Document:

<PAGE>

E-Music.com                       6/30/99                 Confidential Quotation

                                                                   Exhibit 10.22

Note: Portions of this exhibit indicated by "[*]" are subject to a confidential
treatment request, and have been omitted from this exhibit. Complete, unredacted
copies of this exhibit have been filed with the Securities and Exchange
Commission as part of this company's confidential treatment request.

[LOGO OF ENCODING.COM]

Al David
Emusic.com, Inc.

Encoding.com would like to validate our strong desire to have a strategic and
long-term relationship with Emusic.com by delivering what we believe to be a
very compelling proposal. The below proposal is intended to encompass all of
Emusic's encoding for a period of 1-year and is designed with a full partnership
in mind. Please note that the pricing you are being offered here is confidential
to E-music and the terms herein should not be disclosed to any third party.

The terms of this agreement are good until the last day of June 1999.

You will notice in the pricing section that we have given you [*] prices for the
encoding of [*] CDs initially and all ongoing volumes for a period of one-year.

Also pricing for Windows Media encoding has been added here as well at a very
reasonable rate.

                             Encoding Requirements

Please review this document carefully and let me know if there are sections that
are unclear or if we are missing some pressing details.

The following are your requirements, as we understand them.

 .  Support for the highest quality encoding from [*] format into [*] formats.
   Encoding of [*] CDs into [*] formats, [*].  Possible support for [*].
 .  [*] files will be encoded using the [*].
 .  [*] samples will be encoded into [*].
 .  [*] samples will be captured [*] seconds into a song unless otherwise
   requested. [*].
 .  Scanning of cover art into at least [*] formats.  [*] at a frame size to be
   determined.
 .  Receive media from labels and generate an electronic package slip for E-
   music.com for rectification purposes.
 .  Tracking of all media that is shipped to encoding.com without a packing slip
   by our internal tracking number, UOC and album title.
 .  Data entry for all [*] CDs to be used for meta data entry, naming, and cross
   reference to web site.
 .  Deliveries of media back to E-music.com [*].
 .  Require dedicated capacity in the encoding.com lab in an ongoing capacity for
   projects that can not yield the normal 2-4 week lead-time.

[*] Confidential Treatment Request

Quotation valid through June 1999
<PAGE>

E-Music.com                       6/30/99                 Confidential Quotation

           Digitization & Encoding Services; Data Work, and Scanning

Encoding

encoding.com is in a phase in our company culture where the partnerships we make
are as important as anything. By this we are prepared to jump into this
partnership with both feet and offer you the same strategic pricing for your
initial encoding project as all ongoing encoding work.

Please find below a brief description of the two opportunities available to you.

Pricing Short: Please also see contingencies below.

Straight customer/client relationship.
     -----------------------------------------------------------------
                         Encoding- MP3 and RA     Scanning     Data
     -----------------------------------------------------------------
       Initial [*]CDs              [*]               [*]        [*]
     -----------------------------------------------------------------
       1-year ongoing              [*]               [*]        [*]
     -----------------------------------------------------------------

Earn out opportunity: with the below opportunity you can save upwards of [*] off
the initial encoding project for a [*] royalty on all online sales of media we
encoded for a period of [*].

     -----------------------------------------------------------------
                         Encoding- MP3 and RA     Scanning     Data
     -----------------------------------------------------------------
       Initial [*] CDs             [*]               [*]        [*]
     -----------------------------------------------------------------
       1-year ongoing              [*]               [*]        [*]
     -----------------------------------------------------------------

We are not concerned with which option you choose, but we did want to give you a
way to defer your pricing even more if appropriate.

Initial [*]CDs (material):

The following are conditions of this very strategic pricing for your initial [*]
CDs.

 .  Work order is executed and a PO generated for the initial amount by June 30th
   1999.
 .  Jointly Sponsored press release announcing project and partnership
 .  Minimum annual commitment of [*] CDs for a period of 1-year. This will be
   dedicated capacity that will be priority access for E-Music.
 .  Link exchange where appropriate
 .  Possible other promotional or marketing events
 .  [*] downloads for all encoding.com employees for a period of 6-months.

Specifics:

Set-up per CD:                      [*]
Database integration:               [*]
Material Warehousing
     6 months from 1st shipment     [*]
Encoding cost per track/song
     [*] file:                      [*]
[*]                                 [*]

Total for [*] Tracks:               [*]
[*] tracks per CD on average

We will work with you over the next week to put in place a delivery schedule for
this deployment.

*If not executed by June 30th 1999 the price of [*] will apply for per track
encoding.

[*] Confidential Treatment Request

Quotation valid through June 1999
<PAGE>

E-Music.com                       6/30/99                 Confidential Quotation

Data Entry

Encoding.com has put in place a very robust data entry process and management
software. Over the past year we have created custom databases for a number of
clients with similar needs as your own. The following is our understanding of
your data entry requirements and the pricing that we are able to offer to
implement these.  [*] The following are based on our ability to enter data for
[*] CDs per hour per data entry employee.

Please also note that we have looked in the past at the use of the [*] as a tool
for propagating meta fields in our clients databases. [*].

Caveat:   When encoding.com is given an electronic packing slip for the CDs we
are receiving the data entry costs associated with those CDs will be [*] per CD.

Fields to be captured:
[*]

Format for export:          [*]
Cost per CD:                [*]
Total Costs for [*] CDs:    [*]*

* this number will be less if [*]

Scans

Encoding.com has the ability to scan cover art for E-Music.com as part of our
normal fulfillment process. For this project we will capture [*] formats as
follows:
[*]

Costs per scan:         [*]
Costs for [*] scans:    [*]

List price is [*] and [*] additional format..

[*] Confidential Treatment Request

Quotation valid through June 1999
<PAGE>

E-Music.com                       6/30/99                 Confidential Quotation

We will deliver the image files to you on CDR or DLT depending on your
requirements. Sometimes we have found that it is easier to manage the audio
files on CDR depending on your usage. We will work with you on this.

Fulfillment and Delivery

Fulfillment and delivery is how we return your media to you or to your hosting
provider.  The options here are via DAT, CDR, or FTP. We don't recommend FTP
because of timeliness for this amount of data.

DLT delivery media for [*] CDs worth of compressed media and cover art.

Approximately [*] of data to be delivered
[*] can fit on an individual DLT
[*] needed; @ [*] per DLT

Delivery Costs:        [*]
CDR Delivery:          [*]

We will work with your operations teams to put in place a structure for how we
deliver, store and retrieve media to and for E-music.

Summary:

We are very interested in working with you on this  project. We believe that we
are the only choice in the industry that can handle these volumes of audio
encoding. Please let me know what other information you need from me and I will
work to provide it. These prices are valid through June 1999.

Initial [*] CD encoding project

     ---------------------------------------------------------------------
       Item              Count                   Your Costs     Total
     ---------------------------------------------------------------------
       Encoding          [*] Songs into [*]      [*]            [*]
     ---------------------------------------------------------------------
                         [*] Encoding            [*]            [*]
     ---------------------------------------------------------------------
       Data Entry        [*] CDs ([*]fields)     [*]            [*]
     ---------------------------------------------------------------------
       Scans             [*]                     [*]            [*]
     ---------------------------------------------------------------------
       Delivery          [*] DLT                 [*]            [*]
     ---------------------------------------------------------------------
       CDR ongoing                               [*]
     ---------------------------------------------------------------------
       Total Project                                            [*]
        Costs
     ---------------------------------------------------------------------

1-year volume commitment: Additional Volume.

     ---------------------------------------------------------------------
       Item               Count                  Your Costs     Total
     ---------------------------------------------------------------------
       Encoding           [*] songs into [*]     [*]            [*]
     ---------------------------------------------------------------------
                          [*] encoding           [*]            [*]
     ---------------------------------------------------------------------
       Data Entry         [*] CDs ([*]fields)    [*]            [*]
     ---------------------------------------------------------------------
       Scans              [*]                    [*]            [*]
     ---------------------------------------------------------------------
       Delivery           [*] DLT                [*]            [*]
     ---------------------------------------------------------------------
       CDR ongoing                               [*]
     ---------------------------------------------------------------------
       Total Project                                            [*]
        Costs
     ---------------------------------------------------------------------

[*] Confidential Treatment Request

Quotation valid through June 1999
<PAGE>

E-Music.com                       6/30/99                 Confidential Quotation

* Contingent on this work-order being signed by June 30th 1999. Otherwise the
ongoing pricing schedules will be applied.

Ongoing Work:

Contingent on the signing of this work agreement we will work with Emusic.com to
put in place a structure and a process for handling all mass ongoing encoding
work for Emusic.com as well as how we will reserve dedicated lab time. In
signing this document Emusic.com asserts its willingness to enter into an
agreement of this nature.

The following is the pricing that we are able to offer Emusic.com for this
ongoing work as stated earlier.

     ---------------------------------------------------------------------
                         Encoding- MP3, RA,      Scanning       Data
                         and Windows Media
     ---------------------------------------------------------------------
       [*] ongoing       [*]                     [*]            [*] per CD
     ---------------------------------------------------------------------

Ongoing volumes are estimated at [*] tracks [*].

Terms and Conditions

The primary terms of our agreement require that you guarantee to have the rights
to the content and we agree not to use the content for other purposes without
your approval. We require a [*] deposit on all contracted work. The balance will
be invoiced monthly against the past months work.

1.  CONTROLLING TERMS.  Pricing is valid until June 31st 1999 and are valid for
a period of one year from the execution of this document. The terms and
conditions of sale contained herein shall apply to all provisions of encoding
services and related services by encoding.com, Inc. ("encoding.com") and to all
purchase orders or other offers accepted by encoding.com related thereto
(collectively, the "Service").  These terms and conditions may in some instances
conflict with or add to some of the terms and conditions affixed to the purchase
order or the procurement document issued by the Customer.  In such case, the
terms and conditions contained herein shall govern exclusively and ACCEPTANCE OF
CUSTOMER'S ORDER IS EXPRESSLY CONDITIONED UPON CUSTOMER'S ACCEPTANCE OF THE
TERMS AND CONDITIONS CONTAINED HEREIN irrespective of whether the Customer
accepts these conditions by oral or written acknowledgment, by implication or by
acceptance of or payment for the provision of the Service ordered hereunder
based on the content, materials and/or elements (collectively, the "Content")
provided to encoding.com by Customer.

2.  TERMS OF PAYMENT.  Payment must be made in US dollars and may be made in
cash, cashier's check, money order, travelers checks, check drawn on local bank
or Visa / MasterCard. All COD orders must be paid for and picked up Monday
through Friday between the hours of 9:00 AM and 5:00 PM. Credit terms are net 15
days. Interest at the maximum rate allowed by law will be charged on all
accounts not paid within 30 days unless previous arrangements have been made
with the encoding.com. ANY CLAIMS FOR ADJUSTMENT IN CONNECTION WITH AN INVOICE
MUST BE PRESENTED IN WRITING WITHIN 10 DAYS OF THE DATE OF THE INVOICE IN
QUESTION.

3.  PRICES; LIENS.  Prices for the Service are those shown on the face of this
acknowledgment, provided, however, that if such prices are based on the purchase
of a minimum quantity of Service and Customer fails to purchase such minimum
quantity, encoding.com has the right to collect from Customer the difference
between the price paid by Customer for the Service purchased and encoding.com's
standard price for such Service in quantity actually purchased by Customer.
encoding.com shall have a lien and security interest on tapes, CDs, files and
other property delivered by Customer to encoding.com and/or made by encoding.com
therefrom for the balance of any account due us by the Customer, including
collection and attorney's fees.  Customer hereby authorizes encoding.com to
execute and file, on Customer's behalf, a financing or other statement
evidencing this security interest.  When necessary, Customer agrees to execute
necessary documentation for perfecting such security interest.

4.  SHIPPING.  If encoding.com provides shipping and handling services for
Customer's materials, surcharges will apply.  Shipping and delivery dates are
approximate.  In no event, for any reason whether or not beyond encoding.com's
control, shall encoding.com be liable to Customer or any other party for any
losses, damages or liability for delay in delivery of shipped materials; nor
shall any delay in delivery of shipped materials constitute grounds for
cancellation of Customer's work order.

5.  DELIVERY.  The delivery dates set forth on this acknowledgment are
approximate only, and encoding.com is not liable for any damages to Customer,
nor shall encoding.com be in breach of its obligations to the Customer, because
of any delivery made within a reasonable time after the stated delivery date.
encoding.com may by written notice to Customer change any delivery date, and
such date shall become the agreed upon delivery date unless Customer objects to
such date in writing delivered to encoding.com within ten (10) days of receipt
of encoding.com's notice.  encoding.com shall not be liable for any late
delivery caused by the failure of the Customer to provide in a timely manner any
necessary information to affect such delivery.

6.  FORCE MAJEURE.  encoding.com is not liable for any failure to deliver, or
delay in the delivery of, any Service due to a cause beyond its control,
including but not limited to acts of God, fires, typhoons, earthquakes, labor
disputes, governmental actions or inability to obtain materials, components,
energy, encoding facilities, or transportation.  In the event of any such delay,
the data of delivery or performance hereunder shall be extended by a period
equal to the time lost by reason of such delay.  If encoding.com's production is
curtailed for any of the above reasons, encoding.com may allocate its production
among its various customers.  Such allocation shall be in a commercially fair
and reasonable manner.

7.  STORAGE. It is the Customer's responsibility to arrange for removal of
materials from encoding.com at the completion of each project.  At the
Customer's request, encoding.com will store tapes and Content for a maximum of
60 days.  encoding.com reserves the right to ship tapes and/or Content to the
Customer, freight collect, at the conclusion of the 60 day period or to charge a
storage fee or to otherwise dispose of the materials.

8.  RIGHT TO REFUSE SERVICE.  encoding.com reserves the right to refuse service
and/or process any Content which encoding.com, in its sole discretion, deems
unlawful, pornographic, degrading, likely to incite prejudice or passion or
otherwise inappropriate.

9.  CUSTOMER WARRANTIES.  Customer represents and warrants that (a) Customer has
sufficient rights in the Content to use it in the manner contemplated by this
acknowledgment, (b) the Content does not infringe upon or violate any patent,
copyright, trade secret, trademark or other intellectual property right of any
third party or any obscenity law or other applicable law, rule or regulation in
any jurisdiction in which the Content may be viewed or retrieved, (c)
encoding.com's

[*] Confidential Treatment Request

Quotation valid through June 1999
<PAGE>

E-Music.com                       6/30/99                 Confidential Quotation

provision of the Service and/or hosting of the Content hereunder
will not infringe upon or violate any patent, copyright, trade secret, trademark
or other intellectual property right of any third party, including but not
limited to any and all performance license rights, mechanical license rights,
synchronization license rights and rights under the Digital Performance Right in
Sound Recordings Act of 1995, or any obscenity law or other applicable law, rule
or regulation in any jurisdiction in which the Content can be viewed or
retrieved, and (d) the Content and encoding.com's provision of the Service on
behalf of Customer is not for any illegal, obscene, offensive or immoral
purpose.

10. ENCODING.COM LIMITED WARRANTY; LIMITED LIABILITY; EXCLUSION OF
CONSEQUENTIAL DAMAGES.  It is understood and agreed that the Customer's
materials are transported, received, processed, used and stored at Customer's
risk.  ENCODING.COM SHALL NOT BE LIABLE FOR ANY LOST PROFITS OR OTHER DAMAGES
CAUSED BY THE LOSS, DAMAGE OR DESTRUCTION OF MATERIALS BELONGING TO THE CUSTOMER
OR ANY OTHER PERSON WHILE IN TRANSIT OR POSSESSION OF ENCODING.COM UNLESS CAUSED
BY THE NEGLIGENCE OF ENCODING.COM IN WHICH EVENT, THE LIABILITY OF ENCODING.COM
SHALL BE LIMITED TO THE REPLACEMENT OF A SIMILAR QUANTITY OF BLANK TAPE OR
MAGNETIC OR OPTICAL MEDIA TO THE MATERIALS WHICH WERE LOST, DAMAGED OR
DESTROYED.  EXCEPT FOR SUCH REPLACEMENT, ENCODING.COM SHALL HAVE NO FURTHER
LIABILITY REGARDING THE LOSS, DAMAGE OR DESTRUCTION OF SUCH MATERIALS.
ENCODING.COM SHALL NOT BE LIABLE TO CUSTOMER OR ANY OTHER PERSON FOR ANY ACT OR
OMISSION OF ANY PERSON SELECTED BY ENCODING.COM TO PERFORM SERVICES OR FURNISH
MATERIALS TO CUSTOMER.  IF MATERIALS FURNISHED BY ENCODING.COM ARE FOUND TO BE
DEFECTIVE IN MANUFACTURE, ENCODING.COM SHALL REPLACE SUCH MATERIALS WITH A
SIMILAR QUANTITY OF BLANK TAPE, OR MAGNETIC OR OPTICAL MEDIA, PROVIDED THE
CUSTOMER NOTIFIES ENCODING.COM IN WRITING WITHIN THIRTY DAYS AFTER SHIPMENT OF
SUCH DEFECT.  EXCEPT FOR SUCH REPLACEMENT, ENCODING.COM SHALL HAVE NO FURTHER
LIABILITY IN CONNECTION WITH SUCH DEFECTIVE MATERIALS.  ENCODING.COM MAKES NO
WARRANTY, EXPRESSED OR IMPLIED WITH RESPECT TO THE MATERIALS OR SERVICES
PROVIDED IT ASSUMES NO RESPONSIBILITY FOR THE CHARACTER OR QUALITY OF MATERIALS
OR SERVICES PROVIDED BY IT.  ENCODING.COM EXPRESSLY DISCLAIMS ALL WARRANTIES
EXPRESSED OR IMPLIED, STATUTORY OR OTHERWISE, INCLUDING ANY IMPLIED WARRANTY OR
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. ALL WARRANTIES WITH RESPECT
TO THE SERVICE ARE STRICTLY LIMITED TO THOSE SET FORTH IN THIS ACKNOWLEDGMENT.
IN NO EVENT WILL ENCODING.COM BE LIABLE TO THE CUSTOMER FOR ANY CONSEQUENTIAL,
INDIRECT, SPECIAL, OR INCIDENTAL DAMAGES EVEN IF ENCODING.COM HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES. NOTWITHSTANDING THE FOREGOING, ENCODING.COM
MAKES NO REPRESENTATION OR WARRANTIES OF ANY TYPE WHATSOEVER REGARDING THE
HOSTING OF ANY CONTENT ON ITS NETWORK OR ANY SUBCONTRACTOR'S OR OTHER PARTY'S
NETWORK OR THE PERFORMANCE OR RELIABILITY OF ANY SUCH NETWORK, OR ANY CONNECTION
TO, TRANSMISSION OVER, RESULTS OF OR USE OF ANY NETWORK CONNECTION OR FACILITIES
PROVIDED (OR FAILED TO BE PROVIDED) UNDER THIS ACKNOWLEDGMENT AND ENCODING.COM
MAKES NO WARRANTY WHATSOEVER FOR PRODUCTS OR SERVICES NOT ACTUALLY PRODUCED OR
PROVIDED BY ENCODING.COM.

11. INDEMNIFICATION BY CUSTOMER.  Customer agrees to defend, protect, indemnify
and hold encoding.com harmless from and against all claims of any kind, whether
based in contract, in tort (including negligence or strict liability), or
resulting from (a) services provided by encoding.com on behalf of Customer
hereunder, except for any damages arising exclusively out of any material breach
of this acknowledgment by encoding.com, (b) any use by encoding.com of any data
or files provided by Customer to encoding.com under this acknowledgment, (c) any
breach by Customer of this acknowledgment, including without limitation any
failure by Customer to observe or satisfy any terms or conditions of this
acknowledgment, (d) any violation of any applicable federal, state or local laws
with regard to the transmission and use of information and content, including
laws related to privacy, publicity, the Communications Decency Act of 1996,
arising out of the Customer Content, (e) any infringement of any United States
or other patent, trademark, copyright, trade secret or other intellectual
property right, including but not limited to any and all performance license
rights, mechanical license rights, synchronization license rights and rights
under the Digital Performance Right in Sound Recordings Act of 1995, relating to
the Content supplied by Customer to encoding.com or the Services provided
hereunder, or (f) otherwise for any losses, expenses, damages and liabilities,
direct, indirect, special or consequential which may arise out of Customer's
use, distribution or sale of goods or services covered hereby except those
caused solely by the sole gross negligence of encoding.com.

12. ACKNOWLEDGMENT.  Customer acknowledges that encoding.com, in its sole
discretion, may subcontract all or part of the hosting services to be provided
hereunder.  CUSTOMER FURTHER ACKNOWLEDGES THAT ENCODING.COM WILL HAVE NO
LIABILITY FOR THE FAILURE OF ANY NETWORK OR SERVER IN CONNECTION WITH THE
HOSTING OF ANY CONTENT.

13. ORDER CANCELLATION.  If an order for the Service is canceled, Customer must
pay for orders scheduled for delivery or performance within ninety (90) days of
encoding.com's receipt of cancellation notice.

14. MISCELLANEOUS.  Any waiver by encoding.com of any default by the Customer
hereunder shall not be deemed to be a continuing waiver of such default or a
waiver of any other default or of any of the terms and conditions of this
acknowledgment.  The terms and conditions of this acknowledgment may not be
superseded, modified, or amended except in a writing stating that it is a
modification and signed by an authorized representative of each party hereto,
provided, however, that encoding.com may modify the specifications of the
Service provided hereunder if the modification does not change the form, fit or
function of the Service.  This acknowledgment (not including any of the terms
and conditions of the Customer's purchase order or any similar document issued
by Customer), constitutes the entire agreement between the Customer and
encoding.com with regard to the Service listed on the face of this
acknowledgment, and expressly supersedes and replaces any prior or
contemporaneous agreements, written or oral, relating to such goods or services.
This acknowledgment is governed by, construed and enforced in accordance with
the laws of the State of Washington, without regard to conflict of laws
provisions.  Both parties agree that any litigation or arbitration between the
parties shall take place in King County, Washington, and both parties waive any
objection to personal jurisdiction or venue in any forum located in that county.
In any suit or action brought to enforce any term, condition or covenant of this
acknowledgment or to recover damages arising from any breach of the
acknowledgment, the losing party shall pay the prevailing party's reasonable
attorneys' fees and all other costs and expenses which may be incurred by the
prevailing party in any suit, action or in any reviews or appeals therefrom.

ACKNOWLEDGED AND AGREED:

E-music.com

By:   /s/ Joseph Howell
   ------------------------------------
Its:  Chief Financial Officer

[*] Confidential Treatment Request

Quotation valid through June 1999

<PAGE>

E-Music.com                      6/30/99                  Confidential Quotation

                   Rider to encoding.com Terms and Conditions

The following changes will be applied to the attached encoding.com Terms and
Conditions.

1.   Payment terms:

Insert:  EMusic agrees to pay encoding.com [*] of the total project costs in
advance as called out by the contract.  encoding.com will invoice EMusic for [*]
of the total amount of this project in the amount of [*] immediately net 0 and
an additional [*] on the last billing cycle of September.

During the first [*] of the project, encoding.com will invoice EMusic normally
outside of this [*] down payment.  EMusic will pay these invoices per the terms
of the agreement. During the second [*] of the project the down payment that was
made by EMusic will be applied to encoding.com invoices.

2.   Data Entry Rider:

The attached form outlines in detail the fields that need to be captured by
encoding.com in the data entry portion of the encoding process. The fields that
are called out are also defined so each item is clear for all data entry people
across all CDs in the project.

Also-The data fields that are called out in the attached sheet are different
than the ones that were called out in the original proposal. Some of these are
different because of differences in how we defined a parameter and others
because new requirements became available. As such the new pricing will be as
follows but WILL NOT affect the total value of the contract;

Old Pricing per CD:  [*] per CD for data entry.
New Pricing per CD:  [*] per CD for data entry.

Pricing is based on an estimate of a [*] increase in the amount of time needed
to capture the meta information currently requested and a mark up of the old
price of [*].

Encoding.com and EMusic will review these prices and structure every [*] as
appropriate to ensure that significant costs are not being endured in either
direction.

    /s/ Al David                                    June 30, 1999
--------------------------------------------------------------------------------
Signature Al David--Sr. Director, Operations        Date
(Minister of the Digital Bit)

Accepted by encoding.com

    /s/ Todd Hinders                                June 30, 1999
--------------------------------------------------------------------------------
Todd Hinders--Minister of Entertainment             Date:

[*] Confidential Treatment Request

Quotation valid through June 1999<PAGE>

                                                                   Exhibit 10.23

Note: Portions of this exhibit indicated by "[*]" are subject to a confidential
treatment request, and have been omitted from this exhibit. Complete, unredacted
copies of this exhibit have been filed with the Securities and Exchange
Commission as part of this company's confidential treatment request.

                              SERVICES AGREEMENT

             This Services Agreement (this "Agreement") is executed as of this
17th day of December, 1999 (the "Effective Date") by and between encoding.com,
Inc., a Delaware corporation ("Encoding"), and Valley Media, Inc., a Delaware
corporation ("Valley").

                                    RECITALS

             A. Encoding offers services and applications for encoding,
optimizing and delivering audio and video content on the Internet.

             B. Valley is a distributor of music and video entertainment
products.

             C. Valley desires to obtain certain services from Encoding that
will allow Valley to include a digital music sampling service as part of the
consumer database it offers to its retail customers.

                                   AGREEMENT

             In consideration of the foregoing and the mutual promises and
covenants contained herein, and for other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, Valley and Encoding
hereby agree as follows:

1.   Definitions.  For purposes of this Agreement, the following definitions
will apply:

     1.1.    The term "Confidential Information" means any information that one
             party (the "Disclosing Party") furnishes or makes available to the
             other party (the "Receiving Party") and all information related to
             the business of one party (the "Disclosing Party") which the other
             party (the "Receiving Party") acquires in the course of performing
             its obligations under this Agreement; provided, however, that the
             term "Confidential Information" does not include any information
             that the Receiving Party can prove (a) is generally available to or
             known by the public, (b) was available to or known by the Receiving
             Party on a non-confidential basis prior to disclosure by the
             Disclosing Party, (c) was independently developed for the Receiving
             Party by persons who were not given access to the information
             disclosed by the Disclosing Party, or (d) becomes generally known
             to the public after the Effective Date through no act or omission
             of the Receiving Party.

     1.2.    The term "Major Labels" means, collectively, [*], and (f) any
             affiliate, division or subsidiary of any of the entities described
             in parts (a) through (e) of this Section 1.2.

2.   Inventory Loan.  Valley maintains an inventory of compact discs containing
     prerecorded music (each, a "CD" and, collectively, the "CDs"). Valley will
     [*], one copy of each stock-keeping unit maintained by Valley among its
     inventory of CDs during the term of this Agreement, including the original
     artwork and packaging for each such CD (each, a "Loaned CD" and,
     collectively, the "Loaned CDs"). Valley will deliver the Loaned CDs to
     Encoding. Encoding will [*] in delivering the Loaned CDs. In addition,
     Encoding will pay Valley a handling charge of [*] per Loaned CD delivered
     to Encoding by Valley.

[*] Confidential Treatment Request

                                       1
<PAGE>

3.   Product Information File.  Valley maintains an electronic data file
     containing [*] for each recording contained in a CD in its inventory (the
     "Product Information File"). Valley will deliver to Encoding, at [*]
     charge, one electronic copy of the Product Information File. In addition,
     during the term of this Agreement, Valley will deliver to Encoding daily
     updates of the Product Information File ("PIF Updates") containing artist
     and UPC information for recordings contained in CDs that have been added to
     Valley's inventory since the original Product Information File or the last
     PIF Update was delivered to Encoding by Valley, whichever was later. For
     purposes of this Agreement, the term "Product Information File" means the
     Product Information File as updated and/or amended by Encoding to
     incorporate any and all PIF Updates. Valley will not be required to deliver
     updates of the Product Information File to Encoding following the
     termination or expiration of this Agreement unless the parties agree
     otherwise.

4.  Encoding of Loaned CDs.

    4.1.     For each recording contained in a Loaned CD (each, a "Recording"
             and, collectively, the "Recordings"), Encoding will create a
             storable electronic file containing a copy of that Recording in
             digital form (each, a "Song File" and, collectively, the "Song
             Files"). Encoding will create each Song File in a manner that will
             allow that Song File to be encoded into each of the streaming and
             downloading formats and at each of the data rates described in
             Exhibit A hereto, which is incorporated herein by this reference.
             Valley may amend Exhibit A from time to time to include additional
             streaming and/or downloading formats and/or additional data rates,
             and Encoding will create Song Files and Song Clips (as defined
             below) for each Recording in such additional formats and/or at such
             additional data rates in accordance with a schedule agreed upon by
             both parties. Valley will [*] by Encoding in encoding the Loaned
             CDs into such additional formats and/or at such additional data
             rates pursuant to this Section 4.1.

     4.2.    From each Song File, Encoding will create a sound clip (each, a
             "Song Clip" and, collectively, the "Song Clips") of a length, in
             each of the formats and at each of the data rates described in
             Exhibit B hereto, which is incorporated herein by this reference.

     4.3.    Encoding will link each Song Clip to that portion of the Product
             Information File containing product information for the Recording
             underlying the Song Clip, so that users of the Product Information
             File [*] for a particular Recording will be able to [*].

     4.4.    Encoding will create a storable electronic file containing a copy
             of the cover art of each Loaned CD in digital form (each, a "Cover
             Art File" and, collectively, the "Cover Art Files". Encoding will
             incorporate the Cover Art Files into the Product Information File
             so that a digital image of the cover art for a Loaned CD will
             appear on each screen viewed by a user of the Product Information
             File that contains information regarding a Recording contained in
             that Loaned CD.

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     4.5.    After Encoding has created Song Files and Song Clips for each
             Recording contained in a Loaned CD, and created a Cover Art File
             for that Loaned CD, Encoding will promptly return the Loaned CD to
             Valley. Valley will [*] in delivering the returned Loaned CDs.
             Encoding may return Loaned CDs without shrink-wrap, and Encoding
             will use [*] efforts to have each returned Loaned CD in a condition
             that would allow Valley to return the Loaned CD to the vendor from
             which it was purchased without any refurbishment on Valley's part;
             provided, however, if Encoding is not able to return a Loaned CDs
             in such returnable condition, Encoding will pay [*] of Valley's
             wholesale cost for any such Loaned CD.

     4.6.    Encoding will update and/or amend the Product Information File on a
             daily basis to incorporate the information contained in any and all
             PIF Updates.

     4.7.    If, in carrying out its responsibilities under this Agreement, but
             without any separate obligation to do so, Encoding becomes aware of
             a Recording that is contained in a Loaned CD [*].

     4.8.    Encoding will attempt to create a customized clip service that will
             allow an artist or label to select the portion of a Recording by
             that artist or label that is used to create a Song Clip for that
             Recording. The artist or label would be required to bear the cost
             related to the creation of any such customized Song Clip.

5.   Music Sampling Service.  Valley and Encoding will use the Product
     Information File and the Song Clips to create a music sampling service (the
     "Sampling Service") that will be sold or licensed to third parties.
     Encoding and Valley each will have the right to sell or license the
     Sampling Service to third parties; provided, however, that neither Encoding
     nor Valley may sell, license or otherwise transfer the Sampling Service or
     any portion thereof to [*]. Encoding and Valley will each be responsible
     for collecting sales revenue and/or license fees from their respective
     customers and/or licensees. During the term of this Agreement, Encoding and
     Valley will each be entitled to [*] of any license fees received by the
     other party for selling or licensing the Sampling Service, but only to the
     extent [*]. Encoding will perform the following services to support the
     Sampling Service:

     5.1.    Encoding will store the Song Clips on its business systems and use
             those systems to stream the Song Clips to consumers using the
             Sampling Service. In hosting and streaming the Sampling Service,
             Encoding will maintain interface capabilities that are consistent
             with industry standards. Encoding's right to host and stream the
             Sampling Service on behalf of Valley under this Section 5.1. is not
             exclusive, and Valley may retain other persons or entities to
             perform such services in accordance with the following conditions.
             Valley will notify Encoding in writing if it wishes to have hosting
             and streaming services for the Sampling Service performed by a
             person or entity other than Encoding (the "Third Party Service
             Provider"). For a period of sixty (60) days following Encoding's
             receipt of such notice, Valley and Encoding will negotiate in good
             faith regarding Encoding's provision of such services instead of
             the Third Party Service Provider. If, at the conclusion of such
             sixty (60) day period, Valley and Encoding have not reached an
             agreement for Encoding to perform such services after negotiating
             in good faith, Valley will be permitted to retain the Third Party
             Service Provider to perform such services.

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     5.2.    Encoding will collect the data described in Exhibit D hereto (the
             "Consumer Data"), which is incorporated herein by this reference,
             regarding the usage and purchasing habits of consumers that use the
             Sampling Service.

6.   Minimum Service Levels.  In consideration of the capital expenditures that
     will be incurred by Encoding in connection with this Agreement, which are
     described in Section 7.1. below, Valley [*] that Encoding will receive
     revenues from the Sampling Service of at least [*] during each three month
     period (an "Installment Period") during the first twelve (12) months after
     the Sampling Service becomes operational (the "Guaranteed Period") for a
     total guaranteed payment of at least [*]. If Encoding does not receive
     revenues from the Sampling Service of at least [*] during each Installment
     Period during the Guaranteed Period, Valley will make a payment to Encoding
     (each, a "Guaranteed Payment") within thirty (30) Days of the conclusion of
     applicable Installment Period equal to the difference between [*] and the
     amount of revenues actually received by Encoding from the Sampling Service
     during the applicable Installment Period (the "Sampling Service Revenue");
     provided, however, that Encoding will not be entitled to receive the
     Guaranteed Payment if (a) the Sampling Service is not operational on or
     before [*] if Valley has provided the Priority CDs (as defined below)
     within 30 days of the Effective Date,or [*], which is incorporated herein
     by this reference; provided, further, that Valley shall not be obligated to
     make a Guaranteed Payment for a particular Installment Period if Encoding
     has received an average of [*] from Guaranteed Payments and Sampling
     Service Revenue and all Guaranteed Payments for the Installment Period in
     question and each preceding Installment Period. For purposes of this
     Section 6, the Sampling Service will become "operational" when Encoding has
     created Song Files and Song Clips for the [*] Loaned CDs designated as
     "Priority CDs" within 30 days of the Effective Date. For the purposes of
     this Section 6, all references to "revenue" shall be revenue calculated in
     accordance with U.S. GAAP.

7.   Service Fees.

     7.1.    Capital Expenses.  Encoding will pay all the necessary upfront
             capital equipment charges necessary for the creation of the
             Sampling Service which are estimated to total [*] and to include:

             7.1.1.     Facilities
             7.1.2.     Ripping Stations
             7.1.3.     Encoding Stations
             7.1.4.     Raid Online Storage
             7.1.5.     Nearline Storage System
             7.1.6.     Computer servers and Equipment

     7.2.    Shared Costs.  In consideration of the services performed by
             Encoding under this Agreement, Encoding and Valley will [*] the
             costs of creating the Song Files and Song Clips. The costs will
             include [*]. Encoding estimates these direct costs to total [*].
             Therefore, Valley will pay Encoding a total of [*] on [*] for the
             non-refundable expenses for setting up the Sampling Service. The
             above estimates are fixed and in the event the actual costs for
             this service increase or decrease, Valley will [*].

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     7.3.    Maintenance Costs.  For the ongoing maintenance encoding of new
             inventory for the Sampling Service, Valley and Encoding will [*]
             the actual direct ongoing encoding costs estimated at the rate of
             [*] per CD used in the Sampling Service. Therefore, Valley would
             pay Encoding a service fee of [*] per such CD. These costs are
             fixed through September 2000. In the event, the costs for
             maintenance are determined to increase or decrease by [*] or
             higher, the parties agree to renegotiate this clause and its fee
             schedule in good faith. Encoding will invoice Valley on a monthly
             basis that reflects the actual number of files added to the
             Sampling Service inventory. Valley and Encoding will each pay [*]
             of all shipping and handling charges to and from the Valley and
             Encoding.com facilities.

     7.4.    Streaming Costs.  Encoding will charge Valley [*] for the ongoing
             streaming and hosting costs. [*] is defined as the [*] plus [*] of
             the [*] plus [*].

8.   Ownership and Rights upon Termination.

     8.1.    Loaned CDs.

             8.1.1.  The Loaned CDs are, and will at all times remain, Valley's
                  sole and exclusive property, and Valley will have the right to
                  demand the return of any or all of the Loaned CDs, with
                  Encoding and Valley to each pay [*] of the cost of such
                  return, including the original artwork and packaging for each
                  Loaned CD, at any time; provided, however, that, if at any
                  time any or all of the Loaned CDs (other than any Loaned CDs
                  purchased by Encoding pursuant to Section 9.2 of this
                  Agreement) are determined to be Encoding's property, Encoding
                  hereby grants Valley a security interest in such Loaned CDs.

             8.1.2.  Upon the expiration or termination of this Agreement,
                  Encoding will promptly return all of the Loaned CDs, including
                  the original artwork and packaging for each Loaned CD, with
                  Encoding and Valley to each pay [*] of the cost of such
                  return, to Valley (other than any Loaned CDs Encoding has
                  already returned to, or purchased from, Valley pursuant to
                  Section 9.2 of this Agreement).

     8.2.    Files and Clips.

             8.2.1.  The Song Clips, the Song Files and the Cover Art Files will
                  be, and will at all times remain, the sole and exclusive
                  property of Valley; provided, however, that, if at any time
                  any or all of the Song Files and/or the Song Clips and/or the
                  Cover Art Files are determined to be Encoding's property,
                  Encoding hereby grants Valley a security interest in such Song
                  Files and/or Song Clips and/or Cover Art Files .

             8.2.2.  The Product Information File and any and all PIF Updates
                  will be, and will at all times remain, the sole and exclusive
                  property of Valley; provided, however, that, if at any time
                  the Product Information File, any portion thereof, or any or
                  all of the PIF Updates are determined to be Encoding's
                  property, Encoding hereby grants Valley a security interest in
                  the Product Information File and/or such PIF Updates.

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             8.2.3.  Valley hereby grants Encoding a worldwide, perpetual,
                  irrevocable, nonexclusive license to use, store, modify, copy
                  and distribute the Product Information File, the PIF Updates,
                  the Song Clips, the Song Files and the cover Art Files. This
                  license will survive any termination or expiration of this
                  Agreement. Encoding will have the right to sublicense the
                  Product Information File, the PIF Updates, the Song Files, the
                  Song Clips and the Cover Art Files to any entity other than
                  [*].

             8.2.4.  Upon the expiration or termination of this Agreement, or at
                  any earlier time, upon demand by Valley, Encoding will
                  promptly deliver to Valley, [*], copies of all of the Song
                  Files, Song Clips and Cover Art Files in the formats
                  maintained hereunder; provided, however, if Valley terminates
                  this Agreement as a result of a breach of this Agreement by
                  Encoding pursuant to Section 18.2, Encoding shall [*].

     8.3.    Consumer Data. All of the Consumer Data will be, and will at all
             times remain, the sole and exclusive property of Valley; provided,
             however, that Valley will pay Encoding [*] all revenues received by
             Valley through the sale, licensing or other commercial exploitation
             of all or any portion of the Consumer Data during the term of this
             Agreement.

9.   Audiofile License and Deleted Product.

     9.1.    At the same time the parties enter into this Agreement, they will
             enter into an Audiofile License Agreement substantially in the form
             attached hereto as Exhibit F (the "Audiofile License"), which is
             incorporated herein by this reference, pursuant to which Valley
             will license its audiofile database ("Audiofile") to Encoding on a
             royalty free basis during the term of this Agreement. If Valley is
             notified by any of its suppliers that the supplier is deleting one
             of the Loaned CDs from its catalog, Valley will post a deletion
             notice regarding the Loaned CD on Audiofile, and Encoding will
             return its copy of the Loaned CD to Valley on or before the Last
             Customer Return Date stated in the deletion notice, with Encoding
             and Valley to [*] of the cost of such return.

     9.2.    If Valley posts a deletion notice regarding a Loaned CD on
             Audiofile and Audiofile is fully operational and accessible by
             Encoding, and Encoding fails to return its copy of the Loaned CD to
             Valley prior to the Last Customer Return Date stated in the
             deletion notice, Encoding will purchase the Loaned CD from Valley
             at Valley's wholesale price for the Loaned CD.

10.  Initial Warrant Grant.  Encoding will issue warrants for 325,000 shares of
     Encoding common stock with a strike price of $10 per share and an exercise
     period of 1 year (the "Initial Warrants"). The Initial Warrants will be
     granted upon commencement of this agreement.

11.  Rights Acquisition.  Encoding will grant Valley an additional 325,000 on
     the same terms and conditions as the Initial Warrants in consideration of
     Valley's certification attached hereto as Exhibit G (the "Certificate"),
     which is incorporated herein by this reference, regarding Valley's attempts
     to [*]. The statements contained in the Certificate will constitute
     representations and warranties of Valley under this Agreement. If Valley
     enters into a definitive written agreement with [*] regarding the matters
     set forth in the Certificate, Valley will provide a copy of such agreement
     to Encoding.

12.  Future Endeavors.

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     12.1.   Valley and Encoding will explore the possibility of a variety of
             new offerings leveraging either the existing assets such as the
             Song Files, Song Clips and/or the PIF for additional Internet Music
             services including digital downloading services for Valley's
             customers, Internet radio broadcasts, Internet or digital juke
             boxes, "just-in-time" compact disc manufacturing; or offerings
             leveraging other assets of Valley and Encoding.

     12.2.   Valley and Encoding agree that both parties will mutually agree
             upon the appropriate business model for all new jointly created new
             ventures. In such ventures as may occur, Encoding and Valley will
             [*] but will attempt to structure the ventures so [*].

13.  Representations and Warranties of Encoding. To induce Valley to enter into
     this Agreement and to perform the transactions contemplated hereunder,
     Encoding represents and warrants as follows:

     13.1.   Organization.  Encoding is a corporation duly organized, validly
             existing and in good standing under the laws of the state of
             Delaware.

     13.2.   Authority; Consents and Approvals; No Violations. Encoding has
             the full corporate power and authority and legal right to execute
             and deliver this Agreement, and otherwise to perform its
             obligations hereunder. This Agreement has been validly executed and
             delivered by Encoding and will constitute a valid and binding
             obligation of Encoding enforceable in accordance with its terms,
             except to the extent such enforceability may be limited by the
             effects of bankruptcy, insolvency, reorganization, moratorium or
             other similar laws affecting creditors' rights generally, and by
             the effect of general principles of equitable law, regardless of
             whether such enforceability is considered in a proceeding in equity
             or at law. The execution and delivery of this Agreement and the
             consummation of the transactions contemplated hereby do not and
             will not violate any provision of Encoding's Certificate of
             Incorporation or Bylaws, or violate, conflict with, result in a
             breach of or constitute (with or without due notice, lapse of time
             or both) a default under any agreement, license, contract,
             franchise, permit, indenture, lease, or other instrument to which
             Encoding is a party, or by which it or any of its assets are bound.

     13.3.   Performance Standards.  Encoding will perform the services
             described in Sections 4 and 5 of this Agreement in a professional
             and workmanlike manner that is consistent with the highest
             industry standards.

14.  Representations and Warranties of Valley.  To induce Encoding to enter
     into this Agreement and to perform the transactions contemplated hereunder,
     Valley represents and warrants as follows:

     14.1.   Organization.  Valley is a corporation duly organized, validly
             existing and in good standing under the laws of the state of
             Delaware.

     14.2.   Authority; Consents and Approvals; No Violations. Valley has the
             full corporate power and authority and legal right to execute and
             deliver this Agreement, and otherwise to perform its obligations
             hereunder. This Agreement has been validly executed and delivered
             by Valley and will constitute a valid and binding obligation of
             Valley enforceable in accordance with its terms, except to the
             extent such enforceability may be limited by the effects of
             bankruptcy, insolvency,

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             reorganization, moratorium or other similar laws affecting
             creditors' rights generally, and by the effect of general
             principles of equitable law, regardless of whether such
             enforceability is considered in a proceeding in equity or at law.
             The execution and delivery of this Agreement and the consummation
             of the transactions contemplated hereby do not and will not violate
             any provision of Valley's Certificate of Incorporation or Bylaws or
             violate, conflict with, result in a breach of or constitute (with
             or without due notice, lapse of time or both) a default under any
             agreement, license, contract, franchise, permit, indenture, lease,
             or other instrument to which Valley is a party, or by which it or
             any of its assets are bound.

15.  Indemnification.  Each party will, at all times, indemnify, defend and
     hold the other party harmless from and against any and all third-party
     claims, damages, liabilities, costs and expenses (including reasonable
     attorney's fees) arising out of any breach or alleged breach by the
     indemnifying party of any representation, warranty or obligation of such
     party under this Agreement. In addition, each party will, at all times,
     indemnify, defend and hold the other party harmless from and against any
     and all third-party claims, damages, liabilities, costs and expenses
     (including reasonable attorney's fees) arising out of any infringement or
     alleged infringement of the patents, copyrights, trademarks or other
     intellectual property rights of any third party that results from the
     commercial use of the Sampling Service by the indemnifying party, any of
     the indemnifying party's licensees, or any person or entity that has
     purchased the Sampling Service, or any portion thereof, from the
     indemnifying party.

16.  Limitation on Damages.  IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE
     OTHER FOR INDIRECT OR CONSEQUENTIAL DAMAGES, WHETHER OR NOT SUCH PARTY HAS
     BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND REGARDLESS OF THE FORM
     OF ACTION.

17.  Confidential Information.  Neither Encoding nor Valley may use any
     Confidential Information of the other except as permitted under this
     Agreement. In addition, neither Encoding nor Valley may disclose any
     Confidential Information of the other unless (a) such disclosure is made to
     the Disclosing Party's employees or agents on a "need to know" basis or (b)
     such disclosure is required by law or legal process and the party from whom
     such disclosure is required has given the other party prior notice of such
     requirement and has cooperated with the non-Disclosing Party to oppose
     disclosure. For purposes of this Agreement, any unauthorized use or
     disclosure of Confidential Information by an employee or agent of either
     party will be treated as an unauthorized disclosure by such party.

18.  Term and Termination.

     18.1.   This Agreement will terminate on the third anniversary of the
             Effective Date (the "Initial Termination Date"), unless both
             parties provide a written amendment at least ninety (90) days prior
             to the Initial Termination Date, in which case this Agreement will
             be extended for an additional two years and will terminate upon the
             fifth anniversary of the Effective Date.

     18.2.   Either party may terminate this Agreement if (i) the other party
             materially breaches any of its obligations under this Agreement,
             (ii) the non-breaching party sends written notice to the breaching
             party describing the breach in reasonable detail, and (iii) the
             breaching party does not cure the breach within thirty (30) days
             following its receipt of such notice.

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     18.3.   Either party may terminate this Agreement if (i) the other party
             becomes insolvent, or (ii) a petition is filed by or against the
             other party under any bankruptcy or insolvency laws and, in the
             event of any involuntary petition, the petition is not dismissed
             within forty-five (45) days of the filing date.

     18.4.   The parties may terminate this Agreement by mutual consent through
             a signed writing.

19.  Press Release.  Upon execution of this Agreement, Encoding and Valley
     will issue a joint press release (the "Press Release") announcing the
     execution of this Agreement and briefly describing the transactions
     contemplated hereby. Neither party will issue the Press Release, nor any
     other release concerning this Agreement or the transactions contemplated
     hereby, without the other party's prior consent.

20.  Miscellaneous

     20.1.   Assignment. Neither party may assign any of its rights under this
             Agreement without the other party's prior written consent;
             provided, however, that either party may assign its rights under
             this Agreement to any affiliate of such party, any entity into
             which such party is merged or any entity that purchases
             substantially all of the assets of such party.

     20.2.   Further Assurances.  In addition to the obligations required to be
             performed by the parties hereto under the other provisions of this
             Agreement, the parties agree to perform, without further
             consideration, such other acts and to execute, file, acknowledge
             and deliver such other instruments and documents, including without
             limitation UCC-1 financing statements covering the Loaned CDs, the
             Song Files, the Song Clips, the Product Information File and the
             PIF Updates, as may be reasonably required to carry out the
             provisions and purposes of this Agreement and to fully and properly
             consummate the transactions contemplated hereby.

     20.3.   Amendment and Waiver. No amendment or modification of this
             Agreement will be effective unless set forth in a writing signed by
             an authorized representative of the party against which enforcement
             of such amendment is sought. No waiver by a party of the other
             party's obligation to comply with any provision of this Agreement
             will be deemed or will constitute a waiver of the nonwaiving
             party's obligation to comply with any other provision of this
             Agreement or with the nonwaiving party's obligation to comply with
             the waived provision on a subsequent occasion.

     20.4.   Arbitration. Any dispute or controversy arising between Encoding
             and Valley regarding this Agreement will be submitted to
             arbitration in the state of the defending party in accordance with
             the rules then in effect of the American Arbitration Association.
             Any award made by an arbitrator pursuant to this Section 20.4 will
             be binding upon both parties in the absence of fraud and may be
             entered in any court of competent jurisdiction.

     20.5.   Notices. Any notice to a party pursuant to this Agreement shall be
             given by one of the following means: (a) certified or registered
             United States mail, postage prepaid, (b) private courier or express
             service requesting evidence of receipt as a part of its service, or
             (c) by telecopy, with a copy also to

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             be given by first class United States mail, postage prepaid, or by
             any means permitted under parts (a) or (b) of this Section 20.5.
             Notices shall be given to the parties at the following addressees:

               If to Valley:   Valley Media, Inc.
                               1280 Santa Anita Court
                               Woodland, California  95776
                               Attention:  Sachin Adarkar
                               Fax Number:  (530) 406-5231

               If to Encoding: encoding.com, Inc.
                               414 Olive Way, 3rd Floor
                               Seattle, Washington  98101
                               Attention:  CFO
                               Fax Number:  206-832-4001

               with a mandatory copy to:  Venture Law Group
                               4750 Carillon Point
                               Kirkland, WA 98033
                               Attention:  John W. Robertson
                               Fax Number:  (425) 739-8750

     20.6.   Binding Effect.  Upon execution of this Agreement by all parties
             hereto, this Agreement shall inure to the benefit of, and be
             binding on and enforceable against, the parties and their
             respective heirs, legal representatives, successors and permitted
             assigns.

     20.7.   Entire Agreement. This Agreement, including the exhibits and
             schedules hereto, together with the Audiofile License and the
             Warrant, constitute the entire agreement and understanding between
             the parties with respect to the subject matter hereof, and
             supersede any prior or contemporaneous agreements or understandings
             relating to the subject matter hereof, whether written or oral.

     20.8.   Counterparts.  This Agreement may be executed in two or more
             counterparts, each of which shall be deemed an original and all of
             which, taken together, will constitute one and the same instrument.

     20.9.   Attorneys' Fees. If any arbitration, legal action or other
             proceeding is brought for the enforcement of this Agreement, or
             because of an alleged dispute, breach, default or misrepresentation
             in connection with any of the provisions of this Agreement, the
             successful or prevailing party will be entitled to recover
             reasonable attorneys' fees and other costs incurred in such action
             or proceeding, in addition to any other relief to which it may be
             entitled.

     20.10.  Survival. The provisions of Sections 1, 8.3, 15, 16, 17, and 20
             will survive any termination or expiration of this Agreement.

     20.11.  Headings. The headings of the paragraphs and sections of this
             Agreement are included for purposes of convenience only and shall
             not affect the construction or interpretation of any provisions
             hereunder.

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     20.12.  Partial Invalidity. The invalidity of any part or provision of this
             Agreement will not affect the enforceability of the remainder of
             this Agreement.

     20.13.  Governing Law. This Agreement will be governed by and construed in
             accordance with the substantive laws of the State of California
             applicable to contracts entered into and performed entirely within
             that state.

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             In witness whereof, the parties have executed this Services
Agreement as of the Effective Date.

Valley Media, Inc.                     encoding.com, Inc.

/s/ Sachin Adarkar                     /s/ David C. Bullis
____________________________           __________________________
By:                                    By:
Its:                                   Its:

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                                   Exhibit A
                                   ---------
                          Song File Streaming Formats
                          ---------------------------

The parties agree to support the following Digital Audio formats per the terms
in Section 4.1.

[* * * * *]

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                                   Exhibit B
                                   ---------
                      Song Clip Streaming and Data Formats
                      ------------------------------------

The parties agree to support the following Data Rates and Samples lengths per
the terms in Section 4.2.

Formats and Data Rates:

[* * * * *]

Clips Lengths:

1.  Pop/Rock/Non-Jazz and Classical - 30 seconds
2.  Jazz/Classical - 60 seconds

  The clips lengths are intended to meet contemporary commercial standards and
  are subject to change.

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                                   Exhibit C
                                   ---------
                       Product Information File Schedule
                       ---------------------------------

Product Information File Specification

     Valley will provide encoding.com the following minimum data in a
commercially acceptable manner:

[* * * * *]

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                                   Exhibit D
                                   ---------
                                 Consumer Data
                                 -------------

Encoding will track and provide a data file that includes the following
information reports:

[* * * *]

The specifics of these reports will vary and can be modified for particular
customer requests related to the Music sampling Service.

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                                   Exhibit E
                                   ---------
                           Minimum Service Standards
                           -------------------------

The following represents Encoding's standard Service Level Agreement for
Streaming.  The parties agree that the Music Sampling Service will need to meet
commercial and competitive standards and might differ from these terms.  The
parties agree to modify the Service Level Agreement as necessary to meet
commercially acceptable standards.

                            Service Level Guidelines
(KK)
1.   Bandwidth and Processor Capacity.  [* * * *]

2.   Backup.  In the case of server crashes and/or corrupt data, Encoding.com
     shall [* * * *]

3.   Security.  Encoding will [* * * *]

4.   Administration.  [* * * *]

5.   Maintenance.  [* * * * *]

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6.   Support Guidelines.  Encoding will provide support as set out below in
     Table 1, [* * * *]

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7.   Access Warranty.  [* * * *]

8.   Year 2000 Compliance.  Subject to the limitations set forth below, Encoding
     represents and warrants to Provider that the Encoding software used in
     connection with the provision of the Encoding Streamig Services, when used
     properly and in conformity with the product information provided by
     Encoding, will accurately store, display, process, provide, and/or receive
     date data from, into, and between 1999 and 2000, and the twentieth and
     twenty-first centuries, including leap year calculations, provided that all
     other technology used in combination with the such software properly
     exchanges date data with such software.  Encoding makes no representation
     about individual components within such software should they be used
     independently from the product as a whole.  This limited warranty is in
     lieu of all other warranties, whether express, implied, or statutory,
     including, but not limited to, any warranty of merchantability, fitness for
     a particular purpose, or any warranty arising out of any proposal,
     specification, or sample.  Encoding's sole obligation with respect to this
     limited warranty, including its total liability for all

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     claims hereunder, is governed by Section 19 of this Agreement. These
     limitations on potential liability were an essential element in setting the
     price for the services to be provided by Encoding hereunder.

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                                   Exhibit F
                                   ---------
                               Audiofile License
                               -----------------

This audiofile License Agreement (this "License"), dated December 17, 1999 (the
"Effective Date"), is entered into by and between Valley Media, Inc., a Delaware
corporation ("Licensor"), and encoding.com, Inc., a Delaware corporation
("Licensee").

1. License Grant

(a)  Licensor hereby grants Licensee a non-exclusive and non-transferable
     license to:

      (i)   Load, transmit, execute, store and/or display the proprietary
            audiofile database created and developed by Licensor (the
            "Database") for Licensee's internal use;

      (ii)  Modify the Database for internal use by Licensee; and

      (iii) Incorporate the Database or portions thereof into Licensee's own
            database for use by Licensee; provided, however, that the Database
            portion of the resulting conjoined work may only be used in
            accordance with this License and will still be subject to all the
            provisions hereof.

(b)  Licensor will provide Licensee with periodic updates of the information
     contained in the Database (each such update, a "Database Update").  For
     purposes of this License, the term "Database" includes any and all Database
     Updates.

(c)  Licensor will provide Licensee with reasonable telephone support for the
     Database at no additional charge.

2.   Restrictions on Transfer

(a)  Licensee may not, without Licensor's prior written consent or as set forth
     in that certain Services Agreement (the "Services Agreement") between
     Licensor and Licensee dated as of the Effective Date (collectively, a
     "Consent to Transfer"), sublicense, sell, lend, rent or otherwise transfer
     the Database or any portion thereof, or assign any of its rights or
     obligations under this License, to any other person or entity, including,
     without limitation, any of Licensee's wholly or partially owned
     subsidiaries or affiliates; provided, however, that Licensee may make
     copies of the Database sufficient for its own back-up, development and
     production purposes.

(b)  If Licensee obtains a Consent to Transfer from Licensor, Licensee will
     obtain a written undertaking from the intended transferee (the "Permitted
     Transferee") prior to effecting such transfer acknowledging and agreeing to
     the following:

     (i)    That the Database is the valuable, sole and exclusive intellectual
            property of Licensor;

     (ii)   That the Permitted Transferee will only use the Database in the
            manner expressly permitted under the Consent to Transfer, and that
            the Permitted Transferee will be liable for any use of the Database
            by Permitted Transferee, its agents, employees, assigns or
            transferees that is not expressly permitted under the Consent to
            Transfer;

     (iii)  That the Permitted Transferee has read and agrees to be bound by
            Sections 4, 6, 7, 8 and 9 of this License with respect to its use of
            the Database; and

     (iv)   That the Permitted Transferee will place appropriate copyright
            notices on all materials created by or for the Permitted Transferee
            that contain all or any portion of the information contained in the
            Database, regardless of whether such materials are in printed,
            video, audio, electronic or any other form.

3.   Fees

Licensee will not be required to pay Licensor any fees under this License.

4.   Rights in Tangible and Intellectual Property

(a)  Except as set forth in the Services Agreement, as between Licensor and
     Licensee, Licensor is the sole and exclusive owner of the Database, any
     supporting materials provided therewith, and any and all patents,
     trademarks, servicemarks, copyrights, trade names, service names, trade
     secrets and other proprietary and/or intellectual property rights
     associated with the Database or such supporting materials. Licensee agrees
     to treat the Database, the information it contains and any such supporting
     materials as the Licensor's confidential trade secrets.

                                       21
<PAGE>

(b)  Except as set forth in the Services Agreement, if any materials created by
     or for Licensee for publication or display or distribution to the public
     contain all or any portion of the information contained in the Database,
     regardless of whether such materials are in printed, video, audio,
     electronic or any other form, Licensee will ensure that such materials
     contain appropriate copyright notices identifying Licensor as the copyright
     holder with respect to such information.

5.   Term:  Termination

The term of this License will commence as of the Effective Date and will
continue until the expiration or termination of the Services Agreement.

6. Warranty

(a)  Licensor warrants that the media on which or by which the Database and the
     Database Updates are delivered and transmitted will be free from defects.
     If any such media are defective, Licensee's sole and exclusive remedy will
     be to elect one of the following:

     (i)    Require that Licensor replace or repair the defective media; or

     (ii)   Require that Licensor retransmit or redeliver the Database or
            Database Update.

(b)  EXCEPT AS SET FORTH IN SECTION 6(a) ABOVE:

     (i)    THE DATABASE IS PROVIDED "AS IS," AND LICENSOR MAKES NO
            REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE CONTENT,
            SUFFICIENCY, ACCURACY, COMPLETENESS OR CURRENCY THEREOF; AND

     (ii)   LICENSOR EXPRESSLY DISCLAIMS ANY EXPRESS, IMPLIED OR STATUTORY
            WARRANTIES WITH RESPECT TO THE DATABASE, INCLUDING, WITHOUT
            LIMITATION, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
            PARTICULAR PURPOSE.

7. Limitations of Liability

(a)  IN NO EVENT WILL LICENSOR BE LIABLE TO LICENSEE FOR ANY SPECIAL, INDIRECT
     OR CONSEQUENTIAL DAMAGES, WHETHER OR NOT LICENSOR HAS BEEN ADVISED OF THE
     POSSIBILITY OF SUCH DAMAGES AND REGARDLESS OF THE FORM OF ACTION.

(b)  IN NO EVENT WILL LICENSOR'S LIABILITY TO LICENSEE FOR ANY CLAIMS, LOSSES OR
     DAMAGES ARISING UNDER THIS LICENSE, WHETHER IN CONTRACT, TORT OR OTHERWISE,
     EXCEED THE TOTAL AMOUNT OF FEES RECEIVED BY LICENSOR HEREUNDER.

8.   Indemnification

Subject to the limitations on liability set forth in Section 7, each party will,
at all times, indemnify, defend and hold the other party harmless from and
against any and all third-party claims, damages, liabilities, costs and expenses
(including reasonable attorney's fees) arising out of any breach or alleged
breach by the indemnifying party of any representation, warranty or covenant
made by such party under this License.

9. Injunctive Relief

The parties agree that Licensor may suffer irreparable harm in the event
Licensee fails to comply with any of the provisions of Sections 2 or 3 of this
License, and that monetary damages and other remedies available at law would, in
themselves, be insufficient to compensate Licensor for such harm.  Therefore, if
Licensee breaches or threatens to breach any of its obligations under Sections 2
or 3 of this License, Licensor will be entitled to obtain injunctive relief from
any court of competent jurisdiction to cure such breach or prevent such
threatened breach, as the case may be, and such injunctive relief shall be in
addition to, and not in lieu of, any other remedies available to Licensor at law
or in equity.

10. Miscellaneous

(a)  Assignment. This License may not be assigned by either party without the
     other party's prior written consent; provided, however, that Licensor may,
     without Licensee's prior written consent, assign its right to receive fees
     hereunder and may assign this License to any of its affiliates or
     subsidiaries.

(b)  Survival.  The provisions of Sections 6, 7 and 8 will survive the
     termination or expiration of this License.

(c)  Amendment and Termination.  No amendment, modification, termination or
     cancellation of this License will be effective unless set forth in a
     writing signed by an authorized representative of the party against which
     enforcement of such amendment is

                                       22
<PAGE>

     sought. No waiver of any provision of this License will be deemed or will
     constitute a waiver of any other provision of this License or a subsequent
     or continuing waiver of the same provision.

(d)  Notices.  Any notice to a party pursuant to this License shall be given by
     one of the following means: (a) certified or registered United States mail,
     postage prepaid, (b) private courier or express service requesting evidence
     of receipt as a part of its service, or (c) by telecopy, with a copy also
     to be given by first class United States mail, postage prepaid, or by any
     means permitted under subparagraphs (a) or (b) of this section. Notices
     shall be given to the parties at the following addressees:

           If to Licensor:  Valley Media, Inc.
                            1280 Santa Anita Court
                            Woodland, California  95776
                            Attention:  Sachin Adarkar, General Counsel
                            Fax Number:  (530) 406-5231

           If to Licensee:  encoding.com, Inc.
                            414 Olive Way, 3rd Floor
                            Seattle, Washington  98101
                            Attn: CFO
                            Fax Number: (206) 832-4001

           with a copy to:  Venture Law Group
                            4750 Carillon Point
                            Kirkland, WA  98033
                            Attn: John W. Robertson
                            Fax Number: (425) 739-8750

(e)  Headings.  The headings of the sections and paragraphs of this License are
     included for purposes of convenience only and shall not affect the
     construction or interpretation of any provisions hereunder.

(f)  Partial Invalidity.  The invalidity of any part or provision of this
     License will not affect the enforceability of the remainder of the License.

(g)  Governing Law.  This License will be governed by and construed in
     accordance with the substantive laws of the State of California applicable
     to contracts entered into and performed entirely within that state.

In witness whereof, the parties have executed this License as of the Effective
Date.

LICENSOR:                              LICENSEE:

Valley Media, Inc.                     encoding.com, inc.

/s/ Sachin Adarkar                     /s/ David C. Bullis
-----------------------------          -----------------------------
By:                                    By:
   --------------------------             --------------------------
Its:                                   Its:
    -------------------------              -------------------------

                                       23
<PAGE>

                                   Exhibit G
                                   ---------
                             Rights Certification
                             --------------------

                             OFFICER'S CERTIFICATE

     The undersigned, on behalf of Valley Media, Inc., a Delaware corporation
("Valley"), hereby certifies as follows:

1.   The undersigned is Valley's duly appointed President and Chief Executive
     Officer.

2.   Valley has been given oral permission by [****].

3.   Valley has been given oral permission by [****].

4.   Valley has been given oral permission by [****].

5.   Valley has been given oral permission by [****].

6.   All capitalized terms not defined in this Certificate will have the
     respective meanings ascribed to such terms in the Agreement.

     In witness whereof, the undersigned has executed this Officer's Certificate
as of December 16, 1999.

/s/ Robert R. Cain
-----------------------
ROBERT R. CAIN

[*] Confidential Treatment Request

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