-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GceenwmQimO5E3EFwzLozoxIuKuawEKganY1Pl7+I61SG4nwNcdw33c2qh8rh1A/ dPgCjDO2NbY0p99n+kqYRA== 0001012870-02-000186.txt : 20020413 0001012870-02-000186.hdr.sgml : 20020413 ACCESSION NUMBER: 0001012870-02-000186 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20020118 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERVIDEO INC CENTRAL INDEX KEY: 0001114084 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 943300070 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-76640 FILM NUMBER: 2512905 BUSINESS ADDRESS: STREET 1: 47350 FREMONT BLVD CITY: FREMONT STATE: CA ZIP: 94538 BUSINESS PHONE: 5106510888 MAIL ADDRESS: STREET 1: 47350 FREMONT BLVD CITY: FREMONT STATE: CA ZIP: 94538 S-1/A 1 ds1a.txt AMENDMENT NO. 1 TO FORM S-1 As filed with the Securities and Exchange Commission on January 18, 2002 Registration No. 333-76640 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- AMENDMENT NO. 1 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ----------------- INTERVIDEO, INC. (Exact name of Registrant as specified in its charter) ----------------- Delaware 7372 94-3300070 (State or Other (Primary Standard (I.R.S. Employer Jurisdiction of Industrial Classification Identification Number) Incorporation or Code Number) Organization) 47350 Fremont Boulevard Fremont, California 94538 (510) 651-0888 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) ----------------- Steve Ro Chief Executive Officer InterVideo, Inc. 47350 Fremont Boulevard Fremont, California 94538 (510) 651-0888 (Name, address, including zip code, and telephone number, including area code, of agent for service) ----------------- Copies to: Matthew W. Sonsini, Esq. Timothy R. Curry, Esq. Craig D. Norris, Esq. Evan B. Sloves, Esq. Christine S. Wong, Esq. Christine DeSanze, Esq. Ritu K. Tariyal, Esq. Brent D. Johnson, Esq. Barbara A. Wiseman, Esq. Brobeck, Phleger & Harrison LLP Wilson Sonsini Goodrich & Rosati, P.C. Two Embarcadero Place 650 Page Mill Road 2200 Geng Road Palo Alto, CA 94304 Palo Alto, CA 94303 (650) 493-9300 (650) 424-0160 ----------------- Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective. If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [_] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] ----------------- The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this registration statement shall then become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine. ----------------- EXPLANATORY NOTE The purpose of this Amendment No. 1 is solely to file exhibits to the Registration Statement as set forth below as in Item 16 of Part II. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Part II - -------------------------------------------------------------------------------- INFORMATION NOT REQUIRED IN PROSPECTUS Unless otherwise defined, all capitalized terms contained in this Part II shall have the meanings ascribed to them in the prospectus which forms a part of this registration statement. InterVideo is sometimes referred to in this Part II as the "registrant." Item 13. Other Expenses of Issuance and Distribution. The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by the registrant in connection with the sale of common stock being registered. All amounts are estimates except the SEC registration fee, the NASD filing fee and the Nasdaq National Market listing fee. Securities and Exchange Commission registration fees....... $12,369 NASD filing fee............................................ 5,675 Printing and engraving expenses............................ Legal fees and costs....................................... Accounting fees and costs.................................. Nasdaq National Market listing fees........................ Transfer agent and registrar fees and expenses............. Miscellaneous expenses..................................... ------- Total................................................... $ =======
Item 14. Indemnification of Directors and Officers. Section 145 of the Delaware General Corporation Law provides for the indemnification of officers, directors and other corporate agents in terms sufficiently broad to indemnify such persons under certain circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act of 1933, as amended (the "Act"). Article IX of the registrant's Amended and Restated Certificate of Incorporation (Exhibit 3.2 hereto) and Article IX of the registrant's Amended and Restated Bylaws (Exhibit 3.4 hereto) provide for indemnification of the registrant's directors, officers, employees and other agents to the extent and under the circumstances permitted by the Delaware General Corporation Law. The registrant intends to enter into agreements with its directors and officers that will require the registrant, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as director or officers to the fullest extent not prohibited by law. The underwriting Agreement (Exhibit 1.1) provides for indemnification by the underwriters of the registrant, its directors and officers, and by the registrant of the underwriters, for certain liabilities, including liabilities arising under the Act and affords certain rights of contribution with respect thereto. Item 15. Recent Sales of Unregistered Securities. Since December 31, 1998, we have sold and issued the following unregistered securities: (1) From March 1999 to December 2001, we have granted stock options to purchase an aggregate of 9,043,400 shares of common stock at exercise prices ranging from $0.05 to $2.20 per share to employees, consultants, directors and other service providers pursuant to our 1998 Plan and pursuant to options granted outside of the 1998 Plan, which options total 218,750 shares. The options issued outside of the 1998 Plan were issued at exercise prices ranging from $0.05 to $0.25 per share to consultants to us. (2) From May to August 1999, we sold an aggregate of 2,000,000 shares of Series C preferred stock to 39 outside investors at a price of $2.00 per share for an aggregate purchase price of $4,000,000. - -------------------------------------------------------------------------------- II-1 Part II - -------------------------------------------------------------------------------- (3) From April 2000 to May 2000, we sold an aggregate of 4,188,750 shares of Series D preferred stock to 70 outside investors at a price of $4.00 per share for an aggregate purchase price of $16,655,000. All shares of the preferred stock are convertible into shares of common stock at the rate of one share of common stock for each share of preferred stock outstanding. The sales and issuances of securities described in paragraph (1) above were exempt from registration under Section 4(2) of the Securities Act by virtue of Rule 701 promulgated thereunder in that they were offered and sold either pursuant to a written compensatory benefit plan or pursuant to a written contract relating to compensation, as provided by Rule 701. The sale and issuance of securities described in paragraphs (2) and (3) above were exempt from registration under the Securities Act by virtue of Section 4(2) of the Securities Act, Regulation D and Regulation S promulgated thereunder. Item 16. Exhibits and Financial Statements Schedules. (a) Exhibits
Exhibit Number Description - --------------------------------------------------------------------------------------------------------------- 1.1* Form of Underwriting Agreement. 3.1* Amended and Restated Certificate of Incorporation, to be effective upon the reincorporation. 3.2* Amended and Restated Certificate of Incorporation, to be effective upon consummation of this offering. 3.3* Bylaws, to be effective upon the reincorporation. 3.4* Amended and Restated Bylaws, to be effective upon consummation of this offering. 5.1* Opinion of Wilson Sonsini Goodrich & Rosati. 10.1** Registrant's 1998 Stock Option Plan and form of option agreement. 10.2* Registrant's 2002 Stock Plan and form of option agreement. 10.3* Registrant's 2002 Employee Stock Purchase Plan and form of subscription agreement. 10.4* Form of Directors and Officers' Indemnification Agreement. 10.5** Investor Rights Agreement, dated July 2, 1999, as amended, by and among the Registrant and the parties who are signatories thereto. 10.6+ Digital Audio System License Agreement between the Registrant and Dolby Laboratories Licensing Corporation dated March 4, 1999. 10.7+ CSS License Agreement between the Registrant and DVD Copy Control Association dated December 22, 2000. 10.8** Lease Agreement between the registrant and ProLogis Limited Partnership-1, dated December 7, 2000. 10.9** Employment offer letter with Randy Bambrough. 10.10** Form of Nonstatutory Stock Option Agreement for grants to Joe Liu and George Haber. 10.11** Nonstatutory Stock Option Agreement for Henry Shaw. 10.12* Form of Promissory Notes issued by George Haber, Joe Liu and Randall Bambrough. 10.13* Common Stock Purchase Agreement with Honda Shing, dated May 15, 1998. 21.1** Subsidiaries of the registrant. 23.1** Consent of Arthur Andersen. 23.2** Consent of TN Soong & Co. 23.3* Consent of Wilson Sonsini Goodrich & Rosati (included in Exhibit 5.1). 24.1** Power of Attorney. Reference is made to Page II-4.
- -------- * To be filed by amendment. **Previously filed. + Confidential treatment to be requested for a portion of this agreement. (b) Financial Statement Schedules. Schedules other than those referred to above have been omitted because they are not applicable or not required or because the information is included elsewhere in the Financial Statements or the notes thereto. - -------------------------------------------------------------------------------- II-2 Part II - -------------------------------------------------------------------------------- Item 17. Undertakings. The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been informed that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1), or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. - -------------------------------------------------------------------------------- II-3 Part II - -------------------------------------------------------------------------------- Signatures Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Fremont, State of California, on January 18, 2002. INTERVIDEO, INC. By: /S/ RANDALL BAMBROUGH ----------------------------------- Randall Bambrough, Chief Financial Officer Power of Attorney Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 1 to Registration Statement has been signed by the following persons on January 18, 2002 in the capacities indicated.
Signature Title - -------------------------------------------------------------------------------- * President, Chief Executive Officer and Director - ------------------------------- (Principal Executive Officer) Steve Ro /s/ RANDALL BAMBROUGH Chief Financial Officer (Principal Financial and - ------------------------------- Accounting Officer) Randall Bambrough * Director - ------------------------------- Henry Shaw * Director - ------------------------------- Eli Sternheim * Director - ------------------------------- George Haber * Director - ------------------------------- Joseph Liu *By: /S/ RANDALL BAMBROUGH ____________________________ Randall Bambrough ATTORNEY-IN-FACT
- -------------------------------------------------------------------------------- II-4 - -------------------------------------------------------------------------------- Exhibit index
Exhibit Number Description - -------------------------------------------------------------------------------------------------------------- 1.1* Form of Underwriting Agreement. 3.1* Amended and Restated Certificate of Incorporation, to be effective upon the reincorporation. 3.2* Amended and Restated Certificate of Incorporation, to be effective upon consummation of this offering. 3.3* Bylaws, to be effective upon the reincorporation. 3.4* Amended and Restated Bylaws, to be effective upon consummation of this offering. 5.1* Opinion of Wilson Sonsini Goodrich & Rosati. 10.1** Registrant's 1998 Stock Option Plan and form of option agreement. 10.2* Registrant's 2002 Stock Plan and form of option agreement. 10.3* Registrant's 2002 Employee Stock Purchase Plan and form of subscription agreement. 10.4* Form of Directors and Officers' Indemnification Agreement. 10.5** Investor Rights Agreement, dated July 2, 1999, as amended, by and among the Registrant and the parties who are signatories thereto. 10.6+ Digital Audio System License Agreement between the Registrant and Dolby Laboratories Licensing Corporation dated March 4, 1999. 10.7+ CSS License Agreement between the Registrant and DVD Copy Control Association dated December 22, 2000. 10.8** Lease Agreement between the registrant and ProLogis Limited Partnership-1, dated December 7, 2000. 10.9** Employment offer letter with Randy Bambrough. 10.10** Form of Nonstatutory Stock Option Agreement for grants to Joe Liu and George Haber. 10.11** Nonstatutory Stock Option Agreement for Henry Shaw. 10.12* Form of Promissory Notes issued by George Haber, Joe Liu and Randall Bambrough. 10.13* Common Stock Purchase Agreement with Honda Shing, dated May 15, 1998. 21.1** Subsidiaries of the registrant. 23.1** Consent of Arthur Andersen. 23.2** Consent of TN Soong & Co. 23.3* Consent of Wilson Sonsini Goodrich & Rosati (included in Exhibit 5.1). 24.1** Power of Attorney. Reference is made to Page II-4.
- -------- * To be filed by amendment. ** Previously filed. + Confidential treatment to be requested for a portion of this agreement. - -------------------------------------------------------------------------------- EX-10.6 3 dex106.txt DIGITAL AUDIO SYSTEM LICENSE AGREEMENT EXHIBIT 10.6 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. OMITTED INFORMATION HAS BEEN REPLACED BY [*]. Dolby Laboratories Licensing Corporation DIGITAL AUDIO SYSTEM LICENSE AGREEMENT AN AGREEMENT BY AND BETWEEN --------------------------- - -------------------------------------------------------------------------------- Dolby Laboratories Licensing Corporation InterVideo, Inc. (hereinafter called "LICENSOR") (hereinafter called "LICENSEE") of 100 Potrero Avenue of 440 Mission Court, Suite 260 San Francisco, CA 94103-4813 Fremont, CA 94539 United Stated of America United States of America - -------------------------------------------------------------------------------- Facisimile telephone number of LICENSOR for transmission of quarterly royalty reports (Section 4.05): (415) 863-1373 LICENSOR's bank and account number for wire transfer of royalty payments (Section 4.05) Bank: Wells Fargo Bank Address: 464 California Street, San Francisco, CA 94104 U.S.A. Account Name: Dolby Laboratories Licensing Corporation Account Number: [*] ABA Number: [*] Identification of bank with respect to whose prime rate interest is calculated on overdue royalties (Section 4.05): Wells Fargo Bank Address of LICENSEE for communications not otherwise specified (Section 8.04): SIGNATURE: - --------- On behalf of LICENSOR On behalf of LICENSEE Signature: /s/ Lun S. Cheung Signature: /s/ Joe Monastiero --------------------------- ------------------------ Name: Lun S. Cheung Name: Joe Monastiero --------------------------- ------------------------ Title: Intellectual Property Manager Title: VP ----------------------------- ------------------------ Place: San Francisco, CA 94103 Place: Fremont, CA ----------------------------- ------------------------ Date: 4 March 1999 Date: 11/2/98 ----------------------------- ------------------------ Witnessed By: Witnessed By: /s/ [ILLEGIBLE] /s/ [ILLEGIBLE] - ---------------------------------------- ----------------------------------- Effective Date of Agreement: 4 March 1999 Initial Payment: [*] ----------------- TABLE OF CONTENTS
Page ARTICLE I DEFINITIONS..................................................................... 2 Section 1.01 - "LICENSOR"............................................................ 2 Section 1.02 - "LICENSEE"............................................................ 2 Section 1.03 - "Application"......................................................... 2 Section 1.04 - "Patent".............................................................. 2 Section 1.05 - "Related Application"................................................. 2 Section 1.06 - "Related Patent"...................................................... 2 Section 1.07 - "Scheduled Patents"................................................... 3 Section 1.08 - "Dolby Digital AC-3 Audio System Specifications"...................... 3 Section 1.09 - "Licensed Trademark".................................................. 3 Section 1.10 - "Licensed Device"..................................................... 3 Section 1.11 - "Licensed Product".................................................... 3 Section 1.12 - "Patent Rights"....................................................... 4 Section 1.13 - "Know-How"............................................................ 4 Section 1.14 - "Confidential Information"............................................ 4 Section 1.15 - "Non-Patent Country".................................................. 4 Section 1.16 - "LICENSEE's Trade Name and Trademarks"................................ 4 Section 1.17 - "Other-Trademark Purchaser"........................................... 4 Section 1.18 - "Licensed Copyrighted Works".......................................... 4 Section 1.19 - "Consumer Price Index"................................................ 5 Section 1.20 - "Effective Date"...................................................... 5 Section 1.21 - "Virtual Dolby Digital"............................................... 5 ARTICLE II LICENSES GRANTED............................................................... 5 Section 2.01 - Licenses Granted to LICENSEE.......................................... 5 Section 2.02 - Limitation of Licenses Granted........................................ 5 ARTICLE III OTHER OBLIGATIONS OF THE LICENSOR AND LICENSEE................................ 6 Section 3.01 - Use of Licensed Trademark............................................. 6 Section 3.02 - Ownership of the Licensed Trademarks.................................. 8 Section 3.03 - Maintenance of Trademark Rights....................................... 9 Section 3.04 - Patent, Trademark and Copyright Enforcement........................... 9 Section 3.05 - Other-Trademark Purchasers............................................ 9 Section 3.06 - Patent Marking........................................................ 10 Section 3.07 - Copyright Notice...................................................... 10 Section 3.08 - Furnishing of Licensed Copyrighted Works: Use of Licensed Copyrighted Works............................................................ 10 Section 3.09 - License Notice........................................................ 11 Section 3.10 - Furnishing of Know-How................................................ 11 Section 3.11 - Use of Know-How and Confidential Information.......................... 11
-i- TABLE OF CONTENTS (continued)
Page ARTICLE IV PAYMENTS..................................................................... 12 Section 4.01 - Initial Payment..................................................... 12 Section 4.02 - Royalties........................................................... 12 Section 4.03 - Section Deleted..................................................... 13 Section 4.04 - Royalty Applicability............................................... 13 Section 4.05 - Royalty Payments and Statements..................................... 13 Section 4.06 - Royalties in Non-Patent Count....................................... 14 Section 4.07 - Books and Records................................................... 15 Section 4.08 - Rights of Inspecting Books and Records.............................. 15 ARTICLE V STANDARDS OF MANUFACTURE AND QUALITY.......................................... 15 Section 5.01 - Standardization and Quality......................................... 15 Section 5.02 - Right to Inspect Quality............................................ 16 ARTICLE VI TERMINATION AND EFFECT OF TERMINATION........................................ 16 Section 6.01 - Expiration of Agreement............................................. 16 Section 6.02 - Termination for Cause............................................... 16 Section 6.03 - Option to Terminate in a Non-Patent Count........................... 16 Section 6.04 - Effect of Termination............................................... 17 ARTICLE VII LIMITATIONS OF RIGHTS AND AUTHORITY......................................... 18 Section 7.01 - Limitation of Rights................................................ 18 Section 7.02 - Limitation of Authority............................................. 18 Section 7.03 - Disclaimer of Warranties and Liability: Hold Harmless............... 18 Section 7.04 - Limitation of Assignment by LICENSEE................................ 19 Section 7.05 - Compliance with U.S. Export Control Regulations..................... 19 ARTICLE VIII MISCELLANEOUS PROVISIONS................................................... 19 Section 8.01 - Language of Agreement: Language of Notices.......................... 19 Section 8.02 - Stability of Agreement.............................................. 20 Section 8.03 - Public Announcements................................................ 20 Section 8.04 - Address of LICENSOR and LICENSEE for all Other Communications....... 20 Section 8.05 - Applicable Law...................................................... 20 Section 8.06 - Choice of Forum: Attorneys' Fees.................................... 20 Section 8.07 - Construction of Agreement........................................... 21 Section 8.08 - Captions............................................................ 21 Section 8.09 - Singular and Plural................................................. 21 Section 8.10 - Complete Agreement.................................................. 21 Section 8.11 - Severability........................................................ 21
-ii- TABLE OF CONTENTS (continued)
Page Section 8.12 - Company Representation and Warrant................. 21 Section 8.13 - Execution.......................................... 21
-iii- DIGITAL AUDIO SYSTEM LICENSE AGREEMENT WHEREAS, LICENSOR is engaged in the field of audio noise reduction and analog and digital signal processing systems and has developed noise reduction systems useful for audio tape recording, surround sound systems for home entertainment and for other applications; WHEREAS, LICENSOR's audio processing systems have acquired a reputation for excellence and LICENSOR's trademarks have acquired valuable goodwill; WHEREAS, LICENSOR has licensed over 160 companies to make, use and sell consumer audio hardware incorporating LICENSOR's audio systems and marked with LICENSOR's trademarks; and WHEREAS, LICENSOR has defined the operating parameters and configuration of a class of products called, "Virtual" products; and WHEREAS, LICENSOR's Virtual product category and its manufacture are the subject of substantial know-how owned by LICENSOR; WHEREAS, LICENSOR's Dolby Digital AC-3 audio system and its manufacture embody inventive subject matter which are the subject of international patent and patent applications owned or licensable by LICENSOR, WHEREAS, the manufacture and sale of LICENSOR's Dolby Digital AC-3 audio system requires the reproduction of copyrighted works owned or licensable by LICENSOR; WHEREAS, LICENSOR represents and warrants that it has rights to grant licenses under such know-how, patents and patent applications and copyrighted works and under its trademarks; WHEREAS, LICENSEE is engaged in the manufacture and sale of products for the home electronics market; and WHEREAS, LICENSEE believes it can develop substantial demand for equipment to decode audio signals using LICENSOR's Dolby Digital AC-3 audio system; WHEREAS, LICENSEE desires a non-exclusive license to manufacture and sell decoders using LICENSOR's Dolby Digital AC-3 audio system under LICENSOR's trademarks, know-how, copyrighted works, patents and patent applications; and WHEREAS, LICENSOR is willing to grant such a license under the terms and conditions set forth in this Agreement. NOW, THEREFORE, it is agreed by and between LICENSOR and LICENSEE as follows: ARTICLE I DEFINITIONS Section 1.01 - "LICENSOR" means Dolby Laboratories Licensing Corporation, a -------- corporation of the State of New York, having a place of business as indicated on the title page of this Agreement, and its successors and assigns. Section 1.02 - "LICENSEE" means the corporation identified on the title -------- page of this Agreement and any subsidiary thereof of whose ordinary voting shares more than 50% are controlled directly by such corporation, but only so long as such control exists. Section 1.03 - "Application" means an application for the protection of an ----------- invention or an industrial design; references to an "Application" shall be construed as references to applications for patents for inventions, inventors' certificates, utility certificates, utility models, patents or certificates of addition, inventors' certificates of addition, utility certificates of addition, design patents, and industrial design registrations. Section 1.04 - "Patent" means patents for inventions, inventors' ------ certificates, utility certificates, utility models, patents or certificates of addition, inventors' certificates of addition, utility certificates of addition, design patents, and industrial design registrations. Section 1.05 - "Related Application" means an Application, whether ------------------- international or in the same or another country or region, which (1) is substantially the same as (e.g., it does not include any new matter in the sense of the United States Patent Law) an Application or Patent listed in Appendix A, entitled "Scheduled Patents," which is attached hereto and forms an integral part of this Agreement (for example, without limiting the foregoing, a continuation Application, a corresponding Application, an Application to reissue, or a refiled Application), or (2) is substantially only a portion of (e.g., it contains less than an Application or Patent listed in Appendix A and, it does not include any new matter in the sense of the United States Patent Law) an Application or Patent listed in Appendix A (for example, a divisional Application, or a corresponding or refiled Application in the nature of a divisional Application). Section 1.06 - "Related Patent" means: -------------- (1) a Patent granted on an Application listed in Appendix A, (2) a Patent granted on a Related Application, (3) a reissue of a Patent of Sections 1.06(1) or 1.06(2), and (4) a reexamination certificate of a Patent of Sections 1.06 (1), 1.06(2), or 1.06(3). -2- Section 1.07 - "Scheduled Patents" means the Applications and Patents ----------------- listed in Appendix A together with Related Applications and Related Patents. Applications and Patents which contain not only common subject matter but also additional subject matter going beyond the disclosure of Applications and Patents of this Section (for example, without limiting the foregoing, a continuation-in-part Application, or a corresponding or refiled Application in the nature of a continuation-in-part Application) shall be deemed to be Scheduled Patents only with respect to that portion of their subject matter common to the Applications and Patents of this Section. Section 1.08 - "Dolby Digital AC-3 Audio System Specifications" means the ---------------------------------------------- specifications for the Dolby Digital AC-3 audio system, comprising the claims and teachings of the Scheduled Patents, the Dolby Digital AC-3 audio system operating parameters as specified in Appendix B entitled "Dolby Digital AC-3 Audio System," the Dolby Digital LICENSEE Information Manual referred to in Appendix C, the Licensed Copyrighted Works and the Know-How. Appendices B and C are attached hereto and form an integral part of this Agreement. Section 1.09 - "Licensed Trademark" means one or more of the following: (a) ------------------ the word mark "Dolby", (b) the device mark [logo] which is also referred to as the `Double-D' symbol and (c) the term "AC-3". Section 1.10 - "Licensed Device" means a digital audio circuit having Dolby --------------- Digital AC-3 Audio System Specifications, whether made in discrete component, integrated circuit, or other forms, for decoding a digital bitstream into one or more audio channels. A circuit counts as one "Licensed Device" for each full frequency range audio channel it provides. Section 1.11 - "Licensed Product" means a complete ready to use consumer ---------------- entertainment product, such as a mufti-channel A/V receiver, DVD player, or personal computer (PC), or a complete, ready-to-install PC audio subsystem which: (1) contains one or more Licensed Devices, and (2) is intended or designed for use in decoding an AC-3 digital audio bitstream. Every Licensed Product containing three or more Licensed Devices must also contain a Dolby Consumer Surround Decoder with Directional Enhancement licensed under a separate agreement, except that the Licensed Consumer Surround Decoder and the Directional Enhancement Circuit in such Licensed Product shall be royalty-free, so long as applicable royalties under Sections 4.01 and 4.02 under this Agreement are payable. The only exception to this provision are outboard decoders without independent volume controls intended to be used exclusively in conjunction with audio-visual receivers or amplifiers that already contain said Consumer Surround Decoder and Directional Enhancement circuits. A Licensed Product is not a semiconductor chip, a partially assembled product, a product in kit form, or a knocked-down or semi-knocked-down product. -3- Section 1.12 - "Patent Rights" means: ------------- (1) the Scheduled Patents; and (2) such Patents and Applications directed to Licensed Products that LICENSOR may own or gain rights to license during the term of this Agreement and which LICENSOR may agree to include in the Patent Rights without payment of additional compensation by LICENSEE. The Patent Rights do not include such other Applications and Patents as LICENSOR does not agree to include in the Patent Rights without payment of additional compensation by LICENSEE. Section 1.13 - "Know-How" means all proprietary information, trade secrets, -------- skills, experience, recorded or unrecorded, accumulated by LICENSOR, from time to time prior to and during the term of this Agreement, or licensable by LICENSOR, relating to the Licensed Devices and the Licensed Products and all designs, drawings, reports, memoranda, blue-prints, specifications and the like, prepared by LICENSOR or by others and licensable by LICENSOR, insofar as LICENSOR deems the same to relate to and be useful for the development, design, manufacture, sale or use of Licensed Products. Know-How does not include Licensed Copyrighted Works, whether or not published. Section 1.14 - "Confidential Information" means technical and non-technical ------------------------ proprietary information of LICENSOR or LICENSEE, including, without limiting the foregoing, marketing information, product plans, business plans, royalty, and sales information so long as such information is disclosed to the other party a) in written or other tangible form which is clearly marked as being confidential or proprietary or b) orally or in any other manner and is indicated as confidential at the time of disclosure and thereafter summarized in writing within thirty (30) days after such disclosure. Section 1.15 - "Non-Patent Country" means a country in which there do not ------------------ exist, with respect to a Licensed Product, any Scheduled Patents including any pending Application or unexpired Patent, which, but for the licenses herein granted, are (or in the case of an Application, would be if it were an issued Patent) infringed by the manufacture, and/or use, lease or sale of such Licensed Product. Section 1.16 - "LICENSEE's Trade Name and Trademarks" means any trade name ------------------------------------ or trademark used and owned by LICENSEE. Section 1.17 - "Other-Trademark Purchaser" means any customer of LICENSEE ------------------------- who, with LICENSEE's knowledge, intends to resell, use or lease the Licensed Products under a trademark other than LICENSEE's Trade Name and Trademarks. Section 1.18 - "Licensed Copyrighted Works" means all copyrighted works -------------------------- owned by LICENSOR or owned by others and which LICENSOR has the right to sublicense, relating to the Dolby Digital AC-3 audio system and the reproduction of which are required in order for -4- LICENSEE to make or have made for it Licensed Products, and to use, lease and sell the same. Licensed Copyrighted Works exclude mask works fixed in a semiconductor chip product. Section 1.19 - The "Consumer Price Index" means the U.S. City Average Index -------------------- (base of 1982-1984 = 100) of the Consumer Price Index for All Urban Consumers as published by the Department of Labor, Bureau of Labor Statistics of the United States Government. In the event that said Index ceases to be published under its present name or form or ceases to be published by the same government entity, reference shall be made to the most similar index then available. Section 1.20 - The "Effective Date" of this Agreement is the date of -------------- execution hereof by the last party to execute the Agreement, or, if this Agreement requires validation by any governmental or quasi-governmental body, the "Effective Date" is the date of validation of this Agreement. Section 1.21 - "Virtual Dolby Digital" means the configuration, --------------------- specifications, and operating parameters for the Virtual Dolby Digital audio system, as specified in the Dolby Digital LICENSEE Information Manual referred to in Appendix C. ARTICLE II LICENSES GRANTED Section 2.01 - Licenses Granted to LICENSEE ---------------------------- LICENSOR hereby grants to LICENSEE: (1) a personal, non-transferable, indivisible, and non-exclusive license throughout the world under the Patent Rights, subject to the conditions set forth and LICENSEE's performance of its obligations, including paying royalties due, to make or have made for it Licensed Products, and to use, lease, import and sell the same; (2) a personal, non-transferable, indivisible, and non-exclusive license throughout the world to use the Know-How and to reproduce the Licensed Copyrighted Works in connection with the design, manufacture, and sale of the Licensed Products and to use the Licensed Trademarks on the Licensed Products and in connection with the advertising and offering for sale of Licensed Products bearing one or more of the Licensed Trademarks subject to the conditions set forth in this Agreement and LICENSEE's performance of its obligations, including the payment of royalties; and (3) a personal, non-transferable, indivisible, non-exclusive, and royally-free license throughout the world under the Patent Rights and to use the Know-How and to reproduce the Licensed Copyrighted Works in connection with the manufacture, use, lease and sale of spare parts solely for the repair of Licensed Products manufactured by LICENSEE under this Agreement. Section 2.02 - Limitation of Licenses Granted ------------------------------ Notwithstanding the licenses granted under Section 2.01: -5- (1) no license is granted to lease, sell, transfer, or otherwise dispose of any part of a Licensed Product, including, without limiting the foregoing, a semiconductor chip specially adapted for use in a Licensed Product, which part (a) is a material part of an invention which is the subject of a Scheduled Patent and which part is not a staple article or commodity of commerce suitable for substantial noninfringing use or (b) is not a spare part solely for the repair of a Licensed Product manufactured by LICENSEE under this Agreement; (2) no license is granted under this Agreement to lease, sell, transfer, or otherwise dispose of any partially assembled products, products in kit form, and knocked-down or semi-knocked-down products; (3) no license is granted under this Agreement with respect to any of LICENSOR's other licensed technologies; (4) no license is granted under this Agreement to use any Licensed Trademark in connection with offering for sale or in advertising and/or informational material relating to any Licensed Product which is not marked with the mark specified in Section 3.01(1) of this Agreement; (5) no license is granted under this Agreement with respect to the use of any Licensed Trademark on or in connection with products other than Licensed Products; (6) no right is granted with respect to LICENSOR's trade name "Dolby Laboratories" except with respect to the use of said tradename on and in connection with Licensed Products for the acknowledgments and notices required herein; (7) no license is granted to copy, prepare, make, or have made derivative works based on the Licensed Copyrighted Works; and (8) no right to grant sublicenses is granted under this Agreement. ARTICLE III OTHER OBLIGATIONS OF THE LICENSOR AND LICENSEE Section 3.01 - Use of Licensed Trademark ------------------------- The Licensed Trademarks have acquired a reputation for high quality among professionals and consumers around the world. The performance capability of the Dolby Digital AC-3 audio system is such that LICENSOR is willing to allow the use of the Licensed Trademarks on certain Licensed Products and in connection with their advertising and marketing to indicate that the quality of such products conforms with the general reputation for high quality associated with the Licensed Trademarks. LICENSEE's use of the Licensed Trademarks is optional, however, if LICENSEE opts to use one or more Licensed Trademarks, such use shall be subject to the obligations of this Agreement as well as detailed regulations issued from time to time by LICENSOR. Detailed regulations current at the time of execution of this Agreement and additional to those set forth in this -6- Agreement are set forth in the Section entitled "Trademark Usage" in the Dolby Digital LICENSEE Information Manual of Appendix C which is attached hereto and forms an integral part of this Agreement. LICENSEE shall comply with the requirements of the body of this Agreement and those of the Dolby Digital LICENSEE Information Manual of Appendix C and such additional regulations as LICENSOR may issue and shall ensure that its subsidiaries, agents, distributors, and dealers throughout the world comply with such requirements: (1) LICENSEE shall prominently mark the Licensed Product on an exposed surface thereof in the following way: [logo] or: Virtual [logo] Alternatively, if the Licensed Product is a PC or PC subsystem, the mark may appear as part of an opening screen or in an "about" window of the application software controlling the Licensed Product. (2) The mark specified in subsection (1) of this Section 3.01, may also be used at least once in a prominent manner in all advertising and promotions for such Licensed Product; such usages shall be no less prominent and in the same relative size as the most prominent third party trademark(s) appearing on such Licensed Product or in the advertising and promotion thereof. (3) LICENSEE may not use the Licensed Trademarks in advertising and promotion of a product not marked in accordance with subsection (1) of this Section 3.01, even if such product is a Licensed Product. (4) In every use of a Licensed Trademark, except on the exposed main control surface of a Licensed Product, LICENSEE shall give notice to the public that such Licensed Trademark is a trademark by using the superscript letters "TM" after the respective trademark, or by use of the trademark registration symbol "(R)" (the capital letter R enclosed in a circle) as a superscript after the respective trademark. LICENSOR shall inform LICENSEE as to which notice form is to be used. (5) LICENSEE shall use its best efforts to ensure that the appropriate trademark notices, as set forth in subsection (4) above, appear in advertising for such Licensed Products at the retail level. (6) LICENSOR's ownership of Licensed Trademarks shall be indicated whenever used by LICENSEE, whether use is on a product or on descriptive, instructional, advertising, or promotional material, by the most relevant of the following acknowledgments: "`Dolby' is a trademark of Dolby Laboratories", "The `Double-D' symbol is a trademark of Dolby Laboratories", -7- or "`Dolby' and the `Double-D' symbol are trademarks of Dolby Laboratories" On Licensed Products such words shall be used on an exposed surface when space permits. LICENSEE shall use its best efforts to ensure that such an acknowledgment appears in advertising at the retail level. (7) Licensed Trademarks shall always be used in accordance with established United States practices for the protection of trademark and service mark rights, unless the requirements in the country or jurisdiction in which the product will be sold are more stringent, in which case the practice of such country or jurisdiction shall be followed. In no event shall any Licensed Trademark be used in any way that suggests or connotes that it is a common, descriptive or generic designation. Whenever the word `Dolby' is used, the letter D shall be upper-case. The word `Dolby' shall be used only as an adjective referring to a digital audio product, never as a noun or in any other usage which may contribute to a generic meaning thereof. In descriptive, instructional, advertising, or promotional material or media relating to Licensed Products, LICENSEE must use the Licensed Trademarks and expressions which include the Licensed Trademark `Dolby' with an appropriate generic or descriptive term (e.g. "Dolby Digital decoder", "Dolby Digital audio circuit", "Dolby Digital (AC-3) transmission" etc.), with reference to Licensed Products and their use. (8) All uses of the Licensed Trademarks are subject to approval by LICENSOR. LICENSOR reserves the right to require LICENSEE to submit proposed uses to LICENSOR for written approval prior to actual use. Upon request of LICENSOR, LICENSEE shall submit to LICENSOR samples of its own usage of the Licensed Trademarks and usage of the Licensed Trademarks by its subsidiaries, agents, distributors, and dealers. (9) Licensed Trademarks shall be used in a manner that distinguishes them from other trademarks, service marks, symbols or trade names, including LICENSEE's Trade Name and Trademarks. (10) LICENSEE may not use the Licensed Trademarks on and in connection with products that do not meet LICENSOR's quality standards. (11) LICENSEE may not use the Licensed Trademarks on and in connection with products other than Licensed Products. Section 3.02 - Ownership of the Licensed Trademarks ------------------------------------ LICENSEE acknowledges the validity and exclusive ownership by LICENSOR of the Licensed Trademarks. LICENSEE further acknowledges that it owns no rights in the Licensed Trademarks nor in the tradename "Dolby Laboratories." LICENSEE acknowledges and agrees that all rights that it may accrue in the Licensed Trademarks and in the tradenames "Dolby Laboratories" will inure to the benefit of the owner thereof, LICENSOR or LICENSOR's parent Dolby Laboratories, Inc. LICENSEE further agrees that R will not file any application for registration of the Licensed Trademarks or "Dolby Laboratories" in any country, region, or under any arrangement or treaty. -8- LICENSEE also agrees that it will not use nor will it file any application to register in any country, region, or under any arrangement or treaty any mark, symbol or phrase, in any language, which is confusingly similar to the Licensed Trademarks or "Dolby Laboratories". Section 3.03 - Maintenance of Trademark Rights ------------------------------- The expense of obtaining and maintaining Licensed Trademark registrations shall be borne by LICENSOR. LICENSOR, as it deems necessary, will advise LICENSEE of the grant of registration of such trademarks. Upon request by either party, LICENSEE and LICENSOR will comply with applicable laws and practices of the country of registration, including, without limiting the foregoing, the marking with notice of registration and the recording of LICENSEE as a registered or licensed user of such trademarks. The expense of registering or recording LICENSEE as a registered user or otherwise complying with the laws of any country pertaining to such registration or the recording of trademark agreements shall be borne by LICENSEE. LICENSEE shall advise LICENSOR of all countries where Licensed Products are sold, leased or used. Section 3.04 - Patent, Trademark and Copyright Enforcement ------------------------------------------- LICENSEE shall immediately inform LICENSOR of all infringements, potential or actual, which may come to its attention, of the Patent Rights, Licensed Trademarks or Licensed Copyrighted Works. It shall be the exclusive responsibility of LICENSOR, at its own expense, to terminate, compromise, or otherwise act at its discretion with respect to such infringements. LICENSEE agrees to cooperate with LICENSOR by furnishing, without charge, except out-of-pocket expenses, such evidence, documents and testimony as may be required therein. Section 3.05 - Other-Trademark Purchasers -------------------------- If LICENSEE sells or leases Licensed Products on a mass basis to an Other-Trademark Purchaser who does not hold a license with terms and conditions substantially similar to this Agreement, LICENSEE shall inform LICENSOR of the name, place of business, trademarks, and trade names of the Other Trademark Purchaser before such Other-Trademark Purchaser sells, leases, or uses Licensed Products. LICENSEE shall obtain agreement from such Other-Trademark Purchaser not to modify, install, use, lease, sell, provide written material for or about, advertise, or promote Licensed Products in any way which is in conflict with any provision of this Agreement. It shall be the responsibility of LICENSEE to inform the Other-Trademark Purchaser of the provisions of this Agreement, to notify such Other Trademark Purchaser that the provisions of this Agreement shall be applicable, through LICENSEE, in the same way as if the Licensed Products were sold by LICENSEE under LICENSEE's Trade Names and Trademarks, to ensure by all reasonable means that such provisions are adhered to and, if requested by LICENSOR, to provide to LICENSOR copies of such Other-Trademark Purchaser's advertising, public announcements, literature, instruction manuals, and the like. It shall be LICENSEE's responsibility to inform said Other-Trademark Purchaser that any use of any of LICENSOR's trademark(s) on or in conjunction with the Other-Trademark Purchaser's own products can only be done under a separate license from LICENSOR. -9- Section 3.06 - Patent Marking -------------- LICENSEE shall mark each Licensed Product in the form, manner and location specified by LICENSOR, with one or more patent numbers of Patents in such countries under which a license is granted under this Agreement. Section 3.07 - Copyright Notice ---------------- (1) Where Applied LICENSEE shall apply the copyright notice specified ------------- in subsection 3.07(2) of this Section 3.07 to Licensed Products and all media embodying the Licensed Copyrighted Works. (2) Form of Notice LICENSEE shall apply the following copyright notice -------------- as required in subsection 3.07(l) of this Section 3.07: This product contains one or more programs protected under international and U.S. copyright laws as unpublished works. They are confidential and proprietary to Dolby Laboratories. Their reproduction or disclosure, in whole or in part, or the production of derivative works therefrom without the express permission of Dolby Laboratories is prohibited. Copyright 1992-1996 by Dolby Laboratories, Inc. All rights reserved. Section 3.08 - Furnishing of Licensed Copyrighted Works: Use of Licensed --------------------------------------------------------- Copyrighted Works - ----------------- Subject to any restrictions under the export control regulations of the United States or any other applicable restrictions, LICENSOR will promptly after the Effective Date, furnish to LICENSEE copies of all programs constituting the Licensed Copyrighted Works in the form of object code (machine readable code). Alternatively, LICENSEE may obtain such Licensed Copyrighted Works in conjunction with its purchase of integrated circuits or other Licensed Implementations. LICENSEE agrees to use such programs only for the purpose of programming general purpose DSP devices, read only memories (ROMs), random access memories (RAMs), or the like, forming an integral part of Licensed Products and constituting spare parts solely for the repair of a Licensed Products. LICENSEE agrees (1) it will not otherwise reproduce Licensed Copyrighted Works, in whole or in part, (2) it will not prepare derivative works from Copyrighted Works, and (3) it will not disclose the Licensed Copyrighted Works, in whole or in part. LICENSEE further agrees that it will not decompile or otherwise reverse engineer the object code constituting the Licensed Copyrighted Works, or any portion thereof. Upon termination of this Agreement, LICENSEE shall promptly return to LICENSOR, at LICENSEE's expense, all documents and things supplied to LICENSEE as Licensed Copyrighted Works, as well as all copies and reproductions thereof, except those incorporated into Licensed Products. -10 Section 3.09 - License Notice -------------- On all Licensed Products, LICENSEE shall acknowledge that the Licensed Products are manufactured under license from LICENSOR. Unless otherwise from time to time agreed between the parties, the following notice shall be used by LICENSEE on an exposed surface, such as the back or the bottom, of all Licensed Products: "Manufactured under license from Dolby Laboratories". Such notice shall also be used in all instruction and servicing manuals unless such acknowledgment is clearly and unambiguously given in the course of any textual descriptions or explanations. Section 3.10 - Furnishing of Know-How ---------------------- Subject to any restrictions under the export control regulations of the United States or any other applicable restrictions, LICENSOR will promptly after the Effective Date, furnish to LICENSEE: (1) copies of all documents and things comprising the Know-How; and (2) when requested by LICENSEE, provide, as LICENSOR deems reasonable, consulting services regarding design considerations and general advice relating to the Licensed Products and the sale and use thereof, for all of which LICENSEE will reimburse LICENSOR for travel and reasonable per them expenses. Section 3.11 - Use of Know-How and Confidential Information -------------------------------------------- (1) By LICENSEE ----------- LICENSEE shall use all Know-How and Confidential Information obtained heretofore or hereafter from LICENSOR solely for the purpose of manufacturing and selling Licensed Products under this Agreement, shall not use such Know-How or Confidential Information in an unauthorized way, and shall not divulge such Know-How or Confidential Information or any portion thereof to third parties, unless such Know-How or Confidential Information (a) was known to LICENSEE prior to its obtaining the same from LICENSOR; (b) becomes known to LICENSEE from sources other than either directly or indirectly from LICENSOR; (c) becomes public knowledge other than by breach of this Agreement by LICENSEE or by another licensee of LICENSOR; or (d) is independently developed by LICENSEE. Upon termination of this Agreement, with respect to Know-How or Confidential Information subject to the obligations of this subsection 3.11(1), LICENSEE shall promptly return to LICENSOR, at LICENSEE's expense, all documents and things supplied to LICENSEE as Know-How, as well as all copies and reproductions thereof. (2) By LICENSOR ----------- LICENSOR hereby agrees that throughout the term of this Agreement it shall not divulge to third parties, nor use in any unauthorized way Confidential Information belonging to LICENSEE, -11- unless such information (a) was known to LICENSOR prior to its obtaining the same from LICENSEE; (b) becomes known to LICENSOR from sources other than either directly or indirectly from LICENSEE, or (c) becomes public knowledge other than by breach of this Agreement by LICENSOR; or (d) is independently developed by LICENSOR. The obligations of this subsection 3.11(2) shall cease three (3) years from the date on which such Know-How or Confidential Information are acquired by LICENSOR from LICENSEE under this Agreement. ARTICLE IV PAYMENTS Section 4.01 - Initial Payment --------------- LICENSEE shall promptly upon the Effective Date of this Agreement pay LICENSOR the sum specified on the title page and shall pay all local fees, taxes, duties, or charges of any kind. Section 4.02 - Royalties ------------------------ (1) Subject to the provisions of Section 4.05, LICENSEE shall pay to LICENSOR royalties on Licensed Devices manufactured by or for LICENSEE and incorporated in Licensed Products which are used, sold, leased, or otherwise disposed of by LICENSEE, except for Licensed Devices incorporated in Licensed Products returned to LICENSEE by customers of LICENSEE, other than in exchange for an upgraded product, on which a credit has been allowed by LICENSEE to said customers. The royalty payable shall be based on the number of Licensed Devices, hereinbefore defined, contained in Licensed Products, which are used, sold, leased or otherwise disposed of by LICENSEE in successive calendar quarters from the effective date hereof, according to the amount of royalty specified below: [*] (2) For every Licensed Device incorporated in a Licensed Product that is used, sold, leased or otherwise disposed of by LICENSEE in a country that is not a Non-Patent Country LICENSEE shall pay [*] up to a maximum of three Licensed Devices per Licensed Product. (3) In addition, the following royalty shall apply to Licensed Products featuring Virtual Dolby Digital: (a) one Licensed Device for each Licensed Product utilizing more than two channel decoding to create the virtualized output channels if the Licensed Product provides only two -12- audio channels; and (b) one Licensed Device for each Licensed Product containing LICENSOR's "Virtualizer" technology. On the Effective Date of this Agreement, and annually thereafter on first day of each calendar year, the rate at which the total royalties are calculated shall be adjusted in accordance with the Consumer Price Index. The adjustment shall be made by multiplying the royalties calculated as specified above by the ratio between the Consumer Price Index for the last month of the year preceding the year in which the adjustment takes place and the Consumer Price Index for the month of December 1993. LICENSOR will, during the first quarter of each calendar year, or as soon as such information is known, if later, inform LICENSEE of the adjustment ratio to be applied to royalties due in that year. Section 4.03 - Section Deleted --------------- Section 4.04 - Royalty Applicability --------------------- A Licensed Product shall be considered sold under Section 4.02 when invoiced, or if not invoiced, delivered to another by LICENSEE or otherwise disposed of or put into use by LICENSEE, except for consignment shipments, which will be considered sold when the payment for such shipments is agreed upon between LICENSEE and customer. Section 4.05 - Royalty Payments and Statements ------------------------------- LICENSEE shall render statements and royalty payments as follows: (1) LICENSEE shall deliver to the address shown on the cover sheet of this Agreement or such place as LICENSOR may from time to time designate, quarterly reports certified by LICENSEE's chief financial officer or the officer's designate within 30 days after each calendar quarter ending with the last day of March, June, September and December. Alternatively, such reports may be delivered by facsimile by transmitting them to LICENSOR's facsimile telephone number shown on the cover sheet of this Agreement or such other number as LICENSOR may from time to time designate. Royalty payments are due for each quarter at the same time as each quarterly report and shall be made by wire transfer in United States funds to LICENSOR's bank as identified on the cover sheet of this Agreement or such other bank as LICENSOR may from time to time designate. LICENSEE shall pay all local fees, taxes, duties, or charges of any kind and shall not deduct them from the royalties due unless such deductions may be offset against LICENSOR's own tax liabilities. Each quarterly report shall: (a) state the number of each model type of Licensed Products leased, sold, or otherwise disposed of by LICENSEE during the calendar quarter with respect to which the report is due; (b) state the number of Licensed Devices in each model type of Licensed Product; and -13- (c) contain such other information and be in such form as LICENSOR or its outside auditors may prescribe. If LICENSEE claims less than full product royalty (under Section 4.06) or no royalty due (under Section 6.03), LICENSEE shall specify the country in which such Licensed Products were made, the country in which such Licensed Products were sold, and the identity of the purchasers of such Licensed Products. (2) Any remittance in excess of royalties due with respect to the calendar quarter for which the report is due shall be applied by LICENSOR to the next payment due. (3) LICENSEE's first report shall be for the calendar quarter in which LICENSEE sells its first Licensed Product. (4) LICENSEE shall deliver a final report and payment of royalties to LICENSOR certified by LICENSEE's chief financial officer or the officer's designate within 30 days after termination of this Agreement throughout the world. Such a final report shall include a report of all royalties due with respect to Licensed Products not previously reported to LICENSOR. Such final report shall be supplemented at the end of the next and subsequent quarters, in the same manner as provided for during the Life of the Agreement, in the event that LICENSEE learns of any additional royalties due. (5) LICENSEE shall pay interest to LICENSOR from the due date to the date payment is made of any overdue royalties or fees, including the Initial Payment, at the rate of 2% above the prime rate as is in effect from time to time at the bank identified on the cover page of this Agreement, or another major bank agreed to by the LICENSOR and LICENSEE in the event that the identified bank should cease to exist, provided however, that if the interest rate thus determined is in excess of rates allowable by any applicable law, the maximum interest rate allowable by such law shall apply. Section 4.06 - Royalties in Non-Patent Count ----------------------------- If a Licensed Product is manufactured in a Non- Patent Country and used, sold, leased or otherwise disposed of in a Non-Patent Country, be it the same or a different Non-Patent Country, royalties for the manufacture, use, sale, lease or other disposal of the Licensed Products in such Non-Patent Country or Countries under the Know-How, Licensed Copyrighted Works, and the Licensed Trademarks license shall be payable at the rates specified in Section 4.02; however, the additional royalty of [*] on each Licensed Device of such Licensed Product specified in Section 4.02 shall be waived. This provision shall not apply and full royalties shall be payable under Section 4.02: (1) when Licensed Products are manufactured in any country which is not a Non-Patent Country or are used, sold, leased or otherwise disposed of in any country which is not a Non-Patent Country, be it the same country as the country of manufacture or a different country; or (2) when LICENSEE knows or has reason to know that the Licensed Products manufactured in a Non-Patent Country and used, sold, leased or otherwise disposed of in a Non-Patent Country are destined for use by consumers or for sale, lease or other disposal to consumers in -14- a country which is not a Non- Patent Country and LICENSOR deems such sale to be for the purpose of defeating the royalty provisions of this agreement. Section 4.07 - Books and Records ----------------- LICENSEE shall keep complete books and records of all sales, leases, uses, returns, or other disposals by LICENSEE of Licensed Products for a period of three (3) years from such sales, leases, uses or other disposals. Section 4.08 - Rights of Inspecting Books and Records -------------------------------------- LICENSOR shall have the right, through a professionally registered accountant at LICENSOR's expense, to inspect, examine and make abstracts of the said books and records insofar as may be necessary to verify the accuracy of the same and of the statements provided for herein but such inspection and examination shall be made during business hours upon reasonable notice and not more often than once per calendar year. LICENSOR agrees not to divulge to third parties any Confidential Information obtained from the books and records of LICENSEE as a result of such inspection unless such information (a) was known to LICENSOR prior to its acquisition by LICENSOR as a result of such inspection; (b) becomes known to LICENSOR from sources other than directly or indirectly from LICENSEE; or (c) becomes a matter of public knowledge other than by breach of this Agreement by LICENSOR. ARTICLE V STANDARDS OF MANUFACTURE AND QUALITY Section 5.01 - Standardization and Quality --------------------------- LICENSEE shall abide by the Dolby Digital AC-3 Audio System Specifications, hereto appended in Appendix B and as modified from time to time by LICENSOR. LICENSEE shall abide by reasonable standards of quality and workmanship. Such quality standards shall apply to Licensed Devices and to aspects of Licensed Products not directly relating to the Licensed Devices but which nevertheless influence or reflect upon the audio quality or performance of the Licensed Devices as perceived by the end user. LICENSEE shall with respect to all Licensed Products bearing the Licensed Trademarks conform to any reasonable quality standards requirements as specified by LICENSOR within a period of ninety (90) days of such specification in writing. Licensed Products shall not be designed, presented or advertised in any way which contributes to confusion of the Dolby Digital AC-3 audio system with any of LICENSOR's other digital audio systems, audio noise reduction or headroom extension systems or LICENSOR's motion picture sound system. -15- Section 5.02 - Right to Inspect Quality ------------------------ LICENSEE shall provide LICENSOR with such non-confidential information concerning Licensed Products as it may reasonably require in performing its right to enforce quality standards under this Agreement. LICENSEE will, upon request, provide on a loan basis to LICENSOR a reasonable number of samples (at least one from each product family) of Licensed Products for testing, together with instruction and service manuals. If transmissions necessary to test Licensed Products under field operating conditions are not receivable at LICENSOR's San Francisco test facility, LICENSEE shall make available to LICENSOR, upon receipt of reasonable notice from LICENSOR, reasonable facilities for testing Licensed Products. In the event that LICENSOR shall complain that any Licensed Product does not comply with LICENSOR's quality standards, excepting newly specified standards falling within the ninety (90) day time limit of Section 5.01, it shall promptly so notify LICENSEE by written communication whereupon LICENSEE shall within ninety (90) days suspend the lease, sale or other disposal of the same. ARTICLE VI TERMINATION AND EFFECT OF TERMINATION Section 6.01 - Expiration of Agreement ----------------------- Unless this Agreement already has been terminated in accordance with the provisions of Section 6.02, this Agreement shall terminate in all countries of the world upon the expiration of the last-to-expire Patent under the Scheduled Patents. The Agreement is not extended by Patents in the Patent Rights that are not Scheduled Patents. Section 6.02 - Termination for Cause --------------------- At the option of LICENSOR, in the event that LICENSEE breaches any of its material obligations under this Agreement, subject to the conditions of Section 6.04, this Agreement shall terminate upon LICENSOR's giving sixty (60) days advance notice in writing, effective on dispatch of such notice, of such termination, giving reasons therefore to LICENSEE, provided however, that, if LICENSEE, within the sixty (60) day period, remedies the failure or default upon which such notice is based, then such notice shall not become effective and this Agreement shall continue in full force and effect. Notwithstanding the sixty day cure period provided under the provisions of this Section 6.02, interest due under Section 4.05 shall remain payable and shall not waive, diminish, or otherwise affect any of LICENSOR's rights pursuant to this Section 6.02. Section 6.03 - Option to Terminate in a Non-Patent Count ----------------------------------------- Subject to the provisions of Section 6.04, unless this Agreement already has been terminated in accordance with the provisions of Section 6.01 or Section 6.02, LICENSEE shall have the option to terminate its license under this Agreement with respect to a Non-Patent Country at any time after three years from the Effective Date of this Agreement. Said option to terminate with respect to such -16- country shall be effective when LICENSOR receives LICENSEE's written notice of its exercise of such option and shall be prospective only and not retroactive. Section 6.04 - Effect of Termination --------------------- Upon termination of the Agreement, as provided in Sections 6.01 or 6.02, or upon termination of the license under this Agreement with respect to a Non-Patent Country in accordance with the option set forth in Section 6.03, with respect to such country only, all licenses granted by LICENSOR to LICENSEE under this Agreement shall terminate, all rights LICENSOR granted to LICENSEE shall revest in LICENSOR, and all other rights and obligations of LICENSOR and LICENSEE under this agreement shall terminate except that the following rights and obligations of LICENSOR and LICENSEE shall survive to the extent necessary to permit their complete fulfillment and discharge, with the exception that subsection (9) shall not apply in case of termination under Section 6.01: (1) LICENSEE's obligation to deliver a final royalty report and supplements thereto as required by Section 4.05; (2) LICENSOR's right to receive and LICENSEE's obligation to pay royalties, under Article IV, including interest on overdue royalties, accrued or accruable for payment at the time of termination and interest on overdue royalties accruing subsequent to termination; (3) LICENSEE's obligation to maintain books and records and LICENSOR's right to examine, audit, and copy as provided in Section 4.07-, (4) any cause of action or claim of either party accrued or to accrue because of any breach or default by the other party; (5) LICENSEE's obligations with respect to Know-How and Confidential Information under Section 3.11 (1) and LICENSOR's obligations with respect to Confidential Information under Sections 3.11(2) and 4.08; (6) LICENSEE's obligations to cooperate with LICENSOR with respect to Patent, Trademark, and Copyright enforcement under Section 3.04, with respect to matters arising before termination; (7) LICENSEE's obligation to return to LICENSOR all documents and things furnished to LICENSEE, and copies thereof, under the provisions of Section 3.11; (8) LICENSEE's and LICENSOR's obligations regarding public announcements under Section 8.03; and (9) LICENSEE shall be entitled to fill orders for Licensed Products already received and to make or have made for it and to sell Licensed Products for which commitments to vendors have been made at the time of such termination, subject to payment of applicable royalties -17- thereon and subject to said Licensed Products meeting LICENSOR's quality standards, provided that LICENSEE promptly advises LICENSOR of such commitments upon termination; and (10) LICENSEE's right to use the Know-How and to reproduce the Licensed Copyrighted Works in connection with the manufacture, use, lease, and sale of spare parts solely for the repair of Licensed Products as provided in Section 2.01(3). The portions of the Agreement specifically identified in the sub-parts of this Section shall be construed and interpreted in connection with such other portions of the Agreement as may be required to make them effective. ARTICLE VII LIMITATIONS OF RIGHTS AND AUTHORITY Section 7.01 - Limitation of Rights -------------------- No right or title whatsoever in the Patent Rights, Know-How, Licensed Copyrighted Works, or the Licensed Trademarks is granted by LICENSOR to LICENSEE or shall be taken or assumed by LICENSEE except as is specifically laid down in this Agreement. Section 7.02 - Limitation of Authority ----------------------- Neither party shall in any respect whatsoever be taken to be the agent or representative of the other party and neither party shall have any authority to assume any obligation for or to commit the other party in any way. Section 7.03 - Disclaimer of Warranties and Liability: Hold Harmless ----------------------------------------------------- LICENSOR has provided LICENSEE the rights and privileges contained in this Agreement in good faith. LICENSOR represents that it has done diligent U.S. patentability searches in the field of digital audio and that it is unaware of any patents of third parties which would be infringed by the practice of its AC-3 digital audio technology which is the subject of this Agreement. LICENSOR represents that the Licensed Know-How and Licensed Copyrighted Works were either developed by LICENSOR or by a third party from whom LICENSOR has obtained the right to license. However, nothing contained in this Agreement shall be construed as (1) a warranty or representation by LICENSOR as to the validity or scope of any Patent included in The Patent Rights; (2) a warranty or representation that the Dolby Digital AC-3 Audio System technology, Patent Rights, Know-How, Licensed Copyrighted Works, Licensed Trademarks, or any Licensed Device, Licensed Product, or part thereof embodying any of them will be free from infringement of Patents, copyrights, trademarks, service marks, or other proprietary rights of third parties; or (3) an agreement to defend LICENSEE against actions or suits of any nature brought by any third parties. LICENSOR disclaims all liability and responsibility for property damage, personal injury, and consequential damages, whether or not foreseeable, that may result from the manufacture, use, -18- lease, or sale of Licensed Devices, Licensed Products and parts thereof, and LICENSEE agrees to assume all liability and responsibility for all such damage and injury, to the extent that such liability and responsibility of LICENSEE have been finally determined in any court of competent jurisdiction. LICENSEE agrees to indemnify, defend, and hold LICENSOR harmless from and against all claims (including, without limitation, product liability claims), suits, losses and damages, including reasonable attorneys' fees and any other expenses incurred in investigation and defense, arising out of LICENSEE's manufacture, use, lease, or sale of Licensed Devices, Licensed Products, or parts thereof, or out of any allegedly unauthorized use of any trademark, service mark, Patent, copyright, process, idea, method, or device (excepting Licensed Trademarks, Patent Rights, Know-How, Confidential Information, and Licensed Copyrighted Works) by LICENSEE or those acting under its apparent or actual authority. Section 7.04 - Limitation of Assignment by LICENSEE ------------------------------------ The rights, duties and privileges of LICENSEE hereunder shall not be transferred or assigned by it either in part or in whole without prior written consent of LICENSOR. However, LICENSEE shall have the right to transfer its rights, duties and privileges under this Agreement in connection with its merger and consolidation with another firm or the sale of its entire business to another person or firm, provided that such person or firm shall first have agreed with LICENSOR to perform the transferring party's obligations and duties hereunder. Section 7.05 - Compliance with U.S. Export Control Regulations ----------------------------------------------- (1) LICENSEE agrees not to export any technical data acquired from LICENSOR under this Agreement, nor the direct product thereof, either directly or indirectly, to any country in contravention of United States law. (2) Nothing in this Agreement shall be construed as requiring LICENSOR to export from the United States, directly or indirectly, any technical data or any commodities to any country in contravention of United States law. ARTICLE VIII MISCELLANEOUS PROVISIONS Section 8.01 - Language of Agreement: Language of Notices ------------------------------------------ The language of this Agreement is English. If translated into another language, this English version of the Agreement shall be controlling. Except as may be agreed by LICENSOR and LICENSEE, all notices, reports, consents, and approvals required or permitted to be given hereunder shall be written in the English language. -19- Section 8.02 - Stability of Agreement ---------------------- No provision of this Agreement shall be deemed modified by any acts of LICENSOR, its agents or employees or by failure to object to any acts of LICENSEE which may be inconsistent herewith, or otherwise, except by a subsequent agreement in writing signed by LICENSOR and LICENSEE. No waiver of a breach committed by either party in one instance shall constitute a waiver or a license to commit or continue breaches in other or like instances. Section 8.03 - Public Announcements -------------------- Neither party shall at any time heretofore or hereafter publicly state or imply that the terms specified herein or the relationships between LICENSOR and LICENSEE are in any way different from those specifically laid down in this Agreement. LICENSEE shall not at any time publicly state or imply that any unlicensed products use the Dolby Digital AC-3 Audio System Specifications. If requested by one party, the other party shall promptly supply the first party with copies of all public statements and of all publicity and promotional material relating to this Agreement, the Dolby Digital AC-3 Audio System Specifications, Licensed Devices, Licensed Products, Licensed Trademarks, and Know-How. Section 8.04 - Address of LICENSOR and LICENSEE for all Other ---------------------------------------------- Communications -------------- Except as otherwise specified in this Agreement, all notices, reports, consents, and approvals required or permitted to be given hereunder shall be in writing, signed by an officer of LICENSEE or LICENSOR, respectively, and sent postage or shipping charges prepaid by certified or registered mail, return receipt requested showing to whom, when and where delivered, or by Express mail, or by a secure overnight or one-day delivery service that provides proof and date of delivery, or by facsimile, properly addressed or transmitted to LICENSEE or LICENSOR, respectively, at the address or facsimile number set forth on the cover page of this Agreement or to such other address or facsimile number as may from time to time be designated by either party to the other in writing. Wire payments from LICENSEE to LICENSOR shall be made to the bank and account of LICENSOR as set forth on the cover page of this agreement or to such other bank and account as LICENSOR may from time to time designate in writing to LICENSEE. Section 8.05 - Applicable Law -------------- This Agreement shall be construed in accordance with the substantive laws, but not the choice of law rules, of the State of California. Section 8.06 - Choice of Forum: Attorneys' Fees -------------------------------- To the full extent permitted by law, LICENSOR and LICENSEE agree that their choice of forum, in the event that any dispute arising under this agreement is not resolved by mutual agreement, shall be the United States Courts in the State of California and the State Courts of the State of California. -20- In the event that any action is brought for any breach or default of any of the terms of this Agreement, or otherwise in connection with this Agreement, the prevailing party shall be entitled to recover from the other party all costs and expenses incurred in that action or any appeal therefrom, including without limitation, all attorneys' fees and costs actually incurred. Section 8.07 - Construction of Agreement ------------------------- This Agreement shall not be construed for or against any party based on any rule of construction concerning who prepared the Agreement or otherwise. Section 8.08 - Captions -------- Titles and captions in this Agreement are for convenient reference only and shall not be considered in construing the intent, meaning, or scope of the Agreement or any portion thereof. Section 8.09 - Singular and Plural ------------------- Throughout this Agreement, words in the singular shall be construed as including the plural and words in the plural shall be construed as including the singular. Section 8.10 - Complete Agreement ------------------ This Agreement contains the entire agreement and understanding between LICENSOR and LICENSEE relating to the subject matter hereof and merges all prior or contemporaneous oral or written communication between them. Neither LICENSOR nor LICENSEE now is, or shall hereafter be, in any way bound by any prior, contemporaneous or subsequent oral or written communication except insofar as the same is expressly set forth in this Agreement or in a subsequent written agreement duly executed by both LICENSOR and LICENSEE. Section 8.11 - Severability ------------ Should any portion of this Agreement be declared null and void by operation of law, or otherwise, the remainder of this Agreement shall remain in full force and effect. Section 8.12 - Company Representation and Warrant ---------------------------------- LICENSEE represents and warrants to LICENSOR that it is not a party to any agreement, and is not subject to any statutory or other obligation or restriction, which might prevent or restrict it from performing all of its obligations and undertakings under this License Agreement, and that the execution and delivery of this Agreement and the performance by LICENSEE of its obligations hereunder have been authorized by all necessary action, corporate or otherwise. Section 8.13 - Execution --------- IN WITNESS WHEREOF, the said LICENSOR has caused this Agreement to be executed on the cover page of this Agreement, in the presence of a witness, by an officer duly authorized and -21- the said LICENSEE has caused the same to be executed on the cover page of this Agreement, in the presence of a witness, by an officer duly authorized, in duplicate original copies, as of the date set forth on said cover page. -22- APPENDIX A - SCHEDULED PATENTS The Scheduled Patents shall mean the following patents and patent applications: PATENTS Count Patent Number ------------------- ------------------- Australia 631,404 Australia 644,170 Australia 649,786 Australia 653,582 Australia 655,053 Australia 655,535 Australia 674,357 Australia 677,688 Australia 677,856 Austria 0 524 264 Austria 0 519 055 Austria 0 560 413 Austria 0 664 943 Austria 0 709 004 Austria 0 709 005 Austria 0 709 006 Austria 0 716 787 Austria 0 520 068 Austria 0 514 949 Belgium 0 208 712 Belgium 0 481 374 Belgium 0 524 264 Belgium 0 519 055 Belgium 0 560 413 Belgium 0 664 943 Belgium 0 709 004 Belgium 0 709 005 Belgium 0 709 006 Belgium 0 716 787 Belgium 0 520 068 Belgium 0 514 949 Canada 1,239,701 Canada 1,301,337 Canada 2,026,213 Denmark 0 208 712 Denmark 0 481 374 Denmark 0 524 264 Count Patent Number ------------------- ------------------- Denmark 0 519 055 Denmark 0 560 413 Denmark 0 587 733 Denmark 0 664 943 Denmark 0 709 004 Denmark 0 709 005 Denmark 0 709 006 Denmark 0 716 787 Denmark 0 520 068 Denmark 0 514 949 France 0 208 712 France 0 481 374 France 0 455 738 France 0 524 264 France 0 519 055 France 0 560 413 France 0 587 733 France 0 664 943 France 0 709 004 France 0 709 005 France 0 709 006 France 0 716 787 France 0 520 068 France 0 514 949 Germany 3587251 Germany 69125909 Germany 69214523.0 Germany 69221616.2 Germany 69311569.6 Germany 69401512.1 Germany 69401514.8 Germany 69401959.3 Germany 69401517.2 Germany 69006011.4 Germany 69107841.6 Germany 69210689.8 Germany 69031737.9 Greece 0 524 264 Italy 0 208 712 Italy 0 481 374 Italy 0 524 264 Italy 0 519 055 Italy 0 664 943 -2- Count Patent Number -------------------------- ------------------------ Italy 0 709 004 Italy 0 709 005 Italy 0 709 006 Italy 0 716 787 Italy 0 520 068 Italy 0 514 949 Netherlands 0 519 055 Netherlands 0 560 413 Netherlands 0 587 733 Netherlands 0 664 943 Netherlands 0 709 004 Netherlands 0 709 005 Netherlands 0 709 006 Netherlands 0 716 787 Netherlands 0 455 738 Netherlands 0 524 264 Netherlands 0 520 068 Netherlands 0 514 949 Singapore P9692379-2 Singapore P9692369-3 Spain 0 524 264 Spain 0 519 055 Spain 0 560 413 Spain 0 664 943 Spain 0 709 004 Spain 0 709 005 Spain 0 709 006 Spain 0 716 787 Spain 0 520 068 Spain 0 514 949 Sweden 0 519 055 Sweden 0 560 413 Sweden 0 664 943 Sweden 0 709 004 Sweden 0 709 005 Sweden 0 709 006 Sweden 0 716 787 Sweden 0 524 264 Sweden 0 520 068 Sweden 0 514 949 Switzerland/Liechtenstein 0 524 264 Switzerland/Liechtenstein 0 716 787 Switzerland/Liechtenstein 0 519 055 -3- Count Patent Number ------------------------- -------------------------- Switzerland/Liechtenstein 0 560 413 Switzerland/Liechtenstein 0 664 943 Switzerland/Liechtenstein 0 709 004 Switzerland/Liechtenstein 0 709 005 Switzerland/Liechtenstein 0 709 006 Switzerland/Liechtenstein 0 520 068 Switzerland/Liechtenstein 0 514 949 Taiwan 52,047 Taiwan 53,726 Taiwan 56,006 Taiwan 60,430 United Kingdom 0 208 712 United Kingdom 0 481 374 United Kingdom 0 455 738 United Kingdom 0 524 264 United Kingdom 0 519 055 United Kingdom 0 560 413 United Kingdom 0 587 733 United Kingdom 0 664 943 United Kingdom 0 709 004 United Kingdom 0 709 005 United Kingdom 0 709 006 United Kingdom 0 716 787 United Kingdom 0 520 068 United Kingdom 0 514 949 United States of America 4,790,016 United States of America 4,914,701 United States of America 5,235,671 United States of America 5,109,417 United States of America 5,274,740 United States of America 5,291,557 United States of America 5,297,236 United States of America 5,357,594 United States of America 5,394,473 United States of America 5,479,562 United States of America 5,752,225 United States of America 5,583,962 United States of America 5,581,653 United States of America 5,632,003 United States of America 5,623,577 United States of America 5,633,981 -4- PATENT APPLICATIONS ------------------- Country Application Number ------------------ ------------------ Australia 73642/94 Australia 76765/94 Australia 11305/95 Austria 94107838.8 Belgium 94107838.8 Canada 2,053,064-2 Canada 2,059,141 Canada 2,077,662 Canada 2,077,668 Canada 2103051 Canada 2,140,678 Canada 2,142,092 Canada 2,164,964 Canada 2,165,450 Canada 2,166,551 Canada 2,167,527 China 91 102167.1 Denmark 94107838.8 France 94107838.8 Germany 94107838.8 Italy 94107838.8 Japan 2-503825 Japan 3-508357 Japan 4-504474 Japan 4-503836 Japan 5-500680 Japan 6-510170 Japan 7-504717 Japan 7-508213 Japan 7-504753 Japan 7-504747 Korea 90-702194 Korea 92-702394 Korea 92-702095 Korea 92-702096 Korea 95-700769 Netherlands 94107838.8 Singapore 9608277-1 Singapore 9608335-7 Singapore 9608307-6 Country Application Number --------------------------- ------------------ Singapore 9608275-5 Singapore 9608135-1 Singapore 9603970-6 Singapore 9608577-4 Singapore 9608674-9 Singapore 9608134-4 Singapore 9608676-4 Singapore 9608675-6 Singapore 9608341-5 Singapore 9608307-6 Spain 94107838.8 Sweden 94107838.8 Switzerland/Liechtenstein 94107838.8 United Kingdom 94107838.8 -2- THE DOLBY VIRTUAL PATENTS ------------------------- PATENT APPLICATIONS ------------------- Count Application Number -------------------------- -------------------- PCT* 98/03882 United States of America 08/819,582 ___________________ * Filed in these countries: Australia, Austria, Belgium, Canada, Denmark, France, Germany, Italy, Japan, Korea, Netherlands, Singapore, Spain, Sweden, Switzerland/Liechtenstein, United Kingdom APPENDIX B - "DOLBY DIGITAL AC-3 AUDIO SYSTEM" Compliance with the algorithm description and operating parameters as specified in ATSC document A/52, the "Dolby Digital LICENSEE Information Manual", the "Software Interface Protocol" issued by Dolby and any further reasonable specifications and requirements as DOLBY may issue from time to time. APPENDIX C - DOLBY DIGITAL LICENSEE INFORMATION MANUAL [Dolby Logo] Dolby Laboratories Inc. Dolby Laboratories Licensing Corporation Signal Processing and Noise Reduction Systems 100 Potrero Avenue San Francisco, California 94103-4813 Telephone 415-558-0200 Facsimile 415-863-1373 28 March 2000 InterVideo, Inc. 440 Mission Court, Suite 260 Fremont, CA 94539 United States of America Side Letter: Dolby Headphone Gentlemen: Re: License Agreement entitled "DIGITAL AUDIO SYSTEM LICENSE AGREEMENT" (L3D-AC3V) between InterVideo, Inc. and Dolby Laboratories Licensing Corporation, effective March 4, 1999. We have pleasure in extending the rights granted under the above-mentioned License Agreement to include, additional patents, know-how, and copyrighted works that cover our Dolby Headphone audio system. This Dolby Headphone Side Letter makes the necessary changes to the wording of the License Agreement, Coupled with the License Agreement, it forms an integral understanding regarding Dolby Headphone, and is not intended to affect the terms of use for other technologies. If there is any conflict between the wording of this Dolby Headphone Side Letter and that of the above-mentioned Agreement (with respect to the Dolby Headphone audio system), the wording of the Side Letter will be regarded as controlling. 1. Add to the Index page: Section 1.22 - "Dolby Headphone System Specifications." Appendix D - Table of Contents for the Product Development Kit: Dolby Headphone. 2. Add to the Preamble (Page 1) after the eleventh "WHEREAS," clause: WHEREAS, LICENSOR'S approved Dolby Headphone audio system (hereafter, "Dolby Headphone") and its manufacture embody Inventive subject matter which are the subject of international patent and patent applications licensable by LICENSOR; WHEREAS, the manufacture and sale of LICENSOR'S Dolby Headphone audio system requires the reproduction of copyrighted works licensable by LICENSOR; Intervideo, Inc. 28 March 2000 Page 2 WHEREAS, LICENSOR represents and warrants that it has rights to grant licenses under such know-how, patents and patent applications and copyrighted works and under its trademarks; WHEREAS, LICENSEE is engaged in the manufacture and sale of products for the home electronics market; and WHEREAS, LICENSEE believes it can develop substantial demand for equipment to decode audio signals using LICENSOR's Dolby Headphone audio system; WHEREAS, LICENSEE desires a non-exclusive license to manufacture and sell decoders using LICENSOR's Dolby Headphone audio system under LICENSOR's trademarks, know-how, copyrighted works, patents and patent applications; and 3. Add to the end of Section 1.09 - "Licensed Trademark," the following: "and (d) the word mark "Dolby Headphone," and (e) the device mark [Dolby Logo with headphones]. 4. Replace the first sentence of Section 1.10 - "Licensed Device," with the following: "Licensed Device means a digital audio circuit having (a) Dolby Digital AC-3 Audio System Specifications, or (b) Dolby Headphone System Specifications, whether made in discrete component, integrated circuit, or other forms, for decoding a digital bitstream into one or more audio channels (hereafter sometimes referred to as a "Dolby Digital Licensed Device," or a "Dolby Headphone Licensed Device," respectively). 5. Modify Section 1.11(2) - "Licensed Product," so that the first paragraph phrase "intended or designed for use in decoding an AC-3 digital audio bitstream," reads "intended or designed for use in decoding (a) a Dolby Digital AC-3 digital audio bitstream, and/or (b) a Dolby Headphone bitstream, (hereafter sometimes referred to as a "Dolby Digital Licensed Product" or a "Dolby Headphone Licensed Product," respectively)." In addition, modify the second-paragraph phrase "Every Licensed Product containing three or more Licensed Devices must," so that it reads, "Every Licensed Product containing three or more Dolby Digital Licensed Devices must..." 6. Modify Section 1.19 - "Licensed Copyrighted Works," so that the phrase "relating to the Dolby Digital AC-3 audio system," reads "relating to the Dolby Digital AC-3 audio system or to the Dolby Headphone audio system." 7. Add Section 1.22 - "Dolby Headphone System Specifications." Section 1.22 - "Dolby Headphone System Specifications" means the specifications for the Dolby Headphone audio system, comprising the claims and teachings of the relevant Scheduled Patents, and the Dolby Headphone system operating parameters as specified in the Dolby Headphone Product Development Kit (the table of contents of which is attached hereto at Appendix D, entitled, "Table of Contents for the Product Development Kit: Dolby Headphone," and which may be updated from time to time by LICENSOR), and the relevant Licensed Copyrighted Works and Know-How. Appendix D is attached hereto and forms an integral part of this Agreement. Intervideo, Inc. 28 March 2000 Page 3 8. Modify Section 2.02 - Limitation of Licenses Granted, to include the following additional subsection: "(9) no license is granted hereunder to make, have made for, use in, or import or sell Licensed Products into professional (non-consumer) market segments." 9. Modify Section 3.01 - Use of Licensed Trademarks: So that the second sentence phrase, "The performance capability of the Dolby Digital AC-3 audio system." reads, "The performance capability of the Dolby Digital AC-3 and Dolby Headphone audio systems;" and so that the end of Subsection (1) contains additionally: "and/or [Dolby Logo with headphones]"; and so that the end of the first sentence of Subsection (8) contains additionally: "Dolby, `the `Double-D' symbol and `[Dolby Logo with headphones]' are trademarks of Dolby Laboratories." 10. Replace Section 3.07(2) - Form of Notice with the following: LICENSEE shall apply the following relevant copyright notices as required in subsection 3.07(1) of this Section 3.07: (a) For Dolby Digital Licensed Products: This product contains one or more programs protected under international and U.S. copyright laws as unpublished works. They are confidential and proprietary to Dolby Laboratories. Their reproduction or disclosure, in whole or in part, or the production of derivative works therefrom without the express permission of Dolby Laboratories is prohibited. Copyright 1992-1997 by Dolby Laboratories, Inc. All rights reserved. (b) For Dolby Headphone Licensed Products: This product contains one or more programs protected under international and U.S. copyright laws as unpublished works. They are confidential and proprietary to Dolby Laboratories. Their reproduction or disclosure, in whole or in part, or the production of derivative works therefrom without the express permission of Dolby Laboratories is prohibited. Copyright 1998-1999 by Dolby Laboratories. All rights reserved. (c) For Licensed Products which are both Dolby Digital Licensed Products and Dolby Headphone Licensed Products: This product contains programs protected under international and U.S. copyright laws as unpublished works. They are confidential and proprietary to Dolby Laboratories. Their reproduction or disclosure, in whole or in part, or the production of derivative works therefrom without the express permission of Dolby Laboratories is prohibited. Copyright 1992-1997 and 1998-1999 by Dolby Laboratories. All rights reserved. 11. Modify Section 4.02 - Royalties as follows: Add the following after the first paragraph: "In addition, a royalty of two Licensed Devices shall apply to each Dolby Headphone Licensed Product." Modify the paragraph which begins: "For every Licensed Device incorporated in a Licensed Product," as follows: "For every Licensed Device incorporated in a Licensed Product that is used, sold, leased or otherwise disposed of by LICENSEE in a country that is not a Non-Patent Country, LICENSEE shall pay Intervideo, Inc. 28 March 2000 Page 4 [*] With respect to Dolby Digital Licensed Devices, a maximum of three shall apply per Dolby Digital Licensed Product; but Dolby Headphone Licensed Devices shall not count toward such maximum." 12. Add the following after the first sentence of the first paragraph of Section 4.06 - Royalties in Non-Patent Country: "(For the avoidance of doubt, the designation of a particular jurisdiction as a Non-Patent Country with respect to a particular royalty payable, shall be determined by the part of the Schedule of Patents relevant to such royalty payable. For example, the additional Scheduled Patents added by the Dolby Headphone Side Letter are relevant to the designation of a jurisdiction as a Non-Patent Country only with respect to Dolby Headphone royalties payable.)" 13. Modify Section 6.01 - Standardization and Quality as follows: Add to end of the first sentence, of the first paragraph: "...and by the Dolby Headphone System Specifications." Modify the second paragraph to read: "Licensed Products shall not be designed, presented or advertised in any way which contributes to confusion of the Dolby Digital AC-3 audio system, or of the Dolby Headphone audio system, with any of LICENSOR's other digital audio systems, audio noise reduction or headroom extension systems or LICENSOR's motion picture sound system." 14. Modify the second two sentences of Section 8.03 - Public Announcements so that they read: "LICENSEE shall not at any time publicly state or imply that any unlicensed products use either the Dolby Digital AC-3 Audio System Specifications or the Dolby Headphone System Specifications. If requested by one party, the other party shall promptly supply the first party with copies of all public statements and of all publicity and promotional material relating to this Agreement, the Dolby Digital AC-3 Audio System Specifications, Dolby Headphone System Specifications, Licensed Devices, Licensed Products, Licensed Trademarks, and Know-How." 15. Add to APPENDIX A - SCHEDULE OF PATENTS the following: DOLBY HEADPHONE PATENTS ------- Country Patent Number - ------- ------------- Australia 689439 United States of America 5,502,747 Intervideo, Inc. 28 March 2000 Page 5 PATENT APPLICATIONS ------------------- Country Patent Number - ------- ------------- Canada 2139511 EPO* 93914555.3 Japan 502761/94 PCT** AU96/00769 PCT*** AU98/00002 *Designating these countries: Belgium, Denmark, France, Germany, Italy, Netherlands, Sweden, United Kingdom **Designating these countries: Belgium, Denmark, France, Germany, Italy, Netherlands, Sweden, United Kingdom, Japan, Korea, United States of America ***Designating these countries: Australia, Austria, Belgium, Canada, China, Denmark, France, Germany, India, Italy, Japan, Korea, Netherlands, Singapore, Spain, Sweden, Switzerland/Liechtenstein, United Kingdom, United States of America 16. Add to the end of the Agreement: "APPENDIX D - TABLE OF CONTENTS FOR THE PRODUCT DEVELOPMENT KIT: DOLBY HEADPHONE" 1. DOLBY HEADPHONE 1.1. Dolby Headphone Licensing Manual -------------------------------- 999/12691, Draft version, Aug. 89 This document describes the product specifications and functional requirements for the use of Dolby Headphone technology within a range of typical consumer products as well as trademark usage. 1.2. Test Material* ------------- 1.2.1. Test signals* ------------ Under development Test signals to verify that the Dolby Headphone algorithm has been properly implemented. 1.2.2. Test program* ------------ dhcheck.exe Under development This is a Win32 executable for analysis of the measured system responses. Intervideo, Inc. 28 March 2000 Page 6 Yours sincerely, DOLBY LABORATORIES LICENSING CORPORATION /s/ D. Mac Leckrone D. Mac Leckrone Sr. Manager, Agreements & Contracts Read and Agreed on behalf of InterVideo, Inc. Signature: /s/ Joe Monastiero ---------------------------------- Name: Joe Monastiero -------------------------------------- Title: VP -------------------------------------- Date: April 10, 2000 -------------------------------------- EX-10.7 4 dex107.txt CSS LICENSE AGREEMENT Exhibit 10.7 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. OMITTED INFORMATION HAS BEEN REPLACED BY [*]. Version 1.1 CSS LICENSE AGREEMENT This CSS LICENSE AGREEMENT (the "License Agreement"), including the related CSS PROCEDURAL AND TECHNICAL SPECIFICATIONS (together, the "Specifications") and the Exhibits and Attachments to the License Agreement and Specifications (collectively, this "Agreement"), is made and entered into by and between: (i) the DVD Copy Control Association, Inc., a Delaware nonprofit corporation, having offices located at 225B Cochrane Circle, Morgan Hill, CA 95037 ("Licensor"); and (ii) InterVideo, Inc., a California corporation having offices located at 47350 Fremont Blvd., Fremont, CA 94538 ("Licensee"). This Agreement shall be effective as of the date of the later signature below ("Effective Date"). RECITALS A. Matsushita Electric Industrial Co., Ltd. ("MEI") and Toshiba Corporation ("Toshiba") have developed a Content Scramble System (as defined below) to provide reasonable security for content on DVD Discs and thereby, together with the terms and conditions of this Agreement, to provide protection for such copyrighted content against unauthorized consumer copying, and have filed patent applications with respect to the Content Scramble System. B. MEI and Toshiba have licensed the Content Scramble System to Licensor for purposes of further licensing the system and administering such licenses in relation to the protection of content utilizing the DVD Video Specification for content encoded on DVD Discs. C. Licensor desires to license the Content Scramble System to Licensee, and Licensee desires to license the Content Scramble System from Licensor, subject to the terms and conditions set forth in this Agreement: AGREEMENT 1. DEFINITIONS. In addition to the other capitalized terms used in this Agreement and in addition to the terms defined in the CSS Procedural Specifications (which terms shall have the same meanings set forth in the Procedural Specifications), the following terms shall have the following meanings: 1.1 "Absolutely Necessary Claim" shall mean any claim(s) of patent(s) or -------------------------- patent application(s) which are infringed by the manufacture, import, use or sale of CSS Compliant Products because: (i) those portions of the CSS Specifications which are required to implement CSS are read on by such claim(s); or (ii) such CSS Compliant Products, solely because of the requirement to implement the portions of the CSS Specifications which are required to implement CSS, cannot be manufactured, used, distributed, offered to be sold, sold, imported, or otherwise transferred without infringing such claim(s). 1.2 "Affiliate" shall mean any corporation, partnership or other --------- entity that, directly or indirectly, owns, is owned by, or is under common ownership with, Licensee, for so long as such ownership exists. For purposes of the foregoing, "own" "owned" or "ownership" shall mean holding ownership of, or the right to vote, more than fifty percent (50%) of the voting stock or ownership interest entitled to elect a board of directors or a comparable managing authority. 1.3 "Associate Licensee" shall mean any third party that enters into ------------------ an agreement, containing substantially the same terms as those set out in one or both of the documents entitled "Assembler Associate License" and "Reseller Associate License." 1.4 "Associate Licensee Reseller" shall mean an Associate Licensee --------------------------- entering into a Reseller Associate License for the purpose of being authorized to purchase and resell Schedule 1 and Schedule 2 Products, subject to the redistribution requirements of the Reseller Associate License. 1.5 "By-Laws" shall mean the document, or specified section thereof, ------- entitled "By-Laws DVD Copy Control Association, Inc.," as amended from time to time. 1.6 "Confidential Information" shall mean Proprietary Information that ------------------------ is either marked "confidential," when disclosed in tangible form or designated as "confidential" when disclosed orally (or otherwise in intangible form) and confirmed in writing within thirty (30) days after such disclosure. 1.7 "Controlled Company" shall mean (i) any Affiliate, or (ii) any ------------------ other entity that controls, is controlled by, or is under common control with another entity. For purposes of this Section, "control" means possession, direct or indirect, of the power to direct or cause the direction of the management and policies of an entity with respect to the matters set out in this Agreement, whether through the possession of voting power or by contract encompassing such matters. In determining whether an entity is included in (ii) above, where (x) a Licensee's control does not extend to directing the commencement or termination of legal actions as described herein or (y) where causing such entity to take a particular action would constitute a breach of Licensee's fiduciary obligations to such entity, "control" is deemed not to be present. 1.8 "CSS" or "Content Scramble System" shall mean the Content Scramble ---- ----------------------- System developed by MEI and Toshiba which is designed to provide reasonable protection for content encoded onto DVD Discs using the DVD Video Specification, as such system has been licensed by MEI and Toshiba to Licensor and as more fully described in the CSS Specifications, as amended in accordance with Sections 4.2 and 10.7 of this License Agreement. CSS does not include any technology referenced by or used with the CSS Specifications such as MPEG technology, DVD technology (including, but not limited to, DVD disc structure), data compression and decompression, embedded data technology, watermarking, nor any other independent technology mandated or permitted in connection with any amendments to the CSS Specifications. 1.9 "CSS Complaint Products" shall mean DVD Products which are ---------------------- compliant with the CSS Specifications in accordance with Section 4.2 of this License Agreement. -2- 1.10 "CSS Interim License Agreement" shall mean an agreement ----------------------------- (including all documents incorporated therein by reference) entered into by either MEI as the licensor of CSS and thereafter assigned to Licensor by MEI or DVD CCA in its role as interim licensor of CSS. 1.11 "CSS Agreement" shall mean an agreement between Licensor and ------------- another party that contains the same terms as this Agreement (including this License Agreement and all documents incorporated herein by reference), or terms that have been modified consistent with Sections 4.2 and 10.7 of this License Agreement. 1.12 "CSS Licensee" shall mean any third party that enters into a CSS ------------ Agreement with Licensor that is valid and in effect. A third party that has a CSS Interim License Agreement that is valid and in effect shall be included within the meaning of "CSS Licensee." 1.13 "CSS Specifications" shall mean the documentation relating to CSS ------------------ entitled "CSS Specifications" (including the Procedural Specifications and the Technical Specifications) that Licensor makes available to Licensee, as such documentation may be revised from time to time consistent with Sections 4.2 and 10.7 hereof. Except where otherwise specifically stated, all references to "CSS Specifications" shall be deemed to include all or any portion of the documentation referenced in the preceding sentence. 1.14 "Disc IP" shall mean any copyright, trade secret, or other ------- intellectual property inherent in the CSS Specifications pertaining to CSS, or any patent claim(s) (including but not limited to any Absolutely Necessary Claims or Relatively Necessary Claims) that are infringed by any implementation of CSS in any DVD Disc. 1.15 "DVD Products" shall mean the following products if they ------------ incorporate any portion of CSS: DVD Players, DVD Drives, Descramblers, Authenticators, Scramblers, CSS Decryption Modules (implemented in Hardware as CSS Decryption Hardware and/or in software as CSS Decryption Software), CSS Disc Formatters, DVD Discs, Special Purpose DVD Players, Special Purpose DVD Drives, Verification Products and Integrated Products. 1.16 "DVD Video Specification" shall mean the DVD Specifications for ----------------------- Read-Only Disc, Version 1.0 (August 1996), as that document may be amended from time to time. 1.17 "Highly Confidential Information" shall mean Proprietary ------------------------------- Information that constitutes or discloses: (i) the algorithms used for scrambling, descrambling, authentication and key recovery; (ii) master, disc, title or authentication keys; or (iii) information developed by MEI and/or Licensor for testing product compliance with CSS where such information makes use of or reveals information described in (i) or (ii). Such information shall be marked, if disclosed in written form, or designated, if disclosed in electronic form, as "Highly Confidential" when disclosed to Licensee. 1.18 "Licensed Rights" shall mean all Absolutely Necessary Claims, all --------------- Relatively Necessary Claims, copyrights, trade secret rights, and other proprietary rights in any jurisdiction, and in all applications and registrations therefor, in and to CSS (including the Proprietary Information), that Licensor (during the term of this Agreement) owns or has the right to grant licenses of the scope -3- granted herein without the agreement of, or requirement for payment (or provision of other consideration) to any person or entity. 1.19 "Motion Picture Company" shall mean any person which (a) ---------------------- designates itself as a Motion Picture Company on its Membership Application, and (b) is engaged in the production and distribution of theatrical motion pictures in the United States on a substantial scale, as evidenced by production, box office receipts and number of releases annually. 1.20 "Ombudsman" shall mean that individual designated by Licensor to --------- perform this function. 1.21 "Proprietary Information" shall mean any and all information ----------------------- relating to CSS made available to Licensee directly by MEI, Licensor, or any other CSS Licensee, or revealed to Licensee pursuant to Section 5.3 prior hereto or during the term of this Agreement, including, without limitation, CSS Specifications, Software, Hardware, documentation, designs, flow charts, technical data, outlines, blueprints, notes, drawings, prototypes, templates, systems, manuals, know-how, processes, and methods of operation. 1.22 "Protected" shall mean a configuration in which a data stream or --------- signal is not output except (1) via encrypted, scrambled, or otherwise secure link or method authorized hereunder either through a device's or component's authorized output or to the next component or device which in turn has an authorized output; or (2) directed as uncompressed video data to a graphics subsystem via an internal computer path in a manner consistent with Section 6.2 the CSS Procedural Specifications. For purposes of this definition, authorized outputs and methods hereunder are those compliant with the requirements contained in Section 6.2 of the CSS Procedural Specifications, including any upgrades or modifications thereto adopted in accordance with Sections 4.2 and 10.7 of this License Agreement. By way of example and not limitation, the following CSS Compliant Products, if so configured, would be considered to be Protected: (a) CSS Decryption Hardware incorporating MPEG decoding and any or all of the following outputs: (i) NTSC with appropriate AGC and Colorstripe; (ii) Computer Monitor SVGA (or other computer monitor RGB); or (iii) Uncompressed digital video directed via an internal computer path to a computer graphic subsystem for display. (b) CSS Decryption Software incorporating MPEG decoding and supporting the output described in subsection (a)(iii). (c) A CSS Decryption Module which implements the interrogation or identification functions referenced in Section 6.2.11.4 of the CSS Procedural Specifications; and -4- (d) A DVD Player which meets the requirements of Section 6.2.1 of the CSS Procedural Specifications. 1.23 "Relatively Necessary Claim" shall mean, any claim(s) of -------------------------- patent(s) or patent application(s), that: (i) are not Absolutely Necessary Claims; and (ii) with respect to which the implementation of all or any portions of the CSS Specifications pertaining to CSS involves a design-around to such patent claim(s) which would have a commercially significant effect on performance, manufacturability or manufacturing cost, although the cost of designing-around itself shall not be taken into account. Relatively Necessary Claims shall not include claims which if licensed by Licensor to Licensee or by Licensee to another CSS Licensee would require a payment of royalties or other fees by Licensor or Licensee, as appropriate, to unaffiliated third parties. 1.24 "Reseller" shall mean a CSS Licensee or Associate Licensee -------- Reseller that purchases Schedule 1 or Schedule 2 Products from a CSS Licensee for the purpose of reselling such products without modification and only to a CSS Licensee or an Associate Licensee authorized to receive such products. 1.25 "Restricted Schedule 1 Product" shall mean a CSS Compliant ----------------------------- Product licensed hereunder which is a Verification Product. 1.26 "Schedule 1 Product" shall mean a CSS Compliant Product ------------------ which: (a) is not a Schedule 2 or 3 Product, or (b) is (i) an Authenticator, or (ii) a Descrambler, or (iii) a CSS Decryption Module or partial implementation thereof, or (iv) any other device which has an output which is not permitted in a Schedule 2 or 3 Product, or (c) is a CSS Disc Formatter. 1.27 "Schedule 2 Product" shall mean a DVD Product that is a CSS -------------------- Compliant Product except that such product is not Protected and which outputs descrambled CSS Video Data only in decompressed form. 1.28 "Schedule 3 Product" shall mean (a) a CSS Compliant Product ----------------- which outputs CSS Data only in a Protected manner or (b) a DVD Disc. -5- 2. LICENSES GRANTED. 2.1 Nonexclusive License. Subject to the terms and conditions of this -------------------- Agreement, Licensor grants to Licensee a worldwide, royalty-free, non-exclusive, nontransferable right, under the Licensed Rights: (a) to use and implement CSS to develop, design, manufacture and use DVD Products that are in the Membership Categories selected by Licensee and to practice any methods necessary for the manufacture or use of such DVD Products; and (b) according to Licensee's Membership Categories, to receive DVD Products in accordance with this Agreement and to distribute, offer to sell, sell, import and otherwise transfer DVD Products made in accordance with this Agreement, such distribution, offer to sell, sale, importation or other transfer of CSS Compliant Products to be allowable only as follows: (i) Restricted Schedule 1 Products only to CSS Licensees in the DVD Disc Replicator Membership category; (ii) Schedule I Products only to CSS Licensees or to Associate Licensee Resellers; (iii) Schedule 2 Products only to CSS Licensees or to Associate Licensees; (iv) Schedule 3 Products to any person or entity; or (v) Special Purpose DVD Players or Special Purpose DVD Drives only to purchasers that are required by contract with Licensee (x) to use the Special Purpose DVD Players or Special Purpose DVD Drives, as the case may be, for the purpose of the authorized playback of content originally encrypted on DVD Discs using CSS where such DVD Discs are designated as Region 8 discs and where such playback is intended to be in the commercial setting in which the viewer of the movie does not own the Special Purpose DVD Player or Special Purpose DVD Drive, whether or not such viewing is considered a public performance, or non-public performance, of the movie (e.g., airline, cruise ship, hotel or similarl applications); and (y) to sell or otherwise dispose of or distribute any such Special Purpose DVD Players or Special Purpose DVD Drives to another party only in circumstances in which such other party is legally prohibited from using such Special Purpose DVD Players or Special Purpose DVD Drives, as the case may be, other than in the use described in (x), above. Licensee further agrees that with respect to any such contract, it will either provide for third party beneficiary rights for Motion Picture Companies or will itself take all reasonable efforts necessary to enforce the provisions of such contracts as described in (x) and (y), above. Records of sales of Special Purpose DVD Players and Special Purpose DVD Drives must be separately maintained by Licensee, and the names and addresses of each purchaser of Special Purpose DVD Players and Special Purpose DVD Drives shall be provided by Licensee to Licensor upon request by Licensor. Copies of contracts for such sales must be available for inspection by Licensor, at least with respect to the provisions relevant to the requirements of this subparagraph. With respect to any sales of Special Purpose DVD Players or Special Purpose DVD -6- Drives made prior to the effective date of this Agreement, Licensee agrees (a) that any such sale will be subject to the recordkeeping and reporting requirements of this subparagraph, (b) that it will submit to Licensor, within 30 days of the effective date of this Agreement, a specific certification from Licensee that, to the best of Licensee's knowledge and belief, each purchaser intends to use the Special Purpose DVD Players and/or Special Purpose DVD Drives solely for the purpose described in this subparagraph; and (c) that Licensee will make all commercially reasonable efforts to amend the contract for such sale(s) to incorporate the restrictions required for such contracts entered after the effective date of this Agreement; and (c) to provide prototype or sample DVD Products incorporating CSS to prospective customers or retained test companies in situations that are not covered by Section 2.1(b), in each case solely for evaluation in contemplation of a purchase of such products or performance of specified testing of such products, as applicable, and to provide related technical information necessary for the evaluation or testing purposes, as applicable, provided, however, that: (i) Licensee shall not provide to any such customers or test companies any CSS Highly Confidential Information; and (ii) any disclosure of CSS Confidential Information shall be made only pursuant to a written agreement providing at least equivalent protections as are provided in this Agreement; but (d) not to distribute, offer to sell, sell, import or otherwise transfer any DVD Products that Licensee makes or receives under this Agreement or that it made or received under an CSS Interim License Agreement that it entered into, except in accordance with Sections 2.1(b) and (c) above. 2.2 Copyright License. Subject to the terms and conditions of this ----------------- Agreement, including without limitation the confidentiality provisions of Section 5.2 and the prohibition on copying Highly Confidential Information contained in Section 5.2(b)(iii), for any copyrightable information included in the CSS Specifications and other documentation, including Proprietary Information, provided by Licensor in connection with this Agreement, Licensor grants Licensee a worldwide, royalty-free, non-exclusive, nontransferable copyright license to use and reproduce the CSS Specifications and such other documentation for internal purposes solely in connection with the implementation of CSS and marketing of CSS Compliant Products as permitted under Section 2.1 hereof. 2.3 Right to Have Designated or Have Made. Licensee shall have the ------------------------------------- right under the licenses granted herein to have third parties design and/or make CSS Compliant Products or subparts thereof for the sole account of Licensee, but only if said CSS Compliant Products or subparts thereof: (a) are to be sold, used, leased or otherwise disposed of, by or for Licensee under the trademark, tradename, or other commercial indicia (i) of Licensee or (ii) of a person or entity to which Licensee is authorized by this Agreement to sell -7- (1) the CSS Compliant Product that is the subject of the "have designed," and/or "have made" agreement or (2) an Integrated Product that is a CSS Compliant Product made using such CSS Compliant Product, and (b) are designed and/or made by such third parties using design specifications or manufacturing drawings supplied by or for Licensee. Such third parties shall be required to be CSS Licensees if such design and/or manufacture requires disclosure to such third parties of (1) Confidential Information; or (2) other information or materials from which Confidential Information could reasonably be derived. Further, such parties shall be required to be CSS Licensees if such design and/or manufacture requires disclosure to such third parties of (1) Highly Confidential Information; or (2) other information or materials from which Highly Confidential Information could reasonably be derived. Licensee agrees and acknowledges that the fact that it has contracted with a third party pursuant to this provision does not relieve Licensee of any of its obligations under this Agreement and that Section 5.5 of this License Agreement includes obligations applicable to its relationship with third parties engaged pursuant to this provision. Licensee agrees that, with respect to third parties that are not CSS Licenses, Licensee will contractually obligate such third party to adhere to the same reverse engineering prohibitions and limitations as are contained in Section 5.3 of this Agreement. Such third parties shall receive no license, sublicense, or implied license with respect to CSS, and the duration of the "have designed" or "have made" rights granted under this provision shall not extend beyond the term of this Agreement, including any termination thereof pursuant to Section 6.2. 2.4 Sublicenses to Affiliates. Subject to the requirements of the ------------------------- following subsections (a) and (b), Licensee shall have the right to sublicense the rights granted to Licensee hereunder to any of its Affiliates ("Permitted Sublicensees"). (a) Licensee shall have the right to sublicense to any of its Permitted Sublicensees at Licensee's sole discretion, any of Licensee's rights under Sections 2.1, 2.2 and 2.3, provided that: (i) Licensee notifies Licensor of the identity of each Permitted Sublicensee receiving a sublicense and the type of Confidential Information or Highly Confidential Information provided to such Permitted Sublicensee; (ii) each such Permitted Sublicensee receiving a sublicense shall abide by the terms of this Agreement with the same rights (but without the right to grant any further sublicense) and the same obligations and prohibitions as Licensee, including without limitation, the non-assertion and patent license offer provisions of Section 5.1 hereof; (iii) such sublicense coterminates with this Agreement, or terminates at any time such Permitted Sublicensee ceases to qualify as an Affiliate or whenever Licensee determines that an Affiliate is no longer engaged in activities requiring a sublicense, provided that Licensee shall notify Licensor whenever Licensee terminates any sublicense previously granted; (iv) such Permitted Sublicensees receiving a sublicense shall execute and deliver to Licensor a written acknowledgment and agreement, in the form provided for in Exhibit "A" hereto, that the Permitted Sublicensee has read and agrees to abide by the terms of this Agreement; and (v) Licensee may sublicense only those rights for the Membership Categories to which Licensee currently belongs; provided that in the case of a Permitted Sublicensee that is an Affiliate that is owned directly or indirectly by Licensee ("Owned -8- Affiliate"), Licensee agrees that any failure to comply with clause (iv) of this Section 2.4(a) shall be remedied by either or both of the following: (1) Licensee shall consent to a judgment for specific performance of the obligation for each Owned Affiliate to execute and deliver such acknowledgment and agreement, and (2) Licensee shall cause any Owned Affiliate not to defend against any enforcement action by Licensor or by an Eligible Licensee pursuant to Section 9.5 on the ground that this Agreement does not apply to such Owned Affiliate or that any obligation imposed by the Agreement is not applicable to Controlled Affiliate, and provided further that Licensor and any CSS Licensee seeking to enforce the obligation imposed by clause (iv) of this Section 2.4(a) agree that these will be the sole remedies for any failure to obtain the executed acknowledgment and agreement from such a Owned Affiliate. (b) Licensee shall be responsible for its Permitted Sublicensees' compliance with the terms and conditions of this Agreement, and Licensee and each of its Permitted Sublicensees shall be jointly and severally liable for any noncompliance by such Permitted Sublicensee with the terms and conditions of this Agreement. 2.5 No Sublicense or Implied License. Except as set forth in Section -------------------------------- 2.4, Licensee shall not have any right to sublicense any rights granted hereunder and no products or services provided by Licensee shall give rise to any implied licenses to third parties, provided that there shall be no limitation or restriction on the use, resale or other transfer or distribution of CSS Compliant Products that are Schedule 3 Products. Licensee acknowledges and agrees that the licenses granted herein are the only licenses granted to Licensee, and that no other licenses are granted, expressly, by implication or by estoppel, now or in the future. As between Licensor and Licensee, all rights not expressly granted to Licensee under this Agreement in and to CSS and the Proprietary Information are reserved and retained by Licensor. 3. MEMBERSHIP CATEGORIES AND ADMINISTRATION FEE. 3.1 Selection of Membership Categories. Upon the execution of this ---------------------------------- Agreement, and upon each annual renewal of its membership, Licensee shall select one or more Membership Categories. Licensee may from time to time add or delete Membership Categories upon providing Licensor prior written notice and payment of the Administration Fee (as defined below) for each additional Membership Category in accordance with Section 3.2 hereof. 3.2 Administration Fee. Concurrent with Licensee's selection of the ------------------ Membership Categories pursuant to Section 3.1, Licensee shall pay Licensor a nonrefundable sum for each Membership Category selected by Licensee (the "Administration Fee"), which fee shall be used to offset the costs associated with Licensor's administration of CSS. The amount of the Administration Fee shall be determined from time to time by Licensor and set forth on a fee schedule that shall be made available to Licensee at the time of Licensee's selection of Membership Categories and at the time of Licensee's annual renewal. Licensee understands and acknowledges that: (1) the Administration Fee is payable on an annual basis and that failure to make timely payment of such Administration Fee is a breach of this Agreement, (2) payment of the Administration Fee shall entitle Licensee to Non-Voting Membership in DVD CCA, with such rights and privileges as are associated with such membership pursuant to the By-Laws, and (3) that Licensee shall not be entitled to any refund in connection with any deletion of Membership Categories during the term of -9- this Agreement or upon or after termination of this Agreement. Licensee is not required to accept the Non-Voting Membership referenced in (2), above and may resign such membership at any time, provided that Licensee shall remain liable for Administration Fees pursuant to this Section 3.2. 4. CSS SPECIFICATIONS. ------------------ 4.1 Delivery of CSS Specifications. Upon Licensee's selection of one ------------------------------ or more Membership Categories in accordance with Article 3 and the payment of the appropriate Administration Fee(s), Licensor shall distribute to Licensee the portions of Proprietary Information and/or CSS Specifications appropriate to its Membership Category or Categories that Licensee has not previously received from MEI. In the event Licensee deletes any Membership Categories or does not select all of the Membership Categories with respect to which it has previously received proprietary information and/or CSS Specifications from MEI, Licensee shall within thirty (30) days thereafter return or destroy, providing a written certification of such destruction, such portions of Proprietary Information and/or CSS Specifications relevant to the Membership Categories it has deleted or not selected. 4.2 Compliance with CSS Specifications. ---------------------------------- 4.2.1 General. Licensee shall comply with the CSS Specifications, ------- as may be amended by Licensor from time to time in accordance with the By-Laws. Each DVD Product shall comply with the version of the CSS Specifications which is in effect at the time such DVD Product is manufactured, taking into account specific effective date provisions in amendments to the CSS Specifications. 4.2.2 Compliance with Changes to CSS Specifications. With respect --------------------------------------------- to any changes to the CSS Specifications made after the Effective Date of this Agreement, the following rules shall apply. Changes to the CSS Specifications shall be made in accordance with procedures set forth in the By-Laws. All changes shall be notified to all CSS Licensees and shall provide Licensee with sufficient information to incorporate any necessary changes into the design and manufacture of DVD Products to ensure that such products continue to be CSS Compliant Products. All changes shall be applied on a non-discriminatory basis among all CSS Licensees. Licensor shall specify in its notice either the specific date by which the changes shall be implemented in affected products or the specific basis on which Licensee must itself determine that compliance with a change is required. In general, Licensor will follow the following time periods in requiring that changes to the CSS Specifications be implemented in affected products, provided that nothing in the following provisions shall be interpreted so as to alter any time limitations set forth in the CSS Procedural Specifications in effect as of the Effective Date of this Agreement. 4.2.2.1 Licensor may make changes to clarify or amplify elements of the CSS Specifications in order to preserve essential functions of the CSS Specifications ("Emergency Changes"). Licensee shall implement an Emergency Change as soon as reasonably possible, taking into account the danger to Content Providers being addressed by the Emergency Change. In general, Licensee will be expected to implement an Emergency Change not later than sixty (60) days from receipt of the notice of the Emergency Change if such Emergency Change does not require a material change in product design or manufacturing process. -10- 4.2.2.2 In general, unless otherwise specified in relation to a particular change, Licensee shall implement all changes that are not Emergency Changes within eighteen (18) months of the date on which Licensor notifies Licensee of a change in the CSS Specifications. Licensor may request that Licensee agree to implement a specific change in less time than the eighteen (18) months normally provided, and Licensee agrees not to unreasonably withhold consent to such a request. Licensee may request that the normal eighteen (18) month time period be extended with respect to a specific change in the CSS Specifications, and Licensor agrees not to unreasonably withhold its consent to such request. 4.3 Audio Data Covered by this Agreement. The CSS Specifications ------------------------------------ govern audio material only to the extent that such material is CSS Audio Data. All other audio data are outside the scope of this Agreement. 5. ADDITIONAL LICENSEE OBLIGATIONS. 5.1 Access to Intellectual Property. ------------------------------- (a) Absolutely Necessary Claim. Licensee shall not, and shall -------------------------- cause each of its Controlled Companies not to, assert any Absolutely Necessary Claim(s) reading on the portions of the CSS Specifications pertaining to CSS against Licensor or any CSS Licensee (including its Permitted Sublicensees) or vendor, distributor, purchaser or other person in the chain of distribution for the manufacture, use, distribution, offer to sell, sale, import, or other transfer of a CSS Compliant Product which was made under license from Licensor or under a CSS Interim License Agreement entered into by Licensee, provided that this Section 5.1(a) only applies to those aspects of such CSS Compliant Product which are required and used for compliance with the portion of the CSS Specifications pertaining to CSS and which cannot be implemented without infringing (but for this covenant) the Absolutely Necessary Claim(s); and, further provided, that this covenant shall not apply in favor of any entity and any of its Controlled Companies, if such entity or any of its Controlled Companies, is asserting an Absolutely Necessary Claim against Licensee (of any of its Permitted Sublicensees). (b) Disc Immunity. Licensee shall not, and shall cause each of ------------- its Controlled Companies not to, assert any claim(s) based on Disc IP against any CSS Licensee which is a Content Provider, Authoring Studio, or DVD Disc Replicator or vendor, distributor, purchaser or other person in the chain of distribution for the manufacture, use, distribution, offer to sell, sale, import, or other transfer of a DVD Disc that: (i) is a CSS Compliant Product; and (ii) was made under license from Licensor or under a CSS Interim License Agreement entered into by Licensee, provided that (1) this Section 5.1(b) only applies to those aspects of such DVD Discs which are present for the purpose of complying with the portions of the CSS Specifications pertaining to CSS; and (2) this Section 5.1 shall only apply to DVD Discs, and shall not apply to any apparatus for the manufacture thereof. (c) Termination of Suits. -------------------- (i) If Licensee or any of its Controlled Companies asserts any Absolutely Necessary Claim(s) or Disc IP claim(s) in violation of Section 5.1(a) or (b), Licensee -11- shall terminate or cause to be terminated such assertion of claim, provided that this obligation shall not arise with respect to any assertion by a Controlled Company alleged to be in violation of such section unless Licensee has received a written notice of such assertion. (ii) In the case of an entity which is not a Controlled Company but in which Licensee or any of its Controlled Companies holds any voting security or any other ownership interest (a "Partially Owned Company"), Licensee shall not knowingly vote, and shall cause each Controlled Company not to knowingly vote, any voting security or ownership interest in any such Partially Owned Company in favor of asserting any claim which Licensee would be prohibited from asserting hereunder, provided that this paragraph (ii) shall not apply where such action conflicts with Licensee's or Such Controlled Company's fiduciary duty. Licensee agrees to use reasonable efforts to vote, and use reasonable efforts to cause each Controlled Company to vote, all voting securities and ownership interests in each Partially Owned Company to terminate any such claim(s). The termination of any such claim(s) under Absolutely Necessary Claim(s) or Disc IP claim(s), as the case may be, shall relieve Licensee of all liability for any failure to comply with its obligations pursuant to this Section 5.1(c). (d) Patent License Offer. Upon request by a CSS Licensee, -------------------- Licensee shall offer, and shall cause its Controlled Companies to offer, a patent license for any of its/their claims for which Relatively Necessary Claim(s) exist, provided that such license may be limited to Relatively Necessary Claim(s) that are within the scope of the other CSS Licensee's license from Licensor. Such license shall be made available on reasonable and nondiscriminatory terms to any CSS Licensee in good standing and/or its Permitted Sublicensees with respect to a CSS Compliant Product that is or was made under license from Licensor or under a CSS Interim License Agreement entered into by Licensee. To the extent that a Relatively Necessary Claim that would otherwise be governed by this Section 5.1(d) is subject to the Disc Immunity governed by Section 5.1(b), such Relatively Necessary Claim shall be governed by Section 5.1(b) rather than this Section 5.1(d). (e) Applicability. ------------- (i) The provisions of this Section 5.1 regarding Absolutely Necessary Claims, Disc IP, and Relatively Necessary Claims shall be limited to CSS as such system was described in the CSS Specifications on the date this Agreement is entered and does not include any amendments to the CSS Specification that are made after the date of this Agreement, unless Licensee has agreed in writing that the provisions of this Section 5.1 shall apply to such amendment. (ii) Subject to the terms of Section 6.2 hereof, the covenant set forth in Section 5.1 shall remain in effect for the life of any patent issued throughout the world with a first priority date prior to or during the term of the license granted to Licensee under Article 2. (iii) Any executed patent license entered into pursuant to Section 5.1(d) shall survive the termination of this Agreement in accordance with its terms. -12- (iv) Notwithstanding the termination of this Agreement, the obligation to offer a patent license under Section 5.1(d) shall continue after such termination with respect to CSS Compliant Products that were made prior to, or are in production as of, the date of such termination for a license period ending concurrently with the applicable permitted period of distribution set forth in Section 6.2(a) or (b), as the case may be. 5.2 Confidentiality. --------------- (a) Residuals. Licensor acknowledges that Licensee may, as a --------- result of receipt of or exposure to Confidential Information and/or Highly Confidential Information, increase or enhance the knowledge and experience retained in the unaided memories of each of its directors or employees. Notwithstanding anything to the contrary in this Agreement, Licensee and its directors and employees may use and disclose such knowledge and experience in their respective businesses, provided that the Licensee, or any of its directors or employees, has not (a) intentionally memorized the Confidential Information or Highly Confidential Information so as to reduce it to an intangible form for the purpose of creating a residual or using the same; (b) avoided its obligation to maintain the confidentiality of Confidential Information or Highly Confidential Information merely by having a person commit such information to memory so as to reduce it to an intangible form; or (c) deliberately and knowingly utilized Confidential Information or Highly Confidential Information in its business, provided further that Licensee shall not use Confidential Information or Highly Confidential Information or any mentally-retained recollections thereof to circumvent or copy the methods disclosed in Proprietary Information, Confidential Information, or Highly Confidential Information or to circumvent any obligations under this Agreement. Licensor shall have neither any rights in any business endeavors of Licensee that may use such knowledge and experience nor any right to compensation, other than as may be provided for breach of this Agreement, related to any such use of such knowledge and experience. (b) Highly Confidential Information. Licensee and its Permitted ------------------------------- Sublicensees shall maintain the confidentiality of Highly Confidential Information in the following manner: (i) Licensee and its Permitted Sublicensees shall each employ procedures for safeguarding Highly Confidential Information at least as rigorous as Licensee and its Permitted Sublicensees, respectively, would employ for its own most highly confidential information, such procedures to include, at a minimum: (1) maintaining on Licensee's and/or Permitted Sublicensees' premises a secure location in which any and all Highly Confidential Information shall be stored, where such a location may include electronic storage provided that any such electronic storage must meet at least the following minimum security requirements. Such electronic storage must provide a technical means of providing security that is: (x) at least equivalent to the security provided by a common key form of encryption with a key length of at least 40 bits; -13- (y) not subject to known security breaches that effectively negate its use for secure storage of Highly Confidential Information; and (z) (A) proprietary to Licensee and, with respect to any elements of such technical means used for secure storage of Highly Confidential Information that must be maintained as confidential in order for the security to be effective, protected by Licensee at the same level of protection as required for trade secrets; or (B) subject, with respect to any elements of such technical means used for secure storage of Highly Confidential Information that must be maintained as confidential in order for the security to be effective, to a legally binding requirement that such element or elements be maintained as confidential at the time such encryption system is employed to provide secure storage of Highly Confidential Information. (2) that any Highly Confidential Information stored in such a location shall be accessible only by Authorized Employees (as defined below); (3) that (x) where Highly Confidential Information is stored in a location that is physically secure, Authorized Employees visiting such location shall sign in and out each time that they visit such location; and (y) where Highly Confidential Information is stored securely in an electronic form, Authorized Employees having access to such Highly Confidential Information in unsecure form shall sign in and out each time that they have such access; and (4) when Highly Confidential Information is not in use, such information shall be stored in a locked safe at such secure location or shall be stored electronically using technical protection that meets the requirements of (1), above. (ii) Licensee may disseminate Highly Confidential Information only to the strictest minimum possible number of full-time employees of Licensee or its Permitted Sublicensees: (1) who have an absolute need to know such Highly Confidential Information in order to enable Licensee or its Permitted Sublicensees to implement CSS in compliance with the CSS Specifications; (2) who are bound in writing by obligations of confidentiality sufficient to protect the Highly Confidential Information in accordance with the terms of this Agreement; and (3) who, prior to the disclosure of such Highly Confidential Information, have: (x) been identified in writing by Licensee to Licensor; and (y) read and executed the acknowledgment attached as Exhibit "B" hereto (a copy of such executed acknowledgment to be sent to Licensor) (each an "Authorized Employee"). For Authorized Employees who signed an acknowledgement containing the same terms as Exhibit B pursuant to a CSS Interim License Agreement entered into by Licensee, such prior acknowledgements are deemed to be sufficient for purposes of this provision. Licensee and its Permitted Sublicensees shall at all times cause Authorized Employees to strictly abide by their obligations hereunder and shall use the same efforts to enforce the confidentiality obligations of each -14- Authorized Employee after the termination of his/her employment as Licensee uses to enforce with respect to Licensee's own similarly confidential information, provided that Licensee shall not use less than reasonable efforts in such enforcement. Licensee and its Permitted Sublicensees shall make reasonable efforts to assist Licensor in relation to any claim, action, suit, proceeding, or litigation with respect to the access of the former employee to Confidential Information and Highly Confidential Information provided under this Section 5.2. Notwithstanding any contrary provision, Licensee shall not disseminate any CSS Keys to more than three (3) Authorized Employees ("Key Employees") for each Membership Category to which Licensee is licensed and is entitled to disclosure of CSS Keys from Licensor, unless Licensee has notified Licensor in advance of its intention to increase the number of Key Employees to an additional increment of up to three (3) such employees. Licensee may make such notifications of additional increments of Key Employees without limit, but in doing so shall abide by the terms of clauses (1), (2), and (3), above. Licensee may substitute another employee for a Key Employee only in the event of death, permanent or long-term disability or resignation or termination of employment of an existing Key Employee or reassignment of an existing Key Employee to a substantially different business unit that is not involved in the development, manufacture, or sale of CSS Compliant Products. Licensee shall inform Licensor in writing prior to the substitution or addition of any Key Employee. Licensee may also disclose Highly Confidential Information to an employee of another CSS Licensee where such other CSS Licensee is authorized to possess such Highly Confidential Information and where the employee to whom disclosure is made is an Authorized Employee and, where CSS Keys are to be disclosed, a Key Employee, for such other CSS Licensee. Prior to any disclosure pursuant to the preceding sentence, Licensee must assure itself that such other CSS Licensee is, in fact, authorized to possess the Highly Confidential Information to be disclosed, that the employee to whom such disclosure is to be made is entitled to possess the Highly Confidential Information to be disclosed, and that the method to be used to disclose Highly Confidential Information is as secure as the methods used by Licensor to disclose the same information to CSS Licensees. (iii) Licensee shall not make any copies of any document containing Highly Confidential Information. Licensee may request Licensor to provide Licensee with additional copies of such documents. Licensor may, in its sole discretion, fulfill any such request, provided that Licensor shall not unreasonably refuse to provide requested additional copies. (c) Confidential Information. Licensee may disclose Confidential ------------------------ Information only to (i) full-time employees and individuals retained as independent contractors subject to confidentiality obligations equivalent to those applicable to full-time employees of Licensee and/or its Permitted Sublicensees, in each case, who have a reasonable need-to-know and are bound in writing by obligations of confidentiality sufficient to protect the Confidential Information in accordance with the terms of this Agreement, (ii) other CSS Licensees provided that Licensee may disclose to such parties only information that such parties are entitled to receive under their CSS License; or (iii) Licensee's attorneys, auditors or other agents who owe Licensee a duty of confidentiality as a result of a fiduciary relationship. Licensee and/or its Permitted Sublicensees shall use the same degree of care, but no less than a reasonable degree of care, to avoid unauthorized disclosure or use of Confidential Information as such party employs with respect to its comparably important confidential information. Licensee may discuss or disclose Confidential Information with other CSS Licensees, provided such CSS Licensees are licensed to receive the same type of Confidential Information and are obligated in writing to treat the Confidential Information as if -15- received directly from Licensor. Licensee may disclose to potential customers or suppliers the fact that Licensee has obtained a license to CSS from Licensor, and show a certificate to such effect provided by Licensor to Licensee. Upon Licensee's written request to Licensor, Licensor shall maintain the fact that such Licensee is a CSS Licensee confidential during the period prior to Licensee's public announcement of its DVD Product intentions or its actual marketing of a DVD Product, whichever is earlier. Except as provided in the immediately preceding sentence, Licensor shall have the right to disclose to third parties the fact that Licensee has a license to CSS and the Membership Categories to which such license is applicable. (d) Contact Person and Provision of CSS Information. ----------------------------------------------- Licensee shall designate a single Authorized Employee who shall receive all Confidential Information and Highly Confidential Information (the "Licensee Contact") disclosed by Licensor and may designate a single alternative Authorized Employee ("Alternate Licensee Contact") who shall be entitled to receive such Confidential or Highly Confidential Information in the event that Licensee Contact is absent at the time such information is to be provided. Licensee may also designate additional employees ("Additional Licensee Contacts") where Licensee has a legitimate business need to have Confidential Information and/or Highly Confidential Information provided to locations other than where the Licensee Contact is located. The Licensee Contact and any Alternate Licensee Contact shall be the same person(s) as designated under a CSS Interim License Agreement entered into by Licensee or those persons designated by Licensee on Exhibit "D" hereto. Prior to the provision of any Highly Confidential Information to the Licensee Contact, Alternate Licensee Contact or Additional Licensee Contact, such Licensee Contact, Alternate Licensee Contact, or Additional Licensee Contact shall have complied with all of his/her obligations under Section 5.2(b) hereof. (e) No Publication. Except as, and only to the extent, -------------- otherwise expressly provided in Sections 2.2 and 5.2, Licensee shall not publish, disseminate or otherwise disclose or make available Confidential Information or Highly Confidential Information received hereunder to any person, firm or corporation without prior written consent of Licensor. (f) Notification of Unauthorized Use or Disclosure. Licensee ---------------------------------------------- shall notify Licensor in writing immediately upon discovery of any unauthorized use or disclosure of Confidential Information or Highly Confidential Information, and will cooperate with Licensor in every reasonable way to regain possession of Confidential Information and Highly Confidential Information and prevent its further unauthorized use of disclosure. (g) Disclosure Required by Law. In the event Licensee or a -------------------------- Permitted Sublicensee is required by law, regulation or order of a court or other authority of competent jurisdiction to disclose Confidential Information or Highly Confidential Information, (1) Licensee shall take reasonable steps to notify Licensor prior to disclosure, or (2), where notice to Licensor prior to disclosure is not reasonably possible, Licensee shall take reasonable steps to challenge or restrict the scope of such required disclosure and notify Licensor as soon as possible thereafter. In either case, Licensee shall take reasonable steps to seek to maintain the confidentiality of the information required to be disclosed and to cooperate with Licensor in any effort undertaken by Licensor to challenge or restrict the scope of such required disclosure. -16- (h) Confidentiality Exceptions. Provided that the -------------------------- applicability of any one or more of the following exceptions shall have no effect on Licensee's other obligations under this Agreement, the confidentiality restrictions contained in Sections 5.2(a), (b) and (c) herein shall not apply to, or shall be modified in accordance with the provisions set forth below with respect to, Confidential Information or Highly Confidential Information that Licensee can demonstrate: (i) is Confidential Information which is or becomes generally known to the public through no breach of Licensee's obligations owed to Licensor hereunder; (ii) is Highly Confidential Information which is or becomes generally known to the public through no breach of Licensee's obligations owed to Licensor hereunder unless such Highly Confidential Information is the subject of one or more injunctions prohibiting its public availability, provided that at least one such injunction has been obtained not later than one (1) year of the date on which the Highly Confidential Information became generally known to the public and further provided that at least one proceeding seeking an injunction was initiated by Licensor not later than one hundred twenty (120) days following the date on which the Highly Confidential Information became generally known to the public; further provided, however, that if such proceeding is not initiated within 120 days, or, in the case where such proceeding is initiated within 120 days but such injunction has not been obtained by Licensor within one (1) year, any Highly Confidential Information that is or becomes generally known to the public shall be treated as Confidential Information subject to the confidentiality obligations in Sections 5.2(a) and (c) applicable to Confidential Information, and such information shall no longer be subject to the special obligations applicable to Highly Confidential Information in Section 5.2(b), beginning (x) in the event no proceeding is filed within one hundred twenty (120) days and without regard to whether an injunction is thereafter obtained, on the date that is one hundred twenty-one (121) days after such Highly Confidential Information has become generally known to the public, or (y) in the event that a proceeding is filed within one hundred twenty (120) days but no injunction is obtained within one (1) year, on the date that is one (1) year after such Highly Confidential Information has become generally known to the public; (iii) is Highly Confidential Information which is or becomes generally known to the public through no breach of Licensee's obligations owed to Licensor hereunder and is used in DVD Products that are widely sold in significant commercial markets and that make use of the revealed Highly Confidential Information in such a way that such DVD Products are not compliant with Section 6.2.4 or Section 6.2.5, as applicable, of the Procedural Specifications; (iv) is or has been developed by Licensee's employees (whether independently or jointly with others) without having access (whether directly or through any intermediaries) to any such Confidential Information or Highly Confidential Information (or any translation, derivation or abstractions of Confidential Information or Highly Confidential Information) and without any breach of Licensee's obligations to Licensor, provided that the confidentiality restrictions shall continue to apply to CSS Keys provided to Licensee; or (v) is or has been disclosed to Licensee by a third party which had developed (whether independently or jointly with others) such information without any access -17- (whether directly or through any intermediaries) to any Confidential Information or Highly Confidential Information and without any breach of any such third party's obligations to Licensor, provided that this clause (vii) shall not excuse Licensee from maintaining as confidential the fact that such information is CSS-related and, to the extent Licensee uses the information in its CSS implementation(s), the information itself. (i) Confidentiality Period. The confidentiality obligations set ---------------------- forth in this Section 5.2 shall be in effect during the term of this Agreement and shall continue thereafter until (1) with respect to Confidential Information, the later of (i) 5 years after the termination of this Agreement and (ii) the date on which Licensor or any successor licensor of CSS ceases to license CSS; and (2) with respect to Highly Confidential Information, the later of (i) three (3) years after the last commercial use of CSS by Licensor or any CSS Licensee; and (ii) the expiration of the last copyright that protects any CSS-encrypted scrambled content which then exists in any country adhering to the Agreement on Trade Related Aspects of Intellectual Property Rights of the World Trade Organization dated April 15, 1994. (j) Prior Agreements. The obligations of this Section 5.2 shall ---------------- apply to any and all disclosures of Confidential Information or Highly Confidential Information to Licensee prior to the execution of this Agreement. This Agreement shall supersede any inconsistent provisions contained in any CSS confidentiality agreement between the parties hereto, including any CSS nondisclosure agreement between Licensee and either MEI or Licensor and any CSS Interim License Agreement entered into by Licensee. (k) Licensor Confidentiality Obligations. To the extent that ------------------------------------ Licensee provides any information to Licensor that Licensee designates as confidential or highly confidential, including but not limited to any such information disclosed in the context of the activities of the Ombudsman, Licensor shall treat that information with equivalent levels of care as if the information were Confidential or Highly Confidential Information. Any breach of such obligation by Licensor shall be subject to monetary damages in the amount of actual damages proven to the satisfaction of a court of competent jurisdiction and shall, in any event, not exceed [*] dollars. 5.3 Reverse Engineering. Licensee shall under no circumstances ------------------- reverse engineer, decompile, disassemble or otherwise determine the operation of CSS Specifications, including, without limitation, any encryption/decryption or scrambling/descrambling algorithm or logic of CSS, except that Licensee may, to the minimum extent necessary for the purposes of testing, debugging, integration or tuning of Licensee's own CSS Compliant Product to ensure that it works in its intended operational environment with other CSS Compliant Products (the "Analysis Purpose"), conduct performance or electrical analyses with respect to the operation of other CSS Compliant Products that form part of such intended operational environment ("Analysis"), subject to the following conditions: (a) Licensee shall not perform any Analysis, in whole or in part, for the purpose of deriving or discovering CSS Specifications that have not been made available and licensed by Licensor to Licensee hereunder (the "Derived Information"). -18- (b) To the extent Licensee obtains Derived Information that is or should have been identified by Licensee as being part of the CSS Specifications, whether Licensee's obtaining of such information is inadvertent or otherwise, Licensee shall immediately notify Licensor, and upon the instruction of Licensor, Licensee shall within ten (10) days thereafter turn over to Licensor or destroy any portion of Derived Information that is not solely necessary for the Analysis Purpose and cease any use of the same for any other purpose. (c) Subject to Section 5.3(b) above, the Derived Information: (i) shall only be used for the Analysis Purpose and for no other purposes; and (ii) shall be treated as confidential in the manner corresponding to the same type of information as specified in Section 5.2. (d) Nothing herein shall be construed as an inducement for Licensee to reverse engineer any products of any CSS Licensee or third party. (e) For purposes of this Section 5.3: (i) "testing" shall mean a process of evaluating Licensee's CSS Compliant Product to ensure proper operation; (ii) "debugging" shall mean a process of finding the cause of an error in a Licensee's CSS Compliant Product, or another CSS Compliant Product, to the extent Licensee is seeking to ensure that such other product works with one or more of Licensee's products, but not analysis for the purpose of exposing possible design features; (iii) "integration" shall mean a process of evaluating the performance of Licensee's CSS Compliant Product in combination with other CSS Compliant Products to ensure that they properly operate together, and (iv) "tuning" shall mean a process of evaluating and improving Licensee's CSS Compliant Products to work more efficiently with other CSS Compliant Products. 5.4 Export. Licensee will comply with all applicable rules and regulations ------ of the United States, Japan and other countries and jurisdictions relating to the export or re-export of commodities, software and technical data insofar as they relate to the activities under this Agreement, and shall obtain an approval required under such rules and regulations whenever it is necessary for such export or re-export. Licensee agrees that commodities, software and technical data provided under this Agreement may be subject to restrictions under the export control laws and regulations of the United States, Japan and other countries and jurisdictions, as applicable, including but not limited to the U.S. Export Administration Act and the U.S. Export Administration Regulations and the Japanese Foreign Exchange and Foreign Trade Law, and shall obtain any approval required under such laws and regulations whenever it is necessary for such export or re-export. 5.5 Controls Against Theft. Licensee agrees to maintain reasonable ---------------------- controls against theft or misappropriation with respect to Schedule 1 and Schedule 2 Products. This obligation shall be considered to be fulfilled, for example, if Licensee utilizes controls at least equivalent to the controls that it maintains for other of its similarly sensitive products or components. Licensee understands and acknowledges that the obligation imposed by this Section 5.5 requires that it maintain such reasonable controls with respect to any Schedule 1 or Schedule 2 Products provided to a party that it may engage pursuant to Section 2.3 of this License Agreement. -19- 5.6 Good Faith. ---------- (a) Licensee agrees to the extent that future versions of the By-Laws provide authority for Licensee to vote, object or otherwise express its views pursuant to the procedures with respect to proposed changes in the Specifications, it will do so in good faith. (b) Licensee agrees that in the event it is or shall become a member of a body established as the Content Protection Advisory Committee ("CPAC") of Licensor as that committee or any like or successor committee or group may be provided for in a future version of the ByLaws, Licensee shall (1) comply with the requirements of paragraph (a), above, with respect to its participation on CPAC as well as otherwise; and (2) work intensively and in good faith, exercising all reasonable and positive efforts, in cooperation with other CPAC members, in the process by which the technologies described in Section 6.2.13 of the Procedural Specifications are solicited, developed and/or evaluated and in the process by which related amendments to the CSS Specifications are drafted to implement such technologies as are agreed to be adopted. 6. TERM/TERMINATION. 6.1 Termination. This Agreement shall be effective upon the Effective ----------- Date and shall continue until terminated in accordance with any of the following events: (a) Breach Due to Failure to Pay Fees Owed. If Licensee breaches -------------------------------------- this Agreement by failing to pay in a timely fashion the fees owed pursuant to Section 3.2 of this License Agreement, Licensor may terminate this Agreement, provided that Licensor may not terminate this Agreement for any such non-payment until Licensor has provided Licensee with notice and at least ninety (90) days from the date of such notice to cure the non-payment. (b) Other Breach. ------------ (i) If a party hereto materially defaults on any of its obligations under this Agreement (the "Defaulting Party"), the other party hereto (the "Non-Defaulting Party") shall have the right to seek termination or enforcement of this Agreement, or suspension of any licenses or other rights granted under this Agreement, as a temporary, preliminary, or final remedy to be imposed. If such remedy is imposed, the Non-Defaulting Party shall provide for reasonable cure opportunities, including notice and other procedures, in accordance with the relevant order of the court. (ii) In addition to seeking termination or suspension of this Agreement as provided in (i), above, Licensor may, through action by its Board of Directors, suspend the licenses or other rights provided under this Agreement in the following circumstances: (x) if Licensee has failed to pay the fees owed pursuant to Section 3.2 of this License Agreement after having received notice of its failure to pay such fees and having failed to cure such nonpayment within ninety (90) days following such notice, or (y) Licensor's Board of Directors determines that the court enforcement process to obtain suspension of the licenses or rights provided hereunder will delay such suspension in a manner that will cause serious harm to the integrity or security of the protection of content provided by CSS or otherwise pursuant to this Agreement. Any suspension of -20- licenses or rights pursuant to (y) shall be permitted only if Licensor has initiated an enforcement action as provided in paragraph (i) of this Section 6.1(b) or an Eligible Licensee has initiated a Beneficiary Claim as provided in Section 9 (either Licensor's enforcement action or a Beneficiary Claim hereafter referred to as "Enforcement Claim" for purposes of this Section 6) and so long as Licensor or an Eligible Licensee is actively pursuing the imposition of temporary relief in an Enforcement Claim. Once a ruling issued in such enforcement action or Beneficiary Claim, the suspension imposed pursuant to this provision shall be of no further force and effect and the effective date of the termination if any, of the licenses granted to Licensee hereunder shall be decided in connection with an enforcement action pursuant to which termination of the licenses is ordered by the court. If the ruling denies the temporary relief sought, the suspension imposed pursuant to this provision is void ab -- initio. - ------ (c) Failure to Manufacture or Distribute CSS Compliant -------------------------------------------------- Products. If neither Licensee nor at least one of its Permitted Sublicensees has - -------- exercised the rights granted under Article 2 to manufacture or commercially distribute CSS Compliant Products: (i) within the first twelve (12)-month period commencing on the execution of this Agreement, or (ii) during any consecutive twelve (12)-month period thereafter during the term of this Agreement, then Licensee shall, if and when requested to do so by Licensor, elect to (1) recertify its, or one of its Permitted Sublicensee's, present intention to manufacture or commercially distribute CSS Compliant Products within a twelve (12)-month period following such recertification, (2) return all Confidential Information and Highly Confidential Information provided to it under this Agreement and request that its license status be put into a dormant state until such time as it notifies Licensor that it wishes to return to active status based on a certification of its, or one of its Permitted Sublicensee's, then-current intention to manufacture or commercially distribute CSS Compliant Products within twelve (12) months of such certification, or (3) terminate this Agreement. If Licensee fails to exercise one of these options within sixty (60) days of Licensor's request that it do so, then Licensor may terminate this Agreement upon thirty (30) days prior written notice to Licensee. For the purposes of this provision, Licensee shall be deemed to have failed to exercise the rights granted under Article 2 to manufacture or commercially distribute CSS Compliant Products only if neither Licensee nor one of its Permitted Sublicensees, nor a CSS Licensee for which Licensee has designed or manufactured a CSS Compliant Product, shall have manufactured or commercially distributed a CSS Compliant Product during the relevant time period. (d) Termination by Licensee. Licensee shall have the right ----------------------- to terminate this Agreement at any time upon ninety (90) days prior written notice to Licensor. (e) Termination Upon Termination of the License from MEI and -------------------------------------------------------- Toshiba. This Agreement shall terminate upon the termination of the license from - ------- MEI and Toshiba to Licensor. (f) Bankruptcy. Either party shall have the right to ---------- terminate this Agreement in the event (i) a petition in bankruptcy or for reorganization is filed by or against the other party under any bankruptcy laws; (ii) the other party makes an assignment for the benefit of creditors; or (iii) a receiver, trustee, liquidator or custodian is appointed for all or a substantial part of the other party's property, and the order of appointment is not vacated within thirty (30) days. -21- 6.2 Effect of Termination. --------------------- (a) Termination Due to Licensee's Breach or Failure to -------------------------------------------------- Manufacture or Distribute CSS Compliant Products. If this Agreement is - ------------------------------------------------ terminated pursuant to Section 6.1(a) or (b)(i) as a result of Licensee's breach or Licensor terminates this Agreement pursuant to Section 6.1(c), all licenses granted by Licensor to Licensee shall terminate, provided, however, that the license to distribute, offer to sell, sell, import, and otherwise transfer CSS Compliant Products, subject to the conditions of Section 2.1(d), shall terminate ninety (90) days after the effective date of the termination of this Agreement, or upon such earlier date as may be provided by the remedy imposed pursuant to an Enforcement Claim. In the event that any of the licenses or other rights provided under this Agreement are suspended pursuant to Section 6.1(b)(ii) and such suspension is subsequently converted to a termination, the 90-day period shall run from the date of the suspension with respect to any products produced or acquired for which the suspended license or right was necessary for such production or acquisition. If Licensor terminates this Agreement pursuant to Section 6.1(a), (b)(i), or (c), the covenant not to sue granted by Licensee under Section 5.1 shall terminate, provided, however, with respect to CSS Compliant Products that have been produced or are in production as of the effective date of Licensor's termination of this Agreement, then CSS Licensees, and their Permitted Sublicensees, for one (1) year after the effective date of Licensor's termination, shall have the right, subject to the conditions of Section 2.1(d), to distribute such CSS Compliant Products. Notwithstanding any of the foregoing, the covenant not to sue granted in Sections 5.1(b) and Section 5.1(c) with respect to Disc IP shall survive any termination of this Agreement. (b) Termination by Licensee or Due to Licensor's Breach. If this --------------------------------------------------- Agreement is terminated pursuant to Section 6.1(b)(i) as a result of Licensor's material breach, the covenant not to sue granted by Licensee under Section 5.1(a) shall terminate upon the effective date of such termination with respect to any CSS Compliant Products not already produced or in production as of such date and, with respect to products already produced or in production as of the effective date of such termination, such covenant shall terminate ninety (90) days after the effective date of the termination. If this Agreement is terminated by Licensee pursuant to Section 6.l(b)(i), (c), or (d), all licenses granted by Licensor to Licensee shall terminate, provided, however, that the license to distribute, offer to sell, sell, import and otherwise transfer CSS Compliant Products shall terminate upon the final date allowed for distribution of all CSS Compliant Products set forth in this Section 6.2(b), and the covenant not to sue granted by Licensee under Section 5.1 shall terminate, provided, however, that CSS Licensees, and their Permitted Sublicensees, for a period of one (1) year after such termination, shall have the right, subject to the conditions of Section 2.1(d), to distribute all CSS Compliant Products that have been produced or are in production as of the date of such termination. Notwithstanding the foregoing, the covenant not to sue in Sections 5.1(b) and 5.1(c) with respect to Disc IP shall survive any termination of this Agreement. (c) No Refund. If this Agreement is terminated, Licensee shall --------- have no right to receive a refund of any sums paid as Administration Fees pursuant to Section 3.2. 6.3 Return of Materials. Within thirty (30) days after termination of ------------------- this Agreement, or such lesser time as may be provided by the remedy imposed pursuant to an Enforcement Claim, Licensee shall either: (i) return all Confidential Information and Highly -22- Confidential Information to Licensor; or (ii) destroy all Confidential Information and Highly Confidential Information in its possession and certify such destruction in writing to Licensor. 6.4 Survival. The terms of Sections 5.1 (subject to Sections 6.2(a) -------- and (b)), 5.2, 5.3, 5.4, 6.2, and 6.3, this Section 6.4 and Articles 7, 8, 9 and 10, and so much of Article 1 as may be necessary to define any terms used in such Sections or Articles, shall survive the termination of this Agreement. 7. OWNERSHIP. All Proprietary Information and media containing Proprietary Information as provided by Licensor to Licensee shall remain the property of Licensor or its licensors. Except as provided in Article 2, this Agreement does not give Licensee any license or other right to the Proprietary Information. 8. DISCLAIMER AND LIMITATION OF LIABILITY. 8.1 Disclaimer. ALL PROPRIETARY INFORMATION IS PROVIDED "AS IS." ---------- LICENSOR MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AND EXPRESSLY DISCLAIMS IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, AND ANY EQUIVALENTS UNDER THE LAWS OF ANY JURISDICTION THAT MIGHT ARISE FROM THE PROPRIETARY INFORMATION OR LICENSEE'S IMPLEMENTATION, ATTEMPTED IMPLEMENTATION, OR USE OF SUCH INFORMATION OR CSS. LICENSOR FURTHER DISCLAIMS ANY WARRANTY THAT CSS AND/OR THE CONTENTS OF THE PROPRIETARY INFORMATION, OR ANY PRODUCT IMPLEMENTING CSS OR SUCH PROPRIETARY INFORMATION, IN WHOLE OR IN PART, WILL BE FREE FROM INFRINGEMENT OF ANY THIRD PARTY INTELLECTUAL PROPERTY OR PROPRIETARY RIGHTS. 8.2 Limitation of Liability. NEITHER MEI, TOSHIBA, OR ANY DIRECTOR, ----------------------- OFFICER, OR EMPLOYEE OF MEI, TOSHIBA, NOR, EXCEPT AS PROVIDED IN SECTION 5.2(k) OF THIS LICENSE AGREEMENT, LICENSOR OR ANY DIRECTOR, OFFICER, OR EMPLOYEE OF LICENSOR ACTING IN HIS OR HER CAPACITY AS A DIRECTOR, OFFICER, OR EMPLOYEE OF LICENSOR (COLLECTIVELY, THE "AFFECTED PARTIES") SHALL BE LIABLE TO LICENSEE FOR ANY DIRECT, INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES ARISING OUT OF ANY CAUSE OF ACTION RELATING TO THIS AGREEMENT, OR BASED ON MAKING, USING, SELLING OR IMPORTING ANY PRODUCTS OF LICENSEE THAT IMPLEMENT PROPRIETARY INFORMATION OR CSS, WHETHER UNDER THEORY OF CONTRACT, TORT, INDEMNITY, PRODUCT LIABILITY OR OTHERWISE. TO THE EXTENT THAT ANY COURT OF COMPETENT JURISDICTION RENDERS JUDGMENT AGAINST THE AFFECTED PARTIES, NOTWITHSTANDING THE ABOVE LIMITATION, THE AFFECTED PARTIES' TOTAL LIABILITY TO LICENSEE IN CONNECTION WITH THIS AGREEMENT OR CSS SHALL IN NO EVENT EXCEED THE AMOUNTS OF MONEY RECEIVED BY THE AFFECTED PARTIES FROM LICENSEE UNDER THIS AGREEMENT DURING THE MOST RECENT FIVE (5)-YEAR PERIOD IMMEDIATELY PRIOR TO THE DATE OF SUCH JUDGMENT. THIS LIMITATION OF LIABILITY SHALL APPLY TO MEI AND TOSHIBA -23- SOLELY IN THEIR CAPACITIES AS CO-DEVELOPERS AND LICENSORS OF CSS TO LICENSOR. 9. REMEDIES. 9.1 Indemnification. Licensee shall indemnify and hold Licensor and --------------- its officers, directors and employees, and, in their roles as developers of CSS and licensors of CSS to Licensor, MEI and Toshiba and their respective officers, directors and employees, harmless from and against any and all claims, actions, suits, proceedings or litigation and any losses, deficiencies, damages, liabilities, costs and expenses including without limitation, reasonable attorneys' fees and all related costs and expenses, to be paid or otherwise incurred in connection with the defense of any claim, action, suit, proceeding or litigation ("Claims") which result from: (i) any breach of any covenant, agreement, representation or warranty herein by Licensee, its employees, former employees who had access to Confidential Information or Highly Confidential Information pursuant to this Agreement, provided that Licensee's indemnity with respect to acts of former employees shall be limited to circumstances in which Licensee has failed to comply with its obligations as to former employees pursuant to Section 5.2(b)(ii) hereof; (ii) Licensee's manufacture, sale or use of any DVD Products, provided, that such indemnity shall not extend to: (a) any Claim that the CSS Specifications infringe the intellectual property rights of any third parties, or (b) any Claim or any portions thereof that is attributable to compliance with the CSS Specifications themselves; and/or (iii) Licensee's activities under Section 5.3. 9.2 Equitable Relief. Licensee and Licensor recognize and agree that ---------------- due to the unique nature of certain provisions hereof and the lasting effect of and harm from a breach of such provisions, including making available the means for widespread unauthorized copying of copyrighted content intended to be protected using CSS, in the event that Licensee breaches its obligations under Sections 2.1, 2.3, 2.4, 2.5, 4.2, 5, 9.5 or 10 hereof, money damages alone will not adequately compensate an injured party, including an injured Eligible Licensee pursuant to Section 9.5, and that injury to such party will be irreparable. Licensee and Licensor therefore agree that, in addition to all other remedies available to the injured party at law, in equity, by agreement or otherwise, the injured party, including an Eligible Licensee pursuant to Section 9.5, upon showing to the relevant court's satisfaction that applicable factors other than the fact that harm will be irreparable and that monetary damages are not sufficient to remedy the injury have been fulfilled, will be entitled to specific performance or other temporary, preliminary, or permanent injunctive relief including corrective actions appropriate to the circumstances for the enforcement of any such obligation (whether or not there have been commercial sales of products subject to the requested relief). 9.3 Specific Remedies. Licensee acknowledges that, due to the critical ----------------- importance of maintaining the integrity of CSS and the inability to calculate the damage to CSS users, in the event of any material breach of Section 5.2, Licensor, in addition to any other remedies in equity, but in lieu of any and all other claims for monetary damages, may recover liquidated damages for each material breach from Licensee in the amount of [*] U.S. dollars $[*], provided that the parties agree that Licensee may request and the court may grant such request that this amount be reduced to take account of the fact that Licensee brought the breach to Licensor's attention in a timely and reasonable manner. For purposes of the preceding sentence, a breach shall -24- be "material" only if it has resulted in or would be likely to result in commercially significant harm to other CSS Licensees or threat to the integrity or security of CSS. For purposes of this Section 9.3, a series of substantially related events shall constitute a single material breach. In addition, the following is a non exclusive list of circumstances in which liquidated damages pursuant to this Section 9.3 shall not be available for any breach of Section 5.2: (1) if no Confidential Information or Highly Confidential Information was released to a third party not permitted hereunder to have such information or could reasonably have been expected to have been released to such third party as a result of the breach; (2) if Licensee maintains an internal program to assure compliance with Section 5.2 (including a program to assure maintenance of confidentiality of information for purposes in addition to compliance with this Agreement), the breach was inadvertent or otherwise unintentional, and the breach did not have a material adverse effect on the integrity or security of CSS; (3) if Licensee brought the breach to Licensor's attention in a timely manner as required by this Agreement and such breach did not have a material adverse effect on the integrity or security of CSS; or (4) if Licensor improperly marked or failed to mark information as Confidential Information or Highly Confidential Information or failed to otherwise disclose that such information was Confidential Information or Highly Confidential Information and such information is the subject of the alleged breach. 9.4 Damage Limitation. Notwithstanding any other provision of this ----------------- Agreement, Licensee's cumulative liability to Licensor (including MEI and Toshiba) and all other CSS Licensees for any breach, or combination of breaches, or any of its other obligations under this Agreement shall not exceed [*] U.S. Dollars $[*], unless the revenue derived from Licensee's products, sold by Licensee, and developed and manufactured using CSS or Confidential Information or Highly Confidential Information, is less than [*] U.S. dollars $[*], in which case Licensee's liability shall not exceed such lesser amount; provided, however, that if only a portion of one or more of Licensee's products is developed and manufactured using CSS or Confidential Information or Highly Confidential Information, then the proportion of such portion relative to the entirety of such Licensee products shall be used in calculating the revenue derived from such products for purposes of this Section 9.4 (e.g., 5K circuits out of 100K circuits equals 5%); and provided further, however, that such amount shall in no event, except as provided in Section 9.3, be less than $[*]. 9.5 Third Party Beneficiary Right. The parties hereto acknowledge and ----------------------------- agree that the compliance of Licensee, other CSS Licensees, and Associate Licensees with the terms of the licenses granted by this Agreement or the Associate License, as applicable, is essential to maintain the integrity and security of the Content Scramble System and to protect prerecorded motion pictures contained on DVD Discs. As part of the consideration of the licenses granted herein, Licensee, for itself and its Permitted Sublicensees, hereby confers a third-party beneficiary right upon certain CSS Licensees ("Eligible Licensees") that fall into one of two classes: (i) Motion Picture Companies ("Eligible Content Providers") or (ii) manufacturers of CSS Compliant Products other than DVD Discs ("Eligible Implementers"), in order to enforce certain of Licensee's obligations, subject to the following conditions: (a) Either an Eligible Content Provider who has commercially released one or more prerecorded motion pictures on DVD Disc that utilizes CSS or an Eligible Implementer which has commercially released one or more CSS Compliant Products other than DVD Discs shall -25- be entitled to initiate or institute a claim or action ("Beneficiary Claim") to enforce only those obligations of Licensee specified as follows (collectively, the "Eligible Obligations"): (i) for any Beneficiary Claim initiated by Eligible Content Providers, Licensee's obligations under Section 2.1 [Nonexclusive License], 2.3 [Right to Have Made], 2.4 [Sublicenses], 2.5 [No Sublicense or Implied Licenses], 4.2 [Compliance with Specifications], 5.1 [Access to Intellectual Property], 5.2 [Confidentiality], 5.3 [Reverse Engineering], 5.5 [Controls Against Theft], 9.2 [Equitable Relief], 9.5(d) [Settlement Restrictions] and Section 10 [Miscellaneous] and including any equivalent provisions contained in any Associate License; and (ii) for any Beneficiary Claim initiated by Eligible Implementers, Licensee's obligations under Section 4.2 [Compliance with Specifications] solely as such obligations pertain to Section 5.4 [Non-alteration of the Secured Disc Key Set] and Section 6.3 [Motion Picture Scrambling] of the CSS Procedural Specifications, Section 5.1 [Access to Intellectual Property], Section 5.5 [Controls Against Theft], and Section 9.5(d) [Settlement Restrictions]. Each Eligible Licensee which has not initiated the Beneficiary Claim but which is either an Eligible Content Owner, in the case of Beneficiary Claim initiated by an Eligible Content Owner, or an Eligible Implementor, in the case of a Beneficiary Claim initiated by an Eligible Implementor, shall be eligible to join such Beneficiary Claim. Subject to Section 9.6, the remedies available for any Beneficiary Claim shall not include damages, but shall include: (i) equitable relief provided under Section 9.2, provided that such relief shall be limited to temporary and/or preliminary relief until such time as the Eligible Licensee bringing the Beneficiary Claim has completed a process of seeking to reach a reasonable settlement of such claim using the efforts of the Ombudsman; and (ii) reimbursement for actual and reasonable costs mitigation of the harm caused by Licensee's breach, provided that such reimbursement shall be no more than $[*] for all Eligible Licensees cumulatively joining in any particular Beneficiary Claim. In addition, the prevailing party in relation to the contractual claims in any action brought under this Section shall be entitled to an award of its reasonable attorney's fees and related costs (including expert's fees and costs) incurred in relation to such contractual claims in an amount to be fixed either pursuant to stipulation between the parties involved or by the court, provided that in fixing the amount of such an award, the court may determine in its discretion to make no award of attorney's fees in given case and, in any event, shall be limited to an award of no more than $[*], except that the court may award up to $[*] in any case in which the court determines that one of the following circumstances exists: (1) the breach was material and willful or malicious, and resulted in the exposure of an Eligible Content Provider's content unauthorized copying, in the case of a Beneficiary Claim brought by such Eligible Content Provider where such Eligible Content Provider is the prevailing party as described above, (2) the breach was material and willful or malicious, and resulted in consumers being unable to use CSS Compliant Products manufactured or distributed by the Eligible Implementor to view content that would normally be viewable using such CSS Compliant Products, in the case of a Beneficiary Claim brought by such Eligible Implementor where such Eligible Implementor is the prevailing party as described above or (3) the Beneficiary Claim was frivolous or brought in bad faith, in the event the Defendant Licensee is the prevailing party as -26- described above. The amount of any award of attorney's fees and related costs shall be made part of any judgment or award rendered. (b) Prior to initiating or instituting any Beneficiary Claim against a Licensee ("Defendant Licensee"), an Eligible Licensee ("Plaintiff Licensee") shall provide Licensor notice and consultation reasonable under the circumstances regarding a proposed Beneficiary Claim; provided that such consultation with Licensor shall not affect an Eligible Licensee's complete discretion in initiating such a Beneficiary Claim. Such Eligible Licensee shall further provide Licensor with notice of actual filing of a Beneficiary Claim and upon Licensor's request, any copies of material documents to be filed in Plaintiff Licensee's initiation or pursuit of such Beneficiary Claim. Licensor shall cooperate reasonably with such Eligible Licensee in providing appropriate and necessary information in connection with the Beneficiary Claim to the extent that such cooperation is consistent with the preservation of the integrity and security of CSS and to the extent such cooperation does not involve release of information provided to Licensor by another CSS Licensee that such CSS Licensee has designated to Licensor to be its confidential and proprietary information. Documents provided to Licensor under this Section 9.5(b) shall not include any documents filed or to be filed under seal in connection with such Beneficiary Claim. The failure to provide such documents shall not, however, be a defense against any Beneficiary Claim or grounds for a request to delay the granting of any temporary or preliminary relief sought. (c) Licensor shall provide Eligible Content Providers or Eligible Implementors, as the case may be, with prompt notice of a Plaintiff Licensee's Beneficiary Claim against a Defendant Licensee ("Claim Notice") in accordance with Section 10.6. Within sixty (60) days of the date of mailing of a Claim Notice, all such Eligible Licensees shall elect whether to join in such Beneficiary Claim, and the failure of any such Eligible Licensee to join in such Beneficiary Claim within such sixty (60) day period shall be deemed a waiver of such Eligible Licensee's third party beneficiary right under this Section 9.5 with respect to all Beneficiary Claims against such Defendant Licensee arising out of the alleged breach by such Defendant Licensee raised in such Beneficiary Claims. Plaintiff Licensee shall support, and Defendant Licensee shall not oppose, any motion to intervene by such Eligible Licensees or Licensor electing to join such Beneficiary Claim within such sixty (60) day period. Neither an Eligible Licensee's failure to notify or consult with Licensor or provide copies to Licensor as required by Section 9.5(b), nor Licensor's failure to give notice under this Section 9.5(c) shall be a defense against any Beneficiary Claim or grounds for a request to delay the granting of any preliminary relief requested. (d) Eligible Licensees shall have no right to, and Licensee agrees that it will not, enter into any settlement that (i) amends any material term of this Agreement or of the Associate License; (ii) has a material adverse effect on the integrity and/or security of CSS; or (iii) impacts any of the rights in and to CSS held by Licensor, MEI, or Toshiba or to any intellectual property rights embodied therein unless Licensor, MEI, and/or Toshiba, as the case may be, shall have provided prior written consent thereto. (e) NOTWITHSTANDING SECTION 10.4(b), LICENSEE AGREES THAT ALL BENEFICIARY CLAIMS INSTITUTED UNDER THIS SECTION 9.5 SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, U.S.A. EXCLUDING THAT BODY OF LAW RELATING TO CONFLICTS -27- OF LAW PRINCIPLES, AND SHALL BE CONDUCTED IN FEDERAL AND STATE COURTS LOCATED IN LOS ANGELES, SANTA CLARA OR SAN FRANCISCO COUNTIES IN THE STATE OF CALIFORNIA, U.S.A. WITH RESPECT TO ANY DISPUTE CONCERNING COMPLIANCE WITH THIS AGREEMENT, LICENSEE HEREBY IRREVOCABLY CONSENTS TO (i) THE EXCLUSIVE JURISDICTION AND VENUE IN THE FEDERAL AND STATE COURTS LOCATED IN LOS ANGELES, SANTA CLARA OR SAN FRANCISCO COUNTIES IN THE STATE OF CALIFORNIA, U.S.A; AND (ii) THE SERVICE OF PROCESS OF SAID COURTS IN ANY MATTER ARISING OUT OF A DISPUTE OVER COMPLIANCE WITH THIS AGREEMENT BY PERSONAL DELIVERY OR BY MAILING OF PROCESS BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, AT THE ADDRESSES AS SPECIFIED IN THIS AGREEMENT OR TO THE AGENT REQUIRED BY SECTION 10.4(d). LICENSEE WAIVES ANY OBJECTION TO THE JURISDICTION, PROCESS, AND VENUE OF ANY SUCH COURT, AND TO THE EFFECTIVENESS, EXECUTION, AND ENFORCEMENT OF ANY ORDER OR JUDGMENT (INCLUDING, BUT NOT LIMITED TO, A DEFAULT JUDGMENT) OF SUCH COURT PERTAINING TO THIS AGREEMENT, TO THE MAXIMUM EXTENT PERMITTED BY THE LAW OF THE PLACE WHERE ENFORCEMENT OR EXECUTION OF ANY SUCH ORDER OR JUDGMENT MAY BE SOUGHT AND BY THE LAW OF ANY PLACE WHOSE LAW MIGHT BE CLAIMED TO BE APPLICABLE REGARDING THE EFFECTIVENESS, ENFORCEMENT, OR EXECUTION OF SUCH ORDER OR JUDGMENT, INCLUDING PLACES OUTSIDE OF THE STATE OF CALIFORNIA, THE STATE OF DELAWARE, AND OF THE UNITED STATES. HOWEVER, IN THE CASE OF LICENSEES THAT ARE DEFENDANTS THAT ARE INCORPORATED IN THE UNITED STATES AND HAVE SUBSTANTIAL ASSETS IN THE UNITED STATES, ENFORCEMENT OR EXECUTION OF ANY SUCH ORDER OR JUDGMENT AGAINST SUCH DEFENDANTS MAY BE SOUGHT ONLY IN COURTS OF THE UNITED STATES. 9.6 Nothing contained in Section 8.3, Section 9.2 or Section 9.5 is intended to limit remedies or relief available pursuant to statutory or other claims that a CSS Licensee may have under separate legal authority not contained in this Agreement. 10. MISCELLANEOUS. 10.1 Entire Agreement. This Agreement, the exhibits hereto constitute ---------------- the entire agreement between the parties related to the subject matter of this Agreement hereto and supersede all oral or written agreements on this subject matter entered prior to this Agreement. Subject to Section 10.7, this Agreement may not be modified except by written agreement dated subsequent to the date of this Agreement and signed by both parties. 10.2 Assignment. Licensee shall not assign or otherwise transfer any ---------- of its rights or obligations under this Agreement without the prior written consent of Licensor, provided, however, that Licensee may assign this Agreement in connection with a merger, sale or reorganization pursuant to which Licensee merges into, or transfers all or substantially all of the assets or stock (including this Agreement) of Licensee or of the business unit or units that are utilizing CSS in its business activities to the assignee, provided that the assignee agrees in writing to be bound by the terms and conditions of this Agreement and provides all information required by the Licensor of CSS Licensees pursuant to this agreement. Licensor shall have the right to assign this -28- License Agreement in connection with a merger into, or transfer of all or substantially all of Licensor's assets or stock (including this Agreement) to the assignee, provided that the assignee agrees in writing to assume all of Licensor's obligations under this Agreement. 10.3 Presumptions. In construing the terms of this Agreement, no ------------ presumption shall operate in either party's favor as a result of its counsel's role in drafting the terms or provisions hereof. 10.4 Governing Law; Enforcement; Jurisdiction. ---------------------------------------- (a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA, U.S.A. EXCLUDING THAT BODY OF LAW RELATING TO CONFLICTS OF LAW PRINCIPLES. (b) IN CONNECTION WITH ANY DISPUTES BETWEEN THE PARTIES HERETO ARISING OUT OF OR RELATING TO THIS AGREEMENT, EACH PARTY HERETO IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION AND VENUE IN THE FEDERAL AND STATE COURTS LOCATED IN THE COUNTY OF SANTA CLARA, CALIFORNIA, AND (ii) THE SERVICE OF PROCESS OF SAID COURTS IN ANY MATTER RELATING TO THIS AGREEMENT BY PERSONAL DELIVERY OR BY MAILING OF PROCESS BY CERTIFIED MAIL, POSTAGE PREPAID, AT THE ADDRESSES SPECIFIED IN THIS AGREEMENT, OR TO THE AGENT TO BE APPOINTED PURSUANT TO (c), BELOW, (c) LICENSEE SHALL APPOINT AN AGENT IN THE STATE OF CALIFORNIA FOR ACCEPTANCE OF SERVICE OF PROCESS PROVIDED FOR UNDER THIS AGREEMENT AND SHALL NOTIFY LICENSOR OF THE IDENTITY AND ADDRESS OF SUCH AGENT WITHIN THIRTY (30) DAYS AFTER THE EFFECTIVE DATE; (d) LICENSEE WAIVES ANY OBJECTIONS TO THE JURISDICTION, PROCESS, AND VENUE OF ANY SUCH COURTS, AND TO THE EFFECTIVENESS EXECUTION, AND ENFORCEMENT OF ANY ORDER OR JUDGMENT (INCLUDING, BUT NOT LIMITED TO, A DEFAULT JUDGMENT) OF SUCH COURTS PERTAINING TO THIS AGREEMENT, TO THE MAXIMUM EXTENT PERMITTED BY THE LAW OF THE PLACE WHERE ENFORCEMENT OR EXECUTION OF ANY SUCH ORDER, JUDGMENT OR DECISION MAY BE SOUGHT AND BY THE LAW OF ANY PLACE WHOSE LAW MIGHT BE CLAIMED TO BE APPLICABLE REGARDING THE EFFECTIVENESS, ENFORCEMENT, OR EXECUTION OF SUCH ORDER, JUDGMENT, OR DECISION, INCLUDING PLACES OUTSIDE OF THE STATE OF CALIFORNIA, STATE OF DELAWARE, AND THE UNITED STATES. HOWEVER, IN THE CASE OF LICENSEES THAT ARE INCORPORATE IN THE UNITED STATES AND HAVE SUBSTANTIAL ASSETS IN THE UNITED STATES, ENFORCEMENT OR EXECUTION OF ANY SUCH ORDER OR JUDGMENT, AGAINST SUCH DEFENDANT, MAY BE SOUGHT ONLY IN THE COURTS OF THE UNITED STATES. 10.5 Severability; Waiver. Subject to Section 10.7, should any clause, -------------------- sentence, or paragraph of this Agreement judicially be declared to be invalid, unenforceable, or void, such -29- decision shall not have the effect of invalidating or voiding the remainder of this Agreement. The parties agree that the part or parts of this Agreement so held to be invalid, unenforceable, or void shall be reformed without further action by the parties hereto and only to the extent necessary to make such part or parts valid and enforceable. Subject to Section 10.7, a waiver by either of the parties hereto of any of the covenants to be performed by the other party or any breach thereof shall not be effective unless made in writing and signed by the waiving party and shall not be construed to be a waiver of any succeeding breach thereof or of any covenant herein contained. 10.6 Notice. All notices to be provided pursuant to this Agreement ------ shall be given in writing and shall be effective when either served by personal delivery or upon receipt via certified mail, return receipt requested, postage prepaid, overnight courier service or sent by facsimile transmission with hard copy confirmation sent by certified mail, as above, in each case to the party at the addresses listed below or at such other addresses as may be specificd by notice given in accordance with this section. If to Licensor: DVD Copy Control Association 225 B Cochrane Circle Morgan Hill, CA 95037 Attn: John Hoy Fax: +1-408-779-9291 If to Licensee: InterVideo, Inc. 47350 Fremont Blvd. Fremont, CA 94538 Attn: General Counsel Fax: 510-651-8808 10.7 Amendment. No agreement pertaining to CSS similar to this --------- Agreement or to either of the form Associate Licenses hereto between Licensor and any CSS Licensee or Associate Licensee may be entered into on terms other than those contained in this Agreement or the Associate License, as applicable, to the extent that any modified terms would have a material adverse effect on the integrity or security of CSS or the protections provided to Eligible Licensees pursuant to Section 9.5 hereof (including any of the Sections referenced therein) or in the Associate License, and no agreement between Licensor and any CSS Licensee or Associate Licensee having terms contained herein or the Associate License, as applicable may be modified or its terms waived if such modification or waiver would have a material adverse effect on the integrity or security of CSS or the protections provided to Eligible Licensees pursuant to Section 9.5 hereof (including any of the Sections referenced therein) or in the Associate License. 10.8 Licensee List. Unless the Licensor's Board of Directors ------------- determines otherwise, Licensor will provide Licensee, upon Licensee's request, a list of all other CSS Licensees, Associate Licensees, and Permitted Sublicensees of which Licensor has received notice pursuant to -30- Section 2.4(a), above, except that such list shall not include any CSS Licensee that (i) has not announced its intention to manufacture or sell, or has not sold or offered for sale, CSS Compliant Products and (ii) has notified Licensor in writing that it desires confidentiality until such time as it publicly announces its intention to manufacture or sell, or has sold or offered for sale, CSS Compliant Products. 10.9 Headings and Captions. Section headings and captions are used in --------------------- this Agreement for convenience only, and shall not be deemed to constitute a part of or to affect the construction of this Agreement. -31- IN WITNESS WHEREOF, the parties have executed this Agreement as of the dates written below. Licensor: Licensee: /s/ John Hoy /s/ Joe Monastiero - ----------------------------------- ------------------------------------- Signature Signature John Hoy Joe Monastiero - ----------------------------------- ------------------------------------- Printed Name Printed Name President VP Worldwide Sales/Marketing - ----------------------------------- ------------------------------------- Title Title 12/22/00 12/21/00 - ----------------------------------- ------------------------------------- Date Date -32- Exhibit List A. Permitted Sublicensee Acknowledgment and Agreement B. Acknowledgment by Authorized Employees C. CSS Membership Categories and Fee Schedule D. Contact Person and Alternate Contact Person EXHIBIT "A" TO CSS LICENSE AGREEMENT PERMITTED SUBLICENSEE ACKNOWLEDGMENT AND AGREEMENT ______________________________________, a ____________________ corporation having a place of business at ____________________________________________ ("Sublicensee"), hereby acknowledges and agrees that: (i) it is an Affiliate of ____________ ("Licensee"), as "Affiliate" is defined in Section 1.2 of the CSS License Agreement (the "License Agreement") executed on ____________ between Licensee and the CSS Entity ("Licensor"); (ii) it has received a sublicense from Licensee (the "Sublicense") pursuant to Section 2.4 of the License Agreement; (iii) it has read and understood the License Agreement and agrees to abide by its terms with the same rights (but without the right to grant a sublicense) and the same obligations as Licensee, including, without limitation, the covenant not to sue and patent license offer provisions of Section 5.1 thereof; (iv) the Sublicense coterminates with the License Agreement and also terminates at such time that Sublicensee ceases to qualify as an "Affiliate"; (v) in the event Sublicensee fails to abide by the terms of the License Agreement, Licensor and/or Eligible Licensees (as third party beneficiaries) shall, in their respective sole discretion, be entitled to bring an action at law or in equity against Sublicensee to enforce the terms of the License Agreement. IN WITNESS WHEREOF, Sublicensee has executed this Acknowledgment and Agreement as of the date written below. Signed: _____________________________________________ Name: _______________________________________________ Title: ______________________________________________ Date: _______________________________________________ EXHIBIT "B" TO CSS LICENSE AGREEMENT ACKNOWLEDGMENT BY AUTHORIZED EMPLOYEES I, ______________________, a full-time employee of _____________________________, a ______________________ ("Licensee"), acknowledge that I have been designated by Licensee as an "Authorized Employee" to receive on behalf of Licensee access to Confidential Information and Highly Confidential Information of the CSS Entity ("Licensor") which Licensee is obligated to maintain strictly confidential under the terms of the CSS License Agreement between Licensor and Licensee. With respect to Highly Confidential Information, I acknowledge that the CSS License Agreement requires Licensee to employ procedures for safeguarding Highly Confidential Information which procedures include, at a minimum: (i) Licensee and its Permitted Sublicensees shall each employ procedures for safeguarding Highly Confidential Information at least as rigorous as Licensee and its Permitted Sublicensees, respectively, would employ for its own most highly confidential information, such procedures to include, at a minimum: (1) maintaining on Licensee's and/or Permitted Sublicensees' premises a secure location in which any and all Highly Confidential Information shall be stored, where such a location may include electronic storage that provides at least as much security as the CSS system itself provides; (2) that any Highly Confidential Information stored in such a location shall be accessible only by Authorized Employees (as defined below); (3) that (x) where Highly Confidential Information is stored in a location that is physically secure, Authorized Employees visiting such location shall sign in and out each time that they visit such location; and (y) where Highly Confidential Information is stored securely in an electronic form, Authorized Employees having access to such Highly Confidential Information in unsecure form shall sign in and out each time that they have such access; and (4) when Highly Confidential Information is not in use, such information shall be stored in a locked safe at such secure location or shall be stored electronically in a form that provides at least as much security as the CSS system itself provides. I further acknowledge that the CSS License Agreement defines Highly Confidential Information to be (i) the algorithms used for scrambling, descrambling, authentication and key recovery; (ii) master, disc, title or authentication keys; or (iii) information developed by or for Licensor for testing product compliance with CSS where such information makes use of or reveals information described in (i) or (ii). I further acknowledge that I have signed a prior written agreement with Licensee pursuant to which I have agreed to maintain the confidentiality of third party confidential information received by Licensee. I acknowledge that I am bound by such agreement to adhere to procedures established by Licensee to maintain the confidentiality of Confidential Information and Highly Confidential Information during my employment and after my employment with Licensee. By signing below, I attest that I have read and understood this acknowledgment. Signed: _____________________________________________ Name: _______________________________________________ Date: _______________________________________________ cc: CSS Entity EXHIBIT"C" TO CSS LICENSE AGREEMENT CSS MEMBERSHIP CATEGORIES AND FEE SCHEDULE I. CSS Membership Categories: The CSS license has annual DVD Copy Control Association administrative fee of - ------ [*] US dollars ([*] US dollars for Associate License)/1/ for each Membership Category of license selected.
- --------------------------------------------------------------------------------------------------------------------------- Requested license categories . "Reseller" [Associate License] [_] . "Assembler" [Associate License] [_] . "Content Provider" [_] . "Authoring Studio" [_] . DVD Disc Replicator" [_] . "CSS Disc Formatter Manufacturer" [_] . "DVD Player Manufacturer" [_] . "DVD Drive Manufacturer" [X] . "CSS Decryption Module Manufacturer" [X] . "Descrambler Manufacturer" [_] . "Authenticator Module for DVD Drive" [X] . "Authenticator Module for CSS Decryption Module" [_] . "Integrated Products Manufacturer" [_] . "Verification Product Manufacturer" II. Technical Specifications Titles: - ---------------------------------------------------------------------------------------------------------------------------
The cost of each CSS Technical Specification (Confidential Information) is ---- [*]US dollars per copy per Technical Specification Title. --- --- NOTE: To obtain a Specification from DVD CCA, licensee (or potential licensee) must have a fully executed CSS License and provided its DVD Format Book serial number to DVD CCA.
Specification Number of Copies Requested - ----------------------------------------------------------------------------------------------------------- Specifications of DVD Content Scramble System for: 209. - "CSS Disc Formatter" [_] [_] 309. - "DVD Player" [_] [_] 409. - "DVD Drive" [_] [_] 509. - "CSS Decryption Module Manufacturer" [_] [_] 609. - "Descrambler" [_] [_] 709. - "Authenticator Module for DVD Drive" [_] [_] 809. - "Authenticator Module for CSS Descryption Module" [_] [_]
- ---------- /1/ Fee is subject to periodic review and change EXHIBIT "D" TO CSS LICENSE AGREEMENT ________________________________________________________________________________ CONTACT PERSON Name: ______________________________________________ Title: ______________________________________________ Company: ___________________________________________ Division: __________________________________________ Address: ___________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ Telephone Number: __________________________________ Facsimile Number: __________________________________ Email address: _____________________________________ ________________________________________________________________________________ ALTERNATE CONTACT PERSON Name: ______________________________________________ Title: ______________________________________________ Company: ___________________________________________ Division: __________________________________________ Address: ___________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ Telephone Number: __________________________________ Facsimile Number: __________________________________ Email address: _____________________________________ -----END PRIVACY-ENHANCED MESSAGE-----