Document:

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                                                                   Exhibit 10.51

                             Virgin Holdings, Inc.
                            c/o EMI Recorded Music
                              1750 N. Vine Street
                                  YV Building
                             Hollywood, CA  90028

                                                  July 10, 2000

Liquid Audio, Inc.
810 Winslow Street
Redwood City, CA 94063

          Re:  Liquid Audio, Inc./Virgin Holdings, Inc.

Ladies and Gentlemen:

          Liquid Audio, Inc. ("LQA") is a leading provider of software and
                               ---
services for the secure digital delivery of music over the Internet. Virgin
Holdings, Inc. ("Virgin"), through its affiliated record labels, owns or
                 ------
controls an extensive catalog of recorded music performed by various artists.

          LQA and EMI Music Distribution ("EMD"), an affiliate of Virgin, are
                                           ---
party to an agreement, dated May 25, 2000 (the "DSP Agreement").
                                                -------------

          This letter sets forth the agreement between Virgin Holdings, Inc.

("Virgin") and Liquid Audio, Inc. ("LQA") with respect to the following matters:
  ------                            ---

          1.   Virgin.  Upon the terms, conditions, restrictions and limitations
               ------
of this letter agreement, commencing on the date hereof and ending on the first
anniversary of the date hereof (the "Term"), Virgin hereby agrees to use its
                                     ----
commercially reasonable efforts to promote LQA's secure services and software
for the digital delivery of music over the Internet by (i) publicly endorsing
LQA as a recommended provider of end-to-end solutions for the digital
distribution of music, including systems integration solutions for music
retailers/e-tailers and (ii) releasing digital products made available for sale
from time to time by Virgin and its Affiliates encoded in "Liquid Audio" format.

          2.   Limitations.  This letter agreement is non-exclusive.
               -----------
Notwithstanding anything in this Agreement to the contrary, Virgin and its
affiliates may contract or work with, and/or support any other person including,
without limitation, other providers of services and software whose businesses
(or portions thereof) compete with LQA. Neither Virgin nor any affiliate of
Virgin shall be obligated under this letter agreement or otherwise to make
available for sale digital downloads of music content owned or controlled by
Virgin or an affiliate of Virgin, whether through an on-line retailer utilizing
LQA's services or otherwise.

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          3.   Security.  LQA represents and warrants that it is a member of
               --------
SDMI and supports SDMI initiatives. LQA further represents and warrants that all
aspects of its services comply with the standards adopted by the SDMI, to the
extent applicable, and covenants that all such aspects, during the Term, will be
SDMI compliant. In the event that any computer program, utility or hardware
device becomes publicly available that compromises in any way the integrity of
any aspect of its services, LQA will promptly notify Virgin of such security
breach and Virgin shall not have any obligations hereunder unless and until such
security breach is fully remedied. LQA shall not distribute or enable or cause
others to distribute any music content owned or controlled by Virgin or any of
its affiliates in violation of any intellectual property or other right of
Virgin or any of its affiliates.

          4.   LQA.  In consideration of Virgin's entry into this letter
               ---
agreement, not later than July 17, 2000 (the "Issue Date"), LQA shall issue to
                                             ----------
Virgin 150,000 shares (the "Shares") of common stock, par value $0.001 per share
                            ------
(the "Common Stock"), of LQA.
      ------------

          5.   Registration Rights.  With respect to all Shares and any other
               -------------------
shares of Common Stock held by Virgin or any of its affiliates, Virgin and such
affiliates shall have the right to include all or a portion of all such Shares
in any registration statement filed by LQA after the date hereof, whether or not
for sale for its own account (other than any registration statement on Form S-8
or Form S-4 or any successor forms thereto). LQA shall provide Virgin and its
affiliates with sufficient notice of any such offering so that Virgin and such
affiliates may participate therein. LQA shall (i) perform, or cause to be
performed all acts, and execute and deliver all agreements, amendments,
instruments and other documents necessary or required to grant Virgin and its
affiliates the rights described in this Section 5 and (ii) do all things, and
take all actions, necessary from time to time to enable Virgin and its
affiliates to sell such Shares without registration under the Securities Act of
1933, as amended (the "Act"), pursuant to Rule 144 thereunder (as such rule may
                       ---
be amended from time to time) and any similar rules and regulations hereafter
adopted by the Securities and Exchange Commission.

          6.   Representations and Warranties. The Shares, when issued to Virgin
               ------------------------------
in accordance with this letter agreement, shall be validly issued, fully paid
and non-assessable, and shall be issued in compliance with the registration and
qualification requirements of all applicable federal and state securities laws.
No form of general solicitation or advertising was used by LQA or its
representatives in connection with the issuance of the Shares. No registration
of the Shares pursuant to the provisions of the Act or any state securities or
"blue sky" laws will be required by the issuance of the Shares.

          7.   Termination.  Virgin may terminate this letter agreement at any
               -----------
time (i) if LQA fails to deliver the Shares to Virgin on or before the Issue
Date, (ii) if EMD terminates the DSP Agreement in accordance with the terms
thereof, (iii) if LQA becomes insolvent, files a petition in bankruptcy or makes
an assignment for the benefit of creditors or (iv) if LQA sells fifty percent
(50%) or more of its assets, whether by stock sale, merger, share exchange,
asset sale, consolidation or otherwise to (x) Sony Music Entertainment, BMG
Entertainment, Universal Music Group or Warner Music (the "Major Labels"), or
                                                           ------------
any entity owned or controlled by any of the Major Labels or (y) any

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company that engages in piracy.

     8.   General Provisions.
          ------------------

          (a)  So long as this Agreement is in effect, except as required by
law, regulation or stock exchange requirements, the parties hereto shall not,
and shall cause their respective affiliates not to, issue or cause the
publication of any press release or other announcement with respect to the
transactions contemplated by this letter agreement without the consent of the
other party, which consent shall not be unreasonably withheld or delayed, and
without consulting with the other party as to the content of such press release
or other announcement.

          (b)  Virgin may transfer or assign this letter agreement or its rights
and obligations hereunder in whole or in part to any of its affiliates or to any
person owning or acquiring a substantial portion of its stock or assets. LQA
shall not assign its rights and/or obligations hereunder in whole or in part to
any person or entity without the prior written approval of Virgin. Any such
purported assignment shall be null and void. Subject to the foregoing, this
letter agreement shall be binding upon and inure to the benefit of the parties
hereto and their successors and assigns.

          (c)  This letter agreement contains the entire agreement between the
parties with respect to the subject matter hereof. Unless otherwise provided in
this letter agreement, no modification or waiver of any of the provisions, or
any future representation, promise or addition, shall be binding upon the
parties unless made in writing and signed by an authorized representative of the
parties.

          (d)  The failure by or delay of either party to enforce any provision
hereof shall not be construed to be a waiver of such provision or of the right
thereafter to enforce each and every provision. No waiver by either party,
either express or implied, of any breach of any term, condition, or obligation
of this letter agreement, shall be construed as a waiver of any subsequent
breach of that term, condition or obligation or of any other term, condition or
obligation of this letter agreement. No waiver shall be effective unless it is
made in writing, executed by both parties, and refers expressly to this letter
agreement.

          (e)  If any provision, term, condition, covenant, restriction, or
other portion of this letter agreement shall be held to be invalid, illegal or
unenforceable by any court of competent jurisdiction, the remaining portion
shall remain in force and effect.

          (f)  The relationship of the parties established by this letter
agreement is that of independent contractors, and nothing contained in this
letter agreement shall be construed to (i) give one party the power to direct
and control the day-to-day activities of the other or (ii) constitute the
parties as partners, joint venturers, co-owners or otherwise as participants in
a joint or common undertaking. Except as expressly stated herein, no party is
authorized to act on behalf of another party nor make any representation or
warranties, nor make any agreements or commitments binding on another party, nor
create any obligation or liability on another party, directly or indirectly.

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          (g)  Headings and captions used herein are for convenience only and
shall not be construed a part of, or affect the construction or interpretation
of, any provision of this letter agreement.

          (h)  This letter agreement shall be governed by and construed in
accordance with the laws of the State of New York, exclusive of choice of law
rules.

          (i)  All notices, demands and other communications provided for or
permitted under this letter agreement shall be made in writing and will either
be (i) personally delivered, (ii) sent by postage prepaid certified mail, return
receipt requested, (iii) delivered by courier service, (iv) transmitted by
facsimile with confirmation of receipt by telephone or e-mail, or (v)
transmitted by e-mail with confirmation of receipt by telephone, and will be
deemed to have been given when received, to:

               If to LQA:

               Liquid Audio, Inc.
               2221 Broadway Street
               Redwood City, CA 94063
               Facsimile: (650) 549-2199
               Attention: Robert Flynn
               e-mail: rflynn@liquidaudio.com

               If to Virgin:

               Virgin Holdings, Inc.
               c/o EMI Recorded Music, New Media Group
               1750 N. Vine Street
               YV Building
               Hollywood, CA  90028
               Facsimile: (323) 769-4421
               Attention: Robyn L. Glaser
               e-mail: robyn.glaser@emicap.com

or to such other person or at such other address as either party shall hereafter
designate.

          (j) This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument.

                                      -4-
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          Please confirm that the foregoing accurately sets forth our agreement
by signing this letter agreement where indicated below.

                                             Sincerely,

                                             VIRGIN HOLDINGS, INC.

                                             By: /s/ Jay Samit
                                                 ______________________
                                                Name:  Jay Samit
                                                Title: VP

ACKNOWLEDGED AND AGREED
as of July 10, 2000

LIQUID AUDIO, INC.

By: /s/ Robert Flynn
    __________________________
    Name:  Robert Flynn
    Title: SVP Business Development

                                      -5-<PAGE>
                                                                   Exhibit 10.20
                              EMPLOYMENT AGREEMENT

This Agreement is made on  August 4 (the "Effective Date") by and between
                           --------
InterTrust Technologies Corporation, a Delaware corporation, with a place of
business at 4750 Patrick Henry Drive, Santa Clara CA 95054 ("Company"), and
David Ludvigson, an individual residing at 19431 San Marcos Road, Saratoga, CA
95070 ("Employee").

                                   WITNESSETH:

     WHEREAS Employee and Company desire to effect an employment arrangement
under the terms and conditions in this Agreement;

     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and promises made herein and for other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, Company and Employee
agree as follows:

1.   Employment.  As of  August 7, or earlier as mutually agreed (the
                         --------
"Commencement Date"), Company employs Employee as President, reporting to CEO,
with such title and/or job responsibilities subject to change by InterTrust.
Employee accepts such employment. Company and Employee hereby revoke, terminate
and void all prior written or oral employment agreements or employment
arrangements previously made.

2.   Term.  Employee's employment with Company will continue for an indefinite
term unless and until it is terminated in accordance with the provisions of this
Agreement. The employment relationship will be "at will". Either party may
terminate this Agreement at any time and for any reason, with or without cause,
by giving the other party two (2) weeks written notice.

3.   Compensation.  For all services rendered under this Employment Agreement by
Employee, Company shall pay Employee a basic gross salary of $275,000 per year,
payable in periodic installments which shall be approximately equal in amount,
in a manner consistent with the accounting practices adopted by Company, and in
no event less frequently than once per month. Employee will receive a fifty
thousand dollar ($50,000) bonus on the anniversary of his employment and may
receive other bonuses and adjustments to salary when and as determined by
Company in its sole discretion.

4.   Duties and Responsibilities.  Employee shall devote substantially all
his/her business time and attention to the practice of his/her profession for
Company. The expenditure of reasonable time for teaching, personal or outside
business, charitable and professional activities shall not constitute a breach
of this Agreement if such activities do not materially interfere with Employee's
performance of his/her duties and obligations, as solely determined by Company.
Employee specifically agrees to place his/her duties to Company above all other
activities and will abandon or curtail outside activities if so directed by
Company if in its opinion there exists a conflict or other reasonable grounds
for abandoning or curtailing such activities.

5.   Authority and Powers of Company.   Company shall have the power to direct,
control and supervise Employee's duties and the manner of and time for
performing said duties.

6.   Expenses.  In accordance with general corporate policies, Employee shall be
reimbursed for reasonable, authorized expenses related to the performance of
his/her duties including (but not limited to): automobile and transportation
expenses; entertainment expenses; and all other items of authorized, reasonable
and necessary professional expenses incurred by Employee in the performance of
his/her duties as a Corporate employee.

7.   Fringe Benefits.  Employee shall be entitled to participate in any
Corporate plans or agreements, as applicable, regarding retirement, health, life
insurance and other related fringe benefits, in accordance with the terms and
conditions of each.

8.   Vacations and Other Time-Off. Employee shall be entitled to fifteen (15)
days annual vacation, with full Basic Salary, and at times approved by Company,
in addition to sick leave and holidays, in accordance with general corporate
policies.

                                       1
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9.   Severance. If Company terminates its relationship with Employee as set
forth in Section 2 of the Employment Agreement for reasons other than Employee's
commission of an illegal act, misrepresentation, fraud, insubordination, or
neglect or dereliction of duties, Company shall promptly provide to Employee a
severance arrangement pursuant to which Employee would receive a payment
equivalent to three (3) months salary, such payment to be made in not more than
two installments, and that amount of stock equal to six (6) months of vesting
under Employee's original stock option. It is understood and acknowledged that
such severance shall be due in part to continuing responsibilities under the
Confidentiality, No Conflict and Invention Agreement being executed herewith and
shall include standard terms and conditions, including release for any and all
outstanding claims by Employee. In addition, in the event of the occurrence of
an Extraordinary Corporate Transaction (as defined below) where Employee is
terminated by Company for reasons other than Cause, then Company shall promptly
provide to Employee a "Severance Package" comprising additional stock option
vesting equivalent to the number of shares from the original stock option that
would have vested forty eight (48) months after the Start Date minus the number
of shares actually vested as of such termination. For purposes of this
Agreement, an Extraordinary Corporate Transaction shall mean a merger,
consolidation, acquisition, or similar occurrence, where the Company will not be
a surviving entity, or a transfer of substantially all of the assets of the
Company or more than eighty percent (80%) of its outstanding common stock to a
single entity or affiliated group.

10.  Miscellaneous. This Agreement may be amended, altered or changed only
through a written document signed by Employee and Company. This Agreement and
the agreement executed concurrently herewith entitled Employee Confidentiality
and Invention Agreement constitute the entire understanding between the parties
with respect to the employment by Company of Employee, the termination of
Employee's employment, and the other subjects covered. It supersedes any and all
prior discussions, agreements and understandings between Employee and Company.
While Company's personnel policies and fringe benefit programs may be changed
from time to time, the "at will" termination provisions of this Agreement may
not be changed except by means of a written agreement specifically entered into
for such purpose. All provisions of this Agreement are severable and no
provision hereof shall be affected by the invalidity of any other such
provisions. The rights and obligations under this Agreement shall in all
respects be governed by the laws of the State of California, and venue in any
legal action shall exist exclusively in the United States District Court, for
the Northern District of California (San Jose Division) and/or, as relevant, the
State courts in such location. Employee hereby agrees to the jurisdiction of
such United States District Court and agrees not to assert any objection to the
jurisdiction or venue of such Court.

IN WITNESS WHEREOF, the Parties hereto have set their hands.

     InterTrust Technologies Corporation

     By:  /s/ EDMUND J. FISH
        ----------------------------
     Name of Officer: Edmund J. Fish
     EVP and Chief Business Officer

     /s/ DAVID LUDVIGSON
     -------------------------------
     David Ludvigson

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<PAGE>

          EMPLOYEE CONFIDENTIALITY NO CONFLICT AND INVENTION AGREEMENT

This Confidentiality and Invention Agreement (the "Agreement") is made on
August 4 between InterTrust Technologies Corporation, a Delaware Corporation
--------
with a place of business at 4750 Patrick Henry Drive, Santa Clara CA 95054
("Company"), and David Ludvigson, an individual residing at 19431 San Marcos
Road, Saratoga, CA 95070 ("Employee").

     WHEREAS, the Company shall employ Employee as of the Commencement Date (as
defined in the Employment Agreement), and Employee wishes to accept such
employment;

     WHEREAS, it is likely that Employee may have access to or contribute to the
development of Confidential Information and may be involved in the discovery or
the development of ideas or Inventions;

     NOW THEREFORE, in consideration of the premises contained herein, and
intending to be legally bound, the parties hereto agree as follows:

1.   Definitions.  For purposes of this Agreement:
     -----------
     (a) "Confidential Information" means information disclosed to or known by
Employee as a consequence of, or through employment by, InterTrust Technologies
Corporation (including information conceived, originated, discovered, or
developed by Employee), which is not generally known to the public and which
relates to research, development, trade secrets, know-how, Inventions, technical
data, manufacturing techniques, purchasing, accounting, engineering, marketing,
merchandising and/or selling of Company products or processes; and also includes
information entrusted to the Company by third parties under restrictions
relating to Confidentiality which are disclosed to, or become known by,
Employee.

     (b) "Inventions" means discoveries, concepts, ideas and/or improvements to
existing technology, whether or not patentable or copyrightable, and all other
subject matter as is ordinarily comprehended by the term "invention," reasonably
related to any activities of Company, which includes, but is not limited to,
processes, machines, products, compositions of matter, formulas, computer
programs and techniques, software and software developments, as well as
improvements thereof and expressions thereof. The term Invention further
includes: (i) any discoveries, concepts, ideas and/or improvements which are
related to demonstrably anticipated research and/or development of the Company,
or (ii) any discoveries, concepts, ideas and/or improvements developed,
discovered, or originated in connection with employee's employment with the
Company. The term "Invention" shall not include any discoveries, concepts,
ideas, and/or improvements developed by the Employee otherwise than in
connection with his employment with the Company and not using Confidential
Information or any resources, facilities, or assets of the Company.

2.   Employee agrees that he shall promptly, in such form and detail as is
prescribed by the Company, record and keep a complete and permanent written
record of information relating to the conception, origination, discovery or
development of Confidential Information and/or Inventions.

3.   Employee agrees that he shall assign to the Company all of Employee's
rights, title, and interest in and to any Inventions discovered, developed,
made, conceived of and/or reduced to practice during the term of Employees
employment by Company, to applications for United States and foreign letters
patent granted upon Inventions, and all right, title and interest in and to all
Confidential Information related thereto. Employee hereby agrees that the
Company and/or its authorized agent shall have full control over all such patent
applications, including without limitation the right to amend or abandon the
same. Employee further agrees that he shall:

     (a) Apply, at Company's request and expense, for United States and foreign
letters patent in Inventions subject to assignment hereunder either in
Employee's name or as the Company shall otherwise direct;

     (b) Sign and deliver promptly to the Company such written documents,
certificates or other instruments, testify in any legal proceedings, and do such
other acts, things, actions or deeds as may be necessary (the "Other Actions")
in the opinion of the Company or its agents or counsel to secure, obtain and
maintain for the Company exclusive rights in, and United States and foreign
letters patent and/or copyrights for, any and all such Inventions subject to
assignment hereunder (or other matters relating to the Confidential
Information), and provided that the foregoing shall be at Company's reasonable
expense; and

                                       3
<PAGE>

     (c) During the term of Employee's tenure with InterTrust and for a period
of one year thereafter, inform the Company promptly and fully of any and all
Inventions by a written report completely describing each such Invention in
detail.

4.   The Company shall have the right, without additional or further payment or
consideration to Employee, to make and use in its business, and to make, use and
sell processes, machines, products, compositions of matter, designs, software,
and services derived from any discoveries, concepts, ideas, and improvements to
existing technology, whether or not patentable or copyrightable, which are not
within the scope of Inventions as herein above defined but which are conceived
of or made by Employee during the hours in which he is employed by the Company
or with the use or assistance of the Company facilities, materials, or personnel
(the "Additional Intellectual Property").

5.   Except as required in Employee's duties to Company, Employee shall never
directly or indirectly use, disseminate, lecture upon, publish articles
concerning, or otherwise disclose Confidential Information to anyone not
confidentially bound to the Company without first obtaining the prior written
consent of Company, and in no event shall said direct or indirect use,
dissemination, lecturing, publishing, or otherwise disclosing occur except in
strictest accordance with the rules established by the Company concerning the
handling of Confidential Information. All Confidential Information, and any
Derivatives thereof created by Employee, shall remain the property of Company,
and no license or other rights to Confidential Information is granted or implied
hereby. For purposes of this Agreement, "Derivatives" shall mean: (i) for
copyrightable or copyrighted material, any translation, abridgment, revision or
other form in which an existing work may be recast, transformed or adapted; (ii)
for patentable or patented material, any improvement thereon; and (iii) for
material which is protected by trade secret, any new material derived from such
existing trade secret material, including new material which may be protected by
copyright, patent and/or trade secret.

6.   Prior to undertaking any engagement, consulting assignment or employment
with or for any person, firm, corporation, association, partnership or any other
third person during the term of Employee's employment by the Company which
utilizes or involves subject matter related to activities of the type in which
the Company is involved or engaged, Employee shall first fully disclose the
nature of such proposed engagement, assignment or employment to the Company and
obtain the Company's written consent.

7.   Except as the Company may otherwise agree in the exercise of its sole
discretion in a writing signed by InterTrust's Chief Executive Officer, Employee
shall not, within the states of Virginia and California, and such other areas in
which the Company does business, and while working for Company or for twenty
four (24) months thereafter, perform or cause the performance of any advisory,
consulting or services for, operate, materially invest in, or become an employee
of any operating unit of a company or other entity which engages in providing
Digital Rights Management products, technology and/or services.

8.   Upon termination of Employee's employment with the Company, Employee hereby
agrees that he shall deliver to and leave with Company any and all objects,
materials, devices, or substances, including without limitation all documents,
records, notebooks, recordings, drawings, prototypes, models, schematic
diagrams, computer programs (regardless of the media on which they are stored)
and similar repositories of, or objects which describe, depict, contain
constitute, reflect or record Confidential Information, and all copies thereof,
then in Employee's possession or under his control, whether or not prepared by
Employee.

9.   Employee hereby agrees that the Company may notify any future employer of
the existence of this Agreement.

10.  The parties hereto specifically agree that in the event of a breach of the
non-disclosure provision of this Agreement by the Employee, irreparable harm
will be suffered by the Company and remedies at law will not adequately
compensate the Company for such breach, and therefore, and in addition to any
legal remedies available to it, the Company shall be entitled to obtain
injunctive or other equitable relief against the Employee.

11.  Employee hereby acknowledges and agrees that this Agreement shall not in
any manner be construed as an employment agreement, and that Employee's
continued employment with Company shall be subject to termination or renewal in
accordance with the Employment Agreement between the Employee and the Company of
the same date as this Employee Confidentiality and Invention Agreement.

12.  Employee agrees that if Employee is served with any subpoena or other
compulsory judicial or administrative process calling for production of
Confidential Information, Employee will immediately notify InterTrust
Technologies Corporation in order that it may take such action as it deems
necessary to protect its interest.

13.  In any litigation rising out of this Agreement, the prevailing party will
be entitled to recovery of all reasonable costs and attorney's fees, including
costs and fees on appeal. The provisions of this Agreement shall not be
construed as limiting any rights or remedies that the Company may otherwise have
under applicable law. In case any one or more of the provisions contained in
this

                                       4
<PAGE>

Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions of this Agreement, but this Agreement shall be construed as
if such invalid, illegal or unenforceable provision had never been contained
herein. If, moreover, any one or more of the provisions contained in this
Agreement shall for any reason be held to be excessively broad as to time,
duration, scope, activity or subject, by a court of competent jurisdiction, such
court shall exercise discretion in reforming the provisions of this Agreement to
the end that Employee shall be subject to provisions and restrictions which are
enforceable under the circumstances and closest to the covenants set forth
herein.

     InterTrust Technologies Corporation

     By: /s/  EDMUND J. FISH             /s/  DAVID LUDVIGSON
        ---------------------------      ---------------------------
     Name of Officer: Edmund J. Fish     David Ludvigson
     EVP and Chief Business Officer      Date:_______________________

                                       5

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