Strategic Alliance Agreement

EXHIBIT 10.5



STRATEGIC ALLIANCE AGREEMENT





This Strategic Alliance Agreement (this "Agreement"), dated as of February 26, 1998 (the "Effective Date"), is by and between 2 WAY MEDIA, INC. a Delaware corporation, ("LAUNCH"), and NBC MULTIMEDIA, INC., a Delaware corporation ("NBC").





A. Concurrently with the execution and delivery of this Agreement, and pursuant to the terms and conditions of that certain Securities Purchase Agreement of even date herewith (the "Securities Purchase Agreement") by and between LAUNCH, NBC and other investors, LAUNCH shall issue and NBC shall receive 1,960,784 ($3mm) shares (the "Purchased Shares") of LAUNCH, Series D Stock, as such term is defined in the Securities Purchase Agreement. In addition, LAUNCH shall issue a Warrant which will permit NBC to purchase 1,979,323 additional shares of LAUNCH, Series D Stock (the "Warrant") which number of shares is subject to certain adjustments described in the Warrant itself.



B. As a condition to, and as sole consideration for, the issuance of 1,307,190 ($2mm) of the Purchased Shares covered by the Securities Purchase Agreement and the Warrant by LAUNCH to it, NBC has agreed to enter into this Agreement pursuant to which, and subject to the terms and conditions set forth below, LAUNCH shall supply music content and information in connection with NBC's NBC.com world wide web site as described below.



NOW, THEREFORE, in consideration of the terms and conditions set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, NBC and LAUNCH agree as follows:





1. DEFINITIONS



(a) "Adult Content" shall mean any material, including audio or video material, which is pornographic or which contains nudity, explicit sexual material or depictions of sexual acts any of which is beyond that normally broadcast over the NBC Television Network.



(b) "Affiliates" of a specified person means a person who directly or indirectly through one or more intermediaries Controls, is Controlled by, or is under common Control with, such specified person.



(c) "Co-branded Area(s)" shall mean that area (or areas) of myLAUNCH which contains NBC Branding or other material provided by NBC with the characteristics described in Section 2(a).



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(d) "Control" shall mean, with respect to any world wide web site, distribution channel or source of any content, the ability to control, and the actual control, including the final approval right, of the presentation of content on such world wide web site, distribution channel or source, and with respect to any entity, the possession, directly or indirectly, of the power to appoint a majority of the directors or such other persons who direct or cause the direction of the management and policies of a legally recognizable entity, whether through the ownership of voting shares, by contract, or otherwise. Where such entity is a partnership, limited liability company, corporation, or similar entity and has partners, members, or shareholders with equal ownership interests or equal control interests, by contract or otherwise, then each such partner, member, or shareholder will be deemed to possess, directly or indirectly, the power to direct or cause the direction of the management and policies of that entity.



(e) "Confidential Information" shall mean (i) any trade secrets relating to either party's product or service, plans, designs, costs, prices and names, finances, marketing plans, business opportunities, personnel, research, development or know-how; and (ii) the specific terms and conditions of this Agreement. "Confidential Information" shall not include information that: (i) is or becomes generally known or available, whether by publication, commercial use or otherwise, without restriction on disclosure and through no fault of the receiving party; (ii) is known by the receiving party prior to the time of disclosure; (iii) is independently developed or learned by the receiving party without reference to any Confidential Information of the disclosing party; or (iv) is lawfully obtained from a third party that the receiving party reasonably believes has the right to make such disclosure.



(f) "Derivative Material" shall mean any material, including any text, graphics or story ideas, concepts or characters, which is based upon, or derived from, NBC Material (i.e., any "derivative" thereof) as well as the "look and feel" thereof and of the pages and areas of NBC.com and myLAUNCH on which such material appears, regardless of which party actually produces it.



(g) "Intellectual Property Rights" shall mean all artistic or proprietary rights owned or Controlled throughout the world, including, but not limited to, copyrights, moral rights, trade secrets, trademarks, service marks and patents.



(h) "Internet" shall mean (i) the distributed interactive computer network commonly referred to as the internet, and (ii) any other interactive on-line or distributed computer network distribution methods in their current form as of the date hereof, including, without limitation, America Online, @Home, Road Runner, CompuServe and Prodigy. The term Internet shall not include any traditional analog or digital broadcast or distribution medium (e.g., traditional analog or digital broadcast and digital or analog cable or satellite transmission) by which television, film, other audio/visual or textual programming is disseminated to viewers.















(i) "LAUNCH Branding" shall mean any LAUNCH trademarks, service marks, designs or logos which LAUNCH may designate for use hereunder.



(j) "LAUNCH Material" shall mean any material, other than NBC Material or Derivative Material but including LAUNCH Branding, which LAUNCH produces or provides to NBC in connection with the activities described herein.



(k) "myLAUNCH" shall mean the world wide web site on the Internet operated by LAUNCH with the URL address of www.mylaunch.com or its successors and any successor or replacement of www.mylaunch.com on the Internet during the Term, if any, which replacement site contains LAUNCH Branding, provides the material substantially similar to that currently provided at www.mylaunch.com and is Controlled by LAUNCH.



(l) "NBC Advertising Standards" shall mean any and all standards set by NBC for advertising appearing on the NBC Television Network, including any amendments thereto, about which LAUNCH is made aware by NBC and which are relevant to material on the Internet.



(m) "NBC Branding" shall mean any NBC trademarks, service marks, designs or logos which NBC may designate for use hereunder.



(n) "NBC.com" shall mean the world wide web site on the Internet operated by NBC with the URL address of www.nbc.com or its successors and any successor or replacement of www.nbc.com on the Internet during the Term, if any, which replacement site contains NBC Branding, provides the material substantially similar to that currently provided at www.nbc.com and is Controlled by NBC. The parties agree that the ten-n "NBC.com" shall not include any of the world wide web sites on the Internet operated by or associated with [ * ] specifically described in the previous sentence.



(o) "NBC Material" shall mean any material, including any text, graphics, audio, video, photos or software as well as any NBC Branding, provided to LAUNCH or primarily created by NBC or its affiliates, licensors or suppliers.



(p) "Net Advertising Revenue" shall mean all advertising revenue actually collected by LAUNCH in connection with the Co-branded Areas (including in-kind compensation) less actual selling commissions, agency commissions, and all actual out of pocket expenses directly incurred by LAUNCH in connection with creating, selling and fulfilling such advertising, which commissions and expenses shall in no event in total exceed [ * ] of gross advertising revenues.



(q) "Original Purchase Price" shall mean the price per share applicable to the Purchased Shares as of the Effective Date hereof which is $1.53.





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(r) "Other Networks" shall mean [ * ].



(s) "Products" shall mean any merchandise or services offered for sale by LAUNCH on myLAUNCH, including music CDs, audio tapes or CD-ROMs but excluding any merchandise directly based on LAUNCH Branding (e.g., LAUNCH T-shirts) and the LAUNCH CD-ROM magazine.



(t) "Prohibited Sponsors" shall mean [ * ].



(u) "Term" shall mean, collectively, the Initial Term and any Renewal Terms, as those terms are defined in Section 12 below.



2. LAUNCH RESPONSIBILITIES.



(a) Creation of Co-branded Area. LAUNCH agrees that it will create, update and maintain, at its own expense, a sub-site or area of MyLAUNCH which will be branded as described in Section 2(c) below and which shall contain (i) content and information to be originally created or obtained by LAUNCH for use thereon, (ii) content and information created or obtained by LAUNCH for use elsewhere on myLAUNCH or other LAUNCH projects which is relevant to the topics on the Co-branded Area and (iii) content and information that NBC provides to LAUNCH for use thereon. The Co-branded Area will be directly or indirectly tied to the music content, information and services appearing on NBC.com and shall have a design and format which serves to provide a seamless experience for the end user and is mutually agreeable to LAUNCH and NBC. LAUNCH agrees that it shall use commercially reasonable efforts to make the initial version of the Co-Branded Area available for use by commercial users by no later than [ * ] months following the Effective Date hereof, provided, however, that if the Co-branded Area is not available within such [ * ] month period and such delay is primarily caused by LAUNCH, NBC's promotional obligations described in Section 3(c) shall be reduced in a pro rata manner to reflect the time that the Co-branded Area is not available (e.g., the on-air promotional time shall be reduced by [ * ] for every month that the Co-branded Area is not available).



(b) LAUNCH Production. Except for any NBC Material which NBC chooses to provide for use hereunder, LAUNCH will be primarily responsible for creating or obtaining all material to be placed in the Co-branded Area at its own expense. LAUNCH will designate one of its own producers whose primary function will be to act as the LAUNCH liaison for NBC's NBC.com production team as reasonably requested at any time. The LAUNCH liaison will work with the NBC producers to coordinate the production, orchestration and hosting of all music content and information tied to





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NBC.com and the relevant NBC.com entertainment sub-sites that NBC chooses to make a part of NBC.com or an extension thereof using the Co-branded Area pursuant to the procedures described herein. The LAUNCH liaison will follow the reasonable direction of the NBC production team in creating or obtaining material to be placed in the Co-branded Areas, and, in addition, will make suggestions to the NBC production team regarding other material or services possessed by or available to LAUNCH which would improve the Co-branded Area. LAUNCH will create and update the Co-branded Area daily and on any time schedule reasonably requested by NBC in connection with any television broadcast of programming containing music-related guests, content or information. LAUNCH agrees that it will use reasonable efforts to keep the Co-branded Area and myLAUNCH free of computer viruses and material crash bugs in any form.



(c) Co-Branding. Each page of the Co-branded Area will be co-branded with NBC Branding to be provided by NBC. All co-branding design decisions will be at NBC's sole discretion; provided, however, that in no event shall the myLAUNCH branding appear less than [ * ] the size of the NBC branding on any of the pages or areas within the Co-branded Area (but not NBC.com) which are co-branded pursuant hereto.



(d) Approvals. NBC shall pre-approve all uses of NBC Material by LAUNCH. LAUNCH agrees that it shall place any and all NBC Material provided by NBC upon the Co-branded Area whenever requested by NBC. LAUNCH agrees that NBC shall have final approval regarding all aspects of the Co-branded Area, including, but not limited to, any material to be placed thereon by LAUNCH and LAUNCH'S integration of NBC Material into the Co-branded Area. NBC shall have sole discretion regarding how it exercises such approval rights (except that such exercise thereof may not involve any pre-approval of any LAUNCH Material) and may reject any LAUNCH Material or presentation of NBC Material in the Co-branded Area for any, or no, reason. All material in the Co-branded Area and any LAUNCH Material which appears on NBC.com must comply with all NBC guidelines regarding the use of intellectual property related to any NBC television show or talents' names, likenesses and images and any other requirements related thereto of which LAUNCH is informed by NBC. LAUNCH agrees to obtain NBC's prior written approval to any use of any NBC Branding or other NBC Material by LAUNCH which is not specifically contemplated by the terms hereof or provided by NBC for use by LAUNCH.



(e) Registrations. LAUNCH agrees to allow all users to have access to all areas and services of the Co-branded Areas without having to complete the registration process offered to users of myLAUNCH. Such users will receive all myLAUNCH features currently accessible in the myLAUNCH "Guest" mode which are described in Exhibit A as well as the right to purchase Products. NBC acknowledges that LAUNCH may make commercially reasonable efforts to encourage all users to register with LAUNCH through promotional opportunities within the Co-branded Area which are reasonably acceptable to NBC.





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(f) User Tracking. LAUNCH will collect and provide any data and statistics regarding usage, traffic, user feedback and users of the Co-branded Area and myLAUNCH which NBC reasonably requests on a quarterly basis. In order to provide such data and statistics, LAUNCH agrees to track users throughout the Co-branded Area and the rest of myLAUNCH as well as any Orders placed by such users.



(g) Product Purchasing Services. All users of the Co-branded Areas will have the opportunity and right to purchase Products which are relevant or related to the music content and information appearing on NBC.com or in the Co-branded Areas. In addition, each page of the Co-branded Area shall contain a clearly identifiable and prominent link to an area within the Co-branded Area or within myLAUNCH which will permit users to purchase any or all of the Products. In order to encourage such purchases, LAUNCH will foster transactions related thereto by (i) describing procedure and information required to purchase the Products, (ii) providing an order form and procedures which when completed and followed will permit users to place an order ("ORDER") for the Products (iii) placing hotlinks back to the Co-branded Areas from any order fufillment area of myLAUNCH which commercial users may utilize once they have completed their Orders. The descriptions and Order procedures in the Co-branded Areas will be similar to those currently included elsewhere on myLAUNCH but shall be modified by LAUNCH subject to NBC's reasonable approval in order to provide a seamless experience between the Co-branded Area and the order fulfillment area of myLAUNCH. LAUNCH shall provide all services relating to the ordering for and sale of the Products, including, but not limited to, (i) the procurement of all Products, (ii) the creation and maintenance of a reputable, reliable supplier network for the fulfillment of all Orders, and (iii) the creation and maintenance of a customer service system which insures the optimum fulfillment of all Orders placed hereunder and which provides mechanisms for solving all customer complaints and problems. LAUNCH's performance of each of these functions will conform to at least reasonable commercial standards, and LAUNCH recognizes that its failure to meet such standards shall constitute a material breach of this Agreement.



3. NBC RESPONSIBILITIES.



(a) Editorial Guidance. NBC agrees to create, update and maintain NBC.com and to cause its NBC. com production team to work with the LAUNCH liaison to find acceptable methods of making appropriate links to the Co-branded Areas accessible to users of NBC.com. Subject to the requirements of Section 3(b), LAUNCH acknowledges that NBC shall have sole discretion in determining when and if it shall choose to include music content, information or services as part of NBC. com or any part thereof and how any LAUNCH Material applicable to such music content, information or services, if any, shall actually be integrated into NBC.com. In addition, while NBC may choose, in its sole discretion, to provide NBC Material to LAUNCH for use in the Co-branded Area, it shall have sole discretion in determining how or whether such NBC Material may actually be used by LAUNCH.



(b) Access to Co-branded Areas from NBC.com. NBC agrees that the Co-Branded Area will be accessible through both (i) a link on the NBC.com home page or a













page directly accessible from the NBC.com home page (i.e., [ * ]) and (ii) some form of a link on any NBC.com entertainment show sub-sites on which NBC chooses to include music content, information or services, provided that if any sub-site or page of NBC.com contains music content or information supplied by any of the third parties described in 4(a)(i)-(iv), and either (A) the arrangements with such party would prevent NBC from placing LAUNCH material on such sub-site or page or (B) LAUNCH does not have, and is unable to create in a timely manner, any music content or information that would be relevant to such page or sub-site, then no link to myLAUNCH shall be required. NBC agrees that the size and positioning of links to myLAUNCH on NBC.com or its sub-sites shall be [ * ]. In addition, NBC may choose, in its sole discretion, to provide any LAUNCH material which is integrated into, or available via, any NBC.com page as part of any interactive or digital television broadcast(s) which NBC chooses to do in its sole discretion.



(c) On-Air Promotion. NBC agrees to reference myLAUNCH music-related content, information and services available on NBC.com within appropriate NBC promotion (on-air and online) for NBC.com, provided that such reference need not contain any LAUNCH branding or specific textual descriptions. Any such promotion, and the nature thereof, shall be at NBC's sole discretion. In addition, NBC will use good faith efforts to provide a total of [ * ] for NBC. com's on-air music-related promotions described above during the Initial Term of this Agreement; provided, however, that if any on-air music-related promotions promote services on NBC.com which are not provided by LAUNCH as permitted pursuant to the terms of Section 4(b), such promotion shall not be counted when determining the seconds of on-air music-related promotion delivered by NBC for purposes hereof. Such on-air promotions may be placed in either late night, prime-time, or Saturday morning television programming at NBC's sole discretion. LAUNCH acknowledges that none of the promotion described above will occur during the first [ * ] of the Term due to the "ramp-up" period described in Section 2(a). Failure to fulfill the promotional obligations described in this Section 3(c) shall not be deemed a material breach of this Agreement. However, if NBC falls short of such obligations as measured after the first [ * ] of the Term (i.e., NBC has provided less than a total of [ * ]) or at the end of the Initial Term (i.e., NBC has provided less than a total of [ * ]) and if this Agreement has not been terminated by either party as provided in Section 13 below, then LAUNCH's sole remedy shall be, at LAUNCH's option, either (i) for NBC to return to LAUNCH an amount of Purchased Shares of a valu ...