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* Confidential Treatment Requested
Under 17 C.F.R. Sections 200.80(b)(4),
200.83 and 230.406
EXHIBIT 10.19
MEMORANDUM OF AGREEMENT DATED MAY 12, 1999 BETWEEN XX0.XXX,
INC. ("MP3") AND BOUTIT, INC., DBA NO LIMIT RECORDS, INC., A CALIFORNIA
CORPORATION ("NO LIMIT")
For good and valuable consideration, No Limit and MP3 agree as follows:
1. The term of this Agreement (the "Term") shall commence upon the date
hereof and continue thereafter for a period of three (3) years. Notwithstanding
anything to the contrary contained in the immediately-preceding sentence, if an
IPO (as defined in paragraph 26 below) does not take place within eight (8)
months after the date hereof, No Limit may terminate the Term by giving MP3
notice of its election to do so. Such termination shall be effective thirty (30)
days after the effective date of that notice; provided that such termination
shall terminate all of No Limit's rights and MP3's obligations under paragraph
26 below.
2. No Limit hereby licenses exclusively to MP3 the right during the Term
to [***] No Limit shall have the right to approve the final design of the
Official Site and all substantial modifications thereto from time to time,
provided that No Limit agrees to act reasonably and expeditiously in the
exercise of such approval rights and not withhold its approval in a manner
intended to frustrate the intent of this Agreement.
3. No Limit licenses exclusively to MP3 during the Term all [***]
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4. No Limit licenses exclusively to MP3 the right during the Term to [***].
Without limiting the generality of the immediately-preceding sentence, MP3 may
[***]. No Limit and MP3 shall mutually agree upon [***]. MP3 shall solicit
orders for [***] and shall provide all credit and payment facilities. MP3 shall
remit to No Limit on a regular accounting schedule [***] of the gross receipts
[***] derived from [***]. The right to engage in [***] is sometimes referred to
herein as [***].
5. No Limit hereby licenses exclusively to MP3 the right during the Term
throughout the Territory to [***]. No Limit acknowledges and agrees that MP3
shall be entitled to [***] at no additional cost to MP3 provided that [***]. MP3
shall determine, in its sole discretion, the [***] and shall remit to No Limit
on a regular accounting schedule [***] of MP3's gross receipts [***].
Notwithstanding anything to the contrary contained in the immediately-preceding
sentence, if MP3's [***] gross receipts [***]. The right to [***] is sometimes
referred to herein as [***].
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6. (a) No Limit hereby warrants, represents, and agrees that during the
first year of the Term (the "First Contract Year) MP3 shall obtain
exclusive unencumbered [***], and Custom Compilation Rights throughout
the Territory (collectively "the Rights") hereunder with respect to no
fewer than [***] No Limit Masters each in its entirety and that during
each of the second and third years of the Term (the "Second Contract
Year" and the "Third Contract Year" respectively), MP3 shall obtain the
exclusive unencumbered Rights to no fewer than [***] additional No
Limit Masters. The No Limit Masters and No Limit Videos delivered
hereunder shall include reasonable numbers of master recordings and
music videos embodying the featured performances of each top-selling No
Limit Artist such as, without limitation, "Xxxxxx X." and "Xxxxx Xxx."
(b) The No Limit Masters required to be delivered to MP3 during
the First Contract Year shall be delivered to MP3 promptly following the
complete execution of this Agreement. At least [***] of the No Limit
Masters required to be delivered to MP3 during each of the Second and
Third Contract Years shall be delivered to MP3 no later than the date
[***] after the commencement of the applicable Contract Year and the
balance of such No Limit Masters required to be delivered to MP3 during
each of the applicable Contract Years shall be delivered to MP3 no later
than the date [***] after the commencement of the applicable Contract
Year. No Limit shall deliver to MP3 a reasonable number of No Limit
Videos in existence as of the date of this Agreement and shall deliver
to MP3 a reasonable number additional No Limit Videos on a reasonably
regular basis during the remainder of the Term. Without limiting MP3's
other rights and remedies in such instance, if No Limit shall fail to
deliver to MP3 the required number of No Limit Masters as and when
required during any Contract Year, the running of that Contract Year
shall be automatically suspended pending fulfillment of No Limit's
delivery obligation for that Contract Year.
7. No Limit shall be solely responsible for [***].
8. Without limiting the generality of any of No Limit's other
undertakings in this Agreement, No Limit hereby authorizes MP3 to make available
throughout the Territory for [***]. MP3 shall not be obligated to make any
[***]
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9. [***] After the expiration of the [***] with respect to any [***],
MP3 shall continue to have non-exclusive Streaming Rights with respect to that
No Limit Master. In addition, No Limit shall with respect to each No Limit Album
initially released in the Territory during the Term [***]. Nothing contained in
this paragraph 9 shall require No Limit to record any additional master
recordings for the sole purpose of [***]. Each [***] shall apply in [***].
10. During the Term, MP3 will host and No Limit shall use its reasonable
good-faith efforts facilitate monthly "on-line chats" for one (1) or more
recording artists whose featured performances are embodied upon any of the No
Limit Masters or No Limit Videos ("No Limit Artists"), as mutually designated by
MP3 and No Limit. Without limiting the generality of anything contained in the
immediately-preceding sentence, with respect to each No Limit Album released
during the Term featuring the featured performances of only one (1) No Limit
Artist (whether a group or a solo artist), No Limit shall use its reasonable
good-faith efforts to cause that Artist to participate in an "on-line chat"
hosted or presented by MP3 during the period commencing five (5) days prior to
the initial release date of that No Limit Album and ending five (5) days after
the initial release date of that No Limit Album.
11. No Limit hereby licenses to MP3 the non-exclusive right during the
Term to [***], as news or information, for the purposes of trade, or for
advertising purposes, in any manner and in any medium in connection with the
marketing and exploitation of the No Limit Masters and/or No Limit Videos
hereunder, and MP3's Institutional Advertising (i.e., advertising designed to
create goodwill and prestige and not for the purpose of selling any specific
product or service). No Limit shall furnish MP3 with reasonable quantities of
approved portraits, pictures and likenesses of and biographical materials
concerning the No Limit Artists. MP3 shall use only those materials
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*CONFIDENTIAL TREATMENT REQUESTED
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regarding Artist and the No Limit Artists provided by No Limit; provided that
inadvertent or casual failure by MP3 to use such materials shall not constitute
a breach of this Agreement, provided that upon receipt of notice from No Limit
MP3 uses reasonable efforts to effect prospective cure with respect to future
uses of such materials. MP3 shall, in referring to No Limit in its advertising
relating solely to No Limit or No Limit Artists (space permitting), use
reasonable efforts to include the slogan "The Number One Rap/Hip Hop Label" and
when referring to Xxxxxx X. in such advertising, use reasonable efforts to
include the slogan "The King of Hip Hop", provided that MP3's casual or
inadvertent failure to include any such slogan in any advertisement shall not
constitute a breach of this Agreement.
12. (a) No Limit hereby licenses to MP3 the non-exclusive right during
the Term to use No Limit's name and any identifying trademark, logo or
device used by No Limit ("No Limit Names and Logos") for purposes of
trade and consumer advertising pertaining to MP3's exploitation of the
rights granted to it hereunder by No Limit. No Limit also hereby
licenses to MP3 the non-exclusive right during the Term to use
throughout the Territory the No Limit Names and Logos in MP3's
Institutional Advertising and on its websites to publicize its
relationship with No Limit hereunder. No Limit shall have the right to
impose written guidelines governing MP3's use of the No Limit Names and
Logos; provided that such guidelines are reasonable and not formulated
to frustrate MP3's rights under this paragraph 12(a).
(b) MP3 hereby licenses to No-Limit MP3 the non-exclusive right
during the Term to [***].
13. MP3 and No Limit shall mutually approve all press releases issued by
MP3 or No Limit that relate to the relationship between them. Any such press
release that either party hereto desires to publish shall be submitted to the
other party in accordance with the notice provisions contained in paragraph 24
below and any such press release so submitted shall be deemed approved by the
receiving party if the submitting party shall not have received notice of the
receiving party's disapproval thereof within three (3) business days after the
effective date of the notice of submission.
14. No Limit shall use its reasonable good-faith efforts to cause each
No Limit Artist to display prominently at each of his, her, or their live
concert appearances throughout the Territory during the Term signage (prepared
and delivered by MP3 at its sole expense) mutually selected by MP3 and No Limit
featuring MP3's and No Limit's names and/or logos.
15. With respect to each concert tour undertaken during the Term in the
Territory by each No Limit Artist (a "No Limit Artist Tour"), No Limit and MP3
shall use their best efforts to designate one (1) or more artists who provide
digital recordings to MP3 through its website ("MP3 Artists") as an "opening
act" for all or a substantial portion of that No Limit Artist Tour.
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No Limit shall have the right to disapprove of any MP3 Artist submitted by MP3
as an "opening act" for any No Limit Artist Tour on any reasonable basis,
provided that it promptly notifies MP3 of the basis for such disapproval and
does not exercise its disapproval rights for the purpose of frustrating MP3's
rights under this paragraph 15. No Limit will provide representatives of MP3 and
their guests reasonable access to concerts by No Limit Artists during the Term.
Nothing contained in this paragraph 15 shall require No Limit to cause any No
Limit Artist to engage in any concert tour.
16. No Limit and MP3 shall develop [***]. With respect to the product
categories specified on Schedule A, annexed hereto and, by this reference, made
a part hereof, with respect to which categories, No Limit warrants and
represents that it is currently a party to exclusive licensing arrangements with
unaffiliated merchandisers ("Previously Licensed Subject Merchandise"), MP3
shall, during the remainder of the term of such licensing arrangement, purchase
such merchandise only from No Limit's exclusive merchandising licensee and No
Limit shall use its best efforts to cause its exclusive merchandising licensee
to offer to sell such merchandise to MP3 at a [***]. MP3 shall remit to No Limit
on a regular accounting schedule [***] of its [***] derived from the sale of
Previously Licensed Subject Merchandise and [***] of its [***] Subject
Merchandise. MP3 shall have the right for a period of four (4) months after the
end of the Term to sell or otherwise distribute its remaining inventory of
Subject Merchandise. In the event that any Subject Merchandise shall embody the
name, likeness, or other materials pertaining to any No Limit Artist, No Limit
shall be solely responsible for paying all compensation due to that No Limit
Artist in respect of the sale of such Subject Merchandise.
17. If MP3 shall enter into any affiliate referral agreement with any
third party "on line" music retailer pursuant to which MP3 receives a commission
for sales of No Limit Albums (an "Affiliate Referral Agreement"), MP3 shall
remit to No Limit on a regular accounting schedule [***] thereunder as a direct
result of each sale of a No Limit Album made by that "on line" music retailer
occurring by reason of MP3's referral of the purchaser to that "on line"
retailer. As of the date hereof, MP3 is not a party to any Affiliate Referral
Agreement and makes no warranty or representation that it will enter into any
Affiliate Referral Agreement during the Term.
18. No Limit shall, within a reasonable time after the execution of this
Agreement deliver to MP3 [***] for MP3 to give away as promotional items. [***]
pairs shall be furnished at No Limit's sole cost; and No Limit shall use its
best efforts to cause the remaining [***] to be provided to MP3 at [***] price
therefor.
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19. With respect to each album-length phonorecord or other compilation
of soundrecordings initially released by No Limit in the Territory during the
Term, No Limit shall provide and deliver to MP3 at No Limit's sole cost one
hundred (100) CDs autographed by the No Limit Artist(s) whose featured
performances are embodied on such phonorecord or other such compilation.
20. During the Term, MP3 shall [***] organize and effect [***] in
connection with the release of No Limit Albums, singles or other related
products. Notwithstanding the generality of the immediately-preceding sentence,
MP3 will not be required to [***] during each month of the Term. In addition MP3
will consider in good faith and discuss other activities suggested by No Limit
that [***]. Nothing contained herein shall require MP3 to act in a manner
inconsistent with [***] during the Term.
21. No Limit and MP3 each warrants and represents that it has the full
right and power to enter into and fully perform this Agreement and grant all of
the rights herein granted by each of them. Without in any way limiting the
generality of No Limit's warranties and representation contained the
immediately-preceding sentence, nothing contained in this Agreement is intended
or shall be construed to require No Limit to violate any of the terms pertaining
to the distribution of phonorecords embodying master recordings owned or
controlled by No Limit contained in any pre-existing phonograph record
distribution agreement currently in effect to which No Limit is a party (a
"Distribution Agreement"). No Limit warrants and represents that neither the
Materials, as hereinafter defined, nor any use thereof, will violate any law or
infringe upon or violate the rights of any person or entity. "Materials," as
used in this paragraph 17, means: (1) the No Limit Masters and No Limit Videos
furnished under this Agreement, (2) the No Limit Names and Logos, (3) each name
used by each No Limit Artist, individually or as a group, in connection with No
Limit Masters or No Limit Videos furnished hereunder or any Subject Merchandise,
(4) all other musical, dramatic, artistic and literary materials, ideas, and
other intellectual properties, contained in or used in connection with any No
Limit Masters or No Limit Videos furnished hereunder or their packaging for use
in connection with sale, distribution, advertising, publicizing or other
exploitation of the No Limit Masters or No Limit Videos furnished hereunder, and
(5) all artistic and literary materials, ideas, and other intellectual
properties, furnished or selected by No Limit and contained in or used in
connection with any of the Subject Merchandise.
22. No Limit warrants and represents that the No Limit Masters and No
Limit Videos furnished hereunder contain no Samples that have not been
authorized by the owner(s) of the musical composition, master recording, or
other material or portion thereof from which such Sample is derived (the
"Sampled Party"). The term "Sample" shall mean the use, inclusion or
interpolation (the "Interpolation") in a No Limit Master or No Limit Video of
any musical composition, soundrecording, or any other material or intellectual
property, or portion of any such property or material that is not owned and
controlled solely by No Limit. MP3 shall have
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the right to require No Limit to furnish it with instruments or other documents
evidencing that the Interpolation of such Sample has been authorized by the
Sampled Party; provided that MP3's failure to do so or election not to do so
shall not constitute MP3's waiver of its right to rely upon No Limit's
warranties and representations contained herein in proceeding with the full
exercise of the rights granted to MP3 hereunder.
23. (a) No Limit will at all times indemnify and hold harmless MP3 and
any of its licensees (collectively the "Indemnitee") from and against
any and all claims, damages, liabilities, costs and expenses, including
legal expenses and reasonable counsel fees, arising out of any breach or
alleged breach of any warranty or representation made by No Limit in
this Agreement or any other act or omission by No Limit, provided the
claim concerned has been settled or has resulted in a judgment against
any Indemnitee. MP3 will notify No Limit of any action commenced on such
a claim. No Limit may participate in the defense of any such claim
through counsel of its selection at its own expense, but MP3 will have
the right at all times, in its sole discretion, to retain or resume
control of the conduct of the defense. If any claim involving such
subject matter has not been resolved, or has been resolved by a judgment
or other disposition which is not adverse to any Indemnitee, No Limit
will reimburse Indemnitee for sixty-six and two-thirds percent (66.67%)
of the expenses actually incurred by Indemnitee in connection with that
claim. Pending the resolution of any such claim, MP3 will have the right
to withhold monies which would otherwise be payable to No Limit under
this Agreement in an amount not exceeding No Limit's potential liability
to MP3 and/or its licensees under this paragraph.
(b) MP3 will at all times indemnify and hold harmless No Limit
and any of its licensees (collectively the "Indemnitee") from and
against any and all claims, damages, liabilities, costs and expenses,
including legal expenses and reasonable counsel fees, arising out of any
breach or alleged breach of any warranty or representation made by MP3
in this Agreement or any other act or omission by MP3, provided the
claim concerned has been settled or has resulted in a judgment against
any Indemnitee. No Limit will notify MP3 of any action commenced on such
a claim. MP3 may participate in the defense of any such claim through
counsel of its selection at its own expense, but No Limit will have the
right at all times, in its sole discretion, to retain or resume control
of the conduct of the defense. If any claim involving such subject
matter has not been resolved, or has been resolved by a judgment or
other disposition which is not adverse to any Indemnitee, MP3 will
reimburse Indemnitee for sixty-six and two-thirds percent (66.67%) of
the expenses actually incurred by Indemnitee in connection with that
claim.
24. Except as otherwise specifically provided in this Agreement, all
notices under this Agreement shall be in writing and shall be given by courier
or other personal delivery or by registered or certified mail at the appropriate
address below or at a substitute address designated by notice by the party
concerned:
To MP3: 00000 Xxxxxxx Xxxxxx Xxxxx
Xxxx. 00
Xxx Xxxxx, Xxxxxxxxxx 00000
Attn: President
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With a copy to: Hansen, Jacobson, Teller, Hoberman, Xxxxxx & Xxxxxx/
Hertz & Goldring, LLP
000 Xxxxx Xxxxxxx Xxxxx, 0xx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxxxx X. Xxxxx, Esq. and Xxxxxxxx X. Xxxx, Esq.
To No Limit: c/o Endeavor Entertainment
0000 Xxxxxxxx Xxxxxxxxx
00xx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Xxxxxxx, Xxx Xxxxx and Xxxxx Xxxxxxx
with a copy to: Xxxxxxx X. Xxxxxx, Esq.
0000 00xx Xxxxxx
Xxxxx 000 Xxxxx
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Notices shall be deemed given when mailed, except that a notice of change of
address shall be effective only from the date of its receipt. All royalties,
royalty statements and/or payments to No Limit hereunder may also be sent to No
Limit at its address above via regular mail and shall
be deemed sent on the date the applicable statement is mailed.
25. The parties hereby agree that at the request of either party they
shall execute more formal documentation of this Agreement containing additional
standard terms and provisions customarily contained in agreements of this
nature, including, without limitation, additional standard warranties and
representations consistent with the terms hereof, force majeure provisions, and
reasonable "notice and cure" provisions. Each party hereto agrees that it shall
negotiate expeditiously and in good faith with respect to any reasonable changes
that the other party may request in connection with such standard provisions, to
the extent not inconsistent with the terms hereof. Until such time as MP3 and No
Limit enter into such more formal documentation, this Agreement shall constitute
a fully binding and enforceable agreement embodying the entire agreement of the
parties hereto with respect to the subject matter hereof, and shall be governed
by the laws of the State of California applicable to contracts entered into and
intended to be performed entirely within the State of California. Any and all
disputes, claims, or proceedings between the parties hereto arising out of or
relating to this Agreement, or the validity or breach thereof, shall be settled
by binding and final arbitration held before a single arbitrator from the
Judicial Arbitration Mediation Service. Any such arbitration shall be held in
the County of Los Angeles, California and shall be pursuant to the laws of the
State of California. The arbitrator shall also have the power to impose any
sanction against any party permitted by California law. The arbitration award
shall be final. Judgment on any arbitration award may be entered in any court in
the County of Los Angeles. Any process in any such action or proceeding may,
among other methods, be served upon either party hereto by delivering it or
mailing it, by registered or certified mail, directed to the address designated
in paragraph 24 or such other address as that party may designate pursuant to
paragraph 24. Any such delivery or
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mail service shall be deemed to have the same force and effect as personal
service within the state of California.
26. As additional consideration for the rights conveyed to MP3
hereunder, if and when XX0.xxx, Inc. completes an underwritten initial public
offering (an "IPO") of its Common Stock under the Securities Act of 1933, as
amended (the "Act"), during the Term, No Limit shall receive the supplemental
consideration set forth in this section. Upon the effective date of the IPO,
XX0.xxx, Inc. shall issue to No Limit in a private placement to be completed
contemporaneously with the IPO that number of shares of its Common Stock (the
"Shares") equal to Two Million Five Hundred Thousand Dollars ($2,500,000)
divided by the per share price at which the Common Stock is offered to the
public in the IPO (the "Private Placement"). No Limit acknowledges and agrees
that (i) there can be no assurance that XX0.xxx, Inc. will be able to
successfully complete an IPO in the near future or at any time and (ii) whether
or not XX0.xxx, Inc. is able to successfully complete an IPO, all other rights
and obligations contained within this Agreement will remain in full force and
effect.
27. INVESTMENT REPRESENTATIONS.
(a) PURCHASE FOR OWN ACCOUNT. No Limit represents that it is
acquiring the Shares to be issued in the Private Placement solely for
its own account and beneficial interest for investment and not for sale
or with a view to distribution of the Shares or any part thereof, has no
present intention of selling (in connection with a distribution or
otherwise), granting any participation in, or otherwise distributing the
same, and does not presently have reason to anticipate a change in such
intention.
(b) ACCREDITED INVESTOR. No Limit is an "accredited investor" as
such term is defined in Rule 501 under the Act.
(c) LEGENDS. No Limit understands that the certificates
evidencing the Shares may bear the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
(d) RULE 144. No Limit acknowledges and agrees that the Shares must be
held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. No
Limit has been advised or is aware of the provisions of Rule 144
promulgated under the Securities Act as in effect from time to time,
which permits limited resale of shares purchased in a private placement
subject to the satisfaction of certain conditions, including, among
other things: the availability of
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certain current public information about MP3, the resale occurring
following the required holding period under Rule 144 and the number of
shares being sold during any three-month period not exceeding specified
limitations.
(e) MARKET STANDOFF. No Limit agrees that MP3 (or a
representative of the underwriters) may, in connection with the IPO,
require that it not sell, dispose of, transfer, make any short sale of,
grant any option for the purchase of, or enter into any hedging or
similar transaction with the same economic effect as a sale, any shares
of Common Stock or other securities of MP3 held by it, for a period of
time specified by the underwriter(s) (not to exceed one hundred eighty
(180) days) following the effective date of the registration statement
of the Company filed under the Securities Act. No Limit further agrees
to execute and deliver such other agreements as may be reasonably
requested by MP3 and/or the underwriter(s) which are consistent with the
foregoing or which are necessary to give further effect thereto. In
order to enforce the foregoing covenant, MP3 may impose stop-transfer
instructions with respect to No Limit's common stock until the end of
such period.
28. MP3 AFFILIATES: "MP3" as used herein shall be deemed to include any
and all affiliates and/or joint ventures of XX0.Xxx, Inc. now in existence or
hereafter established.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as
of the date specified on page 1 hereof.
XX0.XXX, INC. BOUTIT, INC.,
dba NO LIMIT RECORDS, INC.,
A CALIFORNIA CORPORATION
By: /s/ XXXXX XXXXXXXX By: /S/ [ILLEGIBLE]
--------------------------------- ---------------------------------
Its: Its:
--------------------------------- ---------------------------------
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SCHEDULE A
Category of Merchandise Name of Merchandiser Expiration Date of Agreement
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