EXHIBIT 10.58
CONFIDENTIAL
OPTION AND PURCHASE AGREEMENT
This Option and Purchase Agreement (this "Option Agreement") is
made and entered into as of November 15, 2002 (the "Execution Date") by
and between Liquid Audio, Inc. ("Liquid"), and Universal Music Group,
Inc. ("UMG") (UMG and Liquid, the "Parties").
RECITALS
A. Liquid and UMG have previously entered into a Digital
Distribution Services Agency Agreement (the "Agreement") and a Format
Promotion Agreement (the "Format Agreement") each dated as of March 20,
2002.
B. UMG plans to launch a digital distribution initiative
utilizing the services that have been and currently are being provided
by Liquid under the Agreement. Between the time the Parties entered into
the Agreement and the Execution Date, however, Liquid has communicated
with UMG that, at some point in the future, it may decide to discontinue
or otherwise not offer the services contemplated by the Agreement.
C. In the event Liquid chooses not to offer the services
set forth in the Agreement, the Parties have agreed to address UMG's
concerns that it receive continuity in UMG's digital distribution
initiative by providing UMG with an option to acquire certain of the
assets owned by Liquid that are necessary to provide such services and
certain other agreements described herein.
AGREEMENT
NOW, THEREFORE, with reference to the foregoing recitals, and in
consideration of the mutual covenants and agreements contained herein
and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, UMG and Liquid agree as follows.
1. Grant of Option. Liquid hereby grants to UMG the exclusive
right and option to purchase the Service Assets (as defined below) upon the
terms and conditions set forth in this Option Agreement (the "Option"). The
Option shall be fully vested in UMG as of the Execution Date and is irrevocable.
In the event that Liquid forms or otherwise acquires a new entity (an
"Affiliate") and transfers all or any portion of the Service Assets to that
Affiliate, such Affiliate will be deemed bound by this Option Agreement and all
references herein to "Liquid" shall thereafter be deemed to be references to
Liquid Audio Inc., and such Affiliate.
2. Term of Option. The term of the Option (the "Term")shall
commence on the Execution Date and shall expire at the earliest of 5:00 p.m. Los
Angeles time: (i) 270 days after the Launch Date, (as defined below) and (ii)
284 days after the
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Execution Date and (iii) that date, if ever, which is after a Trigger Event and
a fter UMG's Option has become exercisable but UMG has failed to exercise within
the applicable time period as set forth in Section 4 below.
3. Exercise of Option. UMG shall have the right, but not the
obligation, to exercise the Option only on or after the occurrence of a Trigger
Event (as defined below) during the Term. A "Trigger Event" is any one or more
of the following: (a) Liquid makes a public announcement, or informs UMG in
writing that Liquid has decided that it will discontinue the digital music
fulfillment services (collectively, the "Services") described in the Agreement;
or (b) Liquid takes proactive steps to incapacitate the Services, or (c) Liquid
fails to provide to UMG all or substantially all of the Services for (i) one
hundred and twenty (120) hours or (ii) forty-eight (48) hours after the date
that UMG informs Liquid in writing that Liquid's continued failure will
constitute a Trigger Event, whichever is later; or (d) Liquid receives a
bona-fide written offer from a third party to acquire the Service Assets, or any
portion of them, and provides written notice to UMG that it is considering said
offer and intends to transfer, or Liquid in fact transfers or agrees to transfer
the Service Assets, or any portion of them, to any person (each such person, a
"Service Asset Purchaser") other than an Affiliate pursuant to transfer in
compliance with Section 14. Notwithstanding the foregoing, if a failure to
provide Services event occurs as described under the preceding clause (c), such
event shall not become a Trigger Event if Liquid notifies UMG in writing at any
time prior to the end of the period set forth in clause (c) that the event
occurred due to circumstances outside Liquid's control and that Liquid is taking
commercially reasonable measures to reinstate such Services, provided that such
Services must in fact be reinstated not later than ten (10) business days after
the commencement of such failure to provide Services. UMG shall exercise the
Option pursuant to Section 4 below, if at all, by written notice (the "Option
Notice") delivered to Liquid at any time during the Term on or after a Trigger
Event. If UMG exercises the Option, the purchase by UMG of the Service Assets
and the sale by Liquid of the Service Assets to UMG shall occur on the
twenty-first day following the date (the "Option Notice Date") upon which UMG
delivers written notice to exercise the Option to Liquid, or on such other date
as the Parties shall mutually agree (the date of such purchase and sale, the
"Closing Date"). Pursuant to and subject to Section 22.5, UMG may assign its
rights to acquire the Service Assets to any UMG Affiliate (UMG or such UMG
Affiliate the "Buyer"). For the purposes of this Agreement, "UMG Affiliate(s)"
shall mean an entity controlled by, controlling or under common control with
UMG.
3.1.1 Deliveries at Exercise of Option by Liquid. On or
within one (1) business day of the Option Notice Date, Liquid shall
deliver to UMG a list of the Independent Record Company Commercial
Content Contracts and such Contracts.
4. Liquid's Trigger Event Notice and UMG's Exercise of the
Option. Liquid shall give UMG prompt written notice of the occurrence of any
Trigger Event (each, a "Trigger Event Notice"). For purposes of clarity, a
Trigger Event Notice is not a condition precedent to UMG's exercise of its
Option. Upon the delivery of a Trigger Event Notice, UMG shall have five (5)
business days to exercise its Option, subject to the next sentence. If a Trigger
Event Notice is delivered pursuant to Section 3(c) above, and UMG fails to
exercise its Option within five (5) business days, but a sale to a Service Asset
Purchaser has
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not been consummated within ninety (90) days after the date of the Trigger Event
Notice, Liquid shall so inform UMG, which shall have a second five (5) business
day period after such notice in which to exercise its Option.
5. Option Payments. In consideration of the granting of the
Option, UMG (a) shall make a payment of Ten Dollars ($10.00) to Liquid (the
"Option Payment") concurrently with the execution of this Agreement, and (b)
hereby gives approval for Liquid to launch a digital distribution initiative
utilizing Liquid's technology and the Services as contemplated by the Agreement
as soon as practicable, but in any event within fourteen (14) days after full
execution of this Option Agreement (the date on which such launch actually
occurs, the "Launch Date") provided that if UMG has provided Liquid with notice
of breach under the Agreement, Liquid may not launch until such breach has been
cured or waived by UMG, and (c) in the event that Liquid discontinues the
Services, UMG shall release Liquid from any and all liability to UMG arising out
of the Agreement for discontinuation of the Services, if any, provided that
Liquid is not in material breach of any of its obligations under this Option
Agreement. The Option Payment shall not be credited against the Purchase Price
(as defined below), nor is it refundable to UMG if UMG does not exercise the
Option.
6. Service Assets. The property subject to the Option set forth
in this Option Agreement is all of those tangible and intangible assets owned,
leased or licensed by Liquid as of the Closing Date necessary to provide the
Services or otherwise enable UMG to provide such services to independent record
companies (the "Service Assets"). The Service Assets include: (a) that hardware
and software listed on Schedule 6(a) hereof (the "System") (b) the contracts
listed on Schedule 6(b) hereof (as such contracts exist as of the Closing
Date)(the "Contracts"), and (c) all music files and metadata owned or licensed
by Liquid relating to the Contracts (which does not include eMasters or Metadata
of UMG, all of which are owned by UMG), including the eMasters and Metadata of
so-called "independent" record companies (as the term is commonly understood in
the recorded music industry) as identified in Schedule 6(b) or under Section
3.1.1 contained in any Liquid databases, which are used in, or generated by,
Liquid's Xxxxxx.xxx operations (the "Related Data"), provided, however, that the
Related Data shall not include any promotional or non-commercial eMasters or
Metadata. "Metadata" shall mean text information relating to the music content
of eMasters. "eMasters" shall mean a complete digital copy of an original master
sound recording (i) in a codec and using a digital rights management solution in
accordance with instructions received from the licensor or owner thereof, and
(ii) encoded in an approved format, using the content usage rules designated by
the licensor or owner thereof, and (iii) that is resident on computer servers
owned or controlled by Liquid as of the Closing Date. Notwithstanding the
foregoing, Liquid and UMG agree that if the Option is exercised, on the Closing
Date Liquid shall assign, and UMG shall assume only such Contracts as may be
assigned without the consent or approval of the other parties to such Contract
and Liquid shall only transfer the eMasters and Metadata to UMG if it is
permitted to do so under the Contracts. If any Contract, by its terms as in
effect on the Execution Date, requires the consent, approval, or another third
party action prior to the assignment of such Contract to UMG, promptly after UMG
exercises the Option, Liquid and UMG shall diligently take such actions as may
be reasonably required to obtain any necessary consent or approval, provided
neither Party shall be required to make any payments to obtain such consent or
approval.
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Liquid's obligation to act diligently to obtain consents as set forth in the
previous sentence shall terminate five (5) business days following the Closing
Date (the "Drop Dead Date").
7. Production Operation Requirements. The parties acknowledge
and agree that the System requires certain other third party licenses,
operational equipment, and processes (the "Operational Materials") in order to
operate and that UMG (and not Liquid) shall be responsible for obtaining and/or
managing the Operational Materials. Schedule 7, containing a list of the
Operational Materials is attached hereto and incorporated herewith.
8. Purchase Price. If UMG exercises the Option pursuant to
Section 3, the purchase price for the Service Assets and all of Liquid's
services in effecting the Transition Plan shall be Three Million Dollars
($3,000,000.00). The Purchase Price shall be payable by UMG to Liquid on the
Closing Date.. UMG shall have no right of set off or deductions from the
Purchase Price.
9. Closing. (a) On the Closing Date, UMG and Liquid shall make
the following deliveries to the other (the time at which all such deliveries
have occurred, the "Closing"):
9.1.1 Deliveries by Liquid to UMG. Liquid shall
execute and deliver to UMG on the Closing Date (a) two
(2) originals of a Assignment and Assumption agreement
in the form attached hereto as Exhibit 9.1.1(a) duly
executed by Liquid in favor of UMG) (the "Assignment");
(b) two (2) originals of a Xxxx of Sale in the form
attached hereto as Exhibit 9.1.1(b), duly executed by
Liquid in favor of UMG (the "Xxxx of Sale"), (c) two (2)
originals of a termination agreement in the form
attached hereto as Exhibit 9.1.1(c), which effects the
termination of the Agreement as of the Closing Date (the
"Termination Agreement") and (d) two originals of a
license agreement in the form attached hereto as Exhibit
9.1.1(d) (the "License Agreement"), which grants Liquid a
license effective as of the Closing Date to grant EMI
Christian Music Group (or, in the event of a permitted
assignment by EMI Christian Music Group, to a CMG label,
or other affiliate of EMI, or any such person owning or
acquiring all or substantial portion of the stock or
assets of EMI Christian Music Group) (the EMI Christian
Music Group or such permitted assignee "EMI") a
sublicense pursuant to Liquid's agreement with EMI to
use certain of the Service Assets.
9.1.2 Deliveries by UMG to Liquid. UMG shall deliver
to Liquid (a) two (2) originals of the
Assignment; (b) two (2) originals of the
Termination Agreement; and (c) two originals of
the License Agreement.
9.1.3 Deliveries Effective. The deliveries required
under Sections 9.1.1 and 9.1.2 above will not be
effective until all such deliveries have been
made.
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On Closing, Liquid shall deliver all Service Assets,
including all books, records, warranties, and agreements
including therein or related thereto, provided that UMG
shall pay all costs of packing and moving such Service
Assets.
10. Post-Closing Covenants. Notwithstanding anything in the
preceding sections of this Option Agreement, if a consent, approval or
other third party action is required prior to the transfer of any
Contract to UMG, and is not obtained prior to Closing, Liquid and UMG
shall use reasonable efforts to diligently and in good faith work
together to acquire such consent or approval, provided however, that
neither Party shall be required to make any payments to obtain such
consent or approval. Liquid's obligation to obtain consents as set
forth in the previous sentence shall terminate on the Drop Dead Date.
Promptly after each such required consent or approval is obtained, a
Party shall execute and deliver to the other Party any supplemental
Assignments with respect to such Contract(s). The date after the
Closing Date of a supplemental Assignment is, for the Contracts
assigned and assumed thereby, the "Post-Closing Transfer Date" and
such date shall be no later than the Drop Dead Date. Any Contracts for
which consent is not obtained by the Drop Dead Date shall not be
transferred unless the parties otherwise subsequently agree. For the
avoidance of doubt, if a Contract for which consent has been obtained
is not transferred on or before the Drop Dead Date, and UMG wants such
Contract transferred, UMG (and not Liquid) shall prepare all
documentation and take any other action necessary to transfer such
Contract after the Drop Dead Date, provided Liquid will sign a
supplemental assignment in the form attached hereto if presented to
Liquid by UMG within six (6) months following the Closing Date.
11. Restriction on Sale by UMG. UMG hereby covenants and
agrees that if the Trigger Event preceding its exercise of the Option is the
proposed transfer of the Service Assets or any of them to a Service Asset
Purchaser, UMG will not, within one hundred and eighty days (180 days) of the
Closing, sell or agree to sell the Service Assets UMG has acquired to such third
party for more than the Purchase Price.
12. Representations and Warranties.
12.1 Liquid's Representations and Warranties. Except
as set forth in Schedule 12.1, in consideration of UMG
entering into this Option Agreement and as an inducement to
UMG to purchase the Service Assets, Liquid makes the
following representations and warranties, each of which is
material and is being relied upon by UMG. Each of the
following representations and warranties shall be deemed to
have been remade on and as of the Closing.
12.1.1 Power. Liquid has the legal power, right and
authority to enter into this Option Agreement and the
instruments referenced herein, and to consummate the
transaction contemplated hereby.
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12.1.2 Requisite Action. All requisite action
(corporate, trust, partnership or otherwise) has been taken by
Liquid in connection with entering into this Option Agreement
and the instruments referenced hereinto authorize the
consummation of the transaction contemplated hereby. No
additional consent of any partner, shareholder, member, trustee,
trustor, beneficiary, creditor, investor, judicial or
administrative body, governmental authority or other Party shall
be required for Liquid to consummate the transaction
contemplated by this Option Agreement (other than such third
party consents or approvals, if any, required to transfer the
Contracts).
12.1.3 Individual Authority. The individuals
executing this Option Agreement and the instruments referenced
herein on behalf of Liquid have the legal power, right, and
actual authority to bind Liquid to the terms and conditions
hereof and thereof.
12.1.4 Validity. This Option Agreement and all
documents required hereby to be executed by Liquid are and shall
be valid, legally binding obligations of and enforceable against
Liquid in accordance with their terms, subject only to
applicable bankruptcy, insolvency, reorganization, moratorium
laws or similar laws or equitable principles affecting or
limiting the rights of contracting parties generally.
12.1.5 No Conflict. Neither the execution and
delivery of this Option Agreement and the documents and
instruments referenced herein, nor the performance of the
obligations set forth herein, nor the consummation of the
transaction contemplated herein, nor compliance with the terms
of this Option Agreement and the documents and instruments
referenced herein conflict with or result in the material breach
of any terms, conditions or provisions of, or constitute a
default under, any bond, note, or other evidence of indebtedness
or any contract, indenture, mortgage, deed of trust, loan,
partnership agreement, lease or other agreement or instrument to
which Liquid is a party or affecting the Service Assets.
12.1.6 No Breach. As of the Execution Date,
Liquid is not in breach of, and to the best knowledge of Liquid
no other person party to a Contract is in breach or default
thereunder and to the knowledge of Liquid no event has occurred
that with notice or lapse of time or both would constitute a
breach or default thereunder.
12.1.7 Claims. Liquid has not received any
notice of any violation of any governmental regulation, or of
any pending or threatened governmental actions, condemnation
proceedings, future public assessments or similar charges or any
material physical defects which would materially adversely
affect or delay, or result in additional cost in
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connection with, the ownership or operation of the Service
Assets in connection with the Services.
12.1.8 Insolvency. No attachments, execution
proceedings, assignments for the benefit of creditors,
insolvency, bankruptcy, reorganization or other similar
proceedings are pending or threatened against Liquid.
12.1.9 Contracts and Leases. As of the
Execution Date, there are no contracts, agreements, leases,
subleases, tenancies, service or maintenance contracts,
warranties, guarantees, debts, obligations, or liabilities
(whether known or unknown, fixed or contingent) which as of the
Closing will be in effect with respect to, or otherwise affect,
any of the Service Assets, except the Contracts.
12.1.10 No Encumbrances. The Service Assets are
not at the Closing Date subject to any liens, pledges, security
interests, covenants, restrictions or encumbrances of any
nature.
12.1.11 No Affiliates. Liquid has no affiliates
as of the "Execution Date" (other than the individuals who serve
as its officers or directors). For the purposes of this Option
Agreement, affiliate shall mean an entity controlled by,
controlling or under common control with Liquid.
12.1.12 Necessary Assets. The assets set forth
in Schedules 6(a), 6(b) and Schedule 7 constitute all assets
necessary to provide the Services or otherwise enable UMG to
provide such services to the parties identified in Schedule
6(b).
13.2 UMG's Representations and Warranties. In
consideration of Liquid entering into this Agreement and as an
inducement to Liquid to sell the Service Assets, UMG makes the
following representations and warranties, each of which is
material and is being relied upon by Liquid. Each of the
following warranties shall be deemed to be remade on and as of
the Closing.
13.2.1 Power. UMG has the legal power, right
and authority to enter into this Option Agreement and the
instruments referenced herein, and to consummate the transaction
contemplated hereby.
13.2.2 Requisite Action. All requisite action
(corporate, trust, partnership or otherwise) has been taken by
UMG in connection with entering into this Option Agreement and
the instruments referenced herein; and, by the Closing all such
necessary action will have been taken to authorize the
consummation of the transaction contemplated hereby. By the
Closing no additional consent of any partner, shareholder,
member,
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trustee, trustor, beneficiary, creditor, investor, judicial or
administrative body, governmental authority or other party shall
be required for UMG to consummate the transaction contemplated
by this Option Agreement.
13.2.3 Individual Authority. The individuals
executing this Option Agreement and the instruments referenced
herein on behalf of UMG have the legal power, right, and actual
authority to bind UMG to the terms and conditions hereof and
thereof.
13.2.4 Validity. This Option Agreement and all
documents required hereby to be executed by UMG are and shall be
valid, legally binding obligations of and enforceable against
UMG in accordance with their terms, subject only to applicable
bankruptcy, insolvency, reorganization, moratorium laws or
similar laws or equitable principles affecting or limiting the
rights of contracting parties generally.
13.2.5 No Conflict. Neither the execution and
delivery of this Option Agreement and the documents and
instruments referenced herein, nor the performance of the
obligations set forth herein, nor the consummation of the
transaction contemplated herein, nor compliance with the terms
of this Option Agreement and the documents and instruments
referenced herein conflict with or result in the material breach
of any terms, conditions or provisions of, or constitute a
default under, any bond, note, or other evidence of indebtedness
or any contract, indenture, mortgage, deed of trust, loan,
partnership agreement, lease or other agreement or instrument to
which UMG is a party.
13.3 Breach of Representations and Warranties.
Representations of both Parties contained in this Agreement
shall be true and correct in all material respects upon the
Execution Date and on and as of the Closing. Any claim for a
breach of a representation or warranty must be delivered within
the applicable statute of limitations and the party bringing
such action shall bear the burden of proof in any such action.
13.4 As-Is. As a material inducement to the execution
and delivery of this Agreement by Liquid and the performance by
Liquid of Liquid's duties and obligations hereunder, and subject
to the express representations and warranties of Liquid set
forth in Section 12.1 of this Agreement, UMG does hereby
acknowledge, and agree, to and with the Liquid, that (a) UMG is
purchasing the Service Assets in an "AS-IS" condition as of the
date of the Closing with respect to any facts, circumstances,
conditions and defects; (b) Liquid has no obligation to repair
or correct any such facts, circumstances, conditions or defects
or compensate UMG for same; (c) by the Closing, UMG shall have
undertaken all such physical inspections and examinations of the
Service Assets as UMG deems necessary or appropriate under the
circumstances, and (d) except as expressly
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set forth in Section 12.1, Liquid is not making and has not made
any representation or warranty with respect to all or any part
of the Service Assets.
14. Operation of Property Prior to Closing; Covenant to
Continue Service Until Notice. Liquid shall have the right to convey title to
the Service Assets to and among its Affiliates, provided each Affiliate agrees
to provide the Services required to be provided under the Agreement and to be
bound by this Option Agreement. Liquid shall give UMG prior written notice of
any such conveyance. Nothing herein shall restrict Liquid's right to render
services such as the Services to any person. If (i) Liquid becomes aware that
any lien or encumbrance is filed against all or any portion of the Service
Assets, or (ii) there is a material adverse change in the condition of the
Service Assets, whether due to a casualty or otherwise, then Liquid shall
promptly give UMG written notice of such event. Liquid agrees that it shall not
discontinue provision of the Services; discontinue any operations, or license or
dispose of assets in each event if such discontinuance or disposition would
adversely affect its ability to provide the Services; or otherwise take any
action that would adversely affect its ability to provide the Services to UMG at
all times from the Execution Date until the earliest of (i) 270 days after the
Launch Date, and (ii) 284 days after the Execution Date, and (iii) that date, if
ever, which is after a Trigger Event and after UMG's Option has become
exercisable but UMG has failed to exercise within the applicable time period;
and (iv) the Closing Date, if after a Trigger Event and UMG has timely exercised
its Option. For purposes of clarity, nothing in this Option Agreement shall
permit Liquid to discontinue the Services without compliance with Sections 14
and 15 of this Agreement.
15. Cooperation and Transition Assistance. Promptly after
UMG's exercise of the Option, Liquid and UMG shall in good faith meet, refine,
and agree on a more detailed plan for the transition of the Service Assets from
Liquid to UMG, including without limitation allocation of any responsibilities
not addressed in Schedule 15, and (if the Option is exercised) shall work
together in good faith to effect such plan (the "Transition Plan"). A
preliminary outline of the Transition Plan is incorporated herewith as Schedule
15. Without limitation of the foregoing, if the Option is exercised, Liquid
shall assist UMG at its request in cloning the software included in the System
to new UMG-owned hardware, use commercially reasonable efforts to facilitate the
complete and orderly transition of the Related Data to UMG, and otherwise
provide to UMG the services of Liquid's employees, and any hardware and software
required for such transition, pursuant to the Transition Plan as necessary to
effect the transfer of the Service Assets and the activation, by UMG, of the
services (the costs of all such services or assistance, hardware and software
prior to the Closing Date (except for those items that are set forth on Schedule
7, listed as UMG's responsibility under Schedule 15 or otherwise UMG's
responsibility in the Transition Plan) to be borne by Liquid, including any
out-of-pocket third party costs of Liquid). Both parties shall work in good
faith together to effectuate the transition in a manner which permits the
Services to continue on an uninterrupted basis or as otherwise agreed upon by
the Parties in the Transition Plan. Both Parties shall work diligently and in
good faith to effectuate the transition of the Service Assets by Liquid to UMG
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on or prior to the Closing Date, or other date if mutually agreeable to the
Parties. Notwithstanding the foregoing, Liquid's obligations to provide
assistance to UMG in the transition of the Service Assets from Liquid to UMG,
including without limitation the provision of services by any employees, shall
terminate on the Drop Dead Date.
16. Right of Inspection. From and after a Trigger Event
through and including the Closing Date, UMG and its representatives (including
any engineers and consultants), upon reasonable prior written notice to Liquid,
shall have reasonable access to the Service Assets during business hours to
inspect them and to conduct such tests, studies or investigations as UMG deems
appropriate to evaluate the Service Assets or to plan for or effect a transition
of the Service Assets to UMG. UMG shall bear all costs and expenses of such
inspections. UMG's activities under this Section 16 shall be performed in a
manner so as not to unreasonably interfere with the Liquid's operations. Any
inspection and the results of any inspections shall also be subject to the
Confidentiality provisions contained in Section 22 of this Option Agreement.
17. Conditions Precedent to the Closing.
17.1 Conditions Precedent for the Benefit of UMG. If
UMG exercises the Option, the Closing and UMG's obligation to
consummate the transaction contemplated by this Agreement are
subject to the timely satisfaction or waiver of the following
conditions precedent.
17.1.1 Representations, Warranties and
Covenants of Liquid. Liquid shall have duly performed each and
every material agreement to be performed by Liquid hereunder
(including without limitation Sections 14, 15 and 16) and
Liquid's representations and warranties set forth in Section
12.1 shall be true and correct in all material respects as of
the Closing.
17.1.2 Liquid's Deliveries. Liquid shall have
delivered the items described in Sections 3.1.1 and 9.1.1.
17.2 Conditions Precedent for the Benefit of Liquid.
The Closing and Liquid's obligations with respect to the
transaction contemplated by this Agreement are subject to the
timely satisfaction or waiver of the following conditions
precedent.
17.2.1 Representations, Warranties and
Covenants of UMG. UMG shall have duly performed each and every
material agreement to be performed by UMG hereunder and UMG's
representations and warranties set forth in this Agreement shall
be true and correct in all material respects as of the Closing.
17.2.3 UMG's Deliveries. UMG shall have
delivered the items described in Section 3.1.2 and 9.1.2.
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17.3 Failure of Conditions. If any of the conditions
set forth in Sections 17.1 or 17.2 are not timely satisfied (and
the nonsatisfaction thereof is not cured within five (5) days
after written notice from the party which the condition
benefits) for a reason other than the default of UMG or Liquid
under this Option Agreement, then: this Option Agreement and the
rights and obligations of the Parties hereunder shall terminate
(provided that no such termination shall affect the Agreement,
which shall remain in full force and effect); provided, however,
no such termination shall occur until (a) UMG or Liquid, as
applicable, has had the opportunity to waive any condition for
its benefit within five (5) business days after its receipt of
written notice from the other that such condition will not be
satisfied.
18. Costs and Expenses. Subject to the provisions of
Sections 7 and 14, and Schedule 19(a), each Party shall bear its own costs and
expenses incurred in connection with this Option Agreement and the consummation
of the transactions contemplated hereby, including without limitation the costs
of its own attorneys.
19. Allocations. All revenues and expenses allocable to the
Service Assets shall be allocated between Liquid and UMG as follows; all
revenues and expenses incurred, arising or accrued prior to the Closing Date,
with respect to Service Assets (including Contracts) transferred on such Closing
Date, regardless of when such revenues are received or any payment becomes due,
shall be the assets or liabilities, as applicable, of Liquid; all revenues and
expenses incurred, arising or accrued on or after the Closing Date, including
but not limited to those costs and expenses incurred during the period of
transition of the Service Assets to UMG with respect to Service Assets
(including Contracts) transferred on such Closing Date shall be the assets or
liabilities, as applicable, of UMG. The Parties shall cooperate in promptly
notifying and/or forwarding all information relevant to revenues and expenses to
the appropriate Party, and shall forward without offset any payments received by
them which, pursuant to this Section 19, are the property of the other Party. If
any expenses or revenues are required to be prorated between the period prior to
the Closing Date or Post-Closing Transfer Date, as applicable (the "Pre-Closing
Period") and the period commencing on the Closing Date or Post-Closing Transfer
Date, as applicable, the Parties shall in good faith prorate, apportion or
otherwise divide such expenses or revenues between them based on how much of
such expense or revenue is attributable to the Pre-Closing Period, and how much
time to attributable to the post-closing period. Notwithstanding the foregoing,
or anything to the contrary contained herein (a) UMG shall under no
circumstances have any responsibility or liability for any expenses or
liabilities of Liquid other than third party liabilities incurred, arising or
accrued on or after the Closing Date and which are listed on Schedule 19(a)
hereof ("UMG's Permitted Expenses"), and specifically does not assume, and has
no obligation for any liability or obligation (i) to any employee, contractor,
officer, director or Affiliate of Liquid; (ii) for any claim, litigation, or
proceeding related to Liquid or the Service Assets, whether known or unknown,
(except for any claims related to the Service Assets that arise solely after
transfer of such Service Assets to Buyer), (iii) for any liability arising out
of, or related to, any breach of any contractual obligation, including without
limitation,
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CONFIDENTIAL
any breach of any of the Contracts, (unless such breach or other obligation
occurs solely after an assignment of such Contract to UMG), (iv) to any
governmental entity, whether for taxes or any other obligation of Liquid, or (v)
to any person or entity under any Contract (except for any claims that arise
solely after assignment of such Contract to Buyer); and (b) Liquid shall under
no circumstances have any responsibility or liability for any expenses or
liabilities of Buyer and specifically does not assume, and has no obligation for
any liability or obligation (i) to any employee, contractor, officer, director
or Affiliate of Buyer, (ii) for any claim, litigation, or proceeding related to
Buyer, whether known or unknown, (iii) for any liability arising out of, or
related to, any breach of any contractual obligation, including without
limitation, any breach of any of the Contracts (unless such breach or other
obligation occurs solely prior to an assignment of such contract to UMG), (iv)
to any governmental entity, whether for taxes or any other obligation of Buyer,
or (v) to any person or entity under any Contract assigned to Buyer (except for
any claims that arise solely prior to assignment of such Contract to Buyer). Not
less than two (2) business days prior to the Closing, Liquid shall deliver to
UMG a schedule of expenses and proposed prorations, if any ("Proration and
Expense Schedule"). If any prorations, apportionments or computations made under
this Section 19 shall require final adjustment, then the Parties shall make the
appropriate adjustments promptly when accurate information becomes available and
either Party hereto shall be entitled to an adjustment to correct the same. Any
corrected adjustment or proration shall be paid promptly in cash to the Party
entitled thereto, but in no event later than five (5) days from the date of such
adjustment or pro-ration, or such other time as the parties mutually agree.
20. Defaults. If either Party defaults in its obligations
under this Option Agreement, the nondefaulting Party shall give written notice
of such default to the defaulting Party. If the defaulting Party fails to cure
such default within ten (10) business days after its receipt of the default
notice, then the nondefaulting Party may elect to terminate this Option
Agreement by delivering written notice thereof to the defaulting Party.
21. Survival. Section 5(c) shall survive cancellation,
termination, or expiration, as well as such other terms which by their context
are intended to survive.
22. Miscellaneous.
22.1 Governing Law. This Option Agreement shall be
governed by and construed in accordance with the laws of the
State of California.
22.2 Injunctive Relief. The Parties acknowledge and
agree that money damages would not be a sufficient remedy for
any breach by Liquid of this Option Agreement. The Parties
therefore agree that UMG shall be entitled to specific
performance or other equitable relief as a remedy for any such
breach that would or would reasonably be expected to have such
an effect. Such remedy shall not be deemed to the UMG's
exclusive remedy for
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breach of any agreements, representations or warranties
contained herein, but shall be in addition to all other remedies
available at law or equity. Any right to injunctive relief as
set forth in this Section 22.2 shall automatically terminate on
the Closing Date or the Term expiration, whichever date is
sooner.
22.3 Integration. This Option Agreement contains the
entire agreement between the Parties with respect to the subject
matter hereof, and supersedes all prior or contemporaneous
communications or agreements, whether written or oral. The
parties acknowledge and agree that nothing herein shall affect
the Agreement, which remains in full force and effect, provided
in the event of any perceived conflict between the Agreement and
this Option Agreement, the terms of this Option Agreement shall
prevail.
22.4 Severability. If any provision, term, condition,
covenant, restriction or other portion of this Option Agreement
shall be held to be invalid, illegal or unenforceable, the
remaining portion shall remain in full force and effect.
22.5 Assignment. UMG may assign its rights under this
Option Agreement to a UMG Affiliate, provided that no such
assignment shall release UMG from its obligations hereunder.
Liquid shall not assign its rights or obligations hereunder to
any person without UMG's consent, which shall not unreasonably
be withheld provided that Liquid may transfer Service Assets to
an Affiliate as set forth in Section 14 hereof.
22.6 Required Actions of UMG and Liquid. UMG and
Liquid agree to execute such instruments and documents and to
diligently undertake such actions as may be required in order to
consummate the purchase and sale herein contemplated and if the
Option is exercised shall use their best efforts to accomplish
the Closing in accordance with the provisions hereof.
22.7 Captions. Any captions to, or headings of, the
paragraphs or subparagraphs of this Option Agreement are solely
for the convenience of the Parties hereto, are not a part of
this Option Agreement, and shall not be used for the
interpretation or determination of the validity of this Option
Agreement or any provision hereof.
22.8 Notices. All notices or demands under this
Option Agreement shall be made in writing and personally
delivered or delivered by recognized overnight courier to the
addresses for each Party set forth below (or to such other
address as a Party shall designate in accordance with this
Section).
22.9 No Obligations to Third Parties. Except as
otherwise expressly provided herein, the execution and delivery
of this Option
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Agreement shall not be deemed to confer any rights upon, nor
obligate any of the Parties hereto, to any person or entity
other than the Parties hereto.
22.10 Exhibits and Schedules. The exhibits and
schedules attached hereto are hereby incorporated herein by
this reference for all purposes.
22.11 Amendment to this Option Agreement. The terms of
this Option Agreement may not be modified or amended except by
an instrument in writing executed by each of the Parties hereto.
22.12 Construction. The Parties hereto hereby
acknowledge and agree that (i) each Party hereto is of equal
bargaining strength, (ii) each such Party has actively
participated in the drafting, preparation and negotiation of
this Option Agreement, (iii) each such Party has consulted with
such Party's own, independent counsel, and such other
professional advisors as such Party has deemed appropriate,
relating to any and all matters contemplated under this Option
Agreement, (iv) each such Party and such Party's counsel and
advisors have reviewed this Option Agreement, (v) each such
Party has agreed to enter into this Agreement following such
review and the rendering of such advice, and (vi) any rule of
construction to the effect that ambiguities are to be resolved
against the drafting Party shall not apply in the interpretation
of this Option Agreement, or any portions hereof, or any
amendments hereto.
22.13 Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an
original, but all of which, together, shall constitute but one
and the same instrument. A signature delivered by facsimile
shall be deemed an original.
22.14 Multiple Parties. If more than one entity shall
constitute Liquid or UMG hereunder, then each entity
collectively constituting Liquid or UMG, as the case may be,
shall be jointly and severally liable for the obligations
imposed upon such Party under this Agreement.
22.15 Confidentiality. Each party acknowledges that by
reason of its relationship to the other party under this
Agreement it may have access to certain trade secrets,
information and materials concerning the other party's business,
plans, customers, technology and products that are confidential
and of substantial value to such party (referred to in this
Section as "Confidential Information"), which value would be
impaired if such Confidential Information were disclosed to
third parties. The terms of this Agreement shall be deemed to
constitute Confidential Information. Each Party agrees to
maintain all terms and conditions of this Agreement and all
other Confidential Information received from the other, both
orally and in writing, in confidence and agrees not to disclose
or otherwise make available such Confidential
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Information to any third party (other than such party's
officers, directors, agents, representatives, accountants and
attorneys each of whom shall; (i) only be informed of such
information on a strictly need-to-know basis; (ii) be advised of
the confidential nature of the disclosing party's Confidential
Information prior to the disclosure of the same by the receiving
party; and (iii) have a duty to hold such information in
confidence at least to the same degree as the receiving party
holds its own Confidential Information) without the prior
written consent of the disclosing or other party. Each party
further agrees to use the Confidential Information only for the
purpose of performing this Agreement. No Confidential
Information shall be deemed confidential unless so marked if
given in writing or, if given orally, identified as confidential
orally prior to disclosure and confirmed in writing within
thirty (30) days; provided, however, that UMG agrees that any
Confidential Information in whatever form relating to the
Service Assets, including but not limited to the design,
functionality, operational methods or coding of the Service
Assets, Liquid's technology, including but not limited to any
complete or partial source or object code versions of such
software, as well as any information in whatever format obtained
during an inspection by UMG pursuant to Section 16 of this
Option Agreement or otherwise shall be deemed the Confidential
Information of Liquid (or its successor in interest to the
Service Assets, if any, or a Service Asset Purchaser) regardless
of the presence or absence of any confidential markings or
identifications, and even if such inspection occurred prior to
the Execution Date, unless and until UMG acquires the Service
Assets under this Option Agreement, at which point such
Confidential Information shall be deemed the Confidential
Information of UMG. The confidentiality provisions contained in
the Section 22.15 shall survive the Term of this Option
Agreement until the earlier of the Closing and September 30,
2007 and any trade secrets disclosed to one Party by the other
Party shall survive the Term of this Agreement to the fullest
extent allowed by law.
22.16 Nothing in this Option Agreement shall prohibit
the disclosure of this Option Agreement (whether by filings,
press releases or other public disclosure) to the extent
necessary to comply with securities regulations. Each party
shall provide the other party advance notice of, and a copy of,
any press release or other public disclosure other than a
government filing.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the day and year first written above.
Liquid Audio, Inc.:
By: /s/ Xxxxx Xxxxxx
-------------------------------------
Name: Xxxxx Xxxxxx
------------
Its: CEO and Co-Founder
------------------
Address for Notice:
-------------------
000 Xxxxxxxxxx Xxxxx
Xxxxxxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxx, Senior V.P. Business
Development, with a second copy to Xxxxxxxx
Xxxxx,
Business Affairs.
Universal Music Group, Inc.:
By: /s/ Xxxxxxx Xxxxxxx
-------------------------------------
Name: Xxxxxxx Xxxxxxx
------------------------------------
Its: Executive VP
------------------------------------
Address for Notice:
-------------------
0000 Xxxxxxxx Xxxx.
Xxxxx Xxxxxx, XX 00000
Attn: Senior Vice President, Business & Legal
Affairs
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SCHEDULE 6(a)
SERVICE ASSETS: HARDWARE AND SOFTWARE
1. SOFTWARE ASSETS
Liquid Audio will deliver source & object code as well as all existing
documentation for all of the following systems.
Encoding and Publishing System
Data Warehouse
Catalog Generation System
Retail Inventory and Fulfillment System (RIFFS)
RIFFS Merchant Admin System
Liquid Store Web Application
Territorial ID Application
Liquid Store Merchandising and Admin Tool
Reporting System
Reports Manager Web Application
2. HARDWARE ASSETS
Production Systems:
WMA - 3 license servers, 3 streaming servers
XXX - 0 xxxxxx
Xxxxxx - 0 xxxxxxx
Xxxxxx/Xxxxxx - 0 servers
Production/Staging/Encoding RAID - 12 TB with 3 access point servers
Many switches and routers (internal and not external)
ADIC tape backup system and tapes
Staging systems are;
XXX - 0 xxxxxx
Xxxxxx - 0 xxxxxx
Xxxxxx/Xxxxxx - 0 servers
WMA - 1 license, 1 streaming server
Encoding:
10 Jukeboxes
25 Encoding machines
5 TB RAID
Verance Watermarking systems - 3 Macs
Desktop PCs & and hardware associated with individual staff members to
the extent that UMG hires such individual(s) and 4 encoding
workstations. (UMG
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agrees to promptly obtain necessary software licenses. UMG agrees to
defend, indemnify and hold Liquid harmless from and against any losses,
liabilities, claims, damages or expenses arising solely out of the
transfer of such software to UMG or the failure by UMG to obtain
necessary software licenses.)
3. OTHER
Digitized source files and encoded files
Source CDs for the digitized files
Populated Oracle databases and other data files (e.g. retailer catalogs)
Backup tapes excluding historical transaction/operational data to be in
compliance with liquid's confidentiality obligations
Non-exclusive patent and copyright license rights necessary to operate
the Service, only if such rights are owned or licensable by Liquid as of
the Execution Date, and excluding any license rights identified in
Schedule 7. Any sublicense of license rights to UMG will be limited to
the rights that Liquid is permitted to sublicense under the applicable
license agreement, and will be subject to UMG's agreement to be bound by
the terms of such sublicense or such other requirements as may be set
forth in the applicable license agreement. UMG will be responsible for
any royalties or other fees payable in connection with such sublicense.
Non-exclusive trademark license rights as necessary for UMG to transition out
any remaining Liquid branding from the System as set forth in Schedule 15, which
license rights are subject to compliance with Liquid's trademark guidelines and
quality control requirements (note: some use of Liquid trademarks may be
difficult to transition immediately and the parties contemplate a limited period
for such transition and such period may not exceed one (1) year from the Closing
Date).
Operations and workflow documentation as set forth on the Transition
Plan
Any existing documentation related to the on-going operation of the service,
provided, however, that Liquid shall not be required to provide historical
transaction data or operational history to UMG due to confidentiality
obligations.
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CONFIDENTIAL
Schedule 6(b)
SERVICE ASSETS: CONTRACTS
1. Liquid Store Account Contracts and RIFFS Account Contracts*
a. Liquid Store Accounts
Account URL
--------------------------------------------------------------------------------
XXX.xxx xxx.XXX.xxx
Acoma Company xxx.xxxxx-xx.xxx
Acossi xxx.xxxxxx.xxx
Advanced Book Co. xxx.0xxx.xxx
Algonquin Records xxx.xxxxxxxxxxxxxxxx.xxx
All About Jazz xxx.xxxxxxxxxxxx.xxx
Allied chemical xxx.xxxxxxxxxxxxxx.xxx
Anybody Listening xxx.xxxxxxxxxxxxxxxx.xxx
Audioworld xxxxxxxxxx.xxx, xxxxxxxxxx.xxx, xxxxxxxxxx.xxx
Best Buy xxx.xxxxxxx.xxx
Cannibal Music xxx.xxxxxxxxxxxxx.xxx
Cat's Music xxx.xxxxxxxxx.xxx
Cd Store xxx.xxxxxxx.xx
Xxxxxxxx.Xxx xxx.xxxxxxxx.xxx
Channelfly xxx.xxxxxxxxxx.xxx
Circuit City xxx.xxxxxxxxxxx.xxx
Compact Disc World xxx.xxxxxxx.xxx
Corner Compact Disc xxx.xxxxxxxx.xxx
CR Entertainment xxx.xxxxxxxxxxxxxxx.xxx
Xxxxxx X. Xxxxxxx xxx.xxxxxx.xxx
Dimple Records xxx.xxxxxx.xxx
Dothehole xxx.xxxxxxxxx.xxx, xxx.xxxxxxxxxxxxxx.xxx
Ear X-xxxx xxx.xxxx-xxxx.xxx
Earwax Records xxx.xxxxxxxxxxxxx.xxx
Electric Fetus (CIMS) xxx.xxxxxx.xxx
E-Man Enterprises xxx.xxxxxxxx.xxx
Face The Music xxx.xxxxxxx.xxx
Freecom xxx.xxxxxxx.xxx
Gallery Of Sound xxx.xxxxxxxxxxxxxx.xxx
HMV - Canada xxx.xxx.xxx
Homers Music xxx.xxxxxxxxxxx.xxx
Independent Records xxx.xxxxxxxxxxxxx.xxx
IPI Vision xxx.xxxxxxxxxx.xxx
Jazzfusion xxx.xxxxxxxxxx.xxx
Lakeshore (CIMS) xxx.xxxxxxxxxxxxxxxx.xxx
Xxxxxxxxx.xxx xxx.xxxxxxxxx.xxx
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Little Fish Records xxx.xxxxxxxxxxxxxxxxx.xxx
Looney Tunes xxx.xxxxxxxxxxxxxx.xxx
M.I.R.A xxx.xxxxxxx.xxx
Mainstreet Music xxx.xxxxxxxxxxxxxxx.xxx
Mausoleum xxx.xxx-xxxxxxxxx.xxx
Xxxxxxx X. Xxxxxxx xxx.xxxxxxxxxxxxxxxx.xxx/
Millennium Music xxx.xxxxxxxxxxxxxxx.xxx
MP3 xxx.xx0.xxx
Multimedia-Polska www.multimedia-polska.p/
Music Makers Network xxx.xxxxxxxxxxxxxxxxxx.xxx
Music Millennium xxx.xxxxxxxxxxxxxxx.xxx
New World Record xxx.xxxxxxxxxxxxxx.xxx
Xxxxxxxxxxx.xxx xxx.xxxxxxxxxxx.xxx
Planet of Music xxx.xxxxxxxxxxxxx.xxx
Plextor Corp xxx.xxxxxxx.xxx
Polish Jazz Network xxx.xxxxxxxxxx.xxx
PopLife Online xxx.xxxxxxx.xxx
Q Beach Music xxx.xxxxxx.xxx
Radio Mandala xxx.xxxxxxxxxxxx.xxx
Rasputin Music xxx.xxxxxxxxxxxxx.xxx
Record & Tape Traders xxx.xxxxxxxxxxxxxxxxxxxx.xxx
Record Archive xxx.xxxxxxxxxxxxx.xxx
Record Exchange (CIMS) xxx.xxxxxxxxxxxxxxxxx.xxx
Reggae Breakfast xxx.xxxxxxxxxxxxxxx.xxx
Xxxxxxx Xxxxxx xxx.xxxxxxxxx.xxx
Xxxxxxxxxxxx.xxx xxx.xxxxxxxxxxxx.xxx
RTO Inc xxx.xxxxxx.xxx
Smash Media Group xxx.xxxxxxx.xxx
SoHo Software xxx.xxxxxxxxxxxx.xxx
Sony Music Club xxx.xxxxxxxxx.xxxxxxxxx.xxx
Sounds Good Inc., xxx.xxxxxxxxxxxxxxx.xxx
StoneMill Entertainment xxx.xxxxxxxxxxxxx.xxx
Takeout Music, Inc xxx.xxxxxxxxxxxx.xxx, xxx.xxxxxxxxxx.xxx
The DragoNet Group xxx.xxxxxxxxxxxx.xxx/xxxxxxxxx
The Long Ear xxx.xxxxxxxxxx.xxx
The Music Network xxx.xxxxxxxxxxxx.xxx
Tower Records xxx.xxxxxxxxxxxx.xxx
Trac Records xxx.xxxxxxxxxxx.xxx
Transworld xxx.xxx.xxx
Twist and Shout xxx.xxxxxxxxxxxxx.xxx
Universal Light Tones xxx.xxxxxxxxxxxxxxxxxxx.xxx
Vintage Vinyl -- St. Louis xxx.xxxxxxxxxxxx.xxx
Virtual Music Zone xxx.xxxxxxxxxxxxxxxx.xxx/
Waterloo records xxx.xxxxxxxxxxxxxxx.xxx
Whassup247 xxx.xxxxxxx000.xxx
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X.X. Xxxxxx & Co. xxx.xxxxxxxx.xxx/xxxxxxxxxxx
Yamaha xxxx://xxx.xxxxxx.xxx/xxx/xxxxxxxxxx/xxxxx0.xxxx
Your Concert xxx.xxxxxxxxxxx.xxx
b. RIFFS ACCOUNTS
Account URL
--------------------------------------------------------------------------------
Adamant Media xxx.xxxxxxx.xxx
E-Monee Entertainment xxx.x-xxxxxxxxxxxxxxxxxx.xxx
Music Rebellion xxx.xxxxxxxxxxxxxx.xxx
Topical Networks/iontunes xxx.xxxxxxxx.xxx
c. PENDING AFFILIATE AGREEMENTS
Any Liquid Store or RIFFS agreements that are pending as of the Execution Date
and are concluded prior to the Closing Date.
2. Independent Record Company Commercial Context Contracts
(List to Be Delivered Pursuant to Section 3.1.1 of this Agreement)
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Schedule 7
OPERATIONAL REQUIREMENTS
The following are to be provided by UMG, if at all:
Hardware, Software, and Procedures
Bandwith
Back up system and process
Offsite storage and process
Production Operation Requirements
---------------------------------
Operations Policies and Procedures
Required 3rd Party Contracts
----------------------------
Oracle Database Licenses
Brio Reports License or Equivalent (Oracle Reports)
Windows Media Rights Manager License
ATG Application Server License
Perforce Source Code Control Software License
Production software licenses
Offsite storage agreement
Bandwidth provider agreement
Pager and cell phone agreements (for on call personnel)
Red Alert monitoring agreement
Planet Payment, Payment Processor Agreement or equivalent
Software Licenses for Desktop PC's obtained pursuant to Schedule 6(a)
Muse Data Matching contract
Distribution Contracts with other major record labels ("major record
label(s)" shall have the meaning as is commonly understood in the
recorded music industry) (if desired)
ASCAP, BMI, SESAC performance royalty license
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EXHIBIT 9.1.1(a)
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
This ASSIGNMENT AND ASSUMPTION AGREEMENT is entered into as of
this _____ day of __________, 200_, by and between [Seller], a __________
corporation ("Seller"), and [Purchaser], a __________ corporation ("Purchaser").
Capitalized terms used herein and not otherwise defined shall have the same
meanings ascribed to them in the Option and Purchase Agreement, dated as of
November __, 2002 (as amended, modified or supplemented from time to time, the
"Option Agreement"), by and between Seller and Purchaser.
WITNESSETH:
WHEREAS, subject to the terms and conditions set forth in the
Option Agreement, Seller has agreed to assign, and Purchaser has agreed to
assume, the Contracts as may be assigned without any further consent or approval
of the other parties to such Contracts (the "Closing Contracts").
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby confirmed and acknowledged, the parties
hereto agree as follows:
1. Pursuant to the terms of this Agreement and the
Option Agreement, Seller hereby irrevocably sells, transfers,
conveys, assigns and delivers to Purchaser, as of the Closing
Date, all of Seller's rights to and under each of the Closing
Contracts.
2. Pursuant to the terms of this Agreement and the
Option Agreement, Purchaser hereby assumes and agrees to perform
all of the obligations of Seller under the Closing Contracts
(except to the extent that, but for the breach of Seller, such
obligations would have been performed on or prior to the Closing
Date). Seller is hereby released from all obligations and
liability under the Closing Contracts arising solely after the
Closing Date, and Purchaser agrees to indemnify and hold Seller
harmless from and against any liability with respect thereto.
Purchaser does not hereby assume and shall have no liability for
any other debt, liability or obligation of Seller of whatsoever
kind or nature other than as specifically set fort herein or in
the Option Agreement.
3. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.
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4. This Agreement shall be governed by and
construed in accordance with the laws of the State of
California.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day and year first above written.
[SELLER]
By:
----------------------------------------
Name:
----------------------------------
Title:
----------------------------------
[PURCHASER]
By:
----------------------------------------
Name:
----------------------------------
Title:
----------------------------------
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CONFIDENTIAL
EXHIBIT 9.1.1(b)
FORM OF XXXX OF SALE
This Xxxx of Sale is made as of this _____ day of __________,
200_, by [Seller], a __________ corporation ("Seller"), in favor of [Purchaser],
a __________ corporation ("Purchaser").
Reference is made to that certain Option and Purchase Agreement,
dated as of November __, 2002 (as amended, modified or supplemented from time to
time, the "Option Agreement"), by and between Seller and Purchaser. Capitalized
terms used herein and not otherwise defined shall have the same meanings
ascribed to them in the Option Agreement.
Pursuant to the terms of the Option Agreement, for good and
valuable consideration, the receipt and sufficiency of which are hereby
confirmed and acknowledged. Seller does hereby irrevocably sell, transfer,
convey, assign and deliver to Purchaser, effective as of the date hereof, all of
Seller's right, title and interest in and to the Service Assets, to have and to
hold the same onto Purchaser, its successors and its assigns, forever.
IN WITNESS WHEREOF, Seller has duly executed and delivered this
Xxxx of Sale as of the day and year first above written.
[SELLER]
By:
----------------------------------------
Name:
----------------------------------
Title:
----------------------------------
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EXHIBIT 9.1.1(c)
FORM OF TERMINATION AGREEMENT
This TERMINATION AGREEMENT (the "Termination Agreement") is
entered into as of this _____ day of __________ 200_, by and between Liquid
Audio, Inc., a corporation organized under the laws of the state of Delaware
("Agent"), and Universal Music Group, Inc., a corporation organized under the
laws of the state of California ("Principal"). Agent and Principal are sometimes
referred to herein as the "Parties" and individually referred to as a "Party".
WITNESSETH:
WHEREAS, on March 20, 2002, the Parties entered into a Digital
Distribution Services Agency Agreement (as amended, modified or supplemented,
the "Agency Agreement") setting forth the terms and conditions upon which Agent
performs certain digital music fulfillment services on behalf of Principal;
WHEREAS, on March 20, 2002, the Parties entered into a Format
Promotion Agreement (as amended, modified or supplemented, the "Promotion
Agreement") setting forth the terms and conditions upon which Principal promotes
certain Agent proprietary technology in consideration for a fee;
WHEREAS, on November ___, 2002, the Parties entered into an
Option and Purchase Agreement (as amended, modified or supplemented from time to
time, the "Option Agreement") setting forth the terms and conditions upon which
Principal may acquire certain assets owned by Agent; and
WHEREAS, in consideration of entering into the Option Agreement
and for other consideration described herein, the Parties desire to terminate
the Agency Agreement and the Promotion Agreement upon the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby confirmed and
acknowledged, the Parties hereto agree as follows:
1. Defined Terms. Capitalized terms used and not
otherwise defined in the body hereof are used herein as defined
in the Agency Agreement.
2. Termination of Agency Agreement.
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CONFIDENTIAL
(a) Termination. By execution and delivery
of this Agreement, the Parties hereby agree that the
"Term" of the Agency Agreement will terminate as of the
date of this Agreement and that the Agency Agreement
shall be construed and interpreted accordingly.
(b) User Data. Notwithstanding Sections
5(f)(iii), 8(d) and 8(f) of the Agency Agreement, the
Parties hereby agree that as between Principal and
Agent, Principal shall be the sole owner of the User
data as of the date of this Termination Agreement.
Notwithstanding Sections 5(f)(iv), 8(d) and 8(f) of the
Agency Agreement, the Parties hereby agree that Agent
shall not disclose, sell, license or otherwise transfer
User Information to any third party and that Sections
5(f)(iv)(A) and 5(f)(iv)(B) of the Agency Agreement
shall not remain in full force and effect subsequent to
the date hereof. The foregoing is limited to User data
under those subagency agreements that constitute
Contracts that are assigned to and assumed by UMG
pursuant to the Option Agreement. UMG will use and
disclose the User data that is collected by Liquid under
the Agency Agreement solely in compliance with the
privacy policy set forth in Schedule A to this Exhibit.
(c) Confidential Information.
Notwithstanding Section 12 of the Agency Agreement, the
Parties hereby agree that, as of the date of this
Termination Agreement, (1) any Confidential Information
in whatever form relating to the Service Assets (as that
term is defined in Section 6 of the Option Agreement)
shall be deemed for purposes of the Agency Agreement to
be the Confidential Information of Principal (and not
the Confidential Information of Agent), (2) Agent shall
be deemed to be the "receiving party" of such
Confidential Information, (3) Principal shall be deemed
to be the "disclosing party" of such Confidential
Information and (4) Section 12(b)(ii) does not apply to
such Confidential Information.
3. Termination of Promotion Agreement.
(a) Termination. By execution and delivery
of this Termination Agreement, the Parties hereby agree
that the "Term" of the Promotion Agreement will
terminate as of the date of this Agreement and that the
Promotion Agreement shall be construed and interpreted
accordingly.
(b) Intellectual Property. Notwithstanding
Section 5 and 6(d) of the Promotion Agreement, to the
extent related to the
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CONFIDENTIAL
Service Assets, the third sentence of Section 5(a) and
all of Section 5(b) of the Promotion Agreement shall not
remain in full force and effect subsequent to the date
hereof.
(c) Confidential Information.
Notwithstanding Section 8 of the Promotion Agreement,
the Parties hereby agree that, as of the date of this
Agreement, (1) any Confidential Information (as that
term is defined in Section 8 of the Promotion Agreement)
in whatever form relating to the Service Assets (as that
term is defined in Section 6 of the Option Agreement)
shall be deemed for purposes of the Promotion Agreement
to be the Confidential Information of Principal (and not
the Confidential Information of Agent), (2) Agent shall
be deemed to be the "receiving party" of such
Confidential Information, (3) Principal shall be deemed
to be the "disclosing party" of such Confidential
Information and (4) Section 8(b)(ii) does not apply to
such Confidential Information.
4. Further Assurances. Each Party hereto will
cooperate with the other Party hereto and execute and deliver to
such other Party such other instruments and documents and take
such other actions as may be reasonably requested from time to
time by such other Party as necessary to carry out, evidence and
confirm the intended purposes of this Termination Agreement,
provided however that Liquid's obligations shall end six (6)
months after the execution of this Termination Agreement.
5. Entire Agreement; Amendments in Writing. This
Termination Agreement contains the entire agreement among the
Parties as to the subject matter hereof. This Agreement may be
modified or amended only by a writing signed by each Party
hereto.
6. No Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit
of the Parties hereto and their respective successors and
assigns. This Termination Agreement may not be assigned by
either Party without the prior written consent of the other
Party hereto.
7. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
California.
8. Counterparts. This Agreement may be executed in
separate counterparts by the Parties with the same effect as if
the Parties had signed the same document. All such counterparts
shall be deemed an original, shall be construed together and
shall constitute one and the same instrument.
[Remainder of the Page Intentionally Left Blank]
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CONFIDENTIAL
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the day and year first above written.
LIQUID AUDIO, INC.
By:
----------------------------------------
Name:
----------------------------------
Title:
----------------------------------
UNIVERSAL MUSIC GROUP, INC.
By:
----------------------------------------
Name:
----------------------------------
Title:
----------------------------------
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CONFIDENTIAL
SCHEDULE A
PRIVACY POLICY
Liquid Audio is committed to protecting your privacy. This Privacy Policy
describes our information gathering and dissemination practices. This document
will be updated to remain consistent with new products, services, processes, and
Internet privacy legislation.
Please read on to understand how your personal information is treated when you
use our products and services.
What information do we gather? How do we use it?
LIQUID PLAYER & PASSPORTS
When you use the Liquid Player to preview or purchase music, we collect and
store the song names you're previewing to ensure proper royalty payments to the
musicians and song owners. We also gather the Liquid Player's version, your
computer's IP address, machine type and operating system type and version for
quality control. In addition, our Web servers gather the referrer URL, Web
browser name and IP address to understand Web site usage ("traffic analysis") to
improve the site.
When you use the Liquid Player to purchase music, we also gather your unique
passport ID. Passports are used to ensure that your music is secure and to
protect artists' Intellectual property rights. We use two types of passports:
Full passports and FastTrack passports. Full passports allow you to download
tracks and move them between multiple computers. FastTrack passports allow you
to download and listen to music on one machine. A Passport is a file stored on
your computer.
When you register for a Full passport or when you register for a Liquid Player
Plus upgrade, we collect and store on Our Servers your name, email xxxxxxx,
xxxxxxx, xxxx, xxxxx, ZIP/postal code, country, phone number. This information
is stored in the Passport. We use your email address to send you an email
message confirming your purchase and upgrade to the Liquid Player Plus. In
addition we gather and verify your credit card information. We submit this
information to one of our payment-processing partners for verification. The
payment-processing partner keeps the credit card number after processing. This
allows them to maintain error and transaction logs that make it possible to
synchronize credit card information with customer names. Our payment-processing
partners do not share this information.
Liquid Audio does not keep your credit card information on our servers. The
credit card information is stored in a protected manner inside the Passport kept
on your machine. Do not give your passport to other people! During the
registration process, the Liquid Player will ask you for a password to keep your
Passport private. We will ask you for a phrase to help you recall a forgotten
password. This phrase is stored on our servers to assist you in recalling your
password. We also store information that allows us to see who changed or issued
the passport.
When you register for a FastTrack Passport, we gather your name, email address,
post code, and country. We collect this information in order to restore a lost
Passport, and for fraud detection.
At registration time, we also remember if you've chosen to receive periodic
communications from Liquid Audio.
LIQUID AFFILIATE AND LIQUID COMMERCE WEB SITES
Liquid Audio is a music distribution company. Retailers and music sites use our
technology and extensive music catalog to sell music downloads as sort of their
online product selection. Others use our technology to offer their music catalog
to you so that they may sell music downloads.
When you purchase music through one of our Affiliate or Commerce Web sites, we
gather your name, Credit card information, your email address, billing address,
zip and country code, a list of purchases, and whether or not you have opted in
or out of receiving information about artists or other marketing information.
This allows us to process and fulfill your order and to notify you or your order
status. We submit the information that pertains to payment processing to one of
our payment-processing partners for verification. The payment-processing partner
keeps the credit card number after processing. This allows them to maintain
error and transaction logs that make it possible to synchronize credit card
information with customer names. Our payment processing partners do not share
this information. When you shop
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CONFIDENTIAL
with one of our partners or affiliates and enjoy one of its services, we may ask
you for your physical address, your gender, your age, and to select a password.
If we develop co-branded products or services with our partners or affiliates,
they may collect personally identifying information from you, in which case,
that partner's or that Affiliate's privacy policy shall apply to their
collection and use of data about you. We also gather system information, such as
your IP address, referrer address, Web browser name and version, and OS. It is
your responsibility to keep your password secret and to change it frequently to
maintain its security. If you feel your password has been compromised in any
way, please contact Liquid Audio Support. When you sign up to preview some of
our products and services, we collect your email address. We use this
information to identify you and, if applicable, your shopping cart, for normal
traffic logging and analysis, and to gather demographic information.
Will Liquid Audio disclose the information it gathers to outside parties?
Liquid Audio does not sell or rent your personal information to others. We
return your name, email address, billing address, zip and country code, a list
of purchases, and whether or not you have opted in or out of receiving
information about artists or other marketing information to some of our partners
and Affiliates and some of our partners and Affiliates may co-own this
information. However, if, upon registration, you opt out of receiving marketing
information, we will not, and our partners and Affiliates will not, send
marketing information to you. We provide aggregate statistics about our
customers-sales, traffic parttners, and related site information-to reputable
third parties (such as artist rights agencies and our affiliates). But these
statistics include no personally identifiable information.
What about "cookies" or other information?
"Cookies" are small pieces of information that are stored by your browser on
your computer's hard drive. Liquid Audio cookies do not contain any personally
identifying information, but they do enable us to look up address information
you've provided to us in the past. This reduces the amount of information
required for your subsequent purchases. In general, browsers accept cookies by
default. You can, however, change your browser's settings so that cookies are
disabled. Without cookies enabled, you can use most of the features in our
partners' web sites-including the ability to place items in your shopping cart
and purchase them.
How Does Liquid Audio allow customers to modify the information it gathers?
Please contact Liquid Audio Support if you wish to correct or update information
Liquid Audio has gathered. For digital rights reasons, Liquid Audio does not
provide a way for you to delete your personal information online.
SUMMARY
Liquid Audio is committed to protecting your privacy. We use the information we
collect about you to assign ownership to and protect your Liquid Tracks, as well
as for payment processing, traffic logging and analysis, and rights reporting.
If you feel that you have experienced a violation of this policy, you should
contact Liquid Audio Support.
YOUR CONSENT
By using Liquid Audio products and services, you consent to the collection and
use of the information that we collect from you, and that is outlined in this
policy. This document will be updated to remain consistent with new products,
services, processes, and Internet privacy legislation. We will post changes on
this page so that you are always aware of what information we collect, how we
use it, and under what circumstances we disclose it.
TELL US WHAT YOU THINK
We welcome your questions and comments about privacy. Please contact Liquid
Audio Support.
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CONFIDENTIAL
EXHIBIT 9.1.1(d)
FORM OF LICENSE AGREEMENT
This License Agreement is entered into as of this _____ day of
__________________, 200_, by and between Liquid Audio, Inc., a corporation
organized under the laws of the state of Delaware ("Liquid"), and Universal
Music Group, Inc., a corporation organized under the laws of the state of
California ("UMG"). UMG and Licensee are sometimes referred to herein as the
"Parties" and individually referred to as a "Party".
WITNESSETH:
WHEREAS, on November __, 2002, the Parties entered into an
Option and Purchase Agreement (as amended, modified or supplemented from time to
time, the "Option Agreement") setting forth the terms and conditions upon which
UMG may acquire certain assets owned by Liquid;
WHEREAS, Liquid has existing contractual obligations to EMI
Christian Music Group ("EMI") pursuant to an agreement between Liquid and EMI
("EMI Agreement"); and
WHEREAS, the Parties desire for UMG to grant a license to Liquid
to permit it to sublicense certain rights to certain of the Service Assets to
EMI:
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby confirmed and
acknowledged, the Parties hereto agree as follows:
1. Defined Terms. Capitalized terms used and not
otherwise defined in the body hereof are used herein as defined
in the Option Agreement.
"The Relevant Service Assets" means intellectual property licenses to
the source and object code for the following Service Assets (i) Encoding
and Publishing System; (ii) Data Warehouse; (iii) Catalog Generation
System; (iv) Retail Inventory and Fulfillment System (RIFFS); (v) RIFFS
Merchant Admin System (vi) Territorial ID Application; (vii) Reporting
System; and (viii) Reports Manager Web Application in each case,
existing on the Closing Date and does not include any hardware or third
party software or licenses, such as, by way of example, licenses to the
Oracle Database or the ATG Application Server.
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2. Grant of License. UMG hereby grants to Liquid a
nonexclusive license to enable Liquid to grant to EMI a
nonexclusive sublicense to use and exploit the Relevant Service
Assets solely to enable the operation of services in the manner
contemplated by the EMI Agreement, (i.e., to operate a Christian
Music subscription service) for a license term to be mutually
agreed by Liquid and EMI. Such sublicense shall be assignable by
EMI to any CMG label or any other affiliate of EMI, or any
person owning or acquiring all or a substantial portion of the
stock or assets of EMI.
3. Further Assurances. Each Party hereto will
cooperate with the other Party hereto and execute and deliver to
such other Party such other instruments and documents and take
such other actions as may be reasonably requested from time to
time by such other Party as necessary to carry out, evidence and
confirm the intended purposes of this Agreement.
4. Entire Agreement; Amendments in Writing. This
Agreement contains the entire agreement among the Parties as to
the subject matter hereof. This Agreement may be modified or
amended only by a writing signed by each Party hereto.
5. No Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit
of the Parties hereto and their respective successors and
assigns. This Agreement may not be assigned by either Party
without the prior written consent of the other Party hereto.
6. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
California.
7. Counterparts. This Agreement may be executed in
separate counterparts by the Parties with the same effect as if
the Parties had signed the same document. All such counterparts
shall be deemed an original, shall be construed together and
shall constitute one and the same instrument.
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CONFIDENTIAL
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the day and year first above written.
LIQUID AUDIO, INC.
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
UNIVERSAL MUSIC GROUP, INC.
By:
----------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
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CONFIDENTIAL
SCHEDULE 12.1.1
EXCEPTIONS TO LIQUID REPRESENTATIONS AND WARRANTIES
The section number below corresponds to the section number in the Agreement;
however, any information disclosed under one or more subsections below shall be
deemed disclosed and incorporated in and under each other subsection of Section
12 in which such disclosure is relevant or appropriate.
12.1.9 Contracts and Leases
Agreement between Liquid and EMI Christian Music Group
Distribution Contracts with other major record labels ("major record
label(s)" shall have the meaning as is commonly understood in the
recorded music industry) (if desired)
Agreement between Liquid and CD Now and litigation relating thereto.
ASCAP, BMI, SESAC performance royalty license
Patent infringement litigation with Network Commerce, Inc.
Agreements identified in Schedule 7
For the avoidance of doubt, the agreements listed above will not constitute
Contracts.
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CONFIDENTIAL
SCHEDULE 15
PRELIMINARY OUTLINE OF TRANSITION PLAN
Nothing in this Schedule 15 is intended to extend or contract the Parties'
obligations under the Option Agreement. Rather, this Schedule is intended to
guide the Parties' expectations with respect to the actual Transition Plan
referred to in Section 15 of this Option Agreement. In the event that this
Schedule contradicts the Option Agreement, the Option Agreement shall control,
provided however that Liquid's general obligation to provide assistance in
Section 15 of the Option Agreement will not override UMG's obligations contained
hereunder and the Parties will work together in good faith to allocate any
additional responsibilities that are necessary to transition the Service Assets
from Liquid to UMG in the event that such responsibilities are not set forth on
this Schedule.
Synopsis:
Liquid will setup a temporary production mirror system in the Liquid data center
which will be used to operate the service during the transition time. During
this time publishing of new content will not be possible. UMG will move the now
current production systems to a UMG designated location where UMG will be
responsible for making the new system operational. The retailers will switch
from the temporary production systems at Liquid to the new production systems at
UMG's facility once such systems have been adequately tested. The goal is to
achieve continuous operation of the service for retailers and consumers and
deactivate the Liquid systems by the Drop Dead Date.
1) Liquid and UMG intend to review this plan and flesh-out and update as
necessary to effectuate an efficient and successful transfer that minimizes
the system downtime for both consumers and retailers.
2) Liquid to provide to UMG contact information for all employees necessary to
manage and operate the service or such other employees of interest to UMG,
all entities listed or implicated (e.g., Sun) in Schedules 6(a) 6(b), 7,
19(a) hereof (e.g. without limitation, technology and service vendors,
retail, oem and label partners).
3) UMG to make offers to Liquid employees that it wishes to hire, if any.
4) In parallel, UMG intends to:
. Obtain the 3rd party software licenses & services that it needs, if
any, from Schedule 7
. Designate a location for the system hardware
. Designate facilities for any Liquid employees who may be transitioning
to UMG
5) In parallel, Liquid and UMG will resolve label and retail (including OEM)
contracts/issues as described in this Option Agreement
6) Liquid to cull and delete or withhold such data that it is not obligated
under this Option Agreement to deliver to UMG (e.g., old transactions, non-
transferable metadata and content) from its databases.
7) Liquid to deliver workflow and operations documentation.
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8) Liquid to freeze catalog, setup temporary production mirror system in its
datacenter and switch production environment to run on this system.
9) Liquid to backup all machines that will be delivered to UMG.
10) Liquid to backup and deliver object code installers for software listed on
Schedule 6(a) and contained in the System.
11) Liquid to backup and deliver source code for the software listed on Schedule
6(a) and contained in the System.
12) Liquid to backup and deliver technical documentation for software listed on
Schedule 6(a) and contained in the System.
13) Liquid to document existing hardware and software configuration, and deliver
documentation to UMG.
14) Liquid to document likely areas that will need re-configuration, as a result
of the equipment move and domain name transfer.
15) Liquid to backup WMA files and databases for assigned content contracts.
16) UMG to prepare data center for incoming systems.
17) UMG to establish the domain name for the new service.
18) UMG to coordinate transfer for hardware to the new data center.
19) Liquid to prepare hardware assets listed on Schedule 6(a) for delivery to
UMG.
20) UMG to have hardware assets moved to new data center.
21) UMG to install hardware assets in the new data center and test operational
capability with assistance from Liquid as required prior to the drop dead
date.
22) UMG to make any necessary system changes to account for the new data center
and hardware configuration based on the documentation made in step 14
above.
23) Upon verification that the new production systems operate as expected, UMG
and Liquid will ask the retailers that UMG has chosen to support to
transition from the production systems at Liquid to the production systems
at UMG's facility.
24) UMG to begin to transition out any remaining Liquid branding (note: some use
of Liquid trademarks may be difficult to transition immediately and the
parties contemplate a limited period for such transition and such period
may not exceed one (1) year from the Closing Date).
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SCHEDULE 19(a)
UMG's PERMITTED EXPENSES
1. Ongoing Maintenance for Operational Software and Hardware, if acquired
by UMG
2. Monthly Bandwidth Fee for Service Assets post-Closing
3. Building Space Rental for UMG Employees and Equipment post-Closing
4. Costs and Liability Associated with Planet Payment (the credit card
payment processor)
5. Red Alert Monitoring
6. Offsite Backup Storage
7. ASCAP, BMI, SESAC Performance Royalties for Performances from
xxx.xxxxxx.xxx post-Closing Date until transfer to UMG domain if Service
is still running from domain xxx.xxxxxx.xxx.
8. Expenses of on-call pager (one(1)); On-call cell phones (two(2)),
post-Closing date
9. Personnel Costs of Liquid incurred at the request of UMG beyond those
incurred following the Closing Date, if any (including but not limited
to on-call pay), subject to UMG's prior written approval.
10. Data Center Cage (assuming UMG will move equipment to an off-site
location, i.e., like Exodus, where a cage rental would be required).
11. Pro rata rent beyond Closing Date.
12. All costs and expenses reasonably related to the running of the Service
after the Closing Date, including without limitation those items
contained on Schedule 7 and on this Schedule 17(a).
13. All amounts payable by UMG to Liquid under Section 15.
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