License Agreement - MP3.com Inc. and Virgin Holdings Inc.
MP3.com, 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
Gentlepersons:
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 MP3.com, Inc. (together with
its Affiliates, "MP3") with respect the matters set forth herein.
1. DEFINITIONS:
(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
List.
(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 www.mp3.com 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 My.MP3.com 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
whatsoever).
(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
time.
(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.
3. LIMITATIONS:
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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
Agreement.
(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
[...***...]
4. TERM AND TERRITORY:
(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
otherwise
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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
[...***...]
6. COMPANY SHELF AND USAGE DATA:
(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.
7. ACCOUNTINGS:
(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.
8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
(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
8(a)(iii).
(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.
10. TERMINATION:
(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)
14.
<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:
MP3.com, Inc.
4790 Eastgate Mall
San Diego, CA 92121
Attention: Robin Richards
Facsimile: (858) 623-7003
e-mail: robin@mp3.com
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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
e-mail: garys@zbbf.com
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
e-mail: robyn.glaser@emicap.com
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
e-mail: alasdair.mcmullan@emicap.com
or to such other persons or at such other address hereafter designated by the
parties.
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.
14. MISCELLANEOUS:
(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
representatives.
(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.
17.
<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
enforceable.
(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.
18.
<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
---------------------------------
Name:
Title: PRES
AGREED AND ACCEPTED:
VIRGIN HOLDINGS, INC.
By:
----------------------------
Name:
Title:
<PAGE> 20
Please indicate your acceptance of the above terms by signing in the space
indicated below.
Very truly yours,
MP3.COM, INC.
By:
---------------------------------
Name:
Title:
AGREED AND ACCEPTED:
VIRGIN HOLDINGS, INC.
By: /s/ JAY A. SAVIT
----------------------------
Name: Jay A. Savit
Title: Vice President
<PAGE> 21
EXHIBIT A
DESCRIPTION OF THE MY.MP3.COM SERVICE
THE BEAM-IT SYSTEM
[...***...]
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EXHIBIT B
[...***...]
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