***Denotes certain parts that
have not been disclosed and have been filed separately with the
Secretary, Securities and Exchange Commission, and is subject to a
confidential treatment request pursuant to Rule 24b-2 of the
Securities Exchange Act of 1934.
WIRELESS CONTENT DISTRIBUTION
AGREEMENT
This Agreement is entered into as of
the 24 th day of October 2005 (the “Effective
Date” )
BETWEEN :
Universal Music Canada
Inc. , a corporation
having a principal place of business at 2450 Victoria Park Avenue,
Suite 1, Toronto, ON, M2J 5H3 (“ Universal
”),
AND :
DY Mobile Inc.,
303 – 1847 West Broadway,
Vancouver, BC, V6J 1Y6 (hereinafter “DY Mobile”
).
RECITALS:
NOW THEREFORE
in consideration of the mutual
covenants and obligations contained herein and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, DY Mobile and Universal (individually, a
“ Party ” and collectively, “
Parties ”) agree as follows:
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1.1.
|
Definitions
. In this Agreement, the following
terms will have the following meanings:
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“Affiliate
“ means, with respect to any
entity, any other entity directly or indirectly controlling or
controlled by, or under direct or indirect common control with,
such entity or one or more of the other Affiliates of that entity
(or a combination thereof). For the purposes of this definition, an
entity shall control another entity if the first entity: (i) owns,
beneficially or of record, fifty percent (50%) or more of the
voting securities of the other entity; or (ii) has the ability to
elect a majority of the directors of the other entity.
"Aggregator"
means a mutually agreed upon third
party service provider used to assist the Parties in the
distribution of the Content hereunder.
“Agreement” means this agreement, the Schedules attached
hereto, any other documents included by reference, as each may be
amended from time to time in accordance with the terms of this
Agreement;
“Approved Mobile
Provider” means
each mobile provider approved in writing by Universal. As of the
date of this Agreement, Universal has approved Bell Mobility,
Rogers Wireless and Telus Mobility.
“Approved Mobile Provider
Interfaces” means
the user interfaces through which an Approved Mobile Provider will
present and distribute the Content to the End Users;
“Approved Mobile Provider
Network” means
equipment and infrastructure that facilitates the delivery of
wireless voice and data services to End Users, including the
backbone infrastructure;
“Approved Mobile Provider
Service” means the
wireless services delivered over an Approved Mobile
Provider’s wireless telecommunications network to End
Users;
“Approved Mobile Provider
User Data” shall
have the meaning ascribed to that term in Section 7.1;
7074.3
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2
"Audio Clips"
means a thirty (30) second excerpt
of a sound recording of a musical composition taken from a
Universal Master Recording that corresponds to the Content
authorized under this Agreement.
“Business
Day” means any day
other than a Saturday, Sunday or statutory holiday in the Province
of Ontario or Québec, as applicable;
“Confidential
Information” means
any information which is marked “confidential” or is
reasonably confidential in nature regardless of whether it is
marked “confidential” and is furnished by or on behalf
of a Party or any of its Affiliates (collectively, the "
Disclosing Party ") to the other Party or to any of its
Affiliates (collectively, the " Receiving Party "), whether
such information is or has been conveyed verbally or in written or
other tangible form, and whether such information is acquired
directly or indirectly such as in the course of discussions or
other investigations by the Receiving Party, including, but not
limited to, trade secrets and technical, financial or business
information, data, ideas, concepts or know-how that is considered
and treated as being confidential by the Disclosing Party,
including in the case of DY Mobile, for greater certainty and
without limiting the generality of the foregoing, information
pertaining to the Approved Mobile Provider Network, the Approved
Mobile Provider User Data and the End User Data. Confidential
Information disclosed in tangible or electronic form may be
identified by Disclosing Party as confidential with conspicuous
markings, or otherwise identified with a legend as being
confidential, but in no event shall the absence of such a mark or
legend preclude disclosed information which would be considered
confidential by a party exercising reasonable business judgment
from being treated as Confidential Information by Receiving
Party;
“Content”
means, collectively: (i) the Master
Tone Content, and (ii) the Related Content;
“Content
Unit” means each
individual unit of Content provided by Universal and successfully
delivered to an End User as verified by the Approved Mobile
Provider’s collection of delivery receipts for Content
Units.
“Documentation”
shall have the meaning ascribed to
that term in Section 4.2;
"Downloadable Content"
means, collectively: (i) the Master
Tone Content; and (ii) the Related Content.
“End User”
means any end user of an Approved
Mobile Provider’s Wireless Service;
“End User Data”
means registration, profile, message
and other user information obtained by Universal regarding End User
as a result of this Agreement;
“Intellectual
Property” means
anything that is or may be protected by an Intellectual Property
Right such as, but not limited to works (including computer
programs), performances, discoveries, inventions, trade-marks
(including trade names and service marks), trade secrets,
industrial designs, confidential information (including
Confidential Information as defined herein), mask work and
integrated circuit topographies;
“Intellectual Property
Right” means any
right that is or may be granted or recognized under any Canadian or
foreign legislation regarding patents, copyrights, neighbouring
rights, moral rights, trade-marks, trade names, service marks,
confidential information (including Confidential Information as
defined herein), industrial designs, mask work, integrated circuit
topography, privacy, publicity, celebrity and personality rights
and any other statutory provision or common or civil law principle
regarding intellectual and industrial property, whether registered
or unregistered, and including rights in any application for any of
the foregoing;
“Interactive
Device” means any
device that enables End Users to access the Approved Mobile
Provider Service, as applicable;
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3
“Master Tones
Content” means the
content more particularly described in Part 2 of Schedule A
attached hereto, provided by Universal to DY Mobile pursuant to
this Agreement;
“Mark”
means trade names, trade-marks,
service marks, logos, brand names, corporate names, marks, symbols,
designs, colour combinations or product configurations, or other
business identifiers of any entity, whether registered or
unregistered;
“MIN”
means the “mobile
identification number” issued by an Approved Mobile Provider
to an End User in connection with subscription to the Approved
Mobile Provider Service;
“Person”
means any individual, corporation,
partnership, joint venture, association, trust or other entity or
group;
“Registration
Data” means the MIN
and the handset registration data collected by DY Mobile from End
Users when such persons register for the Approved Mobile Provider
Service;
“Related
Content” means any
downloadable screensavers, wallpaper, voice tones, or other
content, all as more particularly described in Part 3 of Schedule A
attached hereto, including any text, graphics, pictures, sound,
video and other data (other than Universal’s Marks) relating
to such content and provided by Universal to DY Mobile pursuant to
this Agreement;
“Retail
Price” means the
fee billed to End Users by the Approved Mobile Provider, excluding
all applicable taxes;
"Streaming"
means the digital transmission of an
audio recording so that it is played or displayed incrementally, or
in semi-real time, such that it can be heard, viewed or otherwise
received by an End User with minimal delays utilizing commercially
reasonable precautions to prevent the audio recording from
unauthorized digital copying, duplication or storage by the End
User (other than any temporary copies used solely for so-called
"caching" or "buffering" or as otherwise specifically licensed
pursuant to this Agreement).
“Territory” means Canada;
“Term”
shall have the meaning ascribed to
that term in Section 2.1;
“Universal’s
Marks” means those
Marks owned or controlled by Universal and made available to DY
Mobile in conjunction with the Content as identified by Universal
from time to time during the Term pursuant to the terms and
conditions of this Agreement.
"Universal Master
Recording" means the
audio only sound recordings authorized under this Agreement that
are owned or controlled by Universal.
“Use”
includes any act which, if
committed without the proper authorization of the owner of an
Intellectual Property Right, would constitute an infringement of
such Intellectual Property Right;
“Virtual Private
Network” or “VPN” means the private network constructed by DY
Mobile and Universal for the purposes of transferring the Content
as contemplated by this Agreement;
“Web Page”
means a single HTML, WML, VXML, HDML
or similar document, which is all or a portion of a portable or
non-portable Web Site; and
“Web Site”
means, with respect to any Person,
all points of presence and/or services maintained by such Person on
or electronically connected (both wired and wireless connections)
with the Internet (including, without limitation, the World Wide
Web) or any successor public data network.
CW908200.1
CW908200.1
4
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SECTION 2.
|
TERM AND
EXCLUSIVITY
|
|
2.1.
|
Term/Renewal.
This Agreement shall have a term
(the “Term”) commencing on the Effective Date and
ending on 1 March 2007 (the “Initial Expiry Date”),
unless extended or earlier terminated in accordance with the terms
of this Agreement. After the Initial Expiry Date, the Term of this
Agreement will automatically be extended for successive six month
periods unless either party gives at least fifteen (15) days notice
to the other party of its intent not to renew this Agreement prior
to the end of the then current extension of the Term.
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2.2.
|
Non-Exclusive
Agreement . Under no
circumstances shall this Agreement be construed or interpreted as
an exclusive dealing agreement by either Party. Nothing in this
Agreement shall be construed as to restrict either Party from
entering into any agreement with any other party, even if similar
to or competitive with the transactions contemplated hereunder.
Without limiting the generality of the foregoing, either Party is
free to develop, purchase, use or market products or services
similar to or competitive with the Content at any time, and from
time to time, during and after the Term.
|
|
SECTION 3.
|
GRANT OF RIGHTS
|
|
3.1.
|
Distribution and Sale of
Downloadable Content .
Universal hereby grants DY Mobile a non-exclusive, limited,
non-transferable (except as otherwise specified in this Agreement)
right, during the Term to Use, reproduce, and distribute the
Downloadable Content by way of Approved Mobile Providers to End
Users in the Territory and permit End Users in the Territory to
access and use the Downloadable Content on their Interactive
Device(s) via the Approved Mobile Provider Service.
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|
3.2.
|
Audio Clip License
. Universal hereby grants to DY
Mobile a non-exclusive, limited, royalty free, non-transferable
(except as otherwise specified in this Agreement) license, during
the Term to distribute the Audio Clips via Streaming to End Users
solely in connection with the promotion or sale of the Content on
Approved Mobile Provider Interfaces.
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|
3.3.
|
Promotion and Support
License. Universal hereby
grants to DY Mobile a non-exclusive, limited, royalty free,
non-transferable (except as otherwise specified in this Agreement)
license in the Territory during the Term to Use, reproduce, and
publicly display the Content and Universal’s Marks: (i) on
the Approved Mobile Provider Interfaces in connection with posting,
maintaining and delivering the Content thereon; and (ii) to
advertise and promote the Content on the Approved Mobile Provider
Service in promotional and marketing materials, content directories
and indexes, and electronic and printed advertising, publicity,
press releases, newsletters and other communications about
Universal or the Content.
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3.4.
|
Universal hereby grants DY Mobile a
right to exercise any of the specific rights granted pursuant
Sections 3.1 through 3.3, inclusive, through the use of an
Aggregator. Specifically, the foregoing shall permit the Content to
be delivered and stored by an Aggregator provided that: (a) such
Aggregator is using the Content solely to perform rights granted to
DY Mobile pursuant to this Agreement; and (b) DY Mobile shall
remain liable to Universal for the acts of any such
Aggregator.
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|
3.5.
|
Restrictions on Use of Content
and Universal’s Marks . DY Mobile shall not copy, decompile or reverse
compile, reverse engineer or reverse assemble the Content without
the express written consent of the Universal. All Use by DY Mobile
of Universal’s Marks shall be subject to Universal’s
prior written approval and shall be in strict compliance with each
of the following terms and conditions: (a) DY Mobile shall strictly
comply with all standards with respect to the Use of
Universal’s Marks which may be furnished by Universal to DY
Mobile from time to time and all Uses of Universal’s Marks in
proximity to the trade name, trademark, service name or service
mark of any other Person shall be consistent with the standards
furnished by Universal
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CW908200.1
CW908200.1
5
from time to time; (b) DY Mobile
shall not create a combination mark consisting of one or more Marks
of each Party; (c) all Uses of Universal’s Marks shall enure
to the benefit of Universal and DY Mobile acknowledges and agrees
that Universal is the owner of Universal’s Marks; (d) DY
Mobile shall not use, register, or attempt to register, in any
country, any name or trademark identical or confusingly similar to
Universal’s Marks; and (e) any materials, activities,
products or services distributed or marketed by DY Mobile in
conjunction with Universal’s Marks shall: (i) meet all of the
standards of this Agreement; (ii) meet or exceed standards of
quality and performance generally accepted in the industry; and
(iii) comply with all applicable laws, rules and regulations. This
Agreement does not grant Universal any right to use any Marks of DY
Mobile without DY Mobile’s prior written consent.
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3.6.
|
Third Party Costs.
The Parties agree that, as between
Universal and DY Mobile hereunder, DY Mobile will be solely
responsible for securing and administering mechanical licenses from
and paying the mechanical royalties to the owners of copyrights in
the musical compositions embodied in the Universal Sound Recordings
sold as Content to End Users hereunder, either directly by DY
Mobile or by an Aggregator, as directed by DY Mobile acting as an
agent on DY Mobile’s behalf. Universal will be responsible
for paying and administering: (1) all record royalties to artists
and other record royalty participants resulting from the sale of
the Content; and (2) all payments that may be required under
collective bargaining agreements applicable solely to Universal in
connection with the production of the Universal Sound Recordings
(e.g. musician's unions). To the extent that the sale of any
Downloadable Content by DY Mobile as authorized under this
Agreement constitutes a public performance and/or communication to
the public of the musical composition embodied therein, as between
DY Mobile and Universal, DY Mobile will be solely responsible for
obtaining such performance licenses and remitting payment of such
performance royalties as required pursuant to such license or
Tariff. The Parties acknowledge that the foregoing requirement does
not express or imply any agreement by the Parties that performance
licenses are necessary for such purposes.
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SECTION 4.
|
CONTENT AND
PRESENTATION
|
|
4.1.
|
Content Management
. Subject to the terms and
conditions of this Agreement, Universal agrees to provide to DY
Mobile, and DY Mobile agrees that it may acquire, the Content.
Universal shall manage, renew, create, delete, edit and otherwise
control the Content. Universal shall ensure that all Content is
formatted as required to support all Interactive Devices. Universal
shall ensure that the selected timing of Audio Clips or
“approved edits” will be internally reviewed and
approved by Universal and, where applicable, Universal’s
artists, prior to delivery to DY Mobile. For any deletions to the
Content made by Universal, Universal shall supply replacement
content of equivalent quality and of the same genre as the content
that was deleted by Universal. DY Mobile hereby authorizes
Universal to direct an Aggregator that is mutually agreed to in
writing between Universal and DY Mobile to carry out the content
management obligations set out in this Section 4.1 on behalf of
Universal. Specifically, the foregoing shall permit the Content to
be digitized, formatted and delivered by an Aggregator provided
that (a) such Aggregator is providing the Content as required by DY
Mobile pursuant to this Agreement; and (b) Universal shall remain
liable to DY Mobile for the acts of any such Aggregator.
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4.2.
|
Documentation
. Universal, or an Aggregator if
mutually agreed, shall provide such documentation to DY Mobile
hereunder as is reasonably necessary for the user of the applicable
Content, including without limitation DY Mobile, and the End Users,
to understand the functions and features available in connection
with the Content, including, without limitation, up to date user
manuals, operational manuals or instructions and training materials
generally made available by Universal to its customers, and updates
thereof as provided from time to time to DY Mobile under this
Agreement (collectively, the
“Documentation”).
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CW908200.1
CW908200.1
6
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4.3.
|
DY Mobile Responsibilities. DY
Mobile shall:
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|
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4.3.1.
|
ensure that each Approved Mobile
Provider create, design, edit, manage, host and control the
presentation of such Approved Mobile Provider Interfaces. Universal
will provide and deliver the Content to DY Mobile’s proxy
server via a VPN. The VPN will use the standard Internet as the
transport mechanism and the underlying transport protocol will be
TCP/IP;
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4.3.2.
|
except as otherwise provided in this
Article 4, have sole responsibility to deliver the Content to the
Approved Mobile Providers and to the End Users and shall have sole
responsibility for first tier customer support of End Users
utilizing the Content;
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4.3.3.
|
be responsible for the billing of
End Users in connection with End Users’ purchase of Content;
and
|
|
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4.3.4.
|
provide Universal with an exclusive
first right of refusal with respect to all promotional
opportunities secured by DY Mobile which have the possibility for
Content placement. Universal will be required to indicate
Universal’s interest in each such promotional opportunity
within 7 Business Days of Universal’s receipt of all
applicable information related to such promotional opportunity.
Upon Universal notifying DY Mobile that it is interested in such
promotional opportunity, Universal will have an exclusive 30 day
negotiation period during which DY Mobile and Universal will
negotiate in good faith with respect to the material deal terms of
such promotional opportunity. In the event that Universal and DY
Mobile are unable to agree on the material deal terms of such
promotional opportunity, DY Mobile will have the right to contract
with any third party for such promotional opportunity provided the
material deal terms of such third party offer are more beneficial
to DY Mobile than the deal terms (if any) proposed by
Universal.
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|
4.4.
|
Responsibility for
Costs . Except as
otherwise expressly provided hereunder, each Party shall be
responsible for all costs and expenses incurred by it in connection
with its performance of its obligations under this
Agreement.
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|
4.5.
|
Other Universal
Obligations . In carrying
out mobile data services, or any other services using the Approved
Mobile Provider Service Universal shall comply in all material
respects with: (i) all applicable laws and regulations, including,
without limitation those relating to personal information, privacy,
and “opt-in” and “opt-out” ability; and
(ii) policies of DY Mobile, if any.
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4.6.
|
Designated Managers
. Each Party shall designate
managers (the “Designated Manager”) who shall
co-ordinate the Parties’ respective obligations under this
Agreement. The Designated Managers shall be employees of DY Mobile
and Universal tasked to oversee the performance of the
relationship. Each Party may change its Designated Manager(s) from
time to time, but shall inform the other Party of such a change.
The Designated Managers shall meet periodically either in person or
telephonically to discuss plans and issues as necessary. The
initial Designated Managers shall be as follows:
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|
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(a) DY Mobile:
|
Dan Reitzik, President and
C.E.O.
|
|
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(b) Universal:
|
Renee Plato, Director of Digital
Business Development
|
|
4.7.
|
Takedown. Universal shall have the right to remove or
withdraw any Content delivered hereunder on not less than seven (7)
business days written notice to DY Mobile, for any reason, and DY
Mobile will ensure that such Content is no longer available to any
End User. Universal shall have the right to have DY Mobile remove
access to any Content delivered hereunder on not less than 24 hours
written notice if DY Mobile’s continued use would create
Universal artist relationship problems, potentially subject
Universal to litigation and/or legal or regulatory action, or could
result in alleged breach or breach of a third party contract;
provided that Universal does not provide such Master Tone to
another carrier or provider (except in the circumstance where
an
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CW908200.1
CW908200.1
7
artist or Universal specifically
requests that the Content be withdrawn from only DY Mobile and not
other carriers generally).
|
4.8.
|
Soundalikes.
DY Mobile and each Approved Mobile
Provider will cease the sale of Soundalike Ring Tones of all sound
recordings by a Universal artist once DY Mobile begins distributing
Master Tones by that same artist. For the avoidance of doubt, this
Section 4.9 shall not apply to masters owned by a non-Universal
record label embodying the performance of an artist who also has
created recorded masters for Universal (i.e. a commercially
available "cover" by a non-Universal artist). Soundalike Ring Tones
for the purposes of this Agreement shall mean a ring tone featuring
a re-recording of a Universal Sound Recording that can reasonably
be considered to be an attempt to mimic the original Universal
Master Recording the result of which might undermine the commercial
potential of the original Universal Master Recording.
Notwithstanding the foregoing, “Soundalike Ring Tones”
shall specifically exclude monophonic and polyphonic ring tones
(except as otherwise provided in section 4.10).
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|
4.9.
|
Monophonic and Polyphonic Ring
Tones . DY Mobile agrees
that, once DY Mobile begins distributing a Master Tone of a
specific Universal Sound Recording, where a monophonic or
polyphonic ring tone embodying the underlying composition contained
in the applicable Master Tone is also for sale by DY Mobile or by
an Approved Mobile Provider, DY Mobile or such Approved Mobile
Provider (as applicable) will give prominent placement for the
applicable Master Tone. The use of Universal Marks or the names and
likenesses of Universal artists is strictly prohibited in
connection with the sale by DY Mobile or an Approved Mobile
Provider of monophonic or polyphonic ring tones.
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4.10.
|
“Personalized" Ring Tone
services . DY Mobile
shall ensure that no sound recording owned or controlled by
Universal in the Territory (including a sound recording owned or
controlled by Universal that has not been provided by Universal to
DY Mobile as Content pursuant to this Agreement) is sold or made
available to any End User through a Web Site owned or operated by
DY Mobile or an Approved Mobile Provider, during the Term whereby
the End User could create their own ringtone from a sound recording
owned or controlled by Universal.
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4.11.
|
Technical Cooperation
: DY Mobile acknowledges the
importance of implementing a security system for the exploitation
of the Content governed by digital rights and DY Mobile will ensure
that DY Mobile’s Aggregator (if applicable) will comply with
all of the terms and conditions contained in this Agreement. DY
Mobile agrees to comply with Universal’s security guidelines
for wireless service providers and handsets attached hereto as
Schedule C. DY Mobile hereby agrees that all handsets selling
Universal Content will conform with the security requirements
attached as Schedule C and will, on that basis, be considered
pre-approved handsets for the purposes of this Agreement. However,
at any time during the Term, Universal reserves the right to
withdraw approval of any handset at Universal’s sole
discretion. In the event Universal notifies DY Mobile to halt
delivery of Universal Content to an applicable handset, DY Mobile
agrees to do so immediately. The Parties agree to cooperate and
share information and research on technical and security issues
relevant to the Agreement. To this end, DY Mobile and Universal
agree to engage in an ongoing dialogue relating to security and
distribution issues. DY Mobile shall provide Universal with updates
on new handset releases or upcoming launches, potential security
issues or enablement, and reports of internal lab tests on
handsets.
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SECTION 5.
|
COMPENSATION AND
PAYMENT
|
|
5.1.
|
Revenue Share.
DY Mobile agrees to pay Universal
the amounts more particularly set out in Schedule B attached
hereto.
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5.2.
|
Payment. Within 30 days after DY Mobile’s receipt
of payment from the Approved Mobile Providers, DY Mobile shall pay
Universal the aggregate amounts due Universal hereunder
in
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CW908200.1
CW908200.1
8
accordance with Schedule B attached
hereto for each monthly period. Universal acknowledges that
pursuant to DY Mobile’s agreements with the Approved Mobile
Providers, DY Mobile does not receive payment until 60 days after
the month in which such sale occurs. All amounts set out in this
Agreement and all payments due hereunder shall be made in lawful
currency of Canada. All payments due hereunder shall be accompanied
by a detailed accounting which will be provided to Universal by DY
Mobile, or its Aggregator, if applicable, in the electronic file
format attached hereto as Schedule D and will show in reasonable
detail the basis for the payment made and will set forth on an
aggregate basis for the immediately preceding monthly accounting
period, the following information: (1) the aggregate number of
Content Units sold; (2) the number of Content Units sold on a track
by track basis; (3) the UPC or catalog number of the album
concerned for each Content Unit; (4) the name of the artist of each
Content Unit; (5) the International Standard Recording Code
(“ISRC”) for each Content Unit; and (6) the track title
for each Content Unit. All payments to Universal shall be sent to
Universal to the attention of Mark Jones, Vice President of
Finance. The foregoing shall permit DY Mobile’s reporting
obligation hereunder to be undertaken by an Aggregator provided
that: (a) such Aggregator is providing the reporting as required by
Universal pursuant to this Agreement; and (b) DY Mobile shall
remain liable to Universal for the acts of any such
Aggregator.
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5.3.
|
Late Payments.
Upon Universal’s request, DY
Mobile shall pay a finance charge of 1.5% per month, or the maximum
rate permitted by law, whichever is less, from the date that any
payment was first due under the Agreement until the date such
payment is made. DY Mobile agrees to pay all reason
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