EXHIBIT 10.36
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is made an entered into as of
the 31st day of December, 1998 (the "Effective Date"), by and between Liquid
Audio, Inc., a corporation duly incorporated and existing under the laws of the
State of California, U.S.A. with its principal place of business at 000 Xxxxxxx
Xxxxxx, Xxxxxxx Xxxx, Xxxxxxxxxx 00000 X.X.X. ("Liquid Audio") and Liquid Audio
Korea Co., Ltd., a corporation duly incorporated and existing under the laws of
the Republic of Korea with its principal place of business at 0x, XxxXxxxx Xxxx.
000-00, Xxxxxx-Xxxx, Xxxxxxx-Xx, Xxxxx, 135-080 Korea ("LAK").
WITNESSETH
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WHEREAS, Liquid Audio and SKM Limited, a corporation duly incorporated and
existing under the law of the Republic of Korea ("SKM") have established LAK to
promote certain audio software and related technology of Liquid Audio in the
Republic of Korea, and, to the extent later permitted, in the Democratic
Republic of Korea;
WHEREAS, LAK desires to obtain the benefit of consulting and advisory
services from Liquid Audio, with a focus on the implementation and use of Liquid
Audio's technology; and
WHEREAS, Liquid Audio is willing to render such consulting and advisory
services to LAK; and
WHEREAS, the execution of this Agreement is required under the terms of
that certain Shareholders Agreement (the "Shareholders Agreement") between LAK,
SKM and Liquid Audio, and is necessary to induce SKM and Liquid Audio to
participate in LAK.
NOW THEREFORE, in consideration of the promises and the mutual covenants
and agreements set forth below, it is agreed as follows:
ARTICLE 1. APPOINTMENT
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Subject to the terms and conditions hereinafter set forth, LAK hereby
appoints Liquid Audio as its consultant to provide consulting and advisory
services as described in Article 2 hereunder during the term of this Agreement
as set forth in Article 4 hereof, and Liquid Audio hereby accepts such
appointment.
ARTICLE 2. SCOPE OF SERVICES
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The consulting and advisory services, further details of which are
described in Exhibit 1 attached hereto, to be provided by Liquid Audio to LAK,
may include, but shall not be limited to: (a) providing technical consulting and
support and (b) providing business consulting and support (collectively, the
"Services").
* Certain information in this Exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
LAK acknowledges that all Services are provided on an as-is basis without
warranty of any kind, and Liquid Audio disclaims any and all warranties, whether
express or implied. Liquid Audio reserves all ownership rights in and to the
work product and any pre-existing materials delivered or disclosed to LAK
pursuant to the Services (herein, "LA Materials"). LAK may, subject to mutually
agreed upon terms and conditions, have a limited license to use the LA Materials
internally for the purpose of furthering the co-venture between the parties and
for no other purpose. During and after the term of this Agreement, all LA
Materials are and remain the confidential information of Liquid Audio and LAK
agrees to maintain the confidentiality of such materials and not to disclose
such materials to any other party.
ARTICLE 3. CONSULTING FEE
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In consideration of the Services rendered by Liquid Audio under Article 2,
LAK shall make guaranteed, non-refundable payments to Liquid Audio in the
aggregate amount of [*]. These payments are net amounts, and they may not be
reduced by withholding tax or any other charge or deduction. LAK shall pay this
consulting fee to Liquid Audio according to the payment schedule in Exhibit 2,
commencing ten (10) days after the date on which the first Liquid Audio Total
Music Center opens for business. The first payment shall be made on such date;
the remaining payments shall be made every ninety (90) days thereafter by means
of wire transfer to a bank account designated by Liquid Audio. Notwithstanding
the foregoing, in the event that, with respect to the fiscal quarter ending
prior to any payment date: (a) the exchange rate for the Won has, during such
quarter declined by at least 25%; or (b) revenues of LAK during such quarter are
less than 75% of the pro-rata annual revenues projected in the Business Plan for
LAK (in the form attached as Exhibit E to the Shareholders Agreement) then, upon
written notice to Liquid Audio delivered on or prior to the time for delivery of
the applicable payment in accordance with Exhibit 2 and this provision, 50% of
such payment may be deferred provided that: (x) such deferral may be made only
with respect to up to two of the first six such quarterly payments; and (y) in
the event of any such deferral, the amounts payable in quarters seven through
ten shall be increased with respect to each such quarter by an amount equal to
one fourth (1/4) of the prior aggregate deferral of payments.
ARTICLE 4. TERM
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This Agreement shall remain in effect from the Effective Date until: (a)
the completion of LAK's payment obligations in Quarter Ten (as detailed in
Exhibit 2), (b) termination pursuant to Article 5, or (c) expiration or
termination of the Shareholders Agreement or the Software Reseller and Services
Agreement, whichever comes first; provided, however, that if this Agreement
expires or terminates in accordance with (b) or (c) as a result of breach by
LAK, all remaining payments will be due immediately and such payment obligation
shall survive expiration or termination.
* Certain information in this Exhibit has been omitted and filed seperately
with the Commission. Confidential treatment has been requested with respect
to the omitted portions.
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ARTICLE 5. TERMINATION
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Liquid Audio may terminate this Agreement by written notice to LAK, should
LAK breach any material term or condition of this Agreement and fail to cure
such material breach within ten (10) business days of receiving notice from
Liquid Audio specifying the particulars thereof. In addition, if LAK fails to
make any scheduled payment when due, or if Liquid Audio, pursuant to the terms
thereof, elects to terminate that certain Stockholders Agreement among Liquid
Audio, SKM and LAK of even date herewith, or that certain Software Reseller and
Services Agreement between Liquid Audio and LAK, then, in each such instance,
Liquid Audio may terminate this Agreement, effective immediately upon notice in
writing to LAK. In the event that LAK shall be adjudicated bankrupt, then, upon
the vote of a majority of the authorized number of members of the Board of
Directors of LAK, LAK may terminate this Agreement upon written notice to Liquid
Audio.
ARTICLE 6. NOTICES
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Any notices required or permitted hereunder shall be given to the
appropriate party at the address specified below or at such other address as the
party may specify in writing. Such notice shall be deemed served upon personal
delivery, or if sent by certified or registered mail, postage prepaid, then
shall be deemed served ten (10) days after the date of mailing. Notice by
facsimile shall be deemed served upon receipt; provided that a confirmation copy
is also dispatched immediately thereafter by first-class registered mail.
Liquid Audio: Attn: Mr. Xxxxxx Xxxxx
Liquid Audio, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxx Xxxx, Xxxxxxxxxx, X.X.X. 00000
Fax: (0-000) 000-0000
LAK: Attn: Xx. Xxx, Kyu Hwa
Liquid Audio Korea Co., Ltd.
3f, WonKyung Xxxx. 000-00
Xxxxxx-Xxxx, Xxxxxxx-Xx
Xxxxx, 000-000, Xxxxx
Fax: (00-0) 000-0000
ARTICLE 7. MISCELLANEOUS
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7.1 CONDUCT
All Services to be performed by Liquid Audio shall be performed from Liquid
Audio's facilities in the State of California in the United States of America.
Liquid Audio shall at all time conduct its affairs under this Agreement in
accordance with a high
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standard of business ethics and propriety and in accordance with the laws of the
State of California and the United States of America.
7.2 INDEPENDENT CONTRACTOR
Nothing herein shall be construed to place Liquid Audio and LAK in
relationship of partners, joint ventures or principal and agent. The parties
hereto have negotiated and entered into this Agreement in good faith solely as
independent contractors, and no employer-employee relationship exists, nor shall
be deemed to exist between them.
7.3 EXPENSES
The parties shall bear their respective portions of costs and expenses
arising from, or in connection with, this Agreement.
7.4 GOVERNING LAW
This Agreement shall be governed by the laws of the State of California and
the United States of America without regard to its conflict of laws provisions.
7.5 ENFORCEABILITY
Should any provision of this Agreement be deemed unenforceable in any judicial
proceeding, such determination shall not affect the validity and enforceability
of the balance of the Agreement.
7.6 NO WAIVER
Any waiver by either party of any provision of this Agreement, or of any
breach of this Agreement, shall be effective only if in writing signed by such
party, and such waiver shall not be deemed a continuing waiver of such provision
or a waiver of any subsequent breach of a similar or different nature.
7.7 ARBITRATION
Except as otherwise provided in this Agreement, any dispute, controversy or
claim arising out of or relating to this Agreement or to a breach hereof,
including the interpretation, performance or termination, shall be exclusively
and finally resolved by binding arbitration. Arbitration shall be conducted by
the International Chamber of Commerce (the "ICC") which shall administer the
arbitration under its then-current Rules of Arbitration (the "Rules"). The
arbitration shall be conducted by a single arbitrator chosen in accordance with
said Rules. The arbitration, including the rendering of the award, shall take
place in Tokyo, Japan and Tokyo shall be the exclusive forum for resolving such
dispute, controversy or claim. The arbitration proceedings and all pleadings and
rulings shall be conducted and written in the English language. For the
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purpose of any arbitration proceeding, this Agreement shall be governed by the
governing law described in Article 7.4 above. This arbitration agreement is
intended by the parties to be self-executing. The panel shall have sole
jurisdiction to determine whether (i) a claim is subject to arbitration, (ii)
the arbitration may proceed even if one of the parties refuses to attend or
participate and (iii) an award against that party may be ordered pursuant to
default or otherwise by the panel. The parties agree that they will arbitrate
all claims agreed to be arbitrated herein regardless of the existence of any
related dispute, action or special proceeding between any or all of the parties
hereto and/or any third party. The arbitration panel shall render a written
arbitration decision with its award, and the decision of the arbitration panel
shall be final and binding upon the parties hereto, and the parties hereby waive
any right of appeal under applicable law. Judgment upon the award rendered by
the arbitration panel may be entered in any court of competent jurisdiction. The
prevailing party shall be entitled to recover its reasonable attorneys' fees and
its share of the costs including any auditing costs or expenses of expert
witnesses.
Notwithstanding the foregoing, in the event of actual or threatened breach
of the provisions respecting confidentiality of the LA Materials, Liquid Audio
will have no adequate remedy at law and will be entitled to immediate,
injunctive or other equitable relief, without bond and without the necessity of
showing actual money damages, shall have the right to institute judicial
proceedings against LAK or anyone acting by, through or under LAK in order to
seek such injunctive or other equitable relief, and in the event that Liquid
Audio prevails in any such proceeding, Liquid Audio shall be entitled, in
addition to any other rights and remedies it may have, to reimbursement for its
expenses, including court costs and reasonable attorneys' fees.
7.8 NO IMPLIED OBLIGATIONS
There shall be no obligations implied by this Agreement, and each party
reserves the right to engage in similar or dissimilar activities independently
or with third parties.
7.9 LIMITATION OF LIABILITY
In no event shall either party be liable for any consequential, incidental,
special, indirect or reliance damages arising out of or relating to this
Agreement, including without limitation any liability for lost profits or lost
business opportunities.
7.10 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement with respect to the subject
matter hereof and may be modified only by a writing signed by both parties.
7.11 COUNTERPARTS
This Agreement may be executed in any number of English language
counterparts or duplicate originals, and each such counterpart or duplicate
original shall constitute an
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original instrument, but all such separate counterparts or duplicate originals
shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
LIQUID AUDIO, INC.
/s/ Xxxxxx Xxxxx
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By: Xxxxxx Xxxxx
Title: Vice President of Business Development
Date: 12/31/98
LIQUID AUDIO KOREA, CO., LTD.
/s/ Kyu Xxx Xxx
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By: Kyu Xxx Xxx
Title: President
Date: 12/31/98
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EXHIBIT 1
CONSULTING SERVICES
* System design for optimal performance of software used in the co-venture.
* Education regarding Liquid Audio's global business operations.
* Education regarding Liquid Audio's technology and business plan in the
United States.
* Provision of information of worldwide trends: internet and global music
industry.
* Establishment of relationships with representatives of the local music
industry.
* Education regarding the intellectual property rights and royalty reports.
* On-going support in the areas of product development, operation, marketing
support, and copyright management.
* Provide LAK with technical insight and dialogue on product development.
* Control localization of software products.
* Provide assistance in development of operations that enable LAK activities,
e.g. mass encoding projects.
* Provide assistance in design of hardware/network configuration for
retail/kiosk operation ("LTMC-K").
* Provide assistance in design and execution of the Liquid Music Network -
Korea ("LMN-K").
* Provide assistance in locating global sponsors/advertisers for the LMN-K.
* Provide assistance in accessing non-Korean content for inclusion in the
LMN-K.
* Assist LAK in relationships with Korean operations of major multinational
entertainment companies.
* Provide assistance in the creation of sales materials appropriate for the
Korean marketplace.
* Provide technical support.
* Conduct discussions with multinational OEM's for the bundling of the Korean
version of the free Liquid Music Player with their product sold in Korea.
* Integration of Korean rights reporting societies in the global Liquid Audio
copyright management solution.
* Assistance in discussions and education of the Korean rights reporting
societies.
* Establish and oversee the operations of the local Liquid Operations Center.
EXHIBIT 2
GUARANTEED PAYMENT SCHEDULE
Quarter Payment
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One [*]
Two [*]
Three [*]
Four [*]
Five [*]
Six [*]
Seven [*]
Eight [*]
Nine [*]
Ten [*]
* Certain information in this Exhibit has been omitted and filed seperately
with the Commission. Confidential treatment has been requested with respect
to the omitted portions.
