Settlement Agreement - MP3.com Inc. and Capitol Records inc.
SETTLEMENT AGREEMENT
This Settlement Agreement and Mutual Release (hereinafter "Settlement
Agreement") is entered into effective as of July 26, 2000 by and between
MP3.COM, INC. ("MP3" herein) on the one hand, and Capitol Records, Inc.
("Capitol") and all of its affiliated and related entities (collectively with
Capitol, "Company") on the other hand, both of which are sometimes collectively
referred to as the "Parties" and is made with reference to the following:
1. RECITALS:
a) Capitol is a Plaintiff and MP3 is the defendant in the following
litigation (the "Litigation") pending in the United States
District Court for the Southern District of New York captioned
UMG RECORDINGS, INC., SONY MUSIC ENTERTAINMENT INC., WARNER
BROS. RECORDS INC., ARISTA RECORDS INC., ATLANTIC RECORDING
CORPORATION, BMG MUSIC D/B/A THE RCA RECORDS LABEL, CAPITOL
RECORDS, INC., ELEKTRA ENTERTAINMENT GROUP, INC., INTERSCOPE
RECORDS, AND SIRE RECORDS GROUP INC., Plaintiffs, vs. MP3.COM,
INC., Defendant, Case No. 00 Civ. 0472 (JSR). Each of the
Parties to this Settlement Agreement desires to permanently
settle and resolve any and all claims, disputes, issues or
matters that exist between them as of the date of this
Settlement Agreement as to the MyMP3.com service as set forth
below and to dismiss with prejudice the Litigation.
b) NOW, THEREFORE, in consideration of the mutual promises,
covenants and agreements set forth herein, and subject to the
terms and conditions set forth below, the Parties desire to, and
hereby do, resolve their differences and agree as follows:
2. SETTLEMENT TERMS:
a) In consideration hereof, concurrently with the execution hereof
and of the License Agreement referred to in subparagraph (e) of
this Section 2 below, and the execution and filing of the
Dismissal With Prejudice of the Litigation as described
hereinbelow, MP3 will pay Company's Virgin Holdings, Inc.
affiliate an amount equal to[...***...] the "EMI Amount"),
[...***...] by wire transfer of immediately available funds to
an account designated by Company.
b) If MP3 or an affiliate enters into or has heretofore entered
into a settlement
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agreement with any of the original plaintiffs to the Litigation,
which settlement agreement obligates MP3 or an affiliate to pay
such plaintiff or its affiliate (collectively, a "Plaintiff" or
the "Plaintiffs") a "Settlement Amount" (defined below) greater
than the applicable amount set forth in the schedule in
subparagraph 2(b)(ii) below, then MP3 shall pay to Company an
additional settlement payment (the "Additional Payment(s)") as
set forth below:
i) The "Settlement Amount" is defined as sums paid by MP3
or an affiliate to a Plaintiff in settlement of the
Litigation, exclusive only of (i) similar "Additional
Payments" required to be paid to any such Plaintiff,
(ii) sums paid to a Plaintiff in the form of a damage
award in the Litigation or any other litigation, (iii)
legal fees and (iv) any recoupable sums, per stream
royalties or revenue shares paid by MP3 in connection
with any exploitation after the date hereof of sound
recordings or musical compositions pursuant to a license
or other agreement, but inclusive, without limitation,
of (x) any non-recoupable amounts paid to a Plaintiff
(other than per stream royalties or revenue shares as
described above in (iv) of this subparagraph 2(b)(i))
paid pursuant to any license or any other agreement
entered into concurrently or substantially concurrently
with such settlement agreement with a Plaintiff
(including any and all agreements entered into or
substantially negotiated within six [6] months of entry
into the settlement agreement with a Plaintiff), and (y)
any payments to a Plaintiff with respect to past uses of
musical compositions. In the event that an Additional
Payment is due as a result of a license or other
agreement pursuant to which MP3 is granted additional
material rights by a Plaintiff (other than rights
previously granted by Company to MP3), then in
consideration of Company's receipt of such Additional
Payment (should it elect to receive said Additional
Payment), Company shall grant to MP3 the same such
rights, insofar as Company is concerned, as were granted
by such Plaintiff. If such Plaintiff grants additional
material rights to MP3 as aforesaid, but shall not have
granted to MP3 substantially all of the rights that
Company shall have granted to MP3, then the parties
shall assess whether or not the rights granted to MP3 by
Company are in their totality comparable to the rights
granted to MP3 by such Plaintiff and whether or not
Company would be obligated to grant additional rights to
MP3 in order to receive the Additional Payment. If the
parties are unable to agree, such a determination may be
submitted to non-binding mediation, and if a party
thereafter elects, then to binding, expedited
arbitration in each event by written notice from one
party to the other. If it is
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determined that additional rights are required to be
granted to MP3 in order for Company to be entitled to
the Additional Payment, Company shall have the right to
elect not to grant such rights and, in such event, not
to take such Additional Payment.
ii) The Additional Payment shall be defined as the amount in
excess of the EMI Amount determined after multiplying
the EMI Amount by a fraction (the "Fraction"), the
denominator of which is the applicable amount described
in the following schedule and the numerator of which is
the Settlement Amount actually paid to the applicable
Plaintiff
a) BMG Entertainment, - [...***...]
b) Warner Music Group, Inc. - [...***...]
c) UMG Recordings, Inc. - [...***...] and
d) Sony Music Entertainment, Inc. - [...***...]
iii) Such Additional Payment shall be calculated and made
promptly after MP3 has executed any applicable
agreements with any of said Plaintiffs. MP3 is obligated
to advise Company promptly of any applicable agreement.
The total Additional Payment(s) shall be based on the
Settlement Amount which effectively yields the single
largest Fraction, if any, with respect to any of the
four Plaintiffs. Thus, if any one such agreement with a
Plaintiff results in a certain Fraction requiring an
Additional Payment, then any subsequent agreement with
another Plaintiff will only result in a further
Additional Payment to the extent the Fraction applicable
to such subsequent agreement is greater than the
Fraction resulting from such prior agreement.
iv) An "Other Release" is defined as an agreement or
agreements (or any amendment to or modification of any
agreement) that MP3 or an affiliate of MP3 enters into
(or has entered into) with a Plaintiff pursuant to which
claims as to the use by MP3 of musical compositions in
connection with the MyMP3.com service are released or
compromised including by reason of a license or grant of
rights. An agreement with either Sony Music
Entertainment, Inc. or UMG Recordings, Inc. or their
respective affiliates pursuant to which claims as to the
use by
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MP3 of musical compositions in connection with
the MyMP3.com service are released or
compromised shall only be an Other Release as
aforesaid if pursuant to such agreement or any
other agreement entered into concurrently or
substantially concurrently with such agreement
with Sony Music Entertainment, Inc. or UMG
Recordings, Inc. or their respective affiliates
[...***...] or more of the sums scheduled in
2(b)(ii)(c) or (d) are paid or payable to such
Plaintiff as the applicable Settlement Amount
(prior to reduction by reason of setoffs arising
from claims of MP3 or any affiliate of MP3).
Notwithstanding anything to the contrary
contained in this Agreement, if an Other Release
is, in any respect, other than in respect of the
amount of any monies paid or the dollar amount
thresholds which determine whether or not an
Additional Payment may be payable, more
favorable to such Plaintiff in respect of the
disposition of claims than the release granted
in this Settlement Agreement (including, without
limitation, in the event an Other Release only
settles claims with respect to past uses of
musical compositions (x) embodied only in sound
recordings owned or controlled by any entity
affiliated with such Plaintiff or (y) embodied
only on records manufactured and/or distributed
by any entity affiliated with such Plaintiff)
(hereinafter the "More Favorable Terms") then,
without in any way affecting Company's right to
retain or receive payment in full of the EMI
Amount and any other amounts theretofore paid to
Company by MP3 or thereafter payable, unless
Company otherwise specifically elects in
writing, the release given hereunder shall be
deemed to be changed so as to exactly conform in
such respects to the More Favorable Terms of the
Other Release other than the payment amount or
the dollar amount thresholds which determine
whether or not an Additional Payment may be
payable. In the event that as a result of any
such conforming changes in this release, certain
claims are no longer released or compromised by
Company, then Company will be deemed to have
reserved its rights and remedies with respect to
such claims. MP3 agrees that it shall
immediately notify Company in writing as to the
terms of any agreements, amendments,
modifications, changes or dispositions to which
this Section 2(b)(iv) applies or relates, and
shall simultaneously provide Company with a full
and complete copy of such Other Release.
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v) MP3 acknowledges that the provisions of this
subparagraph 2(b) are of the essence of this
Agreement.
vi) In no event will the provisions of this
subparagraph 2(b) operate to reduce the EMI
Amount or require the repayment of any portion
thereof to MP3.
c) Reference is made to all musical compositions owned or
controlled by Company's music publishing affiliates,
including without limitation, EMI Music Publishing, as
of the date hereof (the "Compositions"). Company and MP3
agree that the release herein covers only claims that
Company could have asserted in respect of MP3's
unlicensed use prior to the date hereof for or in
connection with MP3's My.MP3 service of the Compositions
to the extent of Company or its affiliates' ownership or
control thereof as of the date hereof (including, by way
solely of example, the reproduction thereof). Company
and MP3 agree that the release herein does not cover any
additional use of the Compositions which takes place
after the date of this Settlement Agreement by any means
now known or hereafter invented (including without
limitation any exploitations of Compositions already
copied into MP3's database or any use by MP3 of any
other musical compositions). The parties agree that this
release does not extend to uses of the Compositions to
the extent same were authorized pursuant to licenses
between MP3 and any performing rights societies
("Licensed Performances").
d) Capitol represents that it is the parent company to all
of EMI Group plc's U.S. record and music publishing
businesses. It specifically is understood that the term
"Company" shall include any corporation or other entity
currently controlling, or controlled by, or under common
control with Company, including, without limitation,
Company's affiliates and divisions in the music
publishing and the recorded music businesses.
Notwithstanding the foregoing, and for the avoidance of
doubt, "Company" does not include labels or music
publishers owned, distributed or controlled by Time
Warner, Inc. or any of its affiliates. If the Warner EMI
Music joint venture is consummated, any labels or music
publishers which may be controlled by Company or Warner
EMI Music subsequent to its formation but which were not
controlled by Company prior to its formation shall not
be considered related entities or affiliates of Company
for purposes of this Agreement; however, this agreement
shall remain binding with respect to any rights
presently held by Company that are transferred to such
label or music publisher subsequent to such formation.
e) Concurrently herewith, Company and MP3 are entering into
a License Agreement with respect to, inter alia, the
licensing to MP3 of the right to
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stream master recordings controlled by Company via the MyMP3
service(the "License Agreement").
3. RELEASES
a) Company Release. Company, on behalf of itself and its agents,
employees, representatives, partners, owners, officers, parents,
shareholders, directors, subsidiaries, affiliates, attorneys,
transferees, predecessors, successors, and assigns, solely to
the extent it can legally bind such entities, does hereby
irrevocably release, acquit and forever discharge MP3 and each
of its agents, employees, representatives, partners, owners,
related entities, officers, parents, shareholders, directors,
subsidiaries, affiliates, attorneys, transferees, predecessors,
successors, and assigns, jointly and severally (the "MP3
Releasees"), of and from any and all debts, suits, claims,
actions, causes of action, controversies, demands, rights,
damages, losses, expenses, costs, attorneys' fees, compensation,
liabilities and obligations whatsoever (hereinafter referred to
collectively as "Claims"), suspected or unsuspected, known or
unknown, foreseen or unforeseen, arising at any time up to and
including the date of this Settlement Agreement, which Company
may now have or at any time heretofore may have had, or which at
any time hereafter may have or claim to have against the MP3
Releasees, solely to the extent they relate to, arise from, or
concern the MyMP3.com service up to the date hereof, the
Litigation or the subject matter thereof and with respect to the
Compositions and sound recordings included in the MyMP3.com
service as of the date hereof (hereinafter "Company's Released
Claims"). Nothing contained in the Release is intended to
release any claims for any activity of MP3 occurring after the
date of this agreement nor for any Licensed Performances.
b) MP3 Release. MP3, on behalf of itself and its agents, employees,
representatives, partners, owners, related entities, officers,
parents, shareholders, directors, subsidiaries, affiliates,
attorneys, transferees, predecessors, successors, and assigns,
solely to the extent it can legally bind such entities, does
hereby irrevocably release, acquit and forever discharge Company
and each of its agents, employees, representatives, partners,
owners, related entities, officers, parents, shareholders,
directors, divisions, subsidiaries, affiliates, attorneys,
transferees, predecessors, successors, and assigns, jointly and
severally (the "Company Releasees"), of and from any and all
Claims, suspected or unsuspected, known or unknown, foreseen or
unforeseen, arising at any time up to and including the date of
this Settlement Agreement, which MP3 may now have or at any time
heretofore may have had, or which at any time hereafter may have
or claim to have against the Company Releasees, relating to,
arising from, or concerning the MyMP3
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service, the Litigation or the subject matter thereof and any
counter claims which MP3 could have asserted in connection with
the Litigation (hereinafter "MP3's Released Claims").
c) Statutory Waiver. Company's Released Claims and MP3's Released
Claims are collectively defined as the "Released Claims". With
respect to the Released Claims, all rights under California
Civil Code Section 1542 (and any other law of similar effect),
are hereby expressly waived by the Parties, and each of them,
notwithstanding any provision to the contrary. Section 1542
provides as follows:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his
favor at the time of executing the Release, which
if known by him must have materially affected his
settlement with the debtor."
d) The Parties, and each of them, and their representatives, and
assigns expressly waive and release any right or benefit which
they have or may have under Section 1542 of the Civil Code of
the State of California, to the fullest extent that they may
waive all such rights and benefits pertaining to the matters
released herein. It is the intention of the Parties, and each of
them, through this Settlement Agreement, and with the advice of
counsel, to fully, finally and forever settle and release all
such matters, and all claims relative thereto, in furtherance of
such intention.
e) Dismissal With Prejudice. Company, concurrently with the
execution and delivery hereof and payment of the EMI Amount and
the Advance payable under the License Agreement shall execute
and deliver to MP3 a Dismissal With Prejudice of the Litigation,
which MP3 shall file, in the form annexed hereto as Exhibit A.
4. NOTICES
a) Any notice, demand, request, consent, approval, or communication
that either Party desires or is required to give to the other
Party is to be addressed and served on or delivered to the other
Party at the address set forth below. Any Party may change its
address by notifying the other Party of its change of address in
writing.
i) The addresses for MP3 are as follows:
MP3.com, Inc.
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4790 Eastgate Mall
San Diego, CA 92121
Attn: General counsel and VP Legal
With simultaneous copies to:
Gary Stiffelman, Esq.
Ziffren, Brittenham, Branca & Fischer
1801 Century Park West
Los Angeles 90067
ii) The address for Company is as follows:
EMI Recorded Music - North America
1290 Avenue of the Americas
New York, NY 10104
Attn: Alasdair McMullan, Vice President Legal Affairs
With simultaneous copy to:
EMI Recorded Music, New Media
1750 North Vine Street
YV Building
Los Angeles, CA 90028
Attn: Robyn Glaser, Vice President, Business
and Legal Affairs
5. MISCELLANEOUS PROVISIONS
a) By entering into this Settlement Agreement, no Party admits or
acknowledges that they committed any wrongdoing on their part.
b) This Settlement Agreement and any controversy which might arise
therefrom shall in all respects be interpreted, enforced and
governed by the laws of the State of New York applicable to
agreements made and to be fully performed therein. All parties
consent to the sole and exclusive personal jurisdiction and
venue in the United States District Court for the SDNY, or if
federal jurisdiction is unavailable, in the Supreme Court of the
State of New York located in New York County, and agree that all
disputes or litigation regarding this Settlement Agreement shall
be submitted to and determined by said court, which shall have
sole and exclusive jurisdiction. Subsequent changes in New York
law or federal law through legislation or judicial
interpretation that creates or finds additional or different
rights and obligations
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of the Parties shall not affect this Settlement Agreement.
c) This Settlement Agreement, together with the License Agreement,
is the entire agreement between the Parties with respect to the
Released Claims or subject matter of this Settlement Agreement
and supersedes all prior and contemporaneous oral and written
agreements and discussions pertaining to the Released Claims or
subject matter of this Settlement Agreement. This Settlement
Agreement may be amended only by a written agreement executed by
each of the Parties hereto. No breach of the License Agreement
may or shall be deemed a breach of this Settlement Agreement
other than failure to pay the advance due thereunder.
d) No breach of any provision, representation or warranty
("Provision") hereof can be waived unless in writing signed by
the party to be charged with such a waiver. Waiver of any one
breach of any Provision hereof shall not be deemed to be a
waiver of any other breach of the same or any other Provision
hereof.
e) This Settlement Agreement shall be binding upon and inure to the
benefit of the Parties hereto and its respective agents,
employees, representatives, partners, parents, subsidiaries,
divisions, affiliates, officers, related entities, licensees,
directors, shareholders, investors, attorneys, transferors,
transferees, predecessors, successors, trustees in bankruptcy,
and assigns and each and every entity or person which now or
during the pendency of the Litigation was a division, parent,
successor, predecessor, division, affiliate, officer, director,
shareholder, investor, employee, attorney, transferor,
transferee, or subsidiary for each Party and its respective
legal successors and assigns, to the extent each party can bind
such parties.
f) The Parties represent and warrant that each of them have not
assigned all or any portion of any claim pertaining to the
Released Claims to any person or entity. In the event any claims
are made by any third persons or entities based upon any
purported assignment or any such liens or claims are asserted in
connection with the Released Claims or proceeds of the
Settlement Agreement, then the Party who has breached his
representation or warranty contained in this Section 5(f) agrees
to indemnify and hold harmless the other Party from any said
claims being made.
g) In the event that any covenant, condition or other provision
herein contained is held to be invalid, void or illegal by any
court of competent jurisdiction, the same shall be deemed
severable from the remainder of this Settlement Agreement and
shall in no way affect, impair or invalidate any other covenant,
condition or other provision herein contained. If such
condition,
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covenant or other provisions shall be deemed invalid due to its
scope or breadth, such covenant, condition or other provision
shall be deemed valid to the extent of the scope or breadth
permitted by law.
h) Each of the Parties hereto represent and declare that in
executing this Settlement Agreement, it has relied solely upon
its own judgment, belief and knowledge, and on the advice and
recommendations of its own independently selected counsel,
concerning the nature, extent and duration of its rights and
claims and that it has not been influenced to any extent
whatsoever in executing the same by any representations or
statements covering any matters made by the other Party hereto
or by any person representing it.
i) The Parties hereto and each of them, further represent and
warrant that they have carefully read this Settlement Agreement
and know and understand the contents hereof, and that they
signed this Settlement Agreement freely and voluntarily and have
had the benefit of the advice of legal counsel before executing
this Settlement Agreement. Each of the representatives executing
this Settlement Agreement on behalf of their respective
corporations or partnerships is empowered to do so and thereby
binds his respective corporation or partnership. The Parties
hereto acknowledge and agree that this Settlement Agreement
shall be deemed to have been drafted jointly by the Parties
hereto. Ambiguities shall not be construed against the interest
of either party by reason of it having drafted all or any part
of this Settlement Agreement.
j) This Settlement Agreement may be executed in counterparts and
when each Party has signed and delivered at least one such
counterpart to the other Party, each counterpart shall be deemed
an original, and all counterparts taken together shall
constitute one and the same agreement, which shall be binding
and effective as to all Parties. This Settlement Agreement may
be executed via facsimile signatures, which shall have the same
force and effect as if they were original signatures to be
followed by executed originals.
k) Each party hereto represents and warrants that it has all
necessary right, title, and authority to enter into this
Settlement Agreement, to grant the rights and interests herein
granted, and to perform all of its obligations under this
Settlement Agreement.
l) The provisions and existence of this Settlement Agreement (a)
may not be cited by any party hereto as an admission of any
issue of fact or law; and (b) shall not be disclosed to any
third party or entity, except (i) as required by law or
regulation or to enforce the terms hereof, (ii) to the parties
respective professional advisors and executives on a "need to
know" basis, provided that
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such parties agree to be bound by these confidentiality
provisions, and (iii) to the Internal Revenue Service, or any
state or municipal taxing authority or other regulatory body
having jurisdiction. The parties may also disclose these terms
as required in connection with stock exchange, shareholder,
internal, governmental or regulatory requirements, or external
audit or similar disclosure requirements. The amount paid under
this Settlement Agreement may also be disclosed to the
Plaintiffs for purposes of compliance with provisions similar to
2(b) above. It is understood and agreed that if the foregoing
provision is breached by any party hereto, the non-breaching
party may be entitled to injunctive or other equitable relief to
prevent such a breach. Any non-breaching party seeking such
injunctive relief will not be obligated to secure any bond or
give any security in connection with the application for such
relief. The right to seek injunctive relief under this paragraph
shall be in addition to all other rights, remedies and forms of
relief which may be available. In furtherance of the foregoing,
any and all press releases relating to the subject matter hereof
shall not be released until the timing and contents of such
press release has been approved in writing by Company's Vice
President, Legal Affairs; provided, the parties agree that a
press release with respect to this Settlement Agreement shall be
mutually agreed and issued within a reasonable period after
execution hereof, and in any event within any time frame
required by law or regulation.
IN WITNESS WHEREOF, the Parties hereto have executed this Settlement
Agreement on the date(s) written beside its name, respectively.
Capitol Records, Inc.
Dated: 26 July 2000 By: /s/ [SIGNATURE ILLEGIBLE]
---------------- ------------------------------
Its: Secretary
-----------------------------
Dated: MP3.com, Inc.
----------------
By:
------------------------------
Its:
-----------------------------
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IN WITNESS WHEREOF, the Parties hereto have executed this Settlement
Agreement on the date(s) written beside its name, respectively.
Capitol Records, Inc.
Dated: By:
---------------- ------------------------------
Its:
-----------------------------
Dated: 26 July 2000 MP3.com, Inc.
----------------
By: /s/ PAUL OUYANG
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Its: EVP & CFO
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UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
-------------------------------------
UMG RECORDINGS, INC.,
SONY MUSIC ENTERTAINMENT INC.,
CAPITOL RECORDS, INC.,
and INTERSCOPE RECORDS,
Plaintiffs,
v. Case No.: 00 CIV. 0472
(JSR)
MP3.COM, INC.,
Defendant.
-------------------------------------
STIPULATION OF DISMISSAL WITH PREJUDICE OF
PLAINTIFF CAPITOL RECORDS, INC.
Plaintiff Capitol Records, Inc. and defendant MP3.com, Inc. hereby
stipulate that all claims of plaintiff Capitol Records, Inc. herein are
dismissed with prejudice, pursuant to rule 41 of the Federal Rules of Civil
Procedure. Plaintiff Capitol Records, Inc. and defendant MP3.com, Inc. shall
bear their own costs and expenses, including attorneys' fees.
Dated: New York, New York
July 28, 2000
ARNOLD & PORTER
By: /s/ ROBERT A. GOODMAN
-----------------------------
Robert A. Goodman
399 Park Avenue
New York, NY 10022
(212) 715-1000
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-and-
Hadrian R. Katz
555 Twelfth Street, N.W.
Washington, D.C. 20004
(202) 942-5000
Counsel for Plaintiffs
Capitol Records, Inc.
COOLEY GODWARD LLP
By: /s/ MICHAEL G. RHODES
-------------------------------
Michael G. Rhodes (MR-0426)
4365 Executive Drive
Suite 1100
San Diego, CA 92121-2128
Tel: (858) 550-6000
Fax: (858) 453-3555
-and-
ORRICK, HERRINGTON & SUTCLIFFE LLP
By: /s/ JEFFREY A. CONCIATORI
-------------------------------
Jeffrey A. Conciatori (JC-6858)
666 Fifth Avenue
Suite 1100
San Diego, CA 92121
(858) 550-6000
Counsel for Defendant
MP3.com, Inc.
So ordered:
/s/ [Signature Illegible]
-------------------------------
United States District Judge
7-28-00