EXHIBIT 10.2

 

FOIA Confidential Treatment Requested

 

LICENSE AGREEMENT

 

This LICENSE AGREEMENT (the “Agreement”) is made this 14th day of October, 2005
(the “Effective Date”) between TOWER RECORDS JAPAN INC., a corporation
incorporated under the laws of Japan (“Tower”) with offices at 2-15-9
Minami-Shinagawa, Shinagawa-ku, Tokyo 140-0004, NAPSTER, LLC, a Delaware limited
liability company (“Napster”), with offices at 9044 Melrose Ave., Los Angeles,
CA 90069 and NAPSTER JAPAN, INC, a corporation incorporated under the laws of
Japan (“Company”), with offices at 15-4 Sakuragaoka, Shibuya-ku, Tokyo 150-0031.
Tower, Company and Napster hereinafter are each referred to as a “Party” and
collectively referred to as the “Parties.” Capitalized terms used in this
License Agreement but not defined herein have the meanings ascribed to them in
the Joint Venture Operating Agreement (the “JV Agreement”).

 

WHEREAS, Napster has developed an online (via personal computer, mobile phone,
set-top box or otherwise) music download and subscription service currently
comprised of three levels of service – Napster Light, Napster Premium and
Napster To Go (the “Service”);

 

WHEREAS, some or all of the Parties have simultaneously executed the JV
Agreement, a Marketing Agreement (the “Marketing Agreement”), and a Services
Agreement (the “Tower Services Agreement”) and such Parties will execute a Loan
Facility Agreement (the “Loan Agreement” and, together with the JV Agreement,
the Loan Agreement and the Marketing Agreement, all as amended from time to
time, the “Definitive Agreements”); and

 

WHEREAS, the Parties wish to enter into this License Agreement to provide for
the licensing, operation and support of the Service by Napster to and for the
benefit of the Company in the Territory, which shall be promoted on the Napster
Sites and as set forth in the Marketing Agreement, in accordance with the terms
and conditions of this License Agreement.

 

NOW, THEREFORE, in consideration of the mutual promises, representations and
warranties contained in this License Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties agree as follows:

 

1. Definitions. As used in this Agreement:

 

1.1 “Affiliate” means, with respect to any Person, any other Person controlling,
controlled by or under direct or indirect common control with, such Person. For
the purposes of this definition, “control”, when used with respect to any
specified Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of the voting
securities of such Person, by contract, or otherwise; and the terms
“controlling” and controlled” shall have meanings correlative of the foregoing.

 

1.2 “Appointing Party” will have the meaning given in Section 4.2 herein.

 

1.3 “Back-End Services” means the proprietary or third-party software tools
provided by Napster to the Company for the purposes of (i) accessing customer
records via a [*] data feed

 

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

--------------------------------------------------------------------------------

from Napster, (ii) managing audio files, audio file metadata and album
thumbnails via Napster’s web-based tool referred to as “CMS,” (iii) providing
technical support to customers via Napster’s web-based tool referred to as
“CST,” and (iv) creating, editing, and otherwise modifying music programming
content (e.g. featured artists, genre pages, tracks and radio stations) in the
Customized Client.

 

1.4 “Bandwidth Cost” means, for each month during the Term, an amount equal to
the total and reasonable costs paid by Napster to third parties for
communications bandwidth actually used by Napster to provide Services (including
the Customized Service) to end-users throughout the world, multiplied by the
total megabits served by Napster to all End-Users in Japan [*] divided by the
total megabits served to all end-users worldwide, all as reasonably and
accurately determined by Napster’s servers; provided that Company shall have
full rights to audit each such determination as provided herein.

 

1.5 “Bankruptcy Event” means any of the following events or circumstances with
respect to a Party: such Party (i) makes a general assignment for the benefit of
its creditors; (ii) petitions, applies for, or suffers or permits with or
without its consent the appointment of a custodian, receiver, trustee in
bankruptcy or similar officer for all or any substantial part of its business or
assets; (iii) avails itself or becomes subject to any proceeding under the U.S.
Bankruptcy Code or any similar state, federal or foreign statute relating to
bankruptcy, insolvency, receivership, dissolution or liquidation, which
proceeding is not dismissed within sixty (60) days of the commencement thereof.

 

1.6 “Change of Control” means, with respect to the Company, the failure by Tower
and/or its controlled Affiliates to own more than 50.1% of the outstanding
shares of Company. In no event shall a Change of Control result from any Tower
Permitted Transfer or any event or series of events resulting in Tower and/or
its controlled Affiliates owning less than 50.1% of the outstanding shares of
Company entered into with the consent of Napster.

 

1.7 “Client” means the software provided by or on behalf of Napster to users of
the Services for the purposes of downloading or otherwise accessing part or all
of the Services, as such software is updated from time to time by or on behalf
of Napster. The Client provided by Napster to users as of the date hereof
currently includes functionality enabling Streaming, Downloading, organization
of Content for playback on a PC platform and recording via a CD recorder.

 

1.8 “Company Content” means any and all Content owned or licensed by Company or
by Tower; provided that Content owned or licensed by Tower shall be Company
Content solely to the extent such Content is acquired by Tower for the Company
after the date of this Agreement, or, with respect to Content that is owned or
licensed by Tower prior to the Effective Date, only such Content that is
sublicensed to the Company pursuant to a separate agreement. It

 

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

2

--------------------------------------------------------------------------------

is understood that in the event that Napster independently, and not arising out
of or in connection with this Agreement or the Definitive Agreements, has
ownership or other usage rights in or to any Content in connection with the
Services in territories outside of the Territory, the Napster.com website or
otherwise separate and apart from the Services, nothing contained herein shall
prejudice Napster’s existing rights to use such Content in accordance with
Napster’s separate agreements.

 

1.9 “Company Property” has the meaning set forth in Section 6.1.2 herein.

 

1.10 “Content” means any and all text, web pages, data, works, information,
graphics, animation, illustrations, multimedia files, text, audio, images,
digital video, musical compositions, sound recordings, advertisements, art work,
third party metadata or any other content.

 

1.11 “Customized Client” means the version of the Client customized by Napster
for Company pursuant to this Agreement, as such version may be modified from
time to time in accordance with this Agreement.

 

1.12 “Customized Services” means the version of the Services customized by
Napster for Company pursuant to this Agreement, as such version may be modified
from time to time in accordance with this Agreement.

 

1.13 “Definitive Agreements” has the meaning set forth in the second Recital set
forth above.

 

1.14 “Deliverable” means each component of the Customized Services, Customized
Client, the Napster Sites and Back-End Services to be developed or modified by
Napster for Company hereunder, initially as provided in the Statement of Work
attached hereto and thereafter on an ongoing basis as set forth in Section 4.

 

1.15 “Development Costs” has the meaning set forth in Exhibit C.

 

1.16 “Download” means an electronic transmission of Content which results in the
creation of a permanent or temporary (for the duration of the subscription or
until removed by the Content provider) Electronic Digital Copy of the item of
Content concerned. “Downloading” shall mean the act of facilitating a Download.

 

1.17 “Electronic Digital Copy” means a copy of any Content in a digital format.
A temporary copy of Content resident on a medium or device while being
transferred between two (2) locations in the same medium or device in a manner
that is substantially contemporaneous with the transmission of such copy, as in
the case of “buffering” or “caching” during the transmission of a Stream shall
not, for that reason alone, constitute an “Electronic Digital Copy” of the
Content concerned.

 

1.18 “End Users” means end users that have registered with Napster to use the
Customized Services in the Territory.

 

3

--------------------------------------------------------------------------------

1.19 “End User Data” means both Aggregate End User Data and Personal End User
Data pertaining to End Users of the Service. “Aggregate End User Data” means all
information that describes the connection speeds, aggregate Company Content
usage patterns, transaction information, preferences, demographics and/or any
other information regarding End Users but which does not indicate the identity
of any particular End User, and all other information about an individual End
User presented in a form distinguishable from information relating to other end
users but not in a form that enables the recipient to personally identify any
End User. “Personal End User Data” shall mean all information about an End User
enabling such End User to be specifically and personally identified and may
include, but not be limited to names, street addresses, electronic mail
addresses, registration information, e-commerce and credit card transaction
data, preferences and the End User’s personally identifying transaction data.

 

1.20 “EULA” has the meaning set forth in Section 4.5.

 

1.21 “Fully Loaded Costs” means (i) the Bandwidth Costs, the Hardware Costs, and
the Hosting Costs, (ii) all internal personnel costs and direct overhead
reasonably incurred by Napster in performing its obligations under Sections 3
and 4 hereof calculated in accordance with US GAAP rules applicable to
transactions between members of a consolidated group in the reasonable
discretion of Napster, (iii) portion of patent royalties and third party
software costs required for operation of the Customized Service (iv) such other
out-of-pocket costs reasonably incurred by Napster in performing its obligations
under Sections 3 and 4 hereunder, all as fully documented by Napster to Company,
[*], such additional percentage amount being equal to the minimum amount that
may be reasonably required for tax and accounting purposes.

 

1.22 “Gross Revenue Royalty” has the meaning set forth in Exhibit C hereto.

 

1.23 “Hardware” means any computing or networking equipment (including but not
limited to servers, routers, and switches) owned by Napster and used for the
development and maintenance of the Customized Services in accordance with the
terms of this Agreement.

 

1.24 “Hardware Costs” means the third party costs incurred by Napster in
acquiring any additional Hardware and software required in order for Napster to
perform its obligations under Sections 3 and 4 hereof, together with Napster’s
internal personnel costs reasonably incurred in order to configure and install
such Hardware.

 

1.25 “Hosting Costs” means, for each month during the Term, an amount equal to
the total and reasonable costs paid by Napster to third parties for hosting of
the equipment used to provide Services to end-users throughout the world
(including the Customized Service), multiplied by the total megabits served by
Napster to all End-Users in Japan [*] divided by the total megabits served under
this Agreement to all end-users of the Services (including the Customized
Service) worldwide, all as reasonably and accurately determined by Napster’s
servers; provided that Company shall have full rights to audit each such
determination as provided herein.

 

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

4

--------------------------------------------------------------------------------

1.26 “Immediate Ingestion” means that from a given batch of tracks to be
ingested into Napster’s Content Management System, a reasonable number of tracks
(e.g. one hundred) have had a successful test delivery per the Napster Content
Handbook in effect at that time and that the Content provider for such tracks
has agreed to deliver the entire batch of tracks in the same manner.

 

1.27 “Improvements” means (i) derivative works (as such term is defined in 17
U.S.C. Sections 101, et seq.) of the Napster Property or the Company Property,
as applicable (including without limitation Derivatives as defined in
Section 11.3 below) and (ii) any improvement, enhancement, modification or
adaptation of or to any hardware, software or other work of authorship,
technology, including technical and end user documentation.

 

1.28 “Intellectual Property Right(s)” means any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States and
foreign patents and utility models and applications therefor and all reissues,
divisions, re-examinations, renewals, extensions, provisionals, continuations,
and continuations-in-part thereof, and equivalent or similar rights anywhere in
the world in inventions and discoveries including without limitation invention
disclosures; (ii) all trade secrets and other rights in know-how and
confidential or proprietary information; (iii) all copyrights, copyright
registrations and applications therefor and all other rights corresponding
thereto throughout the world; (iv) all United States and foreign Marks and any
registrations or applications therefor; and (v) any similar, corresponding or
equivalent rights to any of the foregoing anywhere in the world (including,
without limitation, all claims and causes of action for infringement,
misappropriation or violation thereof and all rights in any registrations and
renewals).

 

1.29 “Joint Property” has the meaning set forth in Section 6.4.3 below.

 

1.30 “JV Agreement” has the meaning set forth in the Recitals.

 

1.31 “Launch Date” means the date one or more Company approved Customized
Clients are generally made available within the Territory to End-Users for the
purpose of accessing fully functional Customized Services in the Territory,
which date shall coincide with a mutually agreed upon (by Napster, Tower and
Company) promotional program within the Territory, and which initially shall be
a date no later than [*].

 

1.32 “Level 1 Bug” means [*].

 

1.33 “Losses” has the meaning set forth in Section 9.1.

 

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

5

--------------------------------------------------------------------------------

1.34 “Maintenance Services” has the meaning set forth in Section 4.1.1.

 

1.35 “Marketing Agreement” has the meaning set forth in the second Recital set
forth above.

 

1.36 “Marks” means trademarks, service marks, trade dress, trade names or logos.

 

1.37 “Minimum Guaranteed Royalty” has the meaning set forth in Exhibit C hereto.

 

1.38 “Napster Competitor” has the meaning set forth in the JV Agreement as such
term is updated from time to time pursuant to the terms of the JV Agreement.

 

1.39 “Napster Marks” means all Marks owned or licensed by Napster.

 

1.40 “Napster Materials” means (i) all Hardware and software owned or controlled
by Napster or licensed or leased by Napster from a third-party Person and used
in connection with the Customized Services, Customized Client or Napster Sites,
(ii) all data and metadata, graphic materials, textual materials, artwork and
Marks furnished by Napster hereunder for incorporation in the Customized
Services, the Customized Client or the websites located at the Napster Sites,
and (iii) the Napster Marks and the Napster Sites; in each case excluding any
such Hardware, software, data or materials furnished, licensed or leased by or
on behalf of Company or Tower that do not constitute Improvements of Napster
Materials.

 

1.41 “Napster Property” has the meaning set forth in Section 6.1.1.

 

1.42 “Napster Sites” means the websites to be developed, hosted and operated by
Napster in accordance with this Agreement for the benefit of Company and located
at www.napster.jp and www.napster.co.jp and other websites which include any
Napster Marks or any variations thereof.

 

1.43 “Party” has the meaning set forth in the preamble to this Agreement.

 

1.44 “Person” means any natural person, legal entity, or other organized group
of persons or entities.

 

1.45 “Platform” means all software, technology and other Intellectual Property
Rights required for the development, operation and maintenance of the Customized
Services and Customized Client, and the serving, Streaming and/or Downloading of
Content in connection with the Customized Services, including all patches, bug
fixes, upgrades, and enhancements thereto, as well as detailed documentation
thereof.

 

1.46 “Permitted Transfer” means a Napster Permitted Transfer or a Tower
Permitted Transfer as applicable.

 

1.47 “Relationship Manager” has the meaning set forth in Section 4.2 herein.

 

1.48 “Royalty” has the meaning set forth in Exhibit C hereto.

 

6

--------------------------------------------------------------------------------

1.49 “Schedule” means the project deliverable schedule set forth in the
Statement of Work attached hereto and incorporated herein by reference, as
amended in accordance herewith.

 

1.50 “Services” has the meaning set forth in the first Recital set forth above,
and includes such other related services as may be offered by Napster from time
to time in the future and which the Company accepts as part of the Service in
the Territory.

 

1.51 “Service Level Agreement” or “SLA” means the document attached at Exhibit B
and incorporated by this reference.

 

1.52 “Stream” means the digital transmission of Content in compressed form,
which digital transmission is contemporaneous with the performance or display of
such Content (as applicable) and is not intended to result in a Download (other
than any ephemeral copies used solely for so-called “caching” or “buffering”).
“Streaming” shall mean the act of facilitating a Stream.

 

1.53 “Statement of Work” means the scope of services, deliverables and schedules
as set forth in Exhibit A attached hereto and incorporated herein by reference,
as amended as provided herein.

 

1.54 “Term” means the term of this Agreement, which shall begin on the Effective
Date and, unless earlier terminated in accordance with the provisions hereof,
shall continue until terminated by the Parties in accordance with the terms
hereof, and which shall include the period of time following the occurrence of a
Special Event of Default during which the non-Defaulting Party operates the
Company.

 

1.55 “Territory” means Japan and its territories and possessions and any other
territory that is mutually agreed in writing by the Parties.

 

1.56 “Tower Services Agreement” has the meaning set forth in the second Recital
set forth above.

 

1.57 “Upgrades” has the meaning set forth in Section 2.2.

 

2. Development Of The Customized Services

 

2.1 Development Services. Subject to the terms of this Agreement, including
without limitation the terms of the License in Section 6 below, Napster shall
develop the Platform necessary for Company to provide the Customized Client and
Customized Service to End-Users in the Territory. Napster shall provide Company
with the Customized Client, in object code, for distribution to End-Users, and
shall provide Back-End Services as set forth in the Statement of Work sufficient
to allow Company to provide support and administer the Customized Client and
Customized Service to End-Users in the Territory. Company will make no
modifications or alterations to any Napster Materials, provided that the
foregoing shall not preclude Company from modifying or altering any Content
available on or through the Customized Services or Napster Sites via the
Back-End Services, subject in each case to the applicable license(s) for such
Content. For the avoidance of doubt, it is intended that any customer located in
Japan will use the Customized Client and any customer located in the U.S. will
use the English version of the

 

7

--------------------------------------------------------------------------------

Client. At all times during the Term, Company shall control in its sole
discretion (i) the pricing of the Customized Services to End-Users, subject to
the operational restrictions of the Services and (ii) Content programming for
the Customized Services in the Territory and all marketing, messaging and
Content included on the Napster Sites (via the Back-End Services). [*]. Company
shall, at all times during the Term, and at no charge to the Company, have
reasonable access no more restrictive than the access provided by Napster to any
other joint venture operations outside the Territory to the Napster CMS for the
Services solely for purposes of administering the Company Content.

 

2.2 Localization. Napster will localize the initial version of the Customized
Client, the Customized Services, the Napster CST tool and the Napster Sites for
Company in accordance with all applicable requirements and specifications set
forth in this Agreement (including the Statement of Work) and as also agreed to
by the Parties in writing, and provide localization to Company with relation to
all future releases, bug fixes or other improvements to the Client or Services
for incorporation in the Customized Client, and/or the Back-End Services
(“Upgrades”) Napster will use diligent efforts to deliver such localized
versions as soon as reasonably practicable following the time such Upgrades are
released in the U.S. Napster shall provide notice to the Company whenever (i) an
Upgrade is put into effect or (ii) if applicable, a release schedule and product
development plan is put into effect with respect to any Upgrade. Localization
shall include, but not be limited to, translation of the CST Tool, Client and
the Napster Sites from English to Japanese, necessary changes to date/time and
currency fields within the Client, necessary changes to allow song, album and
artist titles to appear correctly in Japanese in the Customized Client when such
Japanese language song, album and artist titles are provided by content owners
to Napster, and necessary changes to the registration path and credit card
billing information to conform with Japanese practices. The Back-End Services
will provide that Japanese language data will be displayed properly and will be
able to process multibyte text. Localization will not include localization of
any music or graphical Content. In consideration of the initial localization and
customization work and any subsequent localization work on any Upgrade, Company
will pay Napster the Development Costs as set forth in Exhibit C, and reimburse
Napster for the actual subcontracting costs paid to Qualified Third Parties for
translation work [*]. For the purposes of this Agreement, “Qualified Third
Parties” shall mean any third party that is, in Napster’s reasonable opinion,
qualified to perform the applicable localization or development services
hereunder.

 

2.3 Initial Client Delivery. Napster shall deliver the initial version of the
Customized Client, Customized Services and Napster Sites in accordance with the
Statement of Work.

 

2.4 Napster Acceptance and Testing. Prior to releasing any Deliverable to
Company, Napster will expeditiously undertake applicable testing of the
Deliverable in accordance with Napster’s test plan and generally accepted
software development practices but, subject to the provision by the Company of
any Content or music programming necessary for testing in accordance

 

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

8

--------------------------------------------------------------------------------

herewith, in no event shall such Deliverable be subject to testing that is any
less stringent than (i) that undertaken in connection with the offering of its
own services in any jurisdiction outside of the Territory, or (ii) as may be
required under its reasonable internal quality control and test protocol
requirements. Napster’s test plan with respect to each Deliverable will include
but not be limited to: (a) End-to-end regression testing of the existing Napster
functionality, as needed; (b) End-to-end testing of new functionality, if
applicable; (c) Localized client testing with local content; (d) Geographical
constraint testing (registration, date/time formats, currency, net acuity); and
(e) Performance testing (cache testing, Statboard nodes). Napster will release
the Deliverable to Company after such Deliverable has satisfactorily passed such
testing.

 

2.5 Company Acceptance and Testing.

 

(a) After delivery of the Alpha version of the Customized Client and CST (the
“Alpha Version”) to Company pursuant to Exhibit A, Company shall have until
delivery of the Beta version of the Customized Client to conduct testing of the
Alpha Version using its own internal testing procedures.

 

(b) At least two weeks prior to the delivery date of any Napster Deliverable
including without limitation those set forth in the Statement of Work other than
the Alpha Version, a representative of Company may be present at the Napster
facilities in Los Angeles, California or Company facilities in Tokyo, at
Company’s option, to test the Deliverable and meet and confer with the technical
representatives of Napster designated by the Napster Chief Technology Officer or
functional equivalent. Company and Napster shall jointly determine the testing
parameters to be used in testing Deliverables, including determination of the
hardware models, operating software versions, and combinations thereof to be
tested.

 

(c) If during a testing/evaluation period, the Platform contains a Level 1 Bug,
Company will provide Napster with a notice describing the nonconformity. Unless
otherwise set forth in the Statement of Work or agreed to by the Parties,
Napster will use commercially reasonable efforts within thirty (30) days from
the date it receives Company’s notice of nonconformity to correct such Level 1
Bug. If Napster redelivers the Platform, then Company will be entitled to repeat
the testing process. If (through no fault of Company) Napster fails to deliver a
corrected Platform within the thirty (30) day period (or such other period as
may be set forth on the Statement of Work or otherwise agreed to by the Parties)
and the Company is not provided with a reasonable plan to timely correct any
such material non-conformities in the Platform, then Company may negotiate with
Napster to retain a third party to correct such fixes at Company’s expense. If
during a testing/evaluation period, the Platform contains a bug, malfunction or
defect other than a Level 1 Bug, Napster shall address such bug, malfunction or
defect in accordance with customary industry practices.

 

2.6 Change Process. If at any time after the Launch Date, the Platform contains
a Level 1 Bug, Napster shall use commercially reasonable efforts to provide an
Upgrade incorporating a fix for such Level 1 Bug. If at any time after the
testing/evaluation period Company determines that the Platform contains a bug,
malfunction or defect other than a Level 1 Bug, Napster shall address such bug
or defect in accordance with customary industry practices. Napster will, in its
reasonable discretion, develop Upgrades and will notify Company of any such
Upgrades and provide Company the ability to test such Upgrades in accordance
with the terms set forth in this

 

9

--------------------------------------------------------------------------------

Section 2. In addition to such Upgrade development, Napster will consider
recommendations from Company with respect to technological features and
capabilities to be added to its Platform [*] and Napster will consider such
recommendations for inclusion into its global road map. If such features are not
included in Napster’s global road map, Napster and Company will discuss the
possibility of Napster providing those features to Company for the Customized
Service and Customized Client and to the extent mutually agreed in writing by
Napster and Company, including with respect to a reasonable timeframe therefor
in an amendment to the Statement of Work, Napster will provide such features
with fees [*].

 

2.7 Qualified Third Parties. Napster will be fully responsible for all acts and
omissions of its Qualified Third Parties. Nothing in this Agreement shall be
construed to create any contractual relationship between Company and any
Qualified Third Party, nor any obligation on the part of Company, to pay or to
ensure the payment of any money due to any Qualified Third Party. Napster will
identify through prior notice of each individual Qualified Third Party that is
used by it to perform its obligations hereunder.

 

3 Storage, Hosting, and Delivery Of Content.

 

3.1 Hosting. During the Term, Napster will host the Platform on Hardware located
at a secure hosting facility in accordance with the SLA. [*]. The Customized
Service will be offered to End-Users through the Napster Sites. Napster is
responsible for acquiring and maintaining the domain names for the Napster Sites
and any other domain names necessary for the Customized Services, other than
domains to be obtained by Tower pursuant to the Marketing Agreement. Napster
shall continue to own the domains where the Napster Sites are located.

 

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

10

--------------------------------------------------------------------------------

3.2 Content.

 

3.2.1 Napster Clearance of Content. Napster will use commercially reasonable
efforts to clear master recording copyrights in music titles now or hereafter
available to users of the Service outside the Territory so that the same titles
will be available to End-Users through the Customized Services in the Territory
as are available to users of the English language system, subject to territorial
restrictions contained in the applicable licenses. Napster need not include any
third party Content in the Service that does not conform to the then current
operational or technological functionality available throughout the Service or
that would require any unreasonable changes to its ingestion, reporting or other
operational procedures (e.g., changes that are inconsistent with the then
current industry practices outside of the Territory); provided, however, that no
operational or technological requirements or restrictions shall be imposed by
Napster for the purpose of restricting the inclusion of Company Content in the
Service from licensors that do not provide the rights sought by Napster in
Section 3.2.2 below.

 

3.2.2 Company Clearance of Company Content. (a) Notwithstanding anything to the
contrary in Section 3.2.1 above, Company will use commercially reasonable
efforts to clear all publishing rights (including mechanical rights and
performance rights) relating to the music titles described in Section 3.2.1 when
and to the extent that Company reasonably deems it necessary for provision of
the Customized Service in the Territory.

 

(b) Napster will use commercially reasonable efforts to directly license master
recordings from third party labels that Company reasonably deems necessary for
provision of the Customized Service in the Territory. If Napster is unable to
obtain such rights, it will so inform the Company, and Company will use
commercially reasonable efforts to acquire such master recording licenses from
any labels.

 

(c) [*].

 

(d) For the avoidance of doubt, the use of the term “worldwide” in connection
with distribution of content only applies to the territories for which each of
the respective music labels have rights to the applicable content.

 

3.2.3 Supply of Company Content. Without limitation of Section 3.2.1, Company
will provide to Napster all Company Content to be offered to End-Users in the
Customized Service at the Launch Date, in accordance with the Statement of Work,
for hosting and delivery by Napster in accordance with this Agreement. On and
after the Launch Date and in accordance with the Statement of Work, Company will
furnish to Napster and periodically update the Company Content, with timing to
be determined by Company.

 

3.2.4 Storage of Company Content. Unless otherwise agreed by the Parties, all
Content, including without limitation the Company Content, shall be stored by
Napster

 

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

11

--------------------------------------------------------------------------------

during the Term on the Hardware. Without limiting the generality of the
foregoing, Napster shall monitor and provide the Customized Services in
accordance with this Agreement, including the SLA.

 

3.2.5 Content Availability. At all times during the Term, Napster shall ensure
that the Customized Service (including the Company Content provided by Company
to Napster in accordance herewith) is available to End Users in accordance with
the SLA, including, without limitation, the provision of sufficient storage and
bandwidth. [*].

 

3.2.6 Third Party Content Costs. Company will administer and pay all third party
Content royalties and shall be solely responsible for paying any or all
compensation due in respect of the use or exploitation of any Content used in
connection with the Customized Service, including, without limitation, all
artists whose performances are embodied thereon, the producers of such Content,
the publishers of the musical compositions embodied in such Content or master
recordings, the owners of any samples contained in those master recordings, any
union, guild or affiliated trust fund, and any Content within the Customized
Services provided by Napster pursuant to Section 3.2.1 above. Notwithstanding
the foregoing, to the extent that Napster is required to pay any additional
royalties solely due to the operation of the Business in the Territory as a
result of its license agreements, Company will reimburse Napster for all such
additional royalties in accordance with the terms of Exhibit C hereto. To the
extent that Company is required to pay any additional royalties solely due to
the operation of the Services outside the Territory as a result of its license
agreements, Napster will reimburse Company for all such additional royalties.
Napster and Company will provide any necessary data to allow such administration
and payment by the other Party. Napster will provide monthly data reports to
Company sufficient to allow Company to calculate and pay any third party
royalties as provided herein.

 

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

12

--------------------------------------------------------------------------------

4. Maintenance Of The Service

 

4.1 Maintenance and Support:

 

4.1.1 By Napster. Without derogation of other obligations in this Agreement
including obligations under the SLA, Napster shall, at all times during the
Term, provide operational, maintenance and support services (“Maintenance
Services”) in connection with the provision and use of the Customized Service,
the Customized Client and Back-End Services, in each case at least at the same
level of service set forth in the SLA, including without limitation by the
operation and maintenance of: [*], in each case as more fully detailed in the
SLA. Additionally, Napster shall answer any reasonable questions from Company in
a timely manner relating to localization of documentation to be provided by the
Company pursuant to Section 4.1.2. Napster shall assign to the performance of
the Maintenance Services support engineers who will be responsible for
maintaining the Service and will have the skills and qualifications required for
performing the Maintenance Services.

 

4.1.2 By Company. As between Napster and Company, Company shall be solely
responsible for providing direct End User Support. Company will, through one or
more third parties, provide End User Support in accordance with the standards
set forth in Exhibit B to the extent available on commercially reasonable terms.
If not available, the Parties will discuss alternate strategies and levels of
End User Support. Napster will provide customary documentation (in English) at
no fee and Company shall be responsible for localization of such documentation.
Napster will provide initial training to Company employees in order to allow
such employees to perform End User Support, and to allow Company employees to
develop necessary support documentation in Japanese. Any additional training
provided by Napster will be billed to Company at Napster’s Fully-Loaded Costs.
Napster also shall provide such reasonable assistance and tier three support to
Company in connection with End User Support that Company may require to
satisfactorily provide direct support to End Users.

 

4.1.3 Napster will initially train Company employees on the use of Back-End
Services at no cost to Company. Any additional training will be charged at
Napster’s Fully-Loaded Costs.

 

4.2 Relationship Managers. Napster and Company (an “Appointing Party”) will
appoint an individual (a “Relationship Manager”) who, from the Effective Date
until replaced by the Appointing Party, shall serve as the Appointing Party’s
primary contact for communications between the Parties to this Agreement.
Napster’s initial Relationship Manager will be Paul Greenberg and Company’s
initial Relationship Manager will be determined at the first meeting of the
Board of Directors of the Company following its formation. Each Relationship
Manager (i) has the overall responsibility for managing and coordinating the
performance of the Appointing Party’s obligations hereunder; and (ii) is
authorized to act for and on behalf of the

 

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

13

--------------------------------------------------------------------------------

Appointing Party concerning all matters relating to this Agreement. Each of
Company and Napster shall have an opportunity to reasonably disapprove of the
other’s Relationship Manager, and the other party shall provide an appropriate
alternative.

 

4.3 Collection Of End-User Data. Napster will compile End User Data on behalf of
Company, in connection with Napster’s services hereunder, and to the extent
permitted under applicable law, such End-User Data shall be owned jointly
throughout the world by Company, Napster and Tower. Each of Company and Tower
may use the End User Data for its own marketing purposes provided such use shall
be in accordance with the Company privacy policy and applicable law. Napster may
use End User Data for its own marketing purposes provided such use shall be in
accordance with the Company privacy policy and applicable law, provided that
Napster may not transfer such End User Data to a Tower Competitor during the
Term or directly compete during the Term with Tower’s retail pre-packaged
physical music sales business. Company’s privacy policy will comply with then
applicable laws, and provide that, subject to applicable law, Company has the
full right to share and co-own all End-User Data with Tower and Napster. During
the Term, such End User Data shall be housed in an End-User Data database
provided by Napster hereunder, to which Company and Tower will have reasonable
access at no charge. Company will provide a list of requested data fields and
the requested form of report and Napster and Company will work together in good
faith to implement a reporting structure acceptable to both Parties pursuant to
which Napster shall provide periodic updates of End User Data to the End User
Data Database as mutually agreed to between the Parties, which updates shall be
provided no less frequently than daily (other than End User support data, which
shall be available in real time). Nothing contained herein will obligate Napster
to obtain or share or permit any Party to itself use any End User Data that
would violate any applicable law, rule, regulation or treaty.

 

4.4 Security. At all times during the Term, Napster will implement appropriate
security measures (including but not limited to network firewalls, and encrypted
authentication certificate technologies, back-up systems, and co-located Napster
Servers) to protect the Customized Service (including the Content and End User
Data), as described in the SLA (provided that Napster will not be responsible
for a security breach resulting from undetected defects contained in third party
software). Accordingly, Napster will be solely responsible for protecting the
Customized Service (including the Content and End User Data) from unauthorized
interruptions, viruses and outside attacks by means of such measures to the
extent required by the SLA.

 

4.5 End User Agreements. End Users will contract directly with Company via an
End User license agreement (“EULA”) when downloading the Customized Client and
registering for the Customized Services. The EULA will be mutually agreed to by
the Parties prior to the Launch Date and at all times during the Term, Company
will update such EULA to ensure that the terms and conditions therein include
the same or similar provisions as are set forth in the representative Napster
end user license agreement for the Services delivered by Napster to Company from
time to time. Notwithstanding any provision herein to the contrary, Company need
not update the EULA to the extent that such update violates applicable Japanese
law.

 

14

--------------------------------------------------------------------------------

5. Company Payment Obligations and Accounting

 

5.1 Company Payment Obligations. In consideration for the development,
maintenance, bandwidth, storage and licensing services described in Section 2
through Section 4 of this Agreement and in the Statement of Work, Company shall
pay Napster in accordance with the payment schedule attached hereto as Exhibit
C. To the extent Company is required to pay Napster’s personnel costs, such
personnel costs shall be charged at the rates specified in Exhibit C.

 

6. Intellectual Property Rights and Licenses

 

6.1 Ownership.

 

6.1.1 Napster Intellectual Property. As between Company and Napster, all:
(i) Napster Materials; (ii) Intellectual Property Rights in such Napster
Materials; (iii) Intellectual Property Rights in the Content provided by Napster
pursuant to Section 3.2.1 above; and (iv) Improvements to any of the foregoing
(collectively, the “Napster Property”) are or will be owned exclusively by
Napster in perpetuity, throughout the world, free of any claim by Company or any
third party, except as otherwise provided herein. Except as set forth herein,
neither Company nor Tower has, nor does it receive under this Agreement, any
rights in any Napster Property. For the avoidance of doubt, any Improvements to
Napster Property created by Company or Tower will be solely owned by Napster
provided that Company will retain a reasonable right to use such Improvements
but not the original Napster Property following the termination of this
Agreement, provided, however, that Company shall not retain a reasonable right
to use such Improvements following termination of this Agreement in the case of
a termination by Napster pursuant to Section 7.1 hereunder. The Parties agree to
discuss in good faith additional trademark licenses from Napster for
merchandising or similar exploitation in the Territory on no less favorable
terms than set forth in agreements between Napster and third parties outside the
Territory, if any.

 

6.1.2 Company Intellectual Property. As between Company and Napster, all:
(i) articles in the Napster Sites provided by Company, (ii) Company Content
including the Content obtained by Company pursuant to Section 3.2.2,
(iii) design features and user interface of the Napster Sites which are created
by Company and are unique to such Napster Sites, and (iv) all Intellectual
Property Rights in all of the foregoing and (v) Improvements to any of the
foregoing (collectively, the “Company Property”) are or will be owned
exclusively by Company in perpetuity, throughout the world, free of any claim by
Napster or any third party, except as otherwise provided herein. Except as set
forth in Section 6.4.2, Napster does not have, and does not receive under this
Agreement, any rights in or to any Company Property. For the avoidance of doubt,
any Improvements to Company Property created by Napster will be solely owned by
Company provided that Napster will retain a reasonable right to use such
Improvements but not the original Company Property following the termination of
this Agreement, provided, however, that Napster shall not retain a reasonable
right to use such Improvements following termination of this Agreement in the
case of a termination by Company pursuant to Section 7.1 hereunder.

 

15

--------------------------------------------------------------------------------

6.1.3 Tower Intellectual Property. As between Tower and Napster, all:
(i) articles in the Napster Sites provided by Tower, (ii) Company Content and
the Content obtained by Company pursuant to Section 3.2.2, (iii) Tower Marks,
(iv) all Intellectual Property Rights in all of the foregoing and
(v) Improvements to any of the foregoing (collectively, the “Tower Property”)
are or will be owned exclusively by Tower in perpetuity, throughout the world,
free of any claim by Napster or any third party, except as otherwise provided
herein. Except as set forth in Section 6.4.3, Napster does not have, and does
not receive under this Agreement, any rights in or to any Tower Property.

 

6.1.4 Disclosure of Improvements. (a) Company and Tower agree during the Term to
disclose to Napster any Improvements that it makes or reduces to practice upon
any of the Napster Property used in the Customized Service. Napster shall own
all right, title and interest in and to such Improvements worldwide and in
perpetuity.

 

(b) Napster agrees during the Term to disclose to Company any Improvements that
it makes or reduces to practice upon any of the Company Property. Company shall
own all right, title and interest in and to such Improvements worldwide and in
perpetuity.

 

(c) With respect to this Section 6.1.3, the Parties agree to cooperate with one
another in obtaining letters patent or patents on any such Improvements which
may be patentable, and further agrees to transfer the title to the patents for
the same to the owning party upon such party’s payment of the expenses in
connection with the filing and prosecution thereof.

 

6.2 Reservation and Limitations. Except as otherwise expressly set forth in this
Agreement, each Party expressly reserves all of its right, title and interest in
its own Intellectual Property Rights, and no Party grants any license to the
others.

 

6.3 Reverse Engineering. Company and Tower will not, and will not authorize any
other Person through actions or omissions to, reverse engineer, decompile or
disassemble or otherwise attempt to derive the source code for the operation of
any Napster Property, or to decode, deencrypt or engineer around any
authorization codes, lockout software or other security measures contained in
any Napster Property.

 

16

--------------------------------------------------------------------------------

6.4 Licenses.

 

6.4.1 By Napster. During the Term, Napster grants to Company an exclusive (in
the Territory only), nontransferable, nonsublicensable license in the Territory
in and to all rights (including Intellectual Property Rights) to (i) any Napster
Property (ii) the Napster Sites, (iii) the Napster Marks and (iv) any other
materials furnished by Napster in connection with this Agreement, expressly for
purpose of use in connection with the Customized Services, Customized Client and
Napster Sites as contemplated hereunder. Company shall only use the Napster
Marks according to the Napster Trademark Usage Guidelines, which shall be
provided to Company in writing, or in accordance with other reasonable written
instructions. Company’s use of any Napster Mark in connection with this
Agreement will not create any right, title or interest in or to the use of the
Napster Marks and all such use and goodwill associated with the Napster Marks
will inure to the benefit of Napster. For quality control purposes, Napster may
examine the use by Company of Napster Marks from time to time upon reasonable
notice to Company. Should Napster reasonably object to Company’s use of a
Napster Mark, Company shall cure the objections within thirty (30) days of
notice thereof, or Napster may suspend Company’s rights to use the Napster Marks
until such objections are cured.

 

6.4.2 By Company. During the Term, Company grants to Napster a non-exclusive,
nontransferable, nonsublicensable, worldwide and royalty free license, effective
throughout the Term, to (i) host, use, copy, transfer, reproduce, distribute,
transmit and publicly perform the Company Property on and via the Internet,
solely as necessary to perform Napster’s obligations hereunder with respect to
the Customized Service and Customized Client; and (ii) host, use, copy,
transfer, reproduce, distribute, transmit and publicly perform any other
materials furnished by Company in connection with this Agreement, solely as
necessary to perform Napster’s obligations under this Agreement with respect to
the Service.

 

6.4.3 By Tower. During the Term, Tower grants to Napster a non-exclusive,
nontransferable, nonsublicensable, worldwide and royalty free license, effective
throughout the Term, to (i) host, use, copy, transfer, reproduce, distribute,
transmit and publicly perform the Tower Property on and via the Internet, solely
as necessary to perform Napster’s obligations hereunder with respect to the
Customized Service and Customized Client; and (ii) host, use, copy, transfer,
reproduce, distribute, transmit and publicly perform any other materials
furnished by Tower in connection with this Agreement, solely as necessary to
perform Napster’s obligations under this Agreement with respect to the Service
provided that Napster agrees, following written notice of any such requirements,
to take such actions to the extent reasonably required in order to ensure
Tower’s compliance with its obligations owed to MTS, Incorporated under the
Trademark and Trade Dress Transfer and Usage Agreement, including without
limitation the blocking of End Users accessing Customized Services from outside
the Territory or permitting only persons who register and/or are otherwise
identified as being physically located in Japan to become End Users.

 

17

--------------------------------------------------------------------------------

6.4.4 Cross License to Joint Property. To the extent that the Parties
collaborate to develop code or functionalities or any other material in which
there may exist Intellectual Property Rights, and that collaborative work does
not otherwise constitute Company Property or Napster Property, such code,
functionalities and/or material shall be considered “Joint Property,” once
expressly and mutually documented as such. Joint Property shall be owned by
Company and Napster during the Term of the Agreement and thereafter by Tower and
Napster or their permitted successors or assigns in perpetuity, throughout the
world, free of any claim by Company or any third party, except as otherwise
provided herein. Each Party shall be entitled, without notice or accounting to
the other, to exploit, disclose, and in any way license, sublicense and/or
alienate any right as may exist in Joint Property; provided that any use or
license by Company or Tower of such Joint Property outside of the Customized
Service during the Term shall require Napster’s prior written consent, which
consent shall not be unreasonably withheld or delayed, and any use or license of
such Joint Property by Napster outside of the Customized Service during the Term
shall require Company and Tower’s prior written consent, which consent shall not
be unreasonably withheld or delayed. The Parties shall consult and provide
reasonable assistance to each other in securing and perfecting any Intellectual
Property Rights as may exist in Joint Property.

 

7. Termination

 

7.1 Termination for Cause. Provided that a Party exercising its rights under
this Section 7.1 is not in material breach of any provision under any Definitive
Agreement and that neither Tower nor Napster has exercised its Special Event of
Default Option under the JV Agreement, any Party may terminate this Agreement
upon thirty (30) days written notice (or shorter period if otherwise specified
herein) to the other Parties if either of the other Parties have materially
breached any obligation set forth in this Agreement, including Exhibits B or C,
and does not promptly and diligently undertake to cure such breach and prosecute
such cure to completion. [*].

 

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

18

--------------------------------------------------------------------------------

In the event that either Tower or Napster exercises its Special Event of Default
Option under the JV Agreement, such Party may terminate this Agreement
immediately upon delivery of written notice to the other Party.

 

7.2 Termination Upon Termination of the JV Agreement. Except as specifically
provided elsewhere in this Agreement, this Agreement will terminate
automatically upon the termination of the JV Agreement without further action by
any Party. Following the exercise of a Special Event of Default Option by Tower
under the JV Agreement, Napster shall provide reasonable assistance, at Tower’s
expense, for the redirection of End Users to a new Tower-operated website and
will transfer to Tower, all End User Data.

 

7.3 Termination Upon Change of Control of Company. Until the earlier of [*],
Napster shall have the right to terminate the License Agreement upon any Change
of Control; provided Napster shall not have such right in connection with any
Tower Permitted Transfer or any other transaction entered into with the prior
written consent of Napster.

 

7.4 Effect of Termination. Except as otherwise expressly indicated herein, upon
any termination or expiration of this Agreement all licenses granted herein
shall be null and void:

 

(a) Each Party, at its own expense, will return to the other Parties or
otherwise dispose of as the owner may instruct, any information of the other
Party, including Confidential Information and other assets that were provided in
connection with this Agreement and that are in the possession or control of the
returning Party.

 

(b) All payment obligations under Section 5 of this Agreement that have accrued
prior to such termination or expiration will be payable in full on the 30th day
following such termination or expiration. All amounts earned pursuant to
Section 5 of this Agreement will be non-refundable.

 

(c) The rights and obligations of the Parties under Section 10 shall continue
until the expiration of the survival period for Confidential Information
pursuant to the terms of the JV Agreement; and the rights and obligations of the
Parties under Sections 6.1, 6.2, 6.4.3, 9, 11 and 12 of this agreement will
survive such termination or expiration.

 

7.5 Bankruptcy Event. In the event of a Bankruptcy Event with respect to the
Company, Napster shall have the option to convert the exclusive license granted
under Section 6.4.1 into a non-exclusive license. Such conversion into a
non-exclusive license will be effective immediately any time on or after a
Bankruptcy Event with respect to the Company upon delivery of written notice to
the Company by Napster. Other than the license granted under Section 6.4.1
converting from an exclusive (in the Territory only) into a non-exclusive
license as provided in

 

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

19

--------------------------------------------------------------------------------

this Section 7.5, the exercise of such conversion option by Napster shall not
have any effect or limit in any way any other provision of this Agreement,
including, without limitation, Napster’s rights under Section 7.1(b) or the
Company’s obligations under Section 5.1; provided that Napster’s grant of any
license to rights listed in Section 6.4.1 to any third party shall, at any time
during the Term and while Section 5.4 of the JV Agreement remains in effect, be
prohibited.

 

[*]

 

8. Representations and Warranties.

 

8.1 By Napster. At all times during the Term, Napster hereby represents and
warrants that: it has the full right, title and authority to enter into this
Agreement, to provide all of the services contemplated in this Agreement and
perform its obligations hereunder and to grant Company the rights granted
herein; and it has the legal authority or ownership rights to grant any license
or right granted to Company under this Agreement.

 

8.2 By Company. Company hereby represents and warrants that, at all times during
the Term, it has the full right, title and authority to enter into this
Agreement and perform its obligations hereunder and to grant Napster the rights
herein granted; and it has the legal authority or ownership rights to grant any
license or right granted to Napster under this Agreement.

 

8.3 Disclaimer of Warranty. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
NEITHER PARTY MAKES ANY OTHER WARRANTIES, EXPRESS, IMPLIED, STATUTORY, OR
OTHERWISE, AND EACH PARTY SPECIFICALLY DISCLAIMS ANY AND ALL OTHER WARRANTIES,
INCLUDING BUT NOT LIMITED TO ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, NONINFRINGEMENT AND TITLE.

 

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

20

--------------------------------------------------------------------------------

9. Indemnification.

 

9.1 Indemnification by Napster.

 

(a) Napster will indemnify, defend and hold Company and Tower harmless from any
and all losses, liabilities, damages, expenses and/or costs (including
reasonable attorneys’ fees) (“Losses”) resulting from any third party claim
against Company or Tower that (a) the Napster Materials infringe, misappropriate
or violate the copyrights, trademarks or trade secrets of any third party,
(b) the Content provided by Napster pursuant to Section 3.2.1 violates the
copyright rights of the labels owning the master recording copyrights or
(c) alleges any privacy policy violation or violation of law arising out of or
relating to use by Napster of End User Data or (d) a breach by Napster of its
obligations under Section 4.4 of this Agreement has damaged any third party.
Napster’s obligations hereunder are conditioned upon (i) Company and Tower
providing sole control and reasonable cooperation to Napster in connection with
the defense and/or settlement of any such claim, at Napster’s expense; and
(ii) Company and Tower providing prompt notice of any and all claims under this
indemnity.

 

[*]

 

9.2 Indemnification by Company. Company shall indemnify, defend and hold Napster
harmless from and against any and all Losses resulting from any third party
claim against Napster (a) that the Content (except for the master recording
rights obtained by Napster pursuant to Section 3.2.1 above or any other Content
furnished by Napster) or the elements of the Customized Service provided by
Company infringe, misappropriate or violate the Intellectual Property Rights of
any third party, or (b) resulting from any third party claim alleging any
privacy policy violation or violation of law arising out of or relating to use
by Company of End User Data. Company’s obligations hereunder are conditioned
upon (i) Napster providing sole control and reasonable cooperation to Company in
connection with the defense and/or settlement of any such claim, at Company’s
expense; and (ii) Napster providing prompt notice of any and all claims under
this indemnity.

 

9.3 Indemnification by Tower. Tower shall indemnify, defend and hold Napster and
Company harmless from and against any and all Losses resulting from any third
party claim that (a) the Tower Property infringe, misappropriate or violate the
Intellectual Property Rights of any third party, or (b) alleges any privacy
policy violation or violation of law arising out of or relating to use by Tower
or any Affiliate of Tower of End User Data. Tower’s obligations to Napster
hereunder are conditioned upon (i) Napster providing sole control and reasonable
cooperation to Tower in connection with the defense and/or settlement of any
such claim, at Tower’s expense; and (ii) Napster providing prompt notice of any
and all claims under this indemnity.

 

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

21

--------------------------------------------------------------------------------

10. Confidentiality

 

10.1 General Obligation. The terms of the JV Agreement will govern the
confidentiality of Confidential Information hereunder.

 

10.2 [Reserved]

 

10.3 Ownership. All Confidential Information, and any Derivatives thereof,
remains the property of the disclosing Party (except as may otherwise be
provided herein) and no license or other rights to Confidential Information is
granted or implied, solely by virtue of its disclosure. For purposes of this
Agreement, “Derivatives” shall mean: (i) for copyrightable or copyrighted
material, any translation, abridgment, revision or other form in which an
existing work may be recast, transformed or adapted; (ii) for patentable or
patented material, any improvement thereon; and (iii) for material which is
protected by trade secret, any new material derived from such existing trade
secret material, including new material which may be protected by copyright,
patent and/or trade secret.

 

10.4. Injunctive Relief. The receiving Party agrees that money damages would not
be a sufficient remedy for any breach of its obligations under this Section 10
and that the disclosing Party shall be entitled to seek injunctive or other
equitable relief to remedy or prevent any breach or threatened breach hereunder
by the receiving Party or any of its designees (in addition to any other
remedy).

 

11. Limitation of Liability

 

Except for claims for indemnification under Section 9, claims related to any
Party exceeding the scope of the licenses granted under Section 6 and damages
arising as a result of a breach of the terms of Section 10, none of the Parties
will be liable to the other Parties for any indirect, incidental or
consequential damages of any type, including lost profits, or third party claims
arising out of or in connection with this Agreement or the services contemplated
hereby, even if a Party is advised by the other Party of the possibility of the
damage and even if a Party asserts or establishes a failure of essential purpose
of any limited remedy provided in this Agreement.

 

12 Miscellaneous

 

12.1 Notices. Except as otherwise specifically provided herein, all notices
under this Agreement shall be in writing and shall be given by courier or other
personal delivery or by registered or certified mail or sent by facsimile
transmission.

 

All such notices, requests, demands and other communications shall be addressed
as follows:

 

If to Company:    Napster Japan, Inc.      15-4 Sakuragaoka, Shibuya-ku, Tokyo
150-0031      Attention: Chief Executive Officer

 

22

--------------------------------------------------------------------------------

If to Napster:    Napster, LLC      9044 Melrose Avenue      Los Angeles,
California 90069, U.S.A.      Attention: General Counsel

with a copy to:

   O’Melveny & Myers LLP      Meiji Yasuda Seimei Building, 11th Floor     
2-1-1 Marunouchi      Chiyoda-ku, Tokyo 100-0005, Japan      Attention: Randy
Laxer, Esq. and Dale Araki, Esq. If to Tower:    Tower Records Japan Inc.     
2-15-9 Minami-Shinagawa      Shinagawa-ku, Tokyo 140-8667, Japan      Attention:
Chief Planning Officer

with a copy to:

   Cleary Gottlieb Steen & Hamilton LLP      One Liberty Plaza      New York, NY
10006      Attention: Steven L. Wilner, Esq.

 

or to such other address or facsimile number as a Party may have specified to
the other Parties in writing delivered in accordance with this Section 12.1.
Notices shall be deemed given three (3) days after mailing or, if personally
delivered, when so delivered, except that a notice of change of address shall be
effective only from the date of its receipt.

 

12.2 Force Majeure. Notwithstanding any other provision of this Agreement, no
Party will be liable for any delay or failure to perform its obligations under
this Agreement, where such delay or failure results from any (i) act of God
(fire, storm, floods, earthquakes, etc.); or (ii) civil disturbances or other
internet terrorist or hacker activities causing general internet breakdown, or
the prolonged general unavailability of necessary power, utilities or raw
materials; provided that it gives the other Parties written notice thereof and
uses commercially reasonable efforts to cure the delay or mitigate the failure
to perform.

 

12.3 Entire Agreement; Amendments. Except for the terms of the Definitive
Agreements, this Agreement contains the entire understanding of the Parties
relating to its subject matter and all previous agreements relating to the
subject matter are superseded by this Agreement. In the event of any conflict
between the Definitive Agreements and this Agreement related to the subject
matter herein, the terms of this Agreement shall govern. Any term of this
Agreement may be amended only with the written consent of the Parties.

 

12.4 Waivers. No waiver by a Party of any condition or any breach of any term,
covenant, representation or warranty contained in this Agreement will be
effective unless in writing, and no waiver of any one or more instances will be
deemed to be a further or continuing waiver of any such condition or breach in
other instances or a waiver of any other condition or breach of any other term,
covenant, representation or warranty.

 

23

--------------------------------------------------------------------------------

12.5 Captions. The captions of the Sections in this Agreement are included for
convenience only and shall not affect the interpretation of any provision.

 

12.6 Survivability. If any part of this Agreement, or the application thereof to
any Party, shall be adjudged by a court of competent jurisdiction to be invalid,
such judgment shall not affect the remainder of this Agreement, which shall
continue in full force and effect, or the application of this Agreement to the
remaining Parties.

 

12.7 Choice Of Law. This Agreement will be governed by and construed in
accordance with the laws of the State of California, without regard to its rules
for conflicts of law, except to the extent mandatory laws of Japan apply
including trademark law of Japan as far as trademarks registered in Japan are
concerned.

 

12.8 Arbitration.

 

(a) In the event there arises a dispute among the Parties as to the performance
or interpretation of any of the provisions of this Agreement, or as to matters
related to but not covered by this Agreement, the Parties shall first attempt to
find a mutually agreeable solution by consultation in good faith. If the matter
has not been resolved within thirty (30) Calendar Days of their first meeting to
resolve a dispute, then any such dispute shall be determined finally by final
and binding arbitration in accordance with the Rules of Arbitration of the
International Chamber of Commerce (“ICC”). The place of arbitration shall be Los
Angeles, California, U.S.A., if initiated and brought by a Party other than
Napster or Tokyo, Japan, if initiated and brought by Napster and the language of
the arbitration shall be English. Each of Napster and Tower shall appoint one
(1) arbitrator and the two nominated arbitrators shall in turn choose a third
arbitrator. If the arbitrators chosen by Napster and Tower cannot agree on the
choice of the third arbitrator within thirty (30) Calendar Days of the notice of
arbitration, then such arbitrator shall be appointed by the ICC acting in
accordance with the rules adopted by the ICC for this purpose. At minimum, the
arbitral tribunal shall be experienced in cross-border transactions.

 

(i) Judgment upon the award of the arbitral tribunal may be entered in any court
having jurisdiction thereof. The Parties acknowledge that this Agreement and any
award rendered pursuant to it shall be governed by the 1958 United Nations
Convention on the Recognition and Enforcement of Foreign Arbitral Award.

 

(ii) Pending the submission to arbitrators and thereafter until the arbitral
tribunal renders the award, the Parties shall, except in the event of
termination, continue to perform all their obligations under this Agreement and
the Definitive Agreements to which it is a party without prejudice to a final
adjustment in accordance with the award.

 

(iii) Judgment upon the award so rendered may be entered in any court having
jurisdiction or application may be made to such court for judicial acceptance of
any award and an order of enforcement, as the case may be.

 

(b) Injunctive Relief. By agreeing to arbitrate disputes arising between the
Parties pursuant to Section 12.8(a), the Parties acknowledge and agree that they
do not intend to deprive

 

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

24

--------------------------------------------------------------------------------

any court with jurisdiction of its ability to issue a preliminary injunction,
attachment or other form of provisional remedy in aid of the arbitration and a
request for such provisional remedies by a party to a court shall not be deemed
a waiver of this agreement to arbitrate. The Parties also acknowledge and agree
that in addition to the authority conferred upon the tribunal by the rules
specified above, the tribunal shall also have the authority to grant provisional
remedies, including injunctive relief.

 

12.9 Assignment. Except in connection with a Permitted Transfer, none of the
Parties may assign its rights and obligations, in whole or in part, under this
Agreement without the prior written consent of the other party. Any purported
assignment by Tower, Company or Napster in violation of this paragraph shall be
void.

 

12.10 Counterparts. This Agreement may be executed in two or more counterparts,
and each counterpart will be deemed an original, but all counterparts together
constitute a single instrument.

 

12.11 Tower Obligations. Tower’s obligations hereunder are limited to those
contained in Sections 4.3, 6.1, 6.3, 6.4, 9.3 and 12.8.

 

25

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the Parties have executed this Agreement by their duly
authorized representatives, to be effective as of the Effective Date stated
above.

 

NAPSTER, LLC       NAPSTER JAPAN, INC. By:  

/S/ WM. CHRISTOPHER GOROG

--------------------------------------------------------------------------------

      By:  

/S/ HIROYUKI FUSHITANI

--------------------------------------------------------------------------------

Printed Name:   Wm Christopher Gorog       Printed Name:   Hiroyuki Fushitani
Title:   Chairman and CEO       Title:   President and CEO (An Authorized
Signatory)       (An Authorized Signatory) TOWER RECORDS JAPAN INC.            
By:  

/S/ HIROYUKI FUSHITANI

--------------------------------------------------------------------------------

            Printed Name:   Hiroyuki Fushitani             Title:   President
and Group CEO             (An Authorized Signatory)            

 

26

--------------------------------------------------------------------------------

EXHIBIT A

 

Statement of Work

 

Alpha Phase

 

Napster will make available to the Company the initial localized version of the
Customized Client and the CST [*].

 

Beta Phase

 

Napster will make the following available for testing by the Company (the “Beta
System”) [*]

 

Complete Phase (“Commercial Product”)

 

Provided that Company has completed the Content programming for the Customized
Service reasonably requested by Napster and satisfied all music Content delivery
requirements, Napster will make available to Company the final Commercial
Product (including the Customized Service, Back-End Services and all other
components necessary to provide Customized Services to End-Users), to be used by
End-Users on and after the Launch Date, no later than the Launch Date.

 

Company Content Specifications

 

Prior to the Launch Date, Company will provide Company Content to Napster for
Immediate Ingestion in the manner set forth in the Napster Content Handbook [*].
Following the Launch Date, Company will provide Company Content to Napster in
the manner set forth in the Napster Content Handbook as provided to Company [*].

 

Programming Tools

 

Napster will provide to Company within ten (10) Calendar Days of the execution
of this Agreement, a list of content pages within the Service (e.g. genre pages,
“Foundation” pages, home page). Company shall provide to Napster, wireframes of
the desired layout of said content pages within the Customized Service [*].

 

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

27

--------------------------------------------------------------------------------

Napster will provide to Company all programming tools described in clause
(iv) of the definition of Back-End Services and training on the use of such
tools in accordance with Section 4.1.3 by [*].

 

Company will provide periodic music programming to Napster for inclusion in the
pre-Beta System builds of the Customized Client [*]. Company will provide
complete music programming to be included in the Customized Service at the
Launch Date to Napster [*].

 

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

28

--------------------------------------------------------------------------------

EXHIBIT B

 

Service Level Agreement

 

[*]

 

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

29

--------------------------------------------------------------------------------

EXHIBIT C

 

Payment Terms

 

1. Development Fees: In consideration of the Development Services, Company will
pay Napster [*].

 

2. Maintenance and Third Party Royalty Fees: In consideration of the Maintenance
Services and Napster’s obligations under Section 3 of this Agreement, [*].

 

3. Royalty: In consideration for the use of Napster technology to provide the
Service and any Improvements to the Napster Property, Company agrees to pay
Napster the following:

 

3.1 Company will pay Napster a royalty based on the annual gross revenues of
Company in accordance with the following formula:

 

[*]

 

4. [*]

 

5. Royalty Accounting.

 

5.1 Statements and Payment.

 

(a) Company shall, as the so-called “merchant of record” for amounts collected
in connection with the Customized Service, [*], Company shall send Napster a
statement detailing those Royalties and shall pay Napster any such Royalties
which are due to Napster.

 

(b) Company shall compute Royalties in U.S. dollars at the published rate of
exchange for the last day of the reporting period as reported in the Wall Street
Journal.

 

5.2 Reconciliation. To the extent that gross revenue which generated a royalty
that had previously been paid to Napster, is reversed or otherwise booked by

 

--------------------------------------------------------------------------------

* Indicates that certain information contained herein has been omitted and filed
separately with the Securities and Exchange Commission. Confidential treatment
has been requested with respect to the omitted portions.

 

30

--------------------------------------------------------------------------------

Company as uncollectable, Company may deduct the corresponding overpayment from
the next Gross Revenue Royalty payment, provided that any subsequent receipt of
uncollectible amounts shall result in additional payment to Napster. In the
event there is no subsequent payment, Company may, at its option, send Napster
an invoice for the overpayment amount, payable by Napster within thirty
(30) days of receipt of such invoice or deduct such overpayment from any payment
otherwise owed by Company to Napster hereunder.

 

6. Books and Audits. Company shall maintain accurate books and records detailing
all information related to Company’s revenues and the computation of Royalties,
which Napster may examine, at Napster’s expense. Napster shall maintain accurate
books and records detailing all information related to Fully Loaded Costs,
Content royalties, and other reimbursed amounts, if any, which Company may
examine, at Company’s expense. Each Party may make those examinations only for
the purpose of verifying the accuracy of the statements and invoices sent to
such Party hereunder. Each Party may make such an examination for a particular
statement or invoice only once. Each Party may make those examinations twice
during any calendar year and only during the other Party’s usual business hours,
on reasonable written notice for a reasonably convenient time, and at the place
where such other Party keeps the books and records to be examined. Each Party
may appoint a certified public accountant to make such an examination for such
Party. Each Party acknowledges that the other Party’s Books and Records
constitute Confidential Information. If the undisputed results of any such audit
reveal that one Party has underpaid the other by more than ten percent (10%) the
amount the underpaying Party should have paid the other, then, in addition to
any other legal and equitable rights and remedies available to the underpaid
Party, the underpaying Party shall reimburse the underpaid Party for the
reasonable and documented costs of the audit plus interest from the date the
amount should have been paid as computed under Section 7 below.

 

7. Taxes and Late Payments. All amounts to be paid by Company to Napster herein
are exclusive of, and Company shall pay, all sales, use, excise and other taxes
that may be levied on either party in connection with this Agreement, except for
taxes based upon Napster’s net assets or net income. Any amount not paid when
due shall bear interest at a rate equal to fourteen percent (14%) per annum.

 

31