EXHIBIT 10.43
ONLINE PROGRAM AGREEMENT
This Online Collaboration Agreement ("Agreement") is effective as of
February 9, 1999 ("Effective Date"), by and between Muze Inc., a New York
corporation with principal offices at 000 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000 ("Muze"), and Liquid Audio, Inc., a California corporation with principal
offices at 000 Xxxxxxx Xxxxxx, Xxxxxxx Xxxx, Xxxxxxxxxx 00000 ("Liquid").
WHEREAS, Liquid and Muze desire to collaborate in order to encode sound
clips and related content and to provide online services with such encoded sound
clips linked to Muze database information as set forth herein and on Exhibit A
attached hereto and hereby incorporated herein (the "Online Program");
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, the parties agree as follows:
1. Online Program.
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1.1 Cooperative Efforts. Each party shall use commercially reasonable
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efforts to develop, market, and otherwise further the Online Program. Each party
shall cooperate with and assist the other party in all aspects of the Online
Program. The Online Program shall commence on the Effective Date and shall
continue for the duration of the Term of this Agreement, unless the parties
mutually agree to terminate this Agreement.
1.2 Encoding and Technical Responsibilities. Liquid and Muze will jointly
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undertake the encoding of music samples matched to the Muze database ("Linked
Sound Clips"), which will be encoded using the Liquid file format. The parties
contemplate that the Linked Sound Clips will generally be thirty (30) seconds
long, except with respect to jazz and classical music, for which the Linked
Sound Clips will generally be sixty (60) seconds long. Liquid will develop and
operate the server infrastructure to host and serve the Linked Sound Clips to
Online Merchants pursuant to the Online Program. The parties specific
responsibilities are set forth in Exhibit A.
1.3 Online Merchants Program. Liquid and Muze will jointly collaborate to
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develop the Online Program. Each party will use reasonable commercial efforts to
promote and market the Online Program to online retailers, record labels and
other sound recording owners, portals, online service providers, and related
third parties (together, "Online Merchants"). Both parties will work to sign up
Online Program participants and execute appropriate customer agreements with
Online Merchants.
1.4 Customer Contacts. The parties will determine in advance which party,
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if any, is to serve as the primary contact for servicing Online Program customer
relationships with the Online Merchants, and in each case the secondary contact,
if requested, shall refer all Online Program
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* Some Material in this Exhibit have been omitted pursuant to a request for
confidential treatment. Such material has been filed separately with the
Securities and Exchange Commission.
customer relationship issues to the primary contact and otherwise cooperate with
the primary contact in serving the customer relationship. If neither party has
been determined to be the primary contact, the parties will co-market and co-
administer the Online Program and will ensure that each party is fully informed
and included as reasonably appropriate in customer relationships that are
formed.
1.5 Online Program Revenue and Expenses. The development of the Online
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Program shall include documentation of the parties' agreement with respect to
the treatment of revenue and expenses associated with the Online Program,
including the matters already agreed to and set forth in Exhibit A and the
process by which each of Liquid and Muze will recoup expenses against any
revenues generated from providing the Linked Sound Clips to the Online Merchants
pursuant to the Online Program. All further documentation of the parties'
agreement on these subjects shall be mutually agreed to in writing, signed and
attached to this Agreement as a part of Exhibit A. Any agreement to share
expenses or revenues from any source other than as expressly set forth in
Exhibit A shall not be effective unless set forth in writing and signed by both
parties. Further details for Exhibit A will be developed pursuant to the
progress review meeting process set forth in Section 2.1 below, or as otherwise
agreed between the parties.
1.6 Revenue Exclusions. For the avoidance of doubt, the Online Program
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will not include any revenues from digital downloading and distribution of song
files for sale (whether to current Muze database licensees or others). The
parties agree, however, with respect to digital download and distribution of
song files for sale and related matters that: (i) Muze currently has in place
agreements with many on-line sites licensed to use its databases for
compensation for any sale of music through digital downloading, and any later
agreement with Liquid on such digital sales shall not include revenue sharing by
either party; (ii) Liquid will create its own relationships with any such Muze
licensee on-line sites for digital distribution and downloading of music files;
and (iii) Liquid is not obligated to share the revenue it generates from this
distribution and downloading activity. In addition, Muze will be entitled to
continue to charge Online Program customers for use of Muze's database products
as services consistent with Muze's current practices.
2. Progress and Technical Reporting and Review; Limited Exclusivity of
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Arrangement.
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2.1 Progress Review Meetings. The parties shall, at the senior management
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level, review the overall progress of the Online Program no less frequently than
monthly. In addition to those set forth in Exhibit A, the parties may agree upon
milestones for the various phases of the Online Program, and each party shall
use reasonable commercial efforts to achieve all milestones and devote
appropriate resources and a high-level of priority to the Online Program. The
parties acknowledge that certain details of the development, commercialization,
and administration of the Program and other aspects of the Online Program cannot
yet be anticipated. However, any procedures that depart from the allocation of
rights and responsibilities set forth in this Agreement, including Exhibit A,
shall be implemented only by a signed, written amendment of this Agreement.
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2.2 Technical Review Meetings. The parties shall, at a technical
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management level (senior engineer or higher), review progress of technical
aspects of the Online Program and report their results to each other in a format
and at intervals to be mutually agreed in writing.
2.3 Limited Exclusivity of Arrangement. During the term hereof, neither
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party shall operate a service substantially the same as the Online Program.
Other than as expressly set forth in the immediately preceding sentence, neither
party shall be precluded from entering into any similar agreement, program,
alliance, collaboration, or licensing scheme with any third party or parties
regarding the subject matter of this Agreement. For the avoidance of doubt, Muze
shall be permitted to license its music database to third parties, including
links to sound clips that are not Linked Sound Clips, and Liquid shall be
permitted to encode sound clips and create links to music databases that are not
Muze databases.
3. Intellectual Property Rights and Ownership.
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3.1 Trademark Rights. Each party grants the other party the right to use
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its trade name and logos solely in promoting and administering the Programs.
Each party covenants with the other that it will in such activities uphold the
high standards of quality and customer service associated with the other's trade
names and adhere to the reasonable trademark guidelines of the other party. Any
breach of this covenant shall be deemed a material breach of this Agreement, and
the parties acknowledge that such breaches may also entitle the aggrieved party
to injunctive relief. All other trademarks and branding developed for use in
connection with the Online Program shall be owned as the parties shall agree,
such agreement to be included in this Agreement as an attachment.
3.2 Independent Development and Ownership. Each party shall retain
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ownership and control of its pre-existing intellectual property rights, lines of
business, and customers. Each party shall retain ownership of independently
developed intellectual property rights (i.e., developments created without use
of the other parties' intellectual property, including Confidential Information)
during the term of this Agreement. There shall be no joint development of
intellectual property rights under this Agreement unless expressly agreed to in
writing by the parties describing the joint development project and the terms
relating thereto.
3.3 Rights to Linked Sound Clips and Cross-License Among Parties. During
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the term of this Agreement, each party may retain and use a copy of the Linked
Sound Clips library for use only in conjunction with the Online Program. In
addition, Muze grants to Liquid a royalty-free, nonexclusive license to use the
Muze music database content in connection with the Online Program. Liquid grams
to Muze a royalty-free, nonexclusive license to use its encoding, file, server,
and delivery technology in connection with the Online Program. Such licenses
shall be extended on commercially reasonable terms upon termination or
expiration of this Agreement. Upon termination or expiration of this Agreement,
each party may retain a copy of the Linked Sound Clips library for any and all
purposes, with no duty to account to the other party. Except as expressly set
forth in this Agreement, no other rights or licenses are granted or implied
hereunder.
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4. Term and Termination.
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4.1 Term. The term of this Agreement shall be for two (2) years from the
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Effective Date. This Agreement shall be renewed automatically for up to five
successive one-year periods unless either party notifies the other of its desire
to avoid such automatic renewal at least sixty (60) days prior to the end of the
term or any successive term.
4.2 Termination. Either party may terminate this Agreement for material
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breach by the other party that remains uncured for more than thirty (30) days
after written notice specifying the breach. Either party may terminate this
Agreement upon written notice to the other party in the event of termination for
default by the other party of any other agreement between the parties. Any party
may terminate this Agreement upon written notice in the event that a voluntary
or involuntary petition in bankruptcy is filed by or against any party, or any
party makes an assignment for the benefit of creditors or is involved in any
other insolvency proceedings.
4.3 Effect of Termination. During the term of this Agreement and after
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termination or expiration of this Agreement, all rights to receive Linked Sound
Clips granted to third parties pursuant to the Online Program shall continue in
effect according to the terms of the agreement governing such services. Upon
termination or expiration of this Agreement: (i) each party shall retain its
copy of the Linked Sound Clips library, the assets allocated to each as may have
been agreed pursuant to Exhibit A, and all pre-existing rights; (ii) the parties
shall settle any revenue or expense sharing issues, as well as any asset
allocation issues (except for the Linked Sound Clips library, which may be
retained by both parties), as soon as practicable after such termination or
expiration, but in any event within ninety (90) days thereof; and (iii) if
requested by Muze, Liquid shall continue to host the Linked Sound Clips for a
period not to exceed ninety (90) days, as well as assist Muze during such period
in effecting a transfer (or replication, if applicable) of hosting and related
operations from Liquid (or the hosting service provider then in place) to Muze
(or Muze's designated hosting service provider), on commercially reasonable
terms. All rights and obligations that do not by their terms survive this
Agreement shall terminate.
5. Confidential Information.
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5.1 Confidential Information. During the Online Program and in the
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development, commercialization, and operation of the Programs relating thereto,
the parties will have access to certain of each other's proprietary and
confidential information and materials, including, but not limited to, marketing
plans, strategies, software and/or hardware design, and other information and
materials developed by the parties or for them by third parties. Such
information shall be designated in writing as confidential, or if orally
disclosed, confirmed in writing as confidential within thirty (30) days of
disclosure ("Confidential Information").
5.2 Confidentiality Obligations. Nothing contained in this Agreement
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shall grant any party rights to use any such Confidential Information of the
other parties in any manner except in the performance of this Agreement (i.e.,
in connection with the Online Program). Each party shall use at least a
reasonable degree of care in protecting the other party's Confidential
Information.
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Neither party shall disclose to any third party or make public in any manner any
Confidential Information of the other party without the prior written consent of
that party. Upon the expiration or prior termination of this Agreement, each
party shall return all Confidential Information of the other party in that
party's possession including all copies thereof, and shall continue to keep all
Confidential Information confidential.
5.3 Injunctive Relief. The parties acknowledge that breach of these
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confidentiality obligations may cause irreparable harm and that a non-breaching
party may be entitled to temporary restraint and/or injunctive relief to prevent
or limit any breach by the other party. In any such proceeding for injunctive
relief, no bond shall be required.
5.4 Exceptions. These obligations shall not apply to Confidential
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Information: (a) in the public domain (now or hereafter, unless through fault of
the party against whom enforcement of this provision is sought), (b) rightfully
disclosed to a party by a third party without obligation of confidentiality, (c)
required to be disclosed pursuant to a court order or other government
requirement, provided that the disclosing party is given reasonable opportunity
to seek a protective order or confidential treatment, or (d) independently
developed by the receiving party, as evidenced by that party's business records.
6. Indemnification.
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6.1 Indemnification Obligations. Each party agrees to indemnify the other
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party against claims by third parties arising out of the negligence or other
tortious conduct of such party or its employees or agents in performing under
this Agreement. The indemnitor shall have the right and obligation to conduct
the defense of any such claim, subject to: (a) the indemnitee's reasonable right
to participate, (b) the indemnitee's full cooperation in the defense, and (c)
the indemnitee's approval of any settlement that purports to bind it to a term
or condition that is not the payment of money damages (which shall be paid by
the indemnitor), which approval shall not be unreasonably withheld. If relevant,
the indemnitor shall resolve any material restriction on the indemnitee's
exercise of any rights licensed by the indemnitor, at the indemnitor's expense,
by (a) obtaining the necessary license from the third party or (b) providing a
non-infringing substitute or work-around to the indemnitee.
7. Miscellaneous Provisions.
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7.1 Independent Contractors. The parties are independent contractors and
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nothing contained in this Agreement shall be construed to create a relationship
of agent and principal, partners, joint venturers, or employer and employee.
7.2 Assignment. This Agreement may not be assigned without the prior,
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written consent of the other party, which shall not be unreasonably withheld,
except no consent shall be required for assignments to any party that acquires
or succeeds to all or substantially all of the assigning party's business or
assets.
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7.3 Governing Law. This Agreement shall be governed by the law of the
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State of California applicable to contracts made and to be performed in the
State of California, without reference to the conflicts of laws principles
thereof.
7.4 Non-Solicitation. During the term of this Agreement and for a period
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of one year thereafter, neither party shall solicit for employment, the
personnel of the other party without that party's written consent.
7.5 Entire Agreement. This Agreement is the entire agreement of the
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parties hereto with respect to the subject matter hereof and shall not be
modified or amended except in writing signed by all parties.
7.6 Limitation of Liability. Other than as may arise from willful
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misconduct, in no event shall any party be liable for any consequential,
incidental, indirect or special damages arising out of or related to this
Agreement or its termination, including without limitation lost data or lost
profits, regardless of whether such party has been advised of the possibility of
such damages and notwithstanding the failure of essential purpose of any limited
remedy. All software and services are provided on an as-is basis without
warranty, express or implied.
IN WITNESS WHEREOF, the duly authorized representatives of the parties have
executed this Agreement as of the date first written above.
MUZE INC. LIQUID AUDIO, INC.
By: /s/ Xxxxxxx Xxxxxxx By: /s/ Xxxxx Xxxxxx
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Xxxxxxx Xxxxxxx Xxxxx Xxxxxx
Chief Executive Officer Chief Executive Officer
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EXHIBIT A
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Online Program, Revenue, & Expense Sharing Points
Revenue and Expense Sharing:
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. Each party initially bears expenses associated with its responsibilities
under the Online Program
. Each party to share Online Program gross revenues equally
. Each party to account to the other and share Online Program expenses
equally
. Allocation of expenses to the Online Program to be determined according
to agreed-upon guidelines, to be attached to this Exhibit A; parties
each to use separate cost accounting for the Online Program
. Muze to pay expenses arising out of additional MP3 encoded output
destined for in-store listening systems (cost increment expect to be
_________); Muze to also pay for MP3 output program code development by
Liquid (expected to require one (1) engineering man-week)
. Each party bears 50% of capital expenditures (e.g., encoding hardware,
hosting facilities, CDs for encoding)
. Capital costs to be allocated, rather than shared, if accounting and/or
tax advantages dictate, as parties may agree
. Original CDs to reside at Muze's facility (copies at Liquid's facility)
Parties' Specific Responsibilities: Each party will assist the other in
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performing its primary responsibilities and the parties will work together to
find the most time- and cost-effective means of developing and promoting the
Program
Muze Liquid Audio
. License music database to Liquid and provide . License Liquid Music Server and encoding
integration support applications to Muze and provide training
. Obtain and provide to Liquid CDs for encoding . Encode music from CDs provided by Muze for
(both the initial Linked Sound Clips library and initial & new releases Linked Sound Clips
newly released CDs) library
. After Liquid encodes the initial Linked Sound . Create links to music database entries for
Clips library, jointly encode with Liquid new encoded files and supply links to Muze
releases as they become available, and
provide Liquid with a copy of the encoded files . Provide copy of encoded files to Muze
for hosting
. Host and provide all network operations for
. Maintain encoded file/database entry links Linked Sound Clips
library and provide to Online Merchants under
the Program . Provide primary technical support for Online
Merchants with respect to Program issues
. Participate in joint marketing efforts (with
respect to Muze customers, as primary . Assist Muze in setting up its own encoding
marketer) site once the initial Linked Sound Clips library
is encoded
. Appoint and empower a Project Manager
. Participate in joint marketing efforts
. Appoint and empower a Project Manager
Timelines/Deliverables:
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. Muze to provide CDs at an ongoing rate sufficient to permit Liquid to meet
all encoding deadlines
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. Liquid to begin encoding by February 9, 1999, with 50,000 CDs to be encoded
by March 8, 1999 (in time for NARM)
. Liquid to encode 120,000 CDs by May 10, 1999, and continue thereafter at a
rate of 10,000 CDs per week until the initial library of Linked Sound Clips
for approximately 300,000 CDs is encoded.
. Parties to agree on expense sharing accounting guidelines in first Progress
Review Meeting or by February 19, 1999, whichever comes first
Technical Details
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. Encoding to be AAC for 28.8 kbps and ISDN streaming rates
. Separate MP3 encoded files for 64 kbps streaming rate for use outside the
Program by Muze (for in-store listening systems)
Product Offerings (Planned and potential)
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. Standard Online Program Linked Sound Clip hosting service
. Data mining services (with respect to Linked Sound Clips only)
. Only if necessary for competitive masons, a server and Linked Sound Clips
library product (not service)
. Linked Sound Clips library (AAC or MP3) for use in physical retail or similar
environments with listening systems not equipped for interactive audio
streaming (this product to be offered by Muze only)
Territory
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. [***]
Branding
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. All Liquid file format players distributed in conjunction with the Online
Program shall contain both Liquid and Muze Branding, in a format to be agreed
upon during the Progress Review Meetings.
* Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
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