Document:

EXHIBIT 10

EXHIBIT 10.17

 

This agreement (sometimes

referred to as the “Content Integration Agreement”) is made as of February 27,

2002 (“Effective Date”), by and between CenterSpan Communications Corp.,

7175 NW Evergreen Parkway, Suite 400 Hillsboro, Oregon 97124 (hereinafter “Subscription

Service Agent”, “CenterSpan” or “you”) and Sony Music, a

Group of Sony Music Entertainment Inc., 550 Madison Avenue, New York, New

York  10022-3211 (hereinafter “Sony”,

“we” or “us”).

 

WHEREAS Sony

is in the business of, inter alia, developing, producing, marketing,

promoting, distributing and otherwise exploiting recorded music;

 

WHEREAS

Subscription Service Agent would like to integrate, inter alia, the Sony

Materials, along with Recordings embodying the featured musical performances of

musical recording artists that are not Sony Artists and other graphic, textual

and multimedia materials, into the Service;

 

WHEREAS Sony

would like to, inter alia, sell Streams and Conditional Downloads of

Sony Cleared Recordings to consumers via the Service;

 

WHEREAS

Subscription Service Agent desires to act as Sony’s agent in connection with

the sale of Streams and Conditional Downloads of the Sony Cleared Recordings to

consumers via the Service;

 

WHEREAS Sony

desires to appoint Subscription Service Agent as Sony’s agent on the terms and

conditions set forth in this Content Integration Agreement;

 

NOW,

THEREFORE, for good and valuable consideration the receipt and sufficiency of

which is hereby acknowledged, the parties agree as follows:

 

1.      DEFINITIONS

 

1.01.     “Above the Fold” shall mean situated

within the portion of a Web Page that is designed to be visible to end users on

a standard computer screen with a resolution of 800 pixels by 600 pixels

without requiring such end users to scroll horizontally or vertically through

the Web Page concerned.

 

1.01.1.  “Adjusted Gross Revenue” shall have the

meaning assigned to such term in section 6.03(b)(12) below.

 

1.02.     “Advance” shall mean a prepayment of

Service Fees (as defined in subparagraph 6.03(a) below), including for the

avoidance of doubt and without limitation, the Execution Advances and the

Anniversary Advances (together, the “Syndication Advances”) payable

pursuant to Schedule A attached hereto. 

Subscription Service Agent may recoup Advances solely from Service Fees

to be paid or accrued to or on behalf of Sony pursuant to this Content

Integration Agreement.   Except as and

to the extent, if at all, expressly provided elsewhere herein, Advances paid

under this Content Integration Agreement shall not be returnable to

Subscription Service Agent or any other Person.

 

 

1.02.1.   “Advertisements” shall have the

meaning assigned to such term in section 6.03(b)(1) below.

 

1.02.2.   “Affiliate” shall mean, with respect

to any specified Person, any other Person that, directly or indirectly, through

one or more intermediaries, controls, is controlled by, or is under common

ownership or control with, or is owned or controlled by, such specified

Person.  As used in this definition, the

term “control” (including the terms “controlling”, “controlled by” and “under

common control with”) of a Person means the ownership of at least fifty percent

(50%) of the equity of such other Person.

 

1.03.     “Agent Servers” shall mean the

computer servers located in the Territory utilized by the Subscription Service

Agent in connection with the Service, including, for the avoidance of doubt,

such computer servers that are so-called “seeding peers”.

 

1.04.     “Aggregate Information” shall mean

such information concerning the usage habits, patterns and/or demographic

classification of End Users as a group without specifying the identity of any

individual End Users, to the extent such information is compiled by or made

available to CenterSpan.  Aggregate

Information shall include such items and categories of such information as

CenterSpan and Sony shall mutually determine in good faith from time-to-time

during the Term.  For the avoidance of

doubt, examples of items and categories of information that may constitute

“Aggregate Information” may include information regarding an End User’s postal

code, connection speed, ISP, household income and use of Recordings on the

Service.

 

1.04.1.  (a)     “Album”

shall mean one (1) or more audio-only Records, at least forty (40) minutes in

playing time and embodying at least eight (8) different musical compositions

sold by Sony in a single package for sale through normal retail channels (as

that term is commonly used in the U.S. phonograph record industry).  (b) “Single” - a vinyl audio-only

Record not more than seven (7) inches in diameter, or the equivalent in

non-vinyl configurations.  (c) “Twelve-inch

Single” - an audio-only Record which contains not more than three (3) Sides

of different Compositions.  (d) “Extended

Play Record” or “EP” - an audio-only Record which contains four (4)

or more Sides of different Compositions but does not constitute an Album.

 

1.04.2.  “Applicable Percentage” shall have the

meaning assigned to such term in section 6.03(b)(11).

 

1.05.     “Approved Electronic Device” shall

mean an Electronic Device approved by Sony in writing in advance in each

instance for use in connection with the delivery of Sony Materials to End Users

via the Service.

 

2

 

[CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY

WITH THE SEC]*

 

1.06.     “Approved Playback Format” shall

have the meaning assigned to such term in section 5.01(a)(ii) below.

 

1.06.1.  “Approved Streaming Format” shall have

the meaning assigned to such term in section 5.01(a)(i) below.

 

1.07.     “Approved Media Player” shall have

the meaning assigned to such term in section 5.06(b)(3) below.

 

1.08.     “Approved Security Features” shall

have the meaning assigned to such term in subparagraph 5.01(b) below.

 

1.09.     “Bounties” shall have the meaning

assigned to such term in section 6.03(b)(2) below.

 

1.10.      “Buy Link” shall mean an active

Link on the Service Site or Syndication Agent Site, as the case may be, which

links such Service Site to a Web Site created, maintained and hosted by an

authorized reseller of Phonograph Records in the United States or Canada, as

the case may be, that processes and fulfills mail order sales of the Phonograph

Records embodying Recordings that are Streamed or Conditionally Downloaded to

End Users in the United States or Canada, as the case may be.

 

1.11.      “Canadian Authorized Recordings”

shall mean those audio-only, stereo Recordings: (i) that are embodied on

Albums, Singles and EPs released by Sony’s principal Licensee in Canada for the

distribution of Phonograph Records in Canada for distribution through normal

retail channels (as that term is understood in the U.S. Phonograph Record

industry) in Canada and are listed in such Licensee’s then most recent active

Canadian product catalog (i.e. the product catalog currently known as the “Sony

Music Canada Catalogue”), as such catalog is updated from time to time

throughout the Term; and (ii) in respect of which the sound recording public

performance and sound recording reproduction rights have been obtained under

the copyright laws of Canada and such Licensee’s recording and other applicable

rights acquisition agreement(s), as applicable; and (iii) which are not

otherwise excluded under paragraph 3.03 or section 4.03(e)(2) below.

 

1.11.1.  “Canadian Cleared Recordings” shall

mean those audio-only, stereo Recordings: (i) that are Canadian Authorized

Recordings; and (ii) in respect of all Publishing Rights have been

obtained.  For the avoidance of doubt,

Canadian Cleared Recordings shall only be accessible by Canadian End Users.

 

*  Confidential

Portions Omitted.

 

3

 

1.11.2.  “Canadian End User” shall mean, at any

particular time, any Person who (i) has registered with Subscription Service

Agent a valid billing address that is in Canada, (ii) either (A) subscribes to

the Service either through the Subscription Service Agent or a Syndication

Agent and uses the Service solely for personal, non-commercial use or (B) is

otherwise eligible to subscribe to the Service but is given access to the

Service either through Subscription Service Agent or a Syndication Agent for a

limited, free-trial membership, (iii) has registered for and been assigned by

you a User Account, (iv) has been assigned a unique password by Subscription

Service Agent in respect of each User Account which must be correctly entered

prior to the commencement of any period during which such Person is permitted

to access the Service (i.e., Persons that do not have such a unique password

cannot access the Service) and (v) remains in good standing pursuant to the

Service’s terms of service and privacy policy.

 

1.11.2.  “Canadian Street Date” shall have the

meaning assigned to such term in subsection 3.03(c)(1)(ii) below.

 

1.12.     “Change

of Control” shall mean the occurrence of any of the following events:

 

(a)   [CONFIDENTIAL PORTION OMITTED AND

FILED SEPARATELY WITH THE SEC]*

 

(b)   [CONFIDENTIAL PORTION OMITTED AND

FILED SEPARATELY WITH THE SEC]*

 

1.12.1.  “Composition” shall mean (i) a single

musical composition, irrespective of length, including all spoken words and

bridging passages, or (ii) a spoken word or dramatic work (or portion thereof),

irrespective of length, that is thematically related and embodied by Sony in an

Album as a separate so-called “track” (as that term is understood in the United

States Phonograph Record industry).

 

1.13.     “Conditional Download” shall mean a

digital file containing a digitized copy of a Sony Cleared Recording that is

accessed by an End User from the Service that is subject to the following

limitations and restrictions: (i) the digital copy resulting from such Download

may reside solely on the hard drive of one (1) Approved Electronic Device owned

or controlled exclusively by the End User that has requested the digital file

concerned, either directly or indirectly, and cannot be retransmitted, moved or

otherwise copied to any other computer hard drive or other digital storage

device by any Person, including, without limitation, any portable device; (ii)

the digital copy will automatically be permanently

 

*Confidential Portions Omitted.

 

4

 

disabled and/or permanently

erased from such hard drive of such End User’s Approved Electronic Device (as

applicable) upon the expiration or termination of the End User’s subscription

to the Service; (iii) the digital copy will automatically be permanently

disabled and/or permanently erased from the hard drives of the Approved

Electronic Devices of all End Users immediately upon the termination or

expiration of the Term or upon the occurrence of an event hereunder that

excludes the Sony Cleared Recording in question from the scope of the Grant of

Rights; (iv) the digital copy will be encoded with a digital rights management

specification that (A) complies in all respects with the provisions of Article

5 below, and (B) complies with any other limitations or restrictions which may

be provided for pursuant to this Content Integration Agreement, or otherwise

agreed to between the parties hereto. 

For the avoidance of doubt, a digital file containing a digitized copy

of a Sony Cleared Recording shall not fail to qualify as a Conditional Download

by reason, alone, that an End User can create an analog copy thereof by

utilizing an analog audio output jack resident on the Approved Electronic

Device concerned.

 

1.14.     “Conditionally Download” shall mean

the act or process of receiving a Conditional Download.

 

1.14.1   [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE

SEC]*

 

1.15.     “Default Event” shall have the

meaning assigned to such term in subparagraph 11.01(b) below.

 

1.16.     Omitted without implication.

 

1.17.     Omitted without implication.

 

1.18.     Omitted without implication.

 

1.19.     Omitted without implication.

 

1.20.     Omitted without implication.

 

1.21.     “Domain Names” shall mean uniform

resource locators (“URLs”) registered with any duly authorized internet

domain name registry (e.g., Network Solutions, Inc.).

 

1.22.     “Download” (as a noun) shall mean an

electronic transmission and delivery of digital data that is transferred from a

central server or the computer hard drive owned or controlled exclusively by

another End User (i.e., so-called “peer-to-peer file sharing”) to the End User

through the Electronic Medium which results in the creation of an Electronic

Digital Copy of the item of content concerned.

 

* 

Confidential Portions Omitted.

 

5

 

 

1.23.     “Download” or “Downloading”

(used as a verb or gerund) shall mean the process of creating Downloads.

 

1.24.     “Downloadable” shall mean the

capability of resulting in a Download.

 

1.25.     “Ephemeral Copy” shall have the

meaning assigned to such term in section 3.01(b)(1) below.

 

1.26.     “Electronic Device” shall mean any

medium or device designed to (i) accept input of digital data; (ii) process

that input through computer programs and other sets of instructions that

control the operation of such electronic device; (iii) accurately count and

report the number of performances of each Recording to the extent necessary to

prepare Service Fee Reports and otherwise comply with the Subscription Service

Agent’s reporting obligations hereunder; and (iv) produces output and causes a

desired result which enables a Person utilizing such device to perceive a copy

or performance, as the case may be, of the content embodied in the digital data

transmission concerned.

 

1.27.     “Electronic Digital Copy” shall mean

a copy (other than a Conditional Download or an Ephemeral Copy) of any content,

including without limitation the Sony Materials, in a digital format.  A temporary copy of content resident on a

machine or device while waiting to be transferred between two (2) locations in

the same machine 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 and a temporary Partial Data Cache resident

in a so-called “obfuscated cache” (as described with greater particularity in

the Technical Specifications attached hereto) located in a machine or device

while waiting to be transferred or potentially transferred from one (1) End

User to another End User via so-called “peer-to-peer file sharing,”

respectively, shall not, for that reason alone, constitute an “Electronic

Digital Copy” of the content concerned.

 

1.28.     “Electronic Medium” shall mean the

subset of the Internet presently known as the World Wide Web and any other

public or private data networks utilized to provide Internet connectivity to

consumers, any digital telephone network, any digital cable television

distribution platform, and any digital satellite television platform that

primarily delivers audiovisual materials.

 

1.29.     “End User” shall mean, at any

particular time, any Person who (i) is located in the Territory, (ii) either

(A) subscribes to the Service either through the Subscription Service Agent or

a Syndication Agent and uses the Service solely for personal, non-commercial

use or (B) is otherwise eligible to subscribe to the Service but is given

access to the Service either through Subscription 

 

6

 

Service Agent or a Syndication

Agent for a limited, free-trial membership, (iii) has registered for and been

assigned by you a User Account, (iv) has been assigned a unique password by

Subscription Service Agent in respect of each User Account which must be

correctly entered prior to the commencement of any period during which such

Person is permitted to access the Service (i.e., Persons that do not have such

a unique password cannot access the Service) and (v) remains in good standing

pursuant to the Service’s terms of service and privacy policy.

 

1.30.     “End User Information” means,

collectively, Aggregate Information and Personal Information whether such

information is in oral, or human readable and/or machine readable form.

 

1.31.     “Entity” shall mean any general

partnership, limited partnership, corporation, limited liability company, joint

venture, trust, business trust, cooperative, association or other business

organization.

 

1.32.     “Equity Consideration” shall have the

meaning assigned to such term in subparagraph 6.02(a).

 

1.33.     “Extranet” shall have the meaning

assigned to such term in subparagraph 7.01(a) below.

 

1.33.1.  “Functionality Specifications” shall

mean the functionality specifications and mock-ups of the Service attached

hereto as Exhibit A-1.

 

1.34.     “GAAP” shall mean generally accepted

accounting principles set forth in the opinions and pronouncements of the

Accounting Principles Board of the American Institute of Certified Public

Accountants and statements and pronouncements of the Financial Accounting

Standards Board, which are in effect from time to time.

 

1.35.     “Grant of Rights” shall have the

meaning assigned to such term in subparagraph 3.01(a) below.

 

1.35.1.  “Gross Margin” shall have the meaning

assigned to such term in section 6.03(b)(3) below.

 

1.35.2.  “Gross Revenue” shall have the meaning

assigned to such term in section 6.03(b)(1) below.

 

1.36.     “Home Page” shall mean the

individual Web Page of a Web Site intended by the Person maintaining the Web

Site concerned to be the first Web Page viewed by end-users accessing such Web

Site.

 

1.36.1.  “Imported Recordings” shall mean audio

or audiovisual recordings for which you have not secured the sound recording public

performance and sound recording reproduction rights from the Person owning or

controlling the applicable sound recording copyright therein necessary to

exploit such recording in connection with the Service.

 

7

 

1.37.     “Launch Date” shall mean the date

that is the earlier of [CONFIDENTIAL

PORTION OMITTED AND FILED SEPARATELY WITH THE SEC]*

 

1.37.1.  “Licensee” shall mean a licensee of

rights from Sony, including, without limitation, wholly or partly owned subsidiaries,

affiliates and other divisions and components of Sony Music Entertainment Inc.

 

1.38.     “Link” shall mean an embedded icon,

object, graphic or text within a Web Page that consists of a hypertext pointer

to the URL of another Web Page.

 

1.39.     Omitted without implication.

 

1.40.     Omitted without implication.

 

1.41.     “Media Player” shall have meaning

assigned to such term in section 5.06(b)(1) below.

 

1.41.1.  “Minimum Monthly Amount” shall have the

meaning assigned to such term in section 6.03(b)(5) below.

 

1.41.2.  “Monthly Playback Number” shall have

the meaning assigned to such term in section 6.03(b)(6) below.

 

1.41.3.  [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE

SEC]*

 

1.41.4.  “New Recordings” shall mean Recordings

released by Sony on Phonograph Records for sale through normal retail channels

in the United States after the Effective Date or by Sony’s principal Licensee

in Canada on Phonograph Records for sale through normal channels in Canada

after the Effective Date.

 

1.41.5.  “Net Advertising Revenue” shall have

the meaning assigned to such term in section 6.03(b)(7) below.

 

1.41.6.  “Network Syndication Agent” shall mean

a Rank 1 Network Syndication Agent, Rank 2 Network Syndication Agent or Rank 3

Network Syndication Agent.

 

1.41.7.  “Online Retailer Syndication Agent”

shall mean a Syndication Agent that is actively engaged in the merchandising,

marketing or promotion of the sale of Records via the Electronic Medium, either

in whole or in part.

 

* 

Confidential Portions Omitted.

 

8

 

1.41.8.  “Partial Data Cache” shall mean a

single, encrypted digital file containing a portion of a digitized copy of a

Sony Cleared Recording, which, solely when combined with not less than five (5)

other single, encrypted digital files each, respectively, containing a

different non-overlapping portion of a digitized copy of the Sony Cleared

Recording concerned, with the aid of an Approved Electronic Device, enables the

Sony Cleared Recording to be perceived by such End User as a Stream of such

Sony Cleared Recording or stored as a Conditional Download embodying such Sony

Cleared Recording.  Without limiting the

generality of the foregoing, each Partial Data Cache shall be subject to the

following limitations, restrictions and attributes: (i) the digital file may

reside solely on the hard drive of an Approved Electronic Device owned or

controlled exclusively by the End User in a so-called “obfuscated cache” (as

described with greater particularity in the Technical Specifications attached

hereto), (ii) the digital file cannot be retransmitted, moved or otherwise

copied to any other computer hard drive or other digital storage device by any

Person, including, without limitation, any portable device except to the

Approved Electronic Device of another End User in a so-called “obfuscated

cache” (as described with greater particularity in the Technical Specifications

attached hereto); (iii) the Sony Materials embodied in the digital file cannot

be perceived as Sony Materials, whether directly or with the aid of an Approved

Electronic Device, without first verifying that the Person seeking access is an

End User in good standing for the online session concerned and without

receiving from the Service the other such non-overlapping portions of the Sony

Cleared Recording concerned that corresponds to the digital file concerned;

(iv) each Partial Data Cache shall be transferred solely under the control and

authority of Subscription Service Agent, and solely to End Users in good

standing; (v) Subscription Service Agent shall track where each digital file

resides at all times; and (vi) the digital copy will be securely protected so

that it (A) complies in all respects with the provisions of Article 5 below,

(B) utilizes effective technological means designed to prevent Persons from

editing, changing or removing any part of the Sony Materials contained therein

or from making a copy (including an Electronic Digital Copy) thereof, or from

moving or transferring such file to an Electronic Device that is not an

Approved Electronic Device, and (C) complies with any other limitations or

restrictions which may be provided for pursuant to this Content Integration

Agreement, or otherwise agreed to between the parties hereto.

 

1.42.     “Permitted Portable Device” means an

End User’s SDMI-compliant portable Electronic Device that is capable of storing

and playing the Sony Materials in accordance with and subject to the terms and

conditions of this Content Integration Agreement and is an Approved Electronic

Device hereunder.

 

1.43.     “Person” shall mean any individual

and any Entity, and their respective heirs, executors, administrators, legal

representatives, successors and assigns.

 

9

 

1.44.     “Personal Information” means

information about each individual End User from which it is possible to

ascertain the identity of such End User, including, without limitation (i) the

End User’s name, (ii) the End User’s mailing address (including, without limitation,

the End User’s zip or postal code or equivalent) and electronic mail address

and (iii) the End User’s personally identifiable transaction data (e.g., credit

card number and titles of Records purchased). 

Notwithstanding the foregoing or anything elsewhere herein, CenterSpan

shall not be obligated to utilize Personal Information for any purpose other

than enforcing and protecting the rights, restrictions and limitations set

forth herein by taking appropriate actions in connection with individual End Users

and potential End Users that have or allegedly have violated (or that

CenterSpan should have known have or allegedly have violated) CenterSpan’s End

User license agreement or other terms of service governing usage of the Service

or the terms, conditions and limitations set forth herein regarding uses of

Recordings as and to the extent permitted herein.

 

1.45.     “Phonograph Record” shall mean a

Record as embodied by the manufacturer and/or distributor in a physical,

non-interactive Record configuration (e.g., vinyl LP’s, cassettes, compact

discs, videocassettes) prior to its distribution to the consumer, as opposed to

the transmission or communication of a Record to the consumer prior to being

embodied in a physical Record configuration, whether or not it may at some

point be embodied in a physical Record configuration, by the consumer or under

the consumer’s direction or control.

 

1.45.1.  “Playback” (as a noun) shall mean a

single, encrypted digital transmission of a Sony Cleared Recording to an End

User via a Conditional Download, through an Approved Playback Format, whereby

such transmission is contemporaneous with the performance of the Recording

embodied therein and which, in all cases, cannot be digitally copied,

duplicated or stored in any manner or medium in whole or in part, directly or

indirectly.

 

1.45.2.  “Playedback” (as a verb) means the act

or process of having transmitted Playbacks solely through an Approved Playback

Format.

 

1.46.     “Procedures Report” shall have the

meaning assigned to such term in paragraph 6.06 below.

 

1.46.1.  “Prohibited Digital Output” shall mean

a digital output that forms a part of an Electronic Device that is capable of

rendering or transmitting unencrypted digital data containing a Conditional

Download or a Partial Data Cache that is not subject to the Approved Security

Features at a transfer rate that is faster than so-called “real time” (e.g.,

capable of a transferring a Record that is intended to have a playing time of

sixty (60) minutes in less than that amount of time).

 

10

 

1.46.2.  “Publishing Costs” shall mean all

actual, out-of-pocket costs paid to music publishers or applicable rights

societies with jurisdiction over reproduction rights in connection with exercising:

(i) Publishing Rights and (ii) the rights, consents, licenses and permissions

necessary for the mechanical reproduction of musical compositions embodied in

all Recordings (other than Sony Cleared Recordings and Sony Authorized

Recordings) in connection with the Service.

 

1.46.3.  “Publishing Rights” shall mean all

rights, consents, licenses and permissions necessary for the mechanical

reproduction of musical compositions embodied in Sony Authorized Recordings in

connection with the Service.

 

1.46.4.  “Publishing Rights Date” shall mean the

date is nine (9) months after the Effective Date.

 

1.46.5.  [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE

SEC]*

 

1.46.6.  [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE

SEC]*

 

1.46.7.  [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE

SEC]*

 

1.46.8.  [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE

SEC]*

 

1.47.     “Record(s)” shall mean all forms of

reproductions, transmissions or communications of Recordings now or hereafter

known, manufactured, distributed, transmitted or communicated primarily for

home use, school use, jukebox use or use in means of transportation.

 

1.48.     “Recording” shall mean a recording

of sound (by any method and on any substance or material, or in any other form

or format, whether now or hereafter known, which is used or useful in the

recording, production and/or manufacture of Records) embodying the performance

of a single Composition.

 

1.48.1.  “Record Labels” shall mean any Person

owning or controlling multiple Recordings featuring the performances of a

reasonably significant number of recording artists (including, but not limited

to, EMI Recorded Music, BMG Entertainment, Universal Music Group, Warner Music

Group, Zomba Records Corporation) and any of Affiliate of any such Person.

 

* 

Confidential Portions Omitted.

 

11

 

1.49.     “Service” shall mean the interactive

subscription music service owned and operated by Subscription Service Agent

conforming to the Technical Specifications, which:

 

(a)   is accessible exclusively by

End Users, exclusively through the Service Site and the Syndication Agent Sites

via a maximum of [CONFIDENTIAL

PORTION OMITTED AND FILED SEPARATELY WITH THE SEC]* Approved

Electronic Devices at any one time per User Account; provided, however, that in

respect of any particular User Account, (x) no more than [CONFIDENTIAL PORTION OMITTED AND

FILED SEPARATELY WITH THE SEC]* such Approved Electronic Devices

may be an Approved Electronic Device described in clause (i) of paragraph 1.05

above and (y) no particular End User may utilize [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH

THE SEC]* or more of the Approved Electronic Devices described

in clause (ii) of paragraph 1.05 above or [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE

SEC]* or more of the Approved Electronic Devices described in

clause (iii) of paragraph 1.05 above;

 

(b)   subject to paragraph 8.01

below, is marketed exclusively under the name “scour”, “C-Star” or such other

name as may be adopted by Subscription Service Agent in connection with a

substantial portion of its business, provided that such other name may not be

construed by a reasonable Person as disparaging to Sony, its Affiliates and/or

any of the Sony Parties, artists, producers, mixers, remixers or other Persons

that contributed to the recording of the Sony Cleared Recordings transmitted

via the Service;

 

(c)   offers, inter  alia,

an End User the opportunity to receive one or more Stream(s) and/or Conditional

Downloads of the Sony Cleared Recordings from the Agent Server (or, in the case

of so-called “peer to peer file sharing”, from an Approved Electronic Device of

another End User in full compliance with the terms of this Content Integration

Agreement) promptly following such End User’s specific request or demand

therefor and prohibits the use of Imported Recordings (except as expressly

permitted under paragraph 5.06 below); provided that the copies of each Sony

Cleared Recording received by End Users must be initially delivered via the

Agent Servers and must be derived from encoded digital files delivered by Sony

to Subscription Service Agent pursuant to subparagraph 3.01(d) below (for the

avoidance of doubt, this paragraph shall not operate to preclude the Service

from authorizing End Users to facilitate serial copying of such encoded digital

files among End Users from an Approved Electronic Device of another End User in

full compliance with the terms of this Content Integration Agreement in the

case of so-called “peer to peer file sharing”);

 

* 

Confidential Portions Omitted.

 

12

 

(d)  requires each End User to

furnish Personal Information to the Subscription Service Agent or to the

Syndication Agent concerned;

 

(e)  compiles Aggregate

Information (subject to paragraph 1.04 above) and Personal Information (subject

to paragraph 1.44 above);

 

(f)   conforms to the Technical

Specifications; and

 

(g)  conforms to the Functionality

Specifications.

 

For the avoidance

of doubt and without limiting the generality of anything in clauses (a) through

(g) of this paragraph 1.49, but subject to the allocation methodology

prescribed in subsection 6.03(b)(4)(B) below, Sony hereby acknowledges that:

(i) nothing contained in this Content Integration Agreement shall be construed

as a limitation of Subscription Service Agent’s right to bundle the Service

with other services operated by Subscription Service Agent as part of the same

consumer offering to an End User, and (ii) an End User’s opportunity to receive

one or more Stream(s) and/or Conditional Downloads of Sony Cleared Recordings

from an Approved Electronic Device of an End User in full compliance with the

terms of this Content Integration Agreement (i.e., so-called “peer to peer file

sharing” is a primary aspect of the functionality of the Service).

 

1.50.     “Service Fee” shall have the meaning

assigned to it in subparagraph 6.03(a) below.

 

1.51.     “Service Fee Report” shall have the

meaning assigned to such term in paragraph 6.04 below.

 

1.51.1.   “Service Release Date” shall have the

meaning assigned to such term in section 3.03(c)(1) below.

 

1.52.     “Service Site” shall mean the Web

Site, based in the United States, the Home Page of which is located at the

Uniform Resource Locator (“URL”) scour.com (or a successor URL designated by

Subscription Service Agent and approved by Sony in writing in advance, which

approval Sony shall not unreasonably withhold) and is owned and operated solely

by the Subscription Service Agent by which End Users can access the Service in

accordance with the terms of this Content Integration Agreement.

 

1.53.     “Sony Artist” shall mean recording

artists whose musical performances are embodied on Sony Cleared Recordings.

 

1.54.     “Sony Authorized Artwork” shall mean

the front album cover art, only, used by Sony in the packaging of the Records

in which Sony Cleared Recordings concerned are originally released by Sony in

the United States for sale through normal retail 

 

13

 

channels (as that term is

understood in the U.S. Phonograph Record industry).  For the avoidance of doubt, Sony Authorized Artwork shall not

include liner notes, lyrics or other artwork, pictorial, graphic, audiovisual

or textual materials which are incorporated in the Album concerned or the

packaging or used in the marketing and/or promotion of Phonograph Records

embodying the Sony Cleared Recordings.

 

1.55.       “Sony Authorized

Recordings” shall mean: (a) solely with respect to United States End Users,

United States Authorized Recordings and (b) solely with respect to Canadian End

Users, Canadian Authorized Recordings.

 

1.56.       “Sony Authorized

Trademarks” shall mean any Trademark owned and/or controlled by Sony and

made available to Subscription Service Agent pursuant to the terms and

conditions of this Content Integration Agreement.

 

1.56.1.  “Sony Cleared Recordings” shall mean:

(a) solely with respect to United States End Users, United States Cleared

Recordings and (b) solely with respect to Canadian End Users, Canadian Cleared

Recordings.

 

1.57.       “Sony Materials”

shall mean the Sony Cleared Recordings and Sony Authorized Artwork.

 

1.58.       “Sony Parties”

shall mean Sony Music Entertainment Inc. and its parent, subsidiaries,

affiliates, divisions, components and Licensees and each of their officers,

agents, employees, partners, directors, controlling persons and advisors.

 

1.58.1.  “Sony’s Pro Rata Share” shall have the

meaning assigned to such term in section 6.03(b)(8) below.

 

1.58.2.  “Sony’s Usage Percentage” shall have

the meaning assigned to such term in section 6.03(b)(9) below.

 

1.59.       “Stream” (as a

noun) shall mean a single, encrypted digital transmission of Recordings to End

Users from the Agent Server (or, in the case of so-called “peer-to-peer

Streaming,” from the Approved Electronic Device of an End User in full

compliance with the terms of this Content Integration Agreement) solely through

the Electronic Medium, which digital transmission is, in the case of

Recordings, contemporaneous with the performance of the Recording embodied

therein and which, in all cases, is designed not to be digitally copied,

duplicated or stored in any manner or medium in whole or in part, directly or

indirectly (other than any temporary copies used solely for so-called “caching”

or “buffering”).

 

1.60.       “Stream”,

“Streaming” or “Streamed” (as a verb or gerund) shall mean  the act or process of transmitting Streams

solely through an Approved Streaming Format.

 

1.61.       “Street Date”

shall have the meaning assigned to such term in section 3.03(c)(1) below.

 

14

 

1.62.       “Stock Purchase

Agreement” shall have the meaning assigned to such terms in subparagraph

6.02(b) below.

 

1.62.1.    “Subscription Fees”

shall have the meaning assigned to such term in section 6.03(b)(10) below.

 

1.62.2.    “Syndication Agent”

shall mean any Person who complies with the provisions of paragraph 8.02 below.

 

1.62.3.    “Syndication Agent

Agreement” shall have the meaning assigned to such term in subparagraph

8.02(a) below.

 

1.62.4.    Omitted without

implication.

 

1.62.5.    Omitted without

implication.

 

1.62.6.    “Syndication Agent

Sites” shall mean the Web Sites, based in the United States or Canada, that

are owned and operated solely by the Syndication Agents by which End Users can

access the Service in accordance with the terms of this Content Integration

Agreement.

 

1.63.       “Technical

Specifications” shall mean the technical specifications of the Service

attached hereto as Exhibit A-2.

 

1.64.       “Term” shall

have the meaning assigned to it in paragraph 2.01 below.

 

1.65.       “Territory”

shall have the meaning assigned to it in paragraph 2.02 below.

 

1.66.       “Trademarks”

shall mean trademarks and service marks, trade names, brand names, corporate

names, logos, trade dress, and other words, designations, labels, symbols,

designs, colors, color combinations or product configurations, whether

registered or unregistered.

 

1.66.1.    “Triggering Person”

shall mean [CONFIDENTIAL

PORTION OMITTED AND FILED SEPARATELY WITH THE SEC]*

 

1.66.2.    “United States

Authorized Recordings” shall mean those audio-only, stereo Recordings: (i)

that are embodied on Albums, Singles and EPs released by Sony for distribution

through normal retail channels (as that term is understood in the U.S. Phonograph

Record industry) in United States and are listed in Sony’s then most recent

active United States product catalog (i.e., the 

 

* 

Confidential Portions Omitted.

 

15

 

product catalog currently known

as the “U.S. Pocket Pop Alpha”), as such catalog is updated from time to time

throughout the Term; and (ii) in respect of which the sound recording public

performance and sound recording reproduction rights have been obtained under

the copyright laws of United States and Sony’s recording and other applicable

rights acquisition agreement(s), as applicable; and (iii) which are not

otherwise excluded under paragraph 3.03 or section 4.03(e)(2) below.

 

1.66.3.    “United States

Cleared Recordings” shall mean those audio-only, stereo Recordings: (i)

that are United States Authorized Recordings; and (ii) in respect of all

Publishing Rights have been obtained. 

For the avoidance of doubt, United States Cleared Recordings shall only

be accessible by United States End Users.

 

1.66.4.    “United States End

User” shall mean, at any particular time, any Person who (i) has registered

with Subscription Service Agent a valid billing address that is in the United

States, (ii) either (A) subscribes to the Service either through the

Subscription Service Agent or a Syndication Agent and uses the Service solely

for personal, non-commercial use or (B) is otherwise eligible to subscribe to

the Service but is given access to the Service either through Subscription

Service Agent or a Syndication Agent for a limited, free-trial membership,

(iii) has registered for and been assigned by you a User Account, (iv) has been

assigned a unique password by Subscription Service Agent in respect of each

User Account which must be correctly entered prior to the commencement of any

period during which such Person is permitted to access the Service (i.e.,

Persons that do not have such a unique password cannot access the Service) and

(v) remains in good standing pursuant to the Service’s terms of service and

privacy policy.

 

1.66.5.    “United States

Street Date” shall have the meaning assigned to such term in subsection

3.03(c)(1)(i) below.

 

1.67.       “User Account”

shall mean, with respect to each End User, the unique account set up by the

Subscription Service Agent to govern such End User’s access to the Service.

 

1.68.       “Web Page”

shall mean a document that is either (A) written in HTML (i.e., Hypertext

Markup Language), or another industry standard mark-up language, that is made

available for viewing by End Users at a single URL or Domain Name via the World

Wide Web portion of the Internet by server software using HTTP (i.e., Hypertext

Transfer Protocol) to effectuate data transmission (or server software using

any other generally accepted protocols utilized to effectuate data

transmissions via the World Wide Web portion of the Internet); or (B) written

in any computer programming language other than HTML, that is intended to be

accessible, directly or indirectly, simultaneously to End Users via a computer or

any other electronic device on any public data network that uses Transmission

Control Protocol/Internet Protocol (i.e., TCP/IP) or Wireless Application

Protocol (i.e., WAP) to effectuate data transmission (or any other generally

accepted protocols utilized to effectuate data transmissions via public data

networks).

 

16

 

1.69.       “Web Site”

shall mean a collection of Web Pages (or its functional equivalent in non-World

Wide Web based methods of transmitting, receiving and displaying textual and

graphic digital data) with a common theme or subject matter which are: (a)

organized hierarchically, (b) owned, managed and operated by the same Person or

at the direction of such Person, and (c) interconnected via Links.

 

2.      TERM; TERRITORY

 

2.01.       The term of this

Content Integration Agreement (“Term”) will begin as of the Launch Date and

will continue for a period ending on the date that is [CONFIDENTIAL PORTION OMITTED AND

FILED SEPARATELY WITH THE SEC]* after such Launch Date, unless

sooner terminated pursuant to Article 11 below.

 

2.02.       The territory of the

Grant of Rights is the United States (including solely the territories and/or

possessions of Puerto Rico and the U.S. Virgin Islands) and Canada

(“Territory”).  Without limiting the

foregoing, you represent and warrant that: (i) neither you nor any Syndication

Agent, directly or indirectly, will market, promote or advertise the Service in

any manner directed to, or designed to attract, visitors to the Service from

countries outside the Territory; (ii) neither you nor any Syndication Agent

will allow any Person whose billing address is outside of the United States or

Canada to be an End User; (iii) neither you nor any Syndication Agent will

create or facilitate the creation of Links from Web Sites outside the Territory

to the Service Site or to any Syndication Agent Site; (iv) you will require

each End User to represent and warrant to you in a click-through End User

license agreement governing such End User’s use of the Service that such End

User resides in the United States or Canada, as the case may be; (v) United

States End Users shall not have access to Canadian Cleared Recordings, directly

or indirectly, in whole or in part and Canadian End Users shall not have access

to United States Cleared Recordings, directly or indirectly, in whole or in

part; and (vi) you will immediately terminate the subscription of any End User

who violates the terms of his or her End User license agreement.  You shall use your best good faith

reasonable efforts to prevent other Web Sites outside of the Territory from

creating Links from such Web Sites to the Service. Notwithstanding the

preceding three sentences, Sony hereby acknowledges and agrees that: (i) your

rights hereunder include the right to exploit the Sony Materials via the

Internet, which by its nature extends beyond the Territory and (ii) you 

 

* 

Confidential Portions Omitted.

 

17

 

shall use effective,

state-of-the-art technologies that (a) prevent Persons seeking access to the

Service from domains located outside the Territory from accessing the Service

and (b) effectively block out access to the Service based upon billing or

addresses or other Personal Information that would lead a reasonable Person to

believe that such Person is a resident of a territory outside the Territory;

provided that such technologies are available to you on commercially reasonable

terms (for the purpose hereof, “reasonableness” shall be determined by taking

into account the cost of implementing the technologies as compared to the

general operating costs of CenterSpan in general).

 

3.      GRANT OF RIGHTS

 

3.01.  (a)     Sony

hereby appoints you to act as its non-exclusive agent to solely perform the

functions expressly authorized by Sony pursuant to subparagraph 3.01(b) below

in connection with the Sony Materials, as integrated by you into the

Service.  For the avoidance of doubt,

this Content Integration Agreement may not be terminated during the Term except

as otherwise specifically provided herein. 

Your right to integrate the Sony Materials into the Service and to

distribute those Sony Materials in accordance with the terms of this Content

Integration Agreement is sometimes referred to herein as the “Grant of

Rights”.  Your rights to use the Sony

Materials shall be subject to all of the terms and conditions of this Content

Integration Agreement, and your right to use such Sony Materials shall not

constitute a transfer of rights to you in or to the Sony Materials or any other

intellectual property associated therewith, except to the extent expressly

authorized herein. For the avoidance of doubt, nothing contained in this

Content Integration Agreement shall be construed as giving you or any

Syndication Agent the right to sell, resell or otherwise conduct or authorize

the transmission of Sony Materials, either in whole or in part, as a dealer,

retailer, distributor, subdistributor, merchant or otherwise, except to the

extent expressly authorized herein. 

Sony hereby acknowledges that you are a distributor of Records.  Notwithstanding the foregoing or anything

elsewhere herein, neither you nor any Person deriving rights from you shall

enable or facilitate access, directly or indirectly, in whole or in part, to Records,

Recordings, or other materials, owned or controlled by Sony or any of its

Licensees via the Service or otherwise that do not constitute Sony Cleared

Recordings hereunder in the Territory or elsewhere.

 

(b)           Solely in order to

effectuate the Grant of Rights, Sony hereby authorizes you and grants to you

the non-exclusive power and authority to do only the following with respect to

your use of the Sony Materials:

 

(1)         Transfer a reasonable, limited number

of copies (each an “Ephemeral Copy”) of each of the Sony Cleared Recordings in

their entirety and corresponding Sony Authorized Artwork onto the Agent

Servers, provided that: (A) the total number of such Ephemeral Copies is

limited to the number reasonably necessary to efficiently digitally transmit the

Sony Materials

 

18

 

in accordance with the terms

and conditions of this Content Integration Agreement; (B) all such Ephemeral

Copies shall be destroyed and/or erased, as Sony shall direct, upon the termination

or expiration of the Term; (C) the Agent Servers to the extent they contain any

Sony Materials (but, for the avoidance of doubt, not the hard drives of

Approved Electronic Devices of End Users accessing the Service via “peer to

peer file sharing”) are not either directly or indirectly part of a network of

computer servers or computers except to the extent, if at all, described in the

Technical Specifications attached hereto; and (D) neither Subscription Service

Agent nor any Person deriving rights from Subscription Service Agent shall have

any right to use or otherwise exploit Ephemeral Copies, either in whole or in

part, directly or indirectly, except as expressly provided in this Content

Integration Agreement;

 

(2)        To maintain the Sony Cleared Recordings

and related Sony Authorized Artwork on the Agent Servers only until the

expiration of the Term (solely to the extent necessary to enable Streams and

Conditional Downloads of the Sony Cleared Recordings and the display of Sony

Authorized Artwork via the Service in accordance with the terms herein);

 

(3)        To integrate the Sony Materials into the

Service for transmission to End Users (including, for the avoidance of doubt,

via so-called “peer to peer file sharing” as and to the extent expressly

permitted herein) in accordance with the following provisions as well as in

accordance with the other terms set forth elsewhere herein: (i) except to the

extent your right to transmit the Sony Materials has been restricted by the

provisions hereunder, the Sony Materials must at all times during the Term be

accessible by End Users from the Agent Servers via the Service Site or via a

Syndication Agent Site in accordance with the terms set forth herein; (ii)

except to the extent your right to transmit the Sony Materials have been

restricted by the provisions hereunder, the Sony Cleared Recordings may, at any

time during the Term, be accessible by End Users from  other End Users through so-called “peer to peer” file sharing;

(iii) in all cases, the Sony Materials shall only be accessible by End Users

via the Electronic Medium during the Term; (iv) United States End Users shall

not have access to Canadian Cleared Recordings, directly or indirectly, in

whole or in part; and (v) Canadian End Users shall not have access to United

States Cleared Recordings, directly or indirectly, in whole or in part; and

 

(4)        To permit End Users to Stream Sony

Cleared Recordings and Playback Conditional Downloads of the Sony Cleared

Recordings and to display (or refrain from displaying, as Subscription Service

Agent may determine in its reasonable discretion) Sony Authorized Artwork via

the Service in accordance with the terms herein, including, but not limited to

the following requirement:  to the extent

Subscription Service Agent displays Sony Authorized Artwork, each Stream and

Playback of a Sony Cleared Recording must be accompanied by an image (75 pixels

by 75 pixels in size) of the Sony Authorized Artwork corresponding to the Sony

Cleared Recording in question.

 

19

 

For the avoidance of doubt, you

shall not be required to display Sony Authorized Artwork via the Service.

 

(c)     (1)        Your rights hereunder are non-transferable, non-sublicensable

and non-delegable and you acknowledge that: (i) all of the rights granted

herein are granted on a non-exclusive basis; and (ii) Sony reserves all rights

to use, and authorize third parties to use, the Sony Materials.

 

(2)        You may only transmit or allow

authorized Syndication Agents to transmit the Sony Materials to End Users as

part of the Service in the Territory, subject to the next sentence.  Notwithstanding the foregoing or anything

elsewhere herein, Syndication Agent may allow Persons other than End Users to access

the Service to the extent permitted under section 4.06(a)(2); provided,

however, that such Persons shall not be entitled to Stream or Playback any Sony

Cleared Recordings unless and until such Persons qualify as End Users

hereunder.

 

(3)        Except as expressly permitted herein

with respect to Conditional Downloads, Subscription Service Agent shall not,

and shall not authorize any Person to, whether through acts or omissions,

either directly or indirectly, in whole or in part, to make any Downloads, or

to create or facilitate the creation of Downloadable copies, of any Sony

Materials.

 

(4)        All rights not expressly granted to

Subscription Service Agent hereunder are reserved by Sony.

 

(5)        As between Sony and Subscription Service

Agent, the Sony Materials, all performances embodied therein, and all

copyrights, and Trademarks and other rights in and to the Sony Materials of any

kind are, and shall remain, the sole and exclusive property of Sony.  Subscription Service Agent warrants,

represents and agrees that it will not through its acts or omissions, directly

or indirectly, sell or otherwise dispose of, pledge, mortgage or in any way

encumber the Sony Materials, in whole or in part, directly or indirectly, or,

attempt to pledge, mortgage or otherwise encumber Subscription Service Agent’s

rights under this Content Integration Agreement for the benefit of or on behalf

of a Triggering Person.

 

(d)     In all cases, the Sony

Materials included on the Service shall be derived from encoded digital files

or other materials or formats (which shall contain the Album title as well as

the corresponding featured artist name, track title, ISRC number (where

available) and UPC number (where available)) provided to you by Sony or such

other Person(s) as Sony designates in its sole, unrestricted, discretion;

provided, however, that neither End Users nor any other Persons shall have

access to any ISRC numbers or UPC numbers. 

For the avoidance of doubt, Sony’s delivery to you of any Phonograph

Record or encoded digital files or other 

 

20

 

materials or formats under this

subparagraph 3.01(d) shall not be deemed to constitute “clearance” for use in

connection with the Service in any manner, nor shall is be deemed to constitute

a waiver of any of the restrictions and/or limitations on your use of any

Recordings embodied thereon set forth in this Content Integration Agreement.

 

(e)      You warrant and represent

that you shall not directly or indirectly allow any of the Sony Materials to be

edited, altered or otherwise modified.

 

3.02.      You hereby represent, warrant and covenant

that: (i) you have not and shall not grant any third party rights to use any

Sony Materials (a “Third Party Use”) not granted to you in this Content

Integration Agreement; and (ii) you have exercised and will continue to

exercise commercially reasonable efforts to monitor all Third Party Uses to

ensure that they abide by the terms of the preceding clause (i).  If you become aware of any unauthorized

manufacture, advertising, distribution, lease or sale by any third party of the

Sony Materials, or any other Recordings (or related Sony Authorized Artwork)

the copyrights to which are owned or controlled by Sony or its Licensees, you

shall immediately advise Sony in writing thereof and shall cooperate with Sony (at

Sony’s reasonable expense, provided that such unauthorized use(s) is not due,

in whole or in part, to Subscription Service Agent’s (or any Person deriving

rights from Subscription Service Agent) acts or omissions) in the event that

Sony commences any action or proceeding against such third party.  In the event that any Third Party Use

violates the terms of this Content Integration Agreement, you agree to assign

to Sony any rights, now or hereafter in existence, which you may have to sue or

otherwise bring an action in law or in equity against such third party

infringer for violating the terms of this Content Integration Agreement or

otherwise violating Sony’s rights in and to the Sony Materials.

 

3.03.     (a)     At

all times during the Term, Sony shall have the right at its sole discretion,

effective immediately upon notice to you (which notice may, notwithstanding

anything to the contrary herein, be via facsimile, electronic mail or any other

effective method of communication), to exclude any Sony Materials from the

scope of the Grant of Rights for any of the following reasons:

 

(1)     Any so-called “artist

relations” and/or “marketing” reasons;

 

(2)     Any

contractual restriction or other limitation on Sony’s right to exploit the Sony

Material concerned as contemplated herein in all or part of the Territory; or

 

(3)     Any

other legal reasons which, in the reasonable judgment of Sony’s attorneys,

might subject you, the Syndication Agents or any Sony Party or other Person to

unfavorable regulatory action or which might violate any law, 

 

21

 

violate the rights of any Person, or subject you, the Syndication

Agents or any Sony Party or other Person to liability for any reason (or if

Sony believes, in its sole reasonable judgment, that (i) Sony lacks the right

to authorize you to use the Sony Material concerned as contemplated herein,

(ii) the Sony Material concerned might infringe upon the rights of any Person,

(iii) any use of the Sony Materials in connection with the Service is patently

offensive or denigrating to Sony, any Sony Artist or any other Person, or (iv)

the use of any Sony Materials in connection with the Service might subject any

Sony Party or any Sony Artist or other Person to unfavorable regulatory action,

might violate any law, might infringe the rights of any Person, or might

subject any Sony Party or any Sony Artist or other Person to liability for any

reason); and/or

 

(4)     The

failure to secure or retain, as the case may be, the necessary Publishing

Rights, as required under section 4.03(e)(2) below, for the Sony Materials

concerned.

 

(b)         (1)      Upon your receipt of Sony’s request to

remove any Sony Materials from the Service, you agree that you shall,

immediately thereafter but in no event later than [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH

THE SEC]* from the date of such demand, remove from the Service

all Sony Materials referenced in Sony’s demand; provided, however, that your

non-habitual, non-repetitive failure to so remove any particular Sony Materials

in any instance(s) shall not constitute a material breach of this Content

Integration Agreement.  At Sony’s

written request, you shall promptly notify Sony in writing of your compliance

with the terms of this subparagraph, which notice shall be accompanied by all

copies of the Sony Materials concerned. 

At Sony’s written request, you shall furnish Sony with an affidavit,

signed by an officer of Subscription Service Agent, in a form satisfactory to

Sony in its reasonable discretion, accurately confirming that you have

destroyed and/or erased all copies of the Sony Materials that are removed from

the Service pursuant to this subparagraph.

 

(2)     [CONFIDENTIAL PORTION OMITTED AND

FILED SEPARATELY WITH THE SEC]*

 

(c)         (1)                 (i)      [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE

SEC]*

 

(ii)     [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE

SEC]*

 

(2)     (i)      Without limiting the generality of the foregoing and

notwithstanding anything to the contrary herein (and in addition to any other

exclusions set forth herein), during each [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE

SEC]* period of the Term Sony may at any time and for any reason

elect to withhold the availability of certain United States Cleared Recordings

via the Service beyond the Street Date as follows: (A) a total of up to [CONFIDENTIAL PORTION OMITTED AND

FILED SEPARATELY WITH THE SEC]* (and all Recordings related

thereto (including

 

* 

Confidential Portions Omitted.

 

22

 

remixes

thereof)) or, at Sony’s option, selected Recordings from up to [CONFIDENTIAL PORTION OMITTED AND

FILED SEPARATELY WITH THE SEC]* for a total of [CONFIDENTIAL PORTION OMITTED AND

FILED SEPARATELY WITH THE SEC]* from the applicable United

States Street Date for the Album concerned, and (B) up to an additional [CONFIDENTIAL PORTION OMITTED AND

FILED SEPARATELY WITH THE SEC]* (and all Recordings related

thereto (including remixes thereof)) or, at Sony’s option, selected Recordings

from up to an additional [CONFIDENTIAL

PORTION OMITTED AND FILED SEPARATELY WITH THE SEC]* for up to [CONFIDENTIAL PORTION OMITTED AND

FILED SEPARATELY WITH THE SEC]* from the applicable United

States Street Date for the Album concerned.

 

(ii)     Without limiting the generality of the

foregoing and notwithstanding anything to the contrary herein (and in addition

to any other exclusions set forth herein), during each [CONFIDENTIAL PORTION OMITTED AND

FILED SEPARATELY WITH THE SEC]* of the Term Sony may at any time

and for any reason elect to withhold the availability of certain Canadian

Cleared Recordings via the Service beyond the Street Date as follows: (A) a

total of up to [CONFIDENTIAL

PORTION OMITTED AND FILED SEPARATELY WITH THE SEC]* (and all

Recordings related thereto (including remixes thereof)) or, at Sony’s option,

selected Recordings from up to [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC]*  for a total of [CONFIDENTIAL PORTION OMITTED AND

FILED SEPARATELY WITH THE SEC]* from the applicable Canadian Street

Date for the Album concerned, and (B) up to an additional [CONFIDENTIAL PORTION OMITTED AND

FILED SEPARATELY WITH THE SEC]* (and all Recordings related

thereto (including remixes thereof)) or, at Sony’s option, selected Recordings

from up to an additional [CONFIDENTIAL

PORTION OMITTED AND FILED SEPARATELY WITH THE SEC]* for up to [CONFIDENTIAL PORTION OMITTED AND

FILED SEPARATELY WITH THE SEC]* from the applicable Canadian

Street Date for the Album concerned.

 

(d)         (1)      (i)      Without

limiting the generality of the foregoing or anything elsewhere herein, Sony

shall advise you of the Album titles listed in Sony’s then most recent active

United States product catalog (i.e. the product catalog currently known as the

“U.S. Pocket Pop Alpha”) that constitute United States Cleared Recordings as of

such date (such list is sometimes referred to herein as the “U.S. Initial

Clearance List”), it being understood and agreed that notwithstanding anything

elsewhere in this Content Integration Agreement: (i) no such Recordings shall

be deemed to constitute United States Cleared

 

* 

Confidential Portions Omitted.

 

 

* 

Confidential Portions Omitted.

 

23

 

Recordings hereunder until you have been so advised of the U.S. Initial

Clearance List, and (ii) all Recordings listed in the Initial Clearance List

shall be deemed to be United States Cleared Recordings unless and until Sony

notifies you otherwise in writing.  Sony

shall use reasonable efforts to provide you with the U.S. Initial Clearance

List, identified as the list of United States Sony Cleared Recordings, in an

electronic format reasonably available to Sony containing the Album title as

well as the corresponding featured artist name, track title, ISRC number (where

available) and UPC number (where available), provided that Sony shall not be

required to incur any non-de-minimus incremental costs to create or deliver to

you the U.S. Initial Clearance List in an electronic format.

 

(ii)     Without limiting the generality of the foregoing

or anything elsewhere herein, Sony shall advise you of the Album titles listed

in Sony’s principal Canadian Licensee’s then most recent active Canadian

product catalog (i.e. the product catalog currently known as the “Sony Music

Canada Catalogue”) that constitute Canadian Cleared Recordings as of such date

(such list is sometimes referred to herein as the “Canadian Initial Clearance

List”), it being understood and agreed that notwithstanding anything elsewhere

in this Content Integration Agreement: (i) no such Recordings shall be deemed

to constitute Canadian Cleared Recordings hereunder until you have been so

advised of the Canadian Initial Clearance List, and (ii) all Recordings listed

in the Canadian Initial Clearance List shall be deemed to be Canadian Cleared

Recordings unless and until Sony notifies you otherwise in writing.

 

(2)     Without limiting the

generality of the foregoing or anything elsewhere herein, at reasonable

periodic intervals during the Term (which periodic intervals shall be no less

frequently than once per month), Sony shall endeavor to advise you of New

Recordings hereunder, it being understood and agreed that, notwithstanding

anything elsewhere in this Content Integration Agreement, any Recordings

released (or re-released, as the case may be) by Sony on Phonograph Records for

sale through normal retail channels in the United States or Canada, as the case

may be, after the Effective Date shall not be deemed to constitute New

Recordings that are Sony Cleared Recordings hereunder unless and until

confirmed as such by Sony in writing in each instance.  Sony’s failure to so advise or so confirm

any particular titles in any instance(s) shall not constitute a breach of this

Content Integration Agreement.

 

4.             OPERATION

OF THE SERVICE; RESTRICTIONS

 

4.01.    Omitted without

implication.

 

4.02.        (a)     All rights in any Sony Materials furnished

by Sony or used by Subscription Service Agent at Sony’s request in connection

with the Subscription Service, including the copyright and the right to secure copyright,

shall, as between you and Sony, be Sony’s property throughout the universe and

in perpetuity.

 

(b)     All matters relating to

the Sony Authorized Trademarks or to notices or disclosures on the Subscription

Service, pursuant to subparagraph 4.05(a) below, deemed advisable by Sony’s

attorneys shall be determined in Sony’s sole discretion.  Sony shall not be deemed unreasonable in

rejecting any requested change to the use of the Sony Authorized Trademarks

with respect to the Subscription Service upon the advice of Sony’s attorneys.

 

24

 

4.03.        (a)     Subscription Service Agent shall be solely

responsible for creating, maintaining and hosting the Service in accordance

with the Technical Specifications and the Functionality Specifications.

 

(b)     Subscription Service Agent

shall, at its sole expense, be solely responsible for conducting all business

activities related to the Service, including, but not limited to the following

activities: (i) setting the price End Users will pay for subscriptions to the

Service sold through the Service Site and delegating to Syndication Agents the

authority to set prices End Users will pay for subscriptions to the Service

sold through Syndication Agent Sites; (ii) processing all subscriptions to the

Service placed by End Users during the Term, (iii) overseeing all activities of

the Syndication Agents in connection with the Service; (iv) subject to

subparagraph 12.01(t) below, providing pricing, billing and financial

clearinghouse services in connection with the Service; (v) handling all

customer service matters related to End Users; and (vi) handling all financial

transactions related to the Service (including, but not limited to, billing End

Users, collecting income from and auditing Syndication Agents, processing all

payments, paying all applicable taxes). 

Except as expressly authorized by Sony in writing in each instance, Sony

shall have no responsibilities or obligations of any nature with respect to any

Syndication Agents or End Users.

 

(c)     Except as expressly set

forth herein (including, without limitation, in paragraph 16.01.1 below), as

between Sony and Subscription Service Agent, Subscription Service Agent hereby

assumes all liability which may arise from products and services, as the case

may be, rendered to End Users and liability for injuries to and by servants,

agents, employees or the general public in connection with operation of the

Service.  Except as expressly set forth

herein, all business risks related to the Service, including but not limited to

the risk of non-payment by End Users and Syndication Agents, shall be borne by

Subscription Service Agent.

 

(d)     All costs and expenses

incurred in insuring against loss, theft or damage of any materials delivered

to Subscription Service Agent by Sony (“Delivery Materials”) shall be borne by

Subscription Service Agent. Upon the loss, theft, damage to or destruction of

any Delivery Materials, Subscription Service Agent shall promptly furnish Sony

with proof thereof by an affidavit executed by a duly authorized officer of the

Subscription Service Agent which accurately confirms, with reasonable

particularity, the loss, theft or damage concerned.  For any Delivery Materials lost, stolen, destroyed or damaged

after delivery to Subscription Service Agent and prior to return to Sony,

Subscription Service Agent shall promptly pay to Sony the reasonable

replacement cost thereof, which payment shall not transfer title thereto to

Subscription Service Agent or any other Person.

 

25

 

(e)     (1) Subscription Service Agent shall be solely responsible for any and

all costs, fees, expenses or other charges in connection with the uses of the

Sony Materials permitted hereunder and the maintenance of the Sony Materials

and computer files embodying Sony Materials. 

For the avoidance of doubt, as between you and Sony, Sony shall be

responsible for making all union payments (if any) and all audio record royalty

payments required to be made by Sony under any agreements to which Sony is a

party to each recording artist, producer, mixer, remixer and other Person that

contributed to the recording of the Sony Cleared Recordings transmitted via the

Service.

 

(2)  (i)      At all times through and including the Publishing Rights Date,

Sony shall have the exclusive right and obligation to attempt to obtain all

necessary Publishing Rights.  After the

Publishing Rights Date, you shall be solely responsible for obtaining all

Publishing Rights to the extent not secured by Sony.  In all cases, notwithstanding anything elsewhere herein, no Sony

Authorized Recordings shall constitute Sony Cleared Recordings hereunder and be

used in connection with the Service until either Sony or you have obtained all

necessary Publishing Rights in connection with such Sony Authorized

Recording.   To the extent you are

responsible for obtaining Publishing Rights with respect to any Sony Authorized

Recording, you shall be solely responsible for obtaining all necessary rights

with respect to (i) the musical compositions and other copyrighted literary,

dramatic and other works, other than the Recording in question, embodied within

such Recording and (ii) publishing rights, consents, licenses and permissions

which are necessary for your uses of the Recording in question in connection

with the Service (e.g., currently effective performance and mechanical

copyright licenses for use of the musical composition in question as well as

literary, dramatic and other works, other than the Recording in question, embodied

in the Sony Authorized Recording in question). 

Whether or not Sony has secured Publishing Rights with respect to any

particular Sony Authorized Recording, you shall be solely responsible for

securing currently effective performance licenses for the use by means of

public and/or private performance of Compositions embodied in all Sony

Authorized Recordings.

 

(ii)     In the event that there

are Excess Publishing Costs (as defined in section 6.03(b)(12)), Sony shall

bear financial responsibility (subject to subsection 4.03(e)(2)(iii) below) for

[CONFIDENTIAL PORTION

OMITTED AND FILED SEPARATELY WITH THE SEC]* of Sony’s Usage

Percentage of Excess Publishing Costs (sometimes referred to as “Sony’s Share

of Excess Publishing Costs”) and Subscription Service Agent shall bear

financial responsibility for all other Excess Publishing Costs (sometimes

referred to as “Subscription Service Agent’s Share of Excess Publishing

Costs”).

 

* 

Confidential Portions Omitted.

 

26

 

(iii) With respect to Publishing Rights obtained by

Sony hereunder in connection with Sony Cleared Recordings, Sony shall perform

the ministerial function of administering such Publishing Rights to the extent

obtained and paying Publishing Costs; provided, however, that you shall pay

(which, for the avoidance of doubt, may be in advance of the time Sony is

required to make such payments to the music publishers and/or copyright

proprietors for the underlying Publishing Rights) Sony for the full amount of

all Publishing Costs paid or incurred by Sony in connection therewith, promptly

following Sony’s written request therefor in each instance, regardless of

whether Advances have theretofore been recouped from Service Fees payable

hereunder, and to the extent that any such Publishing Costs constitute Sony’s

Share of Excess Publishing Costs, the amount of Sony’s Share of Excess

Publishing Costs shall constitute an additional Advance hereunder.  With respect to Publishing Rights obtained

by Subscription Service Agent hereunder, you shall pay to the applicable

holders of Publishing Rights all Publishing Costs (regardless of whether

Advances have theretofore been recouped from Service Fees payable hereunder),

and to the extent that any such Publishing Costs constitute Sony’s Share of

Excess Publishing Costs, the amount of Sony’s Share of Excess Publishing Costs

shall constitute an additional Advance hereunder.

 

(3)       Upon your written

request by notice to Sony (“Publishing Information Request Notice”),

which notice, to be effective, shall be delivered to Sony no earlier than

thirty (30) days prior to the Publishing Rights Date and no later than thirty

(30) days after the Publishing Rights Date, shall use reasonable efforts to

provide you with a list containing any relevant publishing information that

Sony has in its possession as of the Publishing Rights Date regarding Sony

Authorized Recordings that are not Sony Cleared Recordings as of the Publishing

Rights Date within thirty (30) days following the date of Sony’s receipt of the

Publishing Information Request Notice (which shall in no event be deemed

received earlier than the Publishing Rights Date), provided, however, that (A)

Sony shall not be required to incur any non-de-minimus incremental costs to

create or deliver to you such list or information, and (B) Sony’s failure to

provide you with such list or information shall not be deemed a breach of this

Content Integration Agreement, and (C) notwithstanding anything to the contrary

in this Content Integration Agreement, Sony makes no representations or

warranties with respect to such list or information (including, without

limitation, with respect to the accuracy or completeness thereof).

 

4.04.     Subscription Service

Agent shall take such action as may be necessary to avail itself of the “safe

harbor” limited liability provisions of the Digital Millennium Copyright Act of

1998 (as it may be amended from time to time), and shall comply in full with

all of the procedures detailed therein as may be necessary to take advantage of

such provisions.

 

4.05.     (a)      You warrant, represent and agree to comply

with all formalities necessary to ensure the full protection of Sony’s or its

licensors’ copyrights in the Sony Materials and Sony Authorized Trademarks as

Sony may reasonably request.  Your

obligations 

 

27

 

under the

preceding sentence shall include, but not be limited to causing the following

information to be prominently and legibly displayed in human readable form on

the Approved Media Player on which the Sony Cleared Recording concerned is

Streamed or Conditionally Downloaded, provided that with respect to Approved

Electronic Devices that are Permitted Portable Devices only to the extent

technologically feasible using then current state-of-the art means:

 

(1)     the title of the Sony

Cleared Recording concerned;

 

(2)      the

name of the featured musical recording artist(s) are embodied in the Sony

Materials concerned (as Sony shall designate); and

 

(3)      any

other appropriate notices, credits or identifying information specified by Sony

(e.g., the names of producers, featured side artists, authors, publishers,

directors, writers, performers, the name of the applicable Sony label that

markets the Sony Materials concerned, etc.) or any notices required by law.

 

The information set forth above

shall be displayed on the Service in a manner no less prominent in terms of

size, type, appearance and other features as Subscription Service Agent

displays similar information regarding the same category of content (i.e. sound

recordings, artwork, etc.) made available for use on the Service according to

an authorization from a Person other than Sony appearing on or in connection

with the Service.

 

(b)       (1)      Sony hereby grants to you a non-exclusive,

non-transferable right to use Sony Authorized Trademarks for use solely by you

on the Service Site during the Term solely for advertising and purposes of

trade in connection with the Service, without payment of compensation to Sony,

subject to Sony’s prior written consent in each instance regarding all elements

and aspects of your use of the Sony Authorized Trademark concerned in each

instance.  Without limiting the

generality of the foregoing, in each instance (i) you shall not make any

modifications to any Sony Authorized Trademarks (other than formatting the Sony

Authorized Trademark concerned to fit on the applicable Web Page on the Service

Site) in connection with the license granted hereunder without Sony’s prior

written consent, and (ii) you shall place a ® or TM symbol (as appropriate and

as Sony directs you) in juxtaposition with the Sony Authorized Trademarks on

the Service Site.  You acknowledge that

the use of the Sony Authorized Trademarks as contemplated in this subparagraph

4.05(b) will not create in you, nor will you represent that you have, any

right, title or interest in or to any Sony Authorized Trademarks other than the

trademark right granted in the foregoing provisions of this subparagraph

4.05(b).

 

(2)      Without limiting the

foregoing, Subscription Service Agent may not juxtapose any Sony Authorized

Trademark with any other Trademark without Sony’s express, prior written

approval.  Notwithstanding the

foregoing, Subscription Service Agent may juxtapose a Sony Authorized Trademark

with other Trademarks made available for use on the Service according to 

 

28

 

an

authorization from a Person other than Sony whose intellectual property or

other content is made available via the Service; provided that the Sony

Authorized Trademark shall be displayed on the Service in a manner no less

prominent in terms of size, type, appearance and other features as Subscription

Service Agent displays such other Trademarks and all such Trademarks (including

the Sony Authorized Trademark) shall be displayed in alphabetical order.

 

4.06.       (a)       (1)      Subscription

Service Agent shall not, without Sony’s prior written consent in each instance,

which consent Sony may withhold in its unrestricted discretion, make any use

(directly or indirectly) of or authorize any other Persons deriving rights from

Subscription Service Agent to use (directly or indirectly) any Sony Authorized

Trademark or of the names, likenesses or biographical materials of any Sony

Artist and/or any other Persons contributing to the recording or creation of

any Sony Materials (except as explicitly set forth herein), including, for the

avoidance of doubt and without limitation, any producers, mixers and/or

remixers, in advertisements, promotions, press releases or marketing materials

used in connection with the Service or otherwise. In instances where Sony has

granted you consent to use the name or likeness of a particular Sony Artist or

other Person: (i) your right to use the name and likeness of such Person shall be

limited to the extent to which such Person’s name and likeness has been

approved by Sony pursuant to the preceding sentence, and (ii) Sony may, at its

sole election, terminate any rights granted to you in connection with such

Person’s name and/or likeness upon forty-eight (48) hours notice to you (which

notice may, notwithstanding anything to the contrary herein, be via facsimile,

electronic mail or any other effective method of communication).  Upon your receipt of same, you and all

Syndication Agents shall immediately cease to use the name and likeness of such

Person on or in connection with the Service; provided, however, that solely to

the extent that you do not have the right or ability to prevent the further use

or dissemination of the materials or advertisements concerned you may continue

to use the name and likeness of such Person on materials previously

manufactured and advertisements previously placed.   If you or any Syndication Agent do not cease using (directly or

indirectly) any Sony Authorized Trademark or the names, likenesses or

biographical materials of any Sony Artist and/or any other Persons contributing

to the recording or creation of any Sony Materials upon Sony’s request under

section 4.06(a)(i) above, then, upon Sony’s written request and without

limiting any of Sony’s other rights or remedies, you or the Syndication Agent

concerned, as applicable, shall terminate access to the Service (with respect

to Sony Materials only).

 

4.06.       (a)       (2)      Notwithstanding the foregoing but subject

to section 4.06(c)(3) below, Subscription Service Agent shall have the right to

use and to authorize Syndication Agents the right to use the names and

likenesses (solely to the extent such likenesses are contained in corresponding

items of Sony Authorized Artwork and are displayed in a size not to exceed 75

pixels (height) by 

 

29

 

75 pixels

(width)) of the featured Sony Artists on the Service Site and the Syndication

Agent Sites solely on and in connection with the exploitation of Sony Cleared

Recordings hereunder, provided that (A) you comply with subparagraph 4.06(b)

below, (B) that such name and likeness of the featured Sony Artist concerned

shall only be used in a manner that is accurately descriptive and representative

of the artists whose featured Recordings are available via the Service, and

only in a manner that appropriately and proportionately reflects such

availability, such as by listing all such artists (including Sony Artists) in

alphabetical order at all times, or alternatively, by rotating such names and

likenesses in a rotation consisting of no less than an aggregate of twenty-five

(25) names of different artists such that no particular Sony Artist is

disproportionately used or emphasized, (C) such names and such likenesses of

Sony Artists (to the extent such names and such likenesses are displayed in

connection with the Service on the Service Site or the Syndication Agent Site

concerned, as the case may be) shall not be given more or less prominence than

all other artists made available via the Service by position of name, type

size, type style or otherwise, and (D) neither Subscription Service Agent nor

any Syndication Agent shall use any such Sony Artist’s name or likeness in a

manner that can be construed by a reasonable person as an endorsement of a

product or service, including the Service. 

Upon your receipt of Sony’s request to remove any Sony Materials from

the Service, you agree that you shall, immediately thereafter but in no event

later than [CONFIDENTIAL

PORTION OMITTED AND FILED SEPARATELY WITH THE SEC]* from the

date of such demand, remove from the Service all Sony Materials referenced in

Sony’s demand; provided, however, that your non-habitual, non-repetitive

failure to so remove any particular Sony Materials in any instance(s) shall not

constitute a material breach of this Content Integration Agreement.  At Sony’s written request, you shall

promptly advise Sony in writing of your compliance with the terms of this

subparagraph, which notice shall be accompanied by all copies of the Sony

Materials concerned.  At Sony’s written

request, you shall furnish Sony with an affidavit, signed by an officer of

Subscription Service Agent, in a form satisfactory to Sony in its reasonable

discretion, accurately confirming that you have destroyed and/or erased all

copies of the Sony Materials that are removed from the Service pursuant to this

subparagraph.

 

(3)      [CONFIDENTIAL PORTION OMITTED AND

FILED SEPARATELY WITH THE SEC]*

 

(b)       You shall, promptly

following Sony’s request, deliver to Sony sample copies and any other copies

requested by Sony of artwork, packaging, containers, labels, printed programs,

advertising copy and promotional material created in connection with the

Service along with a list of the artists, musical compositions and record

companies whose Recordings are used in connection 

 

* 

Confidential Portions Omitted.

 

30

 

with the

Service.  Without limiting any of Sony’s

rights herein, you warrant, represent and agree that, with respect to any Sony

Artist whose performances are embodied on Sony Cleared Recordings, the credits

for such artist, and the artist credits in any advertising containing the

Service, shall appear (in accordance with subparagraphs 4.05(c) and 4.06(a)

above) in the same size, prominence and type style as the size, prominence, and

type style used in connection with credits and advertising for other artists

whose work is embodied on the Service.

 

4.07.         Subscription Service

Agent shall not, under any circumstance, (i) attempt to pledge, mortgage or

otherwise encumber the (A) Sony Materials, or, attempt to pledge, mortgage or

otherwise encumber Subscription Service Agent’s rights under this Content

Integration Agreement for the benefit of or on behalf of a Triggering Person or

(B) any other tangible or intangible property of Sony provided to Subscription

Service Agent pursuant to this Content Integration Agreement (including,

without limitation, End User Information) or (ii) attack or challenge the

validity of any of Sony’s or its Affiliate’s copyrights, trademarks or other

intellectual property rights or licenses.

 

5.          SECURITY

 

5.01       (a)    All Sony Materials transmitted pursuant to

the Service shall be transmitted solely in either:

 

                           (i)        (This

paragraph 5.01(a)(i) only applies to Streams of Sony Cleared Recordings that

are digitally transmitted directly from Agent Servers to End Users (or, in the

case of so-called “peer-to-peer Streaming”, Streams of Sony Cleared Recordings

from an Approved Electronic Device of another End User).)  A Streaming and Partial Data Cache format

that:  (i) utilizes an encryption

mechanism (utilizing security features which Sony has previously approved in

writing) which is designed to prevent the creation or facilitation of an

Electronic Digital Copy from Streams or Partial Data Caches (or any combination

thereof) of Sony Cleared Recordings Streamed as part of the Service hereunder,

and (ii) has, in each instance, been approved by Sony in writing in advance (each,

an “Approved Streaming Format”). 

Without limiting the generality of the preceding sentence, the following

Streaming formats are hereby deemed Approved Streaming Formats as of the date

hereof: Windows Media Audio, Real G2 with Surestream, Real G2 and RealAudio 3.0

only to the extent that such formats comply with and conform to the security

specifications attached hereto as Exhibit A-2. 

In the event that a technology becomes generally available which is

designed to prevent the creation or facilitation of an Electronic Digital Copy

from Streams by means of computer software programs currently known as

so-called “rippers” (e.g. the software program known as “Streambox”, or

computer software programs with similar functionality, now known or later

developed), then you shall promptly thereafter utilize such technology in

connection with all Streams of Sony Cleared Recordings hereunder.  [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE

SEC]*

 

31

 

(ii)       (This

paragraph only applies to Playbacks of Conditional Downloads of Sony Cleared

Recordings, whether or not derived from Partial Data Caches, either in whole or

in part, that are digitally transmitted directly from Agent Servers or from the

Approved Electronic Device of one (1) End User to another End User (i.e.,

so-called “peer to peer file sharing”)). 

A Playback format that:  (i)

utilizes an encryption mechanism (utilizing security features which Sony has

previously approved in writing) which is designed to prevent the creation or

facilitation of an Electronic Digital Copy from Conditional Downloads and/or

Partial Data Caches transmitted as part of the Service hereunder, (ii) in the

case of digital transmissions of Sony Cleared Recordings from the Approved

Electronic Device of one (1) End User to another End User (i.e., so-called

“peer to peer file sharing”), such transmissions do not cause any material

degradation in audio quality or data loss of any kind as a result of serial

copying, in whole or in part, directly or indirectly, (iii) utilizes effective

technological means designed to prevent Persons from editing, changing or

removing (except as provided in this clause (ii)) any part of the Sony

Materials contained therein or from making a copy (including an Electronic

Digital Copy) thereof, or from moving or transferring such file to an

Electronic Device that is not an Approved Electronic Device, and (iv) has, in

each instance, been approved by Sony in writing in advance (each, an “Approved

Playback Format”).  Without limiting

the generality of the preceding sentence, the following Playback format is

hereby deemed an Approved Playback Format as of the date hereof: Windows Media

Audio only to the extent that such format complies with and conforms to the

security specifications attached hereto as Exhibit A-2.  In the event that a technology becomes

generally available which is designed to prevent the creation or facilitation

of an Electronic Digital Copy from Conditional Downloads by means of computer

software programs currently known as so-called “sound card rippers” (e.g. the

software program known as “Total Recorder”, or computer software programs with

similar functionality, now known or later developed), then you shall promptly

thereafter utilize such technology in connection with all Conditional Downloads

and Partial Data Caches of Sony Cleared Recordings hereunder.  [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE

SEC]*

 

 

* 

Confidential Portions Omitted.

 

32

 

(b)      (1)       The security features, specifications and

formats referred to in subparagraph 5.01(a) above and subparagraph 5.01(c)

below, including the Approval Streaming Format and the Approved Playback

Format, together with the features, specifications and attributes described in

paragraphs 1.05, 1.13, 1.26, 1.29, 1.42, 5.02, 5.02.1 and 5.06 herein,

respectively, and the Technical Specifications and the Functionality

Specifications attached hereto, respectively, are sometimes individually and

collectively referred to herein as “Approved Security Features”.  Without limiting the generality of this

Article 5, the Approved Security Features utilized by Subscription Service

Agent shall at all times be of the highest technical standards, which are

widely considered the so-called “state-of-the-art” in the United States

electronic commerce industry, including an encryption methodology which is

effectively designed to prevent any Person receiving a Stream or a Playback of

Sony Materials via the Service from creating an Electronic Digital Copy of Sony

Cleared Recordings

 

(2)                 [CONFIDENTIAL PORTION OMITTED AND

FILED SEPARATELY WITH THE SEC]*

 

(c)     (i)      Within [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH

THE SEC]* of the establishment of industry standards under the

Secure Digital Music Initiative (SDMI) or any other similar standardized

digital copy protection scheme for audio recordings (an “SDMI Standard”) and

provided that (i) the SDMI Standard is incorporated into formats that are

available to CenterSpan on reasonable (for the purpose hereof, “reasonableness”

shall be determined by taking into account the cost of implementing the SDMI

Standard as compared to the general operating costs of CenterSpan in general)

non-discriminatory terms (i.e., implementation will not impose a

disproportionately greater financial or technical burden on CenterSpan than are

imposed on similarly-situated competitors of CenterSpan) and (ii) if the SDMI

Standard is or is likely to become a generally-accepted standard in the U.S.

phonorecord and United States consumer electronics industries, respectively,

then CenterSpan agrees to: (x) only transmit Sony Materials in a Streaming

format that complies fully with such standards and (y) license any proprietary

technology duly adopted by the SDMI Plenary Body and/or the SDMI Foundation or

any similar body or institute (to the extent such technology is available)

including, without limitation, any watermarks. 

Unless and until such time as there shall have been established an SDMI

Standard, you shall only transmit Sony Materials Streamed via the Service in an

Approved Streaming Format or, in the case of Conditional Downloads, you shall

only transmit Sony Materials in an Approved Playback Format that complies fully

with the Streaming Security Functional Requirements attached hereto as Exhibit

B, as same may be modified by the SDMI Foundation or any similar body or

institute from time to time.

 

(ii)         If CenterSpan is

unwilling or unable to: (x) transmit Sony Materials in a Streaming format that

complies fully with an SDMI Standard or (y) license any proprietary technology

duly adopted by the SDMI Plenary Body and/or the SDMI Foundation or 

 

* 

Confidential Portions Omitted.

 

33

 

any similar body or institute

(to the extent such technology is available) including, without limitation, any

watermarks, as and when required under section 5.03(c)(i) above (taking into

account clause (i) of section 5.03(c)(i) above), then CenterSpan shall have the

option, exercisable by notice to Sony, to suspend the Term (such notice is

sometimes referred to herein as the “SDMI Suspension Notice”) until the date on

which you comply with the requirements set forth in section 5.03(c)(i) above

(the period commencing on the date of your SDMI Suspension Notice and ending on

the date on which you comply with the requirements set forth in section

5.03(c)(i)  above is sometimes referred

to herein as the “SDMI Suspension Period”). 

In the event you suspend the Term pursuant to the previous sentence, the

running of the Term as well as any of Sony’s obligations hereunder for the

duration of any such suspension, shall be so suspended for a period equal to

the SDMI Suspension Period (i.e., the Term shall be extended); provided,

however, that in no event shall the running of the Term be suspended for a

period in excess of [CONFIDENTIAL

PORTION OMITTED AND FILED SEPARATELY WITH THE SEC]*.  No such suspension shall relieve you of your

obligations under this Content Integration Agreement.  For the avoidance of doubt, during the SDMI Suspension Period,

you shall disable or remove from the Service all Sony Materials, all Sony

Authorized Trademarks and all Links to Web Sites owned or controlled by

Sony.  In the event that you do not

comply with the requirements set forth in section 5.03(c)(i) above within [CONFIDENTIAL PORTION OMITTED AND

FILED SEPARATELY WITH THE SEC]* in section 5.03(c)(i) above

then, without limiting any of Sony’s rights or remedies hereunder or otherwise,

Sony shall have the option, exercisable by notice to you and without limiting

any of its rights or remedies, to deem such failure a Default Event.

 

5.02.       In order to ensure

that all Persons other than End Users are prevented from accessing any Sony

Materials contained in the Service, Subscription Service Agent shall cause the

Subscription Service to operate in accordance with each of the following

security features at all times during and after the Term:

 

(a)         The

Service shall utilize systems which contain a mechanism which effectively

prevents: (i) Persons other than End Users from accessing the Service, (ii) an

End User from accessing the Service from more than one Electronic Device

simultaneously and (iii) an End User from accessing the Service from an Electronic

Device that is not a Permitted Electronic Device.

 

(b)         The

Service shall utilize systems which contain a mechanism which is designed to

prevent a Person other than the End User for whom any particular User Account

is established from accessing any Web Page pertaining to such User Account.

 

(c)         The

Service shall utilize systems which contain a mechanism which effectively

prevents the sharing of passwords and simultaneous access by more than one

Person to any one (1) User Account.

 

* 

Confidential Portions Omitted.

 

34

 

(d)         The

Service shall utilize systems which contain a mechanism which effectively

prevents the creation of Downloads or Electronic Digital Copies of Sony Cleared

Recordings Streamed hereunder, including, without limitation, by means of

computer software programs currently known as so-called “stream rippers” (e.g.

the software program known as “Streambox”, or computer software programs with

similar functionality, now known or later developed).

 

(e)         The

Service shall utilize systems which contain a mechanism which effectively

prevents the creation of Downloads or Electronic Digital Copies of Sony Cleared

Recordings Playedback hereunder.

 

(f)          The

Service shall ensure that Persons shall not be able to access Conditional

Downloads after such Persons are no longer End Users in good standing or are

otherwise no longer eligible to receive and/or retain the Conditional Download

concerned for any other reason.

 

5.02.1.     At all times during

the Term you shall ensure that all Sony Cleared Recordings used in connection

with Service shall at all times: (i) originate from files on the Agent Servers

and (ii) be available to End Users directly from the Service Site or from the

Service Site indirectly via a Syndication Agent Site (in accordance with the

terms and conditions of this Content Integration Agreement).  For the avoidance of doubt, in the case of

so-called “peer to peer file sharing”, Sony Cleared Recordings may originate

from files on the hard drive of an Approved Electronic Device of an End User in

compliance with the terms hereof.

 

5.06.        (a)       At all times during the Term, you shall

actively monitor compliance by each Person accessing Sony Materials via the

Service or otherwise of the Approved Security Features.  In the event that you become aware that any

Approved Security Features are reasonably capable of circumvention by any

Person, you shall immediately inform Sony thereof.  Upon being so informed by you, or alternatively, upon Sony’s

informing you that any Approved Security Features are reasonably capable of

circumvention by any Person (the capability of such circumvention is sometimes

referred to herein as a “Security Flaw”), you and Sony shall immediately

discuss an appropriate course of action, taking into account, at a minimum, the

severity of the Security Flaw, the scope of any commercial impact upon Sony

resulting from the exploitation of the Security Flaw, the likelihood of

repeated circumvention, the risk to any intellectual property rights of Sony

and its Licensees, and the cost to CenterSpan of addressing the Security

Flaw.  CenterSpan shall (i) implement

any reasonable resolution proposed by Sony after such discussions within the

shortest possible time period that is commercially practicable (in no event

shall this period last more than [CONFIDENTIAL PORTION 

 

35

 

OMITTED AND FILED

SEPARATELY WITH THE SEC]* from the date of

discovery of the Security Flaw concerned); and (ii) give Sony, within [CONFIDENTIAL PORTION OMITTED AND

FILED SEPARATELY WITH THE SEC]* of the date of discovery of the

Security Flaw concerned, such assurances and furnish to Sony such plans as are

reasonably satisfactory to Sony detailing, with reasonable particularity, the

steps that have been taken and the steps that you propose to take in connection

with clause (i) of this sentence. 

Nothing in this paragraph 5.03 shall be deemed to limit any of Sony’s

rights or remedies hereunder or otherwise, including, for the avoidance of doubt,

Sony’s right to recover damages (whether or not you have complied or attempted

to comply with the provisions of this paragraph), and the provisions of

paragraph 16.01 shall, for the avoidance of doubt, require you to indemnify

Sony for all damages arising from all Security Flaws in accordance with the

provisions thereof (whether or not you have complied or attempted to comply

with the provisions of this paragraph).

 

(b)      In

the event that any Security Flaw is not cured by you as and when required under

subparagraph 5.03(a) above, or alternatively, if you fail to implement any

resolution proposed by Sony on the basis that you dispute whether the breach of

the Security Flaw concerned is material or damaging to Sony or its Licensees or

Affiliates for any reason or on the basis that the resolution proposed by Sony

is “reasonable” in light of the criteria specified in the second sentence of

subparagraph 5.03(a) or otherwise, then, without limiting any of Sony’s rights

or remedies hereunder or otherwise (the parties hereby acknowledge that, after

taking into account such criteria, termination of the Service, to the extent

Sony Materials are utilized in connection therein, termination of the Term and

the triggering of an “Event of Default” hereunder might be “reasonable”;

provided, however that Sony shall not have the right to terminate the Term and

trigger an “Event of Default” hereunder unless [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH

THE SEC]* Sony has first sent a Suspension Notice (as defined below)

in respect of such Security Flaw), Sony shall have the option, exercisable by

notice to you (which notice, notwithstanding anything to the contrary herein,

may be via facsimile, electronic mail or any other effective method of

communication), to suspend the Grant of Rights (such notice is sometimes

referred to herein as the “Suspension Notice”) until such time as: (x)

you have taken all steps necessary to eliminate the Security Flaw concerned;

(y) you have given Sony such assurances and have furnished to Sony such plans

as are reasonably satisfactory to Sony detailing, with reasonable

particularity, the measures that have been taken and the steps that you propose

to take pursuant to clause (x) of this sentence; and (z) Sony has sent you a

notice (the “Suspension Reversal Notice”) confirming that each of the

requirements set forth in clauses (x) and (y) have been satisfied (the period

commencing on the date of Sony’s Suspension Notice and ending on the date of a

Suspension Reversal Notice is sometimes referred to herein as the “Suspension

 

* 

Confidential Portions Omitted.

 

36

 

Period”).  In the event Sony suspends the Grant of

Rights pursuant to the previous sentence, the running of the Term as well as any

of Sony’s obligations hereunder for the duration of any such suspension, shall

be so suspended for a period equal to the Suspension Period (i.e., the Term

shall be extended); provided, however, that in no event shall the running of

the Term be suspended for a period in excess of thirty (30) days.  For the avoidance of doubt, during the

Suspension Period, you shall disable or remove from the Service all Sony

Materials, all Sony Authorized Trademarks and all Links to Web Sites owned or

controlled by Sony.  In the event that

any Security Flaw in respect of which Sony has sent Subscription Service Agent

a Suspension Notice hereunder is not cured by Subscription Service Agent as

required hereunder within ninety (90) days (or, if the Security Flaw is solely

directly attributable to a failure of Microsoft’s digital rights management

technology or other Microsoft software, as described in greater particularity

in the Technical Specifications attached hereto (excluding any reason directly

attributable to the acts or omissions of CenterSpan, directly or indirectly, in

whole or in part), one hundred twenty (120) days) of the date of the Suspension

Notice concerned then, without limiting any of Sony’s rights or remedies

hereunder or otherwise, Sony shall have the option, exercisable by notice to

Subscription Service Agent, to deem such failure a Default Event.

 

(c)        Without limiting the

generality of anything elsewhere herein or any of Sony’s rights or remedies,

each of which is hereby expressly reserved, immediately after becoming aware

that any Person has utilized or has exploited any Security Flaw, either

directly or indirectly, or immediately after Sony has advised Subscription

Service Agent that Persons are utilizing or exploiting any Security Flaw,

either directly or indirectly: (i) all such Persons shall no longer be deemed

End Users hereunder, (ii) Subscription Service Agent shall immediately and

unconditionally cancel, or require the applicable Syndication Agent to cancel,

such Person’s User Account; and (iii) Subscription Service Agent shall take all

necessary steps to ensure that such Person can no longer access the Service at

any time thereafter.

 

5.04.      Without limiting the

generality of anything in this Content Integration Agreement, neither

Subscription Service Agent nor any Person deriving rights from Subscription

Service Agent shall, through Subscription Service Agent’s acts or omissions,

either directly or indirectly, in whole or in part, create or facilitate the

creation of Electronic Digital Copies of any Sony Materials except to the

extent expressly permitted herein in connection with the Service.

 

5.05.      Upon reasonable advance

notice and subject to paragraph 14.02, Sony shall have the right, at its own

expense, to conduct technical audits of the Service including, for the

avoidance of doubt and without limitation, all hardware and software components

and systems utilized by Subscription Service Agent in connection with the

Service including server logs, and all documentation setting forth Subscription

Service Agent’s policies and procedures with respect to security features and

formats including but not limited to, the Approved Security Features.  Sony shall use reasonable efforts to conduct

such technical audit in a

 

37

 

non-intrusive manner and shall

have the right the conduct such technical audit only one time per semi-annual

period; provided, however, that in the event Sony has notified you of a

Security Flaw, the foregoing restriction shall not apply and Sony shall be

entitled to conduct a technical audit whether or not a technical audit(s) has

previously been conducted during that semi-annual period.  In addition, as and to the extent that you

have the right to conduct technical audits of Syndication Agents, Sony shall be

allowed to actively participate, through Persons designated by Sony in its sole

discretion, in technical audits of Syndication Agents conducted by you or, if

Sony declines to so participate in the audit concerned, promptly following Sony’s

request therefor, in each instance, Sony shall be furnished with a copy of all

reports, materials and other information received by you in connection with or

arising out of each technical audit of each Syndication Agent conducted by you.  Without limiting the generality of the

foregoing, at all times, you shall use best good faith reasonable efforts to

obtain such technical audit rights from the Syndication Agents.

 

5.06.        (a)       You hereby represent and warrant that at

all times during the Term only Approved Media Players (as defined below) shall

be used by End Users of the Service in connection with the transmission,

performance and/or playback of Recordings during each session in which the End

User concerned has access to reproductions, performances and/or transmissions

of Sony Cleared Recordings made available via the Service, either in whole or

in part, directly or indirectly.

 

(b)      (1)      As used herein, a “Media Player”

shall mean a computer program which is used or useful in the transmission,

performance and/or playback of Recordings so that the digital data that

embodies the audio or audiovisual recording concerned can be perceived by and

communicated to an End User of such computer program when used in conjunction

with the aid of a machine or device. 

For the avoidance of doubt and without limitation, Microsoft’s “Windows

Media Audio Version 7”, WMA8 and RealNetwork’s “RealPlayer 8” are “Media

Players” as of the date hereof.

 

(b)      (1)     Omitted

without implication.

 

(b)      (3)     As

used herein, an  “Approved Media

Player” shall mean [CONFIDENTIAL

PORTION OMITTED AND FILED SEPARATELY WITH THE SEC]*

 

(c)       [CONFIDENTIAL  PORTION OMITTED AND FILED SEPARATELY WITH

THE SEC]*

 

* 

Confidential Portions Omitted.

 

38

 

6.             PAYMENTS AND FEES

 

6.01.       (a)       You shall make the following payments to

Sony, by wire transfer or certified check, in immediately available funds on

the dates specified  in subparagraphs

6.01(b) and (c) below: (i) a non-recoupable, non-returnable payment in the amount

of One Million Dollars ($1,000,000) (the “Service Preparation Fee”) and (ii) a

recoupable Advance in the amount of One Million Dollars ($1,000,000) (the

“Initial Advance”).

 

(b)       The Service Preparation

Fee shall be payable as follows: (i) Five Hundred Thousand Dollars ($500,000)

promptly (but in no event later than five (5) days) following complete

execution of this Content Integration Agreement and (ii) Five Hundred Thousand

Dollars ($500,000) on or before September 1, 2002.

 

(c)       The Initial Advance shall

be payable as follows:

 

(i) Two Hundred and Fifty Thousand Dollars

($250,000) promptly (but in no event later than five (5) days) following the

earlier of: (i) September 1, 2002 and (ii) that date on which you enter into

the first Syndication Agent Agreement hereunder;

 

(ii) Two Hundred and Fifty Thousand Dollars

($250,000) promptly (but in no event later than five (5) days) following the

earlier of: (i) December 1, 2002 and (ii) the date that is three months after

the date on which you enter into the first Syndication Agent Agreement

hereunder;

 

(iii) Two Hundred and Fifty Thousand Dollars

($250,000) promptly (but in no event later than five (5) days) following the

earlier of: (i) March 1, 2003 and (ii) the date that is six months after the

date on which you enter into the first Syndication Agent Agreement hereunder;

 

(iv) Two Hundred and Fifty Thousand Dollars

($250,000) promptly (but in no event later than five (5) days) following the

earlier of: (i) June 1, 2003 and (ii) the date that is nine months after the

date on which you enter into the first Syndication Agent Agreement hereunder.

 

6.02.       (a)        Simultaneous with the complete execution

of this agreement, and in consideration of the mutual covenants contained

herein, you hereby agree to award, transfer and assign to Sony Two Hundred

Eighty Three Thousand Five Hundred Fifty Six (283,556) shares of common stock

of Subscription Service Agent (representing an interest equal to at least three

percent (3%) of the total issued and outstanding capital stock of Subscription

Service Agent) (the “Equity Consideration”).

 

39

 

               (b)        The transfer of the

Equity Consideration shall be pursuant to a common stock acquisition and

investor rights agreement (the “Stock Purchase Agreement”), in form and

substance satisfactory to Sony and entered into by the parties simultaneously

herewith.

 

               (c)        Simultaneous with the

complete execution of this agreement, and in consideration of the mutual

covenants contained herein, you hereby agree to award, transfer and assign to

Sony warrants (“Warrants”) granting Sony the option to acquire an additional

interest in CenterSpan equal to One Hundred Eighty Nine Thousand Thirty Seven

(189,037) shares of common stock of Subscription Service Agent (representing an

interest equal to at least two percent (2%) of the total outstanding capital

stock of CenterSpan) at an exercise price equal to the thirty (30) day trading

day trailing volume weighted average price as of the sate that is thirty (30)

days prior to the date first written above.

 

               (d)        The transfer of the

Warrants shall be pursuant to a Warrant to Purchase Preferred Stock, in form

and substance satisfactory to Sony and entered into by the parties

simultaneously herewith.

 

6.02.1.    (a)        [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC]*

 

               (b)        (1)          [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC]*

 

                           (2)          [CONFIDENTIAL PORTION OMITTED AND

FILED SEPARATELY WITH THE SEC]*

 

               (c)        [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY

WITH THE SEC]*

 

6.02.2.    (a)        [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC]*

 

               (b)       [CONFIDENTIAL PORTION OMITTED AND FILED

SEPARATELY WITH THE SEC]*

 

               (c)       [CONFIDENTIAL PORTION OMITTED AND FILED

SEPARATELY WITH THE SEC]*

 

6.03.       (a)       [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC]*

 

               (b)       [CONFIDENTIAL PORTION OMITTED AND FILED

SEPARATELY WITH THE SEC]*

 

* 

Confidential Portions Omitted.

 

40

 

6.04.     (a)    (i)        CenterSpan

shall compute the Service Fees and any other payments accrued hereunder as of

the end of each calendar quarter-annual period hereunder.  Within thirty (30) days following the end of

each quarter-annual period hereunder, CenterSpan shall send Sony an accounting

statement covering that computation setting forth a description and calculation

of the applicable payments in detail sufficient to support the calculations of

the amounts paid, including the items of information described in section

6.04(a)(ii) below (the “Service Fee Report”), together with any Service Fees

which are due after deducting unrecouped Advances and other sums which are due;

provided, however, that if Sony administers Publishing Rights pursuant to

subsection 4.03(e)(2)(iii), then you shall send Sony the Service Fee Report and

any such Service Fees and other sums which are due thereunder, including any

sums payable pursuant to section 4.03(e)(2)(ii) above, within fifteen (15) days

following the end of each quarter-annual period hereunder (or such shorter

periods as may be reasonably necessary in order for Sony to effectively and

timely administer Publishing Rights obtained by Sony hereunder and pay

Publishing costs in connection therewith (e.g., monthly)).

 

(ii)              Without

limiting the generality of anything in section 6.04(a)(i) above, each such

Service Fee Report shall contain, among other things, a description and

calculation of the applicable payments payable for the period concerned in

detail sufficient to support the calculations of the amounts paid, as well as

such additional information as Sony may require for each Sony Cleared Recording

accessed via the Service, including but not limited to:

 

(A) the number of Streams and the number of

Playbacks of each Sony Cleared Recording accessed during the period in

question, sorted by featured artist name, track title, the ISRC number for the

Recording concerned (or such other alphanumeric identifier as Sony may

designate in advance for the Recording concerned), the name of the Syndication

Agent from whom the End User obtained access to the Stream or Conditional

Download in question, the Subscription Fees applicable to the Stream or

Conditional Download in question, and the allocated unit price per Stream or

Conditional Download in question.

 

(B) the Monthly Playback Number of all other

Recordings accessed in connection with the Service on an aggregate basis;

 

(C) the number of End Users and other

Persons, if any, who accessed Recordings in connection with the

Service; and

 

(D) a statement of Gross Revenue for the

accounting period concerned itemizing, with reasonable particularity, each of

the items set forth in paragraph 6.03.

 

(b)       At

all times during the Term, Subscription Service Agent shall maintain

comprehensive standard management reporting systems capable of tracking all

information which Sony reasonably requests be included in the Service Fee

Reports.

 

(c)        All

payments becoming due to Sony under this Content Integration Agreement will be

made in full by Subscription Service Agent without any offset or deduction;

provided, however, no Service Fees shall be due and payable to Sony until such

time as all Advances theretofore paid have been recouped by or repaid to you.

 

41

 

(d)    Subscription Service Agent shall pay

interest at the rate per month equal to the rate reported by the Wall Street

Journal as the prime rate for major banks plus one percent (1%), or the maximum

rate permitted by law, whichever is less, from the date due, on any required

payment that is not made on or before its due date, without prejudice to any

other rights Sony may have in connection with such delinquency.

 

6.05.     Omitted

without implication.

 

6.06.     Subscription

Service Agent shall cause the independent public accounting firm that audits

Subscription Service Agent’s books and records to prepare in respect of each

fiscal year of Subscription Service Agent during the Term an agreed upon

procedures report (each, a “Procedures Report”) verifying that the financial

and other information contained on the Service Fee Reports correspond directly

to the underlying books and records of Subscription Service Agent, without

adjustment and/or reconciling items. 

Such books and records shall be the basis for Subscription Service

Agent’s own audited financial statements and shall be subject to an adequate

system of internal accounting controls surrounding the assertions of

completeness, accuracy, occurrence proper period and valuation.  Each such Procedures Report shall be

delivered to Sony by no later than forty-five (45) days following the end of

the fiscal year covered by the Procedures Report.

 

6.07.     Subscription

Service Agent shall maintain accurate and complete records and books of account

in accordance with GAAP applied on a consistent basis, which shall include, at

a minimum, all documentation needed by Sony to compute and verify the payments

payable to Sony hereunder, and to verify all of the information required to be

delivered to or otherwise made available to Sony in connection with the

performance of this Content Integration Agreement.  No more than once per year, and only within three and one-half

(3-1/2) years following the termination or expiration of the Term, Sony’s

representatives will have the right to examine those books and records at any

time during Subscription Service Agent’s normal business hours, and to make

copies of them and extract information from them.  Subscription Service Agent will cooperate with Sony’s

representatives to insure their reasonable (as construed broadly in order for

Sony to enforce and protect its interests in connection with this Content

Integration Agreement) access to Subscription Service Agent’s books and records

and will furnish such supplemental information and documents as Sony may

request. If the audit establishes that Subscription Service Agent has

under-accounted and/or underpaid any Service Fees (deficiency) of eleven

percent (11%) or more of the Service Fees reported during the audit period then

the total expenses of such inspection, including fees, shall be borne by

Subscription Service Agent. 

Subscription Service Agent shall promptly pay the amount of such

deficiency, plus interest, as provided herein.

 

42

 

6.08.     Omitted

without implication.

 

6.09.     You

warrant and represent that you will bear and pay any and all taxes, duties and

customs of any kind, however designated, levied or based in any way anywhere in

the Territory upon the performance of your obligations under this Content

Integration Agreement or the sale or resale of any products or services by you,

including, for the avoidance of doubt and without limitation, all sales, use,

excise, purchase, value added or similar taxes (other than income taxes payable

by Sony on monies earned by Sony under this Content Integration

Agreement).  You will execute any

documents Sony may deem necessary or desirable to evidence your liability for

such taxes.  If any claim is made

against Sony for such taxes, you will promptly remit to Sony such sums together

with any penalties and interest assessed.

 

6.10.     For

a period of three and one-half (3-1/2) years following the last day of the

Term, Subscription Service Agent shall retain all transaction data, End User

Information and other data or information reasonably necessary for Sony and

Subscription Service Agent to determine and verify all amounts due or payable

hereunder and for accounting purposes, including, without limitation, each of

the items required in each Service Fee Report.

 

7.            EXTRANET;

END USER INFORMATION

 

7.01.     (a)  Commencing as of the date that is thirty

(30) days from the date hereof, you will make available to Sony for access

twenty-four (24) hours per day, seven (7) days per week, an electronic

mechanism (e.g., a so-called “extranet”) (the “Extranet”) whereby Sony shall

have access to detailed information in respect of the Service, which

information is updated at no less than daily intervals, including, without

limitation, with respect to the following types of information:

(1) a list of all Streams and Conditional

Downloads of Sony Cleared Recordings, organized by artist, title and “label”

(e.g. Epic Records, Columbia Records, 550 Music);

 

(2) Aggregate Information; and

 

(3) a comparison of the number of Streams and

Conditional Downloads (as well as the number of Playbacks thereof) of Sony

Cleared Recordings hereunder with the total number of Streams and Conditional

Downloads (as well as the number of Playbacks thereof) of Recordings made

available on the Service.

 

(b)  Without limiting the

generality of anything in subparagraph 7.01(a) above, the Extranet shall also

contain, at a minimum, the following information regarding each Sony Cleared

Recording Streamed hereunder and each Conditional Download Downloaded

hereunder:

 

43

 

(1) the name(s) of the recording artist(s)

whose featured performances are embodied on the Sony Cleared Recording;

 

(2) title of the Sony Record from which the

Sony Cleared Recording concerned was encoded;

 

(3) the Sony label;

 

(4) the catalog number applicable to the Sony

Record from which the Sony Cleared Recording concerned was encoded;

 

(5) the initial release date that you make

the Sony Cleared Recording concerned available as part of the Service;

 

(6) the ISRC Code (or such other alphanumeric

identifier as Sony may designate in advance for the Recording concerned)

applicable to the Sony Record from which the Sony Cleared Recording concerned

was encoded; and

 

(7) the aggregate number of times such Sony

Cleared Recording was Streamed and Conditionally Downloaded of each Stream and

Conditional Download.

 

(c)  The Extranet shall also contain such

additional information as Sony and Subscription Service Agent may mutually

agree upon from time to time during the Term, and in no event shall the

Extranet contain less information than the information provided to any other

Person owning or controlling rights in or to Recordings made available on the

Service.

 

(d)  Subject to Article 14, at all times, Sony

shall have the unrestricted ability to make copies of any information contained

in the Extranet, including, for the avoidance of doubt and without limitation,

so-called “page views”, in both human readable form (e.g., printed copies) and

machine readable form (e.g., computer files).

 

7.02.        (a)             At all times during the Term, you

shall collect and retain User Information from all End Users.  All such User Information, to the extent it

is Aggregate Information, collected and retained by you shall be jointly and

equally owned by each of you and Sony. 

Each of you and Sony shall at all times during the Term have

unrestricted access to all such Aggregate Information applicable to End

Users.  Without limiting the generality

of this paragraph 7.02, Aggregate Information shall not be sold by Sony to any

third party or used by Sony for purposes other than in connection with Sony’s

own internal analysis or review.

 

44

 

(b)        Each

End User shall, when registering to become a subscriber of the Service on the

Service Site (and specifically excluding those who join the Service via a

Syndication Agent Site), be offered in clear, prominent and unambiguous terms

(which terms shall be subject to Sony’s prior, written consent in each

instance) the option to subscribe to Sony Music’s electronic mailing list (each

End User who has subscribed to Sony Music’s electronic mailing list shall

hereinafter be referred to as a “Sony Subscriber”).  Without limiting the first sentence of this paragraph 7.02, you

shall deliver to Sony in a file format reasonably acceptable to Sony, the name

and electronic mail address of each Sony Subscriber promptly following the date

that the Sony Subscriber concerned has subscribed to Sony Music’s electronic

mailing list.

 

7.03.     Each

of the parties hereby represents and warrants to the other that: (a) all uses

by such party and each Person deriving rights from such party of End User

Information shall at all times comply with such party’s privacy policy in

effect at the time that the End User Information concerned was collected by

such party, and (b) each party’s privacy policy with respect to the collection

and use of User Information shall at all times comply with any and all

applicable laws, and shall at all times otherwise be in accordance with all

generally accepted customs and practices in the electronic commerce industry in

the United States.

 

8.            SYNDICATION

AGENTS

 

8.01.     Subject

in each case to the restrictions herein, you shall be permitted to enter

agreements with Syndication Agents whereby such agents: (i) will facilitate

Sony’s sale of Streams and Conditional Downloads to End Users by providing

access to the Service from Syndication Agent Sites and (ii) will provide access

to the Service from Syndication Agent Sites by creating a Link between such Web

Sites and the Service Site.  Each

Syndication Agent’s ability to access and/or control the Sony Materials shall

be limited solely to the ability of the Syndication Agent to access and retransmit

the Service by Linking its Syndication Agent Site to the Service Site.  Except as set forth herein, no Syndication

Agent shall have the right to: (i) use any Sony Authorized Trademark or any of

the Sony Materials for any purpose whatsoever (including marketing of the

Service or the Syndication Agent Site) without the express written consent of

Sony or (ii) allow any Person other than an End User (or potential End User

pursuant to a limited, free-trial membership) to access the Service.  Notwithstanding the foregoing or anything

elsewhere herein, Syndication Agent may allow Persons other than End Users to

access the Service to the extent permitted under section 4.06(a)(2); provided,

however, that such Persons shall not be entitled to Stream or Playback any Sony

Cleared Recordings unless and until such Persons qualify as End Users 

 

45

 

hereunder.  All aspects of the Service shall, at all

times, remain under the sole control and authority of the Subscription Service

Agent.  Syndication Agents may have the

right, power or authority to “co-brand”, or otherwise market the Service under

any other name, but shall not have the right, power or authority to “private

label” the Service (i.e., brand the Service in a manner that does not

prominently and accurately attribute to Subscription Service Agent’s role in

connection with the Service).  For the

avoidance of doubt, in the event that the Service is presented bearing a

Syndication Agent’s brand, trademark or other identifying information, and also

includes the phrase “Presented by CenterSpan.com” or the phrase “Powered by

C-Star” (or another equivalent phrase accurately denoting some affiliation with

Subscription Service Agent) on each Web Page that forms a part of the Service,

such presentation shall be deemed to be “co-branded” version of the Service and

not a “private label” version of the Service.

 

8.02.     A

Person must satisfy all of the following conditions in order to constitute a

Syndication Agent hereunder:

 

(a)    It

must not be owned or controlled by you, directly or indirectly, and it must

enter into an agreement with the Subscription Service Agent that complies with

the terms of this Content Integration Agreement with respect to the use of the

Sony Materials by Syndication Agents (a “Syndication Agent Agreement”).

 

(b)    It

must only have access to the Service during the Term of this Content

Integration Agreement, and its use of the Sony Materials must comply with the

terms, conditions and limitations set forth in this Content Integration

Agreement.

 

(c)    (i)

(This section 8.02(c)(i) shall only apply in respect of Syndication Agents that

are not Data Network Syndication Agents.) 

It must be based in the United States, its URL must end in “.com”,

“.net”, “.biz”, “.info”, or similar top-level domain name used for general

commercial purposes in the United States or Canada, respectively, it must

neither transmit nor retransmit the Service outside the United States either

directly or indirectly via subdirectory or otherwise (subject to paragraph

2.02), and it must not syndicate, frame or deep link the Service to a server

located outside the United States.

 

(ii) (This section 8.02(c)(ii) shall only

apply in respect of Syndication Agents that are Data Network Syndication

Agents.)  It must neither transmit nor

retransmit the Service outside the United States or Canada, as the case may be,

either directly or indirectly, in whole or in part.

 

 

46

 

(d)    It

must not engage in the endorsement of political positions or political

candidates (excluding endorsements that are solely incidental and not

affiliated with the Syndication Agent concerned, such as by displaying rotating

“run of the site” banner advertisements over which the Syndication Agent has or

had no editorial discretion or endorsement, whether in whole or in part,

directly or indirectly) and it must not engage in the sale of, or advertise,

tobacco, firearms, personal hygiene products, pornography, religious causes or

any other subject matter which Sony deems in its sole, reasonable discretion to

be objectionable or which, in the opinion of Sony’s attorneys could subject

Sony or any other Person to liability.

 

(e)    Neither

it nor any Affiliate or licensee of it may engage in the sale of products

designed to circumvent copy protection mechanisms (e.g., audio and/or video

stream capture software) or any services, Web Sites and/or products (e.g.,

software) that directly or indirectly facilitate the reproduction (or other

use), distribution, display and/or performance of copyrighted, trademarked or

service marked materials or other property or other tangible or intangible

rights of Sony, any Affiliate of Sony or any Sony Artist without the express

authorization of the applicable rightsowners.

 

If at any time during the Term

you become aware that a Syndication Agent ceases to comply with conditions (b)

— (e) above, you agree to notify Sony immediately thereafter and you agree to

block such Syndication Agent’s access to the Sony Materials as soon as

practicable but in no event later than twenty-four (24) hours thereafter,

subject to the remainder of this paragraph 8.02.  If at any time during the Term Sony becomes aware that a

Syndication Agent ceases to comply with condition (d) above, Sony agrees to

notify you (which notice, notwithstanding anything to the contrary herein, may

be via telephone, facsimile, electronic mail or any other effective method of

communication) and you shall notify the Syndication Agent concerned of such

non-compliance and use your best efforts to cause such Syndication Agent to

cure such non-compliance; provided that Sony’s failure to so notify you shall

not be deemed a breach of this Content Integration Agreement.  In the event that the non-compliance concerned

is not cured to Sony’s satisfaction within ten (10) days following Sony’s

notice to you, then you shall immediately and permanently deny such Syndication

Agent access to the Sony Materials and you shall promptly thereafter send Sony

a notice which accurately confirms, with reasonable particularity, such denial.

 

8.03.     (a)    You shall use best efforts to cause each

Syndication Agent to abide by the applicable Syndication Agent Agreement (to

the extent applicable to the Sony Materials) and the terms of this Content

Integration Agreement (to the extent they apply to the Syndication Agent).  If you become aware of any breach or if you

suspect any breach of any of the Syndication Agent Agreements, or if you become

aware or you suspect that any Syndication Agent’s use of the Sony Materials or

the Sony Trademarks violates any terms of this Content Integration Agreement,

you shall immediately notify Sony and the Syndication

 

47

 

Agent thereof, and you agree to use your best efforts to cause such

Syndication Agent to cure such breach. 

In addition, if Sony notifies you of any such breach, or alleged breach,

you shall notify the Syndication Agent concerned of such breach and use your

best efforts to cause such Syndication Agent to cure such breach.  In the event that the material breach

concerned is not cured to Sony’s satisfaction within forty-eight (48) hours

following your or Sony’s notice of breach to the Syndication Agent concerned

(whichever is sooner) (which notice, notwithstanding anything to the contrary

herein, may be via telephone, facsimile, electronic mail or any other effective

method of communication), then you shall so notify Sony and you shall

immediately and permanently deny such Syndication Agent access to the Sony

Materials.  You shall cooperate with

Sony in any action or proceeding Sony commences against any Syndication Agent

whose use of the Sony Materials violates the terms of this Content Integration

Agreement or the Syndication Agent Agreements. 

The Subscription Service Agent assumes full responsibility for each

Syndication Agent’s compliance with the terms of this Content Integration

Agreement.

 

(b)    Subscription

Service Agent covenants, warrants and represents to Sony that: (i) each

Syndication Agent Agreement shall be consistent in all material respects with

the terms and conditions of this Content Integration Agreement; (ii) each

Syndication Agent Agreement shall explicitly afford Sony, as a third party

beneficiary of such agreement, all of the same rights and remedies with respect

to the Syndication Agent’s use of the Sony Materials (including, without

limitation, all rights of review, approval, withdrawal, removal and

termination) as granted to Sony pursuant to this Content Integration Agreement;

and (iii) Sony shall have the right to require Subscription Service Agent to

terminate any Syndication Agent Agreement with respect to the Sony Materials if

Sony determines that said Syndication Agent has committed any act as would

permit Sony to terminate this Content Integration Agreement pursuant to

paragraph 11.01 below.

 

9.           PROMOTIONAL

OPPORTUNITIES

 

9.01.       [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH

THE SEC]*

 

10.         [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC]*

 

10.01.     (a)

[CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH

THE SEC]*

 

*  Confidential Portions Omitted.

* 

Confidential Portions Omitted.

 

48

 

(b)  [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC]*

 

11.

   TERMINATION

 

11.01.   (a)     Immediately following the occurrence of any

Default Event (as defined below), Subscription Service Agent shall be deemed in

material breach and default hereof and Sony, in addition to any other rights

and remedies which Sony has under this Content Integration Agreement or

otherwise, may upon notice to Subscription Service Agent, immediately terminate

this Content Integration Agreement and the Term, and the provisions of

paragraph 11.02  below shall apply.  No exercise of an option under this

paragraph shall limit Sony’s rights to recover damages by reason of

Subscription Service Agent’s default, Sony’s rights to exercise any other

option under this paragraph, or any of Sony’s other rights or remedies.  No exercise of any right or remedy hereunder

shall limit Sony’s right to recover damages by reason of Subscription Service

Agent’s default, Sony’s right to exercise any other right or remedy under this

paragraph 11.01, or any of Sony’s other rights or remedies.

 

(b)    A “Default Event”

shall mean the occurrence of any of the following events listed below:

 

(1)        Subscription

Service Agent’s failure to timely make payments required hereunder or to

execute, deliver and comply with the terms of the Stock Purchase Agreement or

render Service Fee Reports or render any information or documents required to

be furnished or otherwise made available to Sony as and when required

hereunder; provided, however, that, with respect to any such breach other than

a breach under subparagraph 6.01(a) above, Subscription Service Agent shall have

a period of ten (10) business days from the date of Sony’s notice of such

breach in which to cure said breach before it shall be considered a “Default

Event”.

 

(2)        Subscription

Service Agent’s breach of any of Subscription Service Agent’s material representations,

warranties, covenants or material obligations hereunder, or Subscription

Service Agent’s failure to fulfill any of Subscription Service Agent’s material

obligations hereunder; provided, however, that, with respect to any such breach

in respect of which a shorter cure period is not expressly provided elsewhere

herein, Subscription Service Agent shall have a period of ten (10) business

days from the date of Sony’s notice of such breach in which to cure said breach

before it shall be considered a “Default Event”.

 

 

49

 

(3)        Subscription

Service Agent’s bankruptcy or insolvency, or the dissolution or the liquidation

of Subscription Service Agent’s assets, or the filing of a petition in

bankruptcy or insolvency for an arrangement or reorganization by, for or

against Subscription Service Agent, or the appointment of a receiver or a

trustee for all or a portion of Subscription Service Agent’s property, or

Subscription Service Agent’s making an assignment for the benefit of creditors;

provided, however, that Subscription Service Agent shall have a period of sixty

(60) consecutive days from its receipt of any involuntary petition in

bankruptcy filed against Subscription Service Agent in which to cure said breach

before it shall be considered a “Default Event”.

 

(4)        Subscription

Service Agent’s attempt to assign any of Subscription Service Agent’s rights

under this Content Integration Agreement in contravention of paragraph 16.06

below without Sony’s prior written consent, or the succession of any of those

rights to any other Person by operation of law.

 

(5)        In

the event that Subscription Service Agent, through its acts or omissions,

directly or indirectly, permits or causes any liens, encumbrances or claims against

any of the Sony Materials or permits or causes any liens, encumbrances or

claims against its rights under this Content Integration Agreement for the

benefit of or on behalf of a Triggering Person.

 

(6)        [CONFIDENTIAL PORTION OMITTED AND

FILED SEPARATELY WITH THE SEC]*

 

(7)        [CONFIDENTIAL PORTION OMITTED AND

FILED SEPARATELY WITH THE SEC]*

 

(8)        Failure

to cure a Security Flaw in accordance with the provisions of paragraph 5.03

above.

 

11.02.            (a)         Upon termination

or expiration of the Term:  (i) all rights granted to Subscription

Service Agent herein shall immediately terminate; (ii) neither Subscription

Service Agent nor, for the avoidance of doubt, any Syndication Agent shall

thereafter have any right to make any use of any Sony Materials or Sony Authorized

Trademarks; (iii) Subscription Service Agent shall immediately cease to use the

computer files or software embodying the Sony Materials; (iv) Subscription

Service Agent and Syndication Agents shall 

immediately remove all Links to Web Sites owned or controlled by Sony;

(v) Subscription Service Agent shall immediately return or destroy or remove,

as the case may be, all of the foregoing materials and all copies of the

foregoing materials, and Subscription Service Agent shall promptly furnish Sony

with a sworn affidavit, in a form satisfactory to Sony in its reasonable

discretion, accurately confirming the foregoing; and (vi) all monies then due

or to become due to Sony shall become immediately due and payable without

presentment, demand, protest or other notice of any kind, all of which are

hereby waived by Subscription Service Agent. 

For the avoidance of doubt: (i) no termination or expiration of this

Content Integration Agreement shall 

 

*Confidential Portions Omitted.

 

 

50

 

affect Sony’s right to payment of all monies due hereunder (and the

associated accounting in connection therewith) and (ii) in all cases, those

provisions herein that correspond to provisions in other agreements that

customarily survive the end of the term (including, but not limited to, the

provisions contained in paragraphs 6.04 through 6.08, 12.02, 16.01 and Article

14 herein) shall survive the end of the Term.

 

(b)          (1)        [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE

SEC]*

 

               (2)        [CONFIDENTIAL PORTION OMITTED AND

FILED SEPARATELY WITH THE SEC]*

 

               (3)        [CONFIDENTIAL PORTION OMITTED AND

FILED SEPARATELY WITH THE SEC]*

 

               (4)        [CONFIDENTIAL PORTION OMITTED AND FILED

SEPARATELY WITH THE SEC]*

 

               (5)        [CONFIDENTIAL PORTION OMITTED AND FILED

SEPARATELY WITH THE SEC]*

 

(c)          (1)        [CONFIDENTIAL PORTION OMITTED AND FILED SEPARATELY WITH THE SEC]*

 

               (2)        [CONFIDENTIAL PORTION OMITTED AND

FILED SEPARATELY WITH THE SEC]*

 

               (3)        [CONFIDENTIAL PORTION OMITTED AND FILED

SEPARATELY WITH THE SEC]*

 

               (4)        [CONFIDENTIAL PORTION OMITTED AND FILED

SEPARATELY WITH THE SEC]*

 

12.          REPRESENTATIONS

AND WARRANTIES

 

12.01.   Subscription Service

Agent covenants, represents and warrants that each of the following is true:

 

(a)          Subscription Service

Agent has the right and power to enter into and fully perform this Content

Integration Agreement and to make the commitments Subscription Service Agent

make herein, and has obtained or will obtain all necessary licenses,

permissions and consents (including, for the avoidance of doubt, all necessary

publishing licenses in connection with the use of the Sony Cleared Recordings).

 

(b)          Sony shall not be

subject to any costs, fees, royalties or other charges in respect of the

Service (including, without limitation, any mechanical royalties (except as

otherwise expressly provided herein), synchronization royalties or any fees or 

 

*  Confidential

Portions Omitted.

 

51

 

royalties

payable in respect of the public performance or reproduction of any musical

composition and any other dramatic, literary or other works embodied in a Sony

Cleared Recording).  For the avoidance

of doubt, as between you and Sony, Sony shall be responsible for making all

union payments (if any) and audio record royalty payments required to be made

by Sony under any agreements to which Sony is a party to each recording artist,

producer, mixer, remixer and other Person that contributed to the recording of

the Sony Cleared Recordings transmitted via the Service.

 

(c)          Subscription Service

Agent is fully-qualified to perform all obligations as described herein and to

maintain and operate the Service as described herein.  Subscription Service Agent shall operate the Service to the best

of Subscription Service Agent’s abilities in accordance with the technical

specifications approved by Sony, and shall not subcontract or otherwise

delegate any of Subscription Service Agent’s duties hereunder.

 

(d)          Subscription Service

Agent shall own and/or control all times during the Term, all right, title and

interest in and to the Service and all materials embodied, reproduced or

otherwise contained therein, and all copyrights and other rights therein,

throughout the Territory, free and clear of any and all claims or encumbrances

whatsoever therein to the extent necessary for the operation of the Service as

described herein.  The Service, and the

operation and use thereof for the purposes described herein, shall not, and at

no time shall during the Term, violate any law (including, without limitation,

any federal law or regulation) or infringe upon or violate the rights of any

Person, including, without limitation, any trademarks, names, logos,

copyrights, materials or other content Subscription Service Agent creates,

licenses, uses, publishes, performs, reproduces, distributes or displays (other

than the Sony Materials or other materials furnished to Subscription Service

Agent by Sony hereunder).

 

(e)          Subscription Service

Agent has obtained from all necessary third parties all licenses and other

rights necessary or advisable in order to create and operate the Service, other

than those licenses and other rights specifically required to be obtained by

Sony hereunder.

 

(f)           Subscription Service

Agent is a corporation duly organized and in good standing under the laws of

Oregon.

 

(g)          Subscription Service

Agent shall accurately count and report the number of performances of each

Recording Playedback and Streamed by each potential End User during free-trials

(e.g., by making the free-trial offering a “negative option” to unsubscribe) to

the extent necessary to prepare Service Fee Reports and otherwise comply with

the Subscription Service Agent’s reporting, payment and other obligations

hereunder.

 

(h)          Omitted without

implication.

 

52

 

(i)           The Service shall

not contain or utilize any content or other materials which Sony deems patently

offensive or which, in the judgment of its attorneys, might subject Sony to

unfavorable regulatory action, nor shall any Web Page that forms a part of the

Service contain any Link to any Web Site which contains or features any such

material.

 

(j)           Subscription Service

Agent shall not enter into any agreement whatsoever on behalf of Sony, shall

not make any representations or warranties on behalf of Sony, and shall not

represent to any Person that it has the power, whether express or implied, to

bind Sony in any way or enter into contracts on Sony’s behalf.

 

(k)          Subscription Service

Agent shall not make any use of any Sony Materials, or authorize any third

party to make any use of any Sony Materials, except as specifically permitted

pursuant to the terms of this Content Integration Agreement.

 

(l)           Subscription Service

Agent shall use best efforts to ensure the security of all data and information

collected and/or transmitted by the Service, including without limitation the

Aggregate Information, and that in connection with such efforts it shall make

use of current, effective and so-called “state of the art” encryption and anti-piracy

technologies.

 

(m)         Subscription Service

Agent will not include the Sony Materials in computer files other than those

computer files created for use as part of the Service.

 

(n)          At all times,

Subscription Service Agent shall comply with all applicable laws, rules,

regulations and so-called “privacy policies” (including the privacy policy of

Sony, as such policy may be amended from time to time, to the extent reasonably

applicable) in its use of End User Information.  In connection therewith, Subscription Service Agent shall

maintain, and at all times comply with, a privacy policy with respect to the

Service and any Web Sites as may be owned, operated and/or maintained by

Subscription Service Agent during the Term hereof, relating to the collection and

use of Aggregate Information as contemplated herein, in accordance with all

applicable laws, rules, regulations and generally accepted customs and

practices in the electronic commerce industry in the United States.

 

(o)          Subscription Service

Agent shall not cut, edit, change, add to, delete from or revise any Sony

Materials (or authorize any Person to do any of the foregoing) without the

express prior written consent of Sony in each instance.  Without limiting the scope of the foregoing,

Subscription Service Agent expressly agrees that it will not alter or delete

any title, credit or copyright notice, any trademarks or service marks, or the

talent, writing, producing, directing or music credits contained in the Sony

Materials.

 

53

 

(p)          Subscription Service

Agent will not, directly or indirectly, sell or otherwise dispose of, pledge,

mortgage or in any other way encumber the Sony Materials, or, attempt to

pledge, mortgage or otherwise encumber Subscription Service Agent’s rights

under this Content Integration Agreement for the benefit of or on behalf of a

Triggering Person.

 

(q)          At all times during

the Term, any free-trial memberships that make Sony Cleared Recordings

available to potential End Users shall be limited to: (1) Streams of Sony

Cleared Recordings and other Recordings via the Service offered to End Users,

(2) one (1) membership per household, and (3) only one (1) membership to any

Person (or household) during the Term.

 

(r)           Omitted without

implication.

 

(s)          At all times during

the Term, Agent Servers containing Sony Materials shall be located solely at

such locations in the United States as Subscription Service Agent has notified

Sony with reasonable particularity as to its exact physical location (e.g., by

providing the name of the facility, the street address of such facility and the

main phone number for such facility). 

Subscription Service Agent shall give Sony thirty (30) days’ prior

notice before changing the location of any Agent Server containing Sony

Materials.  As of the date hereof, Agent

Servers containing Sony Materials are located at Inflow, 1233 N.W. 12th Avenue,

Portland, Oregon (telephone: (503) 553-7800).

 

(t)           Except as and to the

extent expressly provided elsewhere in this Content Integration Agreement, at

all times during the Term, Subscription Service Agent shall exclusively provide

all content hosting, bandwidth, rights clearinghouse, and other service

functions (other than billing and financial clearinghouse services) in connection

with the Service.  For the avoidance of

doubt, Subscription Service Agent may authorize Syndication Agents or other

agents designated by Subscription Service Agent in its reasonable discretion to

provide billing and financial clearinghouse services in connection with the

Service; provided that no such delegation of such duties shall relieve

Subscription Service Agent of any of its obligations set forth in this Content

Integration Agreement.

 

12.02.      (a)          Sony represents and warrants that that

it has the right, power and authority to enter into this Content Integration

Agreement.

 

(b)          Sony represents and

warrants that, to the best of its knowledge, the use of the Sony Cleared

Recordings (excluding any musical compositions and any dramatic, literary or other

copyrighted works (other than sound recordings) embodied therein) and the

corresponding Artwork in accordance with the terms of this Content Integration

Agreement will not violate or infringe the rights of any third parties;

provided, however, that in the event that Sony notifies you, under subparagraph

3.03(a) above, that any of the Sony Materials is excluded from the Grant of

Rights, then Sony’s representation and warranty in this subparagraph 12.02(b)

with respect to the Sony Materials that are the subject of such notice shall

terminate immediately upon your receipt of such notice (and Sony’s

indemnification of you under paragraph 16.01.1 below shall not cover any causes

of action arising from your use thereafter of the Sony Materials that are the subject

of such notice).

 

54

 

(c)          Sony represents and

warrants that, to the best of its knowledge, it owns all right, title and

interest in the Sony Materials; provided, however, that in the event that Sony

notifies you, under subparagraph 3.03(a) above, that any of the Sony Materials

is excluded from the Grant of Rights, then Sony’s representation and warranty

in this subparagraph 12.02(c) with respect to the Sony Materials that are the

subject of such notice shall terminate immediately upon your receipt of such

notice (and Sony’s indemnification of you under paragraph 16.01.1 below shall

not cover any causes of action arising from your use thereafter of the Sony

Materials that are the subject of such notice).

 

13.          INFRINGEMENT

 

13.01.                     Subscription

Service Agent agrees to notify Sony immediately after it becomes aware of any

actual or threatened infringement, dilution or other impairment (“Infringement”)

of the Sony Materials or Sony Authorized Trademarks.  Upon receipt of such notice, Sony shall decide whether to assert

or file any legal or equitable proceedings (an “Action”) with respect to

such Infringement at its sole discretion. 

If such Infringement has occurred, at Sony’s sole option, exercisable

upon notice to Subscription Service Agent, Sony may either prosecute the Action

or authorize Subscription Service Agent to prosecute the Action in its own

name.  In the event Sony elects to

prosecute such Action, Subscription Service Agent shall cooperate with Sony in

the Action, at Sony’s reasonable expense.

 

13.02.                     Subscription

Service Agent agrees to notify Sony immediately after it becomes aware of any

asserted or threatened Action by any Person that the Sony Materials causes the

Infringement of the intellectual property or other rights of such Person.  If such Person asserts or institutes an

Action against Subscription Service Agent or against Sony alleging that

Infringement arises from or is related to Subscription Service Agent’s conduct

of the Service, Subscription Service Agent shall pay all expenses and fees

(including attorneys’ fees and expenses and costs of investigation and

litigation) incurred in connection therewith, and shall pay any judgments,

proceeds, damages or settlements resulting therefrom.  Subscription Service Agent may not compromise or settle any such

Infringement Action without Sony’s prior written consent, which can be withheld

in its sole discretion.  Each of Sony

and Subscription Service Agent agrees to reasonably cooperate with each other

as necessary, in defending any such Action.

 

55

 

14.          CONFIDENTIALITY

 

14.01.   (a)      Each of Sony and the Subscription Service

Agent (each a “Disclosing Party”) agrees that it shall, and it shall instruct in

writing its respective attorneys, accountants and other professional advisors

(collectively, “Advisors”) to, hold in confidence and not communicate,

transmit, publish, disseminate or otherwise disclose any of the terms and

conditions of this Content Integration Agreement or of the Syndication Agent

Agreements (or, for the avoidance of doubt, any Outside Agreement) or any fact,

matter, event or surrounding circumstance leading to or relating to the

negotiation thereof to which such party was privy or of which it was otherwise

made aware (e.g., by being copied on correspondence or by being advised of such

fact, matter, event or circumstance by another party to the negotiation)

(collectively, “Confidential Information”); provided, however, that nothing in this

paragraph 14.01 shall prohibit disclosure of such Confidential Information: (i)

by each such party to its respective financial officers, management, bankers or

others as may be reasonably necessary in the operation of its business, (ii) by

each such party to its respective Advisors to the extent that such disclosure

is in the opinion of such Advisors required to enable such Advisors fully to

represent the party concerned, (iii) in connection with any legal or

governmental proceeding, or (iv) to any judicial, governmental or regulatory

body.  At Sony’s request, you shall

cause each of your Advisors to execute a confidentiality statement in

accordance with the preceding sentence. 

In addition, you will provide Sony with a reasonable opportunity to

review and comment on any disclosure in any of filings by you under the United

States securities laws regarding this Content Integration Agreement and the

transactions contemplated hereunder and, if you are required to file this

Content Integration Agreement under applicable securities laws, you will use

best efforts to obtain confidential treatment for those portions of this

Content Integration Agreement that Sony designates.

 

(b)          Notwithstanding

anything to the contrary herein, Confidential Information shall not include

information which:

 

(1)        at

or prior to the time of disclosure by the Disclosing Party was known to or

independently developed by the party receiving such information (a “Receiving

Party”), except to the extent unlawfully appropriated by the Receiving Party or

third party;

 

(2)        at

or after the time of disclosure by the Disclosing Party becomes generally

available to the public through no wrongful or negligent act or omission on the

Receiving Party’s part; or

 

(3)        the

Receiving Party receives from a third party free to make such disclosure

without breach of any legal obligation.

 

(4)        is

required to be disclosed pursuant to any statute, regulation, order, subpoena

or document discovery request.

 

56

 

14.02.   Subscription Service

Agent shall exercise best efforts to ensure that each Syndication Agent shall:

(i) hold in confidence and not communicate, transmit, publish, disseminate or

otherwise disclose any of the terms and conditions of the Syndication Agent Agreements

or any fact, matter, event or surrounding circumstance leading to or relating

to the negotiation thereof to which such party was privy or of which it was

otherwise made aware (e.g., by being copied on correspondence or by being

advised of such fact, matter, event or circumstance by another party to the

negotiation) (collectively, “Agent Confidential Information”) and (ii) instruct

in writing its Advisors to hold in confidence and not communicate, transmit,

publish, disseminate or otherwise disclose any of the terms and conditions of

the Syndication Agent Agreements or any fact, matter, event or surrounding

circumstance leading to or relating to the negotiation thereof; provided,

however, that the exceptions set forth in subparagraphs 14.01 above shall also

apply hereto.  At Sony’s request, you

shall cause each of the Syndication Agents to cause their Advisors to execute a

confidentiality statement in accordance with the preceding sentence.  In addition, you will cause the Syndication

Agents to provide Sony with a reasonable opportunity to review and comment on

any disclosure in any of filings by you under the United States securities laws

regarding this Content Integration Agreement and the transactions contemplated

hereunder and, if they are required to file any Syndication Agent Agreement

under applicable securities laws, you will cause them to use best efforts to

obtain confidential treatment for those portions of such agreement that Sony

designates.

 

14.03.   (a)      Neither party hereto shall, without the

prior written consent of the other party, issue any press release or make any

other public announcement or statement relating to any terms and conditions of

this Content Integration Agreement or any fact, matter, event or surrounding

circumstance leading to or relating to the negotiation thereof to which such

party was privy or of which it was otherwise made aware (e.g., by being copied

on correspondence or by being advised of such fact, matter, event or

circumstance by another party to the negotiation).  You and Sony shall endeavor to mutually prepare a press release

to be issued after the complete execution of this Content Integration

Agreement; provided that (i) the failure of you or Sony to agree on the wording

of the press release or the issuance thereof shall not constitute a breach of

this agreement, and (ii) if you and Sony fail to agree on the wording of the

press release or the issuance thereof then neither you nor Sony shall issue

such press release.

 

(b)      Subscription Service

Agent shall exercise best efforts to prevent Syndication Agents from issuing

any press release or making any other public announcement or statement relating

to any terms and conditions of this Content Integration Agreement or the

Syndication Agent Agreements or any fact, matter, event or surrounding

circumstance leading to or relating to the negotiation thereof to which such

party was privy or of which it was otherwise made aware (e.g., by being copied

on correspondence or by being advised of such fact, matter, event or circumstance

by another party to the negotiation).

 

15.          NOTICES

 

15.01.   (a)      Except as otherwise specifically provided

herein, all notices under this Content Integration Agreement shall be in

writing and shall be given by courier or other personal delivery or by

registered or certified mail at the appropriate address below or at a

substitute address designated by notice by the party concerned.

 

57

 

 

	

  TO YOU:

  	

   

  	

  The address

  shown above.

  
	

   

  	

   

  	

   

  
	

  TO SONY:

  	

   

  	

  550 Madison

  Avenue

  
	

   

  	

   

  	

  New York,

  New York  10022-3211

  

 

Each notice to Sony shall be

addressed for the attention of Sony’s Senior Vice President, Business Affairs

& Administration, and a copy of each notice to Sony shall be sent

simultaneously to the Sony Music Entertainment Inc. Law Department for the

attention of Sony’s Senior Vice President and General Counsel.  Sony shall undertake to send a copy of each

notice sent to you to Myman Abell Fineman Greenspan & Light, LLP, 11601

Wilshire Boulevard, Suite 2200, Los Angeles, California 90025-1758, Attention:

Eric Greenspan, Esq. and Jeffrey Taylor Light, Esq., but Sony’s failure to send

any such copy shall not constitute a breach of this agreement or impair the

effectiveness of the notice concerned. 

Notices shall be deemed given when mailed 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.

 

(b)   Notwithstanding anything in

subparagraph 15.01(a) above, each Service Fee Report and accompanying payment

made under subparagraph 6.03(a) above shall be addressed as follows: Sony Music

Entertainment Inc., Royalty Department, 550 Madison Avenue, New York, New

York  10022-3211, Attention: Vice

President, Royalty Accounting.

 

16.          MISCELLANEOUS

PROVISIONS

 

16.01.   Subscription Service Agent will at all times

indemnify and hold harmless the Sony Parties, from and against any and all

claims, damages, liabilities, costs and expenses (including legal expenses and

counsel fees) arising out of: (a) the operation of the Service, (b)

Subscription Service Agent’s, Syndication Agents’, End Users’ and any other

Person’s use (including but not limited to unauthorized use or duplication), in

connection with the Subscription Service, of any Sony Materials; or (c) any

breach or alleged breach by Subscription Service Agent of any representation,

warranty, covenant or agreement made by Subscription Service Agent herein,

including, without limitation, Subscription Service Agent’s representation,

warranty and agreement to secure and pay for all third party licenses,

permissions and consents (individually and collectively, “CenterSpan

Claims”).  In the event of any

CenterSpan Claim: (i) Sony shall notify CenterSpan of the CenterSpan Claim

concerned promptly following the date that Sony become aware of it; (ii)

CenterSpan shall defend against the CenterSpan Claim concerned (at CenterSpan’s

own expense) through legal counsel selected by CenterSpan with Sony’s consent,

which consent Sony shall not unreasonably withhold; and (iii) each party shall

reasonably cooperate with the other in the defense of the CenterSpan Claim

concerned.  CenterSpan shall be solely

responsible for the amount of any settlement or judgment for such CenterSpan Claim

and all legal expenses and counsel fees incurred by CenterSpan in connection

therewith, subject to subparagraph 16.01(b) below.

 

58

 

(b)     In

the event that CenterSpan is either unwilling to defend against the CenterSpan

Claim concerned or is otherwise not reasonably defending against the CenterSpan

Claim concerned, Sony shall have the right to assume the defense and settlement

of the CenterSpan Claim concerned through legal counsel selected by Sony, but

CenterSpan shall be solely responsible at all times for the amount of any

settlement or judgment for such CenterSpan Claim, as well as all reasonable

legal expenses and counsel fees incurred by Sony in connection therewith.  Any settlement of a CenterSpan Claim shall

be subject to CenterSpan’s consent, which consent CenterSpan shall not

unreasonably withhold.  Notwithstanding

the foregoing, in the event that CenterSpan defends against the CenterSpan

Claim concerned (at CenterSpan’s own expense) through legal counsel selected by

CenterSpan as provided above, Sony shall have the right at all times to

actively participate in the defense thereof, and to employ legal counsel

selected by Sony at Sony’s own expense, it being understood that CenterSpan

shall have the right at all times, in CenterSpan’s sole discretion, to maintain

control of the conduct of the defense.

 

16.01.1.  (a)       Notwithstanding anything to the contrary

in paragraph 16.11 below, except as provided in subparagraphs 12.02(b) and

12.02(c) above, Sony shall at all times indemnify and hold harmless you from

and against any and all third-party claims, losses, damages, liabilities, costs

and expenses, including, without limitation, legal expenses and reasonable

counsel fees arising out of any breach by Sony of any warranty, representation,

covenant or obligation by Sony hereunder (including, without limitation, (1)

any claims arising from Publishing Rights, but only in the event that Sony

secures such Publishing Rights pursuant to section 4.03(e)(2), and (2) any

claims arising from your use of the Sony Cleared Recordings and corresponding

Artwork as and to the extent authorized hereunder in accordance with the terms

of this Content Integration Agreement), any claims that the Sony Cleared

Recordings or Sony Materials cause the Infringement of the intellectual

property or other rights of such third-party regardless of whether Sony is in

breach of the representations and warranties contained in subparagraphs

12.02(b) and 12.02(c) above, and any claims arising out of legal actions

undertaken by Sony against Persons owing debts in accordance with and subject

to subsection 6.03(b)(4)(A)(II) above (individually and collectively, “Sony

Claims”).  In the event of any Sony

Claim: (i) you shall notify Sony of the Sony Claim concerned promptly following

the date that you become aware of it; (ii) Sony shall defend against the Sony

Claim concerned (at Sony’s own expense) through legal counsel selected by Sony

with your consent, which consent you shall not unreasonably withhold; and (iii)

each party shall reasonably cooperate with the other in the defense of the Sony

Claim concerned.  Sony shall be solely

responsible for the amount of any settlement or judgment for such Sony Claim

and all legal expenses and counsel fees incurred by Sony in connection

therewith, subject to subparagraph 16.01.1(b) below.

 

59

 

(b)      In the event that Sony is

either unwilling to defend against the Sony Claim concerned or is otherwise not

reasonably defending against the Sony Claim concerned, you shall have the right

to assume the defense and settlement of the Sony Claim concerned through legal

counsel selected by you, but Sony shall be solely responsible at all times for

the amount of any settlement or judgment for such Sony Claim, as well as all

reasonable legal expenses and reasonable counsel fees incurred by you in

connection therewith.  Any settlement of

a Sony Claim shall be subject to Sony’s consent, which consent Sony shall not

unreasonably withhold.  Notwithstanding

the foregoing, in the event that Sony defends against the Sony Claim concerned

(at Sony’s own expense) through legal counsel selected by Sony as provided

above, you shall have the right at all times to actively participate in the

defense thereof, and to employ legal counsel selected by you at your own

expense, it being understood that Sony shall have the right at all times, in

Sony’s sole discretion, to maintain control of the conduct of the defense.

 

16.02.   Subscription Service

Agent acknowledges that the Sony Materials and Sony Materials hereunder has a

special, unique and extraordinary character which gives them a peculiar value,

and that, in the event of a breach of any term, condition, representation,

warranty, covenant or agreement contained in this Content Integration Agreement,

Sony shall be caused irreparable injury, including loss of goodwill and harm to

reputation, which cannot be adequately compensated in monetary damages.  Accordingly, in the event of any such

breach, actual or threatened, Sony shall have, in addition to any other legal

remedies, the right to injunctive or other equitable relief.

 

16.03.   All remedies provided for

pursuant to this Content Integration Agreement are cumulative, and no exercise,

or failure to exercise, any option by either party will limit such party’s

right to recover damages or pursue any other remedies available at law or in

equity.

 

16.04.    If any provision of this

Content Integration Agreement or the application thereof to any party, Person

or circumstance shall be invalid, illegal or unenforceable to any extent, the

remainder of this Content Integration Agreement and the application thereof

shall not be affected and shall be enforceable to the fullest extent permitted

by law.

 

16.05.   This Content Integration Agreement, including

the various Exhibits attached hereto, shall constitute the entire agreement

between the parties with respect to the subject matter hereof and shall

supersede all previous negotiations, commitments and writings with respect to

such subject matter. No change or termination of this Content Integration

Agreement shall be binding upon Sony or you unless it is made by an instrument

signed by both parties hereto.  A waiver

by either party of any provision of this Content Integration Agreement in any

instance shall not be deemed a waiver of such provision, or any other provision

hereof, as to any future instance or occurrence.  All remedies, rights, undertakings, and obligations contained in

this Content Integration Agreement shall be cumulative and none of them shall

be in limitation of any other remedy, right, undertaking, or obligation of

either party.  The captions of the

Articles in this Content Integration Agreement are included for convenience

only and shall not affect the interpretation of any provision.

 

60

 

16.06.   (a)     Sony

may assign its rights under this Content Integration Agreement in whole or in

part to any subsidiary, affiliated or controlling corporation, to any Person

owning or acquiring a substantial portion of the stock or assets of Sony, or to

any partnership or other venture in which Sony participates, and such rights

may be similarly assigned by any assignee. 

No such assignment shall relieve Sony of any of Sony’s obligations

hereunder.  Subject to subparagraph

16.06(b) below, you shall not have the right to assign this Content Integration

Agreement or any of your rights or obligations hereunder, in whole or in part,

without Sony’s prior written consent. 

Any purported assignment by you in violation of this paragraph shall be

void.

 

(b)  (1) You may assign your rights under this

Content Integration Agreement to another Person, in connection with a sale or

transfer of substantially all assets associated with the Service, subject to

the following conditions:

 

(i) The acquiring Person, or any

Affiliate of such Person, cannot be: (A) a Triggering Person, (B) an entity (or

the parent, subsidiary, affiliate or licensee of any such entity) against which

Sony or any licensee, either directly or indirectly, has a claim arising out of

the unauthorized recording, manufacture, distribution, sale, reproduction (or

other use) of any Sony Materials or other property or other tangible or

intangible rights, (C) an entity (or the parent, subsidiary, affiliate or

licensee of any such entity) involved in litigation with Sony arising out of

the unauthorized recording, manufacture, distribution, sale, reproduction (or

other use) of any Sony Materials or other property or other tangible or

intangible rights, or (D) an entity (or the parent, subsidiary, affiliate or

licensee of any such entity) engaged in any unauthorized recording,

manufacture, distribution, sale or other activity in violation of Sony’s or it

licensee’s rights (any such entity described in clauses (B) – (D) is sometimes

referred to as a “Prohibited Entity”). 

(In each case, CenterSpan may request that Sony inform CenterSpan

whether a potential acquirer of CenterSpan constitutes a Prohibited Entity.)

 

(ii)          The assignment shall

not be effective until you have delivered to Sony an instrument approved by

Sony (such approval not to be unreasonably withheld or delayed) effecting the

assignment and the assignee’s assumption of your obligations, and Sony has

executed that instrument to evidence Sony’s approval of it (which approval

shall not be unreasonably withheld if the conditions of subsections

16.06(b)(1)(i) – (ii) and (iii) and (iv) below herein have been met);

 

61

 

(iii)         No such assignment

shall relieve you of your obligations under this Content Integration Agreement

(unless Sony otherwise agrees in writing); and

 

(iv)        If such an assignment

takes place, any further transfer of the rights assigned shall be subject to

the same conditions.

 

(2)   Subject to section 11.01(b)(6),

you may convey your rights under this Content Integration Agreement to a

subsidiary or affiliate of CenterSpan, provided that: (i) fifty percent (50%)

of the stock and assets of such subsidiary or affiliate are owned by CenterSpan

at all times throughout the Term, (ii) CenterSpan wholly-controls such

subsidiaries’ or affiliates’ operations at all times throughout the Term, and

(iii) fifty percent (50%) of the Service is thereafter owned and operated

solely by such subsidiary or affiliate.

 

(3)   Any purported assignment by

you in violation of this subparagraph 16.06(b) shall be void.  For the avoidance of doubt, CenterSpan’s

obligations under this Content Integration Agreement shall not be diminished or

otherwise affected by any such assignment.

 

16.07.   Unless specifically set forth in this Content

Integration Agreement, neither party shall be entitled to recover damages or to

terminate the Term by reason of any breach by the other party of its material

obligations, unless the latter party has failed to remedy the breach within

thirty (30) days following receipt of notice thereof (or, if the breach

concerned cannot be remedied within thirty (30) days, if the latter party

commences to remedy the breach within that time and proceeds to complete the

remedy with reasonable promptness).

 

16.08.   In entering into this Content Integration

Agreement, you have and shall have the status of independent contractor.  Nothing herein contained shall contemplate

or constitute you or any Syndication Agent as Sony’s agent, except to the

extent expressly set forth herein, or employee, and nothing herein shall

constitute a partnership, joint venture or fiduciary relationship between you

and Sony.

 

16.09.   THIS CONTENT INTEGRATION AGREEMENT HAS BEEN

ENTERED INTO IN THE STATE OF NEW YORK, AND THE VALIDITY, INTERPRETATION AND

LEGAL EFFECT OF THIS CONTENT INTEGRATION 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 (WITHOUT GIVING EFFECT TO ANY

CONFLICT OF LAW PRINCIPLES UNDER NEW YORK LAW).  THE NEW YORK COURTS (STATE AND FEDERAL), SHALL HAVE SOLE 

 

62

 

JURISDICTION OF ANY

CONTROVERSIES REGARDING THIS CONTENT INTEGRATION AGREEMENT; ANY ACTION OR OTHER

PROCEEDING WHICH INVOLVES SUCH A CONTROVERSY SHALL BE BROUGHT IN THOSE COURTS

IN NEW YORK COUNTY AND NOT ELSEWHERE. 

THE PARTIES WAIVE ANY AND ALL OBJECTIONS TO VENUE IN THOSE COURTS AND

HEREBY SUBMIT TO THE JURISDICTION OF THOSE COURTS.  ANY PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY, AMONG OTHER

METHODS, BE SERVED UPON YOU BY DELIVERING IT OR MAILING IT, BY REGISTERED OR

CERTIFIED MAIL, DIRECTED TO THE ADDRESS FIRST ABOVE WRITTEN OR SUCH OTHER

ADDRESS AS YOU MAY DESIGNATE PURSUANT TO ARTICLE 16.  ANY SUCH DELIVERY OR MAIL SERVICE SHALL BE DEEMED TO HAVE THE

SAME FORCE AND EFFECT AS PERSONAL SERVICE WITHIN THE STATE OF NEW YORK.

 

16.10.   This Content Integration Agreement may be

executed in one or more counterparts, each of which shall be deemed an original

but all of which shall constitute one and the same instrument.  This Content Integration Agreement shall not

become effective until executed by all proposed parties hereto.

 

16.11.   SONY MAKES NO WARRANTY OF MERCHANTABILITY,

NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE SONY

MATERIALS.  IN NO EVENT SHALL SONY BE

LIABLE FOR INCIDENTAL, CONSEQUENTIAL, EXEMPLARY, MULTIPLE, SPECIAL OR INDIRECT

DAMAGES IN CONNECTION WITH THIS CONTENT INTEGRATION AGREEMENT (INCLUDING BUT

NOT LIMITED TO LOST BUSINESS PROFITS) EVEN IF SONY HAS BEEN ADVISED OF THE

POSSIBILITY OF THE SAME.

 

16.12.   Subscription Service Agent recognizes that

the sale of Records by means of 

Conditional Download and Streaming, is speculative and that Sony makes

no warranties, representations or guarantees with respect to the number of

Streams or Conditional Downloads, if any, which will be sold by Sony hereunder

or otherwise.

 

16.13.   Omitted without implication.

 

16.14.   Sony and Subscription Service Agent agree to

execute such further documentation and perform such further actions, including

the recordation of such documentation with appropriate authorities, as may be

reasonably requested by the other party hereto to evidence and effectuate

further the purposes and intents set forth in this Content Integration

Agreement.

 

16.15.   Subscription Service Agent shall, from time

to time, do and perform such other and further acts and duly execute and

deliver such further documents and assurances as may be required by applicable

laws or as requested by Sony to establish, maintain and protect Sony’s rights

and remedies and to carry out and effect the intent and purpose of this Content

Integration Agreement, including, without limitation, the execution and

delivery of additional documentation and/or instruments, in recordable form,

and the recording or filing of additional documentation and/or instruments,

including, without limitation, any notice, UCC-1 and/or security agreement in

accordance with the laws of such jurisdictions in which Sony may in its sole

discretion from time to time deem necessary. 

Without limiting the foregoing, Subscription Service Agent shall cause

any such document and/or additional instruments which shall be executed to be

kept, filed, deposited or recorded, at all times, in such places that Sony

shall designate in its sole discretion in order to perfect and preserve Sony’s

rights in and to the Sony Materials and the Sony Authorized Trademarks.

 

63

 

IN WITNESS

WHEREOF, the parties hereto have executed this Content Integration Agreement,

effective as of the date first above written.

 

	

   

  	

  SONY MUSIC,

  A Group of Sony Music Entertainment Inc.

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

   /s/ Ron Wilcox

  	

   

  
	

   

  	

  Name: Ron

  Wilcox

  
	

   

  	

  Title: EVP,

  BA + NT, SMEI SVP, BA + ADM., SONY MUSIC, A Group of SMEI

  
	

   

  	

   

  
	

   

  	

  CENTERSPAN

  COMMUNICATIONS CORP.

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

   /s/ Frank G. Hausman

  	

   

  
	

   

  	

  Name: Frank

  G. Hausman

  
	

   

  	

  Title:

  Chairman + CEO

  
	

   

  	

   

  

 

64

 

Schedule A

 

[CONFIDENTIAL PORTION OMITTED AND FILED

SEPARATELY WITH THE SEC]*

 

* 

Confidential Portions Omitted.

 

65

 

Exhibit A-1

 

Functionality Specifications

 

[CONFIDENTIAL PORTION OMITTED AND FILED

SEPARATELY WITH THE SEC]*

 

* 

Confidential Portions Omitted.

 

66

 

Exhibit A-2

 

Technical Specifications

 

[CONFIDENTIAL PORTION OMITTED AND FILED

SEPARATELY WITH THE SEC]*

 

* 

Confidential Portions Omitted.

 

67

 

Exhibit B

 

STREAMING SECURITY FUNCTIONAL REQUIREMENTS

 

Introduction

 

This document outlines the

issues around the security of streamed media and enumerates the requirements of

the international Recording Industry of such systems.

 

Capitalized terms in this

document are defined in Annex A or in the SDMI Portable Device Specification

Part 1 Version 1.0 (henceforth the “SDMI PD Specification”).

 

FUNCTIONAL REQUIREMENTS

 

The following are requirements

of a Streaming Security System.

 

SCOPE

 

This Streaming Functional

Requirement Document shall be able to be applied to all types of Streaming, in

particular digital broadcasting, other forms of digital communications to the

public (such as cable transmission systems) and streaming over packet-based

networks (such as the Internet).

 

CONTENT SECURITY

 

A Streaming Security System

shall not allow Content to be accessible digitally except in accordance with

this document.

 

In particular:

 

•                                        Content

shall be Protected at all points in the system,

 

•                                        A

Streaming Security System shall ensure that the Content is not accessible by

systems and applications that do not enforce the Usage Rules.  This requirement shall, as a minimum, apply

both to connections between software modules and hardware connections between

consumer devices.

 

•                                        A

Streaming Security System shall ensure that after Content is rendered, it is

inaccessible within the system that performed the rendering.

 

•                                        Unprotected

and unauthenticated digital outputs shall not be enabled or supported for

Content that carries Streaming Usage Rules that do not authorize such

outputs.  This requirement shall not

apply to existing, widely deployed devices such as USB speakers.  The level of protection of the Content shall

be no less than that provided by encryption, using technology customarily

accepted within the applicable industry, to the extent necessary to protect

Content.

 

68

 

A Streaming Security System

shall ensure that Content which is removed from the system other than in

accordance with the Content’s Streaming Usage Rules (for example by analogue

copying) is, to the extent possible, unable to be used in a manner inconsistent

with these Functional Requirements. 

This might be achieved by adding or re-marking a watermark in the

Content into a state whereby systems compliant with other security

specifications (such as the SDMI PD Specification) cannot accept it.

 

STORED CONTENT

 

If Streamed Content contains

Streaming Usage Rules that permit the storage of a copy of the Content by the

recipient of the Stream, then that copy may only be stored as SDMI Protected

Content for Local Use and the Usage Rules of the stored copy shall be the Usage

Rules required by the Streaming Usage Rules.

 

ROBUSTNESS

 

A Streaming Security System

shall conform to agreed robustness Requirements that set out the strength of

the security and response to new circumstances which is required.  The SDMI PD Specification contains

appropriate language and is attached to this document for reference as Annex B.

 

SELECTION OF SYSTEM

 

Where the law does not so

prohibit, Rights Holders shall be able to specify whether their Content is

authorized to be delivered over a particular Streaming Security System.

 

STREAMING USAGE RULES

 

A Streaming Security System

shall allow Streaming Usage Rules to be expressed as associated or embedded

information, or else inherently implied by the Service’s design, and shall

ensure that all forms are obeyed.

 

Streaming Usage Rules shall be

linked persistently to the Content, implicitly or explicitly.

 

A Streaming Security System

shall provide a sufficiently rich vocabulary in its expression of Streaming

Usage Rules that all possible business models are accommodated.  There is a discussion of this in the next section.

 

DEFAULT USAGE RULE ENFORCEMENT

 

Where there are no Streaming

Usage Rules relating to Content, a Streaming Security System shall apply the

Default Streaming Usage Rules.  

 

The Default Streaming Usage

Rule shall be that streamed Content may be rendered for immediate consumption

but that no copy shall be retained before or after rendering.

 

69

 

STREAMING USAGE RULE

ENFORCEMENT

 

A Streaming Security System

shall ensure that Streaming Usage Rules are obeyed within it and also that

Streaming Usage Rules and consequent Usage Rules are obeyed in systems to which

Content is transferred.

 

PERFORMANCE

 

IMPACT ON END-USERS

 

So far as is possible, a

Streaming Security System shall be transparent to end-users.  It shall neither materially increase the

time to listen when a Stream is demanded by an end-user, nor materially degrade

the sonic quality of the system, compared to an insecure system.

 

CONTENT SELECTION

 

A Streaming System shall allow

Rights Holders to specify the type of service for which a particular piece of

content is authorized.  This might

include:

 

RETRANSMISSION

 

A Streaming Security System

shall allow Rights Holders to specify whether another streaming system is

permitted to further stream a particular piece of Content, or to place

conditions on such further streaming.

 

QUALITY ASSURANCE

 

A Streaming Security System

shall, where not prohibited by law, allow Rights Holders to specify that

Content shall not be delivered over Best Effort Systems (i.e., that it shall

only be delivered over Quality of Service (QoS) Assured Systems, or

conventional broadcasting systems).

 

Where not prohibited by law, a

Streaming Security System shall allow Rights Holders to specify the limits on

audio quality at which Content may be delivered by reference to bit rates,

acceptable codecs, etc.

 

IDENTIFICATION DATA

 

A Streaming Security System

shall allow Rights Holders to control how the identification data, which is

associated with Content being Streamed, is used by applications and end users.

 

70

 

COMPLIANCE

 

A Streaming Security System

shall have adequate means for enforcing compliance.

 

USAGE RULES

 

The following is a

non-exhaustive list of the type of Streaming Usage Rules which a Streaming

Security System may be required by Rights Holders to support.

 

RECORD CONTROL

 

A Streaming Security System

shall allow Rights Holders to specify whether the end-user is permitted to

retain a copy of a particular piece of Content (excluding temporary copies made

in rendering the stream).  It shall also

allow Rights Holders to place constraints on the use of this copy by allocating

Usage Rules to the retained Content.

 

COPYING

 

Content may be authorized for

retention only for a specified period or for a specified number of listens.

 

SECURITY

 

Content may be authorized for

retention only if it is held on a system or device of security meeting the

requirements of the Rights Holder, e.g.,

 

• 

“only on an SDMI compliant device”

 

• 

“on a CD-R with the SCMS copy prohibit bit set”

 

• 

“only in a particular type of secure container”

 

NAVIGATION

 

A Streaming Security System

shall be able to allow or prevent various sorts of navigation within streamed

Content – such as skipping or fast-forwarding over musical Content or

advertising.

 

DISTRIBUTION

 

A Streaming Security System

shall allow Rights Holders to specify whether the end-user is permitted to

transmit a copy of a particular piece of Content to other end-users.  It shall also allow Rights Holders to place

restrictions on this transmission, for example by restricting the copy to a

particular audio quality level, or to a particular excerpt.

 

 

71

 

TERRITORIALITY

 

A Streaming Security System

shall allow Rights Holders to specify into which geographic or otherwise

defined territories delivery of the Content is authorized.  A Streaming Security System shall also

support the application of different Default Streaming Usage Rules in different

geographic or otherwise defined territories.

 

SUBSCRIPTION PAYMENT

 

A Streaming Security System

shall allow Rights Holders to restrict a stream for delivery only to end-users

who have paid a subscription fee or otherwise become eligible to have a

particular Stream delivered to them. 

For instance, streams could be limited to end-users who have purchased a

membership in a fan club or responded to an advertisement.

 

PAY PER LISTEN/MINUTE

 

A Streaming Security System

shall allow Rights Holders to restrict distribution of a stream to end-users

who pay a fee to have the Stream delivered, whether by the song, the minute or

some other measure.

 

IMPULSE PURCHASE

 

A Streaming Security System

shall allow Rights Holders to specify that Streamed Content may be retained in

accordance with Streaming Usage Rules that permit purchase of the Streamed

Content under explicitly controlled circumstances.  For example, a Rights Holder might authorize the “purchase” of a

track played over a Streaming Security System.

 

Annex A – Definitions

 

STREAMING

 

Streaming is delivering audio or audio-visual

Content (henceforth Content) to an end-user such that it is consumed at

approximately the same time as it is sent.

 

DOWNLOADING

 

By contrast, Downloading is delivering Content to an

end-user so that it is intended to be consumed at a later time, possibly in

accordance with Usage Rules (see below).

 

Rights Holder

 

The Rights Holder is the owner or licensee of Copyright or

Neighboring Rights in the sound recording being streamed.

 

72

 

STREAMING USAGE RULES

 

Streaming Usage Rules are rules for the use of

Content, defined by Rights Holders in the Content.  Streaming Usage Rules may allow or disallow the immediate

consumption of the Content.  They may also

allow or disallow other uses of the Content such as, retention, onward

transmission etc.

 

Streaming Usage Rules may differ for different

delivery systems and Rights Holders.

 

Streaming Usage Rules may be attached to or

embedded within Content, or else inherently implied by the Service’s design.

 

DEFAULT STREAMING USAGE RULES

 

Default Streaming Usage Rules are the rules

defined for end-users in the absence of Streaming Usage Rules from Rights

Holders.  Default Streaming Usage Rules

may differ for different delivery systems. 

They may also differ from Default Usage Rules set out in other

specifications, such as the SDMI Portable Device Specification Part 1 Version

1.0.

 

STREAMING SECURITY SYSTEM

 

A Streaming Security System is able to ensure that Streaming

Usage Rules (or where relevant, Default Streaming Usage Rules) are obeyed.  It includes the entire system, from the

point where Content is introduced into it to the point where Content is either

rendered in accordance with Streaming Usage Rules or handed off to another

system in accordance with Streaming Usage Rules.

 

PROTECTED

 

Protected Content is in a state in which

unauthorized access is restricted by technical means (e.g., encryption or

scrambling).

 

QUALITY OF SERVICE (Q0S)

ASSURED SYSTEMS

 

QoS Assured Systems are systems where the path

from source to end-user is subject to guarantees over the available bandwidth

and error rate.

 

73

 

BEST EFFORT SYSTEMS

 

Best Effort Systems are systems where the path

from source to end-user is NOT subject to guarantees over the available

bandwidth and error rate.

 

Annex B – Robustness Requirements

 

The following text is copied

from the SDMI PD Specification Section 10:

 

GENERAL

 

SCOPE

 

These Robustness Requirements

apply to implementations (“Implementations”) of the SDMI Portable Device

Specification, Part 1, Version 1.0 (the “Specification”) and are incorporated

in the Specification.  Capitalized terms

not defined herein shall have the meanings set forth in the Specification.

 

OBJECTIVE

 

Implementations shall protect

SDMI Protected Content against unauthorized access, copying and

distribution.  Implementations shall

maintain SDMI Protected Content in a protected state or a protected environment

at all times except while such Content is being rendered in decompressed form.

 

CONSTRUCTION

 

Implementations shall comply

with the Specification and be designed and manufactured so as effectively to

frustrate attempts to modify such products so as to defeat the functions of the

Specification, as more specifically described below.

 

DEFEATING FUNCTIONS AND

FEATURES

 

Implementations shall not

include switches, jumpers or traces that may be cut, or control functions means

(such as end user remote control functions or keyboard, command or keystroke bypass)

by which content protection technologies or other mandatory provisions of the

Specification may be defeated or by which compressed, decrypted SDMI Protected

Content may be exposed to unauthorized copying, usage or distribution.

 

MAINTAIN SECURITY

 

Implementations shall be

designed and manufactured so as to effectively frustrate attempts to:  (i) discover or reveal non-public keys or

cryptographic algorithms or other secrets/confidential information used to protect

Content in Implementations, (ii) defeat the functions related to

Authentication, encryption, decryption, SDMI screening, watermark screening,

watermark insertion, the Secure Authenticated Channel and Storage of SDMI

Protected Content, as defined and required in Specification, including the control

functions or Usage Rules, to the extent such functions and rules are

implemented in the foregoing, and (iii) change embedded identities

(collectively, clauses (i), (ii), and (iii) of this Section 10.1.4 are referred

to herein as the “Security Functions and Features”).  Furthermore, in SDMI-Complaint products, where SDMI Protected

Content is delivered from one part of the SDMI-Complaint product to

another–whether among integrated circuits, software modules, or a combination

thereof–the portions of such product that perform the Security Functions and

Features shall be designed and otherwise integrated and associated with each

other such that SDMI Protected Content in a usable form flowing between them

shall be Protected from being intercepted and copied or distributed.

 

74

 

METHODS OF MAKING FUNCTIONS

ROBUST

 

Implementations shall use at

least the following techniques to be designed to effectively frustrate efforts

to circumvent or defeat the functions and protections in the Specification and

these Robustness Requirements:

 

ACCESSIBILITY OF CONTENT

 

Decrypted SDMI Protected

Content shall not be available on outputs other than those specified in the

Specification or these Robustness Requirements and, within Implementations,

such Content shall not be present on any user accessible buses in useable form

in such a manner that permits users to circumvent or defeat the Security

Functions and Features.  For these

purposes, a “user accessible bus” shall mean a data bus which is designed for

end user upgrades or access, such as PCMCIA, device bay, IEEE 1394 or Cardbus,

but not PCI buses, memory buses, CPU buses, and similar portions of a device’s

internal architecture.  The foregoing

shall also apply to interfaces between or among SDMI-Compliant products, such

that SDMI Protected Content is transmitted in a Protected manner.

 

PLAYBACK

 

Unprotected digital playback

(e.g., via USB speakers) shall be limited to linear PCM at 48 kHz 16 bit or

below, and any playback at a rate higher than 1.5 times normal speed shall be

noticeably degraded unless the pitch is corrected to the pitch at the normal

speed.

 

ROBUSTNESS REQUIREMENTS

APPLICABLE  TO SOFTWARE IMPLEMENTATIONS

 

Any portion of an

Implementation that implements one or more of the security functions set forth

in the Specification in software that could allow compromise of SDMI Protected

Content shall include all of the characteristics set forth in Sections 10.1 and

10.2.1 of these Robustness Requirements. 

In addition, such Implementations shall:

 

Use one or more reasonable

methods, which may include, but shall not be limited to: encryption, execution

of a portion of the implementation in ring zero or supervisor mode, and/or

embodiment in a secure physical implementation; and in every case of

implementation of software, using techniques of obfuscation to disguise and

hamper attempts to discover the approaches used.

 

Be designed so as to perform

self-checking of the integrity of its component parts and be designed to result

in a failure of the Implementation to provide the authorized Authentication

and/or decryption function in the event of unauthorized modification.  For these purposes, a “modification”

includes any change in, or disturbance or invasion of features or characteristics,

or interruption of processing.  This

provision requires at a minimum the use of “signed code” or other means of

tagging or operating throughout the code which are equivalent or more robust.  For purposes hereof, “component parts” are

those that interact with SDMI Protected Content.

 

ROBUSTNESS REQUIREMENTS

APPLICABLE TO HARDWARE IMPLEMENTATIONS

 

Any portion of an

SDMI-Complaint product that implements a part of the Specification in hardware

shall include all of the characteristics set forth in Sections 10.1 and 10.2.1

of these Robustness Requirements.  The

fact that a software Implementation operates on a hardware computing platform

shall not, in and of itself, cause such hardware computer platform to be subject

to the requirements set forth in Sections 10.2.4 and 10.2.5.  If, however, the software Implementation

relies on hardware or any hardware component to satisfy these Robustness

Requirements, then such hardware or hardware component shall be governed by the

robustness rules set forth herein for hardware implementations.  In addition, such Implementation shall:

 

75

 

1)                                   Use

any reasonable means including, but not limited to: embedding encryption keys

and algorithms in silicon circuitry or firmware which cannot be read, or the

techniques described above for software.

 

2)                                   Be

designed such that attempts to remove or replace hardware elements in a way

that would compromise the content protection features of the Specification

would pose a serious risk of damaging such product so that it would no longer

be able to receive playback SDMI Protected Content.  By way of example, a component that is soldered rather than

socketed may be appropriate for these means.

 

3)                                   Be

designed such that the failure of a Security Function or Feature would cause

the product to no longer be able to receive or playback SDMI Protected Content.

 

ROBUSTNESS REQUIREMENTS

APPLICABLE TO HYBRID IMPLEMENTATIONS

 

The interfaces between hardware

and software Implementations of an SDMI-Compliant product or between or among

SDMI-Complaint products shall be designed so that they provide the level of

protection that would be provided by a purely hardware or purely software

Implementation as described above.

 

REQUIRED LEVELS OF ROBUSTNESS

 

1)                                   The

Security Functions and Features and the characteristics set forth in Section

10.1.4 shall be implemented so that it is reasonably certain that they:

 

2)                                   Cannot

be defeated or circumvented using Widely Available Tools (as defined below) or

Specialized Tools (as defined below) and

 

Can only with difficulty be

defeated or circumvented using Professional Tools (as defined below).

 

Widely Available Tools shall

mean general-purpose tools or equipment that are widely available at a

reasonable price, such as screwdrivers, jumpers, clips, and soldering irons.

 

Specialized Tools shall mean

specialized electronic tools that are widely available at a reasonable price,

such as memory readers and writers, debuggers, decompilers, or similar software

development products other than devices or technologies that are designed and

made available for the specific purpose of bypassing or circumventing the

protection technologies that are required by the Specification, i.e.,

“Circumvention Devices”.

 

Professional Tools shall mean professional

tools or equipment, such as logic analyzers, chip disassembly systems, or in

circuit emulators, but not including either professional tools or equipment

that are made available on the basis of a non-disclosure agreement or

Circumvention Devices.

 

NEW CIRCUMSTANCES

 

If an Implementation when

designed and shipped complies with the requirements set forth above, but at any

time thereafter circumstances arise which – had they been existing at the time

of design – would have caused such Implementation to fail to comply with the

Specification (“New Circumstances”), then upon having reasonable notice of such

New Circumstances, the developer of such Implementation (the “SDMI

Participant”) shall promptly redesign affected product(s) or make available upgrades

to its affected product(s), and, as soon as reasonable practicable, consistent

with ordinary product cycles and taking into account the level of threat to

Content under the New Circumstances, shall incorporate such redesign or

replacement into its affected product(s), cease manufacturing such affected

product(s) and cease selling such affected product(s).

 

76

 

EXAMINATION / INSPECTION

 

Under reasonable terms,

including execution of mutually acceptable non-disclosure/non-use agreements,

and upon reasonable notice to the SDMI Participant and the SDMI Foundation by

one of the RIAA, the IFPI or the RIAJ (each referred to herein as a “Recording

Company Association”), such Recording Company Association may at its own

expense have an independent expert (acceptable to the SDMI Participant whose

product(s) are to be inspected) inspect the details necessary to an

understanding of such product(s)’ implementation of the Specification and these

Robustness Requirements and such details sufficient to determine whether such

product(s) is/are SDMI-Compliant.

 

Such SDMI Participant’s

approval of such proposed expert shall not be unreasonably withheld.  Details which may be inspected include the

executable object code, functional design diagrams, examples of the product, or

block diagrams, but shall not include the source code, the Verilog Hardware

Description Language (VHDL) or similar highly confidential information as

reasonable designated by the SDMI Participant. 

Any report made by the independent expert shall be made available to

both the Recording Company Association and the SDMI Participant.  The SDMI Participant shall not be precluded

or estopped from challenging the opinion of such expert in any forum.  Nothing in this paragraph shall limit the

role or testimony of such expert, if any, in a judicial proceeding under such

protective orders as a court may impose. 

This provision may not be invoked more than once per implementation,

model or version, provided that such right of inspection shall include the

right to re-inspect such implementation, model or version if it has been

revised in an effort to cure any alleged failure or compliance.  Any investigation conducted hereunder shall

be based on reasonable grounds and commenced in a good faith attempt to

determine whether an Implementation is SDMI-Compliant.

77Exhibit 10

 

EXHIBIT 10.47

EMPLOYMENT

AGREEMENT

 

 

THIS

EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as of June 2, 1999,

by and between ARDEN REALTY LIMITED PARTNERSHIP, a Maryland limited partnership

(the “Company”) and RICK DAVIS (“Executive”).

 

1.                                 EMPLOYMENT

 

The

Company hereby employs Executive and Executive hereby accepts employment upon

the terms and conditions set forth below.

 

2.                                 TERM

AND RENEWAL

 

2.1.                             Term.  The term of this Agreement shall commence on June 2, 1999 (the

“Effective Date”), and shall continue to December 31, 2000 (the “Original

Employment Term”), on the terms and conditions set forth below, unless sooner

terminated as provided in Section 5.

 

2.2.                             Extension.  Following the expiration of the Original Employment Term and

provided that this Agreement has not been terminated pursuant to Section 5, and

every year thereafter, the Agreement shall be automatically renewed for an

additional 12-month period, effective on January 1, 2001 and each anniversary

thereof; provided, that if a Change in Control (as defined in Section 5.6),

occurs during the original or extended term of this Agreement, this Agreement

shall continue in effect for a period not less than twelve (12) months beyond

the month in which such Change in Control occurred.

 

3.                                 COMPENSATION

 

3.1.                              Base Compensation.  For the services to be rendered by Executive

under this Agreement, Executive shall be entitled to receive, commencing as of

the Effective Date, an annual base compensation (“Base Compensation”) of

$160,000 payable in substantially equal semi-monthly installments.  The Base Compensation shall be reviewed and

adjusted annually as determined by the Compensation Committee (the

“Compensation Committee”) of the Board of Directors (the “Board”) of the

Company.

 

3.2.                             Bonus Compensation.  The Compensation Committee shall review

Executive’s performance at least annually during each year of the Original

Employment Term and cause the Company to award Executive a cash bonus which the

Compensation Committee determines in its sole and absolute discretion.

 

3.3.                             “Gross-Up” of Compensation.

 

(a)                                  280G

“Gross-Up”.

 

 

1

 

(i)            Anything

in this Agreement to the contrary notwithstanding, if it shall be determined

that any payment or distribution to Executive or for his benefit (whether paid

or payable or distributed or distributable) pursuant to the terms of this

Agreement or otherwise (the “Payment”) would be subject to the excise tax

imposed by section 4999 of the Internal Revenue Code of 1986, as amended (the

“Code”) (the “Excise Tax”), then Executive shall be entitled to receive from

the Company an additional payment (the “Gross-Up Payment”) in an amount such

that the net amount of the Payment and the Gross-Up Payment retained by

Executive after the calculation and deduction of all Excise Taxes (including

any interest or penalties imposed with respect to such taxes) on the Payment

and all federal, state and local income tax, employment tax and Excise Tax

(including any interest or penalties imposed with respect to such taxes) on the

Gross-Up Payment provided for in this Section 3.3(a) and taking into account

any lost or reduced tax deductions on account of the Gross-Up Payment, shall be

equal to the Payment;

 

(ii)           All

determinations required to be made under this Section 3.3(a), including whether

and when the Gross-Up Payment is required and the amount of such Gross-Up

Payment, and the assumptions to be used in arriving at such determinations

shall be made by the Accountants (as defined below) which shall provide

Executive and the Company with detailed supporting calculations with respect to

such Gross-Up Payment within fifteen (15) business days of the receipt of

notice from Executive or the Company that Executive has received or will

receive a Payment.  For the purposes of

this Section 3.3(a), the “Accountants” shall mean the Company’s independent

certified public accountants serving immediately prior to the Change in Control

(as defined in Section 5.6).  In the

event that the Accountants are also serving as accountant or auditor for the

individual, entity or group effecting the Change in Control, Executive shall

appoint another nationally recognized public accounting firm to make the

determinations required hereunder (which accounting firm shall then be referred

to as the Accountants hereunder).  All

fees and expenses of the Accountants shall be borne solely by the Company.  For the purposes of determining whether any

of the Payments will be subject to the Excise Tax and the amount of such Excise

Tax, such Payments will be treated as “parachute payments” within the meaning

of section 280G of the Code, and all “parachute payments” in excess of the

“base amount” (as defined under section 280G(b)(3) of the Code) shall be

treated as subject to the Excise Tax, unless and except to the extent that in

the opinion of the Accountants such Payments (in whole or in part) either do

not constitute “parachute payments” or represent reasonable compensation for

services actually rendered (within the meaning of section 280G(b)(4) of the

Code) in excess of the “base amount,” or such “parachute payments” are

otherwise not subject to such Excise Tax. 

For purposes of determining the amount of the Gross-Up Payment,

Executive shall be deemed to pay Federal income taxes at the highest applicable

marginal rate of federal income taxation for the calendar year in which the

Gross-Up Payment is to be made and to pay any applicable state and local income

taxes at the highest applicable marginal rate of taxation for the calendar year

in which the Gross-Up Payment is to be made, net of the maximum reduction in

federal income taxes which could be obtained from the deduction of such state

or local taxes if paid in such year (determined without regard to limitations

on deductions based upon the amount of Executive’s adjusted gross income), and

to have otherwise allowable deductions for federal, state and local income tax

purposes at least equal to those disallowed because of the inclusion of the

Gross-Up Payment in Executive’s adjusted gross income.  To the extent practicable, any Gross-Up

Payment with respect to any Payment shall be paid by the Company at the time

Executive is entitled to receive the Payment and in no event will any Gross-Up

Payment be paid later than five days after the receipt by Executive of the

Accountant’s determination.  Any

determination by the Accountants shall be binding upon the Company and

Executive.  As a result of uncertainty

in the application of section 4999 of the Code at the time of the initial

determination by the Accountants hereunder, it is possible that the Gross-Up

Payment made will have been an amount less than the Company should have paid

pursuant to this Section 3.3(a) (the “Underpayment”).  In the event that the Company exhausts its remedies pursuant to

Section 3.3(a)(ii) and Executive is required to make a payment of any Excise

Tax, the Underpayment shall be promptly paid by the Company to or for

Executive’s benefit; and

 

(iii)          Executive shall notify the Company in

writing of any claim by the Internal Revenue Service that, if successful, would

require the payment by the Company of the Gross-Up Payment.  Such notification shall be given as soon as

practicable after Executive is informed in writing of such claim and shall

apprise the Company of the nature of such claim and the date on which such

claim is requested to be paid. 

Executive shall not pay such claim prior to the expiration of the 30-day

period following the date on which Executive gives such notice to the Company

(or such shorter period ending on 

 

2

 

the date that any

payment of taxes, interest and/or penalties with respect to such claim is

due).  If the Company notifies Executive

in writing prior to the expiration of such period that it desires to contest

such claim, Executive shall:

 

(A)      give the Company any information

reasonably requested by the Company relating to such claim;

 

(B)        take such action in connection

with contesting such claim as the Company shall reasonably request in writing

from time to time, including, without limitation, accepting legal

representation with respect to such claim by an attorney reasonably selected by

the Company;

 

(C)        cooperate with the Company in

good faith in order to effectively contest such claim; and

 

(D)       permit the Company to participate

in any proceedings relating to such claims;

 

provided,

however, that the Company shall bear and pay directly all costs and expenses

(including additional interest and penalties) incurred in connection with such

contest and shall indemnify Executive for and hold Executive harmless from, on

an after-tax basis, any Excise Tax or income tax (including interest and

penalties with respect thereto) imposed as a result of such representation and

payment of all related costs and expenses. 

Without limiting the foregoing provisions of this Section 3.3(a), the

Company shall control all proceedings taken in connection with such contest

and, at its sole option, may pursue or forgo any and all administrative

appeals, proceedings, hearings and conferences with the taxing authority in respect

of such claim and may, at its sole option, either direct Executive to pay the

tax claimed and sue for a refund or contest the claim in any permissible

manner, and Executive agrees to prosecute such contest to a determination

before any administrative tribunal, in a court of initial jurisdiction and in

one or more appellate courts, as the Company shall determine; provided,

however, that if the Company directs Executive to pay such claim and

sue for a refund, the Company shall advance the amount of such payment to

Executive, on an interest-free basis, and shall indemnify Executive for and

hold Executive harmless from, on an after-tax basis, any Excise Tax or income

tax (including interest or penalties with respect thereto) imposed with respect

to such advance or with respect to any imputed income with respect to such

advance (including as a result of any forgiveness by the Company of such

advance); provided,

further, that any extension of the statute of limitations relating

to the payment of taxes for the taxable year of Executive with respect to which

such contested amount is claimed to be due is limited solely to such contested

amount.  Furthermore, the Company’s

control of the contest shall be limited to issues with respect to which a

Gross-Up Payment would be payable hereunder and Executive shall be entitled to

settle or contest, as the case may be, any other issue raised by the Internal

Revenue Service or any other taxing authority.

 

3.4.                              Benefits.

 

(a)                                  Medical

Insurance.  The Company shall provide to Executive, Executive’s spouse and

children, such health, dental and optical insurance as the Company may from

time to time make available to its other executive employees.

 

(b)                                 Life

and Disability Insurance.  The Company shall provide Executive such disability and/or life

insurance as the Company in its sole discretion may from time to time make

available to its other executive employees.

 

(c)                                  Pension

Plans, Etc.  The Executive shall be entitled to participate in all pension,

401(k) and other employee plans and benefits established by the Company on at

least the same terms as the Company’s other executive employees.

 

3

 

3.5.                              Method of Payment.  The monetary compensation payable and any

benefits due to Executive hereunder may be paid or provided in whole or in

part, from time to time, by the Company and/or its respective subsidiaries and

affiliates, but shall at all times remain the responsibility of the Company.

 

4.                                 POSITION

AND DUTIES

 

4.1                                 Position.  Executive shall serve as Senior Vice President & Chief Accounting

Officer or such other position or positions to which the Company, in its sole

and absolute discretion, assigns Executive.

 

4.2                                 Devotion of Time and Effort.  Executive shall use Executive’s good faith

best efforts and judgment in performing Executive’s duties as required

hereunder and to act in the best interests of the Company.  Executive shall devote such time, attention

and energies to the business of the Company as are reasonably necessary to

satisfy Executive’s required responsibilities and duties hereunder.

 

4.3                                 Other Activities.  Executive may engage in other activities for

Executive’s own account while employed hereunder, including without limitation

charitable, community and other business activities, provided that such other

activities do not materially interfere with the performance of Executive’s

duties hereunder.

 

4.4                                 Vacation.  It is understood and agreed that Executive shall be entitled to

three (3) weeks vacation per year. 

During such vacation periods, Executive shall not be relieved of

Executive’s duties under this Agreement and there will be no abatement or

reduction of Executive’s compensation hereunder.

 

4.5                                 Business Expenses.  The Company shall promptly, but in no event

later than thirty days after submission of a claim of expenditure, reimburse

Executive for all reasonable business expenses including, without limitation,

business seminar fees, professional association dues, bar dues and other

reasonable entertainment expenses which have been given approval in advance and

are incurred by Executive in connection with the business of the Company and/or

its respective subsidiaries and affiliates, upon presentation to the Company of

written receipts for such expenses. 

Such reimbursement shall also include, but not be limited to, reimbursement

for all reasonable travel expenses, including all airfare, hotel and rental car

expenses, incurred by Executive in traveling in connection with the business of

the Company.

 

4.6                                 Company’s Obligations.  The Company shall provide Executive with any

and all necessary or appropriate current financial information and access to

current information and records regarding all material transactions involving

the Company and/or its representative subsidiaries and affiliates, including

but not limited to acquisition of assets, personnel contracts, dispositions of

assets, service agreements and registration statements or other state or

federal filings or disclosures, reasonably necessary for Executive to carry out

Executive’s duties and responsibilities hereunder.  In addition, the Company agrees to provide Executive, as a

condition to Executive’s services hereunder, such staff, equipment and office

space as is reasonably necessary for Executive to perform Executive’s duties

hereunder.

 

5.                                      TERMINATION

 

5.1.                         By the Company Without Cause.  The Company may terminate this Agreement

without “cause” (as hereinafter defined) at any time following the Effective

Date, provided that the Company first delivers to Executive the Company’s

written election to terminate this Agreement at least 90 days prior to the

effective date of termination.

 

4

 

5.2.                              Severance Payment

 

(a)                                  Amount.  In the event the Company terminates Executive’s services

hereunder pursuant to Section 5.1, or Executive terminates his employment

hereunder pursuant to Section 5.4 or 5.6, Executive shall continue to

render services to the Company pursuant to this Agreement until the date of

termination and shall continue to receive compensation, as provided hereunder,

through the termination date.  In

addition to other compensation payable to Executive for services rendered

through the termination date, the Company shall pay Executive no later than the

date of such termination, as a single severance payment, an amount equal to the

sum of: (i) three times Executive’s average annual Base Compensation, paid

hereunder for the preceding twenty-four month period (or, if Executive has been

employed less than twenty-four months, the average annual Base Compensation for

the period employed) plus (ii) an amount equal to three times Executive’s most

recent annual bonus from the Company (collectively, the “Severance

Amount”).  In addition to payment of the

Severance Amount, any unvested stock options or restricted stock held by

Executive shall become fully vested as of the date of termination.

 

(b)                                 Benefits.  In the event Executive’s employment hereunder is terminated by

the Company without cause pursuant to Section 5.1 or by Executive pursuant to

Section 5.4 or 5.6, then in addition to paying Executive the Severance Amount

and providing for the full vesting of unvested stock options or restricted

stock held by Executive, the Company shall pay the COBRA premium for health

care coverage for Executive and Executive’s spouse and children, as applicable

and to the extent eligible, for the lesser of 18 months commencing on the date

of such termination (the “Severance Benefits”) or the date on which Executive

becomes eligible for health care coverage under the plan of any other employer.

 

(c)                                  To be eligible to receive any

payments under this Section 5.2, Executive must execute and deliver (and

not revoke, if revocation period is required by law) a release of claims in a

form acceptable to the Company.

 

5.3.                              By The Company For Cause.  The Company may terminate Executive for

cause at any time, upon written notice to Executive.  For purposes of this Agreement, “cause” shall mean:

 

(a)                                  Executive’s conviction for

commission of a felony or a crime involving moral turpitude;

 

(b)                                 Executive’s willful commission of

any act of theft, embezzlement or misappropriation against the Company which,

in any such case, is materially and demonstrably injurious to the Company;

 

(c)                                  Executive’s willful and continued

failure to substantially perform Executive’s duties hereunder (other than such

failure resulting from Executive’s incapacity due to physical or mental

illness), which failure is not remedied within a reasonable time after written

demand for substantial performance is delivered by the Company which

specifically identifies the manner in which the Company believes that Executive

has not substantially performed Executive’s duties; or

 

(d)                                 Executive’s death or Disability

(as hereinafter defined).

 

For purposes of this Section 5.3, no act, or

failure to act, on Executive’s part shall be deemed “willful” unless done, or

omitted to be done, by Executive not in good faith.  In the event Executive is terminated for cause pursuant to this

Section 5.3, Executive shall 

 

5

 

have the right to receive Executive’s compensation

as otherwise provided under this Agreement through the effective date of

termination.  Executive shall have no

further right to receive compensation or other consideration from the Company,

or have any other remedy whatsoever against the Company, as a result of this

Agreement or the termination of Executive pursuant to this Section 5.3, except

as set forth below with respect to a termination due to Executive’s Disability.

In the event Executive is terminated by reason of

Executive’s death or Disability, the Company shall immediately pay Executive

(or his estate) the Severance Amount and shall pay the COBRA premium for health

care coverage for Executive’s spouse and children, as applicable and to the

extent eligible, for a period of 18 months commencing on the date of such

termination.  Said payments shall be in

addition to any disability insurance payments to which Executive is otherwise

entitled and any other compensation earned by Executive hereunder.  In addition, any unvested stock options or

restricted stock held by Executive shall become fully vested as of the date of

termination.  For purposes of this

Agreement, the term “Disability” shall mean a physical or mental incapacity as

a result of which Executive becomes unable to continue the proper performance

of Executive’s duties hereunder for six consecutive calendar months or for

shorter periods aggregating 180 business days in any 12 month period, but only

to the extent that such definition does not violate the Americans with

Disabilities Act.

 

5.4.                              By Executive For Good Reason.  Executive may terminate this Agreement for

good reason upon at least 10 days prior written notice to the Company.  For purposes of this Agreement, “good

reason” shall mean:

 

(a)                                  the Company’s material breach of

any of its respective obligations hereunder and either such breach is incurable

or, if curable, has not been cured within fifteen (15) days following receipt

of written notice by Executive to the Company of such breach by the Company;

 

In the event that Executive terminates this

Agreement for good reason pursuant to this Section 5.4, Executive shall have

the right to receive Executive’s compensation as provided hereunder through the

effective date of termination and shall also have the same rights and remedies

against the Company as Executive would have had if the Company had terminated

Executive’s employment without cause pursuant to Section 5.1 (including the

right to receive the Severance Amount payable and the Severance Benefits to be

provided under Section 5.2).

 

5.5.                              Executive’s Voluntary Termination.  Executive may, at any time, terminate this

Agreement without good reason upon written notice delivered to the Company at

least ninety (90) days prior to the effective date of termination.  In the event of such voluntary termination

of this Agreement by Executive:  (i)

Executive shall have the right to receive Executive’s compensation as provided

hereunder through the effective date of termination, and (ii) the Company,

on the one hand, and Executive, on the other hand, shall not have any further

right or remedy against one another except as provided in Sections 6 and 7

hereof which shall remain in full force and effect.

 

5.6.                              Change in Control.  Executive may terminate this Agreement, upon

at least ten (10) days’ prior written notice to the Company, at any time within

twelve (12) months after a “change in control” (as hereinafter defined) of the

Company.  In the event Executive

terminates this Agreement within twelve (12) months after a change in control

pursuant to this Section 5.6, (i) Executive shall continue to render

services pursuant hereto and shall continue to receive compensation, as

provided hereunder, through the termination date, (ii) the Company shall

pay Executive no later than the date of such termination, as a single severance

payment, an amount equal to the Severance Amount, and (iii) following such

termination, the Company shall provide the Severance Benefits as required by

 

6

 

Section 5.2. 

For purposes of this Agreement, a “change in control” shall mean the

occurrence of any of the following events:

 

(a)                            the individuals constituting the

Board as of the Effective Date (the “Incumbent Board”) cease for any reason to

constitute at least two-thirds (2/3rds) of the Board; provided, however, that

if the election, or nomination for election by the Company’s stockholders, of

any new director was approved by a vote of at least two-thirds (2/3rds) of the

Incumbent Board, such new director shall be considered a member of the

Incumbent Board;

 

(b)                           an acquisition of any voting

securities of the Company (the “Voting Securities”) by any “person” (as the

term “person” is used for purposes of Section 13(d) or Section 14(d) of the

Securities Exchange Act of 1934, as amended (the “1934 Act”)) immediately after

which such person has “beneficial ownership” (within the meaning of

Rule 13d–3 promulgated under the 1934 Act) (“Beneficial Ownership”)

of 20% or more of the combined voting power of the Company’s then outstanding

Voting Securities; or

 

(c)                            approval by the stockholders of

the Company of:

 

(i)                                          a merger, consolidation, share exchange or

reorganization involving the Company, unless

 

(A)                the stockholders of the Company,

immediately before such merger, consolidation, share exchange or

reorganization, own, directly or indirectly immediately following such merger,

consolidation, share exchange or reorganization, at least 80% of the combined

voting power of the outstanding voting securities of the corporation that is

the successor in such merger, consolidation, share exchange or reorganization

(the “Surviving Company”) in substantially the same proportion as their

ownership of the Voting Securities immediately before such merger,

consolidation, share exchange or reorganization; and

 

(B)                  the individuals who were members

of the Incumbent Board immediately prior to the execution of the agreement

providing for such merger, consolidation, share exchange or reorganization

constitute at least two-thirds (2/3rds) of the members of the board of

directors of the Surviving Company;

 

(ii)                                         a

complete liquidation or dissolution of the Company; or

 

(iii)                                       an agreement for

the sale or other disposition of all or substantially all of the assets of the

Company.

 

7

 

 

(d)                                 any

Person is or becomes the Beneficial Owner of securities of the Company representing ten percent (10%) or

more of the combined voting power of the 

Company’s then outstanding securities and (A) the identity of the Chief

Executive Officer of the Company  is

changed during the period beginning sixty (60) days before the attainment of

the ten percent (10%) beneficial ownership and ending two (2) years thereafter,

or (B) individuals constituting at least one-third (1/3) of the members of

the Board at the beginning of such period shall leave the Board during the

period beginning sixty (60) days before the attainment of the ten percent (10%)

beneficial ownership and ending two (2) years thereafter.

 

6.                                      CONFIDENTIALITY

 

During

the term of Executive’s employment under this Agreement, Executive will have

access to and become acquainted with various information relating to the Company’s

business operations, marketing data, business plans, strategies, employees,

contracts, financial records and accounts, projections and budgets, and similar

information.  Executive agrees that to

the extent such information is not generally available to the public and gives

the Company an advantage over competitors who do not know of or use such

information, such information and documents constitute “trade secrets” of the

Company.  Executive further agrees that

all such information and documents relating to the business of the Company,

whether they are prepared by Executive or come into Executive’s possession in

any other way, are owned by the Company and shall remain the exclusive property

of the Company.   Executive shall not

misuse, misappropriate or disclose any trade secrets of the Company, directly

or indirectly, or use them for Executive’s own benefit, either during the term

of this Agreement or at any time thereafter, except as may be necessary or

appropriate in the course of Executive’s employment with the Company, unless

such action is either previously agreed to in writing by the Company or

required by law.

 

7.                                      NON-SOLICITATION

 

For

a period of one (1) year following the date Executive’s employment hereunder is

terminated, Executive shall not solicit or induce any of the Company’s

employees, agents or independent contractors to end their relationship with the

Company, or recruit, hire or otherwise induce any such person to perform

services for Executive, or any other person, firm or company.

 

8.             ARBITRATION

AGREEMENT

 

8.1.                        In the event of any issue or

dispute arising between Executive and the Company, its officers, directors,

managers, supervisors and/or employees (except for claims for workers’

compensation, unemployment insurance, and any matter within the jurisdiction of

the California Labor Commissioner), the matter shall be submitted to and

resolved by final and binding arbitration as provided for by the California

Arbitration Act, California Code of Civil Procedure, Section 1280, et. seq.  Mandatory arbitration will not preclude

Executive from filing an administrative charge or complaint of discrimination

or harassment with either the Equal Employment Opportunity Commission or the

California Department of Fair Employment and Housing.  Except as provided in this section, arbitration shall be the exclusive method for resolving any employment related

dispute, and both the Company, and the Executive are giving up any right that

they might otherwise have to have a judge or jury decide any such employment

related dispute; provided, however, that either the Executive or the Company,

may request equitable relief, including but not limited to injunctive relief,

from a court of competent jurisdiction.

 

8.2.                       The claims

which are to be arbitrated under this Agreement include, but are not limited

to, tort claims, bad faith claims, contract claims, wage claims, benefit

claims, demands, liabilities, debts, accounts, obligations, damages,

compensatory damages, punitive

 

8

 

damages, liquidated damages,

costs, expenses, actions and causes of action arising out of or in connection

with the employment relationship with the Company, the termination of that

relationship, and/or post-employment retaliation and defamation (including but

not limited to any claims for wrongful discharge or breach of the covenant of

good faith and fair dealing), any and all federal and state civil rights laws,

ordinances, regulations or orders, based on charges of discrimination or

harassment on account of race, color, religion, sex, sexual orientation, age,

citizenship, national origin, mental or physical disability, medical condition,

marital status, pregnancy or any other discrimination prohibited by such laws,

ordinances, regulations or orders (including but not limited to Title VII of

the Civil Rights Act of 1964, as amended, 42 USC Section 2000, et  seq.;

Americans with Disabilities Act; Civil Rights Act of 1866, and Civil Rights Act

of 1991; 42 USC Section 1981, et  seq.; Age Discrimination in

Employment Act, as amended, 29 USC Section 621, et  seq.; Equal

Pay Act, as amended, 29 USC Section 206(d); regulations of the Office of

Federal Contract Compliance, 41 CFR Section 60, et  seq.; and the

California Fair Employment and Housing Act, California Government Code Section

12940, et  seq.).

 

8.3.                              If the

Executive or the Company does not make a written request for arbitration within

the limitations period applicable to a claim under applicable federal or state

law, that party will have waived its right to raise that claim, in any forum,

arising out of that issue or dispute.

 

8.4.                              The Executive

and the Company will select an arbitrator by mutual agreement.  If the Executive and the Company are unable

to agree on a neutral arbitrator, either party may elect to obtain a list of

arbitrators from the Alternative Dispute Resolution Service.  The Executive and the Company will

alternately strike names from the list, with the Executive striking the first

name, until only one name remains.  The

remaining person shall be the arbitrator.

 

8.5.                              Arbitration

proceedings will be held in California at a location mutually convenient to the

Executive and the Company.

 

8.6.                              The parties

retain the rights to conduct all discovery as provided for in the California

Code of Civil Procedure, and the arbitrator shall have the power to decide any

discovery disputes between the parties.

 

8.7.                              The arbitrator

shall entertain motions by either party for summary disposition as provided for

by applicable state law.

 

8.8.                              The arbitrator

shall conduct a hearing in a manner to be mutually agreed upon by the Executive

and the Company, or by the arbitrator if the parties cannot agree, provided,

however, that the parties shall have the opportunity to call witnesses under

oath, and to examine and cross examine all witnesses who appear at the hearing.

 

8.9.                              Within thirty

(30) days following the hearing and the submission of the matter to the

arbitrator, the arbitrator shall issue a written opinion and award which shall

be signed and dated.  The arbitrator’s

award shall decide all issues submitted by the parties, and the arbitrator may

not decide any issue not submitted.  The

arbitrator shall be permitted to award only those remedies in law or equity

which are requested by the parties and allowed by law.

 

8.10                           The cost of the

arbitrator and other incidental costs of arbitration, including the cost of a

court reporter, shall be equally shared between the Executive and the Company,

unless the arbitrator determines that this would cause an undue hardship to the

Executive, in which case the entire cost shall be borne by the Company.  The Executive and the Company shall each

bear their own costs for legal representation in any arbitration 

 

9

 

proceeding, provided

however, that the arbitrator shall have the authority to require either party

to pay the fee for the other party’s representation during the arbitration, as

is otherwise permitted under federal or state law, as a part of any remedy that

may be ordered.

 

9.                                      INDEMNIFICATION

 

To

the fullest extent permitted under applicable law, the Company shall indemnify,

defend and hold Executive harmless from and against any and all causes of

action, claims, demands, liabilities, damages, costs and expenses of any nature

whatsoever (collectively, “Damages”) directly or indirectly arising out of or

relating to Executive discharging Executive’s duties hereunder on behalf of the

Company and/or its respective subsidiaries and affiliates, so long as Executive

acted in good faith within the course and scope of Executive’s duties with respect

to the matter giving rise to the claim or Damages for which Executive seeks

indemnification.

 

10.                               GENERAL

PROVISIONS

 

10.1.                        Assignment; Binding Effect.  Neither the Company or Executive may assign,

delegate or otherwise transfer this Agreement or any of their respective rights

or obligations hereunder without the prior written consent of the other

party.  Any attempted prohibited

assignment or delegation shall be void. 

This Agreement shall be binding upon and inure to the benefit of any

permitted successors or assigns of the parties and the heirs, executors,

administrators and/or personal representatives of Executive.

 

10.2.                        Notices.  All notices, requests, demands and other communications that are

required or may be given under this Agreement shall be in writing and shall be

deemed to have been duly given when received if personally delivered; when

transmitted if transmitted by telecopy, electronic or digital transmission

method with electronic confirmation of receipt; the day after it is sent, if

sent for next-day delivery to a domestic address by recognized overnight

delivery service (e.g.,  FedEx); and

upon receipt, if sent by certified or registered mail, return receipt

requested.  In each case notice shall be

sent to:

 

	

  If to the Company:

  	

   

  	

  Arden Realty Limited

  Partnership

  c/o Arden Realty, Inc.

  11601 Wilshire Boulevard 

  Fourth Floor 

  Los Angeles, CA 90025-1740 

  Attention:  President 

  Facsimile:(310) 966-2699

  
	

   

  	

   

  	

   

  
	

  If to Executive:

  	

   

  	

  Rick Davis

  c/o Arden Realty, Inc.

  11601 Wilshire Boulevard 

  Fourth Floor 

  Los Angeles, 

  CA 90025-1740 

  Facsimile:(310) 966-2699

  

 

Any party may change its

address for the purpose of this Section 10.2 by giving the other party

written notice of its new address in the manner set forth above.

 

10.3.                        Entire Agreement.  This Agreement constitutes the entire

agreement of the parties, and supersedes all prior agreements.

 

10.4.                        Amendments; Waivers.  This Agreement may be amended or modified,

and any of the terms and covenants may be waived, only by a written instrument

executed by the parties hereto, or, in the case of a waiver, by the party

waiving compliance.  Any waiver by any 

 

10

 

 

party in

any one or more instances of any term or covenant contained in this Agreement

shall neither be deemed to be nor construed as a further or continuing waiver

of any such term or covenant of this Agreement.

 

10.5.                        Provisions Severable.  In case any one or more provisions of this

Agreement shall be invalid, illegal or unenforceable, in any respect, the

validity, legality and enforceability of the remaining provisions contained

herein shall not, in any way, be affected or impaired thereby.  If any provision hereof is determined by any

court of competent jurisdiction to be invalid or unenforceable by reason of

such provision extending the covenants and agreements contained herein for too

great a period of time or over too great a geographical area, or being too

extensive in any other respect, such provision shall be interpreted to extend

only over the maximum period of time and geographical area, and to the maximum

extent in all other respects, as to which it is valid and enforceable, all as

determined by such court in such action.

 

10.6.                        Attorney’s Fees.  If any legal action, arbitration or other

proceeding, is brought for the enforcement of this Agreement, or because of an

alleged dispute, breach or default in connection with any of the provisions of

this Agreement, each of the parties hereto shall be responsible for payment of

any attorneys’ fees and other costs incurred by them in that action or proceeding,

without regard to whomever is the prevailing party in such action or

proceeding.

 

10.7.                        Governing Law.  This Agreement shall be construed, performed and enforced in

accordance with, and governed by the laws of the State of California without

giving effect to the principles of conflict of laws thereof.

 

10.8.                        Counterparts.  This Agreement may be executed in one or more counterparts, each

of which shall be deemed an original, but all of which shall constitute the

same instrument.

 

 

11

 

IN WITNESS WHEREOF, the

parties hereto have executed this Agreement effective as of the date first

written above.

 

	

  THE COMPANY:

  	

   

  
	

   

  	

   

  
	

  ARDEN REALTY LIMITED

  PARTNERSHIP,

  	

   

  
	

  a Maryland Limited

  Partnership

  	

   

  
	

   

  	

   

  
	

  By:  ARDEN REALTY, INC.,

  	

   

  
	

  a Maryland corporation

  	

   

  
	

  Its:  Sole General Partner

  	

   

  
			

 

	

  By: 

  	

  /s/ Victor J. Colema

  	

   

  	

   

  
	

   

  	

  Victor J. Coleman

  	

  June 2, 1999

  	

   

  
	

   

  	

  Its:  President and COO

  	

  Date

  
	

   

  	

   

  	

   

  

 

EXECUTIVE:

 

	

  /s/ Richard S. Davis

  	

   

  	

   

  
	

  Richard S. Davis

  	

  June 2, 1999

  	

   

  
	

   

  	

  Date

  

 

12

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