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TOUCHTUNES MUSIC CORPORATION
0000 XXXXXXXX XXXXXXXXX, XXXXX 000
XXXXXXX XXXXX, XXXXXXXXXX 00000
Dated as of: December 22, 2001
WARNER MUSIC GROUP, INC.
00 XXXXXXXXXXXX XXXXX
XXX XXXX, N.Y. 10019
Gentlemen:
This agreement ("Agreement") sets forth the terms and conditions under
which you, ("Company") on behalf of your controlled affiliated United States
based record labels listed on Exhibit A, attached hereto and by this reference
made a part hereof (the "Labels"), hereby grants to the undersigned, TouchTunes
Music Corporation ("TT") the non-exclusive right, license and privilege (but not
the obligation) to make digital copies of "Sound Recordings" (as hereinafter
defined) which are owned and/or controlled by the Labels (and as to which the
applicable Label has the right to grant the license conveyed hereunder), and to
make such copies available to the public via coin-operated digital audio
jukeboxes (the "Jukebox(es)"). For the purposes of the Agreement a Jukebox is
described as a unit which plays sound recordings after payment has been made by
the user, and the user has selected one or more Sound Recordings to be
performed. ***
1. PARTICIPATION.
a) Company hereby grants to TT the right and license to convert copies of
certain sound recordings owned or controlled by the Labels (the "Sound
Recording(s)") into the digitized format (as more fully set forth and described
in Paragraph 3 (a) below), for promotional and pay-for-play use in accordance
with the terms and conditions of this Agreement (the "Uses"). TT shall have the
right to include such Sound Recordings on any Jukebox located in ***
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(the "Territory").
b) In addition to being granted rights in the Sound Recordings, TT shall have
the right to convert into a digitized format for use solely in connection with
the Jukeboxes and in accordance with the terms and conditions of this Agreement:
(i) copies of the respective cover art (to the extent that Company owns or
controls same) ("Cover Art"), or copies of the respective Alternative Art (as
hereinafter defined); (ii) to the extent that Company or the Labels expressly
provide such to TT (and to the extent that Company or the Labels owns or
controls the same) copies of promotional materials ("Promotional Materials")
including, but not limited to photographs, liner notes and other visual elements
to be used by TT on the Jukeboxes and related peripherals. In the event that
Company does not provide Cover Art for a particular Sound Recording, then TT
shall have the right to create "Alternative Art" which, subject to Company's
prior written approval, may be used in connection with the Jukeboxes in lieu of
and in the same manner as the Cover Art. The Cover Art, Alternative Art and
Promotional Materials are collectively referred to herein as "Materials".
2. TERM. Reference is hereby made to an agreement by and between Company and
TT's predecessor in interest, TouchTunes Digital Jukebox, Inc. dated March 22,
1999, as amended (hereinafter referred to as the "Old Agreement").
Simultaneously with the full execution hereof, the Term of the Old Agreement
shall be deemed terminated, effective as of the date hereof. The term ("Term")
of this Agreement shall be the period beginning on the date that this Agreement
is fully executed and continuing in full force and effect until ***.
3. LICENSE OF RIGHTS.
(a) During the Term and in the Territory, TT will have the right, but not
the obligation, and on a non-exclusive basis, to do the following in
accordance with the terms and conditions of this agreement: (i) To encode, in
its entirety and without alteration, a digital master of each Sound Recording
(the "Digital Recording") included on any record (the "Record") which is or
may be during the Term owned and/or controlled by Company (and as to which
the applicable Label has the right to grant the License conveyed hereunder,
it being understood and agreed that references hereafter to "Company" shall,
where appropriate, be references to the Labels). The Digital Recording,
together with the Promotional Materials will then be converted into a
compressed digital format and utilized by TT for the Uses contemplated
hereunder. It is understood by the parties that the ***; (ii) To store such
Digital Recordings and Promotioanl materials on a central hard-drive storage
and retrieval system owned and controlled by TT; (iii) To copy and transmit
the Digital Recordings and Promotional Materials from such central hard-drive
storage and retrieval system onto the hard-drive memory of the Jukeboxes. For
the avoidance of doubt, Company hereby acknowledges is understanding that the
Jukeboxes will also contain sound recordings which are owned or controlled by
third parties; (iv) To license rights ***; (v) To permit patrons of the
establishments hereafter referred to, to play such Digital Recordings from
the Jukeboxes; and, (vi) To permit the Jukeboxes hereunder
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in ***.
(b) INTENTIONALLY DELETED
(c) It is understood and agreed that the rights granted to TT pursuant to
Sections 3 (a) above, will be subject to any and all restriction, contractual or
otherwise, imposed on or by Company, and in respect of which TT has received
written notice from Company, and such restrictions shall be acted upon within a
reasonable time after TT's receipt of such written notice. It is further
understood and agreed that only those rights specifically granted to TT
hereunder are covered by this license and that all other rights are reserved to
Company.
4. LICENSE FEE.
(a) PAID PERFORMANCES. In consideration of the rights granted to TT herein in
Section 3 (a) above, TT shall pay to Company a royalty equal to ***.
(b) INTENTIONALLY DELETED
(c) ALL-IN PAYMENTS. (i) The amount set forth in Section 4 (a) (the
"License Fee") and paid to Company hereunder shall include provision for any
and all monies which may be or become due and payable to Company, its
recording artists, producers, or any other third party royalty participants
who has performed services in connection with the recording of the Sound
Recording, (including, but not limited to "mixers", as that term is
understood in the record industry) and who are required to be compensated in
connection with the use provided for under this Agreement ***. As between TT
and Company, it will be Company's responsibility to make all payments
required to be made in accordance with its agreements with such recording
artists, producers and third party royalty participants. Company's failure to
make such payments shall not be deemed a material breach hereof, and TT shall
not have the right to terminate the Term of this Agreement as a result of
such non-payment.
(ii) It is understood that the payments to Company hereunder shall not
include provision for the payment of any applicable mechanical royalties with
respect to compositions embodied on the Digital recording or any performance
royalties payable, the obligations of which shall be met solely by TT.
(iii) ***
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(d) ***
5. ACCOUNTING/REPORTS.
(a) (i) During the Term and within ***, TT will render accounting Reports to
Company and together therewith, pay to Company, such sums as are shown
thereby to be due to Company, *** (as hereinafter defined).
(ii) Each such accounting Report will provide Company with the following
information:
A. A listing of all Records played on each Jukebox during each calendar
quarter annual period;
B. The number of times each record was performed and the aggregate number of
performances during such quarter annual period; and
X. Xxxx additional information as Company may reasonably request from time to
time.
(iii) TT shall transmit its accountings to Company electronically and/or in
the form of hard copies as designated by Company. TT shall pay royalties by wire
transfer or check, as designated by Company.
(b) ***, Company shall the right, *** to examine *** TT's relevant books
and records for the purpose of verifying the accuracy of TT's statements
hereunder. ***.
(c) *** It is *** understood and agreed that Company shall not be
entitled to view copies
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of confidential reports or surveys prepared by TT exclusively for any
third-party who has paid TT a fee to prepare such confidential report or survey.
6. OTHER FEES/CLEARANCES.
(a) ***
(b) ***
(i) ***
(ii) ***
7. RESTRICTIONS ON USE.
(a) ALTERATIONS. TT shall not edit or otherwise alter any Digital Recording or
permit any person to edit or alter any Digital Recording.
(b) ADVERTISING. TT shall not use any Digital Recording, or the likeness of any
artist whose performance is contained on any Digital Recording, for any purpose
other than as expressly set forth herein without the prior written consent of
Company. ***
(c) CLAIMS. In the event that any claim is made or action is commenced, or, in
Company's reasonable opinion the making of a claim or the commencement of an
action is likely or imminent, which challenges Company's underlying rights in
any particular Digital Recording or Company 's right to license a Digital
Recording as contemplated hereunder, Company may require TT to, and TT shall,
promptly remove or delete, such Digital Recording from all of the Jukeboxes.
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(d) SUSPENSION FOR NON-PAYMENT. In the event that TT fails to pay to Company
any sums required to be paid pursuant to this Agreement, Company may suspend
TT's right to utilize any of the Digital Recordings licensed for use by TT
pursuant to this Agreement, which suspension shall be effective on the ***
following TT's receipt of written notice from Company, unless on or before
such date, TT pays Company the full amount due and owing.
8. CREDITS. In each instance that a Digital Recording is performed on a
Jukebox, TT shall, in a manner that is clearly visible to the consumer, identify
the artist, song title, name of album and the applicable Label. ***
9. TERMINATION OF THE TERM. Notwithstanding anything to the contrary contained
herein, Company shall have the right, by written notice, to terminate the Term
of this Agreement if:
(a) TT fails to pay to Company the License Fee and/or the additional
payments hereinafter provided for within *** of the applicable due
date;
(b) Company determines, in good faith, that TT has materially breached any
other material term or condition set forth of this Agreement.
Notice of termination given to TT by Company shall specify the reason(s)
for such termination, and in the case where a cause for termination shall be
susceptible of cure, and such notice of termination is the first notice of
termination given to TT for such reason, if TT fails to cure such cause for
termination within *** after the date of such notice, termination shall be
effective upon the expiration of such period, or if TT cures such cause
within such period, such notice of termination shall be ineffective. In all
other cases, notice of termination shall be effective on the date thereof.
10. DELETION/DESTRUCTION OF COMPANY PROPERTY UPON THE EXPIRATION OR TERMINATION
OF THE TERM. Upon the expiration or early termination of the Term, TT shall
delete all copies (including back-up copies) of the Records, Digital Recordings
and any other materials and information provided to TT hereunder from TT's
central database, the Jukeboxes and all other computer systems by erasure and
shall either deliver to Company or destroy (at Company 's election) all other
copies of the Records, Digital Recordings and other materials and information
previously provided by Company hereunder which have not previously been
returned. Such deletion and destruction (if elected by Company) shall be
certified by an authorized officer of TT supervising the deletion or destruction
of such property.
11. SECURITY/WATERMARKING. *** In addition, TouchTunes agrees that at such
time as an industry standard for security is adopted, it shall use its best
efforts to utilize such standard with respect to the design and operation of
its systems.
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12. INTENTIONALLY DELETED
13. INDEMNIFICATION ***
(a) TT and Company hereby agree to indemnify each other and their respective
affiliates, officers, directors, employees and agents, and to hold such other
party harmless from and against any and liabilities, demands, costs, fees and
expenses incurred by such party as a result of the failure by the indemnifying
party to perform its material obligations hereunder.
(b) ***
(c) ***
14. ***
(a) ***
(b) ***
(c) ***
15. WARRANTS: ***
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16. NOTICES. Any notice or other communications required or which may be given
hereunder shall be in writing and shall be delivered personally, or sent by
certified, registered or express mail or by Federal Express or similar courier
service, postage prepaid, as follows:
If to TT: TouchTunes Music Corporation
0 Xxxxxxxx Xxxxx, 0xx Xxxxx
Xxxx Xxxxxx, Xxxxxxxx (Xxxxxx)
Xxxxxx H3E 1H7
Attention: President
With a cc to:
Xxxxxx and Xxxxxxxx
00000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxx, Esq.
If to Company: Warner Music Group, Inc.
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, X.X. 10019
Attention: Executive Vice President and General Counsel
17. GENERAL. This Agreement: (i) contains the entire agreement of the parties
concerning the subject matters hereof and may not be amended except by a written
instrument signed by both parties hereto; (ii) may not be assigned by TT or
Company, except in connection with any sale, transfer or other disposition of
all or a substantial portion of the stock or assets of Company, or TT; and (iii)
shall be governed by and construed under the laws of the State of New York
applicable to agreements entered and performed entirely therein. No waiver by
either of the parties hereto or any failure by the other party to keep or
perform any covenant or condition under this Agreement shall be deemed to be a
waiver of any other breach of the same, or any other, covenant or condition.
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If you agree with the terms set forth herein, please so indicate by signing
this letter in the space provided below.
Very truly yours,
TOUCHTUNES MUSIC CORPORATION
By: /s/ Xxxxxxx Xxxxxx
-----------------------------------
Xxxxxxx Xxxxxx
Its: V.P. Finance & CFO
ACCEPTED AND AGREED TO:
Warner Music Group, Inc.
By: /s/ Xxxx Xxxxxx
-----------------------------------------------------
Xxxx Xxxxxx
Its: Executive Vice President,
Business, Development and Strategic Planning
--------------------------------------------
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EXHIBIT "A"
WARNER MUSIC GROUP, INC. CONTROLLED AND AFFILIATED RECORD LABELS
***
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