THIS AGREEMENT, dated as of April 1, 1999, between Giant Merchandising ("Merchandiser"), 5655 Union Pacific Avenue, Commerce, CA 90022, and ARTIST direct New Media, LLC ("ADNM"), 17835 Ventura Blvd., Suite 310, Encino, CA91316, is being entered into in light of the following:
A. Merchandiser is in the business of acquiring the right to use the names, photographs and other likenesses, biographical material and other personal identification (collectively, "Personal Identification") of musical artists in connection with the manufacture and sale of merchandise and the licensing of such rights to third parties.
B. ADNM is in the business of developing and operating Internet retail storefronts for musical artists ("Artist Stores") that, among other things, sell merchandise containing the Personal Identification of the applicable artist.
C. Merchandiser and ADNM are entering into this Agreement in order to set forth the terms and conditions upon which Merchandiser has agreed to accommodate ADNM in respect of developing and opening new Artist Stores featuring Merchandiser Artists (as defined below) and in the operation thereof.
NOW, THEREFORE, in consideration of the foregoing and the mutual benefits contained herein, the parties hereto agree as follows:
1. Term: The term of this Agreement (the "term ") shall be four (4) years commencing on the date of this Agreement.
2. Signing Procedures:
(a) As used herein, "Merchandiser Artist" shall mean, individually and collectively, each and every musical recording artist in respect of which Merchandiser from time to time has the exclusive right to manufacture merchandise utilizing such artist's Personal Identification and to sell such merchandise for distribution through retail channels, including to retailers who solely or primarily sell merchandise via the Internet (collectively, the "Rights"). Merchandiser represents and warrants that attached hereto as Exhibit A is a true and complete list of Merchandiser Artists as of the execution of this Agreement, as well as the territory of the Rights in respect of each such Merchandiser Artist.
(b) During the Term, Merchandiser agrees that, promptly upon Merchandiser entering into an agreement to obtain Rights in respect of a Merchandiser Artist, Merchandiser shall notify ADNM of the applicable artist’s name (s) as well as the territory of the Rights. Upon Merchandiser's entering into such agreement, the applicable Merchandiser Artist shall be deemed added to said Exhibit A.
(c) Merchandiser agrees to promptly notify ADNM if any of the information on said Exhibit A should change during the Term, or if the Rights in respect of a particular Merchandiser Artist shall have terminated and/or the "sell-off" provisions of Merchandiser's agreement with the applicable Merchandiser Artist have become operative (after which such artist shall be deemed deleted from said Exhibit A.)
(d) Said Exhibit A indicates with an asterisk (*) those Merchandiser Artists in respect of which ADNM desires to enter into a Store Agreement as of the execution of this Agreement. ADNM shall have the right from time to time during the Term to notify Merchandiser that it desires to enter into a Store Agreement with any other Merchandiser Artists. Each such Merchandiser Artists hall be referred to herein as an "Accepted Artist." ADNM and Merchandiser shall use their collective commercially reasonable efforts to cause the applicable Merchandiser Artist to enter into an agreement with ADNM (each such agreement, along with any extensions or renewals thereof, is sometimes referred to herein as a "Store Agreement") substantially in the form attached hereto as Exhibit B. ADNM agrees to provide Merchandiser with copies of each such Store Agreement promptly after the complete execution thereof during the Term.
(e) Merchandiser acknowledges that, prior to the execution hereof, ADNM entered into a Store Agreement with respect to the Merchandiser Artist professionally known as[***] and that all Merchandiser Product sold under said Store Agreement after the date hereof ("[***] Merchandise") shall be subject to the terms of this Agreement, except as set forth below in this paragraph 2 (e). ADNM agrees to use best efforts to cause [***] to agree that the License Fee (as defined in paragraph 6 below) shall be payable to Merchandiser hereunder (rather than to [***]) in respect of all [***] Merchandise. In the event[***]nevertheless refuses to so agree, ADNM shall pay Merchandiser the following product consignment charges in respect of all[***] Merchandise, computed as if the License Fee had been actually paid to Merchandiser hereunder, as follows: (i) an amount equal to that portion of the otherwise applicable License Fee that Merchandiser would have been entitled to retain for its sole account under its agreement with [***] (e. g., as opposed to any portion thereof that Merchandiser would be obligated to credit to[***] royalty account), plus (ii) the amount of the Consignment Charge, if any, that would have been applicable under paragraph 6 (c) below.
3. Product Supply:
(a) As used herein:
(i) "Merchandiser Product" means all merchandise containing the Personal Identification of a Merchandiser Artist and sold pursuant to a Store Agreement (whether through the applicable Artist Store or the UBL Store), that is provided by or on behalf of Merchandiser or a Sublicensee pursuant to the Merchandiser Terms;
(ii) "Artist Product" means all merchandise and other products or services sold pursuant to a Store Agreement (whether through the applicable Artist Store or the UBL Store) other than Merchandiser Product (e. g., records, concert tickets, advertisement space, and merchandise supplied by a Sublicensee other than pursuant to the Merchandiser Terms);
"Merchandiser Terms" means that payment for the applicable merchandise shall not become due until the date [***] after the applicable merchandise has arrived at ADNM's fulfillment center (s) (the "Center"), it being understood that ADNM shall have the right to return any such merchandise to Merchandiser for a full credit within said [***] period (provided the applicable returned merchandise arrives at Merchandiser's warehouse no later than [***] after the expiration of said [***] period). For purposes of this paragraph 3 (a) .......
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