------------------
The parties agree to support the following Digital Audio formats per the terms
in Section 4.1.
[* * * * *]
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Exhibit B
---------
Song Clip Streaming and Data Formats
------------------------------------
The parties agree to support the following Data Rates and Samples lengths per
the terms in Section 4.2.
Formats and Data Rates:
[* * * * *]
Clips Lengths:
1. Pop/Rock/Non-Jazz and Classical - 30 seconds
2. Jazz/Classical - 60 seconds
The clips lengths are intended to meet contemporary commercial standards and
are subject to change.
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Exhibit C
---------
Product Information File Schedule
---------------------------------
Product Information File Specification
Valley will provide encoding.com the following minimum data in a
commercially acceptable manner:
[* * * * *]
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Exhibit D
---------
Consumer Data
-------------
Encoding will track and provide a data file that includes the following
information reports:
[* * * *]
The specifics of these reports will vary and can be modified for particular
customer requests related to the Music sampling Service.
[*] Confidential Treatment Request
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Exhibit E
---------
Minimum Service Standards
-------------------------
The following represents Encoding's standard Service Level Agreement for
Streaming. The parties agree that the Music Sampling Service will need to meet
commercial and competitive standards and might differ from these terms. The
parties agree to modify the Service Level Agreement as necessary to meet
commercially acceptable standards.
Service Level Guidelines
(KK)
1. Bandwidth and Processor Capacity. [* * * *]
2. Backup. In the case of server crashes and/or corrupt data, Encoding.com
shall [* * * *]
3. Security. Encoding will [* * * *]
4. Administration. [* * * *]
5. Maintenance. [* * * * *]
[*] Confidential Treatment Request
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6. Support Guidelines. Encoding will provide support as set out below in
Table 1, [* * * *]
[*] Confidential Treatment Request
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7. Access Warranty. [* * * *]
8. Year 2000 Compliance. Subject to the limitations set forth below, Encoding
represents and warrants to Provider that the Encoding software used in
connection with the provision of the Encoding Streamig Services, when used
properly and in conformity with the product information provided by
Encoding, will accurately store, display, process, provide, and/or receive
date data from, into, and between 1999 and 2000, and the twentieth and
twenty-first centuries, including leap year calculations, provided that all
other technology used in combination with the such software properly
exchanges date data with such software. Encoding makes no representation
about individual components within such software should they be used
independently from the product as a whole. This limited warranty is in
lieu of all other warranties, whether express, implied, or statutory,
including, but not limited to, any warranty of merchantability, fitness for
a particular purpose, or any warranty arising out of any proposal,
specification, or sample. Encoding's sole obligation with respect to this
limited warranty, including its total liability for all
[*] Confidential Treatment Request
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claims hereunder, is governed by Section 19 of this Agreement. These
limitations on potential liability were an essential element in setting the
price for the services to be provided by Encoding hereunder.
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Exhibit F
---------
Audiofile License
-----------------
This audiofile License Agreement (this "License"), dated December 17, 1999 (the
"Effective Date"), is entered into by and between Valley Media, Inc., a Delaware
corporation ("Licensor"), and encoding.com, Inc., a Delaware corporation
("Licensee").
1. License Grant
(a) Licensor hereby grants Licensee a non-exclusive and non-transferable
license to:
(i) Load, transmit, execute, store and/or display the proprietary
audiofile database created and developed by Licensor (the
"Database") for Licensee's internal use;
(ii) Modify the Database for internal use by Licensee; and
(iii) Incorporate the Database or portions thereof into Licensee's own
database for use by Licensee; provided, however, that the Database
portion of the resulting conjoined work may only be used in
accordance with this License and will still be subject to all the
provisions hereof.
(b) Licensor will provide Licensee with periodic updates of the information
contained in the Database (each such update, a "Database Update"). For
purposes of this License, the term "Database" includes any and all Database
Updates.
(c) Licensor will provide Licensee with reasonable telephone support for the
Database at no additional charge.
2. Restrictions on Transfer
(a) Licensee may not, without Licensor's prior written consent or as set forth
in that certain Services Agreement (the "Services Agreement") between
Licensor and Licensee dated as of the Effective Date (collectively, a
"Consent to Transfer"), sublicense, sell, lend, rent or otherwise transfer
the Database or any portion thereof, or assign any of its rights or
obligations under this License, to any other person or entity, including,
without limitation, any of Licensee's wholly or partially owned
subsidiaries or affiliates; provided, however, that Licensee may make
copies of the Database sufficient for its own back-up, development and
production purposes.
(b) If Licensee obtains a Consent to Transfer from Licensor, Licensee will
obtain a written undertaking from the intended transferee (the "Permitted
Transferee") prior to effecting such transfer acknowledging and agreeing to
the following:
(i) That the Database is the valuable, sole and exclusive intellectual
property of Licensor;
(ii) That the Permitted Transferee will only use the Database in the
manner expressly permitted under the Consent to Transfer, and that
the Permitted Transferee will be liable for any use of the Database
by Permitted Transferee, its agents, employees, assigns or
transferees that is not expressly permitted under the Consent to
Transfer;
(iii) That the Permitted Transferee has read and agrees to be bound by
Sections 4, 6, 7, 8 and 9 of this License with respect to its use of
the Database; and
(iv) That the Permitted Transferee will place appropriate copyright
notices on all materials created by or for the Permitted Transferee
that contain all or any portion of the information contained in the
Database, regardless of whether such materials are in printed,
video, audio, electronic or any other form.
3. Fees
Licensee will not be required to pay Licensor any fees under this License.
4. Rights in Tangible and Intellectual Property
(a) Except as set forth in the Services Agreement, as between Licensor and
Licensee, Licensor is the sole and exclusive owner of the Database, any
supporting materials provided therewith, and any and all patents,
trademarks, servicemarks, copyrights, trade names, service names, trade
secrets and other proprietary and/or intellectual property rights
associated with the Database or such supporting materials. Licensee agrees
to treat the Database, the information it contains and any such supporting
materials as the Licensor's confidential trade secrets.
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(b) Except as set forth in the Services Agreement, if any materials created by
or for Licensee for publication or display or distribution to the public
contain all or any portion of the information contained in the Database,
regardless of whether such materials are in printed, video, audio,
electronic or any other form, Licensee will ensure that such materials
contain appropriate copyright notices identifying Licensor as the copyright
holder with respect to such information.
5. Term: Termination
The term of this License will commence as of the Effective Date and will
continue until the expiration or termination of the Services Agreement.
6. Warranty
(a) Licensor warrants that the media on which or by which the Database and the
Database Updates are delivered and transmitted will be free from defects.
If any such media are defective, Licensee's sole and exclusive remedy will
be to elect one of the following:
(i) Require that Licensor replace or repair the defective media; or
(ii) Require that Licensor retransmit or redeliver the Database or
Database Update.
(b) EXCEPT AS SET FORTH IN SECTION 6(a) ABOVE:
(i) THE DATABASE IS PROVIDED "AS IS," AND LICENSOR MAKES NO
REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE CONTENT,
SUFFICIENCY, ACCURACY, COMPLETENESS OR CURRENCY THEREOF; AND
(ii) LICENSOR EXPRESSLY DISCLAIMS ANY EXPRESS, IMPLIED OR STATUTORY
WARRANTIES WITH RESPECT TO THE DATABASE, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
7. Limitations of Liability
(a) IN NO EVENT WILL LICENSOR BE LIABLE TO LICENSEE FOR ANY SPECIAL, INDIRECT
OR CONSEQUENTIAL DAMAGES, WHETHER OR NOT LICENSOR HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES AND REGARDLESS OF THE FORM OF ACTION.
(b) IN NO EVENT WILL LICENSOR'S LIABILITY TO LICENSEE FOR ANY CLAIMS, LOSSES OR
DAMAGES ARISING UNDER THIS LICENSE, WHETHER IN CONTRACT, TORT OR OTHERWISE,
EXCEED THE TOTAL AMOUNT OF FEES RECEIVED BY LICENSOR HEREUNDER.
8. Indemnification
Subject to the limitations on liability set forth in Section 7, each party will,
at all times, indemnify, defend and hold the other party harmless from and
against any and all third-party claims, damages, liabilities, costs and expenses
(including reasonable attorney's fees) arising out of any breach or alleged
breach by the indemnifying party of any representation, warranty or covenant
made by such party under this License.
9. Injunctive Relief
The parties agree that Licensor may suffer irreparable harm in the event
Licensee fails to comply with any of the provisions of Sections 2 or 3 of this
License, and that monetary damages and other remedies available at law would, in
themselves, be insufficient to compensate Licensor for such harm. Therefore, if
Licensee breaches or threatens to breach any of its obligations under Sections 2
or 3 of this License, Licensor will be entitled to obtain injunctive relief from
any court of competent jurisdiction to cure such breach or prevent such
threatened breach, as the case may be, and such injunctive relief shall be in
addition to, and not in lieu of, any other remedies available to Licensor at law
or in equity.
10. Miscellaneous
(a) Assignment. This License may not be assigned by either party without the
other party's prior written consent; provided, however, that Licensor may,
without Licensee's prior written consent, assign its right to receive fees
hereunder and may assign this License to any of its affiliates or
subsidiaries.
(b) Survival. The provisions of Sections 6, 7 and 8 will survive the
termination or expiration of this License.
(c) Amendment and Termination. No amendment, modification, termination or
cancellation of this License will be effective unless set forth in a
writing signed by an authorized representative of the party against which
enforcement of such amendment is
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<PAGE>
sought. No waiver of any provision of this License will be deemed or will
constitute a waiver of any other provision of this License or a subsequent
or continuing waiver of the same provision.
(d) Notices. Any notice to a party pursuant to this License shall be given by
one of the following means: (a) certified or registered United States mail,
postage prepaid, (b) private courier or express service requesting evidence
of receipt as a part of its service, or (c) by telecopy, with a copy also
to be given by first class United States mail, postage prepaid, or by any
means permitted under subparagraphs (a) or (b) of this section. Notices
shall be given to the parties at the following addressees:
If to Licensor: Valley Media, Inc.
1280 Santa Anita Court
Woodland, California 95776
Attention: Sachin Adarkar, General Counsel
Fax Number: (530) 406-5231
If to Licensee: encoding.com, Inc.
414 Olive Way, 3rd Floor
Seattle, Washington 98101
Attn: CFO
Fax Number: (206) 832-4001
with a copy to: Venture Law Group
4750 Carillon Point
Kirkland, WA 98033
Attn: John W. Robertson
Fax Number: (425) 739-8750
(e) Headings. The headings of the sections and paragraphs of this License are
included for purposes of convenience only and shall not affect the
construction or interpretation of any provisions hereunder.
(f) Partial Invalidity. The invalidity of any part or provision of this
License will not affect the enforceability of the remainder of the License.
(g) Governing Law. This License will be governed by and construed in
accordance with the substantive laws of the State of California applicable
to contracts entered into and performed entirely within that state.
In witness whereof, the parties have executed this License as of the Effective
Date.
LICENSOR: LICENSEE:
Valley Media, Inc. encoding.com, inc.
/s/ Sachin Adarkar /s/ David C. Bullis
----------------------------- -----------------------------
By: By:
-------------------------- --------------------------
Its: Its:
------------------------- -------------------------
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Exhibit G
---------
Rights Certification
--------------------
OFFICER'S CERTIFICATE
The undersigned, on behalf of Valley Media, Inc., a Delaware corporation
("Valley"), hereby certifies as follows:
1. The undersigned is Valley's duly appointed President and Chief Executive
Officer.
2. Valley has been given oral permission by [****].
3. Valley has been given oral permission by [****].
4. Valley has been given oral permission by [****].
5. Valley has been given oral permission by [****].
6. All capitalized terms not defined in this Certificate will have the
respective meanings ascribed to such terms in the Agreement.
In witness whereof, the undersigned has executed this Officer's Certificate
as of December 16, 1999.
/s/ Robert R. Cain
-----------------------
ROBERT R. CAIN
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