NEW YORK (CNN/Money) - Bertelsmann AG dropped a lifeline to once-mighty file swapping service Napster Inc. Friday agreeing to buy the company's assets and pay off its creditors.

Terms of the agreement called for Bertelsmann to acquire Napster's assets while also providing $8 million to Napster's creditors. Konrad Hilbers, who had resigned earlier this week, will resume his role as CEO, while Shawn Fanning, Napster's founder, will become chief technology officer.

Rumors of Napster's demise had been circulating and the company had been expected to file for bankruptcy shortly. Napster has been offline since Dec. 14, testing a new version of its software.

The company agreed last March to comply with a court order to remove all copyrighted material from its file-sharing service and began the long process of trying to settle litigation with the recording industry to keep its service alive.

"Bertelsmann understood our vision when they first invested in us," Fanning said Friday in a statement. "They still believe in that vision."

German media company Bertelsmann has sunk more than $80 million into Napster since October 2000.

The company is also developing a plan to bring back its 70 employees, a source familiar with the situation said.

Napster's new pay service, which respects copyright owners and artists, is expected to launch later this year.