License Agreement - MP3.com Inc. and UMG Recordings Inc.
MP3.com, Inc.
4790 Eastgate Mall
San Diego, CA 92121
November 14, 2000
UMG Recordings, Inc.
2220 Colorado Avenue
Santa Monica, CA 90404
Gentlepersons:
This letter, when and if fully executed, will set forth the terms of the license
agreement between UMG Recordings, Inc. ("Universal" or "Company") and MP3.com,
Inc. ("MP3", "us" or "we"), with respect to Universal licensing certain rights
to MP3 on the following terms:
1. DEFINITIONS:
a) "Adjusted Gross Revenues": All gross sums actually received by
MP3, or credited against a prior advance, in the form of:
i) sums paid by or on behalf of Locker Owners in connection
with accessing MyMP3 or any Lockers, including, for the
avoidance of doubt and without limitation, all
subscription fees, registration fees, access fees,
storage fees, password fees or other remuneration paid
to or for the benefit of MP3, in order to enable a
Locker Owner to access Lockers or otherwise use MyMP3,
less actual, out-of-pocket amounts (not to exceed [***]
paid by or on behalf of Locker Owners) paid to third
parties who are carriers furnishing telephone or other
communications services or other similarly-situated
third parties entitled to a percentage of gross sums for
providing Locker Owners with access to MyMP3;
ii) sums paid by or on behalf of third parties for
sponsorship of Lockers or for the right to include
advertising specifically in Lockers, less actual,
out-of-pocket amounts paid to advertising agencies (not
to exceed [***] paid by or on behalf of third parties)
in connection with such sponsorship or advertising
revenues;
iii) sums paid by or on behalf of third parties in the form
of e-commerce bounties, referral fees or affiliate
program fees resulting from Links within My.MP3 to any
other point of presence on the Internet (as herein
defined);
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iv) sums paid by or on behalf of third parties in respect of
the sale of products or services from any Web Page that
is part of MyMP3 (including any Locker) (less only MP3's
actual, out-of-pocket costs of goods sold, shipping and
handling, sales taxes and third party participations);
and
v) any other sums directly attributable to MyMP3 net of any
third party costs directly related thereto.
vi) It is understood that MP3 sells certain advertising
which appears simultaneously on Web Pages that are part
of MyMP3 and Web Pages that are not part of MyMP3 but
are otherwise part of the MP3 Site ("Site Advertising").
So long as such Site Advertising does not occupy [***]
of Web Pages that are part of MyMP3 and which masthead
and footer (or such other areas), in the aggregate,
occupy no more than [***] of the total area of a Web
Page which is part of MyMp3, no portion of the sums
received from the sale of such Site Advertising shall be
included in Adjusted Gross Revenues hereunder. To the
extent that Site Advertising does exceed the limits
described in the preceding sentence, revenues from such
excess Site Advertising shall be subject to inclusion in
Adjusted Gross Revenues as described in subparagraph
1(a)(ii) above. Notwithstanding anything to the
contrary, it is agreed that any monies specifically
attributable to access by Locker Owners to a particular
service within MyMP3 in respect of which Persons pay
additional, incremental consideration in order to access
such service or the recorded content provided thereby,
none of which recorded content is [***] (e.g., MP3's
existing classical music subscription service as
presently structured) shall not be included in the
calculation of Adjusted Gross Revenues.
vii) Further notwithstanding anything to the contrary, it is
agreed that any monies received for or in connection
with end users accessing a specific subscription,
download or other service which offers content [***]
shall be included in the calculation of Adjusted Gross
Revenues only after deduction of any license fees or
other amounts payable to any such entity in connection
with such service. It is understood that nothing
contained in this agreement permits MP3 to establish any
service using Company Recordings other than as
specifically set forth herein.
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viii) If revenues are paid to or received by MP3 in the form
of advertising inventory or other services, products or
any thing of value received in lieu of cash
consideration (i.e., trade or barter), the fair market
value of any such inventory, products or services or any
thing of value shall be included in the calculation of
Adjusted Gross Revenues.
ix) Adjusted Gross Revenues shall not be reduced by any
amounts [***].
b) [***]
c) "Affiliate": Any corporation or other person or entity
controlling, or controlled by, or under common control with a
party or Person, as the case may be, and any joint ventures in
which any of the foregoing participate.
d) "Artist": A recording artist, record producer, or other third
party entitled to a royalty or other participation in revenues
derived from the exploitation of Company Recordings ("Record
Revenue Participation"). Artists shall not include Persons in
the capacity of songwriters or music publishers, including any
third party to the extent same is entitled to a royalty or other
participation in revenues derived from Compositions or other
literary, dramatic or other works other than audio Recordings
embodied in Company Recordings ("Publishing Revenue
Participation"). To the extent any of said Persons also are
entitled to a Record Revenue Participation in their capacity as
a performer, producer or otherwise, then said Person will be an
Artist but only to the extent such Person's Record Revenue
Participation is concerned and not insofar as such Person's
Publishing Revenue Participation is concerned.
e) "Beam It": means the system currently utilized by MP3 (and any
future enhancements thereto in accordance with this Agreement),
pursuant to which a Locker Owner can place a pre-owned
Phonograph Record into a computer CD-ROM drive, MP3's
proprietary software verifies the existence and identity of such
Phonograph Record and, upon completion of such
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verification, the Recordings embodied in such Phonograph Record
are automatically added to the Locker Owner's Title List. In the
event that a technology is available hereafter during the Term
which enables the Beam It system with commercially reasonable
reliability to identify and distinguish separate Phonograph
Record copies of the same Company Album from one another, MP3
shall adopt such system so as to not allow the same Phonograph
Record copy to be used to add Company Recordings to multiple
Lockers or to allow an unauthorized copy of a Company Album
(e.g., a CD-R copy) to be used to add Company Recordings to
Lockers; provided such technology (i) does not permit the
rejection of misidentified Company Albums so that two copies of
the same Company Album are incorrectly identified as the same
copy and the second is rejected; (ii) does not materially
increase the time required for the Beam It system to add
Recordings to a Locker Owner's Title List with the result that
implementation of such technology would render the user
experience materially inferior to that experience available
without such technology; and (iii) there is no more than a di
minimus cost (relative to the costs of operation of MyMP3) to
MP3 to employ such technology. The Parties acknowledge and agree
that MP3's Beam It service shall (A) require each Locker Owner
to place a physical Record in his or her computer and (B) MP3's
Beam It service shall be required to confirm that such Record
was a Company Record before making available to such Locker
Owner the sound recordings on such Company Record. Locker Owners
shall be prohibited from actually uploading or saving any
Company Recordings on MP3's service (i.e., all "uploads" of
Company Recordings must be virtual).
f) "Company Album": A long-playing Phonograph Record, as said term
presently is understood in the United States recording industry,
which is or was at any time (before or during the Term) listed
in [***] active product catalog in the United States and
available as a CD or DVD Audio, in respect of which Company or
such U.S. based record labels has [***].
g) "Company Master": the Recordings embodied in a Company Album or
other Record which is or was at any time (before or during the
Term) listed in [***] active product catalog in the United
States, in respect of which Company or such U.S. based record
labels has [***]
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[***]
h) "Company Recordings": All Company Albums and Company Masters.
Upon MP3's written request for an up-to-date list of Company
Recordings, but no more often than once per quarter during the
Term, Company shall have the option of providing MP3 with
up-to-date lists of Company Recordings in Company's catalog or a
list of Company Recordings released since the previous update
Company provided to MP3..
i) In the event (A) there is a written, contractual
prohibition on Company's right to grant rights to a
particular Company Recording herein; and/or (B) Company
requires that a Company Recording or any of the elements
related thereto as described in paragraph 2(a)(iii)
below (the "Elements") be excluded from the license
herein because Company has a good faith concern (e.g.,
as a result of the threat or commencement of any legal
action by a third party) that (i) Company lacks the
right to license such Company Recording or Elements as
contemplated herein, or (ii) such Company Recording or
Elements infringe upon the rights of any Person, Company
shall so notify MP3 in writing identifying the reason
for such notice, and MP3's sole obligation shall be to
remove said Company Recording or Elements, as
applicable, from MyMP3 as soon as possible, but no later
than five (5) business days after receipt of such notice
unless and until such time as Company shall be able to
grant such rights (which Company shall so inform MP3 as
soon as possible) or MP3 separately can secure such
rights. Company shall only have the right to send the
notice described in the preceding sentence if it
concurrently ceases all other exploitations of the
applicable Recordings or Elements either generally or
with respect to all Locker usages, as applicable. It is
understood that, in certain instances, the limitations
under (A) or (B) above shall apply only to certain
portions of the Territory or areas of the World outside
the Territory, and that in such instances MP3's
obligation hereunder shall be to remove the applicable
Company Recordings or Elements from access to the
applicable portions of the Territory or areas of the
World outside the Territory. MP3 shall at all times
indemnify and hold harmless Company and its Affiliates
from and against any and all claims, losses, damages,
liabilities, costs and expenses, including, without
limitation, legal expenses and reasonable counsel fees,
arising out of any claims based upon uses by MP3 of
Company Records outside of the Territory, in excess of
sums paid by MP3 to Company hereunder in respect of any
use of such Company Recordings outside of the Territory.
ii) Company Recordings shall not include [***]
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[***]
iii) Company Recordings also shall not include either (i)
Recordings owned or controlled by any Person which is
not an Affiliate of Company and which acquires all or
substantially all of Company's stock or assets and/or
(ii) Recordings owned or controlled by any Person who is
not an Affiliate of Company with which Company merges or
otherwise combines with Company (each such event, a
"Merger"). Notwithstanding the foregoing, if as a result
of a Merger, Company or an Affiliate transfers any of
its rights in and to a Company Recording to any third
party (a "Successor Label"), such Company Recording
shall continue to be deemed to be a Company Recording.
In addition, if as a direct result of such Merger, any
of the [***] (the "Relevant Labels") is merged or
combined with a record label that is not as of the date
of such Merger wholly owned or controlled by Company (a
"Combined Label"), then, if the Combined Label [***] the
Parties shall endeavor to determine in good faith
(taking into account the license arrangement between
MP3.com and the other record label) the percentage of
new Recordings released by such Combined Label to be
deemed to be Company Recordings so that MP3's right to
add new Recordings to Title Lists throughout the Term is
not materially affected by the Merger (the
"Percentage"). If the parties are unable to agree to the
Percentage within sixty (60) days of the commencement of
such meetings, either party may initiate binding
arbitration in Los Angeles California under the rules of
the American Arbitration Association and the laws of
California, before a mutually agreed arbitrator. The
result of any such arbitration shall be binding upon the
parties. Each party shall bear its own expenses incurred
in connection with such arbitration. No arbitrator shall
be an employee of, or advisor to, either party (or any
Affiliate of such party). The subject matter of any such
meetings, mediation or arbitration shall be
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limited solely to the Percentage and no other matters
whatsoever.
i) "Company Shelf" means [***]. The Company shall have the right in
its sole, unrestricted discretion (i) to design and customize
the Company Shelf (with any such artwork, graphics, photographs,
colors and other materials desirable to the Company), (ii) to
program all Web Pages of the Company Shelf with content and
information and (iii) to include on the Company Shelf hyperlinks
to any Web Site selected by the Company. MP3 [***]. As soon as
practicable after the date hereof, MP3 shall provide the Company
with [***] to access each Locker's Company Shelf to make changes
thereto; provided, that until such time as [***] are available,
MP3 shall make [***] as Company shall direct in each instance.
The size of the Company Shelf shall not exceed [***] The Company
shall be entitled to post on the Company Shelf (or post
hyperlinks to) [***]; provided, that MP3 shall respect all usage
rules set by the Company with respect to, and shall utilize
technology designated by the Company for [***]. MP3 shall not be
required to incur any expense in compliance with usage rules not
otherwise applicable to the Streaming of Company Recordings
hereunder or not otherwise applicable to the operation of the
MP3 Web Site in the ordinary course of its business.
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MP3 will not itself give Locker Owners the right or ability to
[***]. The Parties agree to work together to develop the
features of the Company Shelf and to enhance the marketing and
promotional benefits afforded by the Company Shelf.
j) "Composition" - a single musical composition, irrespective of
length, including all spoken words and bridging passages and
including a medley.
k) "Download" or Downloading" - a media delivery method whereby
[***]. The fact that a file [***], does not constitute
Downloading for purposes hereof. The fact that a person is [***]
which shall have been Streamed by MP3 in accordance with this
agreement shall not deem such Steaming to have resulted in a
Download so long as MP3 shall at all times use [***] of Streams
of Company Recordings, consistent with industry standards
employed for such purposes, and is otherwise complying with the
terms hereof including, for the avoidance of doubt and without
limitation, paragraph 12 below and Exhibits A and B annexed
hereto.
l) "Electronic Digital Copy" - a copy of a Recording in a digital
format.
m) "The Fraction": "The Fraction": A fraction, the numerator of
which is [***], and the denominator of which is the [***]
n) "Home Page" - the individual Web Page of a Web Site intended by
the Person maintaining the Web Site concerned to be the first
Web Page viewed by new end-users the first time they access such
Web Site.
o) "Instant Listen": A system described more particularly on
Exhibit A annexed hereto the purpose of which is to enable a
Locker Owner to add to that Locker Owner's Title List any
Company Recordings embodied on a Company Album at the time such
new (not used) Company Album is purchased from a bona fide
on-line retailer at a customary retail price; provided that for
Phonograph Records that are to be delivered to a Locker
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Owner in a tangible medium (e.g., a CD) via use of a third party
delivery company (e.g., Federal Express), [***]. It is agreed
that a Company Album shall not be available for access by a
Locker Owner, even if same may be purchased from an on-line
retailer until [***]. MP3 shall use its best commercially
reasonable efforts to require that all such retailers remove
from a Locker Owner's Title List any Company Recordings embodied
on a Company Album that the Locker Owner (or a Person acting on
behalf of such Locker Owner) returns to the applicable retailer.
MP3 agrees that it shall not make the Instant Listen feature
available to on-line retailers for use in respect of such a
retailer's sale of [***].
p) "Internet": A medium consisting of wired or wireless electronic
or electromagnetic networks (including without limitation, fiber
optic, microwave, twisted-pair copper wires, coaxial cable,
satellite, wireless transmission, cellular networks, and
combinations thereof) and collections thereof now or hereafter
existing, wherever, located, for the transmission from a distant
location of digital data (e.g., text, information, graphics,
audio, video, or combination of the foregoing), through the use
of any protocols or standards now known or hereafter devised
(including without limitation, Transmission Control
Protocol/Internet Protocol ["TCP/IP"] and subsequent extensions
or modifications thereof) from or to electronic devices (e.g.,
computers [mainframe, desktop, laptop, handheld, etc.], set-top
boxes, cable modems, handheld devices, cell phones, televisions,
etc.) capable of transmitting or receiving digital data or
digital information, irrespective of whether such networks are
open or proprietary, public or private, or whether a fee is
charged or a subscription or membership is required in order to
access such networks. "Internet" also includes without
limitation the computer network comprising inter-connected
networks commonly referred to as the "Internet" and the "World
Wide Web." Notwithstanding anything to the contrary contained in
the foregoing, "Internet" shall not include [***]. The fact that
a medium also delivers [***] shall not preclude such medium from
being deemed the "Internet," so long as the medium itself is
generally [***].
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q) "Link" - an embedded icon, object, graphic or text within a Web
Page that consists of a hypertext pointer to the URL of another
Web Page.
r) "Locker": The Web Pages within MyMP3 in which each Locker
Owner's Title List is maintained and Recordings may be accessed
by such Locker Owner. A Locker may be accessed by a Locker Owner
only after correctly entering the password assigned to such
Locker Owner in accordance with the procedures described in
Exhibit A to this agreement.
s) "Locker Owner": an individual end-user who:
i) has registered for and has been assigned by MP3 a unique
"account" for access to MyMP3 (a "User Account");
ii) has had a unique password approved by MP3 in respect of
each User Account, which must be correctly entered prior
to the commencement of any session during which such
end-user is permitted to access MyMP3 (i.e., Persons
that do not have such a unique password cannot access
MyMP3.
t) "Mechanical Royalties" - royalties payable to any Person for the
right to reproduce and distribute copyrighted Compositions,
literary works and other similar copyrighted materials embodied
in a phonorecord, other than sound recording copyrights, on
Phonograph Records.
u) "MP3 Site" - the Web Site created, maintained and hosted by MP3,
the Home Page of which is currently located at and accessed via
the URL "www.mp3.com". Except with respect to co-branded
versions of MyMP3, it is agreed that there will only be [***].
v) "MyMP3": MP3's proprietary service, currently accessed via the
URL "www.MyMP3.com" [***] on the MP3 Site, under which a Locker
Owner can establish and maintain a Title List, together with
other interactive features, which can be accessed and used by
such Locker Owner, all as described subject to the limitations
set forth elsewhere in this Agreement including in the
specifications attached hereto as Exhibit A.
w) [***]
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[***].
x) "Person": any natural person, legal entity, or other organized
group of persons or entities. (All pronouns, whether personal or
impersonal, which refer to Persons include natural persons and
other Persons.)
y) A "Phonograph Record" is a Record as embodied by the
manufacturer and/or distributor in a physical, audio-only Record
configuration (e.g., vinyl LP's, cassettes and compact discs).
z) "Record": Any and all forms of reproductions, transmissions or
communications of audio Recordings (e.g., Albums, singles,
etc.), now or hereafter known, manufactured, distributed,
transmitted or communicated primarily for home use, school use,
juke box use, or use in means of transportation.
aa) "Record Labels" means [***].
bb) "Recording": every recording of sound, not coupled with a visual
image, by any method and on any substance or material, or in any
other form or format,
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whether now or hereafter known, which is used or useful in the
recording, production and/or manufacture of Records.
cc) "Company Site" - the primary Web Site created, hosted and
maintained by Company for the promotion of Company Recordings on
the Internet, the Home Page of which is currently located at and
accessible via the URL "www.umusic.com", and all Web Pages
comprising such Web Site.
dd) (A) "Stream" - a digital transmission of a Recording in
compressed form solely by means of the Internet that (i) is
[***] and (ii) does not [***].
ee) "Title List(s)": The specific Recordings accessible from within
an individual Locker. Multiple listings of the same Recording
within an individual Locker, as in the case of different
groupings or organizations of those Recordings selected by a
Locker Owner (e.g., separate playlists within a Locker derived
from a Title List, such as a particular arrangement of music for
listening while the Locker Owner is exercising) for that reason
alone shall not be deemed separate Title Lists for purposes
hereof.
ff) "Web Page" - a document that is either (a) written in HTML
(i.e., Hypertext Markup Language), or another industry standard
mark-up language, that is made available for viewing by end
users at a single URL or domain name via the World Wide Web
portion of the Internet by server software using HTTP (i.e.,
Hypertext Transfer Protocol) to effectuate data transmission (or
server software using any other generally accepted protocols
utilized to effectuate data transmissions via the World Wide Web
portion of the Internet); or (b) written in any computer
programming language other than HTML, that is intended to be
accessible, directly or indirectly, simultaneously to end users
throughout the world via a computer or any other electronic
device on any public data network that uses Transmission Control
Protocol/Internet Protocol (i.e., TCP/IP) or Wireless
Application Protocol (i.e., WAP) to effectuate data transmission
(or any other generally accepted protocols utilized to
effectuate data transmissions via public data networks). For
purposes of the preceding sentence, only, the requirement that
end users pay a subscription fee or other charge in
consideration of accessing a data network shall not, by that
reason alone, mean that such data network is not a public data
network.
gg) "Web Site" - a collection of Web Pages with a common theme or
subject matter which are (a) organized hierarchically, (b)
owned, managed and
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operated by the same Person or at the direction of such Person,
and (c) interconnected via Links.
2. LICENSE:
a) Subject to the terms and conditions of this agreement, Company
hereby licenses to MP3 during the Term the non-exclusive,
non-sublicensable right:
i) To reproduce one or a reasonable number of copies of the
Company Recordings, solely to the extent necessary to
enable the digital audio transmission of the Company
Recordings in accordance with the terms and conditions
prescribed elsewhere in this Agreement; and
ii) To make digital audio transmissions of the Company
Recordings solely by means of Streaming in accordance
with paragraph 12 and the Exhibits hereto, from MP3's
servers, to Locker Owners solely as part of MyMP3.
iii) To use the names and tradenames of Company (as and
solely to the extent that same appear on Company
Recordings), the titles of Company Albums and Company
Masters, the names of any Artists or other Persons
rendering services or granting rights to Company with
respect to Company Recordings, and any front Company
Album cover artwork utilized by Company and its
Affiliates in the United States, in connection with
Company Recordings solely for informational purposes to
identify Company Recordings in Lockers as part of MyMP3,
e.g., on Title Lists and on display during Streaming.
MP3 shall have the right to use such front album cover
art only to the extent that Company can license such
rights. Except as provided above, MP3 shall not have the
right to use any of said materials, without Company's
approval, which it can withhold in its absolute
discretion. [***]. MP3 agrees to [***]. The [***] may be
chosen by Company [***]
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[***]
b) Company Recordings can be added to or inserted in an individual
Locker solely:
i) Via MP3's "Instant Listen" system, or
ii) Via MP3's "Beam-it" system, or
iii) By any other system established by MP3 which enables MP3
to affirm with no less than the same level of certainty
as via Instant Listen or Beam-It that the Locker Owner
has acquired a lawfully produced copy of a Phonograph
Record embodying the Company Recordings that such Person
desires to add to his or her Title List and which does
not require an end-user to transfer Phonograph
Recordings to storage devices (e.g. computer servers)
maintained by any Person other than such end-user.
iv) MP3 shall at all times utilize all commercially
available technologies, and all technologies proprietary
to MP3.com, if any, to minimize the possibility of
Persons adding Company Recordings to their Title Lists
other than by the methods outlined hereinabove or
hereinbelow.
c) Recordings accessible by Locker Owners via a Locker shall be
organized and made available for access through the use of music
management tools developed, established and maintained by MP3,
which tools shall, inter alia, permit the Locker Owner to access
such Recordings from a single locale at any one time. It is
understood that a Locker Owner shall have the right to access
such Person's Locker from any Internet enabled device or other
connection; provided MyMP3 will not enable more than one
simultaneous connection to a Locker.
d) MP3 shall not enable Locker Owners to Download or facilitate the
Downloading of Company Recordings. MP3 shall at all times use
commercially reasonable measures to: (i) minimize the
opportunity for Persons to create or facilitate the creation of
Electronic Digital Copies of Streams of Company Recordings, and
(ii) prevent circumvention of any security features related to
MyMP3 adopted by MP3, consistent with industry standards
employed for such purposes.
e) MP3 shall be solely responsible for processing all subscriptions
and memberships in and to MyMP3 placed by Locker Owners during
the Term. Except as expressly authorized by Company in writing
in each instance, Company shall have no responsibilities or
obligations of any nature with respect to any end users of
MyMP3. In connection with each such
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subscription and membership, MP3 exclusively will: interact
directly with Locker Owners; prepare the necessary order and
billing forms; approve and implement all unique passwords; bill,
collect and process all payments and cancellations; assume the
risk of canceled orders and non-payment; collect and pay all
applicable taxes; and handle all customer service. Except as
expressly authorized by Company in writing in each instance or
agreed in this Agreement, Company shall have no responsibilities
or obligations of any nature with respect to any end users of
MyMP3, including, for the avoidance of doubt and without
limitation, any Locker Owners..
f) The license granted in this Section 2 is limited to the use of
the Company Recordings and the materials described in 2(a)(iii)
above solely in the manner set forth in this Agreement. Any and
all other rights in connection with the Company Recordings and
the materials described in 2(a)(iii) above are specifically
reserved by Company. Nothing herein shall be construed as
permitting MP3 to otherwise exploit the Company Recordings and
the materials described in 2(a)(iii) above, and/or engage in the
sale or distribution of any Electronic Digital Copies of any
Company Recordings.
g) Except as expressly provided in this agreement or permitted
under applicable law, MP3 may not use the Company Recordings for
[***].
h) Except as expressly provided herein or permitted under
applicable law: (a) neither MP3 nor any Person deriving rights
from MP3 shall have any right to edit, modify or otherwise alter
any of the Company Recordings; and (b) neither MP3 nor any
Person deriving rights from MP3 will include the Company
Recordings in computer files other than computer files created
for use exclusively MyMP3 in accordance with this Agreement.
i) The license granted hereunder shall only permit MP3 to perform
Company Recordings [***].
j) If there are [***], and for so long as there are [***], MP3
shall not have the right to [***] without Company's prior
written approval.
k) [***]
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[***]
3. EXCLUSIVITY: The rights granted to MP3 hereunder shall be non-exclusive.
4. TERM AND TERRITORY:
a) The territory shall be North America (defined as the U.S.,
Canada and Mexico) (the "Territory"). MP3 shall be required to
use commercially reasonable efforts to ensure that all Locker
Owners who add Company Recordings to their Lockers are domiciled
within the Territory, including but not limited to the use of
[***] and to [***]. All servers storing any Company content and
all servers from which Company Recordings are Streamed hereunder
shall be located in the Territory. [***]
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b) Notwithstanding the foregoing, MP3 shall have the right to
permit all existing Locker Owners outside the Territory as of
the date hereof (which MP3 represents [***]) to continue to have
all of the rights of Locker Owners in the Territory (the
"Grandfathered Locker Owners"). MP3 shall not nor shall anyone
on its behalf [***], provided that the mere possibility of
access to MyMP3 by Persons outside the Territory will not
constitute [***] as long as such Persons outside the Territory
are not [***].
c) The term of this license (the "Term") shall commence forthwith
and shall continue until the date that is 36 months after the
earlier of January 1, 2001 or the date hereafter that MP3 begins
Streaming Company Recordings to Locker Owners.
d) Upon termination of the License for any reason, or upon the
termination or expiration of the Term: (a) all rights granted to
MP3 herein to include Company Recordings and the materials
described in paragraph 2(a)(iii) above (collectively, the
"Company Materials") in MyMP3 shall immediately terminate; (b)
MP3 shall thereafter have no right to make any use of any
Company Materials in connection with MyMP3; (c) MP3 shall
immediately cease to use the computer files embodying the
Company Materials and any other materials owned or controlled by
Company including, for the avoidance of doubt and without
limitation, any Company trademarks; (d) MP3 shall immediately
remove all Links to Web Sites owned or controlled by Company or
its licensees on all Web Pages that are a part of MyMP3; (e) MP3
shall immediately remove all Company Shelves from MyMP3; and (f)
MP3 shall promptly furnish Company with a sworn affidavit, in a
form satisfactory to Company in its reasonable discretion,
confirming that MP3 have returned or destroyed or removed, as
the case may be, all copies of the foregoing materials. For the
avoidance of doubt, no termination of the License or the
termination or expiration of the Term shall affect Company's
right to payment of all monies due hereunder.
e) To the extent MP3 chooses to acquire Phonograph Records of
Company Recordings for use on the MP3 Site, it shall acquire new
copies of such Phonograph Records through lawful channels. For
avoidance of doubt, [***].
5. CONSIDERATION:In consideration of this license, Company shall receive
the following:
*** Confidential Treatment Requested
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a) The greatest of:
i) [***] of the Adjusted Gross Revenues multiplied by the
Fraction; or
ii) [***] multiplied by the Fraction; or
iii) A royalty (the "Royalty") of [***] for each Company
Master of which more than 30 consecutive seconds
(without regard to delays attributable to congestion
caused by network traffic on the Internet, etc.) is
Streamed by MP3 via a Locker. No consideration shall be
payable to Company for Streams of a Company Master of 30
seconds duration or less. It is agreed that MP3 shall
have the right to Stream Company Masters of less than 30
seconds duration solely in connection with MyMP3 and the
MP3 Site, e.g., in conjunction with the "Instant
Listening" service, without compensation to Company of
any kind. If during any accounting period, there are
[***], then with respect to any Company Recording
Streamed during such accounting period of greater than
[***], the [***] rate set forth above shall be increased
to [***].
b) [***] for each additional Company Master embodied on a
Phonograph Record which is electronically added to any Locker by
means of the "Instant Listen" or "Beam It" services, or any
equivalent service authorized hereunder, in excess of those so
added prior to the date hereof (the "Per Master Fee"). For
clarification, it is understood that a single Company Master may
be added to multiple Title Lists, and each separate inclusion of
a Company Master into an individual Title List shall generate a
separate Per Master Fee.
c) It is agreed that revenues associated with a Company-owned or
controlled Locker(s) shall be excluded in computing MP3's
payment obligations under 5(a) and (b) above. The presence of a
Company Shelf in a Locker shall not imply Company's control of
such Locker.
d) MP3 shall provide Company [***].
e) MP3 agrees that [***], Company
*** Confidential Treatment Requested
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shall be [***]. If such [***], MP3 shall send such [***].
Company shall have the option of [***]. If Company elects to
[***]. For example, if Company [***].
f) The Company shall have the right to maintain a Company Shelf in
all Lockers. On request from the Company, [***], MP3 will [***].
In addition to the foregoing [***], if MP3 allows Persons
specifically to [***], MP3 shall [***]. For example, if [***],
then Company shall have [***]. Company shall have the right to
purchase additional [***] at [***]. Otherwise, MP3 shall provide
the Company on a semi-monthly basis with a written report
containing aggregate data (the "Aggregate Data") concerning the
Recordings that are included in individual Lockers, as well as
such other categories of information concerning the Lockers and
Locker Owners, on a aggregate basis, as may be available to MP3,
such as the age, gender, primary and secondary music genre, zip
codes, connection speed and other demographics and MyMP3 usage
data, so as to enable the Company better to customize the
information to be included on the Company Shelf. Such Aggregate
Data shall include, as and to the extent reasonably requested by
Company, [***]
*** Confidential Treatment Requested
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<PAGE> 20
[***]. Company shall have the right to request [***] so long as
MP3 can [***]. In addition to the foregoing, to the extent that
MP3 reasonably is able to do so, MP3 shall provide Company with
[***]. The [***]. The costs of [***]. Notwithstanding anything
to the contrary contained herein, MP3 shall provide Company with
monthly (unless a different reporting period is specified)
electronic and/or printed reports detailing the following data
(plus such additional data as MP3 may collect and the parties
agree is appropriate to provide without additional charge to
Company):
i) Beaming Reporting
a) [***]
b) [***]
c) [***]
d) [***]
e) [***].
f) [***].
g) [***].
h) [***]
i) [***]
*** Confidential Treatment Requested
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ii) Instant Listening Reporting
a) [***]
b) [***]
c) [***]
d) [***]
e) [***]
iii) Listen Reporting
a) [***]
b) [***]
c) [***]
d) [***]
e) [***]
f) [***]
g) [***]
h) [***]
iv) Company Shelf
a) [***]
b) [***]
c) [***]
*** Confidential Treatment Requested
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<PAGE> 22
v) Miscellaneous
a) [***]
b) [***]
c) [***]
d) [***]
g) As soon as practicable after the date hereof, MP3 shall make
available to the Company [***], including, without limitation,
[***]. It is understood that MP3 shall not provide [***]. The
Company acknowledges that [***] is confidential and is
proprietary to MP3. Notwithstanding the foregoing, MP3
acknowledges that information contained on a Company Shelf is
confidential and proprietary to the Company. Also, MP3
acknowledges that the Company Shelf may include solicitations
for the Locker Owner directly to contact the Company. Any
information collected by Universal after referral to Company
from the Company Shelf shall be exclusively owned and may be
exclusively used or otherwise exploited by Company, as between
the parties hereto.
*** Confidential Treatment Requested
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h) At Company's option, Company shall be able to purchase
additional marketing rights, data, or advertising at [***].
i) MP3 shall provide Company with access to [***] when such
services are available on the MP3 Site. Company shall have the
right to purchase additional [***]at [***].
j) The Company agrees that in respect of each purchase which is
paid for and not returned (other than for credit) or reversed of
Company Recordings or other products directly from the Company
or its Affiliates through the Company Shelf [***], the Company
shall pay to MP3 a fee (the "Commission") equal to [***] of the
monies actually received by the Company from a Locker Owner for
such Company Recording or other product net of costs of goods
sold (including participations in revenues), shipping and
handling and sales taxes. The Commission shall be accounted,
paid and subject to audit on the same basis as is the
compensation payable to Company hereunder.
6. ACCOUNTINGS:
a) MP3 will compute the sums due Company under paragraphs 5(a),
5(b) and 5(d) as of each March 31, June 30, September 30 and
December 31 after the date hereof. Within sixty-(60) days after
each calendar quarterly period, MP3 will send Company a
statement covering sums due hereunder and shall concurrently pay
Company all sums shown due thereunder.
b) MP3 will maintain (for at least 5 years after the end of the
Term) books and records with respect to sums payable to Company
hereunder. Company may, at its own expense no more than once per
calendar year, examine and copy those books and records, as
provided in this paragraph. Company may make such an examination
for a particular statement within three and one-half (3-1/2)
years after the date when MP3 sends Company the statement
concerned. Company shall only have the right to institute suit
with respect to a particular statement within three years after
the close of the Term hereof. As an alternative, Company shall
have the right to conduct a single audit of MP3, otherwise as
set forth herein, at any time within eighteen (18) months after
the end of the Term. Company may make those examinations only
during MP3's usual business hours, and at the place where it
keeps the books and
*** Confidential Treatment Requested
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<PAGE> 24
records. Such books and records shall be kept at the MP3 office
in San Diego, California, unless otherwise notified. Company
will be required to notify MP3 at least ten (10) days before the
date of planned examination. In the event that an audit proves
(as a result of a mutually approved settlement or a binding
judgment) an underpayment to Company of greater than [***] of
sums properly due for the audited period, MP3 shall reimburse
Company for its reasonable audit costs.
c) The statements referred to paragraph 7(a) above shall provide
Company information, sorted by both artist and title, [***]. MP3
will work in good faith with Company to develop formats for
MP3's accounting statements, including computer-sensible
formats, which will assist Company in accounting to Artists with
respect to the exploitation by MP3 of Company Recordings and
incorporating the information directly into Company's accounting
systems.
d) If Company does not receive any accounting statement and payment
as and when required hereunder, then with respect to the next
accounting period(s) for which MP3 fails to render an accounting
statement, MP3 shall submit License Fee payments that are [***].
If the amount paid pursuant to this subparagraph is more than
the amount actually due, the overpayment shall be credited
against future license fees due to Company under this agreement.
7. WARRANTIES; AUTHORITY TO CONTRACT:
a) MP3 warrants and represents that:
i) MP3 has the right and power to enter into and fully
perform this license agreement and to make the
commitments MP3 makes herein, and has obtained or will
obtain all necessary licenses, permissions and consents.
ii) Company shall not be subject to any Mechanical Royalties
or any royalties in respect of the reproduction or
public performance of any Compositions or other
literary, dramatic or other works (other than underlying
sound recording rights in the Company Recording itself)
embodied in the Company Recordings.
*** Confidential Treatment Requested
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iii) MP3 is fully qualified to render the services described
herein and to maintain and operate the MP3 Site as
described herein. MP3 shall operate the Service to the
best of MP3's abilities in accordance with the technical
specifications attached hereto as Exhibit A.
iv) MP3 owns, and will own at all times during the Term, all
right, title and interest in and to the MP3 Site and the
Service and all materials embodied, reproduced or
otherwise contained therein (other than the rights and
materials licensed by Company hereunder), and all
copyrights and other rights therein, throughout the
Territory, free and clear of any and all claims or
encumbrances whatsoever. The MP3 Site and the Service,
and the operation and use thereof for the purposes
described herein, shall not, and at no time shall during
the Term, violate any law (including, without
limitation, any federal law or regulation) or infringe
upon or violate the rights of any Person, including,
without limitation, any trademarks, names, logos,
copyrights, materials or other content MP3 creates,
licenses, uses, publishes, performs, reproduces,
distributes or displays (other than the Recordings or
other materials licensed or furnished to MP3 by Company
hereunder).
v) MP3 have obtained from all necessary third parties all
licenses and other rights necessary or advisable in
order to create and operate the Service.
vi) MP3 is a corporation duly organized and in good standing
under the laws of Delaware.
vii) MyMP3 will not display any advertising or promotional
material within a Locker that contains Company
Recordings which material is pornographic in Company's
good faith determination, nor shall there appear within
such Locker a Link to a Web Site the principal focus of
which is pornography. The foregoing shall in no way
restrict the type of Recordings or related information
that can be included on Title Lists in any Lockers.
viii) MP3 shall not mislead, misrepresent or make any
fraudulent representations through or in connection with
the Services.
ix) MP3 shall not enter into any agreement whatsoever on
behalf of Company, or make any representations or
warranties on behalf of Company, or represent to any
Person that MP3 have the power, whether express or
implied, to bind Company in any way or enter into
contracts on Company's behalf.
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<PAGE> 26
x) MP3 shall not make any use of any Company Recordings or
any other materials owned or controlled by Company or
its Licensees, or authorize any third party to make any
use of any Company Recordings or any other materials
owned or controlled by Company or its Licensees, except
as specifically permitted pursuant to the terms of this
or another written agreement.
xi) MP3 shall comply with all applicable laws, rules,
regulations and privacy policies.
xii) MP3 shall not cut, edit, change, alter, add to, delete
from or revise any Company Recordings in whole or in
part, directly or indirectly. Without limiting the
generality of the foregoing, MP3 shall not alter or
delete any title, credit or copyright notice, any
trademarks or service marks, or the featured and
non-featured talent, writing, producing, or other
credits required by Company to be used or displayed in
conjunction with the Licensed Recording concerned as
directed by Company. The use of compression technologies
solely to the extent necessary to serve the Company
Recordings as permitted in this Agreement as herein
contemplated will not be deemed a violation of any of
the foregoing restrictions.
b) Company represents and warrants:
i) that it has the full legal right, power and all
authority and approval required to enter into, execute
and deliver this Agreement;
ii) that it has the full legal right, power and all
authority and approval to grant the rights and licenses
herein granted and fully to perform its obligations
hereunder;
iii) that no third party consent is required to grant to MP3
the rights and licenses herein granted;
iv) that Company will be responsible for payment of any
Record Revenue Participations; and
v) that this Agreement has been duly authorized, executed
and delivered by such party and constitutes the valid
and binding obligation of Company enforceable in
accordance with its terms.
c) Either Party may terminate the Term of this Agreement upon a
material breach of any of the material agreements made by the
other Party hereto, which breach is not cured within thirty (30)
days from date of detailed written notice by the non-breaching
Party of any such breach, including a breach of the following:
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<PAGE> 27
i) MP3 breaches paragraph 2(j) above;
ii) MP3 fails to make timely payments in accordance with
paragraph 6 for more than three (3) accounting periods
in any one (1) year period; or
iii) MP3's dissolution or the liquidation of MP3's assets, or
the filing of a petition for liquidation under Title 7
or Title 11 of the United States Code as now or
hereafter in effect, or in the event of the appointment
of a receiver or a trustee for substantially all of
MP3's property.
8. INDEMNITY:
a) MP3 shall at all times indemnify and hold harmless Company and
its Affiliates from and against any and all claims, losses,
damages, liabilities, costs and expenses, including, without
limitation, legal expenses and reasonable counsel fees arising
out of any breach or alleged breach by MP3 or any MP3 Affiliate
of any of warranty, representation, covenant or obligation by
MP3 or any MP3 Affiliate hereunder (individual and collectively,
"MP3 Claims"). In the event of any MP3 Claim: (i) Company shall
notify MP3 of the MP3 Claim concerned promptly following the
date that Company or any Company Affiliate becomes aware of it;
(ii) MP3 shall defend against the MP3 Claim concerned (at MP3's
own expense) through legal counsel selected by MP3 with
Company's consent, which consent Company shall not unreasonably
withhold; and (iii) each Party shall reasonably cooperate with
the other in the defense of the MP3 Claim concerned. MP3 shall
be solely responsible for the amount of any settlement approved
by MP3 or judgment for such MP3 Claim and all legal expenses and
counsel fees incurred by MP3 in connection therewith, subject to
section 8(b) below.
b) In the event that MP3 or any MP3 Affiliate is failing for any
reason to defend against the MP3 Claim concerned, Company shall
have the right to assume the defense and settlement of the MP3
Claim concerned through legal counsel selected by Company, but
MP3 shall be solely responsible at all times for the amount of
any settlement or judgment for such MP3 Claim, as well as all
reasonable legal expenses and reasonable counsel fees incurred
by Company in connection therewith. Any settlement of an MP3
Claim shall be subject to MP3's consent, which consent MP3 shall
not unreasonably withhold. Notwithstanding the foregoing, in the
event that MP3 defends against the MP3 Claim concerned (at MP3's
own expense) through legal counsel selected by MP3 in accordance
with and subject to clause (ii) of section 8(a) above, Company
shall have the right at all times to actively participate in the
defense thereof, and to employ legal counsel selected by Company
at Company's own expense [separate from the counsel employed by
MP3], it being understood
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<PAGE> 28
that MP3 shall have the right at all times, in MP3's sole
discretion, to maintain control of the conduct of the defense.
c) Company shall at all times indemnify and hold harmless MP3 and
its Affiliates from and against any and all claims, losses,
damages, liabilities, costs and expenses, including, without
limitation, legal expenses and reasonable counsel fees arising
out of any breach or alleged breach by Company of any warranty,
representation, covenant or obligation by Company hereunder
(individually and collectively, "Company Claims"). In the event
of any Company Claim: (i) MP3 shall notify Company of the
Company Claim concerned promptly following the date that MP3
becomes aware of it; (ii) Company shall defend against the
Company Claim concerned (at Company's own expense) through legal
counsel selected by Company with MP3's consent, which consent
MP3 shall not unreasonably withhold; and (iii) each Party shall
reasonably cooperate with the other in the defense of the
Company Claim concerned. Company shall be solely responsible for
the amount of any settlement or judgment for such Company Claim
and all legal expenses and counsel fees incurred by Company in
connection therewith, subject to section 8(d) below.
d) In the event that Company or any Company Affiliate is failing
for any reason to defend against the Company Claim concerned,
MP3 shall have the right to assume the defense and settlement of
the Company Claim concerned through legal counsel selected by
MP3, but Company shall be solely responsible at all times for
the amount of any settlement or judgment for such Company Claim,
as well as all reasonable legal expenses and reasonable counsel
fees incurred by MP3 in connection therewith. Any settlement of
a Company Claim shall be subject to Company's consent, which
consent Company shall not unreasonably withhold. Notwithstanding
the foregoing, in the event that Company defends against the
Company Claim concerned (at Company's own expense) through legal
counsel selected by Company in accordance with and subject to
clause (ii) of section 8(c) above, MP3 shall have the right at
all times to actively participate in the defense thereof, and to
employ legal counsel selected by MP3 at MP3's own expense
[separate from the counsel employed by Company], it being
understood that Company shall have the right at all times, in
Company's sole discretion, to maintain control of the conduct of
the defense.
9. INJUNCTIVE RELIEF: MP3 acknowledges that the rights licensed by Company
hereunder have a special, unique and extraordinary character which gives
them a peculiar value, and that, in the event of a material breach of
any material term, condition, representation, warranty, covenant or
agreement contained in this agreement, Universal may be caused
irreparable injury, which cannot be adequately compensated in monetary
damages. Accordingly, in the event of any such breach, actual or
threatened, Company shall have, in addition to any other legal remedies,
the
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right to seek injunctive or other equitable relief. (The preceding
sentence shall not be construed to preclude MP3 from opposing any
application for such relief based upon contest of other facts alleged by
Company in support of the application.).
10. NOTICES: All notices to be given hereunder shall be in writing and shall
be sent by courier or other personal delivery or by registered or
certified mail to the applicable address set forth on page 1 hereof or
at such other address as shall be designated in writing from time to
time by the party receiving notice. Company shall send a copy of each
such notice to MP3 to Ziffren, Brittenham, Branca & Fischer, LLP., 1801
Century Park West, Los Angeles, California 90067, Attn: Gary Stiffelman,
Esq. MP3 shall send a copy of each notice to Company to its Executive
Vice President of Business and Legal Affairs. Except as otherwise
provided herein, such notices shall be deemed given when personally
delivered or mailed, except that notices of change of address shall be
effective only after the actual receipt thereof.
11. MISCELLANEOUS:
a) This Agreement sets forth the entire understanding of the
parties hereto relating to the subject matter hereof and
supersedes all prior and contemporaneous agreements and
understandings, whether oral or written. This Agreement may be
amended, modified, superseded, canceled, renewed or extended,
and the terms hereof may be waived, only by a written instrument
signed by the parties hereto or, in the case of a waiver, by the
party waiving compliance.
b) Company may assign its rights under this agreement in whole or
in part to any subsidiary, affiliated or controlling
corporation, to any Person owning or acquiring a substantial
portion of the stock or assets of Company, or to any partnership
or other venture in which Company participates, and such rights
may be similarly assigned by any assignee. No such assignment
shall relieve Company of any of its obligations hereunder.
Company may also assign its rights to any of its Licensees if
advisable in Company's sole discretion to implement the license
granted. MP3 shall not have the right to assign this agreement
or any of its rights hereunder other than to a Person owning or
acquiring a substantial portion of its stock or assets without
Company's prior written consent; provided no such assignment
shall relieve MP3 of any of its obligations hereunder. Any
purported assignment by MP3 in violation of this paragraph shall
be void.
c) This Agreement shall be governed and construed in accordance
with the laws of the State of California applicable to
agreements made and to be performed entirely within such State.
The California courts (State and Federal), only, will have
jurisdiction of any controversies regarding this agreement; any
action or other proceeding which involves such a controversy
will be brought in those courts and not elsewhere. Except as is
specifically provided herein,
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nothing in this Agreement is intended to confer on any person
not a party hereto any rights or remedies under this Agreement.
d) Neither party shall be deemed to be in breach of any of its
obligations hereunder unless and until the other party shall
have given specific written notice describing in reasonable
detail the breach and the allegedly breaching party shall have
failed to cure that breach within a reasonable time after its
receipt of that written notice.
e) This agreement may not be modified except by an instrument in
writing executed by each party hereto. The invalidity or
unenforceability of any provision hereof shall not affect the
validity or enforceability of any other provision hereof.
f) MP3 acknowledges that Company shall have the right to license or
establish businesses similar to MyMP3.
g) In entering into this agreement, and in providing services
pursuant hereto, MP3 and Company have and shall have the status
of independent contractors and nothing herein contained shall
contemplate or constitute MP3 or Company as each other's agents
or employees.
h) A waiver by either party of any provision of this agreement in
any instance shall not be deemed to waive it for the future.
i) All remedies, rights, undertakings, and obligations contained in
this agreement shall be cumulative and none of them shall be in
limitation of any other remedy, right, undertaking or obligation
of either party. No exercise of any of a Party's options or
remedies under this Agreement will limit a Party's right to
recover damages by reason of any default by the other Party, a
Party's right to exercise any of its other options or remedies
under this Agreement, or any of any Party's other rights or
remedies. The captions of the Articles in this agreement are
included for convenience only and will not affect the
interpretation of any provision.
j) MP3 will bear and pay any and all taxes, duties and customs of
any kind, however designated, levied or based in any way
anywhere in the Territory upon the performance of this agreement
or the sale or resale of any products or services by MP3 and its
Affiliates, including, for the avoidance of doubt and without
limitation, all sales, use, excise, purchase, value added or
similar taxes but excluding income or similar taxes on sums
payable to Company, which income or similar taxes, for the
avoidance of doubt, Company shall bear. If any claim is made
against Company for such taxes, MP3 will promptly remit to
Company such sums together with any penalties and interest
assessed immediately, unconditionally and without offset.
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12. SECURITY:
a) Reference is made to Exhibit A hereof, which is incorporated
herein by this reference. MP3 represents that the security
systems outlined in Exhibit A are presently in place with
respect to MyMP3 and that such systems, or systems more
protective or effective, as the case may be, shall remain in
place throughout the Term hereof as applicable to Company
Recordings. Promptly after becoming aware that any Person has
circumvented any security systems implemented in MyMP3 as
described herein or in Exhibits A and B hereto (a "Security
Breach") and continues to engage in such Security Breach, either
directly or indirectly, or immediately after Company has advised
MP3 that Persons are engaged in a Security Breach, either
directly or indirectly: (i) MP3 shall notify such Person and
undertake an investigation with respect to such activity, (ii)
MP3 shall warn such Person that if the practice in question
continues, MP3 may cancel such Person's Locker or deny access to
Company Recordings thereunder, and (iii) MP3 shall take
reasonable steps to monitor such Person's activity so as to take
such further measures as may be appropriate to protect the
Company Recordings from illicit usages. If such activity
nonetheless continues, MP3 shall take reasonable steps designed
to ensure that such Person can no longer access Company
Recordings via MyMP3. MP3 at all times actively shall monitor
MyMP3 to detect any potential flaws in the security systems
implemented in MyMP3 as described herein or in Exhibits A and B
hereto ("Security Flaws"). If a Person disseminates on a Web
Site, directly or indirectly, any method pursuant to which a
Security Flaw may be exploited in a manner so as to permit
uncontrolled access to Company Recordings, the adding of Company
Recordings to Lockers other than as provided herein or the
creation of Electronic Digital Copies of Company Recordings in
contravention of MP3's Security Systems and/or the policies and
standards in effect for MyMP3, Company shall have the right to
require that MP3 suspend and toll the Term hereof until such
time as such Security Flaw can substantially be repaired. No
suspension or tolling shall apply for a Security Flaw which is
[***]. In the event that a suspension and tolling continues for
more than a year, and the cause thereof solely affects MP3,
Company shall have the right to terminate the tolling of the
Term by written notice to MP3. In the event that a suspension
and tolling continues for more than two years, and the cause
thereof affects MP3 and all companies offering digital locker
services similar to MyMP3, Company shall have the right to
terminate the tolling of the Term by written notice to MP3. A
termination of tolling shall not of itself result in the
termination of suspension.
b) Commencing [***], MP3 shall, [***]
*** Confidential Treatment Requested
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only Stream Company Recordings [***]. Commencing on [***], MP3
shall only Stream Company Recordings [***]. MP3 shall not
increase the bit-rate at which Company Recordings are encoded
from the rate at which Recordings presently are encoded
generally by MP3 (i.e., a encoding "bit rate" of 128Kbs).
c) Notwithstanding anything contained herein, MP3 shall provide
security measures with respect to Company Recordings which are
no less protective than those made available by MP3 to any other
Record Label's Recordings.
d) If there are [***], and for so long as there are [***], the
following shall apply:
i) Commencing with the second complete accounting period of
the Term hereof, and at the close of each quarterly
accounting period of the Term thereafter, MP3 shall
require [***]. The Company Albums that [***]. MP3 shall
have the right to defer [***] for one (1) quarterly
accounting period, it being understood that with respect
to the period deferred, the [***]. For example, if one
accounting period is deferred, then as of the close of
the next accounting period, the [***]. In no event may
such a deferment be used to extend the time between
[***].
*** Confidential Treatment Requested
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ii) It is understood that no additional Per Master Fee shall
be payable in respect of [***]. It also is understood
that in addition to the [***] specified in paragraph
12(d)(i) above, no [***] more than one time during any
one year period of the Term, nor [***] after same was
first added to a Locker.
iii) Locker Owners will be [***] after the close of the
applicable quarterly accounting period. Commencing on
the eighth day after a Locker Owner [***]. Commencing
with such eighth day, the Locker Owner [***]. If the
Locker Owner [***].
iv) The parties agree to continue to discuss alternative
methods to minimize the opportunity for Locker Owners to
add Company Recordings to their Lockers from Phonograph
Records that they do not personally own, including
methods which minimize the inconvenience to the end
user; provided, neither party shall be obliged to adopt
any methods not specifically set forth in this
agreement.
13. CONFIDENTIALITY; PRESS RELEASE:
a) Company, MP3 and each of their respective Affiliates agree that
they shall, and they shall instruct in writing their respective
attorneys, accountants and other professional advisors
(collectively, "Advisors") to, hold in confidence and not
communicate, transmit, publish, disseminate or otherwise
disclose any of the terms and conditions of this Agreement or
any fact, matter, event or surrounding circumstance leading to
or relating to the negotiation thereof to which such Party was
privy or of which they were otherwise made aware (e.g., by being
copied on correspondence or by being advised of such fact,
matter, event or circumstance by another party to the
negotiation) (collectively, "Confidential Information");
provided, however, that nothing in
*** Confidential Treatment Requested
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this paragraph 13 shall prohibit disclosure of such Confidential
Information: (a) by Company, MP3 or any Affiliate to its
respective financial officers, management, bankers or others as
may be reasonably necessary in the operation of its respective
business or by Company to any of its Affiliates; (b) by Company,
MP3 or any Affiliate to its respective Advisors to the extent
that such disclosure is in the opinion of such Advisors required
to enable such Advisors fully to represent the Person concerned
(or by any of Company's Affiliates or licensees to their
respective attorneys, accountants and other professional
advisors); (c) in connection with any legal or governmental
proceeding; or (d) to any judicial, governmental or regulatory
body. Notwithstanding the foregoing, in the event that either
Party seeks or is required to disclose Confidential Information
as a result of the circumstances described in clauses (c) or (d)
of the preceding sentence, the Party seeking to disclose
Confidential Information shall use reasonable efforts to
promptly notify the other Party of such potential disclosure so
that such other Party may seek an appropriate protective order
to prevent the disclosure of such Confidential Information. MP3
also shall have the right to [***].
b) Company, MP3 and each of MP3's Affiliates agree that the
disclosure of the existence of this agreement or any of the
transactions contemplated in this Agreement, including, without
limitation, any Confidential Information, in the context of any
formal public communication to a third party of any kind,
including, for the avoidance of doubt and without limitation, in
the context of a formal press announcement or press conference,
shall be subject to MP3's and Company's mutual approval.
Attached hereto as Exhibit C to this Agreement is a formal press
announcement which is deemed mutually approved by both MP3 and
Universal (the "Agreed Statement").
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14. Music Publishing:
Reference is made to all musical compositions owned or controlled by Company's
music publishing Affiliates, including without limitation, [***] (the
"Compositions"). Company agrees to cause its music publishing Affiliates to
grant to MP3 a general release on the following terms covering MP3's use prior
to the date hereof of the Compositions (including the reproduction, performance
and other exploitation thereof) for or in connection with the MyMP3.com service.
a) Company shall cause its music publishing Affiliates, on behalf of themselves
and their heirs, agents, employees, representatives, partners, owners, related
entities, officers, parents, shareholders, directors, subsidiaries, affiliates,
attorneys, transferees, predecessors, successors, and assigns to irrevocably
release, acquit and forever discharge MP3 and each of its respective heirs,
agents, employees, representatives, partners, owners, related entities,
officers, parents, shareholders, directors, subsidiaries, divisions, affiliates,
investors, family members, 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, 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,
relating to, arising from, or concerning the use prior to the date hereof of the
Compositions (hereinafter the "Company Released Claims").
b) Company shall cause its music publishing Affiliates to agree that, with
respect to the Company Released Claims, all rights under California Civil Code
Section 1542 (and any other law of similar effect), are hereby expressly waived
by Company, 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."
Company shall cause its music publishing Affiliates and their representatives,
heirs and assigns expressly to 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 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.
Notwithstanding anything to the contrary contained herein, but subject to
Paragraph 14 c) below, with respect to all compositions owned or controlled by
[***] MP3 agrees that at Company's election,
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MP3 will [***].
c) Company agrees that [***]. Provided that [***], Company agrees it will [***].
If [***], Company's music publishing Affiliates and [***].
By: /s/ Robin Richards
---------------------------------
AGREED AND ACCEPTED:
UMG Recordings, Inc.
By: /s/ Signature Illegible
-------------------------------------------
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Exhibit A
My.MP3
[***]
*** Confidential Treatment Requested
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Exhibit B
Streaming Security Functional Requirements
[***]
*** Confidential Treatment Requested
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Exhibit C
Form of Press Release
Contact: Contact:
MP3.com Universal Music Group
Greg Wilfahrt Bob Bernstein
Director, Public Relations 310-865-0589
858-623-7280
Email: pr@mp3.com
================================================================================
COURT AWARDS JUDGMENT TO UNIVERSAL MUSIC GROUP IN COPYRIGHT
INFRINGEMENT SUIT WITH MP3.COM
Universal Music Group Grants MP3.com License for My.MP3.com Service
================================================================================
SAN DIEGO AND NEW YORK -- NOV. 14, 2000 -- U.S. District Judge Jed Rakoff today
awarded $53.4 million in statutory damages and attorneys fees to the Universal
Music Group (UMG) in its copyright infringement suit against MP3.com, Inc.
(Nasdaq: MPPP). Last January, UMG and others filed the lawsuit challenging
MP3.com's copying of thousands of copyrighted CDs onto its file servers to
create its My.MP3.com "locker" service. MP3.com does not intend to appeal from
the judgment.
Concurrently, it was announced that UMG has granted MP3.com a non-exclusive,
North American license for the use of UMG-controlled recordings on the
My.MP3.com system, including the "Beam-it(TM)" and "Instant Listening(TM)"
software services.
"Universal Music pursued this case to send a strong message that copyrights will
be protected and that copyright owners and artists need to be properly
compensated for use of their work," said Zach Horowitz, President and Chief
Operating Officer, UMG. "Although we believe our proof at trial would have led
to a greater damage award, we are satisfied with the award. It was never our
intent to put MP3.com out of business with a judgment so large that it would
threaten their viability as a company. We support the development of legitimate
music businesses on the Internet."
Michael Robertson, Chairman and Chief Executive Officer of MP3.com stated: "We
are glad that this case is now behind us and that we will be able to include
UMG's music as part of our My.MP3.com service. We look forward to returning our
entire focus to capitalizing on the tremendous opportunity in the digital
delivery of music and letting consumers listen to CDs which they own in the
digital age. As we move ahead, this provides clear evidence that the needs of
rights holders and music fans can be accommodated in the digital music space.
The marketplace that has served artists and consumers for so long will continue
to thrive in the era of the Internet."
About MP3.com
MP3.com, Inc. has created what it believes is a unique and robust technology
infrastructure for the storage, management, promotion and delivery of digital
music. As the Internet's
<PAGE> 40
premier Music Service Provider (MSP), the company is dedicated to providing
consumers with anytime, anywhere access to their music using any web-enabled
device. The company's web site hosts what MP3.com believes is the largest
collection of digital music available on the Internet, with more than 698,000
songs and audio files posted from over 109,000 digital artists and record
labels. Dedicated to growing the digital music space, the company's products and
services include on-demand Subscription Music Channels, an innovative Retail
Music Program, a Syndicated Radio Division and others. Additionally, through the
company's MSP initiative, MP3.com is partnering with a variety of
forward-looking technology companies to expand its digital music strategy.
MP3.com's common stock is traded on the Nasdaq National Market under the ticker
symbol MPPP. The company is based in San Diego, California. For more information
on MP3.com, visit www.mp3.com.
About Universal Music Group
Universal Music Group is the world's leading music company with wholly-owned
record operations or licensees in 63 countries around the world. Its businesses
also include Universal Music Publishing Group, one of the industry's largest
global music publishing operations.
Universal Music Group consists of record labels A&M Records, Decca Record
Company, Deutsche Grammophon, Geffen Records, Interscope Records, Island Def Jam
Music Group, Jimmy and Doug's Farmclub.com, MCA Nashville, MCA Records, Mercury
Records, Motown Records, Philips, Polydor, Universal Records, and Verve Music
Group as well as a multitude of record labels owned or distributed by its record
company subsidiaries around the world. The Universal Music Group owns the most
extensive catalog of music in the industry, which is marketed through two
distinct divisions, Universal Music Enterprises (in the U.S.) and UM3 (outside
the U.S.). Universal Music Group is a unit of The Seagram Company Ltd., a global
entertainment and spirits and wine company.
Statements in this press release that are not strictly historical are
forward-looking statements within the meaning of section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such
statements include references to activities expected to occur in connection with
MP3.com's license arrangement with Universal Music Group. These statements
involve a high degree of risk and uncertainty, are only predictions, and actual
events or results may differ materially from those projected in such
forward-looking statements. Factors that could cause or contribute to
differences include risks related to: implementation of MP3.com's license
arrangement with Universal Music Group; MP3.com's current litigation
proceedings, including without limitation the inability to reach settlement with
all parties to such litigation proceedings; MP3.com's new and uncertain business
model; acceptance of MP3.com's products and services; MP3.com's limited
operating history, and MP3.com's rapid growth, as well as other risks detailed
from time-to-time in MP3.com's reports to the Securities and Exchange
Commission, including its report on Form 10-K for the year ended December 31,
1999 and its most recent reports on Form 10-Q.