DISTRIBUTION AGREEMENT

Distribution Agreement

AGREEMENTS / CONTRACTS

CLAUSES

Digital Musicworks International Inc

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Title: DISTRIBUTION AGREEMENT
Date: 9/29/2005
Industry: Recreational Products Sector: Consumer Cyclical

Exhibit 10.27

DISTRIBUTION AGREEMENT

THIS AGREEMENT is made the 29 ^th day of September 2005 BETWEEN LICENSEMUSIC.COM ApS of Gammel Strand 42, P.O. Box 1142, DK-1010 Copenhagen K, Denmark (hereinafter referred to as “LM.COM” which expression shall include its successors and permitted assignees) of the one part and Digital Musicworks International Inc of 1545 River Park Drive, Suite 210 Sacramento, CA 95219 USA (hereinafter referred to as “DMI”) which expression shall also include its successors and permitted assignees of the other part

WHEREAS

1.	LM.COM controls the rights in and to a large number of master sound recordings;

and

2.	DMI wishes to acquire the right to exploit the master recordings controlled by LM.COM by means of so called “electronic distribution”

IT IS HEREBY AGREED as follows:

1. DEFINITIONS

For the purpose of this Agreement the following words shall have the meanings set forth against them:


“Masters”		shall mean all of the audio only master sound recordings in the current LM.COM catalogue which comprises not less than [*] tracks details of which are set out in Schedule A attached hereto which shall be incorporated herein by this reference.

“Term”		shall mean an initial period of seven (7) years commencing with the date of this agreement (the “Initial Period”) together with [] for DMI to renew the agreement for a further period of seven (7) years by giving notice in writing to LM.COM not later than six (6) months prior to the expiry of the initial term of its desire so to do and paying to LM.COM within seven (7) days thereafter a further advance equal in amount to [] percent ([]%) of the [], payable (before recoupment) to LM.COM by DMI in years 1 through 6 of the Initial Period or $[*], whichever is greater, such further advance being, fully recoupable from Royalty.

“Territory”		shall mean the World unless indicated to the contrary in respect of an individual Master listed in Schedule A in which case the Territory in respect of such master shall be limited to that set out in Schedule A.


“Net Receipts”	shall mean the gross receipts received by DMI from its exploitation of the Masters less only the following costs and fees incurred in connection with such exploitation and only to the extent incurred:

	i.	sales tax, VAT, or similar tax, if any;

	ii.	returns and credits, including, but not limited to, those on account of errors in billing, and errors in transmission, if any;

2. GRANT OF RIGHTS

A	LM.COM grants to DMI the sole right to exploit the Masters during the Term and throughout the Territory by means of so called electronic distribution and/or digital download only which rights shall include the right to:

(i)

reproduce and/or digitally encode the Masters and the applicable artwork and packaging into secure, downloadable and transmittable digital data formats or other formats now known or hereafter developed;

(ii)

reproduce and store the Masters on DMI’s owned or controlled computer server(s) solely for its internal business purposes and/or for subsequent distribution to consumer end-users;

(iii)

edit the Masters into segments that will constitute ring tones, master tones or similar telephonic ringing tones now known or unknown;

(iv)

promote, market, distribute and sell (as herein permitted) the Masters, deliver, upload, download and otherwise transmit, the Masters, over the Internet (or any successor global computer network) or over a regional wireless transmission network (e.g., SMS or WAP or any other digital delivery mechanism now known or hereafter developed) whether individually or packaged with other masters, for transfer onto consumers’ individual personal computers and/or portable and mobile devices solely for such consumers’ personal use;

(v)

promote and advertise (including on the web sites of DMI and third parties) the Masters using segments of the Masters no greater in length than thirty (30) seconds; and

(vi)

authorize third parties to electronically distribute the masters by means only of an electronic delivery direct to consumers (for the avoidance of doubt DMI shall not be permitted to sub-license its rights hereunder or grant its rights to any so-called aggregator e.g. The Orchard).

For the avoidance of doubt it is hereby acknowledged and agreed that DMI is not granted hereunder the right to exploit the Masters in any physical (as opposed to electronic/digital) format whether now known or hereafter invented (e.g. Vinyl, CD, DVD, Audio-Tape) nor is it granted any performance or broadcast rights.

Notwithstanding the terms of paragraph 2A hereof it is agreed that the rights granted to DMI hereunder are strictly limited to the extent of the rights held by LM.COM (e.g. as to whether the rights are exclusive or non-exclusive, the term and Territory of LM.COM’s rights) as detailed in Schedule A and that in the event that LM.COM’s rights are diminished or curtailed during the Term the rights granted to DMI are automatically and similarly diminished or curtailed. It is further agreed that LM.COM shall not grant the rights granted to DMI hereunder to any other third party.

The non-exclusive right throughout the Territory to use and publish the names, approved likeness and photographs of the artists whose performances are recorded on the Masters. For the avoidance of doubt nothing herein contained shall be construed as granting to DMI any so-called “merchandising rights” nor shall DMI be entitled to use such materials in any manner which may suggest or imply that LM.COM and/or the artists endorses any product or services whatsoever.

3. DELIVERY OF MASTERS

A	To the extent they are in the possession of LM.COM it shall supply to DMI in respect of each Master with either:

a tape recording; or

ii.

a digital audiotape; or

iii

or a compact disc (suitable for use in the digital encoding of the master).

(hereinafter referred to as “the Delivery Materials”)

B	The Delivery Materials supplied to DMI shall be of an audio quality which is commercially acceptable by general industry standards commensurate with the age of the recording contained on the master.

C	Time being of the essence, the Delivery Materials shall be delivered by LM.COM in up to [] batches of not less than [] per batch, with all Delivery Materials to be delivered within [*] of the date of signature hereof.

In respect of any Master where LM.COM is not in possession of a tape recording, digital audiotape or compact disc of the same it hereby undertakes to use its best endeavors to acquire and supply the same to DMI as soon as possible and this obligation/undertaking shall remain throughout the Term of this agreement.

E	In the event LM.COM is not able to deliver a tape recording, digital audiotape or compact disc to DMI for [] within [] then the [] of the [] shall be reduced on a pro-rata basis, the numerator of which shall be the actual number of Masters delivered and the denominator shall be [*]

F	In the event that LM.COM delivers further Masters after the [] period DMI shall pay to LM.COM an additional recoupable advance at the rate of US$[] per Master delivered.

G.	The supply to DMI of the Delivery Materials shall not imply a change of ownership in the Masters which shall be and remain the property of LM.COM.

4. DMI’S OBLIGATIONS

A	DMI shall not:

(i)

Exploit the Masters other than as permitted hereunder;

(ii)

Edit or otherwise alter in any way (other than expressly permitted herein) the Masters without the prior consent of LM.COM;

(iii)

Exploit the Masters other than at regular industry prices for the applicable method of exploitation without the prior written consent of LM.COM;

(iv)

Synchronize or permit to be synchronized the Masters with any visual images whatsoever;

(v)

During the Term license the rights granted to DMI hereunder from any third party.

B	DMI shall:

(i)

use its best efforts throughout the Term to ensure the maximum exploitation of the Masters by all means permitted hereunder; and

(ii)

In the event that it receives any claim from a third party which is inconsistent with any of the warranties contained in Clause 5 (“Third Party Claim”) it shall notify LM.COM in writing of such claim within 48 hours of DMI’s receipt of same. Provided that DMI does not in any way deal with any Third Party Claim (save that it shall be permitted to advise any party making a Third Party Claim that the rights in any Master which is the subject of a Third Party Claim have been acquired from LM.COM and refer any such party to LM.COM) it shall have the benefit of the Indemnity from LM.COM set out in paragraph 6 hereof. In the event that LM.Com does not deal with any such claim (for whatever reason) within a reasonable period of time, DMI shall be entitled to deal with the same and provided that it does so in a commercial and reasonable manner shall be entitled to rely upon the indemnity set out in paragraph 6 hereof. If in any other circumstances DMI elects to deal with any such 3 ^rd Party Claim then it hereby agrees that in respect of such 3 ^rd Party Claim it shall not have the benefit of the indemnity set out in clause 6 hereof.

C	DMI agrees that all digital music files created by it for the exploitation of the Masters shall, upon termination or expiry of the Term hereof, belong to LM.COM and are hereby assigned by way of future assignment of copyright effective on the date of termination or expiry hereof to LM.COM

5. WARRANTIES

A	LM.COM warrants that:

(i)

it possesses full power and authority to enter into and perform this Agreement;

(ii)

it is the licensing representative of the owner of the Masters; and

(iii)

none of the Masters, their contents or DMI’s exploitation of the same pursuant hereto shall interfere with or infringe the rights of any other party;

(iv)

save as otherwise provided herein it has obtained all necessary clearances and permissions in the Territory;

(v)

No other person, firm or corporation has any right, title or interest in or to the Master(s) inconsistent with the terms of this Agreement, except as specified and duly stated herein in the Territory; and

(vi)

It has not heretofore done or permitted to be done, nor will it hereafter do or permit to be done, any act or thing which is or may be inconsistent with the rights granted to DMI hereunder; and

(vii)

there are no liens, encumbrances and/or obligations upon or in connection with the Master(s) not specifically set forth herein which would derogate from the rights granted to DMI hereunder; and

(viii)

it has the right to use the artist’s name and likeness in connection with the exploitation of the Masters granted to DMI hereunder.

(ix)

It will not during the Term and extensions thereof grant the rights granted to DMI hereunder to any third party.

B	DMI warrants that:

(i)

It will at all times use and require its clients to exercise appropriate methods of security conforming to general industry standards in order to protect the Masters from unauthorized copying, distribution or other exploitation; and

(ii)

Prior to DMI commencing exploitation of the Masters by any particular method of exploitation or granting rights to any other party so to do it will inform LM.COM in writing of what methods of security are to be employed to protect the Masters during that exploitation.

C	The parties representations and warranties are true as of the date of this agreement and shall remain true for as long as this Agreement is enforceable.

6. INDEMNITIES

A	Subject to all the terms hereof LM.COM agrees to indemnify, save and hold DMI, it’s directors, officers, shareholders and employees harmless from any costs

SITE SEARCH

INITIAL HERE :

LICENSEMUSIC.COM [ ] *******

LICENSEE [ ]

Page 1 of 12

* Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.

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