Sample Business Contracts

License Agreement - Inc. and Virgin Holdings Inc.

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                        , Inc.
                               4790 Eastgate Mall
                               San Diego, CA 92121

                                                   July 26, 2000

Virgin Holdings, Inc.
c/o EMI Recorded Music
1750 North Vine Street
Los Angeles, CA 90028


This agreement (this "Agreement") sets forth the terms and conditions of the
agreement between Virgin Holdings, Inc. ("Virgin" and, together with the Label
Affiliates (as defined below), the "Company") and, Inc. (together with
its Affiliates, "MP3") with respect the matters set forth herein.


        (a)    "Adjusted Gross Revenues" means sums actually paid to or received
               by or on behalf of MP3 in the form of:

               (i)    Subscription revenues, storage fees or other sums paid
                      by Locker Owners in connection with the Lockers;

               (ii)   Sponsorship revenues or fees relating to Lockers;

               (iii)  Advertising revenues or fees relating to advertisements
                      located within Lockers, less actual out-of-pocket amounts
                      paid to advertising agencies, carriers or other
                      similarly-situated third parties (not to exceed
                      [...***...]) in connection with such advertising revenues;

               (iv)   E-commerce bounties or click-thru royalties, or referral,
                      affiliate program or other fees related to MyMP3;

               (v)    Co-branding, co-linking, framing and similar revenues and
                      fees related to MyMP3; and

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               (vi)   Revenues from the sale of products or services from
                      Lockers, net of direct, out-of-pocket, third party costs
                      of goods sold (including payments made to third parties
                      entitled to participation in revenues collected in
                      connection with the sale of such products or services),
                      the actual cost of shipping and handling and sales taxes
                      actually paid.

               If any such 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. It is understood that
               certain advertising is sold by MP3 that is not specifically
               targeted to users of the MyMP3 service or Locker Owners (as
               evidenced by such advertising appearing as part of a banner that
               appears on a majority of pages of the MP3 Website) and that sums
               received from the sale of such site-wide advertising will not be
               included in the definition of Adjusted Gross Revenues
               (notwithstanding the fact that such advertising appears on a page
               of the MP3 Website that includes a Locker). Adjusted Gross
               Revenues shall not include subscription fees paid to MP3 by a
               Locker Owner for access to a specific service that does not
               include [...***...]

        (b)    "Affiliate" has the meaning assigned to that term under Rule 501
               of the Securities Act of 1933, as amended, and the rules and
               regulations promulgated thereunder [...***...]

        (c)    "Artist" means a recording artist whose performance is embodied
               in the Company Recordings.

        (d)    "Beam-it System" 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 Record into a computer CD-ROM drive, MP3's proprietary
               software verifies the existence and identity of such Record and,
               upon completion of such verification, the Recordings embodied in
               such Record are automatically added to the Locker Owner's Title

        (e)    "Company Album" means an album [...***...] as to which

        (f)    "Company Master" means an individual master recording
               [...***...] as to which [...***...]

        (g)    "Company Recordings" means all Company Albums and Company
               Masters now existing or hereafter created during the Term.

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        (h)    "Company Shelf" means [...***...] provided, that the appearance
               (font size, image, etc.) and location within the [...***...] The
               Company shall have the right (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 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 shall [...***...]
               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
               the [...***...] are available, MP3 shall [...***...] The size of
               the Company Shelf shall not exceed [...***...] The Company shall
               be entitled to post on the Company Shelf (or post hyperlinks to)
               [...***...] It is understood that [...***...] The parties agree
               to work together to [...***...]

        (i)    "Download" or "Downloading" means a media delivery method
               whereby [...***...] The fact that a file [...***...] does not
               qualify as Downloading.

        (j)    "Enforcement Technology" means the means MP3 shall be required
               hereunder to utilize to enforce the territorial, Ownership and
               other restrictions required hereunder including, without
               limitation: (i) prior to creating or establishing Locker,
               requiring that Locker Owners confirm, warrant or agree, through
               a click-thru agreement or otherwise, that [...***...] such
               Locker Owner is the Owner of the Records on which the Recordings
               to be added to a Locker are embodied; (ii) employing technology
               promptly as it becomes available that will enhance enforcement
               of the restrictions contemplated hereby or that will block
               access to Lockers by non-compliant users; and (iii) [...***...]
               and (A) promptly upon identification thereof, disciplining or
               warning non-compliant users in a manner established by MP3 and
               (B) disconnecting or prohibiting access to Lockers by
               repeat-offender non-compliant users.

        (k)    "Fraction" means a fraction, the numerator of which is
               [...***...] and the denominator of which is [...***...]

        (l)    "Instant Listening System" means the system currently utilized
               by MP3 (and any future enhancements thereto in accordance with
               this Agreement), pursuant to which a Locker Owner can purchase a
               Record from an on-line retailer who has entered into an
               arrangement with MP3 and add the Recordings embodied in such
               Record to the Locker Owner's Title List at the time such Record
               is purchased.

        (m)    "Internet" means the publicly available network of computer
               networks using the Transmission Control Protocol/Internet
               Protocol (TCP/IP) (including subsequent extensions or
               modifications thereof) commonly

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               referred to as the Internet and also known as the "World Wide
               Web," from which digital data (e.g., text, information,
               graphics, audio, video or a combination thereof) may be
               transmitted from a distant location 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 a
               fee is charged or a subscription or membership is required in
               order to access such network. Even though it is understood that
               the defined term "Internet," as used in this Agreement, can be
               used to deliver [...***...] the term "Internet" shall not
               include [...***...]

        (n)    "Label Affiliates" means those record labels [...***...] as of
               the date of this Agreement.

        (o)    "Locker" means Web pages within MyMP3 in which an individual
               Locker Owner's Title List is maintained. Each Locker shall be
               accessible solely by a Password and only one Person shall be able
               to access a Locker at any one time.

        (p)    "Locker Owner" means an individual Person who shall have
               established a particular Locker.

        (q)    "MP3 Website" means and any other Web site wholly
               owned by MP3 hereafter approved by Virgin in writing in its sole
               discretion. The MP3 Website shall also include mirror sites,
               caching servers or equivalent devices whose distribution function
               for purposes hereof is determined solely by actions directed at
               such approved URLs.

        (r)    "MyMP3" means the service, MP3's proprietary system
               located on the MP3 Website that includes the Beam-it System and
               the Instant Listening System, pursuant to which an individual
               Person can establish a Locker and maintain a Title List which can
               be accessed and used only by such Locker Owner using a Password.
               A true, accurate and complete description of MyMP3 as of the date
               hereof is attached hereto as Exhibit A, which is incorporated
               herein by reference.

        (s)    "Own," "Owned" or "Ownership" means, with respect to all Locker
               Owners, the [...***...]

        (t)    "Password" means a password either (i) provided to a Locker Owner
               by MP3 or (ii) chosen by the Locker Owner and accepted by MP3 so
               that MP3 is able to identify the Locker Owner. Each Password will
               be unique to the individual Locker Owner.

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        (u)    "Person" means any individual, corporation, partnership or other
               legal entity.

        (v)    "Record" means any and all forms of reproductions of audio
               recordings (e.g., albums, singles, etc.), now or hereafter
               invented, manufactured or distributed primarily for non-public
               use, including, without limitation, home use, school use, juke
               box use, or use in means of transportation including both
               physical and digitized reproductions; provided, that the
               applicable Recording embodied in a Record shall in all events
               have been commercially released in the form of a physical
               phonorecord for sale to consumers.

        (w)    "Recording" means a sound recording embodied in a Record.

        (x)    "Record Labels" means [...***...]

        (y)    "Record Payments" means a payment that may be due to an Artist,
               a record producer or similar third party participant in
               connection with the use or performance of the Company Recordings
               hereunder pursuant to a contract relating to such Company
               Recording entered into between such Artist, producer or third
               party and a Label Affiliate. For the avoidance of any doubt,
               Record Payments shall not include (i) payments to any Person
               (including, without limitation, any songwriter, music publisher
               or similar third party) entitled to payment in connection with
               the use or performance of the musical composition embodied in
               the Company Recordings hereunder and (ii) any other payment
               required to be made by MP3 hereunder.

        (z)    "Stream" means a digital transmission of a Recording in
               compressed form solely by means of the Internet that (i) is
               [...***...] and (ii) does not [...***...]

        (aa)   "Territory" means the United States and, to the extent the
               Company owns or has acquired the right to license the rights
               granted to MP3 under this Agreement, Canada and Mexico.

        (ab)   "Title List(s)" means the specific set of Recordings accessible
               from within an individual Locker by such Locker's Locker Owner
               using a Password (as distinguished from a playlist selected by a
               Locker Owner from Recordings included on such Locker Owner's
               Title List).

2.      LICENSE:

        (a)    Upon the terms and subject to the conditions, restrictions and
               limitations set forth herein, and solely to the extent of the
               Company's rights with respect thereto, the Company hereby grants
               to MP3 a non-exclusive, non-

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               transferable license, without the right to sublicense, solely
               during the Term (as defined below) and within the Territory:

                (i)     To encode the Company Recordings in a secure Streaming
                        format using technologies selected by MP3 (which, if
                        modified or changed from the technologies used by MP3 on
                        the date hereof, shall be subject to the approval of the
                        Company, such approval not to be unreasonably withheld)
                        reasonably necessary to create a database of Recordings
                        which Locker Owners can access only in accordance with
                        the methods described in Sections 2(b)-(d) below and
                        otherwise on the terms and subject to the conditions of
                        this Agreement, to Stream such encoded Company
                        Recordings from the MP3 Servers (as defined below) to
                        Locker Owners via the Internet and to make copies of
                        such Company Recordings solely to the extent necessary
                        to exercise its rights under this Section 2(a)(i);
                        provided, that all such copies shall reside only on the
                        network servers, mirror sites, caching servers,
                        workstations or equivalent devices under the direct
                        control of MP3 dedicated to MyMP3 (the "MP3 Servers");

                (ii)    To encode and display on the MP3 Website solely for
                        informational purposes as part of the MyMP3 service
                        (i.e., not made available for copying or other
                        reproduction by Locker Owners), cover artwork associated
                        with the Company Recordings (except for any Company
                        Recordings that are soundtrack albums, unless the
                        Company has the unrestricted right to authorize such
                        use); provided, that no cover artwork shall be encoded
                        by MP3 at a quality in excess of seventy-two (72) dots
                        per inch; and provided further, that all copies of such
                        cover artwork shall reside only on the MP3 Servers;

                (iii)   To use on the MP3 Website the names and tradenames of
                        the Company (only as such names and tradenames appear on
                        the Company Recordings), the titles of the Company
                        Recordings and the names of the Artists whose
                        performances are embodied in the Company Recordings (or
                        a producer or other performer who is credited by the
                        Company with such Company Recording), in all cases
                        solely to identify the Company Recordings on the MyMP3
                        service (and not in connection with any promotion,
                        marketing and/or advertising of MyMP3, MP3, the MP3
                        Website or for any other purpose whatsoever without
                        Virgin's prior written approval); and

                (iv)    In each instance where Virgin has consented in writing
                        to such use (in all cases prior to the time of such
                        use), to use on the MP3 Website the likenesses (other
                        than cover artwork, which is covered by Section
                        2(a)(iii) above) of the Artists whose performances are
                        embodied in the Company Recordings (and any producer or
                        other performer associated with such Company Recording,
                        to the extent

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                        the Company has the right to authorize such use) solely
                        as part of the MyMP3 service (and not in connection with
                        any promotion, marketing and/or advertising of MyMP3,
                        MP3, the MP3 Website or for any other purpose

        (b)    The Company Recordings may be added to or inserted in an
               individual Locker:

                (i)     At the direction of a Locker Owner using the Instant
                        Listening System (or any Equivalent System (as defined
                        below) established by MP3);

                (ii)    At the direction of a Locker Owner using the Beam-it
                        System (or any Equivalent System established by MP3);

                (iii)   At the direction of a Locker Owner using another system
                        developed by MP3 (so long as such system is an
                        Equivalent System) which enables MP3 to confirm that the
                        Locker Owner Owns and is in the possession of a lawfully
                        produced and acquired Record embodying the Company
                        Recordings that such Locker Owner desires to add to his
                        or her Title List located in his or her Locker; or

                (iv)    By the Company as part of the Company Shelf.

        For purposes of this Section 2(b), the term Equivalent System means a
        system developed by MP3 after the date hereof which operates in a
        similar manner, is subject to the same types of restrictions and
        contains equivalent or better security safeguards as MyMP3 as of the
        date hereof.

        (c)    Recordings located within a Locker Owner's Locker shall be
               organized by a Locker Owner using management tools developed,
               established and maintained by MP3, which tools shall, among
               other things, permit such Locker Owner to organize Recordings
               located within such Locker on a variety of bases customized by
               such Locker Owner. It is understood that a Locker Owner shall
               have the right to access such Person's Locker from any
               Internet-enabled device; provided, that MyMP3 shall not allow
               more than one simultaneous connection to a Locker at any one

        (d)    Recordings included on Title Lists shall only be available for
               Streaming from the MP3 Servers via the Internet. MP3 shall take
               all actions necessary to prevent Locker Owners from, and shall
               use its commercially reasonable best efforts and
               state-of-the-art methods to render the Locker Owners incapable
               of, Downloading, copying, altering, modifying or redistributing
               the Company Recordings from Title Lists or Lockers, unless such
               Company Recordings are made available to Locker Owners for such
               purpose by the Company as part of the Company Shelf.


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        (a)    The rights granted by Virgin hereunder are limited to the
               non-exclusive use of the Company Recordings in the manner
               expressly described in Section 2. Any and all other rights in
               connection with the Company Recordings are specifically reserved
               by the Company. MP3 shall not sublicense, assign or convey to any
               Person, or pledge, mortgage or encumber any rights under this

        (b)    Notwithstanding anything in this Agreement to the contrary,
               MP3's rights hereunder are subject to any restrictions
               applicable to the Company with respect to any Company Recording
               including, without limitation, territorial and contractual
               restrictions. The Company shall be entitled to revoke or
               terminate MP3's right to use a Company Recording authorized
               hereunder (i) if required pursuant to a contractual obligation
               to an Artist or (ii) if the Company does not have or no longer
               has the right to authorize such Company Recording. If the
               Company revokes or terminates MP3's rights to a Company
               Recording pursuant to this Section 3(b), MP3 shall be obligated
               to immediately (but in any event within two (2) business days)
               delete all copies of such Company Recording, all associated
               cover artwork and all titles and hyperlinks referring to the
               Company Recordings, wherever residing (i.e., in any Locker or on
               the MP3 Servers), and certify in writing as to their deletion.
               MP3 shall not be deemed to be in breach of this Section 3(b) so
               long as it complies with the penultimate sentence hereof within
               the time period specified therein.

        (c)    MP3 shall not edit, change or prepare any derivative work from
               any Company Recording and shall not defeat, impair or alter in
               any way any copyright protection technology or mechanism embedded
               in or associated with the Company Recordings.

        (d)    MP3 shall not Stream any Company Recordings from any servers
               that are not the MP3 Servers, or from any Web site that is not
               the MP3 Website. Subject to the foregoing, the Company
               acknowledges that [...***...] In no case shall a Locker be
               accessible [...***...] MP3 shall inform the Company in writing
               of all [...***...]

        (e)    If MP3 elects to [...***...] MP3 shall ensure that all


        (a)    The term (the "Term") of this Agreement shall commence upon
               execution hereof and shall continue for a period of [...***...]
               unless terminated earlier in accordance with Section 10 below.

        (b)    MP3 will use its commercially reasonable best efforts to prevent
               persons outside of the Territory from becoming Locker Owners or

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               creating or accessing Lockers, including [...***...] and
               continuously employing the best available Enforcement
               Technology. Without Virgin's prior written consent in each case,
               MP3 shall not [...***...]

        (c)    Notwithstanding the foregoing, (i) to the extent of the Company
               Recordings authorized hereunder and only to the extent of the
               Company's rights thereto, MP3 shall have the right to permit all
               existing Locker Owners outside the Territory as of the date
               hereof to remain Locker Owners and (ii) provided that MP3 is in
               compliance in all respects with Section 4(b) above, MP3 shall
               not be in breach of this Agreement by reason of Persons outside
               of the Territory becoming Locker Owners unless [...***...] As of
               May 10, 2000, there were approximately [...***...] Locker
               Owners, of which [...***...] were located outside the Territory
               (the "Locker Owner Data"). MP3 shall update the Locker Owner
               Data on a quarterly basis and provide it to Virgin in reasonable
               detail (i.e., [...***...]).

5.      CONSIDERATION:  In consideration of this Agreement, MP3 shall pay to the
        Company the following:

        (a)    Upon execution of this Agreement, a non-returnable advance (the
               "Advance"), recoupable from sums payable pursuant to Sections
               5(b) and (c), equal to [...***...]

        (b)    For each calendar quarter during the Term, a non-returnable
               amount equal to the greater of:

                (i)     [...***...] of the Fraction of the Adjusted Gross
                        Revenues; or

                (ii)    [...***...] every time a Company Master is Streamed from
                        any Locker; provided, that no consideration shall be
                        payable to Company for Streams of a Company Master that,
                        at the election of a Locker Owner, are less than thirty
                        (30) seconds.

        The amounts described in this Section 5(b) are referred to herein as the
        "Royalty Fee" and shall be payable in accordance with Section 7 below.

        (c)    A non-returnable amount equal to [...***...] every time a
               Company Master is added to a Title List after May 10, 2000 (the
               "Per Master Fee"), payable in accordance with Section 7 below.
               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.

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        (d)    If, prior to the time MP3 recoups the payment made to the
               Company under Section 5(a) above (the "Recoupment Period"), the
               Company merges with or into a Record Label (a "Merger") and, as
               a direct result of such Merger, any of [...***...] the "Relevant
               Labels") transfers any of its rights in and to a Company
               Recording to a third party (a "Successor Label"), such Company
               Recording shall continue to be deemed to be a Company Recording.
               In addition, if during the Recoupment Period there is a Merger
               and, as a direct result of such Merger, a Relevant Label is
               merged or combined with a record label that is not a Label
               Affiliate as of the date hereof (a "Combined Label"), then, (i)
               if the Combined Label [...***...] and (ii) [...***...] the
               parties shall meet to determine in good faith the percentage of
               Recordings released by such Combined Label to be deemed to be
               Company Recordings so that MP3's ability to recoup the Advance
               is not materially affected by the Merger and combination (the
               "Percentage"). If the parties are unable to agree to the
               Percentage within sixty (60) days of the commencement of such
               meetings, the parties shall submit the matter to a non-binding
               mediation. If at the end of such mediation the parties are
               unable to agree, either party may initiate binding arbitration
               in Los Angeles, California under the rules of the American
               Arbitration Association, 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 limited solely to the Percentage and no
               other matters whatsover. In no event shall the Company


        (a)    The Company shall have the right to maintain a Company Shelf in
               all Lockers. On request from the Company [...***...] MP3 will
               [...***...] Otherwise, MP3 shall provide the Company with
               aggregate data concerning the Company Recordings that are
               included in individual Lockers so as to enable the Company to
               customize the information to be included on that Locker Owner's
               particular Company Shelf; provided, that data queries by
               the Company with respect to an individual Locker will only be
               accessible to the extent that MP3 develops processes which
               enable mass addressability and messaging to individual Lockers,
               which it shall use best efforts to do as soon as possible.

        (b)    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 [...***...] 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

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               to the Company. Also, MP3 acknowledges that the Company Shelf
               may include solicitations for the Locker Owner directly to
               contact the Company. The Company agrees that if the Company
               elects to permit a Locker Owner to purchase Company Recordings
               or other products directly from the Company 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 the Royalty Fee hereunder.

        (c)    MP3 shall cause MP3's recovery and retention and use of consumer
               information, and its transfer to the Company or any other Person,
               to comply with all laws and regulations that protect consumer
               privacy or otherwise governs consumer information retention, use
               and transfer to which MP3 is subject.


        (a)    MP3 shall maintain full, true and accurate accounts with respect
               to the Royalty Fees and the Per Master Fees and shall compute
               the sums due to the Company under Sections 5(b) and (c) as of
               each March 31, June 30, September 30 and December 31 after the
               date hereof. Within thirty (30) days after each calendar
               quarterly period, MP3 will send the Company a statement relating
               to such quarter that includes [...***...] (the "Quarterly
               Statement"), together with payment of all sums due to the
               Company. MP3 shall send such Quarterly Statements to the Company
               regardless of whether any amounts are due to the Company.
               Quarterly Statements shall be delivered in a computer readable
               format specified by Virgin in its reasonable, good faith
               business discretion.

        (b)    MP3 will maintain (for at least 5 years after the end of the
               Term) books and records with respect to sums payable to the
               Company hereunder. The 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. In the event that the
               calculation of such sums is determined by a computer-based
               system, the Company shall be permitted to examine the machine
               sensible data utilized by such system and the related
               documentation describing such system. The Company may make those
               examinations only during MP3's usual business hours, and at the
               place where it keeps the books and records. Such books and
               records shall be kept at the MP3 office in San Diego,
               California, unless otherwise notified. The Company will be
               required to notify MP3 at least ten (10) days before the date of
               planned examination. If any audit reveals any statement
               hereunder to be in error by more than [...***...] in addition to
               payment of

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              the deficiency, the reasonable costs and expenses of such
              inspection shall be borne by MP3.


        (a)    In addition to the other representations, warranties, agreements
               and obligations of MP3 herein:

                (i)     MP3 represents and warrants that it (x) conducts its
                        business in compliance with applicable laws and not in
                        violation of the rights of any third party and (y) has
                        and will continue to have all necessary rights,
                        licenses, permissions and consents in and to all
                        underlying technology (including both hardware and
                        software) utilized in connection with MyMP3 and the MP3
                        Website or as otherwise necessary in connection with the
                        operation of MyMP3 or the MP3 Website or any of the
                        transactions contemplated hereby and that such
                        underlying technology does not and will not infringe on
                        any patent, copyright, trademark, trade secret or other
                        intellectual property, proprietary or other right of any
                        third party.

                (ii)    MP3 shall obtain on its own behalf all necessary
                        licenses, clearances or consents that may be required
                        for use or performance of the copyrighted musical
                        composition(s) embodied in the Company Recordings (each,
                        a "Copyright License"). No such Copyright License is
                        granted hereunder; [...***...]

                (iii)   MP3 shall pay all fees due to any third party that
                        become payable in connection with the Copyright
                        Licenses. In addition, subject to Section 8(b), MP3
                        shall be solely responsible for all other fees and costs
                        associated with its obligations hereunder or that
                        otherwise become payable in connection with the exercise
                        of MP3's rights hereunder including, without limitation
                        (A) all fees and costs associated with operating MyMP3
                        and the MP3 Website (including, without limitation,
                        employing Enforcement Technology), (B) all payments that
                        may be required under any [...***...] and (C) all costs
                        associated with copying, Streaming, transmitting or
                        performing the Company Recordings (and any authorized
                        cover artwork) in accordance with this Agreement. MP3
                        will take all such actions, and execute any documents
                        and agreements (including, without limitation, any
                        [...***...] as may be requested by the Company in
                        connection with MP3's obligations under this Section

                (iv)    As long as the Company [...***...] MP3 shall,
                        [...***...] only Stream Company Recordings [...***...]
                        Commencing on [...***...] MP3 shall only Stream Company
                        Recordings [...***...]

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                        MP3 shall not Stream any Company Recording without the
                        inclusion of any and every ISRC code (when available) in
                        the digital data embodied therein.

                (v)     MP3 shall use its commercially reasonable best efforts
                        to [...***...] MP3 shall notify Virgin if MP3 becomes
                        aware of any unauthorized copying, manufacture,
                        distribution, lease, sale or other use of the Company
                        Recordings by a Locker Owner, an MP3 Agent or any other
                        Person ("Unauthorized Use"). MP3 shall use its best
                        efforts to cooperate with the Company, and to take all
                        reasonable steps necessary to stop or prevent further
                        Unauthorized Use.

                (vi)    MP3 shall use its commercially reasonable best efforts
                        to upgrade, change or supplement, and thereafter
                        implement, the software (or its equivalent, whether now
                        known or hereafter developed) or other technology that
                        is used (A) to Stream the Company Recordings in
                        accordance with the terms hereunder or (B) to enforce
                        the security systems implemented by MP3 to comply with
                        the restrictions contemplated hereby, whenever: (x)
                        [...***...] or (y) any software or technology

                (vii)   The Company shall have the right to [...***...]
                        provided, that, solely for purposes of this Section
                        8(a)(vii), the [...***...] If, after the date of this
                        Agreement, MP3 [...***...] then the Company may
                        [...***...] MP3 shall provide Virgin [...***...] and the
                        Company shall have [...***...]

                (viii)  MP3 represents and warrants that Exhibit A is a true,
                        accurate and complete description of MyMP3 as of the
                        date hereof, including the security systems utilized
                        therewith, and covenants that such systems, or
                        Equivalent Systems, shall remain in place throughout the
                        Term. MP3 agrees to allow the Company and its
                        representatives to conduct, and shall reasonably
                        cooperate with the Company and such representatives in
                        connection with, a technical audit of MyMP3 and all
                        components thereof, at the Company's expense, during
                        MP3's usual business hours, upon reasonable notice and
                        not more than once per calendar quarter, of the MyMP3
                        service, and all components thereof, to confirm MP3's
                        compliance with this Section 8(a)(viii).

                (ix)    MP3 will use its commercially reasonable best efforts
                        (including, without limitation, employing relevant
                        Enforcement Technology) to ensure that only Recordings
                        Owned by Locker Owners are added to Title Lists
                        including, among other things, (i) [...***...] and (ii)

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        (b)    The Company shall be solely responsible for any Record Payments
               that may be due in connection with the use of the Company
               Recordings contemplated hereunder.

        (c)    Each party to this Agreement represents and warrants to the other
               that (i) such party has the right, power and authority to enter
               into and fully perform this Agreement and (ii) the execution of
               this Agreement by such party and its performance of the
               obligations hereunder do not and will not violate any agreement
               by which such party is bound.

9.      OWNED PROPERTY: MP3 hereby acknowledges that all sound recording
copyrights or equivalent state law rights in and to the Company Recordings, and
all copyrights in and to the cover artwork, names and tradenames described in
Sections 2(a)(ii) and (iii) (the "Owned Property"), as between the Company and
MP3, are the sole property of the Company. MP3 shall not contest, or assist
others in contesting, the Company's rights or interests in the Owned Property or
the validity of such ownership. MP3 shall include on the MP3 Website, its
products and all other material produced and distributed publicly by MP3 in
accordance with this Agreement, such copyright, trademark and other notices as
the Company may from time to time reasonably require.


        (a)    Either party may terminate this Agreement upon a material breach
               of any of the representations, warranties, agreements or
               obligations made by the parties in Sections 2(a), 4(b), 5(b),
               5(c), 8(a)(ii), 8(a)(vii) and (viii) of this Agreement, which
               breach is not cured within thirty (30) days from date of written
               notice by the non-breaching party of any such breach.

        (b)    The Company may terminate this Agreement: (i) if MP3 is dissolved
               or liquidated, or becomes bankrupt or otherwise insolvent; (ii)
               if MP3 fails to fully comply with Sections 3, 5(a) and 8(a)(iv)
               hereof; or (iii) at any time after the sale by MP3 of fifty
               percent (50%) or more of its assets, whether by stock sale,
               merger, share exchange, asset sale, consolidation or otherwise to
               any company engaging in, or which has been sued by the Company
               for engaging in, music piracy.

        (c)    Upon the occurrence of any of the events described in Section
               10(b) or the failure of MP3 to cure a material breach within the
               cure period as provided in Section 10(a), in addition to such
               other rights and remedies which the Company may have at law or
               otherwise under this Agreement, the Company shall have the right
               to terminate this Agreement and all rights granted hereunder
               shall forthwith revert to the Company. Notwithstanding any such
               termination, this Section 10 and Sections 13 and 14 shall remain
               in full force and effect.

        (d)    Upon the expiration of the Term or earlier termination (after
               all disputes are resolved) of this Agreement in accordance with
               this Section 10, MP3 shall immediately: (i) stop all copying of
               Company Recordings; (ii)

<PAGE>   15

               prevent any and all Locker Owners from adding Company Recordings
               to Title Lists; (ii) stop Streaming the Company Recordings; and
               (iii) immediately delete any and all computer files embodying
               any Company Recordings or any other Owned Property, wherever
               residing (i.e., in any Lockers or on the MP3 Servers), and
               certify to their deletion. MP3 hereby acknowledges and agrees
               that [...***...]

11.     INDEMNITY:

        (a)    Each party hereby agrees to hold harmless, defend and indemnify
               the other party (and its Affiliates, directors, officers,
               employees and agents) from any and all damages, liabilities,
               costs, losses and expenses (including reasonable attorneys'
               fees) ("Losses") arising out of or connected with any claim,
               demand, liability or action brought or claimed by a third party
               (collectively referred to as a "Claim") to the extent such Claim
               is based upon a breach of any of the warranties,
               representations, covenants or obligations of the indemnifying
               party in this Agreement or the gross negligence or willful
               misconduct of such party.

        (b)    In claiming any indemnification hereunder, the indemnified party
               shall promptly provide the indemnifying party with written
               notice of any Claim which the indemnified party believe it is
               entitled to be indemnified pursuant to this Section 11. The
               indemnifying party agrees to reimburse the indemnified party, on
               demand, for any payment made by the indemnified party at any
               time with respect to any Losses to which the foregoing indemnity
               applies. The indemnified party may, at its own expense, assist
               in the defense and all negotiations relating to a settlement of
               any such Claim. Any settlement intended to bind the indemnified
               party may not be entered into without the indemnified party's
               prior written consent, which shall not be unreasonably withheld
               or delayed.

        12. NOTICES: All notices hereunder shall be given in writing and shall
be effective when served by personal delivery or upon receipt when sent by
certified mail, return receipt requested, postage prepaid; when sent by
overnight courier service; when sent by facsimile transmission with hard copy
confirmation sent by certified mail; or when sent by e-mail with telephonic
confirmation, in each case to the party at the addresses set forth below (or at
such other addresses hereafter designated by the parties):

               If to MP3:

     , Inc.
               4790 Eastgate Mall
               San Diego, CA  92121
               Attention:  Robin Richards
               Facsimile:  (858) 623-7003

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               with a copy to:

               Ziffren, Brittenham, Branca & Fischer LLP
               1801 Century Park West
               Los Angeles, CA  90067-6405
               Attention:  Gary Stiffelman, Esq.
               Facsimile:  (310) 553-7068

               If to the Company:

               Virgin Holdings, Inc.
               c/o EMI Recorded Music, New Media Group
               1750 N. Vine Street
               YV Building
               Hollywood, California 90028
               Attention:  Robyn L. Glaser
               Facsimile:  (323) 769-4421

               with a copy to:

               EMI Recorded Music, North America
               1290 Avenue of the Americas, 38th Floor
               New York, New York 10104
               Attention:  Alasdair J. McMullan
               Facsimile:  212-492-5095

or to such other persons or at such other address hereafter designated by the

13.     CONFIDENTIALITY. The terms and conditions of this Agreement are in all
respects confidential, and neither party shall disclose them, directly or
indirectly, to any other person (except to the extent such disclosure is
required by law [...***...] other than such party's legal and financial advisors
who shall agree to be bound by this confidentiality agreement. Neither party
shall, directly or indirectly, by any means, disclose, or participate in or
contribute to any public discussion, notice or other publicity concerning, the
terms and conditions of this Agreement. Notwithstanding the foregoing, the
parties agree that a mutually approved press release with respect to this
Agreement shall be issued within a reasonable period after execution hereof in
accordance with Section 14(i) below.


        (a)    This Agreement sets forth the entire understanding of the
               parties hereto relating to the subject matter hereof and
               supersedes all prior and

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               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. 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.

        (b)    The Company may transfer or assign, in whole or in part, this
               Agreement (or its rights, interests or obligations hereunder) to
               any of its Affiliates or upon a change of ownership of the
               Company. MP3 shall not assign its rights hereunder in whole or
               in part to any person or entity without the prior written
               approval of Virgin. Any such purported assignment shall be null
               and void. Subject to the foregoing, this Agreement shall be
               binding upon and inure to the benefit of the parties, their
               permitted assigns and their respective successors and legal

        (d)    This Agreement shall be governed by the laws of the State of New
               York applicable to contracts entered into and performed entirely
               within the State of New York, with respect to the determination
               of any claim, dispute or disagreement which may arise out of the
               interpretation, performance or breach of this Agreement. Any
               claim arising out of or relating to this Agreement or the
               transactions contemplated hereby shall be instituted in the
               United States District Court of the Southern District of New
               York or, if federal jurisdiction is unavailable, in any state
               court located in New York County, State of New York, and each
               party agrees not to assert, by way of motion, as a defense or
               otherwise, in any such claim, that it is not subject personally
               to the jurisdiction of such Court, that the claim is brought in
               an inconvenient forum, that the venue of the claim is improper
               or that this Agreement of the subject matter hereof may not be
               enforced in any such Court.

        (e)    Except as is specifically provided herein, nothing in this
               Agreement is intended to confer on any person not a party hereto
               any rights or remedies under this Agreement.

        (g)    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)    Other than as required by law, regulation or stock exchange
               requirements, and without the consent of the other party, the
               parties hereto shall not, and shall cause their respective
               Affiliates not to, disclose the existence of this Agreement or
               issue or cause the publication of any press release or other
               announcement with respect to the transactions contemplated by
               this Agreement. If any press release or other announcement is
               made in accordance with the foregoing sentence, the content of
               such release or other announcement must be mutually agreed by
               the parties hereto.

<PAGE>   18

        (j)    Should any part of this Agreement judicially be declared to be
               invalid, unenforceable, or void, the parties agree that the part
               or parts of this Agreement so held to be invalid, unenforceable,
               or void shall be reformed by the entity having jurisdiction
               thereover without further action by the parties hereto and only
               to the extent necessary to make such part or parts valid and

        (k)    Each party is acting as an independent contractor and not as an
               agent, partner, or joint venturer with the other party for any
               purpose. Except as provided in this Agreement, neither party
               shall have any right, power, or authority to act or to create any
               obligation, express or implied, on behalf of the other.

        (l)    The Section headings in this Agreement are used for convenience
               only and will not affect the interpretation of any provision.

        (m)    This Agreement may be executed in one or more counterparts, each
               of which shall be deemed an original, and all of which, when
               taken together, shall constitute one and the same instrument.

<PAGE>   19

Please indicate your acceptance of the above terms by signing in the space
indicated below.

                                            Very truly yours,

                                            MP3.COM, INC.

                                            By:   /s/ ROBIN RICHARDS
                                                  Title: PRES




<PAGE>   20

Please indicate your acceptance of the above terms by signing in the space
indicated below.

                                            Very truly yours,

                                            MP3.COM, INC.




By: /s/  JAY A. SAVIT
      Name:  Jay A. Savit
      Title: Vice President

<PAGE>   21

                                    EXHIBIT A




[...***...]  Confidential Treatment Request

<PAGE>   22

                                    EXHIBIT B


[...***...]  Confidential Treatment Request