Exhibit 10.6
MARKETING AGREEMENT
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AGREEMENT made this 30th day of September, 1998 between THE MUSIC
CONNECTION CORPORATION for its "Music Maker" custom music CD compilation
service, having an office at 0000 Xxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx
00000 (herein called "Music") and Platinum Entertainment, Inc., 0000 Xxxxxxxxxxx
Xxxx - Xxxxx 0000, Xxxxxxx Xxxxx, XX 00000 (herein called "Platinum").
Music and Platinum desire to engage in certain joint marketing activities
in connection with the exploitation of sound recordings owned or controlled by
Platinum by means of custom compilation compact discs produced by Music and the
electronic transmission by Music of audio files featuring such sound recordings
by means of the Internet to personal computers for individual use. The parties
hereby agree as follows:
1. Definitions.
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(a) "Custom CDs" shall mean compilation compact discs produced on a
custom basis for individual consumers, each consisting of Selections requested
separately by the customer concerned, from which sounds, without visual images,
can be perceived, reproduced or otherwise communicated, and shall include the
object in which sounds are so fixed.
(b) "Audio File" shall mean a Master in the form of a digitized computer
file capable of being transmitted electronically from Music's Site (as
hereinafter defined) as separately requested on a custom basis to a personal
computer for playback or reproduction on a CD-R.
(c) "Masters" shall mean the sound recordings of individual musical
compositions that comprise the entire repertoire of sound recordings that are
owned or controlled by Platinum or its subsidiaries, and with respect to which
Platinum presently has the right to license to Music during the Term the rights
to manufacture, advertise, market, distribute, and sell Custom CDs embodying
such basic source material coupled with sound recordings from other sources.
"Masters" shall also mean all other sound recordings, which Platinum acquires or
clears licensing rights with respect to after the commencement of and during the
Term.
(d) "Territory" shall mean the world.
(e) "Platinum's Identity" shall mean Platinum's tradenames, trademarks,
trade dress, and other elements of Platinum's trade identity, in the approved
form and style to be furnished by Platinum.
(f) "Selection" shall mean an individual sound recording as designated
by Music to its customers, whether sold for inclusion on a Custom CD or as an
Audio File.
Musicmaker -w- Platinum
September 30, 1998
2. Business Arrangements
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(a) During the term of this Agreement, Music will offer Custom CDs,
featuring Masters and Audio Files, for sale to its customers from its Internet
computer service presently known as MUSICMAKER, having the URL of
xxxx://xxx.xxxxxxxxxx.xxx (the "Music Site").
(b) Music and Platinum will design and implement an interface and links
between the Music Site and Platinum's Internet computer service having the URL
of xxxx://xxx.xxxxxxxxxx.xxx (the "Platinum Site") for the purpose of providing
visitors to the Platinum Site access to the Music Site in order to select and
order Custom CDs and Audio Files, and to enable them to return to the Platinum
Site. The design and implementation of the interface and links will be mutually
approved by Music and Platinum.
(c) Music will manufacture Custom CDs and transmit Audio Files sold to
customers accessing the Music Site from the Platinum Site ("Platinum
Customers"), conforming to the same quality standards as the units or music
files of the highest quality that Music distributes to other customers. Music
will also process all orders for Custom CDs and Audio Files placed by Platinum
Customers, including every aspect of each transaction, including, but not
limited to, receipt, credit card authorization processing, fulfillment, billing,
collection of payments, tracking, transaction security, and all customer service
functions. Music will also obtain all licenses or other authorization and make
all royalty and other payments required in connection with the Custom CDs and
Audio Files distributed under this Agreement, including authorizations from and
payments to owners of copyright in the sound recordings and musical compositions
reproduced in them. All sales to Platinum Customers under this Agreement will be
conducted as transactions between the Platinum Customers and Music, and Platinum
shall not be a party to them. Music will not make any use of names or addresses
of Platinum Customers or other information about them that Music acquires in the
course of its activities under this Agreement, except for the limited purpose of
servicing their orders as required hereunder. Music agrees that all information
concerning customers of Music who purchase Selections embodying Masters, whether
compiled in Custom CDs or as Audio Files, shall be available to Platinum at its
request without cost to Platinum for use by Platinum at its election, subject
only to any restrictions imposed on information concerning customer orders
obtained from Columbia House in existence as of the date of this Agreement.
(d) Platinum will display Music's MUSICMAKER icon on the Platinum Site
as a link to the Music Site, and will otherwise promote the availability of
Custom CDs and Audio Files from the
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September 30, 1998
Music Site by means mutually agreeable to Music and Platinum. Music will display
Platinum's icon on the Music Site as a link to the Platinum Site. During the
period the Masters are licensed by Platinum to Music on an exclusive basis,
Platinum will not authorize any other supplier of Custom CDs to offer them
through the Platinum Site.
(e) During the term of this Agreement, Platinum agrees to properly
maintain the Platinum Site and all links to the Music Site, and Music agrees to
properly maintain the Music Site and all links to the Platinum Site, so as to
fulfill the purposes and intent of this Agreement.
3. Term of Agreement
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(a) The initial term of the Agreement shall mean a period of five (5)
years commencing on the date hereof (the "Initial Term"). The parties hereto
agree that the Initial Term of the Agreement shall be automatically extended for
additional consecutive periods of one (1) year each unless either party elects
to terminate the Agreement, which election may be exercised by either party by
written notice to the other of its election to do so delivered at any time prior
to the expiration of the Initial Term or any option term.
(b) Notwithstanding the foregoing, the term of this Agreement shall be
co-terminous with the term of the Licensing Agreement between Platinum and Music
dated as of September 30, 1998 (the "Licensing Agreement") and shall terminate
automatically and without further notice upon the date of the termination of the
Licensing Agreement.
(c) No breach of this Agreement by either party shall be deemed material
unless the party claiming a breach serves written notice thereof on the other
party, specifying the nature thereof, and the party receiving notice fails to
cure such breach, if any, within thirty (30) days after receipt thereof.
4. Payments to Platinum
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Music will pay to Platinum a share of its proceeds derived from the sale of
Custom CDs and Audio Files in accordance with this Paragraph 4.
(a) Music shall pay the following amounts of Net Profits to Platinum:
(i) Music shall pay to Platinum fifty percent (50%) of the Net
Profits ("Exclusive Base Net Profit Share") realized
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Musicmaker -w- Platinum
September 30, 1998
from all orders received by Music from all customers other than those customers
identified in Paragraph 4(a) (iii) for Selections embodying Masters licensed to
Music by Platinum on an exclusive basis.
(ii) Music shall pay to Platinum twenty percent (20%) of the Net
Profits ("Nonexclusive Base Net Profit Share") realized from all orders received
by Music from all customers other than those customers identified in Paragraph
4(a)(iii) for Selections embodying Masters licensed to Music by Platinum on a
non-exclusive basis.
(iii) Music shall pay to Platinum sixty six and two-thirds percent (66
2/3%) of the Exclusive Base Net Profit Share or Nonexclusive Base Net Profit
Share, as applicable, for all Net Profits realized from all orders received by
Music for Selections embodying Masters from customers electronically linked or
referred to Music under a profit-sharing joint marketing agreement with Xxxxxxxx
Xxxxx, X0X, or other profit-sharing joint marketing partner of Music receiving
equivalent consideration from Music as that received by Columbia House or N2K
(individually and collectively "Marketing Partner"), and from all orders
generated through print or direct mail promotions by such Marketing Partners to
their customers.
(b) "Net Profits", for purposes of this Agreement, shall mean all revenue
derived by Music in connection with the sale of Masters on Custom CDs or as
Audio Files (excluding shipping and handling charges and transactional taxes),
less only the following:
(i) royalty obligations to parties other than Music for master use fees
and mechanical licenses;
(ii) a $.10 per Master charge for orders originating from print
advertising and direct mail; and
(iii) the proportionate cost of (A) the actual per unit manufacturing
cost of a Custom CD, including the disc, jewel case, tray card, cover insert,
and thermal printing on the disc, tray card, and cover insert ("Manufacturing
Costs"), and (B) Music's out-of-pocket costs associated with on-line hosting
of the Music Site, management of the Music Site, and on-line storage of files
("Site Costs"). The amount of Manufacturing Costs and Site Costs charged to
determine Net Profits shall be determined by multiplying the total of all such
costs for the applicable accounting period by a fraction, the numerator of which
shall be the number of Selections embodying Masters sold during the applicable
accounting period and the denominator of which shall be the total number of
Selections sold during the applicable
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September 30, 1998
accounting period;
provided, however, that (A) in no event shall the total costs described above in
Paragraphs 4 (b) (i), (ii), and (iii) for a Custom CD for purposes of
determining Net Profits exceed the amount of $4.00; and (B) in no event shall
Music's indirect costs or general overhead, or the amount of profits payable to
any third party, be included in the calculation of Net Profits.
(c) Music shall pay to Platinum twenty percent (20%) of all proceeds net
of shipping and handling fees realized by Music from all orders for Selections
embodying sound recordings other than Masters from customers electronically
linked or referred to Music by Platinum or any affiliate of Platinum.
5. Statements
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During the Term, Music shall quarterly compute all amounts due pursuant
to Paragraphs 4(a) and 4(c) hereunder, and send a separate statement thereof for
each to Platinum within thirty (30) days following the end of each calendar
quarter period. With respect to the amounts due pursuant to Paragraph 4 (a),
each statement shall show the number of units of Selections embodying Masters
(on a Master-by-Master basis) sold, the price at which each Selection was
sold, and all costs applied to determine Net Profits, identified by category and
amount. Together with each such statement, Music shall supply Platinum with
copies of all invoices supporting all costs applied to determine Net Profits.
With respect to the amounts due pursuant to Paragraph 4(c), each statement shall
show the number of units of Selections sold and the price at which each
Selection was sold. Each statement prepared pursuant to Paragraphs 4(a) and 4(c)
shall be accompanied with the payments shown to be due thereon. Music may
establish reasonable reserves for unpaid or returned records. Such reserves
shall become payable by the payment date of the accounting period immediately
following the accounting period in which such reserves were established. Music
shall keep an accurate and auditable account of its sales, expenses, payments,
and Net Sales under this Agreement, and will retain all records concerning those
sales, expenses, payments, and Net Sales for the period of Platinum's right to
audit such records. Platinum shall have the right, upon thirty (30) days prior
notice in writing, to audit and copy Music's books and records pertaining to
Music's statements hereunder and the computation of Net Profits and other
payments payable to Platinum once each calendar year during the Term and once
within three (3) years of the end of the Term. Any such audit may be conducted
only once with respect to any particular statement, shall be made during regular
business hours where Music's books and records are regularly maintained, and
shall be conducted on
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September 30, 1998
Platinum's behalf at its expense by a Certified Public Accountant familiar with
record industry accounting practices. Any payment not made when due shall bear
simple interest at an annual rate equivalent to the Prime Rate of interest
reported from time to time by the Wall Street Journal, plus Two Percent (2%),
for the period commencing when the payment should have originally been made to
Platinum and ending on the date of payment in full. All royalty statements and
accounts shall be binding upon Platinum unless Platinum specifically objects to
such statement or accounts in writing within thirty-six (36) months from the
date rendered. Platinum will be foreclosed from maintaining any action with
respect to any statement or accounting unless such action is commenced against
Music in a court of competent jurisdiction within forty-eight (48) months after
such statement or account is rendered.
6. Force Majeure
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In the event that Music's manufacture and sale of Custom CDs is
interrupted for any cause beyond the reasonable control of the Music, such as
war, fire, earthquake, strike, civil commotion, or acts of any government, then
Music, at its option, may extend the Term for a period equal to the length of
the interruption, not, however, to exceed six (6) months.
7. General Warranties and Representations
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(a) Platinum warrants and represents it has the right to enter this
Agreement and to perform all of the obligations to be performed by it hereunder.
(b) Music warrants and represents it has the right to enter this
agreement and to perform all of the obligations to be performed by it hereunder.
8. Indemnities
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(a) Platinum indemnifies and agrees to hold Music harmless from and
against any damages awarded in any judgment entered against Music, together with
the reasonable costs, expenses, and reasonable counsel fees of Music, by reason
of any breach of the warranties above set forth by Platinum or by reason of any
claim or claims made by any person or persons arising from the act or ommission
of Platinum with respect to the manufacture, promotion, distribution,
advertising, and sale of Records hereunder or any failure of Platinum to perform
its obligations hereunder (except to the extent such damages resulted from
Platinum's reliance upon information supplied by Music). Music shall promptly
notify Platinum in writing of any such claim or litigation. Platinum may,
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September 30, 1998
at its option, assume the handling, settlement, or defense of any such claim or
litigation, in which event the obligation of Platinum shall be limited to
holding Music harmless from and against any final judgment paid on account
thereof or any settlement effected by Platinum.
(b) Music indemnifies and agrees to hold Platinum harmless from and
against any damages awarded in any judgment entered against Platinum, together
with the reasonable costs, expenses, and reasonable counsel fees of Platinum, by
reason of any breach of the warranties above set forth by Music or by reason of
any claim or claims made by any person or persons arising from the act or
ommission of Music with respect to the manufacture, promotion, distribution,
advertising, and sale of Records hereunder or any failure of Music to perform
its obligations hereunder (except to the extent such damages resulted from
Music's reliance upon information supplied by Platinum). Platinum shall promptly
notify Music in writing of any such claim or litigation. Music may, at its
option, assume the handling, settlement, or defense of any such claim or
litigation, in which event the obligation of Music shall be limited to holding
Platinum harmless from and against any final judgment paid on account thereof or
any settlement effected by Music.
9. Notices
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All notices required to be given to a party hereto must be sent to the
address for the party first mentioned herein or to such new address, if changed,
as described below, in order to be effective. All payments and statements will
be sent to Platinum at Platinum's address mentioned herein. Each party may
change its respective address hereunder by notice in writing to the other. All
notices shall be served by depositing them addressed as aforesaid, postage
prepaid, in the mail, by delivering them by facsimile (with confirmation of
receipt) or by delivering them, charges prepaid. Any notices served by mail
shall be certified or registered with return receipt requested. The date of
mailing of any such notice, the date of delivery thereof, or the date of sending
by facsimile of any such notice shall constitute the date of service.
10. Assignment
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This Agreement is personal to the parties and may not be assigned
without the consent of the other party, except that Music and Platinum may
assign this Agreement, in whole or in part, to its parent, to any subsidiary
corporations of such party, to any affiliated company, or to any company by
which it is acquired, and such rights may be assigned by an assignee thereof to
a similar
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Musicmaker -w- Platinum
September 30, 1998
assignee, provided that such assignment shall not release or alter any
liability, undertaking, or obligation of either party hereunder. This Agreement
and all rights and obligations hereunder shall be binding upon the successors,
assigns, and legal representatives of both parties.
11. Merger
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This Agreement sets forth the entire Agreement between the parties as
to the subject matter hereof, and neither party shall be bound by any amendment
or modification hereto except as may be set forth subsequent to the date hereof
in writing signed by a properly authorized representative of both parties.
12. Governing Law & Jurisdiction
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This Agreement shall be governed by and be construed in accordance with
the internal law of the State of Illinois.
13. Confidentiality
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The terms and conditions hereof are confidential to the parties hereto. The
parties may disclose this Agreement to their employees, officers, directors,
attorneys, and accountants, all of whom shall be bound by the aforesaid
confidentiality requirement.
The parties may also disclose this Agreement if so required by a governmental
agency or by a court of competent jurisdiction.
IN WITNESS WHEREOF, the undersigned have executed this agreement as of the
date set forth above.
THE MUSIC CONNECTION CORPORATION
By: /s/ Xxxxxx Xxxxxxxx
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An Authorized Signer
PLATINUM ENTERTAINMENT, INC.
By: /s/ Platinum Entertainment, Inc.
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An Authorized Signer
Federal ID No. 36-38032328
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