Order Fulfillment Agreement - Buy.com Inc. and i.FILL



                          ORDER FULFILLMENT AGREEMENT

This Order Fulfillment Agreement ("Agreement") is entered into effective as of
the 1st day of February 1999, by and between Buy.com, Inc. ("Retailer") and
i.FILL, a division of Valley Media, Inc. ("Valley").

                                   BACKGROUND
A.  Valley is a distributor of pre-recorded music products ("Product")
B.  Valley has created databases known as "audiofile" and audiotrax" containing
    information regarding Product.
C.  i.FILL provides to various retailers "direct-to-consumer" order fulfillment
    services, pursuant to which i.FILL picks, packs and ships Product to the
    retailer's customers.
D.  Retailer intends to operate on the World Wide Web an "on-line retail store"
    (the "Site") through which it intends to sell Product.

                                   AGREEMENT

Subject to the terms and conditions set forth below, the parties agree as
follows:

1.  BASIC AGREEMENT.  Retailer and i.FILL agree to develop a computer and
    customer service interface for the purposes of conducting small order
    Product transactions via an on-line music store and other direct response
    marketing efforts. Retailer will build and maintain a web site. Retailer
    will also conduct all marketing and merchandising efforts, collect all
    orders and send such orders to i.FILL via EDI. i.FILL will be responsible
    for picking, packing and shipping the orders directly to Retailer's
    customers.

2.  EXCLUSIVITY.  i.FILL will be the exclusive supplier of Product and related
    Product order fulfillment services for Retailer.

3.  TECHNICAL ASSISTANCE.  i.FILL shall provide technical assistance to Retailer
    for the testing of their EDI transmission of orders to Valley's Bulletin
    Board System or FTP server.

4.  AUDIOFILE DATABASE.  i.FILL will license the audiofile License Agreement
    attached hereto as Exhibit A for an annual license fee of [***]. The fee for
                                                               ---
    the first year of the initial term of this Agreement is due and payable on
    the date of this Agreement. The fees for the subsequent years of the initial
    term of this Agreement are due and payable upon the anniversary dates of
    this Agreement.

5.  AUDIOTRAX DATABASE.   i.FILL will license the audiotrax database to Retailer
    under terms and conditions set forth in the audiotrax License Agreement
    attached hereto as Exhibit B for an annual license fee of [***]. The fee for
                                                               ---
    the first year

________________________

     [***] Confidential treatment has been requested for the bracketed portions.
      ---
The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.

 
     of the initial term of this Agreement is due and payable on the date of
     this Agreement.  The fees for the subsequent years of the initial term of
     this Agreement are due and payable upon the anniversary dates of this
     Agreement.

6.   [***].   i.FILL will provide [***] to Retailer which includes [***].  
      ---                          ---                              ---
     Retailer agrees to utilize Valley as its exclusive agency for procurement
     of [***]. i.FILL will credit Retailer [***] procured less [***]. Should
         ---                                ---                 ---
     Retailer meet its minimum annual net Product sales goal ("Volume Goal") for
     any given year as described in Section 7 herein and has adhered to and
     obeyed all [***], i.FILL will guarantee the procurement of [***] to be
                 ---                                             ---
     [***] of Retailer's annual net Product sales for that year. If, in any year
      ---
     as defined in Section 7, Retailer has met its Volume Goal and adhered to
     [***], but i.FILL has not yet procured [***] of Retailer's annual net
      ---                                    ---
     Product sales in [***], i.FILL will credit Retailer with the difference
                       ---
     between [***] received and [***] of Retailer's annual net Product sales.
              ---                ---
     If, in any given year, Retailer dose not meet its Volume Goal or does not
     adhere to all [***], i.FILL will guarantee only the [***] that have been
                    ---                                   ---                
     procured to date for that year.  [***] shall be paid on a quarterly basis.
                                       ---                                     

7.   PRODUCT PRICING.  Except as otherwise set forth in this Agreement, for the
     term of this Agreement, i.FILL will sell Product to Retailer [***], as
                                                                   ---
     described in [***] attached hereto as Exhibit C, provided, however, that
                   ---
     Retailer meets the minimum annual Volume Goals during the term of the
     agreement as set forth below:

        Time Period               Annual Net Product Sales Volume Goal
        -----------               ------------------------------------
        [***]                     [***]
         ---                       ---
        [***]                     [***]
         ---                       ---
     If at the end of any given year defined above, Retailer has not met the
     minimum Volume Goal, Retailer will be debited the equivalent of [***]
                                                                      ---
     percent ([***]) of its gross Product sales of that year.
               ---

     7.1  Average Cost. For purposes of this Agreement, "Average Cost" means the
          ------------
          average price paid by Valley for each Product by Stock Keeping Unit
          ("SKU"). Average Cost is calculated as follows: as Product is
          purchased by Valley, the costing system recalculates, at the time of
          receipt processing, the average price for each SKU in Valley's
          inventory. This costing system incorporates full case pack purchases
          (i.e., "Box Lots") as well as purchases in less than Box Lot
          quantities (i.e., "Loose Piece" purchases), each by SKU. The Average
          Cost calculation includes Box Lot incentives, new release discounts,
          ongoing and periodic catalog discounts, and one-time discounts. The
          Average Cost calculation does not include cash discounts for timely
          payment by Valley, return incentives, advertising incentives or volume
          rebates. In addition, specially negotiated prices on purchases from
          secondary, nontraditional sources (e.g., inventory purchased in
          connection with corporate acquisitions, outsourcing contract, and
          liquidation), shall not be included in the Average Cost calculation.

__________________

     [***] Confidential treatment has been requested for the bracketed portions.
      ---
The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.

                                                                     Buy.com ___
                                                                     i.FILL ____

                                       2

 
     7.2  [***].  The Cost Plus Pricing for CD singles and cassette singles, (as
           ---
          described in the audiofile documentation provided to Retailer from
          time to time and referred to in section 16.3 below) will be [***]. A
                                                                       ---
          copy of the current audiofile user documentation is attached hereto as
          Exhibit D.

     7.3  [***].  Retailer acknowledges that the price charged by i.FILL to its
           ---
          customers for Product sold to such customers ("Product Pricing")
          reflects the cost of Product to i.FILL, as well as the customer's
          order volume, payment terms, fulfillment costs, exclusivity
          requirements, the term of agreement with the customer, product mix
          purchased by the customer, and the service standards offered to the
          customer.

          7.3.1  The Product Pricing offered to Retailer by i.FILL shall be
                 [***], meaning that the Product Pricing offered to Retailer
                  ---
                 shall be [***] to [***] when taking into account all the
                           ---      ---
                 factors set forth above, provided that [***]. The term [***]
                                                         ---             ---
                 refers to i.FILL's direct-to-consumer customers who receive
                 Cost Plus Pricing.

          7.3.2  In the event that i.FILL or Valley offers [***] to any other
                                                            ---
                 similarly situated direct-to-consumer customer, Retailer shall
                 immediately be entitled to [***] provided that Retailer also
                                             ---
                 agrees to accept any other terms and conditions imposed upon
                 [***] including, without limitation, sales volume requirements,
                  ---
                 payment terms, fulfillment fees, term of the agreement, product
                 categories purchased, and level of service offered [***].
                                                                     ---
                      
8.  CUSTOM INVOICE.  i.FILL will create a custom invoice with Retailer's logo,
    product return and customer service information printed on same. The usual
    [***] one-time charge will be waived by i.FILL.
     ---

9.  ORDER PLACEMENT. Retailer will collect orders and send such orders to i.FILL
    via EDI.

    9.1  Pre-orders.  Retailer shall collect pre-orders until four days prior to
         ----------
         the date that a new release title is first to be made available to
         consumers (the "street date"), at which point such pre-orders will be
         forwarded in a separate batch to i.FILL on the date and time of day
         required by i.FILL. i.FILL shall ship all pre-orders no later than
         street date minus one day, provided i.FILL has received the new release
         title(s) from the label/distributor of such new release(s) in time for
         processing. If a street date is delayed, Retailer will be responsible
         for holding the pre-orders until four (4) days before the new street
         date.

    9.2  Back Orders.  i.FILL shall ship the in-stock items of an order as set
         -----------
         forth in this Agreement and, except as set forth in this section, will
         cancel the out of

____________________

     [***] Confidential treatment has been requested for the bracketed portions.
      ---
The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.

                                                                     Buy.com ___
                                                                     i.FILL ____

                                       3

 
          stock items. Retailer may elect to have i.FILL hold an order that has
          one or more items out of stock until it is completely fulfilled by
          typing a "Y" in the "ship complete" field of the EDI inbound
          specifications. Retailer will inform i.FILL of the number of days, up
          to a maximum of 25 days (the "hold Period"), that i.FILL is to hold
          the "ship complete" orders before shipping the available products and
          canceling the out of stock products. In the event that all products
          included in an order are out of stock, i.FILL will hold the order for
          the Hold Period before canceling the order (subject to prior
          cancellation of such order by Retailer).

10.  ORDER FULFILLMENT.  The following sets forth i.FILL's fulfillment
     -----------------
     practices:

     10.1  Priority.  Priority orders are defined as orders shipped domestically
           --------
           for overnight or second-day air freight delivery. Priority orders
           received on any business day by [***] will be shipped on the same
                                            ---
           day. Orders received after [***] will be shipped the following
                                       ---
           business day.

     10.2  Standard.  Standard orders are defined as all orders shipped
           --------
           domestically or internationally for other than overnight or second-
           day air freight delivery. On any business day that i.FILL receives
           Standard orders by [***], it will ship the orders the following
                               ---
           business day. Standard orders received after [***] will be deemed
                                                         ---
           received the next business day and i.FILL will ship these orders the
           business day after the day they are deemed to be received.

     10.3  Peak Periods. The first day of a business week and any day on which
           ------------
           order volume is greater than [***] above average (calculated on a
                                         ---
           floating 30-day basis) is defined as a Peak Period. i.FILL shall use
           best efforts to adhere to the fulfillment policies set forth above
           during Peak Periods, but its failure to so adhere during Peak Periods
           shall not be considered a default under this Agreement.

11.  FULFILLMENT fees  Unless otherwise provided in this Agreement, Retailer
     agrees to pay i.FILL the following fees for each order fulfilled by i.
     FILL.

     11.1  Packing and Handling Fees i.FILL will pick, pack and prepare Product
           -------------------------
           for shipment to Retailer's customers for a fee of [***] per first
                                                              ---
           unit in a given order and [***] per subsequent unit in that same
                                      ---
           order.

     11.2  Surcharges  Retailer agrees to pay to i.FILL the following surcharges
           ----------
           as applicable:

           11.2.1  International Shipment Surcharge.  Surcharge of [***] per
                   --------------------------------                 ---
                   order shipped internationally via integrated carrier.

______________________

     [***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.

                                                                     Buy.com ___
                                                                     i.FILL ____

                                       4

 
           11.2.2  USPS Priority Mail Insured Surcharge. Surcharge of [***] per
                   ------------------------------------                ---
                   order shipped USPS Priority Mail Insured.

           11.2.3  Manual Processing Surcharge.  In the event i.FILL receives
                   ---------------------------
                   an order by any other means EDI transmission (i.e., by mail,
                   facsimile, etc.) a surcharge of [***] per order shall be
                                                    ---
                   assessed.


12.  Shipping

     12.1  Risk of Loss.  All shipments under this Agreement shall be F.O.B.
           ------------
           Valley's shipping facility. Title and risk of loss wit respect to all
           orders and products shipped by i.FILL or Valley under this Agreement
           shall pass to Retailer or it's customers upon delivery of the
           products to the carrier at the point of shipment. In the event of
           shipping damage or orders lost in shipment, i.FILL will assist in
           filing a claim on behalf of Retailer and will credit Retailer any
           amounts received or credits to i.FILL in connection with each claim.

     12.2  Choice of Carrier  i.FILL will ship the order with the carrier
           -----------------
           requested by Retailer or its customer. i.FILL will cancel any order
           with the carrier requested by Retailer or it's customer. i.FILL will
           cancel any order for which the delivery address is not serviced by
           the indicated carrier, and will promptly notify Retailer of the same.
           Retailer shall have the option to retransmit the order to be shipped
           via an alternate i.FILL supported carrier.

     12.3  Shipping Costs.  i.FILL will invoice Retailer's customers at such
           --------------
           rates as are requested by Retailer. Retailer will pay i.FILL shipping
           costs per the shipping tables attached hereto as Exhibit E (as
           mentioned from time to time by i.FILL). i.FILL will provide Retailer
           written notice of shipping rate changes and the effective date of
           such changes. i.FILL represents that the shipping costs charged to
           Retailer are its actual shipping costs (not considering rebates).

13.  PRODUCT RETURNS

     13.1  Definitions.
           -----------

           13.1.1  Rejected Returns: Any of the following: accessories; blank
                   ----------------
                   tape; counterfeit Product; imports; promos; limited editions;
                   Product identified in audofile as non-returnable; Product
                   sold by a record club; Product sold on an one-way basis;
                   Product with a last customer return date (as defined in the
                   audiofile license agreement) prior to the date the returned
                   product is received by i.FILL; Product without the original
                   artwork or liner notes; Schwann Guides; shopworn Product
                   (items that have damage to the artwork, have foreign
                   substance on the media or have been defaced); and vinyl
                   Product.

____________________

     [***] Confidential treatment has been requested for the bracketed portions.
The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.

                                                                     Buy.com ___
                                                                     i.FILL ____

                                       5

 
          13.1.2  Breached Product. Any Opened CDs from the following companies:
                  ----------------
                  Intersound; Polygram Distribution ("PGD"); RYKO; Sony Music
                  Entertainment ("Sony"); Universal ("UNI"); and Warner, Electra
                  and Atlantic ("WEA"). Any Opened PGD cassettes are considered
                  Breached.

          13.1.3  Opened Product: Any Product with the top spine label or
                  --------------
                  original manufacturer's shrink wrap or "dog bone" holographic
                  sticker removed or cut in any way.

          13.1.4  Defective Product: Any Opened Product that is identified as
                  -----------------
                  defective when returned and which is actually defective.

          13.1.5  Accepted Returns. Any Product which is neither Rejected Return
                  ----------------
                  nor Breached Product.

    13.2  Return Policy.  Accepted Returns are returnable and eligible for
          -------------
          return credit to Retailer. Rejected Returns and Breached Product are
          non-returnable and not eligible for return credit to Retailer.

    13.3  Return Fees.  In the event i.FILL receives Rejected Returns or
          -----------
          Breached Product from Retailer or its customers, the Product will be
          returned to Retailer at [***] will be imposed. Retailer may elect to
                                   ---
          have i.FILL keep the Product to avoid the [***] per unit processing
                                                     ---
          charge.

    13.4  Refurbishing Fees.  Retailer will pay a [***] per unit refurbishing
          -----------------                        ---
          fee on all Accepted Opened Product except for Defective Product.

    13.5  Restocking Fees.  Retailer will pay a [***] for processing all
          ---------------                        ---
          Accepted Returns except for Defective Product and Unopened Product
          returned as incorrect items.

    13.6  Reshipping.  i.FILL will accept and reship orders returned by
          ----------     
          Retailer's customers at no Restocking or additional Fulfillment Charge
          if the returned Product falls into any of the following categories:
          (1) Unopened items returned as incorrect items shipped (items included
          in the package that were not listed on the invoice); (2) items listed
          on the invoice as fulfilled, but reported as missing by the consumer;
          and (3) correct items returned as Defective, but not Breached.

    13.7  Return Processing Information.  Return processing information will be
          -----------------------------
          posted daily to i.FILL's Bulletin Board System or FTP server.

__________________________

     [***] Confidential treatment has been requested for the bracketed portions.
      ---
The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.

                                                                     Buy.com ___
                                                                     i.FILL ____

                                       6

 
    13.8  Modifications.  i.FILL reserves the right to modify its return
          -------------
          policies from time to time. Such modifications shall be effective upon
          Receipt by Retailer of written notice thereof.

14. OPTIONAL SERVICES

    14.1  Paper Inserts  Retailer will pay a fee of [***] per Paper Insert
          -------------                              ---
          packed by i.FILL at the request of Retailer in product shipped under
          this Agreement. Retailer shall supply the Paper Inserts at no cost to
          i.FILL. For purposes of this paragraph, Paper Inserts are defined as
          lightweight, paper-based, promotional items the same size or smaller
          than a standard single CD, or pre-folded to such size.

    14.2  Merchandise Inserts.  At Retailer's request, i.FILL will pack
          -------------------
          Merchandise Inserts (promotional inserts other than the Paper Inserts
          described in paragraph 14.1) in its orders at a cost to be negotiated
          by the parties. Retailer shall supply Merchandise Inserts at no cost
          to i.FILL.

    14.3  Exclusive Merchandise. Upon request by Retailer, i.FILL will receive,
          ---------------------
          warehouse and ship Exclusive Merchandise sold through Retailer for a
          fee to be negotiated after a sample has been received and reviewed for
          packing and shipping requirements. For merchandise that is standard
          product (single CDs or cassettes and single VHS) a management fee of
          [***] per unit will be applied.
           ---

    14.4  Insert Bar Codes.  A unique UPC bar-code is required for each Paper or
          ----------------
          Merchandise Insert. Retailer should purchase and apply a proprietary
          bar-code on all inserts. At Retailers request or if the bar-code does
          not meet Valley's standards, i.FILL will create and apply a bar-code
          for a fee of [***] per applied bar-code.
                        ---                       

    14.5  Custom Price Stickers.  At Retailers request, i.FILL will apply
          ---------------------
          customer price stickers for a fee of [***] per applied sticker.
                                                ---                      

15. BILLING AND PAYMENT  Pending i.FILL's review and approval of Retailers
    credit application, i.FILL will extend credit to Retailer under the
    following terms and conditions:

    15.1  Invoices and Account Reconciliation.  i.FILL will provide Retailer
          -----------------------------------
          with an account reconciliation on a monthly basis. Invoices are due
          and payable thirty (30) days after the invoice date.

    15.2  Past Due Amounts.  [***] Furthermore, all overdue balances not paid
          ----------------    ---
          within [***] after the invoice date, will be assessed interest at the
                  ---
          lesser of [***] or the maximum interest rate allowable by law,
                     ---
          beginning on the due date.

______________________

     [***] Confidential treatment has been requested for the bracketed portions.
      ---
The confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.

                                                                     Buy.com ___
                                                                     i.FILL ____

                                       7

 
          i.FILL, in its sole discretion, may refer collection of any past due
          amount to any agency or attorney, and Retailer will be liable for the
          payment of all costs and expenses, including reasonable attorney's
          fees, associated therewith.

16.  PROPRIETARY RIGHTS.

     16.1  Confidential Information.  The term "Confidential Information" refers
           ------------------------
           to this Agreement and the subject matter of this Agreement and to all
           information which one party furnishes or makes available to the other
           party and all information related to one party's business which the
           other party and all information related to one party's business which
           the other party acquires in the course of performing its obligations
           under this Agreement. Disclosure of Confidential Information by a
           party is forbidden except in the following circumstances: (i) to
           employees and outside parties, but only to the extent necessary to
           fulfill its obligations under the Agreement; (ii) if the Information
           disclosed is already publicly known through no fault of the
           disclosing party; (iii) if the information is required to be
           disclosed by law or legal process, provided that the party, from whom
           disclosure is promptly required, gives the other party notice and
           agrees to cooperate with the non-disclosing party as that party may
           reasonably request to oppose disclosure; and (iv) in connection with
           a party's initial public offering; provided, however, that the
           disclosing party shall take reasonable measures to keep Confidential
           Information confidential, including requesting confidential treatment
           of this Agreement by any governmental authority and/or any other
           person or third party reviewing the Agreement in connection with the
           public offering. Under no circumstances may Retailer disclose
           Confidential Information including, but not limited to, any
           information obtained during Retailer's i.FILL site visit, to any of
           Retailer's outside directors; provided, however, that Retailer may
           disclose general financial information (i.e., sales of Product) to
           its outside directors to the extent required by law. i.FILL
           (including its principals or affiliates) agrees not to use Retailer's
           customers' data for any commercial or improper purposes.

     16.2  Transaction Information. Both parties shall use best efforts to
           -----------------------
           ensure maximum security of transaction information maintained on each
           party's computer system including, but not limited to, the names,
           addresses and products ordered by Retailer's customers.

     16.3  audiofile Database.  User documentation for the audiofile database is
           ------------------
           attached hereto as Exhibit D. The rights to intellectual property
           related to the audiofile database are governed by the audiofile
           License, attached hereto as Exhibit A. Any termination of this
           Agreement will automatically terminate the audiofile License, and any
           termination of the audiofile License will automatically terminate
           this Agreement.

     16.4  audiotrax Database. User documentation for the audiotrax database is
           ------------------
           attached hereto as Exhibit F. The rights to intellectual property
           related to the audiotrax database are governed by the audiotrax
           License, attached hereto as 

                                                                    Buy.com ____
                                                                    i.FILL _____

                                       8

 
           Exhibit B. Any termination of this Agreement will automatically
           terminate the audiotrax License, and any termination of the audiotrax
           License will automatically terminate this Agreement.

     16.5  No Rights to Marks.  Each party is hereby granted no rights in or to
           ------------------
           the other party's Marks. "Marks" means the trademarks, service marks,
           trade names or other marks, registered or otherwise, used by either
           i.FILL or Retailer, as applicable.

17.  TERM

     17.1  Term.  The term of this Agreement begins on the date of this
           ----
           Agreement and ends two (2) years thereafter (the "Initial Term").
           Unless and until i.FILL provides at least six (6) month's prior
           written notice of its intention not to extend the term of this
           Agreement or Retailer provides at least ninety (90) days prior
           written notice of its intention not to extend the term of this
           Agreement, this Agreement shall automatically renew for additional
           one (1) year terms (each a "Renewal Term", the Initial Term and all
           Renewal Terms to be collectively referred to as the "Term")

     17.2  Early Termination.  Either party may terminate this Agreement upon
           -----------------
           thirty (30) days' written notice under the following conditions:

           17.2.1  Either party may terminate this Agreement, absent a material
                   breach, if i.FILL discontinues fulfillment services to on-
                   line customers or Retailer discontinues the on-line sale of
                   Product.

           17.2.2  i.FILL or Retailer delivers to the other party a 30-day
                   written notice of termination for a material breach of this
                   Agreement, and the other party fails to cure such a breach
                   within thirty (30) days.

18.  LIMITATION OF REMEDIES AND EXCLUSION OF WARRANTIES. IN NO EVENT SHALL
     EITHER PARTY BE LIABLE TO THE OTHER FOR INDIRECT OR CONSEQUENTIAL DAMAGES,
     WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
     DAMAGES AND REGARDLESS OF THE FORM OF ACTION. ALL PRODUCT SOLD HEREUNDER IS
     SOLD "AS-IS" AND i.FILL EXPRESSLY DISCLAIMS ANY EXPRESS OR IMPLIED
     WARRANTIES WITH RESPECT TO PRODUCT SOLD UNDER THIS AGREEMENT, INCLUDING ANY
     IMPLIED WARRANTY OF MERCHANTABILITY AND FITNESS FOR PURPOSE.

19.  REPRESENTATIONS AND WARRANTIES.

     19.1  i.FILL's Representations and Warranties.
           ---------------------------------------

           19.1.1  i.FILL has the right and authority to enter into this
                   Agreement.

                                                                     Buy.com ___
                                                                     i.FILL ____

                                       9

 
           19.1.2  The Products delivered by i.FILL to Retailer's customers in
                   substantially the same condition as they were in when they
                   were received by Valley in Valley's distribution facility.

     19.2  Retailers Representations and Warranties.
           -----------------------------------------

           19.2.1  Retailer has the right and authority to enter into this
                   Agreement

           19.2.2  Retailer will not include any content on its website that
                   infringes on the intellectual property rights, including
                   copyright and trademark rights, of any third party.

           19.2.3  Retailer will abide by its terms of service and privacy
                   policies.

20.  INDEMNIFICATION.  Both parties will, at all times, indemnify and hold the
     other party harmless from any third and all third-party claims, damages,
     liabilities, costs and expenses (including reasonable attorney's fees)
     arising out of any breach or alleged breach by such party of any warranty
     or representation made by such party in this Agreement. Both parties will
     further indemnify and hold the other party harmless for any and all third-
     party claims, damages, liabilities, costs and expenses (including
     reasonable attorney's fees) arising out of (i) any infringement or alleged
     infringement of intellectual property belonging to a third-party; or (ii)
     any violation of any applicable Federal or State law, rule, regulation, or
     ordinance.

21.  FORCE MAJEURE.   Neither party will be liable for failure to perform, or
     the delay in performance of, any of its obligations under this Agreement
     if, and to the extent, that such failure or delay is caused by events
     substantially beyond its control, including, but not limited to, acts of
     God, acts of the public enemy or governmental body in its sovereign or
     contractual capacity, war, fire, floods, strikes, epidemics, quarantine
     restrictions, civil unrest or riots, freight embargoes and/or unusually
     severe weather. Lack of funds by either party shall not excuse timely
     performance. The party so affected shall use commercially reasonable
     efforts to avoid or remove such causes of non-performance or delay, and
     shall continue performance hereunder with reasonable dispatch whenever such
     causes are removed. If any such non-performance or delay continues for more
     than sixty (60) days, the unaffected party may elect to terminate this
     Agreement without liability or any liquidated or other damages upon written
     notice to the other party.

22.  GENERAL.  

     22.1  Notice.  All notices, including those related to product pricing,
           ------
           ordering and fulfillment policies that will have a material impact on
           the other party's business, shall be in writing and delivered by
           certified mail, postage prepaid and return receipt requested, or
           transmitted either by facsimile or electronic mail if confirmed
           contemporaneously by such mailing, to the addresses provided in
           writing, from time to time by the parties.

                                                                    Buy.com ____
                                                                    i.FILL _____

                                       10

 
     22.2  Entire Agreement; Amendments.  This Agreement constitutes the entire
           ----------------------------
           agreement of the parties concerning the subject matter hereof,
           superseding all prior proposals, negotiations and agreements
           concerning the subject matter of this Agreement. No representation or
           promise relating to and no amendment of this Agreement will be
           binding unless it is in writing and signed by authorized
           representatives of both parties.

     22.3  Assignment.  This Agreement may not be assigned by either party
           ----------
           without first obtaining the other party's written consent, which
           shall not be unreasonably withheld. Subject to the foregoing, this
           Agreement will be binding upon and inure to the benefit of successors
           and permitted assigns of the parties hereto.

     22.4  Captions; Waiver; Severability.  The captions appearing n this
           ------------------------------
           Agreement are inserted only as a matter of convenience and in no way
           define, limit, construe or describe the scope or interpretation of
           this Agreement. No waiver by a party of any breach of any provision
           of this Agreement will constitute a waiver of any other provision of
           this Agreement. If any provision of this Agreement shall be held
           invalid, void or unenforceable, the remaining provisions hereof shall
           in no way be affected or impaired, and such remaining provisions
           shall remain in full force and effect.

     22.5  Governing Law and Arbitration.  This Agreement shall be construed and
           -----------------------------
           enforced pursuant to the laws of the State of California. If the
           parties are unable to settle any disagreements regarding this
           Agreement or the project contemplated by this Agreement, such
           disagreements shall be submitted to binding arbitration within the
           State of California under the rules of the American Arbitration
           Association as then in effect.

     22.6  Counterparts.  This Agreement may be executed in one or more
           ------------
           counterparts, all of which will be considered one and the same
           agreement, and will become a binding agreement when one or more
           counterparts have been signed by each party and delivered to the
           other party. Facsimile signatures shall be considered original in all
           respects.

In witness whereof, the parties hereto have executed this Agreement effective as
of the date first above written.

i.FILL, a division of                             BUY.COM
VALLEY MEDIA, INC.
 
By:____________________________                   By:_________________________
 
Its:___________________________                   Its:________________________

                                                                     Buy.com ___
                                                                     i.FILL ____

                                       11

 
                              SCHEDULE OF EXHIBITS


                  EXHIBIT A                      audiofile License
                  EXHIBIT B                      audiotrax License
                  EXHIBIT C                      Average Cost Movement Worksheet
                  EXHIBIT D                      audiofile User Documentation
                  EXHIBIT E                      Shipping Tables
                  EXHIBIT F                      audiotrax User Documentation

                                                                     Buy.com ___
                                                                     i.FILL ____

                                       12

 
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN REDACTED PROVISIONS OF
THIS AGREEMENT.  THE REDACTED PROVISIONS ARE IDENTIFIED BY THREE ASTERISKS
ENCLOSED BY BRACKETS AND UNDERLINED.  THE CONFIDENTIAL PORTION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.