S-1

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As filed with the Securities and Exchange Commission on May 5, 2006

Registration No. 333-           

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

DIVX, INC.
(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	7371 (Primary Standard Industrial Classification Code Number)	33-0921758 (I.R.S. Employer Identification Number)
4780 Eastgate Mall San Diego, California 92121 (858) 882-0600 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

R. Jordan Greenhall
CEO and Chairman
DivX, Inc.
4780 Eastgate Mall
San Diego, California 92121
(858) 882-0600
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Steven M. Przesmicki, Esq.
Jason L. Kent, Esq.
Cooley Godward LLP
4401 Eastgate Mall
San Diego, California 92121
(858) 550-6000 David J. Richter, Esq.
GC, Legal and Corporate Development
Johnny Y. Chen, Esq.
Associate General Counsel
DivX, Inc.
4780 Eastgate Mall
San Diego, California 92121
(858) 882-0600 Martin A. Wellington, Esq.
Davis Polk & Wardwell
1600 El Camino Real
Menlo Park, California 94025
(650) 752-2000

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.

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, check the following box.    o

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) 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.    o

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.    o

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 number of the earlier effective registration statement for the same offering.    o

CALCULATION OF REGISTRATION FEE

Title of each class of securities to be registered	Proposed maximum aggregate offering price(1)	Amount of registration fee
Common Stock, $0.001 par value per share	$135,000,000	$14,445

(1)

Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended. Includes $17,608,695 of shares that the underwriters have the option to purchase to cover over-allotments.

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 thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

Subject to completion, dated May 5, 2006

The information in this prospectus is not complete and may be changed. Neither we nor the selling stockholders may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and neither we nor the selling stockholders are soliciting an offer to buy these securities, in any state where the offer or sale is not permitted.

Prospectus

                           shares

Common stock

This is an initial public offering of shares of common stock by DivX, Inc. DivX is selling                           shares of common stock. The selling stockholders included in this prospectus are selling an additional                            shares of common stock. We will not receive any proceeds from the sale of shares of common stock by the selling stockholders. The estimated initial public offering price is between $              and $             per share.

We have applied for listing of our common stock on The Nasdaq Stock Market under the symbol DIVX.

		Per share		Total
Initial public offering price	$		$
Underwriting discounts and commissions	$		$
Proceeds to DivX, before expenses	$		$
Proceeds to selling stockholders, before expenses	$		$

DivX and the selling stockholders have granted the underwriters an option for a period of 30 days to purchase up to                           additional shares of common stock.

Investing in our common stock involves a high degree of risk. See "Risk factors" beginning on page 7.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

JPMorgan

                 Banc of America Securities LLC

                                  Cowen & Company

                                                    Canaccord Adams

                                                                    Montgomery & Co., LLC

             , 2006

Table of contents

	Page
Prospectus summary	1
Risk factors	7
Forward-looking statements	30
Use of proceeds	31
Dividend policy	31
Capitalization	32
Dilution	34
Selected consolidated financial data	36
Management's discussion and analysis of financial condition and results of operations	37
A letter to our potential investors	54
Business	56
Management	74
Related party transactions	91
Principal and selling stockholders	94
Description of capital stock	97
Material U.S. federal income tax consequences to non-U.S. holders	103
Shares eligible for future sale	106
Underwriting	109
Legal matters	113
Experts	113
Where you can find additional information	113
Index to consolidated financial statements	F-1

We use "DivX®," "DivX Certified®" and "DivX Ultra™" as trademarks in the U.S. and in other countries. This prospectus also includes references to trademarks and service marks of other entities.

i

Prospectus summary

The following summary is qualified in its entirety by, and should be read together with, the more detailed information and consolidated financial statements and related notes thereto appearing elsewhere in this prospectus. This summary highlights what we believe is the most important information about us and this offering. Before you decide to invest in our common stock, you should read the entire prospectus carefully, including the risk factors and the consolidated financial statements and related notes included in this prospectus. For more insight into our vision and culture, please see "A letter to our potential investors" appearing elsewhere in this prospectus.

DivX overview

We create products and services designed to improve the experience of media. Our first product offering was a video compression-decompression software library, or codec, which has been actively sought out and downloaded over 180 million times in the last four years, including over 50 million times during the last twelve months. We have since built on the success of our codec with other consumer software, including the DivX Player application. We distribute this software from our website, DivX.com, which averaged over five million unique visitors per month during the first quarter of 2006.

We also license our technologies to consumer hardware device manufacturers and certify their products to ensure the interoperable support of DivX-encoded content. Over 35 million DivX Certified hardware devices have been shipped worldwide, including approximately 8.5 million devices reported to us by our customers during the fourth quarter of 2005. Our customers include major consumer video hardware original equipment manufacturers, or OEMs, including Koninklijke Philips Electronics, or Philips, and Samsung Electronics. We are entitled to receive a royalty for each DivX Certified device our customers ship. In addition to technology licensing to consumer hardware device manufacturers, we currently generate revenue from software licensing, advertising and content distribution. In 2005, 2004 and 2003, our revenues were approximately $33.0 million, $16.4 million and $7.7 million, respectively.

Industry overview

We believe three general trends—digitization, connectedness and openness—are converging to create a historic transformation of content. The cost to produce, distribute and market content today is lower than it was in the past, allowing a larger and more diverse group of people to create and generate revenue from quality content. The ways that people discover and consume content are also changing, including the types of content they watch and what devices they use to watch it. Content is also becoming more international, as people around the world become engaged consumers of global content and publish their own content to a global audience.

Our market opportunity

The transformation of content requires a new ecosystem of consumers, content creators, software vendors, hardware device manufacturers and advertisers. The ecosystem must collaborate to address the technological and social needs of the various participants in a more

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digital, connected and open way. To be effective, solutions for the creation, distribution, marketing and consumption of content must provide a neutral platform, enabling collaboration amongst the various participants in the content industry through common technology and community.

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Content consumers need a way to watch content with high visual quality on a variety of connected devices, to pick and choose content from deep, comprehensive catalogs, to discover, share and manage new and interesting content and to create their own content with affordable and accessible tools.

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Content creators need to invest in and increase the value of their content, either directly by generating revenue or indirectly by increasing the value of their content brands.

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Digital media software vendors need to stay competitive by adding valuable features to their products to spur continued software sales, increase profitability and distinguish themselves from generic software provided by operating system vendors.

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Consumer hardware device manufacturers need to remain competitive in the face of pricing pressures and the demands of increasingly connected and engaged consumers. Advertisers need a way to participate in a new content distribution system that allows them to deliver efficient, targeted and richer advertising and branding.

The DivX solution

We have built the technological platform and galvanized the community necessary to enable a digital media ecosystem of consumers, content creators, software vendors, hardware device manufacturers and advertisers, allowing all to benefit from the participation of each other.

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To content consumers, the DivX ecosystem provides a high-quality, interoperable media format supported by dozens of software products and over 1,500 models of consumer hardware devices, making the creation and sharing of content easier and more fun for a growing community of DivX users.

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To content creators, the DivX ecosystem provides the ability to cost-effectively and securely create and distribute high-quality content to a large market of consumers and to deliver that content when, where and how consumers want it.

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To digital media software vendors, the DivX ecosystem offers the ability to differentiate their products by adding DivX media creation and playback functionality that is interoperable with all other DivX Certified devices.

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To consumer hardware device manufacturers, the DivX ecosystem provides the ability to offer capture and playback devices that are interoperable with millions of other DivX Certified devices in a high-quality, secure digital media format that consumers want and use.

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To advertisers, the DivX ecosystem provides access to a large and engaged group of DivX users.

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Our strategy

Our strategy is to make media better by supporting the digital media ecosystem. Key elements of our strategy include:

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increasing our engagement with our existing software vendor and consumer hardware device manufacturing partners;

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building engaged communities of users centered around content;

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developing services around content and advertising that are valued by DivX consumers and economically valuable to the larger DivX ecosystem;

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expanding the DivX ecosystem through partnerships with the community of diverse content creators;

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strengthening the DivX brand; and

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pursuing selected complementary acquisitions, investments and strategic alliances.

Risks affecting us

We are subject to a number of risks, which you should be aware of before you buy our common stock. These risks are discussed more fully in "Risk factors."

Corporate information

We were incorporated in Delaware in May 2000. Our principal offices are located at 4780 Eastgate Mall, San Diego, California 92121, and our telephone number is (858) 882-0600. Our website address is http://www.divx.com. The information contained in or that can be accessed through our website is not part of this prospectus.

Unless the context indicates otherwise, as used in this prospectus, the terms "DivX," "we," "us" and "our" refer to DivX, Inc., a Delaware corporation, and our subsidiaries.

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The offering

Common stock offered by DivX	shares
Common stock offered by the selling stockholders	shares
Common stock to be outstanding after this offering	shares
Use of proceeds	We intend to use the net proceeds to us from this offering for working capital and general corporate purposes and potentially to acquire or license products, technologies or businesses. We will not receive any of the proceeds from the sale of common stock by the selling stockholders.
Proposed symbol on The Nasdaq Stock Market	DIVX

The share amounts listed here are based on shares outstanding as of March 31, 2006. These amounts exclude:

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3,720,413 shares of common stock subject to outstanding options under our 2000 stock option plan, having a weighted average exercise price of $0.49 per share;

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1,847,134 shares of common stock reserved for future issuance under our 2000 stock option plan;

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shares of common stock reserved for future issuance under our 2006 equity incentive plan, which we have adopted to become effective as of the completion of this offering; and

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1,466,669 shares of common stock subject to outstanding warrants, having a weighted average exercise price of $0.68 per share.

Unless otherwise noted, the information in this prospectus assumes:

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the conversion of all our outstanding shares of preferred stock into 33,299,790 shares of common stock upon the completion of this offering;

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the adoption of our amended and restated certificate of incorporation and bylaws upon the completion of this offering; and

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no exercise of the underwriters' over-allotment option.

We expect to effect a reverse stock split of our common stock prior to the completion of this offering. Share data set forth in this prospectus do not currently give effect to the reverse stock split.

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Summary consolidated financial information

The following summary consolidated financial data should be read together with our consolidated financial statements and notes and "Management's discussion and analysis of financial condition and results of operations" appearing elsewhere in this prospectus. The summary consolidated financial data for the years ended December 31, 2003, 2004 and 2005 and at December 31, 2005 are derived from our audited consolidated financial statements, which are included elsewhere in this prospectus. The as adjusted balance sheet data reflects the balance sheet data at December 31, 2005 as adjusted for the sale of             shares of our common stock in this offering at an assumed initial offering price to the public of $             per share, after deducting the estimated underwriting discounts, commissions and offering expenses payable by us.

Year ended December 31, (in thousands, except per share data)		2003			2004			2005
Consolidated statement of operations data:
Net revenues:
	Technology licensing	$	4,290		$	12,228		$	26,919
	Media and other distribution and services		3,456			4,123			6,128
Total net revenues			7,746			16,351			33,047
Total cost of revenues			1,900			3,502			3,656
Gross profit			5,846			12,849			29,391
Operating expenses:
	Selling, general and administrative(1)		5,651			9,816			15,988
	Product development(1)		3,838			6,958			10,269
Total operating expenses			9,489			16,774			26,257
Income (loss) from operations			(3,643	)		(3,925	)		3,134
Interest and other income (expense), net			(89	)		(45	)		223
Income (loss) before income taxes			(3,732	)		(3,970	)		3,357
Income tax provision			(201	)		(373	)		(1,062	)
Net income (loss)		$	(3,933	)	$	(4,343	)	$	2,295
Net income (loss) per share:
	Basic	$	(0.45	)	$	(0.41	)	$	0.16
	Diluted	$	(0.45	)	$	(0.41	)	$	0.05
Shares used to compute basic net income (loss) per share			8,765			10,631			14,646
Shares used to compute diluted net income (loss) per share			8,765			10,631			49,385

(1)

Includes stock-based compensation recorded in 2003, 2004 and 2005 as follows (in thousands):

Cost of revenues	$	—	$	—	$	1
Selling, general and administrative		159		16		252
Product development		—		10		141
Total stock-based compensation	$	159	$	26	$	394

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December 31, 2005 (in thousands)		Actual		As adjusted(2)
Consolidated summary balance sheet data:
	Cash and cash equivalents	$	25,035	$
	Working capital		22,348
	Total assets		33,164
	Total debt		1,265
	Total stockholders' equity		6,185

(2)

A $1.00 increase (decrease) in the assumed initial public offering price of $             per share would increase (decrease) cash and cash equivalents, working capital, total assets and total stockholders' equity by $             (or $             if the underwriters' over-allotment option is exercised in full), assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriter discounts and commissions and estimated offering expenses payable by us.

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Risk factors

Before you decide to invest in our common stock, you should consider carefully the risks described below, together with the other information contained in this prospectus. We believe the risks described below are the risks that are material to us as of the date of this prospectus. If any of the following risks comes to fruition, our business, financial condition, results of operations and future growth prospects would likely be materially and adversely affected. In these circumstances, the market price of our common stock could decline, and you may lose all or part of your investment.

Risks related to our business

Our business and prospects depend on the strength of our brand, and if we do not maintain and strengthen our brand, our business will be materially harmed.

Maintaining and strengthening the "DivX" brand is critical to maintaining and expanding our business, as well as to our ability to enter into new markets for our technologies and products. If we fail to promote and maintain the DivX brand successfully, our business and prospects will suffer. Maintaining and strengthening our brand will depend heavily on our ability to continue to develop and provide innovative and high-quality technologies and products for consumers, content owners, consumer hardware device manufacturers and software vendors, as well as our online video community offering. Moreover, because we engage in relatively little direct brand advertising, the promotion of our brand depends, among other things, upon hardware device manufacturing partners displaying our trademarks on their products. If these partners choose for any reason not to display our trademarks on their products, or if our partners use our trademarks incorrectly or in an unauthorized manner, the strength of our brand may be diluted or our ability to maintain or increase our brand awareness may be harmed, which would have an adverse effect on our business and prospects. In addition, if we fail to maintain high-quality standards for products that incorporate our technologies through the quality-control certification process that we require of our licensees, or if we take other steps to commercialize our products and services that our customers or potential customers reject, the strength of our brand could be adversely affected. Further, unauthorized third parties may use our brand in ways that may dilute or undermine its strength.

If we are unable to penetrate existing markets or adapt or develop technologies and products for new markets, our business prospects could be limited.

We expect that our future success will depend, in part, upon our ability to successfully penetrate existing markets for digital media technologies, including:

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digital versatile disc, or DVD, players;

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DVD recorders;

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network connected DVD players;

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high definition, or HD, DVD players;

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portable media players, or PMPs;

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digital still cameras, or DSCs;

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digital camcorders;

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mobile handsets;

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digital media software applications;

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smart TVs;

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home media centers; and

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set-top boxes.

To date, we have penetrated only some of these markets, including the markets for DVD players, network connected DVD players, PMPs and DSCs. Our success depends upon our ability to further penetrate these markets, some of which we have only penetrated to a limited extent, and to successfully penetrate those markets in which we currently have no presence. Demand for our technologies in any of these developing markets may not grow or develop, and a sufficiently broad base of consumers and professionals may not adopt or continue to use our technologies. In addition, our ability to generate revenue from these markets may be limited to the extent that service providers in these markets choose to provide competitive technologies and entertainment at little or no cost. Because of our limited experience in certain of these markets, we may not be able to adequately adapt our business and our technologies to the needs of consumers and licensees in these markets.

We face significant competition in various markets, and if we are unable to compete successfully, our business will suffer.

We face significant competition in the digital media markets in which we operate. We believe that our most significant competitive threat comes from companies that have the collective financial, technical and other resources to develop the technologies, services, products and partnerships necessary to create a digital media ecosystem that can compete with the DivX ecosystem. Those potential competitors currently include Apple Computer, Google, Microsoft, News Corporation, Sony and Yahoo!.

We also compete with companies that offer products or services that compete with specific aspects of our digital media ecosystem. For example, our digital rights management technology competes with technologies from companies such as Apple Computer, ContentGuard, Intertrust Technologies, Microsoft, Nagra Audio, NDS Group and 4C Entity, as well as the internal development efforts of certain of our licensees. Similarly, content distribution providers, such as Amazon.com, Apple Computer, CinemaNow, Google, MovieLink, Netflix and subscription entertainment services and cable and satellite providers compete against our content distribution services. In addition, Google, Microsoft, Yahoo! and MySpace.com, a subsidiary of News Corporation, offer online communities that we expect will compete with our contemplated online video community offering.

Our proprietary technologies also compete with other video compression technologies, including other implementations of MPEG-4 or implementations of H.264/AVC. A number of companies such as Adobe Systems, Google, Microsoft and RealNetworks offer other competing video formats.

Some of our current or future competitors may have significantly greater financial, technical, marketing and other resources than we do, or may have more experience or advantages in the markets in which they compete. In addition, some of our current or potential competitors, such as Apple Computer, Microsoft and Sony, may be able to offer integrated system solutions in certain markets for entertainment technologies, including audio, video and rights management technologies related to personal computers or the Internet, which could make competing products and technologies that we develop unnecessary. By offering an integrated system solution, these potential competitors also may be able to offer competing products and technologies at lower prices than our products and technologies, which could adversely affect

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our operating results. Further, many of the consumer hardware and software products that include our technologies also include technologies developed by our competitors. As a result, we must continue to invest significant resources in product development in order to enhance our technologies and our existing products and introduce new high-quality technologies and products to meet the wide variety of such competitive pressures. Our business will suffer if we fail to do so successfully.

We also face competition from subscription entertainment services, cable and satellite providers, DVDs and other emerging technologies and products. Our online video community offering will face significant competition from services, such as peer-to-peer and content aggregator services, that allow consumers to directly access an expansive array of content without securing licenses from content providers.

We are dependent on the sale by our licensees of consumer hardware and software products that incorporate our technologies, and a reduction in those sales or a loss of one or more of our key licensees would adversely affect our licensing revenue.

We derive most of our revenue from the licensing of our technologies to consumer hardware device manufacturers, software vendors and consumers. We derived 81%, 75% and 55% of our total revenues from licensing our technology in 2005, 2004 and 2003, respectively. From time to time, one or a small number of our licensees may represent a significant percentage of our revenues. In the year ended December 31, 2005, Philips accounted for approximately 13% of our total revenues, and our top 10 licensees by revenue accounted for approximately 41% of our total revenues. Our technology licensing revenues are particularly dependent upon our relationships with consumer hardware device manufacturers such as Philips and Samsung, and software developers such as Sonic Solutions. We cannot control these manufacturers' and software developers' product development or commercialization efforts or predict their success. Our license agreements typically require manufacturers of consumer hardware devices and software vendors to pay us a specified royalty for every shipped consumer hardware or software product that incorporates our technologies, but many of these agreements do not require these manufacturers to guarantee us a minimum royalty in any given period. Accordingly, if our licensees sell fewer products incorporating our technologies, or otherwise face significant economic difficulties, our revenues will be adversely affected. Our license agreements are generally for two years or less in duration, and a significant number of these agreements are scheduled to expire in 2006. Manufacturers and software developers may elect not to renew their agreements or not to enter into new agreements with us upon expiration of their license agreements on terms as favorable as our current agreements, which could materially and adversely affect our business, operating results and prospects.

Any loss of revenue under our agreement with Google or our failure to renew or replace this agreement could seriously harm our business, operating results and prospects.

We rely on our relationship with Google for a significant portion of our revenue and we cannot guarantee that the revenue from Google will remain available to us. Revenues under the Google agreement represented approximately 15% of our total revenues in 2005. We currently include Google software in both the basic and enhanced versions of our software that we make available to consumers at no cost from our website. In exchange for offering the included Google software to our consumers, and the subsequent activation of the software by those consumers, Google pays us royalties based on specific performance targets. Any decline

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in the popularity of either our products or Google's products among consumers or market saturation by these products could result in a decrease in revenue under this agreement. We have also agreed with Google to include and distribute the Mozilla Firefox Browser and certain Google software products with our software products. The Mozilla Firefox Browser may not achieve widespread adoption by consumers and may lead to fewer downloads and installations. We are obligated to meet certain monthly distribution commitments based on a minimum number of downloads or installations of the included software. If we fail to achieve minimum distribution commitments for specific periods described in the agreement, Google may terminate the agreement. Our ability to continue to generate revenues under the agreement is further limited by a cap on the total amounts payable by Google under the agreement, after which Google is relieved of its obligations to pay us. If our revenues under this agreement exceed this cap prior to the expiration of the agreement, our revenues in subsequent periods may be adversely affected. This agreement expires on December 31, 2006 and Google is under no obligation to renew this agreement. If, upon the expiration of our agreement with Google, we fail to enter into a new agreement with Google or a similar partner on substantially the same or more favorable terms, our business, operating results and prospects would be adversely affected.

The success of our business depends on the interoperability of our technologies with consumer hardware devices.

To be successful we must design our digital media platform to interoperate effectively with a variety of consumer hardware devices, including personal computers, DVD players, DVD recorders, digital cameras, PMPs and mobile handsets. We depend on significant cooperation with manufacturers of these devices and the components integrated into these devices, as well as software providers that create the operating systems for such devices, to incorporate our technologies into their product offerings and ensure consistent playback of DivX-encoded files. Currently, a limited number of devices are designed to support our technologies. If we are unsuccessful in causing component manufacturers, device manufacturers and software providers to integrate our technologies into their product offerings, our business, operating results and prospects could be adversely affected.

If we fail to develop and deliver innovative technologies and products in response to changes in our industry, including changes in consumer tastes or trends, our revenues could decline.

The markets for our technologies and products are characterized by rapid change and technological evolution. We will need to expend considerable resources on product development in the future to continue to design and deliver enduring and innovative technologies and products. For example, significant portions of our online video community offering remain under development and we are continuing to upgrade the technologies we license for use in consumer hardware and software products. Despite our efforts, we may not be able to develop and effectively market new technologies and products that adequately or competitively address the needs of the changing marketplace. In addition, we may not correctly identify new or changing market trends at an early enough stage to capitalize on market opportunities. At times such changes can be dramatic. Our future success depends to a great extent on our ability to develop and deliver innovative technologies that are widely adopted in response to changes in our industry and that are compatible with the technologies or products introduced by other participants in our industry. If we fail to deliver innovative

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technologies, we may be unable to meet changes in consumer tastes or trends, which could decrease our revenues and materially and adversely affect our business and prospects.

Our licensing revenue depends in large part upon semiconductor manufacturers incorporating our technologies into integrated circuits, or ICs, for sale to our consumer hardware device manufacturer licensees and if our technologies are not incorporated in these ICs or fewer ICs are sold that incorporate our technologies, our operating results would be adversely affected.

Our licensing revenue from consumer hardware device manufacturers depends in large part upon the availability of ICs that incorporate our technologies. IC manufacturers incorporate our technologies into ICs, which are then incorporated into consumer hardware devices. We do not manufacture ICs, but rather depend on IC manufacturers to develop, produce and sell ICs to licensed consumer hardware device manufacturers. We do not control the IC manufacturers' decision whether or not to incorporate our technologies into their ICs, and we do not control their product development or commercialization efforts. If we fail to develop new technologies that adequately or competitively address the needs of the changing marketplace, IC manufacturers may not be willing to implement our technologies into their ICs. The process utilized by IC manufacturers to design, develop, produce and sell ICs is generally 12 to 18 months in duration. As a result, if an IC manufacturer is unwilling or unable to implement our technologies into an IC that it is producing, we may experience significant delays in generating revenue while we wait for that IC manufacturer to begin development of a new IC that may incorporate our technologies. In addition, while the design cycles utilized by IC manufacturers are typically long, the life cycles of our technologies tend to be short as a result of the rapidly changing technology environment in which we operate. If IC manufacturers are unable or unwilling to implement technologies we develop into their ICs, or if they sell fewer ICs incorporating our technologies, our operating results will be adversely affected.

Our business is dependent in part on technologies we license from third parties, and these license rights may be inadequate for our business.

Certain of our technologies and products are dependent in part on the licensing and incorporation of technologies from third parties. For example, we have entered into a license agreement with MPEG LA pursuant to which we have acquired rights to use in our technologies and products certain MPEG-4 intellectual property licensed to MPEG LA. Our licensing agreement with MPEG LA grants us a sublicense only to the rights in MPEG-4 intellectual property licensed to MPEG LA. There are other parties who have competing rights to MPEG-4 intellectual property, and to the extent that the rights of such other parties conflict with or are superior to the rights licensed to MPEG LA, our rights to utilize MPEG-4 technology in our technologies and products could be challenged. If the technology we license fails to perform as expected, if key licensors do not continue to support their technology or intellectual property because the licensor has gone out of business or otherwise or if it is determined that any of our licensors are not entitled to license to us any of the technologies or intellectual property that are subject to our current license agreements, then we may incur substantial costs in replacing the licensed technologies or intellectual property or fall behind in our development schedule while we search for a replacement. In addition, replacement technology may not be available for license on commercially reasonable terms, or at all. The costs or potential delays in the development of our technologies and products that may result if our current license arrangements prove inadequate for our business could adversely affect our business and prospects.

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In addition, our agreements with licensors generally require us to give them the right to audit our calculations of royalties payable to them. If a licensor challenges the basis of our calculations, the amount of royalties we have to pay them could increase. Any royalties paid as a result of a successful challenge could adversely affect our operating results and impair our ability to continue to use and re-license technologies or intellectual property from that licensor.

We rely on our licensees to accurately prepare royalty reports for our determination of licensing revenues, and if these reports are inaccurate, our operating results could be materially and adversely affected.

Our licensing revenues are generated primarily from consumer hardware device manufacturers and software vendors who license our technologies and incorporate them into their products. Under these arrangements, these licensees typically pay us a specified royalty for every consumer hardware or software product they ship that incorporates our technologies. We rely on our licensees to accurately report the number of units shipped. We calculate our license fees, prepare our financial reports, projections and budgets, and direct our sales and technology development efforts based in part on these reports. However, it is often difficult for us to independently determine whether or not our licensees are reporting shipments accurately. This is especially true with respect to software incorporating our technologies because software can be copied relatively easily and we often do not have ways to readily determine how many copies have been made. Licensees in specific countries, including China, have a history of underreporting or failing to report shipments of their products that incorporate our technologies. Most of our license agreements permit us to audit our licensees' records, but audits are generally expensive and time consuming and initiating audits could harm our relationships with licensees. In addition, the license agreements that we have entered into with most of our licensees impose restrictions on our audit rights, such as limitations on the number of audits we may conduct. To the extent that our licensees understate or fail to report the number of products incorporating our technologies that they ship, we will not collect and recognize revenue to which we are entitled, which would adversely affect our operating results.

Any development delays or cost overruns may affect our operating results.

We have experienced development delays and cost overruns in our development efforts in the past and we may encounter such problems in the future. Delays and cost overruns could affect our ability to respond to technological changes, competitive developments or customer requirements. Also, our technologies and products may contain undetected errors that could cause increased development costs, loss of revenue, adverse publicity, reduced market acceptance of our technologies and products or lawsuits by participants in the consumer hardware or software industries or consumers.

We face diverse risks in our international business, which could adversely affect our operating results.

We have offices in five foreign countries as well as sales staff in five other foreign countries, and we are dedicating a significant portion of our sales efforts in countries outside North America. We are dependent on international sales for a substantial amount of our total revenues. For 2005, 2004 and 2003, our sales outside North America comprised 78%, 63% and 39%, respectively, of our total revenues. We expect that international sales will continue to represent a substantial portion of our revenues for the foreseeable future. These future

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international revenues will depend to a large extent on the continued use and expansion of our technologies in entertainment industries worldwide. Increased worldwide use of our technologies is also an important factor in our future growth.

We are subject to the risks of conducting business internationally, including:

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our ability to enforce our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent that the United States does, which increases the risk of unauthorized and uncompensated use of our technology;

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United States and foreign government trade restrictions, including those that may impose restrictions on importation of programming, technology or components to or from the United States;

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foreign government taxes, regulations and permit requirements, including foreign taxes that we may not be able to offset against taxes imposed upon us in the United States, and foreign tax and other laws limiting our ability to repatriate funds to the United States;

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foreign labor laws, regulations and restrictions;

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changes in diplomatic and trade relationships;

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difficulty in staffing and managing foreign operations;

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fluctuations in foreign currency exchange rates and interest rates, including risks related to any interest rate swap or other hedging activities we undertake;

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political instability, natural disasters, war and/or events of terrorism; and

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the strength of international economies.

We face risks with respect to conducting business in China due to China's historically limited recognition and enforcement of intellectual property and contractual rights.

A significant number of consumer hardware devices from which we derive license revenues are manufactured by companies located in China. We expect this to continue in the future as consumer hardware device manufacturing in China continues to increase due to its lower manufacturing cost structure as compared to other industrialized countries. As a result, we face many risks in China, in large part due to China's historically limited recognition and enforcement of contractual and intellectual property rights. In particular, we have experienced, and expect to continue to experience, problems with China-based consumer hardware device manufacturers underreporting or failing to report shipments of their products that incorporate our technologies, or incorporating our technologies or trademarks into their products without our authorization or without paying us licensing fees, which may adversely affect our operating results. We may also experience difficulty enforcing our intellectual property rights in China, where intellectual property rights are not as respected as they are in the United States, Japan and Europe.

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Pricing pressures on the consumer hardware device manufacturers and software vendors who incorporate our technologies into their products could limit the licensing fees we charge for our technologies, which could adversely affect our revenues.

The markets for the consumer hardware and software products in which our technologies are incorporated are intensely competitive and price sensitive. For example, retail prices for consumer hardware devices that include our digital media platform, such as DVD players, have decreased significantly in recent years, and we expect prices to continue to decrease for the foreseeable future. In response, consumer hardware device manufacturers and software vendors have sought to reduce their product costs, which can result in downward pressure on the licensing fees we charge our licensees who incorporate our technologies into the consumer hardware and software products that they sell. In addition, we have experienced erosion in the average royalty we can charge for specific versions of our technologies to our OEM partners since the release of these technologies. To maintain higher overall per unit royalties, we must continue to introduce new, more highly functional versions of our products for which we can charge a higher royalty. Any inability to introduce such products in the future or other declines in the royalties we charge would adversely affect our business and operating results.

We do not expect sales of DVD players to continue to grow as quickly as they have in the past. To the extent that sales of DVD players level off or decline, or alternative technologies in which we do not participate replace DVDs as a dominant medium for consumer video entertainment, our licensing revenue will be adversely affected.

Growth in our revenue over the past several years has been the result, in large part, of the rapid growth in sales of DVD players incorporating our technologies. In 2005, 2004 and 2003, we derived approximately 71%, 55% and 22%, respectively, of our total revenues from technology licensing to consumer hardware device manufacturers, a majority of which are derived from sales of DVD players incorporating our technologies. However, as the markets for DVD players mature, we do not expect sales of DVD players to continue to grow as quickly as they have in the past. To the extent that sales of DVD players level off or decline, our licensing revenue will be adversely affected. In addition, if new technologies are developed for use with DVDs or new technologies are developed that substantially compete with or replace DVDs as a dominant medium for consumer video entertainment such as HD DVD or Blu-ray Disc, and if we are unable to develop and successfully market technologies that are incorporated into or compatible with such new technologies, our business, operating results and prospects will be adversely affected.

Digital video technologies could be treated as a commodity in the future, which could adversely affect our business, operating results and prospects.

We believe that the success we have had licensing our digital video technologies to consumer hardware device manufacturers and software vendors is due, in part, to the strength of our brand and the perception that our technologies provide a high-quality video solution. However, as applications that incorporate digital video technologies become increasingly prevalent, we expect more competitors to enter this field with other solutions. Furthermore, to the extent that competitors' solutions are perceived, accurately or not, to provide the same or greater advantages as our technologies, at a lower or comparable price, there is a risk that video encoding and decoding technologies such as ours will be treated as commodities, resulting in loss of status of our technologies, and significant pricing pressure. To the extent

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that our digital video technologies become a commodity, rather than a premium solution, our business, operating results and prospects could be adversely affected.

Current and future government standards or standards-setting organizations may limit our business opportunities.

Various national governments have adopted or are in the process of adopting standards for digital television broadcasts, including cable and satellite broadcasts. In the event national governments adopt similar standards for video codecs used in consumer hardware devices, software products or Internet applications, our technology may be excluded from such standards. We have not made any efforts to have our technologies adopted as standards by any national governments, nor do we currently expect that our technologies will be adopted as standards by any national government in the future. If national governments adopt standards that exclude our technologies, we will be required to redesign our technologies to comply with such government standards to allow our products to be utilized in those countries. Costs or potential delays in the development of our technologies and products to comply with such government standards could materially and adversely affect our business and prospects. In addition, standards-setting organizations are adopting or establishing formal technology standards for use in a wide range of consumer hardware devices, software products and Internet applications. We currently do not participate in standards-setting organizations, nor do we seek or expect to have our technologies adopted as industry standards. If participants in the consumer hardware or software industries or consumers elect not to purchase our technologies because they have not been adopted by standards-setting organizations or if a competing technology is adopted as an industry standard, our business, operating results and prospects could be materially and adversely affected.

Our business may depend in part upon our ability to provide effective digital rights management technology.

Our business may depend in part upon our ability to provide effective digital rights management technology that controls access to digital content that addresses, among other things, content providers' concerns over piracy. We cannot be certain that we can continue to develop, license or acquire such technology, or that content licensors, consumer hardware device manufacturers or consumers will accept such technology. In addition, consumers may be unwilling to accept the use of digital rights management technology that limits their use of content, especially with large amounts of free content readily available. We may need to license digital rights management technology from third parties to support our technologies and products. Such technology may not be available to us on reasonable terms, or at all. If digital rights management technology is not effective, is perceived as not effective or is compromised by third parties, or if laws are enacted that require digital rights management technology to allow consumers to convert content stored in a protected format into an unprotected format, content providers may not be willing to encode their content using our products and consumer hardware device manufacturers may not be willing to include our technologies in their products. As a result, our business, operating results and prospects could be adversely affected.

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We have offered and we expect to continue to offer some of our products and technologies for reduced prices or free of charge, which could adversely affect our prospects.

We have offered and expect to continue to offer some of our products and technologies to consumers for reduced prices or free of charge as part of our overall strategy of developing a digital media ecosystem and promoting additional penetration of our products and technologies into the markets in which we compete. If we offer such products and technologies at reduced prices or free of charge, and we do not realize the intended benefits of this marketing strategy, our prospects could be adversely affected.

Our online video community offering is new and rapidly evolving and may not prove to be a viable business model.

Online video distribution is a relatively new business model for delivering digital media over the Internet and we have only very recently launched our efforts to develop a business centered around online content delivery. It is too early to predict whether consumers will accept, in significant numbers, online video distribution and participate in our online video community. If our online video community fails to attract significant numbers of users or if we fail to develop a viable business model for our online video community, our business and prospects could be adversely affected.

In addition, we expect that the costs of our online video community offering as a percentage of related revenues will be higher than the ratio of costs to our technology licensing revenues. The cost of third party content, in particular, is a substantial percentage of the revenues we expect to receive from users in our online video community offering and is unlikely to decrease significantly over time as a percentage of revenues. To the extent revenue from our online video community offering grows as a percentage of our overall revenues, our margins may decrease.

The success of our online video community offering will depend on our ability to license compelling content on commercially reasonable terms or enter into successful partnering relationships with content providers.

The success of our online video community offering will depend on our obtaining compelling digital media content to attract users. In some cases, we expect to pay substantial fees to obtain premium content even though we have limited experience determining what video content will be successful with consumers. To the extent that we cannot obtain premium content on commercially reasonable terms, or at all, our business, operating results and prospects could be adversely affected.

Our failure to attract advertisers to our online video community could adversely affect our business and prospects.

We expect that advertising revenue will comprise a significant portion of the revenue to be generated by our online video community. Most large advertisers have fixed advertising budgets, only a small portion of which is allocated to Internet advertising. In addition, the overall market for advertising, including Internet advertising, has been generally characterized in recent quarters by softness of demand and the reduction of marketing and advertising budgets or the delay in spending of budgeted resources. We expect that advertisers will continue to focus most of their efforts on traditional media or may decrease their advertising

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spending. If we fail to convince advertisers to spend a portion of their advertising budgets with us, our business, operating results and prospects could be adversely affected.

Even if we initially attract advertisers to our online video community, they may decide not to advertise to our community if their investment does not generate sales leads, and ultimately customers, or if we do not deliver their advertisements in an appropriate and effective manner. If we are unable to provide value to our advertisers, advertisers may not place ads with us.

We will need to increase the size of our organization, and we may experience difficulties in managing growth.

As of March 31, 2006 we had 189 full-time employees. We will need to continue to expand our managerial, operational, financial and other resources to manage our business, including our relationships with key customers and licensees. Our current facilities and systems will not be adequate to support this future growth. We will require additional office space to accommodate our growth. Additional office space may not be available on commercially reasonable terms and may result in a disruption of our corporate culture. Our need to effectively manage our operations, growth and various projects requires that we continue to improve our operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient numbers of talented employees. We may be unable to successfully implement these tasks on a larger scale, which could prevent us from executing our business strategy.

Our business, in particular our online video community offering and content distribution offerings, will suffer if our systems or networks fail, become unavailable or perform poorly so that current or potential users do not have adequate access to our online products and websites.

Our ability to provide our online offerings will depend on the continued operation of our information systems and networks. As our user traffic increases and our products become more complex, we will need more computing power. We expect to spend substantial amounts to purchase or lease data centers and equipment and to upgrade our technology and network infrastructure to handle increased traffic on our website and to introduce new technologies and products. This expansion will be expensive and complex and could result in inefficiencies or operational failures. If we do not implement this expansion successfully, or if we experience inefficiencies and operational failures during the implementation, the quality of our technologies and products and our users' experience could decline. This could damage our reputation and lead us to lose current and potential users, advertisers and content providers. The costs associated with these adjustments to our architecture could harm our financial condition and operating results. Cost increases, loss of traffic or failure to accommodate new technologies or changing business requirements could harm our operating results and financial condition.

In addition, significant or repeated reductions in the performance, reliability or availability of our information systems and network infrastructure could harm our ability to conduct our online video community, content distribution offerings and advertising. We could experience failures in our systems and networks from our failure to adequately maintain and enhance these systems and networks, natural disasters and similar events, power failures, intentional actions to disrupt our systems and networks and many other causes. The vulnerability of our computer and communications infrastructure is increased because it is located at facilities in

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San Diego, California, an area that is at heightened risk of earthquake and flood. We are vulnerable to terrorist attacks, fires, power loss, telecommunications failures, computer viruses, computer denial of service attacks or other attempts to harm our systems. Moreover, our facilities are located near the landing path of a military base and are subject to risks related to falling debris and aircraft crashes. We do not currently have fully redundant systems or a formal disaster recovery plan, and we may not have adequate business interruption insurance to compensate us for losses that may occur from a system outage.

Any failure or interruption of the services provided by bandwidth providers, data centers or other key third parties could harm our ability to operate our business and damage our reputation.

We rely on third-party vendors, including data center and bandwidth providers for network access or co-location services that are essential to our business. Any disruption in these services, including any failure to handle current or higher volumes of use, could significantly harm our business. Our systems are also heavily reliant on the availability of electricity, which also comes from third-party providers. The cost of electricity has risen in recent years with the rising costs of fuel. If the cost of electricity continues to increase, such increased costs could adversely affect our business, results of operations and prospects. In addition, if we were to experience a major power outage, it could result in a significant disruption of our business.

Our network is subject to security risks that could harm our business and reputation and expose us to litigation or liability.

Online commerce and communications depend on the ability to transmit confidential or proprietary information securely over private and public networks. Any compromise of our ability to transmit and store such information and data securely, and any costs associated with preventing or eliminating such problems, could damage our business, hurt our ability to distribute technologies and products or collect revenue, threaten the proprietary or confidential nature of our technology, harm our reputation and expose us to litigation or liability. We also may be required to expend significant capital or other resources to protect against the threat of security breaches or hacker attacks or to alleviate problems caused by such breaches or attacks. Any successful attack or breach of our security could hurt consumer demand for our technologies and products, expose us to consumer class action lawsuits and adversely affect our business, operating results and prospects. In addition, our vulnerability to security risks may affect our ability to maintain effective internal controls over financial reporting as contemplated by Section 404 of the Sarbanes-Oxley Act of 2002.

It is not yet clear how laws designed to protect children that use the Internet may be interpreted, and such laws may apply to our business in ways that may harm our business.

The Child Online Protection Act and the Children's Online Privacy Protection Act impose civil and criminal penalties on persons distributing material harmful to minors (e.g., obscene material) over the Internet to persons under the age of 17, or collecting personal information from children under the age of 13. We do not knowingly distribute harmful materials to minors or collect personal information from children under the age of 13. However, we are not able to control the ways in which consumers use our technology, and our technology may be used for purposes that violate these laws. The manner in which these Acts may be interpreted and enforced cannot be fully determined, and future legislation similar to these Acts could subject us to potential liability if we were deemed to be non-compliant with such rules and regulations, which in turn could adversely affect our reputation, business, operating results and prospects.

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We may be subject to market risk and legal liability in connection with the data collection capabilities of our online video community offering.

Many components of our recently launched online video community offering are interactive Internet applications that by their very nature require communication between a client and server to operate. To provide better consumer experiences and to operate effectively, we collect certain information from users. We post an extensive privacy policy concerning the collection, use and disclosure of user data involved in interactions between our client and server products. Because of the evolving nature of our business and applicable law, our privacy policy may now or in the future fail to comply with applicable law. Any failure by us to comply with our posted privacy policy, any failure by us to conform our privacy policy to changing aspects of our business or applicable law, or any existing or new legislation regarding privacy issues could impact the market for our technologies and products, subject us to litigation and adversely affect our business, operating results and prospects.

Improper conduct by users of our website could subject us to claims and compliance costs.

The terms of use of our website prohibit a broad range of unlawful or undesirable conduct. However, we are unable to block access in all instances to users who are determined to gain access to our sites for improper motives. Claims may be threatened or brought against us using various legal theories based on the nature and content of information that may be posted online or generated by our users or the use of our technology to copy or distribute third-party content. Investigating and defending any of these types of claims could be expensive, even to the extent that the claims do not ultimately result in liability. In addition, we expect to incur substantial costs to monitor users and to exclude certain users of our websites who engage in unlawful or undesirable conduct. The costs of monitoring our website could adversely affect our business, operating results and prospects.

We may be subject to legal liability for the provision of third-party products, services, content or advertising.

We expect to enter into arrangements for third-party products, services, content or advertising to be offered in connection with our online video community and content distribution offerings. These arrangements will involve the distribution of digital content owned by third parties, which may subject us to third party claims related to such products, services, content or advertising, including intellectual property infringement. Our agreements with these parties may not adequately protect us from these potential liabilities. Investigating and defending any of these types of claims is expensive, even if the claims do not result in liability. If any of these claims results in liability, we could be required to pay damages or other penalties, which could adversely affect our business, operating results and prospects.

We may be subject to assessment of sales taxes and other taxes for our licensing of technology or sale of products.

We do not currently collect sales taxes or other taxes on the sale of licenses of our technology or sale of products over the Internet. Our business would be harmed if one or more taxing jurisdictions required us to collect sales or other taxes from past sales of licenses of technology or sale of products over the Internet, particularly because we would be unable to go back to customers to collect sales taxes for past sales and would likely have to pay such taxes out of our own funds. In addition, certain of our licensing agreements require our partners to pay taxes to applicable taxing jurisdictions as a result of the sale of products that incorporate our

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technologies. If our licensees fail to pay such taxes, we may become liable for the payment of such taxes, which may adversely affect our operating results.

Failure to comply with applicable current and future government regulations could have a negative effect on our business.

Our operations and business practices are subject to federal, state and local government laws and regulations, as well as international laws and regulations, including those relating to import or export of technology and software and consumer and other safety-related compliance for electronic equipment. Any failure by us to comply with the laws and regulations applicable to us or our technologies or products could result in our inability to sell those technologies or products, additional costs to redesign technologies or products to meet such laws and regulations, fines or other administrative, civil or criminal liability or actions by the agencies charged with enforcing compliance and, possibly, damages awarded to persons claiming injury as the result of our non-compliance. Changes in or enactment of new statutes, rules or regulations applicable to us could have a material adverse effect on our business.

If we lose the services of our co-founder, CEO and Chairman R. Jordan Greenhall or other key members of our senior management team, we may not be able to execute our business strategy.

Our future success depends in large part upon the continued services of key members of our senior management team. In particular, our co-founder, CEO and Chairman R. Jordan Greenhall is critical to the overall management of DivX as well as the development of our technology, our culture and our strategic direction. All of our executive officers and key employees are at will employees, and we do not maintain any key person life insurance policies. The loss of our management or key personnel could seriously harm our business. We also may have to incur significant costs in identifying, hiring, training and retaining replacements for key employees.

We rely on highly skilled personnel, and if we are unable to retain or motivate key personnel or hire qualified personnel, we may not be able to maintain our operations or grow effectively.

Our performance is largely dependent on the talents and efforts of highly skilled individuals. These individuals have acquired specialized knowledge and skills with respect to us and our operations. Our employment relationship with each of these individuals is on an at will basis and can be terminated at any time. If any of these individuals or a group of individuals were to terminate their employment unexpectedly, we could face substantial difficulty in hiring qualified successors and could experience a loss in productivity while any such successor obtains the necessary training and experience.

Our future success depends on our continuing ability to identify, hire, develop, motivate and retain highly skilled personnel for all areas of our organization. In this regard, if we are unable to hire and train a sufficient number of qualified employees for any reason, we may not be able to implement our current initiatives or grow effectively. We have in the past maintained a rigorous, highly selective and time-consuming hiring process. We believe that our approach to hiring has significantly contributed to our success to date. However, our highly selective hiring process has made it more difficult for us to hire a sufficient number of qualified employees, and, as we grow, our hiring process may prevent us from hiring the personnel we need in a timely manner. Moreover, the cost of living in the San Diego area, where our corporate

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headquarters are located, has been an impediment to attracting new employees in the past, and we expect that this will continue to impair our ability to attract and retain employees in the future. If we do not succeed in attracting qualified personnel and retaining and motivating existing personnel, our existing operations may suffer and we may be unable to grow effectively.

We have limited experience in identifying, completing and integrating acquisitions, and if we do not successfully integrate any future acquisitions, we may incur unexpected costs and disruptions to our business.

As part of our business strategy, we may acquire technologies and businesses that we believe will contribute to our business. We are not currently a party to any agreements or commitments and we have no understandings with respect to any such acquisitions. Future acquisitions, however, may entail numerous operational and financial risks including:

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exposure to unknown liabilities;

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disruption of our business and diversion of our management's time and attention to developing acquired products or technologies;

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incurrence of substantial debt or dilutive issuances of securities to pay for acquisitions;

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higher than expected acquisition and integration costs;

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increased amortization expenses;

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difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel;

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impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership; and

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inability to retain key employees of any acquired businesses.

We have very limited experience in identifying acquisition targets, successfully completing acquisitions and integrating any acquired products, businesses or technologies into our current infrastructure. Moreover, we may devote resources to potential acquisitions that are never completed or that fail to realize any of their anticipated benefits.

Our corporate culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity and teamwork fostered by our culture.

We believe that a critical contributor to our success has been our corporate culture, which we believe fosters innovation, creativity and teamwork. As our organization grows and we are required to implement more complex organizational management structures, we may find it increasingly difficult to maintain the beneficial aspects of our corporate culture. This could negatively impact our future success.

Risks related to our finances

Our quarterly operating results and stock price may fluctuate significantly.

We expect our operating results to be subject to quarterly fluctuations. The revenues we generate and our operating results will be affected by numerous factors, including:

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demand for our technologies and products;

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introduction, enhancement and market acceptance of technologies and products by us and our competitors;

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price reductions by us or our competitors or changes in how technologies and products are priced;

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the mix of technologies and products offered by us and our competitors;

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the mix of distribution channels through which our technologies and products are licensed and sold;

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our ability to successfully generate revenues from advertising and content distribution;

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the mix of international and U.S. revenues attributable to our technologies and products;

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costs of intellectual property protection and any litigation;

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timing of payments received by us pursuant to our licensing agreements;

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our ability to hire and retain qualified personnel; and

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growth in the use of the Internet.

As a result of the variances in quarterly volumes reported by our consumer hardware device manufacturing customers, we expect our revenues to be subject to seasonality, with our second quarter revenues expected to be lower than the revenues we derive in our other quarters. In addition, a substantial majority of our quarterly revenues are based on actual shipment of products incorporating our technologies in that quarter, and not on contractually agreed upon minimum revenue commitments. Because the shipping of products by our consumer hardware and independent software vendor partners are outside our control and difficult to predict, our ability to accurately forecast quarterly revenue is substantially limited. Quarterly fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially. We believe that quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.

We have a history of net losses and only recently achieved profitability on a quarterly basis, and we may not be able to sustain our profitability.

We incurred net losses from our inception through December 31, 2004 and for the six months ended June 30, 2005. While we were profitable during 2005, we had an accumulated deficit of approximately $19.4 million. We may not generate sufficient revenue to be profitable on a quarterly or annual basis in the future. In addition, we devote significant resources to developing and enhancing our technology and to selling, marketing and obtaining content for our technologies and products. We expect our operating expenses to increase, as we, among other things:

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expand our domestic and international sales and marketing activities;

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increase our product development efforts to advance our existing technologies and products and develop new technologies and products;

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hire additional personnel;

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upgrade our operational and financial systems, procedures and controls and plan for compliance with Section 404 of the Sarbanes-Oxley Act; and

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assume the responsibilities of being a public company.

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In addition, starting in the first quarter of 2006, we will adopt Statement of Financial Accounting Standards, or SFAS, No. 123(R), Share-Based Payment, which requires that we record stock-based compensation charges in connection with our equity compensation for employees. As a result, we expect to record significant additional expenses in future periods and we will need to generate significant revenue to be profitable in the future.

We may require additional capital, and raising additional funds by issuing securities, debt financing or through strategic alliances or licensing arrangements may cause dilution to existing stockholders, restrict our operations or require us to relinquish proprietary rights.

We may raise additional funds through public or private equity offerings, debt financings, strategic alliances or licensing arrangements. To the extent that we raise additional capital by issuing equity securities, our existing stockholders' ownership will be diluted. Any debt financing we enter into may involve covenants that restrict our operations. These restrictive covenants may include limitations on additional borrowing, specific restrictions on the use of our assets as well as prohibitions on our ability to create liens, pay dividends, redeem our stock or make investments. In addition, if we raise additional funds through strategic alliances or licensing arrangements, it may be necessary to relinquish potentially valuable rights to our potential products or proprietary technologies, or grant licenses on terms that are not favorable to us.

Risks related to our intellectual property

We are, and may in the future be, subject to intellectual property rights claims, which are costly to defend, could require us to pay damages and could limit our ability to use certain technologies in the future.

Companies in the technology and entertainment industries own large numbers of patents, copyrights, trademarks and trade secrets and they frequently commence litigation based on allegations of infringement or other violations of intellectual property rights. We have faced such claims in the past, we currently face such claims and we expect to face similar claims in the future. For instance, we have been contacted by third parties regarding the licensing of certain patents characterized by such parties as being essential to the MPEG-4 visual standard. In this regard, AT&T has offered to license us certain patents it claims are essential to MPEG-4 and our products, and we are evaluating these claims. In the event we determine that we need to obtain a license from AT&T, we cannot guarantee that we would be able to obtain such license on commercially reasonable terms, if at all. We may be required to develop non-infringing alternative technologies, which could be very time consuming and expensive, and there is no guarantee that we would be successful in developing such technologies. We have also been asked by content owners to stop the display or hosting of copyrighted materials on our website pursuant to the Digital Millennium Copyright Act. In addition, content providers may claim that we are contributorily or vicariously liable for consumers' use of our technology to infringe the content providers' copyrights, including under the Digital Millennium Copyright Act. We have and will promptly respond to any takedown notices or complaints that we are providing unauthorized access to copyrighted content by removing links to such content from our websites. We plan to monitor our websites to ensure that there is no unauthorized content, but we cannot guarantee that such content will not exist or that we will be able to resolve any disputes that may arise with content providers.

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Any intellectual property claims, with or without merit, could be time-consuming, expensive to litigate or settle and could divert management resources and attention. An adverse determination could require that we pay damages or stop using technologies found to be in violation of a third party's rights and could prevent us from offering our technologies and products to others. To avoid these restrictions, we may be required to seek a license for the technology. Such licenses may not be available on reasonable terms, could require us to pay significant royalties and may significantly increase our cost of revenues. The technologies also may not be available for license to us at all. As a result, we may be required to develop alternative non-infringing technologies, which could require significant effort and expense. If we cannot license or develop technologies for any infringing aspects of our business, we may be forced to limit our technology offerings and may be unable to compete effectively. Any of these results could harm our brand, our operating results and our financial condition. In addition, from time to time we engage in disputes regarding the licensing of our intellectual property rights, including matters related to our royalty rates and other terms of our licensing arrangements. These types of disputes can be asserted by our licensees or prospective licensees or by other third parties as part of negotiations with us or in private actions seeking monetary damages or injunctive relief. Any disputes with our licensees or potential licensees or other third parties could adversely affect our business, results of operations and prospects.

We may be unable to adequately protect the proprietary rights in our technologies and products.

We have only one issued patent in the United States and no issued patents elsewhere, and we generally do not rely upon patents to protect our proprietary rights. In addition, our ability to obtain patent protection for our technologies and products will be limited as a result of the incorporation of aspects of MPEG-4 and MP3 technologies into our technologies and products. We license such technologies from third party licensors and do not own any patents relating to such technologies. As a result, we do not have the right to defend perceived infringements of patents relating to such technologies. Moreover, the licensors from which we have acquired the right to incorporate MPEG-4 and MP3 technologies into our products are not the exclusive owners of the patents relating to such technologies. As a result, our licensors must coordinate enforcement efforts with the owners of such patents to protect or defend against infringements of patents relating to such technology, which can be expensive, time consuming and difficult. Any significant impairment of the intellectual property rights relating to the MPEG-4 or MP3 technologies we license for use in our technologies and products could reduce the value of such technologies, which could harm our business or our ability to compete.

Our ability to compete partly depends on the superiority, uniqueness and value of our technologies, including both internally developed technology and technology licensed from third parties. To protect our proprietary rights, we rely on a combination of trademark, patent, copyright and trade secret laws, confidentiality agreements with our employees and third parties, and protective contractual provisions. Despite our efforts to protect our intellectual property, any of the following occurrences may reduce the value of our intellectual property:

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our applications for trademarks or patents may not be granted and, if granted, may be challenged or invalidated;

•

issued patents, copyrights and trademarks may not provide us with any competitive advantages;

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•

our efforts to protect our intellectual property rights may not be effective in preventing misappropriation of our technology or dilution of our trademarks;

•

our efforts may not prevent the development and design by others of products or technologies similar to or competitive with, or superior to those that we develop; or

•

another party may obtain a blocking patent that would force us to either obtain a license or design around the patent to continue to offer the contested feature or service in our technologies.

Legislation may be passed, including pending legislation in France, an important market for us, that would require companies to share information about their digital rights management technology to permit interoperability with other systems. If this legislation is enacted, we may be required to reveal our proprietary digital rights management code to competitors. Furthermore, if content must be formatted such that it can be played on a media player other than a DivX Certified player, then the demand for DivX Certified players could decrease, which may adversely affect our business and operating results.

We may be forced to litigate to defend our intellectual property rights or to defend against claims by third parties against us relating to intellectual property rights.

Disputes regarding the ownership of technologies and rights associated with digital media technologies and online businesses are common and likely to arise in the future. We may be forced to litigate to enforce or defend our intellectual property rights, to protect our trade secrets or to determine the validity and scope of other parties' proprietary rights. Any such litigation could be very costly and could distract our management from focusing on operating our business. The existence and/or outcome of any such litigation could adversely affect our business, results of operations and prospects.

Our ability to maintain and enforce our trademark rights has a large impact on our ability to prevent third party infringement of our brand and technologies.

We generally rely on enforcing our trademark rights to prevent unauthorized use of our brand and technologies. Our ability to prevent unauthorized uses of our brand and technologies would be negatively impacted if our trademark registrations were overturned in the jurisdictions where we do business. Our brand and logo are widely used by consumers and entities, both licensed and unlicensed, in association with digital video compression technology, and if we are not vigilant in preventing unauthorized or improper use of our trademarks, then our trademarks could become generic and we would lose our ability to assert such trademarks against others. We also have trademark applications pending in a number of jurisdictions that may not ultimately be granted, or if granted, may be challenged or invalidated, in which case we would be unable to prevent unauthorized use of our brand and logo in such jurisdiction. We have not filed trademark registrations in all jurisdictions where our brand and logo are used.

Some software we provide may be subject to "open source" licenses, which may restrict how we use or distribute our software or require that we release the source code of certain products subject to those licenses.

Some of the products we support and some of our proprietary technologies incorporate open source software such as open source MP3 codecs that may be subject to the Lesser Gnu Public

25

License, or LGPL, or other open source licenses. The LGPL and other open source licenses typically require that source code subject to the license be released or made available to the public. Such open source licenses typically mandate that proprietary software, when combined in specific ways with open source software, become subject to the open source license. We take steps to ensure that our proprietary software is not combined with, or does not incorporate, open source software in ways that would require our proprietary software to be subject to an open source license. However, few courts have interpreted the LGPL or other open source licenses, and the manner in which these licenses may be interpreted and enforced is therefore subject to some uncertainty. In addition, we rely on multiple software programmers to design our proprietary products and technologies. Although we take steps to ensure that our programmers do not include open source software in the products and technologies they design, we do not exercise complete control over the development efforts of our programmers and we cannot be certain that our programmers have not incorporated open source software into our proprietary products and technologies. In the event that portions of our proprietary technology are determined to be subject to an open source license, we could be required to publicly release the affected portions of our source code, which could reduce or eliminate the value of our products and technologies and materially and adversely affect our business, results of operations and prospects.

Risks related to the securities markets and investment in our common stock

Market volatility may affect our stock price and the value of your investment.

Following this offering, the market price for our common stock is likely to be volatile, in part because our shares have not been traded publicly. In addition, the market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including:

•

announcements of new products, services or technologies, commercial relationships or other events by us or our competitors;

•

regulatory developments in the U.S. and foreign countries;

•

fluctuations in stock market prices and trading volumes of similar companies;

•

variations in our quarterly operating results;

•

changes in securities analysts' estimates of our financial performance;

•

changes in accounting principles;

•

sales of large blocks of our common stock, including sales by our executive officers, directors and significant stockholders;

•

additions or departures of key personnel; and

•

discussion of us or our stock price by the financial press and in online investor communities.

An active public market for our common stock may not develop or be sustained after this offering. We will negotiate and determine the initial public offering price with representatives of the underwriters and this price may not be indicative of prices that will prevail in the trading market. As a result, you may not be able to sell your shares of common stock at or above the offering price.

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We may allocate the net proceeds from this offering in ways that you and other stockholders may not approve.

We intend to use the net proceeds from this offering for working capital and general corporate purposes and may acquire or license products, technologies and businesses. However, we do not currently have any specific plans for use of the proceeds of this offering. As such, our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not necessarily improve our operating results or enhance the value of our common stock.

Investors purchasing common stock in this offering will incur substantial dilution as a result of this offering.

The initial public offering price for this offering is substantially higher than the pro forma, net tangible book value per share of our outstanding common stock. As a result, investors purchasing common stock in this offering will incur immediate dilution of $             per share. This dilution is due in large part to earlier investors having paid substantially less than the initial public offering price when they purchased their shares. Investors purchasing shares of common stock in this offering will contribute approximately    % of the total amount we have raised since our inception, but will own only approximately    % of our total common stock immediately following the completion of this offering.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our certificate of incorporation and bylaws may delay or prevent an acquisition of us or a change in our management. These provisions include a classified board of directors, a prohibition on actions by written consent of our stockholders and the ability of our board of directors to issue preferred stock without stockholder approval. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us. Although we believe these provisions collectively provide for an opportunity to obtain higher bids by requiring potential acquirors to negotiate with our board of directors, they would apply even if an offer were considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management.

We do not intend to pay dividends on our common stock.

We have never declared or paid any cash dividend on our capital stock. We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future.

We will incur increased costs as a result of changes in laws and regulations relating to corporate governance matters.

Changes in the laws and regulations affecting public companies, including the provisions of the Sarbanes-Oxley Act and rules adopted by the Securities and Exchange Commission and by The Nasdaq Stock Market, will result in increased costs to us as we become a public company and respond to their requirements. The impact of these laws and regulations could also make it

27

more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers. We are presently evaluating and monitoring developments with respect to these laws and regulations and cannot predict or estimate the amount or timing of additional costs we may incur to respond to their requirements.

If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements could be impaired, which could adversely affect our operating results, our ability to operate our business and our stock price.

Ensuring that we have adequate internal financial and accounting controls and procedures in place to help ensure that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently. We are in the process of documenting, reviewing and, where appropriate, improving our internal controls and procedures in preparation for compliance with Section 404 of the Sarbanes-Oxley Act, which requires annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent auditors addressing these assessments. Both we and our independent auditors will be testing our internal controls in connection with the Section 404 requirements and could, as part of that documentation and testing, identify material weaknesses, significant deficiencies or other areas for further attention or improvement. Our networks are vulnerable to security risks and hacker attacks, which may affect our ability to maintain effective internal controls as contemplated by Section 404. Implementing any appropriate changes to our internal controls may require specific compliance training for our directors, officers and employees, entail substantial costs to modify our existing accounting systems, and take a significant period of time to complete. Such changes may not, however, be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and could materially impair our ability to operate our business. In addition, disclosure regarding our internal controls or investors' perceptions that our internal controls are inadequate or that we are unable to produce accurate financial statements may adversely affect our stock price.

If our executive officers, directors and their affiliates choose to act together, they may be able to control our operations and act in a manner that advances their best interests and not necessarily those of other stockholders.

After this offering, our executive officers, directors and their affiliates will beneficially own approximately    % of our common stock. As a result, these stockholders, acting together, will be able to effectively control all matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other business combination transactions. The interests of this group of stockholders may not always coincide with our interests or the interests of other stockholders, and they may act in a manner that advances their best interests and not necessarily those of other stockholders.

Future sales of our common stock may cause our stock price to decline.

Our current stockholders hold                           shares of our common stock, of which                           shares may be sold in the public market 90 days after the date of this offering and the remaining                           shares may be sold upon expiration of the lock-up agreements entered into in connection with this offering. In addition, as of March 31, 2006 we had outstanding warrants to purchase up to 1,466,669 shares of common stock that, if

28

exercised, will result in these additional shares becoming available for sale upon expiration of the lock-up agreements. A large portion of these shares and warrants are held by a small number of persons and investment funds. Sales by these stockholders or warrantholders of a substantial number of shares after this offering could significantly reduce the market price of our common stock. Moreover, after this offering, the holders of 42,218,797 shares of common stock and warrants to purchase up to 53,482 shares of common stock as of March 31, 2006 will have rights, subject to some conditions, to require us to file registration statements covering the shares they currently hold or may acquire upon exercise of the warrants, or to include these shares in registration statements that we may file for ourselves or other stockholders.

We also intend to register all common stock that we may issue under our 2000 stock option plan and our 2006 equity incentive plan. Effective upon the completion of this offering, an aggregate of              shares of our common stock will be reserved for issuance under these plans, and the share reserve under our 2006 equity incentive plan will also be subject to automatic annual increases in accordance with the terms of the plan. Once we register these shares, which we plan to do shortly after the completion of this offering, they can be freely sold in the public market upon issuance, subject to the lock-up agreements referred to above. If a large number of these shares are sold in the public market, the sales could reduce the trading price of our common stock and impede our ability to raise future capital. See "Shares eligible for future sale" for a more detailed description of sales that may occur in the future.

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Forward-looking statements

This prospectus contains forward-looking statements that are based on our management's beliefs and assumptions and on information currently available to our management. The forward-looking statements are contained principally in "Prospectus summary," "Risk factors," "Management's discussion and analysis of financial condition and results of operations," "A letter to our potential investors" and "Business." Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as "anticipates," "believes," "could," "seeks," "estimates," "expects," "intends," "may," "plans," "potential," "predicts," "projects," "should," "will," "would" or similar expressions and the negatives of those statements.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. We discuss these risks in greater detail in "Risk factors." Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management's beliefs and assumptions only as of the date of this prospectus. You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect.

Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. The forward-looking statements contained in this prospectus are excluded from the safe harbor protection provided by the Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act of 1933.

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Use of proceeds

We estimate that the net proceeds to us from this offering will be approximately $     million, based upon an assumed initial public offering price of $             per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses. If the underwriters exercise their over-allotment option in full, we estimate that the net proceeds to us from this offering will be approximately $     million. We will not receive any of the proceeds from the sale of common stock by the selling stockholders.

A $1.00 increase (decrease) in the assumed initial public offering price of $             per share would increase (decrease) the net proceeds to us from this offering by $              million (or $              million if the underwriters' over-allotment option is exercised in full), assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriter discounts and commissions and estimated offering expenses payable by us.

The principal purposes of this offering are to obtain additional capital to support our operations, to create a public market for our common stock and to facilitate our future access to the public equity markets.

We currently have no specific plans for the use of the net proceeds to us from this offering. We anticipate using the net proceeds to us from this offering for working capital and general corporate purposes. In addition, we may use a portion of the net proceeds to us from this offering to acquire or license products, technologies or businesses, but we currently have no agreements or commitments relating to material acquisitions or licenses. Accordingly, our management will have broad discretion in the application of the net proceeds of this offering to us, and investors will be relying on the judgment of our management regarding the application of these proceeds.

Pending their use, we plan to invest the net proceeds to us from this offering in short- and intermediate-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government.

Dividend policy

We have never declared or paid any cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business. We do not intend to pay cash dividends on our common stock for the foreseeable future. Any future determination related to dividend policy will be made at the discretion of our board of directors. In addition, our loan and security agreements with Silicon Valley Bank prohibit us from paying dividends on our common stock.

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Capitalization

The following table sets forth our cash, cash equivalents and capitalization as of December 31, 2005:

•

on an actual basis; and

•

on an as adjusted basis to give effect to (1) the filing of an amended and restated certificate of incorporation to authorize 200,000,000 shares of common stock and 10,000,000 shares of undesignated preferred stock, (2) the sale of             shares of common stock in this offering at an assumed initial offering price of $             per share, after deducting estimated underwriting discounts and commissions and estimated offering expenses and (3) the conversion of all of our outstanding shares of preferred stock into 33,299,790 shares of common stock upon the closing of this offering.

You should read the information in this table together with our consolidated financial statements and accompanying notes and "Management's discussion and analysis of financial condition and results of operations" appearing elsewhere in this prospectus.

December 31, 2005				Actual			As adjusted(1)
(in thousands, except share and per share data)				(unaudited)
Cash and cash equivalents				$	25,035		$
Total debt				$	1,265		$
Redeemable Series D convertible preferred stock, $0.001 par value: 5,900,000 shares authorized and 5,811,100 shares issued and outstanding, actual; no shares authorized, issued or outstanding, as adjusted					16,842			—
Stockholders' equity:
	Series A, B and C convertible preferred stock, $0.001 par value: 25,332,352 shares authorized and 25,256,370 shares issued and outstanding, actual; no shares authorized, issued or outstanding, as adjusted				25			—
	Convertible preferred stock, $0.001 par value: 5,767,648 shares authorized and no shares issued or outstanding, actual; 10,000,000 shares authorized and no shares issued and outstanding, as adjusted				—
	Common stock, $0.001 par value: 100,000,000 shares authorized and 16,094,569 shares issued and outstanding, actual, excluding 1,159,927 shares subject to repurchase; 200,000,000 shares authorized and             shares issued and outstanding, as adjusted, excluding 1,159,927 shares subject to repurchase				16
	Additional paid-in capital				27,053
	Deferred stock-based compensation				(1,517	)
	Accumulated deficit				(19,392	)
		Total stockholders' equity		$	6,185		$
			Total capitalization	$	24,292		$

(1)

A $1.00 increase (decrease) in the assumed initial public offering price of $    per share would increase (decrease) cash and cash equivalents, additional paid-in capital, total stockholders' equity and total capitalization by $    (or $    if the underwriters' over-allotment option is exercised in full), assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriter discounts and commissions and estimated offering expenses payable by us.

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The number of shares of common stock outstanding as of December 31, 2005 excludes:

•

3,394,926 shares of common stock subject to outstanding options under our 2000 stock option plan, having a weighted average exercise price of $0.28 per share;

•

2,601,349 shares of common stock reserved for future issuance under our 2000 stock option plan;

•

shares of common stock reserved for future issuance under our 2006 equity incentive plan, which we have adopted to become effective as of the completion of this offering; and

•

1,496,039 shares of common stock subject to outstanding warrants, having a weighted average exercise price of $0.71 per share.

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Dilution

If you invest in our common stock in this offering, your ownership interest will be diluted to the extent of the difference between the initial public offering price per share and the pro forma as adjusted net tangible book value per share of our common stock after this offering. The historical net tangible book value of our common stock as of December 31, 2005 was approximately $6.2 million, or approximately $0.36 per share, based on the number of shares of common stock outstanding as of December 31, 2005. Historical net tangible book value per share is determined by dividing the number of shares of common stock outstanding as of December 31, 2005 into our total tangible assets (total assets less intangible assets) less total liabilities. After giving effect to the conversion of all outstanding shares of preferred stock into 33,299,790 shares of common stock in this offering, our pro forma net tangible book value per share as of December 31, 2005 would have been approximately $23.0 million, or approximately $0.45 per share.

Investors participating in this offering will incur immediate, substantial dilution. After giving effect to the sale of common stock offered in this offering at an assumed initial public offering price of $             per share, net of estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of December 31, 2005 would have been approximately $     million, or approximately $    per share of common stock. This represents an immediate increase in pro forma as adjusted net tangible book value of $    per share to existing stockholders, and an immediate dilution of $    per share to investors participating in this offering. The following table illustrates this per share dilution:

Assumed initial public offering price per share			$
Historical net tangible book value per share as of December 31, 2005	$	0.36
Pro forma increase in net tangible book value per share attributable to conversion of preferred stock		0.09
Pro forma net tangible book value per share as of December 31, 2005	$	0.45
Pro forma increase in net tangible book value per share attributable to investors participating in this offering
Pro forma as adjusted net tangible book value per share after this offering
Dilution per share to investors participating in this offering			$

A $1.00 increase (decrease) in the assumed initial public offering price of $             per share would increase (decrease) our pro forma as adjusted net tangible book value as of December 31, 2005 by $             , the pro forma as adjusted net tangible book value per share after this offering by $             and the dilution in pro forma as adjusted net tangible book value to new investors in this offering by $             per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The following table summarizes, on a pro forma as adjusted basis as of December 31, 2005, the differences between the number of shares of common stock purchased from us, the total

34

consideration and the average price per share paid by existing stockholders and by investors participating in this offering, after deducting estimated underwriting discounts and commissions and estimated offering expenses, at an assumed initial public offering price of $             per share:

	Shares purchased		Total consideration
						Average price per share
	Number	Percent	Amount		Percent
Existing stockholders before this offering	50,554,286	%	$	39,457,000	%	$	0.78
Investors participating in this offering
Total		100%	$		100%

A $1.00 increase (decrease) in the assumed initial public offering price of $             per share would increase (decrease) total consideration paid by investors participating in this offering by $     million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The discussion and tables above assume no exercise of the underwriters' over-allotment option or any outstanding options or warrants and no sale of common stock by the selling stockholders. The sale of                           shares of common stock to be sold by the selling stockholders in this offering will reduce the number of shares held by existing stockholders to                            , or    % of the total shares outstanding, and will increase the number of shares held by investors participating in this offering to                           , or    % of the total shares outstanding. In addition, if the underwriters' over-allotment option is exercised in full, the number of shares of common stock held by existing stockholders will be further reduced to    % of the total number of shares of common stock to be outstanding after this offering, and the number of shares of common stock held by investors participating in this offering will be further increased to             shares, or    % of the total number of shares of common stock to be outstanding after this offering.

The number of shares outstanding as of December 31, 2005 excludes:

•

3,394,926 shares of common stock subject to outstanding options under our 2000 stock option plan, having a weighted average exercise price of $0.28 per share;

•

2,601,349 shares of common stock reserved for future issuance under our 2000 stock option plan;

•

shares of common stock reserved for future issuance under our 2006 equity incentive plan, which we have adopted to become effective as of the completion of this offering; and

•

1,496,039 shares of common stock subject to outstanding warrants, having a weighted average exercise price of $0.71 per share.

To the extent that any options or warrants are exercised, new options are issued under our 2006 equity incentive plan or we issue additional shares of common stock in the future, there will be further dilution to investors participating in this offering.

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Selected consolidated financial data

The following selected consolidated financial data should be read together with our consolidated financial statements and notes and "Management's discussion and analysis of financial condition and results of operations" appearing elsewhere in this prospectus. The selected consolidated statement of operations data for the years ended December 31, 2003, 2004 and 2005 and the selected consolidated balance sheet data as of December 31, 2004 and 2005 are derived from our audited consolidated financial statements, which are included elsewhere in this prospectus. The selected consolidated balance sheet data as of December 31, 2003 and the selected consolidated financial data as of and for the year ended December 31, 2002 are derived from our audited consolidated financial statements, which are not included in this prospectus. The selected consolidated financial data as of and for the year ended December 31, 2001 are derived from our unaudited consolidated financial statements, which are not included in this prospectus.

Year ended December 31,		2001			2002			2003			2004			2005
(in thousands, except per share data)		(unaudited)
Consolidated statement of operations data:
Net revenues:
	Technology licensing	$	57		$	530		$	4,290		$	12,228		$	26,919
	Media and other distribution and services		82			2,164			3,456			4,123			6,128
Total net revenues			139			2,694			7,746			16,351			33,047
Total cost of revenues(1)			223			1,215			1,900			3,502			3,656
Gross profit (loss)			(84	)		1,479			5,846			12,849			29,391
Operating expenses:
	Selling, general and administrative(1)		1,964			2,602			5,651			9,816			15,988
	Product development(1)		3,954			2,567			3,838			6,958			10,269
Total operating expenses			5,918			5,169			9,489			16,774			26,257
Income (loss) from operations			(6,002	)		(3,690	)		(3,643	)		(3,925	)		3,134
Interest and other income (expense), net			51			(39	)		(89	)		(45	)		223
Income (loss) before income taxes			(5,951	)		(3,729	)		(3,732	)		(3,970	)		3,357
Income tax provision			—			(62	)		(201	)		(373	)		(1,062	)
Net income (loss)(1)		$	(5,951	)	$	(3,791	)	$	(3,933	)	$	(4,343	)	$	2,295
Net income (loss) per share:
	Basic	$	(1.66	)	$	(0.60	)	$	(0.45	)	$	(0.41	)	$	0.16
	Diluted	$	(1.66	)	$	(0.60	)	$	(0.45	)	$	(0.41	)	$	0.05
Shares used to compute basic net income (loss) per share			3,580			6,296			8,765			10,631			14,646
Shares used to compute diluted net income (loss) per share			3,580			6,296			8,765			10,631			49,385

(1)

Includes stock-based compensation recorded in 2003, 2004 and 2005 as follows (in thousands):

Cost of revenues	—	—	$	—	$	—	$	1
Selling, general and administrative	—	—		159		16		252
Product development	—	—		—		10		141
Total stock-based compensation	—	—	$	159	$	26	$	394

December 31 (in thousands)	2001		2002		2003			2004		2005
	(unaudited)
Consolidated selected balance sheet data:
Cash and cash equivalents	$	1,534	$	1,831	$	607		$	6,934	$	25,035
Working capital (deficit)		905		403		(3,296	)		2,147		22,348
Total assets		3,030		3,722		2,787			13,680		33,164
Total debt		1,393		1,115		1,496			1,992		1,265
Total stockholders' equity (deficit)		1,361		1,087		(2,626	)		2,886		6,185

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Management's discussion and analysis of financial condition and results of operations

You should read the following discussion and analysis of our financial condition and results of our operations in conjunction with our consolidated financial statements and the notes to those statements included elsewhere in this prospectus. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. Our actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the section entitled "Risk factors," and elsewhere in this prospectus. We are on a calendar year end, and except where otherwise indicated below, "2005" refers to the year ended December 31, 2005; "2004" refers to the year ended December 31, 2004; and "2003" refers to the year ended December 31, 2003.

DivX overview

We create products and services designed to improve the experience of media. Our first product offering was a video compression-decompression software library, or codec, which has been actively sought out and downloaded over 180 million times during the last four years, including over 50 million times during the last twelve months. We have since built on the success of our codec with other consumer software products, including the DivX Player application. We distribute this software from our website, DivX.com, which averaged over five million unique visitors per month during the first quarter of 2006. We also license our technologies to consumer hardware device manufacturers and certified their products to ensure the interoperable support of DivX-encoded content. Over 35 million DivX Certified hardware devices have been shipped worldwide, including approximately 8.5 million devices reported to us by our customers during the fourth quarter of 2005. Our customers include major consumer video hardware original equipment manufacturers, or OEMs, including Philips and Samsung. We are entitled to receive a royalty for each DivX Certified device our customers ship. In addition to technology licensing to consumer hardware device manufacturers, we currently generate revenue from software licensing, advertising and content distribution. In 2005, 2004 and 2003, our revenues were approximately $33.0 million, $16.4 million and $7.7 million, respectively, and our net income (loss) was approximately $2.3 million, $(4.3) million and $(3.9) million, respectively.

Sources of revenues

We have four revenue streams. Three of these are derived from our technologies, including technology licensing to manufacturers of consumer hardware devices, software licensing to independent software vendors, or ISVs, and consumers, and services relating to digital media distribution, or DMD, over the Internet that is made possible via the deployment of our technologies. Additionally, we derive revenues from advertising and distributing third-party products on our website.

Our technology licensing revenues from consumer hardware device manufacturers comprised 71%, 55% and 22% of our total revenues in 2005, 2004 and 2003, respectively, and are derived primarily from per-unit royalties received from OEMs. We license our technologies to manufacturers of integrated circuits, or ICs, designed for consumer hardware products, as well

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as consumer hardware device manufacturers who have licensed our technologies for incorporation in products such as digital versatile disc, or DVD, players, personal media players, or PMPs, and digital still cameras, or DSCs. Our licensing arrangements typically entitle us to receive a royalty for each product unit incorporating our technologies that is shipped by our OEM partners. Though significantly smaller in magnitude than royalties from unit-based shipments, we also receive technology fees from IC manufacturers, original device manufacturers, or ODMs, and OEMs for rights to include our technologies in their products and for DivX product certifications. Because royalties are generated by the shipment volumes of our consumer hardware device customers, and because sales by consumer manufacturers are highly cyclical, we expect revenues relating to consumer hardware devices to be highly cyclical, with our second quarter revenues in any calendar year being generally lower than any other quarter in that calendar year.

Our software license revenues are derived primarily through per-unit royalties from ISVs and to a lesser extent from direct software sales to consumers via our website. We work with ISVs to help them incorporate our technologies into their video creation, editing and playback software products. Our licensing arrangements typically entitle us to receive a royalty for each DivX-enabled software unit shipped by our ISV partners. Revenues from software licensing comprised 11%, 20% and 33% of our total revenues in 2005, 2004 and 2003, respectively.

Advertising and product distribution revenues have generally been earned when we include third-party software products with DivX software that is available for download to consumers from our website. Presently, our only arrangement of this type is with Google, though we have had arrangements with other parties in the past. With each download of included software, consumers are offered the opportunity to install Google software. In exchange for offering the included Google software to our consumers, and the subsequent activation of the software by those consumers, Google pays us royalties based on specific performance targets. See "Business—How we derive revenue—Advertising and third-party product distribution" for more information about our agreement with Google. Advertising and distribution revenues comprised approximately 15%, 17% and 27% of our total revenues in 2005, 2004 and 2003, respectively.

We earn DMD revenues by providing a hosted service to content providers that allows them to download their digital media content to users via the Internet. In such cases, DMD revenues are derived as a revenue-share percentage of total content sales prices. We also derive revenues by encoding third-party content into the DivX format to allow such content to be delivered more efficiently via the Internet. DMD and related service revenues comprised 4%, 8% and 17% of our total revenues in 2005, 2004 and 2003, respectively.

A small number of customers account for a significant percentage of our revenues. In 2005, two customers accounted for 15% and 13%, respectively, of our revenues. In 2004, the same two customers accounted for 10% and 13%, respectively, of our revenues. In 2003, a third customer accounted for 27% of our revenues.

Cost of revenues

Our cost of revenues consists primarily of license fees payable to providers of intellectual property that is included in our technologies. Generally, royalties are due to our third-party intellectual property providers based on when certain of our products are sold, subject to

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contractually agreed-upon limits. To a much lesser extent, cost of revenues also includes depreciation on certain computing equipment and related software, the compensation of related employees, Internet connectivity costs, third-party payment processing fees and allocable overhead. Although this may not be the case in the future, and although we have experienced some variability to our cost of revenue structure in the past, in general our costs of revenues have not been highly variable with revenue volumes. As a result, we generally expect our overall gross margins to fluctuate with revenues.

Selling, general and administrative

The majority of selling, general and administrative expenses consists of employee compensation costs. Selling, general and administrative expense also includes marketing expenses, business travel costs, trade show costs, outside consulting fees and allocable overhead. We intend to increase our sales and marketing staff and selling and marketing budget in the future as we attempt to continue to raise awareness of our products and services. In addition, we expect our general and administrative expenses to increase as we incur additional expenses associated with being a publicly traded company, including expenses associated with comprehensively analyzing and documenting our system of internal controls and maintaining our disclosure controls and procedures as a result of the regulatory requirements of the Sarbanes-Oxley Act.

Product development

The majority of product development expenses consists of employee compensation for personnel responsible for the development of new technologies and products. Product development expense also includes depreciation of computer and related equipment, software license fees and allocable overhead. We expect to increase our product development expenses in absolute dollars as we continue to invest in the development of our products and services.

Opportunities, challenges and risks

Our technology licensing revenues from consumer hardware device manufacturers have been primarily dependent upon our licensees' sales of DVD players that incorporate our technologies. Revenue from technology licensing to consumer hardware device manufacturers increased by 1,269% from 2003 to 2005. We do not expect our revenue growth rates attributable to DVD player sales to remain as high as they have been in recent years as the markets for DVD players mature. Because our technologies are embedded in DVD players, our licensing revenue is subject to fluctuations based on consumer demand for these products. We actively promote the incorporation of our video compression technologies for use in other consumer products such as DSCs, PMPs and DVD recorders, but there is no assurance we will receive material royalties on sales of these products in the future. If sales of DVD players that incorporate our technologies do not continue to grow, or if our technologies are displaced from these devices by competing technologies, our operating results would be materially and adversely affected.

From time to time, one or a small number of our licensees may represent a significant percentage of our revenues. In 2005, Philips accounted for approximately 13% of our total revenues, and our top 10 licensees by revenue accounted for approximately 41% of our total revenues. A reduction in these sales or a loss of one or more of our key licensees would adversely affect our licensing revenues.

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As technologies for DVD players and other consumer hardware devices with video compression capabilities evolve, we must continue to design and deliver innovative technologies that are sought by manufacturers and consumers alike. Part of our strategy is to have our digital media technologies adopted as de facto industry standards for use in consumer hardware devices. Generally, for a technology to become an industry standard, the royalty rates must not be prohibitively costly as compared to other potential alternatives. As a result, the royalty rates we charge for our technologies will likely be lower than the royalty rates received for technologies not adopted as industry standards, and our long-term ability to raise royalty rates for our technologies could be limited by this trend.

Our product distribution revenues derived from Google during 2005 were approximately 15% of our total revenues. If our consumers are not seen as an attractive market for Google's products, or Google's products become undesirable or saturated in the market, it may materially affect our future product distribution revenues. In addition, our product distribution agreement with Google expires in December 2006 and, upon the expiration of this agreement, we may not be able to enter into a new agreement with Google or a similar partner on substantially the same or more favorable terms, or at all.

Beginning in the first quarter of 2006, we adopted SFAS No. 123(R), Share-Based Payment, which requires that we record stock-based compensation charges in connection with our equity compensation for employees. As a result, we expect to record significant additional expenses for the first quarter of 2006 and in future periods, which will adversely affect our operating results.

Recent acquisition

In March 2006, we acquired all of the assets of Corporate Green, a general partnership that developed an online community platform. The total purchase price consisted of an initial cash payment of approximately $351,000 and a total of 208,950 shares of our common stock. Of the common stock issued, 69,648 shares were fully vested as of the closing date for the acquisition. The remaining 139,302 shares of common stock received by the three former Corporate Green partners are subject to a lapsing right of repurchase by us tied to specified events, including their continued employment with us, provided that no such repurchase right shall exist in the event of termination of employment without cause. Upon the earlier of December 31, 2006, March 31, 2007, and June 30, 2007, and the occurrence of certain performance milestones, we will owe an aggregate of another $104,000, $104,000 and $31,000, respectively, to the three former Corporate Green partners. The three partners must also remain our employees to earn the second and third milestone payments.

Critical accounting policies

This discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. The preparation of these financial statements in accordance with U.S. GAAP requires us to use accounting policies and make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingencies as of the date of the financial statements and the reported amounts of revenue and expenses during a fiscal period. We consider an accounting policy to be critical if it is important to our financial condition and results of operations, and if it

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requires significant judgment and estimates on the part of management in its application. We have discussed the selection and development of the critical accounting policies with the audit committee of our board of directors, and the audit committee has reviewed our related disclosures in this document. Although we believe that our judgments and estimates are appropriate and correct, actual results may differ from those estimates.

We believe the following to be our critical accounting policies because they are both important to the portrayal of our financial condition and results of operations and they require critical management judgments and estimates about matters that are uncertain. If actual results or events differ materially from the judgments and estimates we have employed reporting our financial positions and results, our reported financial condition and results of operation for future periods could be materially affected.

Revenue recognition

We evaluate our revenue recognition for transactions to sell products and services and to license technologies using the criteria set forth by the SEC in Staff Accounting Bulletin 104, Revenue Recognition, or SAB 104. SAB 104 states that revenue is recognized when each of the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller's price to the buyer is fixed and determinable and collectibility is reasonably assured.

Our licensing revenue is primarily derived from royalties paid to us by licensees of our intellectual property rights. Royalties and other license fees are recorded net of reserves for estimated losses resulting from our customers' ultimate ability to make required payments and report accurately, and are recognized when all revenue recognition criteria have been met. We make judgments as to whether collectibility can be reasonably assured based on a licensee's recent payment history or its assessed ability to pay. In the absence of a favorable collection history or a favorable assessment of the ability to pay, we recognize revenue upon receipt of cash, provided that all other revenue recognition criteria have been met.

We have contracts with OEMs, ODMs, IC manufacturers, ISVs, advertisers and content providers. Our revenue recognition policies for each of these arrangements are summarized below.

Technology licensing to OEMs.    We license our technologies to OEMs of consumer hardware devices, and in return each OEM typically pays us a royalty for each DivX Certified unit the customer ships. Royalty revenue is recognized in the period in which we receive competent evidential matter that revenue has been earned in the form of a shipment report from the customer. If we receive pre-certification license fees from a customer, recognition of this revenue is deferred in its entirety until we certify the OEM product(s) in accordance with our certification guidelines. If we receive nonrefundable minimum commitments from a customer that are also not allocable to a future contract period, we will recognize the full amount upon billing if collectibility is assured based on recent payment history, but only if we have no further obligation to provide post-contract support. If we have future support obligations pertaining to minimum commitment agreements, we recognize licensing fees ratably over the length of the agreement because vendor-specific objective evidence, or VSOE, does not exist for the unlimited upgrades and support included in the contract.

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Technology licensing to IC manufacturers.    We license our technologies to IC manufacturers and provide support and unlimited upgrades during the contract term so they can incorporate our technologies into the chips they manufacture for consumer hardware devices. The initial license fee is deferred in total until we certify the IC manufacturer's product in accordance with our certification guidelines. Because VSOE does not exist for the service elements, after certification, we recognize the license fee ratably over the remaining length of the associated contract, which is typically two to three years.

Technology licensing to ODMs.    We license our technology to ODM customers and partners who manufacture devices such as DVD players, PMPs and DSCs. Recognition of the related licensing fees is deferred in total until we certify the ODM's product in accordance with our certification guidelines, after which we have no further performance obligation.

Technology licensing for software to ISVs.    We license our technologies for resale to ISVs and in return the software vendor pays us a royalty for each unit shipped that incorporates our technologies. Revenue is recognized in the period in which we receive competent evidential matter that revenue has been earned in the form of a shipment report from the customer. In addition, in some cases we receive an initial license fee for our software and agree to provide post-contract upgrades and support. In these cases, we recognize revenues ratably over the length of the contact, as VSOE typically does not exist for the upgrades and support period implied by the contract.

Technology licensing for software to consumers.    We license our technologies to consumers via our website for a fixed fee per download. The license includes upgrades and support until such time as a new pay version becomes available, which is generally referred to as a "left-of-decimal" upgrade. Payment is made online with a credit card via a third-party payment service provider, who in turn remits aggregate payments to us on a monthly basis. We recognize these revenues ratably over the period ending at the next expected left-of-decimal upgrade, which is typically 24 to 36 months from the time of the last upgrade, as VSOE typically does not exist for the upgrades and support under such licensing agreements.

Advertising and third-party product distribution.    We are paid by third-party software companies for distributing their software within our electronic software download and free download products. We recognize a minimum portion of these fees immediately upon receiving competent evidential documentation from our reporting systems. We recognize the remaining fees in the period we receive final sales reports from the customer that confirm how many units were actually distributed and installed by consumers.

Digital media distribution services.    We make available our online video delivery system to content customers in return for a revenue share of the download-for-rental revenue generated by the content provider customer using our delivery system. The content partner delivers a video-on-demand movie through its website using our Open Video System, or OVS. The end customer purchasing such content must pay by credit card before being allowed to download the movie. We earn a certain percentage of each sale based on a pre-negotiated revenue share with the content-provider customer. Revenue is recognized monthly based on sales reports, net of any returns or charge backs as reconciled by us and the content-provider customer.

Encoding services.    We encode the content of certain customers into the DivX format and charge these customers for this service. In some cases revenue is recognized in full after the

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encoding service is performed if the customer agrees to provide a deposit in full. In other cases revenue is recognized and invoiced based on a calculation of value per unit of DivX-encoded content that is downloaded from a content provider's site.

We record revenue net of allowances for uncollectible sales.    Revenue is recorded net of allowances for uncollectible sales. We continually monitor customer payment performance and maintain a reserve for estimated amounts that may be uncollectible. In determining our reserve, we evaluate the collectibility of our accounts receivable based upon a variety of factors. Generally, in cases where the customer is new and has an undemonstrated ability to pay, we delay recognition of the revenue until such time as the new customer has paid unless significant and persuasive evidence exists that the customer is creditworthy. In cases where we are aware of circumstances that may impair a specific customer's ability to meet its financial obligations, despite the customer's payment history, we record a specific allowance against amounts due and thereby reduce the net recognized receivable to the amount reasonably believed to be collectible. For all other customers, we recognize allowances for uncollectible sales based on our actual historical write-off experience in conjunction with the length of time the receivables are past due, customer creditworthiness, geographic risk and the current business environment. Actual future losses from uncollectible accounts may differ from our estimates and may materially affect our statements of operations and our financial condition.

Accounting for income taxes

In preparing our financial statements we are required to make estimates and judgments that affect our accounting for income taxes. This process includes estimating current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax- and financial-accounting purposes. These differences, including differences in the timing of recognition of stock-based compensation expense, result in deferred tax assets and liabilities. We also assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe recovery to be unlikely, we have established a valuation allowance. Significant judgment is required in determining the provision for income taxes, deferred tax assets and liabilities and any valuation allowance against our deferred tax assets. Our financial position and results of operations may be materially impacted if actual results significantly differ from these estimates or the estimates are adjusted in future periods. At December 31, 2005, we maintained a 100% valuation allowance of $8.7 million on deferred tax assets.

Stock-based compensation

Valuation at the time of grant.    We have granted to our employees options to purchase common stock at exercise prices equal to the fair market value of the underlying stock at the time of each grant, as determined by our board of directors.

In valuing the common stock our board of directors considered a number of factors, including:

•

the illiquidity of our capital stock as a private company;

•

the vesting restrictions imposed upon the equity awards;

•

the business risks we faced;

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•

the liquidation preferences, redemption rights, and other rights, preferences and privileges of our outstanding preferred stock; and

•

the likelihood of a liquidity event, such as a public offering.

Reassessment of fair value.    As described above, at the time we granted stock options, we believed the per share exercise price of the shares of common stock subject to options represented the fair value of that stock as of the grant date. However, in connection with the preparation of the financial statements for this offering and solely for the purposes of accounting for employee stock-based compensation, we considered whether the equity awards granted in 2004 and 2005 had a compensatory element that should be reflected in our financial statements. We noted that the fair value of the shares subject to the equity awards granted during these periods, as determined by our board of directors at the time of grant, was significantly less than the valuations that our underwriters were discussing with us in connection with our preparations for this offering. We believed we should not ignore the discrepancies in valuation in determining whether the equity awards granted during this time had a compensatory element. As a result, we performed a retrospective analysis to reassess the fair value of our common stock for all equity awards granted since October 2004, the date of the completion of our Series C preferred stock financing.

In reassessing the fair value of the shares of common stock underlying the equity awards granted between October 1, 2004 and December 31, 2005, we engaged a third-party specialist to perform valuation analyses of our common stock. Such reassessment analyses were performed consistent with practices recommended by the American Institute of Certified Public Accountants' practice aid on valuing equity of privately-held companies issued for compensation. The reassessment valuations considered a variety of facts and circumstances that indicate common stock value, including our historical financial performance, our expected future financial performance, the market values of firms engaged in analogous business pursuits, the likelihood of our acquisition, the likelihood of our engaging in a public offering, discount rates in effect during the periods of the retrospective valuation analyses, third-party purchases of our preferred stock, the rights and preferences of such preferred stock over our common stock and other similar facts and circumstances. The valuation methodologies that were implemented to determine enterprise value were selected to reflect our stage of development for the measurement dates and blended the income approach and market approach. The cost approach was considered, but was not used, as we determined that such approach would not adequately capture our going concern value. As operating results improved and positive developments in our business occurred, the fair value of our common stock was deemed to rise. The effect of our reassessment was to retrospectively increase the deemed fair value of our common stock above the prices originally determined to equal fair value by our board of directors, and, as a result, we recorded deferred stock-based compensation charges. As of December 31, 2005, we had deferred stock-based compensation of $1.5 million. We expect to amortize approximately $458,000 of this deferred stock-based compensation during 2006. We also expect to record additional stock-based compensation expense in accordance with SFAS No. 123(R) in 2006 for stock awards made during 2006.

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Results of operations

The following table presents our results of operations as a percentage of total revenue for the periods indicated:

		2003		2004		2005
Net revenues:
	Technology licensing	55	%	75	%	81	%
	Media and other distribution and services	45		25		19
Total net revenues		100		100		100
Total cost of revenues		25		21		11
Gross margin		75		79		89
Operating expenses:
	Selling, general and administrative(1)	73		60		48
	Product development(1)	50		43		31
Total operating expenses		123		103		79
Income (loss) from operations		(47	)	(24	)	9
Interest and other income (expense), net		(1	)	—		1
Income (loss) before income taxes		(48	)	(24	)	10
Income tax provision		(3	)	(2	)	(3	)
Net income (loss)		(51	%)	(26	%)	7	%

(1)

Includes stock-based compensation recorded in 2003, 2004 and 2005 as follows:

Cost of revenues	—	%	—	%	—	%
Selling, general and administrative	2		—		1
Product development	—		—		—
Total stock-based compensation	2	%	—	%	1	%

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Revenues

The following table summarizes and analyzes the revenues we earned for 2003, 2004 and 2005:

										2003-2004 Change								2004-2005 Change
				December 31, 2003			December 31, 2004								December 31, 2005
(in thousands)										$			%					$			%
Net revenues:
	Technology licensing Consumer hardware devices			$	1,707		$	8,961		$	7,254		425	%	$	23,361		$	14,400		161	%
			% of total net revenues		22	%		55	%							71	%
		Software			2,583			3,267			684		26			3,558			291		9
			% of total net revenues		33	%		20	%							11	%
	Total technology licensing				4,290			12,228			7,938		185			26,919			14,691		120
			% of total net revenues		55	%		75	%							81	%
	Advertising and third-party product distribution				2,129			2,829			700		33			4,964			2,135		75
			% of total net revenues		27	%		17	%							15	%
	Digital media distribution and services				1,327			1,294			(33	)	(2	)		1,164			(130	)	(10	)
			% of total net revenues		17	%		8	%							4	%
			Total net revenues	$	7,746		$	16,351		$	8,605		111	%	$	33,047		$	16,696		102	%

Technology licensing to consumer hardware device manufacturers.    The $14.4 million, or 161%, increase in revenues from technology licensing to consumer hardware device manufacturers from 2004 to 2005 resulted primarily from a $13.5 million increase in net royalty revenues due to an increase in sales by our licensees of their consumer hardware devices that incorporate our technologies, principally attributable to the worldwide growth in sales of DVD players that incorporate our technologies. The remaining increase in consumer hardware licensing revenues was attributable to a $902,000 increase in license fees we earned from new or renewed IC and ODM licensees. The $7.3 million, or 425%, increase in revenues from technology licensing to consumer hardware device manufacturers from 2003 to 2004 resulted primarily from a $6.8 million increase in royalty revenue due to an increase in sales by our licensees of their consumer hardware devices that incorporate our technologies, principally attributable to the worldwide growth in sales of DVD players that incorporate our technologies. The remaining increase in consumer hardware licensing revenues was attributable to a $512,000 increase in license fees we earned from our IC and ODM licensees.

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Technology licensing for software.    The $291,000, or 9%, net increase in software licensing revenue from 2004 to 2005 resulted primarily from a $856,000 increase in licensing our product directly to consumers. This increase was partially offset by a $565,000 decrease in royalty revenue due to a decrease in sales by our licensees of their video software products that incorporate our technologies. The $683,000, or 26%, increase in software licensing revenue from 2003 to 2004 resulted primarily from a $344,000 increase in royalty revenue due to an increase in sales by our licensees of their video software products that incorporate our technologies. The remaining increase in software licensing revenues was attributable to a $339,000 increase in revenue earned from licensing our product directly to consumers.

Advertising and third-party product distribution.    The $2.1 million, or 75%, increase in advertising and third-party product distribution revenue from 2004 to 2005 resulted from the beginning of our product distribution relationship with Google. The $700,000, or 33%, increase in advertising and third-party product distribution revenue from 2003 to 2004 resulted from an increase in our distribution or promotion of third party software.

Digital media distribution and services.    The $130,000, or 10%, decrease in DMD and services revenue from 2004 to 2005 resulted primarily from a decrease of sales by our OVS customers. The $33,000 decrease in DMD and related services revenue from 2003 to 2004 resulted primarily from a $659,000 reduction in professional service revenue partially offset by a $626,000 increase in sales by our OVS customers and encoding revenues.

Gross profit

The following table shows the gross profits we earned on each of our revenue streams for 2003, 2004 and 2005 in absolute dollars and as a percentage of related revenues:

(in thousands)			2003			2004			2005
Gross profit:
	Technology licensing		$	3,302		$	9,751		$	24,152
		Gross margin		77	%		80	%		90	%
	Advertising and third-party product distribution			2,079			2,762			4,875
		Gross margin		98	%		98	%		98	%
	Digital media distribution and services			465			336			364
		Gross margin		35	%		26	%		31	%
		Total gross profit	$	5,846		$	12,849		$	29,391
		Total gross margin		75	%		79	%		89	%

Technology licensing.    The increase in gross margin across all periods presented was due primarily to increased royalties from technology licensing to consumer hardware device manufacturers without a concomitant increase in royalties payable to our licensors. We expect our gross margins to fluctuate with revenues.

Advertising and third-party product distribution.    Our cost of product distribution revenue remained relatively fixed as a percentage of such revenue because the cost of bandwidth associated with product downloads is directly proportional to the volume of downloads.

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Digital media distribution and related services.    Our DMD and related services gross margin increased from 2004 to 2005 despite lower revenues during this period as more of our sales in 2005 were derived from encoding services. Such services have relatively fixed direct labor and equipment costs. Our gross margins declined from 2003 to 2004 due to diminished revenues over a relatively fixed cost base.

Operating expenses

The following table summarizes and analyzes our operating expenses for 2003, 2004 and 2005:

									2003-2004 Change							2004-2005 Change
			December 31, 2003			December 31, 2004							December 31, 2005
(in thousands)									$		%					$		%
Operating expenses:
	Selling, general and administrative		$	5,651		$	9,816		$	4,165	74	%	$	15,988		$	6,172	63	%
		% of total net revenues		73	%		60	%						48	%
	Product development			3,838			6,958			3,120	81			10,269			3,311	48
		% of total net revenues		50	%		43	%						31	%
		Total operating expenses	$	9,489		$	16,774		$	7,285	77	%	$	26,257		$	9,483	57	%

Selling, general and administrative.    The $6.2 million, or 63%, increase in selling, general and administrative expense from 2004 to 2005 was principally due to a $4.6 million increase in payroll and benefit costs resulting from an increase in headcount and increase in sales performance, a $650,000 increase in marketing costs, particularly promotional and branding expenses, a $253,000 increase in travel costs mainly for our sales functions, a $176,000 increase in facility maintenance costs, a $236,000 increase in stock-based compensation and a $114,000 increase in legal costs, particularly trademark and litigation expenses. The $4.2 million, or 74%, increase in selling, general, and administrative expense from 2003 to 2004 was principally due to a $1.3 million increase in payroll and benefit costs due to an increase in headcount, a $663,000 increase in legal costs, particularly trademark and litigation expenses, a $519,000 increase in outsourced service costs, a $539,000 increase in recruiting and relocation costs due to an increase in headcount, a $338,000 increase in travel costs mainly for our sales functions, a $235,000 increase in marketing costs, particularly promotional and branding expenses, and a $155,000 increase in occupancy costs to accommodate our increased headcount.

Product development.    The $3.3 million, or 48%, increase in product development expense from 2004 to 2005 was principally due to a $2.9 million increase in payroll and benefit costs due to an increase in headcount, a $299,000 increase in outside contractor expense to aid current employees in product development initiatives and a $131,000 increase in stock-based compensation. The $3.1 million, or 81%, increase in product development expense from 2003 to 2004 was principally due to a $2.5 million increase in payroll and benefit costs due to an

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increase in headcount and a $359,000 increase in depreciation and facilities expense due to additional capital needs for new employees and development functions.

Interest and other income (expense), net

Interest and other income (expense), net, consists primarily of net interest income or expense. During 2005, we reported net interest income of $223,000 compared to net interest expense of $45,000 and $89,000 for 2004 and 2003, respectively. Net interest income in 2005 was due to higher interest earned due to higher cash balances in combination with lower interest expense on lower interest-bearing debt outstanding during 2005 compared to prior periods.

Income tax provision

In 2005, we earned net income of $2.3 million and in prior years we reported net losses. Although we are a U.S.-based corporation, we paid no income taxes to the U.S. during 2005, as we had net operating losses from prior periods available to offset the net income we earned in that year. We paid approximately $1.0 million, $373,000 and $201,000 in 2005, 2004 and 2003, respectively for foreign taxes related to royalty payments received from customers doing business within jurisdictions with which the U.S. has no taxing reciprocity agreement in place for the sale or licensing of intellectual property. Such foreign tax payments may be used to offset future U.S. federal income tax on U.S. taxable income determined after utilizing our net operating loss carryforwards. At December 31, 2005, we had approximately $9.3 million and $7.0 million in federal and California net operating loss carryforwards, respectively, which begin to expire in 2020 and 2010, respectively, and approximately $1.0 million in credits available from the payment of foreign taxes described above, which begin to expire in 2016.

Liquidity and capital resources

From our inception through the end of 2005, we financed our operations primarily through private sales of preferred stock totaling $38.4 million and the use of commercially available credit facilities. We generated cash from operations for the first time in 2005. Our financial position included cash and cash equivalents of $25.0 million, $6.9 million and $600,000 at December 31, 2005, 2004 and 2003, respectively. Upon completion of this offering, we expect to have cash and cash equivalents of $     million, based on our financial position at December 31, 2005. We believe our cash, cash equivalents and potential cash flows from operations will be sufficient to satisfy our cash requirements through at least December 31, 2006. In the future, we may acquire complementary businesses or technologies or license complementary technologies from third parties, and we may determine to raise additional capital through future debt or equity financing to the extent we believe necessary to successfully complete these acquisitions or licenses. However, additional financing may not be available to us on favorable terms, if at all, at the time we make such determinations, which could have a material adverse affect on our ability to maintain or improve our liquidity and cash position in the future.

We have entered into loan and security agreements with Silicon Valley Bank, or SVB, whereby we can receive term loans, due in 30 monthly installments, of up to $2 million to finance eligible equipment. As of December 31, 2005 and 2004, $1.1 million and $901,000, respectively, was outstanding under these agreements. Interest is payable monthly at SVB's prime rate plus

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1.0%, not to go below 5.0%. The interest rate was 8.25% and 6.25% at December 31, 2005 and 2004, respectively.

Our financing arrangements with SVB are secured by substantially all of our assets and require us to adhere to various financial covenants, including minimum tangible net worth and minimum liquidity. As of December 31, 2005 we were in compliance with such covenants.

Our financing arrangements with SVB are subject to events of default, including if a material adverse change occurs in our financial condition, if SVB believes the prospect of payment or performance of the indebtedness is impaired or if SVB in good faith deems itself insecure. If an event of default occurs, all amounts due under the term loan agreement would become due and payable.

Aggregate maturities of our debt arrangements at December 31, 2005, are as follows (in thousands):

2006	$	720
2007		378
2008		16
Total	$	1,114

Cash flows

The following table presents our cash flows from operating activities, investing activities and financing activities for the last three years:

(in thousands)		2003			2004			2005
Net cash provided by (used in) operating activities		$	(1,301	)	$	(1,030	)	$	2,190
Net cash used in investing activities			(219	)		(2,533	)		(885	)
Net cash provided by financing activities			426			9,910			16,796
	Total increase (decrease) in cash and cash equivalents	$	(1,094	)	$	6,347		$	18,101

Operating activities.    Cash provided by operating activities in 2005 consisted primarily of $2.3 million of net income plus $1.0 million of depreciation and amortization, partially offset by net changes in working capital accounts of $1.9 million. Cash used in operating activities in 2004 consisted of a net loss of $4.3 million, partially offset by $610,000 of depreciation and amortization and changes in working capital accounts, which included $1.3 million of accounts payable and $1.5 million of accrued liabilities. Cash used in operating activities in 2003 consisted of a net loss of $3.9 million, partially offset by $586,000 of depreciation and amortization and deferred revenue of $2.1 million.

Investing activities.    We used $885,000, $2.5 million and $219,000 in investing activities during 2005, 2004 and 2003, respectively, for the purchase of property and equipment to support the growth of our company. In 2004 and 2003, we also used $250,000 and received $130,000 of restricted cash related to credit facilities from a commercial bank. We expect to substantially increase our capital expenditures in future periods as we continue to invest in computer and office equipment and leasehold improvements as we expand our business.

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Financing activities.    Our financing activities consist primarily of cash received from the issuance of preferred stock and the exercise of employee stock options, financings via a commercial line of credit and financings of certain equipment that we purchased. Such financing cash inflows have been partially offset by principal payments on our various debt facility obligations. During 2005, we generated $16.8 million in cash from our financing activities, primarily due to net proceeds from the issuance of Series D preferred stock of $16.8 million, net proceeds from the issuance of common stock of $701,000 and proceeds from notes payable of $761,000. This was partially offset by payments of $1.5 million on our debt facilities. During 2004, we generated $9.9 million in cash from our financing activities, primarily due to net proceeds from the issuance of Series C preferred stock of $9.8 million. During 2003, we generated $426,000 in cash from our financing activities, primarily from borrowings, net of payment, of $380,000 on our debt facilities.

Contractual obligations

Our contractual obligations at December 31, 2005, were as follows:

	Payments due by period
(in thousands)	Total		Less than 12 months		13-48 months		49-60 months		More than 60 months
Capital lease obligations	$	171	$	52	$	119	$	—	$	—
Operating lease obligations		1,608		500		1,108		—		—
Purchase obligations		18,237		3,701		6,536		2,000		6,000
Other long term liabilities reflected on our balance sheet under U.S. GAAP		1,114		720		394		—		—
Total contractual obligations	$	21,130	$	4,973	$	8,157	$	2,000	$	6,000

Purchase obligations in the above table represent non-cancelable contractual obligations at December 31, 2005.

Off-balance sheet arrangements

At December 31, 2005 and 2004, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special-purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Internal controls over financial reporting

Management is responsible for establishing and maintaining adequate internal controls over financial reporting and for the timeliness and reliability of the information disclosed. During 2005, we have been documenting and reviewing the design and effectiveness of our internal controls over financial reporting in anticipation of the requirement to comply with Section 404 of the Sarbanes-Oxley Act. We expect to be compliant when required for our 2007 year-end. Continuous review and monitoring of our business processes will likely identify other possible changes to our internal controls in the future. If we are unable to comply with Section 404 of the Sarbanes-Oxley Act, our share price may be negatively impacted.

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Quantitative and qualitative disclosures about market risk

Interest rate sensitivity.    As of December 31, 2005, we had cash and cash equivalents of $25.0 million, which consisted of highly liquid money market instruments with original maturities of three months or less. Because of the short-term nature of these instruments, a sudden change in market interest rates would not be expected to have a material impact on our financial condition and/or results of operations. However, as the yield curve of debt instruments may return to a standard profile, we may begin investing in longer-term debt instruments. Although we have an investment policy designed to minimize the effects of interest rate fluctuations, should we begin to invest in longer-term debt instruments, such fluctuations could have a material adverse affect on our reported financial results.

Foreign currency exchange risk.    Although the majority of our revenue is derived from customers who reside outside of the United States, all of our revenue is derived from transactions denominated in U.S. dollars. Because of this, increases in the value of the U.S. dollar could increase the price of our products to non-U.S. customers. This could lead to a reduction in revenues from such customers, which would adversely affect our operating results.

Recently adopted and recently issued accounting standards

Statement of Financial Accounting Standards No. 154, Accounting Changes and Error Corrections

In May 2005, the Financial Accounting Standards Board, or FASB, issued SFAS No. 154, Accounting Changes and Error Corrections-a replacement of APB Opinion No. 20 and FASB Statement No. 3. SFAS No. 154 requires retrospective application to prior periods' financial statements for voluntary changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS No. 154 also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions and makes a distinction between retrospective application of an accounting principle and the restatement of financial statements to reflect the correction of an error. Additionally, SFAS No. 154 requires that a change in depreciation, amortization or depletion method for long-lived, nonfinancial assets be accounted for as a change in accounting estimate affected by a change in accounting principle. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. We do not believe that the adoption of SFAS No. 154 will have a material effect on our financial statements.

Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment

In December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment. SFAS No. 123(R) requires that companies recognize all share-based payments to employees, including grants of employee stock options, in their financial statements. The recognized cost will be based on the fair value of the equity or liability instruments issued. Pro forma disclosure of this cost will no longer be an alternative under SFAS No. 123(R). In April 2005, the SEC adopted a rule that amended the effective dates of SFAS No. 123(R). Under this guidance, SFAS No. 123(R) is effective for us beginning January 1, 2006.

Through December 31, 2005 we have accounted for our stock-based compensation plans under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, using

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the intrinsic value method and have adopted the pro forma disclosure-only alternative of SFAS No. 123, Accounting for Stock-Based Compensation. As a result of using this method, when the exercise price is equal to the deemed fair value of the underlying securities we have recognized no compensation cost for employee stock options in our consolidated financial statements.

At December 31, 2005, we had unrecognized stock-based compensation expense related to options granted through that date of approximately $1.5 million, as calculated in accordance with APB No. 25. Because we have historically used the minimum value method to measure stock-based compensation for pro forma disclosure purposes under SFAS No. 123, under SFAS No. 123(R) we will apply the prospective method of accounting to options granted before December 31, 2005. Under the prospective method, we will continue to recognize compensation expense relating to unvested awards at December 31, 2005 using APB No. 25. To the extent we grant additional awards to employees subsequent to January 1, 2006, we will recognize compensation expense based on the fair value of these awards. The unrecognized compensation cost relating to those awards will be recognized in our statement of operations over the requisite service period. As a result, we expect the adoption of SFAS No. 123(R) and the use of the fair value method to have a material effect on our results of operations.

SFAS No. 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow, as required under current standards. This requirement will reduce net operating cash flows and increase net financing cash flows in the periods after adoption. We cannot estimate what those amounts will be in the future because they are dependent on, among other things, when employees exercise stock options.

Historically, for pro forma reporting purposes we have followed the nominal vesting period approach for stock-based compensation awards with retirement eligibility provisions. Under this approach, we recognize compensation expense over the vesting period of the award. SFAS No. 123(R) requires recognition of compensation cost under a non-substantive vesting period approach. This approach requires recognition of compensation expense over the period from the grant date to the date retirement eligibility is achieved, if that is expected to occur during the nominal vesting period. Additionally, for awards granted to retirement eligible employees, the full compensation cost of an award must be recognized immediately upon grant.

Staff Accounting Bulletin No. 107, Share-Based Payment

In March 2005, the SEC issued Staff Accounting Bulletin No. 107, Share-Based Payment. SAB No. 107 provides guidance regarding the interaction between SFAS No. 123(R) and certain SEC rules and regulations, including guidance related to valuation methods, the classification of compensation expense, non-GAAP financial measures, the accounting for income tax effects of share-based payment arrangements, disclosures in management's discussion and analysis of financial condition and results of operations subsequent to adoption of SFAS No. 123(R) and modifications of options prior to the adoption of SFAS No. 123(R).

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A letter to our potential investors

Welcome to our prospectus. As founders we've seen DivX reach many milestones and this initial public offering will be one of the most significant. But even so, this milestone is just one more in a longer journey. As you consider an investment in DivX, we hope you'll seek to understand not only the fundamentals of our business, but also the people who brought DivX to where it is today and will steward it in the future. We hope after you have read our prospectus you will have a better understanding of who we are, what we believe, and why we do what we do.

DivX was started with a specific goal in mind: to make media better through the use of technology and community. The nature of media is changing, of that there can be no doubt. The changes wrought from the combined forces of digitization, connectedness and openness will be both thorough and profound. However, it is not at all certain that they will be positive.

The nature of these changes matters because media is a powerful conduit through which we communicate ideas and experiences that inspire us, call us to action and change who we are. More fundamentally, it matters because media mediates. The nature of media controls what is said, how it is said, and who says it. The media we have shapes the society we are.

This is why the expansion of the Internet is so important. It is a global, open medium well on its way to connecting everything. We are Internet people; we came of age with the Internet. We embrace its many-to-many essence and the way it can't help but democratize participation and empower the individual. But because we are natives of its environment, we recognize that the Internet also has drawbacks. It can be divisive; it can be destructive. Above all, it can be vacuous.

The challenge we've set for ourselves is to help guide the intersection of technology and media in a way that promotes authentic, diverse, and rich human expression. We want to help creators create and reach broader and more diverse audiences. We want to help everyone become more engaged and forge deeper, more intensive connections. This is what really matters: sharing ideas and experiences, making connections and enriching our lives.

To do this, we have built a company that takes its virtues from the new media. DivX is open, decentralized, flexible and able to meet the diverse needs of many different constituencies. We have built a culture of energetic, imaginative, optimistic and balanced individuals. Most importantly, we realize we cannot do this alone, so we have allied ourselves with a much larger community of like-minded individuals including our consumers, our hardware, software and content partners and going forward, our investors. The role we play in this community is important, but it is only one part.

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We are successful today because we have focused on what is fundamental and enduring, and we believe that same focus will make us successful in the future. We believe the opportunity for DivX is just beginning to be realized. If after reading this prospectus you choose to invest in us, we look forward to working together to make a better media future.

Sincerely,

Jérôme J-P. Vashisht-Rota
R. Jordan Greenhall
Thinh X. (Tay) Nguyen
Darrius N. Thompson
Edward J. (Joe) Bezdek

May 5, 2006

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Business

DivX overview

DivX is a company trying to make media better through the use of technology and community. We believe that media is undergoing a profound transformation that will change how we get information, communicate and express ourselves. This transformation changes how we think and who we are. We believe that there are opportunities within this transformation–
opportunities to generate tremendous value by meeting the needs of the new media and, more importantly, opportunities to influence its evolution and development. Our successes to date have been the result of creating value with and for a broad community of constituents including software vendors, consumer hardware device manufacturers, content creators and consumers themselves. Our aspirations are high, and to execute effectively we have sought to build an organization and culture capable of reaching these heights. Like the evolving markets in which we operate, DivX is open and dynamic.

We create products and services designed to improve the experience of media. Our first product offering was a video compression-decompression software library, or codec, which has been actively sought out and downloaded over 180 million times in the last four years, including over 50 million times during the last twelve months. We have since built on the success of our codec with other consumer software, including the DivX Player application. We distribute this software from our website, DivX.com, which averaged over five million unique visitors per month during the first quarter of 2006. We also license our technologies to consumer hardware device manufacturers and certify their products to ensure the interoperable support of DivX-encoded content. Over 35 million DivX Certified hardware devices have been shipped worldwide, including approximately 8.5 million devices reported to us by our customers during the fourth quarter of 2005. Our customers include major consumer video hardware original equipment manufacturers, or OEMs, including Philips and Samsung. We are entitled to receive a royalty for each DivX Certified device our customers ship. In addition to technology licensing to consumer hardware device manufacturers, we currently generate revenue from software licensing, advertising and content distribution. In 2005, 2004 and 2003, our revenues were approximately $33.0 million, $16.4 million and $7.7 million, respectively.

We are now working to bring together the millions of DivX consumers with content creators both large and small to build communities around media. We are optimistic about the future and believe the opportunity for DivX is only beginning to be realized.

Industry overview

The goal of DivX is to create a better future of media. To understand this goal, it is useful to understand the nature of our market—in particular, the profound disruptions that are underway in the content industry. We believe three general trends—digitization, connectedness and openness—are converging to create a historic transformation of content.

Digitization.    To transmit information digitally means using a simple binary digital code. The simplicity of this code allows virtually anything to be stored and transmitted. The power of digital is not that it is a new medium, but rather that it is becoming the medium. What were previously distinct forms of media—newspaper, telephone, radio, television—are over time

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becoming a single medium: digital. The past several decades have seen a trend of digitization of media content from analog formats to increasingly digital formats. In virtually every instance where a more digital successor to a medium has appeared, the more digital version grew quickly and rapidly replaced its predecessor. The more digital version resulted in a market that was larger than the market served by the earlier version and enabled new ways to use information that were not possible with the previous, less digital medium.

These effects were particularly pronounced when digital successors appeared to analog media, as illustrated by the following examples:

•

Digital still cameras, or DSCs, were first released in 1994 and within 11 years represented approximately 72% of all cameras sold, relegating analog film cameras to niche markets, while growing the camera market to 133 million annual unit sales in 2005 compared to the 82 million annual unit sales in 2000, according to The Mobile Imaging Report published by Future Image.

•

In audio, the compact disc, or CD, was commercially introduced in 1982 and rapidly surpassed its analog cassette predecessor while growing the market to approximately four times the size of the cassette market in the United States from $3.5 billion in 1990 for cassettes to $13.2 billion in 2000 for CDs, according to the Recording Industry Association of America.

•

In the last decade, sales of DVDs dramatically surpassed sales of analog video home system, or VHS, tapes and grew the overall market for home video from $7.0 billion in 1999 to $16.4 billion in 2005 according to Adams Media Research.

In each of these cases, the more digital format created new ways to use information, such as digital photo sharing through services like Flickr, and 10,000 songs on a pocket-sized iPod® player. As the degree of digitization increases, these effects become more pronounced. For example, the effects seen in the transition from cassettes to CDs are being seen again in the transition from CDs to "pure digital" music in MP3 files.

The following chart depicts the effects of digitization in the home video market by showing the change in consumer spending on DVDs relative to VHS tapes for the periods reflected below:

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Connectedness.    Another trend affecting the content industry is connectedness. As more participants join a connected network, the value of that network grows tremendously. This in turn encourages new participants to join the network at an accelerated pace, allowing it to build considerable value with a relatively limited investment. In addition, connected systems gravitate to a common standard that allows their participants to communicate with each other. Once established, connected systems are difficult to displace due to the value they offer their participants.

Connectedness is a general trend, affecting not only technology and devices but also people and their social interactions. For example, in technology and devices, the rapid market success of the code division multiple access, or CDMA, mobile handset technology popularized by QUALCOMM can in part be attributed to connectedness. Although the underlying technology is part of the value of CDMA, a significant portion of its value results from the large network of CDMA-enabled devices. More recently, the MySpace.com social networking site, which grew to 49 million unique visitors worldwide within three years of launch, according to comScore Media Metrix, demonstrates the power of connectedness in social networks. MySpace.com also demonstrates how connected markets gravitate toward a single platform, as shown by the way it rapidly displaced competing services.

Openness.    The content industry is also being affected by openness. "Open" systems are defined by how they are controlled, and are perhaps best understood in comparison to their opposite: "closed" systems. Closed systems are centrally controlled to govern the flow of information within the system, often through a formal or "de jure" standard. As a result, closed systems benefit from inertia and are slow to change. Power in a closed system is exerted from the top-down, and information is transmitted in a "broadcast," one-to-many fashion. Modern media distribution channels like broadcast and cable television are examples of closed systems. Open systems, in contrast, evolve to meet changing conditions and are defined by the demands of the market. Power in an open system is derived from the "bottom-up," which leads to informal or "de facto" standards. Participants in an open system exercise control over the system, transmit information in a many-to-many fashion, and are able to maximize the value they gain from their participation. As a result, open systems are more efficient than closed systems because they are optimized around the needs of their participants.

The Internet is the most prominent modern example of an open system. The protocols and standards upon which the Internet is built—from Internet Protocol to Hypertext Transfer Protocol—are de facto standards created by the open, all-volunteer Internet Engineering Task Force. Users of the Internet are empowered to find, obtain, and publish information at will. Other open systems have themselves been built on top of the Internet. For example, Google's AdWords and AdSense are open advertising networks that give their participants greater power and encourage a larger and more diverse set of advertisers to participate than is possible through traditionally closed advertising networks. Open systems are not necessarily better than closed systems. Closed systems are generally less efficient while offering the benefits of tighter, more centralized control. In some environments, closed systems may be optimal, as has been the case with the distribution of analog media. With the increase of digitization and connectedness, the content distribution environment is shifting toward a more open, more connected, more digital media distribution system.

The transformation of content.    Digitization, connectedness and openness are combining to fundamentally transform the nature of content and the content industry.

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The economics of content are changing. The cost to produce, distribute and market content today is lower than it was in the past, allowing a larger and more diverse group of people to create quality content. The ability to generate revenue from content has also changed. There are new revenue opportunities for pre-existing content, such as collector's edition DVDs and per-track sales of music from Apple Computer's iTunes Music Store. Lower costs allow the distribution and marketing of pre-existing content that could not be released profitably before. Examples include back-catalog television and movie content released on DVD, and shows like Family Guy returning to broadcast TV based on the strength of its DVD sales. In addition, new content can be created that could not be economically produced before. Examples include straight-to-DVD video releases, as well as blogs, podcasts and fan-generated content. This new content grows the overall content market.

The ways that people discover and consume content are also changing, including the types of content they watch and what devices they use to watch it. People are watching shorter-form content, as well as higher-quality content like high-definition, or HD, television and movies. New devices, such as TiVo and other DVRs and MP3 music players, enable people to "time-shift" and "place-shift" content at will, giving them more control over their media experiences and pressuring device manufacturers to continually innovate to meet consumer demand. Social networks are changing how people get information about content. Reviews of new movies and TV shows and recommendations from friends are easy to obtain. Content with positive word-of-mouth will do even better than before, and content with negative word-of-mouth will have a more difficult time succeeding.

Most profoundly, content itself is becoming more democratic. People are increasingly participating in content creation and distribution. Blogs are a new form of news and journalism; podcasts are a new form of radio; and user-generated video content is an alternative to television and movies. As new participants join in content creation, the nature of the content changes. New ideas and information are expressed that were not expressed in the past. This affects the political, such as getting news directly from the video blogs of those participating in events in New Orleans, China, or Iraq instead of from the CNN television network, the personal, such as grandparents watching a grandchild's first steps via Internet videoconferencing, and everything in between. This last effect also makes content more international, as people around the world become engaged consumers of global content and publish their own content to a global audience.

This transformation of content is causing profound changes in the nature of who creates and consumes content, as well as in the content itself. These changes create new market needs, which represent a substantial market opportunity.

Our market opportunity

The transformation of content requires a new ecosystem of consumers, content creators, software vendors, hardware device manufacturers and advertisers. The ecosystem must collaborate to address the technological and social needs of the various participants in a more digital, connected and open way. There is significant dislocation among all participants within the existing ecosystem requiring each to evaluate and incorporate new solutions for the creation, distribution, marketing and consumption of content. To be effective, these solutions must provide a neutral platform that enables collaboration amongst the various participants in the content industry through a common technology and community.

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Each type of participant in the content industry has specific needs:

•

As content consumers, we are becoming increasingly empowered and stand at the center of the evolving digital media market. We need a way to watch content with high visual quality on a variety of connected devices. We want to pick and choose from deep, comprehensive catalogs of digital content, as well as discover and share new and interesting content that matches our tastes. We want to easily add this new content to our large and growing libraries and ably manage our media files. Just as importantly, we want affordable and accessible tools to create our own content and thereby enter the ranks of content creators.

•

Content creators need to invest in and increase the value of their content, either directly by generating revenue or indirectly by increasing the value of their content brands. Premium content creators, such as movie studios, specifically need a secure, high-quality method to deliver their content to a large addressable market. Mid-tier content creators, such as independent film makers, have similar needs, but also need a way to efficiently create content and reach a substantial audience with relatively limited production and marketing budgets. User-generated content requires tools to help users create content and an inexpensive way to store and distribute it over the Internet.

•

Digital media software vendors need to stay competitive by adding valuable features to their products to spur continued software sales, increase their profitability and distinguish themselves from generic software included by operating system vendors. As content consumers become more engaged in the creation of content, these vendors need to offer content creation and publishing tools that are significantly easier to use than the professional and prosumer tools available today.

•

Consumer hardware device manufacturers need to remain competitive in the face of pricing pressures and the demands of increasingly connected and engaged consumers. Device manufacturers face growing competitive pressure from the broader technology industry, including information technology companies and set top box providers whose profits are driven by content and services rather than hardware. Device manufacturers require new product features that differentiate them, promote profitability and provide access to broader revenue streams. In addition, during the last three decades the consumer hardware manufacturing industry has shifted from a vertically integrated model, in which OEMs manufactured or developed each component of a consumer hardware device, to a model in which OEMs rely to a much greater extent on software, semiconductor and other "ingredient" technologies developed by third parties. As a result, there is an opportunity for a high-quality and secure digital media format that allows consumer hardware devices from multiple vendors to capture, play back and share content on a seamlessly interoperable platform.

•

Advertisers need a way to participate in new content distribution systems. They must find new ways to reach consumers who are using new technologies to avoid traditional advertising and moving towards more open content distribution systems. At the same time, advertisers have the opportunity to use digital media to create more efficient, targeted and richer advertising and branding.

The global consumer hardware device, Internet advertising and digital content distribution services markets we serve are large and the opportunities we address within these markets are

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growing rapidly, particularly as we believe advertising and content distribution spending will increasingly shift from analog toward online and digital formats.

•

The global market for digital media hardware devices, including DVD players, DVD recorders, HDTVs, mobile handsets, DSCs, digital camcorders and digital audio players is expected to have total sales of $246.8 billion in 2008, according to IDC and Frost & Sullivan. Producers of these devices generally pay a per unit royalty for the inclusion of digital video capture, enhancement and playback technology.

•

The overall market for television, Internet, newspaper and magazine advertising globally is expected to be $193.3 billion in 2006, and the subset of this market for Internet advertising is expected to be approximately $24.1 billion in 2008, according to Veronis Suhler.

•

The market for video content distribution, consisting of cable and satellite subscription and DVD and VHS retail sales, is expected to total $95.3 billion in 2006, according to Veronis Suhler. Within this category, with the shift to direct digital distribution, the market for U.S. Internet video distribution is expected to grow to $1.8 billion in 2010 from $0.2 billion in 2005, according to IDC.

Through our technologies and solutions, we will seek to address a large portion of this overall market opportunity.

The DivX solution

DivX has developed a solution to address the opportunity created by the transformation of content. Specifically, we have built the technological platform and galvanized the community necessary to enable a digital media ecosystem of consumers, content creators, software vendors, hardware device manufacturers and advertisers, allowing all to benefit from the participation of each other.

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The following illustration depicts how DivX provides the foundation and connection for the participants in the digital media ecosystem, all of whom ultimately work to benefit the consumer:

Specifically, our ecosystem offers the following benefits to these various participants in the content industry:

•

To content consumers, the DivX ecosystem provides a high-quality, interoperable media format supported by dozens of software products and over 1,500 models of consumer hardware devices. This allows users to access a diverse range of content from large and small content creators and to play back this content when, where and how they want. Moreover, the widespread availability of consumer hardware devices, software and services within the DivX ecosystem makes creating and sharing content easier and more fun for a growing community of DivX users.

•

To content creators, the DivX ecosystem provides the ability to cost-effectively and securely create and distribute high-quality content to a large market of consumers, and to deliver that content when, where and how consumers want it. The DivX platform gives content creators access to over 35 million DivX Certified consumer hardware devices as well as millions of digital video savvy consumers who have demonstrated their willingness and ability to seek out high-quality content distributed via the Internet.

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•

To digital media software vendors, the DivX ecosystem offers the ability to differentiate their products by adding DivX media creation and playback functionality. This allows software vendors to provide easy-to-use products for the creation and playback of content that is interoperable with all other DivX Certified devices. By doing so, software vendors can provide useful products and maintain and augment their position in the face of competition from generic operating system bundles.

•

To consumer hardware device manufacturers, the DivX ecosystem provides the ability to offer capture and playback devices that are interoperable with millions of other DivX Certified devices in a high-quality, secure digital media format that consumers want and use. Manufacturers can thus avoid the cost of supporting many different incompatible formats, allowing them to remain competitive in the face of significant price pressures. Use of DivX technologies and association with the DivX brand enables manufacturers to participate in new content business models from content services provided by others in the DivX ecosystem.

•

To advertisers, the DivX ecosystem provides access to a large and engaged group of DivX users.

Our strategy

Our strategy is to make media better by supporting the digital media ecosystem. Key elements of our strategy include:

Increase our engagement with our existing software vendor and consumer hardware device manufacturing partners.    We believe that our software and consumer hardware partners are integral to our success. In hardware, we will focus on increasing the penetration of DivX technologies into the DVD player market, while simultaneously building on the initial success of DivX technologies in new categories of consumer hardware devices such as DVR, DSC, PMP and other mobile devices. We also plan to develop and launch, beginning with our existing hardware partners, new DivX platform technologies into the consumer hardware device market that will, for example, allow consumers to encode and play back high definition video and access connected networks directly. In software, we plan to enhance the value of the DivX technologies to our existing software partners by adding new features to the DivX media format and to increase partnerships across the software market.

Build engaged communities of users centered around content.    We believe it is a fundamental human desire to share experiences and be emotionally connected with others. This desire is especially strong around media experiences, which leads to the creation of communities of individuals with a shared interest in a specific piece or genre of content. We intend to develop a set of products and services that will give people a place to meet one another and build strong relationships around content. We believe this community, centered around online video content, will give content creators the ability to build their content brands and generate revenue through transactions, subscriptions, advertising and other methods.

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Develop services around content and advertising that are valued by DivX consumers and economically valuable to the larger DivX ecosystem.    We plan to create services that offer access to content as well as useful and relevant advertising to DivX consumers in a way that improves the overall media experience. Too often, advertising detracts and distracts from the content it accompanies. We are optimistic that advertising can be done in a way that will enhance the media experience and be valuable to consumers. We have direct contact with millions of users to whom content can be offered and advertising distributed. We intend to work with content creators and advertisers who share our goal of providing DivX users with services that enhance their experience and respect their privacy.

Expand the DivX ecosystem through partnerships with the community of diverse content creators.    We believe the active engagement of content creators in the DivX ecosystem is essential to realizing the full potential of the digital media transformation. We plan to continue to develop relationships with premium, mid-tier and individual content creators. We intend to partner with creators based not only on the economic potential of their content, but also on the potential for DivX to enhance the value of their content through the power of our platform and community.

Strengthen the DivX brand.    We intend to continue building upon the strength of the DivX brand. We plan to ensure that in the future the DivX brand continues to be associated only with those products and services that offer high-quality media experiences. We may also invest in activities beyond our products that are consistent with the DivX vision of better media.

Pursue selected complementary acquisitions, investments and strategic alliances.    When the opportunity presents itself, we intend to pursue selected acquisitions, investments or alliances that complement and further our mission to make media better and improve the media experience for consumers. Our primary objectives in these transactions would be to acquire complementary technologies and platforms and expand the consumer and content portions of our ecosystem.

Our strengths

We believe that the following key strengths uniquely position DivX to continue to enhance and enrich the digital media content experience:

Our demonstrated history of success, innovation and ecosystem creation.    We have a history of technology leadership on which we will continue to build. The success of DivX was driven by the grassroots adoption of our technologies by millions of consumers, driven largely by the strength of our technology. We also have a demonstrated ability to build technologies that support an ecosystem of diverse participants that gain value from their participation.

Our large installed base.    DivX technologies and products have been adopted by millions of users who have sought it out and chosen to download it. This success encouraged consumer hardware device manufacturers to build support for DivX technologies into their products. Today 144 consumer hardware device manufacturers, including major companies like Philips and Samsung, and 21 IC manufacturers, including the ten largest DVD IC manufacturers, support DivX technologies in over 1,500 models of consumer hardware devices. Our OEM customers have shipped over 35 million units as of March 2006, including approximately 8.5 million devices reported to us by our customers during the fourth quarter of 2005. We

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believe our large user and consumer hardware installed base places us in a strong position to benefit from the transformation of the content industry and growing digital content distribution. Because the entire DivX media platform installed base can play protected content, it represents a large addressable market for content creators interested in commercial digital distribution of their content.

The DivX brand.    The DivX logo appears on products that incorporate DivX technology and indicates to consumers that the product meets our strict standards of interoperability and delivers a high-quality DivX media experience. We believe that consumers recognize the value of the DivX logo, and that this increases the value of the DivX brand to all other participants in the DivX ecosystem.

Our neutral media technology platform for software, hardware and content.    Our technology platform for the creation, distribution and consumption of media content is not tied exclusively to any specific consumer hardware device manufacturer, software vendor or content provider. We license our encoding and decoding technologies to a wide array of software vendors, consumer hardware device manufacturers and consumers. We believe our neutral platform allows us to bring a diverse set of powerful interests together in the DivX ecosystem.

Our ability to understand and partner with various constituents of the digital media industry.    We have a demonstrated ability to work with industries that have very different prerogatives and goals. We are as comfortable working within the explosiveness of the Internet industry as we are within the planned and deliberate environment of the consumer hardware industry. We believe this ability will serve us well as we work to add even more diverse participants and industries into the DivX ecosystem.

How we derive revenue

We have four revenue streams. Three of these revenue streams emanate from our technologies, including technology licensing to producers of consumer hardware devices, licenses to independent software vendors, or ISVs, and consumers, and services we provide related to digital media distribution, or DMD, over the Internet. Additionally, we derive revenues from advertising and distributing third-party products on our website.

Consumer hardware technology licensing.    Our technology licensing revenues from consumer hardware device manufacturers comprise the majority of our total revenues and are derived primarily from royalties received from OEMs, although related revenues are derived from other members of the consumer hardware device supply chain. We license our technologies to OEMs, allowing them to build support of DivX technologies into their consumer hardware devices. OEMs pay us a per unit fee for each DivX Certified device they sell. Our license agreements with OEMs typically range from one to two years, and may include the payment of initial fees, volume-based royalties and minimum guaranteed volume levels. To ensure high-quality support of the DivX media format in finished consumer products, we also license our technologies to those companies who create the major components in those products. These include the semiconductor manufacturers who supply the ICs to, and the original design manufacturers, or ODMs, who create the reference designs for the DVD players, DSCs and the other consumer hardware devices distributed by our licensee OEMs. One of our OEM customers, Philips, accounted for 13% of our total revenue in the year ended December 31, 2005.

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To ensure that our licensees' products conform to our quality standards, we employ a rigorous certification program. IC manufacturers, ODMs and OEMs are required to have their devices tested and certified prior to distribution. Only DivX Certified devices are permitted to include our logo as evidence that they conform to our quality standards.

In 2005, 2004 and 2003, we derived 71%, 55% and 22%, respectively, of our revenues from licensing our technology to OEMs, ODMs and IC manufacturers.

Software licensing.    We license our technologies to ISVs that incorporate our technologies into software applications for computers and other consumer hardware devices. An ISV typically pays us an initial fee per license, in addition to per-unit royalties based on the number of products sold that include our technology. We also license our technologies directly to consumers through several software packages. We make a version of our software available free of charge from our website that allows consumers to play and create content in the DivX format. We also make available from our website an enhanced version of our software with additional features that increase the quality and control of DivX media playback and creation. This enhanced version is available free of charge for a limited trial period, which is generally 30 days. At the end of the trial period, our users are invited to purchase a license to one or more components of the enhanced package by making a one time payment to us. If they choose not to do so, they still enjoy playback and creation functionality equivalent to our free software package.

In 2005, 2004 and 2003, we derived 11%, 20% and 33%, respectively, of our revenues from licensing our technology to ISVs and licensing our software directly to consumers.

Advertising and third-party product distribution.    We derive revenue from advertisements or third party software applications that we embed in or include with the software packages we offer to consumers. For example, we currently include Google software in both the basic and enhanced versions of our software that we make available free of charge from our website. In exchange for offering the included Google software to our consumers, and the subsequent activation of the software by those consumers, Google pays us royalties based on specific performance targets. Google may terminate the agreement if we fail to achieve certain minimum distribution commitments for specific periods described in the agreement. Our ability to continue to generate revenues under the agreement is further limited by a cap on the amounts payable by Google under the agreement, after which Google is relieved of its obligations to pay us. This agreement expires on December 31, 2006, and Google is under no obligation to renew this agreement. Payments earned under the Google agreement accounted for approximately 15% of our total revenue in the year ended December 31, 2005.

In 2005, 2004 and 2003, we derived 15%, 17% and 27%, respectively, of our revenues from the inclusion of advertisements and third party software applications in our software products.

Digital media distribution.    We derive revenue by acting as an application service provider, or ASP, for third party owners of digital video content. We provide encoding, content storage and distribution services to these third parties in exchange for a percentage of the revenue they receive from sales of digital content to consumers.

In 2005, 2004 and 2003, we derived 4%, 8% and 17%, respectively, of our revenues from providing content distribution services to third parties.

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Customers

We have a wide range of customers to whom we license our technologies and software and for whom we provide DMD services. The table below provides a list of our representative customers since January 1, 2005:

Category	Customers
Consumer hardware technology licensing	•	Philips	•	Toshiba
	•	Samsung	•	JVC
	•	LG Electronics	•	Siemssen
	•	Pioneer
Software licensing	•	Cyberlink	•	InterVideo
	•	Nortel	•	Pinnacle
	•	Sonic Solutions
Advertising and third-party software application distribution	•	Google

Other than Philips and Google, no customers accounted for 10% or more of our total revenue during this period.

Technologies

Our digital media ecosystem utilizes a series of technologies designed for commercial and consumer users. These technologies enable users to compress, secure and distribute digital video and otherwise participate in our digital media ecosystem. The following is a description of the core technologies that form the basis for our digital media ecosystem.

DivX media format.    Our DivX media format is our primary commercial technology, and comprises our DivX video compression technology, the DivX file format and advanced media features.

        DivX video compression technology.    Our DivX video compression technology reduces the size of high-quality video to a level that can be efficiently distributed over broadband networks. The technology utilizes a mixture of video compression tools, including some from the MPEG-4 standard, and is capable of producing high-quality video using only a fraction of the amount of data required by a standard-length DVD. As a result, DivX technology enables a user to store approximately two hours of high-quality video on a standard CD-R. DivX technology is designed to offer a balance of compression, complexity and speed. Our technology offers superior visual quality at a high level of compression. The computational efficiencies of our technology make it suitable for integration into low-cost consumer hardware devices and its speed makes it useful in both consumer and professional content creation and editing environments. DivX video technology can be used on video sources with sizes ranging from HD quality video to video resolutions suitable for a mobile environment.

        DivX file format.    Our DivX file format is designed to hold multimedia data and metadata. It is based on the Resource Interchange File Format, or RIFF, which by design gives it some compatibility with other RIFF-based file formats such as the Audio Video Interleave file format.

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        DivX advanced media features.    DivX advanced media features enable DivX users to create the following features within the digital media file itself:

•

DVD-like menus that allow the viewer to navigate between scenes;

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audio tracks that enable multiple language versions or specific speaker configurations;

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subtitle tracks that allow users to convert videos with multiple language subtitles;

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chapters for easy navigation when multiple files are combined; and

•

video tags that allow the content creator to add descriptive information such as title, author and video specifications.

        Digital rights management.    We have developed a digital rights management technology that encrypts and manages the playback of protected DivX content on personal computers and consumer hardware devices. When implemented, it ensures that digital video is delivered in a secure manner and used in accordance with rules defined by its publisher. Our digital rights management technology is designed to require minimal system resources, allowing it to be implemented on low-cost consumer hardware devices.

Products and services

Our technologies are incorporated into several software product bundles that we offer directly to consumers, as well as software development kits, or SDKs, that we license to hardware and software companies. We also offer certification services to hardware companies, and operate a DMD system that we use to provide ASP services to third party content owners.

Consumer software

DivX Play Bundle.    Our DivX Play Bundle includes our DivX video codec, DivX Player and DivX Web Player.

        DivX video codec.    Our DivX compressor-decompressor, or codec, is a set of software libraries that plugs into popular video software applications and allows users to create and play high-quality DivX videos, including those that include the advanced media features of the DivX media format. The codec supports six encoding modes that allow users to balance visual quality and performance for virtually any application from live capture to video mastering. Quality-focused encoding modes create the highest quality video possible while performance-focused modes can create high-quality DivX video from live feeds, including PC-based digital video recorders and other real-time video capture applications.

        DivX Player.    The DivX Player is a software application that plays video content created using any version of the DivX video technology. It also allows users to process video downloads, manage video collections and activate DivX Certified devices. The DivX Player also supports the playback of other media formats via DirectShow, a standard system interface designed to handle audio and video functions on the Microsoft Windows operating system.

        DivX Web Player.    Our DivX Web Player is a software plug-in that interfaces with web browsers and allows DivX video to be embedded and played within web pages. This provides a convenient tool to webmasters, bloggers and anyone else embedding high-quality DivX videos into their web pages.

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DivX Create Bundle.    Like our DivX Play Bundle, the DivX Create Bundle includes our DivX Player and DivX Web Player. In addition, it includes our DivX Pro video codec and DivX Converter.

        DivX Pro video codec.    Our DivX Pro video codec is an enhanced version of our DivX video codec. It offers additional encoding tools that improve visual quality while maintaining equivalent file sizes.

        DivX Converter.    Our DivX Converter is a one step application that automatically converts files in other media formats to our DivX media format using a "drag and drop" feature. Advanced settings enable users to customize the conversion process.

DivX for Mac Bundle.    Our DivX for Mac bundle includes our DivX video codec for Mac OS, DivX Converter and DivX Web Player. The DivX for Mac software package does not yet support the advanced media features of the DivX format.

        DivX video codec for Mac OS.    In its Mac OS version, the DivX video codec is a QuickTime component. This allows users to create and play high-quality DivX videos using any application designed to use the QuickTime multimedia architecture built into the Macintosh operating system.

Technology licensing for ISVs and consumer hardware device manufacturers

Software development kits.    We typically make our technologies available to partners via SDKs. For hardware licensees, we have "decode" and "encode" SDKs that enable hardware partners to build DivX playback and creation support, respectively, into their products. For software licensees, we offer several SDKs that allow software vendors to build DivX playback and creation support into their products.

Consumer hardware certification services.    IC manufacturers, ODMs and OEMs alike are required to have their devices certified prior to distribution as DivX Certified devices. For example, IC manufacturers typically receive a software development kit and certification kit from us, which they use to design a DivX Certified IC. Only after the ICs are certified can IC manufacturers distribute those ICs to DivX-licensed OEMs and ODMs for inclusion in DivX Certified devices. Similarly, ODMs and OEMs must have their devices certified prior to distribution as DivX Certified devices. We currently offer four certification programs:

•

DivX Certified.    The DivX Certified program certifies hardware devices for the interoperable and high-quality playback of DivX-encoded content. DivX Certified devices support basic audio/video playback and protected DivX-encoded content.

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DivX Ultra Certified.    The DivX Ultra Certified program certifies hardware devices for enhanced playback of DivX-encoded content. DivX Ultra Certified devices support all functionality of DivX Certified products, and add support for DivX advanced media features such as DVD-like menus, subtitles, audio tracks and metadata.

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DivX HD Certified.    The DivX HD Certified program certifies consumer hardware devices for high-definition playback of DivX-encoded content. DivX HD Certified devices support all functionality of DivX Ultra Certified products, and add support for high-definition video content up to 720p resolutions.

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•

DivX Encoder Certified.    The DivX Encoder Certified program certifies consumer hardware devices to create DivX-encoded video from source material. DivX Encoder Certified devices create DivX-encoded content that is compatible with playback products certified under other DivX programs.

Open Video System

Our OVS is a complete hosted service that allows content creators to deliver high-quality DivX video content over the Internet. We use our Open Video System to provide content and service providers with encoding services, content storage and distribution services, and use of our DivX media format and digital rights management technology. Using the OVS, a content service provider can launch its own web store and sell content online.

Sales and marketing

Our sales and marketing team markets our technologies to a wide range of semiconductor manufacturers, ODMs, OEMs and software developers on a worldwide basis. In addition, members of this team market our products to various consumer segments at industry tradeshows such as CES and CeBIT, and engage in partner and retailer training, product marketing, sales support and partner co-marketing programs. Members of our sales and marketing team also focus on content and distribution partnerships, co-marketing transactions, advertising partnerships, brand and product marketing, electronic software distribution, business operations and marketing programs. As of March 31, 2006, our sales and marketing team included 46 full-time employees based in 11 countries.

Product development

Our product development team is based out of our headquarters in San Diego, California. As of March 31, 2006, this team consisted of 82 full-time employees dedicated to product development and product management, 67 of which were engineers and 10 of which were product managers.

Our product development team focuses on building our technologies into products that meet the needs of our consumers. This team identifies, investigates and analyzes new long-term opportunities, shapes our technology strategy and provides support for internally developed and externally acquired technologies. Our product development team builds the platform technologies upon which our products are based and conducts our applied research in developing and improving technologies to compress, secure and distribute digital video.

Our product development expenses were $10.3 million, $7.0 million and $3.8 million in 2005, 2004 and 2003, respectively.

Competition

We face significant competition in the digital media markets in which we operate. We believe that our most significant competitive threat comes from companies that have the collective financial, technical and other resources to develop the technologies, services, products, and partnerships necessary to create a digital media ecosystem that can compete with the DivX ecosystem. Those potential competitors currently include Apple Computer, Google, Microsoft, News Corporation, Sony and Yahoo!.

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We also compete with companies that offer products or services that compete with specific aspects of our digital media ecosystem. For example, our digital rights management technology competes with technologies from companies such as Apple Computer, ContentGuard, Intertrust Technologies, Microsoft, Nagra Audio, NDS Group and 4C Entity, as well as the internal development efforts of certain of our licensees. Similarly, content distribution providers, such as Amazon.com, Apple Computer, CinemaNow, Google, MovieLink, Netflix and subscription entertainment services and cable and satellite providers compete against our content distribution services. In addition, Google, Microsoft, Yahoo! and MySpace.com, a subsidiary of News Corporation, offer online communities that we expect will compete with our online video community offering.

Our proprietary technologies also compete with other video compression technologies, including other implementations of MPEG-4 or implementations of H.264/AVC. A number of companies such as Adobe Systems, Google, Microsoft and RealNetworks offer other competing video formats.

We believe that the principal competitive factors that affect our digital media ecosystem include some or all of the following:

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quality and reliability of products and services;

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technology performance, flexibility and range of application;

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timeliness and relevance of new product introductions;

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the ability to address the needs of all the constituents in the ecosystem;

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platform neutrality;

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brand recognition and reputation;

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relationships with film producers and distributors as well as semiconductor and consumer hardware device manufacturers; and

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price.

We believe that we compete favorably on the factors described above. However, our industry is evolving rapidly and is becoming increasingly competitive. Larger, more established businesses are increasingly participating in the markets in which our products and technologies compete, and we cannot assure you that we will continue to compete favorably on these or any other factors.

Intellectual property

To protect our proprietary rights, we rely on a combination of trademark, copyright, patent, trade secret and other intellectual property laws, employment, confidentiality and invention assignment agreements with our employees and contractors, and confidentiality agreements and protective contractual provisions with our partners, licensees and other third parties.

Trademarks.    As of March 31, 2006, we had 17 trademark registrations and 28 pending trademark applications in the U.S. and 29 other countries for a variety of word marks, logos and slogans. Our trademarks are an integral part of our licensing program. Licensees are

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allowed to place our trademarks on their products to inform customers that their products incorporate our technology and meet our quality specifications only if such products have been DivX Certified. We also require that our licensees adhere to detailed branding guidelines to ensure that usage of our trademarks and logos are consistent and uphold our image. Our trademarks include, among others, DivX and DivX Certified.

Copyrights.    We have a significant amount of copyright-protected materials, including among other things, software, codecs and textual material. As an additional layer of protection to the common law copyrights we own in our software and other materials, we have also obtained U.S. copyright registrations on 12 software products as of March 31, 2006.

Patents.    As of March 31, 2006, we had one issued U.S. patent. We are in the process of applying for additional patent coverage for various aspects of our technology, including technologies for digital rights management, digital media formats, mobile content delivery, connected devices and video encoding and decoding. As a result, as of March 31, 2006, we had 23 U.S. and international patent applications on file relating to various aspects of our technology.

Other proprietary rights.    Many of our consumer hardware licensees and other partners have contractually recognized our proprietary rights in the file identifiers that identify video content files as encoded using our codec. For instance, a video file encoded using our codec may be identified with a "DIVX" code that can be read and recognized by a consumer hardware device or PC video player. Such consumer hardware licensees and partners have also contractually agreed to limit playback of such "DIVX"-identified files to devices that incorporate our technologies. These contractual agreements enable us to differentiate DivX devices and video files from non-DivX devices and video files.

In addition, we also seek to maintain certain intellectual property and proprietary know-how as trade secrets, and generally require our partners to execute non-disclosure agreements prior to any substantive discussions or disclosures of our technology.

MPEG LA technology license.    We have entered into a license agreement with MPEG LA, effective January 2000, under its MPEG-4 Part 2 Visual Patent Portfolio. Under this license agreement, we have a royalty-bearing, worldwide, non-exclusive sublicense of certain patents licensed to MPEG LA relating to MPEG-4 technology. The current version of our video codec incorporates technologies implementing a portion of the MPEG-4 video standard. Our license agreement with MPEG LA will expire on December 31, 2008, unless the agreement is earlier terminated. We may terminate the license agreement for any reason by providing 30 days prior written notice to MPEG LA. Upon expiration, the license agreement may be renewed for successive five year periods upon notice of renewal to us by MPEG LA. For 2005, 2004 and 2003, we paid $2.0 million, $1.0 million and $0 to MPEG LA under this license agreement.

Government regulation

We are subject to a number of foreign and domestic laws that affect companies conducting business on the Internet. In addition, because of the increasing popularity of the Internet and the growth of online services, laws relating to user privacy, freedom of expression, content, advertising, information security and intellectual property rights are being debated and considered for adoption by many countries throughout the world.

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We are also subject to a number of foreign and domestic laws and regulations that affect companies that import or export software and technology, including encryption technology, such as the U.S. export control regulations as administered by the U.S. Department of Commerce.

In the U.S., online service providers have been subject to claims of defamation, libel, invasion of privacy and other data protection claims, tort, unlawful activity, copyright or trademark infringement, or other theories based on the nature and content of the materials searched and the ads posted or the content generated by users. In addition, several other federal laws could have an impact on our business. For example, the Digital Millennium Copyright Act has provisions that limit, but do not eliminate, our liability for listing or linking to third-party websites that include materials that infringe copyrights or other rights, so long as we comply with the statutory requirements of this act. The Child Online Protection Act and the Children's Online Privacy Protection Act restrict the distribution of materials considered harmful to children and impose additional restrictions on the ability of online services to collect information from minors. In addition, the Protection of Children from Sexual Predators Act of 1998 requires online service providers to report evidence of violations of federal child pornography laws under certain circumstances.

In addition, the application of existing laws regulating or requiring licenses for certain businesses of our advertisers can be unclear. Existing or new legislation could expose us to substantial liability and restrict our ability to deliver services to our users. We also face risks from legislation that could be passed in the future.

We are also subject to international laws associated with data protection in Europe and elsewhere and the interpretation and application of data protection laws is still uncertain and in flux. In addition, because our services are accessible worldwide, foreign jurisdictions may claim that we are required to comply with their laws.

Employees

As of March 31, 2006, we employed 189 full-time employees, consisting of 82 employees in product development, product management and program management, 46 in sales and marketing, 24 in general and administrative, 16 in support, 12 in technical operations and web development and 9 in business and community development. None of our employees is subject to a collective bargaining agreement. We consider our relationship with our employees to be good.

Properties

We lease approximately 47,000 square feet of space for our headquarters in San Diego, California under an agreement that expires in March 2009. We also lease additional offices in San Jose, California, Jundiai, Brazil, Boulogne, France, Taipei, Taiwan, Gyonggi-do, Korea and Tokyo, Japan. We are currently in negotiations to lease additional facilities in San Diego to accommodate our anticipated growth. We believe that suitable additional space will be available on commercially reasonable terms.

Legal proceedings

We are currently not a party to any material legal proceedings.

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Management

Executive officers and directors

The following table sets forth information regarding our executive officers and directors as of May 5, 2006:

Name	Age	Position
R. Jordan Greenhall	34	CEO and Chairman of the Board of Directors
Kevin Hell	42	CXO, Partners and Licensing
David J. Richter	38	GC, Legal and Corporate Development
Chris Russell	39	CTO, Strategy and Technology
John A. Tanner	47	CFO, Finance and Administration
Darrius Thompson	33	CXO, Community and Internet
Paul Chau(1)	49	Director
Frank Creer(1)(2)	42	Director
Fred Gerson(2)(3)	55	Director
Christopher McGurk(2)(3)	49	Director
Jerry Murdock(1)	47	Director

(1)

Member of the compensation committee.

(2)

Member of the audit committee.

(3)

Member of the corporate governance and nominating committee.

Executive officers

R. Jordan Greenhall is a co-founder of DivX and has served as our CEO and Chairman of the Board of Directors since August 2000. Mr. Greenhall is responsible for our corporate strategy and overall strategic direction. From January 1999 to June 1999, Mr. Greenhall was Vice President at MP3.com, a digital media company, where he was responsible for developing and implementing the company's business and content development model. From July 1999 to January 2000, Mr. Greenhall served as a Strategic Consultant with INTERVU, a premiere streaming media services provider. Mr. Greenhall received a J.D., magna cum laude, from Harvard Law School and a B.A., summa cum laude, from Texas A&M University.

Kevin Hell has served as our CXO, Partners and Licensing since April 2006. From November 2002 to April 2006, Mr. Hell served as our Chief Operating Officer. Mr. Hell has executive responsibility for our technology licensing worldwide. We refer to these functions internally as our "Ox" group. From July 2001 to May 2002, Mr. Hell served as Senior Vice President of Product Management in the Solutions Group of Palm, a handheld solutions company. From May 1999 to May 2001, Mr. Hell was Vice President of the Connected Home division and Vice President of Corporate Strategy at Gateway Computer, a personal computer manufacturing company. From May 1991 to May 1999, Mr. Hell worked in the Los Angeles office of the Boston Consulting Group, a management consulting firm. Mr. Hell received an M.B.A. from The Wharton School, and a master's degree in Aeronautics and Astronautics and a B.S. in Mechanical Engineering from Stanford University.

David J. Richter has served as our GC, Legal and Corporate Development since April 2006. From May 2004 to April 2006, Mr. Richter served as our General Counsel and, in addition, from

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January 2005 through April 2006, as our Senior Vice President, Corporate Development. Mr. Richter is responsible for our legal and corporate development efforts. These functions reside in a group we internally refer to as our "Core" group. Previously, Mr. Richter worked at Maveron, a venture capital firm, as a Principal from January 2002 through March 2004 and as Director, Business Development from July 2000 through December 2001. Mr. Richter received a J.D. from Yale Law School and a B.A. in Government from Cornell University.

Chris Russell has served as our CTO, Strategy and Technology since April 2006. From September 2005 to April 2006, Mr. Russell served as our Vice President and General Manager, Technology and Strategy. From January 2005 to September 2005, Mr. Russell served as our Vice President of Advanced Technology. Mr. Russell is responsible for our platform technology development and long-term technology strategy. We refer to these functions internally as our "Monkey" group. From July 2002 to January 2005, Mr. Russell served as Vice President with the Motion Picture Association of America, or MPAA, an association advocating for the motion picture, home video, and television industries. From June 1996 to July 2001, Mr. Russell served as a Vice President of Technology with Sony Pictures Entertainment, an entertainment company. Mr. Russell received an M.B.A. from Pepperdine University and a B.S. in Computer Science from California State Polytechnic University, Pomona.

John A. Tanner has served as our CFO, Finance and Administration since April 2006. From November 2004 to April 2006, Mr. Tanner served as our Executive Vice President and Chief Financial Officer. Mr. Tanner is responsible for executing the financial and administrative aspects of our strategic and tactical goals, and for supplying related support to our operations. These functions reside in a group we internally refer as our "Core" group. From November 2000 to November 2004, Mr. Tanner pursued a variety of personal interests. From November 1997 to November 2000, Mr. Tanner served as Chief Financial Officer, in addition to other senior executive capacities, including most recently as President of International Operations, with AdForce, an online advertising service provider. From October 1995 to November 1997, Mr. Tanner served in senior financial roles, most recently as Vice President and Controller, at Network Computing Devices, a computing solutions provider. From July 1990 to October 1995, Mr. Tanner worked in various key financial positions at Aspect Communications, a telecommunications solutions provider, most recently as Corporate Planning and Reporting Manager. Mr. Tanner received a B.A. in English from San Jose State University.

Darrius Thompson is a co-founder of DivX and has served as our CXO, Community and Internet since April 2006. From September 2000 to April 2006, Mr. Thompson served in a variety of management positions, most recently as our General Manager, Strategy and Platform Technology. Mr. Thompson has responsibility for consumer products and Internet services. We refer to these functions internally as our "Tiger" group. From June 1998 to October 2000, Mr. Thompson served as a strategic technology analyst with Optimark Technologies, a trading solutions company. From April 1991 to April 1996, Mr. Thompson served in the U.S. Navy, most recently as a medic on detachment to the Marine Corps' 1^st Reconnaissance Batallion.

Directors

Paul Chau has been a member of our board of directors since June 2003. Since November 2001, Mr. Chau has served as a Senior Vice President with WI Harper, a venture capital firm. From January 2000 to October 2001, Mr. Chau was a Vice President with Walden International, a venture capital firm. Prior to that he was with GIC Special Investments Pte. Ltd., a subsidiary of

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the Government of Singapore Investment Corporation. Mr. Chau also serves on the boards of directors of several other private companies. Mr. Chau received an M.B.A. from the University of California at Berkeley and a B.S. in Electrical Engineering from the University of Canterbury, New Zealand.

Frank Creer has been a member of our board of directors since August 2000. Mr. Creer is a founder and Managing Director of Zone Ventures, an early stage venture capital fund founded in 1998. Mr. Creer was also a partner and founder of Wasatch Venture Fund, an early stage venture capital fund founded in 1994. He also worked for Bonneville Pacific Corp., a developer of co-generation power projects, where he developed both financial and economic feasibility studies for proposed power projects. In addition to DivX, Mr. Creer currently serves on the boards of directors of Akimbo Systems, a video content licensing company, eStyle, an online clothing retailer, and Vizional, emWare and Zkey, each a software company. He also serves on the board of directors of the Lassonde New Business Development Center at the University of Utah. He received a B.A. in Finance from the University of Utah in 1991.

Fred Gerson has been a member of our board of directors since March 2005. Since July 2001, Mr. Gerson has served as the Chief Financial Officer of the San Diego Padres, a major league baseball club. Mr. Gerson was the interim Chief Financial Officer of Peregrine Systems, a provider of enterprise software, from May 2002 through July 2002, while maintaining his responsibilities with the Padres. His prior history includes CFO positions at Maxis, Marimba, Peter Norton Computing, each a software company, and the coin-operated games division of Atari, a gaming company. Mr. Gerson is a director of Burlington Assurance Exchange Society, Major League Baseball's captive insurance entity. Mr. Gerson received an M.B.A. from New York University and a B.A. in Economics from Brooklyn College.

Christopher McGurk has been a member of our board of directors since January 2006. Since April 2006, Mr. McGurk has served as Senior Advisor, New Ventures with IDT Entertainment, an entertainment company. From 1999 to 2005, Mr. McGurk served as Vice Chairman and Chief Operating Officer of Metro-Goldwyn-Mayer, an entertainment company. Mr. McGurk's previous experience includes key management positions at Universal Pictures and Walt Disney Studios, each an entertainment company, Pepsico, a beverage company, and PriceWaterhouseCoopers, an accounting and consulting firm. Mr. McGurk serves on the boards of directors of DIC Entertainment Holdings, a digital media company, and BRE Properties, a real estate investment trust. Mr. McGurk received an M.B.A. from the University of Chicago and a B.S. in Accounting from Syracuse University.

Jerry Murdock has been a member of our board of directors since October 2005. Since 1995, Mr. Murdock has served as a General Partner of Insight Venture Partners, a venture capital firm. Mr. Murdock currently serves on the boards of directors of Quest Software and CallWave, each a software company. From March 1988 to January 1995, Mr. Murdock served as a director of Aspen Technology Group, a consulting firm that he founded. From 1980 to 1981, he worked at the Georgetown Center for Strategic & International Studies, a strategic insight and policy solutions organization. Mr. Murdock received a B.A. in Political Science from San Diego State University.

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Board composition

Our board of directors currently consists of six members. Effective upon the completion of this offering, we will divide our board of directors into three classes, as follows:

•

Class I, which will consist of Messrs. Greenhall and McGurk, and whose term will expire at our annual meeting of stockholders to be held in 2007;

•

Class II, which will consist of Messrs. Chau and Creer, and whose term will expire at our annual meeting of stockholders to be held in 2008; and

•

Class III, which will consist of Messrs. Gerson and Murdock, and whose term will expire at our annual meeting of stockholders to be held in 2009.

At each annual meeting of stockholders to be held after the initial classification, the successors to directors whose terms then expire will serve until the third annual meeting following their election and until their successors are duly elected and qualified. The authorized number of directors may be changed only by resolution of the board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed between the three classes so that, as nearly as possible, each class will consist of one-third of the directors. This classification of the board of directors may have the effect of delaying or preventing changes in our control or management. Our directors may be removed for cause by the affirmative vote of the holders of at least 66²/3% of our voting stock.

Board committees

Our board of directors has an audit committee, a compensation committee and a corporate governance and nominating committee.

Audit committee.    Our audit committee consists of Messrs. Creer, Gerson and McGurk, each of whom is a non-employee director of our board of directors. The functions of this committee include, among other things:

•

reviewing and pre-approving the engagement of our independent auditors to perform audit services and any permissible non-audit services;

•

reviewing our annual and quarterly financial statements and reports and discussing the statements and reports with our independent auditors and management;

•

reviewing with our independent auditors and management significant issues that arise regarding accounting principles and financial statement presentation, and matters concerning the scope, adequacy and effectiveness of our financial controls; and

•

establishing procedures for the receipt, retention and treatment of complaints received by us regarding financial controls, accounting or auditing matters.

Our board of directors has determined that Mr. Gerson is a financial expert. Our board of directors has determined that each of the directors serving on our audit committee is independent within the meaning of the rules of the SEC and the listing standards of The Nasdaq Stock Market. Both our independent auditors and management periodically meet privately with our audit committee.

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Compensation committee.    Our compensation committee consists of Messrs. Chau, Creer and Murdock, each of whom is a non-employee director of our board of directors. Our board of directors has determined that each of the directors serving on our compensation committee is independent within the meaning of the rules of the SEC and the listing standards of The Nasdaq Stock Market. The functions of this committee include, among other things:

•

determining the compensation and other terms of employment of our executive officers and reviewing and approving corporate performance goals and objectives relevant to such compensation;

•

recommending to our board of directors the type and amount of compensation to be paid or awarded to board members;

•

evaluating and recommending to our board of directors the equity incentive plans, compensation plans and similar programs advisable for us, as well as modification or termination of existing plans and programs;

•

establishing policies with respect to equity compensation arrangements; and

•

reviewing and approving the terms of any employment agreements, severance arrangements, change-in-control protections and any other compensatory arrangements for our executive officers.

Corporate governance and nominating committee.    Our corporate governance and nominating committee consists of Messrs. Gerson and McGurk, each of whom is a non-employee director of our board of directors. Our board of directors has determined that each of the directors serving on our corporate governance and nominating committee is independent within the meaning of the rules of the SEC and the listing standards of The Nasdaq Stock Market. The functions of this committee include, among other things:

•

developing and maintaining a current list of the functional needs and qualifications of members of our board of directors;

•

evaluating director performance on the board and applicable committees of the board and determining whether continued service on our board is appropriate;

•

interviewing, evaluating, nominating and recommending individuals for membership on our board of directors;

•

evaluating nominations by stockholders of candidates for election to our board;

•

developing, reviewing and amending a set of corporate governance policies and principles, including a code of ethics;

•

considering questions of possible conflicts of interest of directors as such questions arise; and

•

recommending to our board of directors the establishment of such special committees as may be desirable or necessary from time to time to address ethical, legal, business or other matters that may arise.

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Compensation committee interlocks and insider participation

No member of our compensation committee has ever been an executive officer or employee of ours. None of our executive officers currently serves, or has served during the last completed year, on the compensation committee or board of directors of any other entity that has one or more executive officers serving as a member of our board of directors or compensation committee. Prior to establishing the compensation committee, our full board of directors made decisions relating to compensation of our executive officers.

Director compensation

In March 2005, we granted to Mr. Gerson an option to purchase an aggregate of 60,000 shares of our common stock at an exercise price of $0.50 per share, of which 15,000 shares vested on the one-year anniversary of the vesting commencement date for the option grant and the remainder will vest monthly over the following three years. In April 2006, we granted to Mr. Gerson an option to purchase an additional 40,000 shares of our common stock at an exercise price of $2.50 per share, of which 10,000 shares shall vest on the one year anniversary of the vesting commencement date for the option grant and the remainder will vest monthly over the following three years. If we undergo a change of control while Mr. Gerson remains one of our directors, Mr. Gerson will be entitled to one year of accelerated vesting of his then unvested shares.

In January 2006, we granted to Mr. McGurk an option to purchase an aggregate of 100,000 shares of our common stock at an exercise price of $0.90 per share, of which 25,000 shares will vest on the one-year anniversary of the vesting commencement date for the option grant and the remainder will vest monthly over the following three years.

We have not provided cash compensation to directors for their services as directors or members of committees of the board of directors. However, we have reimbursed and will continue to reimburse our non-employee directors for their reasonable expenses incurred in attending meetings of our board of directors and committees of our board of directors.

Executive compensation

The following table provides information regarding the compensation earned by each of those persons who were, at December 31, 2005, our CEO and our other four most highly compensated executive officers. We refer to our CEO and these other executive officers as our "named executive officers" elsewhere in this prospectus.

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Summary compensation table(1)

	Annual compensation						Long-term compensation
Name and principal position	Salary(2)		Bonus			Other annual compensation	Restricted stock award(s)	Securities underlying options/ SARs(3)	LTIP payouts	All other compensation
R. Jordan Greenhall CEO and Chairman	$	150,000	$	3,375		—	—	—	—	—
Kevin Hell CXO, Partners and Licensing		202,852		17,143		—	—	115,000	—	—
David J. Richter GC, Legal and Corporate Development		212,500		5,063		—	—	147,500	—	—
Chris Russell CTO, Strategy and Technology		140,385		18,654	(4)	—	—	85,000	—	—
John A. Tanner CFO, Finance and Administration		225,000		5,063		—	—	—	—	—

(1)

In accordance with the rules of the SEC, the compensation described in this table does not include various perquisites and other benefits received by a named executive officer which do not exceed the lesser of $50,000 or 10% of that named executive officer's salary and bonus disclosed in this table.

(2)

Each of Messrs. Hell, Richter, Russell and Tanner have a current annual salary of $225,000.

(3)

In February 2006, we granted to Messrs. Greenhall, Richter and Tanner options to purchase 75,000, 75,000 and 100,000 shares of our common stock, respectively, each at an exercise price of $1.00 per share. In March 2006, we granted to Mr. Russell an option to purchase 150,000 shares of our common stock at an exercise price of $1.50 per share.

(4)

Includes $15,000 relocation bonus.

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Stock option grants in last year

The following table provides information regarding grants of options to purchase shares of our common stock to our named executive officers in the year ended December 31, 2005:

	Individual grants
		% of total options granted to employees in the year ended December 31, 2005(1)
					Potential realizable value at assumed annual rates of stock price appreciation for option term(2)
	Number of securities underlying options granted		Exercise or base price ($/sh)
				Expiration date
Name					5%	10%
R. Jordan Greenhall	—	—	—	—	—	—
Kevin Hell	115,000	7.7%	$0.40	1/11/2015
David J. Richter	35,000 112,500	2.4  7.6	0.40 0.40	1/11/2015 3/8/2015
Chris Russell	50,000 35,000	3.4  2.4	0.40 0.50	2/14/2015 7/27/2015
John A. Tanner	—	—	—	—	—	—

(1)

Based on options to purchase 1,487,900 shares of common stock granted during the year ended December 31, 2005 under our 2000 stock option plan, including grants to executive officers.

(2)

Potential realizable values are computed by (a) multiplying the number of shares of common stock subject to a given option by an assumed initial public offering price of $             per share, (b) assuming that the aggregate stock value derived from that calculation compounds at the annual 5% or 10% rate shown in the table for the entire ten-year term of the option and (c) subtracting from that result the aggregate option exercise price. The 5% and 10% assumed annual rates of stock price appreciation are mandated by the rules of the SEC and do not represent our estimate or projection of future common stock prices.

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Aggregated option exercises in last year and year-end option values

The following table provides information regarding options exercised by each of our named executive officers during the year ended December 31, 2005, as well as the number of shares of common stock subject to exercisable and unexercisable stock options held as of December 31, 2005 by each of our named executive officers. All options listed in the table permit early exercise of unvested shares, in which case all unvested shares are subject to repurchase by us.

			Number of securities underlying unexercised options at year-end		Value of unexercised in-the-money options at year-end(2)
	Shares acquired on exercise
		Value realized(1)
Name			Exercisable	Unexercisable	Exercisable	Unexercisable
R. Jordan Greenhall.	507,098		—	—	—	—
Kevin Hell	714,741		308,259	—		—
David J. Richter	372,500		—	—	—	—
Chris Russell	—	—	85,000	—		—
John A. Tanner	—	—	—	—	—	—

(1)

There was no public market for our common stock as of the dates of option exercises. For purposes of this table, the value realized has been calculated by taking the excess of an assumed initial public offering price of $             per share over the exercise price for the option, multiplied by the number of shares exercised, without taking into account any taxes that may be payable in connection with the transaction.

(2)

The value of an unexercised in-the-money option as of December 31, 2005 is equal to the excess of an assumed initial public offering price of $             per share over the exercise price for the option, multiplied by the number of shares subject to the option, without taking into account any taxes that may be payable in connection with the transaction.

Employment contracts, termination of employment and change-in-control arrangements

Employment agreements.    In February 2003, we entered into an employment offer letter with Mr. Hell, our CXO, Partners and Licensing, which was amended in February 2005. Mr. Hell receives a base salary of $225,000 per year and is entitled to an annual bonus consistent with that of our other senior executives. In addition, pursuant to the offer letter, Mr. Hell received an automatic $25,000 bonus in April 2003. The offer letter also entitles Mr. Hell to receive all customary and usual fringe benefits available to our full-time, regular exempt employees. In December 2002, Mr. Hell was granted options to purchase an aggregate of 600,000 shares of our common stock at an exercise price of $0.06 per share, of which 150,000 shares vested on the one-year anniversary of the date of grant and the remainder vests monthly over the following three years. In addition, pursuant to the offer letter, upon completion of certain performance milestones, in each of September and October 2003 and April 2004 Mr. Hell was granted options to purchase an additional 100,000 shares of our common stock at an exercise price of $0.06 per share, of which 25,000 shares vested on the one-year anniversary of each of the vesting commencement dates for such option grants and the remainder of each vests monthly over the following three years. The offer letter provides that Mr. Hell's employment is voluntary and at will. If, during Mr. Hell's employment with us, there is a change of control, as set forth in the offer letter, and Mr. Hell is not offered a comparable position with the

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surviving entity, any then unvested portion of Mr. Hell's stock options will vest immediately prior to the change in control.

In April 2004, we entered into an employment offer letter with Mr. Richter, our GC, Legal and Corporate Development. Mr. Richter receives a base salary of $225,000 per year and is entitled to an annual bonus consistent with that of our other senior executives. The offer letter also entitles Mr. Richter to receive all customary and usual fringe benefits available to our full-time, regular exempt employees. Pursuant to the offer letter, Mr. Richter received a one-time payment in the amount of $15,000 related to his relocation to San Diego, California and we reimbursed all costs associated with commuting to San Diego prior to his relocation. In May 2004, Mr. Richter was granted options to purchase an aggregate of 225,000 shares of our common stock at an exercise price of $0.06 per share, of which 56,250 shares vested on the one-year anniversary of the vesting commencement date for the option grant and the remainder vests monthly over the following three years. The offer letter provides that Mr. Richter's employment is voluntary and at will. If, during Mr. Richter's employment with us, there is a change of control, as set forth in the offer letter, any then unvested portion of Mr. Richter's stock options will vest immediately prior to the change in control. If Mr. Richter is involuntarily terminated (which would include a voluntary termination following reduction in his duties or compensation), as set forth in the offer letter, within six months prior to a change in control, any then unvested portion of Mr. Richter's stock options will vest immediately upon announcement of such change in control and he will have up to one year thereafter to exercise those options.

In December 2004, we entered into an employment offer letter with Mr. Russell, our CTO, Strategy and Technology. Mr. Russell receives a base salary of $225,000 per year. The offer letter also entitles Mr. Russell to receive all customary and usual fringe benefits available to our full-time, regular exempt employees. Pursuant to the offer letter, Mr. Russell received a one-time payment in the amount of $15,000 related to his relocation to San Diego, California. In February 2005, pursuant to the offer letter, Mr. Russell was granted options to purchase an aggregate of 50,000 shares of our common stock at an exercise price of $0.40 per share, of which 12,500 shares vested on the one-year anniversary of the vesting commencement date for the option grant and the remainder vests monthly over the following three years. In addition, upon completion of certain performance milestones, in July 2005 Mr. Russell received options to purchase an additional 35,000 shares of our common stock at an exercise price of $0.50 per share, of which 8,750 shares vested on the one-year anniversary of the vesting commencement date for the option grant and the remainder vests monthly over the following three years. The offer letter provides that Mr. Russell's employment is voluntarily and at will.

In November 2004, we entered into an employment offer letter with Mr. Tanner, our CFO, Finance and Administration, which was amended in March 2005. Mr. Tanner receives a base salary of $225,000 per year and is entitled to an annual bonus consistent with that of our other senior executives. The offer letter also entitles Mr. Tanner to receive all customary and usual fringe benefits available to our full-time, regular exempt employees. Pursuant to the offer letter, we reimbursed reasonable costs related to Mr. Tanner's relocation to San Diego, California and we reimbursed all costs associated with commuting to San Diego for the three-month period prior to his relocation. In December 2004, Mr. Tanner was granted options to purchase an aggregate of 493,828 shares of our common stock at an exercise price of $0.40 per share, of which 123,457 shares vested on the one-year anniversary of the vesting

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commencement date for the option grant and the remainder vests monthly over the following three years. The offer letter provides that Mr. Tanner's employment is voluntary and at will. If, during Mr. Tanner's employment with us, there is a change of control and Mr. Tanner is not offered a comparable position with the surviving entity, any then unvested portion of Mr. Tanner's stock options will vest immediately prior to the change in control.

In May 2005, we entered into a letter agreement pursuant to which, subject to certain specified limitations, in the event that any payments or benefits are received by either Mr. Richter or Mr. Tanner in connection with a change in control and such payments or benefits are subject to the excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, we will immediately pay them an additional amount, or gross-up payment, such that the net amount retained by each of them, after deduction of any excise tax on their payments or benefits and any federal, state and local income and employment taxes and excise tax upon the gross-up payment, will be equal to the payments or benefits to each of them was entitled to receive absent such excise taxes.

DivX, Inc. 2006 executive cash bonus plan.    In February 2006 our board of directors adopted our 2006 executive cash bonus plan. The 2006 executive cash bonus plan provides for the payment of cash bonuses to our named executive officers upon the achievement of specific performance milestones by us and them.

Employee benefit plans

2000 stock option plan.    In December 2000, our board of directors and stockholders adopted our 2000 stock option plan, or the 2000 plan. The 2000 plan provides for the grant of the following:

•

incentive stock options, or ISOs, which may be granted solely to our employees, including our executive officers; and

•

nonstatutory stock options, or NSOs, which may be granted to our directors, consultants or employees, including our executive officers.

Following the completion of this offering, we will not make any further grants of stock options under the 2000 Plan.

        Share reserve.    As of March 31, 2006, we had reserved a total of 13,158,022 shares under the 2000 Plan. Of the reserved shares, 7,590,475 have been issued pursuant to option exercises, of which 1,136,959 were subject to lapsing rights of repurchase as of March 31, 2006. In addition, as of March 31, 2006, options to purchase 3,720,413 shares of our common stock issued under the 2000 plan were outstanding and 1,847,134 shares of common stock were available for future grant under the 2000 plan. Shares issued under the 2000 plan may be previously unissued shares or reacquired shares.

        Administration.    Our board of directors administers the 2000 plan. Subject to the terms of the 2000 plan, our board of directors determines the stock option recipients and grant dates, the number of shares subject to stock options to be granted under the 2000 plan, the designation of such stock options as ISOs or NSOs and the terms and conditions of the stock options, including the period of their exercisability and vesting. Subject to the limitations set

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forth below, our board of directors also determines the exercise price and manner of payment for stock options granted under the 2000 plan.

        Stock options.    Stock options are granted under the 2000 plan pursuant to a stock option agreement. Generally, the exercise price for an ISO cannot be less than 100% of the fair market value of our common stock subject to the option on the date of grant, and the exercise price for an NSO cannot be less than 85% of the fair market value of our common stock on the date of grant. Options granted under the 2000 plan vest at the rate specified in the stock option agreement. The 2000 plan also allows for the early exercise of unvested options, as set forth in an applicable stock option agreement. All remaining unvested shares of our common stock acquired through early exercised options are subject to repurchase by us following termination of continued service. Options granted under the 2000 plan other than to our officers, directors and consultants vest at a rate of at least 20% per year.

In general, the term of stock options granted under the 2000 plan may not exceed ten years. If an optionee's service relationship with us, or any affiliate of ours, terminates due to disability or death, the optionee, or his or her beneficiary, generally may exercise any vested options after the date the service relationship ends for up to 12 months unless otherwise determined by our board of directors. If an optionee's relationship with us, or any affiliate of ours, ceases for any reason other than disability or death, the optionee may exercise any vested options for up to three months after the termination of service unless otherwise determined by our board of directors. Under certain circumstances following a change in control, an optionee may exercise vested options within 12 months of the change in control.

Acceptable forms of consideration for the exercise of options granted under the 2000 plan will be determined by our board of directors and may include cash or common stock previously owned by the optionee, or payment through a deferred payment arrangement, a broker assisted exercise or other legal consideration or arrangements approved by our board of directors.

Generally, options granted under the 2000 plan may not be transferred other than by will or the laws of descent and distribution. However, the optionee's legal representative or heir may exercise the options granted under the 2000 plan following the optionee's death.

        Tax limitations on stock option grants.    The aggregate fair market value, determined at the time of grant, of shares of our common stock subject to ISOs that are exercisable for the first time by an optionee during any calendar year under all of our stock plans may not exceed $100,000. The options or portions of options that exceed this limit are treated as NSOs. No ISO may be granted to a 10% stockholder unless the following conditions are satisfied:

•

the option exercise price is at least 110% of the fair market value of our common stock on the grant date; and

•

the term of the option must not exceed five years from the grant date.

        Corporate transactions.    An entity surviving a change of control involving us may assume or substitute other awards for options outstanding under our 2000 plan. In the event of a change of control, if any unvested shares subject to outstanding options are not assumed or substituted for, such options will be accelerated, effective as of the date ten days prior to the date of the change of control, to such extent, if any, as shall have been determined by our

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board of directors and as set forth in the applicable stock option agreement. Any unexercised options that are not assumed or substituted for will terminate upon the change of control. Our board may provide that options that are assumed or substituted for by a surviving entity following a change of control remain exercisable for a twelve-month period following the change in control in the event that within a time period after the change of control as specified in the applicable stock option agreement the optionee's service with the surviving entity is terminated without cause or the optionee terminates his or her service with good reason.

2006 equity incentive plan.    We adopted our 2006 equity incentive plan, or the 2006 plan, in             2006, to become effective upon the completion of this offering. The plan will terminate in             2016, unless our board of directors terminates it earlier. The 2006 plan provides for the grant of the following:

•

ISOs, which may be granted solely to our employees, including our executive officers; and

•

NSOs, stock purchase awards, stock bonus awards, stock unit awards, stock appreciation rights and other stock awards, which may be granted to our directors, consultants or employees, including our executive officers.

        Share reserve.    An aggregate of             shares of our common stock are authorized for issuance under our 2006 plan. In addition, this amount will be automatically increased annually on the first day of our calendar year, from 2007 until 2016, by the lesser of (a)     % of the aggregate number of shares of common stock outstanding on December 31 of the preceding year or (b)              shares of common stock. However, our board of directors has the authority to designate a smaller number of shares by which the authorized number of shares of common stock under the 2006 plan will be increased. Shares of our common stock subject to options and other stock awards that have expired or otherwise terminate under the 2006 plan without having been exercised in full will again become available for grant under the 2006 plan. Shares of our common stock issued under the 2006 plan may include previously unissued shares or reacquired shares bought on the market or otherwise. If any shares of our common stock subject to a stock award are not delivered to a participant because such shares are withheld for the payment of taxes or the stock award is exercised through a net exercise, then the number of shares that are not delivered to the participants shall again become available for grant under the 2006 plan. If the exercise of any stock award is satisfied by tendering shares of our common stock held by the participant, then the number of shares tendered shall again become available for grant under the 2006 plan. The maximum number of shares of our common stock that may be issued under the 2006 plan subject to ISOs is             shares plus the automatic annual increases described above.

        Administration.    The 2006 plan will be administered by our board of directors, which may in turn delegate authority to administer the plan to a committee. Subject to the terms of the 2006 plan, our board of directors or its authorized committee determines recipients, the numbers and types of stock awards to be granted and the terms and conditions of the stock awards, including the period of their exercisability and vesting. Subject to the limitations set forth below, our board of directors or its authorized committee will also determine the exercise price of options granted under the 2006 plan and may reprice those options, including by reducing the exercise price of any outstanding option, canceling an option in exchange for cash or another equity award or any other action that is treated as a repricing under generally

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accepted accounting principles. Subject to the terms of the 2006 plan, our board of directors may delegate to one or more of our executive officers the authority to grant stock awards to our other executive officers and employees. Such executive officer would be able to grant only the total number of stock awards specified by our board of directors and such executive officer would not be allowed to grant a stock award to himself or herself.

        Stock options.    Stock options will be granted pursuant to stock option agreements. Generally, the exercise price for stock options cannot be less than 100% of the fair market value of our common stock on the date of grant. Options granted under the 2006 plan will vest at the rate specified in the option agreement. A stock option agreement may provide for early exercise prior to vesting. Unvested shares of our common stock issued in connection with an early exercise may be repurchased by us upon termination of the optionee's service to us. In general, the term of stock options granted under the 2006 plan may not exceed ten years. Unless the terms of an optionholder's stock option agreement provide for earlier or later termination, if an optionholder's service relationship with us, or any affiliate of ours, ceases due to disability or death, the optionholder, or his or her beneficiary, may exercise any vested options for up to    months, after the date the service relationship ends. If an optionholder's service relationship with us, or any affiliate of ours, ceases without cause for any reason other than disability or death, the optionholder may exercise any vested options for up to    months after the date the service relationship ends, unless the terms of the stock option agreement provide for a longer period to exercise the option. If an optionholder's relationship with us, or any affiliate of ours, ceases with cause, the option will terminate at the time the optionholder's relationship with us ceases. In no event may an option be exercised after its expiration date.

Acceptable forms of consideration for the purchase of our common stock issued under the 2006 plan will be determined by our board of directors and may include cash, common stock previously owned by the optionholder, deferred payment arrangement, payment through a broker assisted exercise or a net exercise feature, or other legal consideration approved by our board of directors. Generally, an optionholder may not transfer a stock option other than by will or the laws of descent and distribution or a domestic relations order. However, an optionholder may designate a beneficiary who may exercise the option following the optionholder's death.

        Limitations.    ISOs may be granted only to our employees, including executive officers. The aggregate fair market value, determined at the time of grant, of shares of our common stock with respect to ISOs that are exercisable for the first time by an optionholder during any calendar year under all of our stock plans may not exceed $100,000. The options or portions of options that exceed this limit are treated as NSOs. No ISO may be granted to any person who, at the time of the grant, owns or is deemed to own stock possessing more than 10% of our total combined voting power or that of any affiliate unless the following conditions are satisfied:

•

the option exercise price must be at least 110% of the fair market value of our common stock on the date of grant; and

•

the term of any ISO award must not exceed five years from the date of grant.

In addition, no employee may be granted options, stock appreciation rights, stock purchase awards, stock bonus awards, stock unit awards and other stock awards under the 2006 plan

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covering more than             shares of our common stock in any calendar year, subject to an exception for new hires who may be granted an additional             shares of our common stock during the calendar year of initial employment.

        Stock purchase awards.    Stock purchase awards will be granted pursuant to stock purchase award agreements. A stock purchase award may require the payment of at least the par value of the stock. The purchase price for a stock purchase award may be payable in cash or any other form of legal consideration approved by our board of directors. Shares of our common stock acquired under a stock purchase award may, but need not, be subject to a repurchase option in our favor in accordance with a vesting schedule to be determined by our board of directors. Rights to acquire shares of our common stock under a stock purchase award may be transferred only upon such terms and conditions as are set forth in the stock purchase award agreement.

        Stock bonus awards.    Stock bonus awards will be granted pursuant to stock bonus award agreements. A stock bonus award may be granted in consideration for the recipient's past or future services performed for us or an affiliate of ours. Shares of our common stock acquired under a stock bonus award may, but need not, be subject to forfeiture to us in accordance with a vesting schedule to be determined by our board of directors. Rights to acquire shares of our common stock under a stock bonus award may be transferred only upon such terms and conditions as are set forth in the stock bonus award agreement.

        Stock unit awards.    Stock unit awards will be granted pursuant to stock unit award agreements. A stock unit award may require the payment of at least the par value of the stock. Payment of any purchase price may be made in any form permitted under applicable law; however, we will settle a payment due to a recipient of a stock unit award by cash or by delivery of shares of our common stock, a combination of cash and stock as deemed appropriate by our board of directors, or in any other form of consideration determined by our board of directors and set forth in the stock unit award agreement. Additionally, dividend equivalents may be credited in respect of shares of our common stock covered by a stock unit award. Except as otherwise provided in the applicable stock unit award agreement, stock units that have not vested will be forfeited upon the participant's termination of continuous service for any reason.

        Stock appreciation rights.    Stock appreciation rights will be granted through a stock appreciation rights agreement. Each stock appreciation right is denominated in common stock share equivalents. The strike price of each stock appreciation right will be determined by our board of directors or its authorized committee at the time of grant. Our board of directors or its authorized committee may also impose any restrictions or conditions upon the vesting of stock appreciation rights that it deems appropriate. Stock appreciation rights may be paid in our common stock or in cash or any combination of the two, or any other form of legal consideration approved by our board of directors. If a stock appreciation right recipient's relationship with us, or any affiliate of ours, ceases for any reason, the recipient may exercise any vested stock appreciation right up to    months from cessation of service, unless the terms of the stock appreciation right agreement provide that the right may be exercised for a longer or shorter period.

        Other stock awards.    Other forms of stock awards valued in whole or in part with reference to our common stock may be granted either alone or in addition to other stock

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awards under the 2006 plan. Our board of directors will have sole and complete authority to determine the persons to whom and the time or times at which such other stock awards will be granted, the number of shares of our common stock to be granted and all other conditions of such other stock awards.

        Changes to capital structure.    In the event that there is a specified type of change in our capital structure not involving the receipt of consideration by us, such as a stock split or stock dividend, the number of shares reserved under the 2006 plan and the number of shares and exercise price or strike price, if applicable, of all outstanding stock awards will be appropriately adjusted.

        Corporate transactions.    Unless otherwise provided in the stock award agreement, in the event of certain corporate transactions, all outstanding stock awards under the 2006 plan may be assumed, continued or substituted for by any surviving entity. If the surviving entity elects not to assume, continue or substitute for such awards, the vesting provisions of such stock awards generally will be accelerated in full and such stock awards will be terminated if and to the extent not exercised at or prior to the effective time of the corporate transaction and our repurchase rights with respect to unvested outstanding shares of common stock will generally lapse. In the event stock awards outstanding under the 2006 plan are assumed, continued or substituted for by a surviving entity, our board of directors or its authorized committee may provide that all or a portion of the unvested shares subject to those stock awards will become fully vested as of the change of control.

        Plan amendments.    Our board of directors will have the authority to amend or terminate the 2006 plan. However, no amendment or termination of the plan will adversely affect any rights under awards already granted to a participant unless agreed to by the affected participant. We will obtain stockholder approval of amendments to the 2006 plan as required by applicable law.

401(k) plan.    We maintain a defined contribution employee retirement plan for our employees. The plan is intended to qualify as a tax-qualified plan under Section 401(k) of the Internal Revenue Code so that contributions to the 401(k) plan, and income earned on such contributions, are not taxable to participants until withdrawn or distributed from the 401(k) plan. The 401(k) plan provides that each participant may contribute up to 100% of his or her pre-tax compensation, up to a statutory limit, which is $15,000 for calendar year 2006. Participants who are at least 50 years old can also make "catch-up" contributions, which in calendar year 2006 may be up to an additional $5,000 above the statutory limit. Under the 401(k) plan, each employee is fully vested in his or her deferred salary contributions. Employee contributions are held and invested by the plan's trustee. The 401(k) plan also permits us to make discretionary contributions and matching contributions, subject to established limits and a vesting schedule. To date, we have not made any discretionary or matching contributions to the plan on behalf of participating employees.

Limitation of liability and indemnification

Our amended and restated certificate of incorporation, which will become effective upon the completion of this offering, limits the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally

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liable for monetary damages for breach of their fiduciary duties as directors, except for liability for any:

•

breach of their duty of loyalty to the corporation or its stockholders;

•

act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

•

unlawful payment of dividends or redemption of shares; or

•

transaction from which the directors derived an improper personal benefit.

These limitations of liability do not apply to liabilities arising under federal securities laws and do not affect the availability of equitable remedies such as injunctive relief or rescission.

Our amended and restated bylaws, which will become effective upon the completion of this offering, provide that we will indemnify our directors and executive officers, and may indemnify other officers, employees and other agents, to the fullest extent permitted by law. Our amended and restated bylaws also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in connection with their services to us, regardless of whether our amended and restated bylaws permit such indemnification. We have obtained a policy of directors' and officers' liability insurance.

We have entered, and intend to continue to enter, into separate indemnification agreements with our directors and executive officers, in addition to the indemnification provided for in our amended and restated bylaws. These agreements, among other things, require us to indemnify our directors and executive officers for certain expenses, including attorneys' fees, judgments, fines and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of their services as one of our directors or executive officers, or any of our subsidiaries or any other company or enterprise to which the person provides services at our request.

At present, there is no pending litigation or proceeding involving any of our directors or executive officers as to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, executive officers or persons controlling us, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

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Related party transactions

The following is a description of transactions since January 1, 2003 to which we have been a party, in which the amount involved in the transaction exceeds $60,000, and in which any of our directors, executive officers or holders of more than 5% of our capital stock had or will have a direct or indirect material interest, other than compensation, termination and change-in-control arrangements, which are described under "Management."

Preferred stock financings

In March, April and October 2004, we issued and sold to investors an aggregate of 4,251,194 shares of Series C preferred stock at a purchase price of $2.32 per share, for aggregate consideration of $9,876,374. Upon completion of this offering, these shares will convert into 4,251,194 shares of common stock.

In October 2005, we issued and sold to investors an aggregate of 5,811,100 shares of Series D preferred stock at a purchase price of $2.92 per share, for aggregate consideration of $16,977,709. Upon completion of this offering, these shares will convert into 5,811,100 shares of common stock.

The participants in these preferred stock financings included the following directors, executive officers and holders of more than 5% of our capital stock or entities affiliated with them. The following table presents the number of shares issued to these related parties in these financings:

Participants (1)		Series C preferred stock	Series D preferred stock
5% or Greater Stockholders
	Zone Venture Fund and its affiliates(2)	1,431,806	—
	WI Harper Group and its affiliates(3)	215,221	—
	Insight Holdings and its affiliates(4)	—	5,811,100

(1)

Additional detail regarding these stockholders and their equity holdings is provided in "Principal and selling stockholders."

(2)

Represents shares held by Zone Venture Fund II, L.P., or Zone Venture Fund, the Timothy Draper Living Trust, Draper Atlantic Venture Fund, L.P., Draper Atlantic Venture Fund II, L.P., Draper Atlantic Opportunity Fund, L.P., Argus Capital LLC and Wasatch Venture Fund III, LLC. Frank Creer, one of our directors, is a managing director of Zone Venture Fund, a fund affiliated with the Timothy Draper Living Trust, Draper Atlantic Venture Fund, L.P., Draper Atlantic Venture Fund II, L.P., Draper Atlantic Opportunity Fund, L.P., Argus Capital LLC and Wasatch Venture Fund III, LLC. Mr. Creer disclaims beneficial ownership of these shares except to the extent of his pecuniary interest in these entities. Upon completion of this offering, these shares will convert into 1,431,806 shares of common stock.

(3)

Represents shares held by International Network Capital Global Fund, International Network Capital Global Investment Limited, Springboard-Harper Technology Fund PTE Ltd., Springboard-Harper Investment (Cayman) Ltd. and Springboard-Harper Technology Fund (Cayman) Ltd. Paul Chau, one of our directors, is a senior vice president of WI Harper Group, Inc., or WI Harper Group, the manager of International Network Capital Global Fund and International Network Capital Global Investment Limited and the co-manager of Springboard-Harper Technology Fund PTE Ltd., Springboard-Harper Investment (Cayman) Ltd. and Springboard-Harper Technology Fund (Cayman) Ltd. Mr. Chau disclaims beneficial ownership of these shares except to the extent of his pecuniary interest in these entities. Upon completion of this offering, these shares will convert into 215,221 shares of common stock.

(4)

Represents shares held by Insight Venture Partners V, L.P., Insight Venture Partners (Cayman) V, L.P. and Insight Venture Partners V (Employee Co-Investors), L.P. Jerry Murdock, one of our directors, is a managing director of Insight Holdings Group, LLC, or Insight Holdings, the managing member of Insight Venture Associates V, L.L.C., or Insight Venture Associates, which is the general partner of Insight Venture Partners V, L.P., Insight Venture Partners (Cayman) V, L.P. and Insight Venture Partners V (Employee Co-Investors), L.P. Mr. Murdock disclaims beneficial ownership of these shares except to the extent of his pecuniary interest in these entities. Upon completion of this offering, these shares will convert into 5,811,100 shares of common stock.

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In connection with our preferred stock financings, we entered into a stockholders' agreement containing voting rights, information rights, rights of first refusal and registration rights, among other things, with the holders of our preferred stock and certain holders of our common stock, which was most recently amended in connection with our Series D preferred stock financing in October 2005.

Except for the registration rights contained in the stockholders' agreement, all of the rights set forth in the stockholders' agreement will terminate immediately prior to the closing of this offering. See "Description of capital stock—registration rights" for a more detailed description of the registration rights contained in the stockholders' agreement.

Convertible notes and warrant issuances

In January 2004, we issued subordinated convertible promissory notes in an aggregate amount of $425,410 to WI Harper Group and its affiliates and a subordinated convertible promissory note in an aggregate amount of $500,000 to Zone Venture Fund, each with a maturity date of December 31, 2004. These promissory notes were converted into shares of Series C preferred stock in connection with our Series C preferred stock financing. In connection therewith, we also issued warrants to purchase an aggregate of 261,475 shares of our Series B preferred stock to WI Harper Group and its affiliates and a warrant to purchase an aggregate of 307,695 shares of our Series B preferred stock to Zone Venture Fund, each with an exercise price of $0.36 per share. These warrants were cancelled in accordance with their terms in connection with our Series C preferred stock financing.

In April 2004, we issued 13 warrants to purchase an aggregate of 70,385 shares of our common stock, with an exercise price of $2.32 per share, to Zone Venture Fund and its affiliates and WI Harper Group and its affiliates. The warrants expire upon the completion of this offering if and to the extent not then exercised.

Stock option issuances

From January 1, 2003 to March 31, 2006, we granted options to purchase an aggregate of 1,992,883 shares of common stock to our current directors and executive officers, with exercise prices ranging from $0.06 to $1.50.

Consulting agreement

In April 2002, we entered into a consulting agreement with WI Harper Group. Pursuant to the consulting agreement, we issued to WI Harper Group a warrant to purchase an aggregate of 1,000,000 shares of our common stock at an exercise price of $0.36 per share upon successful completion of certain milestones. The consulting agreement terminated in February 2004.

Loan agreement

In October 2000, we made a loan of $75,000 to Darrius Thompson, bearing interest at an annual rate of 7%. The loan was payable in monthly payments of principal and interest through October 2010. From January 2003 to April 2006, we no longer collected monthly payments from Mr. Thompson. In April 2006, the remaining outstanding balance of the loan of approximately $76,000 was forgiven in its entirety.

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Indemnification agreements

We have entered into indemnification agreements with each of our directors and executive officers, as described in "Management—Limitation of liability and indemnification."

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Principal and selling stockholders

The following table sets forth information regarding beneficial ownership of our capital stock by:

•

each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common stock;

•

each of our directors;

•

each of our named executive officers;

•

all of our directors and executive officers as a group; and

•

each selling stockholder.

The percentage ownership information shown in the table is based upon (1) 17,836,229 shares of common stock outstanding as of March 15, 2006, (2) the conversion of all outstanding shares of our preferred stock into 33,299,790 shares of common stock upon the completion of this offering and (3) after the offering, the issuance of             shares of common stock in this offering. The percentage ownership information assumes no exercise of the underwriters' over-allotment option.

Each individual or entity shown in the table has furnished information with respect to beneficial ownership. We have determined beneficial ownership in accordance with the SEC's rules. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules include shares of common stock issuable pursuant to the exercise of stock options, warrants or other rights that are either immediately exercisable or exercisable on May 14, 2006, which is 60 days after March 15, 2006. These shares are deemed to be outstanding and beneficially owned by the person holding those options or warrants for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. All of the options in this table are exercisable at any time but, if exercised, are subject to a lapsing right of repurchase until the shares subject to the options are fully vested. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.

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Except as otherwise noted below, the address for each person or entity listed in the table is c/o DivX, Inc., 4780 Eastgate Mall, San Diego, California 92121.

				Percentage of shares beneficially owned
	Number of shares beneficially owned before offering		Number of shares beneficially owned after the offering
		Number of shares to be sold in the offering(1)
Name and address of beneficial owner				Before offering		After offering
5% stockholders
Zone Venture Fund and its affiliates(2) 241 S. Figueroa Street, Suite 340 Los Angeles, CA 90012	18,015,830			35.2	%
WI Harper Group and its affiliates(3) 50 California Street, Suite 2920 San Francisco, CA 94111	8,627,600			16.6
Insight Holdings and its affiliates(4) 680 Fifth Avenue, 8th Floor New York, NY 10019	5,811,100			11.4
Directors and named executive officers
R. Jordan Greenhall(5)	6,019,010			11.8
Paul Chau(6)	8,627,600			16.6
Frank Creer(7)	18,015,830			35.2
Fred Gerson(8)	100,000			*
Christopher McGurk(9)	100,000			*
Jerry Murdock(10)	5,811,100			11.4
Kevin Hell(11)	1,023,000			2.0
David J. Richter(12)	447,500			*
Chris Russell(13)	235,000			*
John A. Tanner(14)	593,828			1.2
All directors and executive officers as a group (11 persons)(15)	41,415,645			77.4
Selling stockholders

*

Represents beneficial ownership of less than 1%.

(1)

If the underwriters exercise their over-allotment in full, the following stockholders will sell the following additional shares in the offering:             .

(2)

Includes shares held by Zone Venture Fund, the Timothy Draper Living Trust, Draper Richards, L.P., Draper Atlantic Venture Fund, L.P., Draper Atlantic Venture Fund II, L.P., Draper Atlantic Opportunity Fund, L.P., the 1999 Draper Grandchildrens Trust, Wasatch Venture Fund III, LLC, Argus Capital LLC and JABE, LLC. Frank Creer is a managing director of Zone Venture Fund, a fund affiliated with the Timothy Draper Living Trust, Draper Richards, L.P., Draper Atlantic Venture Fund, L.P., Draper Atlantic Venture Fund II, L.P., Draper Atlantic Opportunity Fund, L.P., the 1999 Draper Grandchildrens Trust, Wasatch Venture Fund III, LLC, Argus Capital LLC and JABE, LLC. Mr. Creer disclaims beneficial ownership of these shares except to the extent of his pecuniary interest in these entities. Also includes 61,064 shares subject to warrants that will terminate upon the completion of this offering.

(3)

Includes shares held by International Network Capital Global Fund, International Network Capital Global Investment Limited, International Network Capital Corp, International Network Capital LDC, Beijing Technology Development Fund, Springboard-Harper Technology Fund PTE Ltd., Springboard-Harper Investment (Cayman) Ltd., Springboard-Harper Technology Fund (Cayman) Ltd. and WI Harper Group. Paul Chau is a senior vice president of WI Harper Group, the manager of International Network Capital Global Fund, International Network Capital Global Investment Limited, International Network Capital Corp, International Network Capital LDC and Beijing Technology Development Fund and the co-manager of Springboard-Harper Technology Fund PTE Ltd., Springboard-Harper Investment (Cayman) Ltd. and Springboard-Harper Technology Fund (Cayman) Ltd. Mr. Chau disclaims beneficial ownership of these shares except to the extent of his pecuniary

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interest in these entities. Also includes 1,000,000 shares subject to warrants that will terminate in April 2009 and 9,319 shares subject to warrants that will terminate upon the completion of this offering.

(4)

Includes shares held by Insight Venture Partners V, L.P., Insight Venture Partners (Cayman) V, L.P. and Insight Venture Partners V (Employee Co-Investors), L.P. Jerry Murdock is a managing director of Insight Holdings, the managing member of Insight Venture Associates, which is the general partner of Insight Venture Partners V, L.P., Insight Venture Partners (Cayman) V, L.P. and Insight Venture Partners V (Employee Co-Investors), L.P. Mr. Murdock disclaims beneficial ownership of these shares except to the extent of his pecuniary interest in these entities.

(5)

Includes 5,944,010 shares of common stock, none of which are subject to repurchase as of May 14, 2006, including 500,000 shares held by The Pooh 2005 Grantor Retained Annuity Trust created U.T.A. dated February 15, 2005, of which Mr. Greenhall is the trustee, and 500,000 shares held by The Piglet 2005 Grantor Retained Annuity Trust, created U.T.A. dated February 15, 2005, of which Jennifer Greenhall, Mr. Greenhall's wife, is the trustee. Also includes options to purchase 75,000 shares of common stock, all of which will be unvested but exercisable as of May 14, 2006.

(6)

Includes the shares referred to in footnote (3) above. Mr. Chau disclaims beneficial ownership of these shares except to the extent of his pecuniary interest in these entities.

(7)

Includes the shares referred to in footnote (2) above. Mr. Creer disclaims beneficial ownership of these shares except to the extent of his pecuniary interest in these entities.

(8)

Includes 60,000 shares of common stock, of which 42,500 are subject to repurchase as of May 14, 2006 and options to purchase 40,000 shares of common stock, all of which will be unvested but exercisable as of May 14, 2006.

(9)

Includes options to purchase 100,000 shares of common stock, all of which will be unvested but exercisable as of May 14, 2006.

(10)

Includes the shares referred to in footnote (4) above. Mr. Murdock disclaims beneficial ownership of these shares except to the extent of his pecuniary interest in these entities.

(11)

Includes 714,741 shares of common stock, none of which are subject to repurchase as of May 14, 2006, and options to purchase 308,259 shares of common stock, of which 224,678 will be unvested but exercisable as of May 14, 2006.

(12)

Includes 447,500 shares of common stock, of which 264,845 are subject to repurchase as of May 14, 2006.

(13)

Includes 85,000 shares of common stock, of which 69,375 are subject to repurchase as of May 14, 2006, and options to purchase 150,000 shares of common stock, all of which will be unvested but exercisable as of May 14, 2006.

(14)

Includes 493,828 shares of common stock, of which 318,932 are subject to repurchase as of May 14, 2006, and options to purchase 100,000 shares of common stock, all of which will be unvested but exercisable as of May 14, 2006.

(15)

Includes 40,224,442 shares of common stock, of which 695,652 will be subject to repurchase as of May 14, 2006, and options to purchase 1,191,203 shares of common stock, of which 499,678 will be unvested but exercisable as of May 14, 2006.

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Description of capital stock

Upon completion of this offering and the filing of our amended and restated certificate of incorporation, our authorized capital stock will consist of 200,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share.

The following is a summary of the rights of our common stock and preferred stock. This summary is not complete. For more detailed information, please see our amended and restated certificate of incorporation and bylaws, which will be filed as exhibits to the registration statement of which this prospectus is a part.

Common stock

Outstanding shares.    Based on 17,911,544 shares of common stock outstanding as of March 31, 2006, the conversion of preferred stock outstanding as of March 31, 2006 into 33,299,790 shares of common stock upon the completion of this offering, the issuance of             shares of common stock in this offering, and no exercise of options or warrants, there will be             shares of common stock outstanding upon completion of this offering.

As of March 31, 2006, there were 3,720,413 shares of common stock subject to outstanding options under our 2000 stock option plan, and 1,466,669 shares of common stock subject to outstanding warrants.

As of March 31, 2006, we had approximately 140 record holders of our common stock.

Voting rights.    Each holder of common stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors. Our amended and restated certificate of incorporation and bylaws do not provide for cumulative voting rights. Because of this, the holders of a majority of the shares of common stock entitled to vote in any election of directors can elect all of the directors standing for election.

Dividends.    Subject to preferences that may be applicable to any then outstanding preferred stock, holders of common stock are entitled to receive ratably those dividends, if any, as may be declared from time to time by our board of directors out of legally available funds.

Liquidation.    In the event of our liquidation, dissolution or winding up, holders of common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities and the satisfaction of any liquidation preference granted to the holders of any outstanding shares of preferred stock.

Rights and preferences.    Holders of common stock have no preemptive, conversion or subscription rights, and there are no redemption or sinking fund provisions applicable to the common stock. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock which we may designate in the future.

Fully paid and nonassessable.    All of our outstanding shares of common stock are, and the shares of common stock to be issued in this offering will be, fully paid and nonassessable.

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Preferred stock

Upon the completion of this offering, there will be no shares of preferred stock issued and outstanding. Upon the closing of this offering, our board of directors will have the authority, without further action by the stockholders, to issue up to 10,000,000 shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the rights, preferences and privileges of the shares of each wholly unissued series and any qualifications, limitations or restrictions thereon and to increase or decrease the number of shares of any such series (but not below the number of shares of such series then outstanding).

Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change of control and may adversely affect the market price of the common stock and the voting and other rights of the holders of common stock. We have no current plans to issue any shares of preferred stock.

Warrants

As of March 31, 2006, warrants to purchase an aggregate of 1,413,187 shares of our common stock, having a weighted average exercise price of $0.69 per share, were outstanding. Of these, warrants to purchase 1,258,000 shares of our common stock will remain outstanding following the completion of this offering and are described below, and the remaining warrants will terminate upon the completion of this offering. As of March 31, 2006, warrants to purchase an aggregate of 53,482 shares of Series B preferred stock, having a weighted average exercise price of $0.36, were outstanding. Upon completion of this offering, the Series B warrants will convert into warrants to purchase an aggregate of 53,482 shares of our common stock.

Common stock warrants.    In December 2000, we issued a warrant to purchase an aggregate of 100,000 shares of our common stock, with an exercise price of $0.16 per share, to a third party in connection with an acquisition of assets. The warrant has a net exercise provision under which its holder may, in lieu of payment of the exercise price in cash, surrender the warrant and receive a net amount of shares based on the fair market value of our common stock at the time of exercise of the warrant after deduction of the aggregate exercise price. The warrant also contains provisions for the adjustment of the exercise price and the aggregate number of shares issuable upon the exercise of the warrant in the event of stock dividends, stock splits, reorganizations, reclassifications and consolidations. The warrant will terminate in December 2010.

In April 2001, we issued two warrants to purchase an aggregate of 50,000 shares of our common stock, each with an exercise price of $4.00 per share, to two service providers. Each of these warrants has a net exercise provision under which its holder may, in lieu of payment of the exercise price in cash, surrender the warrant and receive a net amount of shares based on the fair market value of our common stock at the time of exercise of the warrant after deduction of the aggregate exercise price. Each of these warrants also contains provisions for the adjustment of the exercise price and the aggregate number of shares issuable upon the

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exercise of the warrant in the event of stock dividends, stock splits, reorganizations, reclassifications and consolidations. Each of these warrants will terminate in December 2010.

In June 2001, we issued a warrant to purchase an aggregate of 3,000 shares of our common stock, with an exercise price of $1.25 per share, to a lender. The warrant has a net exercise provision which will be triggered automatically in the event the warrant is not exercised prior to its termination date. The warrant also contains provisions for the adjustment of the exercise price and the aggregate number of shares issuable upon the exercise of the warrant in the event of stock dividends, stock splits, reorganizations, reclassifications, consolidations and dilutive issuances. In addition, the warrant contains a "put" feature, pursuant to which the warrantholder can require us to repurchase the warrant at any time through the expiration date of the warrant for $3,750. The warrant will terminate in June 2006.

In April 2002, we issued a warrant to purchase an aggregate of 1,000,000 shares of our common stock with an exercise price of $0.36 per share, to a consultant. This warrant was subsequently divided into six warrants distributed among the consultant and five affiliated entities. Each of these warrants has a net exercise provision under which its holder may, in lieu of payment of the exercise price in cash, surrender the warrant and receive a net amount of shares based on the fair market value of our common stock at the time of exercise of the warrant after deduction of the aggregate exercise price. Each of these warrants also contains provisions for the adjustment of the exercise price and the aggregate number of shares issuable upon the exercise of the warrant in the event of stock dividends, stock splits, reorganizations, reclassifications and consolidations. Each of these warrants will terminate in April 2009.

In September 2002, we issued two warrants to purchase an aggregate of 5,000 shares of our common stock, each with an exercise price of $0.36 per share, to two service providers. Each of these warrants contains provisions for the adjustment of the aggregate number of shares issuable upon the exercise of the warrant in the event of stock dividends, stock splits, reorganizations and similar events. Each of these warrants will terminate in September 2007.

In June 2003, we issued a warrant to purchase an aggregate of 100,000 shares of our common stock, with an exercise price of $0.36 per share, to a service provider. The warrant contains provisions for the adjustment of the aggregate number of shares issuable upon the exercise of the warrant in the event of stock dividends, stock splits, reorganizations and similar events. The warrant will terminate in June 2008.

Series B preferred stock warrants.    In September 2002, October 2002 and July 2003, we issued warrants to purchase an aggregate of 53,482 shares of our Series B preferred stock, each with an exercise price of $0.36 per share, to a lender. Each of the warrants has a net exercise provision which will be triggered automatically in the event the warrant is not exercised prior to its termination date. Each of the warrants also contains provisions for the adjustment of the exercise price and the aggregate number of shares issuable upon the exercise of the warrant in the event of stock dividends, stock splits, reorganizations, reclassifications and consolidations. Upon completion of this offering, these warrants will convert into warrants to purchase an aggregate of 53,482 shares of our common stock. Each of the warrants also provides for "piggyback" registration rights pursuant to the same terms that apply to registration rights under our third amended and restated stockholders' agreement. The warrants issued in

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September 2002, October 2002 and July 2003 will terminate in September 2007, October 2007 and July 2013, respectively.

Registration rights

Under our third amended and restated stockholders' agreement, following the completion of this offering, the holders of 42,218,797 shares of common stock and warrants to purchase up to 53,482 shares of common stock will have certain rights to require us to register their shares (including shares issuable upon exercise of warrants) with the SEC so that those shares may be publicly resold.

Demand registration rights.    At any time beginning six months after the completion of this offering, the holders of a majority of the shares having demand registration rights have the right to demand that we file two registration statements so long as the aggregate number of securities requested to be sold under either registration statement is at least 25% of the securities held or issuable to the requesting parties or the amount of securities to be sold under either registration statement is at least $2,000,000, subject to specified exceptions.

Form S-3 registration rights.    If we are eligible to file a registration statement on Form S-3, one or more holders of registration rights have the right to demand that we file a registration statement on Form S-3 so long as the aggregate amount of securities to be sold under the registration statement on Form S-3 is at least $2,000,000, subject to specified exceptions.

"Piggyback" registration rights.    After the completion of this offering, if we register any securities for public sale, holders of registration rights will have the right to include their shares in the registration statement. The underwriters of any underwritten offering will have the right to limit the number of shares having registration rights to be included in the registration statement, but not below 15% of the total number of shares included in the registration statement.

Expenses of registration.    Generally, we are required to bear all registration and selling expenses incurred in connection with the demand, piggyback and Form S-3 registrations described above, other than underwriting discounts and commissions. We are also required to bear the reasonable fees and expenses of one counsel, in an amount not to exceed $30,000, for the selling stockholders in each registration.

Expiration of registration rights.    The demand, piggyback and Form S-3 registration rights discussed above will terminate five years following the closing of this offering. In addition, the registration rights discussed above will terminate with respect to any stockholder or warrant holder entitled to these registration rights on the date when such stockholder or warrant holder is able to sell all of their registrable common stock without volume limitations in a single 90-day period under Rule 144 of the Securities Act.

Delaware anti-takeover law and provisions of our amended and restated certificate of incorporation and bylaws

Delaware anti-takeover law.    We are subject to Section 203 of the Delaware General Corporation Law. Section 203 generally prohibits a public Delaware corporation from engaging

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in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person became an interested stockholder, unless:

•

prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

•

the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding (a) shares owned by persons who are directors and also officers and (b) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

•

on or subsequent to the date of the transaction, the business combination is approved by the board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66²/3% of the outstanding voting stock which is not owned by the interested stockholder.

Section 203 defines a business combination to include:

•

any merger or consolidation involving the corporation and the interested stockholder;

•

any sale, transfer, pledge or other disposition involving the interested stockholder of 10% or more of the assets of the corporation;

•

subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;

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subject to exceptions, any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; and

•

the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.

In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by the entity or person.

Amended and restated certificate of incorporation and bylaws.    Provisions of our amended and restated certificate of incorporation and bylaws, which will become effective upon the completion of this offering, may delay or discourage transactions involving an actual or potential change of control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our common stock. Among other things, our amended and restated certificate of incorporation and bylaws:

•

permit our board of directors to issue up to 10,000,000 shares of preferred stock, with any rights, preferences and privileges as they may designate (including the right to approve an acquisition or other change of control);

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•

provide that the authorized number of directors may be changed only by resolution of the board of directors;

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provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;

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divide our board of directors into three classes;

•

require that any action to be taken by our stockholders must be effected at a duly called annual or special meeting of stockholders and not be taken by written consent;

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provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide advance notice in writing, and also specify requirements as to the form and content of a stockholder's notice;

•

do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election); and

•

provide that special meetings of our stockholders may be called only by the chairman of the board, our CEO or by the board of directors pursuant to a resolution adopted by a majority of the total number of authorized directors.

The amendment of any of these provisions would require approval by the holders of at least 66²/3% of our then outstanding common stock.

Listing on The Nasdaq Stock Market

We are applying to have our common stock included for quotation on The Nasdaq Stock Market under the symbol DIVX.

Transfer agent and registrar

The transfer agent and registrar for our common stock is                           . The transfer agent and registrar's address is                           .

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Material U.S. federal income tax
consequences to non-U.S. holders

The following is a general discussion of the material U.S. federal income tax consequences of the ownership and disposition of our common stock to a non-U.S. holder. For the purpose of this discussion, a non-U.S. holder is any holder that for U.S. federal income tax purposes is not a U.S. person. For purposes of this discussion, the term U.S. person means:

•

an individual citizen or resident of the U.S.;

•

a corporation or other entity taxable as a corporation or a partnership or entity taxable as a partnership created or organized in the U.S. or under the laws of the U.S. or any political subdivision thereof;

•

an estate whose income is subject to U.S. federal income tax regardless of its source; or

•

a trust (x) whose administration is subject to the primary supervision of a U.S. court and which has one or more U.S. persons who have the authority to control all substantial decisions of the trust or (y) which has made an election to be treated a U.S. person.

If a partnership holds common stock, the tax treatment of a partner will generally depend on the status of the partner and upon the activities of the partnership. Accordingly, we urge partnerships that hold our common stock and partners in such partnerships to consult their tax advisors.

This discussion assumes that a non-U.S. holder will hold our common stock issued pursuant to the offering as a capital asset (generally, property held for investment). This discussion does not address all aspects of U.S. federal income taxation that may be relevant in light of a non-U.S. holder's special tax status or special tax situations. U.S. expatriates, life insurance companies, tax-exempt organizations, dealers in securities or currency, banks or other financial institutions, investors whose functional currency is other than the U.S. dollar, and investors that hold common stock as part of a hedge, straddle or conversion transaction are among those categories of potential investors that are subject to special rules not covered in this discussion. This discussion does not address any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction. Furthermore, the following discussion is based on current provisions of the Internal Revenue Code and Treasury Regulations and administrative and judicial interpretations thereof, all as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect. Accordingly, we urge each non-U.S. holder to consult a tax advisor regarding the U.S. federal, state, local and non-U.S. income and other tax consequences of acquiring, holding and disposing of shares of our common stock.

Dividends

We have not paid any dividends on our common stock and we do not plan to pay any dividends for the foreseeable future. However, if we do pay dividends on our common stock, those payments will constitute dividends for U.S. tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those dividends exceed our current and accumulated earnings and

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profits, the dividends will constitute a return of capital and will first reduce a holder's basis, but not below zero, and then will be treated as gain from the sale of stock.

Any dividend (out of earnings and profits) paid to a non-U.S. holder of common stock generally will be subject to U.S. withholding tax either at a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by an applicable tax treaty. To receive a reduced treaty rate, a non-U.S. holder must provide us with an IRS Form W-8BEN or other appropriate version of Form W-8 certifying qualification for the reduced rate.

Dividends received by a non-U.S. holder that are effectively connected with a U.S. trade or business conducted by the non-U.S. holder are exempt from such withholding tax. To obtain this exemption, a non-U.S. holder must provide us with an IRS Form W-8ECI properly certifying such exemption. Such effectively connected dividends, although not subject to withholding tax, are taxed at the same graduated rates applicable to U.S. persons, net of certain deductions and credits, subject to any applicable tax treaty providing otherwise. In addition to the graduated tax described above, dividends received by corporate non-U.S. holders that are effectively connected with a U.S. trade or business of the corporate non-U.S. holder may also be subject to a branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable tax treaty.

A non-U.S. holder of common stock that is eligible for a reduced rate of withholding tax pursuant to a tax treaty may obtain a refund of any excess amounts currently withheld if an appropriate claim for refund is filed with the IRS.

Gain on disposition of common stock

A non-U.S. holder generally will not be subject to U.S. federal income tax on any gain realized upon the sale or other disposition of our common stock unless:

•

the gain is effectively connected with a U.S. trade or business of the non-U.S. holder (which gain, in the case of a corporate non-U.S. holder, must also be taken into account for branch profits tax purposes), subject to any applicable tax treaty providing otherwise;

•

the non-U.S. holder is an individual who is present in the U.S. for a period or periods aggregating 183 days or more during the calendar year in which the sale or disposition occurs and certain other conditions are met; or

•

our common stock constitutes a U.S. real property interest by reason of our status as a "U.S. real property holding corporation" for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding the disposition or the holder's holding period for our common stock. We believe that we are not currently, and that we will not become, a "U.S. real property holding corporation" for U.S. federal income tax purposes.

Backup withholding and information reporting

Generally, we must report annually to the IRS the amount of dividends paid, the name and address of the recipient, and the amount, if any, of tax withheld. A similar report is sent to the holder. Pursuant to tax treaties or other agreements, the IRS may make its reports available to tax authorities in the recipient's country of residence.

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Payments of dividends or of proceeds on the disposition of stock made to a non-U.S. holder may be subject to backup withholding (currently at a rate of 28%) unless the non-U.S. holder establishes an exemption, for example, by properly certifying its non-U.S. status on a Form W-8BEN or another appropriate version of Form W-8. Notwithstanding the foregoing, backup withholding may apply if either we or our paying agent has actual knowledge, or reason to know, that the holder is a U.S. person.

Backup withholding is not an additional tax. Rather, the U.S. income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained, provided that the required information is furnished to the IRS.

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Shares eligible for future sale

Immediately prior to this offering, there has been no public market for our common stock. Future sales of substantial amounts of common stock in the public market could adversely affect prevailing market prices. Furthermore, since only a limited number of shares will be available for sale shortly after this offering because of contractual and legal restrictions on resale described below, sales of substantial amounts of common stock in the public market after the restrictions lapse could adversely affect the prevailing market price for our common stock as well as our ability to raise equity capital in the future.

Based on the number of shares of common stock outstanding as of March 31, 2006, upon completion of this offering,                    shares of common stock will be outstanding, assuming no exercise of the underwriters' over-allotment option and no exercise of options or warrants. All of the shares sold in this offering will be freely tradable unless held by an affiliate of ours. Except as set forth below, the remaining shares of common stock outstanding after this offering will be restricted as a result of securities laws or lock-up agreements. These remaining shares will generally become available for sale in the public market as follows:

•

no restricted shares will be eligible for immediate sale upon the completion of this offering;

•

restricted shares, less shares subject to a repurchase option in our favor tied to the holders' continued service with us, which will be eligible for sale upon lapse of the repurchase option, will be eligible for sale 90 days after the date of this offering;

•

restricted shares, less shares subject to a repurchase option in our favor tied to the holders' continued service to us, which will be eligible for sale upon lapse of the repurchase option, will be eligible for sale upon expiration of lock-up agreements 180 days (subject to limited extension in certain circumstances as described in "Underwriting") after the date of this offering; and

•

the remainder of the restricted shares will be eligible for sale from time to time thereafter upon expiration of their respective one-year holding periods, but could be sold earlier if the holders exercise any available registration rights.

Rule 144

In general, under Rule 144 under the Securities Act of 1933, as in effect on the date of this prospectus, a person who has beneficially owned shares of our common stock for at least one year would be entitled to sell within any three-month period a number of shares that does not exceed the greater of:

•

1% of the number of shares of our common stock then outstanding, which will equal approximately             shares immediately after this offering; or

•

the average weekly trading volume of our common stock on The Nasdaq Stock Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.

Sales under Rule 144 are also subject to manner of sale provisions and notice requirements and to the availability of current public information about us.

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Rule 144(k)

Under Rule 144(k) under the Securities Act as in effect on the date of this prospectus, a person who is not deemed to have been one of our affiliates at any time during the 90 days preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, is entitled to sell the shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144.                     shares of our common stock will qualify for resale under Rule 144(k) within 180 days of the date of this prospectus.

Rule 701

Rule 701 under the Securities Act, as in effect on the date of this prospectus, permits resales of shares in reliance upon Rule 144 but without compliance with certain restrictions of Rule 144, including the holding period requirement. Most of our employees, executive officers, directors or consultants who purchased shares under a written compensatory plan or contract may be entitled to rely on the resale provisions of Rule 701, but all holders of Rule 701 shares are required to wait until 90 days after the date of this prospectus before selling their shares. However, substantially all Rule 701 shares are subject to lock-up agreements as described below and under "Underwriting" and will become eligible for sale at the expiration of those agreements.

Lock-up agreements

We, our directors and executive officers, and substantially all of our stockholders have entered into lock-up agreements with the underwriters prior to the commencement of this offering pursuant to which we and each of these persons or entities, with limited exceptions, for a period of 180 days after the date of the final prospectus, may not, without the prior written consent of J.P. Morgan Securities Inc., (1) offer, pledge, announce the intention to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of our common stock (including, without limitation, common stock which may be deemed to be beneficially owned by such directors, executive officers, managers and members in accordance with the rules and regulations of the SEC and securities which may be issued upon exercise of a stock option or warrant) or (2) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the common stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of common stock or such other securities, in cash or otherwise. These lock-up restrictions may be extended in specified circumstances and are subject to exceptions specified in the lock-up agreements. See "Underwriting."

Registration rights

Upon completion of this offering, the holders of 42,218,797 shares of our common stock and warrants to purchase up to 53,482 shares of our common stock will be entitled to rights with respect to the registration of their shares (including shares issuable upon exercise of warrants) under the Securities Act, subject to the lock-up arrangement described above. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act. Any sales of securities by these stockholders could

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have a material adverse effect on the trading price of our common stock. See "Description of capital stock—registration rights."

Equity incentive plans

We intend to file with the SEC a registration statement under the Securities Act covering the shares of common stock reserved for issuance under our 2000 stock option plan and our 2006 equity incentive plan. The registration statement is expected to be filed and become effective as soon as practicable after the completion of this offering. Accordingly, shares registered under the registration statement will be available for sale in the open market following its effective date, subject to Rule 144 volume limitations and the lock-up arrangement described above, if applicable.

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Underwriting

We and the selling stockholders are offering the shares of common stock described in this prospectus through a number of underwriters. J.P. Morgan Securities Inc. is acting as sole book-running manager. J.P. Morgan Securities Inc., Banc of America Securities LLC, Cowen & Co., LLC, Canaccord Adams Inc. and Montgomery & Co., LLC are acting as representatives of the underwriters. We and the selling stockholders have entered into an underwriting agreement with the underwriters. Subject to the terms and conditions of the underwriting agreement, we and the selling stockholders have agreed to sell to the underwriters, and each underwriter has severally agreed to purchase, at the initial public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus, the number of shares of common stock listed next to its name in the following table:

Name	Number of shares
J.P. Morgan Securities Inc.
Banc of America Securities LLC
Cowen & Co., LLC
Canaccord Adams Inc.
Montgomery & Co., LLC
Total

The underwriters are committed to purchase all the shares of common stock offered by us and the selling stockholders if they purchase any shares. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may also be increased or the offering may be terminated.

The underwriters propose to offer the shares of common stock directly to the public at the initial public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $    per share. Any such dealers may resell shares to certain other brokers or dealers at a discount of up to $             per share from the initial public offering price. After the initial public offering of the shares, the offering price and other selling terms may be changed by the underwriters. The representatives have advised us that the underwriters do not intend to confirm discretionary sales in excess of 5% of the shares of common stock offered in this offering.

The underwriters have an option to buy up to additional shares of common stock from us and the selling stockholders (additional shares from us and additional shares from the selling stockholders) to cover sales of shares by the underwriters which exceed the number of shares specified in the table above. The underwriters have 30 days from the date of this prospectus to exercise this over-allotment option. If any shares are purchased with this over-allotment option, the underwriters will purchase shares in approximately the same proportion as shown in the table above. If any additional shares of common stock are purchased, the underwriters will offer the additional shares on the same terms as those on which the shares are being offered.

The underwriting fee is equal to the initial public offering price per share of common stock less the amount paid by the underwriters to us and the selling stockholders per share of common

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stock. The underwriting fee is $    per share. The following table shows the per share and total underwriting discounts and commissions to be paid to the underwriters assuming both no exercise and full exercise of the underwriters' option to purchase additional shares.

Underwriting discounts and commissions

	Without over- allotment exercise	With full over- allotment exercise
Per share	$	$
Total	$	$

We estimate that the total expenses of this offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding the underwriting discounts and commissions, will be approximately $             . Of this total, approximately $    is payable by us and approximately $    is payable by the selling stockholders.

A prospectus in electronic format may be made available on the websites maintained by one or more underwriters, or selling group members, if any, participating in the offering. The underwriters may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters and selling group members that may make Internet distributions on the same basis as other allocations.

We have agreed that we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Securities and Exchange Commission a registration statement under the Securities Act relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, without the prior written consent of J.P. Morgan Securities Inc. for a period of 180 days after the date of this prospectus. Notwithstanding the foregoing, if (1) during the last 17 days of the 180-day restricted period, we issue an earnings release or material news or a material event relating to us occurs; or (2) prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period, the restrictions described above shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.

Our directors and executive officers, and substantially all of our stockholders have entered into lock-up agreements with the underwriters prior to the commencement of this offering pursuant to which each of these persons or entities, with limited exceptions, for a period of 180 days after the date of the final prospectus, may not, without the prior written consent of J.P. Morgan Securities Inc., (1) offer, pledge, announce the intention to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of our common stock (including, without limitation, common stock that may be deemed to be beneficially owned by such persons in accordance with the rules and regulations of the SEC and securities that may be issued upon exercise of a stock option or warrant) or (2) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the common stock, whether any such transaction described in

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clause (1) or (2) above is to be settled by delivery of common stock or such other securities, in cash or otherwise. Notwithstanding the foregoing, if (1) during the last 17 days of the 180-day restricted period, we issue an earnings release or material news or a material event relating to our company occurs; or (2) prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period, the restrictions described above shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event. These restrictions shall not apply to (a) sales of common stock by selling stockholders in this offering, (b) transactions relating to common stock acquired in open market transactions after the completion of this offering, provided that no filing by any party under the Securities Exchange Act of 1934 shall be required or shall be voluntarily made in connection with subsequent sales of common stock or other securities acquired in such open market transactions or (c) transfers of common stock or any security convertible into or exercisable or exchangeable for common stock (i) as a bona fide gift, (ii) to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned, (iii) as a distribution by a partnership to its partners or former partners or by a limited liability company to its members or retired members or (iv) to any affiliate, as defined in Rule 405 under the Securities Act of 1933, of the undersigned; provided that in the case of any transfer pursuant to clause (c), (A) each transferee shall sign and deliver a lock-up agreement and (B) the undersigned shall not be required to, and shall not voluntarily, file a report under Section 16(a) of the Securities Exchange Act of 1934, reporting a reduction in beneficial ownership of common stock during the restricted period referred to in the foregoing paragraph. In addition, these restrictions shall not be deemed to restrict or prohibit the entry into or modification of a so-called "10b5-1" plan at any time (other than the entry into or modification of such a plan in such a manner as to cause the sale of shares of common stock within the restricted period).

We and the selling stockholders have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act of 1933.

We will apply to have our common stock approved for listing on The Nasdaq Stock Market under the symbol DIVX.

In connection with this offering, the underwriters may engage in stabilizing transactions, which involves making bids for, purchasing and selling shares of common stock in the open market for the purpose of preventing or retarding a decline in the market price of the common stock while this offering is in progress. These stabilizing transactions may include making short sales of the common stock, which involves the sale by the underwriters of a greater number of shares of common stock than they are required to purchase in this offering, and purchasing shares of common stock on the open market to cover positions created by short sales. Short sales may be "covered" shorts, which are short positions in an amount not greater than the underwriters' over-allotment option referred to above, or may be "naked" shorts, which are short positions in excess of that amount. The underwriters may close out any covered short position either by exercising their over-allotment option, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market compared to the price at which the underwriters may purchase shares through the over-allotment option. A naked short position is more likely to be created if the underwriters are concerned that there

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may be downward pressure on the price of the common stock in the open market that could adversely affect investors who purchase in this offering. To the extent that the underwriters create a naked short position, they will purchase shares in the open market to cover the position.

The underwriters have advised us that, pursuant to Regulation M of the Securities Act of 1933, they may also engage in other activities that stabilize, maintain or otherwise affect the price of the common stock, including the imposition of penalty bids. This means that if the representatives of the underwriters purchase common stock in the open market in stabilizing transactions or to cover short sales, the representatives can require the underwriters that sold those shares as part of this offering to repay the underwriting discount received by them.

These activities may have the effect of raising or maintaining the market price of the common stock or preventing or retarding a decline in the market price of the common stock, and, as a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If the underwriters commence these activities, they may discontinue them at any time. The underwriters may carry out these transactions on The Nasdaq Stock Market, in the over-the-counter market or otherwise.

Prior to this offering, there has been no public market for our common stock. The initial public offering price will be determined by negotiations between us and the representatives of the underwriters. In determining the initial public offering price, we and the representatives of the underwriters expect to consider a number of factors including:

•

the information set forth in this prospectus and otherwise available to the representatives;

•

our prospects and the history and prospects for the industry in which we compete;

•

an assessment of our management;

•

our prospects for future earnings;

•

the general condition of the securities markets at the time of this offering;

•

the recent market prices of, and demand for, publicly traded common stock of generally comparable companies; and

•

other factors deemed relevant by the underwriters and us.

Neither we nor the underwriters can assure investors that an active trading market will develop for our common stock, or that the shares of common stock will trade in the public market at or above the initial public offering price.

Certain of the underwriters and their affiliates have provided in the past to us and our affiliates and may provide from time to time in the future certain commercial banking, financial advisory, investment banking and other services for us and such affiliates in the ordinary course of their business, for which they have received and may continue to receive customary fees and commissions. In addition, from time to time, certain of the underwriters and their affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future.

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Directed share program

At our request, the underwriters have reserved for sale at the initial public offering price up to              shares offered hereunder for officers, directors, employees and certain other persons associated with us. Participants in this program will agree that they will not, directly or indirectly, sell, transfer, assign, pledge or hypothecate any shares for a period of 180 days from the date of this prospectus (subject to limited extension in certain circumstances) and will comply with any other applicable rules imposed by NASD Regulation, Inc. We will pay all fees and disbursements of counsel incurred by the underwriters in connection with offering the shares to such persons. The number of shares available for sale to the general public will be reduced to the extent such persons purchase such reserved shares. Any reserved shares not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered hereby.

Legal matters

The validity of the shares of common stock being offered by this prospectus will be passed upon for us by Cooley Godward LLP, San Diego, California. Davis Polk & Wardwell, Menlo Park, California, is representing the underwriters in this offering.

Experts

Ernst & Young LLP, independent registered public accounting firm, have audited our consolidated financial statements and schedule at December 31, 2004 and 2005, and for each of the three years in the period ended December 31, 2005, as set forth in their report. We have included our financial statements and schedule in the prospectus and elsewhere in the registration statement in reliance on Ernst & Young LLP's report, given on their authority as experts in accounting and auditing.

Where you can find more information

We have filed with the SEC a registration statement on Form S-1 under the Securities Act of 1933, as amended, with respect to the shares of common stock being offered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information in the registration statement and its exhibits. For further information with respect to us and the common stock offered by this prospectus, you should refer to the registration statement and the exhibits filed as part of that document. Statements contained in this prospectus as to the contents of any contract or any other document referred to are not necessarily complete, and in each instance, we refer you to the copy of the contract or other document filed as an exhibit to the registration statement. Each of these statements is qualified in all respects by this reference.

You can read our SEC filings, including the registration statement, over the Internet at the SEC's website at http://www.sec.gov. You may also read and copy any document we file with the SEC at its public reference facilities at 100 F Street, N.E., Washington, D.C. 20549. You may also obtain copies of these documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities. You

113

may also request a copy of these filings, at no cost, by writing or telephoning us at: 4780 Eastgate Mall, San Diego, California 92121, (858) 882-0600.

Upon completion of this offering, we will be subject to the information and periodic reporting requirements of the Securities Exchange Act of 1934, as amended, and we will file periodic reports, proxy statements and other information with the SEC. These reports, proxy statements and other information will be available for inspection and copying at the public reference room and website of the SEC referred to above. We also maintain a website at http://www.divx.com, at which you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The information contained in, or that can be accessed through, our website is not part of this prospectus.

114

DivX, Inc. consolidated financial statements
for the years ended December 31, 2003, 2004 and 2005

Contents

	Page
Report of Ernst & Young LLP, independent registered public accounting firm	F-2
Audited consolidated financial statements
Consolidated balance sheets	F-3
Consolidated statements of operations	F-4
Consolidated statements of redeemable convertible preferred stock and stockholders' equity (deficit)	F-5
Consolidated statements of cash flows	F-6
Notes to consolidated financial statements	F-7

F-1

Report of Ernst & Young LLP, independent registered public accounting firm

The Board of Directors and Stockholders
DivX, Inc.

We have audited the accompanying consolidated balance sheets of DivX, Inc. as of December 31, 2004 and 2005, and the related consolidated statements of operations, redeemable convertible preferred stock and stockholders' equity (deficit), and cash flows for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of DivX, Inc. at December 31, 2004 and 2005, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

San Diego, California
April 27, 2006

F-2

DivX, Inc.
Consolidated balance sheets

December 31, (in thousands, except share and per share data)		2004			2005			Pro forma redeemable convertible preferred stock and stockholders' equity as of December 31, 2005
									(Unaudited)
Assets
Current assets:
	Cash and cash equivalents	$	6,934		$	25,035
	Restricted cash		270			270
	Accounts receivable (net of allowance of $1,041 and $963 at December 31, 2004 and 2005, respectively)		2,242			4,194
	Prepaid expenses		191			676
	Other current assets		967			94
Total current assets			10,604			30,269
Property and equipment, net			3,013			2,876
Other assets			63			19
		$	13,680		$	33,164
Liabilities, redeemable convertible preferred stock and stockholders' equity
Current liabilities:
	Accounts payable	$	1,743		$	988
	Accrued liabilities		897			646
	Accrued compensation and related benefits		671			1,262
	Accrued patent royalties		1,103			1,156
	Deferred revenue, current		2,723			3,106
	Current portion of capital lease obligations		264			43
	Notes payable, current portion		1,056			720
Total current liabilities			8,457			7,921
Capital lease, net of current portion			159			108
Notes payable, net of current portion			513			394
Deferred revenue, long term			696			786
Deferred rent			761			640
Liability for unvested portion of early stock option exercises			208			288
Commitments and contingencies (See Notes 5 and 6)
Redeemable Series D convertible preferred stock, $.001 par value; 5,900,000 shares authorized; no and 5,811,100 shares issued and outstanding at December 31, 2004 and 2005, respectively; no shares issued and outstanding, pro forma (unaudited); liquidation preference—$16,978			—			16,842		$	—
Stockholders' equity:
	Series A convertible preferred stock, $.001 par value; 4,522,000 shares authorized, issued and outstanding at December 31, 2004 and 2005; no shares issued and outstanding, pro forma (unaudited); liquidation preference—$5,653 at December 31, 2005		5			5			—
	Series B convertible preferred stock, $.001 par value; 16,559,158 shares authorized; 16,483,176 shares issued and outstanding at December 31, 2004 and 2005; no shares issued and outstanding, pro forma (unaudited); liquidation preference—$11,950 at December 31, 2005		16			16			—
	Series C convertible preferred stock, $.001 par value; 4,251,194 shares authorized, issued, and outstanding at December 31, 2004 and 2005; no shares issued and outstanding, pro forma (unaudited); liquidation preference—$9,876 at December 31, 2005		4			4			—
	Convertible preferred stock, $.001 par value; 5,767,648 shares authorized; no shares issued and outstanding at December 31, 2004 and 2005; no shares issued and outstanding pro forma (unaudited)		—			—			—
	Common stock, $.001 par value; 100,000,000 shares authorized; 10,950,346 and 16,094,569 shares issued and outstanding, excluding 670,985 and 1,159,927 shares subject to repurchase at December 31, 2004 and 2005, respectively, and 50,554,286 issued and outstanding, pro forma (unaudited)		11			16			51
	Additional paid-in capital		25,204			27,053			43,885
	Deferred stock-based compensation		(667	)		(1,517	)		(1,517	)
	Accumulated deficit		(21,687	)		(19,392	)		(19,392	)
Total stockholders' equity			2,886			6,185			23,027
		$	13,680		$	33,164

See accompanying notes.

F-3

DivX, Inc.
Consolidated statements of operations

Year ended December 31, (in thousands, except per share data)		2003			2004			2005
Net revenues:
	Technology licensing	$	4,290		$	12,228		$	26,919
	Media and other distribution and services		3,456			4,123			6,128
Total net revenues			7,746			16,351			33,047
Cost of revenues:
	Cost of technology licensing		988			2,477			2,767
	Cost of media and other distribution services(1)		912			1,025			889
Total cost of revenues			1,900			3,502			3,656
Gross profit			5,846			12,849			29,391
Operating expenses:
	Selling, general and administrative(1)		5,651			9,816			15,988
	Product development(1)		3,838			6,958			10,269
Total operating expenses			9,489			16,774			26,257
Income (loss) from operations			(3,643	)		(3,925	)		3,134
Interest income			7			68			338
Interest expense and other			(96	)		(113	)		(115	)
Income (loss) before income taxes			(3,732	)		(3,970	)		3,357
Income tax provision			(201	)		(373	)		(1,062	)
Net income (loss)		$	(3,933	)	$	(4,343	)	$	2,295
Basic net income (loss) per share		$	(0.45	)	$	(0.41	)	$	0.16
Diluted net income (loss) per share		$	(0.45	)	$	(0.41	)	$	0.05
Shares used to compute basic net income (loss) per share			8,765			10,631			14,646
Shares used to compute diluted net income (loss) per share			8,765			10,631			49,385

(1)

Includes stock-based compensation recorded in 2003, 2004 and 2005 as follows:

Cost of revenues	$	—	$	—	$	1
Selling, general and administrative		159		16		252
Product development		—		10		141
Total stock-based compensation	$	159	$	26	$	394

See accompanying notes.

F-4

DivX, Inc.
Consolidated statements of redeemable convertible preferred stock and stockholders' equity (deficit)

		Series D Redeemable Convertible Preferred Stock			Series A Convertible Preferred Stock			Series B Convertible Preferred Stock			Series C Convertible Preferred Stock			Common Stock
																			Deferred stock-based compensation						Total stockholders' equity (deficit)
Year ended December 31, 2003, 2004 and 2005 (in thousands)		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Additional paid-in capital					Accumulated deficit
Balance at December 31, 2002		—	$	—	4,522	$	5	16,483	$	16	—	$	—	7,439	$	7	$	14,470	$	—		$	(13,411	)	$	1,087
	Exercise of stock options, net of repurchases and repurchase liability for early exercises	—		—	—		—	—		—	—		—	2,948		3		42		—			—			45
	Stock-based compensation for vesting of restricted founders shares	—		—	—		—	—		—	—		—	—		—		135		—			—			135
	Acceleration of vesting of common stock	—		—	—		—	—		—	—		—	—		—		24		—			—			24
	Common stock warrants issued for services	—		—	—		—	—		—	—		—	—		—		10		—			—			10
	Series B preferred stock warrants issued in conjunction with financing	—		—	—		—	—		—	—		—	—		—		6		—			—			6
	Net loss and comprehensive loss	—		—	—		—	—		—	—		—	—		—		—		—			(3,933	)		(3,933	)
Balance at December 31, 2003		—		—	4,522		5	16,483		16	—		—	10,387		10		14,687		—			(17,344	)		(2,626	)
	Exercise of stock options, net of repurchases and repurchase liability for early exercises	—		—	—		—	—		—	—		—	563		1		24		—			—			25
	Issuance of Series C preferred stock for cash, net of issuance costs	—		—	—		—	—		—	4,230		4	—		—		9,750		—			—			9,754
	Deferred stock-based compensation	—		—	—		—	—		—	—		—	—		—		693		(693	)		—			—
	Amortization of deferred stock-based compensation	—		—	—		—	—		—	—		—	—		—		—		26			—			26
	Issuance of Series C preferred stock for services	—		—	—		—	—		—	21		—	—		—		50		—			—			50
	Net loss and comprehensive loss	—		—	—		—	—		—	—		—	—		—		—		—			(4,343	)		(4,343	)
Balance at December 31, 2004		—		—	4,522		5	16,483		16	4,251		4	10,950		11		25,204		(667	)		(21,687	)		2,886
	Exercise of stock options, net of repurchases and repurchase liability for early exercises	—		—	—		—	—		—	—		—	5,130		5		563		—			—			568
	Issuance of Series D redeemable convertible preferred stock for cash, net of issuance costs	5,811		16,842	—		—	—		—	—		—	—		—		—		—			—			—
	Common stock warrants exercised	—		—	—		—	—		—	—		—	14		—		33		—			—			33
	Deferred stock-based compensation	—		—	—		—	—		—	—		—	—		—		1,244		(1,244	)		—			—
	Amortization of deferred stock-based compensation	—		—	—		—	—		—	—		—	—		—		—		394			—			394
	Stock warrants issued for services	—		—	—		—	—		—	—		—	—		—		9		—			—			9
	Net income and comprehensive income	—		—	—		—	—		—	—		—	—		—		—		—			2,295			2,295
Balance at December 31, 2005		5,811	$	16,842	4,522	$	5	16,483	$	16	4,251	$	4	16,094	$	16	$	27,053	$	(1,517	)	$	(19,392	)	$	6,185

See accompanying notes.

F-5

DivX, Inc.
Consolidated statements of cash flows

Year ended December 31, (in thousands)			2003			2004			2005
Operating activities
Net income (loss)			$	(3,933	)	$	(4,343	)	$	2,295
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
	Depreciation and amortization			586			610			1,022
	Loss on disposal of assets			25			—			—
	Stock and warrants issued for services			16			50			9
	Stock-based compensation			159			26			394
	Changes in operating assets and liabilities:
		Accounts receivable, net		(611	)		(970	)		(1,952	)
		Prepaids and other assets		60			(1,081	)		432
		Accounts payable		23			1,260			(755	)
		Accrued liabilities		197			1,532			(198	)
		Accrued compensation and related benefits		100			423			591
		Deferred rent		—			761			(121	)
		Deferred revenue, net		2,077			702			473
Net cash provided by (used in) operating activities				(1,301	)		(1,030	)		2,190
Investing activities
Purchase of property and equipment				(349	)		(2,283	)		(885	)
Restricted cash				130			(250	)		—
Net cash used in investing activities				(219	)		(2,533	)		(885	)
Financing activities
Net proceeds from issuance of preferred stock				—			9,754			16,842
Net proceeds from issuance of common stock				46			232			701
Repurchase of unvested stock				—			—			(20	)
Payments on capital lease obligations				(509	)		(473	)		(272	)
Proceeds from notes payable				1,211			1,006			761
Payments on notes payable				(322	)		(609	)		(1,216	)
Net cash provided by financing activities				426			9,910			16,796
Net increase (decrease) in cash and cash equivalents				(1,094	)		6,347			18,101
Cash and cash equivalents at beginning of the year				1,681			587			6,934
Cash and cash equivalents at end of the year			$	587		$	6,934		$	25,035
Supplemental information
Income taxes paid			$	201		$	373		$	1,028
Capital leases for acquisition of computer equipment			$	—		$	573		$	—
Interest paid			$	71		$	113		$	115

See accompanying notes.

F-6

DivX, Inc.

Notes to consolidated financial statements

December 31, 2005

1. Organization and summary of significant accounting policies

 DivX, Inc. (the Company) was incorporated in Delaware on May 16, 2000. The Company creates products and services designed to improve consumers' media experience. The Company's first product offering was a video compression-decompression software library, or codec. In addition to its codec, the Company provides consumer software, including the DivX Player application, from its website, DivX.com. The Company also licenses its technologies to consumer hardware device manufacturers and certifies their products to ensure the interoperable support of DivX-encoded content. In addition to technology licensing to consumer hardware device manufacturers, the Company currently generates revenue from software licensing, advertising, distributing third-party software and services related to digital media distribution.

Principles of consolidation

The consolidated financial statements include the accounts of DivX, Inc. and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes to the financial statements. Actual results could differ from those estimates.

Unaudited pro forma stockholders' equity presentation

The unaudited pro forma stockholders' equity at December 31, 2005 reflects the effect of the automatic conversion of all shares of convertible preferred stock and redeemable convertible preferred stock into 33,299,790 shares of common stock as though the completion of the planned initial public offering occurred on December 31, 2005. Shares of common stock issued in such initial public offering and any related net proceeds are excluded from such pro forma information.

Cash and cash equivalents

Cash and cash equivalents consist of cash, money market funds and other highly liquid investments with original maturities of three months or less from the date of purchase. As of December 31, 2005, the Company had $270,000 of restricted cash primarily related to an unused letter of credit.

F-7

Long-lived assets

Long-lived assets, consisting primarily of office and computer equipment, are recorded at cost. Depreciation is computed using the straight-line method over the shorter of the useful lives of the assets or the remaining associated lease terms, which are three to seven years.

Long-lived assets, such as property and equipment, are evaluated for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable in accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The Company assesses the value of the assets based on the future cash flows the assets are expected to generate, and recognizes an impairment loss when the estimated undiscounted future cash flows that are expected to result from the use of the assets, plus net proceeds expected from disposition of the assets (if any), are less than the carrying value of the assets. When an impairment is identified, the Company reduces the carrying amount of the assets to estimated fair value based on a discounted cash flow approach or, when available and appropriate, comparable market values.

Concentration of credit risk

A small number of customers account for a significant percentage of the Company's revenues as follows:

Year ended December 31,	2003		2004		2005
Google, Inc.	*		10	%	15	%
Koninklijke Philips Electronics N.V.	*		13		13
Gator Corporation	27	%	*		*

*

Less than 10% of net revenue.

As the Company does not ship inventory, credit is generally extended given consideration to the small financial commitment of the Company's resources to any customer transaction. A cash deposit is generally not required.

Accounts receivable and allowance for uncollectible sales and accounts

The Company has reflected in its balance sheets, on a net basis, amounts invoiced to customers that are unpaid when the associated revenue is unearned. The amount of unearned revenue that has been offset against the related accounts receivables totaled $470,000 and $1,412,000 at December 31, 2004 and 2005, respectively.

The Company maintains a reserve for estimated uncollectible sales and accounts. The Company estimates the allowance for uncollectible sales and accounts based on its historical experience.

F-8

In evaluating the adequacy of this reserve the Company considers the length of time the receivables are past due, specific customer creditworthiness, geographic risk, the current business environment and historical discrepancies in business volume reports received from customers. In cases where the customer is new and has an undemonstrated ability to pay, the Company delays recognition of the revenue until such time as the new customer has paid unless significant and persuasive evidence exists that the customer is creditworthy.

Actual future write-offs may differ from the allowances the Company has estimated, which may have a material effect on the Company's future results of operations and financial condition.

Fair value of financial instruments

Financial instruments, including cash and cash equivalents, accounts receivable, net of applicable allowances, accounts payable and accrued liabilities, are carried at cost, which management believes approximates fair value because of the short-term maturity of these instruments.

Deferred rent

Rent expense on noncancellable leases containing known future scheduled rent increases are recorded on a straight-line basis over the term of the respective leases beginning when the Company takes possession of the leased property. The difference between rent expense and rent paid is accounted for as deferred rent. Landlord construction allowances and other such lease incentives are recorded as deferred rent and are amortized on a straight-line basis as a reduction to rent expense.

Revenue recognition

The Company evaluates revenue recognition for transactions to sell products and services and to license technology using the criteria set forth by the Securities Exchange Commission in Staff Accounting Bulletin No. 104, Revenue Recognition, or SAB No. 104. SAB No. 104 states that revenue is recognized when each of the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller's price to the buyer is fixed and determinable and collectibility is reasonably assured. In accordance with EITF Issue 00-21, revenue from multiple-element arrangements is allocated among separate elements based on their relative fair values, provided the elements have value on a stand-alone basis, there is objective and reliable evidence of fair value, the arrangement does not include a general right of return relative to the delivered item and delivery or performance of the undelivered item(s) is considered probable and substantially in the Company's control. The maximum revenue recognized on a delivered element is limited to the amount that is not contingent upon the delivery of additional items.

F-9

The Company's licensing revenue is primarily derived from royalties paid to the Company by licensees of the Company's intellectual property rights. Revenue in such transactions is recognized during the period in which such customers report to the Company the number of royalty-eligible units that they have shipped. Revenue from guaranteed minimum-royalty licenses is recognizable upon delivery of the technology license when no further obligations of the Company exist. In certain guaranteed minimum-royalty licenses, the Company enters into extended payment programs with customers. Revenue related to such extended payment programs is recognized when periodic payments become due to the Company. Royalties and other license fees are recorded net of reserves for estimated losses, and are recognized when all revenue recognition criteria have been met. The Company makes judgments as to whether collectibility can be reasonably assured based on the licensee's recent payment history unless significant and persuasive evidence exists that the customer is creditworthy. In the absence of a favorable collection history or significant and persuasive evidence that the customer is creditworthy, the Company recognizes revenue upon receipt of cash, provided that all other revenue recognition criteria have been met.

The Company recognizes revenue in connection with its software products pursuant to the requirements of Statement of Position ("SOP") No. 97-2, Software Revenue Recognition, as amended by SOP No. 98-9, Software Revenue Recognition with Respect to Certain Arrangements. During 2003, the Company provided consultation services that were sold separately under consulting engagement contracts. Consulting revenues from these arrangements were accounted for separately from software license revenues because the arrangements qualify as service transactions as defined in SOP 97-2. Revenues for consulting services are recognized as the services are performed. For multiple element software arrangements, the Company recognizes revenue under the residual method when Company-specific objective evidence of fair value exists for all of the undelivered elements of the arrangement, but does not exist for one or more of the delivered elements in the arrangement. Under the residual method, at the outset of the arrangement with a customer, the Company defers revenue for the fair value of its undelivered elements and recognizes the revenue for the remainder of the arrangement fee attributable to the elements initially delivered, such as software licenses, when the criteria in SOP 97-2 have been met. If vendor specific objective evidence does not exist for an undelivered element in a software arrangement, such as distribution or other term-based arrangements for which the license fee includes support during the arrangement term, revenue is recognized over the term of the contractual support period or, if unspecified, 24 to 36 months (depending on the estimated length of the product life cycle, which approximates the support period for the specific product), commencing upon delivery of the Company's software to the customer. Royalty revenue from license agreements with independent software vendors ("ISVs") is recognized upon receipt of reports from licensees stating the number of products implementing the Company's technologies on which royalties are due. In the case of prepayments received from

F-10

an ISV when the Company provides ongoing support to the ISV in the form of future upgrades, enhancements or other services over the term of the arrangement, revenue is recognized ratably over the term of the contract, as vendor specific objective evidence does not exist for future support services to be provided.

So long as all of the other elements of revenue recognition are met, the Company recognizes revenues on services during the period such services are provided. The Company is paid for distributing certain third-party software when such software is downloaded or installed via the Company's website. The related distribution fees are recognized based on the number of downloads and installations. The Company is also paid by content providers and commercial content users to encode content into the DivX media format, and recognizes related revenues when such encoding services are provided. Additionally, the Company is paid service fees as a percentage of transaction revenue for electronically distributing encoded media for content providers, and recognizes related revenues in the period third-party reports on such transactions are received.

Product development costs

The Company includes research and development costs as part of product development. The Company accounts for research and development costs in accordance with several accounting pronouncements, including SFAS No. 2, Accounting for Research and Development Costs, and SFAS No. 86, Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed. SFAS No. 86 specifies that costs incurred internally in researching and developing a computer software product should be charged to expense until technological feasibility has been established for the product. Once technological feasibility is established, all software costs should be capitalized until the product is available for general release to customers. Judgment is required in determining when technological feasibility of a product is established. The Company has determined that technological feasibility for its software products is reached shortly before the products are available for general release to customers. Through December 31, 2005, the Company has expensed all software development costs when incurred because costs incurred after technological feasibility was established and prior to commercial availability were not material. Additionally, the Company incurs website development costs. Such costs are accounted for in accordance with EITF Issue 00-2, Accounting for Web Site Development Costs, and SOP 98-1, Accounting for the costs of Computer Software Developed or Obtained for Internal Use. Through December 31, 2005, costs required to be capitalized, such as software acquired or built while in the web site application and infrastructure development stage have not been material, and as a result all related development costs have been expensed in the period incurred.

F-11

Income taxes

The Company accounts for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. Deferred income tax assets or liabilities are recognized based on the temporary differences between financial statement and income tax basis of assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to reverse. Deferred income tax expenses or credits are based on the changes in the deferred income tax assets or liabilities from period to period. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized. The Company also determines its tax contingencies in accordance with SFAS No. 5, Accounting for Contingencies. The Company records estimated tax liabilities to the extent the contingencies are probable and can be reasonably estimated.

Advertising

The Company expenses advertising costs as incurred. Advertising expenses for the years ended December 31, 2003, 2004 and 2005, were approximately $3,000, $8,000 and $65,000, respectively.

Net income (loss) per share data

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding, net of shares subject to repurchase by the Company, during the period. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding, including the dilutive effects of common stock equivalents outstanding during the period using the treasury-stock method. The common stock equivalent shares are comprised of stock options, unvested common shares subject to repurchase, warrants, redeemable convertible preferred stock and convertible preferred stock, and are only included in the calculation of diluted net income per share when their effect is dilutive.

F-12

The following table sets forth the computation of basic and diluted net income (loss) per share:

Year ended December 31, (in thousands, except per share data)		2003			2004			2005
Numerator:
	Net income (loss)	$	(3,933	)	$	(4,343	)	$	2,295
Denominator:
	Weighted-average common shares outstanding (basic)		8,765			10,631			14,646
	Common equivalent shares from redeemable convertible preferred stock and convertible preferred stock		—			—			28,634
	Common equivalent shares from common and preferred stock warrants		—			—			1,013
	Common equivalent shares from options to purchase common stock and unvested shares of common stock subject to repurchase		—			—			5,092
	Weighted-average common shares outstanding (diluted)		8,765			10,631			49,385
	Basic net income (loss) per share	$	(0.45	)	$	(0.41	)	$	0.16
	Diluted net income (loss) per share	$	(0.45	)	$	(0.41	)	$	0.05

Potentially dilutive securities not included in the calculation of diluted net income (loss) per share because to do so would be anti-dilutive are as follows:

Year ended December 31, (in thousands)	2003	2004	2005
Convertible preferred stock	23,221	25,330	—
Common and preferred stock warrants	1,321	1,491	50
Options to purchase common stock	7,215	8,258	—
Shares of common stock subject to repurchase	222	671	—
Totals	31,979	35,750	50

Stock-based compensation

For employee stock options granted prior to December 31, 2005, the Company recorded compensation expense based upon their intrinsic value on the date of grant pursuant to Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees and related interpretations, and has adopted the disclosure-only alternative of SFAS No. 123, Accounting for Stock-Based Compensation ("SFAS No. 123") and SFAS No. 148, Accounting for Stock Based Compensation-Transition and Disclosures.

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For non-employees, the Company accounts for stock-based compensation in accordance with Emerging Issues Task Force No. 96-18, Accounting Recognition for Equity Instruments That are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods for Services. Equity instruments awarded to non-employees are periodically remeasured as the underlying awards vest unless the instruments are fully vested, immediately exercisable and nonforfeitable on date of grant.

The Company grants stock options to purchase common stock to employees with exercise prices equal to the value of the underlying stock, as determined by the board of directors on the date the equity award was granted. While the board of directors did not rely on third-party valuation analyses, the board of directors determined the value of the underlying stock by considering a number of factors, including historical and projected financial results, the risks the Company faced at the time, the preferences of the Company's preferred stockholders and the lack of liquidity of the Company's common stock.

In connection with the preparation of the financial statements for the Company's initial public offering and solely for the purposes of accounting for stock-based compensation for financial statement purposes, the Company's management reassessed the fair value of the Company's common stock for the equity awards granted on or after October 1, 2004 (which coincided approximately with the Company's Series C preferred stock financing), based in part upon a retrospective third-party valuation analysis. Based upon this reassessment of the fair value of the Company's common stock, the Company recorded deferred stock-based compensation to the extent that the reassessed value of the Company's common stock at the date of the grant exceeded the exercise price of the equity awards. Reassessed values are inherently uncertain and highly subjective. The Company recorded deferred compensation of $693,000 during 2004 and $1,244,000 during 2005. For stock options granted prior to September 30, 2004, no expense was recorded as management determined that the estimated fair value of the Company's stock at the date of grant did not exceed the exercise price. Deferred stock-based compensation is being amortized on a straight-line basis over the stock option vesting period of generally four years. In 2005, the Company recognized stock-based compensation expense related to options granted to employees based on the reassessed values of the common stock underlying the stock option awards. The expense associated with the amortization of deferred

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stock-based compensation related to options is classified in the Company's statements of operations as follows:

Year ended December 31,	2003		2004		2005
Total cost of revenues	$	—	$	—	$	1
Selling, general and administrative		159		16		252
Product development		—		10		141
Total	$	159	$	26	$	394

The table below shows the expected amortization of deferred stock-based compensation expense over the next four years for all options granted as of December 31, 2005 assuming all employees remain employed by the Company for their remaining vesting periods:

Expense by year	2006		2007		2008		2009
Amortization of deferred stock-based compensation related to options granted to purchase shares of common stock	$	458,000	$	455,000	$	430,000	$	174,000

The table below summarizes options granted during the period from October 1, 2004 through December 31, 2005, which resulted in stock-based compensation expense. The reassessed fair

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values were based in part on a retrospective analysis conducted by a third party valuation specialist.

Month ended		Number of shares	Exercise price per share		Intrinsic value per share		Deemed fair value of common stock at grant
Options granted:
	October 2004	265,500	$	0.40	$	0.64	$	1.04
	November 2004	158,800		0.40		0.69		1.09
	December 2004	551,328		0.40		0.75		1.15
	January 2005	405,300		0.40		0.81		1.21
	February 2005	286,800		0.40		0.87		1.27
	March 2005	116,000		0.50		0.83		1.33
	April 2005	11,500		0.50		0.90		1.40
	May 2005	43,800		0.50		0.97		1.47
	June 2005	49,500		0.50		1.05		1.55
	July 2005	75,000		0.50		1.13		1.63
	August 2005	21,500		0.50		1.21		1.71
	September 2005	58,500		0.50		1.30		1.80
	October 2005	18,000		0.70		1.19		1.89
	November 2005	402,000		0.90		1.57		2.47
	December 2005	—		—		—		3.23
		2,463,528

The pro forma information regarding net income (loss) and net income (loss) per share detailed below has been accounted for as if the Company had accounted for stock-based awards under the fair value method prescribed in SFAS No. 123. The fair value of the Company's options to purchase common stock was estimated at the date of grant using the minimum value pricing model for 2003, 2004 and 2005.

The fair value of stock-based awards was estimated using the following weighted average assumptions for 2003, 2004, and 2005:

Year ended December 31,	2003		2004		2005
Expected life (in years)	5		5		5
Interest rate	4.5	%	4.5	%	4.6	%
Volatility	N/A		N/A		N/A
Dividend yield	—		—		—

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Using the minimum value pricing model for the estimated weighted average fair value of an option to purchase one share of common stock granted during 2003, 2004, and 2005 was $0.06, $0.58 and $1.65 per option, respectively.

The following table illustrates the effect on net income (loss) and net income (loss) per share as if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based awards for fiscal 2003, 2004, and 2005:

Year ended December 31, (in thousands, except per share data)		2003			2004			2005
Net income (loss)		$	(3,933	)	$	(4,343	)	$	2,295
Add: Stock-based compensation expense included in reported net income (loss), net of tax			159			26			394
Deduct: Stock-based compensation expense under the fair value method, net of tax			(188	)		(37	)		(309	)
Pro forma net income (loss)		$	(3,962	)	$	(4,354	)	$	2,380
Basic net income (loss) per share
	As reported	$	(0.45	)	$	(0.41	)	$	0.16
	Pro forma	$	(0.45	)	$	(0.41	)	$	0.16
Diluted net income (loss) per share
	As reported	$	(0.45	)	$	(0.41	)	$	0.05
	Pro forma	$	(0.45	)	$	(0.41	)	$	0.05

In December 2004, the FASB issued SFAS 123(R), Share-Based Payment, which is a revision of SFAS 123. SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their grant date fair values and does not allow the previously permitted pro forma disclosure-only method as an alternative to financial statement recognition. SFAS 123(R) supersedes APB 25, and related interpretations and amends SFAS No. 95, Statement of Cash Flows. Effective January 1, 2006, the Company will adopt SFAS 123(R). As the Company is preparing to transition from a non-public entity to a public entity through an initial public offering and has historically used the minimum value method to measure its share-based payments for pro-forma footnote disclosure purposes only, the Company will apply the prospective method to awards granted through December 31, 2005. The Company has unrecognized compensation cost relating to awards issued prior to December 31, 2005 of $1,517,000. Pursuant to SFAS 123(R), as the Company utilized the minimum value method, the Company will continue to recognize compensation expense relating to unvested awards using APB 25 which is the same accounting principle originally applied to those awards. To the extent that the Company grants additional equity awards to employees subsequent to January 1, 2006, the Company will recognize compensation expense based on the fair value of these awards. The unrecognized

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compensation cost relating to those awards will be recognized in the statement of operations over the requisite service period. The Company anticipates it will grant additional employee stock options in 2006 as part of its regular annual equity compensation program. The fair value of these grants is not included in the amount above, as the effect of these grants will depend on the number of share-based payments granted as part of the authorized grant and the then current fair values and cannot be determined at this time.

Comprehensive income (loss)

SFAS No. 130, Reporting Comprehensive Income, establishes standards for reporting comprehensive income (loss) and its components in the financial statements. Net income (loss) and other comprehensive income (loss), shall be reported net of their related tax effect to arrive at comprehensive income (loss). To date, comprehensive income (loss) equals the net income (loss) as reported.

Reclassifications

Certain prior-period amounts have been reclassified to conform to the current-period presentation.

F-18

DivX, Inc.

Notes to consolidated financial statements (continued)

December 31, 2005

2. Property and equipment

 Property and equipment consists of the following:

Year ended December 31, (in thousands)	2004			2005
Computer equipment	$	3,019		$	3,679
Software		686			776
Leasehold improvements		927			1,002
Furniture and fixtures		271			271
Office equipment		100			160
		5,003			5,888
Less accumulated depreciation and amortization		(1,990	)		(3,012	)
	$	3,013		$	2,876

3. Redeemable Series D convertible preferred stock and stockholders' equity

Series A, Series B, and Series C convertible preferred stock

Each share of Series A, Series B, and Series C preferred stock is convertible into 1.49, 1 and 1 shares of common stock, respectively. The Series A, Series B, and Series C preferred stock will automatically convert into shares of common stock if authorized by the vote of holders of at least two-thirds of the Series A, Series B and Series C preferred stock voting together as a single class on an as-converted to common stock basis or if the Company closes a firm commitment underwritten public offering with aggregate net proceeds (after deduction of underwriting discounts, commissions and fees) of at least $40,000,000 and at a price per share of at least $4.3824. In addition, the terms include anti-dilution provisions whereby the conversion ratio is adjusted due to stock splits, issuance of a stock dividend on outstanding shares of common stock or the issuance of equity securities at a consideration per share less than the conversion price in effect immediately prior to such issuance, subject to certain exceptions.

Dividends on the Series A, Series B and Series C preferred stock are non-cumulative, but if dividends are declared, each share of Series A, Series B and Series C preferred stock is entitled to $0.1125, $0.029 and $0.1859 per annum, respectively, on a pari passu basis, subject to the prior payment of stated dividends on the Series D preferred stock and prior and in preference to payment of any dividends on the common stock. Holders of the Series A, Series B and Series C preferred stock are entitled to vote together with holders of the common stock on all matters brought before holders of the common stock, and with holders of other series of preferred stock and separately as a class on certain other matters. Each share of Series A, Series B and Series C preferred stock is entitled to a number of votes equal to the number of shares of common stock issuable upon conversion.

F-19

Subject to prior payment of the liquidation preference on the Series D preferred stock and prior and in preference to the payment of any amounts in respect of common stock, (i) each share of Series A preferred stock is entitled to a liquidation preference between $0 and $1.25 per share, depending upon the aggregate liquidation value of the Company at the time of such liquidation, (ii) each share of Series B preferred stock is entitled to a liquidation preference between $0 and $0.7252 per share, depending upon the aggregate liquidation value of the Company at the time of such liquidation and (iii) each share of Series C preferred stock is entitled to a liquidation preference of $2.3232 per share. To the extent there are proceeds available for distribution in respect of the Series A, Series B and Series C preferred stock upon liquidation, such amounts would be applied first to satisfy the Series C liquidation preference in full, then to satisfy the Series B liquidation preference in full, and finally to satisfy the Series A liquidation preference in full. Proceeds on liquidation remaining after satisfaction of such preferences would be distributed ratably to the holders of common stock and preferred stock on an as-if converted basis, subject to certain limits on the aggregate amounts payable to the holders of the Series C and Series D preferred stock. A liquidation includes a merger, consolidation or sale of all or substantially all of the assets of the Company, subject to certain exceptions.

Redeemable Series D convertible preferred stock

Each share of Series D preferred stock is convertible into one share of common stock. The Series D preferred stock will automatically convert into shares of common stock if authorized by the vote of holders of a majority of the Series D preferred stock or if the Company closes a firm commitment underwritten public offering with aggregate net proceeds (after deduction of underwriting discounts, commissions and fees) of at least $40,000,000 and at a price per share of at least $4.3824. In addition, the terms include anti-dilution provisions whereby the conversion ratio is adjusted due to stock splits, issuance of a stock dividend on outstanding shares of common stock or the issuance of equity securities at a consideration per share less than the conversion price in effect immediately prior to such issuance, subject to certain exceptions.

Dividends on the Series D preferred stock are non-cumulative, but if dividends are declared, each share of Series D preferred stock is entitled to $0.2337 per annum prior to and in preference to the payment of any dividends on the Series A, Series B and Series C preferred stock and the common stock. Holders of the Series D preferred stock are entitled to vote together with the holders of the common stock on all matters brought before holders of the common stock, and with holders of other series of preferred stock and separately as a class on certain other matters. Each share of Series D preferred stock is entitled to a number of votes equal to the number of shares of common stock issuable upon conversion. Each share of Series D preferred stock is entitled to a liquidation preference of $2.9216 per share prior and in

F-20

preference to the payment of any amounts in respect of Series A, Series B and Series C preferred stock and common stock. Proceeds on liquidation remaining after satisfaction of liquidation preferences payable on the Series A, Series B, Series C and Series D preferred stock would be distributed ratably to the holders of common stock and preferred stock on an as-if converted basis, subject to certain limits on the aggregate amounts payable to the holders of the Series C preferred stock and Series D preferred stock. A liquidation includes a merger, consolidation or sale of all or substantially all of the assets of the Company, subject to certain exceptions.

The holders of at least a majority of the then outstanding shares of Series D preferred stock, voting together as a single class, may, by providing written notice to the Company, require the Company, to the extent it may lawfully do so, to redeem up to all of the then outstanding shares of Series D preferred stock on or after October 19, 2010. The Company shall effect such redemption by paying in cash in exchange for each share of Series D preferred stock a sum equal to the original Series D issue price plus declared and unpaid dividends with respect to such share.

In accordance with Accounting Series Release 268, Redeemable Preferred Stock, the Company has excluded the Redeemable Series D Convertible Preferred Stock from its caption Stockholders' Equity because redemption is outside the control of the Company. While the shares are redeemable on or after a specified date at the option of the shareholder, the shareholder also may convert into shares of common stock of the Company at its option and the conversion is considered substantive. As such, the Company considers the Redeemable Series D Convertible Preferred Stock contingently redeemable.

Stock options

In December 2000, the Company adopted the 2000 Stock Incentive Plan (the "2000 Plan"). The Company has reserved 13,158,022 shares of common stock for issuance under the 2000 Plan. Generally, options granted under the 2000 Plan are exercisable for up to 10 years from the date of grant and vest over a four-year period. The Plan allows for early exercise of unvested options. In such circumstances, the Company typically allows employees to exercise stock options prior to vesting. Upon the exercise of an option prior to vesting, the Company has a right to repurchase such shares at the original exercise price to the extent that they have not vested in accordance with the related option agreement. In accordance with EITF 00-23, Issues Related to Accounting for Stock Compensation under APB Opinion No. 25 and FASB Interpretation No. 44, the consideration received for the exercise of an unvested stock option granted after the effective date of EITF 00-23 is to be considered a deposit of the exercise price, and thus is a liability that is recorded by the Company. The liability associated with this potential for repurchase, and the related shares, are only reclassified into equity as the option

F-21

award vests. As a result, the Company has recorded liabilities of $208,000 and $288,000 as of December 31, 2004 and 2005, respectively, for the unvested portion of early stock option exercise.

Following is a summary of all stock option activity for 2003, 2004 and 2005:

		Options		Weighted-average exercise price
Balance at December 31, 2002		5,982,488		$	0.11
	Granted	1,988,415			0.06
	Exercised	(616,522	)		0.07
	Canceled	(106,000	)		0.06
Balance at December 31, 2003		7,248,381		$	0.10
	Granted	2,065,128			0.24
	Exercised	(871,998	)		0.27
	Canceled	(150,448	)		0.09
Balance at December 31, 2004		8,291,063		$	0.12
	Granted	1,487,900			0.56
	Exercised	(5,702,405	)		0.12
	Canceled	(681,632	)		0.24
Balance at December 31, 2005		3,394,926		$	0.29

The number of shares subject to options outstanding at December 31, 2004 and 2005 includes 670,985 and 1,159,927 of shares at a weighted average exercise price of $0.31 and $0.25, respectively, that were unvested at December 31, 2004 and 2005.

F-22

As of December 31, 2005, 2,601,349 shares were available for future grant under the 2000 Plan. The following is a breakdown of the options outstanding and exercisable under the 2000 Plan as of December 31, 2005:

Exercise price	Options outstanding and exercisable	Weighted-average remaining life in years	Weighted-average exercise price of options outstanding and exercisable
$0.06	1,307,969	7.1	$	0.06
$0.16	779,909	4.9		0.16
$0.40	587,098	8.9		0.40
$0.50	300,050	9.4		0.50
$0.70	17,900	9.8		0.70
$0.90	402,000	9.8		0.90
Total or Average	3,394,926	7.5	$	0.28

Warrants

At December 31, 2005, warrants to purchase 1,496,039 shares were issued and vested, including the warrants described below. The fair value of the services recorded as expense for the years ended December 31, 2003, 2004 and 2005, was $16,000, $0 and $9,000, respectively. The

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Company recognizes compensation as the services are provided and shares are vested. The following table summarizes the historical warrant issuances by the Company:

Security issuable upon exercise	Shares issuable	Grant date	Exercise price		Term	Purpose of grant
Common stock	100,000	December 2000	$	0.16	10 years	Acquisition of assets
Common stock	10,000	January 2001		1.25	5 years	Lending arrangement
Common stock	50,000	April 2001		4.00	9.5 years	Services
Common stock	3,000	June 2001		1.25	5 years	Lending arrangement
Common stock	1,000,000	April 2002		0.36	7 years	Services provided by related party and affiliates
Common stock	5,000	September 2002		0.36	5 years	Services
Common stock	100,000	June 2003		0.36	5 years	Services
Series B convertible preferred stock	53,482	September 2002 through July 2003		0.36	5-10 years	Lending arrangement
Common stock	155,187	April 2004		2.32	5 years	Placement of preferred stock
Common stock	19,370	November 2005		2.32	4 months	Services

The Company determined the value of these warrants at the date of grant using the Black-Scholes option pricing model based on the estimated fair value of the underlying stock, a volatility rate ranging from 75% to 100%, no dividends, a risk-free interest rate ranging from 4% to 6%, and an expected life that coincides with the maximum exercise periods of the warrants.

Shares of common stock reserved for issuance

As of December 31, 2005, shares of common stock reserved for issuance were as follows:

Series A convertible preferred stock	6,754,320
Series B convertible preferred stock	16,483,176
Series C convertible preferred stock	4,251,194
Series D convertible preferred stock	5,811,100
Common stock options outstanding	3,394,926
Common stock options available for grant	2,601,349
Warrants	1,496,039
Total common shares reserved for future issuance	40,792,104

F-24

Note receivable from stockholder/officer

At December 31, 2004 and 2005, the Company had a note receivable for approximately $71,000 and $75,000, respectively, from a stockholder and officer of the Company. At December 31, 2004 and 2005, the note was fully reserved.

4. Financing arrangements

 The Company has a loan and security agreement whereby the Company can receive term loans, due in 30 monthly installments, of up to $2,000,000 to finance eligible equipment. As of December 31, 2004 and 2005, $901,000 and $1,114,000 was outstanding under this equipment term loan agreement, respectively. Interest is payable monthly at the bank's prime rate plus 1%, not to go below 5.0%. The interest rate was 6.25% and 8.25% at December 31, 2004 and 2005, respectively.

The financing arrangements are secured by substantially all of the assets of the Company. The Company must adhere to various financial covenants, including minimum tangible net worth and minimum liquidity. As of December 31, 2005 the Company was in compliance with its covenants and presently anticipates being in compliance through at least December 31, 2006.

The financing arrangements are subject to events of default, including if (i) a material adverse change occurs in the Company's financial condition, (ii) the lender believes the prospect of payment or performance of the indebtedness is impaired or (iii) the lender in good faith deems itself insecure. If an event of default occurs, all amounts due under the term loan agreement would become due and payable. While there are subjective acceleration clauses contained in these financing arrangements, the Company's management presently believes the likelihood of triggering acceleration to be remote.

Aggregate maturities of the Company's debt arrangements at December 31, 2005, are as follows (in thousands):

2006	$	720
2007		378
2008		16
Total	$	1,114

F-25

5. Commitments

Leases

The Company has multiple capital and operating leases for facilities and equipment expiring through 2009. Cost under capital leases was $1,900,000 at December 31, 2004 and 2005. Accumulated amortization under capital leases was $1,364,000 and $1,647,000 at December 31, 2004 and 2005, respectively. Amortization of equipment under capital lease obligations is included in depreciation expense. Some of the leases contain renewal and purchase options. Rent expense under operating leases was $259,000, $417,000, and $359,000 for the years ended December 31, 2003, 2004, and 2005, respectively.

Future minimum payments under capital leases and non-cancelable operating leases with initial terms of one year or more consists of the following at December 31, 2005 (in thousands):

	Operating leases		Capital leases
2006	$	500	$	52
2007		483		42
2008		498		42
2009		127		35
Total minimum lease payments	$	1,608	$	171
Less amount representing interest				(20	)
Present value of future minimum capital lease obligations				151
Less amount due in one year				(43	)
Long-term portion of capital lease obligations			$	108
Rents to be received from subtenants in 2006	$	14

In June 2004, pursuant to an office lease agreement, the Company established a $250,000 letter of credit which expires in March 2009, but automatically renews subsequent to March 2009 on a yearly basis unless the Company is notified by the lender.

6. Contingencies

 The Company has been involved in intellectual property litigation that had the potential to adversely affect operating results. While the Company prevailed in such matters in the past, it may not prevail in any such matters in the future. Although the Company licenses intellectual property from a variety of sources, other owners of intellectual property rights have sent notifications to the Company indicating that they believe that the Company may be infringing on their intellectual property rights.

F-26

While the Company has filed patent applications, copyright applications and applications for trademark registrations, these applications may not result in the issuance of patents, registered copyrights or trademarks, and the Company may not be able to obtain all necessary intellectual property rights. Further, even if patents, copyrights or trademarks are granted, other parties may contest the Company's intellectual property rights.

The Company from time to time is involved in legal proceedings or encounters regulatory or other matters in the ordinary course of business that could result in unasserted or asserted claims or litigation. At December 31, 2005, there are no matters that are considered probable under SFAS No. 5, and as a result no amounts have been accrued.

7. Income taxes

 The components of the income tax provision were as follows (in thousands):

Year ended December 31,	2003		2004		2005
Federal	$	—	$	—	$	—
State		—		—		34
Foreign		201		373		1,028
	$	201	$	373	$	1,062

The following is a reconciliation of the expected statutory federal income tax provision to the Company's actual income tax provision:

Year ended December 31, (in thousands)	2003			2004			2005
Expected income tax provision at federal statutory tax rate	$	(1,306	)	$	(1,390	)	$	1,175
State income tax provision, net of federal benefit		(214	)		(228	)		193
Stock compensation		71			10			164
Foreign income taxes		201			373			1,028
Valuation allowance		1,778			2,256			33
Tax credits		(253	)		(508	)		(1,884	)
Other		(76	)		(140	)		353
Income tax expense	$	201		$	373		$	1,062

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Significant components of the Company's deferred tax assets as of December 31, 2004 and 2005, are shown below:

(in thousands)		2004			2005
Deferred tax assets:
	Net operating loss carryforwards	$	5,844		$	3,644
	Research and development and other tax credits		1,246			3,111
	Allowance for uncollectible sales		424			707
	Deferred revenue		392			730
	Deferred rent		310			261
	Other, net		471			267
Total deferred tax assets			8,687			8,720
Valuation allowance for deferred tax assets			(8,687	)		(8,720	)
Net deferred tax assets		$	—		$	—

At December 31, 2005, the Company had U.S. federal and California tax net operating loss carryforwards of approximately $9,257,000 and $7,025,000, respectively. The U.S. federal and California tax loss carryforwards will begin to expire in 2020 and 2010, respectively, unless previously utilized. At December 31, 2005, the Company had U.S. federal research tax credit carryforwards of approximately $1,196,000 which will begin to expire in 2021 unless previously utilized and California research credit carryovers of $1,217,000 which do not expire. At December 31, 2005, the Company had California manufacturer's investment credit carryovers of $113,000 which will begin to expire in 2010 unless previously utilized. At December 31, 2005, the Company also had foreign tax credit carryforwards of $1,028,000 which will begin to expire in 2016 and California alternative minimum tax credit carryforwards of $35,000 which do not expire.

The Company has assessed the likelihood of utilizing the deferred tax assets and considered both positive and negative evidence. The Company has factored in the inherent risk of forecasting revenue and expenses over an extended period of time, along with the potential risks associated with the business. Based on current information and available objective evidence, the Company has determined that there is uncertainty regarding its ability to realize the deferred tax assets. This information includes the Company's history of cumulative losses, the fact that the market in which it operates is intensely competitive, the lack of carryback capacity to realize deferred tax assets and the uncertainty regarding market acceptance of new and existing product categories. Because of the Company's history of losses, the Company was not able to determine that there was sufficient positive evidence to support the conclusion that it was more likely than not that it would be able to utilize the deferred tax assets by generating taxable income during the carryforward period. Therefore, as of December 31, 2004

F-28

and 2005, the Company had recorded a full valuation allowance on deferred tax assets of $8,687,000 and $8,720,000, respectively.

The Company may be subject to potential audits from various taxing authorities in the jurisdictions in which it does business. The Company believes it has adequately provided for any uncertain tax issues with federal, state and foreign tax authorities. Although the Company has determined that it is not probable, the most adverse resolution of these issues could result in additional charges to earnings in future periods. Based upon a consideration of all relevant facts and circumstances, the company does not believe the ultimate resolution of uncertain tax issues for all open tax periods will have a materially adverse effect upon its results of operations or financial condition.

The Company has had cumulative changes in its ownership structure during the last three years. Pursuant to Internal Revenue Code Sections 382 and 383, use of the Company's net operating loss and tax credit carryforwards may be limited in the event of a cumulative change in ownership of more than 50% within a three-year period. While the Company has not completed a formal analysis of how the stock ownership changes that it has experienced would affect the value of its carryforwards in relation to Sections 382 and 383, it does not expect that any such limitations would prevent the Company from utilizing its net operating losses prior to their expiration.

8. Employee retirement plan

 Effective January 1, 2001, the Company adopted a 401(k) defined contribution retirement plan covering all employees who have completed one month of service. Participants may contribute up to 15% of annual compensation. The Company may, at its sole discretion, match dollar for dollar up to 2% of gross wages. For the years ended December 31, 2003, 2004 and 2005, there were no matching contributions made by the Company.

9. Segment information

 The Company's operations are located primarily in the United States, and substantially all of its assets are located in San Diego, California. Revenues are derived from different geographies in the following manner:

(in thousands)	2003		2004		2005
North America	$	4,718	$	6,079	$	7,406
Europe		931		1,991		6,616
Asia		1,979		8,010		18,596
Rest of world		118		271		429
Total	$	7,746	$	16,351	$	33,047

F-29

10. Subsequent events

Recent acquisition

In March 2006, the Company acquired all of the assets of Corporate Green, a general partnership that developed an online community platform. The total purchase price consisted of an initial upfront cash payment of approximately $351,000 and a total of 208,950 shares of the Company's common stock. Of the common stock issued, 69,648 shares were fully vested as of the closing date for the acquisition. The remaining 139,302 shares of common stock received by the three former Corporate Green partners are subject to a lapsing right of repurchase by the Company tied to specified events, including their continued employment with the Company, provided that no such repurchase right shall exist in the event of termination of employment without cause. Upon the earlier of December 31, 2006, March 31, 2007, and June 30, 2007, and the occurrence of certain performance milestones, the Company will owe an aggregate of another $104,000, $104,000 and $31,000, respectively, to the three former Corporate Green partners. The three partners must also remain employees of the Company to earn the second and third milestone payments. In accordance with EITF Issue No. 95-8, Accounting for Contingent Consideration Paid to the Shareholders of an Acquired Enterprise in a Purchase Business Combination, the Company will record compensation expense for the 139,302 shares of common stock issued and the contingent additional cash payments to the three partners as the vesting of the shares of common stock and the additional payments are directly linked to continued employment.

Loan forgiveness

In April 2006, the Company forgave in its entirety the remainder of the outstanding amount of approximately $76,000 under a note receivable from a stockholder and officer of the Company.

Initial public offering

In April 2006, the board of directors of the Company authorized the initial public offering of the Company's common stock contemplated by the filing of this prospectus.

F-30

             shares

Common stock

Prospectus

JPMorgan

                 Banc of America Securities LLC

                                  Cowen & Company

                                                    Canaccord Adams

                                                                    Montgomery & Co., LLC

                           , 2006

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We and the selling stockholders are offering to sell, and seeking offers to buy, common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale or our common stock.

No action is being taken in any jurisdiction outside the United States to permit a public offering of the common stock or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus applicable to that jurisdiction.

Until                           , 2006, all dealers that buy, sell or trade in our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other expenses of issuance and distribution.

The following table sets forth all costs and expenses, other than underwriting discounts and commissions, payable by us in connection with the sale of the common stock being registered. All amounts shown are estimates except for the SEC registration fee, the NASD filing fee and the filing fee for The Nasdaq Stock Market.

	Amount to be Paid
SEC registration fee	$14,445
NASD filing fee	14,000
The Nasdaq Stock Market filing fee	*
Blue sky qualification fees and expenses	*
Printing and engraving expenses	*
Legal fees and expenses	*
Accounting fees and expenses	*
Transfer agent and registrar fees and expenses	*
Miscellaneous expenses	*
Total	$

*

To be provided by amendment.

Item 14. Indemnification of directors and officers.

We are incorporated under the laws of the State of Delaware. Section 145 of the Delaware General Corporation Law provides that a Delaware corporation may indemnify any persons who are, or are threatened to be made, parties to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person was an officer, director, employee or agent of such corporation, or is or was serving at the request of such person as an officer, director, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided that such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation's best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was illegal. A Delaware corporation may indemnify any persons who are, or are threatened to be made, a party to any threatened, pending or completed action or suit by or in the right of the corporation by reason of the fact that such person was a director, officer, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit provided such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation's best interests except that no indemnification is permitted without

II-1

judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him or her against the expenses which such officer or director has actually and reasonably incurred. Our amended and restated certificate of incorporation and amended and restated bylaws, each of which will become effective upon the completion of this offering, provide for the indemnification of our directors and officers to the fullest extent permitted under the Delaware General Corporation Law.

Section 102(b)(7) of the Delaware General Corporation Law permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duties as a director, except for liability for any:

•

transaction from which the director derives an improper personal benefit;

•

act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

•

unlawful payment of dividends or redemption of shares; or

•

breach of a director's duty of loyalty to the corporation or its stockholders.

Our amended and restated certificate of incorporation and amended and restated bylaws include such a provision. Expenses incurred by any officer or director in defending any such action, suit or proceeding in advance of its final disposition shall be paid by us upon delivery to us of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified by us.

Section 174 of the Delaware General Corporation Law provides, among other things, that a director who willfully or negligently approves of an unlawful payment of dividends or an unlawful stock purchase or redemption may be held liable for such actions. A director who was either absent when the unlawful actions were approved, or dissented at the time, may avoid liability by causing his or her dissent to such actions to be entered in the books containing minutes of the meetings of the board of directors at the time such action occurred or immediately after such absent director receives notice of the unlawful acts.

As permitted by the Delaware General Corporation Law, we have entered into indemnity agreements with each of our directors and executive officers, that require us to indemnify such persons against any and all expenses (including attorneys' fees), witness fees, damages, judgments, fines, settlements and other amounts incurred (including expenses of a derivative action) in connection with any action, suit or proceeding, whether actual or threatened, to which any such person may be made a party by reason of the fact that such person is or was a director, an officer or an employee of DivX or any of its affiliated enterprises, provided that such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to our best interests and, with respect to any criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful. The indemnification agreements also set forth certain procedures that will apply in the event of a claim for indemnification thereunder.

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At present, there is no pending litigation or proceeding involving any of our directors or executive officers as to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.

We have an insurance policy covering our officers and directors with respect to certain liabilities, including liabilities arising under the Securities Act or otherwise.

We have entered into an underwriting agreement which provides that the underwriters are obligated, under some circumstances, to indemnify our directors, officers and controlling persons against specified liabilities, including liabilities under the Securities Act.

Reference is made to the following documents filed as exhibits to this registration statement regarding relevant indemnification provisions described above and elsewhere herein:

Exhibit Document	Number
Form of Underwriting Agreement	1.1
Form of Amended and Restated Certificate of Incorporation to be effective upon completion of this offering	3.1
Form of Amended and Restated Bylaws to be effective upon completion of this offering	3.2
Form of Indemnity Agreement	10.1
Third Amended and Restated Stockholders' Agreement dated October 19, 2005 between the Registrant and certain of its stockholders	10.13

Item 15. Recent sales of unregistered securities.

The following list sets forth information regarding all securities sold by us since January 2003.

(1)

In June 2003, we issued a warrant to purchase an aggregate of 100,000 shares of our common stock, with an exercise price of $0.3626 per share, to a service provider. The warrant will terminate in June 2008.

(2)

In July 2003, we issued a warrant to purchase an aggregate of 22,500 shares of our Series B preferred stock, with an exercise price of $0.36 per share, to a lender. Upon completion of this offering, this warrant will become exercisable for 22,500 shares of our common stock. The warrant will terminate in July 2013.

(3)

In January 2004, we issued subordinated convertible promissory notes in an aggregate amount of $425,409.55 to a group of affiliated investors, and a subordinated convertible promissory note in an aggregate amount of $500,000 to another investor, each with a maturity date of December 31, 2004. These promissory notes were converted into shares of Series C preferred stock in connection with our Series C preferred stock financing. In connection therewith, we also issued warrants to purchase an aggregate of 261,475 shares of our Series B preferred stock to the group of affiliated investors and a warrant to purchase an aggregate of 307,695 shares of our Series B preferred stock to the other investor, each with an exercise price of $0.36 per share. These warrants were cancelled by their terms in connection with our Series C preferred stock financing.

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(4)

In March 2004, we issued a warrant to purchase an aggregate of 3,233 shares of our common stock, with an exercise price of $2.3232 per share, to an investor. The warrant was exercised in full in July 2005.

(5)

In March, April and October 2004, we issued and sold an aggregate of 4,251,194 shares of our Series C preferred stock to a group of investors at a price of $2.3232 per share for aggregate gross proceeds of approximately $9.9 million. Upon completion of this offering, these shares will convert into 4,251,194 shares of our common stock.

(6)

In April 2004, we issued 21 warrants to purchase an aggregate of 155,187 shares of our common stock, each with an exercise price of $2.3232 per share, to a group of investors. The warrants expire upon the completion of this offering if and to the extent not exercised prior thereto.

(7)

In November 2004, we issued a warrant to purchase an aggregate of 10,776 shares of our common stock, with an exercise price of $2.3232 per share, to an investor. The warrant was exercised in full in June 2005.

(8)

In October 2005, we issued and sold an aggregate of 5,811,100 shares of our Series D preferred stock to a group of affiliated investors at a price of $2.9216 per share for aggregate gross proceeds of approximately $16.9 million. Upon completion of this offering, these shares will convert into 5,811,100 shares of our common stock.

(9)

In November 2005, we issued a warrant to purchase an aggregate of 19,370 shares of our common stock, with an exercise price of $2.32 per share, to a service provider. The warrant was exercised in full in January 2006.

(10)

In March 2006, we issued an aggregate of 208,950 shares of our common stock at an aggregate value of $208,950, to a group of individuals in connection with our acquisition of certain assets previously held by those individuals and a general partnership of which they were partners.

(11)

From January 1, 2003 to March 31, 2006, we granted stock options under our 2000 stock option plan to purchase 5,352,429 shares of our common stock (net of expirations and cancellations) to our employees, directors and consultants, having exercise prices ranging from $0.06 to $1.50 per share. Of these, options to purchase 2,859,770 shares of common stock have been exercised through March 31, 2006 for aggregate consideration of $575,489, at exercise prices ranging from $0.06 to $0.90 per share.

The offers, sales and issuances of the securities described in paragraphs (1), (2), (3), (4), (7), (9) and (10) was deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act in that the issuance of securities to the recipients did not involve a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was an accredited or sophisticated person and had adequate access, through employment, business or other relationships, to information about us.

The offers, sales and issuances of the securities described in paragraphs (5), (6) and (8) were deemed to be exempt from registration under the Securities Act in reliance on Rule 506 of

II-4

Regulation D in that the issuance of securities to the accredited investors did not involve a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was an accredited investor under Rule 501 of Regulation D.

The offers, sales and issuances of the securities described in paragraph (11) were deemed to be exempt from registration under the Securities Act in reliance on Rule 701 in that the transactions were under compensatory benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of such securities were our employees, directors or bona fide consultants and received the securities under our 2000 stock option plan. Appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions had adequate access, through employment, business or other relationships, to information about us.

Item 16. Exhibits and financial statement schedules.

(a)     Exhibits.

Exhibit Number	Description of Document
1.1†	Form of Underwriting Agreement.
3.1†	Form of Amended and Restated Certificate of Incorporation to be effective upon completion of this offering.
3.2†	Form of Amended and Restated Bylaws to be effective upon completion of this offering.
4.1†	Form of Common Stock Certificate.
5.1†	Opinion of Cooley Godward LLP.
10.1†+	Form of Indemnity Agreement.
10.2+	2000 Stock Option Plan and Form of Stock Option Agreement thereunder.
10.3†+	2006 Equity Incentive Plan and Form of Stock Option Agreement thereunder.
10.4+	Amended and restated offer letter dated April 12, 2006, between the Registrant and Fred Gerson.
10.5+	Offer letter effective January 3, 2006, between the Registrant and Christopher McGurk.
10.6+	Employment offer letter dated November 21, 2002, as amended, between the Registrant and Kevin Hell.
10.7+	Employment offer letter dated April 20, 2004 between the Registrant and David J. Richter.

II-5

10.8+	Employment offer letter dated December 13, 2004 between the Registrant and Chris Russell.
10.9+	Employment offer letter dated November 2, 2004, as amended, between the Registrant and John A. Tanner.
10.10+	Letter agreement dated May 26, 2005 between the Registrant, David J. Richter and John A. Tanner.
10.11+	Form of Employee Innovations and Proprietary Rights Assignment Agreement.
10.12+	DivX, Inc. 2006 Executive Cash Bonus Plan.
10.13	Third Amended and Restated Stockholders' Agreement dated October 19, 2005 between the Registrant and certain of its stockholders.
10.14	Real Property Sub-Sublease dated July 7, 2004 between the Registrant and MP3.com.
10.15	Loan and Security Agreements dated September 9, 2002 and July 28, 2003 and Loan and Security Agreement (Exim Program) dated July 28, 2003 between the Registrant and Silicon Valley Bank, each as amended.
10.16*	MPEG-4 Visual Patent Portfolio License dated May 22, 2003 between the Registrant and MPEG LA, L.L.C.
10.17*	Google Toolbar and Google Deskbar Promotion and Distribution Agreement effective June 18, 2004, as amended, between the Registrant and Google Inc.
21.1	Subsidiaries of the Registrant.
23.1	Consent of Ernst & Young LLP, independent registered public accounting firm.
23.2†	Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1	Power of Attorney. Reference is made to the signature page hereto.

†

To be filed by amendment.

+

Indicates management contract or compensatory plan.

*

Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission.

II-6

(b)    Financial statement schedule.

II—Valuation and qualifying accounts

Allowance for uncollectible sales and accounts	Balance at beginning of year	Charged to operations	Write offs deducted from allowance		Balance at end of year
For the year ended December 31, 2003	32,128	390,785	(32,128	)	390,785
For the year ended December 31, 2004	390,785	832,846	(183,129	)	1,040,502
For the year ended December 31, 2005	1,040,502	898,839	(976,077	)	963,264

All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes.

Item 17. Undertakings.

The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriter 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 advised 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 Act and will be governed by the final adjudication of such issue.

The undersigned Registrant 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-7

Signatures

Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Diego, State of California, on the 5^th day of May, 2006.

DIVX, INC.
By:	/s/  R. JORDAN GREENHALL R. Jordan Greenhall CEO and Chairman

KNOW ALL BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints R. Jordan Greenhall and John A. Tanner, and each of them, as his or her true and lawful attorneys-in-fact and agents, each with the full power of substitution, for him or her and in his or her name, place or stead, in any and all capacities, to sign any and all amendments to this Registration Statement (including post-effective amendments), and to sign any registration statement for the same offering covered by this Registration Statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act, and all post-effective amendments thereto, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their, his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  R. JORDAN GREENHALL R. Jordan Greenhall	CEO and Chairman of the Board of Directors (Principal Executive Officer)	May 5, 2006
/s/  JOHN A. TANNER John A. Tanner	CFO, Finance and Administration (Principal Financial and Accounting Officer)	May 5, 2006
/s/  PAUL CHAU Paul Chau	Director	May 5, 2006

II-8

/s/  FRANK CREER Frank Creer	Director	May 5, 2006
/s/  FRED GERSON Fred Gerson	Director	May 5, 2006
/s/  CHRISTOPHER MCGURK Christopher McGurk	Director	May 5, 2006
/s/  JERRY MURDOCK Jerry Murdock	Director	May 5, 2006

II-9

Exhibit index

Exhibit Number	Description of Document
1.1†	Form of Underwriting Agreement.
3.1†	Form of Amended and Restated Certificate of Incorporation to be effective upon completion of this offering.
3.2†	Form of Amended and Restated Bylaws to be effective upon completion of this offering.
4.1†	Form of Common Stock Certificate.
5.1†	Opinion of Cooley Godward LLP.
10.1†+	Form of Indemnity Agreement.
10.2+	2000 Stock Option Plan and Form of Stock Option Agreement thereunder.
10.3†+	2006 Equity Incentive Plan and Form of Stock Option Agreement thereunder.
10.4+	Amended and restated offer letter dated April 12, 2006, between the Registrant and Fred Gerson.
10.5+	Offer letter effective January 3, 2006, between the Registrant and Christopher McGurk.
10.6+	Employment offer letter dated November 21, 2002, as amended, between the Registrant and Kevin Hell.
10.7+	Employment offer letter dated April 20, 2004 between the Registrant and David J. Richter.
10.8+	Employment offer letter dated December 13, 2004 between the Registrant and Chris Russell.
10.9+	Employment offer letter dated November 2, 2004, as amended, between the Registrant and John A. Tanner.
10.10+	Letter agreement dated May 26, 2005 between the Registrant, David J. Richter and John A. Tanner.
10.11+	Form of Employee Innovations and Proprietary Rights Assignment Agreement.
10.12+	DivX, Inc. 2006 Executive Cash Bonus Plan.
10.13	Third Amended and Restated Stockholders' Agreement dated October 19, 2005 between the Registrant and certain of its stockholders.
10.14	Real Property Sub-Sublease dated July 7, 2004 between the Registrant and MP3.com.
10.15	Loan and Security Agreements dated September 9, 2002 and July 28, 2003 and Loan and Security Agreement (Exim Program) dated July 28, 2003 between the Registrant and Silicon Valley Bank, each as amended.
10.16*	MPEG-4 Visual Patent Portfolio License dated May 22, 2003 between the Registrant and MPEG LA, L.L.C.

10.17*	Google Toolbar and Google Deskbar Promotion and Distribution Agreement effective June 18, 2004, as amended, between the Registrant and Google Inc.
21.1	Subsidiaries of the Registrant.
23.1	Consent of Ernst & Young LLP, independent registered public accounting firm.
23.2†	Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1	Power of Attorney. Reference is made to the signature page hereto.

†

To be filed by amendment.

+

Indicates management contract or compensatory plan.

*

Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission.

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Table of contents
Prospectus summary
The offering
Summary consolidated financial information
Risk factors
Forward-looking statements
Use of proceeds
Dividend policy
Capitalization
Dilution
Selected consolidated financial data
Management's discussion and analysis of financial condition and results of operations
A letter to our potential investors
Business
Management
Related party transactions
Principal and selling stockholders
Description of capital stock
Material U.S. federal income tax consequences to non-U.S. holders
Shares eligible for future sale
Underwriting
Legal matters
Experts
Where you can find more information
DivX, Inc. consolidated financial statements for the years ended December 31, 2003, 2004 and 2005
Report of Ernst & Young LLP, independent registered public accounting firm
DivX, Inc. Consolidated balance sheets
DivX, Inc. Consolidated statements of operations
DivX, Inc. Consolidated statements of cash flows
DivX, Inc. Notes to consolidated financial statements December 31, 2005
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
Signatures
Exhibit index

EX-10.2

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Exhibit 10.2

DIVXNETWORKS, INC.
2000 STOCK OPTION PLAN

        1.    Establishment, Purpose and Term of Plan.

        1.1    Establishment.    The DivXNetworks, Inc. 2000 Stock Option Plan (the "Plan") is hereby established effective as of December 1, 2000.

        1.2    Purpose.    The purpose of the Plan is to advance the interests of the Participating Company Group and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Participating Company Group and by motivating such persons to contribute to the growth and profitability of the Participating Company Group.

        1.3    Term of Plan.    The Plan shall continue in effect until the earlier of its termination by the Board or the date on which all of the shares of Stock available for issuance under the Plan have been issued and all restrictions on such shares under the terms of the Plan and the agreements evidencing Options granted under the Plan have lapsed. However, all Options shall be granted, if at all, within ten (10) years from the earlier of the date the Plan is adopted by the Board or the date the Plan is duly approved by the stockholders of the Company.

        2.    Definitions and Construction.

        2.1    Definitions.    Whenever used herein, the following terms shall have their respective meanings set forth below:

        (a)   "Board" means the Board of Directors of the Company. If one or more Committees have been appointed by the Board to administer the Plan, "Board" also means such Committee(s).

        (b)   "Code" means the Internal Revenue Code of 1986, as amended, and any applicable regulations promulgated thereunder.

        (c)   "Committee" means the Compensation Committee or other committee of the Board duly appointed to administer the Plan and having such powers as shall be specified by the Board. Unless the powers of the Committee have been specifically limited, the Committee shall have all of the powers of the Board granted herein, including, without limitation, the power to amend or terminate the Plan at any time, subject to the terms of the Plan and any applicable limitations imposed by law.

        (d)   "Company" means DivXNetworks, Inc., a Delaware corporation, or any successor corporation thereto.

        (e)   "Consultant" means a person engaged to provide consulting or advisory services (other than as an Employee or a Director) to a Participating Company, provided that the identity of such person, the nature of such services or the entity to which such services are provided would not preclude the Company from offering or selling securities to such person pursuant to the Plan in reliance on either the exemption from registration provided by Rule 701 under the Securities Act or, if the Company is required to file reports pursuant to Section 13 or 15(d) of the Exchange Act, registration on a Form S-8 Registration Statement under the Securities Act.

        (f)    "Director" means a member of the Board or of the board of directors of any other Participating Company.

1

        (g)   "Disability" means the inability of the Optionee, in the opinion of a qualified physician acceptable to the Company, to perform the major duties of the Optionee's position with the Participating Company Group because of the sickness or injury of the Optionee.

        (h)   "Employee" means any person treated as an employee (including an officer or a Director who is also treated as an employee) in the records of a Participating Company and, with respect to any Incentive Stock Option granted to such person, who is an employee for purposes of Section 422 of the Code; provided, however, that neither service as a Director nor payment of a director's fee shall be sufficient to constitute employment for purposes of the Plan.

        (i)    "Exchange Act" means the Securities Exchange Act of 1934, as amended.

        (j)    "Fair Market Value" means, as of any date, the value of a share of Stock or other property as determined by the Board, in its discretion, or by the Company, in its discretion, if such determination is expressly allocated to the Company herein, subject to the following:

        (i)    If, on such date, the Stock is listed on a national or regional securities exchange or market system, the Fair Market Value of a share of Stock shall be the closing price of a share of Stock (or the mean of the closing bid and asked prices of a share of Stock if the Stock is so quoted instead) as quoted on the Nasdaq National Market, The Nasdaq SmallCap Market or such other national or regional securities exchange or market system constituting the primary market for the Stock, as reported in The Wall Street Journal or such other source as the Company deems reliable. If the relevant date does not fall on a day on which the Stock has traded on such securities exchange or market system, the date on which the Fair Market Value shall be established shall be the last day on which the Stock was so traded prior to the relevant date, or such other appropriate day as shall be determined by the Board, in its discretion.

        (ii)   If, on such date, the Stock is not listed on a national or regional securities exchange or market system, the Fair Market Value of a share of Stock shall be as determined by the Board in good faith without regard to any restriction other than a restriction which, by its terms, will never lapse.

        (k)   "Incentive Stock Option" means an Option intended to be (as set forth in the Option Agreement) and which qualifies as an incentive stock option within the meaning of Section 422(b) of the Code.

        (l)    "Insider" means an officer or a Director of the Company or any other person whose transactions in Stock are subject to Section 16 of the Exchange Act.

        (m)  "Nonstatutory Stock Option" means an Option not intended to be (as set forth in the Option Agreement) or which does not qualify as an Incentive Stock Option.

        (n)   "Option" means a right to purchase Stock (subject to adjustment as provided in Section 4.2) pursuant to the terms and conditions of the Plan. An Option may be either an Incentive Stock Option or a Nonstatutory Stock Option.

        (o)   "Option Agreement" means a written agreement between the Company and an Optionee setting forth the terms, conditions and restrictions of the Option granted to the Optionee and any shares acquired upon the exercise thereof. An Option Agreement may consist of a form of "Notice of Grant of Stock Option" and a form of "Stock Option Agreement" incorporated therein by reference, or such other form or forms as the Board may approve from time to time.

        (p)   "Optionee" means a person who has been granted one or more Options.

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        (q)   "Parent Corporation" means any present or future "parent corporation" of the Company, as defined in Section 424(e) of the Code.

        (r)   "Participating Company" means the Company or any Parent Corporation or Subsidiary Corporation.

        (s)   "Participating Company Group" means, at any point in time, all corporations collectively which are then Participating Companies.

        (t)    "Rule 16b-3" means Rule 16b-3 under the Exchange Act, as amended from time to time, or any successor rule or regulation.

        (u)   "Securities Act" means the Securities Act of 1933, as amended.

        (v)   "Service" means an Optionee's employment or service with the Participating Company Group, whether in the capacity of an Employee, a Director or a Consultant. An Optionee's Service shall not be deemed to have terminated merely because of a change in the capacity in which the Optionee renders Service to the Participating Company Group or a change in the Participating Company for which the Optionee renders such Service, provided that there is no interruption or termination of the Optionee's Service. Furthermore, an Optionee's Service with the Participating Company Group shall not be deemed to have terminated if the Optionee takes any military leave, sick leave, or other bona fide leave of absence approved by the Company; provided, however, that if any such leave exceeds ninety (90) days, on the ninety-first (91st) day of such leave the Optionee's Service shall be deemed to have terminated unless the Optionee's right to return to Service with the Participating Company Group is guaranteed by statute or contract. Notwithstanding the foregoing, unless otherwise designated by the Company or required by law, a leave of absence shall not be treated as Service for purposes of determining vesting under the Optionee's Option Agreement. The Optionee's Service shall be deemed to have terminated either upon an actual termination of Service or upon the corporation for which the Optionee performs Service ceasing to be a Participating Company. Subject to the foregoing, the Company, in its discretion, shall determine whether the Optionee's Service has terminated and the effective date of such termination.

        (w)  "Stock" means the common stock of the Company, as adjusted from time to time in accordance with Section 4.2.

        (x)   "Subsidiary Corporation" means any present or future "subsidiary corporation" of the Company, as defined in Section 424(f) of the Code.

        (y)   "Ten Percent Owner Optionee" means an Optionee who, at the time an Option is granted to the Optionee, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of a Participating Company within the meaning of Section 422(b)(6) of the Code.

        2.2    Construction.    Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term "or" is not intended to be exclusive, unless the context clearly requires otherwise.

        3.    Administration.

        3.1    Administration by the Board.    The Plan shall be administered by the Board. All questions of interpretation of the Plan or of any Option shall be determined by the Board, and such

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determinations shall be final and binding upon all persons having an interest in the Plan or such Option.

        3.2    Authority of Officers.    Any officer of a Participating Company shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, determination or election which is the responsibility of or which is allocated to the Company herein, provided the officer has apparent authority with respect to such matter, right, obligation, determination or election.

        3.3    Powers of the Board.    In addition to any other powers set forth in the Plan and subject to the provisions of the Plan, the Board shall have the full and final power and authority, in its discretion:

        (a)   to determine the persons to whom, and the time or times at which, Options shall be granted and the number of shares of Stock to be subject to each Option;

        (b)   to designate Options as Incentive Stock Options or Nonstatutory Stock Options;

        (c)   to determine the Fair Market Value of shares of Stock or other property;

        (d)   to determine the terms, conditions and restrictions applicable to each Option (which need not be identical) and any shares acquired upon the exercise thereof, including, without limitation, (i) the exercise price of the Option, (ii) the method of payment for shares purchased upon the exercise of the Option, (iii) the method for satisfaction of any tax withholding obligation arising in connection with the Option or such shares, including by the withholding or delivery of shares of stock, (iv) the timing, terms and conditions of the exercisability of the Option or the vesting of any shares acquired upon the exercise thereof, (v) the time of the expiration of the Option, (vi) the effect of the Optionee's termination of Service with the Participating Company Group on any of the foregoing, and (vii) all other terms, conditions and restrictions applicable to the Option or such shares not inconsistent with the terms of the Plan;

        (e)   to approve one or more forms of Option Agreement;

        (f)    to amend, modify, extend, cancel or renew any Option or to waive any restrictions or conditions applicable to any Option or any shares acquired upon the exercise thereof;

        (g)   to accelerate, continue, extend or defer the exercisability of any Option or the vesting of any shares acquired upon the exercise thereof, including with respect to the period following an Optionee's termination of Service with the Participating Company Group;

        (h)   to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to adopt supplements to, or alternative versions of, the Plan, including, without limitation, as the Board deems necessary or desirable to comply with the laws of, or to accommodate the tax policy or custom of, foreign jurisdictions whose citizens may be granted Options; and

        (i)    to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Option Agreement and to make all other determinations and take such other actions with respect to the Plan or any Option as the Board may deem advisable to the extent not inconsistent with the provisions of the Plan or applicable law.

        3.4    Administration with Respect to Insiders.    With respect to participation by Insiders in the Plan, at any time that any class of equity security of the Company is registered pursuant to Section 12 of the Exchange Act, the Plan shall be administered in compliance with the requirements, if any, of Rule 16b-3.

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        3.5    Indemnification.    In addition to such other rights of indemnification as they may have as members of the Board or officers or employees of the Participating Company Group, members of the Board and any officers or employees of the Participating Company Group to whom authority to act for the Board or the Company is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys' fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same.

        4.    Shares Subject to Plan.

        4.1    Maximum Number of Shares Issuable.    Subject to adjustment as provided in Section 4.2, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be 13,158,022 and shall consist of authorized but unissued or reacquired shares of Stock or any combination thereof. If an outstanding Option for any reason expires or is terminated or canceled or if shares of Stock are acquired upon the exercise of an Option subject to a Company repurchase option and are repurchased by the Company at the Optionee's exercise price, the shares of Stock allocable to the unexercised portion of such Option or such repurchased shares of Stock shall again be available for issuance under the Plan. Notwithstanding the foregoing, at any such time as the offer and sale of securities pursuant to the Plan is subject to compliance with Section 260.140.45 of Title 10 of the California Code of Regulations ("Section 260.140.45"), the total number of shares of Stock issuable upon the exercise of all outstanding Options (together with options outstanding under any other stock option plan of the Company) and the total number of shares provided for under any stock bonus or similar plan of the Company shall not exceed thirty percent (30%) (or such other higher percentage limitation as may be approved by the stockholders of the Company pursuant to Section 260.140.45) of the then outstanding shares of the Company as calculated in accordance with the conditions and exclusions of Section 260.140.45.

        4.2    Adjustments for Changes in Capital Structure.    In the event of any stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification or similar change in the capital structure of the Company, appropriate adjustments shall be made in the number and class of shares subject to the Plan and to any outstanding Options and in the exercise price per share of any outstanding Options. If a majority of the shares which are of the same class as the shares that are subject to outstanding Options are exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event, as defined in Section 8.1) shares of another corporation (the "New Shares"), the Board may unilaterally amend the outstanding Options to provide that such Options are exercisable for New Shares. In the event of any such amendment, the number of shares subject to, and the exercise price per share of, the outstanding Options shall be adjusted in a fair and equitable manner as determined by the Board, in its discretion. Notwithstanding the foregoing, any fractional share resulting from an adjustment pursuant to this Section 4.2 shall be rounded down to the nearest whole number, and in no event may the exercise price of any Option be decreased to an amount less than the par value, if any, of the stock subject to the Option. The adjustments determined by the Board pursuant to this Section 4.2 shall be final, binding and conclusive.

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        5.    Eligibility and Option Limitations.

        5.1    Persons Eligible for Options.    Options may be granted only to Employees, Consultants, and Directors. For purposes of the foregoing sentence, "Employees," "Consultants" and "Directors" shall include prospective Employees, prospective Consultants and prospective Directors to whom Options are granted in connection with written offers of an employment or other service relationship with the Participating Company Group. Eligible persons may be granted more than one (1) Option.

        5.2    Option Grant Restrictions.    Any person who is not an Employee on the effective date of the grant of an Option to such person may be granted only a Nonstatutory Stock Option. An Incentive Stock Option granted to a prospective Employee upon the condition that such person become an Employee shall be deemed granted effective on the date such person commences Service with a Participating Company, with an exercise price determined as of such date in accordance with Section 6.1.

        5.3    Fair Market Value Limitation.    To the extent that options designated as Incentive Stock Options (granted under all stock option plans of the Participating Company Group, including the Plan) become exercisable by an Optionee for the first time during any calendar year for stock having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portions of such options which exceed such amount shall be treated as Nonstatutory Stock Options. For purposes of this Section 5.3, options designated as Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of stock shall be determined as of the time the option with respect to such stock is granted. If the Code is amended to provide for a different limitation from that set forth in this Section 5.3, such different limitation shall be deemed incorporated herein effective as of the date and with respect to such Options as required or permitted by such amendment to the Code. If an Option is treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this Section 5.3, the Optionee may designate which portion of such Option the Optionee is exercising. In the absence of such designation, the Optionee shall be deemed to have exercised the Incentive Stock Option portion of the Option first. Separate certificates representing each such portion shall be issued upon the exercise of the Option.

        6.    Terms and Conditions of Options.    Options shall be evidenced by Option Agreements specifying the number of shares of Stock covered thereby, in such form as the Board shall from time to time establish. No Option or purported Option shall be a valid and binding obligation of the Company unless evidenced by a fully executed Option Agreement. Option Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:

        6.1    Exercise Price.    The exercise price for each Option shall be established in the discretion of the Board; provided, however, that (a) the exercise price per share for an Incentive Stock Option shall be not less than the Fair Market Value of a share of Stock on the effective date of grant of the Option, (b) the exercise price per share for a Nonstatutory Stock Option shall be not less than eighty-five percent (85%) of the Fair Market Value of a share of Stock on the effective date of grant of the Option, and (c) no Option granted to a Ten Percent Owner Optionee shall have an exercise price per share less than one hundred ten percent (110%) of the Fair Market Value of a share of Stock on the effective date of grant of the Option. Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an exercise price lower than the minimum exercise price set forth above if such Option is granted pursuant to an assumption or substitution for another option in a manner qualifying under the provisions of Section 424(a) of the Code.

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        6.2    Exercisability and Term of Options.    Options shall be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria and restrictions as shall be determined by the Board and set forth in the Option Agreement evidencing such Option; provided, however, that (a) no Option shall be exercisable after the expiration of ten (10) years after the effective date of grant of such Option, (b) no Incentive Stock Option granted to a Ten Percent Owner Optionee shall be exercisable after the expiration of five (5) years after the effective date of grant of such Option, (c) no Option granted to a prospective Employee, prospective Consultant or prospective Director may become exercisable prior to the date on which such person commences Service with a Participating Company, and (d) with the exception of an Option granted to an officer, Director or Consultant, no Option shall become exercisable at a rate less than twenty percent (20%) per year over a period of five (5) years from the effective date of grant of such Option, subject to the Optionee's continued Service. Subject to the foregoing, unless otherwise specified by the Board in the grant of an Option, any Option granted hereunder shall terminate ten (10) years after the effective date of grant of the Option, unless earlier terminated in accordance with its provisions.

        6.3    Payment of Exercise Price.

        (a)    Forms of Consideration Authorized.    Except as otherwise provided below, payment of the exercise price for the number of shares of Stock being purchased pursuant to any Option shall be made (i) in cash, by check or cash equivalent, (ii) by tender to the Company, or attestation to the ownership, of shares of Stock owned by the Optionee having a Fair Market Value (as determined by the Company without regard to any restrictions on transferability applicable to such stock by reason of federal or state securities laws or agreements with an underwriter for the Company) not less than the exercise price, (iii) by delivery of a properly executed notice together with irrevocable instructions to a broker providing for the assignment to the Company of the proceeds of a sale or loan with respect to some or all of the shares being acquired upon the exercise of the Option (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System) (a "Cashless Exercise"), (iv) provided that the Optionee is an Employee (unless otherwise not prohibited by law, including, without limitation, any regulation promulgated by the Board of Governors of the Federal Reserve System) and in the Company's sole discretion at the time the Option is exercised, by delivery of the Optionee's promissory note in a form approved by the Company for the aggregate exercise price, provided that, if the Company is incorporated in the State of Delaware, the Optionee shall pay in cash that portion of the aggregate exercise price not less than the par value of the shares being acquired, (v) by such other consideration as may be approved by the Board from time to time to the extent permitted by applicable law, or (vi) by any combination thereof. The Board may at any time or from time to time, by approval of or by amendment to the standard forms of Option Agreement described in Section 7, or by other means, grant Options which do not permit all of the foregoing forms of consideration to be used in payment of the exercise price or which otherwise restrict one or more forms of consideration.

        (b)    Limitations on Forms of Consideration.

        (i)    Tender of Stock.    Notwithstanding the foregoing, an Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock to the extent such tender or attestation would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Company's stock. Unless otherwise provided by the Board, an Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock unless such shares either have been owned by the Optionee for more than six (6) months or were not acquired, directly or indirectly, from the Company.

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        (ii)    Cashless Exercise.    The Company reserves, at any and all times, the right, in the Company's sole and absolute discretion, to establish, decline to approve or terminate any program or procedures for the exercise of Options by means of a Cashless Exercise.

        (iii)    Payment by Promissory Note.    No promissory note shall be permitted if the exercise of an Option using a promissory note would be a violation of any law. Any permitted promissory note shall be on such terms as the Board shall determine at the time the Option is granted. The Board shall have the authority to permit or require the Optionee to secure any promissory note used to exercise an Option with the shares of Stock acquired upon the exercise of the Option or with other collateral acceptable to the Company. Unless otherwise provided by the Board, if the Company at any time is subject to the regulations promulgated by the Board of Governors of the Federal Reserve System or any other governmental entity affecting the extension of credit in connection with the Company's securities, any promissory note shall comply with such applicable regulations, and the Optionee shall pay the unpaid principal and accrued interest, if any, to the extent necessary to comply with such applicable regulations.

        6.4    Tax Withholding.    The Company shall have the right, but not the obligation, to deduct from the shares of Stock issuable upon the exercise of an Option, or to accept from the Optionee the tender of, a number of whole shares of Stock having a Fair Market Value, as determined by the Company, equal to all or any part of the federal, state, local and foreign taxes, if any, required by law to be withheld by the Participating Company Group with respect to such Option or the shares acquired upon the exercise thereof. Alternatively or in addition, in its discretion, the Company shall have the right to require the Optionee, through payroll withholding, cash payment or otherwise, including by means of a Cashless Exercise, to make adequate provision for any such tax withholding obligations of the Participating Company Group arising in connection with the Option or the shares acquired upon the exercise thereof. The Fair Market Value of any shares of Stock withheld or tendered to satisfy any such tax withholding obligations shall not exceed the amount determined by the applicable minimum statutory withholding rates. The Company shall have no obligation to deliver shares of Stock or to release shares of Stock from an escrow established pursuant to the Option Agreement until the Participating Company Group's tax withholding obligations have been satisfied by the Optionee.

        6.5    Repurchase Rights.    Shares issued under the Plan may be subject to a right of first refusal, one or more repurchase options, or other conditions and restrictions as determined by the Board in its discretion at the time the Option is granted. The Company shall have the right to assign at any time any repurchase right it may have, whether or not such right is then exercisable, to one or more persons as may be selected by the Company. Upon request by the Company, each Optionee shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder and shall promptly present to the Company any and all certificates representing shares of Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions.

        6.6    Effect of Termination of Service.

        (a)    Option Exercisability.    Subject to earlier termination of the Option as otherwise provided herein and unless otherwise provided by the Board in the grant of an Option and set forth in the Option Agreement, an Option shall be exercisable after an Optionee's termination of Service only during the applicable time period determined in accordance with this Section 6.6 and thereafter shall terminate:

        (i)    Disability.    If the Optionee's Service with the Participating Company Group terminates because of the Disability of the Optionee, the Option, to the extent unexercised and exercisable on the date on which the Optionee's Service terminated, may

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be exercised by the Optionee (or the Optionee's guardian or legal representative) at any time prior to the expiration of twelve (12) months (or such longer period of time as determined by the Board, in its discretion) after the date on which the Optionee's Service terminated, but in any event no later than the date of expiration of the Option's term as set forth in the Option Agreement evidencing such Option (the "Option Expiration Date").

        (ii)    Death.    If the Optionee's Service with the Participating Company Group terminates because of the death of the Optionee, the Option, to the extent unexercised and exercisable on the date on which the Optionee's Service terminated, may be exercised by the Optionee's legal representative or other person who acquired the right to exercise the Option by reason of the Optionee's death at any time prior to the expiration of twelve (12) months (or such longer period of time as determined by the Board, in its discretion) after the date on which the Optionee's Service terminated, but in any event no later than the Option Expiration Date. The Optionee's Service shall be deemed to have terminated on account of death if the Optionee dies within three (3) months (or such longer period of time as determined by the Board, in its discretion) after the Optionee's termination of Service.

        (iii)    Termination After Change in Control.    The Board may, in its discretion, provide in any Option Agreement that if the Optionee's Service ceases as a result of "Termination After Change in Control" (as defined in such Option Agreement), then (1) the Option, to the extent unexercised and exercisable on the date on which the Optionee's Service terminated, may be exercised by the Optionee (or the Optionee's guardian or legal representative) at any time prior to the expiration of twelve (12) months (or such longer period of time as determined by the Board, in its discretion) after the date on which the Optionee's Service terminated, but in any event no later than the Option Expiration Date, and (2) the exercisability and vesting of the Option and any shares acquired upon the exercise thereof shall be accelerated effective as of the date on which the Optionee's Service terminated to such extent, if any, as shall have been determined by the Board, in its discretion, and set forth in the Option Agreement. Notwithstanding the foregoing, if the Company and the other party to the transaction constituting a Change in Control agree to treat such transaction as a "pooling-of-interests" for accounting purposes and it is determined that the provisions or operation of this Section 6.6(a)(iii) would preclude treatment of such transaction as a "pooling-of-interests" and provided further that in the absence of the preceding sentence such transaction would be treated as a "pooling-of-interests," then this Section 6.6(a)(iii) shall be without force or effect, and the vesting and exercisability of the Option shall be determined under any other applicable provision of the Plan or the Option Agreement evidencing such Option.

        (iv)    Other Termination of Service.    If the Optionee's Service with the Participating Company Group terminates for any reason, except Disability or death, the Option, to the extent unexercised and exercisable by the Optionee on the date on which the Optionee's Service terminated, may be exercised by the Optionee at any time prior to the expiration of three (3) months (or such longer period of time as determined by the Board, in its discretion) after the date on which the Optionee's Service terminated, but in any event no later than the Option Expiration Date.

        (b)    Extension if Exercise Prevented by Law.    Notwithstanding the foregoing, if the exercise of an Option within the applicable time periods set forth in Section 6.6(a) is prevented by the provisions of Section 10 below, the Option shall remain exercisable until three (3) months (or such longer period of time as determined by the Board, in its discretion) after the date the Optionee is notified by the Company that the Option is exercisable, but in any event no later than the Option Expiration Date.

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        (c)    Extension if Optionee Subject to Section 16(b).    Notwithstanding the foregoing, if a sale within the applicable time periods set forth in Section 6.6(a) of shares acquired upon the exercise of the Option would subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option shall remain exercisable until the earliest to occur of (i) the tenth (10th) day following the date on which a sale of such shares by the Optionee would no longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day after the Optionee's termination of Service, or (iii) the Option Expiration Date.

        6.7    Transferability of Options.    During the lifetime of the Optionee, an Option shall be exercisable only by the Optionee or the Optionee's guardian or legal representative. No Option shall be assignable or transferable by the Optionee, except by will or by the laws of descent and distribution. Notwithstanding the foregoing, to the extent permitted by the Board, in its discretion, and set forth in the Option Agreement evidencing such Option, a Nonstatutory Stock Option shall be assignable or transferable subject to the applicable limitations, if any, described in Section 260.140.41 of Title 10 of the California Code of Regulations, Rule 701 under the Securities Act, and the General Instructions to Form S-8 Registration Statement under the Securities Act.

        7.    Standard Forms of Option Agreement.

        7.1    Option Agreement.    Unless otherwise provided by the Board at the time the Option is granted, an Option shall comply with and be subject to the terms and conditions set forth in the form of Option Agreement approved by the Board concurrently with its adoption of the Plan and as amended from time to time.

        7.2    Authority to Vary Terms.    The Board shall have the authority from time to time to vary the terms of any standard form of Option Agreement described in this Section 7 either in connection with the grant or amendment of an individual Option or in connection with the authorization of a new standard form or forms; provided, however, that the terms and conditions of any such new, revised or amended standard form or forms of Option Agreement are not inconsistent with the terms of the Plan.

        8.    Change in Control.

        8.1    Definitions.

        (a)   An "Ownership Change Event" shall be deemed to have occurred if any of the following occurs with respect to the Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than fifty percent (50%) of the voting stock of the Company; (ii) a merger or consolidation in which the Company is a party; (iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company; or (iv) a liquidation or dissolution of the Company.

        (b)   A "Change in Control" shall mean an Ownership Change Event or a series of related Ownership Change Events (collectively, a "Transaction") wherein the stockholders of the Company immediately before the Transaction do not retain immediately after the Transaction, in substantially the same proportions as their ownership of shares of the Company's voting stock immediately before the Transaction, direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding voting stock of the Company or the corporation or corporations to which the assets of the Company were transferred (the "Transferee Corporation(s)"), as the case may be. For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting stock of one or more corporations which, as a result of the Transaction, own the Company or the Transferee Corporation(s), as the case may be, either directly or through one or more subsidiary corporations. The Board shall have the right to determine whether multiple sales or exchanges of the voting stock of the Company or

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multiple Ownership Change Events are related, and its determination shall be final, binding and conclusive.

        8.2    Effect of Change in Control on Options.    In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the "Acquiring Corporation"), may, without the consent of any Optionee, either assume the Company's rights and obligations under outstanding Options or substitute for outstanding Options substantially equivalent options for the Acquiring Corporation's stock. In the event the Acquiring Corporation elects not to assume or substitute for outstanding Options in connection with a Change in Control, the exercisability and vesting of each such outstanding Option and any shares acquired upon the exercise thereof held by Optionees whose Service has not terminated prior to such date shall be accelerated, effective as of the date ten (10) days prior to the date of the Change in Control, to such extent, if any, as shall have been determined by the Board, in its discretion, and set forth in the Option Agreement evidencing such Option. The exercise or vesting of any Option and any shares acquired upon the exercise thereof that was permissible solely by reason of this Section 8.2 and the provisions of such Option Agreement shall be conditioned upon the consummation of the Change in Control. Any Options which are neither assumed or substituted for by the Acquiring Corporation in connection with the Change in Control nor exercised as of the date of the Change in Control shall terminate and cease to be outstanding effective as of the date of the Change in Control. Notwithstanding the foregoing, shares acquired upon exercise of an Option prior to the Change in Control and any consideration received pursuant to the Change in Control with respect to such shares shall continue to be subject to all applicable provisions of the Option Agreement evidencing such Option except as otherwise provided in such Option Agreement. Furthermore, notwithstanding the foregoing, if the corporation the stock of which is subject to the outstanding Options immediately prior to an Ownership Change Event described in Section 8.1(a)(i) constituting a Change in Control is the surviving or continuing corporation and immediately after such Ownership Change Event less than fifty percent (50%) of the total combined voting power of its voting stock is held by another corporation or by other corporations that are members of an affiliated group within the meaning of Section 1504(a) of the Code without regard to the provisions of Section 1504(b) of the Code, the outstanding Options shall not terminate unless the Board otherwise provides in its discretion.

        9.    Provision of Information.    At least annually, copies of the Company's balance sheet and income statement for the just completed fiscal year shall be made available to each Optionee and purchaser of shares of Stock upon the exercise of an Option. The Company shall not be required to provide such information to key employees whose duties in connection with the Company assure them access to equivalent information.

        10.    Compliance with Securities Law.    The grant of Options and the issuance of shares of Stock upon exercise of Options shall be subject to compliance with all applicable requirements of federal, state and foreign law with respect to such securities. Options may not be exercised if the issuance of shares of Stock upon exercise would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, no Option may be exercised unless (a) a registration statement under the Securities Act shall at the time of exercise of the Option be in effect with respect to the shares issuable upon exercise of the Option or (b) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company's legal counsel to be necessary to the lawful issuance and sale of any shares hereunder shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to the exercise of any

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Option, the Company may require the Optionee to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.

        11.    Termination or Amendment of Plan.    The Board may terminate or amend the Plan at any time. However, subject to changes in applicable law, regulations or rules that would permit otherwise, without the approval of the Company's stockholders, there shall be (a) no increase in the maximum aggregate number of shares of Stock that may be issued under the Plan (except by operation of the provisions of Section 4.2), (b) no change in the class of persons eligible to receive Incentive Stock Options, and (c) no other amendment of the Plan that would require approval of the Company's stockholders under any applicable law, regulation or rule. No termination or amendment of the Plan shall affect any then outstanding Option unless expressly provided by the Board. In any event, no termination or amendment of the Plan may adversely affect any then outstanding Option without the consent of the Optionee, unless such termination or amendment is required to enable an Option designated as an Incentive Stock Option to qualify as an Incentive Stock Option or is necessary to comply with any applicable law, regulation or rule.

        12.    Stockholder Approval.    The Plan or any increase in the maximum aggregate number of shares of Stock issuable thereunder as provided in Section 4.1 (the "Authorized Shares") shall be approved by the stockholders of the Company within twelve (12) months of the date of adoption thereof by the Board. Options granted prior to stockholder approval of the Plan or in excess of the Authorized Shares previously approved by the stockholders shall become exercisable no earlier than the date of stockholder approval of the Plan or such increase in the Authorized Shares, as the case may be.

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DivXNetworks, Inc.
2000 Stock Option Plan
History

Date	Description
12/01/00	Board Approved and Adopted Original Plan: 2000 Stock Option Plan adopted (6,000,000 Shares of Common Stock Reserved for Issuance Under Plan)
12/01/00	Plan Approved by Stockholders
12/21/00	25102(o) Notice Filed with California Dept. of Corporations for 2,000,000 Shares
04/30/03	Board Approved Increase in Shares Reserved—Amount Increased by: 2,500,000 Shares of Common Stock for an Aggregate of 8,500,000 Shares Reserved Under Plan
06/06/03	Stockholders Approve Increase by 2,500,000 (for an aggregate of 8,500,000 Shares).
10/16/03	25102(o) Notice Filed with California Dept. of Corporations for an Increase of 2,500,000 Shares (Total Aggregate: 8,500,000)
05/06/04	Board Approved Increase in Shares Reserved Under the 2000 Stock Option Plan by 2,000,000 Shares of Common Stock for an Aggregate Amount of 10,500,000 Shares Reserved Under the Plan.
06/03/04	Stockholders Approved Increase by 2,000,000 Shares of Common Stock for an Aggregate Amount of 10,500,000 Shares Reserved Under the Plan.
7/15/04	25102(o) Notice Filed with the California Department of Corporation for an Increase in 2,000,000 Shares (Total Aggregate 10,500,000)
5/26/05	Board Approved Increase in Shares Reserved Under the 2000 Stock Option Plan by 1,700,000 Shares of Common Stock for an Aggregate Amount of 12,200,000 Shares Reserved Under the Plan.
6/30/05	Stockholders Approved Increase by 1,700,000 Shares of Common Stock for an Aggregate Amount of 12,200,000 Shares Reserved Under the Plan.
10/18/05	Board Approved Increase in Shares Reserved Under the 2000 Stock Option Plan by 958,022 Shares of Common Stock for an Aggregate Amount of 13,158,022 Shares Reserved Under the Plan.
10/18/05	Stockholders Approved Increase by 958,022 Shares of Common Stock for an Aggregate Amount of 13,158,022 Shares Reserved Under the Plan.
10/27/05	25102(o) Notice Filed with the California Department of Corporation for an Increase in 958,022 Shares (Total Aggregate 13,158,022).

DIVX, INC.
STOCK OPTION AGREEMENT
(Immediately Exercisable)

        DivX, Inc. has granted to the individual (the "Optionee") named in the Notice of Grant of Stock Option (the "Notice") to which this Stock Option Agreement (the "Option Agreement") is attached an option (the "Option") to purchase certain shares of Stock upon the terms and conditions set forth in the Notice and this Option Agreement. The Option has been granted pursuant to and shall in all respects be subject to the terms and conditions of the DivX, Inc. 2000 Stock Option Plan (the "Plan"), as amended to the Date of Option Grant, the provisions of which are incorporated herein by reference. By signing the Notice, the Optionee: (a) represents that the Optionee has read and is familiar with the terms and conditions of the Notice, the Plan and this Option Agreement, including the Effect of Termination of Service set forth in Section 7, the Unvested Share Repurchase Option set forth in Section 11 and the Right of First Refusal set forth in Section 12, (b) accepts the Option subject to all of the terms and conditions of the Notice, the Plan and this Option Agreement, (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under the Notice, the Plan or this Option Agreement, and (d) acknowledges receipt of a copy of the Notice, the Plan and this Option Agreement.

        13.    Definitions and Construction.

        13.1    Definitions.    Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms in the Notice or the Plan.

        13.2    Construction.    Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of this Option Agreement. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term "or" is not intended to be exclusive, unless the context clearly requires otherwise.

        14.    Tax Consequences.

        14.1    Tax Status of Option.    This Option is intended to have the tax status designated in the Notice.

        (a)    Incentive Stock Option.    If the Notice so designates, this Option is intended to be an Incentive Stock Option within the meaning of Section 422(b) of the Code, but the Company does not represent or warrant that this Option qualifies as such. The Optionee should consult with the Optionee's own tax advisor regarding the tax effects of this Option and the requirements necessary to obtain favorable income tax treatment under Section 422 of the Code, including, but not limited to, holding period requirements. (NOTE TO OPTIONEE: If the Option is exercised more than three (3) months after the date on which you cease to be an Employee in accordance with Section 7.1(c) of this Option Agreement (other than by reason of your death or permanent and total disability as defined in Section 22(e)(3) of the Code), the Option will be treated as a Nonstatutory Stock Option and not as an Incentive Stock Option to the extent required by Section 422 of the Code.)

        (b)    Nonstatutory Stock Option.    If the Notice so designates, this Option is intended to be a Nonstatutory Stock Option and shall not be treated as an Incentive Stock Option within the meaning of Section 422(b) of the Code.

        14.2    ISO Fair Market Value Limitation.    If the Notice designates this Option as an Incentive Stock Option, then to the extent that the Option (together with all Incentive Stock Options granted to the Optionee under all stock option plans of the Participating Company Group, including the Plan) becomes exercisable for the first time during any calendar year for shares having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portion

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of such options which exceeds such amount will be treated as Nonstatutory Stock Options. For purposes of this Section 2.2, options designated as Incentive Stock Options are taken into account in the order in which they were granted, and the Fair Market Value of stock is determined as of the time the option with respect to such stock is granted. If the Code is amended to provide for a different limitation from that set forth in this Section 2.2, such different limitation shall be deemed incorporated herein effective as of the date required or permitted by such amendment to the Code. If the Option is treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this Section 2.2, the Optionee may designate which portion of such Option the Optionee is exercising. In the absence of such designation, the Optionee shall be deemed to have exercised the Incentive Stock Option portion of the Option first. Separate certificates representing each such portion shall be issued upon the exercise of the Option. (NOTE TO OPTIONEE: If the aggregate Exercise Price of the Option (that is, the Exercise Price multiplied by the Number of Option Shares) plus the aggregate exercise price of any other Incentive Stock Options you hold (whether granted pursuant to the Plan or any other stock option plan of the Participating Company Group) is greater than $100,000, you should contact the Chief Financial Officer of the Company to ascertain whether the entire Option qualifies as an Incentive Stock Option.)

        14.3    Election Under Section 83(b) of the Code.    If the Optionee exercises this Option to purchase shares of Stock that are both nontransferable and subject to a substantial risk of forfeiture, the Optionee understands that the Optionee should consult with the Optionee's tax advisor regarding the advisability of filing with the Internal Revenue Service an election under Section 83(b) of the Code, which must be filed no later than thirty (30) days after the date on which the Optionee exercises the Option. Shares acquired upon exercise of the Option are nontransferable and subject to a substantial risk of forfeiture if, for example, they are unvested and are subject to a right of the Company to repurchase such shares at the Optionee's original purchase price if the Optionee's Service terminates. Failure to file an election under Section 83(b), if appropriate, may result in adverse tax consequences to the Optionee. The Optionee acknowledges that the Optionee has been advised to consult with a tax advisor prior to the exercise of the Option regarding the tax consequences to the Optionee of the exercise of the Option. AN ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE DATE ON WHICH THE OPTIONEE PURCHASES SHARES. THIS TIME PERIOD CANNOT BE EXTENDED. THE OPTIONEE ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS THE OPTIONEE'S SOLE RESPONSIBILITY, EVEN IF THE OPTIONEE REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO FILE SUCH ELECTION ON HIS OR HER BEHALF.

        15.    Administration.    All questions of interpretation concerning this Option Agreement shall be determined by the Board. All determinations by the Board shall be final and binding upon all persons having an interest in the Option. Any officer of a Participating Company shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the officer has apparent authority with respect to such matter, right, obligation, or election.

        16.    Exercise of the Option.

        16.1    Right to Exercise.    Except as otherwise provided herein, the Option shall be exercisable on and after the Initial Exercise Date and prior to the termination of the Option (as provided in Section 6) in an amount not to exceed the number of Option Shares less the number of shares previously acquired upon exercise of the Option, subject to the Company's repurchase rights set forth in Section 11 and Section 12. In no event shall the Option be exercisable for more shares than the Number of Option Shares.

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        16.2    Method of Exercise.    Exercise of the Option shall be by written notice to the Company which must state the election to exercise the Option, the number of whole shares of Stock for which the Option is being exercised and such other representations and agreements as to the Optionee's investment intent with respect to such shares as may be required pursuant to the provisions of this Option Agreement. The written notice must be signed by the Optionee and must be delivered in person, by certified or registered mail, return receipt requested, by confirmed facsimile transmission, or by such other means as the Company may permit, to the Chief Financial Officer of the Company, or other authorized representative of the Participating Company Group, prior to the termination of the Option as set forth in Section 6, accompanied by full payment of the aggregate Exercise Price for the number of shares of Stock being purchased and (ii) an executed copy, if required herein of the then current form of escrow agreement reference below. The Option shall be deemed to be exercised upon receipt by the Company of such written notice, the aggregate Exercise Price, and, if required by the Company, such executed agreement.

        16.3    Payment of Exercise Price.

        (i)    Forms of Consideration Authorized.    Except as otherwise provided below, payment of the aggregate Exercise Price for the number of shares of Stock for which the Option is being exercised shall be made (i) in cash, by check, or cash equivalent, (ii) by tender to the Company, or attestation to the ownership, of whole shares of Stock owned by the Optionee having a Fair Market Value (as determined by the Company without regard to any restrictions on transferability applicable to such stock by reason of federal or state securities laws or agreements with an underwriter for the Company) not less than the aggregate Exercise Price, (iii) by means of a Cashless Exercise, as defined in Section 4.3(b), or (iv) by any combination of the foregoing.

        (b)    Limitations on Forms of Consideration.

        (i)    Tender of Stock.    Notwithstanding the foregoing, the Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock to the extent such tender or attestation would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Company's stock. The Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock unless such shares either have been owned by the Optionee for more than six (6) months or were not acquired, directly or indirectly, from the Company.

        (ii)    Cashless Exercise.    A "Cashless Exercise" means the delivery of a properly executed notice together with irrevocable instructions to a broker in a form acceptable to the Company providing for the assignment to the Company of the proceeds of a sale or loan with respect to some or all of the shares of Stock acquired upon the exercise of the Option pursuant to a program or procedure approved by the Company (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System). The Company reserves, at any and all times, the right, in the Company's sole and absolute discretion, to decline to approve or terminate any such program or procedure.

        16.4    Tax Withholding.    At the time the Option is exercised, in whole or in part, or at any time thereafter as requested by the Company, the Optionee hereby authorizes withholding from payroll and any other amounts payable to the Optionee, and otherwise agrees to make adequate provision for (including by means of a Cashless Exercise to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Participating Company Group, if any, which arise in connection with the Option, including, without limitation, obligations arising upon (i) the exercise, in whole or in part, of the Option, (ii) the transfer, in whole or in part, of any shares acquired upon exercise of the Option, (iii) the operation of any law or regulation providing for the imputation of interest, or (iv) the lapsing of

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any restriction with respect to any shares acquired upon exercise of the Option. The Company shall have no obligation to deliver shares of Stock or to release shares of Stock from an escrow established pursuant to this Option Agreement until the tax withholding obligations of the Participating Company Group have been satisfied by the Optionee.

        16.5    Certificate Registration.    Except in the event the Exercise Price is paid by means of a Cashless Exercise, the certificate for the shares as to which the Option is exercised shall be registered in the name of the Optionee, or, if applicable, in the names of the heirs of the Optionee.

        16.6    Restrictions on Grant of the Option and Issuance of Shares.    The grant of the Option and the issuance of shares of Stock upon exercise of the Option shall be subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities. The Option may not be exercised if the issuance of shares of Stock upon exercise would constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, the Option may not be exercised unless (i) a registration statement under the Securities Act shall at the time of exercise of the Option be in effect with respect to the shares issuable upon exercise of the Option or (ii) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company's legal counsel to be necessary to the lawful issuance and sale of any shares subject to the Option shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to the exercise of the Option, the Company may require the Optionee to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.

        16.7    Fractional Shares.    The Company shall not be required to issue fractional shares upon the exercise of the Option.

        17.    Nontransferability of the Option.    The Option may be exercised during the lifetime of the Optionee only by the Optionee or the Optionee's guardian or legal representative and may not be assigned or transferred in any manner except by will or by the laws of descent and distribution. Following the death of the Optionee, the Option, to the extent provided in Section 7, may be exercised by the Optionee's legal representative or by any person empowered to do so under the deceased Optionee's will or under the then applicable laws of descent and distribution.

        18.    Termination of the Option.    The Option shall terminate and may no longer be exercised on the first to occur of (a) the Option Expiration Date, (b) the last date for exercising the Option following termination of the Optionee's Service as described in Section 7, or (c) a Change in Control to the extent provided in Section 8.

        19.    Effect of Termination of Service.

        19.1    Option Exercisability.

        (a)    Disability.    If the Optionee's Service with the Participating Company Group terminates because of the Disability of the Optionee, the Option, to the extent unexercised and exercisable on the date on which the Optionee's Service terminated, may be exercised by

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the Optionee (or the Optionee's guardian or legal representative) at any time prior to the expiration of twelve (12) months after the date on which the Optionee's Service terminated, but in any event no later than the Option Expiration Date.

        (b)    Death.    If the Optionee's Service with the Participating Company Group terminates because of the death of the Optionee, the Option, to the extent unexercised and exercisable on the date on which the Optionee's Service terminated, may be exercised by the Optionee's legal representative or other person who acquired the right to exercise the Option by reason of the Optionee's death at any time prior to the expiration of twelve (12) months after the date on which the Optionee's Service terminated, but in any event no later than the Option Expiration Date. The Optionee's Service shall be deemed to have terminated on account of death if the Optionee dies within three (3) months after the Optionee's termination of Service.

        (c)    Other Termination of Service.    If the Optionee's Service with the Participating Company Group terminates for any reason, except Disability or death, the Option, to the extent unexercised and exercisable by the Optionee on the date on which the Optionee's Service terminated, may be exercised by the Optionee at any time prior to the expiration of three (3) months (or such other longer period of time as determined by the Board, in its discretion) after the date on which the Optionee's Service terminated, but in any event no later than the Option Expiration Date.

        19.2    Additional Limitation on Option Exercise.    Notwithstanding the provisions of Section 7.1, the Option may not be exercised after the Optionee's termination of Service to the extent that the shares to be acquired upon exercise of the Option would be subject to the Unvested Share Repurchase Option as provided in Section 11.

        19.3    Extension if Exercise Prevented by Law.    Notwithstanding the foregoing, if the exercise of the Option within the applicable time periods set forth in Section 7.1 is prevented by the provisions of Section 4.6, the Option shall remain exercisable until three (3) months after the date the Optionee is notified by the Company that the Option is exercisable, but in any event no later than the Option Expiration Date.

        19.4    Extension if Optionee Subject to Section 16(b).    Notwithstanding the foregoing, if a sale within the applicable time periods set forth in Section 7.1 of shares acquired upon the exercise of the Option would subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option shall remain exercisable until the earliest to occur of (i) the tenth (10th) day following the date on which a sale of such shares by the Optionee would no longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day after the Optionee's termination of Service, or (iii) the Option Expiration Date.

        19.5    Certain Definitions.

        (a)   "Termination After Change in Control" shall mean either of the following events occurring within twelve (12) months after a Change in Control:

        (i)    termination by the Participating Company Group of the Optionee's Service with the Participating Company Group for any reason other than for Cause (as defined below); or

        (ii)   the Optionee's resignation for Good Reason (as defined below) from all capacities in which the Optionee is then rendering Service to the Participating Company Group within a reasonable period of time following the event constituting Good Reason.

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Notwithstanding any provision herein to the contrary, Termination After Change in Control shall not include any termination of the Optionee's Service with the Participating Company Group which (1) is for Cause (as defined below); (2) is a result of the Optionee's death or disability; (3) is a result of the Optionee's voluntary termination of Service other than for Good Reason; or (4) occurs prior to the effectiveness of a Change in Control.

        (b)   "Cause" shall mean any of the following: (i) the Optionee's theft, dishonesty, or falsification of any Participating Company documents or records; (ii) the Optionee' s improper use or disclosure of a Participating Company's confidential or proprietary information; (iii) any action by the Optionee which has a detrimental effect on a Participating Company's reputation or business; (iv) the Optionee's failure or inability to perform any reasonable assigned duties after written notice from a Participating Company of, and a reasonable opportunity to cure, such failure or inability; (v) any material breach by the Optionee of any employment agreement between the Optionee and a Participating Company, which breach is not cured pursuant to the terms of such agreement; or (vi) the Optionee's conviction (including any plea of guilty or nolo contendere) of any criminal act which impairs the Optionee's ability to perform his or her duties with a Participating Company.

        (c)   "Good Reason" shall mean any one or more of the following:

          (i)  without the Optionee's express written consent, the assignment to the Optionee of any duties, or any limitation of the Optionee's responsibilities, substantially inconsistent with the Optionee's positions, duties, responsibilities and status with the Participating Company Group immediately prior to the date of the Change in Control;

         (ii)  without the Optionee's express written consent, the relocation of the principal place of the Optionee's Service to a location that is more than fifty (50) miles from the Optionee's principal place of Service immediately prior to the date of the Change in Control, or the imposition of travel requirements substantially more demanding of the Optionee than such travel requirements existing immediately prior to the date of the Change in Control;

        (iii)  any failure by the Participating Company Group to pay, or any material reduction by the Participating Company Group of, (1) the Optionee's base salary in effect immediately prior to the date of the Change in Control (unless reductions comparable in amount and duration are concurrently made for all other employees of the Participating Company Group with responsibilities, organizational level and title comparable to the Optionee's), or (2) the Optionee's bonus compensation, if any, in effect immediately prior to the date of the Change in Control (subject to applicable performance requirements with respect to the actual amount of bonus compensation earned by the Optionee); or

        (iv)  any failure by the Participating Company Group to (1) continue to provide the Optionee with the opportunity to participate, on terms no less favorable than those in effect for the benefit of any employee or service provider group which customarily includes a person holding the employment or service provider position or a comparable position with the Participating Company Group then held by the Optionee, in any benefit or compensation plans and programs, including, but not limited to, the Participating Company Group's life, disability, health, dental, medical, savings, profit sharing, stock purchase and retirement plans, if any, in which the Optionee was participating immediately prior to the date of the Change in Control, or their equivalent, or (2) provide the Optionee with all other fringe benefits (or their equivalent) from time to time in effect for the benefit of any employee or service provider group which customarily includes a person holding the employment or service provider position or a comparable position with the Participating Company Group then held by the Optionee.

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        20.    Change in Control.

        20.1    Definitions.

        (a)   An "Ownership Change Event" shall be deemed to have occurred if any of the following occurs with respect to the Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than fifty percent (50%) of the voting stock of the Company; (ii) a merger or consolidation in which the Company is a party; (iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company; or (iv) a liquidation or dissolution of the Company.

        (b)   A "Change in Control" shall mean an Ownership Change Event or a series of related Ownership Change Events (collectively, a "Transaction") wherein the stockholders of the Company immediately before the Transaction do not retain immediately after the Transaction, in substantially the same proportions as their ownership of shares of the Company's voting stock immediately before the Transaction, direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding voting stock of the Company or the corporation or corporations to which the assets of the Company were transferred (the "Transferee Corporation(s)"), as the case may be. For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting stock of one or more corporations which, as a result of the Transaction, own the Company or the Transferee Corporation(s), as the case may be, either directly or through one or more subsidiary corporations. The Board shall have the right to determine whether multiple sales or exchanges of the voting stock of the Company or multiple Ownership Change Events are related, and its determination shall be final, binding and conclusive.

        20.2    Effect of Change in Control on Option.    In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the "Acquiring Corporation"), may, without the consent of the Optionee, either assume the Company's rights and obligations under the Option or substitute for the Option a substantially equivalent option for the Acquiring Corporation's stock. In the event the Acquiring Corporation elects not to assume the Company's rights and obligations under the Option or substitute for the Option in connection with the Change in Control, and provided that the Optionee's Service has not terminated prior to such date, the Vested Ratio shall be deemed to be ¹/1 and all shares acquired upon exercise of the Option shall be Vested Shares for purposes of Section 11 as of the date ten (10) days prior to the date of the Change in Control. Any vesting of the Option that was permissible solely by reason of this Section 8.2 shall be conditioned upon the consummation of the Change in Control. The Option shall terminate and cease to be outstanding effective as of the date of the Change in Control to the extent that the Option is neither assumed or substituted for by the Acquiring Corporation in connection with the Change in Control nor exercised as of the date of the Change in Control. Notwithstanding the foregoing, shares acquired upon exercise of the Option prior to the Change in Control and any consideration received pursuant to the Change in Control with respect to such shares shall continue to be subject to all applicable provisions of this Option Agreement except as otherwise provided herein. Furthermore, notwithstanding the foregoing, if the corporation the stock of which is subject to the Option immediately prior to an Ownership Change Event described in Section 8.1(a)(i) constituting a Change in Control is the surviving or continuing corporation and immediately after such Ownership Change Event less than fifty percent (50%) of the total combined voting power of its voting stock is held by another corporation or by other corporations that are members of an affiliated group within the meaning of Section 1504(a) of the Code without regard to the provisions of Section 1504(b) of the Code, the Option shall not terminate unless the Board otherwise provides in its discretion.

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        20.3    Fair Market Value Limitation.    Should the exercisability of this Option be accelerated in connection with a Change in Control in accordance with Section 8.2, then to the extent that the aggregate Fair Market Value of the shares of Stock with respect to which the Optionee may exercise the Option for the first time during the calendar year of such acceleration, when added to the aggregate Fair Market Value of the shares subject to any other options designated as Incentive Stock Options granted to the Optionee under all stock option plans of the Participating Company Group prior to the Date of Option Grant with respect to which such options are exercisable for the first time during the same calendar year, exceeds One Hundred Thousand Dollars ($100,000) (or such other limit, if any, imposed by Section 422 of the Code), the portion of the Option which exceeds such amount shall be treated as a Nonstatutory Stock Option. For purposes of the preceding sentence, options designated as Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of shares of stock shall be determined as of the time the option with respect to such shares is granted.

        21.    Adjustments for Changes in Capital Structure.    In the event of any stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification, or similar change in the capital structure of the Company, appropriate adjustments shall be made in the number, Exercise Price and class of shares of stock subject to the Option. If a majority of the shares which are of the same class as the shares that are subject to the Option are exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event) shares of another corporation (the "New Shares"), the Board may unilaterally amend the Option to provide that the Option is exercisable for New Shares. In the event of any such amendment, the Number of Option Shares and the Exercise Price shall be adjusted in a fair and equitable manner, as determined by the Board, in its discretion. Notwithstanding the foregoing, any fractional share resulting from an adjustment pursuant to this Section 9 shall be rounded down to the nearest whole number, and in no event may the Exercise Price be decreased to an amount less than the par value, if any, of the stock subject to the Option. The adjustments determined by the Board pursuant to this Section 9 shall be final, binding and conclusive.

        22.    Rights as a Stockholder, Employee or Consultant.    The Optionee shall have no rights as a stockholder with respect to any shares covered by the Option until the date of the issuance of a certificate for the shares for which the Option has been exercised (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date such certificate is issued, except as provided in Section 9. If the Optionee is an Employee, the Optionee understands and acknowledges that, except as otherwise provided in a separate, written employment agreement between a Participating Company and the Optionee, the Optionee's employment is "at will" and is for no specified term. Nothing in this Option Agreement shall confer upon the Optionee any right to continue in the Service of a Participating Company or interfere in any way with any right of the Participating Company Group to terminate the Optionee's Service as an Employee or Consultant, as the case may be, at any time.

        23.    Unvested Share Repurchase Option.

        23.1    Grant of Unvested Share Repurchase Option.    In the event the Optionee's Service with the Participating Company Group is terminated for any reason or no reason, with or without cause, or, if the Optionee, the Optionee's legal representative, or other holder of shares acquired upon exercise of the Option attempts to sell, exchange, transfer, pledge, or otherwise dispose of (other than pursuant to an Ownership Change Event) any Unvested Shares, as defined in Section 11.2 below (the "Unvested Shares"), the Company shall have the right to repurchase the Unvested Shares under the terms and subject to the conditions set forth in this Section 11 (the "Unvested Share Repurchase Option").

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        23.2    Unvested Shares Defined.    The "Unvested Shares" shall mean, on any given date, the number of shares of Stock acquired upon exercise of the Option which exceed the Vested Shares determined as of such date.

        23.3    Exercise of Unvested Share Repurchase Option.    The Company may exercise the Unvested Share Repurchase Option by written notice to the Optionee within sixty (60) days after (a) termination of the Optionee's Service (or exercise of the Option, if later) or (b) the Company has received notice of the attempted disposition of Unvested Shares. If the Company fails to give notice within such sixty (60) day period, the Unvested Share Repurchase Option shall terminate unless the Company and the Optionee have extended the time for the exercise of the Unvested Share Repurchase Option. The Unvested Share Repurchase Option must be exercised, if at all, for all of the Unvested Shares, except as the Company and the Optionee otherwise agree.

        23.4    Payment for Shares and Return of Shares to Company.    The purchase price per share being repurchased by the Company shall be an amount equal to the Optionee's original cost per share, as adjusted pursuant to Section 9 (the "Repurchase Price"). The Company shall pay the aggregate Repurchase Price to the Optionee in cash within thirty (30) days after the date of the written notice to the Optionee of the Company's exercise of the Unvested Share Repurchase Option. For purposes of the foregoing, cancellation of any purchase money indebtedness of the Optionee to any Participating Company for the shares shall be treated as payment to the Optionee in cash to the extent of the unpaid principal and any accrued interest canceled. The shares being repurchased shall be delivered to the Company by the Optionee at the same time as the delivery of the Repurchase Price to the Optionee.

        23.5    Assignment of Unvested Share Repurchase Option.    The Company shall have the right to assign the Unvested Share Repurchase Option at any time, whether or not such option is then exercisable, to one or more persons as may be selected by the Company.

        23.6    Ownership Change Event.    Upon the occurrence of an Ownership Change Event, any and all new, substituted or additional securities or other property to which the Optionee is entitled by reason of the Optionee's ownership of Unvested Shares shall be immediately subject to the Unvested Share Repurchase Option and included in the terms "Stock" and "Unvested Shares" for all purposes of the Unvested Share Repurchase Option with the same force and effect as the Unvested Shares immediately prior to the Ownership Change Event. While the aggregate Repurchase Price shall remain the same after such Ownership Change Event, the Repurchase Price per Unvested Share upon exercise of the Unvested Share Repurchase Option following such Ownership Change Event shall be adjusted as appropriate. For purposes of determining the Vested Shares following an Ownership Change Event, credited Service shall include all Service with any corporation which is a Participating Company at the time the Service is rendered, whether or not such corporation is a Participating Company both before and after the Ownership Change Event.

        24.    Right of First Refusal.

        24.1    Grant of Right of First Refusal.    Except as provided in Section 11.7 below, in the event the Optionee, the Optionee's legal representative, or other holder of shares acquired upon exercise of the Option proposes to sell, exchange, transfer, pledge, or otherwise dispose of any Vested Shares (the "Transfer Shares") to any person or entity, including, without limitation, any stockholder of a Participating Company, the Company shall have the right to repurchase the Transfer Shares under the terms and subject to the conditions set forth in this Section 12 (the "Right of First Refusal").

        24.2    Notice of Proposed Transfer.    Prior to any proposed transfer of the Transfer Shares, the Optionee shall deliver written notice (the "Transfer Notice") to the Company describing fully the proposed transfer, including the number of Transfer Shares, the name and address of the proposed

10

transferee (the "Proposed Transferee") and, if the transfer is voluntary, the proposed transfer price, and containing such information necessary to show the bona fide nature of the proposed transfer. In the event of a bona fide gift or involuntary transfer, the proposed transfer price shall be deemed to be the Fair Market Value of the Transfer Shares, as determined by the Board in good faith. If the Optionee proposes to transfer any Transfer Shares to more than one Proposed Transferee, the Optionee shall provide a separate Transfer Notice for the proposed transfer to each Proposed Transferee. The Transfer Notice shall be signed by both the Optionee and the Proposed Transferee and must constitute a binding commitment of the Optionee and the Proposed Transferee for the transfer of the Transfer Shares to the Proposed Transferee subject only to the Right of First Refusal.

        24.3    Bona Fide Transfer.    If the Company determines that the information provided by the Optionee in the Transfer Notice is insufficient to establish the bona fide nature of a proposed voluntary transfer, the Company shall give the Optionee written notice of the Optionee's failure to comply with the procedure described in this Section 12, and the Optionee shall have no right to transfer the Transfer Shares without first complying with the procedure described in this Section 12. The Optionee shall not be permitted to transfer the Transfer Shares if the proposed transfer is not bona fide.

        24.4    Exercise of Right of First Refusal.    If the Company determines the proposed transfer to be bona fide, the Company shall have the right to purchase all, but not less than all, of the Transfer Shares (except as the Company and the Optionee otherwise agree) at the purchase price and on the terms set forth in the Transfer Notice by delivery to the Optionee of a notice of exercise of the Right of First Refusal within thirty (30) days after the date the Transfer Notice is delivered to the Company. The Company's exercise or failure to exercise the Right of First Refusal with respect to any proposed transfer described in a Transfer Notice shall not affect the Company's right to exercise the Right of First Refusal with respect to any proposed transfer described in any other Transfer Notice, whether or not such other Transfer Notice is issued by the Optionee or issued by a person other than the Optionee with respect to a proposed transfer to the same Proposed Transferee. If the Company exercises the Right of First Refusal, the Company and the Optionee shall thereupon consummate the sale of the Transfer Shares to the Company on the terms set forth in the Transfer Notice within sixty (60) days after the date the Transfer Notice is delivered to the Company (unless a longer period is offered by the Proposed Transferee); provided, however, that in the event the Transfer Notice provides for the payment for the Transfer Shares other than in cash, the Company shall have the option of paying for the Transfer Shares by the present value cash equivalent of the consideration described in the Transfer Notice as reasonably determined by the Company. For purposes of the foregoing, cancellation of any indebtedness of the Optionee to any Participating Company shall be treated as payment to the Optionee in cash to the extent of the unpaid principal and any accrued interest canceled.

        24.5    Failure to Exercise Right of First Refusal.    If the Company fails to exercise the Right of First Refusal in full (or to such lesser extent as the Company and the Optionee otherwise agree) within the period specified in Section 12.4 above, the Optionee may conclude a transfer to the Proposed Transferee of the Transfer Shares on the terms and conditions described in the Transfer Notice, provided such transfer occurs not later than ninety (90) days following delivery to the Company of the Transfer Notice. The Company shall have the right to demand further assurances from the Optionee and the Proposed Transferee (in a form satisfactory to the Company) that the transfer of the Transfer Shares was actually carried out on the terms and conditions described in the Transfer Notice. No Transfer Shares shall be transferred on the books of the Company until the Company has received such assurances, if so demanded, and has approved the proposed transfer as bona fide. Any proposed transfer on terms and conditions different from those described in the Transfer Notice, as well as any subsequent proposed transfer by the Optionee,

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shall again be subject to the Right of First Refusal and shall require compliance by the Optionee with the procedure described in this Section 12.

        24.6    Transferees of Transfer Shares.    All transferees of the Transfer Shares or any interest therein, other than the Company, shall be required as a condition of such transfer to agree in writing (in a form satisfactory to the Company) that such transferee shall receive and hold such Transfer Shares or interest therein subject to all of the terms and conditions of this Option Agreement, including this Section 12 providing for the Right of First Refusal with respect to any subsequent transfer. Any sale or transfer of any shares acquired upon exercise of the Option shall be void unless the provisions of this Section 12 are met.

        24.7    Transfers Not Subject to Right of First Refusal.    The Right of First Refusal shall not apply to any transfer or exchange of the shares acquired upon exercise of the Option if such transfer or exchange is in connection with an Ownership Change Event. If the consideration received pursuant to such transfer or exchange consists of stock of a Participating Company, such consideration shall remain subject to the Right of First Refusal unless the provisions of Section 12.9 below result in a termination of the Right of First Refusal.

        24.8    Assignment of Right of First Refusal.    The Company shall have the right to assign the Right of First Refusal at any time, whether or not there has been an attempted transfer, to one or more persons as may be selected by the Company.

        24.9    Early Termination of Right of First Refusal.    The other provisions of this Option Agreement notwithstanding, the Right of First Refusal shall terminate and be of no further force and effect upon (a) the occurrence of a Change in Control, unless the Acquiring Corporation assumes the Company's rights and obligations under the Option or substitutes a substantially equivalent option for the Acquiring Corporation's stock for the Option, or (b) the existence of a public market for the class of shares subject to the Right of First Refusal. A "public market" shall be deemed to exist if (i) such stock is listed on a national securities exchange (as that term is used in the Exchange Act) or (ii) such stock is traded on the over-the-counter market and prices therefor are published daily on business days in a recognized financial journal.

        25.    Escrow.

        25.1    Establishment of Escrow.    To ensure that shares subject to the Unvested Share Repurchase Option will be available for repurchase, the Company may require the Optionee to deposit the certificate evidencing the shares which the Optionee purchases upon exercise of the Option with an agent designated by the Company under the terms and conditions of an escrow agreement approved by the Company. If the Company does not require such deposit as a condition of exercise of the Option, the Company reserves the right at any time to require the Optionee to so deposit the certificate in escrow. Upon the occurrence of an Ownership Change Event or a change, as described in Section 9, in the character or amount of any of the outstanding stock of the corporation the stock of which is subject to the provisions of this Option Agreement, any and all new, substituted or additional securities or other property to which the Optionee is entitled by reason of the Optionee's ownership of shares of Stock acquired upon exercise of the Option that remain, following such Ownership Change Event or change described in Section 9, subject to the Unvested Share Repurchase Option shall be immediately subject to the escrow to the same extent as such shares of Stock immediately before such event. The Company shall bear the expenses of the escrow.

        25.2    Delivery of Shares to Optionee.    As soon as practicable after the expiration of the Unvested Share Repurchase Option, but not more frequently than twice each calendar year, the escrow agent shall deliver to the Optionee the shares and any other property no longer subject to such restriction.

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        25.3    Notices and Payments.    In the event the shares and any other property held in escrow are subject to the Company's exercise of the Unvested Share Repurchase Option or the Right of First Refusal, the notices required to be given to the Optionee shall be given to the escrow agent, and any payment required to be given to the Optionee shall be given to the escrow agent. Within thirty (30) days after payment by the Company, the escrow agent shall deliver the shares and any other property which the Company has purchased to the Company and shall deliver the payment received from the Company to the Optionee.

        26.    Stock Distributions Subject to Option Agreement.    If, from time to time, there is any stock dividend, stock split or other change, as described in Section 9, in the character or amount of any of the outstanding stock of the corporation the stock of which is subject to the provisions of this Option Agreement, then in such event any and all new, substituted or additional securities to which the Optionee is entitled by reason of the Optionee's ownership of the shares acquired upon exercise of the Option shall be immediately subject to the Unvested Share Repurchase Option and the Right of First Refusal with the same force and effect as the shares subject to the Unvested Share Repurchase Option and the Right of First Refusal immediately before such event.

        27.    Notice of Sales Upon Disqualifying Disposition.    The Optionee shall dispose of the shares acquired pursuant to the Option only in accordance with the provisions of this Option Agreement. In addition, if the Notice designates this Option as an Incentive Stock Option, the Optionee shall (a) promptly notify the Chief Financial Officer of the Company if the Optionee disposes of any of the shares acquired pursuant to the Option within one (1) year after the date the Optionee exercises all or part of the Option or within two (2) years after the Date of Option Grant and (b) provide the Company with a description of the circumstances of such disposition. Until such time as the Optionee disposes of such shares in a manner consistent with the provisions of this Option Agreement, unless otherwise expressly authorized by the Company, the Optionee shall hold all shares acquired pursuant to the Option in the Optionee's name (and not in the name of any nominee) for the one-year period immediately after the exercise of the Option and the two-year period immediately after Date of Option Grant. At any time during the one-year or two-year periods set forth above, the Company may place a legend on any certificate representing shares acquired pursuant to the Option requesting the transfer agent for the Company's stock to notify the Company of any such transfers. The obligation of the Optionee to notify the Company of any such transfer shall continue notwithstanding that a legend has been placed on the certificate pursuant to the preceding sentence.

        28.    Legends.    The Company may at any time place legends referencing the Unvested Share Repurchase Option and the Right of First Refusal and any applicable federal, state or foreign securities law restrictions on all certificates representing shares of stock subject to the provisions of this Option Agreement. The Optionee shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to the Option in the possession of the Optionee in order to carry out the provisions of this Section. Unless otherwise specified by the Company, legends placed on such certificates may include, but shall not be limited to, the following:

        28.1 "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."

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        28.2 "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN UNVESTED SHARE REPURCHASE OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION."

        28.3 "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION."

        28.4 "THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK OPTION AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED ("ISO"). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT AFFORDED TO ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO [INSERT DISQUALIFYING DISPOSITION DATE HERE]. SHOULD THE REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR TO THIS DATE AND FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES SHALL NOTIFY THE CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER'S NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL TRANSFERRED AS DESCRIBED ABOVE."

        29.    Lock-Up Agreement.    The Optionee hereby agrees that in the event of any underwritten public offering of stock, including an initial public offering of stock, made by the Company pursuant to an effective registration statement filed under the Securities Act, the Optionee shall not offer, sell, contract to sell, pledge, hypothecate, grant any option to purchase or make any short sale of, or otherwise dispose of any shares of stock of the Company or any rights to acquire stock of the Company for such period of time from and after the effective date of such registration statement as may be established by the underwriter for such public offering; provided, however, that such period of time shall not exceed one hundred eighty (180) days from the effective date of the registration statement to be filed in connection with such public offering. The foregoing limitation shall not apply to shares registered in the public offering under the Securities Act.

        30.    Restrictions on Transfer of Shares.    No shares acquired upon exercise of the Option may be sold, exchanged, transferred (including, without limitation, any transfer to a nominee or agent of the Optionee), assigned, pledged, hypothecated or otherwise disposed of, including by operation of law, in any manner which violates any of the provisions of this Option Agreement and, except pursuant to an Ownership Change Event, until the date on which such shares become Vested Shares, and any such attempted disposition shall be void. The Company shall not be required (a) to transfer on its books any shares which will have been transferred in violation of any of the provisions set forth in this Option Agreement or (b) to treat as owner of such shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares will have been so transferred.

        31.    Miscellaneous Provisions.

        31.1    Binding Effect.    Subject to the restrictions on transfer set forth herein, this Option Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns.

        31.2    Termination or Amendment.    The Board may terminate or amend the Plan or the Option at any time; provided, however, that except as provided in Section 8 in connection with a

14

Change in Control, no such termination or amendment may adversely affect the Option or any unexercised portion hereof without the consent of the Optionee unless such termination or amendment is necessary to comply with any applicable law or government regulation or is required to enable the Option, if designated an Incentive Stock Option in the Notice, to qualify as an Incentive Stock Option. No amendment or addition to this Option Agreement shall be effective unless in writing.

        31.3    Notices.    Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Option Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail, with postage and fees prepaid, addressed to the other party at the address shown below that party's signature or at such other address as such party may designate in writing from time to time to the other party.

        31.4    Integrated Agreement.    The Notice, this Option Agreement and the Plan constitute the entire understanding and agreement of the Optionee and the Participating Company Group with respect to the subject matter contained herein or therein and supersedes any prior agreements, understandings, restrictions, representations, or warranties among the Optionee and the Participating Company Group with respect to such subject matter other than those as set forth or provided for herein or therein. To the extent contemplated herein or therein, the provisions of the Notice and the Option Agreement shall survive any exercise of the Option and shall remain in full force and effect.

        31.5    Applicable Law.    This Option Agreement shall be governed by the laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within the State of California.

        31.6    Counterparts.    The Notice may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

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TM Incentive Stock Option	Optionee:
TM Nonstatutory Stock Option	Date:

STOCK OPTION EXERCISE NOTICE
(IMMEDIATELY EXERCISABLE)

DivX, Inc.
Attention: Chief Financial Officer

Ladies and Gentlemen:

        1.Option.    I was granted an option (the "Option") to purchase shares of the common stock (the "Shares") of DivX,  Inc. (the "Company") pursuant to the Company's 2000 Stock Option Plan (the "Plan"), my Notice of Grant of Stock Option (the "Notice") and my Stock Option Agreement (the "Option Agreement") as follows:

Grant Number:
Date of Option Grant:
Number of Option Shares:
Exercise Price per Share:	$

        2.Exercise of Option.    I hereby elect to exercise the Option to purchase the following number of Shares:

Vested Shares:
Unvested Shares:
Total Shares Purchased:
Total Exercise Price (Total Shares × Price per Share)	$

        3.Payments.    I enclose payment in full of the total exercise price for the Shares in the following form(s), as authorized by my Option Agreement:

TM Cash:	$
TM Check:	$
TM Tender of Company Stock:                                                             Contact Plan Administrator

        4.Tax Withholding.    I authorize payroll withholding and otherwise will make adequate provision for the federal, state, local and foreign tax withholding obligations of the Company, if any, in connection with the Option. If I am exercising a Nonstatutory Stock Option, I enclose payment in full of my withholding taxes, if any, as follows:

(Contact Plan Administrator for amount of tax due.)

TM Cash:	$
TM Check:	$

        5.Optionee Information.

My address is:

My Social Security Number is:

        6.Notice of Disqualifying Disposition.    If the Option is an Incentive Stock Option, I agree that I will promptly notify the Chief Financial Officer of the Company if I transfer any of the Shares within one (1) year from the date I exercise all or part of the Option or within two (2) years of the Date of Option Grant.

        7.Binding Effect.    I agree that the Shares are being acquired in accordance with and subject to the terms, provisions and conditions of the Option Agreement, including the Unvested Share Repurchase Option and the Right of First Refusal set forth therein, to all of which I hereby expressly assent. This Agreement shall inure to the benefit of and be binding upon the my heirs, executors, administrators, successors and assigns. If required by the Company, I agree to deposit the certificate(s) evidencing the Shares, along with a blank stock assignment separate from certificate executed by me, with an escrow agent designated by the Company, to be held pursuant to the Company's standard Joint Escrow Instructions.

        8.Transfer.    I understand and acknowledge that the Shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and that consequently the Shares must be held indefinitely unless they are subsequently registered under the Securities Act, an exemption from such registration is available, or they are sold in accordance with Rule 144 or Rule 701 under the Securities Act. I further understand and acknowledge that the Company is under no obligation to register the Shares. I understand that the certificate or certificates evidencing the Shares will be imprinted with legends which prohibit the transfer of the Shares unless they are registered or such registration is not required in the opinion of legal counsel satisfactory to the Company.

        I am aware that Rule 144 under the Securities Act, which permits limited public resale of securities acquired in a nonpublic offering, is not currently available with respect to the Shares and, in any event, is available only if certain conditions are satisfied. I understand that any sale of the Shares that might be made in reliance upon Rule 144 may only be made in limited amounts in accordance with the terms and conditions of such rule and that a copy of Rule 144 will be delivered to me upon request.

        9.Election Under Section 83(b) of the Code.    I understand and acknowledge that if I am exercising the Option to purchase Unvested Shares (i.e., shares that remain subject to the Company's Unvested Share Repurchase Option), that I should consult with my tax advisor regarding the advisability of filing with the Internal Revenue Service an election under Section 83(b) of the Code, which must be filed no later than thirty (30) days after the date on which I exercise the Option. I acknowledge that I have been advised to consult with a tax advisor prior to the exercise of the Option regarding the tax consequences to me of exercising the Option. AN ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE DATE ON WHICH I PURCHASE SHARES. THIS TIME PERIOD CANNOT BE EXTENDED. I ACKNOWLEDGE THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS MY SOLE RESPONSIBILITY, EVEN IF I REQUEST THE COMPANY OR ITS REPRESENTATIVES TO FILE SUCH ELECTION ON MY BEHALF.

        I understand that I am purchasing the Shares pursuant to the terms of the Plan, the Notice and my Option Agreement, copies of which I have received and carefully read and understand.

	Very truly yours,
	(Signature)
Receipt of the above is hereby acknowledged.
DivX, Inc.
By:
Title:
Dated:

QuickLinks

DIVXNETWORKS, INC. 2000 STOCK OPTION PLAN
DivXNetworks, Inc. 2000 Stock Option Plan History
DIVX, INC. STOCK OPTION AGREEMENT (Immediately Exercisable)
STOCK OPTION EXERCISE NOTICE (IMMEDIATELY EXERCISABLE)
(Contact Plan Administrator for amount of tax due.)

EX-10.4

Exhibit 10.4

April 12, 2006

Fred Gerson
Perco Park
100 Park Boulevard
San Diego, CA 92101

Re

Amended and Restated Offer Letter

Fred:

        DivX, Inc. ("DXN") is pleased to formally extend to amend and restate its offer letter to you dated March 2005 in which we offered you the opportunity to join the DXN Board of Directors.

        This letter supersedes all prior agreements, including without limitation the March 2005 offer letter.

        You are a member of the Audit Committee and will be a member of the Nominating and Corporate Governance Committee. As we discussed, it is essential that you attend scheduled board meetings in person, but we understand that other matters may require you to attend no more than 20% of each year's board meetings telephonically.

        You have been granted a non-qualified stock option to purchase 60,000 shares of common stock of DXN. At the next meeting of the Board of Directors on April 27, 2006, it will be recommended to the Board that you be granted a non-qualified stock option to purchase 40,000 shares of common stock of DXN. The exercise price per share for these options will be fixed based on DXN's common stock price as determined by DXN's board of directors for the three days prior to date of grant. This grant will vest 25% upon the first year anniversary of the grant date and then ¹/48 per month thereafter. Vesting will depend upon your continued status as a Director of DXN.

        In the event that you are a Director and there is a "Change in Control," you will receive one year of accelerated vesting. "Change of Control" shall mean the sale of all or substantially all of the assets of DXN or the acquisition of DXN by another entity by means of consolidation or merger after which the then current shareholders of DXN hold less than 50% of the voting power of the surviving corporation provided that a reincorporation of DXN shall nor be a Change of Control.

        DXN will extend Directors & Officers ("D&O") insurance coverage for liability resulting from your acts or omissions as a Director of DXN pursuant to the terms and conditions of DXN's current D&O insurance policy.

        To the extent permitted under DXN's Articles of Incorporation or By-Laws, DXN further agrees to indemnify you for any damages, suits, liability or claims, resulting from or arising out of your acts or omissions as a Director of DXN, provided the DXN's indemnification under this provision shall not extend to acts of bad faith, willful misconduct, gross negligence, fraud, embezzlement or other material dishonesty, or commission of a felony or other crime of moral turpitude.

        As a Director of DXN you will have access to confidential information and will continue to be bound by the DXN Nondisclosure Agreement, a copy of which you have already executed.

        Please indicate by signature below your agreement and acknowledgement of this amended and restated letter and fax it to our General Counsel, David Richter (fax: 858-882-0604).

DivX, Inc.

/s/ R. Jordan Greenhall R. Jordan Greenhall
Chief Executive Officer

Acknowledged and Agreed:

        I have read this letter in its entirety and agree to its terms and conditions.

/s/ Fred Gerson Fred Gerson

Dated:
4-12-06

EX-10.5

Exhibit 10.5

January 3, 2006

Via E-Mail

Christopher McGurk

Re: Board of Directors

Chris,

        I am glad to formally invite you to join the DivX, Inc. Board of Directors. You stand apart from other available candidates in terms of your substantive knowledge and experience as well as your cultural fit with both the DivX team and understanding of the Company's mission. This letter encapsulates the discussions we have had over the last few weeks with respect to your joining the Board.

        As a board member of DivX, you agree to provide entertainment industry expertise to DivX management in its efforts to prepare, refine and/or restructure the Company's content plan; make the necessary high-level contacts on behalf of DivX with content providers; evangelize DivX to the entertainment industry and financial community, including among other things a press release with respect to your joining the DivX Board; and attend scheduled Board meetings in person except under unusual circumstances.

        Upon your acceptance of this offer of Board membership, you would receive a nonstatutory stock option grant to purchase 100,000 shares of DivX common stock. As with all option grants, such grant would be subject to Board approval. All options would be subject to the Company's stock option plan and would vest over four years with 25% vesting on the one-year anniversary of the grant date and then 1/48 vesting on a monthly basis for 36 months. Vesting in such options would depend upon your continued status as a Director of DivX.

        The exercise price of such options would be the fair market value of the Company's common stock as of the date of such option grant as determined by the Company's Board of Directors. The last time such exercise price was determined by the Board was at its November 2005 meeting during which the exercise price was set at ninety cents ($0.90) per share. Please note that no representation is made that the exercise price for your options will also be set at such price. As a point of interest, the Company's most recent equity financing closed in October 2005 pursuant to which a new investor in the Company invested $17 million for Series D preferred stock priced at $2.9216 per share. Such Series D preferred stock has certain rights, preferences and privileges additional to those of common stock.

        Please note that as a Director, you would have access to confidential information and would be required to execute the Company's standard nondisclosure agreement, a copy of which shall be provided to you.

        Our proposal to you significantly exceeds what we have contemplated with respect to other candidates and reflects how strongly management and the Board feel about the prospect of working with you. We look forward to you joining our team.

DivX, Inc.

/s/ R. Jordan Greenhall R. Jordan Greenhall
Chief Executive Officer

        Acknowledged and Agreed:

        I have read this letter in its entirety and agree to its terms and conditions.

/s/ Christopher McGurk Christopher McGurk
Dated:	4-20-06

EX-10.6

Exhibit 10.6

November 21, 2002

Kevin Hell
PO Box 676296
Rancho Santa Fe, CA 92067

Dear Kevin:

        DivXNetworks, Inc. is pleased to formally extend to you an offer of employment for the position of Chief Marketing Officer, based in San Diego, CA. In this position you will report to the CEO, Jordan Greenhall.

        To compensate you for your efforts in this position, you will receive a base salary of $16,666.67 per month (equivalent to $200,000 per annum). In addition, you have an opportunity to earn additional bonus compensation up to a gross compensation cap on the bonus of $300,000. The bonus compensation will be tied to specific goals which are outlined in the attached "Bonus Compensation" document and will be finalized within two weeks of your start date.

        It will be recommended to the Board that you be granted an option to purchase 600,000 stock options of DivXNetworks, Inc. The price per share for these options will be fixed based on the Company's stock price for the three days prior to date of grant (currently at $0.06 per share strike price). This grant will vest with a 1 year cliff at 25% then ¹/48 per month thereon, based upon your employment anniversary date.

        With regard to benefits, you will receive all the employment benefits available to full time, regular exempt employees of DivXNetworks, Inc. These benefits include medical, dental, life insurance. AD&D, and STD/LTD, accrual of 20 days PTO during the year, and paid holidays. In addition you can contribute to the companies 401(k) plan; currently there is no company matching.

        In accordance with the Immigration Reform & Control Act of 1986, employment in the United States is conditional upon proof of eligibility to legally work in the United States. On your first day of employment, you will need to provide us with this proof, (please refer to the enclosed list of acceptable documents). If you do not have these documents, please contact me prior to your first day of employment.

        The terms of your employment relationship with DivXNetworks, Inc. is and always will be one of voluntary employment "at will".

        As an employee of DivXNetworks, Inc. you will have access to confidential information and you may, during the course of your employment, develop information or inventions, which will be the property of DivXNetworks, Inc. To protect the interests of DivXNetworks, Inc., you will be required to sign the Company's standard "Agreement Regarding Proprietary Information and Inventions" and it must be accepted by DivXNetworks, Inc. as a condition of your employment. We wish to impress upon you that we do not wish you to bring with you any confidential or proprietary material of any former employer or to violate any other obligations you may have to your former employer.

        This offer letter is an offer of employment and is not intended and shall not be construed as a contract proposal or contract of employment.

        This written offer constitute all conditions and agreements made on behalf of DivXNetworks, Inc. and supersedes any previous verbal commitments by the Company. No representative other than myself has any authority to alter or add to any of the terms and conditions herein.

        Please contact me to indicate your response to this offer. Upon your acceptance return the original and retain the copy for your records. I have also enclosed Agreement Regarding Proprietary Information and Inventions. Following your acceptance, please review, sign, and return, along with your signed offer letter. This employment offer expires on December 1, 2002.

        Your experience and talents will be a strong addition to our company. We are looking forward to having you join our team.

Regards,
DivXNetworks, Inc.

/s/  R. JORDAN GREENHALL Jordan Greenhall
CEO

        I have read this offer letter in its entirety and agree to the terms and conditions of employment. I understand and agree that my employment with DivXNetworks.com, Inc. is at-will.

2-18-03 Date	/s/  KEVIN HELL Signature
Start Date

2

BONUS COMPENSATION

        You have been offered the opportunity to earn an additional bonus compensation. This bonus compensation is in addition to base salary. All bonuses will are paid upon receipt of cash. Below are the details of your bonus plan:

Cash Bonus

April 1, 2003	automatic $25,000 bonus
Q2'03 Milestone	Revenue generated greater than $4M in first six months of 2003 $33,000 bonus
Q3'03 Milestone	Revenue generated greater than $9M in first nine months of 2003 $33,000 bonus
Q4'03 Milestone	Revenue generated greater than $15M for 2003 $33,000 bonus

        An additional $100,000 bonus in 2003 targeting 3 additional milestones at the close of Q2, Q3, and Q4. These milestones are:

Equity Bonus

1.	Q2'03 Milestone: Close 3 major SW VAR/OEM deals (>100K) by the end of Q2'03.	100,000 options
2.	Q3'03 Milestone: Get Dr. DivX launched into a retail market by Thanksgiving 2003.	100,000 options
3.	Q4'03 Milestone: Successfully implement at least one major strategic project (on the order of Snakebite, Simba, P2P, Disney OVS node) by the end of 2003.	100,000 options

        In 2004, you will move to a bonus based on the following formula: 1% of all company revenues over $8M with a $300k cap on the bonus.

        I acknowledge and accept the terms of this bonus program.

/s/  KEVIN HELL Signature
2-18-03 Date

3

February 2, 2005

Kevin Hell
14460 Caminito Lazanja
San Diego, CA 92127

Dear Kevin,

        This letter will confirm our mutual understanding regarding your continued employment at DivXNetworks, Inc. ("DXN"). All terms and conditions of your prior offer letter from DXN dated November 21, 2002 (the "Original Letter"), a copy of which is attached hereto remain in force and effect except as stated in this letter:

•

Your title at DXN is Chief Operating Officer.



•

The second and third sentences of the second paragraph of your Offer Letter are deleted and the following is substituted instead:

"You will be paid a bonus consistent with the bonuses paid to other senior executives of the Company."

The second-to-last paragraph of the Bonus Compensation page attached to the Original Letter (which read; "In 2004, you will move to a bonus based on the following formula: 1% of all company revenues over $8M with a $300K cap on the bonus.") is deleted in its entirety as such bonus structure did not reflect your direct contribution to the production of revenues.

For the avoidance of doubt, the deleted language is indicated on the attached copy of the Original Letter.

•

If during your employment with DXN (i) there is a Change of Control (as defined below) and (ii) you are not offered a Comparable Position (as defined below) by the surviving corporation, all of the options to purchase shares of common stock of DXN that you own as of the date of this letter shall vest and become exercisable immediately prior to the Change of Control. A "Comparable Position" is a position with similar or greater responsibilities at your then-current base salary. For the purpose of clarity and without limiting the universe of comparable positions, a role with responsibility for marketing, including without limitation product marketing, with operational expense responsibility for an operational group of substantially similar size to that managed by you at DXN at the time of the Change of Control shall be considered a Comparable Position. "Change of Control" shall mean the sale or substantially all of the assets of DXN or the acquisition of DXN by another entity by means of consolidation or merger after which the then current shareholders of DXN hold less than 50% of the voting power of the surviving corporation provided that a reincorporation of DXN shall not be a Change of Control.

        This letter, together with the Original Letter (with attachments) as modified by this letter, constitutes all terms and conditions of your employment by DXN and supersedes any previous written or verbal commitments by DXN. No representative other than the CEO of DXN has any authority to alter or add to any of the terms and conditions herein.

4

        Please acknowledge your agreement to the terms and conditions of this letter below. Your failure to return this signed letter to me by Thursday, February 3, 2005 would render this letter null, void and of no effect.

DivXNetworks, Inc.

/s/  R. JORDAN GREENHALL R. Jordan Greenhall
Chief Executive Officer

Acknowledged and agreed:

/s/  KEVIN HELL Kevin Hell

2/2/05 Dated

5

EX-10.7

Exhibit 10.7

April 20, 2004

David Richter
417 E. Pine Street, # 409
Seattle, WA 98122

Dear David:

        DivXNetworks, Inc. is pleased to formally extend to you an offer of employment for the position of Vice President, General Counsel, based in San Diego, CA. You will be expected to perform various duties consistent with your position, and will report to Jordan Greenhall, CEO. Of course, the Company may change your position, duties, and work location from time to time as it deems necessary.

        Your compensation will be $14,583.33 per month (equivalent to $175,000 per annum), less payroll deductions and all required withholdings. You will be paid semi-monthly. You will be paid a bonus consistent with the bonuses paid to other senior executives of DivXNetworks, Inc. We are also extending you a relocation package of $15,000. This budget will be available at your discretion to use for any costs related to your relocation from Seattle to San Diego. The costs associated with your commuting to San Diego from Seattle before the move (flights and hotel) will be covered outside of this budget by DivXNetworks, Inc. All travel arrangements will be coordinated through the company travel agent and be consistent with the Companies guidelines. The Company expects that you will make the necessary effort to ensure your relocation is completed within a reasonable timeframe not to exceed 3 months.

        It will be recommended to the Board that you be granted an incentive stock option to purchase 225,000 shares of common stock of DivXNetworks, Inc. The price per share for these options will be fixed based on the Company's common stock price for the three days prior to date of grant. This grant will vest with a 1 year cliff at 25% then ¹/48 per month thereafter, based upon the grant date.

        If, during your employment with DivXNetworks, Inc., there is a Change of Control, all of the 225,000 option shares shall vest and become exercisable immediately prior to the Change of Control. "Change of Control" shall mean the sale of all or substantially all of the assets of DivXNetworks, Inc. or the acquisition of DivXNetworks, Inc. by another entity by means of consolidation or merger after which the then current shareholders of DivXNetworks, Inc. hold less than 50% of the voting power of the surviving corporation; provided that a reincorporation of DivXNetworks, Inc. shall not be a Change of Control.

        Notwithstanding anything to the contrary in this letter agreement, if your employment with DivXNetworks, Inc. is involuntarily terminated and a Change of Control is announced within six (6) months of such termination date, all of the 225,000 option shares shall vest and be immediately exercisable as of the date of such announcement, and you shall have up to one year to exercise the option. For purposes of this letter, your employment will be deemed involuntarily terminated if your duties are reduced, your title as Vice President, General Counsel is reduced, your compensation and/or benefits are reduced or you no longer report to DivXNetworks, Inc.'s CEO.

        With regard to benefits, you will receive all the benefits available to full time, regular exempt employees of DivXNetworks, Inc. These benefits include medical, dental, life insurance, AD&D, and STD/LTD, for which the premiums for employees are paid 99% by the Company, accrual of 20 days vacation during the year, and 9 paid holidays. In addition, you can contribute to the Company's 401(k) plan; currently there is no Company matching. Details about these benefits are provided in the Benefits Summary, available for your review. DivXNetworks, Inc. may modify your compensation and benefits from time to time as it deems necessary.

        Normal working hours are from 8:30 a.m. to 5:00 p.m., Monday through Friday. As an exempt salaried employee, you will be expected to work additional hours as required by the nature of your work assignments. Additionally, as an employee of DivXNetwork, Inc., you will be expected to abide by

the Company's rules and regulations and acknowledge in writing that you have read the Company's Employee Handbook, which will govern the terms and conditions of your employment.

        In accordance with the Immigration Reform & Control Act of 1986, employment in the United States is conditional upon proof of eligibility to legally work in the United States. On your first day of employment, you will need to provide us with this proof, (please refer to the enclosed list of acceptable documents). If you do not have those documents, please contact me prior to your first day of employment.

        The terms of your employment relationship with DivXNetworks, Inc. is and always will be one of voluntary employment "at will". This means you may terminate your employment with DivXNetworks, Inc. at any time and for any reason whatsoever simply by notifying DivXNetworks, Inc. Likewise, DivXNetworks, Inc. may terminate your employment at any time and for any reason whatsoever, with or without cause or advance notice. "At will" can't be changed unless in writing by Executive Officer of the Company.

        As an employee of DivXNetworks, Inc. you will have access to confidential information and you may during the course of your employment, develop information or inventions, which will be the properly of DivXNetworks, Inc. To protect the interests of DivXNetworks, Inc., you will be required to sign and comply with the Company's standard "Employee Innovations and Proprietary Rights Assignment Agreement" and it must be accepted by DivXNetworks, Inc. as a condition of your employment. We wish to impress upon you that we do not wish you to bring with you any confidential or proprietary material of any former employer or other person or to violate any other obligations you may have to your former employer or other person. You agree that you will not bring onto Company premises any unpublished documents or property belonging to any former employer or other person to whom you have an obligation of confidentiality.

        This written offer, together with your assigned "Employee Innovations and Proprietary Rights Assignment Agreement," constitutes all conditions and agreements regarding your employment made on behalf of DivXNetworks, Inc. and supersedes any previous written or verbal commitments by the Company. No representative other than me has any authority to alter or add to any of the terms and conditions herein.

        Please contact me to indicate your response to the offer. Upon your acceptance return the original and retain the copy for your records. I have also enclosed our standard "Employee Innovations and Proprietary Rights Assignment Agreement." Following your acceptance, please review, sign, and return the "Employee Innovations and Proprietary Rights Assignment Agreement," along with your signed offer letter. This employment offer expires on April 21st, 2004.

        Your experience and talents will be a strong addition to DivXNetworks, Inc. We are looking forward to having you join our team.

Regards,
DivXNetworks, Inc.

/s/ JORDAN GREENHALL Jordan Greenhall
CEO

I have read this offer letter in its entirety and agree to the terms and conditions of employment. I understated and agree that, except as provided otherwise in this letter agreement, my employment with DivXNetworks, Inc. is at will.
4-20-04 Date Signed	/s/ David Richter Signature
, 2004 Start Date

EX-10.8

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Exhibit 10.8

[LOGO]

December 13, 2004

Chris Russell
P.O. Box 2967
Culver City, CA 90231

Dear Chris;

        DivXNetworks, Inc. is pleased to formally extend to you an offer of employment for the position of Vice President, Advanced Technology based in San Diego, CA. You will be expected to perform various duties consistent with your position and will report to Jordan Greenhall, CEO. Of course, the Company may change your position, duties, and work location from time to time as it deems necessary.

        Your compensation will be $12,000 per month (equivalent to $150,000 per annum) less payroll deductions and all required withholdings. You will be paid semi-monthly. You will also receive relocation assistance in the amount of $15,000, payable upon your first day of employment.

        It will be recommended to the Board that you be granted an option to purchase 50,000 shares of common stock of DivXNetworks, Inc. You will also be eligible for an additional 15,000 share of common stock based upon your performance in 2005. The price per share for these options will be fixed based on the Company's common stock price for the three days prior to date of grant. Subject to your continued employment by the Company, this grant will vest according to the following 4-year schedule: 25% on the one-year anniversary of the commencement date of your employment and then ¹/48 per completed month thereafter.

        With regard to benefits, you will receive all the employment benefits available to full time, regular exempt employees of DivXNetworks, Inc. These benefits include medical, dental, life insurance, AD&D, and STD/LTD, for which the premiums for employees are paid 99% by the Company, accrual of 20 days vacation during the year, and 9 paid holidays. In addition you can contribute to the Company's 401(k) plan; currently, there is no Company matching of 401(K) contributions. Details about these benefits are provided in the Benefits Summary, which is available for your review. DivXNetworks, Inc. may modify your compensation and benefits from time to time as it deems necessary.

        Normal working hours are from 8:30a.m. to 5:30p.m., Monday through Friday. Your position is salaried and ineligible for overtime pay. Your particular schedule will be coordinated between you and your manager. You may be expected to work additional hours as required by the nature of your work assignments. DivXNetworks, Inc. acknowledges that, at your expense, you are completing your graduate studies through night school.

        As an employee at DivXNetworks, Inc. you will be expected to abide by the Company's rules and regulations and acknowledge in writing that you have read the Company's Employee Handbook, which will govern the terms and conditions of your employment.

        In accordance with the Immigration Reform & Control Act of 1986, employment in the United States is conditional upon proof of eligibility to legally work in the United States. On your first day of employment, you will need to provide us with this proof. Please refer to the enclosed list of acceptable documents. If you do not have these documents, please contact me prior to your first day of employment.

        The terms of your employment relationships with DivXNetworks, Inc. is and always will be one of voluntary, "at will" employment. This means you may terminate your employment with DivXNetworks, Inc. at any time and for any reason whatsoever simply by notifying DivXNetworks, Inc. Likewise,

DivXNetworks, Inc. may terminate your employment at any time and for any reason whatsoever, with or without cause or advance notice. "At will" cannot be changed unless in writing by the Chief Executive Officer of the Company.

        As an employee of DivXNetworks, Inc. you will have access to confidential information, and you may, during the course of your employment, develop information or inventions, which will be the property of DivXNetworks, Inc. To protect the interest of DivXNetworks, Inc., you will be require to sign and comply with the attached "Employee Innovations and Proprietary Rights Assignments Agreement" and it must be accepted by DivXNetworks, Inc. as a condition of your employment. We wish to impress upon you that we do not wish you to bring with you any confidential or proprietary material of any former employer or other person or to violate any other obligations you may have in your former employer or other person. You agree that you will not bring onto Company premises any unpublished documents or property belonging to any former employer or other person to whom you have an obligation of confidentiality

        This written offer together with your signed "Employee Innovations and Proprietary Rights Assignment Agreement" attached hereto, constitutes all conditions and agreements regarding your employment by DivXNetworks, Inc. and supersedes all previous written or verbal comments by the Company. No representative other than myself or my successor as CEO, if any, has any authority to alter or add to any of the terms and conditions herein.

        Please contact me to indicate your response to this offer. Upon your acceptance, return the original and retain the copy for your records. Following your acceptance, please review, sign and return the "Employee Innovations and Proprietary Rights Assignment Agreement," along with your signed offer letter. This employment offer expires on December 24, 2004.

        Your experience and talents will be a strong addition to DivXNetworks, Inc. We are looking forward to having you join our team.

Regards,
DivXNetworks, Inc.
  
/s/  R. JORDAN GREENHALL Jordan Greenhall
CEO

        I have read this offer letter in its entirety and agree to its terms and conditions of employment. I understand and agree that my employment with DivXNetworks, Inc. is "at will".

12/20/2004 Date Signed	/s/  CHRIS RUSSELL Signature
TBD Start Date

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EX-10.9

Exhibit 10.9

November 2, 2004

John A. Tanner
1224 Serene Valley Court
San Jose, CA 95120

Dear John:

        DivXNetworks, Inc. ("DXN") is pleased to formally extend to you an offer of employment for the position of Chief Financial Officer based in San Diego, CA. You will be expected to perform various duties consistent with your position and will report to R. Jordan Greenhall, CEO. Of course, DXN may change your position, duties, and work location from time to time as it deems necessary. The commencement date of your employment will be Thursday, November 11, 2004.

        Your compensation will be $18,750.00 per month (equivalent to $225,000.00 per annum) less payroll deductions and all required withholdings. You will be paid semi-monthly. You will be paid a bonus consistent with the bonuses paid to other senior executives of DXN. We will also cover your reasonable relocation costs from San Jose to San Diego and the reasonable costs associated with your commuting to San Jose from Seattle for up to 3 months before the move. All travel arrangements will be coordinated through DXN's travel agent and be consistent with DXN guidelines. DXN expects that you will ensure your relocation is completed within a reasonable timeframe not to exceed 3 months.

        It will be recommended to the Board that you be granted an incentive stock option to purchase 493,828 shares of common stock of DXN (collectively, the "Option Shares"). The exercise price per share for these options will be fixed based on DXN's common stock price as determined by DXN's board of directors for the three days prior to date of grant. This grant will vest with a 1 year cliff at 25% and then ¹/48 per month thereafter based upon the grant date. Vesting will depend upon your continued employment with DXN.

        If during your employment with DXN (i) there is a Change of Control (as defined below), and (ii) you are not offered a Comparable Position (as defined below) by the surviving corporation, all of the Option Shares shall vest and become exercisable immediately prior to the Change of Control. A "Comparable Position" is a position with similar or greater responsibilities at your then current base salary and bonus potential. "Change of Control" shall mean the sale of all or substantially all of the assets of DXN or the acquisition of DXN by another entity by means of consolidation or merger after which the then current shareholders of DXN hold less than 50% of the voting power of the surviving corporation provided that a reincorporation of DXN shall not be a Change of Control.

        You will receive all the benefits available to full time, regular exempt employees of DXN. These benefits include medical, dental, life insurance. AD&D, and STD/LTD, for which the premiums for employees are paid 99% by DXN, accrual of 20 days vacation during the year, and 9 paid holidays. In addition, you can contribute to DXN's 401(k) plan; currently there is no matching by DXN. Details about these benefits are provided in the Benefits Summary, available for your review. DXN may modify your compensation and benefits from time to time as it deems necessary.

        Normal working hours are from 8:30a.m. to 5:00p.m., Monday through Friday. As an exempt salaried employee, you will be expected to work additional hours as required by the nature of your work assignments. Additionally, as an employee of DXN, you will be expected to abide by DXN's rules and regulations and acknowledge in writing that you have read DXN's Employee Handbook, which will govern the terms and conditions of your employment.

        In accordance with the Immigration Reform & Control Act of 1986, employment in the United States is conditional upon proof of eligibility to legally work in the United States. On your first day of employment, you will need to provide us with this proof, (please refer to the enclosed list of acceptable documents). If you do not have these documents, please contact me prior to your first day of employment.

        The terms of your employment relationship with DXN is and always will be one of voluntary employment "at will". This means you may terminate your employment with DXN at any time and for any reason whatsoever simply by notifying DXN. Likewise, DXN may terminate your employment at any time and for any reason whatsoever, with or without cause or advance notice. "At will" can't be changed unless in writing by the CEO of DXN.

        As an employee of DXN you will have access to confidential information and you may, during the course of your employment, develop information or inventions, which will be the property of DXN. To protect the interests of DXN, you will be required to sign and comply with DXN's standard "Employee Innovations and Proprietary Rights Assignment Agreement" and it must be accepted by DXN as a condition of your employment. We wish to impress upon you that we do not wish you to bring with you any confidential or proprietary material of any former employer or other person or to violate any other obligations you may have to your former employer or other person. You agree that you will not bring onto DXN premises any unpublished documents or property belonging to any former employer or other person to whom you have an obligation of confidentiality.

        This written offer, together with your signed "Employee Innovations and Proprietary Rights Assignment Agreement," constitutes all conditions and agreements regarding your employment made on behalf of DXN and supersedes any previous written or verbal commitments by DXN. No representative other than me has any authority to alter or add to any of the terms and conditions herein.

        Please contact me to indicate your response to this offer. Upon your acceptance return the original and retain the copy for your records. I have also enclosed our standard "Employee Innovations and Proprietary Rights Assignment Agreement." Following your acceptance, please review, sign, and return the "Employee Innovations and Proprietary Rights Assignment Agreement," along with your signed offer letter. This employment offer expires on November 4, 2004.

        Your experience and talents will be a strong addition to DXN. We are looking forward to having you join our team.

DivXNetworks, Inc.

/s/  R. JORDAN GREENHALL R. Jordan Greenhall
Chief Executive Officer

        I have read this offer letter in its entirely and agree to the forms and conditions of employment understand and agree that, except as provided otherwise in this letter agreement, my employment with DivXNetworks, Inc. is at-will.

/s/  JOHN A. TANNER John A. Tanner November 5, 2004 Date

March 1, 2005

John A. Tanner
1224 Serene Valley Court
San Jose, CA 95120

John:

        This letter is an amendment to the terms and conditions of your offer letter of November 2, 2004 (the "Original Letter") from DivXNetworks, Inc. ("DXN"). Except as expressly noted herein, all terms and conditions of the Original Letter shall remain unchanged.

        The last sentence of the second paragraph of the Original Letter (which read: "DXN expects that you will ensure your relocation is completed within a reasonable time frame not to exceed 3 months.") is deleted in its entirety and the following is substituted instead:

DXN expects that you will ensure your relocation is completed within a reasonable time frame but no later than September 1, 2005.

        If this accords with your understanding, please acknowledge below and return this letter to me on or before March 6, 2005.

        If you have any questions or comments, please contact David Richter or me.

Sincerely,
DivXNetworks, Inc.
/s/  R. JORDAN GREENHALL R. Jordan Greenhall CEO
Acknowledged and agreed:
/s/  JOHN A. TANNER John A. Tanner
Dated:	March 1, 2005

EX-10.10

Exhibit 10.10

May 26, 2005

John A. Tanner
1224 Serene Valley Court
San Jose, CA 95120

David J. Richter
825 Fifth Ave
#301
San Diego, CA 92101

Via Hand Delivery

Re:

280G Gross-Up Payments

Dear John and David,

        This letter will confirm the terms of your Section 280G coverage as to which we agreed in principle in November 2004 subject to approval by the Board of Directors.

        For the purpose of this agreement:

•

John Tanner and David Richter are referred to collectively as "Executives" and each individually as an "Executive."



•

"Change of Control" has the meaning set forth in each Executive's employment agreement with DivX, Inc. as amended.



•

"Company" means DivX, Inc.

        In the event that any payments or benefits to be received by one or more of Executives in connection with a Change in Control (collectively, the "Payments") will be subject to the excise tax (the "Excise Tax") imposed under Section 4999 of the Internal Revenue Code of 1986, as amended from time to time (the "Code"), then, subject to the two paragraphs immediately following this paragraph, Company shall pay to each Executive an additional amount (the "Gross-Up Payment") such that the net amount retained by each Executive, after deduction of any Excise Tax on the Payments and any Federal, state and local income and employment taxes and Excise Tax upon the Gross-Up Payment, shall be equal to the Payments to each Executive; provided, however, that in no event shall the Gross-Up Payment to the Executives exceed One Million Dollars in the aggregate. In the event that the Gross-Up Payment would exceed One Million Dollars in the aggregate, the Gross-Up Payment shall be divided between the Executives on a pro rata basis based upon their relative exposure to the Excise Tax (calculated without giving effect to any portion of the Gross-Up Payment). The Gross-Up Payment shall be made by Company to each Executive immediately upon the payment to each such Executive of the Payments.

        Notwithstanding the foregoing, in the event that (i) the Gross-Up Payment to the Executives would, but for the limitations set forth in the paragraph above, exceed One Million Dollars in the aggregate, and (ii) an Executive becomes entitled to a pro rata portion of the Gross-Up Payment based upon his or her relative exposure to the Excise Tax (as provided above), then, notwithstanding the foregoing, such Executive's Payments shall not exceed the Reduced Amount. The "Reduced Amount" shall be either (x) the largest portion of the Payments that would result in no portion of the Payments being subject to the Excise Tax or (y) the largest portion of the Payments, up to and including the total Payments, whichever amount, after taking into account (I) all applicable federal, state and local employment taxes, income taxes and the Excise Tax (all computed at the highest applicable marginal rate) and (II) the Gross-Up Payment, results in the Executive's receipt, on an after-tax basis, of the greater amount of the Payments notwithstanding that all or some portion of the Payments may be subject to the Excise Tax. If a reduction in payments or benefits constituting "parachute payments" is necessary so that the Payments equal the Reduced Amount, reduction shall occur in the following

order unless the Executive elects in writing a different order (provided, however, that such election shall be subject to Company approval if made on or after the date on which the event that triggers the Payments occur: reduction of the Gross-Up Payment; reduction of other cash payments; cancellation of accelerated vesting of stock awards; reduction of employee benefits. If acceleration of vesting of stock award compensation is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of the Executive's stock awards unless the Executive elects in writing a different order for cancellation.

        Except as otherwise provided in a written agreement between the Company and a Participant, any determination required under the immediately preceding paragraph shall be made in writing in good faith by the Accounting Firm (as defined below). For purposes of making the calculations required by this paragraph, the Accounting Firm may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of the Code and other applicable legal authority. The Company and the Executive shall furnish to the Accounting Firm such information and documents as the Accounting Firm may reasonably request in order to make such a determination. The Company shall bear all costs the Accounting Firm may reasonably incur in connection with any calculations contemplated by this paragraph.

        For purposes of determining whether any of the Payments will be subject to the Excise Tax and the amount of such Excise Tax, (A) all of the Payments shall be treated as "parachute payments" (within the meaning of Section 280G(b)(2) of the Code) unless, in the opinion of an accounting firm or consulting firm with particular expertise regarding Excise Tax ("Accounting Firm") reasonably acceptable to each Executive and selected by the accounting firm which was, immediately prior to the Change in Control, Company's independent auditor (the "Auditor"), such payments or benefits (in whole or in part) should not be treated by the courts as subject to the Excise Tax, (B) all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax unless, in the opinion of Accounting Firm, such excess parachute payments (in whole or in part) should not be treated by the courts as subject to the Excise Tax, and (C) the value of any noncash benefits or any deferred payment or benefit shall be determined by the Auditor in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. The Accounting Firm shall not be a firm providing auditing or accounting services to any entity involved in the Change of Control. Fees and expenses of Accounting Firm and the Auditor shall be borne solely by Company.

        For purposes of determining the amount of the Gross-Up Payment, each Executive shall be deemed to pay Federal income tax at the highest marginal rate of Federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of each Executive's residence in the calendar year in which the Gross-Up Payment is to be made, net of the maximum reduction in Federal income taxes which could be obtained from deduction of such state and local taxes.

Please contact the Company's CEO if you have any questions.

Sincerely,

DivX, Inc.

By:
/s/  R. JORDAN GREENHALL R. Jordan Greenhall
CEO                        

EX-10.11

Exhibit 10.11

EMPLOYEE INNOVATIONS AND PROPRIETARY RIGHTS ASSIGNMENT AGREEMENT

        This Agreement is intended to formalize in writing certain understandings and procedures which have been in effect since the time I was initially employed by DivX, Inc. ("Company"). In return for my new or continued employment by Company and other good and valuable consideration, the receipt and sufficiency of which I hereby acknowledge, I acknowledge and agree that:

Duties; At-Will Employment; No Conflict. I will perform for Company such duties as may be designated by Company from time to time. I agree that my employment with Company is for no specified term, and may be terminated by Company at any time, with or without cause, and with or without notice. Similarly, I may terminate my employment with Company at any time, with or without cause, and with or without notice. During my period of employment by Company, I will devote my best efforts to the interests of Company and will not engage in other employment or in any activities determined by Company to be detrimental to the best interests of Company without the prior written consent of Company.

Prior Work. All previous work done by me for Company relating in any way to the conception, reduction to practice, creation, derivation, design, development, manufacture, sale or support of products or services for Company ("Prior Work") is the property of Company, and I hereby assign to Company all of my right, title and interest in and to such Prior Work.

Proprietary Information. My employment creates a relationship of confidence and trust between Company and me with respect to any information:

        Applicable to the business of Company; or

        Applicable to the business of any client or customer of Company, which may be made known to me by Company or by any client or customer of Company, or learned by me in such context during the period of my employment.

        All such information has commercial value in the business in which Company is engaged and is hereinafter called "Proprietary Information." By way of illustration, but not limitation, Proprietary Information includes any and all technical and non-technical information including patent, copyright, trade secret, mask works, ideas, techniques, sketches, drawings, designs, models, inventions, know-how, improvements, processes, apparatus, equipment, algorithms, software programs, software source documents, source and object codes, data, formulae and other works of authorship related to the current, future and proposed products and services of Company, and includes, without limitation, information concerning research, experimental work, development, design details and specifications, engineering, financial information, procurement requirements, purchasing manufacturing, customer lists, business forecasts, sales and merchandising and marketing plans and information. "Proprietary Information" also includes proprietary or confidential information of any third party who may disclose such information to Company or to me in the course of Company's business.

Ownership and Nondisclosure of Proprietary Information. All Proprietary Information is the sole property of Company, Company's assigns, and Company's customers, and Company, Company's assigns and Company's customers shall be the sole and exclusive owner of all patents, copyrights, mask works, trade secrets and other rights in the Proprietary Information. I hereby assign and agree to assign in the future to Company all right, title and interest I may have or may acquire in the Proprietary Information. At all times, both during my employment by Company and after termination of such employment, I will keep in strictest confidence and trust all Proprietary Information, and I will not use or disclose any Proprietary Information or anything directly relating to Proprietary Information without the written consent of Company, except as may be necessary in the ordinary course of performing my duties as an employee of Company.

Ownership and Return of Materials. All materials (including, without limitation, documents, drawings, models, apparatus, sketches, designs, lists, and all other tangible media of expression) furnished to me by Company shall remain the property of Company. Upon termination of my

employment, or at any time on the request of Company before termination, I will promptly (but no later than five (5) days after the earlier of my employment's termination or Company's request) destroy or deliver to Company, at Company's option, (a) all materials furnished to me by Company, (b) all tangible media of expression which are in my possession and which incorporate any Proprietary Information or otherwise relate to Company's business, and (c) written certification of my compliance with my obligations under this sentence. I further agree that any property situated on Company's premises and owned by Company, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by Company personnel at any time with or without notice.

Innovations. As used in this Agreement, the term "Innovations" means all processes, machines, manufactures, compositions of matter, improvements, inventions (whether or not protectable under patent laws), works of authorship, information fixed in any tangible medium of expression (whether or not protectable under copyright laws), moral rights, mask works, trademarks, trade names, trade dress, trade secrets, know-how, ideas (whether or not protectable under trade secret laws), and all other subject matter protectable under patent, copyright, moral right, mask work, trademark, trade secret or other laws, and includes without limitation all new or useful art, combinations, discoveries, formulae, manufacturing techniques, technical developments, discoveries, artwork, software, and designs. "Innovations" includes "Inventions," which is defined to mean any inventions protected under patent laws.

Disclosure of Prior Innovations. I have identified on Exhibit A ("Prior Innovations") attached hereto all Innovations (other than those Innovations included as Prior Work), applicable to the business of Company or relating in any way to Company's business or demonstrably anticipated research and development or business, which were conceived, reduced to practice, created, derived, developed, or made by me or which I caused to be conceived, reduced to practice, created, derived, developed, or made prior to my employment with Company, whether solely or jointly with others (collectively, the "Prior Innovations"), and I represent that such list is complete. I represent that I have no rights in any such Innovations other than those Prior Innovations specified in Exhibit A ("Prior Innovations"). If there is no such list on Exhibit A ("Prior Innovations"), I represent that I have neither conceived, reduced to practice, created, derived, developed, or made nor caused to be conceived, reduced to practice, created, derived, developed, or made any such Prior Innovations at the time of signing this Agreement.

Records. I agree to keep and maintain adequate and current records (in the form of notes, sketches, drawings and in any other form that may be required by Company) of all Proprietary Information developed by me and all Innovations (including Inventions) made by me during the period of my employment at Company, which records shall be available to and remain the sole property of Company at all times.

Assignment of Innovations; License of Prior Innovations. I hereby agree promptly to disclose and describe to Company, and I hereby do and will assign to Company or Company's designee my entire right, title, and interest in and to each of the Innovations (including Inventions) and any associated intellectual property rights, which I may solely or jointly conceive, reduce to practice, create, derive, develop or make or cause to be conceived, reduced to practice, created, derived, developed or made during the period of my employment with Company (the "Company Innovations"). To the extent any of the right, title and interest in and to Company Innovations cannot be assigned by me to Company, I hereby grant to Company an exclusive, royalty-free, transferable, irrevocable, worldwide license (with rights to sublicense through multiple tiers of sublicensees) to practice such non-assignable rights, title and interest. To the extent any of the rights, title and interest in and to Company Innovations can be neither assigned nor licensed by me to Company, I hereby irrevocably waive and agree never to assert such non-assignable and non-licensable rights, title and interest against Company or any of Company's successors in interest to such non-assignable and non-licensable rights. I hereby grant to Company or Company's designees a non-exclusive, royalty free, irrevocable, worldwide license (with rights to

2

sublicense through multiple tiers of sublicensees) to make, have made, modify, use and sell, and to practice all applicable patent, copyright, moral right, mask work, trade secret and other intellectual property rights relating to, any Prior Innovations which I incorporate, or permit to be incorporated, in any Company Innovations. Notwithstanding the foregoing, I agree that I will not incorporate, or permit to be incorporated, any Prior Innovations in any Company Innovations without Company's prior written consent. I also agree to assign all my right, title and interest in and to any Proprietary Information or Innovation to a third party, including without limitation the United States, as directed by Company.

Cooperation in Perfecting Rights to Proprietary Information and Innovations.

        I agree to perform, during and after my employment, all acts deemed necessary or desirable by Company to permit and assist Company, at Company's expense, in obtaining and enforcing the full benefits, enjoyment, rights and title throughout the world in the Proprietary Information (including improvements thereof) and Innovations (including derivative works, improvements, renewals, extensions, continuations, divisionals, continuations in part, continuing patent applications, reissues, and reexaminations thereof) assigned or licensed to, or whose rights are irrevocably waived and shall not be asserted against, Company under this Agreement. Such acts may include, but are not limited to, execution of documents and assistance or cooperation (i) in the filing, prosecution, registration, and memorialization of assignment of any applicable patents, copyrights, mask work, or other applications, (ii) in the enforcement of any applicable patents, copyrights, mask work, moral rights, trade secrets, or other proprietary rights, and (iii) in other legal proceedings related to the Proprietary Information or Innovations.

        In the event that Company is unable for any reason to secure my signature to any document needed in connection with any of the actions specified in the preceding paragraph, I hereby irrevocably designate and appoint Company and Company's duly authorized officers and agents as my agents and attorneys-in-fact, which appointment is coupled with an interest, to act for and on my behalf and instead of me, (i) to execute, verify and file, prosecute, register and memorialize the assignment of any such documents, (ii) to execute, verify and file any documentation required for such enforcement, and (iii) to do all other lawfully permitted acts to further the purposes of the preceding paragraph, all with the same legal force and effect as if executed by me.

No Violation of Rights of Third Parties. My performance of all the terms of this Agreement and as an employee of Company does not and will not breach any agreement to keep in confidence proprietary information, knowledge or data acquired by me prior to my employment with Company, and I will not disclose to Company, or induce Company to use, any confidential or proprietary information or material belonging to any previous employer or other third parties. I am not a party to any other agreement which will interfere with my full compliance with this Agreement. I agree not to enter into any agreement, whether written or oral, in conflict with the provisions of this Agreement.

Survival. This Agreement (a) shall survive the termination of my employment by Company; (b) does not in any way restrict my right or the right of Company to terminate my employment at any time, for any reason or for no reason; (c) inures to the benefit of successors and assigns of Company; and (d) is binding upon my heirs and legal representatives.

Nonassignable Inventions. This Agreement does not apply to an Invention which qualifies fully as a nonassignable invention under the provisions of Section 2870 of the California Labor Code. I acknowledge that a condition for an Invention to qualify fully as a non-assignable invention under the provisions of Section 2870 of the California Labor Code is that the invention must be protected under patent laws. I have reviewed the notification in Exhibit B ("Limited Exclusion Notification") and agree that my signature acknowledges receipt of the notification.

Obligation to Keep Company Informed. During the period of my employment and for six (6) months after termination of my employment with Company, I will promptly disclose to Company fully and in

3

writing all Innovations authored, conceived or reduced to practice by me, either alone or jointly with others. In addition, I will promptly disclose to Company all patent applications filed by me or on my behalf within one (1) year after termination of employment. At the time of each such disclosure, I will advise Company in writing of any Innovations that I believe fully qualify for protection under Section 2870; and I will at that time provide to the Company in writing all evidence necessary to substantiate that belief. The Company will keep in confidence and will not use for any purpose or disclose to third parties without my consent any confidential information disclosed in writing to the Company pursuant to this Agreement relating to Inventions that qualify fully for protection under the provisions of Section 2870. I will preserve the confidentiality of any Invention that does not fully qualify for protection under Section 2870.

No Solicitation. During the term of my employment with Company and for a period of one (1) year thereafter, I will not, either directly or through others, solicit, attempt to solicit, encourage, or cause others to solicit or encourage any employee, independent contractor or consultant of Company to terminate his or her relationship with Company in order to become an employee, consultant or independent contractor to or for any other person or entity.

Works for Hire. I acknowledge that all original works of authorship which are made by me (solely or jointly with others) within the scope of my employment and which are protectable by copyright are "works made for hire," pursuant to the United States Copyright Act (17 U.S.C., Section 101).

Injunctive Relief. A breach of any of the promises or agreements contained herein will result in irreparable and continuing damage to Company for which there will be no adequate remedy at law, and Company shall be entitled to injunctive relief and/or a decree for specific performance, and such other relief as may be proper (including monetary damages if appropriate), without bond and without prejudice to any other rights and remedies that Company may have for a breach of this Agreement.

Notices. Any notice required or permitted by this Agreement shall be in writing and shall be delivered as follows, with notice deemed given as indicated: (a) by personal delivery, when delivered personally; (b) by overnight courier, upon written verification of receipt; (c) by telecopy or facsimile transmission, upon acknowledgment of receipt of electronic transmission; or (d) by certified or registered mail, return receipt requested, upon verification of receipt. Notices to me shall be sent to any address in Company's records or such other address as I may specify in writing. Notices to Company shall be sent to Company's Human Resources Department or to such other address as Company may specify in writing.

Governing Law. This Agreement shall be governed in all respects by the laws of the United States of America and by the laws of the State of California, as such laws are applied to agreements entered into and to be performed entirely within California between California residents. Each of the parties irrevocably consents to the exclusive personal jurisdiction of the federal and state courts located in California, as applicable, for any matter arising out of or relating to this Agreement, except that in actions seeking to enforce any order or any judgment of such federal or state courts located in California, such personal jurisdiction shall be nonexclusive.

Severability. If any provision of this Agreement is held by a court of law to be illegal, invalid or unenforceable, (i) that provision shall be deemed amended to achieve as nearly as possible the same economic effect as the original provision, and (ii) the legality, validity and enforceability of the remaining provisions of this Agreement shall not be affected or impaired thereby.

Waiver; Amendment; Modification. The waiver by Company of a term or provision of this Agreement, or of a breach of any provision of this Agreement by me, shall not be effective unless such waiver is in a writing signed by Company. No waiver by Company of, or consent by Company to, a breach by me, will constitute a waiver of, consent to or excuse of any other or subsequent breach by me. This Agreement may be amended or modified only with the written consent of both me and

4

Company. No oral waiver, amendment or modification shall be effective under any circumstances whatsoever.

Entire Agreement. This Agreement represents my entire understanding with Company with respect to the subject matter of this Agreement and supersedes all previous understandings, written or oral.

        I certify and acknowledge that I have carefully read all of the provisions of this Agreement and that I understand and will fully and faithfully comply with such provisions.

"COMPANY"	EMPLOYEE:
DivX, Inc.
By:	By:
Title:	Printed Name:
Dated:	Dated:

5

EXHIBIT A

PRIOR INNOVATIONS

6

EXHIBIT B

LIMITED EXCLUSION NOTIFICATION

        THIS IS TO NOTIFY you in accordance with Section 2872 of the California Labor Code that the foregoing Agreement between you and Company does not require you to assign or offer to assign to Company any invention that you developed entirely on your own time without using Company's equipment, supplies, facilities or trade secret information except for those inventions that either:

        (1)   Relate at the time of conception or reduction to practice of the invention to Company's business, or actual or demonstrably anticipated research or development of Company; or

        (2)   Result from any work performed by you for Company.

        To the extent a provision in the foregoing Agreement purports to require you to assign an invention otherwise excluded from the preceding paragraph, the provision is against the public policy of this state and is unenforceable.

        This limited exclusion does not apply to any patent or invention covered by a contract between Company and the United States or any of its agencies requiring full title to such patent or invention to be in the United States.

        I ACKNOWLEDGE RECEIPT of a copy of this notification.

	By:
	(Printed Name of Employee)
	Date:
Witnessed by:
Dated:

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EX-10.12

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Exhibit 10.12

Executive Cash Bonus Plan
Proposal

GENERAL

Purpose
	The Board of Directors of DivX, Inc. (the "Company") seeks to promote and reward the attainment of certain objectives by the members of the Company's senior management via an Executive Cash Bonus Plan ("ECBP"). The objectives are:
		•  Revenue growth
		•  Earnings growth
		•  Future period (beyond 2006) growth
	In order to create incentives at the most effective level of the Company, each member of the executive staff will be included in this plan. It is believed that this structure will foster greater levels of teamwork within the increasingly segregated operations within the Company.
	The ECBP is separate and apart from any equity-based awards that the Compensation Committee will provide to senior members of management, and may be changed/modified by the Board of Directors at any time.
Metrics
	The two basic metrics shall be indicative of business growth, wisely pursued. They shall be defined as revenue and earnings before interest, taxes, depreciation and amortization ("EBITDA")1. The basic metrics shall be quantified by using the escalating-target approach. Targets shall escalate and payout bonuses in the following manner:

—2006—

Target and Level		Bonus
BRONZE
(i.e., Minimum Performance Generating EBP payouts)
Requires both of the following:		20% of base salary for combination
	•  Revenue of $54 million
	•  EBITDA of $4.0 million

¹ Calculated inclusive of the effect of the ECBP.

Target and Level			Bonus
SILVER
(i.e., Second-Level Performance Generating EBP payouts)
Requires both of the following:			40% of base salary for combination
		•  Revenue of $55 million
		•  EBITDA of $6.0 million
GOLD
(i.e., Escalating-Target Performance Generating Escalating ECBP payouts)
Each metric will be bonused separately for GOLD performance::
		•  Revenue $56 M to $62 M	Ratable from 20% of base to 50% (20% at $56M to 50% at $62M)
			Plus
		•  EBITDA $6 M to $10 M	Ratable from 20% of base to 50% (20% at $6M to 50% at $10 M)
PLATINUM
(i.e., Escalating-Target Performance Generating Escalating ECBP payouts)
Each metric will be bonused separately for the preceding GOLD performance. In addition, provided a minimum of $62 million in revenue has been reached:
	For EBITDA less Excess		Ratable portion of 10% EBITDA less
	CapEx over Budget  > $10 M		Excess CapEx over budget >$10M

Bonus Calculations and Payments

Calculations and payments of the bonuses will two-tiered in order to promote focus on both near-term (quarterly) and long-term (annual) performance. Annual targets will be divided up into seasonally forecast Quarterly targets. In order to get the full payout at any level (Gold, Silver, or Bronze), both annual and quarterly targets must be achieved. Any payments will be paid in arrears for the prior performance period (whether annually or quarterly) subsequent to the Audit Committee's approval of Financial results. Target relief, if granted by the board, shall redefine required performance levels.

The Quarterly Performance(s) Can Lead to up to One-Half Total Payout.

Each Quarterly target, when and if attained, shall generate one-half of the total eligible percentage calculation and payout, multiplied by one quarter. Thus, if all quarterly targets are achieved, one-half of the total eligible percentage bonus shall be paid on a quarterly basis. If a quarterly target is missed, the associated "half" of the total potential percentage payout is not eligible for reclamation in future quarters.

The Annual Target Can Lead to up to One-Half Total Payout.

The Annual Target(s), if achieved, will lead to the "other" half of the percentage-calculated payout after the close of the year. Although the a missed quarterly bonus would not be eligible for reclamation in future quarters, in order to achieve annual targets and related bonuses, the performance shortfall in any interim quarter would need to be reclaimed in a subsequent quarter in order to earn the annual-target based portion(s) of the ECBP.

—2007—

Metrics and Payouts

The features of the plan (payout percentages, etc.) will be identical, however, the quantification of the metrics will be subject to board identification and approval, and the percentage payouts will each be exactly doubled for 2007. In this way, a target accomplished in 2007 is worth twice that of 2006.

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Executive Cash Bonus Plan Proposal
—2006—
—2007—

EX-10.13

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Exhibit 10.13

DIVX, INC.
THIRD AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
OCTOBER 19, 2005

1.	General		1
	1.1.	Amendment and Restatement of Prior Agreement.	1
	1.2.	Certain Definitions.	1
	1.3.	Restrictions	3
	1.4.	Restrictive Legend	3
	1.5.	Notice of Proposed Transfers	3
	1.6.	Standoff Agreement	4
2.	Registration Rights		4
	2.1.	Requested Registration	4
	2.2.	Company Registration.	6
	2.3.	Registration on Form S-3.	7
	2.4.	Expenses of Registration.	7
	2.5.	Registration Procedures	8
	2.6.	Delay in Registration	9
	2.7.	Indemnification	9
	2.8.	Information by Holder.	11
	2.9.	Rule 144 Reporting	11
	2.10.	Transfer of Registration Rights	12
	2.11.	Limitations on Subsequent Registration Rights	12
3.	Affirmative Covenants of the Company		12
	3.1.	Financial Information	12
	3.2.	Inspection	13
	3.3.	Reserve for Conversion Shares	13
	3.4.	Employee Proprietary Information and Invention Assignment Agreements	13
	3.5.	Compensation of Employees	13
	3.6.	Marketing and Publicity	14
	3.7.	Board Expenses	14
	3.8.	Zone IPO Participation Right	14
	3.9.	Key Man Insurance	14

4.	Right of First Offer		14
	4.1.	Subsequent Offerings	14
	4.2.	Exercise of Rights	15
	4.3.	Issuances of Equity Securities to Other Persons	15
	4.4.	Issuances below Conversion Price of Series D Preferred Stock	15
	4.5.	Excluded Securities	16
5.	Right of First Refusal on Sales by Founders; Co-Sale Right		16
	5.1.	Transfer of Shares	16
	5.2.	Investors' Option	17
	5.3.	Company's Option	17
	5.4.	Sale to a Third Party	17
	5.5.	Application of Provisions	17
	5.6.	Closing	17
	5.7.	Co-Sale Right	18
	5.8.	Transfers Void	18
6.	Right of First Refusal on Sales by Series C Preferred Holders; Co-Sale Right		18
	6.1.	Transfer of Shares	18
	6.2.	Investors' Option	18
	6.3.	Company's Option	19
	6.4.	Sale to a Third Party	19
	6.5.	Application of Provisions	19
	6.6.	Closing	19
	6.7.	Co-Sale Right	19
	6.8.	Transfers Void	19
7.	Voting Agreements; Board Observer Rights		20
	7.1.	Board of Directors	20
	7.2.	Size of Board of Directors	20
	7.3.	Board Observer Rights	20
8.	Change of Control		21
	8.1.	Change of Control	21

9.	Miscellaneous		22
	9.1.	Termination	22
	9.2.	Successors in Interest	22
	9.3.	Governing Law	22
	9.4.	Survival	22
	9.5.	Successors and Assigns	22
	9.6.	Entire Agreement; Amendment	22
	9.7.	Effect of Amendment and Waiver	22
	9.8.	Notices	23
	9.9.	Delays or Omissions	23
	9.10.	Counterparts	23
	9.11.	Severability of this Agreement	23
	9.12.	Titles and Subtitles	23
	9.13.	Right to Specific Performance	24

THIRD AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT

        This Third Amended and Restated Stockholders' Agreement (this "Agreement") is made as of October 19, 2005, by and among DivX, Inc., a Delaware corporation (f/k/a DivXNetworks, Inc.) (the "Company"), the investors listed on Schedule A hereto (including any permitted transferee of each such investor, each individually referred to as an "Investor," and collectively, the "Investors"), and the holders of shares of Common Stock listed on Schedule B (the "Founders").

RECITALS

WHEREAS, the Founders beneficially own the number of shares of Common Stock of the Company set forth opposite their respective names on Schedule B hereto; and

WHEREAS, the Company, the Founders and certain of the Investors are parties to that certain Second Amended and Restated Stockholders' Agreement, dated March 22, 2004, as amended to date (the "Prior Agreement");

WHEREAS, the Company is proposing to issue and certain of the Investors are planning to purchase a total of up to 5,811,100 shares of Series D Preferred Stock pursuant to a Series D Preferred Stock Purchase Agreement of even date herewith (the "Series D Agreement");

WHEREAS, in order to induce the Company and certain Investors to enter into the Series D Agreement, the Company, the Investors and the Founders desire to amend the Prior Agreement on the terms set forth herein and to enter into this Agreement to provide for the grant of certain registration, first refusal and information rights to the Investors, the implementation of procedures for electing the Company's board of directors and voting for transactions involving a change of control of the Company, and the implementation of certain restrictions on the shares of Common Stock and Preferred Stock held by the Founders and Investors.

NOW, THEREFORE, in consideration of the mutual promises and covenants and agreements set forth herein, the Company, the Investors and the Founders agree as follows:

1.     General.

        1.1.    Amendment and Restatement of Prior Agreement.    The Prior Agreement is hereby amended in its entirety and restated herein. All provisions of, rights granted and covenants made in the Prior Agreement are hereby waived, released and superseded in their entirety and shall have no further force or effect.

        1.2.    Certain Definitions.    As used in this Agreement, the following terms shall have the following respective meanings:

        "Charter" shall mean the Amended and Restated Certificate of Incorporation of the Company, as such may be amended from time to time.

        "Commission" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

        "Common Stock" shall mean the Common Stock of the Company, par value $0.001 per share.

        "Conversion Shares" shall mean the Common Stock issued or issuable upon conversion of the Preferred Stock (as defined below).

        "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

        "Founders' Stock" shall mean the Common Stock now held or hereafter acquired by the Founders.

        "Holder" shall mean any stockholder of the Company holding Registrable Securities and any person holding securities convertible into or exchangeable for Registrable Securities.

        "Initiating Holders" shall mean the Investors or transferees of Investors under Section 2.9 hereof who in the aggregate are Holders of not less than (i) a majority of the Registrable Securities issued or issuable upon conversion of the Preferred Stock or (ii) a majority of the Registrable Securities issued or issuable upon conversion of the Company's Series D Preferred Stock (in each case excluding Registrable Securities previously sold in a public offering or as to which registration rights have terminated).

        "Permitted Transfer" shall mean (A) a transfer by a Holder of up to 5% of such Holder's shares of the Company's Common or Preferred Stock (i) to a trust controlled by Holder for the benefit of such Holder's spouse (other than pursuant to any divorce or separation proceedings or settlement), parents, children (natural or adopted), stepchildren or grandchildren, (ii) by will to a spouse, parents, children (natural or adopted), stepchildren or grandchildren or, in the absence of a will, by the laws of descent and distribution, (iii) as a gift to a spouse, parents, children (natural or adopted), stepchildren or grandchildren, (iv) to a transferee or assignee that is a wholly-owned subsidiary or constituent partner (including limited partners or retired partners of such Holder, (vi) if the Holder is an Investor or a Founder, to another Investor or Founder, or (vii) with the prior approval of the Board of Directors (including at least one Director elected by the holders of the Company's Preferred Stock) and (B) in the event of the "winding down" of SVIC No. 4 New Technology Business Investment LLP ("Samsung Fund"), a transfer by Samsung Fund to Samsung Electronics Co., Ltd., Samsung SDI Co., Ltd. and/or Samsung Electro-Mechanics Co., Ltd., in each case provided that the transferee agrees in writing to be bound by the obligations imposed upon the Stockholders under this Agreement as if such transferee were originally a signatory to this Agreement.

        "Preferred Stock" means the shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock of the Company.

        The terms "register", "registered" and "registration" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement.

        "Qualified IPO" has the meaning ascribed to such term in the Charter.

        "Registrable Securities" means (i) any Founders' Stock, (ii) any Conversion Shares and (iii) any Common Stock of the Company issued or issuable in respect of the Conversion Shares or other securities issued or issuable upon conversion of the Preferred Stock or upon any stock split, stock dividend, recapitalization, or similar event, or any Common Stock otherwise issued or issuable with respect to the Preferred Stock, Founders' Stock or the Conversion Shares; provided, however, that shares of Common Stock or other securities shall only be treated as Registrable Securities if and so long as they have not been (a) sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction, or (b) sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act so that all transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale.

        "Registration Expenses" shall mean all expenses incurred by the Company in complying with Sections 2.1, 2.2 and 2.3 hereof, including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, blue sky fees and expenses, and the expense of any audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company which shall be paid in any event by the Company).

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        "Restricted Securities" shall mean the securities of the Company required to bear the legend set forth in Section 1.4 hereof.

        "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

        "Selling Expenses" shall mean all underwriting discounts, selling commissions and stock transfer taxes applicable to the securities registered by the Investors and all fees and disbursements of counsel for the Investors (as limited by Section 2.4).

        "Stockholders" shall mean the Investors, the Founders and any of their permitted transferees, collectively.

        1.3.    Restrictions.    The Restricted Securities shall not be sold, assigned, transferred or pledged except upon the conditions specified in this Agreement, which conditions are intended to ensure compliance with the provisions of the Securities Act. The Investors will cause any proposed purchaser, assignee, transferee or pledgee of the Restricted Securities from such Investor to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Agreement.

        1.4.    Restrictive Legend.    Each certificate representing Common Stock or Preferred Stock and each certificate representing other equity securities held by the Stockholder, shall (unless otherwise permitted by the provisions of Section 1.4 below) be stamped or otherwise imprinted with a legend in the following form (in addition to any legend required under applicable state securities laws):

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT.

THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY. THIS CONDITION TO TRANSFER SHALL TERMINATE ON THE EFFECTIVE DATE OF THE COMPANY'S INITIAL PUBLIC OFFERING.

        The Investors and the Founders consent to the Company making a notation on its records and giving instructions to any transfer agent of the Restricted Securities in order to implement the restrictions on transfer established in this Section 1.

        1.5.    Notice of Proposed Transfers.    The holder of each certificate representing Restricted Securities, by acceptance thereof, agrees to comply in all respects with the provisions of this Section 1. Prior to any proposed sale, assignment, transfer or pledge of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transfer, the holder thereof shall give written notice to the Company of such holder's intention to effect such transfer, sale, assignment or pledge. Each such notice shall describe the manner and circumstances of the proposed transfer, sale, assignment or pledge in sufficient detail, and shall be accompanied at such holder's expense by either (i) a written opinion of legal counsel who shall, and whose legal opinion shall, be reasonably satisfactory to the Company, addressed to the Company, to the effect that the proposed transfer of the Restricted Securities may be effected without registration under the Securities Act, (ii) a "no action" letter from the Commission to the effect that the transfer of such securities without registration will not result in a recommendation by the staff of the Commission that action be taken with respect thereto, or (iii) any other evidence reasonably satisfactory to counsel to the Company,

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whereupon the holder of such Restricted Securities shall be entitled to transfer such Restricted Securities in accordance with the terms of the notice delivered by the holder to the Company. The Company will not require such a legal opinion or "no action" letter in any transaction which counsel to the Company reasonably concludes is in compliance with Rule 144. Each certificate evidencing the Restricted Securities transferred as above provided shall bear, except if such transfer is made to a person or entity not affiliated with the Company pursuant to Rule 144, the appropriate restrictive legend set forth in Section 1.4 above, except that such certificate shall not bear such restrictive legend if, in the opinion of counsel for such holder and the Company, such legend is not required in order to establish compliance with any provisions of the Securities Act.

        1.6.    Standoff Agreement.    Each Holder agrees in connection with each of the first two registrations of the Company's securities (other than a registration of securities in a Rule 145 transaction or with respect to an employee benefit plan, neither of which shall count as one of the two registrations referred to above), upon request of the Company or the underwriters managing any underwritten offering of the Company's securities, not to sell, make any short sale of, loan, pledge (or otherwise encumber or hypothecate), grant any option for the purchase of, or otherwise directly or indirectly dispose of any Registrable Securities (other than those included in the registration) without the prior written consent of the Company and such managing underwriters for such period of time (not to exceed 180 days in the case of the Company's initial public offering, and not to exceed 90 days in the case of a subsequent public offering, from the effective date of the Registration Statement filed in connection with such offering) as the Board of Directors establishes pursuant to its good faith negotiations with such managing underwriters; provided, however, that the Holders shall not be subject to such lockup unless the then current officers and directors of the Company who own stock of the Company and each owner, together with all other affiliated owners, of 5% or more of the Company's voting securities shall also be bound by such restrictions.

2.     Registration Rights.

        2.1.    Requested Registration.

        (a)    Request for Registration.    In case the Company shall receive from Initiating Holders a written request that the Company effect a registration, qualification or compliance with respect to at least 25% of the Registrable Securities held by or issuable to them (or a lesser percent if the anticipated gross aggregate offering proceeds are in excess of $2,000,000), the Company will:

        (i)    promptly give written notice of the proposed registration, qualification or compliance to all other Holders; and

        (ii)   as soon as practicable, use its best efforts to effect such registration, qualification or compliance (including, without limitation, the execution of an undertaking to file post-effective amendments, appropriate qualification under applicable blue sky or other state securities laws and appropriate compliance with applicable regulations issued under the Securities Act and any other governmental requirements or regulations) as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any Holder or Holders joining in such request as are specified in a written request received by the Company within 30 days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to take any action to effect any such registration, qualification or compliance pursuant to this Section 2.1:

        1.     in any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification or compliance unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;

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        2.     prior to the earlier of (a) six months following the effective date of a Qualified IPO of the Common Stock of the Company, or (b) five years following the date of this Agreement;

        3.     during the period starting with the date 60 days prior to the Company's estimated date of filing of, and ending on the date six months immediately following the effective date of, any registration statement pertaining to securities of the Company (other than a registration of securities in a Rule 145 transaction or with respect to an employee benefit plan), provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective and that the Company's estimate of the date of filing such registration statement is made in good faith;

        4.     after the Company has effected two such registrations pursuant to this subparagraph 2.1(a) and each such registration has been declared or ordered effective;

        5.     if the Company shall furnish to such Holders a certificate, signed by the Chief Executive Officer of the Company, stating that in the good faith judgment of the Board of Directors it would be seriously detrimental to the Company or its stockholders for a registration statement to be filed in the near future; in such case the Company's obligation to use its best efforts to register, qualify or comply under this Section 2.1 shall be deferred for a period not to exceed 180 days from the date of receipt of written request from the Initiating Holders, provided, the Company may not use this right nor the right in Section 2.3(b)(iv) more than once in any twelve month period; or

        6.     if the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 2.3 below.

        Subject to the foregoing clauses (1) through (6), the Company shall file a registration statement covering the Registrable Securities so requested to be registered as soon as practicable after receipt of the request or requests of the Initiating Holders.

        (b)    Underwriting.    In the event that a registration pursuant to Section 2.1 is for a registered public offering involving an underwriting, the Company shall so advise the Holders as part of the notice given pursuant to Section 2.1(a)(i). The right of any Holder to registration pursuant to Section 2.1 shall be conditioned upon such Holder's participation in the underwriting arrangements required by this Section 2.1 and the inclusion of such Holder's Registrable Securities in the underwriting, to the extent requested, to the extent provided herein.

        The Company shall (together with all Holders proposing to distribute their securities through such underwriting) enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Initiating Holders (which managing underwriter shall be reasonably acceptable to the Company). Notwithstanding any other provision of this Section 2.1, if the managing underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Company shall so advise all participating Holders of Registrable Securities, and the number of shares of Registrable Securities that may be included in the registration and underwriting shall be allocated among all participating Holders thereof in proportion, as nearly as practicable, to the respective amounts of Registrable Securities held by such participating Holders at the time of filing the registration statement. No Registrable Securities excluded from the underwriting by reason of the underwriter's marketing limitation shall be included in such registration. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any participating Holder to the nearest 100 shares.

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        If any Holder of Registrable Securities disapproves of the terms of the underwriting, such person may elect to withdraw therefrom by written notice to the Company, the managing underwriter and the Initiating Holders. The Registrable Securities and/or other securities so withdrawn shall also be withdrawn from registration, and such Registrable Securities shall not be transferred in a public distribution prior to 90 days after the effective date of such registration.

        2.2.    Company Registration.

        (a)    Notice of Registration.    If at any time or from time to time, the Company shall determine to register any of its securities, either for its own account or the account of a security holder or holders other than (i) a registration relating solely to employee benefit plans, or (ii) a registration relating solely to a Commission Rule 145 transaction, the Company will:

        (i)    promptly give to each Holder written notice thereof; and

        (ii)   include in such registration (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests made within fifteen days after receipt of such written notice from the Company by any Holder, but only to the extent that such inclusion will not diminish the number of securities included by holders of the Company's securities who have demanded such registration.

        (b)    Underwriting.    If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Holders as a part of the written notice given pursuant to Section 2.2(a)(i). In such event, the right of any Holder to registration pursuant to Section 2.2 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company and the other holders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Company. Notwithstanding any other provision of this Section 2.2, if the managing underwriter determines that marketing factors require a limitation of the number of shares to be underwritten, the managing underwriter may limit the number of Registrable Securities to be included in the registration and underwriting, on a pro ratabasis based on the total number of securities (including, without limitation, Registrable Securities) entitled to registration pursuant to registration rights granted to the participating Holders by the Company; provided, however, that no such reduction shall reduce the number of Registrable Securities included in the registration below 15% of the total number of securities included in the registration, unless such offering is the Company's initial public offering, in which event any or all of the Registrable Securities may be excluded in accordance with the immediately preceding clause on a pro rata basis with all other holders of registration rights that have elected to include securities in such initial public offering. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder or other holder to the nearest 100 shares. If any Holder or other holder disapproves of the terms of any such underwriting, he or she may elect to withdraw therefrom by written notice to the Company and the managing underwriter. Any securities excluded or withdrawn from such underwriting shall be withdrawn from such registration, and shall not be transferred in a public distribution prior to 90 days after the effective date of the registration statement relating thereto.

        (c)    Right to Terminate Registration.    The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.2 prior to the effectiveness of such registration, whether or not any Holder has elected to include securities in such registration.

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        (d)    Limitations on Rights.    The rights given to each Holder under this Section 2.2 shall not apply at any time that all Registrable Securities are eligible to be sold or distributed pursuant to Rule 144, as promulgated under the Securities Act, within any consecutive three month period without volume limitations.

        2.3.    Registration on Form S-3.

        (a)   If Holder(s) request that the Company file a registration statement on Form S-3 (or any successor form to Form S-3) for a public offering of shares of the Registrable Securities held by such Holders, the reasonably anticipated aggregate price to the public of which, net of underwriting discounts and commissions, would exceed $2,000,000, and the Company is a registrant entitled to use Form S-3 to register the Registrable Securities for such an offering, the Company shall use its best efforts to cause such Registrable Securities to be registered for the offering on such form. The Company will (i) promptly give written notice of the proposed registration to all other Holders, and (ii) as soon as practicable, use its best efforts to effect such registration (including, without limitation, the execution of an undertaking to file post-effective amendments, appropriate qualification under applicable blue sky or other state securities laws and appropriate compliance with applicable regulations issued under the Securities Act and any other governmental requirements or regulations) as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any Holder or Holders joining in such request as are specified in a written request received by the Company within 30 days after receipt of such written notice from the Company. The substantive provisions of Section 2.1(b) shall be applicable to each registration initiated under this Section 2.3.

        (b)   Notwithstanding the foregoing, the Company shall not be obligated to take any action pursuant to this Section 2.3: (i) in any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification or compliance unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act; (ii) during the period starting with the date 60 days prior to the Company's estimated date of filing of, and ending on the date six months immediately following the effective date of, a registration statement (other than with respect to a registration statement relating to a Rule 145 transaction, an offering solely to employees or any other registration which is not appropriate for the registration of Registrable Securities), provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective; (iii) if the aggregate amount of Registration Expenses incurred by the Company in connection with any registrations pursuant to this Section 2.3 has exceeded $350,000 within the prior twelve months; or (iv) if the Company shall furnish to such Holder a certificate signed by the Chief Executive Officer of the Company stating that, in the good faith judgment of the Board of Directors, it would be seriously detrimental to the Company or its stockholders for registration statements to be filed in the near future, then the Company's obligation to use its best efforts to file a registration statement shall be deferred for a period not to exceed 180 days from the receipt of the request to file such registration by such Holder or Holders; provided, however, that the Company may not utilize this right nor the right in Section 2.1(a)(ii)(5) more than once in any twelve month period.

        (c)    Limitations on Rights.    The rights given to each Holder under this Section 2.3 shall not apply at any time that all Registrable Securities are eligible to be sold or distributed pursuant to Rule 144, as promulgated under the Securities Act, within any consecutive three month period without volume limitations.

        2.4.    Expenses of Registration.    All Registration Expenses incurred in connection with any registration pursuant to Sections 2.1, 2.2 and 2.3 shall be borne by the Company, except as otherwise

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expressly provided for in this Agreement. Unless otherwise stated, all other Selling Expenses relating to securities registered on behalf of the Holders and any expenses in excess of $15,000 relating to any special audit required in connection with a request for registration pursuant to Section 2.1 shall be borne by the Holders of the registered securities included in such registration pro rata on the basis of the number of shares so registered. In addition, the Company hereby agrees to reimburse the reasonable fees and expenses of one counsel to the Holders in each registration pursuant to Section 2.1 or 2.3 in an amount not to exceed $30,000 per registration.

        2.5.    Registration Procedures.    In the case of each registration, qualification or compliance effected by the Company pursuant to this Section 2, the Company will keep each Holder advised in writing as to the initiation of each registration, qualification and compliance and as to the completion thereof. At its expense the Company will:

        (a)   Prepare and file with the Commission a registration statement with respect to such securities and use its best efforts to cause such registration statement to become and remain effective for at least 180 days or until the distribution described in the registration statement has been completed (provided that before filing a registration statement or prospectus or any amendment or supplement thereto, the Company shall furnish to the counsel selected by the Initiating Holders requesting registration pursuant to Section 2.1(a) copies of all such documents proposed to be filed, which documents shall be subject to review and comment of such counsel); provided, however, that at any time, upon written notice to the participating Holders and for a period not to exceed ninety (90) days thereafter (the "Suspension Period"), the Company may delay the filing or effectiveness of any registration statement or suspend the use or effectiveness of any registration statement (and the Initiating Holders hereby agree not to offer or sell any Registrable Securities pursuant to such registration statement during the Suspension Period) if the Company reasonably believes that there is or may be in existence material nonpublic information or events involving the Company, the failure of which to be disclosed in the prospectus included in the registration statement could result in a Violation (as defined below). The Company may extend the Suspension Period for an additional consecutive sixty (60) days with the consent of the holders of a majority of the Registrable Securities registered under the applicable registration statement, which consent shall not be unreasonably withheld. If so directed by the Company, all Holders registering shares under such registration statement shall (i) not offer to sell any Registrable Securities pursuant to the registration statement during the period in which the delay or suspension is in effect after receiving notice of such delay or suspension; and (ii) use their best efforts to deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holders' possession, of the prospectus relating to such Registrable Securities current at the time of receipt of such notice. The Company shall not be required to file, cause to become effective or maintain the effectiveness of any registration statement that contemplates a distribution of securities on a delayed or continuous basis pursuant to Rule 415 under the Securities Act.

        (b)   Prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement.

        (c)   Furnish to the Holders participating in such registration and to the underwriters of the securities being registered such reasonable number of copies of the registration statement, preliminary prospectus, final prospectus and such other documents as such underwriters may reasonably request in order to facilitate the public offering of such securities.

        (d)   Use its best efforts to register and qualify the securities covered by such registration statement under such other securities laws of such jurisdictions as shall be reasonably requested by

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the Holders; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act.

        (e)   In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement.

        (f)    Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing.

        (g)   Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange or market system on which similar securities issued by the Company are then listed.

        (h)   Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration.

        (i)    Use its best efforts to furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to this Section 2, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Section 2, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities and (ii) a letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities.

        2.6.    Delay in Registration

        (a)   No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.

        (b)   It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 2.1, 2.2 or 2.3 that the selling Holders shall furnish to the Company such information regarding themselves, the Registrable Securities held by them and the intended method of disposition of such securities as shall be required to effect the registration of their Registrable Securities.

        2.7.    Indemnification.

        (a)   The Company will indemnify each Holder, each of its officers and directors and partners, and each person controlling such Holder within the meaning of Section 15 of the Securities Act, with respect to which registration, qualification or compliance has been effected pursuant to this

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Section 2, against all expenses, claims, losses, damages or liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened, arising out of or based on any of the following statements, omissions or violations (collectively, a "Violation"): (i) any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, preliminary prospectus, offering circular or other document, or any amendment or supplement thereto, incident to any such registration, qualification or compliance, (ii) any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or (iii) any violation or any alleged violation by the Company of any rule or regulation promulgated under the Securities Act or the Exchange Act or any state securities law applicable to the Company in connection with any such registration, qualification or compliance, and the Company will reimburse each such Holder, each of its officers and directors, and each person controlling such Holder, each such underwriter and each person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, as such expenses are incurred, provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by such Holder or controlling person and stated to be specifically for use therein; provided however, that the indemnity agreement contained in this Section 2.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder, partner, officer, director, or controlling person of such Holder.

        (b)   Each Holder will, if Registrable Securities held by such Holder are included in the securities as to which such registration, qualification or compliance is being effected, indemnify the Company, each of its directors and officers, each person who controls the Company within the meaning of Section 15 of the Securities Act, and each other such Holder, each of its officers and directors and each person controlling such Holder within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company, such Holders, such directors, officers, persons or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, as such expenses are incurred, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by such Holder and stated to be specifically for use therein; provided, however, that the indemnity agreement contained in this Section 2.7(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided further, that in no event shall any indemnity under this Section 2.7 exceed the proceeds from the offering received by such Holder.

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        (c)   Each party entitled to indemnification under this Section 2.7 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party's expense; provided, however, that an Indemnified Party (together with all other Indemnified Parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the Indemnifying Party, if representation of such Indemnified Party by the counsel retained by the Indemnifying Party would be inappropriate due to actual or potential differing interests between such Indemnified Party and any other party represented by such counsel in such proceeding. The failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 2 unless the failure to give such notice is materially prejudicial to an Indemnifying Party's ability to defend such action. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation.

        (d)   If the indemnification provided for in this Section 2.7 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any losses, claims, damages or liabilities referred to herein, the Indemnifying Party, in lieu of indemnifying such Indemnified Party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such Indemnified Party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the violation(s) that resulted in such loss, claim, damage or liability, as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, that in no event shall any contribution by a Holder hereunder exceed the proceeds from the offering received by such Holder, unless such liability arises out of or is based on willful misconduct by such Holder.

        2.8.    Information by Holder.    The Holder or Holders of Registrable Securities included in any registration shall furnish to the Company such information regarding such Holder or Holders, the Registrable Securities held by them and the distribution proposed by such Holder or Holders as the Company may request in writing and as shall be required in connection with any registration, qualification or compliance referred to in this Section 2. Each Holder agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter that are consistent with the Holder's obligations under Section 1.6 or that are necessary to give further effect thereto.

        2.9.    Rule 144 Reporting.    With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of the Restricted Securities to the

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public without registration, after such time as a public market exists for the Common Stock of the Company, the Company agrees to use its best efforts to:

        (a)   Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times after the effective date that the Company becomes subject to the reporting requirements of the Securities Act or the Exchange Act; and

        (b)   File with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements).

        2.10.    Transfer of Registration Rights.    The rights to cause the Company to register securities granted to Holders under Sections 2.1, 2.2 and 2.3 may be assigned to a transferee or assignee reasonably acceptable to the Company in connection with any transfer or assignment of Registrable Securities by a Holder; provided that: (a) such transfer may otherwise be effected in accordance with applicable securities laws, (b) notice of such assignment is given to the Company, and (c) such transferee or assignee (i) is an affiliate or constituent partner (including limited partners, retired partners, spouses and ancestors, lineal descendants and siblings of such partners or spouses who acquire Registrable Securities by gift, will or intestate succession and trusts for the benefit of any of the foregoing) of such Holder, who agrees to act through a single representative, or (ii) acquires at least 5% of the Company's Series D Preferred Stock.

        2.11.    Limitations on Subsequent Registration Rights.    From and after the date of this Agreement, the Company shall not, without the prior written consent of Holders of a least a majority of the shares of Preferred Stock then outstanding, voting together as a single class, enter into any agreement with any holder or prospective holder of any securities of the Company which would grant such holder any registration rights superior to or on a parity with the rights granted pursuant to Section 2.2 hereof.

3.     Affirmative Covenants of the Company.

        The Company hereby covenants and agrees as follows:

        3.1.    Financial Information.

        (a)   So long as an Investor is a holder of at least 800,000 Conversion Shares (as adjusted for stock splits and the like and as aggregated with the share holdings of any affiliate of such Investor), as soon as practicable after the end of each fiscal year, and in any event within 150 days thereafter, the Company shall furnish such Investor the audited consolidated balance sheets of the Company and its subsidiaries, if any, as of the end of such fiscal year, and consolidated statements of income, cash flows and stockholders' equity of the Company and its subsidiaries, if any, for such year, prepared in accordance with generally accepted accounting principles and setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail.

        (b)   So long as an Investor is a holder of at least 800,000 Conversion Shares (as adjusted for stock splits and the like and as aggregated with the share holdings of any affiliate of such Investor), as soon as practicable after the end of each of the Company's first, second and third fiscal quarter, and in any event within 45 days thereafter, the Company shall furnish such Investor the unaudited consolidated balance sheets of the Company and its subsidiaries, if any, as of the end of such fiscal quarter, and consolidated statements of income and cash flows of the Company and its subsidiaries, if any, for such quarter, prepared in accordance with generally accepted accounting principles with the exception that no notes need be attached to such statements and year-end audit adjustments may not have been made.

        (c)   So long as an Investor is a holder of at least 800,000 Conversion Shares (as adjusted for stock splits and the like and as aggregated with the share holdings of any affiliate of such

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Investor), the Company will furnish such Investor: (i) at least 30 days prior to the beginning of each fiscal year an annual budget and operating plans for each fiscal quarter in such fiscal year and for such fiscal year in its entirety (and as soon as available, any subsequent written revisions thereto); and (ii) as soon as practicable after the end of each month other than those months ending on the last day of any fiscal quarter or fiscal year, and in any event within 30 days thereafter, a balance sheet of the Company as of the end of each such month, and a statement of income and a statement of cash flows of the Company for such month, prepared in accordance with generally accepted accounting principles with the exception that no notes need be attached to such statements and year-end audit adjustments may not have been made. In addition, any such Investor shall have the right to receive, at its request and at the Company's sole cost and expense, monthly trial balances of the Company's accounting records.

        3.2.    Inspection.    The Company shall permit an Investor, at Investor's expense, so long as such Investor holds at least 800,000 Conversion Shares (as adjusted for stock splits and the like and as aggregated with the share holdings of any affiliate of such Investor) and provided that such Investor has executed the Company's standard nondisclosure agreement, to visit and inspect the Company's properties, to examine its books of account and records and to discuss the Company's affairs, finances and accounts with its officers, all at such reasonable times as may be requested by such Investor. All Investors shall hold in confidence and trust, act in a fiduciary manner with respect to, and not use except solely in connection with their investment in the Company, all information provided by the Company pursuant to this Agreement; provided, however, that the Company shall not be obligated under this Section 3.2 (i) with respect to a competitor of the Company, (ii) with respect to information which the Board of Directors determines in good faith is confidential or attorney-client privileged and should not, therefore, be disclosed, or (iii) with respect to a competitor of any stockholder or customer of the Company, for any information which the Board of Directors determines in good faith could be susceptible to use in a competitive manner to the detriment of such stockholder or customer of the Company.

        3.3.    Reserve for Conversion Shares.    The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, for the purpose of effecting the conversion of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock and otherwise complying with the terms of this Agreement, such number of its duly authorized shares of Common Stock, as shall be sufficient to effect the conversion of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock from time to time outstanding or otherwise to comply with the terms of this Agreement. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of the Preferred Stock or otherwise to comply with the terms of this Agreement, the Company will forthwith take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes. The Company will obtain any authorization, consent, approval or other action by or make any filing with any court or administrative body that may be required under applicable state securities laws in connection with the issuance of shares of Common Stock upon conversion of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock.

        3.4.    Employee Proprietary Information and Invention Assignment Agreements.    The Company will require that all present and future directors, employees, consultants and officers having access to proprietary information execute proprietary information and invention assignment agreements substantially in the form provided by the Company to the Investors, and that such form may not be altered in a manner adverse to the Company without the written approval of the Company's Chief Executive Officer.

        3.5.    Compensation of Employees.    Other than employees of the Company and individuals with whom the Company has open offers of employment as of the date of this Agreement, the Company

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agrees that it shall make no commitments to pay any of its employees a base salary in excess of $150,000 without first obtaining approval from the Compensation Committee of the Board of Directors. The covenant described in this section shall expire upon the earlier of the Company's initial public offering, or any liquidation, dissolution or winding up of the Company as those terms are used in Section 2(b)(2) of Article IV of the Charter (hereafter a "Change of Control"). In addition, unless the Board of Directors determines otherwise, until the Company's initial public offering of its Common Stock, all grants of stock options to founders and employees made after the date of this Agreement shall vest at a rate of 25% on the first anniversary of the date of grant, and at a rate of 1/48^th of the shares for each month thereafter.

        3.6.    Marketing and Publicity.    The Company shall use reasonable efforts to include at least a pre-approved one-sentence mention of Zone Venture Group ("Zone") as the Company's first and continuing institutional investor in each Company press release so long as Zone holds any Conversion Shares and where such mention is reasonably relevant. The covenant described in this section shall expire upon the earlier of the Company's initial public offering or a Change of Control.

        3.7.    Board Expenses.    The Company will pay the reasonable out-of-pocket expenses of any member of the Board of Directors of the Company incurred while acting on behalf of the Company, including attending meetings of the Board of Directors, upon presentation to the Company of an itemized accounting of such expenses with reasonable supporting data.

        3.8.    Zone IPO Participation Right.    Subject to the approval of the lead underwriter in its sole discretion, and applicable laws and regulations, Zone shall have the right to purchase up to 5% of the shares offered and sold by the Company in its initial public offering ("IPO") on the same terms and conditions and at the same price as other participants in the IPO (the "IPO Purchase Option"). If (i) the filing of a registration statement relating to the Company's IPO occurs on or prior to the one-year anniversary of the creation of this Section 3.8 or (ii) the Company determines (based on advice of legal counsel) that the IPO Purchase Option is not permissible under the federal securities laws, the rules and regulations of the National Association of Securities Dealers, Inc., or any other applicable laws, rules and regulations, then the Company shall, in lieu thereof and simultaneously with the IPO, make a concurrent private placement offering to Zone of such number of shares equal to the number of shares that Zone otherwise would have been entitled to purchase pursuant to the first sentence of this Section 3.8.

        3.9.    Key Man Insurance.    Subject to the approval of the Board of Directors of the Company, the Company will use its best efforts to obtain and maintain in full force and effect term life insurance in the amount of $2,000,000 dollars on the life of R. Jordan Greenhall, naming the Company as beneficiary.

4.     Right of First Offer.

        4.1.    Subsequent Offerings.    Subject to the limitations set forth in Section 4.4 below, each Investor shall have a right of first offer to purchase its pro rata share of all Equity Securities, as defined below, that the Company may, from time to time, propose to sell or issue after the date of this Agreement, other than the Equity Securities excluded by Section 4.5 hereof. Each Investor's pro rata share is equal to the ratio of (a) the number of shares of the Company's Common Stock (including all shares of Common Stock issued or issuable upon conversion of the Preferred Stock) which such Investor is deemed to be a holder immediately prior to the issuance of such Equity Securities to (b) the total number of shares of the Company's outstanding Common Stock (including all shares of Common Stock issued or issuable upon conversion of the Preferred Stock or upon the exercise or conversion of any outstanding warrants or options or other Securities directly or indirectly exercisable or convertible into Common Stock) immediately prior to the issuance of the Equity Securities (the "Ownership Percentage"). The term "Equity Securities" shall mean (i) any Common Stock, Preferred Stock or

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other security of the Company, (ii) any security convertible into or exchangeable for, with or without consideration, any Common Stock, Preferred Stock or other security (including any option to purchase such a convertible security), (iii) any security carrying any warrant or right to subscribe to or purchase any Common Stock, Preferred Stock or other security, or (iv) any such warrant or right.

        4.2.    Exercise of Rights.    If the Company proposes to issue any Equity Securities, it shall give each Investor written notice of its intention, describing the Equity Securities, the price and the terms and conditions upon which the Company proposes to issue the same. Each Investor shall have fifteen business days from the giving of such notice to agree to purchase its pro rata share of the Equity Securities for the price and upon the terms and conditions specified in the notice by giving written notice to the Company and stating therein the quantity of Equity Securities to be purchased. Notwithstanding the foregoing, the Company shall not be required to offer or sell such Equity Securities to any Investor who would cause the Company to be in violation of applicable federal securities laws by virtue of such offer or sale.

        4.3.    Issuances of Equity Securities to Other Persons.    If not all of the Investors elect to purchase their pro rata share of the Equity Securities, then the Company shall promptly notify in writing the Investors who do so elect and shall offer such Investors the right to acquire such unsubscribed shares. Such Investors shall have ten days after receipt of such notice to notify the Company of their election to purchase all or a portion thereof of the unsubscribed shares. If the Investors fail to exercise in full the rights of first offer, the Company shall have 120 days thereafter to sell the Equity Securities in respect of which the Investors' rights were not exercised, at a price and upon general terms and conditions materially no more favorable to the purchasers thereof than specified in the Company's notice to the Investors pursuant to Section 4.2 hereof. If the Company has not sold such Equity Securities within 120 days of the notice provided pursuant to Section 4.2, the Company shall not thereafter issue or sell any Equity Securities without first re-offering such securities to the Investors in the manner provided above.

        4.4.    Issuances below Conversion Price of Series D Preferred Stock.    Notwithstanding anything to the contrary set forth in this Section 4, if the Company proposes to issue any Equity Securities other than the Equity Securities excluded by Section 4.5 hereof in any transaction or series of related transactions at a price per share (determined in accordance with Section 2(e)(2) of Article IV of the Charter) less than the Series D Conversion Price (as defined in the Charter) then in effect, then, (i) in the event that the Company desires to designate Insight Venture Partners V, L.P. (or one or more of its affiliated investment funds, "Insight") and Insight desires to be the lead investor in such transaction or series of related transactions, Insight shall have a right of first offer pursuant to this Section 4 to purchase up to 50% of such Equity Securities issued by the Company in such transaction or series of related transactions or (ii) in the event that the Company or Insight determines that Insight shall not purchase a majority of the Equity Securities to be issued in such transaction or series of related transactions, Insight shall have a right of first offer pursuant to this Section 4 to purchase up to two times its pro rata share of such Equity Securities issued by the Company in such transaction or series of related transactions (calculated in accordance with Section 4.1 above). The right of first offer set forth in this Section 4.4 in favor of Insight is in lieu of, an not in addition to, the right of first offer in favor of Insight established by Section 4.1 above. In the event that Insight exercises its right of first offer to purchase Equity Securities pursuant to this Section 4.4, then, with respect to the Equity Securities issued by the Company in such transaction or series of related transactions, (i) the right of first offer in favor of each of the remaining Investors set forth in Section 4.1 above shall be to purchase its pro rata share of the Equity Securities issued by the Company in such transaction or series of related transactions other than the Equity Securities excluded by Section 4.5 hereof and the Equity Securities to be purchased by Insight in accordance with this Section 4.4, and (ii) each Investor's pro rata share of the Equity Securities issued by the Company in such transaction or series of related transactions shall be equal to the ratio of (a) the number of shares of the Company's Common Stock (including all

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shares of Common Stock issued or issuable upon conversion of the Preferred Stock) of which such Investor is deemed to be a holder immediately prior to the issuance of such Equity Securities to (b) the total number of shares of the Company's outstanding Common Stock other than shares of Common Stock held by Insight (including all shares of Common Stock issued or issuable upon conversion of the Preferred Stock or upon the exercise or conversion of any outstanding warrants or options or other Securities directly or indirectly exercisable or convertible into Common Stock) immediately prior to the issuance of the Equity Securities in such transaction or series of related transactions.

        4.5.    Excluded Securities.    The rights of first offer established by this Section 4 shall have no application to any of the following Equity Securities:

        (a)   Any shares of Common Stock (and/or options, warrants, convertible notes or other Common Stock purchase rights issued pursuant to such options, warrants, convertible notes or other rights) as adjusted for any stock dividends, combinations, splits, recapitalizations and the like issued or to be issued after the date of this Agreement to employees, officers or directors of, or consultants or advisors to the Company or any subsidiary, pursuant to stock purchase or stock option plans or other arrangements that are approved by the Board of Directors (including a representative designed by the holders of the Series A Preferred Stock or Series B Preferred Stock of the Company);

        (b)   any Equity Securities issued for consideration other than cash pursuant to a merger, consolidation, acquisition or similar business combination or strategic alliance approved by the Board of Directors (including a representative designated by the holders of the Series A Preferred Stock or Series B Preferred Stock of the Company);

        (c)   shares of Common Stock issued in connection with any stock split, stock dividend or recapitalization by the Company;

        (d)   the Conversion Shares;

        (e)   any Equity Securities issued pursuant to any equipment leasing, loan arrangement or debt financing from a bank or similar financial or lending institution approved by the Board of Directors (including a representative designated by the holders of the Series A Preferred Stock or Series B Preferred Stock of the Company);

        (f)    any Equity Securities issued to the Company's strategic corporate partners or key service providers, as approved by the Board of Directors;

        (g)   any Equity Securities that are issued by the Company pursuant to a registration statement filed under the Securities Act; and

        (h)   shares of Common Stock issued or issuable pursuant to any rights or agreements, options, warrants or convertible securities outstanding as of the date of this Agreement.

5.     Right of First Refusal on Sales by Founders; Co-Sale Right.

        5.1.    Transfer of Shares.    A Founder may transfer any or all of the shares he or she holds or any right or interest therein then owned by such Founder only in accordance with Section 5 hereof. If a Founder proposes to effect a transfer (a "Transferring Founder") pursuant to this Section 5.1 (other than a Permitted Transfer), then at least ten days prior to such transfer, such Transferring Founder shall give notice (the "Founder Notice") to the Chief Executive Officer of the Company and the Investors of his or her intention to effect the transfer. The Founder Notice shall set forth (i) the number, class and series of shares or options to be sold by the Transferring Founder (the "Sale Shares"), (ii) the date or proposed date of the transfer and the name and address of the proposed transferee, and (iii) the principal terms of the transfer, including the cash or other property or

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consideration to be received upon such transfer. In the case of a proposed transfer by way of gift or if the nature of the transfer is such that no readily determinable consideration is to be paid for the transfer of the Sale Shares, then the transfer price for purposes of Section 5.1(iii) shall be the book value per share, calculated in accordance with the books and records of the Company under generally accepted accounting principles as of the date of the Founder Notice, unless a higher value is determined by the Board of Directors or a majority of the voting shares of the Company, excluding the vote of the Transferring Founder.

        5.2.    Investors' Option.    The Investors shall have the option, but not the obligation, to purchase, pro-rata (in proportion to their holdings of all shares of Common Stock held by all Investors, on an as-converted basis), all or any portion of the Sale Shares on the same terms as specified in the Founder Notice. Not later than seven days after the Investors receive a Founder Notice (if any), each Investor shall give written notice to the Transferring Founder and the Company (the "Investors Notice") stating (i) whether or not such Investor elects to exercise its respective option to purchase and (ii) a date and time for consummation of the purchase not more than seven days after the receipt of the Investors Notice by the Transferring Founder. Failure by any Investor to give such notice within such time period shall be deemed an election by such Investor not to exercise its option.

        5.3.    Company's Option.    If any Investors elect not to exercise their respective rights to purchase all or any portion of the Sale Shares, then the Company shall have the option, but not the obligation, to purchase all such Sale Shares not purchased by the Investors on the same terms as specified in the Founder Notice. Within seven days of the date the Company receives the Founder Notice, the Company shall give written notice to the Transferring Founder (the "Company Notice") stating (i) whether or not it elects to exercise its option to purchase any Sale Shares not elected to be purchased by the Investors and (ii) a date and time for consummation of the purchase not more than five days after the receipt of the Company Notice by the Transferring Founder. Failure by the Company to give such notice within such time period shall be deemed an election by it not to exercise its option.

        5.4.    Sale to a Third Party.    If the Investors and the Company elect not to exercise their rights to purchase the Sale Shares, then the Transferring Founder shall thereafter be free to transfer the Sale Shares on the terms provided in the Founder Notice within 120 days of the date of the Founder Notice.

        5.5.    Application of Provisions.    Any Sale Shares not purchased by the proposed transferee in accordance with Section 5 hereof within 120 days of the Founder Notice may not be sold or otherwise disposed of until they are again offered to the Investors under the procedures specified in Section 5.1.

        5.6.    Closing.    The closing of the purchase and sale of Sale Shares pursuant to this Section 5 shall take place at the principal office of the Company (or such other location as may be agreed upon by the Transferring Founder and the Investors or the Company, as applicable) on the date specified in any Investors Notice or Company's Notice. At the closing, the Transferring Founder shall deliver to each Investor or the Company, as applicable, certificates representing the Sale Shares, duly endorsed for transfer, free and clear of any lien, claim, charge, pledge, security interest or encumbrance whatsoever, and each Investor or the Company, as applicable, shall deliver to the Transferring Founder consideration therefor at the price and on the terms set forth in the Founder Notice (or the reasonable economic equivalent thereto).

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        5.7.    Co-Sale Right.    If the Investors and/or the Company do not elect to purchase all of the Sale Shares pursuant to Section 5.2, any Investor not electing to purchase any of the Sale Shares above may elect to participate in the contemplated sale by delivering written notice thereof to the Transferring Founder and the Company no later than ten days after the Investors receive any Founder Notice under Section 5.1 (a "Participating Seller"). If and to the extent a Transferring Founder is to sell all or part of the remaining Sale Shares covered by a Founder Notice as contemplated by Section 5.4, it shall be a condition of such sale that each Participating Seller shall have the right to have a portion of its Preferred Stock purchased by the purchaser of the Sale Shares pursuant to Section 5.4 at the same price with respect to the same type of securities and on the same terms and conditions, such portion to be equal to the product obtained by multiplying (i) the aggregate number of Sale Shares to be purchased by the purchaser by (ii) the aggregate Ownership Percentage of the Participating Sellers.

        5.8.    Transfers Void.    Any attempted transfer in violation of the terms of this Section 5 shall be ineffective to vest in any transferee any interest held by any Founder in the Sale Shares. Anything contained in this Section 5 to the contrary notwithstanding, any transferee of a Transferring Founder pursuant to this Section 5 shall agree in writing in advance of such transfer with the parties hereto to be bound by and comply with all applicable provisions of this Agreement.

6.     Right of First Refusal on Sales by Series C Preferred Holders; Co-Sale Right.

        6.1.    Transfer of Shares.    A Holder of shares of Series C Preferred Stock, or other Registrable Securities issued upon conversion, exchange or similar event of Series C Preferred Stock (such shares of Series C Preferred Stock and Registrable Securities being referred to herein as the "Subject Shares"), may transfer any or all of the Subject Shares such Holder holds or any right or interest therein then owned by such Holder only in accordance with Section 6 hereof. If such a Holder proposes to effect a transfer (a "Transferring Series C Holder") pursuant to this Section 6.1 (other than a Permitted Transfer) of Subject Shares, then at least ten days prior to such transfer, such Transferring Series C Holder shall give notice (the "Transferring Holder Notice") to the Company and the Investors of such Holder's intention to effect the transfer. The Transferring Holder Notice shall set forth (i) the number, class and series of Subject Shares to be sold by the Transferring Series C Holder (the "Holder Sale Shares"), (ii) the date or proposed date of the transfer and the name and address of the proposed transferee, and (iii) the principal terms of the transfer, including the cash or other property or consideration to be received upon such transfer. In the case of a proposed transfer by way of gift or if the nature of the transfer is such that no readily determinable consideration is to be paid for the transfer of the Holder Sale Shares, then the transfer price for purposes of Section 6.1(iii) shall be the book value per share, calculated in accordance with the books and records of the Company under generally accepted accounting principles as of the date of the Transferring Holder Notice, unless a higher value is determined by the Board of Directors or a majority of the voting shares of the Company, excluding the vote of the Transferring Series C Holder.

        6.2.    Investors' Option.    The Investors shall have the option, but not the obligation, to purchase, pro-rata (in proportion to their holdings of all shares of Common Stock held by all Investors, on an as-converted basis), all or any portion of the Holder Sale Shares on the same terms as specified in the Transferring Holder Notice. Not later than seven days after the Investors receive a Transferring Holder Notice, each Investor shall give written notice to the Transferring Series C Holder and the Company (the "Investors Series C Notice") stating (i) whether or not such Investor elects to exercise its respective option to purchase and (ii) a date and time for consummation of the purchase not more than seven days after the receipt of the Investors Series C Notice by the Transferring Series C Holder. Failure by such Investor to give such notice within such time period shall be deemed an election by such Investor not to exercise its option.

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        6.3.    Company's Option.    If any Investors elect not to exercise their respective rights to purchase all or any portion of the Holder Sale Shares, then the Company shall have the option, but not the obligation, to purchase all of the Holder Sale Shares not purchased by the Investors on the same terms as specified in the Transferring Holder Notice. Within seven days of the date the Company receives the Transferring Holder Notice, the Company shall give written notice to the Transferring Series C Holder (the "Company Series C Notice") stating (i) whether or not it elects to exercise its option to purchase any Holder Sale Shares not elected to be purchased by the Investors and (ii) a date and time for consummation of the purchase not more than five days after receipt of the Company Series C Notice by the Transferring Series C Holder. Failure by the Company to give such notice within such time period shall be deemed an election by it not to exercise its option.

        6.4.    Sale to a Third Party.    If the Investors and the Company elect not to exercise their rights to purchase the Holder Sale Shares, then the Transferring Series C Holder shall thereafter be free to transfer the Holder Sale Shares on the terms provided in the Transferring Holder Notice within 120 days of the date of the Transferring Holder Notice.

        6.5.    Application of Provisions.    Any Holder Sale Shares not purchased by the proposed transferee in accordance with Section 6 hereof within 120 days of the Transferring Holder Notice may not be sold or otherwise disposed of until they are again offered to the Investors under the procedures specified in Section 6.1.

        6.6.    Closing.    The closing of the purchase and sale of Holder Sale Shares pursuant to this Section 6 shall take place at the principal office of the Company (or such other location as may be agreed upon by the Transferring Series C Holder and the Investors or the Company, as applicable) on the date specified in any Investors Series C Notice or Company Series C Notice. At the closing, the Transferring Series C Holder shall deliver to each Investor or the Company, as applicable, certificates representing the Holder Sale Shares, duly endorsed for transfer, free and clear of any lien, claim, charge, pledge, security interest or encumbrance whatsoever, and each Investor or the Company, as applicable, shall deliver to the Transferring Series C Holder consideration therefor at the price and on the terms set forth in the Transferring Holder Notice (or the reasonable economic equivalent thereto).

        6.7.    Co-Sale Right.    If the Investors and/or the Company do not elect to purchase all of the Holder Sale Shares pursuant to Section 6.2, any Investor not electing to purchase any of the Holder Sale Shares above may elect to participate in the contemplated sale by delivering written notice thereof to the Transferring Series C Holder and the Company no later than ten days after the Investors receive any Transferring Holder Notice under Section 6.1 (a "Participating Series C Seller"). If and to the extent a Transferring Series C Holder is to sell all or part of the remaining Holder Sale Shares covered by a Transferring Holder Notice as contemplated by Section 6.4, it shall be a condition of such sale that each Participating Series C Seller shall have the right to have a portion of its Preferred Stock purchased by the purchaser of the Holder Sale Shares pursuant to Section 6.4 at the same price with respect to the same type of securities and on the same terms and conditions, such portion to be equal to the product obtained by multiplying (i) the aggregate number of Holder Sale Shares to be purchased by the purchaser by (ii) the aggregate Ownership Percentage of the Participating Series C Sellers.

        6.8.    Transfers Void.    Any attempted transfer in violation of the terms of this Section 6 shall be ineffective to vest in any transferee any interest held by any Holder in the Holder Sale Shares. Anything contained in this Section 6 to the contrary notwithstanding, any transferee of a Transferring Series C Holder pursuant to this Section 6 shall agree in writing in advance of such transfer with the parties hereto to be bound by and comply with all applicable provisions of this Agreement.

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7.     Voting Agreements; Board Observer Rights.

        7.1.    Board of Directors.    Each of the Stockholders agrees to vote all of the Company's voting stock controlled by such Stockholder in favor of the following candidates for their election to the Company's Board of Directors:

        (a)   one representative of the holders of the Series A Preferred Stock, who, for as long as Zone holds at least 1,000,000 shares (as adjusted for stock splits and the like) of Series A Preferred Stock or Common Stock issued upon the conversion thereof, shall be the person nominated by Zone;

        (b)   one representative of the holders of the Common Stock, who shall be selected by the holders of a majority-in-interest of the Founders' Stock;

        (c)   one representative of the holders of the Series B Preferred Stock, who, so long as WI Harper Group and its affiliates hold at least 1,000,000 shares (as adjusted for stock splits and the like) of Series B Preferred Stock or Common Stock issued upon the conversion thereof, shall be the person nominated by WI Harper Group;

        (d)   one representative of the holders of the Series D Preferred Stock, who, so long as Insight and its affiliates hold at least 1,000,000 shares (as adjusted for stock splits and the like) of Series D Preferred Stock or Common Stock issued upon the conversion thereof, shall be the person nominated by Insight Venture Partners V, L.P. (and such person shall also be a member of the compensation committee of the Company's Board of Directors and, at Insight's election, the audit committee of the Company's Board of Directors);

        (e)   to the extent that the Board of Directors has more than four members, individuals (each an "Additional Designee") who are not employees of the Company or employees or affiliates of any of the Investors and are approved in writing by not less than three (3) of the directors chosen in accordance with subsections (a), (b), (c) and (d) above (each a "Primary Designee"). Each of the Stockholders agrees to vote all shares of capital stock of the Company now or hereafter directly or indirectly owned by such Stockholder in such manner as may be necessary to cause the Board to consist solely of the Primary Designees and Additional Designees, including taking action to limit or increase the authorized number of directors.

        7.2.    Size of Board of Directors.    As of the date of this Agreement, the authorized size of the Board of Directors shall be set at five. After the date of this Agreement, as soon as suitable Additional Designees are identified and approved in accordance with Section 7.1(e) above, the Company will use its best efforts to seek the necessary approvals to increase the size of the Board of Directors from five to seven. Thereafter, the Company will use its best efforts to seek the necessary approvals to increase the size of the Board of Directors to accommodate any other Additional Designees that are approved in accordance with Section 7.1(e) above.

        7.3.    Board Observer Rights.    Any Investor owning at least 800,000 Conversion Shares (as adjusted for stock splits and the like and as aggregated with the share holdings of any affiliate of such Investor) and any general partner of Zone Venture Fund II L.P. shall have the right to attend the Company's Board of Director's meetings as observers, provided, however, that each Investor having this right shall only be allowed to send one observer per meeting of the Board of Directors. Upon the request of Zone or any other Investor with such observer rights, the Company shall furnish each such Investor with the same notice as any Director is entitled to receive or is actually furnished with respect to a meeting of the Board of Directors, and, subject to the right of the Board of Directors to limit a distribution of materials as provided in this Section below, shall promptly furnish to the observer all materials which are delivered to the Board of Directors. Zone shall submit to the chairman of the Company's Board of Directors (the "Chairman") a written request providing the name(s) of the person(s) wishing to attend at least five days prior to the meeting. Each Investor (other than Zone)

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having the right provided by this Section 7.3 shall initially inform the Chairman of the person designated to be its observer and shall notify the Chairman of any change of such designee at least five days prior to the date of the next meeting of the Company's Board of Directors. All Investors having rights to observers shall agree to, and shall cause any representative observer to, hold in confidence and trust, not use except in connection with such Investor's investment in the Company, and act in a fiduciary manner with respect to, all information provided by the Company thereto. The Company shall have the right to exclude any observer from all or any part of a Board of Directors meeting and to limit materials delivered to such observer pursuant to this Section if the Board of Directors determines in its sole reasonable discretion (acting by a majority vote of the Directors present at the meeting) that such exclusion is in the best interests of the Company.

8.     Change of Control.

        8.1.    Change of Control.    In the event that (i) (a) the holders of a majority of the Conversion Shares, (b) Insight (in its capacity as a stockholder of the Company), (c) Zone (in its capacity as a stockholder of the Company) and (d) R. Jordan Greenhall (in his capacity as a stockholder of the Company) (collectively, the "Drag-Along Investors") approve a transaction involving a Change of Control (as defined in Section 3.5 above) (each, a "Drag-Along Transaction" and a Drag-Along Transaction approved as described in this subsection (i), an "Approved Transaction") or (ii) the holders of a majority of the Conversion Shares approve a Drag-Along Transaction that constitutes a Qualified Transaction (as defined below), each Investor and Founder (each, a "Voting Stockholder") shall consent to and vote its shares of Common Stock and Preferred Stock for the Drag-Along Transaction, and (i) if the Drag-Along Transaction is structured as an asset transfer or merger or consolidation of the Company, the Voting Stockholders shall each vote for or consent to, and waive any dissenters' rights, appraisal rights or similar rights in connection with such asset transfer, merger or consolidation, or (ii) if the Drag-Along Transaction is structured as a sale of the stock of the Company, the Voting Stockholders shall each agree to sell their shares of Preferred Stock and Common Stock on the terms and conditions approved by (a) in the case of an Approved Transaction, the Drag-Along Investors or (b) in the case of a Qualified Transaction, the holders of a majority of the Conversion Shares, provided that such terms do not provide that any such Voting Stockholder would receive less than the amount that would be distributed to such Voting Stockholder in the event the proceeds of such Drag-Along Transaction were distributed in accordance with the Charter. The Voting Stockholders shall each take all necessary and desirable actions approved by (i) in the case of an Approved Transaction, the Drag-Along Investors or (ii) in the case of a Qualified Transaction, the holders of a majority of the Conversion Shares, in connection with the consummation of the Drag-Along Transaction, including the execution of such agreements and such instruments and other actions necessary to (i) provide the customary Investor or Founder representations, warranties, indemnities, covenants, conditions, escrow agreements and other provisions and agreements relating to such Drag-Along Transaction and (ii) effectuate the allocation and distribution of the aggregate consideration received in such Drag-Along Transaction in accordance with the applicable provisions of the Charter. For purposes of this Agreement, a "Qualified Transaction" shall be a transaction involving a Change of Control (i) that does not constitute an Approved Transaction and (ii) in which (a) the Aggregate Liquidation Value (as defined in and determined in accordance with the Charter) is equal to or greater than $1,000,000,000, (b) the consideration paid to the Voting Stockholders is in the form of cash or securities registered pursuant Section 12(b) or Section 12(g) of the Exchange Act which, during the four calendar weeks prior to the date on which the Voting Stockholders are required to vote in favor of such Drag-Along Transaction, have been subject to an average daily trading volume on all national securities exchanges and/or the automated quotation system of a registered securities association, of at least 1,000,000 shares per day, and (c) the indemnification obligations of each Voting Stockholder under the agreement of sale is several (and not joint and several) based on the share of the aggregate proceeds paid with

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respect to such Voting Stockholder's securities and does not exceed the net proceeds to be received by such Voting Stockholder from such Drag-Along Transaction.

9.     Miscellaneous.

        9.1.    Termination.    The rights of any particular Holder to cause the Company to register securities set forth Sections 2.1, 2.2 and 2.3 shall terminate five years from the effective date of a Qualified IPO. A Holder's right to require registration pursuant to Section 2.1, 2.2 or 2.3 will expire if and for so long as the Holder is able to sell all of such Holder's Registrable Securities in any consecutive 90-day period pursuant to Rule 144 or any successor or other exemption promulgated under the Act, without volume limitations. The covenants set forth in Sections 3.1, 3.2 and 3.4, and the rights set forth in Sections 4, 5, 6, 7 and 8 shall terminate and be of no further force or effect upon the earlier of (i) a Qualified IPO, (ii) a Change of Control, or (iii) October 19, 2020.

        9.2.    Successors in Interest.    The provisions of this Agreement shall be binding upon the successors in interest to any of the Registrable Securities. The Company shall not permit the transfer of any of the Preferred Stock, Founders' Stock or Conversion Shares on its books or issue new certificates representing any shares of the Preferred Stock, Founders' Stock or Conversion Shares unless and until the person(s) to whom such shares are to be transferred shall have executed a written agreement, pursuant to which such person becomes a party to this Agreement and agrees to be bound by all the provisions hereof as if such person was a party hereunder.

        9.3.    Governing Law.    This Agreement shall be governed by and construed under the laws of the State of California as applied to agreements among California residents entered into and to be performed entirely within California. Each of the parties irrevocably consents to the exclusive personal jurisdiction of the federal and state courts for the State of California located in San Diego county, as applicable, for any matter arising out of or relating to this Agreement, except that in actions seeking to enforce any order or any judgment of such federal or state courts located in California, such personal jurisdiction shall be nonexclusive.

        9.4.    Survival.    The representations, warranties, covenants and agreements made herein shall survive any investigation made by any Investor and the closing of the transactions contemplated hereby. All statements as to factual matters contained in any certificate or exhibit delivered by or on behalf of the Company pursuant hereto shall be deemed to be the representations and warranties of the Company hereunder as of such date of such certificate or exhibit.

        9.5.    Successors and Assigns.    Except as otherwise provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto; provided, however, that prior to the receipt by the Company of adequate written notice of the transfer of any Registrable Securities specifying the full name and address of the transferee, the Company may deem and treat the person listed as the holder of such shares in its records as the absolute owner and holder of such shares for all purposes, including the payment of dividends or any redemption price.

        9.6.    Entire Agreement; Amendment.    This Agreement and the other documents and exhibits delivered pursuant hereto, constitute the full and entire understanding and agreement among the parties with regard to the subjects hereof and thereof. This Agreement, or any provision hereof, may be amended or waived only in a writing signed by the Company, the holders of the majority of the outstanding Founders' Stock and the holders of at least a majority of the outstanding Preferred Stock (including any Conversion Shares issued upon conversion of the shares of Preferred Stock).

        9.7.    Effect of Amendment and Waiver.    The Holders and their successors and assigns acknowledge that by operation of Section 9.6 hereof, the Holders of more than fifty percent (50%) of the outstanding Preferred Stock and the Holders of more than fifty percent (50%) of the outstanding

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Founders' Stock, acting in conjunction with the Company, will have the right and power to diminish or eliminate any or all rights or increase any or all obligations pursuant to this Agreement; provided, however, that this Agreement may not be amended to alter or remove the rights granted to (i) WI Harper and its affiliates under Section 7.1(c) without first obtaining the written consent of WI Harper, (ii) Insight and its affiliates under Section 4.4, Section 7.1(d), Section 8.1, Section 9.6 or this Section 9.7 without first obtaining the written consent of Insight or (iii) Zone and its affiliates under Section 3.6, Section 3.8, Section 7.1(a), Section 8.1, Section 9.6 or this Section 9.7 without first obtaining the written consent of Zone; provided, further, that any amendment or waiver that by its terms applies only to the holders of one or more classes or series of the Company's securities (as compared to all such holders as a group) shall require the consent of the holders of a majority of such class or series. The parties hereto (comprising the Company and the Holders of more than fifty percent (50%) of the Preferred Stock and Founder's Stock (each as defined in the Prior Agreement)) acknowledge that the execution of this Agreement terminates the Prior Agreement and that the rights and obligations provided for hereunder replace those of the Prior Agreement both for themselves and for the other parties bound by the Prior Agreement pursuant to Section 8.6 thereof.

        9.8.    Notices.    Any notice required by this Agreement shall be in writing and shall be sent by certified U.S. mail, correctly addressed and postage prepaid, return receipt requested, or by facsimile transmission, or by overnight courier or hand delivery, to (a) in the case of the Company, Attn: R. Jordan Greenhall, 4780 Eastgate Mall, San Diego, California 92121, and (b) in the case of a Stockholder, the address indicated for such party on the signature page hereof, or such other address of which such party gives notice hereunder.

        9.9.    Delays or Omissions.    No delay or omission to exercise any right, power or remedy accruing to any holder of any shares of the Company's stock upon any breach or default of the Company under this Agreement shall impair any such right, power or remedy of such holder, nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any holder of any breach or default under this Agreement, or any waiver on the part of any holder of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing or as provided in this Agreement. All remedies, either under this Agreement or by law or otherwise afforded to any holder, shall be cumulative and not alternative.

        9.10.    Counterparts.    This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument. Delivery of an executed counterpart of a signature page to this Agreement by facsimile shall be effective as delivery of a manually executed counterpart of this Agreement.

        9.11.    Severability of this Agreement.    In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement will continue in full force and effect without said provision and the parties agree to replace such provision with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such provisions; provided that no such severability will be effective against a party if it materially and adversely changes the economic benefits of this Agreement to such party.

        9.12.    Titles and Subtitles.    The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

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        9.13.    Right to Specific Performance.    The parties hereto agree that each shall be entitled to a decree of specific performance of the terms hereof or an injunction restraining violation of this Agreement.

[Remainder of page intentionally left blank.]

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        IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

DIVX, INC.
By:	/s/  R. JORDAN GREENHALL R. Jordan Greenhall Chief Executive Officer

[Signature page to DivX Third Amended and Restated Stockholders' Agreement]

"FOUNDERS":
/s/  R. JORDAN GREENHALL
	R. Jordan Greenhall
Address:		[Illegible]San Diego, CA 92129
/s/  EDWARD J. BEZDEK
	Edward J. Bezdek
Address:		3941 Via HolguraSan Diego, CA 92130
	Eldon C. Hylton, Jr.
Address:
	Jerome Rota
Address:
GRAY CARY WARE & FREIDENRICH LLP
Address:
By:
Name:
Title:
	Shahi Ghanem
Address:

"INVESTORS":

INSIGHT VENTURE PARTNERS V, L.P.
By:	Insight Venture Associates V, L.L.C. its General Partner
Address:		680 Fifth Avenue 8th FloorNew York, New York 10019
By:		/s/  DEVEN PAREKH
Name:		Deven Parekh
Title:		Managing Member

INSIGHT VENTURE PARTNERS (CAYMAN) V, L.P.
By:	Insight Venture Associates V, L.L.C. its General Partner
Address:		680 Fifth Avenue, 8th FloorNew York, New York 10019
By:		/s/  DEVEN PAREKH
Name:		Deven Parekh
Title:		Managing Member

INSIGHT VENTURE PARTNERS V (EMPLOYEE CO-INVESTORS), L.P.
By:	Insight Venture Associates V, L.L.C. its General Partner
Address:		680 Fifth Avenue, 8th FloorNew York, New York 10019
By:		/s/  DEVEN PAREKH
Name:		Deven Parekh
Title:		Managing Member

ZONE VENTURE FUND II, L.P.
Address:	241 S. Figuroa St. Suite 340LA, CA 90012
By:	/s/  FRANK M. CREER
Name:	Frank M. Creer
Title:	Managing Director, ZONE VENTURES
INTERNATIONAL NETWORK CAPITAL CORP.
Address:	10F-2 Ruentex Banking Tower, 76 Tun Hua South Road, SeatioTaipei, Taiwan B.O.L.
By:	/s/  PETER LIU
Name:	Peter Liu
Title:	President
INTERNATIONAL NETWORK CAPITAL LDC
Address:	P.O. Box 866, Anderson Square Bldg., 3rd FlGeorge Town Grand Cayman, Cayman Islands, British West Indies
By:	/s/  PETER LIU
Name:	Peter Liu
Title:	Chairman
BEIJING TECHNOLOGY DEVELOPMENT FUND
Address:	Ugland House South Church Street, P.O. Box 309George Town Grand Cayman Cayman Islands, British West Indies
By:	/s/  PETER LIU
Name:	Peter Liu
Title:	Chairman

INTERNATIONAL NETWORK CAPITAL GLOBAL FUND
Address:	10F-2, 76 Tun Hua South Road,Taipei, 106 Taiwan B.O.L.
By:	/s/  PETER LIU
Name:	Peter Liu
Title:	President
INTERNATIONAL NETWORK CAPITAL GLOBAL INVESTMENT LIMITED
Address:	Offshore Incorporations Ltd. P.O. Box 957 Offshore Incorporation CenterRead Town Tortola British Islands
By:	/s/  PETER LIU
Name:	Peter Liu
Title:	Director
SPRINGBOARD-HARPER TECHNOLOGY FUND (CAYMAN) LTD
Address:	Ugland House P.O. Box 309George Town Grand Cayman Cayman Islands, British West Indies
By:	/s/  PETER LIU
Name:	Peter Liu
Title:	Director

SPRINGBOARD-HARPER TECHNOLOGY FUND PTE LTD LTD
Address:	250 North Bridge RoadRaffles City Tower #30-07 Singapore
By:	/s/  PETER LIU
Name:	Peter Liu
Title:	Director
SPRINGBOARD-HARPER INVESTMENT (CAYMAN) LTD LTD
Address:	Ugland House P.O. Box 309George Town Grand Cayman Cayman Islands, British West Indies
By:	/s/  PETER LIU
Name:	Peter Liu
Title:	Director

CARDINAL VENTURE AFFILIATES, L.P. LTD
By:	Cardinal Ventures LLC Its General Partner
Address:		1010 El Camino Real #250Menlo Park, CA 94025
By:		/s/  DEREK J. BLAZENSKY
Name:		Derek J. Blazensky
Title:		General Partner
CVP SBIC, L.P. LTD
By:	CVSBIC, Inc. Its General Partner
Address:		1010 El Camino Real #250Menlo Park, CA 94025
By:		/s/  DEREK J. BLAZENSKY
Name:		Derek J. Blazensky
Title:		General Partner
CARDINAL VENTURE PARTNERS, L.P.
By:	Cardinal Ventures, LLC Its General Partner
Address:		1010 El Camino Real #250Menlo Park, CA 94025
By:		/s/  DEREK J. BLAZENSKY
Name:		Derek J. Blazensky
Title:		General Partner

ALI CORPORATION

Address:

By:

Name:

Title:

CYBERLINK INTERNATIONAL TECHNOLOGY CORP. (B.V.I.)
Address:
By:
Name:
Title:
SVIC NO. 4 NEW TECHNOLOGY BUSINESS INVESTMENT L.L.P.
Address:	16th Fl KIPS Center 647-9Yeoksam-Dong, Kangnam-Gu, Seoul, Korea
By:	/s/  SANGKI KIM
Name:	Sangki Kim
Title:	C.E.O.

INVESTOR'S COUNTERPART SIGNATURE PAGE

DIVX, INC.

THIRD AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT

"INVESTOR"

Address:

  
By:

 
Title:

[Signature page to DivX, Inc. Third Amended and Restated Stockholders' Agreement]

Acknowledgment

        The undersigned, the spouse of a Founder in the foregoing Third Amended and Restated Stockholders' Agreement ("Agreement"), as an inducement to the Investors to invest in the Company, and for other good and valuable consideration, does hereby:

        (1)   acknowledge the Agreement and all of the provisions therein; and

        (2)   to the extent that he/she has an interest in the capital stock of the Company owned by the Founders, consent to be bound by all of its terms and conditions in the same manner and to the same extent that his/her spouse is bound thereby and as though the undersigned was a party thereto.

Dated:	October 18	, 2005	/s/  E. PAIGE BEZDEK
			Name: E. Paige Bezdek

Acknowledgment

        The undersigned, the spouse of a Founder in the foregoing Third Amended and Restated Stockholders' Agreement ("Agreement"), as an inducement to the Investors to invest in the Company, and for other good and valuable consideration, does hereby:

        (1)   acknowledge the Agreement and all of the provisions therein; and

        (2)   to the extent that he/she has an interest in the capital stock of the Company owned by the Founders, consent to be bound by all of its terms and conditions in the same manner and to the same extent that his/her spouse is bound thereby and as though the undersigned was a party thereto.

Dated:	10/18	, 2005	/s/  JENNIFER A. GREENHALL
			Name: Jennifer A. Greenhall

SCHEDULE A
LIST OF INVESTORS

Name	Number of Shares of Series A Preferred Stock Purchased	Number of Shares of Series B Preferred Stock Purchased	Number of Shares of Series C Preferred Stock Purchased	Number of Shares of Series D Preferred Stock Purchased
Zone Venture Group	2,400,012	5,123,012	430,441
Timothy Draper Living Trust	400,000	853,827	107,611
Draper Richards, L.P.	360,000	0	0
Draper Atlantic Venture Fund, L.P.	0	0	129,132
Draper Atlantic Venture Fund II, L.P.	400,000	2,232,757	258,265
Draper Atlantic Opportunity Fund L.P	0	0	301,309
Argus Capital LLC	40,000	0	51,654
James Lee	80,000	0	0
Charles Harrell	20,000	0	0
GCWF Investment Partners II	20,000	0	0
International Network Capital Corp	200,000	0	0
International Network Capital LDC	200,000	0	0
Beijing Technology Development Fund	200,000	0	0
Springboard-Harper Technology Fund (Cayman) Ltd	142,840	487,500	76,096
Springboard-Harper Technology Fund Pte Ltd	57,136	195,000	30,439
Springboard-Harper Investment (Cayman) Ltd	2,000	6,965	1,076
International Network Capital Global Fund	0	3,309,432	64,566
International Network Capital Global Investment Ltd.	0	2,206,288	43,044
Wasatch Venture Fund	0	2,068,395	153,394
Eldon C. Hylton, Jr.	12	0	0
ALi Corporation	0	0	430,441
Cyberlink International Technology Corp (B.V.I.)	0	0	430,441
CVP SBIC, L.P.	0	0	829,890
Cardinal Venture Affiliates, L.P.	0	0	30,992
MPP Holdings, LLC	0	0	21,522
SVIC No. 4 New Technology Business Investment L.L.P.	0	0	860,881
Insight Venture Partners V, L.P.				4,267,887
Insight Venture Partners (Cayman) V, L.P.				1,292,249
Insight Venture Partners V (Employee Co-Investors), L.P.				250,964
TOTAL	4,522,000	16,483,176	4,251,194	5,811,100

SCHEDULE B
LIST OF FOUNDERS

Name	Number of Shares of Common Stock Held
R. Jordan Greenhall	4,944,010
Eldon C. Hylton, Jr.	1,500,000
Edward J. Bezdek	500,000
Jerome Rota	500,000
Gray Cary Ware & Freidenrich LLP	200,000
Shahi Ghanem	1,274,997
	8,919,007

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DIVX, INC. THIRD AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT OCTOBER 19, 2005
THIRD AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
RECITALS
INVESTOR'S COUNTERPART SIGNATURE PAGE DIVX, INC. THIRD AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
Acknowledgment
Acknowledgment
SCHEDULE A LIST OF INVESTORS
SCHEDULE B LIST OF FOUNDERS

EX-10.14

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Exhibit 10.14

SUB-SUBLEASE

        This Sub-Sublease (hereinafter referred to as the "Sub-Sublease") is made as of this 7^th day of July, 2004, by and between MP3.COM, INC., a Delaware corporation (hereinafter called "Sublandlord") and DIVXNETWORKS, INC., a Delaware corporation (hereinafter called "Subtenant"), with reference to the following facts:

R E C I T A L S:

        A.    On or about September 2, 1998, SPIEKER PROPERTIES, L.P., a California limited partnership ("Original Landlord") and Franklin Resources, Inc., a Delaware corporation ("Tenant"), entered into that certain Lease, dated as of September 2, 1998 ("Original Lease"), pursuant to which Original Landlord leased to Tenant and Tenant leased from Original Landlord that certain space located in the Bridge Pointe Corporate Centre consisting of the buildings located at 4760, 4770 and 4780 Eastgate Mall, San Diego, California (approximately 154,000 square feet), as more particularly described on Exhibit "B" attached to the Original Lease (the "Original Master Premises").

        B.    On or about March 15, 1999, Original Landlord and Tenant entered into that certain First Amendment to Lease, dated as of March 15, 1999 ("First Amendment"), pursuant to which the terms of the Original Lease were modified including, without limitation, reducing the size of the Original Master Premises and the rental terms thereunder, all as more particularly set forth therein. As used herein, the term "Lease" shall mean and refer to the Original Lease as amended by the First Amendment. In addition, as used herein, the term "Master Premises" shall mean and refer to that portion of the Original Master Premises continued to be leased by Tenant after the execution of the First Amendment, as more particularly described on Exhibit "B" attached to the First Amendment.

        C.    On or about December 13, 1999, Tenant and Sublandlord entered into that certain Sublease Agreement, dated as of December 13, 1999 (the "Sublease"), pursuant to which Tenant subleased to Sublandlord and Sublandlord subleased from Tenant that certain space located at 4780 Eastgate Mall, San Diego, California, consisting of a portion of Master Premises (approximately 47,000 rentable square feet) defined as the "Phase A-3 Premises" and depicted on Exhibit "B" attached to the First Amendment (the "Sublease Premises"). Original Landlord consented to the Sublease pursuant to the terms of that certain Consent to Sublease Agreement dated as of Deccmber 13, 1999, by and among Original Landlord, Tenant and Sublandlord ("Sublease Consent"). CA-Bridge Pointe Corporate Centre Limited Partnership, a Delaware limited partnership, is the sucecssor-in-interest to the Original Landlord and is hereinafter referred to as "Landlord."

        D.    Sublandlord now desires to sub-sublease to Subtenant, and Subtenant desires to sub-sublease from Sublandlord, all of the Sublease Premises (the "Premises") upon the terms, covenants and conditions set forth in this Sub-Sublease.

        NOW, THEREFORE, in consideration of the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.     SUB-SUBLEASE OF PREMISES.

1.1

Sub-Sublease of Premises. Sublandlord does hereby sublease to Subtenant and Subtenant does hereby sublease from Sublandlord, the Premises on as "AS-IS, WHERE-IS" basis, subject to the terms, covenants and conditions set forth in this Sub-Sublease. Except as expressly set forth herein (including, without limitation, Section 1.5 below), no representations or warranties of any kind have been made to Subtenant concerning the condition of the Premises, nor have any promises to alter or improve the Premises or provide any allowance or contribution been made by Sublandlord or any party on behalf of Sublandlord. Subtenant is

subleasing the Premises from Sublandlord after having had an opportunity to fully inspect the Premises and the right not to execute this Sub-Sublease if the results of said inspection were unacceptable. Therefore, Subtenant hereby agrees that the term "as is" means that upon having approved said inspection, it will sublease the Premises, without warranty or representation, either oral or written, or expressed or implied, as to the physical condition of the Premises and/or the compliance of same with building, fire, health and zoning codes and other applicable laws, ordinances and regulations. Sublandlord hereby expressly disclaims any and all warranties or representations made to Subtenant, whether the same were made by any partner, officer, director or employee of Sublandlord or any other agent of same, such as a broker. At the termination of this Sub-Sublease, Subtenant shall surrender the Premises to Sublandlord in the condition received, reasonable wear and tear excepted and all improvements and/or modifications installed by Subtenant in the Premises (excluding only trade fixtures and equipment, furniture, furnishings and other moveable items) shall remain and be the property of Sublandlord; provided, however, notwithstanding anything to the contrary herein and as to be more particularly described in the Consent (as defined in Section 1.3, below), Subtenant shall be responsible (and shall reimburse Sublandlord within ten (10) days after receipt of an invoice therefore) for the difference, if any, by which (a) the cost to restore the Premises in its current condition to the condition required by Tenant and Landlord (the "Surrender Condition"), is exceeded by (b) the cost to restore the Premises in the condition as of the end of the Term (as defined in Section 2.1, below) and the Surrender Condition.

1.2

Lease. The terms and conditions of this Sub-Sublease are subject and subordinate to the terms and conditions of the Lease and the Sublease. A copy of the Lease is attached hereto as Exhibit "A" and a copy of the Sublease is attached hereto as Exhibit "B." Subtenant confirms that it has read the Lease and Sublease and is familiar with the respective terms and provisions thereof. This Sub-Sublease is subject to automatic termination upon the termination, cancellation or expiration of the Lease and/or Sublease, anything to the contrary in this Sub-Sublease notwithstanding. Except as otherwise expressly provided herein, the covenants, agreements, terms, provisions and conditions of the Lease and the Sublease insofar as they relate to the Premises and insofar as they are not inconsistent with the terms of this Sub-Sublease are made a part of and incorporated into this Sub-Sublease as if recited herein in full, except that no representations made by Landlord to Tenant under the Lease and/or by Tenant to Sublandlord under the Sublease shall be deemed to have been made by Sublandlord to Subtenant hereunder. The rights and obligations of Landlord and Tenant under the Lease and Tenant and Sublandlord under the Sublease shall be deemed the rights and obligations of Sublandlord and Subtenant respectively hereunder and shall be binding upon and inure to the benefit of Sublandlord and Subtenant respectively. Notwithstanding the foregoing or anything to the contrary herein, the following provisions of the Lease and the Sublease shall not apply to this Sub-Sublease: (a) Original Lease, Basic Lease Information—Tenant, Tenant's Notice Address, Tenant's Billing Address, Tenant Contact, Premises, Occupancy Density, Scheduled Term Commencement Date, Scheduled Length of Term. Scheduled Term Expiration Date, Rent, Security Deposit, Prepaid Rent, Tenant's Proportionate Share; (b) Original Lease, Article 1 (first sentence only), Articles 2 and 3, Sections 4.C (last phrase of the First sentence regarding punchlist items and latent defects only) and 4.D (second sentence only), Article 6, Section 8.B (first two (2) sentences only), Articles 19, 25 (last two sentences only), 28 and 32 (except Section C), Sections 37.H and 37.V and Article 38 (except for Sections 38.F, 38.G and 38.H), and Exhibits "B," "C" and "D"; (c) First Amendment, Sections 1, 2 (Premises and Scheduled Term Commencement Date descriptions only), 4 (except Tenant's Proportionate Share), 5, 6-8 and 12 and Exhibit "A"; (d) Sublease, Sections 2, 3(a), 3(c), 4, 5, 7, 8, 9, 11, 12, 15-22 and 25.

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1.3

Consent to Sub-Sublease. This Sub-Sublease shall not be effective until Landlord and Tenant have signed and delivered to Sublandlord and Subtenant their written consent to this Sub- Sublease and the Initial Improvements (as defined in Section 1.4, below) (the "Consent"). Promptly following execution hereof and delivery to Sublandlord of the items specified in subsections (i) and (ii) below, Sublandlord will submit this Sub-Sublease and the items set forth in subsection (ii)(B) below to Landlord and Tenant for such consent and, thereafter, Sublandlord agrees to diligently and in good faith pursue obtaining the Consent. Subtenant agrees that it shall cooperate in good faith with Sublandlord and shall comply with any reasonable request made of Subtenant by Sublandlord, Tenant or Landlord in connection with the procurement of the Consent. In the event, for any reason whatsoever (other than the failure of the party electing to terminate this Sub-Sublease to use reasonable, diligent and good faith issues in connection with obtaining the Consent), the Consent is not delivered to Sublandlord and Subtenant within twenty-five (25) business days following the date Sublandlord has received (i) seven (7) copies of this Sub-Sublease executed by two (2) authorized signatories of Subtenant, and (ii) all documentation, information and materials required to be provided to (A) Sublandlord pursuant to the terms of this Sub-Sublease including, without limitation, the Letter of Credit (as defined in Section 3.4, below), and (B) Landlord and Tenant in connection with their consent as provided in the Lease and/or Sublease, then Sublandlord and Subtenant, following the expiration of such 25-busincss day period, shall each have the right, in its sole discretion, to cancel this Sub-Sublease by giving written notice to the other party before the Consent is actually delivered to either Sublandlord or Subtenant; if this Sub-Sublease is terminated in accordance with the foregoing, then this Sub-Sublease shall be of no further force and effect, and the parties hereto shall have no further rights, obligations or liability hereunder, and all deposits and pre-paid rent shall be refunded to Subtenant.



1.4

Initial Improvements. Following the receipt of the Consent, Subtenant shall be permitted, at its sole cost (subject to receipt of the Improvement Allowance (as set forth below)), to make the alterations to the Premises proposed by Subtenant as more particularly described in the plan attached hereto as Exhibit "C" and incorporated herein by this reference (collectively, the "Initial Improvements"), in accordance with Section 5.4 below and Article 12 of the Original Lease. In connection therewith (i) Subtenant shall competitively bid or competitively negotiate the Initial Improvements to contractors selected by Subtenant that have been reasonably approved by Sublandlord and otherwise approved in accordance with the terms of the Sublease and the Lease, and (ii) Sublandlord shall not be permitted to charge Subtenant for profit, overhead or supervision in connection with the construction of the Initial Improvements. Sublandlord acknowledges and agrees that Subtenant's selection of DPR Construction, Inc. shall meet the terms and conditions of this Section 1.4; provided, however, Sublandlord's approval of DPR is subject to the approval of Landlord and Tenant pursuant to the applicable portions of the Lease and Sublease.



1.5

Improvement Allowance. In connection with the Initial Improvements, Subtenant shall be entitled to a one-time improvement allowance (the "Improvement Allowance") in an amount up to Fifteen Dollars ($15.00) per rentable square foot of the Premises (to wit, $705,000.00) for the costs relating to the completion of the Initial Improvements, as well as specifications and quantities of standard building components which will comprise and be used in the construction of the Initial Improvements; space plans and studies; architectural and engineering fees; permits, approvals and other governmental fees; labor, material, equipment and supplies construction fees and other amounts payable to contractors or subcontractors; taxes; remediation and preparation of Premises for construction of the Initial Improvements; filing and recording fees; premiums for insurance and bonds; and all other costs expended or to be expended in the construction of the Initial Improvements, project management fees, the

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actual costs of moving, Internet connectivity, signage, network/data cabling and telecommunication systems procurement, installation and configuration costs; provided, however, Subtenant shall only be entitled to use the Improvement Allowance to the extent any of the foregoing items are expended in connection with completing the Initial Improvements. In no event shall Sublandlord be obligated to make disbursements pursuant to this Section 1.5: (a) in a total amount which exceeds the Improvement Allowance; or (b) for any costs incurred later than March 31, 2005. After completion of the Initial Improvements, Subtenant shall deliver to Sublandlord: (i) invoices from all of Subtenant's contractors, suppliers and materialmen ("Subtenant's Agents") for labor rendered and materials delivered to the Premises; (ii) executed mechanic's lien releases from all of Subtenant's Agents which shall comply with the appropriate provisions, as reasonably determined by Sublandlord, of California Civil Code §3262(d): and (iii) all other information reasonably requested by Sublandlord. Subtenant's request for payment shall be deemed Subtenant's acceptance and approval of the work furnished and/or the materials supplied as set forth in Subtenant's payment request. Within thirty (30) days after Sublandlord's receipt of all of the aforementioned materials with respect to the Initial Improvements, Sublandlord shall deliver a check to Subtenant in payment of the lesser of: (A) the amounts so requested by Subtenant; and (B) the amount of the Improvement Allowance. Sublandlord's payment of such amount shall not be deemed Sublandlord's approval or acceptance of the work furnished or materials supplied as set forth in Subtenant's payment request.

1.6

Representations and Warranties of Sublandlord. Sublandlord represents and warrants to Subtenant that, to its actual knowledge as of the date hereof: (i) Sublandlord is not in default or breach of any of the provisions of the Sublease and Lease (as incorporated into the Sublease); (ii) the Lease and Sublease are in full force and effect and the copies thereof attached hereto are true and correct copies; and (iii) there are no pending or threatened actions, suits or proceedings before any court or administrative agency against Sublandlord, Landlord or Tenant which could, in the aggregate, adversely affect the Premises or any part thereof or the ability of Landlord to perform its obligations under the Lease, Tenant to perform its obligations under the Sublease or of Sublandlord to perform its obligations under this Sub-Sublease.

2.     TERM.

2.1

Term. The term ("Term") of this Sub-Sublease shall commence on the earlier of (i) September 1, 2004, plus the number of days after the Sub-Sublease is submitted to Landlord and Tenant for consent that it takes to receive the Consent, and (ii) September 11, 2004 (the "Commencement Date"), and shall expire as of 11:59 p.m. on March 30, 2009, unless sooner terminated pursuant to any provision of this Sub-Sublease, the Sublease or the Lease (the "Termination Date"). At the request of either party, promptly following the Commencement Date, the parties shall enter into a written agreement fixing the exact date on which the Commencement Date occurred in the form attached hereto as Exhibit "D."

2.2

No Option Terms. Notwithstanding anything herein or in the Lease or Sublease to the contrary, Subtenant shall have no rights to extend the term of this Sub-Sublease.



2.3

Holdover. Notwithstanding anything to the contrary contained in the Lease or Sublease, if Subtenant fails to surrender the Premises upon the termination or expiration of this Sub-Sublease, with or without the express or implied consent of Sublandlord, Subtenant shall pay rent during such continued tenancy at a monthly rate equal to the greater of (i) the amount which Tenant requires Sublandlord to pay with respect to the Premises during such tenancy pursuant to the Sublease, or (ii) two hundred percent (200%) of the Rent (as defined herein) applicable under this Sub-Sublease during the last period of the Term and, in addition

4

to any and all other liabilities of Subtenant to Sublandlord accruing therefrom and any and all other rights and remedies of Sublandlord provided herein, at law, or in equity, Subtenant shall protect, defend, indemnify and hold Sublandlord harmless from all loss, cost (including reasonable attorneys' fees) and liability resulting from such failure to surrender the Premises, including, without limiting the generality of the foregoing, any claims made by Tenant and/or Landlord, and any losses suffered by Sublandlord, including loss profits.

2.4

Beneficial Occupancy. Sublandlord shall deliver the Premises to Subtenant on the first business day following Sublandlord's receipt of the Consent (such date to be referred to herein as the "Delivery Date"). Subtenant may enter the Premises on or after the Delivery Date and prior to the Commencement Date for the purpose of space planning, demolition, constructing its improvements in the Premises and installing its telecommunications wiring, data wiring and furniture. Such early entry will not advance the Commencement Date so long as Tenant complies with the terms of this Section 2.4 and this Sub-Sublease. Subtenant's early entry shall be in accordance with the terms of this Section 2.4, and Subtenant agrees that: (a) Subtenant shall comply with all provisions of this Sub-Sublease other than the obligation to pay Basic Rent and Additional Rent (other than those incurred for Subtenant Surcharges in accordance with Section 3.3), and all of the provisions of this Sub-Sublease, other than those provided above, shall be binding upon Subtenant; (b) Subtenant shall pay for and provide Sublandlord with all required evidence of insurance by the terms of this Sub-Sublease for all insurance required to be maintained by Subtenant pursuant to Section 5.5; (c) in connection therewith, Subtenant and its employees, contractors, agents and representatives shall comply with all applicable laws, regulations, permits and other approvals applicable to such beneficial occupancy of the Premises; and (d) notwithstanding and in addition to Sections 5.10.1 and 5.10.2 of this Sub-Sublease, Subtenant shall indemnify, defend, protect and hold Sublandlord and the Premises harmless from and against all liens, liabilities, losses, damages, costs, expenses, demands, actions, causes of action and claims (including, without limitation, attorneys' fees and costs) arising out of the use, construction or occupancy of the Premises by Subtenant and/or its agents, employees, contractors and representatives prior to the Commencement Date, except with respect to those that arise from the gross negligence or willful misconduct of Sublandlord, its agents or representatives.

3.     RENTAL.

3.1

Basic Rent. Effective as of the Commencement Date, Subtenant hereby agrees to pay Sublandlord, without any set off, notice, reduction or deduction, but subject to the Rent Credit described in Section 3.5 below, on or before the first (1st) day of each calendar month, monthly basic rent (the "Basic Rent"), in advance, in an amount equal to:

TIME PERIOD	MONTHLY BASIC RENT
Months 1-12	$	37,600.00
Months 13-24	$	38,728.00
Months 25-36	$	39,889.84
Months 37-48	$	41,086.54
Month 49-Termination Date	$	42,319.13

Rent and all other payments of rent or other sums due under this Sub-Sublease (collectively referred to herein as "Rent") shall be payable by Subtenant in lawful money of the United States of America to Sublandlord at the address set forth in this Sub-Sublease below, or to such other person or such other places as Sublandlord may from time to time designate in writing. Concurrent with Subtenant's execution of this Sub-Sublease, Subtenant shall deliver a check to Sublandlord in the amount of Eighteen Thousand Eight Hundred and No/100

5

Dollars ($18,800.00) as prepayment of the first month's net Basic Rent due hereunder. Rent for any partial months shall be prorated based upon a thirty (30) day month.

Until further written notice, all Rent payments should be made payable to MP3.COM, INC. and sent c/o Vivendi Universal Net USA, 4790 Eastgate Mall, San Diego, CA 92121-1970. Attention: Accounts Receivable.

3.2

Additional Rent. In addition to the Basic Rent and any other amounts constituting additional rent under the Lease, the Sublease or this Sub-sublease to be paid by Subtenant to Sublandlord, commencing on the Rent Commencement Date, Subtenant shall pay to Sublandlord, as additional rent, Tenant's Proportionate Share of Operating Expenses attributable to the Premises, as such are determined pursuant to the Lease and the Sublease including, but not limited to, operating expenses, taxes, utilities, and insurance attributable to the Premises; provided, however, Subtenant shall pay for any utilities separately metered directly to the utility company providing such utility to the Sublease Premises. Such additional rent shall be payable as and when Tenant's Proportionate Share of Operating Expenses is payable by Sublandlord to Tenant. Because the Lease provides for the payment by Tenant of Tenant's Proportionate Share of Operating Expenses on the basis of an estimate thereof, as and when adjustments between estimated and actual Tenant's Proportionate Share of Operating Expenses are made under the Lease, the obligations of Sublandlord and Subtenant hereunder shall be adjusted in a like manner, and if any such adjustment shall occur after the expiration or earlier termination of the Term, then the obligations of Sublandlord and Subtenant under this Section 3.2 shall survive such expiration or termination.



3.3

Subtenant Surcharges. During the Term, Subtenant shall also pay to Sublandlord the Subtenant Surcharges (as defined below). As used herein, "Subtenant Surcharges" shall mean: (i) any and all amounts other than Basic Rent and Tenant's Proportionate Share of Operating Expenses which become due and payable by Subtenant to Sublandlord hereunder; and (ii) any and all amounts which become due and payable by Tenant to Landlord under the Lease and/or Sublandlord to Tenant under the Sublease as additional charges which would not have become due and payable but for the acts and/or failures to act of Subtenant under this Sub-Subleases including, but not limited to, any additional charges under the Lease and/or Sublease payable by Sublandlord on account of (a) Subtenant's use of water, electricity, elevator, heating, ventilation or air conditioning or any other building services in excess of those provided pursuant to Section 15(C) of the Original Lease, (b) late charges and default interest set forth in Sections 26(C) and (D) of the Original Lease, and/or (c) the use by Subtenant of the Building or the Premises or any services or additional services (in addition to those specified in subsection (a), above). Subtenant shall pay the Subtenant Surcharges set forth above within ten (10) days after the presentation of statements therefor by Landlord, Tenant or Sublandlord to Subtenant.



3.4

Letter of Credit. Subtenant shall deliver to Sublandlord, concurrent with its execution of this Sub-Sublease, an irrevocable and unconditional standby letter of credit (the "Letter of Credit") in favor of Sublandlord in an amount equal to Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) (the "LC Amount"), as collateral for the full and faithful performance by Subtenant of all of its obligations under this Sub-Sublease, the terms, covenants and conditions of this Sub-Sublease and for all losses and damages Sublandlord may suffer as a result of any default by Subtenant under this Sub-Sublease which is not cured within the applicable notice and cure period. Notwithstanding the foregoing, if, and only if, at the end of each twelve (12) month period of the Term (i.e., end of the twelfth (12^th) month, twenty-fourth (24^th) month, thirty-sixth (36^th) month and forty-eighth (48^th) month (i) Subtenant is not then in default under this Sub-Sublease (beyond all applicable notice and cure period), (ii) Subtenant has not been in default at any time during the Sub-Sublease (beyond all

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applicable notice and cure period), (iii) all payments due from Subtenant under the Sub-Sublease have been timely made (including all applicable notice and cure periods provided herein), and (iv) in Sublandlord's commercially reasonable opinion, Subtenant's financial condition is equal to or better than Subtenant's financial condition at the time of execution of this Sub-Sublease, then (and only then); (a) the LC Amount required to be maintained by Subtenant under this Sub-Sublease shall be reduced by Fifty Thousand and No/100 Dollars ($50,000.00) from the LC Amount required during the prior twelve (12) month period; and (b) Subtenant shall be permitted to provide Sublandlord with a substitute Letter of Credit in such reduced LC Amount provided that such Letter of Credit otherwise complies with the other terms of this Section 3.4. In connection with the foregoing, upon Sublandlord's request, Subtenant shall resubmit to Sublandlord a completed commercially reasonable credit application and then current financial information of the same type submitted to Sublandlord in conjunction with the execution of this Sub-Sublease.

3.4.1

The Letter of Credit shall: (i) be from a solvent, nationally recognized bank, or a national banking association reasonably acceptable to Sublandlord, with an office in San Diego and having a long term rating of BBB or higher as rated by Moody's Investors Service or Standard & Poor's, under the supervision of the Superintendent of Banks of the State of California (the "Issuing Bank"); (ii) be in the form and content which is reasonably acceptable to Sublandlord; (iii) be maintained in effect, whether through replacement, renewal or extension, for the period from the Commencement Date and continuing until the date which is sixty (60) days after the Termination Date (the "LC Expiration Date"), and Subtenant shall deliver a new Letter of Credit or certificate of renewal or extension to Sublandlord at least thirty (30) days prior to the expiration of the Letter of Credit then held by Sublandlord, without any action whatsoever on the part of Sublandlord; (iv) be subject to the Uniform Customs and Practices for Documentary Credits (1993-Rev) International Chamber of Commerce Publication #500; (v) be fully assignable by Sublandlord; (vi) permit partial draws; (vii) provide that Sublandlord shall have the right to draw down an amount up to the face amount of the Letter of Credit upon the presentation to the Issuing Bank of Sublandlord's written statement by an officer that (a) such amount is due to Sublandlord under the terms and conditions of this Sub-Sublease, (b) Subtenant has filed a voluntary petition under the Federal Bankruptcy Code, or (c) an involuntary petition has been filed against Subtenant under the Federal Bankruptcy Code, it being understood that such statement shall be signed by an authorized officer of Sublandlord or any party authorized to execute documents on behalf of Sublandlord; and (viii) provide that the Letter of Credit will be honored by the Issuing Bank without inquiry as to the accuracy thereof and regardless of whether Subtenant disputes the content of such statement.



3.4.2

If, as result of any application or use by Sublandlord of all or any part of the Letter of Credit, the amount of the Letter of Credit shall be less than the applicable LC Amount, Subtenant shall, within ten (10) business days thereafter, provide Sublandlord with additional letter(s) of credit in an amount equal to the deficiency (or a replacement letter of credit in the total LC Amount), and any such additional (or replacement) letter of credit shall comply with all of the provisions of this Section 3.4. If Subtenant fails to comply with the foregoing, notwithstanding anything to the contrary contained herein, the same shall constitute an uncurable default by Subtenant under this Sub-Sublease. Subtenant further covenants and warrants that it will neither assign nor encumber the Letter of Credit or any part thereof and that neither Sublandlord nor its successors or assigns will be bound by any such assignment, encumbrance, attempted assignment or attempted encumbrance.

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3.4.3

Without limiting the generality of the foregoing, if the Letter of Credit expires earlier that the LC Expiration Date, Sublandlord will accept a renewal thereof or substitute letter of credit (such renewal or substitute letter of credit to be in effect and delivered to Sublandlord, as applicable, not later than thirty (30) days prior to the expiration of the Letter of Credit), which shall be irrevocable and automatically renewable as above provided through the LC Expiration Date upon the same terms as the expiring Letter of Credit or such other terms as may be reasonably acceptable to Sublandlord. However, if the Letter of Credit is not timely renewed or a substitute letter of credit is not timely received, or if Subtenant fails to maintain the Letter of Credit in the amount and in accordance with the terms set forth in this Section 3.4, Sublandlord shall have the right to present the Letter of Credit to the Issuing Bank in accordance with the terms of this Section 3.4, and the proceeds of the Letter of Credit may be applied by Sublandlord against any Rent payable by Subtenant under this Sub-Sublease that is not paid when due and/or to pay for all losses and damages that Sublandlord has suffered as a result of any default by Subtenant under this Sub-Sublease (beyond all applicable notice and cure period). Any unused proceeds shall constitute the property of Sublandlord and need not be segregated from Sublandlord's other assets. Sublandlord agrees to pay to Subtenant, within thirty (30) days after the LC Expiration Date, the amount of any proceeds of the Letter of Credit received by Sublandlord and not applied against any rent payable by Subtenant under this Sub-Sublease that was not paid when due or used to pay for any losses and/or damages suffered by Sublandlord (or reasonably estimated by Sublandlord that it will suffer) as a result of any default by Subtenant under this Sub-Sublease (beyond all applicable notice and cure period); provided, however, if, prior to the LC Expiration Date, a voluntary petition is filed by Subtenant, or an involuntary petition is filed against Subtenant by any of Subtenant's creditors, under the Federal Bankruptcy Code, then Sublandlord shall not be obligated to make such payment in the amount of the unused Letter of Credit proceeds until either all preference issues relating to payments under this Sub-Sublease have been resolved in such bankruptcy or reorganization case or such bankruptcy or reorganization case has been dismissed.



3.4.4

Subtenant hereby acknowledges and agrees that Sublandlord is entering into the Sub-Sublease in material reliance upon the ability of Sublandlord to draw upon the Letter of Credit upon the occurrence of any default on the part of Subtenant under the Sub-Sublease (beyond all applicable notice and cure period). If there shall occur a default under this Sub-Sublease (beyond all applicable notice and cure period), Sublandlord may, but without obligation to do so, and without notice, draw upon the Letter of Credit, in part or in whole, to cure any default of Subtenant and/or to compensate Sublandlord for any and all damages of any kind or nature sustained or which Sublandlord reasonably estimates that it will sustain as a result of Subtenant's default. Subtenant agrees not to interfere in any way with payment to Sublandlord of the proceeds of the Letter of Credit, either prior to or following a "draw" by Sublandlord of any portion of the Letter of Credit, regardless of whether any dispute exists between Subtenant and Sublandlord as to Sublandlord's right to draw from the Letter of Credit. Subtenant agrees and acknowledges that Subtenant has no property interest whatsoever in the Letter of Credit or the proceeds thereof and that, in the event Subtenant becomes a debtor under any chapter of the Federal Bankruptcy Code, neither Subtenant, any trustee, nor Subtenant's bankruptcy estate shall have any right to restrict or limit Sublandlord's claim and/or rights to the Letter of Credit and/or the proceeds thereof by application of Section 502(b)(6) of the Federal Bankruptcy Code.



3.4.5

Sublandlord and Subtenant acknowledge and agree that in no event or circumstance shall the Letter of Credit or any renewal thereof or substitute therefor be: (i) deemed to be or

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treated as a "security deposit" within the meaning of California Civil Code Section 1950.7; (ii) subject to the terms of such Section 1950.7; or (iii) intended to serve as a "security deposit" within the meaning of such Section 1950.7. The parties hereto; (a) recite that the Letter of Credit is not intended to serve as a security deposit and such Section 1950.7 and any and all other laws, rules and regulations applicable to security deposits in the commercial context ("Security Deposit Laws") shall have no applicability or relevancy thereto; and (b) waive any and all rights, duties and obligations either party may now or, in the future, will have relating to or arising from the Security Deposit Laws.

3.5

Rent Abatement. Notwithstanding anything to the contrary herein and as reflected in Section 3.1, above, Subtenant shall not be required to pay, during the first six (6) months of the Term (the "Rent Credit Period"), fifty percent (50%) of the monthly Basic Rent (to wit, $18,800.00) which would otherwise be due for the Premises hereunder (for a total credit of $112,800.00) ("Rent Credit"). Notwithstanding the foregoing, Subtenant shall be obligated to pay Sublandlord for Tenant's Proportionate Share of Operating Expenses attributable to the Premises and any Subtenant Surcharges due under this Sub-Sublease during such Rent Credit Period. In addition, notwithstanding anything to the contrary set forth in this Sub-Sublease or the Lease and in addition to all of Sublandlord's remedies set forth in Article 26 of the Original Lease, in the event that Subtenant's right of possession of the Premises is terminated prior to the end of the Term by reason of Subtenant's default hereunder or abandonment of the Premises, then, immediately upon such termination, Subtenant shall owe and immediately pay to Sublandlord (after Subtenant receives a written invoice for the same from Sublandlord) an amount equal to the Rent Credit.

4.     USE OF PREMISES.

4.1

Use of Premises. Subtenant shall use the Premises only for administrative office purposes and uses incidental thereto, subject to applicable laws (including zoning laws and the MCAS Miramar Comprehensive Land Use Plan), rules and regulations and the Premises may be used for no other purpose; provided, however, Subtenant shall permitted to use the Premises for additional uses to the extent permitted by the Sublease including, without limitation, software engineering, certification of consumer electronic devices and related quality assurance, should Subtenant receive Landlord's prior written approval to such additional uses, a copy of which approval shall be promptly delivered to Sublandlord. All provisions of the Lease and Sublease regarding use of the Premises (including, without limitation, Article 4 of the Original Lease and Section 23 of the Sublease (including, without limitation, the Occupancy Limits set forth therein)) shall apply to Subtenant.



4.2

Signage. Subject to Landlord's and Tenant's approval in accordance with the terms of the Lease and Sublease (including, but not limited to, Section 6 of the Sublease), Subtenant shall be permitted to have identity signage on the upper exterior of the building containing the Premises; provided, however, Subtenant shall be responsible for all costs and expenses incurred in having such signage installed and/or changed and further provided that such costs and expenses may be part of the Initial Improvements.



4.3

Parking. Subtenant shall be permitted to use the parking areas serving the Premises in accordance with the terms of the Lease (including, without limitation, the Parking Density limits set forth in Section 4(A) of the Original Lease) and Sublease.

5.     OTHER TERMS AND CONDITIONS.

5.1

Lease and Sublease.

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5.1.1

Wherever the term "Landlord" is used in the Lease and/or the term "Sublandlord" is used in the Sublease, said term shall apply to Sublandlord; wherever the term "Tenant" is used in the Lease and/or the term "Subtenant" is used in the Sublease, said term shall apply to Subtenant. Notwithstanding the foregoing, in any instance where work, services, repairs, utilities or materials are required to be delivered, provided or performed by Sublandlord for the benefit of Subtenant as a consequence of the provisions of the Lease and/or Sublease being incorporated herein, Sublandlord shall not have any obligation other than to promptly, with reasonable good faith, require the same from or by Landlord or Tenant (as the case may be), in each case upon the receipt of a written request by Subtenant. Without limiting the generality of the foregoing, Subtenant understands that the supplying of services including, without limitation, heat, light, water, air conditioning and other utilities, janitorial cleaning, window washing and elevator services, and building maintenance and repair are the obligations of the Landlord, and that Sublandlord has no control thereof, and assumes no responsibility in connection therewith; and no failure to furnish, or interruption of, any such services or facilities shall give rise to any (i) abatement, diminution or reduction of Subtenant's obligations under this Sub-Sublease except to the extent Sublandlord's obligations as "Subtenant" under the Sublease are abated, diminished or reduced thereby, (ii) constructive eviction, in whole or in part (except as provided and permitted below under Section 5.1.4), or (iii) liability on the part of Sublandlord, Subtenant shall not have any claim against Sublandlord by reason of Landlord's failure or refusal to comply with any of the provisions of the Lease and/or Tenant's failure or refusal to comply with any of the provisions of the Sublease, unless such failure or refusal is a result of Sublandlord's act or failure to act. Subtenant covenants and warrants that it fully understands and agrees to be subject to and bound by all of the covenants, agreements, terms, provisions and conditions of the Lease and Sublease, except as modified herein. Furthermore, Subtenant and Sublandlord further covenant not to take any action or do or perform any act or fail to perform any act which would result in the failure or breach of any of the covenants, agreements, terms, provisions or conditions of the (a) Lease on the part of the "Tenant" thereunder, and (b) the Sublease on the part of the "Subtenant" thereunder.



5.1.2

So long as Subtenant is not in default under this Sub-Sublease (beyond all applicable notice and cure periods), Sublandlord covenants as follows: (1) not to voluntarily terminate the Sublease (except in the event of damage or destruction or condemnation and in accordance with Sublandlord's rights under the Sublease or in any other manner in which Subtenant's rights hereunder are preserved); (2) not to modify the Sublease so as to adversely affect Subtenant's rights hereunder; (3) to take all commercially reasonable actions necessary to preserve the Sublease; and (4) not do anything to affect Subtenant's right to peaceably and quietly have, hold and enjoy the Premises and all of the rights granted to Subtenant pursuant to this Sub-Sublease (except in the event of damage or destruction or condemnation and in accordance with Sublandlord's rights under the Sublease or in any other manner in which Subtenant's rights hereunder are preserved). Subtenant agrees that Sublandlord shall not be required to dispute any determinations or other assertions or claims of Tenant regarding the rights or obligations of Sublandlord under the Sublease for which Subtenant is or may be responsible under this Sub-Sublease or by which Subtenant may be bound; provided, however, upon the written request of Subtenant, Sublandlord agrees to use commercially reasonable efforts to dispute any determinations or other assertions or claims of Tenant regarding the rights or obligations of Sublandlord under the Sublease for which Subtenant is or may be responsible under this Sub-Sublease or by which Subtenant may be bound; provided, further, Subtenant shall immediately reimburse Sublandlord (following receipt of an invoice therefor) for any

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and all costs and expenses that Sublandlord incurs in connection with such efforts and the terms of Sections 5.10.1 and 5.10.2 shall apply thereto.

5.1.3

Notwithstanding anything to the contrary set forth herein, Subtenant shall be permitted to exercise any rights to cure the defaults of Sublandlord under the Sublease and/or Lease (as more particularly set forth in Section 14 of the Sublease) unless (1) the failure of Sublandlord to perform Sublandlord's obligations under the Sublease is not based upon the failure of Subtenant to perform an obligation hereunder, (2) Sublandlord's performance of such obligations is dependent on the performance by Subtenant of certain obligations and Subtenant has failed to perform such requisite preliminary obligations (after the expiration of all applicable notice and cure periods), and/or (3) Sublandlord's failure to act results from the acts or omissions of Subtenant in violation of this Sublease or the Lease; provided, further, Subtenant shall not be permitted to cure such defaults until Subtenant provides Sublandlord with written notice of its intent to do so and provided that Sublandlord, within five (5) business days after receipt of such written notice (A) fails to notify Subtenant that Sublandlord's default is in dispute with the Landlord or Tenant, or (B) Sublandlord fails to cure such default under the Sublease; provided that if, and only if, any dispute over an alleged Sublandlord default is later resolved in Sublandlord's favor, then (x) Subtenant shall immediately reimburse Sublandlord (following receipt of an invoice therefor) for any costs and expenses that Sublandlord incurred as a result of Subtenant's requests and actions, (y) Sublandlord shall have no liability or responsibility to reimburse Subtenant for any costs and expenses Subtenant may have incurred in curing such purported default, and (x) Subtenant shall immediately reimburse Sublandlord for any prior payments made to Subtenant by Sublandlord for such cure costs.



5.1.4

Notwithstanding anything to the contrary set forth herein, Subtenant shall be permitted to exercise any rights to terminate the Sub-Sublease due to a constructive eviction and/or the rights of Subtenant under Section 38.F of the Lease provided that Sublandlord is also able to successfully terminate the Sublease under such circumstances. In connection with the foregoing, Subtenant shall provide Sublandlord with written notice of its election to terminate the Sub-Sublease pursuant to its rights hereunder, which notice shall also describe the factual circumstances upon which such termination rights are based (the "Notice of Termination Rights"). Upon receipt of the Notice of Termination Rights, Sublandlord shall diligently and in good faith pursue its rights under the Sublease to terminate the Sublease. If, and only if, Sublandlord shall successfully terminate the Sublease due to its right thereunder, then the Notice of Termination Rights shall be effective and the terms of this Sub-Sublease (other than those that expressly survive the termination hereof) shall be of no further force or effect as of the date on which the Sublease terminates; provided, however, if Sublandlord is unable to successfully terminate the Sublease pursuant its rights thereunder, the terms of this Sub-Sublease shall continue in full force and effect, Subtenant shall immediately reimburse Sublandlord (following receipt of an invoice therefor) for any costs and expenses that Sublandlord incurs in attempting to have the Sublease terminated, and the terms of Sections 5.10.1 and 5.10.2 shall apply thereto.



5.2

Sublandlord's Liability. Sublandlord's partners, officers, directors, shareholders, employees and agents shall not be liable to Subtenant under any circumstance. Subtenant's partners, officers, directors, shareholders, employees and agents shall not be liable to Sublandlord under any circumstance. Subtenant waives all claims against Sublandlord for any injury or damage to any person or property in or about the Premises, except injury or damage caused by the gross

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negligence or intentional misconduct of Sublandlord and its agents or representatives or any breach of this Sub-Sublease by Sublandlord.

5.3

Time Requirements. Wherever the "Landlord" under the Lease or "Sublandlord" under the Sublease is required to perform within a maximum amount of time under the Lease and/or Sublease (as the case may be). Sublandlord shall be deemed to have an additional two (2) business days to perform under this Sub-Sublease. Wherever the "Tenant" under the Lease or "Subtenant" under the Sublease is required to perform within a maximum amount of time, Subtenant shall be required to perform two (2) business days prior to the expiration of said time period; provided, however, in no instance shall Subtenant ever have less than two (2) business days to perform. Wherever the "Tenant" under the Lease or "Subtenant" under the Sublease is required to give notice to the "Landlord" or "Sublandlord" (as the case may be) in a minimum amount of time, Subtenant shall be required to give an additional two (2) business days notice to Sublandlord. Wherever the "Landlord" under the Lease or the "Sublandlord" under the Sublease is required to give notice to the "Tenant" or the "Subtenant" in a minimum amount of time, Sublandlord shall have an additional two (2) business days in which to give notice to Subtenant. Notwithstanding anything to the contrary in this Section 5.3, Sublandlord's failure to abide by any such time requirements shall be excused in the event that Sublandlord failed to provide Subtenant a written notice required hereunder or to forward a written notice to Subtenant that Sublandlord received from either Landlord or Tenant; provided, however, Sublandlord shall not be required to forward to Subtenant any notice that Sublandlord received from either Landlord or Tenant to the extent a duplicate notice was sent directly to Subtenant; provided, further, Subtenant's performance shall only be excused until such time as Subtenant does receive such written notice.



5.4

Subtenant's Work. Subtenant shall, at its sole cost and expense, construct such tenant improvements as Subtenant shall deem necessary or desirable in the Premises in accordance with the terms of this Sub-Sublease, the Lease, the Sublease and all applicable statutes, ordinances and regulations of any governmental agency or authority having jurisdiction. In connection therewith, Subtenant shall indemnify, protect, defend and hold harmless Sublandlord and Landlord (and their respective directors, officers, agents, representatives, employees and occupants) from and against all claims, including any action or proceedings brought thereon, and all costs, losses, expenses and liabilities (including reasonable attorneys' fees and costs of suit) arising from or as a result of the performance of such work on or about the Premises except those that arise from or as a result of the gross negligence or intentional misconduct of Sublandlord or Landlord or their respective agents or representatives.



5.5

Insurance.

5.5.1

Subtenant shall maintain all insurance required of Sublandlord as "Tenant" in accordance with and pursuant to the Lease and "Subtenant" in accordance with and pursuant to the Sublease, which insurance shall name Landlord, Tenant and Sublandlord as additional insureds.



5.5.2

Sublandlord and Subtenant agree to have their respective insurance companies issuing property damage insurance waive any rights of subrogation that such companies may have against Sublandlord or Subtenant, as the case may be. In connection therewith, Sublandlord and Subtenant hereby waive any right that either may have against the other on account of any loss or damage to their respective property to the extent such loss or damage is insurable under policies of insurance for fire and all risk coverage, theft, or other similar insurance.



5.5.3

Notwithstanding anything contained in the Lease and/or Sublease to the contrary, as between Sublandlord and Subtenant only, all insurance proceeds (other than those

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proceeds paid out on insurance obtained by Subtenant) or condemnation awards received by Sublandlord under the Sublease shall be deemed to be the property of Sublandlord; provided, however, the foregoing shall not preclude and Subtenant shall be entitled to file any separate claim available to Subtenant for any taking of Subtenant's personal property and fixtures belonging to Subtenant and removable by Subtenant upon expiration of the Term pursuant to the terms of this Sub-Sublease, and for moving expenses, and such claim is payable separately to Subtenant or is otherwise separately identifiable.

5.6

Assignment and Subletting. Subtenant shall have the right to assign this Sub-Sublease or sublease all or any portion of the Premises with Sublandlord's prior written consent, which may be granted or withheld in accordance with the terms of the Lease and Sublease and which shall not be unreasonably withheld. In addition to Sublandlord's consent, Subtenant must also have procured the written consent of Landlord to the extent required pursuant to the Lease and the Tenant to the extent required pursuant to the Sublease. Further, to the extent Subtenant wishes to exercise its rights pursuant to Section 21.C of the Original Lease, in addition to the requirements set forth thereunder, Sublandlord's consent to such an assignment, sublease or transfer shall be required unless the Related Entity (as defined therein) has a net worth equal or greater to Subtenant's net worth as set forth in the financial information provided to Sublandlord in conjunction with this Sub-Sublease. In connection with the foregoing, upon Sublandlord's request, Subtenant shall submit to Sublandlord a completed commercially reasonable credit application and then current financial information of the same type submitted to Sublandlord in conjunction with the execution of this Sub-Sublease.



5.7

Notices and Requests. Any and all notices, approvals or demands required or permitted under this Sub-Sublease shall be in writing, shall be served either personally, by United States certified mail, postage prepaid, return receipt requested or by reputable overnight carrier and, shall be deemed to have been given or made on the day on which it was received and shall be addressed to the parties at the addresses set forth below. Any party may, from time to time, by like notice, give notice of any change of address, and in such event, the address of such party shall be deemed to have been changed accordingly. The address for each party is:

If to Sublandlord:

MP3.Com, Inc.
c/o Vivendi Universal Net USA
4790 Eastgatc Mall
San Diego, CA 92121-1970
Attn: Legal Department

If to Subtenant:

At the Premises
Attn: Mr. David Richter

5.8

Brokerage. Sublandlord and Subtenant represent and warrant to each other that neither party has dealt with any other real estate broker, agent or finder in connection with this Sub-Sublease, except for CRESA Partners (on behalf of Sublandlord) and Irving Hughes (on behalf of Subtenant) (the "Brokers"), whose commissions shall be payable solely by Sublandlord pursuant to a separate written agreement. Sublandlord and Subtenant agree to indemnify, defend, protect and hold the other, Landlord and Tenant harmless from and against any and all liabilities, costs, cause of action, damages and expenses, including without limitation, attorneys' fees, for any claims made by any real estate broker, agent or finder with respect to this Sub-Sublease, other than the Brokers.

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5.9

Consents. All references in this Sub-Sublease to the consent or approval of Landlord, Tenant and/or Sublandlord shall be deemed to mean the written consent or approval of Landlord, Tenant and/or Sublandlord, as the case may be, and no consent or approval of Landlord, Tenant and/or Sublandlord, as the case may be, shall be effective for any purpose unless such consent or approval is set forth in a written instrument executed by Landlord, Tenant and/or Sublandlord, as the case may be. In all provisions requiring the approval or consent of Sublandlord (whether pursuant to the express terms of this Sub-Sublease or the terms of the Lease and/or Sublease incorporated herein), Subtenant shall be required to obtain the approval or consent of Landlord and Tenant and then to obtain like approval or consent of Sublandlord; provided, however, that: (1) application for Sublandlord's approval or consent may be submitted by Subtenant prior to receipt of Landlord's or Tenant's approval or consent; (ii) Sublandlord shall respond to such application for approval or consent within a reasonable time after receipt thereof, but need not respond prior to receipt from Landlord and Tenant of their consent; and (iii) Sublandlord may condition its approval or consent upon the subsequent receipt by Subtenant of Landlord's and/or Tenant's unconditional approval or consent to such application. If Sublandlord is required or has determined to give its consent or approval, Sublandlord shall cooperate reasonably with Subtenant in endeavoring to obtain Landlord's and Tenant's consent or approval upon and subject to the following terms and conditions: (a) Subtenant shall reimburse Sublandlord for any out-of-pocket costs incurred by Sublandlord in connection with seeking such consent or approval; (b) Sublandlord shall not be required to make any payments to Landlord or Tenant or to enter into any agreements or to modify the Lease, the Sublease or this Sub-Sublease in order to obtain any such consent or approval unless Subtenant agrees to and does reimburse Sublandlord for all related out-of-pocket costs, expenses and payments; and (c) if Subtenant agrees or is otherwise obligated to make any payments to Sublandlord, Tenant or Landlord in connection with such request for such consent or approval, Subtenant shall have made arrangements for such payments which are reasonably satisfactory to Sublandlord. If Subtenant asks Sublandlord in writing to (1) request Landlord to give Landlord's consent or approval in any situation where such consent or approval is required hereunder or under the Lease, and/or (2) request Tenant to give Tenant's consent or approval in any situation where such consent or approval is required hereunder or under the Sublease, if such request contains the form and substance of the request prepared for Sublandlord's signature and is reasonably acceptable to Sublandlord, Sublandlord shall promptly request such consent or approval from Landlord and/or Tenant (as the case may be). Nothing contained in this Section 5.9 shall be deemed to require Sublandlord to give any consent or approval because Landlord or Tenant has given such consent or approval. Whenever either party to this Sub-Sublease agrees not to unreasonably withhold its consent, such consent shall also not be unreasonably delayed or conditioned.



5.10

Indemnification.

5.10.1

By Subtenant. Subtenant hereby agrees to indemnify, defend, protect and hold Sublandlord, its affiliates, employees, officers, directors, agents and representatives, Landlord, Tenant and each of their respective successors and assigns, harmless from and against any and all losses, liabilities, costs (including costs of cure, remedy or settlement made by Sublandlord), damages, demands, and expenses (including costs of investigation, defense and reasonable attorneys' fees, whether or not litigation, arbitration or mediation is actually instigated or commenced) from the payment of, or the obligation to pay, any and all sums of money due or demanded by any person or entity whatsoever on account of any and all claims, demands, suits, actions, liens, settlements, judgments, garnishments or attachments (collectively, "Losses"), arising out of or in connection with: (i) the acts, omissions or negligence of Subtenant or its employees, agents and invitees; (ii) the breach of this Sub-Sublease by Subtenant and any default (beyond all applicable notice and cure

14

periods) in the observance of its terms, covenants or conditions which shall include, without limitation, a breach of the Lease and Sublease by Subtenant and/or default by Subtenant (beyond all applicable notice and cure periods) in the observance of its terms, covenants or conditions and any cure undertaken by Sublandlord with respect thereto (to the extent such terms, covenants and/or conditions have been incorporated herein by reference); (iii) the use of the Premises by Subtenant or its employees, agents and invitees or any person claiming by, through or under Subtenant; (iv) any injury or death of any person (including, without limitation, any employee of Sublandlord) or any damage to or destruction of any property of any person (including, without limitation, any employee of Sublandlord) occurring on or about the Premises; or (v) any and all actions, suits, proceedings, claims and demands taken or made in enforcing this indemnity; provided, however, the foregoing indemnity shall not apply to the extent such costs or expenses arose out of gross negligence or willful misconduct of Sublandlord, Landlord or Tenant (and/or their respective agents or representatives) or any breach of this Sub-Sublease by Sublandlord. The provisions of Sections 5.10.1 and 5.10.2 shall survive the expiration or earlier termination of this Sub-Sublease.

5.10.2

Defense by Subtenant. In connection with any claim giving rise to indemnity hereunder resulting from or arising out of any claim or legal proceeding by any third party, Subtenant, at its sole cost and expense, shall assume the defense of any such claim or legal proceeding using counsel reasonably selected by Sublandlord. Sublandlord shall be entitled to participate in (but not control) the defense of any such action, with its counsel and at its own expense; provided, however, that if Sublandlord, in its reasonable discretion, determines that there exists a conflict of interest between Subtenant (or any constituent party thereof) and Sublandlord, Sublandlord shall have the right to engage separate counsel, the reasonable costs and expenses of which shall be paid by Subtenant.



5.10.3

By Sublandlord. Sublandlord hereby agrees to indemnify, defend, protect and hold Subtenant, its employees, agents and representatives, harmless from and against any and all Losses, arising out of or in connection with: (a) the willful misconduct, omissions or negligence of Sublandlord or its agents or representatives; (b) the breach of this Sublease by Sublandlord and any default in the observance of its terms, covenants or conditions; or (c) any and all actions, suits, proceedings, claims and demands taken or made in enforcing this indemnity.



5.11

Counterparts. This Sub-Sublease may be executed in counterparts and when so executed shall be deemed executed as one agreement.



5.12

Governing Law. This Sub-Sublease shall be governed in all respects by the laws of the State of California, without regard to choice of law principles.



5.13

Successors and Assigns. The provisions of this Sub-Sublease, except as herein otherwise specifically provided, shall extend to, bind and inure to the benefit of the parties hereto and their respective successors and, in the case of Sublandlord, assigns.



5.14

Capitalized Terms. All capitalized terms when used herein shall have the same meaning as is given such terms in the Lease and/or Sublease, unless expressly superseded by the terms of this Sub-Sublease.



5.15

Severability. If any term or provision of this Sub-Sublease or the application thereof to any person or circumstances shall, to any extent, be invalid and unenforceable, the remainder of this Sub-Sublease or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby

15

and each term or provision of this Sub-Sublease shall be valid and be enforced to the fullest extent permitted by law.

5.16

Entire Agreement. This Sub-Sublease contains the entire agreement between the parties hereto. Any agreement hereinafter made shall be ineffective to change, modify, waive, release, discharge, terminate or effect an abandonment hereof, in whole or in part, unless such agreement is in writing and signed by the parties hereto.



5.17

Further Assurances. The parties hereto agree that each of them, upon the request of the other party, shall execute and deliver, in recordable form if necessary, such further documents, instruments or agreements and shall take such further action that may be necessary or appropriate to effectuate the purposes of this Sub-Sublease.



5.18

Attorneys' Fees. In the event of the bringing of any action or suit by any part or parties hereto against another party or parties hereundcr alleging a breach of any of the covenants, conditions, agreements or provisions of this Sub-Sublease, the prevailing party or parties shall recover all reasonable costs and expenses of suit including, without limitation, reasonable attorneys' fees, consultants fees and fees of expert witnesses. As used in this Section 5.18, the term "prevailing party" shall mean the party who receives substantially the relief desired whether by dismissal, summary judgment or otherwise.



5.19

Power and Authority. Each of the persons executing this Sub-Sublease on behalf of Subtenant and Sublandlord respectively warrants and represents to the other that they have full power and authority to execute this Sub-Sublease and bind their respective parties hereto.



5.20

Confidentiality.

5.20.1

Except as may be required by subpoena or other legal requirement, all information learned by or disclosed to Subtenant with respect to the business of Sublandlord, its parents, subsidiaries, agents and affiliates shall be kept strictly confidential by Subtenant and its legal representatives, successors, assigns, employees, servants and agents and shall not be used (except for their confidential internal purposes) or disclosed to others (other than such legal representatives, employees, servants and agents for such internal business purposes) by them or their servants, agents, employees, legal representatives, successors or assigns, without the express prior written consent of Sublandlord, which Sublandlord may withhold in its sole and absolute discretion. In the event it is necessary for Subtenant to disclose any confidential information to a court of competent jurisdiction or pursuant to a subpoena as described above, Subtenant shall (i) notify Sublandlord in writing of any such order or subpoena as soon as reasonably practicable of the receipt of such order or subpoena and prior to making such a disclosure, and (ii) provide Sublandlord the opportunity to obtain an injunction prohibiting such disclosure. The notice pursuant to this Section shall include any documents which require or purport to require the disclosure of such confidential information.



5.20.2

Subtenant shall not acquire any rights whatsoever under this Sub-Sublease, or under any other document executed or delivered in connection herewith, to use, and Subtenant nor any such person or entity shall use, Sublandlord's name, the name "Vivendi", "Universal" or "MP3" (either alone or in conjunction with or as a part of any other word or name) or derivatives thereof, or the names, trade names, logos or marks of any their affiliated companies: (i) in any advertisements, publicity or promotions; (ii) to express or imply any endorsement by Sublandlord of any goods or services provided or furnished by Subtenant; or (iii) in any other manner whatsoever (whether or not similar to the uses specifically prohibited).

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5.20.3

Except as may be required by subpoena or other legal requirement or the specific request of Landlord or Tenant, all information learned by or disclosed to Sublandlord with respect to the business of Subtenant, its parents, subsidiaries, agents and affiliates shall be kept strictly confidential by Sublandlord and its legal representatives, successors, assigns, employees, servants and agents and shall not be used (except for their confidential internal purposes) or disclosed to others (other than such legal representatives, employees, servants and agents for such internal business purposes) by them or their servants, agents, employees, legal representatives, successors or assigns, without the express prior written consent of Subtenant, which Subtenant may withhold in its sole and absolute discretion. In the event it is necessary for Sublandlord to disclose any confidential information to a court of competent jurisdiction or pursuant to a subpoena as described above, Sublandlord shall (i) notify Subtenant in writing of any such order or subpoena as soon as reasonably practicable of the receipt of such order or subpoena and prior to making such a disclosure, and (ii) provide Subtenant the opportunity to obtain an injunction prohibiting such disclosure. The notice pursuant to this Section shall include any documents which require or purport to require the disclosure of such confidential information.

[remainder of page intentionally left blank; continued on next page]

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5.21

WAIVER OF JURY TRIAL. SUBTENANT AND SUBLANDLORD EACH HEREBY WAIVE ANY RIGHT THAT EITHER MAY HAVE TO TRIAL BY JURY IN ANY SUMMARY PROCEEDING OR OTHER ACTION OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS SUB-SUBLEASE, WITH THE RELATIONSHIP OF SUBLANDLORD TO SUBTENANT, OR WITH THE PREMISES AND THE USE AND OCCUPANCY THEREOF.

        IN WITNESS WHEREOF, Sublandlord and Subtenant have executed this Sub-Sublease as of the day and year first above written.

"Sublandlord":
MP3.COM, INC., a Delaware corporation
By:	/s/  RÉGIS TURRINI
	Name:	Régis Turrini
	Its:
By:
	Name:
	Its:
"Subtenant":
DIVXNETWORKS, INC., a Delaware corporation
By:	/s/  R. JORDAN GREENHALL
	Name:	R. JORDAN GREENHALL
	Its:	CEO
By:	/s/  SHAHI GHANEM
	Name:	Shahi Ghanem
	Its:	President

[signatures continued on next page]

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[signatures continued from previous page]

        As an inducement to and solely for the benefit of Subtenant, the undersigned hereby agrees to guaranty the performance by Sublandlord of its obligations under the Sublease and this Sub-Sublease.

VIVENDI UNIVERSAL HOLDING I CORP., a Delaware corporation
By:	/s/  GEORGE E. BUSHNELL III
	Name:	George E. Bushnell III
	Its:	President

19

EXHIBIT "A"

LEASE

[Attached]

INDUSTRIAL NET LEASE

For The

BRIDGE POINTE CORPORATE CENTRE
("Phase A Premises")

By and Between

Landlord: Spieker Properties, L.P.

and

Tenant: Franklin Resources, Inc.

BASIC LEASE INFORMATION
INDUSTRIAL NET

LEASE DATE:		September 2, 1998
TENANT:		Franklin Resources, Inc., a Delaware corporation
TENANT'S NOTICE ADDRESS:		Franklin Resources, Inc. 777 Mariners Island Boulevard San Mateo, CA 94404 Attn: Manager of Corporate Real Estate
TENANT'S BILLING ADDRESS:		Franklin Resources, Inc. 777 Mariners Island Boulevard San Mateo, C.A. 94404 Attn: Manager of Corporate Real Estate
TENANT CONTACT:		PHONE NUMBER: 650-312-5816 FAX NUMBER:      650-312-5830
LANDLORD:		Spieker Properties, L.P., a California limited partnership
LANDLORD'S NOTICE ADDRESS:		9255 Towne Centre Drive, Suite 100, San Diego, CA 92121 FAX Number 619-623-8506
LANDLORD'S REMITTANCE ADDRESS:		Spieker Properties, Department 11491, P.O. Box 60077 Los Angeles, CA 90060-0077
Project Description:		Approximately 29 acres and up to approximately 591,000 square feet in up to 9 buildings known as Bridge Pointe Corporate Centre, within the Eastgate Technology Park of San Diego, California. The Project is divided into three phases as detailed in Exhibit B attached hereto.
Building Description:		Approximately 154,900 rentable square feet, subject to adjustment pursuant to Paragraph 38.1. hereof, in the three buildings of Phase A of the Project, as detailed above and in Exhibit B attached hereto and known as:
		4760 Eastgate Mall (47,000 square feet) 4770 Eastgate Mall (60,900 square feet) 4780 Eastgate Mall (47,000 square feet)
Premises:		Approximately 154,900 rentable square feet, subject in adjustment pursuant to Paragraph 38.1. hereof, as detailed in the Building Description above and in Exhibit B attached hereto.
Permitted Use:		Administrative office in accordance with and uses incidental thereto as permitted by the City of San Diego's M-LI zoning, and the MCAS Miramar Comprehensive Land Use Plan attached hereto as Exhibit E.
Occupancy Density:		Maximum of 5 persons per 1,000 square feet
Parking Density:		3.6 parking spaces per 1,000 square feet of the rentable area in Phase 1 (as defined in Exhibit B attached hereto), or 558 parking spaces, all unreserved surface parking. On or before April 1, 1999, Landlord at its sole cost and responsibility shall construct and install sixty-two (62) surface parking spaces and appropriate nighttime lighting on the site of the Phase B Premises, in reasonable proximity to the Premises hereunder for Tenant's use and occupancy of the 4780 Eastgate Mall Building, as required by the City's M-LI zoning for the Project.
Scheduled Term Commencement Date:		December 1, 1998 for 4770 Eastgate Mall; February 1, 1999 for 4760 Eastgate Mall; and April 1, 1999 for 4780 Eastgate Mall
Scheduled Length of Term:		Ten (10) years based upon a Term Commencement Date of April 1, 1999 for the entire Premises.
Scheduled Term Expiration Date:		March 31, 2009 (subject to extension pursuant to Paragraph 38.B. and/or adjustment as provided in Paragraph 38.C. hereof.)
Rent:
	Base Rent:	per month net of all Operating Expenses as defined in Paragraph 7 (subject to adjustment as provided in Paragraph 38.A. and 38.I. hereof).

	Estimated First Year Operating Expenses:	$29,431.00 per month
Security Deposit:
Prepaid Rent:
Tenant's Proportionate Share:
	Of Building:	100% for each Building
	Of Phase A of the Project:	71.78%
	Option to Renew:	Two (2), five (5) year options pursuant to Paragraph 38.B. hereof

The foregoing Basic Lease Information is incorporated into and made a part of this Lease. Each reference in this Lease to any of the Basic Lease Information shall mean the respective information above and shall be construed to incorporate all of the terms provided under the particular Lease paragraph pertaining to such information. In the event of any conflict between the Basic Lease Information and the Lease, the latter shall control.

LANDLORD		TENANT
Spieker Properties, L.P., a California limited partnership		Franklin Resources, Inc., a Delaware corporation
			/s/ MICHAEL J. MCCULLOCH
By:	Spieker Properties, Inc.,
	a Maryland corporation,	By:	Michael J. McCulloch
	its general partner	Its:	Director of Corporate Services
	/s/ RICHARD L. ROMNEY
	By: Richard L. Romney Its: Senior Vice President

2

TABLE OF CONTENTS

		Page
	Basic Lease Information	1
	Table of Contents	3
1.	Premises	4
2.	Possession and Lease Commencement	4
3.	Term	5
4.	Use	6
5.	Rules and Regulations	8
6.	Rent	9
7.	Operating Expenses	10
8.	Insurance and Indemnification	16
9.	Waiver of Subrogation	18
10.	Landlord's Repairs and Maintenance	19
11.	Tenant's Repairs and Maintenance	19
12.	Alterations	20
13.	Signs	22
14.	Inspection/Posting Notices	22
15.	Services and Utilities	23
16.	Subordination	24
17.	Financial Statements	25
18.	Estoppel Certificate	25
19.	Security Deposit	26
20.	Limitation of Tenant's Remedies	26
21.	Assignment and Subletting	26
22.	Authority of Tenant	29
23.	Condemnation	29
24.	Casualty Damage	30
25.	Holding Over	31
26.	Default	32
27.	Liens	34
28.	Subscription	35
29.	Transfers by Landlord	35
30.	Right of Landlord to Perform Tenant's Covenants	35
31.	Waiver	35
32.	Notices	36
33.	Attorney's Fees	36
34.	Successors and Assigns	36
35.	Force Majeure	36
36.	Surrender of Premises	37
37.	Miscellaneous	37
38.	Additional Provisions	40
39.	Jury Trial Waiver	46
	Signatures	47

Exhibits:
	Exhibit A	Rules and Regulations
	Exhibit B	Site Plan, Premises
	Exhibit C	Tenant Improvement Agreement
	Exhibit D	Tenant's Hazardous Materials Declaration
	Exhibit E	MCAS Miramar Comprehensive Land Use Plan
	Exhibit F	Signage Criteria

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LEASE

        THIS LEASE is made as of the 2^nd day of September, 1998, by and between Spieker Properties, L.P., a California limited partnership (hereinafter called "Landlord"), and Franklin Resources, Inc., a Delaware corporation (hereinafter called "Tenant").

1. PREMISES

        Landlord leases to Tenant and Tenant leases from Landlord, upon the terms and conditions hereinafter set forth, those premises (the "Premises") outlined in red on Exhibit B and described in the Basic Lease Information. The Premises shall be comprise all or part of a the buildings (each individually a "Building") and of a portion of the project (the "Project"), which may consist of more than one building and additional facilities, as described in the Basic Lease Information. The Building and Project are outlined in blue and green respectively on Exhibit B. Landlord and Tenant acknowledge that, subject to the terms and provisions of this Lease, physical changes may occur from time to time in the Premises, Building or Project, and that the number of buildings and additional facilities which constitute the Project may change from time to time, which may result in an adjustment in Tenant's Proportionate Share, as defined in the Basic Lease Information, as provided in Paragraph 7.A.

2. POSSESSION AND LEASE COMMENCEMENT

A.    Existing Improvements.    If this Lease pertains to a Premises in which the interior improvements have already been constructed ("Existing Improvements"), the provisions of this Paragraph 2.A. shall apply and the term commencement date ("Term Commencement Date") shall be the earlier of the date on which: (1) Tenant takes possession of some or all of the Premises; or (2) Landlord notifies Tenant that Tenant may occupy the Premises. If for any reason Landlord cannot deliver possession of the Premises to Tenant on the scheduled Term Commencement Date, Landlord shall not be subject to any liability therefor, nor shall Landlord be in default hereunder nor shall such failure affect the validity of this Lease, and Tenant agrees to accept possession of the Premises at such time as Landlord is able to deliver the same, which date shall then be deemed the Term Commencement Date. Tenant shall not be liable for any Rent (defined below) for any period prior to the Term Commencement Date. Tenant acknowledges that Tenant has inspected and accepts the Premises in their present condition, broom clean, "as is," and as suitable for, the Permitted Use (as defined below), and for Tenant's intended operations in the Premises. Tenant agrees that the Premises and other improvements are in good and satisfactory condition as of when possession was taken. Tenant further acknowledges that no representations as to the condition or repair of the Premises nor promises to alter, remodel or improve the Premises have been made by Landlord or any agents of Landlord unless such are expressly set forth in this Lease. Upon Landlord's request, Tenant shall promptly execute and return to Landlord a "Start Up Letter" in which Tenant shall agree, among other things, to acceptance of the Premises and to the determination of the Term Commencement Date, in accordance with the terms of this Lease, but Tenant's failure or refusal to do so shall not negate Tenant's acceptance of the Premises or affect determination of the Term Commencement Date.

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B.    Construction of Improvements.    If this Lease pertains to a Building to be constructed or improvements to be constructed within a Building, the provisions of this Paragraph 2.B. shall apply in lieu of the provisions of Paragraph 2.A. above and the term commencement date ("Term Commencement Date") shall be the earlier of the date on which: (1) Tenant takes possession of some or all of the Premises for purposes of the commencement of the conduct of its business therein; or (2) the improvements to be constructed or performed in the Premises by Landlord (if any) shall have been substantially completed in accordance with the plans and specifications, if any, Plans described on Exhibit C as certified by the architect Deveon Construction Incorporated, in writing to Tenant and Landlord (subject to mutual approval by Landlord and Tenant), and Tenant's taking of possession of the Premises or any part thereof for purposes of other than the installation of telephone or data cabling or the installation of furniture or furniture systems shall constitute Tenant's confirmation of substantial completion for all purposes hereof (subject to the completion by Landlord of any punch list items and any latent defects not visually discoverable by Tenant upon a reasonably diligent inspection and which are identified in writing by Tenant within six (6) months of the Tenant's occupancy of each Building), whether or not substantial completion of other portions of the Building or Project shall have occurred. If for any reason beyond Landlord's reasonable control Landlord cannot deliver possession of the subject portion of the Premises to Tenant on the scheduled Term Commencement Date, Landlord shall not be subject to any liability therefor, nor shall Landlord be in default hereunder nor shall such failure affect the validity of this Lease, and Tenant agrees to accept possession of other portions of the Premises at such time as such improvements have been substantially completed, which date shall then be deemed the Term Commencement Date; provided, however, that if Landlord fails to tender possession of any portion of the Premises, subject to Paragraph 35 of this Lease, within ninety (90) days of the scheduled Term Commencement Date with respect to each Building, then Tenant, upon not less than thirty (30) days prior written notice to Landlord shall have the right to terminate this Lease with respect to each Building, unless within such thirty (30) day period Landlord tenders possession of each Building in the condition required by this Lease. Tenant shall not be liable for any Rent for any period prior to the Term Commencement Date (but without affecting any obligations of Tenant under any improvement agreement appended to this Lease). In the event of any dispute as to substantial completion of work performed or required to be performed by Landlord, the certificate of Landlord's architect or general contractor shall be conclusive. Substantial completion shall have occurred notwithstanding Tenant's submission of a punchlist to Landlord, which Tenant shall submit, if at all, within three (3) seven (7) business days after the Term Commencement Date or otherwise in accordance with any improvement agreement appended to this Lease. Upon Landlord's request, Tenant shall promptly execute and return to Landlord a "Start-Up Letter" in which Tenant shall agree, among other things, to acceptance of the Premises (subject to any punchlist exceptions according to Paragraph 6.C of Exhibit C) and to the determination of the Term Commencement Date, in accordance with the terms of this Lease, but Tenant's failure or refusal to do so shall not negate Tenant's acceptance of the Premises or affect determination of the Term Commencement Date.

3. TERM

        The term of this Lease (the "Term") shall commence on the Term Commencement Date and continue in full force and effect for the number of months specified as the Length of Term in the Basic Lease Information or until this Lease is terminated as otherwise provided herein. If the Term Commencement Date is a date other than the first day of the calendar month, the Term shall be the number of months of the Length of Term in addition to the remainder of the calendar month following the Term Commencement Date.

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4. USE

A.    General.    Tenant shall use the Premises for the permitted use specified in the Basic Lease Information ("Permitted Use") and for no other use or purpose, without Landlord's consent, which consent shall not be unreasonably withheld, delayed or conditioned. Tenant shall control Tenant's employees, agents, customers, visitors, invitees, licensees, contractors, assignees and subtenants (collectively, "Tenant's Parties") in such a manner that Tenant and Tenant's Parties cumulatively do not exceed the occupancy density (the "Occupancy Density") or the parking density specified in the Basic Lease Information (the "Parking Density") at any time. So long as Tenant is occupying the Premises, Tenant and Tenant's Parties shall have the nonexclusive right to use, without paying any fee or charge therefor, in common with other parties occupying the Building or Project, the parking areas, driveways and other common areas of the Building and Project, subject to the terms of this Lease and such rules and regulations as Landlord may from time to time reasonably prescribe upon written notice to Tenant. Further, Landlord and Tenant acknowledge that Tenant's actual Occupancy Density may exceeds Tenant's Parking Density, however, Landlord shall not be obligated to Tenant to provide additional parking in the event the Occupancy Density causes the Parking Density to be exceeded. In the event Tenant's Parking Density is exceeded, Tenant shall use its commercially reasonable efforts to immediately cure this condition. Landlord reserves the right to the extent it is commercially reasonable to do so, upon reasonable prior written notice to Tenant, without notice or liability to Tenant, and without the same constituting an actual or constructive eviction, to alter or modify the common areas from time to time, including the location and configuration thereof, and the amenities and facilities which Landlord may determine to provide from time to time, provided that no such changes shall unreasonably affect access to or visibility of the Premises and all such changes shall be consistent with the operation of comparable first-class business parks in San Diego County, California.

B.    Limitations.    Tenant shall not permit any odors, smoke, dust, gas, substances, noise or vibrations to emanate from the Premises or from any portion of the common areas as a result of Tenant's or any Tenant's Party's use thereof, nor take any action which would constitute a nuisance or would unreasonably disturb, obstruct or endanger any other tenants or occupants of the Building or Project or elsewhere, or interface with their use of their respective premises or common areas. Storage outside the Premises of materials, vehicles or any other items is prohibited. Tenant shall not use or allow the Premises to be used for any immoral, improper or unlawful purpose, nor shall Tenant cause or maintain or permit any nuisance in, on or about the Premises. Tenant shall not commit or suffer the commission of any waste in, on or about the Premises. Tenant shall not allow any sale by auction upon the Premises, or place any loads upon the floors, walls or ceilings which could endanger the structure, or place any harmful substances in the drainage system of the Building or Project. No waste, materials or refuse shall be dumped upon or permitted to remain outside the Premises except in trash containers placed inside exterior enclosures designated for that purpose by Landlord. Landlord shall not be responsible to Tenant for the non-compliance by any other tenant or occupant of the Building or Project with any of the above-referenced rules or any other terms or provisions of such tenant's or occupant's lease or other contract, provided Landlord shall administer compliance with such rules and regulations in a nondiscriminatory manner.

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C.    Compliance with Regulations.    By entering the Premises for purposes of the commencement of the conduct of Tenant's business, Tenant accepts the Premises in the condition existing as of the date of such entry subject to the completion by Landlord of any punchlist items and any latent defects as described in Paragraph 2.B. of this Lease. Tenant shall at its sole cost and expense strictly comply with all existing or future applicable municipal, state and federal and other governmental statutes, rules, requirements, regulations, laws and ordinances, including zoning ordinances and regulations, including the MCAS Miramar Comprehensive Land Use Plan ("CLUP") attached hereto as Exhibit E of this Lease, and covenants, easements and restrictions of record governing and relating to the specific manner of Tenant's use, occupancy or possession of the Premises, to Tenant's use of the common areas, or to the use, storage, generation or disposal of Hazardous Materials (hereinafter defined) (collectively "Regulations"). Tenant shall at its sole cost and expense obtain any and all licenses or permits necessary for Tenant's use of the Premises. Tenant shall at its sole cost and expense promptly comply with the requirements of any board of fire underwriters or other similar body now or hereafter constituted. Tenant shall not do or permit anything to be done in, on, under or about the Project or bring or keep anything which will in any way increase the rate of any insurance upon the Premises, Building or Project or upon any contents therein or cause a cancellation of said insurance or otherwise affect said insurance in any manner. Tenant shall indemnify, defend (by counsel reasonably acceptable to Landlord), protect and hold Landlord harmless from and against any loss, cost, expense, damage, attorney's fees or liability arising out of the failure of Tenant to comply with any Regulation. Tenant's obligations pursuant to the foregoing indemnity shall survive the expiration or earlier termination of this Lease.

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D.    Hazardous Materials.    As used in this Lease, "Hazardous Materials" shall include, but not be limited to, hazardous, toxic and radioactive materials and those substances defined as "hazardous substances," "hazardous materials," "hazardous wastes," "toxic substances," or other similar designations in any Regulation. Tenant's Hazardous Materials Declaration is attached hereto as Exhibit D. Tenant shall not cause, or allow any of Tenant's parties to cause, any Hazardous Materials to be handled, used, generated, stored, released or disposed of in, on, under or about the Premises, the Building or the Project or surrounding land or environment in violation of any Regulations. Tenant must obtain Landlord's written consent prior to the introduction of any Hazardous Materials onto the Project. Notwithstanding the foregoing, Tenant may handle, store, use and dispose of products containing small quantities of Hazardous Materials for "general office purposes" (such as toner for copiers) to the extent customary and necessary for the Permitted Use of the Premises; provided that Tenant shall always handle, store, use and dispose of any such Hazardous Materials in a safe and lawful manner and never allow such Hazardous Materials to contaminate the Premises, Building, or Project or surrounding land or environment. Tenant shall immediately notify Landlord in writing of any Hazardous Materials, contamination of any portion of the Project of which Tenant becomes aware, whether or not caused by Tenant. If, but only if, Landlord has a reasonable basis to believe that Tenant has introduced any Hazardous Materials onto the Premises, then Landlord shall have the right at all reasonable times to inspect the Premises and to conduct tests and investigations to determine whether Tenant is in compliance with the foregoing provisions, the reasonable and actual cost of all such inspections, tests and investigations to be borne by Tenant. Tenant shall indemnify, defend (by counsel reasonably acceptable to Landlord), protect and hold Landlord harmless from and against any and all claims, liabilities, losses, costs, loss of rents, liens, damages, injuries or expenses (including attorneys' and consultants' fees and court costs), demands, causes of action, or judgments directly or indirectly arising out of or related to the use, generation, storage, release, or disposal of Hazardous Materials by Tenant or any of Tenant's parties in, on, under or about the Premises, the Building or the Project or surrounding land or environment, which indemnity shall include, without limitation, damages for personal or bodily injury, property damage, damage to the environment or natural resources occurring on or off the Premises, losses attributable to diminution in value or adverse effects on marketability, the cost of any investigation, monitoring, government oversight, repair, removal, remediation, restoration, abatement, and disposal, and the preparation of any closures or other required plans, whether such action is required or necessary prior to or following the expiration or earlier termination of this Lease. Neither the consent by Landlord to the use, generation, storage, release or disposal of Hazardous Materials nor the strict compliance by Tenant with all laws pertaining to Hazardous Materials shall excuse Tenant from Tenant's obligation of indemnification pursuant in this Paragraph 4.D. Tenant's obligations pursuant to the foregoing indemnity shall survive the expiration or earlier termination of this Lease.

5. RULES AND REGULATIONS

        Tenant shall faithfully observe and comply with the building rules and regulations attached hereto as Exhibit A and any other rules and regulations and any modifications or additions thereto which Landlord may from time to time reasonably prescribe in writing for the purpose of maintaining the proper care, cleanliness, safety, traffic flow and general order of the Premises or the Building or Project. Tenant shall cause Tenant's parties to comply with such rules and regulations. Landlord shall not be responsible to Tenant for the non-compliance by any other tenant or occupant of the Building or Project with any of such rules and regulations, any other tenant's or occupant's lease or any Regulations, provided Landlord shall administer compliance with such rules in a non-discriminatory manner.

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6. RENT

A.    Base Rent.    Tenant shall pay to Landlord and Landlord shall receive, without notice or demand throughout the Term, Base Rent as specified in the Basic Lease Information, payable in monthly installments in advance on or before the first day of each calendar month, in lawful money of the United States, without deduction or offset whatsoever (except as otherwise expressly set forth in this Lease), at the Remittance Address specified in the Basic Lease Information or to such other place in the Continental United States as Landlord may from time to time designate in writing. Base Rent for the first full two (2) months of the Term shall be paid by Tenant upon Tenant's execution of this Lease in accordance with Paragraph 38.D. of this Lease. If the obligation for payment of Base Rent commences on a day other than the first day of a month, then Base Rent shall be prorated and the prorated installment shall be paid on the first day of the calendar month next succeeding the Term Commencement Date. The Base Rent payable by Tenant hereunder is subject to adjustment as provided elsewhere in this Lease, as applicable. As used herein, the term "Base Rent" shall mean the Base Rent specified in the Basic Lease Information as it may be so adjusted from time to time.

B.    Additional Rent.    All monies other than Base Rent required to be paid by Tenant hereunder, but not limited to, Tenant's Proportionate Share of Operating Expenses, as specified in Paragraph 7 of this Lease, charges to be paid by Tenant under Paragraph 15, the interest and late charge described in Paragraphs 26. C. and D., and any monies spent by Landlord pursuant to Paragraph 30, shall be considered additional rent ("Additional Rent"). "Rent" shall mean Base Rent and Additional Rent.

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7. OPERATING EXPENSES

A.    Operating Expenses.    In addition to the Base Rent required to be paid hereunder, Tenant shall pay as Additional Rent, Tenant's Proportionate Share of the Building and/or Project (as applicable), as defined in the Basic Lease Information, of Operating Expenses (defined below) in the manner set forth below. Tenant shall pay the applicable Tenant's Proportionate Share of each such Operating Expenses. Landlord and Tenant acknowledge that if the number of buildings which constitute the Project increases or decreases, or if physical changes are made to the Premises, Building or Project or the configuration of any thereof, Landlord may at its discretion reasonably adjust Tenant's Proportionate Share of the Building or Project to reflect the change. Landlord's determination of Tenant's Proportionate Share of the Building and of the Project shall be conclusive so long as it is reasonably and consistently applied. "Operating Expenses" shall mean all expenses and costs of every kind and nature which Landlord shall reasonably pay or become obligated to pay, because of or in connection with the ownership, management, maintenance, repair, preservation, replacement and operation of the Building or Project and its supporting facilities and such additional facilities now and in subsequent years as may be determined by Landlord to be necessary or desirable to the Building and/or Project (as determined in a reasonable manner) other than those expenses and costs which are specifically attributable to Tenant or which are expressly made the financial responsibility of Landlord or specific tenants of the Building or Project pursuant to this Lease. Operating Expenses shall include, but are not limited to, the following:

        (1)    Taxes.    All real property taxes and general assessments, possessory interest taxes, sales taxes, personal property taxes, business or license taxes or fees, gross receipts taxes, service payments in lieu of such taxes or fees, annual or periodic license or use fees, excises, transit charges imposed generally and not in connection with the initial development of the Project, and other impositions, general and special, ordinary and extraordinary, unforeseen as well as foreseen, of any kind (including fees "in-lieu" of any such tax or assessment) which are now or hereafter assessed, levied, charged, confirmed, or imposed by any public authority upon the Building or Project, its operations or the Rent (or any portion or component thereof), or any tax, assessment or fee imposed in substitution, partially or totally, of any of the above. Operating Expenses shall also include any taxes, assessments, reassessments, or other fees or impositions with respect to the development, leasing, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises, Building or Project or any portion thereof, including, without limitation, by or for Tenant, and all increases therein or reassessments thereof whether the increases or reassessments result from increased rate and/or valuation (whether upon a transfer of the Building or Project or any portion thereof or any interest therein or for any other reason). Operating Expenses shall not include inheritance or estate taxes imposed upon or assessed against the interest of any person in the Project, or taxes computed upon the basis of the net income of any owners of any interest in the Project. If it shall not be lawful for Tenant to reimburse Landlord for all or any part of such taxes, the monthly rental payable to Landlord under this Lease shall be revised to net Landlord the same net rental after imposition of any such taxes by Landlord as would have been payable to Landlord prior to the payment of any such taxes. Notwithstanding anything set forth in this Lease to the contrary, in no event shall "Taxes" include any fees, costs or exactions incurred by Landlord in connection with obtaining the right to develop the Project (exclusive of Tenant Improvements), including, but not limited to, any fees for schools, parks, traffic, sewer and fire protection, or any special assessments used to finance any portion of the Project, including any off-site roadway or utility facilities.

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        (2)    Insurance.    All insurance premiums and costs, including, but not limited to, any deductible amounts, premiums and other costs of insurance reasonably and actually incurred by Landlord, including for the insurance coverage set forth in Paragraph 8.A. herein. In an event wherein a deductible may be greater than Fifty Thousand Dollars ($50,000.00) said deductible amount shall be amortized over the greater of (i) the remaining Term of this Lease or (ii) three (3) years.

        (3)    Common Area Maintenance.

        (a)   Repairs, replacements, and general maintenance of and for the Building and Project and public and common areas and facilities of and comprising the Building and Project, including, but not limited to, the roof and roof membrane, elevators, mechanical rooms, alarm systems, pest extermination, landscaped areas, parking and service areas, driveways, sidewalks, truck staging areas, rail spur areas, fire sprinkler systems, sanitary and storm sewer lines, utility services, heating/ventilation/air conditioning systems, electrical, mechanical or other systems, telephone equipment and wiring servicing, plumbing, lighting, and any other items or areas which affect the operation or appearance of the Building or Project, which determination shall be at Landlord's discretion, except for: those items expressly made the financial responsibility of Landlord pursuant to Paragraph 10 hereof; those items to the extent paid for by the proceeds of insurance or which are covered under warranties of the contractor, manufacturer or supplier thereof; and those items attributable solely or jointly to specific tenants of the Building or Project.

        (b)   Repairs, replacements, and general maintenance shall include the cost of any capital improvements made in or capital assets acquired for the Project or Building that in Landlord's discretion are reasonably intended to may reduce any other Operating Expenses, including present or future repair work not covered by applicable warranties, are reasonably necessary for the health and safety of the occupants of the Building or Project, or are required to comply with any change in Regulation not applicable to the Building as of the Term Commencement Date, such costs or allocable portions thereof to be amortized over such reasonable period as Landlord shall determine, together with interest on the unamortized balance at the publicly announced "prime rate" charged by Wells Fargo Bank, N.A. (San Francisco) or its successor at the time such improvements or capital assets are constructed or acquired, plus two (2) percentage points; or in the absence of such prime rate, then at the U.S. Treasury six-month market note (or bond, if so designated) rate as published by any national financial publication selected by Landlord, plus four (4) percentage points, but in no event more than the maximum rate permitted by law, plus reasonable financing charges. Landlord shall be responsible, at its sole cost and expense, for performing all work to each Building (exclusive of Tenant Improvements) or the common areas necessary to cause the Project to conform to Regulations applicable as of the Term Commencement Date.

        (c)   Payment under or for any easement, license, permit, operating agreement, declaration, restrictive covenant or instrument relating to the Building or Project.

        (d)   All expenses and rental related to services and costs of supplies, materials and equipment used in operating, managing and maintaining the Premises, Building and Project, the equipment therein and the adjacent sidewalks, driveways, parking and service areas, including, without limitation, expenses related to service agreements regarding security, fire and other alarm systems, janitorial services to the extent not addressed in Paragraph 11 hereof, window cleaning, elevator maintenance, Building exterior maintenance, landscaping and expenses related to the administration, management and operation of the Project, including without limitation salaries, wages and benefits, and management office rent.

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        (e)   The cost of supplying any services and utilities which benefit all or a portion of the Premises, Building or Project to the extent not addressed in Paragraph 15 hereof.

        (f)    Reasonable Llegal expenses and the cost of audits by certified public accountants; provided, however, that legal expenses chargeable as Operating Expenses shall not include the cost of negotiating leases, collecting rents, evicting tenants nor shall it include costs incurred in legal proceedings with or against any tenant or to enforce the provisions of any lease.

        (g)   An management administrative and accounting cost recovery fee equal to five percent (5%) twenty percent (20%) of the sum of the Project's base rents and Operating Expenses (other then such management and accounting fee).

        If the rentable area of the Building and/or Project is not fully occupied during any fiscal year of the Term as determined by Landlord, an adjustment may be made in Landlord's discretion in computing the Operating Expenses for such year so that Tenant pays an equitable portion of all variable items (e.g., utilities, janitorial services and other component expenses that are affected by variations in occupancy levels) of Operating Expenses, as reasonably determined by Landlord; provided, however, that in no event shall Landlord be entitled to collect in excess of one hundred percent (100%) of the total Operating Expenses from all of the tenants in the Building or Project, as the case may be.

        Operating Expenses shall not include the cost of providing tenant improvements or other specific costs incurred for the account of separately billed to and paid by specific tenants of the Building or Project, the initial construction cost of the Building, or debt service on any mortgage or deed of trust recorded with respect to the Project other than pursuant to Paragraph 7.A.(3)(b) above following:

(i)	costs incurred in connection with the original construction of the Building or the Project;
(ii)	interest, principal, late charges, default fees, prepayment penalties or premiums on any debt owed by Landlord, including any mortgage debt;
(iii)	costs of correcting defects in or inadequacy of the initial design or construction of the Building;
(iv)	expenses directly resulting from the gross negligence of the Landlord, its agents, servants or employees, or another tenant;
(v)	legal fees, space planners' fees, real estate brokers' leasing commissions and advertising expenses include in connection with the original development or original leasing of the Project or future leasing of the Project;
(vi)	costs for which Landlord is reimbursed by any tenant or occupant of the Project or by insurance by its carrier or any tenant's carrier or by anyone else;
(vii)	any bad debt loss, rent loss, or reserves for bad debts or rent loss;
(viii)	expenses of extraordinary services provided to other tenants in the Project which are made available to Tenant at costs or for which Tenant is separately charged;

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(ix)	costs associated with the operation of the business of the partnership which constitutes Landlord, as the same are distinguished from the costs of operation of the Project, including partnership accounting and legal matters, costs of defending any lawsuits with any mortgagee (except as the actions of Tenant may be the issue), costs of selling, syndicating, financing, mortgaging or hypothecating any of Landlord's interest in the Project, or any portions thereof costs (including attorney fees and costs of settlement, judgments and payments in lieu thereof) arising from claims, disputes or potential disputes in connection with potential or actual claims, litigation or arbitrations respecting Landlord and/or the Project and/or the site upon which the Project is situated;
(x)	the wages and benefits of any employee who does not devote substantially all of his or her time to the Project unless such wages and benefits are prorated in reflect time spent on operating and managing the Project vis-à-vis time spent on matters unrelated to operating and managing the Project;
(xi)	fines, penalties and interest;
(xii)	amounts paid as ground rental by Landlord;
(xiii)	capital expenditures to comply with applicable laws including costs arising from the presence of Hazardous Materials in or about the Project, or the site upon which the Project is situated, which are not caused by or connected with Tenant;
(xiv)	costs incurred by Landlord with respect to goods and services (including utilities sold or supplied to tenants and occupants of the Project) to the extent that Landlord would be entitled to reimbursement for such costs if incurred by Tenant pursuant to this Lease.
(xv)	costs, including permit, license and inspection costs, incurred with respect to the installation of tenant improvements made for new tenants in the Project or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant space for tenants or other occupants of the Project;
(xvi)	costs incurred by Landlord for alterations which are considered capital improvements and replacements under generally accepted accounting principles, consistently applied, except as expressly allowed for in Paragraph 7.A.(3)(b) of this Lease;
(xvii)	costs of a capital nature, including without limitation capital improvements, capital repairs, capital equipment and capital tools, all as determined in accordance with generally accepted accounting principles, consistently applied, except as expressly allowed for in Paragraph 7.A.(3)(b) of this Lease;
(xviii)	expenses in connection with services or other benefits which are not provided in Tenant or for which Tenant is charged directly but which are provided to another tenant or occupant of the Project without a separate charge;
(xix)	costs paid to Landlord or to affiliates of Landlord for services in the Project to the extent the same exceed or would exceed the costs for such services if rendered by unaffiliated third parties on a competitive basis;
(xx)	rentals and other related expenses incurred in leasing air conditioning systems, elevators or other equipment ordinarily considered to be of a capital nature if purchased, except equipment not affixed to the Project which is used in providing janitorial or similar services;
(xxi)	all items and services for which Tenant or any other tenant in the Project reimburses Landlord or which Landlord provides selectively to one or more tenants (other than Tenant) without reimbursement;

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(xxii)	electric power costs for which any tenant directly contracts with the local public service company;
(xxiii)	costs arising from Landlord's political or charitable contributions;
(xxiv)	costs arising from tenant defects in the Project or improvements installed by Landlord;
(xxv)	costs, other than those incurred in ordinary maintenance, for sculpture, paintings or other objects of art;
(xxvi)	costs for which Landlord has been compensated by an administrative fee;
(xxvii)	costs arising from the gross negligence of Landlord or its agents, or any vendors, contractors or providers of materials or services selected, hired or engaged by Landlord or it agents, including without limitation, the selection of building materials;
(xxviii)	Landlord's general corporate overhead and general and administrative expenses; and
(xxix)	costs incurred by Landlord due to the violation by Landlord or any tenant of the terms and conditions or any lease of space in the Project.

        Notwithstanding anything herein to the contrary, in any instance wherein Landlord, in Landlord's sole reasonable discretion, deems Tenant to be responsible for any amounts greater than Tenant's Proportionate Share, Landlord shall have the right to reasonably allocate costs in any manner Landlord reasonably deems appropriate.

        The above enumeration of services and facilities shall not be deemed to impose an obligation on Landlord to make available or provide such services or facilities except to the extent if any that Landlord has specifically agreed elsewhere in this Lease to make the same available or provide the same; provided that Landlord shall operate and maintain the Project in a manner reasonably comparable to other comparable first-class business park projects in San Diego County. Without limiting the generality of the foregoing, Tenant acknowledges and agrees that it shall be responsible for providing adequate security for its use of the Premises, the Building and the Project and that Landlord shall have no obligation or liability with respect thereto, except to the extent if any that Landlord has specifically agreed elsewhere in this Lease to provide the same.

B.    Payment of Estimated Operating Expenses.    "Estimated Operating Expenses" for any particular year shall mean Landlord's reasonable estimate of the Operating Expenses for such fiscal year made with respect to such fiscal year as hereinafter provided, Landlord shall have the right from time to time to revise its fiscal year and interim accounting periods so long as the periods as so revised are reconciled with prior periods in a reasonable manner. During the last month of each fiscal year during the Term, or as soon thereafter as practicable, but in any event by April 30 of the following year, Landlord shall give Tenant written notice of the Estimated Operating Expenses for the ensuing fiscal year. Tenant shall pay Tenant's Proportionate Share of the Estimated Operating Expenses with installments of Base Rent for the fiscal year in which the Estimated Operating Expenses applies in monthly installments on the first day of each calendar month during such year, in advance. Such payment shall be construed to be Additional Rent for all purposes hereunder. If at any time during the course of the fiscal year, Landlord determines that Operating Expenses are projected to vary from the then Estimated Operating Expenses by more than five percent (5%), Landlord may by written notice to Tenant stating with specificity the basis for such readjustment, revise the Estimated Operating Expenses for the balance of such fiscal year, and Tenant's monthly installments for the reminder of such year shall be adjusted so that by the end of such fiscal year Tenant has paid to Landlord Tenant's Proportionate Share of the revised Estimated Operating Expenses for such year, such revised installment amounts to be Additional Rent for all purposes hereunder.

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C.    Computation of Operating Expense Adjustment.    "Operating Expense Adjustment" shall mean the difference between Estimated Operating Expenses and actual Operating Expenses for any fiscal year determined as hereinafter provided. Within one hundred twenty (120) days after the end of each fiscal year, or as soon thereafter as practicable but in any event by June 30 of such year, Landlord shall deliver to Tenant a statement of actual Operating Expenses for the fiscal year just ended, accompanied by a computation of Operating Expense Adjustment. If such statement shows that Tenant's payment based upon Estimated Operating Expenses in less than Tenant's Proportionate Share of Operating Expenses, then Tenant shall pay to Landlord the difference within twenty (20) thirty (30) days after receipt of such statement, such payment to constitute Additional Rent for all purposes hereunder. If such statement shows that Tenant's payments of Estimated Operating Expenses exceed Tenant's Proportionate Share of Operating Expenses, then (provided that Tenant is not in default under this Lease) Landlord shall pay to Tenant's the difference within twenty (20) thirty (30) days after delivery of such statement to Tenant. If this Lease has been terminated or the Term hereof has expired prior to the date of such statement, then the Operating Expense Adjustment shall be paid by the appropriate party within twenty (20) thirty (30) days after the date of delivery of the statement. Should this Lease commence or terminate at any time other than the first day of the fiscal year, Tenant's Proportionate Share of the Operating Expense Adjustment shall be prorated based on a month of 30 days and the number of calendar months during such fiscal year that this Lease is in effect. Notwithstanding anything to the contrary contained in Paragraph 7.A or 7.B, Landlord's failure to provide any notices or statements within the time periods specified in those paragraphs shall in no way excuse Tenant from its obligation to pay Tenant's Proportionate Share of Operating Expenses.

D.    Net Lease.    This shall be a triple net Lease and Base Rent shall be paid to Landlord absolutely net of all costs and expenses, except as specifically provided to the contrary in this Lease. The provisions for payment of Operating Expenses and the Operating Expense Adjustment are intended to pass on to Tenant and reimburse Landlord for all costs and expenses of the nature described in Paragraph 7.A. incurred in connection with the ownership, management, maintenance, repair, preservation, replacement and operation of the Building and/or Project and its supporting facilities and such additional facilities now and in subsequent years as may be determined by Landlord to be necessary or desirable to the Building and/or Project.

E.    Tenant Audit.    If Tenant shall dispute the amount set forth in any statement provided by Landlord under Paragraph 7.B. or 7.C. above, Tenant shall have the right, not later than twenty (20) days six (6) months following receipt of such statement and upon the condition that Tenant shall first deposit with Landlord the full amount in dispute, to cause Landlord's books and records with respect to Operating Expenses for such fiscal year to be audited by certified public accountants selected by Tenant and subject to Landlord's reasonable right of approval. The Operating Expense Adjustment shall be approximately adjusted on the basis of such audit. If such audit discloses a liability for a refund in excess of ten five percent (10%) (5%) of Tenant's proportionate Share of the Operating Expenses previously reported, the cost of such audit shall be borne by Landlord; otherwise the cost of such audit shall be paid by Tenant. If Tenant shall not request an audit in accordance with the provisions of this Paragraph 7.E. within twenty (20) days six (6) months after receipt of Landlord's statement provided pursuant to Paragraph 7.B. or 7.C., such statement shall be final and binding for all purposes hereof, absent manifest error.

F.    Calculation of Operating Expenses.    Operating Expenses shall be calculated and determined in accordance with the following general principles:

        (1)   Recovery Limited to Actual Costs. Landlord shall not recover the cost of any item more than once,

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        (2)   Arm's Length. All services rendered to and materials supplied to the Project shall be rendered or supplied at a cost comparable to those charged in arm's length transactions for similar services or materials rendered of supplied for similar purposes to comparable building in San Diego County.

        (3)   Reimbursements. All discounts, reimbursements, rebates, refunds or credits (collectively, "Reimbursements") attributable to Operating Expenses received by Landlord in a particular year shall be deducted from Operating Expenses in the year the same are received: provided, however, if a particular Reimbursement exceeds Fifty Thousands Dollars ($50,000.00) and applies to a prior year, such Reimbursement shall be applied to such prior year (and Tenant's Proportionate Share thereof shall be promptly refunded).

        (4)   Non-Project Exclusive Expenses. Whenever expenses are paid or incurred by landlord as a result of activities that are not exclusively rendered to the project, only that portion that can be reasonably allocated to the Project shall be included within Operating Expenses.

        (5)   Installments. All assessments and premiums of Operating Expenses which can be paid or incurred by Landlord in annual installments shall be paid by Landlord in the maximum number of annual installments permitted by law and shall not be included as Operating Expenses except in the calculation year in which the installments are actually paid; provided, however, that if the then-prevailing practice in other comparable buildings is to pay such assessments or premiums on an earlier basis and Landlord shall pay the same on such basis, such assessments or premiums shall be included in Operating Expenses as paid by Landlord.

        (6)   Reasonableness. Landlord shall use its reasonable efforts to operate and maintain the project in an economically reasonable manner.

8. INSURANCE AND INDEMNIFICATION

A.    Landlord's Insurance.    All insurance maintained by Landlord shall be for the sole benefit of Landlord and under Landlord's sole control.

        (1)    Property Insurance.    Landlord agrees to maintain property insurance insuring the Building against damage or destruction due to risk including fire, vandalism, and malicious mischief in an amount not less than the replacement cost thereof, in the form and with deductibles and endorsements as selected by Landlord. At its election, Landlord may instead (but shall have no obligation to) obtain "All Risk" coverage, and may also obtain earthquake, pollutions, and/or flood insurance in amounts selected by Landlord.

        (2)    Optional Insurance.    Landlord, at Landlord's option, may also (but shall have no obligation to) carry insurance against loss of rent, in an amount equal to the amount of Base Rent and Additional Rent that Landlord could be required to abate to all Building tenants in the event of condemnation or casualty damage for a period of twelve (12) months. Landlord may also (but shall have no obligation to) carry such other insurance as Landlord may reasonably deem prudent or advisable, including, without limitation, liability insurance in such amounts and on such terms as Landlord shall determine. If and when Spieker Properties, L.P. or its successor by merger or acquisition, is no longer the "Landlord" under this Lease, then at all times Landlord shall carry a policy of Commercial General Liability Insurance with limits of liability of no less than Three Million Dollars ($3,000,000.00). Landlord shall not be obligated to insure, and shall have no responsibility whatsoever for any damage to, any furniture, machinery, goods, inventory or supplies, or other personal property or fixtures which Tenant may keep or maintain in the Premises, or any leasehold improvements, additions or alterations within the Premises except where such damage arises from the active negligence or willful misconduct of Landlord, its employees, agents, or contractors.

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B.    Tenant's Insurance.

        So long as Franklin Resources Inc. is "Tenant" under this Lease, the coverages Tenant is required to maintain under this Lease may be maintained under a program of Tenant's self-insurance or under policies that include self-insured retentions or deductibles that are typically carried by similarly situated tenants. Prior to any implementation of Tenant's self-insurance program, Tenant shall in writing advise Landlord of the self-insured retentions or deductibles.

        (1)    Property Insurance.    Tenant shall procure at Tenant's sole cost and expense and keep in effect from the date of this Lease and at all times until the end of the Term, insurance on all personal property and fixtures of Tenant and all improvements, additions or alterations made by or for Tenant to the Premises on an "All Risk" basis, insuring such property for the full replacement value of such property.

        (2)    Liability Insurance.    Tenant shall procure at Tenant's sole cost and expense and keep in effect from the date of this Lease and at all times until the end of the Term Commercial General Liability insurance covering bodily injury and property damage liability occurring in or about the Premises or arising out of the use and occupancy of the Premises and the Project, and any part of either, and any areas adjacent therein, and the business operated by Tenant or by any other occupant of the Premises. Such insurance shall include contractual liability coverage insuring all of Tenant's indemnity obligations under this Lease. Such coverage shall have a minimum combined single limit of liability of at least Two Million Dollars ($2,000,000.00), and a minimum general aggregate limit of Three Million Dollars ($3,000,000.00), with an "Additional Insured—Managers or Lessors of Premises Endorsement" and the "Amendment of the Pollution Exclusion Endorsement." All such policies shall be written to apply to all bodily injury (including death), property damage or loss, personal and advertising injury and other covered loss, however occasioned, occurring during the policy term, shall be endorsed to add Landlord and any party holding an interest to which this Lease may be subordinated as an additional insured, and shall provide that such coverage shall be "primary" and non-contributing with any insurance maintained by Landlord, which shall be excess insurance only. Such coverage shall also contain endorsements including employees as additional insureds if not covered by Tenant's Commercial General Liability Insurance. All such insurance shall provide for the severability of interests of insureds; and shall be written on an "occurence" basis, which shall afford coverage for all claims based on acts, omissions, injury and damage, which occurred or arose (or the onset of which occurred or arose) in whole or in part during the policy period.

        (3)    Workers' Compensation and Employers' Liability Insurance.    Tenant shall carry Workers' Compensation Insurance as required by any Regulation, throughout the Term at Tenant's sole cost and expense. To the extent required by any Regulation, Tenant shall also carry Employers' Liability Insurance in amounts not less than One Million Dollars ($1,000,000) each accident for bodily injury by accident; One Million Dollars ($1,000,000) policy limit for bodily injury by disease; and One Million Dollars ($1,000,000) each employee for bodily injury by disease, throughout the Term at Tenant's sole cost and expense.

        (4)    Commercial Auto Liability Insurance.    Tenant shall procure at Tenant's sole cost and expense and keep in effect from the date of this Lease and at all times until the end of the Term commercial auto liability insurance with a combined limit of not less than One Million Dollars ($1,000,000) for bodily injury and property damage for each accident. Such insurance shall cover liability relating to any auto (including owned, hired and non-owned autos).

        (5)    General Insurance Requirements.    All coverages described in this Paragraph 8.B. shall be endorsed to (i) provide Landlord with thirty (30) days' notice of cancellation or material change in terms; and (ii) waive all rights of subrogation by the insurance carrier against Landlord. If at any time during the Term the amount or coverage of insurance which Tenant is required to carry

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under this Paragraph 8.B. is, in Landlord's reasonable judgment, materially less than the amount or type of insurance coverage typically carried by owners or tenants of properties located in the general area in which the Premises are located which are similar to and operated for similar purposes as the Premises or if Tenant's use of the Premises should change with or without Landlord's consent, Landlord shall have the right to require Tenant to increase the amount or change the types of insurance coverage required under this Paragraph 8.B. All insurance policies required to be carried by Tenant under this Lease shall be written by companies rated A X VII or better in "Best's Insurance Guide" and authorized to do business in the State of California. Should Franklin Resources, Inc. or its successor by merger or acquisition, no longer be "Tenant" under this Lease, In any event then deductible amounts under all insurance policies required to be carried by Tenant under this Lease shall not exceed Five Thousand Dollars ($5,000.00) per occurrence. Tenant shall deliver to Landlord on or before the Term Commencement Date, and thereafter at least thirty (30) days before the expiration dates of the expired policies, certified copies of Tenant's insurance policies, or a certificate evidencing the same issued by the insurer thereunder; and, if Tenant shall fail to procure such insurance, or to deliver such policies or certificates, Landlord may, at Landlord's option and in addition to Landlord's other remedies in the event of a default by Tenant hereunder, procure the same for the account of Tenant, and the cost thereof shall be paid to Landlord as Additional Rent.

C.    Indemnification.    Tenant shall indemnify, defend by counsel reasonably acceptable to Landlord, protect and hold Landlord harmless from and against any and all claims, liabilities, losses, costs, loss of rents, liens, damages, injuries or expenses, including reasonable attorney's and consultants' fees and court costs, demands, causes of action, or judgments, directly or indirectly arising out of or related to: (1) claims of injury to or death of persons or damage to property occurring or resulting directly or indirectly from the use or occupancy of the Premises, Building or Project by Tenant or Tenant's Parties, or from activities or failures to act of Tenant or Tenant's Parties; (2) claims arising from work or labor performed, or for materials or supplies furnished to or at the request of Tenant in connection with performance of any work done for the account of Tenant within the Premises or Project; (3) claims arising from any breach or default on the part of Tenant in the performance of any covenant contained in this Lease; and (4) claims arising from the negligence or intentional acts or omissions of Tenant or Tenant's Parties. The foregoing indemnity by Tenant shall not be applicable to claims to the extent arising from the gross active negligence or willful misconduct of Landlord. Landlord shall not be liable to Tenant and Tenant hereby waives all claims against Landlord for any injury or damage to any person or property in or about the Premises, Building or Project by or from any cause whatsoever (other than Landlord's gross active negligence or willful misconduct) and, without limiting the generality of the foregoing, whether caused by water leakage of any character from the roof, walls, basement or other portion of the Premises, Building or Project, or caused by gas, fire, oil or electricity in, on or about the Premises, Building or Project. Landlord shall indemnify, defend by counsel reasonably acceptable to Tenant, protect and hold Tenant harmless from and against any and all claims, liabilities, losses, costs, liens, damages, injuries or expenses, including reasonable attorneys' fees and consultants' fees and court costs, demands, causes of action or judgments directly or indirectly arising from active negligence or willful misconduct of Landlord or its employees, agents or contractors. The provisions of this Paragraph shall survive the expiration or earlier termination of this Lease.

9. WAIVER OR SUBROGATION

        To the extent permitted by law and without affecting the coverage provided by insurance to be maintained hereunder or any other rights or remedies, Landlord and Tenant each waive any right to recover against the other for: (a) damages for injury to or death of persons; (b) damages to property, including personal property; (c) damages to the Premises or any part thereof; and (d) claims arising by reason of the foregoing due to hazards covered by insurance maintained or required to be maintained pursuant to this Lease to the extent of proceeds recovered therefrom, or proceeds which would have

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been recoverable therefrom in the case of the failure of any party to maintain any insurance coverage required to be maintained by such party pursuant to this Lease. This provision is intended to waive fully, any rights and/or claims arising by reason of the foregoing, but only to the extent that any of the foregoing damages and/or claims referred to above are covered or would be covered, and only to the extent of such coverage, by insurance actually carried or required to be maintained pursuant to this Lease by either Landlord or Tenant. This provision is also intended to waive fully, and for the benefit of each party, any rights and/or claims which might give rise to a right of subrogation on any insurance carrier. Subject to all qualifications of this Paragraph 9, Landlord waives its rights as specified in this Paragraph 9 with respect to any subtenant that it has approved pursuant to Paragraph 21 but only in exchange for the written waiver of such rights to be given by such subtenant to Landlord upon such subtenant taking possession of the Premises or a portion thereof. Each party shall cause each insurance policy obtained by it to provide that the insurance company waives all right of recovery by way of subrogation against either party in connection with any damage covered by any policy.

10. LANDLORD'S REPAIRS AND MAINTENANCE

        Landlord shall at Landlord's expense maintain in good first-class condition and repair, reasonable wear and tear excepted, the structural soundness of the roof, foundations, and exterior walls of the Building. The term "exterior walls" as used herein shall not include windows, glass or plate glass, doors, dock bumpers or dock plates, special store fronts or office entries. Landlord shall perform on behalf of Tenant and other tenants of the Project the maintenance of the public and common areas of the Project including, but not limited to, the landscaped areas, parking areas, driveways, sanitary and storm sewer lines, utilities services, HVAC systems, electric equipment (excluding Tenant's emergency electric generator(s) described in Paragraph 38.H. hereof) servicing the Building, exterior lighting, Project trash removal services, and anything which affects the operation and exterior appearance of the Project, which determination shall be at Landlord's reasonable discretion. Any damage caused by or repairs necessitated by any negligence or act of Tenant or Tenant's Parties may be repaired by Landlord at Landlord's option and Tenant's expense. Tenant shall immediately give Landlord written notice of any defect or need of repairs in such components of the Building for which Landlord is responsible, after which Landlord shall have a reasonable opportunity and the right to enter the Premises at all reasonable times to repair same. Landlord's liability with respect to any defects, repairs, or maintenance for which Landlord is responsible under any of the provisions of this Lease shall be limited to the cost of such repairs or maintenance, and there shall be no abatement of rent and no liability of Landlord by reason of any injury to or interference with Tenant's business arising from the making of repairs, alterations or improvements in or to any portion of the Premises, the Building or the Project or to fixtures, appurtenances or equipment in the Building, except as provided in Paragraph 24 or anywhere else in this Lease. By taking possession of the Premises, Tenant, subject to Paragraph 2.B. of this Lease, accepts them "as is," as being in good order, condition and repair and the condition in which Landlord is obligated to deliver them suitable for the Permitted Use and Tenant's intended operations in the Premises, whether or not any notice of acceptance is given.

11. TENANT'S REPAIRS AND MAINTENANCE

        Tenant shall at all times during the Term at Tenant's expense maintain all interior non-structural parts of the Premises and such portions of the Building as are within the exclusive control of Tenant in a first-class, good, clean and secure condition and promptly make all necessary repairs and replacements, as reasonably determined by Landlord, including but not limited to, all windows, glass, doors, walls, including demising walls, and finishes, floors and floor covering, heating, ventilating and air conditioning systems, ceiling insulation, truck doors, hardware, dock bumpers, dock plates and levelors, plumbing work and fixtures, downspouts, entries, skylights, smoke hatches, roof vents, electrical and lighting systems, and fire sprinklers, and the emergency generator(s) described in Paragraph 38.H. of this Lease, with materials and workmanship of the same character, kind and quality

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as the original, Tenant shall at Tenant's expense also perform regular removal of trash and debris. If Tenant uses rail and if required by the railroad company, Tenant agrees to sign a joint maintenance agreement governing the use of the rail spur, if any. Tenant shall, at Tenant's own expense, enter into a regularly scheduled preventative maintenance/service contract with a maintenance contractor for servicing all hot water, heating and air conditioning systems and equipment within or serving the Premises. The maintenance contractor and the contract must be approved by Landlord. The service contract must include all services suggested by the equipment manufacturer within the operation/maintenance manual and must become effective and a copy thereof delivered to Landlord within thirty (30) days after the Term Commencement Date, Landlord may, upon notice to Tenant, enter into such a service contract on behalf of Tenant or perform the work and in either case charge Tenant the cost thereof along with a reasonable amount for Landlord's overhead. Notwithstanding anything to the contrary contained herein, Tenant shall, at its expense, promptly repair any damage to the Premises or the Building or Project resulting from or caused by any negligence or act of Tenant or Tenant's parties. Nothing herein shall expressly or by Implication render Tenant Landlord's agent or contractor to effect any repairs or maintenance required of Tenant under this Paragraph 11, as to all of which Tenant shall be solely responsible.

12. ALTERATIONS

        A.    Except for interior, nonstructural alterations costing less than Twenty-five Thousand Dollars ($25,000.00) to perform, Tenant shall not make, or allow to be made, any alterations, physical additions, improvements or partitions, including without limitation the attachment of any Fixtures or equipment, in, about or to the Premises ("Alterations") without obtaining the prior written consent of Landlord, which consent shall not be unreasonably withheld, delayed or conditioned with respect to proposed Alterations which: (a) comply with all applicable Regulations; (b) are, in Landlord's opinion, compatible with the Building or the Project and its mechanical, plumbing, electrical, heating/ventilation/air conditioning systems, and will not cause the Building or Project or such systems to be required to be modified to comply with any Regulations (including, without limitation, the Americans With Disabilities Act) unless Tenant agrees to perform the same at its sole cost and expense; and (c) will not interfere with the use and occupancy of any other portion of the Building or Project by any other tenant or its invitees. Specifically, but without limiting the generality of the foregoing, Landlord shall have the right of written consent (which consent shall not be unreasonably withheld, delayed or conditioned) for all plans and specifications for the proposed Alterations, construction means and methods, all appropriate permits and licenses, any contractor or subcontractor to be employed on the work of Alterations, and the time for performance of such work, and may impose reasonable rules and regulations for contractors and subcontractors performing such work. Tenant shall also supply to Landlord any documents and information reasonably requested by Landlord in connection with Landlord's consideration of a request for approval hereunder. Tenant shall cause all Alterations to be accomplished in a first-class, good and workmanlike manner, and to comply with all applicable Regulations and Paragraph 27 hereof. If Landlord does not respond in writing ten (10) days of receipt of Tenant's plan, stating with specificity its reasons therefor, Tenant shall deliver a second notice to Landlord, stating in bold type on the first page thereof "URGENT—DELAY NOTICE," which notice may be delivered by facsimile to Landlord at Landlord's Notice Address and as otherwise set forth in Paragraph 32, and if Landlord fails to respond within five (5) days thereafter, Landlord's consent shall be deemed given. Tenant shall at Tenant's sole expense, perform any additional work required under applicable Regulations due to the Alterations hereunder. No review or consent by Landlord of or to any proposed Alteration or additional work shall constitute a waiver of Tenant's obligations under this Paragraph 12. Tenant shall reimburse Landlord for all third-party costs which Landlord may reasonably and actually incur in connection with granting approval to Tenant for any such Alterations, including any costs or expenses which Landlord may incur in electing to have outside architects and engineers review said plans and specifications, and shall pay Landlord an administration fee of fifteen

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percent (15%) of the cost of the Alterations as Additional Rent hereunder to the extent it is reasonably necessary to do so. All such Alterations shall remain the property of Tenant until the expiration or earlier termination of this Lease, at which time they shall be and become the property of Landlord; provided, however, that Landlord may, at Landlord's option, require that Tenant, at Tenant's expense, remove any or all Alterations made by Tenant which Landlord indicated at the time consent thereto was granted would have to be removed and restore the Premises by the expiration or earlier termination of this Lease, to their condition existing prior to the construction of any such Alterations. All such removals and restoration shall be accomplished in a first-class and good and workmanlike manner so as not to cause any damage to the Premises or Project whatsoever. If Tenant fails to remove such Alterations or Tenant's trade fixtures or furniture or other personal property, Landlord may keep and use them or remove any of them and cause them to be stored or sold in accordance with applicable law, at Tenant's sole expense. In addition to and wholly apart from Tenant's obligation to pay Tenant's Proportionate Share of Operating Expenses, Tenant shall be responsible for and shall pay prior to delinquency any taxes or governmental service fees, possessory interest taxes, fees or charges in lieu of any such taxes, capital levies, or other charges imposed upon, levied with respect to or assessed against its fixtures or personal property, on the value of Alterations within the Premises, and on Tenant's interest pursuant to this Lease, or any increase in any of the foregoing based on such Alterations. To the extent that any such taxes are not separately assessed or billed to Tenant, Tenant shall pay the amount thereof as invoiced to Tenant by Landlord.

        Notwithstanding the foregoing, or Landlord's option (but without obligation), all or any portion of the Alterations shall be performed by Landlord for Tenant's account and Tenant shall pay Landlord's estimate of the cost thereof (including a reasonable charge for Landlord's overhead and profit) prior to commencement of the work. The work necessary to make such Alterations shall be performed by employees, contractors or space planners employed by Landlord or, with Landlord's prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned, by space planners and/or contractors licensed in California which are employed by Tenant. In addition, at Landlord's election, and notwithstanding the foregoing, however, Tenant shall pay to Landlord. In addition, if Landlord elected at the time consent to any such Alterations was granted to require that any such Alterations be removed by Tenant upon the expiration or earlier termination of the Term, and Landlord elects to be responsible for performing such removal, then notwithstanding the provisions of the preceding paragraph, Tenant shall pay to Landlord the cost of removing any such Alterations and restoring the Premises to their original condition such cost to include a reasonable charge for Landlord's overhead and profit as provided above, and such amount may be deducted from the Security Deposit or any other sums or amounts held by Landlord under this Lease.

        B.    In compliance with Paragraph 27 hereof, at least ten (10) business days before beginning construction of any Alteration, Tenant shall give Landlord written notice of the expected commencement date of that construction to permit Landlord to post and record a notice of non-responsibility. Upon substantial completion of construction, if the law so provides, Tenant shall cause a timely notice of completion to be recorded in the office of the recorder of the county in which the Building is located.

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13. SIGNS

        Tenant shall not place, install, affix, paint or maintain any signs, notices, graphics or banners whatsoever or any window decor which is visible in or from public view or corridors, the common areas or the exterior of the Premises or the Building, in or on any exterior window or window fronting upon any common areas or service area or upon any truck doors or man doors without Landlord's prior written approval which Landlord shall have the right to withhold in its absolute and sole discretion; provided that Tenant's name shall be included in any Building-standard door and directory signage, if any, and Tenant shall have the right to install at Tenant's sole cost, expense and responsibility, identifying signage on the existing monument sign at the entranceway to the Project, in accordance with Landlord's Building signage program, criteria attached as Exhibit F hereto, including without limitation, payment by Tenant of any fee charged by Landlord for maintaining such signage, which fee shall constitute Additional Rent hereunder. Any installation of signs, notices, graphics or banners on or about the Premises or Project approved by Landlord shall be subject to any Regulations and to any other requirements imposed by Landlord. Tenant shall remove all such signs or graphics by the expiration or any earlier termination of this Lease. Such installations and removals shall be made in such manner as to avoid injury to or defacement of the Premises, Building or Project and any other improvements contained therein, and Tenant shall repair any injury or defacement including without limitation discoloration caused by such installation or removal.

14. INSPECTION/POSTING NOTICES

        After reasonable notice, and subject to such security requirements as Tenant may reasonably impose, except in emergencies where no such notice or compliance with any such security requirements shall be required, Landlord and Landlord's agents and representatives, shall have the right to enter the Premises to inspect the same, to clean, to perform such work as may be permitted or required hereunder, to make repairs, improvements or alterations to the Premises, Building or Project or to other tenant spaces therein, to deal with emergencies, to post such notices as may be permitted or required by law to prevent the perfection of liens against Landlord's interest in the Project or to exhibit the Premises to prospective tenants (during the last twelve (12) months of the Term or extended Term), purchasers, encumbrancers or to others, or for any other purpose as Landlord may deem necessary or desirable; provided, however, that Landlord shall use reasonable efforts not to unreasonably interfere with Tenant's business operations. Tenant shall have the right to require a representative of Tenant to accompany Landlord during any such entry or inspection. Tenant shall not be entitled to any abatement of Rent by reason of the exercise of any such right of entry. Tenant waives any claim for damages for any injury or inconvenience to or interference with Tenant's business, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned thereby except for any damage to persons as property caused by the active negligence or willful misconduct of Landlord or its employees, agents or contractors. Landlord shall at all times have and retain a key with which to unlock all of the doors in, upon and about the Premises, excluding Tenant's vaults and safes or special security areas (designated in advance), and Landlord shall have the right to use any and all means which Landlord may deem necessary or proper to open said doors in an emergency, in order to obtain entry to any portion of the Premises, and any entry to the Premises or portions thereof obtained by Landlord by any of said means, or otherwise, shall not be construed to be a forcible or unlawful entry into, or a detainer of, the Premises, or an eviction, actual or constructive, of Tenant from the Premises or any portions thereof. At any time within six (6) months prior to the expiration of the Term or following any earlier termination of this Lease or agreement to terminate this Lease, Landlord shall have the right to erect on the Premises, Building and/or Project a suitable sign indicating that the Premises are available for lease.

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15. SERVICES AND UTILITIES

        A.    Tenant shall pay directly for all water, gas, heat, air conditioning, light, power, telephone, sewer, sprinkler charges and other utilities and services used on or from the Premises, together with any taxes, penalties, surcharges or the like pertaining thereto, and maintenance charges for utilities and shall furnish all electric light bulbs, ballasts and tubes. Tenant shall have the right to conduct its business operations within the Premises, and to receive reasonable quantities of water, electricity and HVAC in connection therewith, seven (7) days per week, twenty-four (24) hours per day. If any such services are not separately billed or metered to Tenant, Tenant shall pay a proportion, as determined by Landlord, of all charges jointly serving other premises. All sums payable under this Paragraph 15 shall constitute Additional Rent hereunder. Landlord shall use reasonable efforts to reasonably capture any material benefit available through deregulation of electricity supply or of the supply of other utilities.

        B.    Tenant acknowledges that Tenant has inspected and accepts the water, electricity, heat and air conditioning and other utilities and services being supplied or furnished to the Premises as of the date Tenant takes possession of the Premises, if any, as being sufficient in their present condition, "as is," for the Permitted Use, and for Tenant's intended operations in the Premises. Landlord shall have no obligation to provide additional or after hours electricity, heating or air conditioning but if Landlord elects to provide such services at Tenant's request, Tenant shall pay to Landlord a reasonable charge for such services as determined by Landlord. Tenant agrees to keep and cause to be kept closed all window covering when necessary because of the sun's position, and Tenant also agrees at all times to cooperate fully with Landlord and to abide by all of the regulations and requirements which Landlord may prescribe for the proper functioning and protection of electrical, heating, ventilating and air conditioning systems. Wherever heat generating machines excess lighting or equipment are used in the Premises which effect the temperature otherwise maintained by the air conditioning system, Landlord reserves the right to install supplementary air conditioning units in the Premises and the cost thereof, including the cost of installation and the cost of operation and maintenance thereof, shall be paid by Tenant to landlord upon demand by Landlord.

        C.    Tenant shall not without written consent of Landlord (which consent shall not be unreasonably withheld, delayed or conditioned) use any apparatus, equipment or device in the Premises, including without limitation, computers, electronic data processing machines, copying machines, and other machines, using excess lighting or using electric current, water, or any other resource in excess of or which will in any way increase the amount of electricity, water, or any other resource being furnished or supplied for the use of the Premises for reasonable and normal office use, in each case as of the date Tenant takes possession of the Premises as reasonably determined by Landlord, or which will require additions or alterations to or interfere with the Building power distribution systems; nor connect with electric current, except through existing electrical outlets in the Premises or water pipes, any apparatus, equipment or device for the purpose of using electrical current, water, or any other resource. If Tenant shall require water or electric current or any other resource in excess of that being furnished or supplied for the use of the Premises as of the date Tenant takes possession of the Premises, if any, as reasonably determined by Landlord, Tenant shall first procure the written consent of Landlord which Landlord may refuse (which consent shall not be unreasonably withheld, delayed or conditioned), to the use thereof, and Landlord may cause a special meter to be installed in the Premises so as to measure the amount of water, electric current or other resource consumed for any such other use. Tenant shall pay directly to Landlord as an addition to and separate from payment of Operating Expenses the cost of all such additional resources, energy, utility service and meters (and of installation, maintenance and repair thereof and of any additional circuits or other equipment necessary to furnish such additional resources, energy, utility or service). Landlord may add to the separate or metered charge a recovery of additional expense incurred in keeping account of the excess water, electric current or other resource so consumed. Landlord shall not be liable for any damages directly or indirectly resulting from nor shall the Rent or any monies owed Landlord under this Lease herein

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reserved be abated by reason of: (a) the installation, use or interruption of use of any equipment used in connection with the furnishing of any such utilities or services, or any change in the character or means of supplying or providing any such utilities or services or any supplier thereof; (b) the failure to furnish or delay in furnishing any such utilities or services when such failure or delay is caused by acts of God or the elements, labor disturbances of any character, or any other accidents or other conditions beyond the reasonable control of Landlord or because of any interruption of service due to Tenant's use of water, electric current or other resource in excess of that being supplied or furnished for the use of the Premises as of the date Tenant takes possession of the Premises; or (c) the inadequacy, limitation, curtailment, rationing or restriction on use of water, electricity, gas or any other form of energy or any other service or utility whatsoever serving the Premises or Project otherwise; or (d) the partial or total unavailability of any such utilities or services to the Premises or the Building, whether by Regulation or otherwise; nor shall any such occurrence constitute an actual or constructive eviction of Tenant. Landlord shall further have no obligation to protect or preserve any apparatus, equipment or device installed by Tenant in the Premises, including without limitation by providing additional or after hours heating or air conditioning. Landlord shall be untitled to cooperate voluntarily and in a reasonable manner with the efforts of national, state or local governmental agencies or utility supplies in reducing energy or other resource consumption. The obligation to make services available hereunder shall be subject to the limitations of any such voluntary, reasonable program. In addition, Landlord reserves the right to change the supplier or provider of any such utility or service from time to time. Landlord may, but shall not be obligated to, upon notice to Tenant, contract with or otherwise obtain any electrical or other such service for or with respect to the Premises or Tenant's operations therein from any supplier or provider of any such service. Tenant shall cooperate with Landlord and any supplier or provider of such services designated by Landlord from time to time to facilitate the delivery of such services to Tenant at the Premises and to the Building and Project, including without limitation allowing Landlord and Landlord's suppliers or providers, and their respective agents and contractors, reasonable access to the Premises for the purpose of installing maintaining, repairing, replacing, or upgrading such service or any equipment or machinery associated therewith.

        Subject to Paragraph 35 of this Lease, for services or utilities that Landlord is required to supply to the Premises hereunder, but is actively negligent in adequately providing or altogether fails to provide, Tenant's Rent shall be abated or reduced for such period of time that the Premises or portion thereof is not supplied with such services or utilities, in proportion to the rentable square feet of the Premises that is so affected bears to the total rentable square feet of the Premises.

        D.    Landlord acknowledges and agrees to Tenant's exclusive use, operation, maintenance, repair and security protection of those certain underground conduit, vault and equipment facilities within the Project for Tenant's telecommunication cabling and equipment. Furthermore, Tenant agrees to and accepts complete and full responsibility and control of the facilities described in the preceding sentence.

16. SUBORDINATION

        Without the necessity of any additional document being executed by Tenant for the purpose of effecting a subordination, the Lease shall be and is hereby declared to be subject and subordinate at all times to: (a) all ground leases or underlying leases which may now exist or hereafter be executed affecting the Premises and/or the land upon which the Premises and Project are situated, or both; and (b) any mortgage or deed of trust which may now exist or be placed upon the Building, the Project and/or the land upon which the Premises or the Project are situated, or said ground leases or underlying leases, or Landlord's interest or estate in any of said items which is specified as security. Notwithstanding the foregoing, Landlord shall have the right to subordinate or cause to be subordinated any such ground leases or underlying leases or any such liens to this Lease. If any ground lease or underlying lease terminates for any reason or any mortgage or deed of trust is foreclosed or a conveyance in lieu of foreclosure is made for any reason, Tenant shall, notwithstanding any

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subordination, attorn to and become the Tenant of the successor in interest to Landlord provided that Tenant shall not be disturbed in its possession under this Lease by such successor in interest so long as tenant is not in default under this Lease beyond the expiration of all applicable grace, notice and cure periods. Within ten (10) days after request by Landlord, Tenant shall execute and deliver any commercially reasonable additional documents evidencing Tenant's attornment or the subordination of this Lease with respect to any such ground leases or underlying leases or any such mortgage or deed of trust, in the form reasonably requested by Landlord or by any ground landlord, mortgagee, or beneficiary under a deed of trust, subject to such nondisturbance requirement. If requested in writing by Tenant, Landlord shall use commercially reasonable efforts to obtain a subordination, nondisturbance and attornment agreement for the benefit of Tenant reflecting the foregoing from any ground Landlord, mortgagee or beneficiary, at Tenant's expense to such other terms and conditions as the ground Landlord, mortgagee or beneficiary may require.

17. FINANCIAL STATEMENTS

        At the request of Landlord from time to time, Tenant shall provide to Landlord Tenant's and any guarantor's current financial statement's or other information discussing financial worth of Tenant and guarantor, which Landlord shall use solely for purposes of this Lease and in connection with the ownership, management, financing and disposition of the Project.

18. ESTOPPEL CERTIFICATE

        Tenant agrees from time to time, but not more than twice in any calendar year, within ten (10) business days after request of Landlord, to deliver to Landlord, or Landlord's designee, an estoppel certificate stating that this Lease is in full force and effect, that this Lease has not been modified (or stating all modifications, written or oral, to this Lease), the date in which Rent has been paid, the unexpired portion of this Lease, that there are no current defaults by Landlord or Tenant under this Lease (or specifying any such defaults), that the leasehold estate granted by this Lease is the sole interest of Tenant in the Premises and/or the land at which the Premises are situated (subject to such rights of first refusal and/or options to purchase as may be set forth herein), and such other matters pertaining to this Lease as may be reasonably requested by Landlord or any mortgagee, beneficiary, purchaser or prospective purchaser of the Building or Project or any interest therein. If Tenant fails to execute such certificate within such ten (10) business day period, and such failure continues for more than five (5) days following delivery of a second request therefor, which second notice shall be labeled at the top in bold letters "URGENT: DELAY NOTICE," then the failure by Tenant to execute and deliver such certificate shall constitute a default under this Lease. an acceptance of the Premises and acknowledgment by Tenant that the statements included are true and correct without exception. Tenant agrees that of Tenant fails to execute and deliver such certificate within such ten (10) day period, Landlord may execute and deliver such certificate on Tenant's behalf and that such certificate shall be binding on Tenant. Landlord and Tenant intend that any statement delivered pursuant to this paragraph may be relied upon by any mortgagee, beneficiary, purchaser or prospective purchaser of the Building or Project or any interest therein. The parties agree that Tenant's obligation to furnish such estoppel certificate in a timely fashion is a material inducement for Landlord's execution of the Lease, and shall be an event of default (without any cure period that might be provided under Paragraph 26.A(3) of this Lease) if Tenant fails to fully comply or makes any material misstatement in any such certificate.

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19. SECURITY DEPOSIT

        In the event Tenant does not exercise, its first and/or second option to extend the Term pursuant to Paragraph 38.B. of this Lease, Tenant agrees to deposit with Landlord no later than twelve (12) months prior to the expiration of the Term, or the extended Term upon execution of this Lease, a security deposit as stated in the Basic Lease Information (the "Security Deposit"), which sum shall be held and owned by Landlord, without obligation to pay interest, as security for the performance of Tenant's covenants and obligations under this Lease. The Security Deposit is not an advance rental deposit or a measure of damages incurred by Landlord in case of Tenant's default. Upon the occurrence of any event of default by Tenant, Landlord may from time to time without prejudice to any other remedy provided herein or by law, use such fund as a credit to the extent necessary to credit against any arrears of Rent or other payments due to Landlord hereunder, and any other damage, injury, expense or liability caused by such event of default, and Tenant shall pay to Landlord, on demand, the amount so applied in order to restore the Security Deposit to its original amount. Although the Security Deposit shall be deemed the property of Landlord, any remaining balance of such deposit shall be returned by Landlord to Tenant shall pay to Landlord, on demand, the amount so applied in order to restore the Security Deposit to its original amount. Although the Security Deposit shall be deemed the property of Landlord, any remaining balance of such deposit shall returned by Landlord to Tenant at such time after termination of this Lease that all of Tenant's obligations under this Lease have been fulfilled, reduced by such amounts as may be required by Landlord to remedy defaults on the part of Tenant in the payment of Rent or other obligations of Tenant under this Lease, to repair damage to the Premises, Building or Project caused by Tenant or any Tenant's Parties and to clean the Premises. Landlord may use and commingle the Security Deposit with other funds of Landlord.

20. LIMITATION OF TENANT'S REMEDIES

        The obligations and liability of Landlord to Tenant for any default by Landlord under the terms of this Lease are not personal obligations of Landlord or of the individual or other partners of Landlord or its or their partners, directors, officers, or shareholders and Tenant agrees to look solely to Landlord's interest in the Project (including the rents, issues and proceeds therefrom) for the recovery of any amount from Landlord, and shall not look to other assets of Landlord nor seek recourse against the assets of the individual or other partners of Landlord or its or their partners, directors, officers or shareholders. Any lien obtained to enforce any such judgment and any levy of execution thereon shall be subject and subordinate to any lien, mortgage or deed of trust on the Project. Under no circumstances shall Tenant have the right to offset against or recoup Rent or other payments due and to become due to Landlord hereunder except as expressly provided in Paragraph 23.B. below or elsewhere in this Lease, which Rent and other payments shall be absolutely due and payable hereunder in accordance with the terms hereof.

21. ASSIGNMENT AND SUBLETTING

A.    (1) General.    This Lease has been negotiated to be and is granted as an accommodation to Tenant. Accordingly this Lease is personal to Tenant, and Tenant's rights granted hereunder do not include the right to assign the Lease sublease the Premises, or to receive any excess, either in installments or lump sum, over the Rent which is expressly reserved by Landlord be hereinafter provided, except as otherwise expressly hereinafter provided. Tenant shall not assign or pledge this Lease or sublet the Premises or any part thereof, whether voluntarily or by operation of law, or permit the use or occupancy of the Premises or any part thereof, whether voluntarily or by operation of law, or permit the use or occupancy of the Premises or Landlord's prior written consent except as provided herein which consent shall not be unreasonably withheld, delayed or conditioned. If Tenant desires to assign this Lease or sublet any or all of the Premises, Tenant shall give Landlord written notice (the

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"Transfer Notice") at least sixty (60) thirty (30) days prior to the anticipated effective due of the proposed assignment or specified hereinafter. Landlord shall then have a period of thirty (30) fifteen (15) business days following receipt of the Transfer Notice to notify Tenant in writing that whether Landlord elects either (i) to terminate this Lease as to the space as effected as of the date so requested by Tenant; or (ii) to consents to the proposed assignments or sublease, subject, however, to Landlord's prior written consent of the proposed assignee or subtenant and of any related documents or agreements associated with the assignments or sublease and if Landlord withholds such consent, stating with specificity the reason therefor. If Landlord should fail to notify Tenant in writing of such election within said period, Landlord shall be deemed to have waived option (i) above but written consent by Landlord of the proposed assignee or subtenant shall still be required. If Landlord does not exercise option (i) Landlord withholds such consent to a proposed assignment or shall not be unreasonably withheld. Consent to any assignment or subletting shall not constitute consent to any subsequent transaction to which this Paragraph 21 applies.

        (2)    Conditions of Landlord's Consent.    Without limiting the other instances in which it may be reasonable for Landlord to withhold Landlord's consent to an assignment or subletting, Landlord and Tenant acknowledge that it shall be reasonable for Landlord to withhold Landlord's consent in the following instances: If the proposed assignee does not agree to be bound by and assume the obligations of Tenant under this Lease in form and substance reasonably satisfactory to Landlord; the use of the Premises by such proposed assignee or subtenant would not be a Permitted Use or would violate any exclusivity or other arrangement which Landlord has with any other tenant or occupant or any Regulation or would increase the Occupancy Density or Parking Density of the Building or Project, or would otherwise result in an undesirable tenant for the Project as reasonably determined by Landlord; the proposed assignee or subtenant is not of sound financial condition as determined by Landlord in Landlord's sole reasonable discretion; the proposed assignee or subtenant is a governmental agency that occupies more than twenty-five percent (25%) of the Premises; the proposed assignee or subtenant does not have a good reputation as a tenant of property or a good business reputation; the proposed assignee or subtenant is a person with whom Landlord is negotiating to lease space in the Project or is a present tenant of the Project; the assignment or subletting would entail any Alternations which would lessen the value of the leasehold improvements in the Premises or use of any Hazardous Materials or other noxious use or use which may disturb other tenants of the Project; or Tenant is in default of any obligation of Tenant under this Lease, or Tenant has defaulted under this Lease on three (3) or more occasions during any twelve (12) months preceding the date that Tenant shall request consent. Failure by or refusal of Landlord to consent to a proposed assignee or subtenant shall not cause a termination of this Lease. Upon a termination under Paragraph 21(A)(1) (i) Landlord may lease the Premises in any party including parties with whom Tenant has negotiated an assignment or sublease, without incurring any liability to Tenant. At the option of Landlord, a surrender and termination of this Lease shall operate as an assignment to Landlord of some or all subleases or subtenancies. Landlord shall exercise this option by giving notice of that assignment to such subtenants on or before the effective date of the surrender and termination. In connection with each request for assignment or subletting, Tenant shall pay to Landlord Landlord's standard fee for approving such requests, as well as all costs incurred by Landlord or any mortgagee or ground lessor in approving each such request and effecting any such transfer, including, without limitation, reasonable attorney's fee in an amount not to exceed Twenty-five Hundred Dollars ($2,500.00).

B.    Bonus Rent.    For any subleasing or assignment that is in the aggregate less than twenty-five percent (25%) of the Premises, A any Rent or other consideration realized by Tenant under any such sublease of assignment, in excess of the Rent payable hereunder, after authorization of all transaction costs reasonably incurred in connection therewith, including but not limited to a reasonable brokerage commission incurred by Tenant, legal fees, costs of improvements, shall be divided and paid, ten fifty

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percent (10%) (50%) to Tenant, ninety fifty percent (90%) (50%) to Landlord ("Bonus Rent"). However, for any subleasing or assignment that is in the aggregate twenty-five percent (25%) or more of the Premises then the Bonus Rent shall be divided and paid twenty-five percent (25%) to Tenant and seventy-five (75%) to Landlord. In any subletting or assignment undertaken by Tenant, Tenant shall diligently seek to obtain the maximum rental amount available in the marketplace for comparable space available for primary leasing.

C.    Corporation.    If Tenant is a corporation, a transfer of corporate shares by sale, assignment, bequest, inheritance, operation of law or other disposition (including such a transfer to or by a receiver or trustee in federal or state bankruptcy, insolvency or other proceedings) resulting in a change in the present control of such corporation or any of its parent corporations by the person or persons owning a majority of said corporate shares, shall constitute an assignment for purposes of this Lease. So long as Franklin Resources, Inc., is the "Tenant" in possession of the Premises, and Tenant is not in default of this Lease after the expiration of all applicable grace, notice and cure periods, Tenant shall have the right subject to the terms and conditions hereinafter set forth without the consent of Landlord, to (a) assign its interest in this Lease (i) to any corporation which is a successor to Tenant either by merger or consolidation, or (ii) to a purchaser of all or substantially all of Tenant's assets (provided such purchaser shall have also assumed substantially all of Tenant's liabilities), or to a corporation or other entity which shall control, be under the control of or be under common control with Franklin Resources, Inc., (the term "control" as used herein shall be deemed to mean ownership of more than fifty percent (50%) of the outstanding voting stock of a corporation, or other majority equity and controlling interest if Tenant is not a corporation) (any such entity being a "Related Entity"), or (b) sublease all or any portion of the Premises to a Related Entity; upon the condition that (i) the principal purpose of such assignment or sublease is not the acquisition of Tenant's interest in this Lease (except if such assignment or sublease is made to a Related Entity and is made for a valid intra-corporate business purpose and is not made to circumvent the provisions of this Paragraph 21), and (ii) any such assignee shall have a net worth and annual income and cash flow, determined in accordance with generally accepted accounting principles, consistently applied, after giving effect to such assignment, in amounts necessary to perform its duties, obligations and liabilities hereunder, as reasonably determined by Landlord. Tenant shall within ten (10) business days after execution thereof, deliver to Landlord (a) a duplicate original instrument of assignment in form and substance reasonably satisfactory to Landlord, duly executed by Tenant, (b) an instrument in form and substance reasonably satisfactory to Landlord, duly executed by the assignee, in which such assignee shall assume observance and performance of, and agree to he personally bound by all of the terms, covenants and conditions of this Lease on Tenant's part to be observed and performed, or (c) a duplicate original sublease in form and substance reasonably satisfactory to Landlord, duly executed by Tenant and subtenant, in which such assignee shall assume observance and performance of, and agree to be personally bound by all of the terms, covenants and conditions of this Lease on Tenant's part to be observed and performed.

D.    Unincorporated Entity.    If Tenant is a partnership, joint venture, unincorporated limited liability company or other unincorporated business form, a transfer of the interest of persons, firms or entities responsible for managerial control of Tenant by sale, assignment, bequest, inheritance, operation of law or other disposition so as to result in a change in the present control of said entity and/or of the underlying beneficial interests of said entity and/or a change in the identity of the persons responsible for the general credit obligations of said entity shall constitute an assignment for all purposes of this Lease.

E.    Liability.    No assignment or subletting by Tenant, permitted or otherwise, shall relieve Tenant of any obligation under this Lease or alter the primary liability of the Tenant named herein for the payment of Rent or for the performance of any other obligations to be performed by Tenant, including obligations contained in Paragraph 25 with respect to any assignee or subtenant. Landlord may collect rent or other amounts or any portion thereof from any assignee, subtenant, or other occupant of the

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Premises, permitted or otherwise, and apply the net rent collected to the Rent payable hereunder, but no such collection shall be deemed to be a waiver of this Paragraph 21, or the acceptance of the assignee, subtenant or occupant as tenant, or a release of Tenant from the further performance by Tenant of the obligation of Tenant under this Lease. Any assignment or subletting which conflicts with the provisions hereof shall be void.

22. AUTHORITY

        Landlord represents and warrants that it has full right and authority to enter into this Lease and to perform all of Landlord's obligations hereunder and that all persons signing this Lease on its behalf are authorized to do. Tenant and the person or persons, if any, signing on behalf of Tenant, jointly and severally represent and warrant that Tenant has full right and authority to enter into this Lease, and to perform all of Tenant's obligations hereunder, and that all persons signing this Lease on its behalf are authorized to do so.

23. CONDEMNATION

A.    Condemnation Resulting in Termination.    If the whole or any substantial part of the Premises should be taken or condemned for any public use under any Regulation, or by right of eminent domain, or by private purchase in lieu thereof, and the taking would prevent or materially interface with the Permitted Use of the Premises, either party shall have the right to terminate this Lease at its option. If any material portion of the Building or Project is taken or condemned for any public use under any Regulation, or by right of eminent domain, or by private purchase in lien thereof, Landlord may terminate this Lease at its option. In either of such events, the Rent shall be abated during the unexpired portion of this Lease, effective when the physical taking of said Premises shall have occurred.

B.    Condemnation Not Resulting in Termination.    If a portion of the Project of which the Premises are a part should be taken or condemned for any public use under any Regulation, or by right of eminent domain, or by private purchase in lieu thereof, and the taking prevents or materially interferes with the Permitted Use of the Premises, and this Lease is not terminated as provided in Paragraph 23.A above, the Rent payable hereunder during the unexpired portion of the Lease shall be reduced, beginning on the date when the physical taking shall have occurred, to such amount as may be fair and reasonable under all of the circumstances, but only after giving Landlord credit for all sums received or to be received by Tenants by the condemning authority. Notwithstanding anything to the contrary contained in this Paragraph, if the temporary use or occupancy of any part of the Premises shall be taken or appropriated under power of eminent domain during the Term, this Lease shall be and remain unaffected by such taking or appropriation and Tenant shall continue to pay in full all Rent payable hereunder by Tenant during the Term; in the event of any such temporary appropriation or taking, Tenant shall be entitled to receive that portion of any award which represents compensation for the use of or occupancy of the Premises during the Term, and Landlord shall be entitled to receive that portion of any award which represents the cost of restoration of the Premises and the use and occupancy of the Premises.

C.    Award.    Landlord shall be entitled to (and Tenant shall assign to Landlord) any and all payment, income, rent, award or any interest therein whatsoever which may be paid or made in connection with such taking or conveyance and Tenant shall have no claim against Landlord or otherwise for any sums paid by virtue of such proceedings, whether or not attributable to the value of any unexpired portion of this Lease, except as expressly provided in this Lease. Notwithstanding the foregoing, any compensation specifically and separately awarded Tenant for Tenant's personal property and moving costs, shall be remain the property of Tenant and the unamortized value of improvements to the Premises paid for by Tenant.

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D.    Waiver of CCP§1265.130.    Each party waives the provisions of California Civil Code Procedure Section 1265.130 allowing either party to petition the superior court to terminate this Lease as a result of a partial taking.

24. CASUALTY DAMAGE

A.    General.    If the Premises or Building should be damaged or destroyed by fire, tornado, or other casualty (collectively, "Casualty"), Tenant shall give immediate written notice thereof to Landlord. Within thirty (30) days after Landlord's receipt of such notice, Landlord shall notify Tenant whether in Landlord's estimation (based upon the certificate of a general contractor reasonably acceptable to Tenant) material restoration of the Premises can reasonably be made within one hundred eighty (180) days from the date of such notice and receipt of required permits for such restoration. Landlord's determination shall be binding on Tenant.

B.    Within 180 Days.    If the Premises or Building should be damaged by Casualty to such extent that material restoration can in Landlord's estimation be reasonably completed within one hundred eighty (180) days after the date of such notice and receipt of required permits for such restoration, this Lease shall not terminate. Provided that insurance proceeds are received by Landlord to fully repair the damage (less the amount of any deductible), Landlord shall proceed to rebuild and repair the Premises in the manner reasonably determined by Landlord, except that Landlord shall not be required to rebuild, repair or replace any part of the Alterations which may have been placed on or about the Premises by Tenant. If the Premises are untenantable in whole or in part following such damage, the Rent payable hereunder during the period in which they are untenantable shall be abated proportionately, but only in the extent of rental abatement insurance proceeds received by Landlord during the time and to the extent the Premises are unfit for occupancy.

C.    Greater than 180 Days.    If the Premises or Building should be damaged by Casualty to such extent that rebuilding or repairs cannot in Landlord's estimation be reasonably completed within one hundred eighty (180) days after the date of such notice and receipt of required permits for such rebuilding or repair, then Landlord either party shall have the option, to be exercised within thirty (30) days following receipt of Landlord's estimate, of either (1) terminating this Lease effective upon the date of the occurrence of such damage, in which event the Rent shall be abated during the unexpired portion of this Lease or (2) electing to rebuild or repair the Premises diligently and in the manner determined by Landlord. Landlord shall notify Tenant of its election within thirty (30) days after Landlord's receipt of notice of the damage or destruction. If neither party elects to so terminate, Landlord shall commence to rebuild or repair the Premises diligently and in the manner reasonably determined by Landlord. Notwithstanding the above, Landlord shall not be required to rebuild, repair or replace any part of any Alterations which may have been placed, on or about the Premises by Tenant. If the Premises are untenantable in whole or in part following such damage, the Rent payable hereunder during the period in which they are untenantable shall be abated proportionately, but only to the extent of rental abatement insurance proceeds received by Landlord during the time and to the extent the Premises are unfit for occupancy.

D.    Tenant's Fault.    Notwithstanding anything herein to the contrary, if the Premises or any other portion of the Building are damaged by Casualty resulting from the fault, negligence, or breach of this Lease by Tenant or any of Tenant's Parties, Base Rent and Additional Rent shall not be diminished during the repair of such damage (to the extent Tenant is responsible for the loss and Landlord is not being covered by any other insurance proceeds) and Tenant shall be liable to Landlord for the cost and expense of the repair and restoration of the Building caused thereby to the extent such cost and expenses is not covered by insurance proceeds.

E.    Insurance Proceeds.    Notwithstanding anything herein to the contrary, if the Premises or Building are damaged or destroyed and are not fully covered by the insurance proceeds received by

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Landlord or if the holder of any indebtedness secured by a mortgage or deed of trust covering the Premises requires, despite Landlord's commercially reasonable efforts to obtain such proceeds, that the insurance proceeds be applied to such indebtedness, then in either case Landlord shall have the right to terminate this lease by delivering written notice of termination to Tenant within thirty (30) days after the date of notice to Landlord that said damage or destruction is not fully covered by insurance or such requirement is made by any such holder, as the case may be, whereupon this Lease shall terminate.

F.    Waiver.    This Paragraph 24 shall be Tenant's sole and exclusive remedy in the event of damage or destruction to the Premises or the Building. As a material inducement to Landlord entering into this Lease. Tenant hereby waives any rights it may have under Sections 1932, 1933(4), 1941 or 1942 of the Civil Code of California with respect to any destruction of the Premises, Landlord's obligation for tenantability of the Premises and Tenant's right to make repairs and deduct the expenses of such repairs, or under any similar law, statute or ordinance now or hereafter in effect.

G.    Tenant's Personal Property.    In the event of any damage or destruction of the Premises or the Building under no circumstances shall Landlord be required to repair any injury or damage to or make any repairs to, or replacements of Tenant's personal property.

25. HOLDING OVER

        Unless Landlord expressly consents in writing to Tenant's holding over, Tenant shall be unlawfully and illegally in possession of the Premises, whether or not Landlord accepts any rent from Tenant or any other person while Tenant remains in possession of the Premises without Landlord's written consent. If Tenant shall retain possession of the Premises or any portion thereof without Landlord's consent following the expiration of this Lease or sooner termination for any reason then Tenant shall pay to Landlord for each day of such retention triple two hundred percent (200%) the amount of daily rental as of the last month prior to the date of expiration or earlier termination. Tenant shall also indemnify, defend, protect and hold Landlord harmless from any loss, liability or cost, including consequential and incidental damages and reasonable attorneys' fees, incurred by Landlord resulting from delay by Tenant in surrendering the Premises within thirty (30) days following the expiration or earlier termination of the Term or extended Term of this Lease, including without limitation, any claims made by the succeeding tenant founded on such delay. Acceptance of Rent by Landlord following expiration or earlier termination of this Lease, or following demand by Landlord for possession of the Premises, shall not constitute a renewal of this Lease, and nothing contained in this Paragraph 25 shall waive Landlord's right of reentry or any other right. Additionally, if upon expiration or earlier termination of this Lease, or following demand by Landlord for possession of the Premises. Tenant has not fulfilled its obligation with respect to repairs and cleanup of the Premises or any other Tenant obligations as set forth in this Lease then Landlord shall have the right to perform any such obligations as it deems necessary at Tenant's sole cost and expense, and any time required by Landlord to complete such obligations shall be considered a period of holding over and the terms of this Paragraph 25 shall apply. The provisions of this Paragraph 25 shall survive any expiration or earlier termination of this Lease. If by written notice to Landlord delivered not later than twelve (12) months prior in the Term Expiration Date, or the expiration of the extended Term (the "Hold Over Notice"), Tenant advises Landlord of its intent to hold-over specifying the period of such hold-over (which period must be for a period of no longer than six (6) months) (the "Hold-Over Term") then Tenant may, as matter of right, remain in possession following the Term Expiration Date or the expiration of the extended Term, as the case may be, for the Hold-Over Term set forth in the Hold-Over Notice; provided, that the Base Rent for the Hold-Over Term shall be one hundred fifty percent (150%) of the sum of the Base Rent and other charges payable for the last month of the Term or extended Term. In no event under the preceding sentence shall Tenant have the right to hold-over in the Premises for more than one (1) six (6) month or shorter period beyond the Term Expiration Date or the expiration of the extended Term.

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26. DEFAULT

A.    Event of Default.    The occurrence of any of the following shall constitute an event of default on the part of Tenant:

        (1)    Abandonment.    An abandonment or vacation of the Premises for a continuous period in excuse of five (5) days. Tenant waives any right to notice Tenants may have under Section 1951.3 of the Civil Code of the State of California, the terms of this paragraph 24.A being downed such notice to Tenant as required by said Section 1951.7.

        (2)    Nonpayment of Rent.    Failure to pay any installment of Rent or any other amount due and payable hereunder upon the date when said payment is due, as to which the is of the essence.

        (3)    Other Obligations.    Failure to perform any obligation, agreement or covenant under this Lease other than those matters specified in subparagraphs (1) and (2) of this Paragraph 26.A. such failure continuing for fifteen (15) twenty (20) days after written notice of such failure unless such default cannot reasonably be cured within such twenty (20) day period and Tenant shall within such period commence with due diligence and dispatch the curing of such default, and having so commenced, shall thereafter, with periodic written reports submitted to Landlord, prosecute or complete with due diligence and dispatch the curing of such default as to which time is of the essence.

        (4)    General Assignment.    A general assignment by Tenant for the benefit of creditors.

        (5)    Bankruptcy.    The filling of any voluntary petition in bankruptcy by Tenant, or the filing of an involuntary petition remains undercharged for a period of thirty (30) days. If under applicable law, the trustee in bankruptcy or Tenant has the right to affirm this Lease and continue to perform the obligations of Tenant hereunder, such trustee or Tenant shall, in such time period as may be permitted by the bankruptcy court having jurisdiction, cure all defaults of Tenant hereunder outstanding as of the date of the affirmance of this Lease and provide to Landlord such adequate assurances as may be necessary to ensure Landlord of the continued performance of Tenants obligations under this Lease.

        (6)    Receivership.    The employment of a receiver to take possession of substantially all of Tenant's assets or the Premises if such appointment remains undismissed or undischarged for a period of fifteen (15) days after the order therefor.

        (7)    Attachment.    The employment of a receiver to take possession of substantially all of Tenant's assets or Tenant's leasehold of the Premises, if such attachment or other seizure remains undismissed or undischarged for a period of fifteen (15) days after the levy thereof.

        (8)    Insolvency.    The admission by Tenant in writing of its inability to pay its debts as they become due.

B.    Remedies Upon Default.

        (1)    Termination.    In the event of the occurrence of any event of default, Landlord shall have the right to give a written termination notice to Tenant, and on the date specified in such notice, Tenant's right to possession shall terminate, and this Lease shall terminate unless on or before such date all Rent in arrears and expenses incurred by or on behalf of Landlord hereunder shall have been paid by Tenant and all other events of default of this Lease by Tenant at the time existing shall have been fully remedies to the satisfaction of Landlord. At any time after such termination, Landlord may recover possession of the Premises or any part thereof and expel and remove there from Tenant and any other person occupying the same, including any subtenant or subtenants notwithstanding Landlord's consent to any sublease, by any lawful means, and again repossess and enjoy the Premises without prejudice to any of the remedies that Landlord may have

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under this Lease or at law or equity by any reason of Tenant's default or of such termination. Landlord hereby reserves the right, but shall not have the obligation, to recognize the continued possession of any subtenant. The delivery or surrender to Landlord by or on behalf of Tenant of keys, entry codes, or other means to bypass security at the premises shall not terminate this Lease.

        (2)    Continuation After Default.    Even though and event of default may have occurred, this Lease shall continue in effect for so long as Landlord does not terminate Tenant's right to possession under Paragraph 26.B.(1) hereof, and Landlord may enforce all of Landlord's rights and remedies under this Lease and at law or in equity, including without limitation, the rights to recover Rent as it becomes due, and Landlord, without terminating this Lease, may exercise all of the rights and remedies of a landlord under Section 1951.4 of the Civil Code of the State of California or any successor code section. Acts of maintenance preservation or efforts to lease the Premises or the appointment of receiver under application of Landlord to protect Landlord's interest under this Lease or other entry by Landlord upon the Premises shall not constitute an election to terminate Tenant's right to possession.

        (3)    Increased Security Deposit.    If Tenant is in default under Paragraph 26.A.(2) hereof and such default remains uncured for ten (10) days after such occurrence or such default occurs more than three lines in any twelve (12) months period Landlord may require that Tenant increase the Security Deposit to the amount of three times the current month's Rent on the time of the most recent default.

C.    Damages After Default.    Should Landlord terminate this Lease pursuant to the provisions of Paragraph 26.B.(1) hereof, Landlord shall have the rights and remedies of a Landlord provided by Section 1951.2 of the State of California, or any successor code sections. Upon such termination, in addition to any other rights and remedies to which Landlord may be entitled under applicable law or at equity, Landlord shall be entitled to recover from Tenant: (1) the worth at the time of award of the unpaid Rent and other amounts which had been earned at the time of termination, (2) the worth at the time of award exceeds the amount by which the unpaid Rent and other amounts for the balance of the balance of the Term after the time of award exceeds the amount of such Rent loss that the Tenant proves could be reasonably avoided; (3) the worth at the time of award of the amount by which the unpaid Rent and other amounts for the balance of the Term after the time of award exceeds the amount of such Rent loss that the Tenant proves could be reasonably avoided; and (4) any other amount and court costs necessary to compensate landlord for all detriment proximately caused by the Tenant's failure to perform Tenant's obligation under this Lease or which, in the ordinary course of things, would be likely to result therefrom. The "worth at the time of award" as used in (1) and (2) above shall be completed at the Applicable Interest Rate (defined below). The "worth at the time of award" as used in (3) above shall be computed by discounting such amount at the Federal Discount Rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). If this Lease provides for any periods during the term during which Tenant is not required to pay Lease Rent or if Tenant otherwise receives a Rent concession, then upon the occurrence of an event of default, Tenant shall owe to Landlord the full amount of such Base Rent or value of such Rent concession plus interest at due Applicable Interest Rate calculated from the date that such Base Rent or Rent concessions would have been payable.

D.    Late Charge.    In addition to its other remedies, Landlord shall have the right without notice or demand to add to the amount of any payment required to be made by Tenant hereunder, and which is not paid and received by Landlord on or before the first fifth business day of each calendar month an amount equal to (i) two and one-half percent (2.5%) for the first late payment during any calendar year and (ii) ten five percent (10%) (5%) for the second and subsequent late payment during any calendar year of the delinquency for each month of portion thereof the delinquency remains outstanding to compensate Landlord for the loss of the use of the amount not paid and the administrative costs caused by the delinquency, the parties agreeing that Landlord's damage by virtue

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of such delinquencies would be extremely difficult and impracticable to compete and the amount stated herein represents a responsible estimates thereof, provided, however, that on one (1) occasion during any calendar year of the Term, Landlord shall give Tenant written notice of such late payment and tenants shall have a period of five (5) calendar days thereafter in which to make such payment before any late charge shall be assessed. Any waiver by Landlord of any late charge or failure to claim the same shall not constitute a waiver of other late charge or any other remedies available to Landlord.

E.    Interest.    Interest shall accrue on all sums not paid when due hereunder at the lesser of eighteen fourteen percent (18%) (14%) per annum or the maximum Interest rate allowed by law ("Applicable Interest Rate") from the date until paid.

F.    Remedies cumulative.    All rights privileges and election or remedies of the parties are cumulative and not alternative to the extent permitted by law and except as otherwise provided herein.

G.    Landlord's Default.    Landlord shall not be in default hereunder unless landlord fails to perform any material obligation required of Landlord under the terms of this Lease within a reasonable time, but in no event later than sixty (60) days after written notice by Tenant to Landlord, subject to Paragraph 35 of this Lease, specifying the nature of Landlord's failure to perform. If, however, the nature of Landlord's obligation is such that more than sixty (60) days are reasonable required for performance, then Landlord shall not be in default hereunder if Landlord commences performance within such sixty (60) day period, subject to Paragraph 35 of this Lease, and thereafter diligently prosecutes such cure to completion. If Landlord at the expiration of such notice and cure periods has failed to cure such default, then, subject to the exculpatory provisions of this Paragraph 26, Tenant may pursue any of its legal or equitable remedies, but Tenant shall be deemed to expand Tenant's remedies under circumstances where particular provisions of this Lease expressly provide for an available remedy and where such available remedies are so set forth they shall be deemed Tenant's exclusive remedy.

27. LIENS

        Tenant shall at all times keep the Premises and the Project free from liens arising out of or related to work or services performed, materials or supplies furnished or obligations incurred by or on behalf of Tenant or in connection with work made, suffered or done by or on behalf of Tenant in or on the Premises of Project. If Tenant shall not, within ten (10) days following the imposition of any such lien, cause the same to be released of record by payment or posting of a proper bond, Landlord shall have, in addition to all other remedies provided herein and by law, the right, but not the obligation, to cause the same to be released by such means as Landlord shall deem proper, including payment of the claim giving rise to such lien. All sums paid by Landlord on behalf of Tenant and all expenses incurred by Landlord in connection therefore shall be payable to Landlord by Tenant on demand with interest at the Applicable Interest Rate as Additional Rent. Landlord shall have the right at all times to post and keep posted on the Premises any notices permitted or requested by law, or which Landlord shall deem proper, for the protection of Landlord, the Premises, the Project and any other party having an interest therein, from mechanics' and materialmen's liens and Tenant shall give Landlord not less than ten (10) business days prior written notice, of the commencement of any work in the Premises or Project which could lawfully give rise to a claim for mechanics or materialmen's liens to permit Landlord to post and record a timely notice of non-responsibility as Landlord may elect to proceed or as the law may from time to time provide for which purpose if Landlord shall so determine, Landlord may enter the Premises. Tenant shall not remove any such notice posted by Landlord without Landlord's consent, and in any event not before completion of the work which could Lawfully give rise to a claim for mechanics or materialmen's liens.

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28. SUBSTITUTION

        A.    At any time after execution of this Lease, Landlord may substitute for the Premises other premises in the Project or owned by Landlord in the vicinity of the Project (the "New Premises") upon not less than sixty (60) days prior written notice, in which event the New Premises shall be deemed to be the Premises for all purposes hereunder and this Lease shall be deemed modified accordingly to reflect the new location and shall remain in full force and offers as so modified provided that:

        (1)   The New Premises shall be similar in area and in function for Tenant purposes and

        (2)   If Tenant is occupying the Premises at the time of such substitution Landlord shall pay the expenses of physically moving Tenant. Tenant's properly and equipment to the New Premises and shall, or Landlord's sole cost, improve the New Premises with improvements substantially similar to these the Landlord has committed to provide or has provided in the Premises.

29. TRANSFERS BY LANDLORD

        In the event of a sale or convenience by Landlord of the Building or a foreclosure by any creditor or Landlord, the same shall operate to release Landlord from any liability upon any of the convenience or condition, express or implied, herein contained in favor of Tenant, to the extent required to be performed after the passing of title to Landlord's successor-in-interest. In such event, Tenant agrees to look solely to the responsibility of the successor-in-interest of Landlord under this Lease with respect to the performance of the covenants and duties of "Landlord" to be performed after the passing of title to Landlord's successor-in-interest provided such successor-in-interest assumes in writing Landlord's duties, obligations all liabilities hereunder. This Lease shall not be affected by any such sale and Tenant agrees to attorn to the purchaser or assignee. Landlord's successor(s)-in-interest shall not have liability to Tenant with respect to the failure to perform any of the obligations of "Landlord," to the extent required to be performed prior to the date such successor(s)-in-interest became the owner of the Building.

30. RIGHT OF LANDLORD TO PERFORM TENANT'S COVENANTS

        All covenants and agreements to be performed by Tenant under any of the terms of this Lease shall be performed by Tenant at Tenant's sole cost and expense and without any statement of Rent, except as otherwise expressly set forth herein. If Tenant shall fail to pay any sum of money, other than Base Rent, required to be paid by Tenant hereunder or shall fail to perform any other act on Tenant's part to be performed hereunder, including Tenant's obligations under Paragraph 11 hereof, and such failure shall continue for fifteen (15) days after notice thereof by Landlord, in addition to the other rights and remedies of Landlord, Landlord may make any such payment and perform any such act on Tenant's part. In the case of an emergency, no prior notification by Landlord shall be required. Landlord may take such actions without any obligation and without releasing Tenant from any of Tenant's obligations. All sums so paid by Landlord and all incidental costs incurred by Landlord and interest thereon at the Applicable Interest Rate from the date of payment by Landlord, shall be paid to Landlord on demand as Additional Rent.

31. WAIVER

        If either Landlord or Tenant waivers the performance of any term, covenant or condition contained in this Lease such waiver shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant or condition contained herein, or constitute a course of dealing contrary in the expressed terms of this Lease. The acceptance of Rent by Landlord shall not constitute a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, regardless of Landlord's knowledge of such preceding breach at the time Landlord accepted such Rent. Failure by Landlord to enforce any of the terms, covenants or conditions of this Lease for any length of time shall not be deemed to waive or decrease the right of Landlord to insist thereafter upon strict performance by Tenant, Waiver by Landlord of any term, covenant or condition contained in this Lease may only be made by a written document signed by Landlord based upon full knowledge of the circumstances.

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32.    NOTICES

        Each provision of this Lease or of any applicable governmental laws, ordinances, regulations and other requirements with reference to sending, mailing, or delivery of any notice or the making of any payment by Landlord or Tenant to the other shall be deemed to be complied with when and if the following steps are taken:

A.    Rent.    All Rent and other payments required to be made by Tenant to Landlord hereunder shall be payable to Landlord at Landlord's Remittance Address set forth in the Basic Lease Information, or at such other address as Landlord may specify from time to time by written notice delivered in accordance herewith. Tenant's obligation to pay Rent and any other amounts to Landlord under the terms of this Lease shall not be deemed satisfied until such Rent and other amounts have been actually received by Landlord.

B.    Other.    All notices, demands, consents and approvals which may or are required to be given by either party to the other hereunder shall be in writing and either personally delivered, sent by commercial overnight courier, mailed, certified or registered, postage prepaid or sent by facsimile with confirmed receipt (and with an original sent by commercial overnight courier), and in each case addressed to the party to be notified at the Notice Address for such party as specified in the Basic Lease Information or to such other place as the party to be notified may form time to time designate by at least fifteen (15) days notice to the notifying party. Notices shall be deemed served upon receipt or refusal to accept delivery. Tenant appoints as its agent to receive the service of all default notices and notices of commencement of unlawful detainer proceedings the person in charge of or apparently in charge of occupying the Premises at the time, and, if there is no such person, then such service may be made by attaching the notice on the main entrance of the Premises.

C.    Required Notices.    Tenant shall immediately notify Landlord in writing of any notice of a violation or a potential or alleged violation of any Regulation that relates to the Premises or the Project, or of any inquiry, investigation, enforcement or other action that is instituted or threatened by any governmental or regulatory agency against Tenant or any other occupant of the Premises, or any claim that is instituted or threatened by any third party relates to the Premises or the Project.

33.    ATTORNEYS' FEES

        If Landlord places the enforcement of this Lease, or any part thereof, or the collection of any Rent due, or to become due hereunder, or recovery of possession of the Premises in the bands of an attorney. Tenant shall pay to Landlord, upon demand, Landlord's reasonable attorney's fees and court costs, whether incurred at trial, appeal or review. In any action which Landlord or Tenant brings to enforce its respective rights hereunder, the unsuccessful party shall pay all costs incurred by the prevailing party including reasonable attorneys' fees, to be fixed by the court, and said costs and attorneys' fees shall be a part of the judgement in said action.

34.    SUCCESSORS AND ASSIGNS

        This Lease shall be binding upon and inure to the benefit of Landlord, its successors and assigns, and shall be binding upon and inure to the benefit of Tenant, its successors, and to the extent assignment is approved by Landlord as provided hereunder Tenant's assigns.

35.    FORCE MAJEURE

        If performance by a party of any portion of this Lease is made impossible by any prevention, delay, or stoppage caused by strikes, lockouts, labor disputes, acts of God, inability to obtain services, labor, or materials or reasonable substitutes for those items, government actions, civil commotions, fire or other casualty, or other causes beyond the reasonable control of the many obligated to perform,

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performance by that party for a period equal to the period of that prevention, delay, or stoppage is excused Tenant's obligation to pay Rent, however, is not excused by this Paragraph 35.

36.    SURRENDER OF PREMISES

        Tenant shall, upon expiration or sooner termination of this Lease, surrender the Premises to Landlord in the same condition as existed on the date Tenant originally took possession thereof (reasonable wear and tear, casualty damage and acts of God excepted), including but not limited to, all interior walls cleaned, all interior painted surfaces repainted in the original color, all holes in walls repaired, all carpets shampooed and cleaned, all HVAC equipment in operating order and in good repair, and all floors cleaned, waxed, and free of any Tenant-introduced marking or painting, all to the reasonable satisfaction of Landlord. Tenant shall remove all of its debris from the Project. At or before the time of surrender, Tenant shall comply with the terms of Paragraph 12.A. hereof with respect to Alterations to the Premises and all other matters addressed in such Paragraph. If the Premises are not so surrendered at the expiration or sooner termination of this Lease, the provisions of paragraph 25 hereof shall apply. All keys to the Premises or any part thereof shall be surrendered to Landlord upon expiration or sooner termination of the Term. Tenant shall give written notice to Landlord at least thirty (30) days prior to vacating the Premises and shall meet with Landlord for a joint inspection of the Premises at the time of fifteen (15) days prior to vacating, but nothing contained herein shall be construed as an extension of the Term or as a consent by Landlord to any holding over by Tenant. In the event of Tenant's failure to give such notice or participate in such joint inspection, Landlord's inspection at or after Tenant's vacating the Premises shall conclusively be deemed correct for purposes of determining Tenant's responsibility for repairs and restoration. Any delay caused by Tenant's failure to carry out its obligations under the paragraph 36 beyond the term hereof, shall constitute unlawful and illegal possession of Premises under Paragraph 25 hereof.

37.    MISCELLANEOUS

A.    General.    The term "Tenant" or any pronoun used in place thereof shall indicate and include the masculine or feminine, the singular or plural number, individuals, firms or corporations, and their respective successors, executors administrators and permitted assigns, according to the context hereof.

B.    Time.    Time is of the essence regarding this Lease and all of its provisions.

C.    Choice of Law.    This Lease shall in all respects be governed by the laws of the State of California.

D.    Entire Agreement.    This Lease, together with its Exhibits, addenda and attachments and the Basic Lease Information, contains all the agreements of the parties hereto and supersedes any previous negotiations. There have been no representations made by the Landlord or understandings made between the parties other than those set forth in this Lease and its Exhibits, addenda and attachments and the Basic Lease Information.

E.    Modification.    This Lease may not be modified except by a written instrument signed by the parties hereto. Tenant accepts the area of the Premises as specified in the Basic Lease Information as the approximate area of the Premises for all purposes under this Lease, and acknowledges and agrees that no other definition of the area (rentable, usable or otherwise) of the Premises shall apply. Tenant shall in no event be entitled to a recalculation of the square footage of the Premises, rentable, usable or otherwise, and no recalculation, if made, irrespective of its purpose, shall reduce Tenant's obligations under this lease in any manner, including without limitation the amount of Base Rent payable by Tenant or Tenant's Proportionate Share of the Building and of the Project.

F.    Severability.    If for any reason whatsoever, any of the provisions hereof shall be unenforceable or ineffective, all of the other provisions shall be and remain in full force and effect.

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G.    Recordation.    Tenant shall not have the right to record this Lease or a a mutually acceptable short form memorandum hereof, provided that Tenant agrees upon the expiration or earlier termination of this Lease to execute and deliver to Landlord a quitclaim deed terminating said short form memorandum.

H.    Examination of Lease.    Submission of this Lease to Tenant does not constitute an option or offer to lease and this Lease is not effective otherwise until execution and delivery by both Landlord and Tenant.

I.    Accord and Satisfaction.    No payment by Tenant of a lesser amount than the total Rent due nor any endorsement on any check or letter accompanying any check or payment of Rent shall be deemed an accord and satisfaction of full payment of Rent, and Landlord may accept such payment without prejudice to Landlord's right to recover the balance of such Rent or to pursue other remedies. All offers by or on behalf of Tenant of accord and satisfaction are hereby rejected in advance.

J.    Easements.    Landlord may grant easements on the Project and dedicate for public use portions of the Project without Tenant's consent; provided that no such grant or dedication shall materially interfere with Tenant's Permitted Use of the Premises. Upon Landlord's request, Tenant shall execute, acknowledge and deliver to Landlord documents, instruments, maps and plans reasonably necessary to effectuate Tenant's hereunder.

K.    Drafting and Determination Presumption.    The parties acknowledge that this Lease has been agreed to by both the parties, that both Landlord and Tenant have consulted with attorneys with respect to the terms of this Lease and that no presumption shall be created against Landlord because Landlord drafted this Lease. Except as otherwise specifically set forth in this Lease, with respect to any consent, determination or estimation of Landlord required or allowed in this Lease or requested of Landlord, Landlord's consent, determination or estimation shall be give or made solely by Landlord in Landlord's good faith and reasonable opinion, whether or not objectively reasonable. If landlord fails to respond any request for its consent within the time period, if any, specified in this Lease, Landlord shall be deemed to have disapproved such request.

L.    Exhibits.    The Basic Lease information, and the Exhibits, addenda and attachments attached hereto are hereby incorporated herein by this reference and made a part of this Lease as though fully set forth herein.

M.    No Lights, Air or View Easement.    Any diminution or shutting off of light, air or view by any structure which may be erected on lands adjacent to or in the vicinity of the Building shall in no way affect this Lease or impose any liability on Landlord.

N.    No Third Party Benefit.    This lease is a contract between Landlord and Tenant and nothing herein is intended to create any third party benefit.

O.    Quiet Enjoyment.    Upon payment by Tenant of the Rent, and upon the observance and performance of all of the other covenants, terms and conditions on Tenant's part to be observed and performed, Tenant shall peaceably and quietly hold and enjoy the Premises for the term hereby demised without hindrance or interruption by Landlord or any other person or persons lawfully or equitably claiming by, through or under Landlord, subject, nevertheless, to all of the other terms and conditions of this Lease. Landlord shall not be liable for any hindrance, interruption, interference or disturbance by other tenants or third persons. nor shall Tenant be released from any obligations under this Lease because of such hindrance, interruption, interference or disturbance.

P.    Counterparts.    This Lease may be executed in any number of counterparts, each of which shall be deemed an original.

Q.    Multiple Parties.    If more than one person or entity is named herein as Tenant, such multiple parties shall have joint and several responsibility to comply with the terms of this Lease.

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R.    Prorations.    Any Rent or other amounts payable to Landlord by Tenant hereunder for any fractional month shall be prorated based on a month of 30 days. As used herein, the term "fiscal year" shall mean the calendar year or such other fiscal year as Landlord may deem appropriate.

S.    Operating Policies.    During the Term of this Lease, Landlord shall operate and maintain the Building in a manner generally consistent with other comparable first-class business park projects in San Diego County.

T.    Landlord's Covenant.    In connection with the exercise by Landlord of the rights and reservations granted or afforded by this Lease, Landlord hereby covenants and agrees to:

        (1)   use its reasonable good faith efforts to avoid taking any action (excepting any actions in comply with Regulations) which may materially adversely affect Tenant's use of or normal business operations within the Premises;

        (2)   use its reasonable good faith efforts in provide Tenant with prior written notice of any such actions by Landlord (excepting any actions to comply with Regulations) which may materially adversely affect Tenant's use of or normal business operations within the Premises and at least forty-eight (48) hours prior written notice of any scheduled work to be performed by Landlord which may materially adversely interfere with Tenant's normal business operations; it being understood, however, that the giving of such prior written notice may be impossible or impractical under emergency circumstances;

        (3)   In a manner consistent with the prudent and efficient operation of the Project, to reasonably coordinate and reasonably cooperate with Tenant to reasonably minimize any cessation or degradation of Tenant's use of or normal business operations within the Premises; and

        (4)   use its reasonable good faith efforts to perform all work in an expeditious and workmanlike manner and to restore access to the Premises and the availability of Building services as soon as reasonably practicable.

Notwithstanding anything contained in this Paragraph 37. T. to the contrary, in no event shall Landlord be liable or responsible for any consequential or exemplary damages.

U.    Consent/Duty to Act Reasonably.    Except for the provisions of this Lease which expressly grant a party the right to act in its sole discretion, whereupon in each such case, Landlord's and Tenant's duty is to act in good faith (but shall not otherwise be subject in a "reasonableness" standard (i) any time the consent of Landlord or Tenant is required, such consent shall not be unreasonably withheld, delayed or conditioned, and (ii) whenever this Lease grants Landlord or Tenant the right to take action, exercise discretion, establish rules and regulations or make allocations or other determinations, Landlord and Tenant shall act reasonably and in good faith and take no action which might result in the frustration of the other party's reasonable expectations concerning the benefits to be enjoyed under this Lease.

V.    Year 2000 Compliance.    Landlord hereby represents, warrants and covenants to the best of its knowledge to Tenant that all of the Project's mechanical, electrical, elevator, fire and life safety systems (the "Building Systems") will operate on and after January 1, 2000 without normal operation being implied by dates in and after the year 2000. At Tenant's request, Landlord shall provide Tenant with reasonably satisfactory evidence of the Building Systems' compliance with the foregoing.

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38.    ADDITIONAL PROVISIONS

A.    Base Rent.    The monthly Base Rent during the initial Term shall be as follows:

Period
Monthly Base Rent

B.    Renewal Option.    Provided Tenant is not, and has not been, in material default of any of its obligations under the this Lease or any other lease Tenant may have in the Project, after expiration of all applicable grace, notice and cure periods, it shall have an option in renew this Lease for the Premises in "as is" condition for two (2) five (5) year periods on the same terms and conditions as set forth in this Lease except that the Base Rent of each option period shall be the then prevailing fair market rental rate for comparable space of at least one hundred thousand (100,000) square feet at comparable buildings within the Eastgate Technology Park and University Towne Centre areas, as defined and determined by Subparagraph 38.B. (1) and /or 38 B. (2) below. In no event will the Base Rent for each option period be less than that of the previous period. Tenant shall give Landlord written notice to exercise its option at least no earlier than eighteen (18) months but not more less than fifteen (15) months prior to the expiration of the Term, or extended Term.

        Notwithstanding anything to the contrary herein contained, Tenant's right to extent the Term by exercise of the foregoing option shall be conditioned upon the following: (a) at the time of the exercise of the option, and at the time of the commencement of the extended Term, Tenant shall be in possession of and occupying at least seventy-five percent (75%) of the Premises, and at least seventy-five percent (75%) of all other premises under any other leases Tenant may have in the Project, for the conduct of its business therein and the same shall not be occupied by any assignee, subtenant, or licensee; and (b) the notice of exercise shall constitute a representation, by commencement of the extended Term, that Tenant does not intend to seek to assign or sublet more than twenty-five percent (25%) of the Premises, or assign or sublet more than twenty-five percent (25%) of any other premises under any other leases Tenants may have in the Project.

        (1)   "Fair Market Rental" shall mean the rate being charged to tenants recently renewing existing leases for comparable space in buildings within the Eastgate Technology Park and University Towne Centre areas, taking into consideration all relevant factors, including but not limited to, the following: size, location, floor level, proposed term of the lease, expense stops, extent of building services to be provided and the time that the rental rate under consideration is to become effective. Fair Market Rental as of the commencement of each option period shall be determined by Landlord with written notice (the "Notice") given to the Tenant not later than thirty (30) days after the receipt of the option notice, subject to Tenant's right to arbitration as provided in subparagraph 38.B(2) below, Failure on the part of Tenant to demand arbitration within thirty (30) days after receipt of the Notice from Landlord shall bind Tenant to the Fair Market Rental as determined by Landlord. Notwithstanding anything to contrary herein, Tenant's right to arbitrate shall conclude no later than ninety (90) days after the date of the Notice.

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        (2)   If Tenant disputes the amount claimed by Landlord as Fair Market Rental, Tenant may require that Landlord submit the dispute to arbitration. The arbitration shall be conducted and determined in San Diego, California, in accordance with the then prevailing rules of the American Arbitration Association or its successor for arbitration of commercial disputes, except that the procedures mandated by such rules shall be modified as follows:

        (a)   Tenant shall make demand for arbitration in writing within thirty (30) days after service of the Notice, specifying therein the name and address of the person to act as the arbitrator on Tenant's behalf. The arbitrator shall be a M.A.I. designated and independent real estate appraiser with at least ten (10) years full-time commercial appraisal experience who is familiar with the Fair Market Rental of first-class business park space in San Diego County. (in the event M.A.I. appraisers are no longer available, a comparable designation with at least ten (10) years experience with commercial property appraisal in San Diego County will be acceptable.) Failure on the part of Tenant in make the timely and proper demand for such arbitration shall constitute a waiver of the right thereto. Within ten (10) business days after the service of the demand for arbitration, Landlord shall give notice to Tenant specifying the name and address of the person designated by Landlord to act as arbitrator on its behalf, which arbitrator shall be similarly qualified. If Landlord fails to notify Tenant of the appointment of its arbitrator, within or by the time specified, then the arbitrator appointed by Tenant shall be the arbitrator to determine the Fair Market Rental for the Premises.

        (b)   If two arbitrators are chosen pursuant to Subparagraph 38.B.(2)(a) above, the arbitrators so chosen shall meet within ten (10) business days after the second arbitrator is appointed and shall appoint a third arbitrator, who shall be a competent and impartial person with qualifications similar to those required of the first two arbitrators pursuant to Subparagraph 38.B.(2)(a) above. If they are unable to agree upon such appointment within five (5) business days after expiration of such ten (10) day period, the third arbitrator shall be selected by the parties themselves. If the parties do not agree on the third arbitrator within five (5) business days after expiration of the foregoing five (5) business day period, then either party, on behalf of both, may request appointment of such a qualified arbitrator by (i) the majority of board members of the San Diego County Chapter of M.A.I. appraisers, or (ii) the chief arbitrator of the San Diego County Chapter of the American Arbitration Association. The three arbitrators shall decide the dispute, if it has not been previously resolved by following the procedures set forth in Subparagraph 38.B.(2)(c) below. Each party shall pay the fees and expenses of its respective arbitrator and both shall share the fees and expenses of the third arbitrator. Attorneys' fees and expenses of counsel and of witnesses or other experts for the respective parties shall be paid by the respective party engaging such counsel or calling such witnesses or other experts.

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        (c)   The Fair Market Rental shall be fixed by the three arbitrators in accordance with the following procedures. Each of the arbitrators selected by the parties shall state in writing, his or her determination of the Fair Market Rental supported by the reasons therefor and shall make counterpart copies for each of the other arbitrators. The arbitrators shall arrange for a simultaneous exchange of such proposed resolutions within ten (10) business days after appointment of the third arbitrator. If either arbitrator fails to deliver to the other arbitrators his or her determination within such ten (10) business day period, then the determination of the other arbitrator shall be final and binding upon the parties. The role of the third arbitrator shall be to select which of the two proposed resolutions most closely approximates his or her determination of Fair Market Rental. The third arbitrator shall have no right to propose a middle ground or any modification of either of the two proposed resolutions. The resolution he or she chooses as the most closely approximating his or her determination of the Fair Market Rental shall constitute the decision of the arbitrators and shall be final and binding upon the parties. If either party fails to pay its share of the fees of the third arbitrator within thirty (30) days after receipt of an invoice, or fails to execute and deliver any documents reasonably required by the third arbitrator within thirty (30) days after receipt thereof, then the Fair Market Rental shall be determined solely by the arbitrator selected by the other party.

        (d)   In the event of a failure, refusal or inability of any arbitrator to act, his or her successor shall be appointed by him or her, but in the case of the third arbitrator, his or her successor shall be appointed in the same manner as that set forth herein with respect to the appointment of the original third arbitrator. The arbitrators shall attempt to decide the issue within ten (10) business days after the appointment of the third arbitrator. Any decision in which the arbitrator appointed by Landlord and the arbitrator appointed by Tenant concur shall be binding and conclusive upon the parties, except that such arbitrators shall not attempt by themselves to mutually ascertain the Fair Market Rental and any such determination in a manner other than that provided for in Subparagraph 38.B(2)(c) hereof, shall not be binding on the parties.

C.    Alternative Term Expiration Date.    Subject to a certain lease dated September 2, 1998 for approximately 150,000 square feet within Phase B of the Project which adjoins the Premises ("Expansion Phase B Premises") and Tenant taking full occupancy and commencing the payment of Rent, Tenant shall have the right to alter the Term Expiration Date upon written notice to Landlord no earlier than twenty-four (24) months and not less than eighteen (18) months prior to the scheduled Term Expiration Date. This alteration of the Premises' Term Expiration Date shall consist of exchanging the term expiration date of the Phase B Premises with the Term Expiration Date for the Premises. In this event, monthly Base Rent for the period beyond the scheduled Term Expiration Date and through the new Term Expiration Date, as modified by the immediately preceding sentence, shall be the then prevailing fair market rental rate for comparable space of at least one hundred thousand (100,000) square feet in comparable buildings within the Eastgate Technology Park and University Towne Centre areas as reasonably determined by Landlord. In no event will the Base Rent be less than that of the previous period. Landlord shall submit to Tenant the then prevailing market rate by a written notice given to Tenant not later than thirty (30) days after the receipt of the Tenant's notice to alter the Term Expiration Date. Tenant shall have fifteen (15) days to accept said rental rate of Tenant's right to alter the Term Expiration Date hereunder shall terminate.

D.    Prepaid Rent.    Upon execution of this Lease, Tenant shall pay the first and second month's Base Rent for the entire Premises, totaling Three Hundred Seventy-one Thousand Seven Hundred Sixty Dollars $371,760.00 ("Pre-paid Rent"). Landlord shall apply the Pre-paid Rent to the Base Rent for the Premises as they become due during the initial months of the Term.

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E.    First Right of Offer to Lease.    Tenant is granted a first right of offer to lease Building 2 of Phase A of the Project located at 4790 Eastgate Mall, which is approximately sixty thousand nine hundred 60,900 rentable square feet, ("Building 2") when it comes available (termination of the Building 2 tenant's lease obligation, right and interest to Building 2) at the end of initial term of such lease, and during or at the end of any option period to extend the form of the lease for Building 2. if the existing tenant thereof elects to extend the term of such lease, on the following terms: Before Landlord enters into a lease for Building 2, and provided Tenant is not then in default under this Lease, or any other lease Tenant may have in the Project, after any applicable grace, notice and cure periods, and has not been in material default of any terms or conditions of this Lease, or any other lease Tenant may have in the Project, and provided Tenant has not assigned or sublet a portion more than twenty-five percent (25%) of its Premises, or any other premises under any other leases Tenant may have in the Project. Landlord will so notify Tenant in writing and propose a rent and other lease terms and conditions ("Landlord's Notice"). Tenant shall have three (3) five (5) days after notification to notify Landlord in writing of its intent to pursue negotiations. Thereafter Landlord and Tenant shall negotiate in good faith in an attempt to reach an agreement on the terms of the lease for Building 2. If Tenant exercises this first right of offer in the manner prescribed, Tenant shall immediately deliver to Landlord payment for the first month's rent for Building 2 (in the same manner as provided for in this Lease), and the lease for Building 2 will be consummated without delay in accordance with the terms and conditions set forth in Landlord's Notice. If Landlord and Tenant are unable to agree in writing within ten (10) days after Landlord's notice to Tenant, Landlord may lease Building 2 to another tenant. Thereafter, Tenant's first right of offer to lease Building 2 shall terminate, and Landlord shall be relieved from any further obligations to lease Building 2 to Tenant.

F.    Termination Rights.    Notwithstanding, anything in the contrary contained in this Lease, if Tenant is notified by Landlord, or Tenant becomes aware and notifies Landlord of the occurrence of a Trigger Event (defined below) and such Trigger Event materially adversely affects the operation of Tenant's normal business in, use of, prevents Tenant's reasonable access to the Premises and such Trigger Event continues for such a time greater than twelve (12) months (the "Maximum Restoration Period"), then Tenant may elect to exercise an ongoing right to terminate this Lease, upon thirty (30) days' prior written notice sent to Landlord within a period of sixty (60) days following the later of the occurrence of the Trigger Event or Tenant's receipt (or giving) of notice thereof (such notice, in the case of a Trigger Event described in subparagraphs (1) and (2) below, in contain a reasonably detailed description of the scope of the Trigger Event). Notwithstanding the foregoing, Tenant shall not have a right to so terminate this Lease if Landlord takes action within said sixty (60) day period (but no later than the expiration of the thirty (30) day period) which will result in the restoration of the Tenant's normal business operations in, Tenant's reasonable access to, and Tenant's use of the Premises in a condition suitable for the efficient conduct of Tenant's normal business (including,without limitation, utilities required or necessary for the operation of Tenant's normal business in the Premises) prior to the end of the Maximum Restoration Period.

        As used herein, the term "Trigger Event" shall mean and refer to;

        (1)   continuous interruption of electrical, water, telecommunication, telephone, gas, sewer or other essential utility services used or required in connection with Tenant's occupancy of the Premises or interruption of Tenant's access to the Premises;

        (2)   discovery of Hazardous Materials or any other material environmental condition in, on or around the land, Building Project, common areas or Premises, which taking into account applicable environmental laws, either is unlawful or represents a significant health risk to occupants of the Premises, excepting those Hazardous Materials either:

        (a)   used by Tenant's contractor in the construction of Alterations in the Premises; or

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        (b)   generated by Tenant or brought onto or into the Project, Building, Premises or common areas, by Tenant as more particularly described in Paragraph 4.D. of this Lease.

G.    Rooftop Communications Equipment.    During the Term of this Lease (and any renewal or extensions thereof), Tenant shall have the right, without payment of any fee or charge therefor to install and operate, for Tenant's personal use only, one (1) microwave transmitter-receiver or satellite dish (the "Satellite Dish") on one Building rooftop (the "Designated Building") of a weight, height, and width reasonably acceptable to Landlord. Landlord shall not withhold its consent to the installation of a Satellite Dish reasonably comparable to those installed within the Project. Tenant's right pursuant to this Paragraph 38.G. are subject to the following:

        (1)   All costs for the installation of the Satellite Dish including, but not limited to, electrical equipment and connections, mounting fixtures, engineering studies, inspections permits, etc. will be at the Tenant's sole cost, expense and responsibility.

        (2)   Prior to installing the Satellite Dish, Tenant must notify Landlord in writing, specifying the type, character, size, location, amount of space required, installation details and electrical requirements. Landlord in its reasonable discretion shall approve of said specifications of the Satellite Dish within ten (10) days following receipt of Tenant's written request to install a Satellite Dish on the roof of the Designated Building.

        (3)   Tenant shall pay any federal, state and local taxes applicable to the installation and use of the Satellite Dish and Tenant shall procure, maintain and pay for and obtain all fees, permits and governmental agency licenses necessary in connection with all installation, maintenance and operation of the Satellite Dish; provided, however, that Landlord shall reasonably cooperate with the efforts of the Tenant in connection with any governmental application or filing required thereby. Tenant shall reimburse Landlord for any actual costs Landlord may incur to assist Tenant as detailed in the preceding sentence.

        (4)   Tenant shall be permitted, at its sole cost, expense and responsibility, but without separate charge other than any charges permitted to be imposed by Landlord under Paragraph 7, to install, modify, alter, repair, maintain, operate and replace one (1) existing chaseway of the Designated Building in an area in the core of the Designated Building, one (1) non-dedicated conduit for its cabling use (and the use of the Satellite Dish and cable contained therein connecting to such Building's roof for operation of Tenant's Satellite Dish). All installation required in connection with the Satellite Dish shall be made by means of conduits, wires or cables that will pass through existing opening in the walls or roof decks of the Designated Building, and all cable and wires located on the roof of the Designated Building used in connection with Satellite Dish shall be covered by rust-proof conduits and attachments. In no event shall any of Tenant's installations he made through the roof surface or membrane of the Designated Building without the prior written consent of Landlord, which consent may be withheld in Landlord's sole and absolute discretion. The installation of the Satellite Dish shall be subject to Landlord's review and approval and shall conform to the engineering standards commonly used for installing similar satellite dishes within the Project.

        (5)   Tenant, at its sole cost, expense, and responsibility will comply with all present and future laws, and with any reasonable requirements of any applicable fire rating bureau relating to the maintenance, use, installation and operation, of the Satellite Dish. Tenant shall install, maintain and operate all of its equipment used in connection with the Satellite Dish in conformity with all Regulations of all government agencies having jurisdiction over the installation, use and operation of the Satellite Dish, including, without limitation, the Federal Aviation Administration and the Federal Communications Commission; provided, however that if compliance with such laws or regulations would require a change in the size, configuration or location of the Satellite Dish, such changes shall be subject to Landlord's prior written consent.

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        (6)   Prior to the expiration or earlier termination of the Term of this Lease, or any extended Term, Tenant shall remove the Satellite Dish and all wires and cables used in connection with the Satellite Dish, and shall restore and repair all damage to the Designated Building occasioned by the installation, maintenance or removal, of the Satellite Dish. If Tenant fails to timely complete such removal, restoration and repair, all sums incurred by Landlord to complete such work shall be paid by Tenant to Landlord upon demand.

        (7)   Landlord makes no representations or warranties whatsoever with respect to the fitness or suitability of the Designated Building for the installation, maintenance and operation of the Satellite Dish, including, without limitation, with respect to the quality and clarity or any receptions and transmissions in or from the Satellite Dish and the presence of any interference with such signals, whether emanating from the Designated Building or otherwise. Landlord shall permit Tenant to have reasonable access to such other parts of the Designated Building as are open to the public or for which access is otherwise reasonably necessary in order to install, maintain and operate the Satellite Dish. Notwithstanding anything set forth in this Paragraph 38.G. to the contrary, if Landlord reasonably determines that the installation of the Satellite Dish will be detrimental to the design or structural soundness of the Designated Building or will create risk of injury or damage to persons or property, Tenant shall not be permitted to install said Satellite Dish.

        (8)   Tenant must notify Landlord in writing prior to the scheduled date Tenant proposes to install the Satellite Dish on the roof of the Designated Building in order to make arrangements for the movement of materials needed in connection with the installation of the Satellite Dish.

        (9)   Tenant shall provide at its sole cost, expense and responsibility, adequate maintenance personnel in order to ensure the safe operation of the Satellite Dish. In addition, Tenant shall install, maintain and operate all of its equipment used in connection with the Satellite Dish in a fashion and manner so as not to interfere with the use and operation of any: (a) other televisions or radio equipment in the Designated Building; (b) present or future electronic control system for any operating services or the operation of the elevators in any Building within the Project; (c) other transmitting, receiving or master television, telecommunications or microwave antenna equipment currently located on the roof of the Designated Buildings or other buildings within the Project; or (d) any radio communication system now used by Landlord and/or other tenants of the Project. In addition, Tenant shall use its commercially reasonable efforts to ensure that Tenant will not interfere with any equipment installed by Landlord and/or other tenants of the Project in the future. Landlord shall use its commercially reasonable efforts to ensure that Tenant's equipment will not be unreasonably interfered with.

H.    Emergency Generator.    During the Term or extended Term of this Lease, upon written approval by Landlord, which shall not be unreasonably withheld, delayed or conditioned, Tenant shall have the right, at its sole cost, expense and responsibility, in accordance with all applicable laws and in a location as determined by Landlord to install one (1) emergency electrical generator per Building and all appurtenant equipment. The maintenance and operation of said equipment shall be at Tenant's sole cost, expense and responsibility and subject to Paragraph 11 of this Lease.

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L.    Measurement of the Premises.    Within thirty (30) days after the date on which Landlord's Base Building Work is substantially complete for Tenant Improvements construction, but in no event later than the Term Commencement Date, Landlord shall cause the Premises to be measured by a mutually acceptable and professionally qualified architect (other than Landlord's or Tenants architect) licensed in the state of California. The rentable square feet of the Premises shall be based on a dripline measurement. If the rentable square footage of the Premises is other than the stated rentable feet of the Premises in the Basic Lease Information, the Base Rent shall correspondingly be adjusted at the same rate per square foot as set forth in the Basic Lease Information. Any modification or adjustment to the rentable square feet of the Premises and any other terms of the Lease must be made and agreed to in writing by the parties within fifteen (15) days after Landlord's receipt of architect's measurement. Failure on the part of the parties to agree within fifteen (15) days or any dispute between Landlord and Tenant pertaining this Paragraph 38.l. shall be resolved by submitting to binding arbitration, conducted and determined in San Diego County according to the prevailing rules of the American Arbitration Association for arbitration of commercial disputes.

39.    JURY TRIAL WAIVER

EACH PARTY HERETO (WHICH INCLUDES ANY ASSIGNEE, SUCCESSOR HEIR OR PERSONAL REPRESENTATIVE OF A PARTY) SHALL NOT SEEK A JURY TRIAL, HEREBY WAIVES TRIAL BY JURY, AND HEREBY FURTHER WAIVES ANY OBJECTION TO VENUE IN THE COUNTY IN WHICH THE BUILDING IS LOCATED, AND AGREES AND CONSENTS TO PERSONAL JURISDICTION OF THE COURTS OF THE STATE IN WHICH THE PROPERTY IS LOCATED, IN ANY ACTION OR PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO AGAINST THE OTHER ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE PREMISES, OR ANY CLAIM OF INJURY OR DAMAGE OR THE ENFORCEMENT OF ANY REMEDY UNDER ANY STATUTE, EMERGENCY OR OTHERWISE, WHETHER ANY OF THE FOREGOING IS BASED ON THIS LEASE OR ON TORT LAW. EACH PARTY REPRESENTS THAT IT HAS HAD THE OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL CONCERNING THE EFFECT OF THIS PARAGRAPH 39. THE PROVISIONS OF THE PARAGRAPH 39 SHALL SURVIVE THE EXPIRATION OR EARLIER TERMINATION OF THIS LEASE.

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IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day and the year first above written.

LANDLORD
Spieker Properties, L.P., a California limited partnership
By:	Spieker Properties, Inc., a Maryland corporation, its general partner
	By:	/s/  RICHARD L. ROMNEY Richard L. Romney
	Its:	Senior Vice President
Date:	9/2/98
TENANT
Franklin Resources, Inc., a Delaware corporation
By:	/s/  MICHAEL J. MCCULLOCH Michael J. McCulloch
Its:	Director of Corporate Services
Date:	9/2/98

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EXHIBIT A
Industrial Lease
Rules and Regulations

1.

Driveways, sidewalks, halls, passages, exits, entrances, elevators, escalators and stairways shall not be obstructed by tenants or used by tenants for any purpose other than for ingress to and egress from their respective premises. The driveways, sidewalks, halls, passages, exits, entrances, elevators and stairways are not for the use of the general public and Landlord shall in all cases retain the right to control and prevent access thereto by all persons whose presence, in the judgment of Landlord, shall be prejudicial to the safety, character, reputation and interests of the Building, the Project and its tenants, provided that nothing herein contained shall be construed to prevent such access to persons with whom any tenant normally deals in the ordinary course of such tenant's business unless such persons are engaged in illegal activities. No tenant, and no employees or invitees of any tenant, shall go upon the roof of any Building, except as authorized by Landlord.

2.

No sign, placard, banner, picture, name, advertisement or notice, visible from the exterior of the Premises or the Building or the common areas of the Building shall be inscribed, painted, affixed, installed or otherwise displayed by Tenant either on its Premises or any part of the Building or Project without the prior written consent of Landlord in Landlord's sole and absolute discretion. Landlord shall have the right to remove any such sign, placard, banner, picture, name, advertisement, or notice without notice to and at the expense of Tenant, which were installed or displayed in violation or this rule. If Landlord shall have given such consent to Tenant at any time, whether before or after the execution of Tenant's Lease, such consent shall in no way operate as a waiver or release of any of the provisions hereof or of the Lease, and shall be deemed to relate only to the particular sign, placard and banner, picture, name, advertisement or notice so consented to by Landlord and shall not be construed as dispensing with the necessity of obtaining the specific written consent of Landlord with respect to any other such sign, placard, banner, picture, name, advertisement or notice. All approved signs or lettering on doors and walls shall be printed, painted, affixed or inscribed at the expense of Tenant by a person or vendor approved by Landlord and shall be removed by Tenant at the time of vacancy at Tenant's expense.

3.

The directory of the Building or Project will be provided exclusively for the display of the name and location of tenants only and Landlord reserves the right to charge for the use thereof and in exclude any other names therefrom.

4.

No curtains, draperies, blinds, shutters, shades, screens or other coverings, awnings, hangings or decorations shall be attached to, hung or placed in, or used in connection with, any window or door on the Premises without the prior written consent of Landlord. In any event with the prior written consent of Landlord, all such items shall be installed inboard of Landlord's standard window covering and shall in no way be visible from the exterior of the Building. All electrical ceiling fixtures hung in offices or spaces along the perimeter of the Building must be fluorescent or of a quality, type, design, and bulb color approved reasonably by Landlord. No articles shall be placed or kept on the window sills so as to be visible from the exterior of the Building. No articles shall be placed against glass partitions or doors which Landlord considers unsightly from outside Tenant's Premises.

5.

Each tenant shall be responsible for all persons for whom it allows to enter the Building or the Project and shall be liable to Landlord for all acts of such persons. Landlord and its agents shall not be liable for damages for any error concerning the admission to, or exclusion from, the Building or the Project of any person. During the continuance of any invasion, mob, riot, public excitement or other circumstance rendering such action advisable in Landlord's opinion, Landlord reserves the right (but shall not be obligated) to prevent access to the Building and the Project

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during the continuance of that event by any means it considers appropriate for the safety of tenants and protection of the Building property in the Building and the Project.

6.

Tenant shall not alter any lock or access device or install a new or additional lock or access device or bolt on any door of its Premises, without the prior written consent of Landlord which consent shall not be unreasonably withheld, delayed or conditioned. If Landlord shall give its consent, Tenant shall in each case furnish Landlord with a key for any such lock. Tenant, upon the termination of its tenancy, shall deliver to Landlord the keys for all doors which have been furnished to Tenant, and in the event of loss of any keys so furnished, shall pay Landlord therefor.

7.

The restrooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown into them. The expense of any breakage, stoppage, or damage resulting from violation of this rule shall be borne by the tenant who, or whose employees or invitees, shall have caused the breakage, stoppage, or damage.

8.

Tenant shall not use or keep in or on the Premises, the Building or the Project any kerosene, gasoline, or inflammable or combustible fluid or material except in strict accordance with the terms of the Lease.

9.

Tenant shall not use, keep or permit to be used or kept in its Premises any foul or noxious gas or substance. Tenant shall not allow the Premises to be occupied or used in a manner offensive or objectionable to Landlord or other occupants of the Building by reason of noise, odors and/or vibrations or interfere in any way with other tenants or those having business therein, nor shall any animals or birds be brought or kept in or about the Premises, the Building, or the Project.

10.

Except with the prior written consent of Landlord, Tenant shall not sell, or permit the sale, at retail, of newspapers, magazines, periodicals, theater tickets or any other goods or merchandise in or on the Premises, nor shall Tenant carry on, or permit or allow any employee or other person to carry on, the business of stenography, typewriting or any similar business in or from the Premises for the service or accommodation of occupants of any other portion of the Building, or the business of a public barber shop, beauty parlor, nor shall the Premises be used for any illegal, improper, immoral or objectionable purpose, or any business or activity other than that specifically provided for in such Tenant's Lease. Tenant shall not accept hairstyling, barbering, shoeshine, nail, massage or similar services in the Premises or common areas except as authorized by Landlord.

11.

If Tenant requires telegraphic, telephonic, telecommunications, data processing, burglar alarm or similar services, it shall first obtain, and comply with, Landlord's instructions in their installation. The cost of purchasing, installation and maintenance of such services shall be borne solely by Tenant.

12.

Landlord will direct electricians as to where and how telephone, telegraph and electrical wires are to be introduced or installed. No boring or cutting for wires will be allowed without the prior written consent of Landlord which consent shall not be unreasonably withheld, delayed or conditioned. The location of burglar alarms, telephones, call boxes and other office equipment affixed to the Premises shall be subject to the prior written approval of Landlord which consent shall not be unreasonably withheld, delayed or conditioned.

13.

Tenant shall not install any radio or television antenna, satellite dish, loudspeaker or any other device on the exterior walls or the roof of the Building, without Landlord's consent which consent shall not be unreasonably withheld, delayed or conditioned. Tennant shall not interfere with radio or television broadcasting or reception from or in the Building, the Project or elsewhere.

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14.

Tenant shall not mark, or drive nails, screws or drill into the partitions, woodwork or drywall or in any way deface the Premises or any part thereof other than in connection with the hanging of artwork. Tenant shall not lay linoleum, tile, carpet or any other floor covering so that the same shall be affixed to the floor of its Premises in any manner except as reasonably approved in writing by Landlord. The expense of repairing any damage resulting from a violation of this rule or the removal of any floor covering shall be borne by the tenant by whom, or by whose contractors, employees or invitees, the damage shall have been caused.

15.

Tenant shall not place a load upon any floor of its Premises which exceeds the load per square foot which such floor was designed to carry or which is allowed by law. Business machines and mechanical equipment belonging to Tenant which cause noise or vibration that may be transmitted to the structure of the Building or to any space therein to such a degree as to be objectionable to Landlord or to any tenants in the Building shall be placed and maintained by Tenant, at Tenant's expense, on vibration eliminators or other devices sufficient to eliminate noise or vibration. The persons employed to move such equipment in or out of the Building must be acceptable to Landlord.

16.

Each tenant shall store all its trash and garbage within the interior of the Premises or as otherwise directed by Landlord from time to time. Tenant shall not place in the trash boxes or receptacles any personal trash or any material that may not or cannot be disposed of in the ordinary and customary manner of removing and disposing of trash and garbage in the city, without violation of any law or ordinance governing such disposal.

17.

Canvassing, soliciting, distribution of handbills or any other written material and peddling in the Building and the Project are prohibited and each tenant shall cooperate to prevent the same. No tenant shall make room-to-room solicitation of business from other tenants in the Building or the Project, without the written consent of Landlord.

18.

Landlord shall have the right, exercisable without upon not less than six (6) months prior notice and but without liability to any tenant, to change the name and address of the Building and the Project.

19.

Landlord reserves the right to exclude or expel from the Project any person who, in Landlord's judgment, is under the influence of alcohol or drugs or who commits any act in violation of any of these Rules and Regulations.

20.

Without the prior written consent of Landlord, Tenant shall not use the name of the Building or the Project or any photograph or other likeness of the Building or the Project in connection with, or in promoting or advertising, Tenant's business except that Tenant may include the Building's or Project's name in Tenant's address.

21.

Tenant shall comply with all safety, fire protection and evacuation procedures and regulations reasonably established by Landlord or any governmental agency.

22.

Tenant assumes any and all responsibility for protecting its Premises from theft, robbery and pilferage, which includes keeping doors locked and other means of entry to the Premises closed.

23.

Landlord reserves the right to designate the use of the parking spaces on the Project. Tenant or Tenant's guests shall park between designated parking lines only, and shall not occupy two parking spaces with one car. No trucks, truck tractors, trailers or fifth wheel are allowed to be parked anywhere at any time within the Project other than in Tenant's own truck dock well. Vehicles in violation of the above shall be subject to tow-away, at vehicle owner's expense. Vehicles parked on the Project overnight without prior written consent of the Landlord shall be deemed abandoned and shall be subject to tow-away at vehicle owner's expense. No tenant of the Building shall park in visitor or reserved parking areas or loading areas. Any tenant found parking in such designated

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visitor or reserved parking areas or loading areas or unauthorized areas shall be subject to tow-away at vehicle owner's expense. The parking areas shall not be used to provide car wash, oil changes, detailing, automotive repair or other services unless otherwise approved or furnished by Landlord. Tenant will from time to time, upon the request of Landlord, supply Landlord with a list of license plate numbers of vehicles owned or operated by its employees or agents.

24.

No Tenant is allowed to unload, unpack, pack or in any way manipulate any products, materials or goods in the common areas of the Project including the parking and driveway areas of the Project. All products, goods and materials must be manipulated, handled, kept, and stored within the Tenant's Premises and not in any exterior areas, including, but not limited to, exterior dock platforms, against the exterior of the Building, parking areas and driveway areas of the Project. Tenant also agrees to keep the exterior of the Premises clean and free of nails, wood, pallets, packing materials, barrels and any other debris produced from their operation. All products, materials and goods are to enter and exit the Premises by being loaded or unloaded through dock high doors into trucks and or trailers, over dock high loading platforms into trucks and or trailers or loaded or unloaded into trucks and or trailers within the Premises through grade level door access.

25.

Tenant shall be responsible for the observance of all of the foregoing Rules and Regulations by Tenant's employees, agents, clients, customers, invitees and guests.

26.

These Rules and Regulations are in addition to, and shall not be construed to in any way modify, alter or amend, in whole or in part, the terms, covenants, agreements and conditions of any lease of any premises in the Project.

27.

Landlord may waive any one more of these Rules and Regulations for the benefit of any particular tenant or tenants, but no such waiver by Landlord shall be construed as waiver of such Rules and Regulations in favor of any other tenant or tenants, nor prevent Landlord from thereafter enforcing any such Rules and Regulations against any or all tenants of the Building.

28.

Landlord reserves the right to make such other and reasonable rules and regulations as in its judgment may from time to time be needed for safety and security, for care and cleanliness of the Building and the Project and for the preservation of good order therein. Tenant agrees to abide by all such Rules and Regulations herein stated and any additional rules and regulations which are adopted.

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EXHIBIT B

Site Plan, Premises

        Bridge Pointe Corporate Centre consists of approximately of 29 acres and up to approximately 591,000 square feet in up to 9 buildings. Phase A consists of four building indicated on the site plan below as 4760, 4770, 4780 and 4790 Eastgate Mall, totaling 215,800 square feet consisting of approximately 12.5 net acres. Phase B will consist of two buildings totaling approximately 150,000 square feet and consisting of approximately 8.5 acres. Phase C will consist of three buildings totaling up to approximately 225,000 square feet and consisting of approximately 8 acres.

        The Premises consists of the buildings located at 4760, 4770 and 4780 Eastgate Mall in San Diego, California.

        The Site Plan detailing the Premises and the Project follows this page and consists of two (2) pages.

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[MAP]

53

[MAP]

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EXHIBIT C
LEASE IMPROVEMENT AGREEMENT

        This Lease Improvement Agreement ("Improvement Agreement") sets forth the terms and conditions relating to construction of the initial tenant improvements described in the Plans to be prepared and approved as provided below (the "Tenant Improvements") in the Premises. Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Lease (the "Lease") to which this Improvement Agreement is attached and forms a part.

1.    Base Building Work. The "Base Building Work" described on Schedule 1 to this Exhibit C, if any, has been or will be performed by landlord at Landlord's sole cost and expense.

2.    Plans and Specifications.

        A.    Landlord and Tenant shall jointly retain the services of the space planned             designated by Landlord Devean Construction Incorporated (the "Space Planner") to prepare a detailed space plan (the "Space Plan") mutually satisfactory to Landlord and Tenant for the construction of the Tenant Improvements in the Premises. Landlord and Tenant shall approve or disapprove the Space Plan and any proposed revisions thereto in writing within three (3) business days after receipt thereof which approval shall not be unreasonably withheld.

        B.    Based on the approved Space Plan, Landlord and Tenant shall cause the Space Planner to prepare detailed plans, specifications and working drawings for the construction of the Tenant Improvements (the "Plans"), Landlord and Tenant shall diligently pursue the preparation of the Plans. Landlord and Tenant shall approve or disapprove the Plans and any proposed revisions thereto, including the estimated cost of the Tenant Improvements, in writing within three (3) business days after receipt thereof. If Landlord or Tenant fails to approve or disapprove the Space Plan or Plans or any revisions thereto within the time limits specified herein, Landlord or Tenant shall be deemed to have approved approved the same. Landlord and Tenant shall use diligent efforts to cause the final Plans and the cost estimate to be prepared and approved no later than thirty (30) days after the execution of the Lease.

        C.    Notwithstanding Landlord's preparation, review and approved of the Space Plan and the Plans and any revisions thereto. Landlord shall have no responsibility or liability whatsoever for any errors or omissions contained in the Space Plan or plans to verify dimensions or conditions, or for the quality, design or compliance with applicable Regulation of any improvements described therein or constructed in accordance therewith. Landlord hereby assigns to Tenant all warranties and guarantees by the Space Planner or the contractor who constructs the Tenant Improvements relating to the Tenant Improvements, and Tenant hereby waives all claims against Landlord relating to, or arising out of the design or construction of, the Tenant Improvements.

3.    Specifications for Standard Tenant Improvements.

        A.    Specifications and quantities of standard building components which will comprise and be used in the construction of the Tenant Improvements ("Standards") are set forth in Schedule 2 to this Exhibit C. As used herein, "Standards" of "Building Standards" shall mean the standards for a particular item selected from time to time by Landlord for the Building, including those set forth on Schedule 2 of this Exhibit C, or such other standards of equal or better quality as may be mutually agreed between Landlord and Tenant in writing.

        B.    No deviations from the Standards are permitted without Landlord's prior written consent which such consent shall not be unreasonably withheld, delayed or conditional.

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4.    Tenant Improvements Cost.

        A.    The cost of the Tenant Improvements shall be paid for by Tenant, including without limitation, the cost of: Standards; space plans and studies; architectural and engineering fees incurred in connection with preparation of the Plans; permits, approvals and other governmental fees; labor, material, equipment and supplies; construction fees and other amounts payable to contractors or subcontractors; taxes; off-side improvements; remediation and preparation of the Premises for construction of the Tenant Improvements; taxes; filing and recording fees; premiums for insurance and bonds; attorneys' fees, financing costs; and all other costs expended or to be expended in the construction of the Tenant Improvements, including those costs incurred for construction of elements of the Tenant Improvements in the Premises, which construction was performed by Landlord prior in the execution of the Lease or for materials comprising the Tenant Improvements which were purchased by Landlord prior to the execution of the Lease; and an administration fee of fifteen percent (15%) of the total cost of the Tenant Improvements.

Provided Tenant is not in default under the Lease, including this Improvement Agreement, Landlord shall contribute a one-time tenant improvement allowance not to exceed $25.00 per square foot times the rentable area of the Premises, plus a credit for the Building core areas not fully constructed by Landlord (described below), which credit and/or supply of pre-stocked fixtures and/or materials shall be by mutual agreement of the parties ("Tenant Improvement Allowance"), to be credited by Landlord toward the cost of the initial Tenant Improvements. If the cost of the Tenant Improvements exceeds the Tenant Improvement Allowance, Tenant shall pay Landlord such excess cost within three (3) five (5) business days after Landlord's notice to Tenant of such excess cost. No credit shall be given to tenant if If the cost of the Tenant Improvements is less than the Tenant Improvement Allowance, Tenant shall receive a credit towards Base Rent as follows: Within sixty (60) days after Tenant takes possession of the entire Premises Landlord shall deliver a statement to Tenant detailing the actual Tenant Improvement costs spent by Landlord. For every whole $1.00 per square foot of the Tenant Improvement Allowance that is unspent by Landlord Tenant shall receive a rent credit which shall be applied to item for the next month of the Terms. Notwithstanding the foregoing, in no event shall said rent credit be greater than $3.00 per square foot of the rentable area of the Premises.

The Building cores, not fully constructed by Landlord are generally described as follows:

4760 Eastgate Mall & 4770 Eastgate Mall;

1.

The first and second floor interior lobbies exclusive of the restroom/elevator/stair vertical walls and the exterior and interior granite stone.

2.

The first and second floor mens' and womens' restrooms, including final plumbing electrical and toilet fixtures, sinks and granite tops, HVAC distribution, toilet partitions, showers, lockers and all wall, ceiling and floor finishes.

4780 Eastgate Mall: The first and second floor mens' and womens' restrooms, including final plumbing, electrical and toilet fixtures, sinks and granite taps, HVAC distribution, toilet partitions, showers, lockers and all wall, ceiling and floor finishes.

        C.    If the cost of the Tenant Improvements increases after the Tenant's approval of the Plans due to the requirements of any governmental agency or applicable Regulation or any other reason, Tenant shall pay Landlord the amount of such increase above the Tenant Improvement Allowance within three (3) five (5) business days after notice from Landlord of such increase.

        D.    If Tenant requests any change(s) in the Plans after approval of the estimate of the cost of the Tenant Improvements and any such requested changes are approved by Landlord in writing (which consent shall not be unreasonably withheld, delayed or conditioned), Landlord shall advise Tenant promptly of any cost increases and/or delays such approved change(s) will cause in the construction of

56

the Tenant Improvements. Tenant shall approve or disapprove any or all such change(s) within three (3) business days after notice from Landlord of such cost increases and/or delays. To the extent Tenant disapproves any such cost increase and/or delay attributable thereto, Landlord shall have the right, in its sole discretion, to disapprove Tenant's request for any changes to the approved Plans. If the cost of the Tenant Improvements increases due to any changes in the Plan(s) requested by Tenant, Tenant shall pay Landlord the amount of such increase within three (3) five (5) business days after notice from Landlord of such increase and Tenant's approval thereof in accordance with this Paragraph 4.D.

5.    Construction of Tenant Improvements.

        A.    Landlord and Tenant hereby approve Devcon Construction Incorporated as the contractor, which Landlord and Tenant shall retain under a mutually acceptable construction contract to be jointly administered by Landlord and Tenant. Landlord shall pay the contractor directly for all contractors' invoices in accordance with the construction contract specified herein. Upon Tenant's approval of the Plans including the estimate of the cost of the Tenant Improvements and Landlord's receipt of payment of any such estimated cost exceeding the amount of the Tenant Improvement Allowance, Landlord and Tenant shall cause Devcon Construction Incorporated to proceed in secure a building permit and commence construction of the Tenant Improvements provided that Landlord and Tenant shall cooperate together in executing permit applications and performing other actions reasonably necessary to enable Landlord and Tenant to obtain any required permits or certificates of occupancy; and provided further that the Building has in Landlord's discretion reached the stage of construction where it is appropriate to commence construction of the Tenant Improvements in the Premises.

        B.    Without limiting the provisions of Paragraph 35 of the Lease Landlord shall not be liable for any direct or indirect damages suffered by Tenant as a result of delays in construction beyond Landlord's reasonable control, Including, but not limited to, delays due to strikes or unavailability of materials or labor, or delays caused by Tenant (including delays by the Space Planner, the contractor or any one else performing services on behalf of Landlord or Tenant).

        C.    If any work is to be performed on the Premises solely by Tenant or Tenant's contractor or agents:

        (1)   Such work shall proceed upon Landlord's written approval (which consent shall not be unreasonably withheld, delayed or conditioned) of Tenant's contractor, public liability and property damage insurance carried by Tenant's contractor, and detailed plans and specifications for such work, shall be at Tenant's sole cost and expense and shall further be subject to the provisions of Paragraphs 12 and 27 of the Lease.

        (2)   All work shall be done in conformity with a valid building permit when required, a copy of which shall be furnished to Landlord before such work is commenced, and in any case, all such work shall be performed in accordance with all applicable Regulations. Notwithstanding any failure by Landlord to object to any such work, Landlord shall have no responsibility for Tenant's failure to comply with all applicable Regulations.

        (3)   If required by Landlord or any lender of Landlord all work by Tenant or Tenant's contractor or agents shall be done with union labor in accordance with all union labor agreements applicable to the trades being employed.

        (4)   All work by Tenant or Tenant's contractor or agents shall be scheduled through Landlord.

        (5)   Tenant or Tenant's contractor or agents shall arrange for necessary utility, hoisting and elevator service with Landlord's contractor and shall pay such reasonable charges for such services as may be charged by Tenant's or Landlord's contractor.

        (6)   Tenant's entry to the Premises for any purpose, including, without limitation, inspection or performance of Tenant construction by Tenant's agents, prior to the date Tenant's obligation to pay

57

rent commences shall be subject to all the terms and conditions of the Lease except the payment of Rent. Tenant's entry shall mean entry by Tenant, its officers, contractors, licensees, agents, servants, employees, guests, invitees, or visitors.

        (7)   Tenant shall promptly reimburse Landlord upon demand for any reasonable expense actually incurred by the Landlord by reason of faulty work done by Tenant or its contractors or by reason of any delays caused by such work, or by reason of inadequate, clean-up.

6.    Completion and Rental Commencement Date.

        A.    Tenant's obligation to pay Rent under the Lease shall commence on the applicable described in Paragraph 2 of the Lease, however:

        (1)   If Tenant delays in preparing or approving the Space Plans or the Plans, or fails to approve the estimate of the cost of the Tenant Improvements or any other matter requiring Tenant's approval, or to pay the excess cost of Tenant Improvements, in each case within the time limits specified herein; or

        (2)   If the construction period is extended because Tenant requests any changes in construction, or modifies the approved Plans or if the same do not comply with applicable Regulations; or

        (3)   If Landlord is otherwise delayed in the construction of the Tenant Improvements for any act or omission of or breach by Tenant or anyone performing services on behalf of Tenant or on account of any work performed on the Premises by Tenant or Tenant's contractors or agents, then the date described in Paragraph 2 of the Lease shall be deemed to be accelerated by the total number of days of Tenant delays described in (a) through (c) above (each, a "Tenant Delay"), calculated in accordance with the provisions of Paragraph 6. B below.

        B.    If the Term of the Lease has not already commenced pursuant to the provisions of Paragraph 2 of the Lease and substantial completion of the Tenant Improvements has been delayed on account of any Tenant Delays, then upon actual substantial completion of the Tenant Improvements (as defined in Paragraph 2 of the Lease), Landlord shall notify Tenant in writing of the date substantial completion of the Tenant Improvements would have occurred by for such Tenant Delays, and such date shall thereafter be deemed to be the Term Commencement Date for all purposes under the Lease. Tenant shall pay to Landlord, within five (5) business days after receipt of such written notice (which notice shall include a summary of Tenant Delays), the per diem Base Rent times the number of days between the date the Term Commencement Date would have otherwise occurred but for the Tenant Delays (as determined by Landlord's written documentating describing Tenant Delays), and the date of actual substantial completion of the Tenant Improvements.

        C.    Promptly after substantial completion of the Tenant Improvements, Landlord shall give notice to Tenant and Tenant shall conduct an inspection of the Premises with a representative of Landlord and develop with such representative of Landlord a punchlist of items of the Tenant Improvements that are not complete or that require corrections. Upon receipt of such punchlist. Landlord shall proceed diligently to remedy such items at Landlord's cost and expense provided such items are part of the Tenant Improvements to be constructed by the Landlord hereunder and are otherwise consistent with Landlord's obligations under this Improvement Agreement and provided Tenant has fully paid Landlord for the cost of the Tenant Improvements exceeding the Tenant Improvement Allowance (with any dispute between Landlord and Tenant pertaining thereto to be resolved by the Space Planner or Landlord's general contracts submitting to binding arbitration conducted and determined in San Diego County according to the prevailing rules of the American Arbitration Association for arbitration of commercial disputes). Substantial completion shall not be delayed notwithstanding delivery of any such punchlist.

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        D.    A default under this Improvement Agreement shall constitute a default under the Lease, and the parties shall be entitled to all rights and remedies under the Lease in the event of a default hereunder by the other party (notwithstanding that the Term thereof has not commenced).

        E.    Without limiting the "as-is" provisions of the Lease, except for the Tenant Improvements, if any, to be constructed by Landlord pursuant to this Improvement Agreement, Tenant accepts the Premises in its "as-is" condition and acknowledges that it has had an opportunity to inspect the Premises prior to signing the Lease.

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SCHEDULE 1
TO EXHIBIT C

BASE BUILDING WORK

Completed according to plans and spaces prepared by Pacific Cornerstone Architects consisting of sheets TS-1 to L-7, and dated June 1, 1998.

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SCHEDULE 2
TO EXHIBIT C

BUILDING STANDARDS

        The following constitutes the Building Standard tenant improvements ("Standards") in the quantities specified:

The Standards are detailed in the Project Manual for Eastgate Technology Park Lot-3 dated August 11, 1997 the Bid Addendum #1, dated August 11, 1997 and the Base Building Work described in Schedule 1 to Exhibit C.

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EXHIBIT D

Tenant's Hazardous Materials Declaration

This exhibit shall be completed by Tenant upon occupancy of the entire Premises, but no later than May 1, 1999. The final Exhibit D, to be mutually agreed upon by the parties, shall be inserted to replace this Exhibit D.

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EXHIBIT E

MCAS Miramar Comprehensive Land Use Plan

        The MCAS Miramar Comprehensive Land Use Plan follows this page, and consists of four (4) pages.

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AIRPORT NOISE/LAND USE COMPATIBILITY MATRIX
IMPLEMENTATION DIRECTIVES

        All the uses specified are "compatible" up to the noise level indicated. Specified uses are also allowed as "conditionally compatible" in the noise levels shown if two specific conditions are met and certified by the local general purpose agency.

•

Proposed buildings will be noise attenuated to the level shown on the matrix based on an acoustical study submitted along with building plans.



•

In the case of discretionary actions, such as approval of subdivisions, zoning changes, or conditional use permits, an aviation easement for noise shall be required to be recorded with the County Recorder as a condition of approval of the project. A copy shall also be filed with the affected airport operator. For all property transactions, appropriate legal action shall be given to all purchasers, lessees and renters of property in "conditionally compatible" areas which clearly describes the potential for impacts from airplane noise associated with airport operations. Notice will also be provided as required on the State Real Estate Disclosure Form.

        Identified uses proposed in noisier areas than the level indicated on the matrix are considered "incompatible."

        The directives below relate to the specific "conditionally compatible" land use categories identified by number on the matrix.

3.

New schools, preschools and libraries located within the CNEL 60-65 contours must be subjected to an acoustical study to assure that interior levels will not exceed CNEL 45.

4.

New residential and related uses located within the CNEL 60-65 contours must be subjected to an acoustical study to assure that interior levels will not exceed CNEL 45. Appropriate legal notice shall be provided to purchasers, lessees and renters of properties in this conditionally compatible zone in the manner previously described.

"Residential hotels" are defined as those that have 75% or more of accommodations occupied by permanent guests (staying more than 30 days) or those hotels which have at least 50 percent of their accommodations containing kitchens.

5.

Transient Lodging is defined as hotels and motels, membership lodgings (Y's etc.), suite or apartment hotels, hostels or other temporary residence units, not defined as residential hotels, above. Within the CNEL 60-70 contours, buildings must be subjected to an acoustical study to assure that interior levels do not exceed CNEL 45. Appropriate legal notice shall be provided to purchasers, lessees, and renters of properties in this conditionally compatible zone in the manner previously described.

6.

Office buildings include many types of office and service uses: business and business services; finance, insurance, real estate; personal services; professional (medical, legal and educational); and government, research and development and others. Within the CNEL 65-70 contours, buildings must be subjected to an acoustical study to assure that interior levels do not exceed CNEL 50. Appropriate legal notice shall be provided to purchasers, lessees, and renters of properties in this conditionally compatible zone in the manner previously described.

8.

For new commercial retail uses located within the CNEL 65-75 contours, buildings must be subjected to an acoustical study to assure that interior levels do not exceed CNEL 50. Appropriate legal notice shall be provided to purchasers, lessees, and renters of properties in this conditionally compatible zone in the manner previously described.

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CLUP
Comprehensive Land Use Plan
1990

[GRAPHIC]

Naval Air Station Miramar
San Diego, California

What is the CLUP?

        The Naval Air Station (NAS) Miramar Comprehensive Land Use Plan (CLUP) represents Navy and community recommendations for achieving compatible development near the air station. The CLUP was prepared by the San Diego Association of Governments (SANDAG) under authority of Article 3.5 of the California Public Utilities Code. The CLUP also incorporates recommendations of the Navy's Air Installation Compatible Use Zones (AICUZ) program, part of a nation-wide planning effort by the Department of Defense to look at accident potential and noise impacts around each military air installation in the United States. The goals of the CLUP are to:

•

Protect NAS Miramar from incompatible land uses;



•

Provide criteria for the orderly growth of the area surrounding the air station;



•

Safeguard the general welfare of those inhabitants within the vicinity of the air station by protecting them from the adverse effects of aircraft noise and accident potential; and



•

Ensure that no obstructions or other hazards affect navigable airspace.

Why is there a Problem?

        Many military and civilian airfields were originally constructed in the open countryside. Over the years pressures to house a growing population meant people tended to move onto land near airfields. This nearby land normally has established access routes, and in many cases offers the advantages of living or working close to a major employment base. Meanwhile the level of air traffic has increased. These counteracting trends can cause problems for the air facility as well as local residents. Specifically, problems arise when use of the land is not controlled for compatibility with air operations.

        Although noise impact areas no longer grow at rates experienced in the 1970's (and have actually decreased at NAS Miramar), the land near all airfields will continue to have high noise levels and potential for aircraft accidents. Land near airfields is suitable for certain types of development, such as agriculture or industrial uses, but may not be suitable for other types of development. Land near NAS Miramar consists of a mix of residential, commercial and industrial uses. For the most part, these developments are considered compatible with the current land use plan.

Community Participation

        Land use compatibility is a shared concern of the Navy, the public, and the local government agencies who have planning and zoning authority. The decision makers for the local government have the key responsibility for taking actions that preserve land use compatibility. The cooperative action of all parties helps to resolve land use compatibility problems.

Navy Role in the Economy

        More than 11,000 military and 2,500 civilian personnel work at NAS Miramar. Nearly 2,500 bachelor and 615 married military personnel (with 1,000 dependents) live at the air facility. An additional 1800 military, with 5,500 dependents, live in military housing off station with the rest living

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in the surrounding communities. All totalled—military, civilians and dependents—NAS Miramar has an extended family of nearly 30,000.

        NAS Miramar is part of the naval complex in San Diego County. Over 175,000 Department of Defense personnel work in San Diego with a total economic impact to the community of $9.5 billion annually. NAS Miramar accounts for over $700 million of this total. Overall, one in five dollars in the San Diego economy is a Navy dollar.

Installation Mission

        NAS Miramar is the home of the jet fighter and early warning aircraft of the Pacific Fleet. The mission of the station is to maintain and operate facilities and provide services and materials to support operations of aviation activities and units of the operating forces of the Navy.

What is NAS Miramar doing?

        The people stationed at NAS Miramar are aware of their responsibility to minimize noise levels and hazards for the residents of nearby communities. Since 1974, noise complaints at NAS Miramar have decreased from a high of over 2,000 to 210 in 1991. This decrease resulted from the installation of hush houses to suppress ground engine runups, noise abatement procedures, and changes to aircraft mix.

More Information

        Copies of the NAS Miramar CLUP may be obtained from SANDAG. Information on height restrictions and obstruction determination can be obtained from the Federal Aviation Administration or NAS Miramar. Information on land use compatibility may be obtained from the Community Planning Liaison Office at NAS Miramar.

NAS Miramar NOISE COMPLAINTS (619) 531-4277	Community Planning Liaison Office Code: 00M, NAS Miramar San Diego, CA 92165-5000 (619) 537-1235
San Diego Association of Governments 401 B Street, Suite 800 San Diego, CA 92101 (619) 595-5300	Federal Aviation Administration 13006 Aviation Blvd. Hawthorne, CA 90261 (310) 297-1667

[MAP GRAPHIC]

CLUP Composite Map CLUP Area

        The NAS Miramar CLUP Composite Map shows a combination of noise and Accident Potential Zones (APZs). The noise descriptor used in this study is CNEL, which stands for Community Noise Equivalent Level. CNEL is the weighted average sound level for a 24-hour day. It is calculated by weighing evening and night operations five and ten times more than day operations, respectively, to adjust for the increased inflation caused by noise during evening and night hours. The depicted noise footprint ranges from 60 dB CNEL to 75 dB CNEL. The Accident Potential Zones represent areas that are overflown by aircraft and, therefore, more susceptible to accidents. The three APZs are APZ II, APZ I, and the Clear Zone; each progressively closer to the runway and potentially of most concern. The Land Use Compatibility Guidelines for noise and APZs promotes compatible development near the air station. The guidelines recommend restricting noise sensitive development in the high noise

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zones, and restricting population density within the APZs. Zones of higher noise and accident potential have the smallest range of compatible land uses.

[MAP GRAPHIC]

Vicinity Map

Heights and Obstructions

        In addition to noise and APZ considerations, height restrictions are necessary to insure that no object will interfere with safe operation of aircraft or deny operational capability of the air station. Any development proposal that includes an object over 200 feet above ground level (AGL) or which penetrates the 100:1 slope extending 20,000 feet from the nearest point of the nearest runway must be submitted to the Federal Aviation Administration (FAA) for an obstruction evaluation. SANDAG and NAS Miramar must also be notified of these proposals by the applicant. The following should also be examined for compatibility:

•

Uses that release into the air any substance that would impair visibility or otherwise interfere with the operation of aircraft (e.g. dust, smoke, or steam).



•

Uses which emit or reflect light that would interfere with aircraft vision.



•

Uses that produce emissions which would interfere with aircraft communications systems, navigation systems or other electrical systems.



•

Uses which attract birds, such as (but not limited to) sanitary landfills, maintenance of feed stations, growing certain types of vegetation, etc.

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Airport Noise/Land Use Compatibility Matrix

[GRAPHIC]

        This matrix should be used with reference to the Implementation Directives shown on the reverse.

Land Use Compatibility In Accident Potential Zones

[GRAPHIC]

        Residential Land uses include single family, duplex, mobile homes, multi-family, and residential homes. See 1992 CLUP petition for siting of flammable, hazardous and toxic materials within the APZs. It is suggested that lot coverage in APZ1 should be less than 25%; and less than 40% in APZ2.

        For further information on determining compatibility in APZs, please see the NAS Miramar CLUP.

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EXHIBIT F

Signage Criteria
For
Bridge Points Corporation Centre

        The final Exhibit F, to be mutually agreed upon by the parties, shall be inserted to replace this Exhibit F.

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EXHIBIT "B"

SUBLEASE

[Attached]

SUBLEASE AGREEMENT

        This SUBLEASE AGREEMENT ("Sublease") is made and entered into as of the 13th day of December 1999 by and between FRANKLIN RESOURCES, INC., a Delaware corporation ("Sublandlord"), and MP3.com, Inc., a Delaware corporation ("Subtenant"), with respect to the following facts and circumstances:

RECITALS

        A.    Spieker Properties, L.P., a California limited partnership ("Landlord") is the owner of approximately 29 acres and up to approximately 591,000 square feet (existing, under construction or planned) in 9 buildings known as Bridge Pointe Corporate Centre within the Eastgate Technology Park in San Diego, California (the "Project"). A depiction of the Project is attached hereto as Exhibit "A" and incorporated herein by this reference. Phase A of the Project consists of 4 existing buildings known as "Building 1" (also referred to as the "Phase A-1 Premises") located at 4770 Eastgate Mall, "Building 2" (also referred to as the "ADC Telecommunications Premises") located at 4790 Eastgate Mall, "Building 3" (also referred to as the "Phase A-2 Premises") located at 4760 Eastgate Mall and "Building 4" (also referred to as the "Phase A-3 Premises") located at 4780 Eastgate Mall. Phase B of the Project consists of 2 buildings under construction known as "Building 5" (also referred to as the "Phase B-2 Premises") located at 4810 Eastgate Mall and "Building 6" (also referred to as the "Phase B-1 Premises") located at 4820 Eastgate Mall. Phase C of the Project consists of 3 planned buildings known as "Buildings 7 through 9".

        B.    Landlord and Sublandlord entered into an Industrial Net Lease dated September 2, 1998, as amended by that certain First Amendment to Lease dated as of March 15, 1999 between Landlord and Sublandlord (collectively, the "Phase A Lease") whereby Landlord leased to Sublandlord the Phase A-2 Premises and the Phase A-3 Premises, upon the terms and conditions contained therein. Futhermore, Landlord and Sublandlord entered into another Industrial Net Lease dated September 2, 1998, (the "Phase B Lease") whereby Landlord leased to Sublandlord the Phase B-1 Premises and the Phase B-2 Premises, upon the terms and conditions contained therein. A true, correct and complete copy of the Phase A Lease and the Phase B Lease is attached hereto as Exhibit "B" and Exhibit "E", respectively and made a part hereof. All capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Phase A Lease and the Phase B Lease.

        C.    Sublandlord and Subtenant are desirous of entering into a sublease of the Phase A-3 Premises ("Sublease Premises") on the terms and conditions hereafter set forth.

        NOW, THEREFORE, in consideration of the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto mutually covenant and agree as follows:

        1.    Sublease.    Sublandlord hereby subleases and demises to Subtenant and Subtenant hereby hires and subleases from Sublandlord the Sublease Premises which contain 47,000 rentable square feet, upon and subject to the terms, covenants and conditions hereinafter set forth.

        2.    Term.

        (a)   The term of this Sublease ("Sublease Term") shall commence on the earlier of (i) February 1, 2000 (extended for each day of a documented Landlord or Sublandlord Delay in substantial completion of the Tenant Improvements as defined in the Work Letter) or (ii) Substantial Completion (as defined below) ("Sublease Commencement Date") and shall terminate on March 31, 2009 ("Sublease Expiration Date"). As used herein, the term "Substantial Completion" shall mean (A) all of the Sublease Premises' plumbing, heating, life safety, ventilation, air conditioning and electrical systems are operational to the extent necessary to service the Sublease Premises, (B) Landlord has substantially completed all work required to be performed by Landlord in accordance with the Work Letter Agreement executed among Landlord, Sublandlord and Subtenant of even date herewith and attached hereto as Exhibit "D" ("Work

Letter Agreement"), except minor "punch-list" items which shall thereafter be promptly completed, (C) Subtenant has obtained a certificate of occupancy for the Sublease Premises or its equivalent in accordance with the Work Letter Agreement, (D) Subtenant has been provided with the number of parking spaces to which it is entitled under this Sublease, and (E) Subtenant has been tendered access to the Sublease Premises.

        (b)   Sublandlord shall deliver possession of the Sublease Premises to Subtenant upon full execution of this Sublease and receipt of Landlord's consent pursuant to Paragraph 17 hereof, with the roof and all plumbing, lighting, heating, ventilating and air conditioning systems within the Sublease Premises in good working order, at which time Subtenant shall have the right to commence the Tenant Improvements pursuant to the Work Letter.

        (c)   Subtenant acknowledges that Subtenant has inspected and accepts the Sublease Premises in its present condition, broom clean, "as is" and is suitable for Subtenant's intended operations in the Sublease Premises, subject to punch list items and latent defects not visually discoverable by Subtenant in accordance with the Work Letter and Paragraph 2.B of the Master Lease. Subtenant further acknowledge that except as set forth in the work Letter Agreement or expressly set forth in this Sublease, no representations as to the condition or repair of the Sublease Premises and no promises to alter, remodel or improve the Sublease Premises have been made by Landlord, Sublandlord or any agents of either party.

        (d)   After the Sublease Commencement Date, Subtenant shall promptly execute and return to Sublandlord a "Start-Up Letter" in which Subtenant shall agree, among other things, to acceptance of the Sublease Premises and to the determination of the Sublease Commencement Date, in accordance with the terms of this Sublease, but Subtenant's failure or refusal to do so shall not negate Subtenant's acceptance of the Sublease Premises or affect determination of the Sublease Commencement Date.

        3.    Subrental

        (a)    Base Rental.    Beginning with the Sublease Commencement Date and thereafter during the Sublease Term and ending on the Sublease Expiration Date, Subtenant shall pay to Sublandlord monthly installments of base rent ("Base Rental") as set forth below. The first monthly installment of Base Rental shall be paid by Subtenant upon the execution of this Sublease. Base Rental and additional rent shall hereinafter be collectively referred to as "Rent." Base Rental

2

shall be increased by four percent (4%) per annum on each February 1^st of each year of the Sublease Term as follows:

Period	Monthly Base Rental (Per Square Foot)
Sublease Commencement Date—January 31, 2001	$	1.25
February 1, 2001—January 31, 2002	$	1.30
February 1, 2002—January 31, 2003	$	1.35
February 1, 2003—January 31, 2004	$	1.40
February 1, 2004—January 31, 2005	$	1.46
February 1, 2005—January 31, 2006	$	1.52
February 1, 2006—January 31, 2007	$	1.58
February 1, 2007—January 31, 2008	$	1.64
February 1, 2008—January 31, 2009	$	1.71
February 1, 2009—March 31, 2009	$	1.78

        (b)    Operating Expenses.    Beginning with the Sublease Commencement Date and thereafter during the Sublease Term, Subtenant shall pay to Sublandlord as additional rent under this Sublease, Subtenant's Proportionate Share of the amounts that Sublandlord, as Tenant, has to pay Landlord, pursuant to Paragraph 7 of the Phase A Lease. "Subtenant's Proportionate Share" shall mean the following: 100% of the Building in which the Phase A-3 Premises are located and 21.78% of Phase A of the Project.

        (c)    Payment of Rent.    Except as otherwise specifically provided in this Sublease, Rent shall be payable in lawful money without notice or demand, and without offset, counterclaim, or setoff in monthly installments, in advance, on the first day of each and every month during the Sublease Term. All of said Rent is to be paid to Sublandlord at its office at the address set forth in Paragraph 15 herein, or at such other place or to such agent and at such place as Sublandlord may designate by notice to Subtenant. Any additional rent payable on account of items which are not payable monthly by Sublandlord to Landlord under the Phase A Lease is to be paid directly to Sublandlord as and when such items are payable by Sublandlord to Landlord under the Phase A Lease unless a different time for payment is elsewhere stated herein. Sublandlord shall request that copies of all notices sent by Landlord pursuant to the Phase A Lease also be sent to Subtenant at the address set forth in Paragraph 15 below. In addition Sublandlord agrees to provide Subtenant with copies of any notices, statements or invoices received by Sublandlord from Landlord pursuant to the terms of the Phase A Lease.

        4.    Security Deposit.    Concurrently with the execution of this Sublease, Subtenant shall deposit with Sublandlord the sum of Eighty Four Thousand and no/100 Dollars ($84,000.00) ("Deposit"), which shall be held by Sublandlord as security for the full and faithful performance by Subtenant of its covenants and obligations under this Sublease. The Deposit is not an advance Rent deposit, an advance payment of any other kind, or a measure of Sublandlord's damage in case of Subtenant's default. If Subtenant defaults in the full and timely performance of any or all of Subtenant's covenants and obligations set forth in this Sublease, then Sublandlord may, from time to time, without waving any other remedy available to Sublandlord, use the Deposit, or any portion of it, to the extent necessary to cure or remedy the default or to compensate Sublandlord for all or a part of the damages sustained by Sublandlord resulting from Subtenant's default. Subtenant shall immediately pay to Sublandlord within five (5) business days following demand,

3

the amount so applied in order to restore the Deposit to its original amount, and Subtenant's failure immediately do so shall constitute a default under this Sublease. If Subtenant is not in default with respect to the covenants and obligations set forth in this Sublease at the expiration or expiration or earlier termination of this Sublease, Sublandlord shall return Deposit to Subtenant after the expiration or earlier termination of this Sublease, Sublandlord's obligations with respect to the Deposit are those of a debtor and not a trustee. Sublandlord shall not be required to maintain the Deposit separate and apart from Sublandlord's general and other funds and Sublandlord may commingle the Deposit with any of Sublandlord's general or other funds. Subtenant shall not at any time be entitled to interest on the Deposit.

        5.    Additional Security Deposit; Letter of Credit.

        (a)    Delivery of Letter of Credit.    In addition to delivering the Deposit, Subtenant shall also, on execution of this Sublease, deliver to Sublandlord and cause to be in effect during the entire Sublease Term an unconditional, irrevocable letter of credit ("LOC") in the amount of Three Hundred Fifty Thousand Five Hundred and no/100 Dollars ($352,500.00), as such LOC may be increased as provided in this Sublease (the "LOC Amount") for a term extending not less than thirty (30) days beyond the expiration date of this Sublease, which LOC shall be held by Sublandlord as security for the full and faithful performance by Subtenant of its covenants and obligations under this Sublease. The LOC shall be in a form acceptable to Sublandlord, shall permit partial draws and shall be issued by a bank selected by Subtenant and acceptable to Sublandlord. The issuer of the LOC shall be a commercial bank that accepts deposits, maintains accounts, has a local office in San Diego County that will negotiate a letter of credit, and the deposits of which are insured by the Federal Deposit Insurance Corporation. Such bank shall have a shareholders equity of at least Five Hundred Million Dollars ($500,000,000.00). Subtenant shall pay all expenses, points, or fees mortgaged, assigned or encumbered in any manner whatsoever by Subtenant without the prior written consent of Sublandlord, which consent may be withheld in the exercise of Sublandlord's sole and absolute discretion.

        (b)    Replacement of Letter of Credit.    Subtenant may, from time to time, replace any existing LOC with a new LOC if the new LOC (i) becomes effective at least thirty (30) days expiration of the LOC that it replaces; (ii) is in the required LOC amount; (iii) is issued by a bank acceptable to Sublandlord; and (iv) otherwise complies with the requirements of this Paragraph 5.

        (c)    Sublandlord's Right to Draw on Letter of Credit.    Sublandlord shall hold the LOC as security for the performance of Subtenant's obligations under this Sublease. If, after any required notice and failure to cure within any applicable period provided in this Sublease, Subtenant defaults on any provision of this Sublease, Sublandlord may, without prejudice to any other remedy it has, only draw on that portion of the LOC necessary to (i) pay Rent or other sum in default; (ii) pay or reimburse Sublandlord for any amount that Sublandlord may spend or become obligated to spend in exercising Sublandlord's rights under Paragraph 30 (Right of Landlord to Perform Tenant's Covenant) of the Phase A Lease; and/or (iii) compensate Sublandlord for any expense, loss, or damage that Sublandlord may suffer because of Subtenant's default. If Subtenant fails to renew or replace the LOC at least thirty (30) days before its expiration, Sublandlord may, without prejudice to any other remedy it has, draw on the entire amount of the LOC, provided that if Sublandlord so draws on the LOC, so long as Subtenant is not otherwise in default, Sublandlord shall deliver the amount so drawn to Subtenant upon Subtenant's delivery to Sublandlord of a new LOC in the amount then required, provided that Subtenant makes such delivery within ten (10) days of Sublandlord's draw.

        (d)    LOC Security Deposit.    Any amount of the LOC that is drawn on by Sublandlord but not applied by Sublandlord shall be held by Sublandlord as a security deposit (the "LOC Security Deposit") in accordance with Paragraph 4 of this Sublease and returned to Subtenant within five

4

(5) business days of Subtenant's restoration of the LOC to the full amount required under this Sublease.

        (e)    Restoration of Letter of Credit and LOC Security Deposit.    If Sublandlord draws on any portion of the LOC and applies all or any portion of such draw, Subtenant shall, within five (5) business days after demand by Sublandlord, either (i) deposit cash with Sublandlord in an amount that, when added to the amount remaining under the LOC and the amount of any LOC Security Deposit, shall equal the LOC Amount then required under this Paragraph 5 or (ii) reinstate the LOC to the full LOC Amount. Any portion of the LOC drawn by Sublandlord but not applied shall be returned to Subtenant upon Subtenant's restoration of the LOC Amount as required hereby.

        (f)    Required LOC Amount.    Notwithstanding the forgoing, Subtenant's required LOC Amount shall be increased when Subtenant exercises any of its rights to expand its Sublease Premises, as allowed in Paragraphs 7 and 8 by an amount that is equal to six (6) months of the initial Base Rent for any expansion space (as such amount may be reduced in accordance with the procedures set forth in subparagraph (g) below). Said increase in LOC shall be completed and an amended LOC shall be delivered to Sublandlord upon execution of any amendment for such expansion space.

        (g)    Reduction of LOC Amount.

        (i)    Definitions.    For purposes of this Paragraph 5(g), the following terms shall have the meanings set forth below:

(A)

"Audited Financial Statements" means unqualified (except for a qualification for a change in accounting principles with which the opining CPA concurs) audited financial statements of Subtenant as of the end of, and for the, applicable Measurement Year, certified by any of the "Big Five" firms or independent certified public accountants of recognized standing selected by Subtenant but acceptable to Sublandlord ("CPA"):



(B)

"Cash Flow From Operations" means, with respect to any Measurement Year, cash flow from operating activities as set forth in the Subtenant Financial Report and determined in accordance with GAAP, including, without limitation, the requirements of Financial Accounting Standards Board Statement No. 95, as amended, but adjusted to exclude any such cash flows arising from extraordinary or non-recurring items.



(C)

"Financial Milestones" means that (1) as of the applicable Measurement Date, Subtenant has Working Capital of at least Thirty Million Dollars ($30,000,000.00) and (2) during the applicable Measurement Year, Subtenant has achieved (i) Net Sales of a least One Hundred Million Dollars ($100,000,000.00) and (ii) Cash Flow From Operations that is Greater than Zero (0).



(D)

"GAAP" means generally accepted accounting principles consistently applied.



(E)

"Measurement Date" means the last day of the applicable Measurement Year.



(F)

"Measurement Year" means Subtenant's most recent four(4) quarter fiscal periods ending prior to the applicable Reduction Date.



(G)

"Milestones" means the Financial Milestones and the Secondary Milestones, collectively.



(H)

"Net Sales" means, with respect to any Measurement Year, aggregate gross revenues from the sale of Subtenant's products or merchandise or the provision of services by Subtenant in connection with Subtenant's business, but deducting or excluding therefrom, as applicable: (1) appropriate allowances for (i) merchandise returns by customers, (ii) uncollectible accounts receivable and (iii) anticipated direct or indirect refunds,

5

rebates, discount or other credits or sales price reductions to customers: (2) interest, service, finance or sale carrying charges paid by customers for extension of credit on sales where not included in the merchandise sales price; and (3) revenues from sales, not in the ordinary course of Subtenant's business, of fixtures, machinery or equipment; all as determined in accordance with GAAP.

(I)

"Reduction Date" means the first (1st) anniversary of the Sublease Commencement Date and each anniversary of the Sublease Commencement Date thereafter.



(J)

"Reduction Increment" means an amount equal to the lesser of (1) thirty-five percent (35.00%) of the amount of the LOC as required in Paragraph 5(f) hereof or (2) the excess of the then amount of the LOC over the Reduction Limit.



(K)

"Reduction Limit" means Zero Dollars ($0).



(L)

"Secondary Milestones" means that (1) as of the applicable Measurement Date, Subtenant has Working Capital of at least Fifty Million Dollars ($50,000,000.00) and (2) during the applicable Measurement Year, Subtenant has achieved (i) net Sales at least Two Hundred Fifty Million Dollars ($250,000,000.00) and (ii) Cash Flow From Operations of at least Thirty Million Dollars ($30,000,000.00).



(M)

"Secondary Reduction Increment" means an amount equal to the lesser of (1) fifty percent (50%) of the amount of the LOC as required in Paragraph 5(f) hereof or (ii) the excess of the then amount of the LOC over the Reduction Limit.



(N)

"Subtenant Financial Report" means a report package consisting of: (1) a certificate of Subtenant setting forth each component of the applicable Milestones and, with respect to any such component that is not set forth on the face of the Audited Financial Statements, a supporting schedule showing, in reasonable detail, the calculation thereof, certified by the principal financial officer of Subtenant as fairly presenting the amounts of all components of the applicable Milestones in accordance with this Paragraph 5 together with copies of (2) the applicable audited Financial Statements.



(O)

"Working Capital" means the excess of current assets over current liabilities of Subtenant, as such terms are defined by, and determined in accordance with, GAAP.

        (ii)    Reduction Procedure.    Following any Reduction Date on which Subtenant desires to reduce the LOC Amount, Subtenant shall deliver to Sublandlord a Subtenant Financial Report and, provided that Subtenant has satisfied each of the applicable Financial Milestones or, as the case may be, each of the Secondary Milestones, as of the Measurement Date with respect to the Measurement Year and, provided further that both no default has occurred and is continuing as of the date that is ten (10) Business Days following the date upon which Sublandlord receives such Subtenant Financial Report ("Release Date"), then, for each such Reduction Date until the amount of the LOC has been reduced to the Reduction Limit, if Subtenant has so satisfied the applicable Financial Milestones, the LOC shall be reduced effective as of the Release Date by the Reduction Increment, unless Subtenant has so satisfied the applicable Secondary Milestones, in which event the LOC shall be reduced by the Secondary Reduction Increment. Promptly following any such Release Date, Sublandlord shall provide written notice to Subtenant of any such permitted reduction in the amount of the LOC and then, from and after Subtenant's receipt of such Sublandlord notice, Subtenant shall be authorized to deliver a substitute or amended LOC to Sublandlord satisfying the requirements set forth in this Paragraph 5 and in an amount equal to the LOC as reduced by such Reduction Increment or Secondary Reduction Increment, as the case may be, and Sublandlord shall exchange the prior LOC for the substitute LOC in cooperation with the bank.

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        6.    Signage.    Subtenant shall have the right to install at Subtenant's sole cost and expense a business identification sign identifying Subtenant on the upper exterior of the building and adjacent to the building entrance doors of the building in which the Sublease Premises are located, subject to Landlord's prior written approval, which approval shall not be unreasonably withheld, delayed or conditioned. Except for the foregoing, Subtenant shall have no right to install or keep Subtenant identification signs in any other location outside the Sublease Premises. The size, design, color and other physical aspects of all such permitted signs shall also be subject to Landlord's prior written approval, which approval shall not be unreasonably withheld, delayed or conditioned and shall also be subject to any covenants, conditions or restrictions encumbering the Sublease Premises and any applicable municipal or other governmental permits and approvals. The cost of all such signs, including the installation, maintenance and removal thereof, shall be at Subtenant's sole cost and expense. If Subtenant fails to maintain its signs, or if Subtenant fails to remove same upon the expiration or earlier termination of this Sublease and repair any damage caused by such removal, Sublandlord may do so at Subtenant's expense and Subtenant shall reimburse Sublandlord for all actual costs incurred by Sublandlord to affect such removal.

        7.    First Right to Sublease Phase A-2 Premises.

        a.     Provided Subtenant is not in material default (beyond any applicable notice and cure periods) at the time of exercise and has not been in material default (beyond any applicable notice and cure periods) during the Sublease Term of any of the material terms and conditions of the Sublease, and Subtenant has not assigned or sublet more than twenty-five percent (25%) of the Sublease Premises to unaffiliated third parties, Subtenant shall have a continuing first right (the "FR to Sublease Phase A-2 Premises") until June 30, 2000, to exercise its right to sublease the Designated Space (as defined below) within the Phase A-2 Premises. The FR to Sublease Phase A-2 Premises shall be exercised, if at all, within five (5) business days of receipt of notice ("Sublandlord's Notice") from Sublandlord and Landlord of their mutual intention to accept a bona fide third party offer to lease or sublease from a prospective tenant ("Prospective Tenant"). Sublandlord's Notice also indicate the amount of space the Prospective Tenant intends to sublease or lease (the "Designated Space").

        b.     Base Rental for the Designated Space shall commence on the earlier of: (a) the date which the improvements to be constructed or performed in the Designated Space by or on Sublandlord's behalf shall have been substantially completed (Sublandlord shall deliver the Designated Space in a condition similar to the condition Sublandlord is required to deliver the sublease Premises hereunder and the Sublandlord shall provide Subtenant with a similar Tenant Improvement Allowance for the Designated Space); (b) one hundred fifty (150) days after receipt of notice from subtenants of its exercise of its FR to sublease Phase A-2 Premises, which one hundred fifty (150) day period shall be extended one day for each delay in substantial completion of the tenant improvements caused by a documented Landlord or Sublandlord Delay (as defined in the work Letter); or (c) July 1, 2000. The term and conditions of the sublease for the Designated Space shall be the same terms and conditions in this Sublease except that (a) the monthly Base Rental for the Phase A-2 Premises shall be (i) $1.25 per square foot of rentable space per month through December 31, 2000, and $1.33 per square foot of rentable space from January 1, 2001 through December 31, 2001, which amount shall increase by four percent (4%) per year thereafter, (b) the term of any sublease for the Designated Space shall be coterminous with this Sublease, and (c) the Occupancy Density shall be a maximum of four and one-half (4.5) persons per 1,000 square feet.

        c.     Notwithstanding the forgoing, Subtenant's first right to Sublease Phase A-2 Premises is subordinate to the rights of Science Applications International Corporation ("SAIC") to lease the Phase A-2 Premises and shall remain subordinate through December 31, 1999. Subtenant's five (5) business day period to respond to Sublandlord's Notice shall run

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concurrently with the SAIC's five (5) business day period to respond to Landlord. In addition, if Sublandlord or Landlord has not executed a sublease or lease for the Designated Space with the Prospective Tenant within six (6) months of Sublandlord's Notice, Subtenant's FR to Sublease Phase A-2 Premises shall be reinstated, but in any event shall expire on June 30, 2000. This FR to Sublease Phase A-2 shall be personal to Subtenant and may not be sublet or assigned to any third party.

        d.     Upon execution of an amendment for said expansion space, Subtenant shall deposit with Sublandlord an additional security deposit in an amount equal to the last month's rent for the Phase A-2 Premises, plus an increase in the LOC amount by an amount equal to six (6) months of base rent with respect thereto (as such amount may be decreased in accordance with the provisions of Paragraph 5(g)).

        8.    First Right to Sublease Phase B-2 Premises.    Subtenant shall have a continuing first right (the "FR to Sublease Phase B-2 Premises") to sublease any or all of the 90,000 square feet in the Phase B-2 Premises. (the "Phase B-2 Space") until the Phase B-2 Premises have been leased, in accordance with the terms and conditions outlined in Paragraph 7 (a) and (b) above except that: (a) said right shall be exercised within three (3) business days of receipt of the Sublandlord's Notice; (b) Base Rental for the Designated Space shall commence on the earlier of: (i) the date which the improvements to be constructed or performed in the Designated Space by or on Sublandlord's behalf shall have been substantially completed (Sublandlord shall deliver the Designated Space in a condition similar to the condition sublandlord is required to deliver the Sublease Premises hereunder and Sublandlord shall provide Subtenant with a similar Tenant Improvement Allowance for the Designated Space); or (ii) one hundred fifty (150) days after receipt of notice from Subtenant of its exercise of its FR to Sublease Phase B-2 Premises, (which one hundred fifty (150) day period shall be extended for each day of delay in substantial completion of the tenant improvements caused by a documented Landlord or Sublandlord Delay as defined in the Work Letter) (the forgoing determination of the commencement date of Base Rental shall be subject to Paragraph 35 of the Phase B Lease only until the completion of the Building's shell); (c) the monthly Base Rental for the Phase B-2 Space shall be $1.55 per rentable square foot if rent commences on or before December 31, 2000; (d) the monthly base Rental amount shall be increased by four percent (4%) on May 1, 2001 and shall be increased by four percent (4%) per annum on each May 1st thereafter during the Term; (e) Subtenant shall be granted the right to install (subject to receipt of Landlord's approval), at Subtenant's sole cost and expense, prorata Phase B monument signage with other tenants of Phase B, subject to the City of San Diego's sign criteria and in accordance with the Project's signage criteria; (f) the Occupancy Density for the Phase B-2 Premises shall be a maximum of five (5) persons per 1,000 square feet and (g) the Parking Density for the Phase B-2 Premises shall be a four and one half (4.5) parking spaces per 1,000 square feet. The sublease of the Phase B-2 Space shall be otherwise on the same terms and conditions of the Phase B Master Lease (a copy of which is attached hereto as Exhibit "E". If Subtenant does not exercise the FR to Sublease the Designated Space portion of the Phase B-2 Premises in accordance with the provisions of Paragraphs 7 and 8 and Sublandlord subleases or Landlord leases the Designated Space to a Prospective Tenant, this FR to Sublease the Designated Space portion of the Phase B-2 Premises shall expire and shall be null and void. This FR to Sublease Phase B-2 Premises shall be personal to Subtenant and may not be sublet or assigned to any third party. The term of any sublease for the Phase B-2 Space shall expire pursuant to the terms of the Phase B Master Lease, which scheduled term expiration date is April 30, 2010.

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        Upon execution of an amendment foe said expansion space, Subtenant shall deposit with Sublandlord an additional security deposit in an amount equal to the last month's rent for the Phase B-2 Premises, plus an increase in the LOC amount by an amount equal to 6 months of base rent with respect thereto (as such amount may be decreased in accordance with the provisions of Paragraph 5(g)).

        9.    Right of First Offer to Sublease the Phase A-2 Premises and/or the Phase B-2 Premises.

        a.     In addition to the first right to sublease described in Paragraphs 7 and 8 above, Subtenant shall have a right to sublease the Phase A-2 Premises and/or the Phase B-2 Premises by sending to Sublandlord a notice ("Request Notice") advising Sublandlord that Subtenant is interested in subleasing all or a portion (in full-floor increments only) of the Phase A-2 Premises and/or the Phase B-2 Premises. The premises identified in the Request Notice shall be referred to as the ROFO Space. Notwithstanding the foregoing Subtenant's right to send a Request Notice with respect to all or any full-floor portion of the Phase A-2 Premises shall expire on June 30, 2000.

        b.     Subtenant shall have no such right to sublease the ROFO Space if (i) the ROFO Space has been leased to a third party; (ii) Subtenant is or has been, in material default (beyond any applicable notice and cure periods) of any material terms and conditions of this Sublease, or (iii) Subtenant has assigned or sublet more than twenty-five percent (25%) of the Sublease Premises to unaffiliated third parties.

        c.     Notwithstanding the forgoing, Subtenant may only exercise the right to sublease less than the entire building (in a full-floor increment) of either the Phase A-2 Premises or Phase B-2 Premises if Sublandlord is in current written negotiations with a third party to sublease less than the entire building (in full-floor increments) of either the Phase A-2 Premises or Phase B-2 Premises on terms which Sublandlord is prepared to accept.

        d.     Notwithstanding the foregoing, Subtenant's right hereunder with respect to the Phase A-2 Premises is subordinate to the rights of SAIC to the lease the Phase A-2 Premises and shall remain subordinate through December 31, 1999.

        e.     If the above conditions are met, Landlord and Tenant shall promptly execute an amendment within ten (10) business days to this Sublease adding the ROFO Space to the Sublease Premises on the same terms and conditions as set forth in this Sublease except as follows:

        (i)    with respect to any ROFO Space within the Phase A-2 Premises, (A) Base Rental shall commence as set forth in Paragraph 7.b. above, (B) monthly Base Rental shall be at the rate per rentable square foot as set forth in Paragraph 7.b. above, (C) the Occupancy Density shall be a maximum of four and one-half (4.5) persons per 1,000 rentable square feet, and (D) upon execution of an amendment for such ROFO Space, Subtenant shall deposit with Sublandlord an additional security deposit in an amount equal to the last month's rent for the Phase A-2 Premises, plus an increase in the LOC amount by an amount equal to six (6) months of Base Rental with respect thereto; and

        (ii)   with respect to any ROFO Space within the Phase B-2 Premises, (A) Base Rental shall commence as set forth in Paragraph 8(b) above, (B) monthly Base Rental shall be at the rate per rentable square foot as set forth in Paragraphs 8(c) and B(d) above, (C) Subtenant shall be granted the right to install (subject to receipt of Landlord's approval), at Subtenant's sole cost and expense, prorata Phase B monument signage with other tenants of Phase B, subject to the City of San Diego's sign criteria and in accordance with the Project's sign criteria, (D) the Occupancy Density shall be a maximum of five (5) persons per 1,000 square feet, (E) the Parking Density for the Phase B-2 Premises shall be four and one half (4.5) parking spaces per 1,000 square feet, (F) the sublease for the Phase B-2 Space shall be otherwise on the same terms and conditions of the Phase B Lease attached hereto as Exhibit "E", (G) the term of any sublease for the Phase B-2

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Premises shall expire on April 30, 2010, and (H) upon execution of an amendment for such ROFO Space, Subtenant shall deposit with Sublandlord an additional security deposit in an amount equal to the last month's rent for the Phase B-2 Premises, plus an increase in the LOC amount by an amount equal to six (6) months of Base Rental with respect thereto (as such amount may be decreased pursuant to Paragraph 5.2).

        g.     The right of first offer contained in this Paragraph 9 is personal to Subtenant and may not be sublet or assigned to any third party,

10.    Incorporation of Terms of phase A Lease.    (a) This Sublease is subject and subordinate to the Phase A Lease. Subject to the modifications set forth in this Sublease, the terms of the Phase A Lease are incorporated herein by reference, and shall as between Sublandlord and Subtenant (as if they were Landlord and Tenant, respectively, under the Phase A Lease) constitute the terms of this Sublease except to the extent that they are inapplicable to, inconsistent with, or modified by, the terms of this Sublease. In the event of any inconsistencies between the terms and provisions of the Phase A Lease and the terms and provisions of this Sublease, the terms and provisions of this Sublease shall govern. Subtenant acknowledges that it has reviewed the Phase A Lease and is familiar with the terms and conditions thereof,

        (b)   For the purposes of incorporation herein, the terms of the Phase A Lease are subject to the following additional modifications:

        (i)    In all provisions of the Phase A Lease (under the terms thereof and without regard to modifications thereof for purposes of incorporation into this Sublease) requiring the approval or consent of Landlord, Subtenant shall be required to obtain the approval or consent of Landlord and Sublandlord.

        (ii)   In all provisions of the Phase A Lease requiring Tenant to submit, exhibit to, supply or provide Landlord with evidence, certificates, or any other matter or thing, Subtenant shall be required to submit, exhibit to, supply or provide, as the case may be, the same to Landlord and Sublandlord.

        (iii)  Sublandlord shall have no obligation to restore or rebuild any portion of the Sublease Premises after any destruction or taking by eminent domain.

        (c)   The following provisions of the Phase A Lease are specifically excluded: all of the Basic Lease Information, Paragraph 1, Paragraph 2, Paragraph 3, the requirement for two months prepaid rent in Paragraph 6.A., last sentence in Paragraph 7.A., first paragraph of Paragraph 8.B. concerning self-insurance, Paragraph 19, Paragraph 21.B., last two sentences of Paragraph 25, Paragraph 32, Paragraph 38.A., Paragraph 38.B., Paragraph 38.C., Paragraph 38.D., Paragraph 38.E., Exhibit B, Exhibit C (Tenant Improvement Agreement). Furthermore, Paragraphs 1 through 5 and 12 and Exhibits A and B of the First Amendment to Lease are hereby deleted.

11.    Subtenant's Obligation.    Subtenant covenants and agrees that all obligations of Sublandlord under the Phase A Lease shall be done or performed by Subtenant with respect to the Sublease Premises, except as otherwise provided by this Sublease, and Subtenant's obligations shall run to Sublandlord and Landlord as Sublandlord may determine to be appropriate or be required by the respective interests of Sublandlord and Landlord. Subtenant agrees to indemnify Sublandlord, and hold it harmless, from and against any and all claims, damages, losses, expenses and liabilities (including reasonable attorneys' fees) incurred as a result of the non-performance, non-observance or non-payment of any of Sublandlord's obligations under the Phase A Lease applicable to the Sublease Premises which, as a result of this Sublease, became an obligations of Subtenant. Subtenant shall not do, nor permit to be done, any act or thing which is, or with notice or the passage of time would be, a default under this Sublease or the Phase A Lease (to the extent applicable to the Sublease Premises). Sublandlord agrees to indemnify Subtenant, and hold it harmless, from and against any and all claims, damages, losses,

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expenses and liabilities (including reasonable attorneys' fees) incurred as a result of the non-performance, non-observance or non-payment of any of Sublandlord's obligation under the Phase A Lease.

12.    Sublandlord's Obligations.    Sublandlord agrees that Subtenant shall be entitled to receive all services and repairs to be provided by Landlord to Sublandlord under the Phase A Lease. Subtenant shall look solely to Landlord for all such services and shall not, under any circumstances, seek nor requires Sublandlord to perform any of such services, nor shall Subtenant make any claim upon Sublandlord for any damages which may arise by reason of Landlord's default under the Phase A Lease. Any condition resulting from a default by Landlord shall not constitute between Sublandlord and Subtenant an eviction, actual or constructive, of Subtenant and no such default shall excuse Subtenant from the performance or observance of any of its obligations to be performed or observed under Sublease, or, except as otherwise provided in this Sublease, entitle Subtenant to receive any reduction in or abatement of the Rent provided for in this Sublease. In furtherance of the foregoing, and subject to Paragraph 14 hereof, Subtenant does hereby waive any cause action and any right to bring any action against Sublandlord by reason of any act or omission of Landlord under the Phase A Lease. Sublandlord covenants and agrees with Subtenant that Sublandlord will pay all fixed rent and additional rent payable Sublandlord pursuant to the Phase A Lease. In the event of a breach by Landlord of any term of the Phase A Lease then Sublandlord's sole obligation in regard to its obligation under this Sublease shall be to diligently pursue the correction on cure by Landlord of Landlord's breach. Such efforts shall include, without limitation, upon Subtenant's request, (a) immediately notifying Landlord of its non-performance under the Phase A Lease and demanding that Landlord performs its obligations under the Phase A Lease and/or (b) assigning Sublandlord's rights under the Phase A Lease to Subtenant to the extent necessary to permit Subtenant to institute legal proceedings against Landlord to obtain the performance of Landlord's obligation under the Phase A Lease; provided however that if Subtenant commences a Lawsuit or other action, Subtenant shall pay all costs and expenses incurred in connection therewith, and Subtenant shall indemnify Sublandlord against, and hold Sublandlord harmless from, all costs and expenses incurred by Sublandlord in connection therewith.

13.    Default by Subtenant.    In the event Subtenant shall be in default of any covenant of, or shall fail to honor any obligation under, this Sublease, Sublandlord shall have available to it against Subtenant all of the remedies available (a) to Landlord under the Phase A Lease in the event of a similar default on the part of Sublandlord thereunder or (b) at law.

14.    Quiet Enjoyment.    So long as Subtenant pays all of the Rent due hereunder and performs all of Subtenant's other obligations hereunder, Sublandlord shall do nothing to affect Subtenant's right to peaceably and quietly have, hold and enjoy the Sublease Premises, and all of the rights, entitlements, and options granted to Subtenant hereunder. In the event, however, that Sublandlord defaults in the performance or observance of any of Sublandlord's obligations under this Sublease or receives a notice of default from Landlord under the Phase A Lease, then Subtenant shall give written notice to Sublandlord specifying in what manner Sublandlord has defaulted. If such default shall not be cured within a reasonable time, but in no event later than thirty (30) days after Sublandlord's receipt of such written notice from Subtenant (except that if such default cannot be cured within said thirty (30) day period, this period shall be extended for an additional reasonable time, provided that Sublandlord commerce's to cure such default within such thirty (30) day period and proceeds diligently thereafter to effect such cure as quickly as possible), then Subtenant shall be entitled, at Subtenant's option, to cure such default and promptly collect from Sublandlord Subtenant's reasonable expenses in so doing (including, without limitation, reasonable attorneys' fees and court costs) unless such default by Sublandlord is caused by a default of Subtenant hereunder (in which case Sublandlord shall not be liable for Subtenant's costs to cure the default). Subtenant shall not be required to wait the entire cure period provided for herein if earlier action is required to prevent a termination by Landlord of the

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Phase A Lease and Sublandlord has failed to take such earlier action. Sublandlord shall not amend or modify the Phase A Lease in such a manner as to materially adversely affect Subtenant's use of the Sublease Premises or increase tie obligations or decrease the rights of Subtenant hereunder, without the prior written consent of Subtenant, which may be granted or withheld at Subtenant's sole discretion. Anything contained in any provision of this Sublease to the contrary notwithstanding, Subtenant agrees, with respect to the Sublease Premises, to comply with and remedy any default in this Sublease or the Phase A Lease which is Subtenant's obligation to cure, within the period allowed to Sublandlord under the Phase A Lease, even if such time period is shorter than the period otherwise allowed therein due to the fact that notice of default from Sublandlord to Subtenant is given after the corresponding notice of default from Landlord to Sublandlord. Sublandlord agrees to forward to Subtenant, promptly upon receipt thereof by Sublandlord, a copy of each notice of default received by Sublandlord in its capacity as Tenant under the Phase A Lease. Subtenant agrees to forward to Sublandlord, promptly upon receipt thereof, copies of any notices received by Subtenant from Landlord or from any governmental authorities.

15.    Notices.    All notices, demands and requests shall be in writing and shall be sent either by hand delivery or by a nationally recognized overnight courier service (e.g., Federal Express), in either case return receipt requested, to the address of the appropriate party. Notices, demands and requests so sent shall be deemed given when the same are received. Notices and remittance of Rent to Sublandlord shall be sent to the attention of:

Franklin Resources, Inc.
777 Mariners Island Boulevard
San Mateo, California 94404
Attn: Manager of Corporate Real Estate

Notices to Landlord shall be sent to the attention of:

Spieker Properties, L.P,
9255 Towne Centre Drive, Suite 100
San Diego, California 92121
Attn: Tambra Martinez

Notices to Subtenant shall be sent to the attention of:

MP3.com, Inc.
4790 Eastgate Mall
San Diego, California 92121
Attn: Director of Legal Affairs

With a copy to;

Cooley Godward LLP.
One Maritime Plaza
20^th Floor
San Francisco, California 94111
Attention: Elizabeth Willes, Esq.

16.    Broker.    Sublandlord and Subtenant represent and warrant to each other that, with the exception of Cushman Really Corporation ("Broker"), no brokers were involved in connection with the negotiation or consummation of this Sublease. Sublandlord agrees to pay the commission of the Broker pursuant to a separate agreement, which Sublandlord represents has been executed as of the date hereof. Each party agrees to indemnify the other, and hold it harmless, from and against any and all claims, damages, losses, expenses and liabilities (including reasonable attorney's fees) incurred by said party as a result of a breach of this representation and warranty by the other party.

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17.    Condition of Premises.    Except as provided in the Work Letter, Subtenant acknowledges that it is subleasing the Sublease Promises "as-is" and that Sublandlord is not making any representation or warranty concerning the condition of the Sublease Premises and that Sublandlord is not obligated to perform any work to prepare the Sublease Premises for Subtenant's occupancy. Subtenant acknowledges that it is not authorized to make or do any alterations of improvements in or to the Sublease Premises except as permitted by the provisions of this Sublease and the Phase A Lease and that it must deliver the Sublease Premises to Sublandlord on the Sublease Expiration Date in the condition required by the Phase A Lease.

18.    Consent of Landlord.    Paragraph 21.A. of the Phase A Lease requires Sublandlord to obtain the written consent of Landlord to this Sublease. Sublandlord shall diligently pursue Landlord's consent to this Sublease promptly following the execution and delivery of this Sublease by Sublandlord and Subtenant.

19.    Termination of the Phase A Lease.    If for ant reason the term of the Phase A Lease shall terminate to the Sublease Expiration Date, this Sublease shall automatically be terminated and Sublandlord shall not be liable to Subtenant by reason thereof unless said termination shall have been caused by the default of Sublandlord under the Phase A Lease, and said Sublandlord default was not as a result of a Subtenant default hereunder. To the extent that the Phase A Lease grants Sublandlord any discretionary right to terminate the Phase A Lease, whether due to casualty, condemnation, or otherwise, Sublandlord shall not exercise such right without the prior written consent of the Subtenant which may be withheld by Subtenant in its sole and absolute discretion. If Landlord seeks to terminate the Phase A Lease because of a default or alleged default by Sublandlord under the Phase A Lease (other than a default or alleged default caused by the default by Subtenant under this Sublease), Sublandlord shall take all action required to reinstate the Phase A Lease. Further, if Rent is abated under the Phase A Lease, Rent hereunder shall also be abated in the same proportion.

20.    Limitation of Estate.    Subtenant's estate shall in all respects be limited to, and be construed in a fashion consistent with, the estate granted to Sublandlord by Landlord.

21.    Confidentiality.    The covenants, obligations and conditions contained in this Sublease and the Phase A Lease shall remain strictly confidential. Subtenant agrees to keep such terms, covenants, obligations and conditions strictly confidential and not to disclose such matters to any other landlord, tenant, prospective tenant, or broker. Notwithstanding the foregoing, Subtenant shall be allowed to disclose the Sublease and all covenants, obligations and conditions contained therein and the Phase A Lease, for business purposes only, to its shareholders, lenders, attorneys and accountants, and in any filing made by Subtenant with the Securities and Exchange Commission or other governmental authorities in accordance with applicable law.

22.    Indemnity.    Subtenant shall indemnify, defend, protect, and hold sublandlord harmless from and against all actions, claims, demands, costs, liabilities, losses, reasonable attorneys' fees, damages, penalties, and expenses (collectively "Claims") which may be brought or made against Sublandlord or which Sublandlord may pay or incur to the extend caused by (i) a breach of this Sublease by Subtenant, (ii) any violation of law by Subtenant or its employees, agents, contractors or invitees ("Agents") relating to the use or occupancy of the Sublease Premises, or (iii) the negligence or willful misconduct of Subtenant or its Agents. Sublandlord shall indemnify, defend, protect, and hold Subtenant harmless from and against all actions, claims, demands, costs, liabilities, losses, reasonable attorneys' fees, damages, penalties and expenses which may be brought or made against Subtenant or which Subtenant may pay or incur to the extent caused by (i) the negligence or willful misconduct of Sublandlord or its Agents occurring on or about the Project or Sublease Premise; (ii) the failure by Sublandlord to comply with or perform its obligations under the Phase A Lease and /or this Sublease, and (iii) a breach by Sublandlord of any of its representations or warranties to Subtenant under this Sublease.

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23.    Permitted Use.    The Sublease Premises shall be used for general office space and any other legal permitted uses compatible with the City of San Diego's MLI zone and the MCAS Miramar Comprehensive Land Use Plan and otherwise compatible with comparable office projects. The Occupancy Density shall not exceed 4 persons per 1,000 square feet.

24.    Mutual Waiver of Subrogation.    The waiver of subrogation provision set forth in Paragraph 9 of the Phase A Lease shall be deemed a three party agreement binding among and inuring to the benefit of Sublandlord, Subtenant and Landlord (by reason of its consent to hereto).

25.    Representations.    Sublandlord represents to Subtenant that (A) the Phase A Lease is in full force and effect, (B) the copy of the Phase A Lease which is attached to this Sublease as Exhibit A is a true, correct and complete copy of the Phase A Lease, (C) to Sublandlord's best knowledge, no default exists on the part of Sublandlord, or has there occurred any event which, with the giving of notice or passage of time or both, could constitute such a default or event of default, and (D) to Sublandord's best knowledge, there are no pending or threatened actions, suits or proceedings before any court or administrative agency against Sublandlord which could, in the aggregate, adversely affect the Sublease Premises or of a Sublandlord to perform its obligations under the Sublease, and Sublandlord is not aware of any facts which might result in any actions, suits or proceedings.

26.    Entire Agreement.    It is understood and acknowledged that there are no oral agreements between the parties hereto affecting this Sublease and this Sublease supersedes and cancels any and all previous negotiations, arrangements, brochures, agreements and understandings, if any, between the parties hereto or displayed by Sublandlord to Subtenant with respect to the subject matter thereof, and none thereof shall be used to interpret or construe this Sublease. This Sublease, and the exhibits and schedules attached hereto, contain all of the terms, covenants, conditions, warranties and agreements of the parties relating in any manner to the rental, use and occupancy of the Sublease Premises and shall be considered to be only agreements between the parties hereto and their representatives and agents. None of the terms, covenants, conditions or provisions of this Sublease can be modified, deleted or added to except in writing signed by the practices hereto. All negotiations and oral agreements acceptable to both parties have been merged into and are included herein. There are no other representations or warranties between the parties, and all reliance with respect to representations is based totally upon the representations and agreements contained in this Sublease.

        IN WITNESS WHEREOF, the parties have entered into this Sublease as of the date first written above.

SUBLANDLORD
FRANKLIN RESOURCES INC., a Delaware corporation
By:	/s/  MARTIN L. FLANAGAN Martin L. Flanagan
Its:	President
SUBTENANT:
MP3.com Inc., a Delaware corporation
By:	/s/ Michael Robertson
Its:	Chairman/CEO Michael Robertson
By:	/s/ Paul Ouyang
Its:	EVP/CFO Paul Ouyang

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EXHIBIT "A"
DEPICTION OF THE PROJECT

MAP

EXHIBIT "B"
COPY OF PHASE A LEASE

B-1

CONSENT TO SUBLEASE AGREEMENT

        This Consent to Sublease Agreement (this "Agreement") is made as of December 13, 1999, by and among Spieker Properties, L.P. a California limited partnership ("Master Landlord"), Franklin Resources, Inc., a Delaware corporation ("Sublandlord"), and MP3.com. Inc., a Delaware corporation ("Subtenant").

Recitals

        This Agreement is made with regard to the following facts:

        A.    Master Landlord is the owner of approximately 29 acres and up to approximately 591,000 square feet (existing, under construction or planned) in 9 buildings known as Bridge Pointe Corporate Centre within the Eastgate Technology Park in San Diego, California (the "Project"). Phase A of the Project consists of 4 existing buildings known as "Building 1" (also referred to as the "Phase A-1 Premises") located at 4770 Eastgate Mall, "Building 2" (also referred to as the "ADC Telecommunications Premises") located at 4790 Eastgate Mall, "Building 3" (also referred to as the "Phase A-2 Premises") located at 4760 Eastgate Mall and "Building 4 "(also referred to as the "Phase A-3 Premises") located at 4780 Eastgate Mall, Phase B of the Project consists of 2 building under construction known as "Building 5" (also referred to as the "Phase B-2 Premises") located at 4810 Eastgate Mall and "Building 6" (also referred to as the "Phase B-1 Premises") located at 4820 Eastgate Mall, Phase C of the project consists of 3 planned building known as "Building 7 through 9".

        B.    Master Landlord and Sublandlord entered into a lease dated September 2,1998, as amended by that certain First Amendment to Lease dated as of March 15, 1999 between Master Landlord and Sublandlord (collectively, the "Phase A Lease") whereby Master Landlord leased to Sublandlord the Phase A-3 Premises and the Phase A-3 Premises, upon the terms and conditions contained therein. Furthermore, Master Landlord and Sublandlord entered into another lease dated September 2,1998, between Master Landlord and Sublandlord. (the "Phase B Lease") whereby Master Landlord leased to Sublandlord the Phase B-1 Premises and the Phase B-2 Premises, upon the terms and conditions contained therein.

        D.    Under the terms of Paragraph 21 of the Phase A Lease, Sublandlord has requested Master Landlord's consent to the Sublease Agreement dated December 13, 1999 between Sublandlord and Subtenant (the "Sublease"), pursuant to which would Sublandlord will sublease to Subtenant the Phase A-3 Premises and grant options on the Phase A-2 Premises and the Phase B-2 Premises, as more particular described in the Sublease (the "Subleased Premises"). A copy of the Sublease is attached to this Agreement as Exhibit A.

        E.    Master Landlord is willing to consent to the Sublease on the terms and conditions contained in this Agreement.

        NOW THEREFORE, in consideration of the mutual covenants contained in the Agreement, and for valuable consideration, the receipt and sufficiency of which are acknowledged by the parties, the parties as follows,

        1.     Master Landlord's Consent.    Master Landlord consents to the Sublease. This consent is granted only on the terms and conditions stated in this Agreement. Master Landlord is not bound by any of the terms, covenants, or conditions of the Sublease, except as set forth in Section 2.2 below. The Sublease is subject and subordinate to the Master Lease.

        2.     Limits of Consent.

        2.1   Nonrelease of Sublandlord; Further Transfers.    Neither the Sublease nor this Agreement will;

        (a)   release Sublandlord from any liability, whether past, present or future, under the Master Lease;

        (b)   alter the primary liability of Sublandlord to pay the Rent and perform all of Tenant's obligations under the Master Lease (including the payment of all bills rendered by Master Landlord for charges incurred by Subtenant for services and materials supplied to the Subleased Premises); or

        (c)   be construed as a waiver of Master Landlord's right to consent to any proposed transfer after the date hereof by Sublandlord under the Master Lease or Subtenant under the Sublease, or as a consent to any portion of the Subleased Premises being used or occupied by any other party. or

        (d)   limit Master landlord's right, in the event of a proposed future sublease, to recapture any portion of the Premises, including the Subleased Premises, affected by that proposed sublease, as provided in Paragraph 21 of the Master Lease.

        Master Landlord may consent to the subsequent sublease and assignment of the Sublease or any amendment or modifications to the Sublease without notifying Sublandlord of anyone else liable under the Master Lease, including any guarantor of the Master Lease, and without consent. No such action by Master Landlord will relieve those persons from any liability to Master Landlord or otherwise with regard to the Subleased Premises. Notwithstanding the foregoing, nothing contained herein shall diminish any obligation of Subtenant to obtain Sublandlords' approval prior to taking any such actions.

        2.2   Consent to Certain Provisions.    Master Landlord specifically consents and agrees to be bound by the Section 4(d) of the Sublease: Section 4 (d). Such provisions will be binding on the Master Landlord in the event of any attorment between master Landlord and Subtenant following provisions of the Sublease: Paragraph 23 and 24.

        3.     Relationship with Master Landlord

        3.1   Effect of Sublandlord Default Under Master Lease.    If after the expiration of any applicable cure period Sublandlaord defaults in the performance of its obligations under the Master Lease terminates, Master Landlord shall notify Subtenant and, without limiting its other rights and remedies, by notice to Sublandlord and Subtenant, elect to receive and collect, directly from Subtenant, all rent and any other sums owing and to be owed under the Sublease, as further set forth in Section 3.2 below.

        3.2   Master Landlord's Election to Receive Rents.    Master Landlord will not, as a result of the Sublease, or as a result of the collection of rents or any other sums from Subtenant under Section 3.1 above, be liable to Subtenant for any failure of Sublandlord to perform any obligation of Sublandlord under the Sublease.

        Sublandlord irrecoverably authorizes and directs Subtenant, on receipt of any written notice from Master Landlord stating that a default exists in the performance of Sublandlord's obligation under the Master Lease, to pay to Master Landlord the rents and any other sums due and to become due under the Sublease. Sublandlord agrees that Subtenant has the right to rely on any such statement from Master Landlord, and the Subtenant will pay those rents and other sums to Master Landlord without any obligation or right to inquire as to whether a default exists and despite any notice or claim from Sublandlord to the contrary. Sublandlord will not have any right or claim against Subtenant for those rents or other sums paid by Subtenant to Master Landlord. Master Landlord will credit Sublandlord with any rent received by Master Landlord under this agreement, but the acceptance of any payment on account of rent from Subtenant as a result of a default by Sublandlord will not: (a) except as set forth in Section 3.3 below, be an attornment by Master Landlord to Subtenant or by Subtenant to Master Landlord; (b) be a waiver by Master Landlord of any provision of the Master Lease; or (c) release Sublandlord from any liability under the terms, agreements, or conditions of the

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Master Lease Except as set forth in Section 3.3 below, no payment of rent by Subtenant directly to Master Landlord, regardless of the circumstances or reasons for the payment, will be deemed an attornment by Subtenant to Master Landlord in the absence of specific written agreement signed by Master Landlord to that effect.

        3.3   Tenant's Attorntment.    In the event the Master Lease is terminated prior to the expiration of the term of the Sublease, Master Landlord shall have the right, pursuant to notice to Subtenant, to succeed to Sublandlord's interest in the Sublease and cause Subtenant to attorn to Master Landlord. Furthermore Master Landlord shall recognize Subtenant's right to possession of the Premises as provided for in the Sublease and shall not disturb Subtenant's right to possession of the Premises so long as an event of default does not exist in the performance of subtenant's obligations under the Sublease. Master Landlord will assume the obligation of Sublandlord under the Sublease from the time of the exercise of the option, but Master Landlord will not be:

        (a)   liable for any rent paid by Subtenant to Sublandlord more than one month in advance, or any security deposit paid by Subtenant to Sublandlord;

        (b)   liable for any act or omission of Sublandlord under the Master Lease or for any default of Sublandlord under the Sublease which occurred prior to the Master Landlord's assumption;

        (c)   subject to any defenses or offsets that Subtenant may have against Sublandlord which arose prior to Master Landlord's assumption; or

        (d)   bound by any changes or modifications made to the Sublease without the written consent of Master Landlord.

        Upon receipt of the notice from Master Landlord, Subtenant shall attom to Master Landlord and perform all of the Subtenant's obligations under the Sublease directly to Master Landlord, just as if Master Landlord were the "Sublessor" under the Sublease. If and so long as Subtenant is not in substantial and material default (beyond any notice and cure periods) under the Sublease, Master Landlord shall continue to recognize the interest of Subtenant created under the Subtenant and the Sublease shall continue with the same force and effect as if Master Landlord and Subtenant had entered into a Sublease on the same terms and conditions as those contained in the Sublease.

        Sublandlord and Subtenant shall not enter into any agreement which amends the Sublease without master Landlord's prior written consent, which shall not be unreasonably withheld or delayed. Any amendment of the Sublease in violation of this provision shall have no force or effect on Master Landlord.

        4.     Consideration for Sublease.    Sublandlord and Subtenant represent and warrant that there are no additional payments of rent or any other consideration of any type which has been paid or is payable by Subtenant to Sublandlord in connection with the Sublease, other than as disclosed in the Sublease.

        5.     General Provisions

        5.1   Brokerage Commission.    Sublandlord and Subtenant agree that Master Landlord will not liable for any brokerage commission or finder's fee in connection with the consummation of the Sublease or this Agreement. Sublandlord and Subtenant will protect, defend, indemnify, and hold Master Landlord harmless from any brokerage commission or finder's fee in connection with the consummation of the Sublease or this Agreement, and from any cost or expense (including attorney fees) incurred by Master Landlord in resisting any claim for any such brokerage commission or finder's fee. The provisions of this Section 5.1 shall survive the expiration or earlier termination of the Sublease and this Agreement.

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        5.2   Notice.    Any notice that may or must be given by any party under this Agreement will be delivered (i) personally, (ii) by certified mail, return receipt requested, or (iii) by a nationally recognized overnight courier, addressed to the party to whom it is intended. Any notice given to the Master Landlord, Sublandlord or Subtenant shall be sent to the respective address set forth on the signature page below, or to such other address as that party may designate for service of notice by a notice given in accordance with the provisions of this Section 5.2, Master Landlord and Sublandlord agree to send to Subtenant copies of all notices of default and other formal notices that may require action by Sublandlord or Subtenant under the Master Lease.

        5.3   Controlling Law.    The terms and provisions of this Agreement will be construed in accordance with, and will be governed by, the laws of the State of California.

        5.4   Entire Agreement; Waiver.    This Agreement constitutes the final, complete and exclusive statement between the parties to this Agreement pertaining to the terms of Master Landlord's consent to the Sublease, supersedes all prior and contemporaneous understandings or agreements of the parties, and is binding on and inures to the benefit of their respective heirs, representatives, successors and assigns.

        5.5   Waiver of July Trial; Attorney Fees.    If any party commences litigation against any other party for the specific performance of this Agreement, for damages for the breach hereof or otherwise for enforcement of any remedy hereunder, the parties waive any right to a trial by jury and, in the event of any commencement of litigation, the prevailing party shall be entitled to recover from the applicable party such costs and reasonable attorney fees as may have been incurred.

        5.6   Non-Disturbance From Lenders, Master Landlord represents and warrants that there are no deeds of trust, mortgages, ground leases or other liens affecting the Project as of the date hereof. With respect to any future mortgages, deeds of trust or other liens or ground leases entered into by and between Landlord and any beneficiary of any deed of trust or other such lien granted by Landlord or any ground lessor or otherwise encumbering the Building (collectively referred to as "Landlord's Mortgagee"). Landlord shall use commercially reasonable efforts to secure and deliver to Tenant recordable Non-Disturbance Agreements from, and executed by, all Landlord's Mortgagees for the benefit of Tenant as a condition precedent to subordination and attornment to any such future Landlord Mortgagee.

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        The parties have executed this Consent to Sublease Agreement as of the above date.

Master Landlord:

SPIEKER PROPERTIES, L.P., a California limited partnership
By:	Spieker Properties, Inc., A Maryland corporation, Its general partner		Master Landlord Address: 9255 Towne Centre Drive, Suite 100 San Diego, California 92121 Attention: Tambra Martinez
	By:	/s/ Richard L. Romney
	Its:	Senior Vice President
	By:	/s/ Mitch J. Ritschel
	Its:	Vice President
Sublandlord:
			Sublandlord Address:
FRANKLIN RESOURCES, INC., a Delaware Corporation			777 Mariners Island Boulevard San Mateo, California 94404 Attention: Manager of Corporate Real Estate
	By:	/s/ Martin L. Flanagan Martin L. Flanagan
	Its:	President
Subtenant:
MP3.com, Inc., a Delaware corporation			Subtenant Address:
	By:	/s/ Michael Robertson	4790 Eastgate Mall San Diego, CA 92121 Attn: Director of Legal Affairs
	Its:	CHAIRMAN / CEO Michael Robertson
	By:	/s/ Paul Ouyang
	Its:	EVP / CFO Paul Ouyang

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EXHIBIT A

Sublease

6

FIRST AMENDMENT TO LEASE

        THIS FIRST AMENDMENT TO LEASE ("First Amendment") is made and entered into as of March 15, 1999, by and between SPIEKER PROPERTIES, L.P., California limited partnership ("Landlord"), and FRANKLIN RESOURCES, INC., Delaware corporation ("Tenant").

R E C I T A L S:

        A.    WHEREAS, Landlord and Tenant entered into that certain Industrial Net Lease dated as of September 2, 1998 for the Bridge Pointe Corporate Centre Phase A Premises (the "Franklin Lease") covering those certain premises located at 4760, 4770 and 4780 Eastgate Mall, in the City of San Diego, California (collectively, the "Premises"); and

        B.    WHEREAS, Tenant has expressed a desire not to take possession of the Premises as it would become available under the Franklin Lease; and

        C.    WHEREAS, Landlord and Tenant have entered into that certain agreement to Market, dated December 1, 1998, ("Agreement to Market"), whereby Tenant has authorized Landlord to attempt to find a replacement tenant or tenants reasonably satisfactory to Landlord and Tenant to occupy the Premises, and has agreed to reasonably cooperate with Landlord to assist Landlord in finding such replacement tenant or tenants, under such terms and conditions as more specifically set forth in the Agreement to Market; and

        D.    WHEREAS, Landlord has received a proposal from Science Applications International Corporation ("SAIC"), to enter into a lease (the "SAIC Lease") of that portion of the Premises situated in the building located at and known as 4770 Eastgate Mall (the "4770 Eastgate Mall Premises"); and

        E.    WHEREAS, Landlord and Tenant have agreed that, upon approval of the SAIC Lease by Tenant and the execution of the SAIC Lease by Landlord and SAIC, the Franklin Lease shall be amended to delete the 4770 Eastgate Mall Premises from the Premises subject to the Franklin Lease; and

        F.     WHEREAS, Landlord and Tenant have agreed that Landlord and Tenant shall continue to be bound by and to observe and perform all obligations under the Franklin Lease, as herby amended, as more specifically set forth in the agreement to Market.

A G R E E M E N T

        NOW THEREFORE, in consideration of the mutual covenants agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto herby amend the Franklin Lease and agree as follows:

        1.    Approval of SAIC Lease.    Tenant hereby approves and consents to the terms and conditions of the SAIC Lease, a copy of which lease is attached hereto as Exhibit A. Without limiting to the generality of the forgoing, Tenant expressly consents to and agrees to be bound by the expansion option contained in the paragraph 38.C. of the SAIC Lease, pursuant to which the expansion option SAIC has contain right to elect to lease 47,000 square feet in Building 3 of Phase A of the Project (4760 Eastgate Mall). Should SAIC exercise said expansion option, Tenant shall be released from its obligations with respect to 4760 Eastgate Mall in the same manner as set forth in this First Amendment for the 4770 Eastgate Mall Premises. Contemporaneously with execution and delivery of this First Amendment by Landlord and Tenant, Landlord and SAIC shall execute and deliver the SAIC Lease and Tenant shall execute a consent thereto to be incorporated therein, and thereupon, Tenant shall be released from any further liability under the Franklin Lease with respect to the 4770 Eastgate Mall Premises, including, without limitations, any liability for rent payable thereunder.

        2.    Premises.    Landlord and Tenant hereby amend the following provisions of the Basic Lease Information contained in the Franklin Lease, to read as follows:

Building Description:	Approximately 94,000 rentable square feet, subject to adjustment pursuant to Paragraph 38.I. hereof, in the two buildings of Phase A of the Project, as detailed above and in Exhibit B attached hereto and known as:
	4760 Eastgate Mall (47,000 square feet)
	4780 Eastgate Mall (47,000 square feet)
Premises:	Approximately 94,000 rentable square feet, subject to adjustment pursuant to Paragraph 38.I. hereof, as detailed in the Building Description above and in Exhibit B attached hereto.
Parking Density:	3.6 parking spaces per 1,000 square feet of the rentable areas in Phase A (as defined in Exhibit B attached hereto), or 339 parking spaces, all unreserved surface parking. Landlord's requirement to construct sixty two (62) additional parking stalls is hereby deleted.
* * *
Scheduled Term	February 1, 1999 for 4760 Eastgate Mall
Commencement Date:	April 1, 1999 for 4780 Eastgate Mall

        3.     In addition to the forgoing, Exhibit B attached to the Franklin Lease is hereby deleted and replaced in its entirely by the new Exhibit B attached hereto and made a part hereof.

        4.    Rent.    Effective June 1, 1999, Landlord and Tenant hereby amend the following provisions of the Basic Lease Information contained in the Franklin Lease, to read as follows:

Rent:

Base Rent:		Shall be in accordance with Paragraph 5 of this First Amendment to Lease, net of all Operating Expenses as defined in Paragraph 7 of the Lease.
Estimated First Year Operating Expenses:		$15,532 per month.
* * *
Tenant's Proportionate Share:
	Of Building:	100% for each building
	Of Phase A of the Project:	43.56%
	Option to Renew:	Deleted.

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        5.     Landlord and Tenant further amend Paragraph 38.A. of the Franklin Lease to read as follows:

Base Rent. The monthly Base Rent during the initial Term shall be as follows:

PERIOD
MONTHLY BASE RENT

        6.    Option to Renew.    Paragraph 38.B., "Option to Renew", of the Lease is hereby deleted.

        7.    Alternative Expiration Date.    Paragraph 38.C., "Alternative Expiration Date", of the Lease is hereby deleted. In addition and as a result of the modification in the immediately preceding sentence, Paragraph 38.C., "Alternative Expiration Date", of that certain lease dated September 2, 1998 for the Phase B Premises is hereby deleted.

        8.    First Right of Offer to Lease.    Paragraph 38.E., "First Right of Offer to Lease," of the Lease is hereby deleted.

        9.Service and Utilities.    Paragraph 15.D. of the Lease, pertaining to Tenant's exclusive use of the Project's underground vaults and conduits, is hereby deleted.

        10.    Other References to the 4770 Eastgate Mall Premises.    Any other references to the 4770 Eastgate Mall Premises contained in the Franklin Lease or the Exhibits thereto are hereby deleted from the Franklin Lease and such Exhibits, unless the particular context otherwise requires.

        11.    Incorporation; Defined Terms.    The Franklin Lease is hereby incorporated into this First Amendment by reference. All capitalized terms used and not otherwise defined in this First Amendment, but defined in the Franklin Lease, shall have the same meaning in this First Amendment as in the Franklin Lease.

        12.    No Effect on Agreement to Market.    Nothing contained in this First Amendment shall be constructed to modify or affect in any way the rights and obligations of the parties hereto under the Agreement to Market, including, without limitation, Tenant's obligation under Paragraph 3 thereof, to pay or guaranty payment of any rent due or to become due under the Franklin Lease (as amended hereby) if the rent payable by any replacement tenant or tenants at any time during the balance of the term of the Franklin Lease is less than the rent due and to become due under the Franklin Lease. Tenant hereby acknowledges that, pursuant to Paragraph 5 of the Agreement to Market, Tenant shall reimburse Landlord for Landlord's costs, broker's and other commissions and fees and expenses incurred in connection with the procurement, negotiation and execution of the SAIC Lease.

        13.    Effect of Amendment on Lease.    Except to the extent the Franklin Lease is expressly modified by this First Amendment, the remaining terms and provisions of the Franklin Lease shall remain unmodified and in full force and effect. In the event of conflict between the terms of the Franklin Lease and the terms of this First Amendment, the terms of this first Amendment shall control.

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        14.    Miscellaneous

        (a)    Entire Agreement.    This First Amendment embodies the entire understanding between Landlord and Tenant with respect to its subject matter and can be changed only by an instrument in writing signed by Landlord and Tenant.

        (b)    Counterparts.    This First Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which, together, shall constitute one and the same First Amendment.

        (c)    Corporate and Partnership Authority.    If Tenant is a corporation or partnership, or is comprised of either or both of them, each individual executing this First Amendment for the corporation or partnership represents that he or she is duly authorized to execute and deliver this First Amendment for the corporation or partnership and that this First Amendment is binding upon the corporation or partnership in accordance with its terms.

        IN WITNESS WHEREOF, the parties have executed this First Amendment as of the date and year first set forth above.

"LANDLORD"	SPIEKER PROPERTIES, L.P., a California limited partnership
	By:	SPIEKER PROPERTIES, INC., a Maryland corporation
		By:	/s/ RICHARD L. ROMNEY Richard L. Romney
		Its:	Senior Vice President
		By:	/s/ MITCH J. RITSCHEL Mitch J. Ritschel
		Its:	Vice President
"TENANT"	FRANKLIN RESOURCES, INC., a Delaware corporation
	By:	/s/ MICHAEL J. MCCULLOCH Michael J. McCulloch Its: Director of General Services

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EXHIBIT A

[Copy of SAIC Lease]

Exhibit A-1

EXHIBIT B

Site Plan, Premises

        Bridge Pointe Corporate Centre consists of approximately 29 acres and up to approximately 591,000 square feet in up to 9 buildings. Phase A consists of four buildings indicated on the site plan below as 4760, 4770, 4780 and 4790 Eastgate Mall, totaling 215,800 square feet consisting of approximately 12.5 net acres. Phase B will consist of two buildings totaling approximately 150,000 square feet and consisting of approximately 8.5 acres. Phase C will consist of three buildings totaling up to approximately 225,000 square feet and consisting of approximately 8 acres.

        The Premises consists of the buildings located at 4760 and 4780 Eastgate Mall in San Diego, California.

        The Site Plan detailing the Premises and the Project follows this page and consists of two (2) pages.

Exhibit B-1

[MAP]

[MAP]

EXHIBIT "C"

PLAN FOR INITIAL IMPROVEMENTS

[Attached]

QuickLinks

SUB-SUBLEASE
R E C I T A L S
EXHIBIT "A" LEASE [Attached]
INDUSTRIAL NET LEASE For The BRIDGE POINTE CORPORATE CENTRE ("Phase A Premises")
By and Between Landlord: Spieker Properties, L.P. and Tenant: Franklin Resources, Inc.
BASIC LEASE INFORMATION INDUSTRIAL NET
TABLE OF CONTENTS
LEASE
1. PREMISES
2. POSSESSION AND LEASE COMMENCEMENT
3. TERM
4. USE
5. RULES AND REGULATIONS
6. RENT
7. OPERATING EXPENSES
8. INSURANCE AND INDEMNIFICATION
9. WAIVER OR SUBROGATION
10. LANDLORD'S REPAIRS AND MAINTENANCE
11. TENANT'S REPAIRS AND MAINTENANCE
12. ALTERATIONS
13. SIGNS
14. INSPECTION/POSTING NOTICES
15. SERVICES AND UTILITIES
16. SUBORDINATION
17. FINANCIAL STATEMENTS
18. ESTOPPEL CERTIFICATE
32. NOTICES
33. ATTORNEYS' FEES
34. SUCCESSORS AND ASSIGNS
35. FORCE MAJEURE
36. SURRENDER OF PREMISES
37. MISCELLANEOUS
38. ADDITIONAL PROVISIONS
39. JURY TRIAL WAIVER
EXHIBIT A Industrial Lease Rules and Regulations
EXHIBIT B Site Plan, Premises
[MAP]
[MAP]
EXHIBIT C LEASE IMPROVEMENT AGREEMENT
SCHEDULE 1 TO EXHIBIT C BASE BUILDING WORK
SCHEDULE 2 TO EXHIBIT C BUILDING STANDARDS
EXHIBIT D Tenant's Hazardous Materials Declaration
EXHIBIT E MCAS Miramar Comprehensive Land Use Plan
AIRPORT NOISE/LAND USE COMPATIBILITY MATRIX IMPLEMENTATION DIRECTIVES
EXHIBIT F Signage Criteria For Bridge Points Corporation Centre
EXHIBIT "B" SUBLEASE
SUBLEASE AGREEMENT
RECITALS
EXHIBIT "A" DEPICTION OF THE PROJECT
MAP
EXHIBIT "B" COPY OF PHASE A LEASE
CONSENT TO SUBLEASE AGREEMENT
Recitals
EXHIBIT A Sublease
FIRST AMENDMENT TO LEASE
R E C I T A L S
A G R E E M E N T
EXHIBIT A [Copy of SAIC Lease]
EXHIBIT B Site Plan, Premises

EX-10.15

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Exhibit 10.15

LOAN AND SECURITY AGREEMENT
DIVXNETWORKS, INC.

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TABLE OF CONTENTS

			Page
1	ACCOUNTING AND OTHER TERMS		3
2	LOAN AND TERMS OF PAYMENT		3
	2.1	Promise to Pay	3
	2.2	Interest Rate, Payments	3
	2.3	Fees	4
3	CONDITIONS OF LOANS		4
	3.1	Conditions Precedent to Initial Credit Extension	4
4	CREATION OF SECURITY INTEREST		4
	4.1	Grant of Security Interest	4
	4.2	Authorization of File	4
5	REPRESENTATIONS AND WARRANTIES		4
	5.1	Due Organization and Authorization	4
	5.2	Collateral	4
	5.3	Litigation	5
	5.4	No Material Adverse Change in Financial Statements	5
	5.5	Solvency	5
	5.6	Regulatory Compliance	5
	5.7	Investments in Subsidiaries	6
	5.8	Full Disclosure	6
6	AFFIRMATIVE COVENANTS		6
	6.1	Government Compliance	6
	6.2	Financial Statements, Reports, Certificates	6
	6.3	Inventory; Returns	7
	6.4	Taxes	7
	6.5	Insurance	7
	6.6	Primary Accounts	7
	6.7	Financial Covenants	7
	6.8	Registration of Intellectual Property Rights	7
	6.9	Further Assurances	7
7	NEGATIVE COVENANTS		8
	7.1	Dispositions	8
	7.2	Changes in Business, Ownership, Management or Locations of Collateral	8
	7.3	Mergers or Acquisitions	8
	7.4	Indebtedness	8
	7.5	Encumbrance	8
	7.6	Distributions; Investments	8
	7.7	Transactions with Affiliates	9
	7.8	Subordinated Debt	9
	7.9	Compliance	9
8	EVENTS OF DEFAULT		9
	8.1	Payment Default	9
	8.2	Covenant Default	9
	8.3	Material Adverse Change	9
	8.4	Attachment	10

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This LOAN AND SECURITY AGREEMENT dated as of the Effective Date, between SILICON VALLEY BANK ("Bank"), whose address is 3003 Tasman Drive, Santa Clara, California 95054 with a loan production office located at 9645 Scranton Road, Suite 110, San Diego, California 92121 and DIVXNETWORKS, INC. ("Borrower"), whose address is 10350 Science Center Drive, Building 14, Suite 140, San Diego, California 92121 provides the terms on which Bank will lend to Borrower and Borrower will repay Bank. The parties agree as follows:

1      ACCOUNTING AND OTHER TERMS

        Accounting terms not defined in this Agreement will be construed following GAAP. Calculations and determinations must be made following GAAP. The term "financial statements" includes the notes and schedules. The terms "including" and "includes" always mean "including (or includes) without limitation," in this or any Loan Document.

2      LOAN AND TERMS OF PAYMENT

2.1   Promise to Pay.

        Borrower promises to pay Bank the unpaid principal amount of all Credit Extensions and interest on the unpaid principal amount of the Credit Extensions.

2.1.1 Term Loan.

(a)

Bank will make a Term Loan available to Borrower.



(b)

Borrower will pay 36 equal installments of principal plus Interest completely amortized over 36 months (the "Term Loan Payment"). Each Term Loan Payment is payable on the 1st of each month during the term of the loan. Borrower's final Term Loan Payment, due on September 1, 2005 (the "Term Loan Maturity Date"), includes all outstanding Term Loan principal and accrued interest.



(c)

Bank's obligation to lend the undisbursed portion of the Obligations will terminate if, in Bank's sole discretion, there has been a material adverse change in the general affairs, management, results of operation, condition (financial or otherwise) or the prospect of repayment of the Obligations, or there has been any material adverse deviation by Borrower from the most recent business plan of Borrower presented to and accepted by Bank prior to the execution of this Agreement.

2.2   Interest Rate, Payments.

        (a)Interest Rate.    The Term Loan accrues interest at a per annum rate of 1 percentage point above the Prime Rate. After an Event of Default, Obligations accrue interest at 5 percent above the rate effective immediately before the Event of Default. The interest rate increases or decreases when the Prime Rate changes. Interest is computed on a 360 day year for the actual number of days elapsed.

        (b)Payments.    Bank may debit any of Borrower's deposit accounts including Account Number 3300294285 for principal and interest payments owing or any amounts Borrower owes Bank. Bank will promptly notify Borrower when it debits Borrower's accounts. These debits are not a set-off. Payments received after 12:00 noon Pacific time are considered received at the opening of business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment is due the next Business Day and additional interest shall accrue.

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2.3   Fees.

        Borrower will pay:

        (a)Bank Expenses.    All Bank Expenses (including reasonable attorneys' fees and reasonable expenses) incurred through and after the date of this Agreement, are payable when due. A good faith deposit of $2,500.00 has been received by Bank.

3      CONDITIONS OF LOANS

3.1   Conditions Precedent to Initial Credit Extension.

        Bank's obligation to make the initial Credit Extension is subject to the condition precedent that (a) it receive the agreements, documents and fees it requires, and (b) it receive evidence satisfactory to Bank of the termination of all UCC financing statements against Borrower and in favor of Comerica.

4      CREATION OF SECURITY INTEREST

4.1   Grant of Security Interest.

        Borrower grants Bank a continuing security interest in all presently existing and later acquired Collateral to secure all Obligations and performance of each of Borrower's duties under the Loan Documents. Except for Permitted Liens, any security interest will be a first priority security interest in the Collateral. Bank may place a "hold" on any deposit account pledged as Collateral. If this Agreement is terminated, Bank's lien and security interest in the Collateral will continue until Borrower fully satisfies its Obligations.

4.2   Authorization of File.

        Borrower authorizes Bank to file financing statements without notice to Borrower, with all appropriate jurisdictions, as Bank deems appropriate, in order to perfect or protect Bank's interest in the Collateral.

5      REPRESENTATIONS AND WARRANTIES

        Borrower represents and warrants as follows:

5.1   Due Organization and Authorization.

        Borrower and each Subsidiary is duly existing and in good standing in its state of formation and qualified and licensed to do business in, and in good standing in, any state in which the conduct of its business or its ownership of property requires that it be qualified, except where the failure to do so could not reasonably be expected to cause a Material Adverse Change. Borrower has not changed its state of formation or its organizational structure or type or any organizational number (if any) assigned by its jurisdiction of formation.

        The execution, delivery and performance of the Loan Documents have been duly authorized, and do not conflict with Borrower's formation documents, nor constitute an event of default under any material agreement by which Borrower is bound. Borrower is not in default under any agreement to which or by which it is bound in which the default could reasonably be expected to cause a Material Adverse Change.

5.2   Collateral.

        Borrower has good title to the Collateral, free of Liens except Permitted Liens or Borrower has Rights to each asset that is Collateral. Borrower has no other deposit account, other than the deposit

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accounts described in the Schedule. The Accounts are bona fide, existing obligations, and the service or property has been performed or delivered to the account debtor or its agent for immediate shipment to and unconditional acceptance by the account debtor. The Collateral is not in the possession of any third party bailee (such as at a warehouse). In the event that Borrower, after the date hereof, intends to store or otherwise deliver the Collateral to such a bailee, then Borrower will receive the prior written consent of Bank and such bailee must acknowledge in writing that the bailee is holding such Collateral for the benefit of Bank. All Inventory is in all material respects of good and marketable quality, free from material defects. Borrower is the sole owner of the Intellectual Property, except for non-exclusive licenses granted to its customers in the ordinary course of business. Each Patent is valid and enforceable and no part of the Intellectual Property has been judged invalid or unenforceable, in whole or in part, and no claim has been made that any part of the Intellectual Property violates the rights of any third party, except to the extent such claim could not reasonably be expected to cause a Material Adverse Change.

5.3   Litigation.

        Except as shown in the Schedule, there are no actions or proceedings pending or, to the knowledge of Borrower's Responsible Officers, threatened by or against Borrower or any Subsidiary in which a likely adverse decision could reasonably be expected to cause a Material Adverse Change.

5.4   No Material Adverse Change in Financial Statements.

        All consolidated financial statements for Borrower, and any Subsidiary, delivered to Bank fairly present in all material respects Borrower's consolidated financial condition and Borrower's consolidated results of operations. There has not been any material deterioration in Borrower's consolidated financial condition since the date of the most recent financial statements submitted to Bank.

5.5   Solvency.

        The fair salable value of Borrower's assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities; the Borrower is not left with unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay its debts (including trade debts) as they mature.

5.6   Regulatory Compliance.

        Borrower is not an "investment company" or a company "controlled" by an "investment company" under the Investment Company Act. Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations T and U of the Federal Reserve Board of Governors). Borrower has complied in all material respects with the Federal Fair Labor Standards Act. Borrower has not violated any laws, ordinances or rules, the violation of which could reasonably be expected to cause a Material Adverse Change. None of Borrower's or any Subsidiary's properties or assets has been used by Borrower or any Subsidiary or, to the best of Borrower's knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally. Borrower and each Subsidiary has timely filed all required tax returns and paid, or made adequate provision to pay, all material taxes, except those being contested in good faith with adequate reserves under GAAP. Borrower and each Subsidiary has obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all government authorities that are necessary to continue its business as currently conducted, except where the failure to do so Could not reasonably be expected to cause a Material Adverse Change.

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5.7   Investments in Subsidiaries.

        Borrower does not own any stock, partnership interest or other equity securities except for Permitted Investments.

5.8   Full Disclosure.

        No written representation, warranty or other statement of Borrower in any certificate or written statement given to Bank (taken together with all such written certificates and written statements to Bank) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading. It being recognized by Bank that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected and forecasted results.

6      AFFIRMATIVE COVENANTS

        Borrower will do all of the following for so long as Bank has an obligation to lend, or there are outstanding Obligations:

6.1   Government Compliance.

        Borrower will maintain its and all Subsidiaries' legal existence and good standing in its jurisdiction of formation and maintain qualification in each jurisdiction in which the failure to so qualify would reasonably be expected to cause a material adverse effect on Borrower's business or operations. Borrower will comply, and have each Subsidiary comply, with all laws, ordinances and regulations to which it is subject, noncompliance with which could have a material adverse effect on Borrower's business or operations or would reasonably be expected to cause a Material Adverse Change.

6.2   Financial Statements, Reports, Certificates.

(a)

Borrower will deliver to Bank: (i) as soon as available, but no later than 30 days after the last day of each month, a company prepared consolidated balance sheet and income statement covering Borrower's consolidated operations during the period certified by a Responsible Officer and in a form acceptable to Bank; (ii) as soon as available, but no later than 120 days after the last day of Borrower's fiscal year, audited company prepared consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm reasonably acceptable to Bank; (iii) budgets, sales projections, operating plans or other financial information Bank reasonably requests; (iv) a prompt report of any legal actions pending or threatened against Borrower or any Subsidiary that could result in damages or costs to Borrower or any Subsidiary of $100,000 or more; and (v) prompt notice of any material change in the composition of the Intellectual Property, including any subsequent ownership right of Borrower in or to any Copyright, Patent or Trademark not shown in any intellectual property security agreement between Borrower and Bank or knowledge of an event that materially adversely affects the value of the Intellectual Property.



(b)

Within 30 days after the last day of each month, Borrower will deliver to Bank with the monthly financial statements a Compliance Certificate signed by a Responsible Officer in the form of Exhibit C.

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6.3   Inventory; Returns.

        Borrower will keep all Inventory in good and marketable condition, free from material defects. Returns and allowances between Borrower and its account debtors will follow Borrower's customary practices as they exist at execution of this Agreement. Borrower must promptly notify Bank of all returns, recoveries, disputes and claims, that involve more than $50,000.

6.4   Taxes.

        Borrower will make, and cause each Subsidiary to make, timely payment of all material federal, state, and local taxes or assessments and will deliver to Bank, on demand, appropriate certificates attesting to the payment.

6.5   Insurance.

        Borrower will keep its business and the Collateral insured for risks and in amounts, as Bank may reasonably request. Insurance policies will be in a form, with companies, and in amounts that are satisfactory to Bank in Bank's reasonable discretion. All property policies will have a lender's loss payable endorsement showing Bank as an additional loss payee and all liability policies will show the Bank as an additional insured and provide that the insurer must give Bank at least 20 days notice before canceling its policy. At Bank's request, Borrower will deliver certified copies of policies and evidence of all premium payments. Proceeds payable under any policy will, at Bank's option, be payable to Bank on account of the Obligations.

6.6   Primary Accounts.

        Borrower will maintain its primary banking relationship with Bank, which relationship shall include Borrower maintaining account balances in any accounts at or through Bank representing at least 80% of all account balances at any financial institution.

6.7   Financial Covenants.

        Borrower will maintain at all times (tested as of the last day of each month):

        (i)Tangible Net Worth.    A Tangible Net Worth of at least $1,750,000.

6.8   Registration of Intellectual Property Rights.

        Borrower will register with the United States Patent and Trademark Office or the United States Copyright Office its Intellectual Property within 30 days of the date of this Agreement, and additional Intellectual Property rights developed or acquired including revisions or additions with any product before the sale or licensing of the product to any third party.

        Borrower will (i) protect, defend and maintain the validity and enforceability of the Intellectual Property and promptly advise Bank in writing of material infringements and (ii) not allow any Intellectual Property to be abandoned, forfeited or dedicated to the public without Bank's written consent.

6.9   Further Assurances.

        Borrower will execute any further instruments and take further action as Bank reasonably requests to perfect or continue Bank's security interest in the Collateral or to effect the purposes of this Agreement.

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7      NEGATIVE COVENANTS

        Borrower will not do any of the following without Bank's prior written consent, which will not be unreasonably withheld, for so long as Bank has an obligation to lend and there are any outstanding Obligations:

7.1   Dispositions.

        Convey, sell, lease, transfer or otherwise dispose of (collectively "Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (i) of Inventory in the ordinary course of business; (ii) of non-exclusive licenses and similar arrangements for the use of the property of Borrower or its Subsidiaries in the ordinary course of business; or (iii) of worn-out or obsolete Equipment.

7.2   Changes in Business, Ownership, Management or Locations of Collateral.

        Engage in or permit any of its Subsidiaries to engage in any business other than the businesses currently engaged in by Borrower or reasonably related thereto or have a material change in its ownership or management of greater than 25% (other than by the sale of Borrower's equity securities in a public offering or to venture capital investors so long as Borrower identifies the venture capital investors prior to the closing of the investment). Borrower will not, without at least 30 days prior written notice, relocate its chief executive office, change its state of formation (including reincorporation), change its organizational number or name or add any new offices or business locations (such as warehouses) in which Borrower maintains or stores over $5,000 in Collateral.

7.3   Mergers or Acquisitions.

        Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person, except where (i) no Event of Default has occurred and is continuing or would result from such action during the term of this Agreement and (ii) such transaction would not result in a decrease of more than 25% of Tangible Net Worth. A Subsidiary may merge or consolidate into another Subsidiary or into Borrower.

7.4   Indebtedness.

        Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness.

7.5   Encumbrance.

        Create, Incur, or allow any Lien on any of its property, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, or permit any Collateral not to be subject to the first priority security interest granted here, subject to Permitted Liens.

7.6   Distributions; Investments.

        Directly or indirectly acquire or own any Person, or make any Investment in any Person, other than Permitted Investments, or permit any of its Subsidiaries to do so. Pay any dividends or make any distribution or payment or redeem, retire or purchase any capital stock.

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7.7   Transactions with Affiliates.

        Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower except for transactions that are in the ordinary course of Borrower's business, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arm's length transaction with a nonaffiliated Person.

7.8   Subordinated Debt.

        Make or permit any payment on any Subordinated Debt, except under the terms of the Subordinated Debt, or amend any provision in any document relating to the Subordinated Debt without Bank's prior written consent.

7.9   Compliance.

        Become an "investment company" or a company controlled by an "investment company," under the Investment Company Act of 1940 or undertake as one of its important activities extending credit to purchase or carry margin stock, or use the proceeds of any Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a material adverse effect on Borrower's business or operations or would reasonably be expected to cause a Material Adverse Change, or permit any of its Subsidiaries to do so.

8      EVENTS OF DEFAULT

        Any one of the following is an Event of Default:

8.1   Payment Default.

        If Borrower fails to pay any of the Obligations within 3 days after their due date, however, during such period no Credit Extensions will be made;

8.2   Covenant Default.

(a)

If Borrower fails to perform any obligation under Sections 6.2 or 6.7 or violates any of the covenants contained in Article 7 of this Agreement, or



(b)

If Borrower fails or neglects to perform, keep, or observe any other material term, provision, condition, covenant, or agreement contained in this Agreement, in any of the Loan Documents, or in any other present or future agreement between Borrower and Bank and as to any default under such other term, provision, condition, covenant or agreement that can be cured, has failed to cure such default within ten (10) days after the occurrence thereof; provided, however, that if the default cannot by its nature be cured within the ten (10) day period or cannot after diligent attempts by Borrower be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional reasonable period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to have cured such default shall not be deemed an Event of Default (provided that no Credit Extensions will be made during such cure period);

8.3   Material Adverse Change.

        If there (i) occurs a material adverse change in the business, operations, or financial condition of the Borrower, or (ii) is a material impairment of the prospect of repayment of any portion of the

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Obligations; or (iii) is a material impairment of the value or priority of Bank's security interests in the Collateral (the foregoing being defined as a "Material Adverse Change").

8.4   Attachment.

        If any material portion of Borrower's assets is attached, seized, levied on, or comes into possession of a trustee or receiver and the attachment, seizure or levy is not removed in 10 days, or if Borrower is enjoined, restrained, or prevented by court order from conducting a material part of its business or if a judgment or other claim becomes a Lien on a material portion of Borrower's assets, or if a notice of lien, levy, or assessment is filed against any of Borrower's assets by any government agency and not paid within 10 days after Borrower receives notice. These are not Events of Default if stayed or if a bond is posted pending contest by Borrower (but no Credit Extensions will be made during the cure period);

8.5   Insolvency.

        If Borrower becomes insolvent or if Borrower begins an Insolvency Proceeding or an Insolvency Proceeding is begun against Borrower and not dismissed or stayed within 30 days (but no Credit Extensions will be made before any Insolvency Proceeding is dismissed);

8.6   Other Agreements.

        If there is a default in any agreement between Borrower and a third party that gives the third party the right to accelerate any Indebtedness exceeding $100,000 or that could cause a Material Adverse Change;

8.7   Judgments.

        If a money judgment(s) in the aggregate of at least $50,000 is rendered against Borrower and is unsatisfied and unstayed for 10 days (but no Credit Extensions will be made before the judgment is stayed or satisfied); or

8.8   Misrepresentations.

        If Borrower or any Person acting for Borrower makes any material misrepresentation or material misstatement now or later in any warranty or representation in this Agreement or in any writing delivered to Bank or to induce Bank to enter this Agreement or any Loan Document.

9      BANK'S RIGHTS AND REMEDIES

9.1   Rights and Remedies.

        When an Event of Default occurs and continues Bank may, without notice or demand, do any or all of the following:

(a)

Declare all Obligations immediately due and payable (but If an Event of Default described in Section 8.5 occurs all Obligations are immediately due and payable without any action by Bank);



(b)

Stop advancing money or extending credit for Borrower's benefit under this Agreement or under any other agreement between Borrower and Bank;



(c)

Settle or adjust disputes and claims directly with account debtors for amounts, on terms and in any order that Bank considers advisable; notify any Person owing Borrower money of Bank's security interest in the funds and verify the amount of the Account. Borrower must collect all payments in trust for Bank and, if requested by Bank, immediately deliver the

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payments to Bank in the form received from the account debtor, with proper endorsements for deposit;

(d)

Make any payments and do any acts it considers necessary or reasonable to protect its security interest in the Collateral. Borrower will assemble the Collateral if Bank requires and make it available as Bank designates. Bank may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Borrower grants Bank a license to enter and occupy any of its premises, without charge, to exercise any of Bank's rights or remedies;



(e)

Apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) any amount held by Bank owing to or for the credit or the account of Borrower;



(f)

Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral. Bank is granted a non-exclusive, royalty-free license or other right to use, without charge, Borrower's labels, Patents, Copyrights, Mask Works, rights of use of any name, trade secrets, trade names, Trademarks, service marks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Bank's exercise of its rights under this Section, Borrower's rights under all licenses and all franchise agreements inure to Bank's benefit; and



(g)

Dispose of the Collateral according to the Code,

9.2   Power of Attorney.

        Effective only when an Event of Default occurs and continues, Borrower irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower's name on any checks or other forms of payment or security; (ii) sign Borrower's name on any invoice or bill of lading for any Account or drafts against account debtors, (iii) make, settle, and adjust all claims under Borrower's insurance policies; (iv) settle and adjust disputes and claims about the Accounts directly with account debtors, for amounts and on terms Bank determines reasonable; and (v) transfer the Collateral into the name of Bank or a third party as the Code permits. Bank may exercise the power of attorney to sign Borrower's name on any documents necessary to perfect or continue the perfection of any security interest regardless of whether an Event of Default has occurred. Bank's appointment as Borrower's attorney in fact, and all of Bank's rights and powers, coupled with an interest, are irrevocable until all Obligations have been fully repaid and performed and Bank's obligation to provide Credit Extensions terminates.

9.3   Bank Expenses.

        If Borrower fails to pay any amount or furnish any required proof of payment to third persons, Bank may make all or part of the payment or obtain insurance policies required in Section 6.5, and take any action under the policies Bank deems prudent. Any amounts paid by Bank are Bank Expenses and immediately due and payable, bearing interest at the then applicable rate and secured by the Collateral. No payments by Bank are deemed an agreement to make similar payments in the future or Bank's waiver of any Event of Default.

9.4   Bank's Liability for Collateral.

        If Bank complies with reasonable banking practices and Section 9-207 of the Code, it is not liable for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other person. Except as provided above, Borrower bears all risk of loss, damage or destruction of the Collateral.

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9.5   Remedies Cumulative.

        Bank's rights and remedies under this Agreement, the Loan Documents, and all other agreements are cumulative. Bank has all rights and remedies provided under the Code, by law, or in equity. Bank's exercise of one right or remedy is not an election, and Bank's waiver of any Event of Default is not a continuing waiver. Bank's delay is not a waiver, election, or acquiescence. No waiver is effective unless signed by Bank and then is only effective for the specific instance and purpose for which it was given.

9.6   Demand Waiver.

        Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Bank on which Borrower is liable.

10    NOTICES

        All notices or demands by any party about this Agreement or any other related agreement must be in writing and be personally delivered or sent by an overnight delivery service, by certified mail, postage prepaid, return receipt requested, or by telefacsimile to the addresses set forth at the beginning of this Agreement. A party may change its notice address by giving the other party written notice.

11    CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

        California law governs the Loan Documents without regard to principles of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in San Diego County, California.

BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

12    GENERAL PROVISIONS

12.1 Successors and Assigns.

        This Agreement binds and is for the benefit of the successors and permitted assigns of each party. Borrower may not assign this Agreement or any rights under it without Bank's prior written consent which may be granted or withheld in Bank's discretion. Bank has the right, without the consent of or notice to Borrower, to sell, transfer, negotiate, or grant participation in all or any part of, or any interest in, Bank's obligations, rights and benefits under this Agreement.

12.2 Indemnification.

        Borrower will indemnify, defend and hold harmless Bank and its officers, employees, and agents against: (a) all obligations, demands, claims, and liabilities asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (b) all losses or Bank Expenses incurred, or paid by Bank from, following, or consequential to transactions between Bank and Borrower (including reasonable attorneys fees and expenses), except for losses caused by Bank's gross negligence or willful misconduct.

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12.3 Time of Essence.

        Time is of the essence for the performance of all obligations in this Agreement.

12.4 Severability of Provision.

        Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision.

12.5 Amendments in Writing, Integration.

        All amendments to this Agreement must be in writing and signed by Borrower and Bank. This Agreement represents the entire agreement about this subject matter, and supersedes prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Agreement merge into this Agreement and the Loan Documents.

12.6 Counterparts.

        This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, are an original, and all taken together, constitute one Agreement.

12.7 Survival.

        All covenants, representations and warranties made in this Agreement continue in full force while any Obligations remain outstanding. The obligations of Borrower in Section 12.2 to indemnify Bank will survive until all statutes of limitations for actions that may be brought against Bank have run.

12.8 Confidentiality.

        In handling any confidential information, Bank will exercise the same degree of care that it exercises for its own proprietary information, but disclosure of information may be made (i) to Bank's subsidiaries or affiliates in connection with their business with Borrower, (ii) to prospective transferees or purchasers of any interest in the loans (provided, however, Bank shall use commercially reasonable efforts in obtaining such prospective transferee or purchasers agreement of the terms of this provision), (iii) as required by law, regulation, subpoena, or other order, (iv) as required in connection with Bank's examination or audit and (v) as Bank considers appropriate exercising remedies under this Agreement. Confidential information does not include information that either: (a) is in the public domain or in Bank's possession when disclosed to Bank, or becomes part of the public domain after disclosure to Bank; or (b) is disclosed to Bank by a third party, if Bank does not know that the third party is prohibited from disclosing the information.

12.9 Attorneys' Fees, Costs and Expenses.

        In any action or proceeding between Borrower and Bank arising out of the Loan Documents, the prevailing party will be entitled to recover its reasonable attorneys' fees and other reasonable costs and expenses incurred, in addition to any other relief to which it may be entitled.

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13    DEFINITIONS

13.1 Definitions.

        In this Agreement:

"Accounts" are all existing and later arising accounts, contract rights, and other obligations owed Borrower in connection with its sale or lease of goods (including licensing software and other technology) or provision of services, all credit insurance, guaranties, other security and all merchandise returned or reclaimed by Borrower and Borrower's Books relating to any of the foregoing, as such definition may be amended from time to time according to the Code.

"Affiliate" of a Person is a Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person's senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person's managers and members.

"Bank Expenses" are all audit fees and expenses and reasonable costs and expenses (including reasonable attorneys' fees and expenses) for preparing, negotiating, administering, defending and enforcing the Loan Documents (including appeals or Insolvency Proceedings).

"Borrower's Books" are all Borrower's books and records including ledgers, records regarding Borrower's assets or liabilities, the Collateral, business operations or financial condition and all computer programs or discs or any equipment containing the information.

"Business Day" is any day that is not a Saturday, Sunday or a day on which the Bank is closed.

"Code" is the California Uniform Commercial Coda, as applicable.

"Collateral" is the property described on Exhibit A.

"Contingent Obligation" is, for any Person, any direct or indirect liability, contingent or not, of that Person for (i) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (ii) any obligations for undrawn letters of credit for the account of that Person; and (iii) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but "Contingent Obligation" does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinate, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under the guarantee or other support arrangement.

"Copyrights" are all copyright rights, applications or registrations and like protections in each work or authorship or derivative work, whether published or not (whether or not it is a trade secret) now or later existing, created, acquired or held.

"Credit Extension" is each Term Loan or any other extension of credit by Bank for Borrower's benefit.

"Effective Date" is the date Bank executes this Agreement.

"Equipment" is all present and future machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments in which Borrower has any interest.

"ERISA" is the Employment Retirement Income Security Act of 1974, and its regulations.

"GAAP" is generally accepted accounting principles.

14

"Indebtedness" is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations and (d) Contingent Obligations.

"Insolvency Proceeding" are proceedings by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.

"Intellectual Property" is all of Borrower's:

(a)

Copyrights, Trademarks, Patents, and Mask Works including amendments, renewals, extensions, and all licenses or other rights to use and all license fees and royalties from the use;



(b)

Any trade secrets and any intellectual property rights in computer software and computer software products now or later existing, created, acquired or held;



(c)

All design rights which may be available to Borrower now or later created, acquired or held;



(d)

Any claims for damages (past, present or future) for infringement of any of the rights above, with the right, but not the obligation, to sue and collect damages for use or infringement of the intellectual property rights above;

        All proceeds and products of the foregoing, including all insurance, indemnity or warranty payments.

"Inventory" is present and future inventory in which Borrower has any interest, including merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products intended for sale or lease or to be furnished under a contract of service, of every kind and description now or later owned by or in the custody or possession, actual or constructive, of Borrower, including inventory temporarily out of its custody or possession or in transit and including returns on any accounts or other proceeds (including insurance proceeds) from the sale or disposition of any of the foregoing and any documents of title.

"Investment" is any beneficial ownership of (Including stock, partnership interest or other securities) any Person, or any loan, advance or capital contribution to any Person.

"Lien" is a mortgage, lien, deed of trust, charge, pledge, security interest or other encumbrance.

"Loan Documents" are, collectively, this Agreement, any note, or notes or guaranties executed by Borrower or Guarantor, and any other present or future agreement between Borrower and/or for the benefit of Bank in connection with this Agreement, all as amended, extended or restated.

"Mask Works" are all mask works or similar rights available for the protection of semiconductor chips, now owned or later acquired.

"Material Adverse Change" is defined in Section 8.3.

"Obligations" are debts, principal, Interest, Bank Expenses and other amounts Borrower owes Bank now or later, including cash management services, letters of credit and foreign exchange contracts, if any and including interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Bank.

"Patents" are patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.

15

"Permitted Indebtedness" is:

(a)

Borrower's indebtedness to Bank under this Agreement or any other Loan Document;



(b)

Indebtedness existing on the Effective Date and shown on the Schedule;



(c)

Subordinated Debt;



(d)

Indebtedness to trade creditors incurred in the ordinary course of business; and



(e)

Indebtedness secured by Permitted Liens.

"Permitted Investments" are:

(a)

Investments shown on the Schedule and existing on the Effective Date; and



(b)

(i) marketable direct obligations issued or unconditionally guaranteed by the United States or its agency or any State maturing within 1 year from its acquisition, (ii) commercial paper maturing no more than 1 year after its creation and having the highest rating from either Standard & Poor's Corporation or Moody's Investors Service, Inc., and (iii) Bank's certificates of deposit issued maturing no more than 1 year after issue.

"Permitted Liens" are;

(a)

Liens existing on the Effective Date and shown on the Schedule or arising under this Agreement or other Loan Documents;



(b)

Liens for taxes, fees, assessments or other government charges or levies, either not delinquent or being contested in good faith and for which Borrower maintains adequate reserves on its Books, if they have no priority over any of Bank's security interests;



(c)

Purchase money Liens (i) on Equipment acquired or held by Borrower or its Subsidiaries incurred for financing the acquisition of the Equipment, or (ii) existing on equipment when acquired, if the Lien is confined to the property and Improvements and the proceeds of the equipment;



(d)

Licenses or sublicenses granted in the ordinary course of Borrower's business, and any interest or title of a licensor or under any license or sublicense, if the licenses and sublicenses permit granting Bank a security interest;



(e)

Leases or subleases granted in the ordinary course of Borrower's business, including in connection with Borrower's leased premises or leased property;



(f)

Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c), but any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase.

"Person" is any individual, sole proprietorship, partnership, limited liability company, joint venture, company association, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency.

"Prime Rate" is Bank's most recently announced "prime rate," even if it is not Bank's lowest rate.

"Responsible Officer" is each of the Chief Executive Officer, the President, the Chief Financial Officer and the Controller of Borrower.

"Rights", as applied to the Collateral, means the Borrower's rights and interests in, and powers with respect to, that Collateral, whatever the nature of those rights, interests and powers and, in any event, including Borrower's power to transfer rights in such Collateral to Bank.

16

"Schedule" is any attached schedule of exceptions.

"Subordinated Debt" is debt incurred by Borrower subordinated to Borrower's indebtedness owed to Bank and which is reflected in a written agreement in a manner and form acceptable to Bank and approved by Bank in writing.

"Subsidiary" is for any Person, or any other business entity of which more than 50% of the voting stock or other equity interests is owned or controlled, directly or indirectly, by the Person or one or more Affiliates of the Person.

"Tangible Net Worth" is, on any date, the consolidated total assets of Borrower and its Subsidiaries minus, (i) any amounts attributable to (a) goodwill, (b) intangible items such as unamortized debt discount and expense, patents, trade and service marks and names, copyrights and research and development expenses except prepaid expenses, and (c) reserves not already deducted from assets, and (ii) Total Liabilities.

"Term Loan" is the lesser of (i) $180,000 or (ii) the outstanding balance of equipment term loan provided to DivXNetworks, Inc. by Comerica.

"Term Loan Maturity Date" is defined in Section 2.1.1.

"Total Liabilities" is on any day, obligations that should, under GAAP, be classified as liabilities on Borrower's consolidated balance sheet, including all Indebtedness, and current portion Subordinated Debt allowed to be paid, but excluding all other Subordinated Debt.

"Trademarks" are trademark and servicemark rights, registered or not, applications to register and registrations and like protections, and the entire goodwill of the business of Assignor connected with the trademarks.

BORROWER: DIVXNETWORKS, INC.	BANK: SILICON VALLEY BANK
/s/ John Aylsworth By: John Aylsworth Title: Controller	/s/ Raquel B. Cunningham Raquel B. Cunningham Vice President Effective Date: 9.9.02

17

EXHIBIT A

        The Collateral consists of all of Borrower's right, title and interest in and to the following whether owned now or hereafter arising and whether the Borrower has rights now or hereafter has rights therein and wherever located;

        All goods and equipment now owned or hereafter acquired, including, without limitation, all machinery, fixtures, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing, and all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing, wherever located;

        All Inventory, now owned or hereafter acquired, including, without limitation, all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products including such inventory as is temporarily out of Borrower's custody or possession or in transit and including any returns upon any accounts or other proceeds, including insurance proceeds, resulting from the sale or disposition of any of the foregoing and any documents of title representing any of the above;

        All contract rights and general intangibles (as such definitions may be amended from time to time according to the Code), now owned or hereafter acquired, including, without limitation, goodwill, trademarks, servicemarks, trade styles, trade names, patents, patent applications, leases, license agreements, franchise agreements, blueprints, drawings, purchase orders, customer lists, route lists, infringements, claims, computer programs, computer discs, computer tapes, literature, reports, catalogs, design rights, income tax refunds, payments of insurance and rights to payment of any kind,;

        All now existing and hereafter arising accounts, contract rights, royalties, license rights and all other forms of obligations owing to Borrower arising out of the sale or lease of goods, the licensing of technology or the rendering of services by Borrower (as such definitions may be amended from time to time according to the Code) whether or not earned by performance, and any and all credit insurance, insurance (including refund) claims and proceeds, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by Borrower;

        All documents, cash, deposit accounts, securities, securities entitlements, securities accounts, investment property, financial assets, letters of credit, letter of credit rights, certificates of deposit, instruments and chattel paper and electronic chattel paper now owned or hereafter acquired and Borrower's Books relating to the foregoing;

        All copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof, whether published or unpublished, now owned or hereafter acquired; all trade secret rights, including all rights to unpatented inventions, know-how, operating manuals, license rights and agreements and confidential information, now owned or hereafter acquired; all mask work or similar rights available for the protection of semiconductor chips, now owned or hereafter acquired; all claims for damages by way of any past, present and future infringement of any of the foregoing; and

        All Borrower's Books relating to the foregoing and any and all claims, rights and interests in any of the above and all substitutions for, additions and accessions to and proceeds thereof.

EXHIBIT B

LOAN PAYMENT/ADVANCE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 12:00 P.S.T.

Fax To: Date:

o    LOAN PAYMENT:

DivXNetworks, Inc. (Borrower)

From Account #		To Account #
	(Deposit Account #)		(Loan Account #)

Principal $ and/or Interest $

All Borrower's representation and warranties in the Loan and Security Agreement are true, correct and complete in all material respects up to and including the date of the transfer request for a loan payment, but those representations and warranties expressly referring to another date shall be true, correct and complete in all material respects as of that date:

Authorized Signature: Phone Number:

o    LOAN ADVANCE:

Complete Outgoing Wire Request section below if all or a portion of the funds from this loan advance are for an outgoing wire.

From Account #		To Account #
	(Loan Account #)		(Deposit Account #)

Amount of Advance $

All Borrower's representation and warranties in the Loan and Security Agreement are true, correct and complete in all material respects up to and including the date of the transfer request for an advance, but those representations and warranties expressly referring to another date shall be true, correct and complete in all material respects as of that date:

Authorized Signature: Phone Number:

OUTGOING WIRE REQUEST

Complete only if all or a portion of funds from the loan advance above are to be wired.

Deadline for same day processing is 12:00pm, P.S.T.

Beneficiary Name:	Amount of Wire: $
Beneficiary Bank:	Account Number:
City and State:

Beneficiary Bank Transit (ABA) #:	Beneficiary Bank Code (Swift, Sort, Chip, etc.):
(For International Wire Only)

Intermediary Bank: Transit (ABA) #:

For Further Credit to:

Special Instruction:

By signing below, I (we) acknowledge and agree that my (our) funds transfer request shall be processed in accordance with and subject to the terms and conditions set forth in the agreements(s) covering funds transfer service(s), which agreement(s) were previously received and executed by me (us).

Authorized Signature: 2^nd Signature (If Required):

Print Name/Title: Print Name/Title:

Telephone # Telephone #

2

Schedule to Loan and Security Agreement

The exact correct corporate name of Borrower is (attach a copy of the formation documents, e.g., articles, partnership agreement):

Borrower's State of formation: Delaware

Borrower has operated under only the following other names (if none, so state):

All other address at which the Borrower does business are as follows (attach additional sheets if necessary and include all warehouse addresses):

Borrower has deposit accounts and/or investment accounts located only at the following institutions:

List Acct. Numbers:

Liens existing on the Effective Date and disclosed to and accepted by Bank in writing:

Investments existing on the Effective Date and disclosed to and accepted by Bank in writing:

Subordinated Debt:

Indebtedness on the Effective Date and disclosed to and consented to by Bank in writing:

The following is a list of the Borrower's copyrights (including copyrights of software) which are registered with the United States Copyright Office. (Please include name of the copyright and registration number and attach a copy of the registration):

3

The following is a list of all software which the Borrower sells, distributes or licenses to others, which is not registered with the United States Copyright Office. (Please include versions which are not registered:

The following is a list of all of the Borrower's patents which are registered with the United States Patent Office. (Please include name of the patent and registration number and attach a copy of the registration.):

The following is a list of all of the Borrower's patents which are pending with the United States Patent Office. (Please include name of the patent and a copy of the application.):

The following is a list of all of the Borrower's registered trademarks. (Please include name of the trademark and a copy of the registration.):

Borrower is not subject to litigation which would have a material adverse effect on the Borrower's financial condition, except the following (attach additional comments, if needed):

Tax ID Number 33-0921758

Organizational Number, if any: 3229390

4

EXHIBIT C
COMPLIANCE CERTIFICATE

TO:	SILICON VALLEY BANK 9645 Scranton Road, Suite 110 San Diego, CA 92121
FROM:	DIVXNETWORKS, INC.

        The undersigned Responsible Officer of DivXNetworks, Inc. ("Borrower") certifies that under the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is in complete compliance for the period ending                        with all required covenants except as noted below and (ii) all representations and warranties in the Agreement are true and correct in all material respects on this date. Attached are the required documents supporting the certification. The Officer certifies that these are prepared in accordance with Generally Accepted Accounting Principles (GAAP) consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The Responsible Officer acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered.

Please indicate compliance status by circling Yes/No under "Complies" column.

Reporting Covenant	Required			Complies
Monthly financial statements + CC		Monthly within 30 days		Yes	No
Annual (audited) + CC		FYE within 120 days		Yes	No
Financial Covenant	Required		Actual	Complies
Maintain at all times, (tested monthly):
Minimum Tangible Net Worth	$	1,750,000	$	Yes	No

Have there been updates to Borrower's intellectual property? Yes / No

Borrower only has deposit accounts located at the following Institutions: .

Comments Regarding Exceptions: See Attached.	BANK USE ONLY
Sincerely,	Received by:	AUTHORIZED SIGNER

DivXNetworks, Inc.
Date:

SIGNATURE
Verified:
AUTHORIZED SIGNER

TITLE
Date:

DATE
Compliance Status:
Yes    No

INTELLECTUAL PROPERTY SECURITY AGREEMENT

        This Intellectual Property Security Agreement is entered into as of the Effective Date by and between SILICON VALLEY BANK ("Bank") and DivXNetworks, Inc. ("Grantor").

RECITALS

A.

Bank has agreed to make certain advances of money and to extend certain financial accommodation to Grantor (the "Loans") in the amounts and manner set forth in that certain Loan and Security Agreement by and between Bank and Grantor dated the Effective Date (as the same may be amended, modified or supplemented from time to time, the "Loan Agreement"; capitalized terms used herein are used as defined in the Loan Agreement). Bank is willing to make the Loans to Grantor, but only upon the condition, among others, that Grantor shall grant to Bank a security interest in certain Copyrights, Trademarks, Patents, and Mask Works to secure the obligations of Grantor under the Loan Agreement.



B.

Pursuant to the terms of the Loan Agreement, Grantor has granted to Bank a security interest in all of Grantor's right, title and interest, whether presently existing or hereafter acquired, in, to and under all of the Collateral.

        NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, and intending to be legally bound, as collateral security for the prompt and complete payment when due of its obligations under the Loan Agreement, Grantor hereby represents, warrants, covenants and agrees as follows:

AGREEMENT

        To secure its obligations under the Loan Agreement, Grantor grants and pledges to Bank a security interest in all of Grantor's right, title and interest in, to and under its Intellectual Property Collateral (including without limitation those Copyrights, Patents, Trademarks and Mask Works listed on Schedules A, B, C, and D hereto), and including without limitation all proceeds thereof (such as, by way of example but not by way of limitation, license royalties and proceeds of infringement suits), the right to sue for past, present and future infringements, all rights corresponding thereto throughout the world and all re-issues, divisions continuations, renewals, extensions and continuations-in-part thereof.

        This security interest is granted in conjunction with the security interest granted to Bank under the Loan Agreement. The rights and remedies of Bank with respect to the security interest granted hereby are in addition to those set forth in the Loan Agreement and the other Loan Documents, and those which are now or hereafter available to Bank as a matter of law or equity. Each right, power and remedy of Bank provided for herein or in the Loan Agreement or any of the Loan Documents, or now or hereafter existing at law or in equity shall be cumulative and concurrent and shall be in addition to every right, power or remedy provided for herein and the exercise by Bank of any one or more of the rights, powers or remedies provided for in this Intellectual Property Security Agreement, the Loan Agreement or any of the other Loan Documents, or now or hereafter existing at law or in equity, shall not preclude the simultaneous or later exercise by any person, including Bank, of any or all other rights, powers or remedies.

        IN WITNESS WHEREOF, the parties have cause this Intellectual Property Security Agreement to be duly executed by its officers thereunto duly authorized as of the first date written above.

	GRANTOR:
Address of Grantor:	DivXNetworks, Inc.
10350 Science Center Drive	By:	/s/  JOHN AYLSWORTH
Building 14, Suite 140

San Diego, CA 92121	Title:	Controller
Attn:

	BANK:
Address of Bank:	SILICON VALLEY BANK
9645 Scranton Road	By:	/s/  R. CUNNINGHAM
Suite 110

San Diego, CA 92121	Title:	VP
Attn:

2

EXHIBIT A

Copyrights

Description
Registration/
Application
Number Registration/
Application
Date

EXHIBIT B

Patents

Description
Registration/
Application
Number Registration/
Application
Date

EXHIBIT C

Trademarks

Description
Registration/
Application
Number Registration/
Application
Date

EXHIBIT D

Mask Works

Description
Registration/
Application
Number Registration/
Application
Date

CORPORATE BORROWING RESOLUTION

Borrower: DivXNetworks, Inc.
10350 Science Center Drive
Building 14, Suite 140
San Diego, CA 92121 Bank: Silicon Valley Bank
9645 Scranton Road
Suite 110
San Diego, CA92121

I, the Secretary or Assistant Secretary of DivXNetworks, Inc. ("Borrower"), CERTIFY that Borrower is a corporation existing under the laws of the State of Delaware.

I certify that at a meeting of Borrower's Directors (or by other authorized corporate action) duly held the following resolutions were adopted.

It is resolved that any one of the following officers of Borrower, whose name, title and signature is below:

NAMES	POSITIONS	ACTUAL SIGNATURES
R. JORDAN GREENHALL	CEO	/s/  R. JORDAN GREENHALL
S. SHAHI GHANEM	EVP & COO	/s/  S. SHAHI GHANEM
JOHN AYLSWORTH	CONTROLLER	/s/  JOHN AYLSWORTH

may act for Borrower and:

Borrow Money.    Borrow money from Silicon Valley Bank ("Bank").

Execute Loan Documents.    Execute any loan documents Bank requires.

Grant Security.    Grant Bank a security interest in any of Borrower's assets.

Negotiate Items.    Negotiate or discount all drafts, trade acceptances, promissory notes, or other indebtedness in which Borrower has an interest and receive cash or otherwise use the proceeds.

Letters of Credit.    Apply for letters of credit from Bank.

Foreign Exchange Contracts.    Execute spot or forward foreign exchange contracts.

Issue Warrants.    Issue warrants for Borrower's stock.

Further Acts.    Designate other individuals to request advances, pay fees and costs and execute other documents or agreements (including documents or agreement that waive Borrowers right to a jury trial) they think necessary to effectuate these Resolutions.

Further resolved that all acts authorized by these Resolutions and performed before they were adopted are ratified. These Resolutions remain in effect and Bank may rely on them until Bank receives written notice of their revocation.

I certify that the persons listed above are Borrower's officers with the titles and signatures shown following their names and that these resolutions have not been modified are currently effective.

CERTIFIED TO AND ATTESTED BY:

X	/s/  S. SHAHI GHANEM *Secretary or Assistant Secretary
X	/s/  JOHN AYLSWORTH

*

NOTE: In case the Secretary or other certifying officer is designated by the foregoing resolutions as one of the signing officers, this resolution should also be signed by a second Officer or Director of Borrower.

2

[GRAPHIC]

UCC FINANCING STATEMENT
FOLLOW INSTRUCTIONS (front and back) CAREFULLY

A. NAME & PHONE OF CONTACT AT FILER [optional]
    Diligenz, Inc.    1-800-858-5294

B. SEND ACKNOWLEDGMENT TO: (Name and Address)

1531834
Diligenz, Inc.
4629 168th Street SW
Suite E
Lynnwood, WA 98037

THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY

1.	DEBTOR'S EXACT FULL LEGAL NAME—insert only one debtor name (1a or 1b)—do not abbreviate or combine names
	1a. ORGANIZATION'S NAME
	DIVXNETWORKS, INC.
OR
	1b. INDIVIDUAL'S LAST NAME		FIRST NAME		MIDDLE NAME		SUFFIX
1c. MAILING ADDRESS				CITY	STATE	POSTAL CODE	COUNTRY
	10350 SCIENCE CENTER DRIVE, BUILDING 14, SUITE 140			SAN DIEGO	CA	92121	USA
1d. TAX ID #: SSN OR EIN		ADD'L INFO RE	1e. TYPE OF ORGANIZATION	1f. JURISDICTION OF ORGANIZATION	1g. ORGANIZATIONAL ID #, if any
	33-0921758	ORGANIZATION	Corp.	DE	3229390		o NONE
		DEBTOR

2.	ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME—insert only one debtor name (2a or 2b)—do not abbreviate or combine names
	2a. ORGANIZATION'S NAME
OR
	2b. INDIVIDUAL'S LAST NAME		FIRST NAME		MIDDLE NAME		SUFFIX
2c. MAILING ADDRESS				CITY	STATE	POSTAL CODE	COUNTRY
2d. TAX ID #: SSN OR EIN		ADD'L INFO RE	2e. TYPE OF ORGANIZATION	2f. JURISDICTION OF ORGANIZATION	2g. ORGANIZATIONAL ID #, if any
		ORGANIZATION					o NONE
		DEBTOR

3.	SECURED PARTY'S NAME (or NAME of TOTAL ASSIGNEE of ASSIGNOR S/P)—insert only one secured party name (3a or 3b)
	3a. ORGANIZATION'S NAME
	Silicon Valley Bank
OR
	3b. INDIVIDUAL'S LAST NAME	FIRST NAME		MIDDLE NAME		SUFFIX
3c. MAILING ADDRESS			CITY	STATE	POSTAL CODE	COUNTRY
	3003 Tasman Drive		Santa Clara	CA	95054	USA
4.	This FINANCING STATEMENT covers the following collateral:
	All of Debtor's present and future assets of every kind, including without limitation the types and items of property described on Exhibit A hereto (but this Financing Statement shall be fully effective notwithstanding any lack of any Exhibit A).
5.	ALTERNATIVE DESIGNATION (if applicable): o LESSEE/LESSOR o CONSIGNEE/CONSIGNOR o BAILEE/BAILOR o SELLER/BUYER o AG. LIEN o NON-UCC FILING

6.	o This FINANCING STATEMENT is to be filed [for record] (or recorded) in the REAL ESTATE RECORDS,    Attach Addendum    [if applicable]	7. Check to REQUEST SEARCH REPORT(S) on Debtor(s) [ADDITIONAL FEE]    [optional]	o All Debtors o Debtor 1 o Debtor 2
8.	OPTIONAL FILER REFERENCE DATA
	122/RBS—JCARINO—DIVXNETWORKS, INC.—BLANKET LIEN—DE SOS        1531834
FILING OFFICE COPY—NATIONAL UCC FINANCING STATEMENT (FORM UCC1) (REV. 07/29/98)

EXHIBIT A

DEBTOR: DIVXNETWORKS, INC.

        The Collateral consists of all of Borrower's right, title and interest in and to the following whether owned now or hereafter arising and whether the Borrower has rights now or hereafter has rights therein and wherever located:

        All goods and equipment now owned or hereafter acquired, including, without limitation, all machinery, fixtures, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing, and all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing, wherever located;

        All inventory, now owned or hereafter acquired, including, without limitation, all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products including such inventory as is temporarily out of Borrower's custody or possession or in transit and including any returns upon any accounts or other proceeds, including insurance proceeds, resulting from the sale or disposition of any of the foregoing and any documents of title representing any of the above;

        All contract rights and general intangibles (as such definitions may be amended from time to time according to the Code), now owned or hereafter acquired, including, without limitation, goodwill, trademarks, servicemarks, trade styles, trade names, patents, patent applications, leases, license agreements, franchise agreements, blueprints, drawings, purchase orders, customer lists, route lists, infringements, claims, computer programs, computer discs, computer tapes, literature, reports, catalogs, design rights, income tax refunds, payments of insurance and rights to payment of any kind,;

        All now existing and hereafter arising accounts, contract rights, royalties, license rights and all other forms of obligations owing to Borrower arising out of the sale or lease of goods, the licensing of technology or the rendering of services by Borrower (as such definitions may be amended from time to time according to the Code) whether or not earned by performance, and any and all credit insurance, insurance (including refund) claims and proceeds, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by Borrower;

        All documents, cash, deposit accounts, securities, securities entitlements, securities accounts, investment property, financial assets, letters of credit, letter of credit rights, certificates of deposit, instruments and chattel paper and electronic chattel paper now owned or hereafter acquired and Borrower's Books relating to the foregoing;

        All copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof, whether published or unpublished, now owned or hereafter acquired; all trade secret rights, including all rights to unpatented inventions, know-how, operating manuals, license rights and agreements and confidential information, now owned or hereafter acquired; all mask work or similar rights available for the protection of semiconductor chips, now owned or hereafter acquired; all claims for damages by way of any past, present and future infringement of any of the foregoing; and

        All Borrower's Books relating to the foregoing and any and all claims, rights and interests in any of the above and all substitutions for, additions and accessions to and proceeds thereof.

Silicon Valley Bank

Amendment to Loan Agreement

Borrower:	DivXNetworks, Inc.
Dated as of:	July 28, 2003

THIS AMENDMENT TO LOAN AGREEMENT is entered into between SILICON VALLEY BANK ("Bank") and the borrower named above (the "Borrower"). The Parties agree to amend the Loan and Security Agreement between them, dated September 9, 2002, as amended or otherwise modified from time to time (the "Loan Agreement"), as follows, effective as of the date hereof. (Capitalized terms used but not defined in this Amendment, shall have the meanings set forth in the Loan Agreement.)

1.    Revised Section 6.8    Section 6.8 of the Loan Agreement is hereby amended in its entirety to read as follows:

"6.8    Intellectual Property Rights.

        Borrower will register (as determined in the commercially reasonable business judgment of Borrower) with the United States Patent and Trademark Office its material patent and trademark Intellectual Property and such additional Intellectual Property rights relating thereto developed or acquired including revisions or additions to any product before the sale or licensing of the product to any third party or which is otherwise material. Borrower shall inform Bank of any such registration promptly and take such actions and execute such documentation as Bank may deem necessary or advisable relating thereto.

        Borrower has no present maskworks, software, computer programs and other works of authorship registered with the United States Copyright Office except as disclosed on Exhibit 6.8 hereto, and Borrower shall not hereafter register any maskworks, software, computer programs or other works of authorship subject to United States copyright protection with the United States Copyright Office without first complying with the following: (i) providing Bank with at least 15 days prior written notice thereof, (ii) providing Bank with a copy of the application for any such registration and (iii) executing and filing such other instruments, and taking such further actions as Bank may reasonably request from time to time to perfect or continue the perfection of Bank's interest in the Collateral, including without limitation the filing with the United States Copyright Office, simultaneously with the filing by Borrower of the application for any such registration, of a copy of this Agreement or a Supplement hereto in form acceptable to Bank identifying the maskworks, software, computer programs or other works of authorship being registered and confirming the grant of a security interest therein in favor of Bank.

        Borrower will (i) protect, defend and maintain the validity and enforceability of all material Intellectual Property in a manner consistent with past practices and, in any event, consistent with reasonable and prudent business practices and promptly advise Bank in writing of material infringements and (ii) not allow any Intellectual Property to be abandoned, forfeited or dedicated to the public without Bank's written consent."

2.    Representations True.    Borrower represents and warrants to Bank that all representations and warranties set forth in the Loan Agreement, as amended hereby, are true and correct.

3.    General Provisions.    This Amendment, the Loan Agreement, any prior written amendments to the Loan Agreement signed by Bank and the Borrower, and the other written documents and agreements between Bank and the Borrower set forth in full all of the representations and agreements of the parties with respect to the subject matter hereof and supersede all prior discussions, representations, agreements and understandings between the parties with respect to the subject hereof. Except as herein expressly amended, all of the terms and provisions of the Loan Agreement, and all other documents and agreements between Bank and the Borrower shall continue in full force and effect and the same are hereby ratified and confirmed. This Agreement and Consent may be executed

in any number of counterparts, which when taken together shall constitute one and the same agreement.

Borrower:			Silicon:
DivXNetworks, Inc.			Silicon Valley Bank
By	/s/ Jordan Greenhall		By	/s/ Deborah Brinker
	Title:	CEO	Title:	Vice President

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Silicon Valley Bank

Loan and Security Agreement

Borrower:	DivXNetworks, Inc.
Address:	10350 Science Center Drive, Building 14, Suite 140 San Diego, California 92121
Date:	July 28, 2003

        THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between SILICON VALLEY BANK ("Silicon"), whose address is 3003 Tasman Drive, Santa Clara California 95054 and the borrower(s) named above (jointly and severally, the "Borrower"), whose chief executive office is located at the above address ("Borrower's Address"). The Schedule to this Agreement (the "Schedule") shall for all purposes be deemed to be a part of this Agreement, and the same is an integral part of this Agreement. (Definitions of certain terms used in this Agreement are set forth in Section 8 below.)

1.    LOANS.

1.1    Loans.    Silicon will make loans to Borrower (the "Loans") up the amounts (the "Credit Limit") shown on the Schedule, provided no Default or Event of Default has occurred and is continuing, and subject to deduction of Reserves for accrued interest and such other Reserves as Silicon deems proper from time to time in its good faith business judgment.

1.2    Interest.    All Loans and all other monetary Obligations shall bear interest at the rate shown on the Schedule, except where expressly set forth to the contrary in this Agreement. Interest shall be payable monthly, on the last day of the month. Interest may, in Silicon's discretion, be charged to Borrower's loan account, and the same shall thereafter bear interest at the same rate as the other Loans. Silicon may, in its discretion, charge interest to Borrower's Deposit Accounts maintained with Silicon. Regardless of the amount of Obligations that may be outstanding from time to time, Borrower shall pay Silicon minimum monthly interest during the term of this Agreement in the amount set forth on the Schedule (the "Minimum Monthly Interest").

1.3    Overadvances.    If at any time or for any reason the total of all outstanding Loans and all other monetary Obligations exceeds the Credit Limit (an "Overadvance"). Borrower shall immediately pay the amount of the excess to Silicon, without notice or demand. Without limiting Borrower's obligation to repay to Silicon the amount of any Overadvance, Borrower agrees to pay Silicon interest on the outstanding amount of any Overadvance, on demand, at the Default Rate.

1.4    Fees.    Borrower shall pay Silicon the fees shown on the Schedule, which are in addition to all interest and other sums payable to Silicon and are not refundable.

1.5    Loan Request.    To obtain a Loan, Borrower shall make a request to Silicon by facsimile or telephone. Loan requests received after 12:00 Noon will not be considered by Silicon until the next Business Day. Silicon may rely on any telephone request for a Loan given by a person whom Silicon believes is an authorized representative of Borrower, and Borrower will indemnify Silicon for any loss Silicon suffers as a result of that reliance.

1.6    Letters of Credit.    [Not Applicable]

2.    SECURITY INTEREST.    To secure the payment and performance of all of the Obligations when due, Borrower hereby grants to Silicon a security interest in all of the following (collectively, the "Collateral"): all right, title and interest of Borrower in and to all of the following, whether now owned

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or hereafter arising or acquired and wherever located: all Accounts; all Inventory; all Equipment; all Deposit Accounts; all General Intangibles (including without limitation all Intellectual Property); all Investment Property; all Other Property; and any and all claims, rights and interests in any of the above, and all guaranties and security for any of the above, and all substitutions and replacements for, additions, accessions, attachments, accessories, and improvements to, and proceeds (including proceeds of any insurance policies, proceeds of proceeds and claims against third parties) of, any and all of the above, and all Borrower's books relating to any and all of the above.*

        *      Enforcement of the rights of the Silicon with respect to the Collateral shall be governed by, among other things, the provisions of Section 7.2 hereof.

3.    REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.

        In order to induce Silicon to enter into this Agreement and to make Loans, Borrower represents and warrants to Silicon as follows, and Borrower covenants that the following representations will continue to be true*, and that Borrower will at all times comply with all of the following covenants, throughout the term of this Agreement and until all Obligations have been paid and performed in full:

*      in all material respects

3.1    Corporate Existence and Authority.    Borrower is and will continue to be, duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. Borrower is and will continue to be qualified and licensed to do business in all jurisdictions in which any failure to do so would result in a Material Adverse Change. The execution, delivery and performance by Borrower of this Agreement, and all other documents contemplated hereby (i) have been duly and validly authorized, (ii) are enforceable against Borrower in accordance with their terms (except as enforcement may be limited by equitable principles and by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to creditors' rights generally), and (iii) do not violate Borrower's articles or certificate of incorporation, or Borrower's by-laws, or any law or any material agreement or instrument which is binding upon Borrower or its property, and (iv) do not constitute grounds for acceleration of any material indebtedness or obligation under any agreement or instrument which is binding upon Borrower or its property.

3.2    Name; Trade Names and Styles.    The name of Borrower set forth in the heading to this Agreement is its correct name. Listed in the Representations are all prior names of Borrower and all of Borrower's present and prior trade names. Borrower shall give Silicon 30 days' prior written notice before changing its name or doing business under any other name. Borrower has complied and will in the future comply, in all material respects, with all laws relating to the conduct of business under a fictitious business name, except where the failure to so comply would not reasonably be expected to result in a Material Adverse Change.

3.3    Place of Business; Location of Collateral.    The address set forth in the heading to this Agreement is Borrower's chief executive office. In addition, Borrower has places of business and Collateral is located only at the locations set forth in the Representations. Borrower will give Silicon at least 30 days prior written notice before opening any additional place of business, changing its chief executive office, or moving any of the Collateral to a location other than Borrower's Address or one of the locations set forth in the Representations, except that Borrower may maintain sales offices in the ordinary course of business at which not more than a total of $10,000 fair market value of Equipment is located.

3.4    Title to Collateral; Perfection; Permitted Liens.

        (a)   Borrower is now, and will at all times in the future be, the sole owner* of all the Collateral, except for items of Equipment which are leased to Borrower. The Collateral now is and

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will remain free and clear of any and all liens, charges, security interests, encumbrances and adverse claims, except for Permitted Liens. Silicon now has, and will continue to have, a first-priority perfected and enforceable security interest in all of the Collateral, subject only to the Permitted Liens, and Borrower will at all times defend Silicon and the Collateral against all claims of others.

*      (either as a fee owner or as an owner of a license, as applicable)

        (b)   Borrower has set forth in the Representations all of Borrower's Deposit Accounts, and Borrower will give Silicon five Business Days advance written notice before establishing any new Deposit Accounts and will cause the institution where any such new Deposit Account is maintained to execute and deliver to Silicon a control agreement in form sufficient to perfect Silicon's security interest in the Deposit Account and otherwise satisfactory to Silicon in its good faith business judgment*. Nothing herein limits any requirements which may be set forth in the Schedule as to where Deposit Accounts will be maintained.

*      (if an acceptable control agreement is not able to be delivered to Silicon within a reasonable amount of time, Borrower will take such other action as Silicon reasonably determines is appropriate such that Silicon will have a first priority perfected security interest in such funds, including, without limitation, moving such account to an institution where an acceptable control agreement may be obtained)

        (c)   In the event that Borrower shall at any time after the date hereof have any commercial tort claims against others, which it is asserting or intends to assert, and in which the potential recovery exceeds $100,000, Borrower shall promptly notify Silicon thereof in writing and provide Silicon with such information regarding the same as Silicon shall request (unless providing such information would waive the Borrower's attorney-client privilege). Such notification to Silicon shall constitute a grant of a security interest in the commercial tort claim and all proceeds thereof to Silicon, and Borrower shall execute and deliver all such documents and take all such actions as Silicon shall request in connection therewith.

        (d)   None of the Collateral now is or will be affixed to any real property in such a manner, or with such intent, as to become a fixture. Borrower is not and will not become a lessee under any real property lease pursuant to which the lessor may obtain any rights in any of the Collateral and as such lease now prohibits, restrains, or will prohibit, restrain or impair Borrower's right to remove any Collateral from the leased premises.* Whenever any Collateral is located upon premises in which any third party has an interest, Borrower shall, whenever requested by Silicon, use its best efforts to cause such third party to execute and deliver to Silicon, in from acceptable to Silicon, such waivers and subordinations as Silicon shall specify in its good faith business judgment. Borrower will keep in full force and effect, and will comply with all material terms of, any lease of real property where any of the Collateral now or in the future may be located.

*      Borrower is not and will not become a lessee under any real property lease pursuant to which the lessor may obtain any rights in any of the Collateral that violate any other material term or provision hereof, including without limitation, the covenant against encumbrances on the Collateral subject to the Permitted Liens.

3.5    Maintenance of Collateral.    Borrower will maintain the Collateral in good working condition (ordinary wear and tear excepted), and Borrower will not use the Collateral for any unlawful purpose. Borrower will immediately advise Silicon in writing of any material loss or damage to the Collateral.

3.6    Books and Records.    Borrower has maintained and will maintain at Borrower's Address complete and accurate books and records, comprising an accounting system in accordance with GAAP.

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3.7    Financial Condition, Statements and Reports.    All financial statements now or in the future delivered to Silicon have been, and will be, prepared in conformity with GAAP and now and in the future will fairly present the results of operations and financial condition of Borrower, in accordance with GAAP, at the times and for the periods therein stated. Between the last date covered by any such statement provided to Silicon and the date hereof, there has been no Material Adverse Change.

3.8    Tax Returns and Payments; Pension Contributions.    Borrower has timely filed, and will timely file, all required tax returns and reports, and Borrower has timely paid, and will timely pay, all foreign, federal, state and local taxes, assessments, deposits and contributions now or in the future owed by Borrower. Borrower may, however, defer payment of any contested taxes, provided that Borrower (i) in good faith contests Borrower's obligation to pay the taxes by appropriate proceedings promptly and diligently instituted and conducted, (ii) notifies Silicon in writing of the commencement of, and any material development in, the proceedings, and (iii) posts bonds or takes any other steps required to keep the contested taxes from becoming a lien upon any of the Collateral. Borrower is unaware of any claims or adjustments proposed for any of Borrower's prior tax years which could result in additional taxes becoming due and payable by Borrower. Borrower has paid, and shall continue to pay all amounts necessary to fund all present and future pension, profit sharing and deferred compensation plans in accordance with their terms, and Borrower has not and will not withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.

3.9    Compliance with Law.    Borrower has, to the best of its knowledge, complied, and will comply, in all material respects, with all provisions of all foreign, federal, state and local laws and regulations applicable to Borrower*, including, but not limited to, those relating to Borrower's ownership of real or personal property, the conduct and licensing of Borrower's business, and all environmental matters.

*      , the violation of which could cause a Material Adverse Change

3.10    Litigation.    There is no claim, suit, litigation, proceeding or investigation pending or (to best of Borrower's knowledge) threatened against or affecting Borrower in any court or before any governmental agency (or any basis therefor known to Borrower) which could reasonably be expected to result, either separately or in the aggregate, in any Material Adverse Change. Borrower will promptly inform Silicon in writing of any claim, proceeding, litigation or investigation in the future threatened or instituted against Borrower involving any single claim of $50,000 or more, or involving $100,000 or more in the aggregate.

3.11    Use of Proceeds.    All proceeds of all Loans shall be used solely for lawful business purposes. Borrower is not purchasing or carrying any "margin stock" (as defined in Regulation U of the Board of Governors of the Federal Reserve System) and no part of the proceeds of any Loan will be used to purchase or carry any "margin stock" or to extend credit to others for the purpose of purchasing or carrying any "margin stock."

4.    ACCOUNTS.

4.1    Representations Relating to Accounts.    Borrower represents and warrants to Silicon as follows: Each Account with respect to which Loans are requested by Borrower shall, on the date each Loan is requested and made, (i) represent an undisputed bona fide existing unconditional obligation of the Account Debtor created by the sale, delivery and acceptance of goods or the rendition of services, or the non-exclusive licensing of Intellectual Property, in the ordinary course of Borrower's business, and (ii) meet the Minimum Eligibility Requirements set forth in Section 8 below.

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4.2    Representations Relating to Documents and Legal Compliance.    Borrower represents and warrants to Silicon as follows: All statements made and all unpaid balances appearing in all invoices, instruments and other documents evidencing the Accounts are and shall be true and correct and all such invoices, instruments and other documents and all of Borrower's books and records are and shall be genuine and in all respects what they purport to be. All sales and other transactions underlying or giving rise to each Account shall comply in all material respects with all applicable laws and governmental rules and regulations. To the best of Borrower's knowledge, all signatures and endorsements on all documents, instruments, and agreements relating to all Accounts are and shall be genuine, and all such documents, instruments and agreements are and shall be legally enforceable in accordance with their terms.

4.3    Schedules and Documents relating to Accounts.    Borrower shall deliver to Silicon transaction reports and schedules of collections, as provided in the Schedule, on Silicon's standard forms; provided, however, that Borrower's failure to execute and deliver the same shall not affect or limit Silicon's security interest and other rights in all of Borrower's Accounts, nor shall Silicon's failure to advance or lend against a specific Account affect or limit Silicon's security interest and other rights therein. If requested by Silicon, Borrower shall furnish Silicon with copies (or, at Silicon's request, originals) of all contracts, orders, invoices, and other similar documents, and all shipping instructions, delivery receipts, bills of lading, and other evidence of delivery, for any goods the sale or disposition of which gave rise to such Accounts, and Borrower warrants the genuineness of all of the foregoing. Borrower shall also furnish to Silicon an aged accounts receivable trial balance as provided in the Schedule. In addition, Borrower shall deliver to Silicon, on its request, the originals of all instruments, chattel paper, security agreements, guarantees and other documents and property evidencing or securing any Accounts, in the same form as received, with all necessary indorsements, and copies of all credit memos.

4.4    Collection of Accounts.    Borrower shall have the right to collect all Accounts, unless and until a Default or an Event of Default has occurred and is continuing. Whether or not an Event of Default has occurred and is continuing, Borrower shall hold all payments on, and proceeds of, Accounts in trust for Silicon, and Borrower shall immediately deliver all such payments and proceeds to Silicon in their original form, duly endorsed, to be applied to the Obligations in such order as Silicon shall determine. Silicon may, in its good faith business judgment, require that all proceeds of Collateral be deposited by Borrower into a lockbox account, or such other "blocked account" as Silicon may specify, pursuant to a blocked account agreement in such form as Silicon may specify in its good faith business judgment.

4.5.    Remittance of Proceeds.    All proceeds arising from the disposition of any Collateral shall be delivered, in kind, by Borrower to Silicon in the original form in which received by Borrower not later than the following Business Day after receipt by Borrower, to be applied to the Obligations in such order as Silicon shall determine; provided that, if no Default or Event of Default has occurred and is continuing, Borrower shall not be obligated to remit to Silicon the proceeds of the sale of worn out or obsolete Equipment disposed of by Borrower in good faith in an arm's length transaction for an aggregate purchase price of $25,000 or less (for all such transactions in any fiscal year). Borrower agrees that it will not commingle proceeds of Collateral with any of Borrower's other funds or property, but will hold such proceeds separate and apart from such other funds and property and in an express trust for Silicon. Nothing in this Section limits the restrictions on disposition of Collateral set forth elsewhere in this Agreement.

4.6    Disputes.    Borrower shall notify Silicon promptly of all disputes or claims relating to Accounts. Borrower shall not forgive (completely or partially), compromise or settle any Account for less than payment in full, or agree to do any of the foregoing, except that Borrower may do so, provided that: (i) Borrower does so in good faith, in a commercially reasonable manner, in the ordinary course of business, and in arm's length transactions, which are reported to Silicon on the regular reports provided to Silicon; (ii) no Default or Even of Default has occurred and is continuing; and

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(iii) taking into account all such discounts, settlements and forgiveness, the total outstanding Loans will not exceed the Credit Limit.

4.7    Returns.    Provided no Event of Default has occurred and is continuing, if any Account Debtor returns any Inventory to Borrower, Borrower shall promptly determine the reason for such return and promptly issue a credit memorandum to the Account Debtor in the appropriate amount. In the event any attempted return occurs after the occurrence and during the continuance of any Event of Default, Borrower shall hold the returned Inventory in trust for Silicon, and immediately notify Silicon of the return of the Inventory.

4.8    Verification.    Silicon may, from time to time, verify directly with the respective Account Debtors the validity, amount and other matters relating to the Accounts, by means of mail, telephone or otherwise, either in the name of Borrower or Silicon or such other name as Silicon may choose.

4.9    No Liability.    Silicon shall not be responsible or liable for any shortage or discrepancy in, damage to, or loss or destruction of, any goods, the sale or other disposition of which gives rise to an Account, or for any error, act, omission, or delay of any kind occurring in the settlement, failure to settle, collection or failure to collect any Account, or for settling any Account in good faith for less than the full amount thereof, nor shall Silicon be deemed to be responsible for any of Borrower's obligations under any contract or agreement giving rise to an Account. Nothing herein shall, however, relieve Silicon from liability for its own gross negligence or willful misconduct.

5.    ADDITIONAL DUTIES OF BORROWER.

5.1    Financial and Other Covenants.    Borrower shall at all times comply with the financial and other covenants set forth in the Schedule.

5.2    Insurance.    Borrower shall, at all times insure all of the tangible personal property Collateral and carry such other business insurance, with insurers reasonably acceptable to Silicon, in such form and amounts as Silicon may reasonably require and that are customary and in accordance with standard practices for Borrower's industry and locations, and Borrower shall provide evidence of such insurance to Silicon. All such insurance policies shall name Silicon as an additional loss payee, and shall contain a lenders loss payee endorsement in form reasonably acceptable to Silicon. Upon receipt of the proceeds of any such insurance, Silicon shall apply such proceeds in reduction of the Obligations as Silicon shall determine in its good faith business judgment, except that, provided no Default or Event of Default has occurred and is continuing. Silicon shall release to Borrower insurance proceeds with respect to Equipment totaling less than $100,000, which shall be utilized by Borrower for the replacement of the Equipment with respect to which the insurance proceeds were paid. Silicon may require reasonable assurance that the insurance proceeds so released will be so used. If Borrower fails to provide or pay for any insurance. Silicon may, but is not obligated to, obtain the same at Borrower's expense. Borrower shall promptly deliver to Silicon copies of all material reports made to insurance companies.

5.3    Reports.    Borrower, at its expense, shall provide Silicon with the written reports set forth in the Schedule, and such other written reports with respect to Borrower (including budgets, sales projections, operating plans and other financial documentation), as Silicon shall from time to time specify in its good faith business judgment.

5.4    Access to Collateral, Books and Records.    At reasonable times, and on one Business Day's notice, Silicon, or its agents, shall have the right to inspect the Collateral, and the right to audit and copy Borrower's books and records*. Silicon shall take reasonable steps to keep confidential all information obtained in any such inspection or audit, but Silicon shall have the right to disclose any such information to its auditors, regulatory agencies, and attorneys, and pursuant to any subpoena or other legal process. The foregoing inspections and audits shall be at Borrower's expense and the charge therefor shall be $750 per person per day (or such higher amount as shall represent Silicon's then current standard charge for the same), plus reasonable out-of-pocket expenses. In the event Borrower

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and Silicon schedule an audit more than 10 days in advance, and Borrower seeks to reschedules the audit** with less than 10 days written notice to Silicon, then (without limiting any of Silicon's rights or remedies), Borrower shall pay Silicon a cancellation fee of $1,000 plus any out-of-pocket expenses incurred by Silicon, to compensate Silicon for the anticipated costs and expenses of the cancellation.

*      with such audits not to conducted on a more frequent basis than quarterly unless a Default or Event of Default is then occurring or if Silicon, in its good faith business judgment, determines that a further investigative audit is necessary

**    for a second time

5.5    Negative Covenants.    Except as may be permitted in the Schedule, Borrower shall not, without Silicon's prior written consent (which shall be a matter of its good faith business judgment), do any of the followings: (i) merge or consolidate with another corporation or entity; (ii) acquire any assets, except in the ordinary course of business; (iii) enter into any other transaction outside the ordinary course of business; (iv) sell or transfer any Collateral, except for the sale of finished Inventory in the ordinary course of Borrower's business, and except for the sale of obsolete or unneeded Equipment in the ordinary course of business; (v) store any Inventory or other Collateral with any warehouseman or other third party; (vi) sell any Inventory on a sale-or-return, guaranteed sale, consignment, or other contingent basis; (vii) make any loans of any money or other assets; (viii) incur any debts.* outside the ordinary course of business, which would result in a Material Adverse Change; (ix) guarantee or otherwise become liable with respect to the obligations of another party or entity; (x) pay or declare any dividends on Borrower's stock (except for dividends payable solely in stock of Borrower); (xi) redeem, retire, purchase or otherwise acquire, directly or indirectly, any of Borrower's stock**; (xii) make any change in Borrower's capital structure which would result in a Material Adverse Change; or (xiii) engage, directly or indirectly, in any business other than the businesses currently engaged in by Borrower or reasonably related thereto; or (xiv) dissolve or elect to dissolve. Transactions permitted by the foregoing provisions of this Section are only permitted if no Default or Event of Default would occur as a result of such transaction.

*      other than for Permitted Indebtedness

**    other than for dividends issued solely in the capital stock of the Borrower or repurchases of stock from former employees, consultants, officers, or directors of Borrower under the terms of applicable repurchase agreements or pursuant to Borrower's employee stock option plans as approved by the Borrower's board of directors, provided that no Default or Event of Default has occurred, is continuing or would exist after giving effect to such repurchase or repurchases, provided, further, that the aggregate amount of such repurchases shall not exceed $50,000.

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5.6    Litigation Cooperation.    Should any third-party suit or proceeding be instituted by or against Silicon with respect to any Collateral or relating to Borrower, Borrower shall, without expense to Silicon, make available Borrower and its officers, employees and agents and Borrower's books and records, to the extent that Silicon may deem them reasonably necessary in order to prosecute or defend any such suit or proceeding.

5.7    Further Assurances.    Borrower agrees, at its expense, on request by Silicon, to execute all documents and take all actions, as Silicon, may, in its good faith business judgment, deem necessary or useful in order to perfect and maintain Silicon's perfected first-priority security interest in the Collateral (subject to Permitted Liens), and in order to fully consummate the transactions contemplated by this Agreement.

6.    TERM.

6.1    Maturity Date.    This Agreement shall continue in effect until the maturity date set forth on the Schedule (the "Maturity Date"), subject to Section 6.3 below.

6.2    Early Termination.    This Agreement may be terminated prior to the Maturity Date as follows: (i) by Borrower, effective three Business Days after written notice of termination is given to Silicon; or (ii) by Silicon at any time after the occurrence and during the continuance of an Event of Default, without notice, effective immediately. If this Agreement is terminated by Borrower or by Silicon under this Section 6.2, Borrower shall pay to Silicon a termination fee in an amount equal to one percent (1.0%) of the Maximum Credit Limit*, provided that no termination fee shall be charged if the credit facility hereunder is replaced with a new facility from another division of Silicon. The termination fee shall be due and payable on the effective date of termination and thereafter shall bear interest at a rate equal to the highest rate applicable to any of the Obligations.

*

as a joint termination fee in connection herewith and the Exim Agreement (as defined in the Schedule hereto)

6.3    Payment Of Obligations.    On the Maturity Date or on any earlier effective date of termination, Borrower shall pay and perform in full all Obligations, whether evidenced by installment notes or otherwise, and whether or not all or any part of such Obligations are otherwise than due and payable. Without limiting the generality of the foregoing, if on the Maturity Date, or, on any earlier effective date of termination, there are any outstanding Letters of Credit issued by Silicon or issued by another institution based upon an application, guarantee, indemnity or similar agreement on the part of Silicon, then on such date Borrower shall provide to Silicon cash collateral in an amount equal to 105% of the face amount of all such Letters of Credit plus all interest, fees and cost due or to become due in connection therewith (as estimated by Silicon in its good faith business judgment), to secure all of the Obligations relating to said Letters of Credit, pursuant to Silicon's then standard form cash pledge agreement. Notwithstanding any termination of this Agreement, all of Silicon's security interests in all of the Collateral and all of the terms and provisions of this Agreement shall continue in full force and effect until all Obligations have been paid and performed in full; provided that Silicon may, in its sole discretion, refuse to make any further Loans after termination. No termination shall in any way affect or impair any right or remedy of Silicon, nor shall any such termination relieve Borrower of any Obligation to Silicon, until all of the Obligations have been paid and performed in full. Upon payment and performance in full of all the Obligations and termination of this Agreement, Silicon shall promptly terminate its financing statements with respect to the Borrower and deliver to Borrower such other documents as may be required to fully terminate Silicon's security interests.

7.    EVENTS OF DEFAULT AND REMEDIES.

7.1    Events of Default.    The occurrence of any of the following events shall constitute an "Event of Default" under this Agreement, and Borrower shall give Silicon immediate written notice

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thereof: (a) Any warranty, representation, statement, report or certificate made or delivered to Silicon by Borrower or any of Borrower's officers, employees or agents, now or in the future, shall be untrue or misleading in a material respect when made or deemed to be made; or (b) Borrower shall fail to pay when due any Loan or any interest thereon or any other monetary Obligation; or (c) the total Loans and other Obligations outstanding at any time shall exceed the Credit Limit*; or (d) Borrower shall fail to comply with any of the financial covenants set forth in the Schedule, or shall fail to perform any other non-monetary Obligation which by its nature cannot be cured, or shall fail to permit Silicon to conduct an inspection or audit as specified in Section 5.4 hereof; or (e) Borrower shall fail to perform any other non-monetary Obligation, which failure is not cured within five Business Days after the date due; or (f) any levy, assessment, attachment, seizure, lien or encumbrance (other than a Permitted Lien) is made on all or any part of the Collateral which is not cured within 10 days after the occurrence of the same; or (g) any default or event of default occurs under any obligation secured by a Permitted Lien, which is not cured within any applicable cure period or waived in writing by the holder of the Permitted Lien; or (h) Borrower breaches any material contract or obligation, which has resulted or may reasonably be expected to result in a Material Adverse Change; or (i) Dissolution, termination of existence, insolvency or business failure of Borrower; or appointment of a receiver, trustee or custodian, for all or any part of the property of, assignment for the benefit of creditors by, or the commencement of any proceeding by Borrower under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect; or (j) the commencement of any proceeding against Borrower or any guarantor of any of the Obligations under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect, which is not cured by the dismissal thereof within 30 days after the date commenced; or (k) revocation or termination of, or limitation or denial of liability upon, any guaranty of the Obligations or any attempt to do any of the foregoing, or commencement of proceedings by any guarantor of any of the Obligations under any bankruptcy or insolvency law, or (l) revocation or termination of, or limitation or denial of liability upon, any pledge of any certificate of deposit, securities or other property or asset of any kind pledged by any third party to secure any or all of the Obligations, or any attempt to do any of the foregoing, or commencement of proceedings by or against any such third party under any bankruptcy or insolvency law; or (m) Borrower makes any payment on account of any indebtedness or obligation which has been subordinated to the Obligations other than as permitted in the applicable subordination agreement, or if any Person who has subordinated such indebtedness or obligations terminates or in any way limits his subordination agreement; or (n) there shall be a change in the record or beneficial ownership of an aggregate of more than 20%** of the outstanding shares of stock of Borrower, in one or more transactions, compared to the ownership of outstanding shares of stock of Borrower in effect on the date hereof, without the prior written consent of Silicon; or (o) Borrower shall generally not pay its debts as they become due, or Borrower shall conceal, remove or transfer any part of its property, with intent to hinder, delay or defraud its creditors, or make at suffer any transfer of any of its property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law; or (p) a Material Adverse Change shall occur***. Silicon may cease making any Loans hereunder during any of the above cure periods, and thereafter if an Event of Default has occurred and is continuing.

*

provided, however, if any such excess results directly from a change by Silicon of either the amount of Reserves or of the Minimum Eligibility Requirements, then Borrower shall have one Business Day in order to cure such a default

**

35%

***

or (q) an event of default arises under the Existing Loan Agreement

9

7.2    Remedies.    Upon the occurrence and during the continuance of any Event of Default, and at any time thereafter, Silicon, at its option, and without notice or demand of any kind (all of which are hereby expressly waived by Borrower), may do any one or more of the following: (a) Cease making Loans or otherwise extending credit to Borrower under this Agreement or any other Loan Document; (b) Accelerate and declare all or any part of the Obligations to be immediately due, payable, and performable, notwithstanding any deferred or installment payments allowed by any instrument evidencing or relating to any Obligation; (c) Take possession of any or all of the Collateral wherever it may be found, and for that purpose Borrower hereby authorizes Silicon without judicial process to enter onto any of Borrower's premises without interference to search for, take possession of, keep, store, or remove any of the Collateral, and remain on the premises or cause a custodian to remain on the premises in exclusive control thereof, without charge for so long as Silicon deems it necessary, in its good faith business judgment, in order to complete the enforcement of its rights under this Agreement or any other agreement; provided, however, that should Silicon seek to take possession of any of the Collateral by court process, Borrower hereby irrevocably waives: (i) any bond and any surety or security relating thereto required by any statute, court rule or otherwise as an incident to such possession; (ii) any demand for possession prior to the commencement of any suit or action to recover possession thereof; and (iii) any requirement that Silicon retain possession of, and not dispose of, any such Collateral until after trial or final judgment; (d) Require Borrower to assemble any or all of the Collateral and make it available to Silicon at places designated by Silicon which are reasonably convenient to Silicon and Borrower, and to remove the Collateral to such locations as Silicon may deem advisable; (e) Complete the processing, manufacturing or repair of any Collateral prior to a disposition thereof and, for such purpose and for the purpose of removal, Silicon shall have the right to use Borrower's premises, vehicles, hoists, lifts, cranes, and other Equipment and all other property without charge; (f) Sell, lease or otherwise dispose of any of the Collateral, in its condition at the time Silicon obtains possession of it or after further manufacturing, processing or repair, at one or more public and/or private sales, in lots or in bulk, for cash, exchange or other property, or on credit, and to adjourn any such sale from time to time without notice other than oral announcement at the time scheduled for sale. Silicon shall have the right to conduct such disposition on Borrower's premises without charge, for such time or times as Silicon deems reasonable, or on Silicon's premises, or elsewhere and the Collateral need not be located at the place of disposition. Silicon may directly or through any affiliated company purchase or lease any Collateral at any such public disposition, and if permissible under applicable law, at any private disposition. Any sale or other disposition of Collateral shall not relieve Borrower of any liability Borrower may have if any Collateral is defective as to title or physical condition or otherwise at the time of sale; (g) Demand payment of, and collect any Accounts and General Intangibles comprising Collateral and, in connection therewith, Borrower irrevocably authorizes Silicon to endorse or sign Borrower's name on all collections, receipts, instruments and other documents, to take possession of and open mail addressed to Borrower and remove therefrom payments made with respect to any item of the Collateral or proceeds thereof, and, in Silicon's good faith business judgment, to grant extensions of time to pay, compromise claims and settle Accounts and the like for less than face value; (h) Offset against any sums in any of Borrower's general, special or other Deposit Accounts with Silicon against any or all of the Obligations; and (i) Demand and receive possession of any of Borrower's federal and state income tax returns and the books and records utilized in the preparation thereof or referring thereto. All reasonable attorneys' fees, expenses, costs, liabilities and obligations incurred by Silicon with respect to the foregoing shall be added to and become part of the Obligations, shall be due on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations. Without limiting any of Silicon's rights and remedies, from and after the occurrence and during the continuance of any Event of Default, the interest rate

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applicable to the Obligations shall be increased by an additional four percent per annum (the "Default Rate").*

*

Further, Silicon hereby acknowledges and agrees that enforcement of its rights with respect to certain items of Collateral in which the bank is granted a security interest (including the use or assignment thereof) may be restricted by the provisions of Section 9407(b), 9408(d) or 9409(b) of the Code.

Silicon's exercise of exclusive control over the securities accounts of Borrower shall be subject to the occurrence and continuance of an Event of Default and as otherwise set forth in the provisions of any and all applicable control agreements entered into from time to time regarding any such accounts.

7.3    Standards for Determining Commercial Reasonableness.    Borrower and Silicon agree that a sale or other disposition (collectively, "sale") of any Collateral which complies with the following standards will conclusively be deemed to be commercially reasonable: (i) Notice of the sale is given to Borrower at least ten days prior to the sale, and, in the case of a public sale, notice of the sale is published at least five days before the sale in a newspaper of general circulation in the county where the sale is to be conducted; (ii) Notice of the sale describes the collateral in general, non-specific terms; (iii) The sale is conducted at a place designated by Silicon, with or without the Collateral being present; (iv) The sale commences at any time between 8:00 a.m. and 6:00 p.m; (v) Payment of the purchase price in cash or by cashier's check or wire transfer is required; (vi) With respect to any sale of any of the Collateral, Silicon may (but is not obligated to) direct any prospective purchaser to ascertain directly from Borrower any and all information concerning the same. Silicon shall be free to employ other methods of noticing and selling the Collateral, in its discretion, if they are commercially reasonable.

7.4    Power of Attorney.    Upon the occurrence and during the continuance of any Event of Default, without limiting Silicon's other rights and remedies, Borrower grants to Silicon an irrevocable power of attorney coupled with an interest, authorizing and permitting Silicon (acting through any of its employees, attorneys or agents) at any time, at its option, but without obligation, with or without notice to Borrower, and at Borrower's expense, to do any or all of the following, in Borrower's name or otherwise, but Silicon agrees that if it exercises any right hereunder, it will do so in good faith and in a commercially reasonable manner: (a) Execute on behalf of Borrower any documents that Silicon may, in its good faith business judgment, deem advisable in order to perfect and maintain Silicon's security interest in the Collateral, or in order to exercise a right of Borrower or Silicon, or in order to fully consummate all the transactions contemplated under this Agreement, and all other Loan Documents; (b) Execute on behalf of Borrower, any invoices relating to any Account, any draft against any Account Debtor and any notice to any Account Debtor, any proof of claim in bankruptcy, any Notice of Lien, claim of mechanic's, materialsman's or other lien, or assignment or satisfaction of mechanic's, materialman's or other lien; (c) Take control in any manner of any cash or non-cash items of payment or proceeds of Collateral; endorse the name of Borrower upon any instruments, or documents, evidence of payment or Collateral that may come into Silicon's possession; (d) Endorse all checks and other forms of remittances received by Silicon; (e) Pay, contest or settle any lien, charge, encumbrance, security interest and adverse claim in or to any of the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; (f) Grant extensions of time to pay, compromise claims and settle Accounts and General Intangibles for less than face value and execute all releases and other documents in connection therewith; (g) Pay any sums required on account of Borrower's taxes or to secure the release of any liens therefor, or both; (h) Settle and adjust, and give releases of, any insurance claim that relates to any of the Collateral and obtain payment therefor; (i) Instruct any third party having custody or control of any books or records belonging to, or relating to, Borrower to give Silicon the same rights of access and other rights with respect thereto as Silicon has under this Agreement; and (j) Take any action or pay any sum required of Borrower pursuant to this Agreement and any other Loan Documents. Any and all reasonable sums paid and any and all

11

reasonable costs, expenses, liabilities, obligations and attorneys' fees incurred by Silicon with respect to the foregoing shall be added to and become part of the Obligations, shall be payable on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations. In no event shall Silicon's rights under the foregoing power of attorney or any of Silicon's other rights under this Agreement be deemed to indicate that Silicon is in control of the business, management or properties of Borrower.

7.5    Application of Proceeds.    All proceeds realized as the result of any sale of the Collateral shall be applied by Silicon first to the reasonable costs, expenses, liabilities, obligations and attorneys' fees incurred by Silicon in the exercise of its rights under this Agreement, second to the interest due upon any of the Obligations, and third to the principal of the Obligations, in such order as Silicon shall determine in its sole discretion. Any surplus shall be paid to Borrower or other persons legally entitled thereto; Borrower shall remain liable to Silicon for any deficiency. If, Silicon, in its good faith business judgment, directly or indirectly enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Silicon shall have the option, exercisable at any time, in its good faith business judgment, of either reducing the Obligations by the principal amount of purchase price or deferring the reduction of the Obligations until the actual receipt by Silicon of the cash therefor.

7.6    Remedies Cumulative.    In addition to the rights and remedies set forth in this Agreement, Silicon shall have all the other rights and remedies accorded a secured party under the California Uniform Commercial Code and under all other applicable laws, and under any other instrument or agreement now or in the future entered into between Silicon and Borrower, and all of such rights and remedies are cumulative and none is exclusive. Exercise or partial exercise by Silicon of one or more of its rights or remedies shall not be deemed an election, nor bar Silicon from subsequent exercise or partial exercise of any other rights or remedies. The failure or delay of Silicon to exercise any rights or remedies shall not operate as a waiver thereof, but all rights and remedies shall continue in full force and effect until all of the Obligation have been fully paid and performed.

8.    DEFINITIONS.    As used in this Agreement, the following terms have the following meanings:

        "Account debtor" means the obligor on an Account

        "Accounts" means all present and future "accounts" as defined in the California Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all accounts receivable and other sums owing to Borrower.

        "Affiliate" means, with respect to any Person, a relative, partner, shareholder, director, officer, or employee of such Person, or any parent or subsidiary of such Person, or any Person controlling, controlled by or under common control with such Person.

        "Business Day" means a day on which Silicon is open for business.

        "Code" means the Uniform Commercial Code as adopted and in effect in the State of California from time to time.

        "Collateral" has the meaning set forth in Section 2 above.

        "continuing" and "during the continuance of" when used with reference to a Default or Event of Default means that the Default or Event of Default has occurred and has not been either waived in writing by Silicon or cured within any applicable cure period.

        "Default" means any event which with notice or passage of time or both, would constitute an Event of Default.

        "Default Rate" has the meaning set forth in Section 7.2 above.

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        "Deposit Accounts" means all present and future "deposit accounts" as defined in the California Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all general and special bank accounts, demand accounts, checking accounts, savings accounts and certificates of deposit.

        "Eligible Inventory" [Not Applicable]

        "Eligible Accounts" means Accounts and General Intangibles arising in the ordinary course of Borrower's business from the sale of goods or the rendition of services, or the non-exclusive licensing of Intellectual Property, which Silicon, in its good faith business judgment, shall deem eligible for borrowing. Without limiting the fact that the determination of which Accounts are eligible for borrowing is a matter of Silicon's good faith business judgment, the following (the "Minimum Eligibility Requirements") are the minimum requirements for a Account to be an Eligible Account: (i) the Account must not be outstanding for more than 90 days from its invoice date (the "Eligibility Period"), (ii) the Account must not represent progress billings, or be due under a fulfillment or requirements contract with the Account Debtor, (iii) the Account must not be subject to any contingencies (including Accounts arising from sales on consignment, guaranteed sale or other terms pursuant to which payment by the Account Debtor may be conditional), (iv) the Account must not be owing from an Account Debtor with whom Borrower has any dispute (whether or not relating to the particular Account), (v) the Account must not be owing from an Affiliate of Borrower, (vi) the Account must not be owing from an Account Debtor which is subject to any insolvency or bankruptcy proceeding, or whose financial condition is not acceptable to Silicon, or which, fails or goes out of a material portion of its business, (vii) the Account must not be owing from the United States or any department, agency or instrumentality thereof (unless there has been compliance, to Silicon's satisfaction, with the United States Assignment of Claims Act), (viii) the Account must not be owing from an Account Debtor located outside the United States or Canada (unless pre-approved by Silicon in its discretion in writing, or backed by a letter of credit satisfactory to Silicon, or FCIA insured satisfactory to Silicon), and (ix) the Account must not be owing from an Account Debtor to whom Borrower is or may be liable for goods purchased from such Account Debtor or otherwise (but, in such case, the Account will be deemed not eligible only to the extent of any amounts owed by Borrower to such Account Debtor). Accounts owing, from one Account Debtor will not be deemed Eligible Accounts to the extent they exceed 25% of the total Accounts outstanding. In addition, if more than 50% of the Accounts owing from an Account Debtor are outstanding for a period longer than their Eligibility Period (without regard to unapplied credits) or are otherwise not eligible Accounts, then all Accounts owing from that Account Debtor will be deemed ineligible for borrowing. Silicon may, from time to time, in its good faith business judgment, revise the Minimum Eligibility Requirements, upon written notice to Borrower.

        "Equipment" means all present and future "equipment" as defined in the California Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.

        "Event of Default" means any of the events set forth in Section 7.1 of this Agreement.

        "Existing Loan Agreement" shall mean the Loan and Security Agreement dated September 9, 2002 by and between Silicon and Borrower, as amended and otherwise modified from time to time.

        "GAAP" means generally accepted accounting principles consistently applied.

        "General Intangibles" means all present and future "general intangibles" as defined in the California Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all Intellectual Property, payment

13

intangibles, royalties, contract rights, goodwill, franchise agreement, purchase orders, customer lists, route lists, telephone numbers, domain names, claim, income tax refunds, security and other deposits, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind.

        "good faith business judgment" means honesty in fact and good faith (as defined in Section 1201 of the Code) in the exercise of Silicon's business judgment.

        "including" means including (but not limited to).

        "Intellectual Property" means all present and future (a) copyrights, copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof, whether published or unpublished; (b) trade secret rights, including all rights to unpatented inventions and know-how, and confidential information; (c) mask work or similar rights available for the protection of semiconductor chips; (d) patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same; (e) trademarks, servicemarks, trade styles, and trade names, whether or not any of the foregoing are registered, and all applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by any such trademarks; (f) computer software and computer software products; (g) designs and design rights; (h) technology; (i) all claims for damages by way of past, present and future infringement of any of the rights included above; and (j) all licenses or other rights to use any property or rights of a type described above.

        "Inventory" means all present and future "inventory" as defined in the California Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of Borrower's custody or possession or in transit and including any returned goods and any documents of title representing any of the above.

        "Investment property" means all present and future investment property, securities, stocks, bonds, debentures, debt securities, partnership interests, limited liability company interests, options, security entitlements, securities accounts, commodity contracts, commodity accounts, and all financial assets held in any securities account or otherwise, and all options and warrants to purchase any of the foregoing, wherever located, and all other securities of every kind, whether certificated or uncertificated.

14

        "Loan Documents" means, collectively, this Agreement, the Representations, and all other present and future documents, instruments and agreements between Silicon and Borrower, including, but not limited to those relating to this Agreement, and all amendments and modifications thereto and replacements therefor.

        "Material Adverse Change" means any of the following: (i) a material adverse change in the business, operations, or financial or other condition of the Borrower, or (ii) a material impairment of the prospect of repayment of any portion of the Obligations; or (iii) a material impairment of the value or priority of Silicon's security interests in the Collateral.

        "Obligations" means all present and future Loans, advances, debts, liabilities, obligations, guaranties, covenants, duties and indebtedness at any time owing by Borrower to Silicon, whether evidenced by this Agreement or any note or other instrument or document, or otherwise, whether arising from an extension of credit, opening of a letter of credit, banker's acceptance, loan, guaranty, indemnification or otherwise, whether direct or indirect (including, without limitation, those acquired by assignment and any participation by Silicon in Borrower's debts owing to others), absolute or contingent, due or to become due, including, without limitation, all interest, charges, expenses, fees,  * attorney's fees, expert witness fees, audit fees, letter of credit fees, collateral monitoring fees, closing fees, facility fees, termination fees, minimum interest charges and any other sums chargeable to Borrower under this Agreement or under any other Loan Documents.

*      reasonable

        "Other Property" means the following as defined in the California Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and all rights relating thereto; all present and future "commercial tort claims" (including without limitation any commercial tort claims identified in the Representations), "documents", "instruments", "promissory notes", "chattel paper", "letter of credit rights", "fixtures", "farm products" and "money", and all other goods and personal property of every kind, tangible and intangible, whether or not governed by the California Uniform Commercial Code.

        "Permitted Indebtedness" means the following: (a) Borrower's indebtedness to Silicon under this Agreement or any other Loan Document; (b) indebtedness existing on the Closing Date and shown on the Schedule; (c) Subordinated Debt; (d) Indebtedness to trade creditors incurred in the ordinary course of business; (e) Indebtedness secured by Permitted Liens; (f) Additional Indebtedness in an aggregate amount not to exceed $25,000 at any time, provided that no such Additional Indebtedness shall be incurred while a Default or Event of Default is then occurring and continuing or would arise upon the incurring thereof; and (g) Extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a), (b), (e) and (f) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case may be, provided, however, it is understood and agreed that no extension, refinancing, modification, amendment or restatement of any Subordinated Debt may occur without the written consent of Silicon thereto.

        "Permitted Liens" means the following: (i) purchase money security interests in specific items of Equipment; (ii) leases of specific items of Equipment; (iii) liens for taxes not yet payable, (iv) additional security interests and liens consented to in writing by Silicon, which consent may be withheld in its good faith business judgment; (v) security interests being terminated substantially concurrently with this Agreement; (vi) liens of materialmen, mechanics, warehousemen, carriers, or other similar liens arising in the ordinary course of business and securing obligations which are not delinquent; (vii) liens incurred in connection with the extension, renewal or refinancing of the

15

indebtedness secured by liens of the type described above in clauses (i) or (ii) above, provided that any extension, renewal or replacement lien is limited to the property encumbered by the existing lien and the principal amount of the indebtedness being extended, renewed or refinanced does not increase; (viii) Liens in favor of customs and revenue authorities which secure payment of customs duties in connection with the importation of goods. Silicon will have the right to require, as a condition to its consent under subparagraph (iv) above, that the holder of the additional security interest or lien sign an intercreditor agreement on Silicon's then standard form, acknowledge that the security interest is subordinate to the security interest in favor of Silicon, and agree not to take any action to enforce its subordinate security interest so long as any Obligations remain outstanding, and that Borrower agree that any uncured default in any obligation secured by the subordinate security interest shall also constitute an Event of Default under this Agreement.

        "Person" means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, government, or any agency or political division thereof, or any other entity.

        "Representations" means the written Representations and Warranties provided by Borrower to Silicon referred to in the Schedule.

        "Reserves" means, as of any date of determination, such amounts as Silicon may from time to time establish and revise in its good faith business judgment, reducing the amount of Loans, Letters of Credit and other financial accommodations which would otherwise be available to Borrower under the lending formula(s) provided in the Schedule: (a) to reflect events, conditions, contingencies or risks which, as determined by Silicon in its good faith business judgment, do or may adversely affect (i) the Collateral or any other property which is security for the Obligations or its value (including without limitation any increase in delinquencies of Accounts), (ii) the assets, business or prospects of Borrower or any Guarantor, or (iii) the security interests and other rights of Silicon in the Collateral (including the enforceability, perfection and priority thereof); or (b) to reflect Silicon's good faith belief that any collateral report or financial information furnished by or on behalf of Borrower or any Guarantor to Silicon is or may have been incomplete, inaccurate or misleading in any material respect; or (c) in respect of any state of facts which Silicon determines in good faith constitutes an Event of Default or may, with notice or passage of time or both, constitute an Event of Default.

Other Terms. All accounting terms used in this Agreement, unless otherwise indicated, shall have the meanings given to such terms in accordance with GAAP, consistently applied. All other terms contained in this Agreement, unless otherwise indicated, shall have the meanings provided by the Code, to the extent such terms are defined therein.

9.    GENERAL PROVISIONS.

9.1    Interest Computation.    In computing interest on the Obligations, all checks, wire transfers and other items of payment received by Silicon (including proceeds of Accounts and payment of the Obligations in full) shall be deemed applied by Silicon on account of the Obligations three Business Days after receipt by Silicon of immediately available funds, and, for purposes of the foregoing, any such funds received after 12:00 Noon on any day shall be deemed received on the next Business Day. Silicon shall not, however, be required to credit Borrower's account for the amount of any item of payment which is unsatisfactory to Silicon in its good faith business judgment, and Silicon may charge Borrower's loan account for the amount of any item of payment which is returned to Silicon unpaid.

9.2    Application of Payments.    All payments with respect to the Obligations may be applied, and in Silicon's good faith business judgment reversed and re-applied, to the Obligations, in such order and manner as Silicon shall determine in its good faith business judgment.

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9.3    Charges to Accounts.    Silicon may, in its discretion, require that Borrower pay monetary Obligations in cash to Silicon, or charge them to Borrower's Loan account, in which event they will bear interest at the same rate applicable to the Loans. Silicon may also, in its discretion, charge any monetary Obligations to Borrower's Deposit Accounts maintained with Silicon.

9.4    Monthly Accountings.    Silicon shall provide Borrower monthly with an account of advances, charges, expenses and payments made pursuant to this Agreement. Such account shall be deemed correct, accurate and binding on Borrower and an account stated (except for reverses and reapplications of payments made and corrections of errors discovered by Silicon), unless Borrower notifies Silicon in writing to the contrary within 60 days after such account is rendered, describing the nature of any alleged errors or omissions.

9.5    Notices.    All notices to be given under this Agreement shall be in writing and shall be given either personally or by reputable private delivery service or by regular first-class mail, or certified mail return receipt requested, addressed to Silicon or Borrower at the addresses shown in the heading to this Agreement, or at any other address designated in writing by one party to the other party. Notices to Silicon shall be directed to the Commercial Finance Division, to the attention of the Division Manager or the Division Credit Manager. All notices shall be deemed to have been given upon delivery in the case of notices personally delivered, or at the expiration of one Business Day following delivery to the private delivery service, or two Business Days following the deposit thereof in the United States mail, with postage prepaid.

9.6    Severability.    Should any provision of this Agreement be held by any court of competent jurisdiction to be void or unenforceable, such defect shall not affect the remainder of this Agreement, which shall continue in full force and effect.

9.7    Integration.    This Agreement and such other written agreements, documents and instruments as may be executed in connection herewith are the final, entire and complete agreement between Borrower and Silicon and supersede all prior and contemporaneous negotiations and oral representations and agreements, all of which are merged and integrated in this Agreement. There are no oral understandings, representations or agreements between the parties which are not set forth in this Agreement or in other written agreements signed by the parties in connection herewith.

9.8    Waivers; Indemnity.    The failure of Silicon at any time or times to require Borrower to strictly comply with any of the provisions of this Agreement or any other Loan Document shall not waive or diminish any right of Silicon later to demand and receive strict compliance therewith. Any waiver of any default shall not waive or affect any other default, whether prior or subsequent, and whether or not similar. None of the provisions of this Agreement or any other Loan Document shall be deemed to have been waived by any act or knowledge of Silicon or its agents or employees, but only by a specific written waiver signed by an authorized officer of Silicon and delivered to Borrower. Borrower waives the benefit of all statutes of limitations relating to any of the Obligations or this Agreement or any other Loan Document, and Borrower waives demand, protest, notice of protest and notice of default or dishonor, notice of payment and nonpayment, release, compromise, settlement, extension or renewal of any commercial paper, instrument, account, General Intangible, document or guaranty at any time held by Silicon on which Borrower is or may in any way be liable, and notice of any action taken by Silicon, unless expressly required by this Agreement. Borrower hereby agrees to indemnify Silicon and its affiliates, subsidiaries, parent, directors, officers, employees, agents, and attorneys, and to hold them harmless from and against any and all claims, debts, liabilities, demands, obligations, actions, causes of action, penalties, costs and expenses (including reasonable attorneys' fees), of every kind, which they may sustain or incur based upon or arising out of any of the Obligations, or any relationship or agreement between Silicon and Borrower, or any other matter, relating to Borrower or the Obligations; provided that this indemnity shall not extend to damages proximately caused by the indemnitee's own gross negligence or willful misconduct. Notwithstanding any provision in this Agreement to the

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contrary, the indemnity set forth in this Section shall survive any termination of this Agreement and shall for all purposes continue in full force and effect.

9.9    No Liability for Ordinary Negligence.    Neither Silicon, nor any of its directors, officers, employees, agents, attorneys or any other Person affiliated with or representing Silicon shall be liable for any claims, demands, losses or damages, of any kind whatsoever, made, claimed, incurred or suffered by Borrower or any other party through the ordinary negligence of Silicon, or any of its directors, officers, employees, agents, attorneys or any other Person affiliated with or representing Silicon, but nothing herein shall relieve Silicon from liability for its own gross negligence or willful misconduct.

9.10    Amendment; Conflict.    The terms and provisions of this Agreement may not be waived or amended, except in a writing executed by Borrower and a duly authorized officer of Silicon. Further, in the event of a conflict between any provision of this Agreement and any provision of any other document, instrument or agreement between Borrower on the one hand, and Bank or any other division or affiliate of Bank on the other hand, including without limitation the Existing Loan Agreement, Bank shall determine in its sole discretion which provision shall apply.

9.11    Time of Essence.    Time is of the essence in the performance by Borrower of each and every obligation under this Agreement.

9.12    Attorneys Fees and Costs.    Borrower shall reimburse Silicon for all reasonable attorneys' fees and all filing, recording, search, title insurance, appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to, or in connection with, or relating to this Agreement (whether or not a lawsuit is filed), including, but not limited to, any reasonable attorneys' fees and costs Silicon incurs in order to do the following: prepare and negotiate this Agreement and all present and future documents relating to this Agreement; obtain legal advice in connection with this Agreement or Borrower; enforce, or seek to enforce, any of its rights; prosecute actions against, or defend actions by, Account Debtors; commence, intervene in, or defend any action or proceeding; initiate any complaint to be relieved of the automatic stay in bankruptcy; file or prosecute any probate claim, bankruptcy claim, third-party claim, or other claim; examine, audit, copy, and inspect any of the Collateral or any of Borrower's books and records; protect, obtain possession of, lease, dispose of, or otherwise enforce Silicon's security interest in, the Collateral; and otherwise represent Silicon in any litigation relating to Borrower. In satisfying Borrower's obligation hereunder to reimburse Silicon for attorneys fees, Borrower may, for convenience, issue checks directly to Silicon's attorneys, Levy, Small & Lallas, but Borrower acknowledges and agrees that Levy, Small & Lallas is representing only Silicon and not Borrower in connection with this Agreement. If either Silicon or Borrower files any lawsuit against the other predicated on a breach of this Agreement, the prevailing party in such action shall be entitled to recover its reasonable costs and attorneys' fees, including (but not limited to) reasonable attorneys' fees and costs incurred in the enforcement of, execution upon or defense of any order, decree, award or judgment. All attorneys' fees and costs to which Silicon may be entitled pursuant to this Paragraph shall immediately become part of Borrower's Obligations, shall be due on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations.

9.13    Benefit of Agreement.    The provisions of this Agreement shall be binding upon and inure to the benefit of the respective successors, assigns, heirs, beneficiaries and representatives of Borrower and Silicon; provided, however, that Borrower may not assign or transfer any of its rights under this Agreement without the prior written consent of Silicon, and any prohibited assignment shall be void. No consent by Silicon to any assignment shall release Borrower from its liability for the Obligations.

9.14    Joint and Several Liability.    If Borrower consists of more than one Person, their liability shall be joint and several, and the compromise of any claim with, or the release of, any Borrower shall not constitute a compromise with, or a release of, any other Borrower.

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9.15    Limitation of Actions.    Any claim or cause of action by Borrower against Silicon, its directors, officers, employees, agents, accountants or attorneys, based upon, arising from, or relating to this Loan Agreement, or any other Loan Document, or any other transaction contemplated hereby or thereby or relating hereto or thereto, or any other matter, cause or thing whatsoever, occurred, done, omitted or suffered to be done by Silicon, its directors, officers, employees, agents, accountants or attorneys, shall be barred unless asserted by Borrower by the commencement of an action or proceeding in a court of competent jurisdiction by the filing of a complaint within one year after the first act, occurrence or omission upon which such claim or cause of action, or any part thereof, is based, and the service of a summons and complaint on an officer of Silicon, or on any other person authorized to accept service on behalf of Silicon, within thirty (30) days thereafter. Borrower agrees that such one-year period is a reasonable and sufficient time for Borrower to investigate and act upon any such claim or cause of action. The one-year period provided herein shall not be waived, tolled, or extended except by the written consent of Silicon in its sole discretion. This provision shall survive any termination of this Loan Agreement or any other Loan Document.

9.16    Paragraph Headings; Construction.    Paragraph headings are only used in this Agreement for convenience. Borrower and Silicon acknowledge that the headings may not describe completely the subject matter of the applicable paragraph, and the headings shall not be used in any manner to construe, limit, define or interpret any term or provision of this Agreement. This Agreement has been fully reviewed and negotiated between the parties and no uncertainty or ambiguity in any term or provision of this Agreement shall be construed strictly against Silicon or Borrower under any rule of construction or otherwise.

9.17    Governing Law; Jurisidiction; Venue.    This Agreement and all acts and transactions hereunder and all rights and obligations of Silicon and Borrower shall be governed by the laws of the State of California. As a material part of the consideration to Silicon to enter into this Agreement, Borrower (i) agrees that all actions and proceedings relating directly or indirectly to this Agreement shall, at Silicon's option, be litigated in courts located within California, and that the exclusive venue therefor shall be San Diego County; (ii) consents to the jurisdiction and venue of any such court and consents to service of process in any such action or proceeding by personal delivery or any other method permitted by law; and (iii) waives any and all rights Borrower may have to object to the jurisdiction of any such court, or to transfer or change the venue of any such action or proceeding.

9.18    Mutual Waiver of Jury Trial.    BORROWER AND SILICON EACH HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN SILICON AND BORROWER, OR ANY CONDUCT, ACTS OR OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY

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OTHER PERSONS AFFILIATED WITH SILICON OR BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.

Borrower:		Silicon:
DIVXNETWORKS, INC.		SILICON VALLEY BANK
By:	/s/ Illegible	By:	/s/ DEBORAH BRINKER
	President or Vice President	Title:	Vice President
By:	/s/ Illegible
	Secretary or Asst. Secretary

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Silicon Valley Bank

Schedule to

Loan and Security Agreement

Borrower:	DivXNetworks, Inc.
Address:	10350 Science Center Drive, Building 14, Suite 140 San Diego, California 92121
Date:	July    , 2003

This Schedule forms an integral part of the Loan and Security Agreement between Silicon Valley Bank and the above-borrower of even date.

1.	CREDIT LIMIT (Section 1.1):	An amount not to exceed the lesser of: (i) $2,000,000 at any one time outstanding (the "Maximum Credit Limit"); or (ii) 80% (the "Advance Rate") of the amount of Borrower's Eligible Accounts (as defined in Section 8 above);
		PROVIDED, HOWEVER: the Loans outstanding hereunder and under the Exim Agreement shall not at any time in the aggregate exceed $2,000,000.
		Silicon may, from time to time, modify the Advance Rate, in its good faith business judgment, upon notice to the Borrower, based on changes in collection experience with respect to Accounts or other issues or factors relating to the Accounts or other Collateral.

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	Exim Agreement; Cross-Collateralization; Cross-Default:	Silicon and the Borrower are parties to that certain Loan and Security Agreement (Exim Program) of even date (the "Exim Agreement"). Both this Agreement and the Exim Agreement shall continue in full force and effect, and all rights and remedies under this Agreement and the Exim Agreement are cumulative. The term "Obligations" as used in this Agreement and in the Exim Agreement shall include without limitation the obligation to pay when due all Loans made pursuant to this Agreement (the "Non-Exim Loans") and all interest thereon and the obligation to pay when due all Loans made pursuant to the Exim Agreement (the "Exim Loans") and all interest thereon. Without limiting the generality of the foregoing, all "Collateral" as defined in this Agreement and as defined in the Exim Agreement shall secure all Exim Loans and all Non-Exim Loans and all interest thereon, and all other Obligations. Any Event of Default under this Agreement shall also constitute an Event of Default under the Exim Agreement, and any Event of Default under the Exim Agreement shall also constitute an Event of Default under this Agreement. In the event Silicon assigns its rights under the Exim Agreement and/or under any Note evidencing Exim Loans and/or its rights under this Agreement and/or under any Note evidencing Non-Exim Loans, to any third party, including without limitation the Export-Import Bank of the United States ("Exim Bank"), whether before or after the occurrence of any Event of Default, Silicon shall have the right (but not any obligation), in its sole discretion, to allocate and apportion Collateral to the Agreement and/or Note assigned and to specify the priorities of the respective security interests in such Collateral between itself and the assignee, all without notice to or consent of the Borrower.
	Existing Loan Agreement	Borrower and Silicon have entered into other credit facility arrangements as reflected in the Existing Loan Agreement. All of the terms and conditions of the Existing Loan Agreement shall continue in full force and effect and are not deemed modified by the terms and conditions hereof, and Borrower shall continue to repay the indebtedness in such manner and in accordance with the repayment terms as are stated in the Existing Loan Agreement. Further, the amount of indebtedness outstanding thereunder shall not be deemed to affect the availability for Loans hereunder.
2.	INTEREST
	Interest Rate (Section 1.2):

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		A rate equal to the "Prime Rate" in effect from time to time, plus 2.50% per annum, provided that the interest rate in effect on any day shall not be less than 6.75% per annum. Interest shall be calculated on the basis of a 360-day year for the actual number of days elapsed. As used in this Agreement, "Prime Rate" means the interest rate announced from time to time by Silicon as its "prime rate" (which is a base rate upon which other rates charged by Silicon are based, and it is not necessarily the best rate available at Silicon). The interest rate applicable to the Obligations shall change on each date there is a change in the Prime Rate.
	Minimum Monthly Interest (Section 1.2):	N/A
3.	FEES (Section 1.4):
	Loan Fee:	$25,000 on a joint basis herewith and in connection with the Exim Agreement, which shall be payable concurrently herewith.
	Collateral Monitoring Fee:	$1,000 per month on a joint basis in connection with this Agreement and the Exim Agreement, and which is payable in arrears (prorated for any partial month at the beginning and at termination of this Agreement).
	Unused Line Fee:	In the event, in any calendar month (or portion thereof at the beginning and end of the term hereof), the average daily principal balance of the Loans outstanding hereunder and under the Exim Agreement during the month is less than the amount of the Maximum Credit Limit, Borrower shall pay Silicon an unused line fee in an amount equal to 0.50% per annum on the difference between the amount of the Maximum Credit Limit and the average daily principal balance of such Loans outstanding during such month, computed on the basis of a 360-day year, which unused line fee shall be computed and paid monthly, in arrears, on the first day of the following month.
4.	MATURITY DATE (Section 6.1):	July    , 2004.
5.	FINANCIAL COVENANT (Section 5.1):	Borrower shall comply with each of the following covenant. Compliance shall be determined as of the end of each month:

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	Minimum Tangible Net Worth:	Borrower shall maintain a Tangible Net Worth of not less than $1,500,000 plus (i) 50% of all consideration received after the date hereof for equity securities and subordinated debt of the Borrower, and plus (ii) 50% of the Borrower's net income in each fiscal quarter ending after the date hereof. Increases in the Minimum Tangible Net Worth Covenant based on consideration received for equity securities and subordinated debt of the Borrower shall be effective as of the end of the quarter in which such consideration is received, and shall continue effective thereafter. Increases in the Minimum Tangible Net Worth Covenant based on net income shall be effective on the last day of the fiscal quarter in which said net income is realized, and shall continue effective thereafter. In no event shall the Minimum Tangible Net Worth Covenant be decreased.
	Definitions.	For purposes of the foregoing financial covenant, the following term shall have the following meaning:
		"Tangible Net Worth" shall mean the excess of total assets over total liabilities, determined in accordance with GAAP, with the following adjustments:
		(A)	there shall be excluded from assets: (1) notes, accounts receivable and other obligations owing to Borrower from its officers or other Affiliates, and (ii) all assets which would be classified as intangible assets under GAAP, including without limitation goodwill, licenses, patents, trademarks, trade names, copyrights, capitalized software and organizational costs, licenses and franchises.
		(B)	there shall be excluded from liabilities: all indebtedness which is subordinated to the Obligations under a subordination agreement in form specified by Silicon or by language in the instrument evidencing the indebtedness which Silicon agrees in writing is acceptable to Silicon in its good faith business judgment.
6.	REPORTING. (Section 5.3):	Borrower shall provide Silicon with the following:
		1.	Transaction reports and schedules of collections, each week and at the time of each Loan request, on Silicon's standard form.
		2.	Monthly accounts receivable agings, aged by invoice date, within fifteen days after the end of each month.
		3.	Monthly accounts payable agings, aged by invoice date, and outstanding or held check registers, if any, within fifteen days after the end of each month.

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		4.	Monthly reconciliations of accounts receivable agings (aged by invoice date), transaction reports, and general ledger, within fifteen days after the end of each month.
		5.	Monthly unaudited financial statements, as soon as available, and in any event within thirty days after the end of each month.
		6.	Monthly Compliance Certificates, within thirty days after the end of each month, in such form as Silicon shall reasonably specify, signed by the Chief Financial Officer of Borrower, certifying that as of the end of such month Borrower was in full compliance with all of the terms and conditions of this Agreement, and setting forth calculations showing compliance with the financial covenants set forth in this Agreement and such other information as Silicon shall reasonably request, including, without limitation, a statement that at the end of such month there were no held checks.
		7.	Annual operating budgets (including income statements, balance sheets and cash flow statements, by month) for the upcoming fiscal year of Borrower within thirty days prior to the end of each fiscal year of Borrower.
		8.	Annual financial statements, as soon as available, and in any event within 90 days following the end of Borrower's fiscal year, certified by, and with an unqualified opinion of, independent certified public accountants acceptable to Silicon.
7.	BORROWER INFORMATION:
		Borrower represents and warrants that the information set forth in the Representations and Warranties of the Borrower dated March 24, 2003, previously submitted to Silicon (the "Representations") is true and correct as of the date hereof.
8.	ADDITIONAL PROVISIONS

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(1)	Banking Relationship. Borrower shall at all times maintain its primary banking relationship with Silicon. Without limiting the generality of the foregoing, Borrower shall, at all times, maintain not less than 85% of its total cash and investments on deposit with Silicon. Further, as to any Deposit Accounts and investment accounts maintained with another institution, there shall be no requirement for Borrower to cause such institution, to enter into a control agreement in form acceptable to Silicon unless Silicon specifically makes an additional request in writing for Borrower to do so.
(2)	Initial Collateral Audit. The first audit of the Collateral hereunder shall be completed, with results satisfactory to Silicon, no later than 90 days from the date hereof.
(3)	Subordination of Inside Debt. All present and future indebtedness of Borrower to its officers, directors and shareholders ("Inside Debt") shall, at all times, be subordinated to the Obligations pursuant to a subordination agreement on Silicon's standard form. Borrower represents and warrants that there is no Inside Debt presently outstanding, except for the following: None. Prior to incurring any Inside Debt in the future, Borrower shall cause the person to whom such Inside Debt will be owed to execute and deliver to Silicon a subordination agreement on Silicon's standard form.
(4)	Intellectual Property Rights. Borrower will register (as determined in the commercially reasonable business judgment of Borrower) with the United States Patent and Trademark Office its material patent and trademark Intellectual Property and such additional Intellectual Property rights relating thereto developed or acquired including revisions or additions to any product before the sale or licensing of the product to any third party or which is otherwise material. Borrower shall inform Silicon of any such registration promptly and take such actions and execute such documentation as Silicon may deem necessary or advisable relating thereto.

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Borrower has no present maskworks, software, computer programs and other works of authorship registered with the United States Copyright Office except as disclosed on Exhibit 6.8 hereto, and Borrower shall not hereafter register any maskworks, software, computer programs or other works of authorship subject to United States copyright protection with the United States Copyright Office without first complying with the following: (i) providing Silicon with at least 15 days prior written notice thereof, (ii) providing Bank with a copy of the application for any such registration and (iii) executing and filing such other instruments, and taking such further actions as Silicon may reasonably request from time to time to perfect or continue the perfection of Silicon's interest in the Collateral, including without limitation the filing with the United States Copyright Office, simultaneously with the filing by Borrower of the application for any such registration, of a copy of this Agreement or a Supplement hereto in form acceptable to Silicon identifying the maskworks, software, computer programs or other works of authorship being registered and confirming the grant of a security interest therein in favor of Silicon.

Borrower will (i) protect, defend and maintain the validity and enforceability of all material Intellectual Property in a manner consistent with past practices and, in any event, consistent with reasonable and prudent business practices and promptly advise Silicon in writing of material Infringements and (ii) not allow any Intellectual Property to be abandoned, forfeited or dedicated to the public without Silicon's written consent.

Borrower:		Silicon:
DIVXNETWORKS, INC.		SILICON VALLEY BANK
By:	/s/  ILLEGIBLE President or Vice President	By:	/s/  ILLEGIBLE
		Title:	/s/  ILLEGIBLE
By:	/s/  ILLEGIBLE Secretary or Asst. Secretary

7

Silicon Valley Bank

Loan and Security Agreement
(Exim Program)

Borrower:	DivXNetworks, Inc.
Address:	10350 Science Center Drive, Building 14, Suite 140 San Diego, California 92121
Date:	July 28, 2003

        THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between SILICON VALLEY BANK ("Silicon"), whose address is 3003 Tasman Drive, Santa Clara, California 95054 and the borrower(s) named above (jointly and severally, the "Borrower"), whose chief executive office is located at the above address ("Borrower's Address"). The Schedule to this Agreement (the "Schedule") shall for all purposes be deemed to be a part of this Agreement, and the same is an integral part of this Agreement. (Definitions of certain terms used in this Agreement are set forth in Section 8 below.)

1.    LOANS.

1.1    Loans.    Silicon will make loans to Borrower (the "Loans") up to the amounts (the "Credit Limit") shown on the Schedule, provided no Default or Event of Default has occurred and is continuing, and subject to deduction of Reserves for accrued interest and such other Reserves as Silicon deems proper from time to time in its good faith business judgment.

1.2    Interest.    All Loans and all other monetary Obligations shall bear interest at the rate shown on the Schedule, except where expressly set forth to the contrary in this Agreement. Interest shall be payable monthly, on the last day of the month. Interest may, in Silicon's discretion, be charged to Borrower's loan account, and the same shall thereafter bear interest at the same rate as the other Loans. Silicon may, in its discretion, charge interest to Borrower's Deposit Accounts maintained with Silicon. Regardless of the amount of Obligations that may be outstanding from time to time, Borrower shall pay Silicon minimum monthly interest during the term of this Agreement in the amount set forth on the Schedule (the "Minimum Monthly Interest").

1.3    Overadvances.    If at any time or for any reason the total of all outstanding Loans and all other monetary Obligations exceeds the Credit Limit (an "Overadvance"), Borrower shall immediately pay the amount of the excess to Silicon, without notice or demand. Without limiting Borrower's obligation to repay to Silicon the amount of any Overadvance, Borrower agrees to pay Silicon interest on the outstanding amount of any Overadvance, on demand, at the Default Rate.

1.4    Fees.    Borrower shall pay Silicon the fees shown on the Schedule, which are in addition to all interest and other sums payable to Silicon and are not refundable.

1.5    Loan Requests.    To obtain a Loan, Borrower shall make a request to Silicon by facsimile or telephone. Loan requests received after 12:00 Noon will not be considered by Silicon until the next Business Day. Silicon may rely on any telephone request for a Loan given by a person whom Silicon believes is an authorized representative of Borrower, and Borrower will indemnify Silicon for any loss Silicon suffers as a result of that reliance.

1.6    Letters of Credit.    [Not Applicable]

2.2.    SECURITY INTEREST.    To secure the payment and performance of all of the Obligations when due, Borrower hereby grants to Silicon a security interest in all of the following (collectively, the "Collateral"): all right, title and interest of Borrower in and to all of the following, whether now owned

1

or hereafter arising or acquired and wherever located: all Accounts, all Inventory; all Equipment; all Deposit Accounts; all General Intangibles (including without limitation all Intellectual Property); all Investment Property; all Other Property; and any and all claims, rights and interests in any of the above, and all guaranties and security for any of the above, and all substitutions and replacements for, additions, accessions, attachments, accessories, and improvements to, and proceeds (including proceeds of any insurance policies, proceeds of proceeds and claims against third parties) of, any and all of the above, and all Borrower's books relating to any and all of the above. *

*      Enforcement of the rights of the Silicon with respect to the Collateral shall be governed by, among other things, the provisions of Section 7.2 hereof.

3.    REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.

        In order to induce Silicon to enter into this Agreement and to make Loans, Borrower represents and warrants to Silicon as follows, and Borrower covenants that the following representations will continue to be true *, and that Borrower will at all times comply with all of the following covenants, throughout the term of this Agreement and until all Obligations have been paid and performed in full:

*      in all material respects

3.1    Corporate Existence and Authority.    Borrower is and will continue to be, duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. Borrower is and will continue to be qualified and licensed to do business in all jurisdictions in which any failure to do so would result in a Material Adverse Change. The execution, delivery and performance by Borrower of this Agreement, and all other documents contemplated hereby (i) have been duly and validly authorized, (ii) are enforceable against Borrower in accordance with their terms (except as enforcement may be limited by equitable principles and by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to creditors' rights generally), and (iii) do not violate Borrower's articles or certificate of incorporation, or Borrower's by-laws, or any law or any material agreement or instrument which is binding upon Borrower or its property, and (iv) do not constitute grounds for acceleration of any material indebtedness or obligation any agreement or instrument which is binding upon Borrower or its property.

3.2    Name; Trade Names and Styles.    The name of Borrower set forth in the heading to this Agreement is its correct name. Listed in the Representations are all prior names of Borrower and all of Borrower's present and prior trade names. Borrower shall give Silicon 30 days' prior written notice before changing its name or doing business under any other name. Borrower has complied, and will in the future comply, in all material respects, with all laws relating to the conduct of business under a fictitious business name, except where the failure to so comply would not reasonably be expected to result in a Material Adverse Change.

3.3    Place of Business; Location of Collateral.    The address set forth in the heading to this Agreement is Borrower's chief executive office. In addition, Borrower has places of business and Collateral is located only at the locations set forth in the Representations. Borrower will give Silicon at least 30 days prior written notice before opening any additional place of business, changing its chief executive office, or moving any of the Collateral to a location other than Borrower's Address or one of the locations set forth in the Representations, except that Borrower may maintain sales offices in the ordinary course of business at which not more than a total of $10,000 fair market value of Equipment is located.

3.4    Title to Collateral; Perfection; Permitted Liens.

        (a)   Borrower is now, and will at all times in the future be, the sole owner * of all the Collateral, except for items of Equipment which are leased to Borrower. The Collateral now is and will remain

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free and clear of any and all liens, charges, security interests, encumbrances and adverse claims, except for Permitted Liens. Silicon now has, and will continue to have, a first-priority perfected and enforceable security interest in all of the Collateral, subject only to the Permitted Liens, and Borrower will at all times defend Silicon and the Collateral against all claims of others.

*      (either as a fee owner or as an owner of a license, as applicable)

        (b)   Borrower has set forth in the Representations all of Borrower's Deposit Accounts, and Borrower will give Silicon five Business Days advance written notice before establishing any new Deposit Accounts and will cause the institution where any such new Deposit Account is maintained to execute and deliver to Silicon a control agreement in form sufficient to perfect Silicon's security interest in the Deposit Account and otherwise satisfactory to Silicon in its good faith business judgment *. Nothing herein limits any requirements which may be set forth in the Schedule as to where Deposit Accounts will be maintained.

*      (if an acceptable control agreement is not able to be delivered to Silicon within a reasonable amount of time, Borrower will take such other action as Silicon reasonably determines is appropriate such that Silicon will have a first priority perfected security interest in such funds, including, without limitation, moving such account to an institution where an acceptable control agreement may be obtained)

        (c)   In the event that Borrower shall at any time after the date hereof have any commercial tort claims against others, which it is asserting or intends to assert, and in which the potential recovery exceeds $100,000, Borrower shall promptly notify Silicon thereof in writing and provide Silicon with such information regarding the same as Silicon shall request (unless providing such information would waive the Borrower's attorney-client privilege). Such notification to Silicon shall constitute a grant of a security interest in the commercial tort claim and all proceeds thereof to Silicon, and Borrower shall execute and deliver all such documents and take such actions as Silicon shall request in connection therewith.

        ((d) None of the Collateral now is or will be affixed to any real property in such a manner, or with such intent, as to become a fixture. Borrower is not and will not become a lessee under any real property lease pursuant to which the lessor may obtain any rights in any of the Collateral and no such lease now prohibits, restrains, impairs or will prohibit, restrain or impair, Borrower's right to remove any Collateral from the leased premises. * Whenever any Collateral is located upon premises in which any third party has an interest, Borrower shall, whenever requested by Silicon, use its best efforts to cause such third party to execute and deliver to Silicon, in form acceptable to Silicon, such waivers and subordinations as Silicon shall specify in its good faith business judgment. Borrower will keep in full force and effect, and will comply with all material terms of, any lease of real property where any of the Collateral now or in the future may be located.

*      Borrower is not and will not become a lessee under any real property lease pursuant to which the lessor may obtain any rights in any of the Collateral that violate any other material term or provision hereof, including without limitation, the covenant against encumbrances on the Collateral subject to the Permitted Liens.

3.5    Maintenance of Collateral.    Borrower will maintain the Collateral in good working condition (ordinary wear and tear excepted), and Borrower will not use the Collateral for any unlawful purpose. Borrower will immediately advise Silicon in writing of any material loss or damage to the Collateral.

3.6    Books and Records.    Borrower has maintained and will maintain at Borrower's Address complete and accurate banks and records, comprising an accounting system in accordance with GAAP.

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3.7    Financial Condition, Statements and Reports.    All financial statements now or in the future delivered to Silicon have been, and will be, prepared in conformity with GAAP and now and in the future will fairly present the results of operations and financial condition of Borrower, in accordance with GAAP, at the times and for the periods therein stated. Between the last date covered by any such statement provided to Silicon and the date hereof, there has been no Material Adverse Change.

3.8    Tax Returns and Payments; Pension Contributions.    Borrower has timely filed, and will timely file, all required tax returns and reports, and Borrower has timely paid, and will timely pay, all foreign, federal, state and local taxes, assessments, deposits and contributions now or in the future owed by Borrower. Borrower may, however, defer payment of any contested taxes, provided that Borrower (i) in good faith contests Borrower's obligation to pay the taxes by appropriate proceedings promptly and diligently instituted and conducted, (ii) notifies Silicon in writing of the commencement of, and any material development in, the proceedings, and (iii) posts bonds or takes any other steps required to keep the contested taxes from becoming a lien upon any of the Collateral. Borrower is unaware of any claims or adjustments proposed for any of Borrower's prior tax years which could result in additional taxes becoming due and payable by Borrower. Borrower has paid, and shall continue to pay all amounts necessary to fund all present and future pension, profit sharing and deferred compensation plans in accordance with their terms, and Borrower has not and will not withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.

3.9    Compliance with Law.    Borrower has, to the best of its knowledge, complied, and will comply, in all material respects, with all provisions of all foreign, federal, state and local laws and regulations applicable to Borrower *, including, but not limited to, those relating to Borrower's ownership of real or personal property, the conduct and licensing of Borrower's business, and all environmental matters.

*      , the violation of which could cause a Material Adverse Change

3.10    Litigation.    There is no claim, suit, litigation, proceeding or investigation pending or (to best of Borrower's knowledge) threatened against or affecting Borrower in any court or before any governmental agency (or any basis therefor known to Borrower) which could reasonably be expected to result, either separately or in the aggregate, in any Material Adverse Change. Borrower will promptly inform Silicon in writing of any claim, proceeding, litigation or investigation in the future threatened or instituted against Borrower involving any single claim of $50,000 or more, or involving $100,000 or more in the aggregate.

3.11    Use of Proceeds.    All proceeds of all Loans shall be used solely for lawful business purposes. Borrower is not purchasing or carrying any "margin stock" (as defined in Regulation U of the Board of Governors of the Federal Reserve System) and no part of the proceeds of any Loan will be used to purchase or carry any "margin stock" or to extend credit to others for the purpose of purchasing or carrying any "margin stock."

4.    ACCOUNTS.

4.1    Representations Relating to Accounts.    Borrower represents and warrants to Silicon as follows: Each Account with respect to which Loans are requested by Borrower shall, on the date each Loan is requested and made, (i) represent an undisputed bona fide existing unconditional obligation of the Account Debtor created by the sale, delivery, and acceptance of goods or the rendition of services, or the non-exclusive licensing of Intellectual Property, in the ordinary course of Borrower's business, and (ii) meet the Minimum Eligibility Requirements set forth in Section 8 below.

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4.2    Representations Relating to Documents and Legal Compliance.    Borrower represents and warrants to Silicon as follows: All statements made and all unpaid balance appearing in all invoices, instruments and other documents evidencing the Accounts are and shall be true and correct and all such invoices, instruments and other documents and all of Borrower's books and records are and shall be genuine and in all respects what they purport to be. All sales and other transactions underlying or giving rise to each Account shall comply in all material respects with all applicable laws and governmental rules and regulations. To the best of Borrower's knowledge, all signatures and endorsements on all documents, instruments, and agreements relating to all Accounts are and shall be genuine, and all such documents, instruments and agreements are and shall be legally enforceable in accordance with their terms.

4.3    Schedules and Documents relating to Accounts.    Borrower shall deliver to Silicon transaction reports and schedules of collections, as provided in the Schedule, on Silicon's standard forms; provided, however, that Borrower's failure to execute and deliver the same shall not affect or limit Silicon's security interest and other rights in all of Borrower's Accounts, nor shall Silicon's failure to advance or lend against a specific Account affect or limit Silicon's security interest and other rights therein. If requested by Silicon, Borrower shall furnish Silicon with copies (or, at Silicon's request, originals) of all contracts, orders, invoices, and other similar documents, and all shipping instructions, delivery receipt, bills of lading, and other evidence of delivery, for any goods the sale or disposition of which gave rise to such Accounts, and Borrower warrants the genuineness of all of the foregoing. Borrower shall also furnish to Silicon an aged accounts receivable trial balance as provided in the Schedule. In addition, Borrower shall deliver to Silicon, on its request, the originals of all instruments, chattel paper, security agreements, guarantees and other documents and property evidencing or securing any Accounts, in the same form as received, with all necessary indorsements, and copies of all credit memos.

4.4    Collection of Accounts.    Borrower shall have the right to collect all Accounts, unless and until a Default or an Event of Default has occurred and is continuing. Whether or not an Event of Default has occurred and is continuing, Borrower shall hold all payments on, and proceeds of, Accounts in trust for Silicon, and Borrower shall immediately deliver all such payments and proceeds to Silicon in their original form, duly endorsed, to be applied to the Obligations in such order as Silicon shall determine. Silicon may, in its good faith business judgment, require that all proceeds of Collateral be deposited by Borrower into a lockbox account, or such other "blocked account" as Silicon may specify, pursuant to a blocked account agreement in such form as Silicon may specify in its good faith business judgment.

4.5    Remittance of Proceeds.    All proceeds arising from the disposition of any Collateral shall be delivered, in kind, by Borrower to Silicon in the original form in which received by Borrower not later than the following Business Day after receipt by Borrower, to be applied to the Obligations in such order as Silicon shall determine; provided that, if no Default or Event of Default has occurred and is continuing, Borrower shall not be obligated to remit to Silicon the proceeds of the sale of worn out or obsolete Equipment disposed of by Borrower in good faith in an arm's length transaction for an aggregate purchase price of $25,000 or less (for all such transactions in any fiscal year). Borrower agrees that it will not commingle proceeds of Collateral with any of Borrower's other funds or property, but will hold such proceeds separate and apart from such other funds and property and in an express trust for Silicon. Nothing in this Section limits the restrictions on disposition of Collateral set forth elsewhere in this Agreement.

4.6    Disputes.    Borrower shall notify Silicon promptly of all disputes or claims relating to Accounts. Borrower shall not forgive (completely or partially), compromise or settle any Account for less than payment in full, or agree to do any of the foregoing, except that Borrower may do so, provided that: (i) Borrower does so in good faith, in a commercially reasonable manner, in the ordinary course of business, and in arm's length transactions, which are reported to Silicon on the regular reports provided to Silicon; (ii) no Default or Event of Default has occurred and is continuing; and

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(iii) taking into account all such discounts, settlements and forgiveness, the total outstanding Loans will not exceed the Credit Limit.

4.7    Returns.    Provided no Event of Default has occurred and is continuing, if any Account Debtor returns any Inventory to Borrower, Borrower shall promptly determine the reason for such return and promptly issue a credit memorandum to the Account Debtor in the appropriate amount. In the event any attempted return occurs after the occurrence and during the continuance of any Event of Default, Borrower shall hold the returned Inventory in trust for Silicon, and immediately notify Silicon of the return of the Inventory.

4.8    Verification.    Silicon may, from time to time, verify directly with the respective Account Debtors the validity, amount and other matters relating to the Accounts, by means of mail, telephone or otherwise, either in the name of Borrower or Silicon or such other name as Silicon may choose.

4.9    No Liability.    Silicon shall not be responsible or liable for any shortage or discrepancy in, damage to, or loss or destruction of, any goods, the sale or other disposition of which gives rise to an Account, or for any error, act, omission, or delay of any kind occurring in the settlement, failure to settle, collection or failure to collect any Account, or for settling any Account in good faith for less than the full amount thereof, nor shall Silicon be deemed to be responsible for any of Borrower's obligations under any contract or agreement giving rise to an Account. Nothing herein shall, however, relieve Silicon from liability for its own gross negligence or willful misconduct.

5.    ADDITIONAL DUTIES OF BORROWER.

5.1    Financial and Other Covenants.    Borrower shall at all times comply with the financial and other covenants set forth in the Schedule.

5.2    Insurance.    Borrower shall, at all times insure all of the tangible personal property Collateral and carry such other business insurance, with insurers reasonably acceptable to Silicon, in such form and amounts as Silicon may reasonably require and that are customary and in accordance with standard practices for Borrower's industry and locations, and Borrower shall provide evidence of such insurance to Silicon. All such insurance policies shall name Silicon as an additional loss payee, and shall contain a lenders loss payee endorsement in form reasonably acceptable to Silicon. Upon receipt of the proceeds of any such insurance, Silicon shall apply such proceeds in reduction of the Obligations as Silicon shall determine in its good faith business judgment, except that, provided no Default or Event of Default has occurred and is continuing, Silicon shall release to Borrower insurance proceeds with respect to equipment totaling less than $100,000, which shall be utilized by Borrower for the replacement of the Equipment with respect to which the insurance proceeds were paid. Silicon may require reasonable assurance that the insurance proceeds so released will be so used. If Borrower fails to provide or pay for any insurance, Silicon may, but is not obligated to, obtain the same at Borrower's expense. Borrower shall promptly deliver to Silicon copies of all material reports made to insurance companies.

5.3    Reports.    Borrower, at its expense, shall provide Silicon with the written reports set forth in the Schedule, and such other written reports with respect to Borrower (including budgets, sales projections, operating plans and other financial documentation), as Silicon shall from time to time specify in its good faith business judgment.

5.4    Access to Collateral Books and Records.    At reasonable times, and on one Business Day's notice, Silicon, or its agents, shall have the right to inspect the Collateral, and the right to audit and copy Borrower's books and records *. Silicon shall take reasonable steps to keep confidential all information obtained in any such inspection or audit, but Silicon shall have the right to disclose any such information to its auditors, regulatory agencies, and attorneys, and pursuant to any subpoena or other legal process. The foregoing inspections and audits shall be at Borrower's expense' and the charge therefor shall be $750 per person per day (or such higher amount as shall represent Silicon's then current standard charge for the same), plus reasonable out-of-pocket expenses. In the event

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Borrower and Silicon schedule an audit more than 10 days in advance, and Borrower seeks to reschedules the audit ** with less than 10 days written notice to Silicon, then (without limiting any of Silicon's rights or remedies), Borrower shall pay Silicon a cancellation fee of $1,000 plus any out-of-pocket expenses incurred by Silicon, to compensate Silicon for the anticipated costs and expenses of the cancellation.

*      with such audits not to conducted on a more frequent basis than quarterly unless a Default or Event of Default is then occurring or if Silicon, in its good faith business judgment, determines that a further investigative audit is necessary

**    for a second time

5.5    Negative Covenants.    Except as may be permitted in the Schedule, Borrower shall not, without Silicon's prior written consent (which shall be a matter of its good faith business judgment), do any of the following: (i) merge or consolidate with another corporation or entity; (ii) acquire any assets, except in the ordinary course of business; (iii) enter into any other transaction outside the ordinary course of business; (iv) sell or transfer any Collateral, except for the sale of finished Inventory in the ordinary course of Borrower's business, and except for the sale of obsolete or unneeded Equipment in the ordinary course of business; (v) store any Inventory or other Collateral with any warehouseman or third party; (vi) sell any Inventory on a sale-or-return, guaranteed sale, consignment, or other contingent basis; (vii) make any loans of any money or other assets; (viii) incur any debts, * outside the ordinary course of business, which would result in a Material Adverse Change; (ix) guarantee or otherwise become liable with respect to the obligations of another party or entity; (x) pay or declare any dividends on Borrower's stock (except for dividends payable solely in stock of Borrower); (xi) redeem, retire, purchase or otherwise acquire, directly or indirectly, any of Borrower's stock *; (xii) make any change in Borrower's capital structure which would result in a Material Adverse Change; or (xii) engage, directly or indirectly, in any business other than the businesses currently engaged in by Borrower or reasonably related thereto; or (xiv) dissolve or elect to dissolve. Transactions permitted by the foregoing provisions of this Section are only permitted if no Default or Event of Default would occur as a result of such transaction.

*      other than for Permitted Indebtedness

**    other than for dividends issued solely in the capital stock of the Borrower or repurchases of stock from former employees, consultants, officers, or directors of Borrower under the terms of applicable repurchase agreements or pursuant to Borrower's employee stock option plans as approved by the Borrower's board of directors, provided that no Default or Event of Default has occurred, is continuing or would exist after giving effect to such repurchase or repurchases, provided, further, that the aggregate amount of such repurchases shall not exceed $50,000.

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5.6    Litigation Cooperation.    Should any third-party suit or proceeding be instituted by or against Silicon with respect to any Collateral or relating to Borrower, Borrower shall, without expense to Silicon, make available Borrower and its officers, employees and agents and Borrower's books and records, to the extent that Silicon make deem them reasonably necessary in order to prosecute or defend any such suit or proceeding.

5.7    Further Assurances.    Borrower agrees, at its expense, on request by Silicon, to execute all documents and take all actions, as Silicon may, in its good faith business judgment, deem necessary or useful in order to perfect and maintain Silicon's prefected first-priority security interest in the Collateral (subject to Permitted Liens), and in order to fully consummate the transactions contemplated by this Agreement.

6.    TERM.

6.1    Maturity Date.    This Agreement shall continue in effect until the maturity date set forth on the Schedule (the "Maturity Date"), subject to Section 6.3 below.

6.2    Early Termination.    This Agreement may be terminated prior to the Maturity Date as follows: (i) the Borrower, effective three Business Days after written notice of termination is given to Silicon; or (ii) by Silicon at any time after the occurrence and during the continuance of an Event of Default, without notice, effective immediately. If this Agreement is terminated by Borrower or by Silicon under this Section 6.2, Borrower shall pay to Silicon a termination fee in an amount equal to one percent (1.0%) of the Maximum Credit Limit*, provided that no termination fee shall be charged if the credit facility hereunder is replaced with a new facility from another division of Silicon. The termination fee shall be due and payable on the effective date of termination and thereafter shall bear interest at a rate equal to the highest rate applicable to any of the Obligations.

*      as a joint termination fee in connection herewith and the Non-Exim Agreement (as defined in the Schedule hereto)

6.3    Payment of Obligations.    On the Maturity Date or on any earlier effective date of termination, Borrower shall pay and perform in full all Obligations, whether evidenced by installment notes or otherwise, and whether or not all or any part of such Obligations are otherwise then due and payable. Without limiting the generality of the foregoing, if on the Maturity Date, or on any earlier effective date of termination, there are any outstanding Letters of Credit issued by Silicon or issued by another institution based upon an application, guarantee, indemnity or similar agreement on the part of Silicon, then on such date Borrower shall provide to Silicon cash collateral in an amount equal to 105% of the face amount of all such Letters of Credit plus all interest, fees and cost due or to become due in connection therewith (as estimated by Silicon in its good faith business judgment), to secure all of the Obligations relating to said Letters of Credit, pursuant to Silicon's then standard form cash pledge agreement. Notwithstanding any termination of this Agreement, all of Silicon's security interests in all of the Collateral and all of the terms and provisions of this Agreement shall continue in full force and effect until all Obligations have been paid and performed in full; provided that Silicon may, in its sole discretion, refuse to make any further Loans after termination. No termination shall in any way affect or impair any right or remedy of Silicon, nor shall any such termination relieve Borrower of any Obligation to Silicon, until all of the Obligations have been paid and performed in full. Upon payment and performance in full of all the Obligations and termination of this Agreement, Silicon shall promptly terminate its financing statements with respect to the Borrower and deliver to Borrower such other documents as may be required to fully terminate Silicon's security interests.

7.    EVENTS OF DEFAULT AND REMEDIES.

7.1    Events of Default.    The occurrence of any of the following events shall constitute an "Event of Default" under this Agreement, and Borrower shall give Silicon immediate written notice thereof:

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(a) Any warranty, representation, statement, report or certificate made or delivered to Silicon by Borrower or any of Borrower's officers, employees or agents, now or in the future, shall be untrue or misleading in a material respect when made or deemed to be made; or (b) Borrower shall fail to pay when due any Loan or any interest thereon or any other monetary Obligation; or (c) the total Loans and other Obligations outstanding at any time shall exceed the Credit Limit*; or (d) Borrower shall fail to comply with any of the financial covenants set forth in the Schedule, or shall fail to perform any other non-monetary Obligation which by its nature cannot be cured, or shall fail to permit Silicon to conduct an inspection or audit as specified in Section 5.4 hereof; or (e) Borrower shall fail to perform any other non-monetary Obligation, which failure is not cured within five Business Days after the date due; or (f) any levy, assessment, attachment, seizure, lien or encumbrance (other than a Permitted Lien) is made on all or any part of the Collateral which is not cured within 10 days after the occurrence of the same; or (g) any default or event of default occurs under any obligation secured by a Permitted Lien, which is not cured within any applicable cure period or waived in writing by the holder of the Permitted Lien; or (h) Borrower breaches any material contract or obligation, which has resulted or may reasonably be expected to result in a Material Adverse Change; or (i) Dissolution, termination of existence, insolvency or business failure of Borrower; or appointment of a receiver, trustee or custodian, for all or any part of the property of, assignment for the benefit of creditors by, or the commencement of any proceeding by Borrower under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect; or (j) the commencement of any proceeding against Borrower or any guarantor of any of the Obligations under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect, which is not cured by the dismissal thereof within 30 days after the date commenced; or (k) revocation or termination of, or limitation or denial of liability upon, any guaranty of the Obligations or any attempt to do any of the foregoing, or commencement of proceedings by any guarantor of any of the Obligations under any bankruptcy or insolvency law; or (l) revocation or termination of, or limitation or denial of liability upon, any pledge of any certificate of deposit, securities or other property or asset of any kind pledged by any third party to secure any or all of the Obligations, or any attempt to do any of the foregoing, or commencement of proceedings by or against any such third party under any bankruptcy or insolvency law; or (m) Borrower makes any payment on account of any indebtedness or obligation which has been subordinated to the Obligations other than as permitted in the applicable subordination agreement, or if any Person who has subordinated such indebtedness or obligations terminates or in any way limits his subordination agreement; or (n) there shall be a change in the record or beneficial ownership of an aggregate of more than 20%** of the outstanding shares of stock of Borrower, in one or more transactions, compared to the ownership of outstanding shares of stock of Borrower in effect on the date hereof, without the prior written consent of Silicon; or (o) Borrower shall generally not pay its debts as they become due, or Borrower shall conceal, remove or transfer any part of its property, with intent to hinder, delay or defraud its creditors, or make or suffer any transfer or any of its property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law; or (p) a Material Adverse Change shall occur***. Silicon may cease making any Loans hereunder during any of the above cure periods, and thereafter if an Event of Default has occurred and is continuing.

*      provided, however, if any such excess results directly from a change by Silicon of either the amount of Reserves or of the Minimum Eligibility Requirements, then Borrower shall have one Business Day in order to cure such a default

**    35%

***  or (q) an event of default arises under the Existing Loan Agreement

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7.2    Remedies.    Upon the Occurrence and during the continuance of any Event of Default, and at any time thereafter, Silicon, at its option, and without notice or demand of any kind (all of which are hereby expressly waived by Borrower), may do any one or more of the following: (a) Cease making Loans or otherwise extending credit to Borrower under this Agreement or any other Loan Document; (b) Accelerate and declare all or any part of the Obligations to be immediately due, payable, and performable, notwithstanding any deferred or installment payments allowed by any instrument evidencing or relating to any Obligation; (c) Take possession of any or all of the Collateral wherever it may be found, and for that purpose Borrower hereby authorizes Silicon without judicial process to enter onto any of Borrower's premises without interference to search for, take possession of, keep, store, or remove any of the Collateral, and remain on the premises or cause a custodian to remain on the premises in exclusive control thereof, without charge for so long as Silicon deems it necessary, in its good faith business judgment, in order to complete the enforcement of its rights under this Agreement or any other agreement; provided, however, that should Silicon seek to take possession of any of the Collateral by court process, Borrower hereby irrevocably waives: (i) any bond and any surety or security relating thereto required by any statute, court rule or otherwise as an incident to such possession; (ii) any demand for possession prior to the commencement of any suit or action to recover possession thereof; and (iii) any requirement that Silicon retain possession of, and not dispose of, any such Collateral until after trial or final judgment; (d) Require Borrower to assemble any or all of the Collateral and make it available to Silicon at places designated by Silicon which are reasonably convenient to Silicon and Borrower, and to remove the Collateral to such locations as Silicon may deem advisable; (e) Complete the processing, manufacturing or repair of any Collateral prior to a disposition thereof and, for such purpose and for the purpose of removal, Silicon shall have the right to use Borrower's premises, vehicles, hoists, lifts, cranes, and other Equipment and all other property without charge; (f) Sell, lease or otherwise dispose of any of the Collateral, in its condition at the time Silicon obtains possession of it or after further manufacturing, processing or repair, at one or more public and/or private sales, in lots or in bulk, for cash, exchange or other property, or on credit, and to adjourn any such sale from time to time without notice other than oral announcement at the time scheduled for sale. Silicon shall have the right to conduct such disposition on Borrower's premises without charge, for such time or times as Silicon deems reasonable, or on Silicon's premises, or elsewhere and the Collateral need not be located at the place of disposition. Silicon may directly or through any affiliated company purchase or lease any Collateral at any such public disposition, and if permissible under applicable law, at any private disposition. Any sale or other disposition of Collateral shall not relieve Borrower of any liability Borrower may have if any Collateral is defective as to title or physical condition or otherwise at the time of sale; (g) Demand payment of, and collect any Accounts and General Intangibles comprising Collateral and, in connection therewith, Borrower irrevocably authorizes Silicon to endorse or sign Borrower's name on all collections, receipts, instruments and other documents, to take possession of and open mail addressed to Borrower and remove therefrom payments made with respect to any item of the Collateral or proceeds thereof, and, in Silicon's good faith business judgment, to grant extensions of time to pay, compromise claims and settle Accounts and the like for less than face value; (h) Offset against any sums in any of Borrower's general, special or other Deposit Accounts with Silicon against any or all of the Obligations; and (i) Demand and receive possession of any of Borrower's federal and state income tax returns and the books and records utilized in the preparation thereof or referring thereto. All reasonable attorneys' fees, expenses, costs, liabilities and obligations incurred by Silicon with respect to the foregoing shall be added to and become part of the Obligations, shall be due on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations. Without limiting any of Silicon's rights and remedies, from and after the occurrence and during the continuance of any Event of Default, the interest rate

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applicable to the Obligations shall be increased by an additional four percent per annum (the "Default Rate").*

*      Further, Silicon hereby acknowledges and agrees that enforcement of its rights with respect to certain items of Collateral in which the Bank is granted a security interest (including the use or assignment thereof) may be restricted by the provisions of Sections 9407(b), 9408(d) or 9409(b) of the Code.

Silicon's exercise of exclusive control over the securities accounts of Borrower shall be subject to the occurrence and continuance of an Event of Default and as otherwise set forth in the provisions of any and all applicable control agreements entered into from time to time regarding any such accounts.

7.3    Standards for Determining Commercial Reasonableness.    Borrower and Silicon agree that a sale or other disposition (collectively, "sale") of any Collateral which complies with the following standards will conclusively be deemed to be commercially reasonable: (i) Notice of the sale is given to Borrower at least ten days prior to the sale, and, in the case of a public sale, notice of the sale is published at least five days before the sale in a newspaper of general circulation in the county where the sale is to be conducted; (ii) Notice of the sale describes the collateral in general, non-specific terms; (iii) The sale is conducted at a place designated by Silicon, with or without the Collateral being present; (iv) The sale commences at any time between 8:00 a.m. and 6:00 p.m; (v) Payment of the purchase price in cash or by cashier's check or wire transfer is required; (vi) With respect to any sale of any of the Collateral, Silicon may (but is not obligated to) direct any prospective purchaser to ascertain directly from Borrower any and all information concerning the same. Silicon shall be free to employ other methods of noticing and selling the Collateral, in its discretion, if they are commercially reasonable.

7.4    Power of Attorney.    Upon the occurrence and during the continuance of any Event of Default, without limiting Silicon's other rights and remedies, Borrower grants to Silicon an irrevocable power of attorney coupled with an interest, authorizing and permitting Silicon (acting through any of its employees, attorneys or agents) at any time, at its option, but without obligation, with or without notice to Borrower, and at Borrower's expense, to do any or all of the following, in Borrower's name or otherwise, but Silicon agrees that if it exercises any right hereunder, it will do so in good faith and in a commercially reasonable manner: (a) Execute on behalf of Borrower any documents that Silicon may, in its good faith business judgment, deem advisable in order to perfect and maintain Silicon's security interest in the Collateral, or in order to exercise a right of Borrower or Silicon, or in order to fully consummate all the transactions contemplated under this Agreement, and all other Loan Documents; (b) Execute on behalf of Borrower, any invoices relating to any Account, any draft against any Account Debtor and any notice to any Account Debtor, any proof of claim in bankruptcy, any Notice of Lien, claim of mechanic's, materialman's or other lien, or assignment or satisfaction of mechanic's, materialman's or other lien; (c) Take control in any manner of any cash or non-cash items of payment or proceeds of Collateral; endorse the name of Borrower upon any instruments, or documents, evidence of payment or Collateral that may come into Silicon's possession; (d) Endorse all checks and other forms of remittances received by Silicon; (e) Pay, contest or settle any lien, charge, encumbrance, security interest and adverse claim in or to any of the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; (f) Grant extensions of time to pay, compromise claims and settle Accounts and General Intangibles for less than face value and execute all releases and other documents in connection therewith; (g) Pay any sums required on account of Borrower's taxes or to secure the release of any liens therefor, or both; (h) Settle and adjust, and give releases of, any insurance claim that relates to any of the Collateral and obtain payment therefor; (i) Instruct any third party having custody or control of any books or records belonging to, or relating to, Borrower to give Silicon the same rights of access and other rights with respect thereto as Silicon has under this Agreement; and (j) Take any action or pay any sum required of Borrower pursuant to this Agreement and any other Loan Documents. Any and all reasonable sums paid and any and all

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reasonable costs, expenses, liabilities, obligations and attorney's fees incurred by Silicon with respect to the foregoing shall be added to and become part of the Obligations, shall be payable on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations. In no event shall Silicon's rights under the foregoing power of attorney or any of Silicon's other rights under this Agreement be deemed to indicate that Silicon is in control of the business, management or properties of Borrower.

7.5    Application of Proceeds.    All proceeds realized as the result of any sale of the Collateral shall be applied by Silicon first to the reasonable costs, expenses, liabilities, obligations and attorneys' fees incurred by Silicon in the exercise of its rights under this Agreement, second to the interest due upon any of the Obligations, and third to the principal of the Obligations, in such order as Silicon shall determine in its sole discretion. Any surplus shall be paid to Borrower or other persons legally entitled thereto; Borrower shall remain liable to Silicon for any deficiency. If, Silicon, in its good faith business judgment, directly or indirectly enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Silicon shall have the option, exercisable at any time, in its good faith business judgment, of either reducing the Obligations by the principal amount of purchase price or deferring the reduction of the Obligations until the actual receipt by Silicon of the cash therefor.

7.6    Remedies Cumulative.    In addition to the rights and remedies set forth in this Agreement, Silicon shall have all the other rights and remedies accorded a secured party under the California Uniform Commercial Code and under all other applicable laws, and under any other instrument or agreement now or in the future entered into between Silicon and Borrower, and all of such rights and remedies are cumulative and none is exclusive. Exercise or partial exercise by Silicon of one or more of its rights or remedies shall not be deemed an election, nor bar Silicon from subsequent exercise or partial exercise of any other rights or remedies. The failure or delay of Silicon to exercise any rights or remedies shall not operate as a waiver thereof, but all rights and remedies shall continue in full force and effect until all of the Obligations have been fully paid and performed.

8.    DEFINITIONS.    As used in this Agreement, the following terms have the following meanings:

        "Account Debtor" means the obligor on an Account.

        "Accounts" means all present and future "accounts" as defined in the California Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all accounts receivable and other sums owing to Borrower.

        "Affiliate" means, with respect to any Person, a relative, partner, shareholder, director, officer, or employee of such Person, or any parent or subsidiary of such Person, or any Person controlling, controlled by or under common control with such Person.

        "Business Day" means a day on which Silicon is open for business.

        "Code" means the Uniform Commercial Code as adopted and in effect in the State of California from time to time.

        "Collateral" has the meaning set forth in Section 2 above.

        "continuing" and "during the continuance of" when used with reference to a Default or Event of Default means that the Default or Event of Default has occurred and has not been either waived in writing by Silicon or cured within any applicable cure period.

        "Default" means any event which with notice or passage of time or both, would constitute an Event of Default.

        "Default Rate" has the meaning set forth in Section 7.2 above.

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        "Deposit Accounts" means all present and future "deposit accounts" as defined in the California Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all general and special bank accounts, demand accounts, checking accounts, savings accounts and certificates of deposit.

        "Eligible Inventory" [Not Applicable]

        "Eligible Accounts" means Accounts and General Intangibles arising in the ordinary course of Borrower's business from the sale of goods or the rendition of services, or the non-exclusive licensing of Intellectual Property, which Silicon, in its good faith business judgment, shall deem eligible for borrowing*. Without limiting the fact that the determination of which Accounts are eligible for borrowing is a matter of Silicon's good faith business judgment, the following (the "Minimum Eligibility Requirements") are the minimum requirements for a Account to be an Eligible Account: (i) the Account must not be outstanding for more than 90 days from its invoice date** (the "Eligibility Period"), (ii) the Account must not represent progress billings, or be due under a fulfillment or requirements contract with the Account Debtor, (iii) the Account must not be subject to any contingencies (including Accounts arising from sales consignment, guaranteed sale or other terms pursuant to which payment by the Account Debtor may be conditional), (iv) the Account must not be owing from an Account Debtor with whom Borrower has any dispute (whether or not relating to the particular Account), (v) the Account must not be owing from an Affiliate of Borrower, (vi) the Account must not be owing from an Account Debtor which is subject to any insolvency or bankruptcy proceeding, or whose financial condition is not acceptable to Silicon, or which, fails or goes out of a material portion of its business, (vii) the Account must not be owing from the United States or any department, agency or instrumentality thereof (unless there has been compliance, to Silicon's satisfaction, with the United States Assignment of Claims Act), (viii) the Account must not be owing from an Account Debtor located outside the United States or Canada (unless pre approved by Silicon in its discretion in writing, or backed by a letter of credit satisfactory to Silicon, or FCLA insured satisfactory to Silicon), and (ix) the Account must not be owing from an Account Debtor to whom Borrower is or may be liable for goods purchased from such Account Debtor or otherwise (but, in such case, the Account will be deemed not eligible only to the extent of any amounts owed by Borrower to such Account Debtor). Accounts owing from one Account Debtor will not be deemed Eligible Accounts to the extent they exceed 25% of the total Accounts outstanding. In addition, if more than 50% of the Accounts owing from an Account Debtor are outstanding for a period longer than their Eligibility Period*** (without regard to unapplied credits) or are otherwise not eligible Accounts, then all Accounts owing from that Account Debtor will be deemed ineligible for borrowing. Silicon may, from time to time, in its good faith business judgment, revise the Minimum Eligibility Requirements, upon written notice to Borrower.***

*      and which constitute "Eligible Export-Related Accounts Receivable" (as defined in the Exim Borrower Agreement referred to in the Schedule)

**    have an initial sales term exceeding 90 days

***  60 days past their due date

**** Further, Eligible Accounts shall not include any of the following: Accounts for an account debtor, 50% or more of whose Accounts have not been paid within 60 days of invoice due date; credit balances over 60 days from invoice date; Accounts with open account terms for an account debtor, including Affiliates, whose total obligations to Borrower exceed 25% of all foreign Accounts, unless pre-approved by Bank in writing; or Accounts which are backed by a letter of credit that Bank determines is not acceptable or not negotiated by Bank.

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        "Eligible Unbilled Accounts" shall mean Accounts with respect to which the invoice and other necessary billing documentation have not been submitted to the applicable account debtor in connection with a completed (or contracted) sale of goods, rendition of services or licensing of software but which otherwise qualify as Eligible Accounts for purposes hereof.

        "Equipment" means all present and future "equipment" as defined in the California Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.

        "Event of Default" means any of the events set forth in Section 7.1 of this Agreement.

        "Existing Loan Agreement" shall mean the Loan and Security Agreement dated September 9, 2002 by and between Silicon and Borrower, as amended and otherwise modified from time to time.

        "GAAP" means generally accepted accounting principles consistently applied.

        "General Intangibles" means all present and future "general intangibles" as defined in the California Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all Intellectual Property, payment intangibles, royalties, contract rights, goodwill, franchise agreements, purchase orders, customer lists, route lists, telephone numbers, domain names, claims, income tax refunds, security and other deposits, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind.

        "good faith business judgment" means honesty in fact and good faith (as defined in Section 1201 of the Code) in the exercise of Silicon's business judgment.

        "including" means including (but not limited to).

        "Intellectual Property" means all present and future (a) copyrights, copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof, whether published or unpublished; (b) trade secret rights, including all rights to unpatented inventions and know-how, and confidential information; (c) mask work or similar rights available for the protection of semiconductor chips; (d) patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same; (e) trademarks, servicemarks, trade styles, and trade names, whether or not any of the foregoing are registered, and all applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by any such trademarks; (f) computer software and computer software products; (g) designs and design rights; (h) technology; (i) all claims for damages by way of past, present and future infringement of any of the rights included above; and (j) all licenses or other rights to use any property of rights or a type described above.

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        "Inventory" means all present and future "inventory" as defined in the California Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of Borrower's custody or possession or in transit and including any returned goods and any documents of title representing any of the above.

        "Investment Property" means all present and future investment property, securities, stocks, bonds, debentures, debt securities, partnership interests, limited liability company interests, options, security entitlements, securities accounts, commodity contracts, commodity accounts, and all financial assets held in any securities account or otherwise, and all options and warrants to purchase any of the foregoing, wherever located, and all other securities of every kind, whether certificated or uncertificated.

        "Loan Documents" means, collectively, this Agreement, the Representations, and all other present and future documents, instruments and agreements between Silicon and Borrower, including, but not limited to those relating to this Agreement, and all amendments and modifications thereto and replacements therefor.

        "Material Adverse Change" means any of the following: (i) a material adverse change in the business, operations, or financial or other condition of the Borrower, or (ii) a material impairment of the prospect of repayment of any portion of the Obligations; or (iii) a material impairment of the value or priority of Silicon's security interests in the Collateral.

        "Obligations" means all present and future Loans, advances, debts, liabilities, obligations, guaranties, covenants, duties and indebtedness at any time owing by Borrower to Silicon, whether evidenced by this Agreement or any note or other instrument or document, or otherwise, whether arising from an extension of credit, opening of a letter of credit, banker's acceptance, loan, guaranty, indemnification or otherwise, whether direct or indirect (including, without limitation, those acquired by assignment and any participation by Silicon in Borrower's debts owing to others), absolute or contingent, due or to become due, including, without limitation, all interest, charges, expenses, fees, * attorney's fees, expert witness fees, audit fees, letter of credit fees, collateral monitoring fees, closing fees, facility fees, termination fees, minimum interest charges and any other sums chargeable to Borrower under this Agreement or under any other Loan Documents.

*      reasonable

        "Other Property" means the following as defined in the California Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and all rights relating thereto: all present and future "commercial tort claims" (including without limitation any commercial tort claims identified in the Representations), "documents", "instruments", "promissory notes", "chattel paper", "letters of credit", "letter-of-credit rights", "fixtures", "farm products" and "money"; and all other goods and personal property of every kind, tangible and intangible, whether or not governed by the California Uniform Commercial Code.

        "Permitted Indebtedness" means the following: (a) Borrower's indebtedness to Silicon under this Agreement or any other Loan Document; (b) Indebtedness existing on the Closing Date and shown on the Schedule; (c) Subordinated Debt; (d) Indebtedness to trade creditors incurred in the ordinary course of business; (e) Indebtedness secured by Permitted Liens; (f) Additional Indebtedness in an aggregate amount not to exceed $25,000 at any time, provided that no such Additional Indebtedness shall be incurred while a Default or Event of Default is then occurring and continuing or would arise upon the incurring thereof; and (g) Extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a), (b),

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(e) and (f) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case may be, provided, however, it is understood and agreed that no extension, refinancing, modification, amendment or restatement of any Subordinated Debt may occur without the written consent of Silicon thereto.

        "Permitted Liens" means the following: (i) purchase money security interests in specific items of Equipment; (ii) leases of specific items of Equipment; (iii) liens for taxes not yet payable; (iv) additional security interests and liens consented to in writing by Silicon, which consent may be withheld in its good faith business judgment; (v) security interests being terminated substantially concurrently with this Agreement; (vi) liens of materialmen, mechanics, warehousemen, carriers, or other similar liens arising in the ordinary course of business and securing obligations which are not delinquent; (vii) liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by liens of the type described above in clauses (i) or (ii) above, provided that any extension, renewal or replacement lien is limited to the property encumbered by the existing lien and the principal amount of the indebtedness being extended, renewed or refinanced does not increase; (viii) Liens in favor of customs and revenue authorities which secure payment of customs duties in connection with the importation of goods. Silicon will have the right to require, as a condition to its consent under subparagraph (iv) above, that the holder of the additional security interest or lien sign an intercreditor agreement on Silicon's then standard form, acknowledge that the security interest is subordinate to the security interest in favor of Silicon, and agree not to take any action to enforce its subordinate security interest so long as any Obligations remain outstanding, and that Borrower agree that any uncured default in any obligation secured by the subordinate security interest shall also constitute an Event of Default under this Agreement.

        "Person" means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, government, or any agency or political division thereof, or any other entity.

        "Representations" means the written Representations and Warranties provided by Borrower to Silicon referred to in the Schedule.

        "Reserves" means, as of any date of determination, such amounts as Silicon may from time to time establish and revise in its good faith business judgment, reducing the amount of Loans, Letters of Credit and other financial accommodations which would otherwise be available to Borrower under the lending formula(s) provided in the Schedule: (a) to reflect events, conditions, contingencies or risks which, as determined by Silicon in its good faith business judgment, do or may adversely affect (i) the Collateral or any other property which is security for the Obligations or its value (including without limitation any increase in delinquencies of Accounts), (ii) the assets, business or prospects of Borrower or any Guarantor, or (iii) the security interests and other rights of Silicon in the Collateral (including the enforceability, perfection and priority thereof); or (b) to reflect Silicon's good faith belief that any collateral report or financial information furnished by or on behalf of Borrower or any Guarantor to Silicon is or may have been incomplete, inaccurate or misleading in any material respect, or (c) in respect of any state of facts which Silicon determines in good faith constitutes an Event of Default or may, with notice or passage of time or both, constitute an Event of Default.

Other Terms. All accounting terms used in this Agreement, unless otherwise indicated, shall have the meanings given to such terms in accordance with GAAP, consistently applied. All other terms contained in this Agreement, unless otherwise indicated, shall have the meanings provided by the Code, to the extent such terms are defined therein.

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9.    GENERAL PROVISIONS.

9.1    Interest Computation.    In computing interest on the Obligations, all checks, wire transfers and other items of payment received by Silicon (including proceeds of Accounts and payment of the Obligations in full) shall be deemed applied by Silicon on account of the Obligations three Business Days after receipt by Silicon of immediately available funds, and, for purposes of the foregoing, any such funds received after 12:00 Noon on any day shall be deemed received on the next Business Day. Silicon shall not, however, be required to credit Borrower's account for the amount of any item of payment which is unsatisfactory to Silicon in its good faith business judgment, and Silicon may charge Borrower's loan account for the amount of any item of payment which is returned to Silicon unpaid.

9.2    Application of Payments.    All payments with respect to the Obligations may be applied, and in Silicon's good faith business judgment reversed and re-applied, to the Obligations, in such order and manner as Silicon shall determine in its good faith business judgment.

9.3    Charges to Accounts.    Silicon may, in its discretion, require that Borrower pay monetary Obligations in cash to Silicon, or charge them to Borrower's Loan account, in which event they will bear interest at the same rate applicable to the Loans. Silicon may also, in its discretion, charge any monetary Obligations to Borrower's Deposit Accounts maintained with Silicon.

9.4    Monthly Accountings.    Silicon shall provide Borrower monthly with an account of advances, charges, expenses and payments made pursuant to this Agreement. Such account shall be deemed correct, accurate and binding on Borrower and an account stated (except for reverses and reapplications of payments made and corrections of errors discovered by Silicon), unless Borrower notifies Silicon in writing to the contrary within 60 days after such account is rendered, describing the nature of any alleged errors or omissions.

9.5    Notices.    All notices to be given under this Agreement shall be in writing and shall be given either personally or by reputable private delivery service or by regular first-class mail, or certified mail return receipt requested, addressed to Silicon or Borrower at the addresses shown in the heading to this Agreement, or at any other address designated in writing by one party to the other party. Notices to Silicon shall be directed to the Commercial Finance Division, to the attention of the Division Manager or the Division Credit Manager. All notices shall be deemed to have been given upon delivery in the case of notices personally delivered, or at the expiration of one Business Day following delivery to the private delivery service, or two Business Days following the deposit thereof in the United States mail, with postage prepaid.

9.6    Severability.    Should any provision of this Agreement be held by any court of competent jurisdiction to be void or unenforceable, such defect shall not affect the remainder of this Agreement, which shall continue in full force and effect.

9.7    Integration.    This Agreement and such other written agreements, documents and instruments as may be executed in connection herewith are the final, entire and complete agreement between Borrower and Silicon and supersede all prior and contemporaneous negotiations and oral representations and agreements, all of which are merged and integrated in this Agreement. There are no oral understandings, representations or agreements between the parties which are not set forth in this Agreement or in other written agreements signed by the parties in connection herewith.

9.8    Waivers; Indemnity.    The failure of Silicon at any time or times to require Borrower to strictly comply with any of the provisions of this Agreement or any other Loan Document shall not waive or diminish any right of Silicon later to demand and receive strict compliance therewith. Any waiver of any default shall not waive or affect any other default, whether prior or subsequent, and whether or not similar. None of the provisions of this Agreement or any other Loan Document shall be deemed to have been waived by any act or knowledge of Silicon or its agents or employees, but only by a specific written waiver signed by an authorized officer of Silicon and delivered to Borrower. Borrower waives

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the benefit of all statutes of limitations relating to any of the Obligations or this Agreement or any other Loan Document, and Borrower waives demand, protest, notice of protest and notice of default or dishonor, notice of payment and nonpayment, release, compromise, settlement, extension or renewal of any commercial paper, instrument, account, General Intangible, document or guaranty at any time held by Silicon on which Borrower is or may in any way be liable, and notice of any action taken by Silicon, unless expressly required by this Agreement. Borrower hereby agrees to indemnify Silicon and its affiliates, subsidiaries, parent, directors, officers, employees, agents, and attorneys, and to hold them harmless from and against any and all claims, debts, liabilities, demands, obligations, actions, causes of action, penalties, costs and expenses (including reasonable attorneys' fees), of every kind, which they may sustain or incur based upon or arising out of any of the Obligations, or any relationship or agreement between Silicon and Borrower, or any other matter, relating to Borrower or the Obligations; provided that this indemnity shall not extend to damages proximately caused by the indemnitee's own gross negligence or willful misconduct. Notwithstanding any provision in this Agreement to the contrary, the indemnity agreement set forth in this Section shall survive any termination of this Agreement and shall for all purposes continue in full force and effect.

9.9    No Liability for Ordinary Negligence.    Neither Silicon, nor any of its directors, officers, employees, agents, attorneys or any other Person affiliated with or representing Silicon shall be liable for any claims, demands, loses or damages, of any kind whatsoever, made, claimed, incurred or suffered by Borrower or any other party through the ordinary negligence of Silicon, or any of its directors, officers, employees, agents, attorneys or any other Person affiliated with or representing Silicon, but nothing herein shall relieve Silicon from liability for its own gross negligence or willful misconduct.

9.10    Amendment; Conflict.    The terms and provisions of this Agreement may not be waived or amended, except in a writing executed by Borrower and a duly authorized officer of Silicon. Further, in the event of a conflict between any provision of this Agreement and any provision of any other document, instrument or agreement between Borrower on the one hand, and Bank or any other division or affiliate of Bank on the other hand, including without limitation the Existing Loan Agreement, Bank shall determine in its sole discretion which provision shall apply.

9.11    Time of Essence.    Time is of the essence in the performance by Borrower of each and every obligation under this Agreement.

9.12    Attorneys Fees and Costs.    Borrower shall reimburse Silicon for all reasonable attorneys' fees and all filing, recording, search, title insurance, appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to, or in connection with, or relating to this Agreement (whether or not a lawsuit is filed), including, but not limited to, any reasonable attorneys' fees and costs Silicon incurs in order to do the following: prepare and negotiate this Agreement and all present and future documents relating to this Agreement; obtain legal advice in connection with this Agreement or Borrower, enforce, or seek to enforce, any of its rights; prosecute actions against, or defend actions by, Account Debtors; commence; intervene in, or defend any action or proceeding; initiate any complaint to be relieved of the automatic stay in bankruptcy; file or prosecute any probate claim, bankruptcy claim, third-party claim, or other claim; examine, audit, copy, and inspect any of the Collateral or any of Borrower's books and records; protect, obtain possession of, lease, dispose of, or otherwise enforce Silicon's security interest in, the Collateral; and otherwise represent Silicon in any litigation relating to Borrower. In satisfying Borrower's obligation hereunder to reimburse Silicon for attorneys fees, Borrower may, for convenience, issue checks directly to Silicon's attorneys, Levy, Small & Lallas, but Borrower acknowledges and agrees that Levy, Small & Lallas is representing only Silicon and not Borrower in connection with this Agreement. If either Silicon or Borrower files any lawsuit against the other predicated on a breach of this Agreement, the prevailing party in such action shall be entitled to recover its reasonable costs and attorneys' fees, including (but not limited to) reasonable attorneys' fees and costs incurred in the enforcement of, execution upon or defense of any order, decree, award or judgment. All attorneys' fees and costs to which Silicon may be entitled pursuant to this Paragraph

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shall immediately become part of Borrower's Obligations, shall be due on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations.

9.13    Benefit of Agreement.    The provisions of this Agreement shall be binding upon and inure to the benefit of the respective successors, assigns, heirs, beneficiaries and representatives of Borrower and Silicon; provided, however, that Borrower may not assign or transfer any of its rights under this Agreement without the prior written consent of Silicon, and any prohibited assignment shall be void. No consent by Silicon to any assignment shall release Borrower from its liability for the Obligations.

9.14    Joint and Several Liability.    If Borrower consists of more than one Person, their liability shall be joint and several, and the compromise of any claim with, or the release case of, any Borrower shall not constitute a compromise with, or a release of, any other Borrower.

9.15    Limitation of Actions.    Any claim or cause of action by Borrower against Silicon, its directors, officers, employees, agents, accountants or attorneys, based upon, arising from, or relating to this Loan Agreement, or any other Loan Document, or any other transaction contemplated hereby or thereby or relating hereto or thereto, or any other matter, cause or thing whatsoever, occurred, done, omitted or suffered to be done by Silicon, its directors, officers, employees, agents, accountants or attorneys, shall be barred unless asserted by Borrower by the commencement of an action or proceeding in a court of competent jurisdiction by the filing of a complaint within one year after the first act, occurrence or omission upon which such claim or cause of action, or any part thereof, is based, and the service of a summons and complaint on an officer of Silicon, or on any other person authorized to accept service on behalf of Silicon, within thirty (30) days thereafter. Borrower agrees that such one-year period is a reasonable and sufficient time for Borrower to investigate and act upon any such claim or cause of action. The one-year period provided herein shall not be waived, tolled, or extended except by the written consent of Silicon in its sole discretion. This provision shall survive any termination of this Loan Agreement or any other Loan Document.

9.16.    Paragraph Headings; Construction.    Paragraph headings are only used in this Agreement for convenience. Borrower and Silicon acknowledge that the headings may not describe completely the subject matter of the applicable paragraph, and the headings shall not be used in any manner to construe, limit, define or interpret any term or provision of this Agreement. This Agreement has been fully reviewed and negotiated between the parties and no uncertainty or ambiguity in any term or provision of this Agreement shall be construed strictly against Silicon or Borrower under any rule of construction or otherwise.

9.17    Governing Law; Jurisdiction; Venue.    This Agreement and all acts and transactions hereunder and all rights and obligations of Silicon and Borrower shall be governed by the laws of the State of California. As a material part of the consideration to Silicon to enter into this Agreement, Borrower (i) agrees that all actions and proceedings relating directly or indirectly to this Agreement shall, at Silicon's option, be litigated in courts located within California, and that the exclusive venue therefor shall be San Diego County; (ii) consents to the jurisdiction and venue of any such court and consents to service, of process in any such action or proceeding by personal delivery or any other method permitted by law; and (iii) waives any and all rights Borrower may have to object to the jurisdiction of any such court, or to transfer or change the venue of any such action or proceeding.

9.18    Mutual Waiver of Jury Trial.BORROWER AND SILICON EACH HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN SILICON AND BORROWER, OR ANY CONDUCT, ACTS OR OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS

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AFFILIATED WITH SILICON OR BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.

Borrower:		Silicon:
DIVXNETWORKS, INC.		SILICON VALLEY BANK
By:	/s/ Illegible	By:	/s/ Illegible
	President or Vice President	Title:	Vice President
By:	/s/ Illegible
	Secretary or Ass't Secretary

Form: - -3 (3/7/02)
Version—I

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Silicon Valley Bank

SECURED PROMISSORY NOTE
(EXIM PROGRAM)

$1,000,000 July 28, 2003

FOR VALUE RECEIVED, the undersigned (the "Borrower") promises to pay to the order of SILICON VALLEY BANK ("Silicon"), at 3003 Tasman Drive, Santa Clara, California 95054, or at such other address as the holder of this Note shall direct, the principal sum of One Million Dollars ($1,000,000), or such lesser or greater amount as shall be equal to the unpaid balance of the "Exim Loans" as defined in the Loan and Security Agreement (Exim Program) between Borrower and Silicon of even date herewith (the "Loan Agreement").

        The principal amount of this Note shall be payable on the date the Loan Agreement terminates by its terms or is terminated by either party in accordance with its terms.

        This Note shall bear interest on the unpaid principal balance hereof from time to time outstanding at a rate equal to the interest rate set forth in the Loan Agreement.

        Accrued interest on this Note shall be payable monthly in accordance with the terms of the Loan Agreement. Any accrued interest not paid when due shall bear interest at the same rate as the principal hereof.

        Principal of and interest on this Note shall be payable in lawful money of the United States of America. If a payment hereunder becomes due and payable on a Saturday, Sunday or legal holiday, the due date thereof shall be extended to the next succeeding business day, and interest shall be payable thereon during such extension.

        In the event any payment of principal or interest on this Note is not paid in full when due, or if any other default or event of default occurs hereunder, under the Loan Agreement or under any other present or future instrument, document, or agreement between the Borrower and Silicon (collectively, "Events of Default"), Silicon may, at its option, at any time thereafter, declare the entire unpaid principal balance of this Note plus all accrued interest to be immediately due and payable, without notice or demand. The acceptance of any installment of principal or interest by Silicon after the time when it becomes due, as herein specified, shall not be held to establish a custom, or to waive any rights of Silicon to enforce payment when due of any further installments or any other rights, nor shall any failure or delay to exercise any rights be held to waive the same.

        All payments hereunder are to be applied first to costs and fees referred to hereunder, second to the payment of accrued interest and the remaining balance to the payment of principal. Silicon shall have the continuing and exclusive right to apply or reverse and reapply any and all payments hereunder.

        The Borrower agrees to pay all costs and expenses (including without limitation attorney's fees) incurred by Silicon in connection with or related to this Note, or its enforcement, whether or not suit be brought. The Borrower hereby waives presentment, demand for payment, notice of dishonor, notice of nonpayment, protest, notice of protest, and any and all other notices and demands in connection with the delivery, acceptance, performance, default, or enforcement of this Note, and the Borrower hereby waives the benefits of any statute of limitations with respect to any action to enforce, or otherwise related to, this Note.

        This Note is secured by the Loan Agreement and all other present and future security agreements between the Borrower and Silicon. Nothing herein shall be deemed to limit any of the terms or

1

provisions of the Loan Agreement or any other present or future document, instrument or agreement, between the Borrower and Silicon, and all of Silicon's rights and remedies hereunder and thereunder are cumulative.

        In the event any one or more of the provisions of this Note shall for any reason be held to be invalid, illegal or unenforceable, the same shall not affect any other provision of this Note and the remaining provisions of this Note shall remain in full force and effect.

        No waiver or modification of any of the terms or provisions of this Note shall be valid or binding unless set forth in a writing signed by a duly authorized officer of Silicon, and then only to the extent therein specifically set forth. If more than one person executes this Note, their obligations hereunder shall be joint and several.

        SILICON AND BORROWER EACH HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO: (i) THIS NOTE; OR (ii) ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN SILICON AND BORROWER; OR (iii) ANY CONDUCT, ACTS OR OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH SILICON OR BORROWER; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.

        This Note is payable in, and shall be governed by the laws of, the State of California.

DivXNetworks, Inc.
By	/s/  ILLEGIBLE
	President
By	/s/  ILLEGIBLE
	Secretary

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Silicon Valley Bank

Amendment to Loan Documents

Borrower:	DivXNetworks, Inc.
Dated as of:	June 11, 2004

THIS AMENDMENT TO LOAN DOCUMENTS is entered into between SILICON VALLEY BANK ("Bank") and the borrower named above (the "Borrower").

        Reference is made to the following agreements: (A) the Loan and Security Agreement dated September 9, 2002 between the Bank and Borrower, as amended by that certain Amendment to Loan Agreement dated July 28, 2003 and as otherwise amended from time to time (the "Equipment Loan Agreement"); (B) the Loan and Security Agreement dated July 28, 2003 between the Bank and Borrower, as amended (the "Non-Exim Agreement"); and (C) Loan and Security Agreement (Exim Program) dated July 28, 2003 between the Bank and Borrower, as amended (the "Exim Agreement" together with the Equipment Loan Agreement and the Non-Exim Agreement are collectively referred to as the "Loan Documents"). (Capitalized terms used but not defined in this Amendment, shall have the meanings set forth in the Loan Documents.)

        The parties hereto hereby agree to amend the Loan Documents as follows, effective as of the date hereof.

1.    Revised Schedule to Non-Exim Agreement.    The Schedule to the Non-Exim Agreement is hereby amended to read as is set forth on the Amended Schedule to Non-Exim Agreement attached hereto.

2.    Revised Schedule to Exim Agreement.    The Schedule to the Exim Agreement is hereby amended to read as is set forth on the Amended Schedule to Exim Agreement attached hereto.

3.    Revised Section 6.2 to Non-Exim Agreement.    Section 6.2 of the Non-Exim Agreement is hereby amended to read as follows:

"6.2    Early Termination.    This Agreement may be terminated prior to the Maturity Date as follows: (i) by Borrower, effective three Business Days after written notice of termination is given to Silicon; or (ii) by Silicon at any time after the occurrence and during the continuance of an Event of Default, without notice, effective immediately. If this Agreement is terminated by Borrower or by Silicon under this Section 6.2, Borrower shall pay to Silicon a termination fee in an amount equal to * one-percent (1.0%) of the Maximum Credit Limit, provided that no termination fee shall be charged if the credit facility hereunder is replaced with a new facility from another division of Silicon. The termination fee shall be due and payable on the effective date of termination and thereafter of termination and thereafter shall bear interest at a rate equal to the highest rate applicable to any of the Obligations.

* $20,000"

4.    Revised Section 6.2 to Exim Agreement.    Section 6.2 of the Exim Agreement is hereby amended to read as follows:

"6.2    Early Termination.    This Agreement may be terminated prior to the Maturity Date as follows: (i) by Borrower, effective three Business Days after written notice of termination is given to Silicon; or (ii) by Silicon at any time after the occurrence and during the continuance of an Event of Default, without notice, effective immediately. If this Agreement is terminated by Borrower or by Silicon under this Section 6.2, Borrower shall pay to Silicon a termination fee in an amount equal to * one percent (1.0%) of the Maximum Credit Limit, provided that no termination fee shall be charged if the credit facility hereunder is replaced with a new facility from another

division of Silicon. The termination fee shall be due and payable on the effective date of termination and thereafter shall bear interest at a rate equal to the highest rate applicable to any of the Obligations.

* $50,000"

5.    Representations True.    Borrower represents and warrants to Bank that all representations and warranties set forth in the Loan Agreement, as amended hereby, are true and correct.

6.    General Provisions.    This Amendment, the Loan Agreement, any prior written amendments to the Loan Agreement signed by Bank and the Borrower, and the other written documents and agreements between Bank and the Borrower set forth in full all of the representations and agreements of the parties with respect to the subject matter hereof and supersede all prior discussions, representations, agreements and understandings between the parties with respect to the subject hereof. Except as herein expressly amended, all of the terms and provisions of the Loan Agreement, and all other documents and agreements between Bank and the Borrower shall continue in full force and effect and the same are hereby ratified and confirmed. This Agreement and Consent may be executed in any number of counterparts, which when taken together shall constitute one and the same agreement.

Borrower:		Silicon:
DivXNetworks, Inc.		Silicon Valley Bank
By	/s/  R. JORDAN GREENHALL	By	/s/  ILLEGIBLE
Title:	CEO	Title	Vice President

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Silicon Valley Bank

Amendment to Loan Documents

Borrower:	DivXNetworks, Inc.
Dated:	March 22, 2005 (the "March 2005 Amendment Date")

THIS AMENDMENT TO LOAN DOCUMENTS (this "Amendment") is entered into between SILICON VALLEY BANK ("Bank") and the borrower named above (the "Borrower").

        Reference is made to the following agreements: (A) the Loan and Security Agreement dated September 9, 2002 between the Bank and Borrower, as amended by that certain Amendment to Loan Agreement dated July 28, 2003 and as otherwise amended from time to time (the "Equipment Loan Agreement"); (B) the Loan and Security Agreement dated July 28, 2003 between the Bank and Borrower, as amended (the "Non-Exim Agreement"); and (C) Loan and Security Agreement (Exim Program) dated July 28, 2003 between the Bank and Borrower, as amended (the "Exim Agreement"; the Equipment Loan Agreement, the Non-Exim Agreement, and the Exim Agreement are herein referred to, individually and collectively, as the "Loan Agreement"). (Capitalized terms used but not defined in this Amendment, shall have the meanings set forth in the applicable Loan Agreement.) The term "March 2005 Amendment Date" as defined above hereby is incorporated into the Loan Agreement.

        Borrower and the Bank hereby agree to amend the Loan Agreement as follows, effective as of the date hereof.

1.    Modification of Section 1 of Schedule to the Non-Exim Agreement (regarding Revolving Loans).    The portion of Section 1 of the Schedule to the Non-Exim Agreement that currently reads as follows (after giving effect to Bank's reduction, effective from and after January 2005, of the advance rates set forth in clauses (C)(ii)(x) and (y) of such Section 1):

        An amount not to exceed (A) the sum of the loan advances under the Existing Loan Agreement; plus (B) the amount of the New Term Loans (as defined below) outstanding from time to time; plus (C) the lesser of: (i) $7,000,000 at any one time outstanding (the "Maximum Revolving Credit Limit"); or (ii) the sum of (x) 75% of the amount of Borrower's Eligible Accounts (as defined in Section 8 above) and (y) 70% of the amount of Borrower's Eligible Unbilled Accounts, provided that the amount of Loans made pursuant to this clause (y) shall in no event exceed $500,000 (and the loans outstanding under this clause (C) generally are referred to as the "Revolving Loans");

        PROVIDED, HOWEVER: the Revolving Loans outstanding hereunder and under the Exim Agreement shall not at any time in the aggregate exceed $7,000,000.

        As used herein the term "Eligible Unbilled Accounts" shall mean Accounts with respect to which the invoice and other necessary billing documentation have not been submitted to the applicable account debtor in connection with a completed (or contracted) sale of goods, rendition of services or licensing of software but which otherwise qualify as Eligible Accounts for purposes hereof

        Silicon may, from time to time, modify the above advance rates applicable to the Revolving Loans under clauses (C)(ii)(x) and (y) above, in its good faith business judgment, upon notice to the Borrower, based on changes in collection experience with respect to Accounts or other issues or factors relating to the Accounts or other Collateral.

1

, hereby is amended and restated in its entirety to read as follows:

        An amount not to exceed (A) the sum of the loan advances under the Existing Loan Agreement; plus (B) the amount of the New Term Loans (as defined below) outstanding from time to time; plus (C) the lesser of: (i) $7,000,000 at any one time outstanding (the "Maximum Revolving Credit Limit"); or (ii) 75% of the amount of Borrower's Eligible Accounts (as defined in Section 8 above) (and the loans outstanding under this clause (C) generally are referred to as the "Revolving Loans");

        PROVIDED, HOWEVER: the Revolving Loans outstanding hereunder and under the Exim Agreement shall not at any time in the aggregate exceed $7,000,000.

        Bank may, from time to time, modify the above advance rates applicable to the Revolving Loans under clause (C)(ii) above, in its good faith business judgment, upon notice to the Borrower, based on changes in collection experience with respect to Accounts or other issues or factors relating to the Accounts or other Collateral.

2.    Modification of Section 1 of Schedule to the Exim Agreement (regarding Revolving Loans).    The portion of Section 1 of the Schedule to the Exim Agreement that currently reads as follows (after giving effect to Bank's reduction, effective from and after January 2005, of the advance rates set forth in clauses (ii)(A) and (B) of such Section 1):

        An amount not to exceed the lesser of: (i) $5,000,000 at any one time outstanding (the "Maximum Credit Limit"); or

         (ii)  the sum of: (A) 85% of the amount of Borrower's Eligible Accounts (as defined in Section 8 above); plus (B) 70% of the amount of Borrower's Eligible Unbilled Accounts, provided that the amount of Loans made pursuant to this clause (B) shall in no event exceed $2,000,000, of which (1) the first $1,000,000 of such Loans shall be guarantied by the Exim Bank pursuant to the Exim Guaranty ("Guarantied Unbilled Accounts Loans"), and (2) the remaining $1,000,000 of such Loans are not guarantied by the Exim Bank pursuant to the Exim Guaranty ("Non-Guarantied Unbilled Accounts Loans"), but the Bank shall have no obligation to make any Non-Guarantied Unbilled Accounts Loans unless and until the outstanding amount of Guarantied Unbilled Accounts Loans equals the full $1,000,000 guarantied by the Exim Bank pursuant to the Exim Guaranty. Loans outstanding under the immediately preceding clause (ii) are referred to as "Revolving Loans".

        PROVIDED, FURTHER; the Revolving Loans outstanding hereunder and under the Non-Exim Agreement shall not at any time in the aggregate exceed $7,000,000.

        Silicon may, from time to time, modify the above advance rates, in its good faith business judgment, upon notice to the Borrower, based on changes in collection experience with respect to Accounts or other issues or factors relating to the Accounts or other Collateral.

, hereby is amended and restated in its entirety to read as follows:

        An amount not to exceed the lesser of: (i) $5,000,000 at any one time outstanding (the "Maximum Credit Limit"); or (ii) 85% of the amount of Borrower's Eligible Accounts (as defined in Section 8 above) (Loans outstanding under this clause (ii) are referred to as "Revolving Loans").

        PROVIDED, FURTHER: the Revolving Loans outstanding hereunder and under the Non-Exim Agreement shall not at any time in the aggregate exceed $7,000,000.

        Bank may, from time to time, modify the above advance rate, in its good faith business judgment, upon notice to the Borrower, based on changes in collection experience with respect to Accounts or other issues or factors relating to the Accounts or other Collateral.

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3.    Modification of Section 9(1) of Schedule to the Exim Agreement.    The portion of Section 1 of the Schedule to the Exim Agreement that currently reads as follows:

        Prior to the further disbursement of any Loans hereunder, Borrower shall cause the Export Import Bank of the United States (the "Exim Bank") to guarantee the Loans made under this Agreement, pursuant to a Master Guarantee Agreement, Loan Authorization Agreement and (to the extent applicable) Delegated Authority Letter Agreement (collectively, the "Exim Guaranty"); provided, however, that, if and so long as the Exim Bank has so guarantied the full $1,000,000 of Guarantied Unbilled Accounts Loans, then the Exim Bank need not guaranty up the remaining $1,000,000 of Non-Guarantied Unbilled Accounts Loans made pursuant to clause (B)(2) of clause (ii) set forth in Section I of the Schedule. Borrower shall cause the Exim Guaranty to be in full force and effect throughout the term of this Agreement and so long as any Loans hereunder are outstanding.

, hereby is amended and restated in its entirety to read as follows:

        Prior to the further disbursement of any Loans hereunder, Borrower shall cause the Export Import Bank of the United States (the "Exim Bank") to guarantee the Loans made under this Agreement, pursuant to a Master Guarantee Agreement, Loan Authorization Agreement and (to the extent applicable) Delegated Authority Letter Agreement (collectively, the "Exim Guaranty"), and Borrower shall cause the Exim Guaranty to be in full force and effect throughout the term of this Agreement and so long as any Loans hereunder are outstanding.

4.    Modification of Section 1 of Schedule to the Non-Exim Agreement (regarding New Term Loans).    The portion of Section 1 of the Schedule to the Non-Exim Agreement that currently reads as follows:

New Term Loans

        (a)   Through the date that is six months from the date hereof (but in no event later than December 31, 2004) Bank will make advances (individually referred to herein as an "New Term Loan" and collectively as the "New Term Loans") not exceeding $2,000,000 in the aggregate initial amount thereof for all New Term Loans. New Term Loans are to be used to finance Eligible Equipment purchased in the period beginning on the 90th day prior to the date of the making of the applicable New Term Loan and ending on the date of the making thereof.

        (b)   The amount of a New Term Loan may not exceed 100% of the equipment invoices for such Eligible Equipment, excluding taxes, shipping, warranty charges, freight discounts and installation expense. Not more than 40% of the original amount of all outstanding New Term Loans from time to time may be based on or relate to Other Equipment. There shall be: (i) no more than one New Term Loan per month, (ii) no more than four New Term Loans in the aggregate made, and (iii) and the minimum amount of any New Term Loan shall be $250,000, provided that the final New Term Loan may be in a lesser amount if such lesser amount represents the entire remaining New Term Loan availability.

        (c)   Interest accrues from the date of each New Term Loan at the applicable rate for New Term Loans set forth below in Section 2 hereof. Further, each New Term Loan is payable in thirty (30) equal monthly installments principal plus interest beginning on the first day of the month following the making of such New Term Loan and continuing on the first day of each of the succeeding twenty-nine months thereafter (such final installment payment date for such New Term Loan being referred to herein as the "New Term Loan Maturity Date"), with the understanding that on each E New Term Loan Maturity Date the related New Term Loan and all related Obligations shall be repaid in full, provided that, in any event, all New Term Loans shall be repaid in full no later than June 1, 2007. Further, New Term Loans may not be reborrowed when repaid.

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, hereby is amended and restated in its entirety to read as follows:

New Term Loans

        (a)   During the period commencing June 11, 2004 and ending June 10, 2005, Bank will make Term loan advances (individually referred to herein as an "New Term Loan" and collectively as the "New Term Loans") not exceeding $2,000,000 in the aggregate initial amount thereof for all New Term Loans (of which $2,000,000 approximately $994,000 remains available, as of the March 2005 Amendment Date, to be funded as additional New Term Loans in accordance with the terms and conditions hereof). New Term Loans are to be used to finance Eligible Equipment purchased in the period beginning on the 90th day prior to the date of the making of the applicable New Term Loan and ending on the date of the making thereof; provided, however, that the first New Term Loan to be funded on or after the March 2005 Amendment Date may be used to finance Eligible Equipment purchased in the period beginning January 1, 2005 and ending on the date of the making thereof.

        (b)   The amount of a New Term Loan may not exceed 100% of the equipment invoices for such Eligible Equipment, excluding taxes, shipping, warranty charges, freight discounts and installation expense. Not more than 40% of the original amount of all outstanding New Term Loans from time to time may be based on or relate to Other Equipment. There shall be: (i) no more than one New Term Loan per month, (ii) no more than four New Term Loans in the aggregate funded from and after the March 2005 Amendment Date, and (iii) the minimum amount of any New Term Loan funded from and after the March 2005 Amendment Date shall be $100,000, provided that the final such New Term Loan may be in a lesser amount if such lesser amount represents the entire remaining New Term Loan availability.

        (c)   Interest accrues from the date of each New Term Loan at the applicable rate for New Term Loans set forth below in Section 2 hereof. Further, each New Term Loan is payable in thirty (30) equal monthly installments principal plus interest beginning on the first day of the month following the making of such New Term Loan and continuing on the first day of each of the succeeding twenty-nine months thereafter (such final installment payment date for such New Term Loan being referred to herein as the "New Term Loan Maturity Date"), with the understanding that on each E New Term Loan Maturity Date the related New Term Loan and all related Obligations shall be repaid in full, provided that, in any event, all New Term Loans shall be repaid in full no later than June 1, 2007. Further, New Term Loans may not be reborrowed when repaid.

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5.    Modification of Section 5 of Schedule to Non-Exim Agreement (regarding Minimum Tangible Net Worth).    The portion of Section 5 of the Schedule to the Non-Exim Agreement that currently reads as follows:

Minimum Tangible
Net Worth: Borrower shall maintain a Tangible Net Worth of not less than $4,104,484 plus (i) 50% of all consideration received after March 31, 2004 for equity securities and subordinated debt of the Borrower, and plus (ii) 50% of the Borrower's net income in each fiscal quarter beginning June 30, 2004. Increases in the Minimum Tangible Net Worth Covenant based on consideration received for equity securities and subordinated debt of the Borrower shall be effective as of the end of the month in which such consideration is received, and shall continue effective thereafter. Increases in the Minimum Tangible Net Worth Covenant based on net income shall be effective on the last day of the fiscal quarter in which said net income is realized, and shall continue effective thereafter. In no event shall the Minimum Tangible Net Worth Covenant be decreased.

, hereby is amended and restated in its entirety to read as follows:

Minimum Tangible
Net Worth: Borrower shall maintain a Tangible Net Worth of not less than $2,000,000 plus (i) 50% of all consideration received after March 31, 2005 for equity securities and subordinated debt of the Borrower, and plus (ii) 50% of the Borrower's net income in each fiscal quarter (commencing with the fiscal quarter ending June 30, 2005). Increases in the Minimum Tangible Net Worth Covenant based on consideration received for equity securities and subordinated debt of the Borrower shall be effective as of the end of the month in which such consideration is received, and shall continue effective thereafter. Increases in the Minimum Tangible Net Worth Covenant based on net income shall be effective on the last day of the fiscal quarter in which said net income is realized, and shall continue effective thereafter. In no event shall the Minimum Tangible Net Worth Covenant be decreased.

5

6.    Modification of Section 5 of Schedule to Exim Agreement (regarding Minimum Tangible Net Worth).    The portion of Section 5 of the Schedule to the Exim Agreement that currently reads as follows:

Minimum Tangible
Net Worth: Borrower shall maintain a Tangible Net Worth of not less than $4,104,484 plus (i) 50% of all consideration received after March 31, 2004 for equity securities and subordinated debt of the Borrower, and plus (ii) 50% of the Borrower's net income in each fiscal quarter beginning June 30, 2004. Increases in the Minimum Tangible Net Worth Covenant based on consideration received for equity securities and subordinated debt of the Borrower shall be effective as of the end of the month in which such consideration is received, and shall continue effective thereafter. Increases in the Minimum Tangible Net Worth Covenant based on net income shall be effective on the last day of the fiscal quarter in which said net income is realized, and shall continue effective thereafter. In no event shall the Minimum Tangible Net Worth Covenant be decreased.

, hereby is amended and restated in its entirety to read as follows:

Minimum Tangible
Net Worth: Borrower shall maintain a Tangible Net Worth of not less than $2,000,000 plus (i) 50% of all consideration received after March 31, 2005 for equity securities and subordinated debt of the Borrower, and plus (ii) 50% of the Borrower's net income in each fiscal quarter (commencing with the fiscal quarter ending June 30, 2005). Increases in the Minimum Tangible Net Worth Covenant based on consideration received for equity securities and subordinated debt of the Borrower shall be effective as of the end of the month in which such consideration is received, and shall continue effective thereafter. Increases in the Minimum Tangible Net Worth Covenant based on net income shall be effective on the last day of the fiscal quarter in which said net income is realized, and shall continue effective thereafter. In no event shall the Minimum Tangible Net Worth Covenant be decreased.

7.    Modification of Section 6 of Schedule to Non-Exim Agreement (regarding Streamline Conditions).    The portion of Section 6 of the Schedule to the Non-Exim Agreement that currently reads as follows:

        1.     Transaction reports and schedules of collections, each week and at the time of each Loan request, on Silicon's standard form, provided, however, when the subject to the Streamline Conditions (as defined below) are satisfied, then Borrower shall only be required to submit Transaction reports and related documentation on a monthly basis only (and also when any new Revolving Loan is being requested) (such reduced frequency being referred to herein as the "Streamline Reporting"). The term "Streamline Conditions" shall mean the following: Borrower has maintained with Bank or SVB Securities, an affiliate of the Bank, unrestricted cash deposits plus the amount of Revolving Loans available to be made (but not extended to Borrower) of at least $8,500,000 for at least eight consecutive weeks.

, hereby is amended and restated in its entirety to read as follows:

        1.     Transaction reports and schedules of collections, each week and at the time of each Loan request, on Bank's standard form, provided, however, if and so long as at least one of the

6

Streamline Conditions (as defined below) is satisfied, then Borrower shall only be required to submit Transaction reports and related documentation on a monthly basis only, not later than 15 days following the end of the preceding month and with respect to such preceding month (and also when any new Revolving Loan is being requested) (such reduced frequency being referred to herein as the "Streamline Reporting"). The term "Streamline Conditions" shall mean, as of any date of determination, collectively: (a) Borrower has maintained with Bank or SVB Securities, an affiliate of the Bank, unrestricted cash deposits plus the amount of Revolving Loans available to be made (but not extended to Borrower) of at least $8,500,000 at all times during the consecutive-30-day-period ending on such date; or (b) no Revolving Loans are outstanding at any time during the consecutive-30-day-period ending on such date.

8.    Modification of Section 6 of Schedule to Exim Agreement (regarding Streamline Conditions).    The portion of Section 6 of the Schedule to the Exim Agreement that currently reads as follows:

        1.     Transaction reports and schedules of collections, each week and at the time of each Loan request, on Silicon's standard form, provided, however, when the subject to the Streamline Conditions (as defined below) are satisfied, then Borrower shall only be required to submit Transaction reports and related documentation on a monthly basis only (and also when any new Revolving Loan is being requested) (such reduced frequency being referred to herein as the "Streamline Reporting"). The term "Streamline Conditions" shall mean the following: Borrower has maintained with Bank or SVB Securities, an affiliate of the Bank, unrestricted cash deposits plus the amount of Revolving Loans available to be made (but not extended to Borrower) of at least $8,500,000 for at least eight consecutive weeks.

, hereby is amended and restated in its entirety to read as follows:

        1.     Transaction reports and schedules of collections, each week and at the time of each Loan request, on Bank's standard form, provided, however, if and so long as at least one of the Streamline Conditions (as defined below) is satisfied, then Borrower shall only be required to submit Transaction reports and related documentation on a monthly basis only, not later than 15 days following the end of the preceding month and with respect to such preceding month (and also when any new Revolving Loan is being requested) (such reduced frequency being referred to herein as the "Streamline Reporting"). The term "Streamline Conditions" shall mean, as of any date of determination, collectively: (a) Borrower has maintained with Bank or SVB Securities, an affiliate of the Bank, unrestricted cash deposits plus the amount of Revolving Loans available to be made (but not extended to Borrower) of at least $8,500,000 at all times during the consecutive-30-day-period ending on such date; or (b) no Revolving Loans are outstanding at any time during the consecutive-30-day-period ending on such date.

9.    Fees.    In consideration for Bank entering into this Amendment, Borrower shall pay Bank) an amendment fee in the amount of $6,215, which fee shall be due and payable, fully-earned, and non-refundable concurrently herewith and shall be in addition to all interest and other fees payable to Bank under the Loan Documents. Bank is authorized to charge any or all such fees to Borrower's loan account.

10.    Representations True.    Borrower represents and warrants to Bank that all representations and warranties set forth in the Loan Agreement, as amended hereby, are true and correct.

11.    General Provisions.    This Amendment, the Loan Agreement, any prior written amendments to the Loan Agreement signed by Bank and the Borrower, and the other Loan Documents set forth in full all of the representations and agreements of the parties with respect to the subject matter hereof and supersede all prior discussions, representations, agreements and understandings between the parties with respect to the subject hereof. All of the terms and provisions of the Non-Exim Agreement and

7

Exim Agreement (each, as expressly amended hereby), the other Loan Agreements, and all other Loan Documents shall continue in full force and effect and the same are hereby ratified and confirmed.

[remainder of page intentionally left blank; section 10 and signature blocks immediately follow]

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12.    Counterparts.    This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same document. Delivery of an executed counterpart of this Amendment by telefacsimile shall be equally as effective as delivery of an original executed counterpart of this Amendment. The foregoing shall apply to each other Loan Document mutatis mutandis.

Borrower:		Bank:
DivXNetworks, Inc.		Silicon Valley Bank
By	/s/ JOHN A. TANNER	By	/s/ Illegible
Title	Chief Financial Officer	Title	Vice President

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Silicon Valley Bank

Amendment to Loan Documents

Borrower:	DivXNetworks, Inc. DivX, Inc.	initial	KMM
		initial	JSA
Dated:	June 10, 2005 (the "June 2005 Amendment Date")	initial	QJ

THIS AMENDMENT TO LOAN DOCUMENTS (this "Amendment") is entered into between SILICON VALLEY BANK ("Bank") and the borrower named above (the "Borrower").

        Reference is made to the following agreements: (A) the Loan and Security Agreement dated September 9, 2002 between the Bank and Borrower, as amended by that certain Amendment to Loan Agreement dated July 28, 2003 and as otherwise amended from time to time (the "Equipment Loan Agreement"); (B) the Loan and Security Agreement dated July 28, 2003 between the Bank and Borrower, as amended (the "Non-Exim Agreement"); and (C) Loan and Security Agreement (Exim Program) dated July 28, 2003 between the Bank and Borrower, as amended (the "Exim Agreement"; the Equipment Loan Agreement, the Non-Exim Agreement, and the Exim Agreement are herein referred to, individually and collectively, as the "Loan Agreement"). (Capitalized terms used but not defined in this Amendment, shall have the meanings set forth in the applicable Loan Agreement.) The term "June 2005 Amendment Date" as defined above hereby is incorporated into the Loan Agreement.

        Borrower and the Bank hereby agree to amend the Loan Agreement as follows, effective as of the date hereof.

1.    Modification of Section 4 of Schedule to the Non-Exim Agreement (regarding Maturity Date).    The portion of Section 4 of the Schedule to the Non-Exim Agreement that currently reads as follows:

        As to the Revolving Loans:    June 10, 2005.

, hereby is amended and restated in its entirety to read as follows:

        As to the Revolving Loans:    September 30, 2005.

2.    Modification of Section 4 of Schedule to the Exim Agreement (regarding Maturity Date).    Section 4 of the Schedule to the Exim Agreement, which currently reads as follows:

4.    Maturity Date

        (Section 6.1):    June 10, 2005.

, hereby is amended and restated in its entirety to read as follows:

4.    Maturity Date

        (Section 6.1):    September 30, 2005.

3.    Modification of Section 1 of Schedule to the Non-Exim Agreement (regarding New Term Loans).    The portion of Section 1 of the Schedule to the Non-Exim Agreement that currently reads as follows:

New Term Loans

        (a)   During the period commencing June 11, 2004 and ending June 10, 2005, Bank will make term loan advances (individually referred to herein as an "New Term Loan" and collectively as the "New Term Loans") not exceeding $2,000,000 in the aggregate initial amount thereof for all New Term Loans (of which $2,000,000 approximately $994,000 remains available, as of the March 2005 Amendment Date, to be funded as additional New Term Loans in accordance with the terms and conditions hereof). New Term Loans are to be used to finance Eligible Equipment purchased in

1

the period beginning on the 90th day prior to the date of the making of the applicable New Term Loan and ending on the date of the making thereof; provided, however, that the first New Term Loan to be funded on or after the March 2005 Amendment Date may be used to finance Eligible Equipment purchased in the period beginning January 1, 2005 and ending on the date of the making thereof.

        (b)   The amount of a New Term Loan may not exceed 100% of the equipment invoices for such Eligible Equipment, excluding taxes, shipping, warranty charges, freight discounts and installation expense. Not more than 40% of the original amount of all outstanding New Term Loans from time to time may be based on or relate to Other Equipment. There shall be: (i) no more than one New Term Loan per month, (ii) no more than four New Term Loans in the aggregate funded from and after the March 2005 Amendment Date, and (iii) the minimum amount of any New Term Loan funded from and after the March 2005 Amendment Date shall be $100,000, provided that the final such New Term Loan may be in a lesser amount if such lesser amount represents the entire remaining New Term Loan availability.

        (c)   Interest accrues from the date of each New Term Loan at the applicable rate for New Term Loans set forth below in Section 2 hereof. Further, each New Term Loan is payable in thirty (30) equal monthly installments principal plus interest beginning on the first day of the month following the making of such New Term Loan and continuing on the first day of each of the succeeding twenty-nine months thereafter (such final installment payment date for such New Term Loan being referred to herein as the "New Term Loan Maturity Date"), with the understanding that on each E New Term Loan Maturity Date the related New Term Loan and all related Obligations shall be repaid in full, provided that, in any event, all New Term Loans shall be repaid in full no later than June 1, 2007. Further, New Term Loans may not be reborrowed when repaid.

        (d)   To obtain a New Term Loan, Borrower must notify Bank (the notice is irrevocable) by facsimile no later than 12:00 p.m. Pacific time one Business Day before the day on which the New Term Loan is to be made. The notice must be signed by an authorized officer of the Borrower and shall include a copy of the invoices for the items of equipment proposed to be financed with any such New Term Loan.

        As used herein the term "Other Equipment" shall mean software, tenant improvements and other "soft cost" items purchased by Borrower (as Bank shall deem acceptable for loan purposes hereunder).

        As used herein the term "Eligible Equipment" shall mean general purpose computer, test and laboratory equipment, and office equipment, and Other Equipment, provided that any and all of such items comply with all of Borrower's representations, warranties and covenants in favor of the Bank with respect thereto and which items the Bank determines, in its good faith business judgment, are acceptable for loan advance purposes hereunder.

, hereby is amended and restated in its entirety to read as follows:

New Term Loans

        (a)   (1) During the period commencing June 11, 2004 and ending on September 30, 2005, Bank will make certain term loan advances (individually referred to herein as a "New First Tranche Term Loan" and collectively as the "New First Tranche Term Loans")") not exceeding $2,000,000 in the aggregate initial amount thereof for all New First Tranche Term Loans (of which $2,000,000 approximately $489,400 remains available, as of the June 2005 Amendment Date, to be funded as additional New First Tranche Term Loans in accordance with the terms and conditions hereof); and (ii) during the period commencing on the June 2005 Amendment Date and ending on September 30, 2005, Bank will make additional term loan advances (individually referred to herein

2

as a "New Second Tranche Term Loan" and collectively as the "New Second Tranche Term Loans") not exceeding the Second Tranche Limit (as defined below) in the aggregate initial amount thereof for all New Second Tranche Term Loans, in accordance with the terms and conditions hereof. As used herein, the term "Second Tranche Limit" means the result of $1,000,000 minus the aggregate remaining unfunded availability of New First Tranche Term Loans as of the June 2005 Amendment Date.

        As used herein, the term "New Term Loan" means, individually and collectively, New First Tranche Term Loan and New Second Tranche Term Loan. New Term Loans are to be used to finance Eligible Equipment purchased in the period beginning on the 90th day prior to the date of the making of the applicable New Term Loan and ending on the date of the making thereof; provided, however, that the first New First Tranche Term Loan to be funded on or after the March 2005 Amendment Date may be used to finance Eligible Equipment purchased in the period beginning January 1, 2005 and ending on the date of the making thereof.

        The amount of a New Term Loan may not exceed 100% of the equipment invoices for such Eligible Equipment, excluding taxes, shipping, warranty charges, freight discounts and installation expense. Not more than 40% of the original amount of all outstanding New Term Loans from time to time may be based on or relate to Other Equipment.

        (b)   (i) There shall be no more than one New Term Loan per month, (ii) there shall be no more than four New Term Loans in the aggregate funded from and after the June 2005 Amendment Date, and (iii) the minimum amount of any New Term Loan funded from and after the June 2005 Amendment Date shall be $100,000, provided that the final such New Term Loan may be in a lesser amount if such lesser amount represents the entire remaining New Term Loan availability.

        (c)   Interest accrues from the date of each New Term Loan at the applicable rate for New Term Loans set forth below in Section 2 hereof. Further, each New Term Loan is payable in thirty (30) equal monthly installments principal plus interest beginning on the first day of the month following the making of such New Term Loan and continuing on the first day of each of the succeeding twenty-nine months thereafter (such final installment payment date for such New Term Loan being referred to herein as the "New Term Loan Maturity Date"), with the understanding that on each New Term Loan Maturity Date the related New Term Loan and all related Obligations shall be repaid in full, provided that, in any event, all New Term Loans shall be repaid in full no later than March 1, 2008. Further, New Term Loans may not be reborrowed when repaid.

        (d)   To obtain a New Term Loan, Borrower must notify Bank (the notice is irrevocable) by facsimile no later than 12:00 p.m. Pacific time one Business Day before the day on which the New Term Loan is to be made. The notice must be signed by an authorized officer of the Borrower and shall include a copy of the invoices for the items of equipment proposed to be financed with any such New Term Loan.

        As used herein the term "Other Equipment" shall mean software, tenant improvements and other "soft cost" items purchased by Borrower (as Bank shall deem acceptable for loan purposes hereunder).

        As used herein the term "Eligible Equipment" shall mean general purpose computer, test and laboratory equipment, and office equipment, and Other Equipment, provided that any and all of such items comply with all of Borrower's representations, warranties and covenants in favor of the Bank with respect thereto and which items the Bank determines, in its good faith business judgment, are acceptable for loan advance purposes hereunder.

3

4.    Limited Consent.    Anything in Section 6.2(a)(ii) of the Equipment Loan Agreement, Section 6(9) of the Schedule to Non-Exim Agreement, and Section 6(10) of the Schedule to Exim Agreement (collectively, the "Designated Provisions") to the contrary notwithstanding and effective as of April 30, 2005, Silicon hereby consents to the delivery by Borrower of the annual financial statements of Borrower for the fiscal year ended December 31, 2004, and related auditor's opinion, as soon as available after April 30, 2005, but in any event not later than June 30, 2005. It is understood by Borrower, however, that such consent does not constitute a waiver of any failure of Borrower to comply with any of the Designated Provisions in respect of annual financial statements of Borrower, and related auditor's opinion, for any other fiscal year, nor a waiver of any other provision or term of the Loan Agreement or any other Loan Document, nor an agreement to waive compliance, in the future, with any of the Designated Provisions in respect of annual financial statements of Borrower, and related auditor's opinion, for any other fiscal year, or any other provision or term of the Loan Agreement or any other Loan Document.

5.    Fees.    In consideration for Bank entering into this Amendment, Borrower shall pay Bank) an amendment fee in the amount of $27,500, which fee shall be due and payable, fully-earned, and non-refundable concurrently herewith and shall be in addition to all interest and other fees payable to Bank under the Loan Documents. Bank is authorized to charge any or all such fees to Borrower's loan account.

6.    Representations True.    Borrower represents and warrants to Bank that all representations and warranties set forth in the Loan Agreement, as amended hereby, are true and correct.

7.    General Provisions.    This Amendment, the Loan Agreement, any prior written amendments to the Loan Agreement signed by Bank and the Borrower, and the other Loan Documents set forth in full all of the representations and agreements of the parties with respect to the subject matter hereof and supersede all prior discussions, representations, agreements and understandings between the parties with respect to the subject hereof. All of the terms and provisions of the Equipment Loan Agreement, the Non-Exim Agreement, and the Exim Agreement (each, as expressly amended hereby), and all other Loan Documents shall continue in full force and effect and the same are hereby ratified and confirmed.

[remainder of page intentionally left blank; section 8 and signature blocks immediately follow]

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        8.    Counterparts.    This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same document. Delivery of an executed counterpart of this Amendment by telefacsimile shall be equally as effective as delivery of an original executed counterpart of this Amendment. The foregoing shall apply to each other Loan Document mutatis mutandis.

Borrower:		Initial	KMM	Bank:
		Initial	JSA
DivXNetworks, Inc. DivX, Inc.		Initial	QJ	Silicon Valley Bank
By	/s/ John A. Tanner			By	/s/ [ILLEGIBLE]            KMM
Title	EVP & Chief Financial Officer			Title	Vice President
By	/s/ [ILLEGIBLE]
Title	Controller

5

QuickLinks

LOAN AND SECURITY AGREEMENT DIVXNETWORKS, INC.
TABLE OF CONTENTS
EXHIBIT A
EXHIBIT B
EXHIBIT A
EXHIBIT B
EXHIBIT C
EXHIBIT D
EXHIBIT A DEBTOR: DIVXNETWORKS, INC.
Schedule to Loan and Security Agreement

EX-10.16

Exhibit 10.16

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE ***Text Omitted and Filed Separately
CONFIDENTIAL TREATMENT REQUESTED
Under 17 C.F.R. §§ 200.80(b)(4) and 230.406

        This Agreement is made this         22         day of         May 2003        , by and between MPEG LA, L.L.C., a limited liability company of Delaware having a principal place of business in Denver, Colorado, U.S.A. (hereinafter "Licensing Administrator"); and         DivXNETWORKS        , having a principal place of business in         10350 Science Center, Building 14, Suite 140, San Diego, CA 92121        (hereinafter "Licensee").

WHEREAS, ISO/IEC and the Moving Pictures Experts Group have jointly adopted an international standard relating to visual data compression, formally known as ISO/IEC 14496-2, and referred to in this Agreement as the "MPEG-4 Visual Standard" (as more fully defined herein below);

WHEREAS, Canon, Inc., a corporation of Japan, having a principal place of business in Tokyo, Japan; Curitel Communications, Inc., a corporation of Korea, having a principal place of business in Seoul, Korea; France Télécom, société anonyme, a corporation of France, having a principal place of business in Paris, France; Fujitsu Limited, a corporation of Japan, having a principal place of business in Kawasaki, Japan; GE Technology Development, Inc., a corporation of Delaware, U.S.A, having a principal place of business in Princeton, New Jersey, U.S.A.; General Instrument Corporation, a corporation of Delaware, U.S.A., having a principal place of business in Horsham, Pennsylvania, U.S.A.; Hitachi, Ltd., a corporation of Japan, having a principal place of business in Tokyo, Japan; KDDI Corporation, a corporation of Japan, having a principal place of business in Tokyo, Japan; Koninklijke Philips Electronics N.V., a corporation of the Netherlands, having a principal place of business in Amsterdam, the Netherlands; Matsushita Electric Industrial Co., Ltd., a corporation of Japan, having a principal place of business in Osaka, Japan; Microsoft Corporation, a corporation of Washington, U.S.A., having a principal place of business in Redmond, Washington, U.S.A.; Mitsubishi Electric Corporation, a corporation of Japan, having a principal place of business in Tokyo, Japan; Oki Electric Industry Co., a corporation of Japan, having a principal place of business in Tokyo, Japan; Samsung Electronics Co., Ltd., a corporation of Korea, having a principal place of business in Seoul, Korea; SANYO Electric Co., Ltd., a corporation of Japan, having a principal place of business in Osaka, Japan; Sharp Kabushiki Kaisha, a corporation of Japan, having a principal place of business in Osaka-Fu, Japan; Sony Corporation, a corporation of Japan, having a principal place of business in Tokyo, Japan; Telenor Communication II AS, a corporation of Norway, having a principal place of business in Fornebu, Norway; Toshiba Corporation, a corporation of Japan, having a principal place of business in Tokyo, Japan; and Victor Company of Japan, Ltd., a corporation of Japan, having a principal place of business in Yokohama, Japan; (hereinafter collectively the "Licensors" or individually "Licensor," as more fully defined in this Agreement) each own and have the right to license, or have the right to sublicense, one or more patents, utility models and/or enforceable allowed patent or enforceable allowed utility model applications published for opposition which claim apparatus and/or methods necessary for compliance with the MPEG-4 Visual Standard;

WHEREAS, each Licensor believes that the MPEG-4 Visual Standard represents significant advances in the field of digital visual data compression, which will make available innovative new products and services to the public, and for this reason desires to encourage widespread adoption of the MPEG-4 Visual Standard by video product and video service industries throughout the world;

1

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

WHEREAS, each Licensor hereby commits to make available licenses and/or sublicenses under any and all MPEG-4 Visual Essential Patents licensable or sublicensable by the Licensor (without payment to any third party) to any individual, company or other entity requiring such a license and/or sublicense on fair, reasonable and nondiscriminatory terms and conditions in light of the terms offered herein;

WHEREAS, each Licensor has granted the Licensing Administrator a worldwide, nonexclusive license and/or sublicense under all MPEG-4 Visual Essential Patents licensable or sublicensable by the Licensor without payment to any third party to allow the Licensing Administrator to grant worldwide, nonexclusive sublicenses under all such MPEG-4 Visual Essential Patent(s) under the terms hereof;

WHEREAS, the Licensors desire to make available, through the Licensing Administrator, license rights under their respective MPEG-4 Visual Essential Patents in a single sublicense with a variety of licensing and royalty payment choices for licensees for the convenience of any individual, company or other entity desirous of acquiring such rights, thereby avoiding the need of such individual, company or other entity to obtain separate licenses from each of the Licensors under its MPEG-4 Visual Essential Patent(s);

WHEREAS, the Licensing Administrator desires to grant MPEG-4 Visual Patent Portfolio Licenses to all individuals, companies and other entities requiring such a license under the terms and conditions set forth herein;

WHEREAS, nothing in this Agreement precludes the respective Licensors from licensing or sublicensing rights under individual MPEG-4 Visual Essential Patent(s) to make, use, sell, or offer to sell products or processes including, but not limited to, the rights licensed in the MPEG-4 Visual Patent Portfolio License;

WHEREAS, Licensee understands that this MPEG-4 Visual Patent Portfolio License is offered for the convenience of Licensee and that Licensee is free to contact any Licensor to negotiate a license for any patent offered herein on terms and conditions different from those set forth herein which may be mutually acceptable to such Licensee and Licensor;

WHEREAS, Licensee understands that it may execute this Agreement as either a Legal Entity or an Enterprise (as those terms are defined herein); and

WHEREAS, Licensee desires for its own convenience to obtain rights which Licensee has elected under the MPEG-4 Visual Essential Patent(s) of the Licensors as offered by this Agreement in a single sublicense from the Licensing Administrator under the terms hereof.

NOW, THEREFORE, the Licensing Administrator and Licensee AGREE AS FOLLOWS:

0.     EFFECTIVE DATE

0.1   This License Agreement shall be effective as of January 1, 2000.

2

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

1.     DEFINITIONS

        The definitions set forth in this Article shall apply to the following terms when used with initial capital letters in this Agreement, its attachments, and amendments hereto. The below definitions may be changed by the Licensing Administrator upon written notice to the Licensee in light of changed market conditions in order to effectuate the purpose of this Agreement.

1.1   Affiliate—shall mean a corporation, company, or other entity which now or hereinafter, directly or indirectly, controls, is controlled by or is under common control with a party. The term "control" as used in this Section 1.1 shall mean ownership of 50% or more of the outstanding shares representing the right to vote for directors or other managing officers of such corporation, company or other entity, or for a corporation, company or other entity which does not have outstanding shares, of 50% or more of the ownership interest representing the right to make decisions for such corporation, company or other entity. An entity shall be deemed an Affiliate only so long as such "control" exists.

1.2   Agreement—shall mean this sublicense between the Licensing Administrator and Licensee, including exhibits, attachments, amendments and modifications hereto.

1.3   Calendar Year—shall mean the period commencing on January 1 and concluding on December 31 of any year.

1.4   Confidential Information—shall mean any information given to the Licensing Administrator pursuant to Article 5 of this Agreement which is designated "confidential" by Licensee.

1.5   Consumer—shall mean a natural person acting in his or her own personal capacity and not engaged in commercial activity or activity for which he or she receives any remuneration.

1.6   E-mail—shall mean an application for transferring text messages, data, video and/or attached files, electronically between users over one or more networks using various network protocols, such as Internet Protocol and Simple Mail Transfer Protocol.

1.7   End User—shall mean any person or entity which orders, purchases, retrieves, receives or is specifically sent MPEG-4 Visual Video for their or its own personal or commercial use, whether alone or in combination with any other product, and not for re-Sale.

1.8   Enterprise—shall mean a Legal Entity and all other subsidiaries that are fifty percent (50%) or more owned by such Legal Entity.

1.9   Enterprise Licensee—shall mean a Licensee which elects an Enterprise License under Section 2.14 hereof.

3

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

1.10 Legal Entity—shall mean a corporation, limited liability company, partnership or other entity recognized by state, provincial or national law as having the power to sue or be sued.

1.11 Licensed Product (Licensed Products)—shall mean any product, including software, licensed under Article 2 of this Agreement.

1.12 Licensors (individually Licensor)—shall mean Canon, Inc., Curitel Communications, Inc.; France Télécom, société anonyme; Fujitsu Limited; GE Technology Development, Inc.; General Instrument Corporation; Hitachi, Ltd.; KDDI Corporation; Koninklijke Philips Electronics N.V.; Matsushita Electric Industrial Co., Ltd.; Microsoft Corporation; Mitsubishi Electric Corporation; Oki Electric Industry Co.; Samsung Electronics Co., Ltd.; SANYO Electric Co., Ltd.; Sharp Kabushiki Kaisha; Sony Corporation; Telenor Communication II AS; Toshiba Corporation; and Victor Company of Japan, Ltd.; subject to additions and deletions from time to time, as identified in Attachment 1 hereto.

1.13 Manufacture (Manufactured) (Manufacturer)—shall mean fabrication, reproduction, copying, assembly, or otherwise making of substantially the entire finished MPEG-4 Visual Royalty Product.

1.14 Movie—shall mean a single motion picture as well as related video materials typically packaged with the motion picture including, without limitation, previews of other motion pictures, information about the making of the motion picture or the artists appearing therein. Movie shall not include a second motion picture regardless of whether such second motion picture is related to the first.

1.15 MPEG-4 Video—shall mean video information encoded in compliance with the MPEG-4 Visual Standard.

1.16 MPEG-4 Visual Consumer Recorded Video—shall mean video information which is not MPEG-4 Visual Internet Video, MPEG-4 Visual Mobile Video, MPEG-4 Visual Stored Video or MPEG-4 Visual Unique Use Video which is encoded in compliance with the MPEG-4 Visual Standard by a Consumer with a device which has a retail sales price of [***] or less including, way by of example only, video encoded by a Consumer with a personal video recorder or a camcorder.

1.17 MPEG-4 Visual Consumer Recorded Video Decoder(s)—shall mean a decoder used by a Consumer to decode MPEG-4 Visual Consumer Recorded Video.

1.18 MPEG-4 Visual Consumer Recorded Video Encoder(s)—shall mean an encoder used by a Consumer to encode MPEG-4 Visual Consumer Recorded Video.

1.19 MPEG-4 Visual Essential Patent—shall mean any and all claim(s), but only such claim(s), in a Patent which are necessarily infringed in connection with the

***CONFIDENTIAL TREATMENT REQUESTED

4

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

use or implementation of the MPEG-4 Visual Standard under the laws of the country which issued or published the Patent.

1.20 MPEG-4 Visual Internet Video—shall mean MPEG-4 Video received by or Transmitted to a device or product that uses the Internet to obtain a visual signal by, for example and without limitation, using a Web Browser or via E-mail.

1.21 MPEG-4 Visual Internet Video Decoder(s)—shall mean a decoder used to decode MPEG-4 Visual Internet Video.

1.22 MPEG-4 Visual Internet Video Encoder(s)—shall mean an encoder used to encode MPEG-4 Visual Internet Video.

1.23 MPEG-4 Visual Mobile Video—shall mean MPEG-4 Video Transmitted over the air and received by a personal and portable wireless device typically relying on an internal battery source and viewed on a screen which, in its smallest configuration, measures [***] inches or [***] centimeters or less in diagonal, including by way of example only and without limitation, video received by a PDA, mobile telephone or portable and personal devices.

1.24 MPEG-4 Visual Mobile Video Decoder(s)—shall mean a decoder used to decode MPEG-4 Visual Mobile Video.

1.25 MPEG-4 Visual Mobile Video Encoder(s)—shall mean an encoder used to encode MPEG-4 Visual Mobile Video.

1.26 MPEG-4 Visual Patent Portfolio—shall mean the portfolio of MPEG-4 Visual Essential Patent(s) initially identified in Attachment I hereto, which portfolio may be supplemented or reduced from time to time in accordance with the provisions of this Agreement.

1.27 MPEG-4 Visual Patent Portfolio Patent—shall mean an MPEG-4 Visual Essential Patent under which a Licensor has the right to grant a license or sublicense to a third party (without payment to any third party) with the right of such third party to grant sublicenses, and which is included in the MPEG-4 Visual Patent Portfolio.

1.28 MPEG-4 Visual Related Patent—shall mean any and all claims, but only such claims, in any Patent in the field of visual data compression which is not an MPEG-4 Visual Essential Patent but which are infringed by an apparatus or a method using or implementing the MPEG-4 Visual Standard under the laws of the country which issued or published the Patent.

1.29 MPEG-4 Visual Royalty Product—shall mean a product for which a royalty is payable to the Licensing Administrator hereunder.

1.30 MPEG-4 Visual Standard—shall mean the MPEG-4 standard for simple, core, main, simple scalable, N-bit, basic animated texture, scalable texture, simple FA,

***CONFIDENTIAL TREATMENT REQUESTED

5

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

advanced real time simple, core scalable, advanced coding efficiency, advanced core, advanced scalable texture, simple FBA, hybrid, advanced simple, fine granularity scalable, simple studio, and/or core studio profiles as defined in ISO/IEC 14496-2:2001 [Part 2 Visual dated 2001-12-01], 14496-2:2001/Amd.1:2002 [Studio profile dated 2002-02-01], or 14496-2:2001/Amd.2:2002 [Streaming video profile dated 2002-02-01].

1.31 MPEG-4 Visual Stored Video—shall mean MPEG-4 Visual Video which is paid for on a title by title basis and which is either (i) stored, replicated or recorded onto one or more physical media or (ii) Transmitted to an End User in a form which allows the End User, either by affirmative act of the Licensee or otherwise, to view such video (a) at least [***] and (b) for a period of at least [***] from the date of Transmission, including by way of example only and without limitation, MPEG-4 Visual Video encoded on an optical disk and wired or wireless MPEG-4 Visual Video Transmitted to an End User who made a specific payment for such video.

1.32 MPEG-4 Visual Stored Video Decoder(s)—shall mean a decoder used to decode MPEG-4 Visual Stored Video including, by way of example only, a decoder contained in an optical disk player.

1.33 MPEG-4 Visual Stored Video Encoder(s)—shall mean an encoder used to encode MPEG-4 Visual Stored Video.

1.34 MPEG-4 Visual Unique Use Video—shall mean MPEG-4 Video Sold or Transmitted to a Subscriber and which is neither MPEG-4 Visual Internet Video nor MPEG-4 Visual Mobile Video, including by way of example only and without limitation, MPEG-4 Visual Video provided by cable or satellite.

1.35 MPEG-4 Visual Unique Use Video Decoder(s)—shall mean a decoder used to decode MPEG-4 Visual Unique Use Video.

1.36 MPEG-4 Visual Unique Use Video Encoder(s)—shall mean an encoder used to encode MPEG-4 Visual Unique Use Video.

1.37 Patent(s)—shall mean any issued patent or issued utility model of any country, or any enforceable allowed patent application or enforceable allowed utility model application, published for opposition in any country.

1.38 Running Time—shall mean the number of clock minutes or part thereof that is necessary to view a video as it is intended to be viewed by an End User.

1.39 Sale (Sell) (Sold)—shall mean any sale, rental, lease, license, copying, reproduction, Transmission, or other form of distribution of an MPEG-4 Visual Royalty Product or the Transmission of MPEG-4 Video for use in connection with an MPEG-4 Visual Royalty Product. For purposes of subsections 3.1.1.1, 3.1.2.1, 3.1.3.1, 3.1.4.1, 3.1.5.1(i), 3.1.5.2(i), 3.1.6.1, 3.1.7.1, 3.1.8.1(i), 3.1.8.2(i),

***CONFIDENTIAL TREATMENT REQUESTED

6

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

3.1.9.1, 3.1.10.1, 3.1.12.1 and 3.1.13.1 of this Agreement, a Manufacture or Sale shall be deemed to take place in the country in which title to the MPEG-4 Visual Royalty Product passes from Licensee, in the country in which a Transmission occurs or encoding occurs, except that if there is no MPEG-4 Visual Essential Patent in such country, then a Manufacture or Sale shall be deemed to take place in the country in which the MPEG-4 Visual Royalty Product is used by an End User. For purposes of subsection 3.1.11 of this Agreement, a Sale shall be deemed to take place at the earlier of a provider of MPEG-4 Visual Unique Use Video (i) providing an MPEG-4 Visual Unique Use Decoder to an End User or (ii) providing MPEG-4 Visual Unique Use Video to an MPEG-4 Visual Unique Use Decoder for which a royalty has not been paid pursuant to Section 3.1.11 of this Agreement.

1.40 Single MPEG-4 Visual Stored Video—shall mean an MPEG-4 Visual Stored Video which is intended to be viewed in its entirety during a single period of time, including, for example and without limitation, a Movie, a television program, a news broadcast regarding a single topic, or a music video.

1.41 Subscriber—shall mean either (a) an identified End User which, during any Calendar Year, uses an MPEG-4 Visual Internet Video Decoder, an MPEG-4 Visual Mobile Video Decoder or an MPEG-4 Visual Unique Use Video Decoder or, if the identity of such End User is not known to the Licensee, (b) a decoder which is used by an End User at any time during any Calendar Year to decode any MPEG-4 Visual Internet Video, MPEG-4 Visual Mobile Video, or MPEG-4 Visual Unique Use Video. With respect to each licensee's royalty and royalty reporting obligations under Article 3 hereof, a Subscriber shall be counted as only one Subscriber regardless of the level of any individual Subscriber's use and/or viewing of MPEG-4 Video in any Calendar Year.

1.42 Transmits (Transmission) (Transmitted)—shall mean the act of distributing, disseminating, streaming or otherwise delivering to a third party any MPEG-4 Video.

1.43 Video Provider—shall mean any person or entity which displays, offers or provides any MPEG-4 Video as part of a service, business or other pursuit (collectively, "Business") for which Business such person or entity receives directly or indirectly any revenue, remuneration or other benefit (collectively "Revenue") in any form, but only if such person or entity is any of the following:

(i)    a person or entity which owns and/or controls the Uniform Resource Locator ("URL") address which is contacted by an End User or prospective End User; or

(ii)   a person or entity which receives any Revenue, in any form from an End User (or a person or entity paying on behalf of an End User) in connection with the Sale of MPEG-4 Video to an End User, and is the apparent source of such Video to the End User; or

7

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

(iii) a person or entity which is not described in subparagraph (i) above, but which identifies itself as the ultimate source of any MPEG-4 Video Sold or Transmitted to an End User.

Provided, however, a Video Provider shall not include a person or entity Transmitting MPEG-4 Video which contains only advertising for their or its own products and such person or entity receives no revenue in connection with the Transmission of such MPEG-4 Video except from Sales of its own products advertised in such MPEG-4 Video. No royalty shall be payable by a Licensee for Transmitting MPEG-4 Video as specifically described in the preceding sentence and as limited thereby.

1.44 Web Browser—shall mean a network application for presenting information obtainable from web servers via one or more networks using various network protocols, such as the Internet Protocol, the Hypertext Transfer Protocol and the File Transfer Protocol.

2.     LICENSING ADMINISTRATOR GRANT

2.1    MPEG-4 Visual Consumer Recorded Video Decoder(s).    Subject to the terms and conditions of this Agreement (including, without limitation, Articles 3 and 7), the Licensing Administrator hereby grants to Licensee, a Manufacturer and/or Seller of MPEG-4 Visual Consumer Recorded Video Decoders in the product configuration in which it is used by a Consumer, a royalty-bearing worldwide, nonexclusive, nontransferable sublicense under all MPEG-4 Visual Essential Patent(s) in the MPEG-4 Visual Patent Portfolio to make, have made, Sell or offer for Sale MPEG-4 Visual Consumer Recorded Video Decoders, and for a Consumer to use such decoders to decode MPEG-4 Visual Consumer Recorded Video. NO OTHER LICENSE IS GRANTED HEREIN, BY IMPLICATION OR OTHERWISE, TO MANUFACTURE, SELL OR USE ANY DECODER.

2.2    MPEG-4 Visual Consumer Recorded Video Encoder(s).    Subject to the terms and conditions of this Agreement (including, without limitation, Articles 3 and 7), the Licensing Administrator hereby grants to Licensee, a Manufacturer and/or Seller of MPEG-4 Visual Consumer Recorded Video Encoders in the product configuration in which it is used by a Consumer, a royalty-bearing, worldwide, nonexclusive, nontransferable sublicense under all MPEG-4 Visual Essential Patent(s) in the MPEG-4 Visual Patent Portfolio to make, have made, and Sell or offer for Sale MPEG-4 Visual Consumer Recorded Video Encoders and for a Consumer to use such encoders to encode MPEG-4 Visual Consumer Recorded Video. NO OTHER LICENSE IS GRANTED HEREIN, BY IMPLICATION OR OTHERWISE, TO MANUFACTURE, SELL OR USE ANY ENCODER.

2.3    MPEG-4 Visual Internet Video Decoder(s).    Subject to the terms and conditions of this Agreement (including, without limitation, Articles 3 and 7), the Licensing Administrator hereby grants to Licensee, a Manufacturer and/or Seller of MPEG-4 Visual Internet Video Decoders in fully functioning form, a royalty-bearing,

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MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

worldwide, nonexclusive, nontransferable sublicense under all MPEG-4 Visual Essential Patent(s) in the MPEG-4 Visual Patent Portfolio to make, have made, and Sell or offer for Sale MPEG-4 Visual Internet Video Decoders but not to use such decoders, except for use by an End User to decode MPEG-4 Visual Internet Video that has been Transmitted by another End User. NO OTHER LICENSE IS GRANTED HEREIN, BY IMPLICATION OR OTHERWISE, TO MANUFACTURE, SELL OR USE ANY DECODER.

2.4    MPEG-4 Visual Internet Video Encoder(s).    Subject to the terms and conditions of this Agreement (including, without limitation, Articles 3 and 7), the Licensing Administrator hereby grants to Licensee, a Manufacturer and/or Seller of MPEG-4 Visual Internet Encoders in fully functioning form, a royalty-bearing, worldwide, nonexclusive, nontransferable sublicense under all MPEG-4 Visual Essential Patent(s) in the MPEG-4 Visual Patent Portfolio to make, have made, and Sell or offer for Sale MPEG-4 Visual Internet Video Encoders, but not to use such encoders, except for use by an End User to encode MPEG-4 Visual Internet Video that is to be Transmitted to an End User. NO OTHER LICENSE IS GRANTED HEREIN, BY IMPLICATION OR OTHERWISE, TO MANUFACTURE, SELL OR USE ANY ENCODER.

2.5    MPEG-4 Visual Internet Video Encoder and Decoder Use.    Subject to the terms and conditions of this Agreement (including, without limitation, Article 3), the Licensing Administrator hereby grants to Licensee, a Video Provider, a royalty-bearing, worldwide, nonexclusive, nontransferable sublicense under all MPEG-4 Visual Essential Patent(s) in the MPEG-4 Visual Patent Portfolio to Sell or offer for Sale any MPEG-4 Visual Internet Video, and to use or have used MPEG-4 Visual Internet Encoders to encode such video and to use or have used MPEG-4 Visual Internet Decoders to decode such video (provided applicable royalties have been paid on such encoders and decoders in accordance with the provisions of Articles 3.1.3 and 3.1.4 of this Agreement). NO OTHER LICENSE IS GRANTED HEREIN, BY IMPLICATION OR OTHERWISE, TO MANUFACTURE, HAVE MADE, SELL OR USE OR HAVE USED ANY ENCODERS AND/OR DECODERS.

2.6    MPEG-4 Visual Mobile Video Decoder(s).    Subject to the terms and conditions of this Agreement (including, without limitation, Articles 3 and 7), the Licensing Administrator hereby grants to Licensee, a Manufacturer and/or Seller of MPEG-4 Visual Mobile Video Decoders in the product configuration in which it is used by an End User, a royalty-bearing, worldwide, nonexclusive, nontransferable sublicense under all MPEG-4 Visual Essential Patent(s) in the MPEG-4 Visual Patent Portfolio to make, have made, and Sell or offer for Sale MPEG-4 Visual Mobile Video Decoders but not to use such decoders, except for use by an End User to decode MPEG-4 Visual Mobile Video that has been Transmitted by another End User. NO OTHER LICENSE IS GRANTED HEREIN, BY IMPLICATION OR OTHERWISE, TO MANUFACTURE, SELL OR USE ANY DECODER.

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MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

2.7    MPEG-4 Visual Mobile Video Encoder(s).    Subject to the terms and conditions of this Agreement (including, without limitation, Articles 3 and 7), the Licensing Administrator hereby grants to Licensee, a Manufacturer and/or Seller of MPEG-4 Visual Mobile Video Encoders in fully functioning form, a royalty-bearing, worldwide, nonexclusive, nontransferable sublicense under all MPEG-4 Visual Essential Patent(s) in the MPEG-4 Visual Patent Portfolio to make, have made, and Sell or offer for Sale MPEG-4 Visual Mobile Video Encoders but not to use such encoders, except for use by an End User to encode MPEG-4 Visual Mobile Video that is to be Transmitted to an End User. NO OTHER LICENSE IS GRANTED HEREIN, BY IMPLICATION OR OTHERWISE, TO MANUFACTURE, SELL OR USE ANY ENCODER.

2.8    MPEG-4 Visual Mobile Video Encoder and Decoder Use.    Subject to the terms and conditions of this Agreement (including, without limitation, Article 3), the Licensing Administrator hereby grants to Licensee, a Video Provider, a royalty-bearing, worldwide, nonexclusive, nontransferable sublicense under all MPEG-4 Visual Essential Patent(s) in the MPEG-4 Visual Patent Portfolio to Sell or offer for Sale MPEG-4 Visual Mobile Video, and to use or have used MPEG-4 Visual Mobile Video Encoders to encode such video and to use or have used MPEG-4 Visual Mobile Video Decoders to decode such video (provided applicable royalties have been paid on such encoders and decoders in compliance with Articles 3.1.6 and 3.1.7 of this Agreement). NO OTHER LICENSE IS GRANTED HEREIN, BY IMPLICATION OR OTHERWISE, TO MANUFACTURE, HAVE MADE, SELL OR USE OR HAVE USED ANY VIDEO ENCODERS AND/OR DECODERS.

2.9    MPEG-4 Visual Unique Use Video Decoder.    Subject to the terms and conditions of this Agreement (including, without limitation, Articles 3 and 7), the Licensing Administrator hereby grants to Licensee, a Manufacturer and/or Seller of Unique Use Video Decoders in a product configuration in which it is used by an End User, a royalty bearing, worldwide, nonexclusive, nontransferable sublicense under all MPEG-4 Visual Essential Patent(s) in the MPEG-4 Visual Patent Portfolio License to make, have made and Sell or offer for Sale MPEG-4 Visual Unique Use Video Decoders but not to use such decoders, except for use by an End User to decode MPEG-4 Visual Unique Use Video Transmitted by another End User. NO OTHER LICENSE IS GRANTED HEREIN, BY IMPLICATION OR OTHERWISE, TO MANUFACTURE, SELL OR USE ANY DECODER.

2.10    MPEG-4 Visual Unique Use Video Encoder(s).    Subject to the terms and conditions of this Agreement (including, without limitation, Articles 3 and 7), the Licensing Administrator hereby grants to Licensee, a Manufacturer and/or Seller of Unique Use Video Encoders in a fully functional form, a royalty-bearing, worldwide, nonexclusive, nontransferable sublicense under all MPEG-4 Visual Essential Patent(s) in the MPEG-4 Visual Patent Portfolio to make, have made, and Sell or offer for Sale MPEG-4 Visual

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MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

Unique Use Video Encoders but not to use such encoders, except for use by an End User to Encode MPEG-4 Visual Unique Use Video that is to be Transmitted to an End User. NO OTHER LICENSE IS GRANTED HEREIN, BY IMPLICATION OR OTHERWISE, TO MANUFACTURE, SELL OR USE ANY ENCODER.

2.11    MPEG-4 Visual Unique Use Video Decoder and Encoder Use.    Subject to the terms and conditions of this Agreement (including, without limitation, Article 3), the Licensing Administrator hereby grants to Licensee, an encoder (directly or indirectly) of MPEG-4 Visual Unique Use Video and provider of MPEG-4 Visual Unique Use Video to a Subscriber (directly or through a chain of distribution), a royalty-bearing, worldwide, nonexclusive, nontransferable sublicense under all MPEG-4 Visual Essential Patents in the MPEG-4 Visual Patent Portfolio to Sell or offer for Sale any MPEG-4 Visual Unique Use Video, and to use or have used any MPEG-4 Visual Unique Use Video Encoder to encode such video or to use or have used MPEG-4 Visual Unique Use Video Decoders to decode such video (provided applicable royalties have been paid on such encoders and decoders pursuant to the provisions of Articles 3.1.9 and 3.1.10 of this Agreement). NO OTHER LICENSE IS GRANTED HEREIN, BY IMPLICATION OR OTHERWISE, TO MANUFACTURE, HAVE MADE, SELL, USE OR HAVE USED ANY DECODER AND/OR ENCODER.

2.12    MPEG-4 Visual Stored Video Decoder and Decoder Use.    Subject to the terms and conditions of this Agreement (including, without limitation, Article 3), the Licensing Administrator hereby grants to Licensee, a Manufacturer and/or Seller of MPEG-4 Visual Stored Video Decoders in a product configuration in which it is used by an End User, a royalty-bearing, worldwide, non-exclusive, nontransferable sublicense under all MPEG-4 Visual Essential Patent(s) in the MPEG-4 Visual Patent Portfolio to make, have made, and Sell or offer for Sale, and to use or have used MPEG-4 Visual Stored Video Decoders to decode MPEG-4 Visual Stored Video. NO OTHER LICENSE IS GRANTED HEREIN BY IMPLICATION OR OTHERWISE, TO MANUFACTURE, SELL OR USE ANY DECODER.

2.13    MPEG-4 Visual Stored Video Encoder and Encoder Use.    Subject to the terms and conditions of this Agreement (including, without limitation, Article 3), the Licensing Administrator hereby grants to Licensee, a Transmitter of MPEG-4 Visual Stored Video and/or an encoder of MPEG-4 Visual Stored Video, a royalty-bearing, worldwide, nonexclusive, nontransferable sublicense under all MPEG-4 Visual Essential Patent(s) in the MPEG-4 Visual Patent Portfolio to make, have made, and Sell or offer for Sale, and use or have used an MPEG-4 Visual Stored Video Encoder and to Sell, offer for Sale or otherwise distribute any MPEG-4 Visual Stored Video. NO OTHER LICENSE IS GRANTED HEREIN, BY IMPLICATION OR OTHERWISE, TO MANUFACTURE, SELL OR USE ANY ENCODERS.

2.14    Enterprise License.    Subject to the terms and conditions of this Agreement (including, without limitation, Articles 2 (as they apply to each individual Licensed Product) and 3) the Licensing Administrator hereby grants to an

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MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

Enterprise Licensee those licenses granted under Sections 2.1 through 2.12 herein, but not those licenses granted in Section 2.13.

2.15    No License or Immunity Unless Expressly Granted.    NO LICENSE, NON-ASSERT OR IMMUNITY IS GRANTED BY EITHER PARTY HERETO TO THE OTHER PARTY HERETO, EITHER DIRECTLY OR BY IMPLICATION, ESTOPPEL OR OTHERWISE, OTHER THAN AS EXPRESSLY PROVIDED IN SECTIONS 2.1 THROUGH 2.14, 8.3 AND 8.4 OF THIS AGREEMENT.

2.16    No Sublicenses.    The sublicenses granted in Sections 2.1 through 2.14 of this Agreement do not include the right of the Licensee to grant any further sublicenses. The Licensing Administrator is willing to offer an MPEG-4 Visual Patent Portfolio License to any Affiliate of Licensee.

2.17    Scope of License Grant.    Notwithstanding anything to the contrary herein, all licenses granted under this Agreement are limited to a field of use to comply with the MPEG-4 Visual Standard. No other licenses for any other purpose or use are granted herein.

3.     ROYALTY AND PAYMENTS

3.1    Royalties for Licenses under MPEG-4 Visual Essential Patents in the MPEG-4 Visual Patent Portfolio.    For those licenses offered in Article 2 hereof and elected by Licensee under MPEG-4 Visual Essential Patents in the MPEG-4 Visual Patent Portfolio, Licensee shall pay to the Licensing Administrator, for the benefit of Licensors, for each license elected by Licensee (subject to the terms of Article 3.2), throughout the term of this Agreement, the applicable royalties as follows:

3.1.1    MPEG-4 Visual Consumer Recorded Video Decoders.    At the option of Licensee the royalty for the sublicense granted pursuant to Section 2.1 hereof shall be that specified in either subparagraphs 3.1.1.1, 3.1.1.2 or 3.1.1.3. For Licensees which have elected to pay royalties pursuant to subparagraphs 3.1.1.1 or 3.1.1.2 there shall be (i) no royalties payable for the first [***] MPEG-4 Visual Consumer Recorded Video Decoders Sold in any Calendar Year; and (ii) a maximum royalty payable by a Legal Entity in each Calendar Year of [***] (U.S. $[***]); provided, however, that the foregoing subsection (i) shall be applicable to [***] within an Enterprise in any Calendar Year.

3.1.1.1 The royalty payable for the sublicense granted pursuant to Section 2.1 hereof shall be [***] (U.S. $[***]) upon the Sale of each MPEG-4 Visual Consumer Recorded Video Decoder Manufactured or Sold in a country in which there is in force one or more MPEG-4 Visual Patent Portfolio Patent(s) that would be infringed absent a license hereunder.

***CONFIDENTIAL TREATMENT REQUESTED

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MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

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3.1.1.2 The royalty for the sublicense granted pursuant to Section 2.1 hereof shall be [***] (U.S. $[***]) upon the Sale of each MPEG-4 Visual Consumer Recorded Video Decoder.

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3.1.1.3 The royalty for the sublicense granted pursuant to Section 2.1 hereof shall be [***] (U.S. $[***]) per Legal Entity per Calendar Year or part thereof.

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3.1.2    MPEG-4 Visual Consumer Recorded Video Encoders.    At the option of Licensee, the royalty for the sublicense granted pursuant to Section 2.2 hereof shall be that specified in either subparagraphs 3.1.2.1, 3.1.2.2, or 3.1.2.3. For Licensees which have elected to pay royalties pursuant to subparagraphs 3.1.2.1 or 3.1.2.2, there shall be (i) no royalties payable for the first [***] MPEG-4 Visual Consumer Recorded Video Encoders Sold in any Calendar Year; and (ii) a maximum royalty payable by a Legal Entity in each Calendar Year of [***] (U.S. $[***]); provided, however, that the foregoing subsection (i) shall be applicable to [***] within an Enterprise in any Calendar Year.

3.1.2.1 The royalty payable for the sublicense granted pursuant to Section 2.2 hereof shall be [***] (U.S. $[***]) upon the Sale of each MPEG-4 Visual Consumer Recorded Video Encoder Manufactured or Sold in a country in which there is in force one or more MPEG-4 Visual Patent Portfolio Patent(s) that would be infringed absent a license hereunder.

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3.1.2.2 The royalty for the sublicense granted pursuant to Section 2.2 hereof shall be [***] (U.S. $[***]) upon the Sale of each MPEG-4 Visual Consumer Recorded Video Encoder.

***CONFIDENTIAL TREATMENT REQUESTED

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MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

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3.1.2.3 The royalty for the sublicense granted pursuant to Section 2.2 hereof shall be [***] (U.S. $[[***]) per Legal Entity per Calendar Year or part thereof.

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3.1.3    MPEG-4 Visual Internet Video Decoders.    At the option of Licensee, the royalty for the sublicense granted pursuant to Section 2.3 hereof shall be that specified in either subparagraphs 3.1.3.1., 3.1.3.2 or 3.1.3.3. For Licensees which have elected to pay royalties pursuant to Articles 3.1.3.1 or 3.1.3.2, there shall be (i) no royalties payable for the first [***] MPEG-4 Visual Internet Decoders Sold in any Calendar Year; and (ii) a maximum royalty payable by a Legal Entity in each Calendar Year of [***] (U.S. $[***]); provided, however, that the foregoing subsection (i) shall be applicable to [***] within an Enterprise in any Calendar Year.

3.1.3.1 The royalty payable for the sublicense granted pursuant to Section 2.3 hereof shall be [***] (U.S. $[***]) upon the Sale of each MPEG-4 Visual Internet Video Decoder Manufactured or Sold in a country in which there is in force one or more MPEG-4 Visual Patent Portfolio Patent(s) that would be infringed absent a license hereunder.

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3.1.3.2 The royalty for the sublicense granted pursuant to Section 2.3 hereof shall be [***] (U.S. $[***]) upon the Sale of each MPEG-4 Visual Internet Video Decoder.

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3.1.3.3 The royalty for the sublicense granted pursuant to Section 2.3 hereof shall be [***] (U.S. $[***]) per Legal Entity per Calendar Year or part thereof.

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***CONFIDENTIAL TREATMENT REQUESTED

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MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

3.1.4    MPEG-4 Visual Internet Video Encoders.    At the option of Licensee, the royalty for the sublicense granted pursuant to Section 2.4 hereof shall be that specified in either subparagraphs 3.1.4.1, 3.1.4.2, or 3.1.4.3. For Licensees which have elected to pay royalties pursuant to subparagraphs 3.1.4.1 or 3.1.4.2, there shall be (i) no royalties payable for the first [***] MPEG-4 Visual Internet Video Encoders Sold in any Calendar Year; and (ii) a maximum royalty payable by a Legal Entity in each Calendar Year of [***] (U.S. $[***]); provided, however, that the foregoing subsection (i) shall be applicable to [***] within an Enterprise in any Calendar Year.

3.1.4.1 The royalty payable for the sublicense granted pursuant to Section 2.4 hereof shall be [***] (U.S. $[***]) upon the Sale of each MPEG-4 Visual Internet Video Encoder Manufactured or Sold in a country in which there is in force one or more MPEG-4 Visual Patent Portfolio Patent(s) that would be infringed absent a license hereunder.

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3.1.4.2 The royalty for the sublicense granted pursuant to Section 2.4 hereof shall be [***] (U.S. $[***]) upon the Sale of each MPEG-4 Visual Internet Video Encoder.

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3.1.4.3 The royalty for the sublicense granted pursuant to Section 2.4 hereof shall be [***] (U.S. $[***]) per Legal Entity per Calendar Year or part thereof.

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3.1.5    MPEG-4 Visual Internet Video Encoder and Decoder Use.    At the option of Licensee, the royalty for the sublicense granted pursuant to Section 2.5 hereof shall be that specified in either subparagraphs 3.1.5.1, 3.1.5.2, or 3.1.5.3. For Licensees which have elected to pay royalties pursuant to subparagraphs 3.1.5.1 and 3.1.5.2 there shall be (i) no royalties payable for the first [***] MPEG-4 Visual Internet Video Encoder and Decoder Subscribers in any Calendar Year; and (ii) a maximum royalty payable by a Legal Entity in each Calendar Year of [***] (U.S. $[***]); provided, however, that the foregoing

***CONFIDENTIAL TREATMENT REQUESTED

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MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

subsection (i) shall be applicable to [***] within an Enterprise in any Calendar Year.

3.1.5.1 The royalty payable for the sublicense granted pursuant to Section 2.5 hereof shall be either (i) [***] (U.S. $[***]) per Subscriber per Calendar Year where the MPEG-4 Visual Internet Video Decoder or Encoder is used in a country in which there is in force one or more MPEG-4 Visual Patent Portfolio Patent(s) that would be infringed by such use absent a license hereunder or (ii) [***] (U.S. $[***]) for each Subscriber per Calendar Year.

initial selection
(specify subparagraph (i) or (ii))

3.1.5.2 The royalty for the sublicense granted pursuant to Section 2.5 hereof shall be (i) [***] (U.S. $[***]) per minute per Subscriber of MPEG-4 Visual Internet Video Transmitted to a Subscriber if the use of an MPEG-4 Visual Internet Video Encoder or Decoder in connection with such Transmission occurred in a country in which there is in force one or more MPEG-4 Visual Patent Portfolio Patent(s) that would be infringed by such use absent a license hereunder or (ii) $[***] per minute for each Subscriber of MPEG-4 Visual Internet Video Transmitted to a Subscriber.

initial selection
(specify subparagraph (i) or (ii))

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3.1.5.3 The royalty for the sublicense granted pursuant to Section 2.5 hereof shall be [***] (U.S. $[***]) per Legal Entity per Calendar Year or part thereof.

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3.1.6    MPEG-4 Visual Mobile Video Decoders.    At the option of Licensee, the royalty for the sublicense granted pursuant to Section 2.6 hereof shall be that specified in either subparagraph 3.1.6.1., 3.1.6.2 or 3.1.6.3. For Licensees which have elected to pay royalties pursuant to Articles 3.1.6.1 and 3.1.6.2, there shall be (i) no royalties payable for the first [***] MPEG-4 Visual Mobile Video Decoders Sold in any Calendar Year; and (ii) a maximum royalty payable by a Legal Entity in each Calendar Year

***CONFIDENTIAL TREATMENT REQUESTED

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MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

of [***] (U.S. $[***]); provided, however, that the foregoing subsection (i) shall be applicable to [***] within an Enterprise in any Calendar Year.

3.1.6.1 The royalty payable for the sublicense granted pursuant to Section 2.6 hereof shall be [***] (U.S. $[***]) upon the Sale of each MPEG-4 Visual Mobile Video Decoder Manufactured or Sold in a country in which there is in force one or more MPEG-4 Visual Patent Portfolio Patent(s) that would be infringed absent a license hereunder.

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3.1.6.2 The royalty for the sublicense granted pursuant to Section 2.6 hereof shall be [***] (U.S. $[***]) upon the Sale of each MPEG-4 Visual Mobile Video Decoder.

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3.1.6.3 The royalty for the sublicense granted pursuant to Section 2.6 hereof shall be [***] (U.S. $[***]) per Legal Entity per Calendar Year or part thereof.

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3.1.7    MPEG-4 Visual Mobile Video Encoders.    At the option of Licensee, the royalty for the sublicense granted pursuant to Section 2.7 hereof shall be that specified in either subparagraphs 3.1.7.1, 3.1.7.2, or 3.1.7.3. For Licensees which have elected to pay royalties pursuant to Articles 3.1.7.1 or 3.1.7.2, there shall be (i) no royalties payable for the first [***] MPEG-4 Visual Mobile Video Encoders Sold in any Calendar Year; and (ii) a maximum royalty payable by a Legal Entity in each Calendar Year of [***] (U.S. $[***]); provided, however, that the foregoing subsection (i) shall be applicable to [***] within an Enterprise in any Calendar Year.

3.1.7.1 The royalty payable for the sublicense granted pursuant to Section 2.7 hereof shall be [***] (U.S. $[***]) upon the Sale of each MPEG-4 Visual Mobile Video Encoder Manufactured or Sold in a country in which there is in force one or

***CONFIDENTIAL TREATMENT REQUESTED

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MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

more MPEG-4 Visual Patent Portfolio Patent(s) that would be infringed absent a license hereunder.

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3.1.7.2 The royalty for the sublicense granted pursuant to Section 2.7 hereof shall be [***] (U.S. $[***]) upon the Sale of each MPEG-4 Visual Mobile Video Encoder.

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3.1.7.3 The royalty for the sublicense granted pursuant to Section 2.7 hereof shall be [***] (U.S. $[***]) per Legal Entity per Calendar Year or part thereof.

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3.1.8    MPEG-4 Visual Mobile Video Encoder and Decoder Use.    At the option of Licensee, the royalty for the sublicense granted pursuant to Section 2.8 hereof shall be that specified in either subparagraphs 3.1.8.1, 3.1.8.2, or 3.1.8.3. For Licensees which have elected to pay royalties pursuant to subparagraphs 3.1.8.1 or 3.1.8.2 there shall be (i) no royalties payable for the first [***] MPEG-4 Visual Mobile Video Encoder and Decoder Subscribers in any Calendar Year; and (ii) a maximum royalty payable by a Legal Entity in each Calendar Year of [***] (U.S. $[***]); provided, however, that the foregoing subsection (i) shall be applicable to [***] within an Enterprise in any Calendar Year.

3.1.8.1 The royalty payable for the sublicense granted pursuant to Section 2.8 hereof shall be either (i) [***] (U.S. $[***]) per Subscriber per Calendar Year where the MPEG-4 Visual Mobile Video Decoder or Encoder is used in a country in which there is in force one or more MPEG-4 Visual Patent Portfolio Patent(s) that would be infringed by such use absent a license hereunder or (ii) [***] (U.S. $[***]) for each Subscriber per Calendar Year.

***CONFIDENTIAL TREATMENT REQUESTED

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MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

initial selection
(specify subparagraph (i) or (ii))

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3.1.8.2 The royalty for the sublicense granted pursuant to Section 2.8 hereof shall be (i) [***] (U.S. $[***]) per minute per Subscriber of MPEG-4 Visual Mobile Video Transmitted to a Subscriber if the use of an MPEG-4 Visual Mobile Video Encoder or Decoder in connection with such Transmission occurred in a country in which there is in force one or more MPEG-4 Visual Patent Portfolio Patent(s) that would be infringed by such use absent a license hereunder or (ii) U.S. $[***] per minute for each Subscriber of MPEG-4 Visual Mobile Video Transmitted to a Subscriber.

initial selection
(specify subparagraph (i) or (ii))

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3.1.8.3 The royalty for the sublicense granted pursuant to Section 2.8 hereof shall be [***] (U.S. $[***]) per Legal Entity per Calendar Year or part thereof.

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3.1.9    MPEG-4 Visual Unique Use Video Decoders.    At the option of Licensee, the royalty for the sublicense granted pursuant to Section 2.9 hereof shall be that specified in either subparagraph 3.1.9.1., 3.1.9.2 or 3.1.9.3. For Licensees which have elected to pay royalties pursuant to Articles 3.1.9.1 and 3.1.9.2, there shall be (i) no royalties payable for the first [***] MPEG-4 Visual Unique Use Video Decoders Sold in any Calendar Year; and (ii) a maximum royalty payable by a Legal Entity in each Calendar Year of [***] (U.S. $[***]); provided, however, that the foregoing subsection (i) shall be applicable to [***] within an Enterprise in any Calendar Year.

3.1.9.1 The royalty payable for the sublicense granted pursuant to Section 2.9 hereof shall be [***] (U.S. $[***]) upon the Sale of each MPEG-4 Visual Unique Use Video Decoder Manufactured or Sold in a country in which there is in force one or

***CONFIDENTIAL TREATMENT REQUESTED

19

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

more MPEG-4 Visual Patent Portfolio Patent(s) that would be infringed absent a license hereunder.

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3.1.9.2 The royalty for the sublicense granted pursuant to Section 2.9 hereof shall be [***] (U.S. $[***]) upon the Sale of each MPEG-4 Visual Unique Use Video Decoder.

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3.1.9.3 The royalty payable for the sublicense granted pursuant to Section 2.9 hereof shall be [***] (U.S. $[***]) per Legal Entity per Calendar Year or part thereof.

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3.1.10    MPEG-4 Visual Unique Use Video Encoders.    At the option of Licensee, the royalty for the sublicense granted pursuant to Section 2.10 hereof shall be that specified in either subparagraphs 3.1.10.1, 3.1.10.2 or 3.1.10.3. For Licensees which have elected to pay royalties pursuant to subparagraphs 3.1.10.1 or 3.1.10.2, there shall be (i) no royalties payable for the first [***] MPEG-4 Visual Unique Use Video Encoders Sold in any Calendar Year; and (ii) a maximum royalty payable by a Legal Entity in each Calendar Year of [***] (U.S. $[***]); provided, however, that the foregoing subparagraph (i) shall be applicable to [***] within an Enterprise in any Calendar Year.

3.1.10.1 The royalty payable for the sublicense granted pursuant to Section 2.10 hereof shall be [***] (U.S. $[***]) upon the Sale of each MPEG-4 Visual Unique Use Video Encoder Manufactured or Sold in a country in which there is in force one or more MPEG-4 Visual Patent Portfolio Patent(s) that would be infringed absent a license hereunder.

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***CONFIDENTIAL TREATMENT REQUESTED

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3.1.10.2 The royalty for the sublicense granted pursuant to Section 2.10 hereof shall be [***] (U.S. $[***]) upon the Sale of each MPEG-4 Visual Unique Use Encoder.

initial selection

-OR-

3.1.10.3 The royalty for the sublicense granted pursuant to Section 2.10 hereof shall be [***] (U.S. $[***]) per Legal Entity per Calendar Year or part thereof.

initial selection

-OR-

3.1.11    MPEG-4 Visual Unique Use Video Decoder and Encoder Use.    The royalty for the sublicense granted pursuant to Section 2.11 hereof shall be [***] (U.S. $[***]) upon the Sale of each MPEG-4 Visual Unique Use Video Decoder Sold in a country in which there is in force one or more MPEG-4 Visual Patent Portfolio Patent(s) that would be infringed absent a license hereunder.

3.1.12    MPEG-4 Visual Stored Video Decoders and Decoder Use.    At the option of Licensee, the royalty for the sublicense granted pursuant to Section 2.12 hereof shall be that specified in either subparagraphs 3.1.12.1, 3.1.12.2 or 3.1.12.3. For Licensees which have elected to pay royalties pursuant to subparagraphs 3.1.12.1 and 3.1.12.2, there shall be (i) no royalties payable for the first [***] MPEG-4 Visual Stored Video Decoders Sold in any Calendar Year; and (ii) a maximum royalty payable by a Legal Entity in each Calendar Year of [***] (U.S. $[***]); provided, however, that the foregoing subsection (i) shall be applicable to [***] within an Enterprise in any Calendar Year.

3.1.12.1 The royalty payable for the sublicense granted pursuant to Section 2.12 hereof shall be [***] (U.S. $[***]) upon the Sale of each MPEG-4 Visual Stored Video Decoder Manufactured or Sold in a country in which there is in force one or more MPEG-4 Visual Patent Portfolio Patent(s) that would be infringed absent a license hereunder.

initial selection

***CONFIDENTIAL TREATMENT REQUESTED

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MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

-OR-

3.1.12.2 The royalty for the sublicense granted pursuant to Section 2.12 hereof shall be [***] (U.S. $[***]) upon the Sale of each MPEG-4 Visual Stored Video Decoder.

initial selection

-OR-

3.1.12.3 The royalty for the sublicense granted pursuant to Section 2.12 hereof shall be [***] (U.S. $[***]) per Legal Entity per Calendar Year or part thereof.

initial selection

-OR-

3.1.13    MPEG-4 Visual Stored Video Encoders and Encoder Use.    The royalty for the sublicense granted pursuant to Section 2.13 hereof shall be that specified in subsection 3.1.13.1 computed in accordance with subparagraphs 3.1.13.3 and 3.1.13.4, except that a Licensee which is a Transmitter of MPEG-4 Visual Stored Video may, in lieu of subparagraph 3.1.13.1, select the royalty payment option in subparagraph 3.1.13.2.

3.1.13.1 The royalty payable for the sublicense granted pursuant to Section 2.13 hereof shall be [***] (U.S. $ [***]) per [***] of Running Time of MPEG-4 Visual Stored Video that is encoded or Transmitted (up to a maximum royalty of [***] (U.S. $[***]) per Movie) where the Transmission or encoding on stored media occurs in a country in which there is in force one or more MPEG-4 Visual Patent Portfolio Patent(s) that would be infringed by such Transmission or encoding absent a license hereunder.

initial selection

-OR-

3.1.13.2 The royalty payable for the sublicense granted pursuant to Section 2.13 hereof for a Transmitter-Licensee shall be [***] (U.S. $[***]) per [***] of Running Time of MPEG-4 Visual Stored Video that is encoded or Transmitted (up to a maximum

***CONFIDENTIAL TREATMENT REQUESTED

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MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

royalty of [***] (U.S. $[***]) per Movie.

initial selection

-OR-

3.1.13.3 Royalties payable pursuant to Sections 3.1.13.1 and 3.1.13.2 shall be [***] the amount specified in those subsections for the encoding or Transmission of MPEG-4 Visual Stored Video that is Sold more than [***] Calendar Years after the first date on which such video was either (i) copyrighted or (ii) eligible for copyright protection under any state, provincial or national law.

3.1.13.4 The maximum royalty payable for a Single MPEG-4 Visual Stored Video with Running Time of [***] shall be either (i) [***] (U.S. $[***]) under subsection 3.1.13.1 or (ii) [***] (U.S. $[***]) per Transmission or encoding of a single MPEG-4 Visual Stored Video with Running Time of [***] for a Transmitter-Licensee which elects to pay royalties pursuant to subparagraph 3.1.13.2.

3.1.14    Enterprise License.    The royalty payable for the sublicense granted to an Enterprise pursuant to Section 2.14 hereof shall be the following:

•

For each Calendar Year 2004 and 2005 or part thereof: $[***] (U.S. $[***]).



•

For each Calendar Year 2006 and 2007 or part thereof: $[***] (U.S. $[***]).



•

For Calendar Year 2008 or part thereof: $[***] (U.S. $[***]).

initial selection

3.2    Applicable Royalty Payments.    The royalties set forth in this Article 3 are additive as to each MPEG-4 Visual Royalty Product to the extent that individual royalties specified in subparagraphs 3.1.1 through 3.1.13 are applicable thereto including, without limitation, when multiple such MPEG-4 Visual Royalty Product(s) are included in a single product Sold to an End User; except that only [***] is payable on a [***] licensed pursuant to subparagraphs [***] hereof, or a [*** ]

***CONFIDENTIAL TREATMENT REQUESTED

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MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

[***] licensed pursuant to subparagraphs [***] hereof regardless of the royalty payment option elected by Licensee for such licenses. No royalties shall be payable under subsections [***] for the license granted under sections [***] in the event, and only in the event, that Licensee [***], for which a royalty is paid under the terms hereof, an [***], [***] or an [***] that has no function and no capability other than [***], with which it is transmitted or replicated.

3.3    Election of License and Royalty Payment Options.    License and royalty payment options provided to Licensees under Articles 2 and 3 may be elected [***] by each Licensee by written notice to the Licensing Administrator in the form of Attachments A and B hereto. Such notice shall only be effective if received by the Licensing Administrator by [***] of the Calendar Year prior to the Calendar Year to which such royalty election applies. If no such election is received by the Licensing Administrator by such date, Licensee's prior election shall apply.

3.4    The Payment of Running Royalties Upon the Sale of MPEG-4 Visual Internet, Mobile, and Unique Use Video Decoders, MPEG-4 Visual Internet, Mobile, and Unique Use Video Encoders, or Any Combination of the Above Said in an Encrypted, Disabled, or Otherwise Unusable Form (for purposes of this Section 3.4, collectively "Encrypted Products").

3.4.1 Royalties pursuant to this Article 3 are payable upon the Sale of Encrypted Products in which the MPEG-4 Visual functionality of the Encrypted Product is encrypted, disabled or otherwise unusable only:

3.4.1.1 upon the distribution of a key or other instrumentality allowing the Encrypted Product to be used to decode and/or encode bit streams compliant with the MPEG-4 Visual Standards; or

3.4.1.2 if the encryption, disablement or other method employed to prevent use of the Encrypted Product is generally breached; royalties for all such Encrypted Products Sold shall become payable pursuant to Article 3; or

3.4.1.3 if Licensee fails to take reasonable steps to insure that the MPEG-4 Visual functionality is encrypted, disabled or otherwise unusable, royalties for all such Encrypted Products Sold shall become payable pursuant to Article 3.

3.5    Payment Schedule.

3.5.1    Payment of Royalties.    Except as provided in Section 3.6 hereof, royalties payable pursuant to Article 3 of this Agreement that accrue after

***CONFIDENTIAL TREATMENT REQUESTED

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MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

the latest signature date specified on the final page of this Agreement shall be payable by Licensee to the Licensing Administrator [***] as measured from such signature date to the last business day of each [***] period thereafter for MPEG-4 Visual Royalty Products Manufactured or Sold during the immediately preceding [***] period ending on the last business day of the [***] preceding the month when royalties are payable; except that royalties payable to the Licensing Administrator pursuant to subparagraphs 3.1.1.3, 3.1.2.3, 3.1.3.3, 3.1.4.3, 3.1.5.3, 3.1.6.3, 3.1.7.3, 3.1.8.3, 3.1.9.3, 3.1.10.3, 3.1.12.3 or 3.1.14 hereof shall be paid no later than [***] of the Calendar Year to which such royalty payment applies. Except as provided in Section 3.11, such royalties shall be paid to the Licensing Administrator and shall be accompanied by a statement pursuant to Section 3.11 of this Agreement, which statement shall be deemed to be true and correct unless shown otherwise in an audit in accordance with Section 3.12 of this Agreement.

3.5.2    Back Royalties.    Except as provided in Paragraph 3.5.3, any royalties pursuant to the above schedule which accrued during the period from [***] to the latest signature date of this Agreement shall be payable within [***] of such signature date or end of accrual period, together with accrued interest of [***] per annum from the date of Sale of the MPEG-4 Visual Royalty Product to which the royalty applies, and shall be accompanied by a royalty statement in accordance with Section 3.11 of this Agreement.

3.5.3    Grace Period.    In consideration of Licensee's early promotion and use of the MPEG-4 Visual Standard and Licensee's execution of this Agreement within the first [***] during which the MPEG-4 Visual Patent Portfolio License is offered, no royalties will be due or payable for any MPEG-4 Visual Royalty Product Sold by Licensee after [***] and prior to [***]. Any Sale after [***] is subject to royalty payments regardless of Manufacture date.

3.6    Payments Upon Termination or Expiration.    Within [***] after the effective date of termination or expiration of this Agreement, Licensee shall pay the Licensing Administrator any and all amounts that are due pursuant to this Agreement as of the effective date of such termination or expiration, together with applicable royalty statements for such payment in accordance with Section 3.11 of this Agreement.

3.7    Form of Payment.    Any payment made under the provisions of this Agreement shall be made in United States Dollars and by check drawn on a bank(s) reasonably acceptable to the Licensing Administrator, by cashier's check drawn on immediately available funds, or by other means of payment acceptable to the Licensing Administrator.

***CONFIDENTIAL TREATMENT REQUESTED

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MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

3.8    Taxes.    In addition to the royalties set forth in Article 3 of this Agreement, Licensee shall pay or reimburse the Licensing Administrator for any and all taxes, such as sales, excise, value added, use taxes, and similar taxes of the Licensee, based on payments to be made hereunder in a jurisdiction(s) where such taxes are required. The royalties set forth in Article 3 of this Agreement shall be subject to withholding of any taxes of the Licensors required by applicable law, Licensors being the effective beneficial owner of all royalties.

3.8.1 At the Licensee's request, the Licensing Administrator shall file any certificate or other document which may cause any tax that is so payable by the Licensee to be avoided or reduced.

3.8.2 The Licensee shall not be required to pay or reimburse the Licensing Administrator for taxes based upon the net worth, capital, net income, or franchise of the Licensing Administrator, nor for taxes imposed upon the Licensing Administrator solely by reason of the Licensing Administrator's doing business in or being incorporated in the jurisdiction imposing such taxes.

3.8.3 The Licensee shall reasonably cooperate with the Licensing Administrator in respect of mitigating any withholding taxes, including providing such information as may be required by the Licensing Administrator for purposes of obtaining refunds of any taxes withheld.

3.8.4 The Licensing Administrator shall reasonably cooperate and provide such information as may be required by the Licensee for any purpose or reason relating to taxation.

3.8.5 If the Licensee in good faith contests any tax that is so payable or reimbursable by the Licensee, the Licensing Administrator shall reasonably cooperate in such contest at the Licensee's expense.

3.8.6 The Licensing Administrator shall pass on to the Licensee any tax refunds received by the Licensing Administrator with respect to the Licensee's previous payment or reimbursement of applicable taxes hereunder, if any.

3.9    Late Payments.    Any payment required hereunder that is made late (including unpaid portions of amounts due) shall bear interest, compounded monthly, at the lesser of [***] per annum or the highest interest rate permitted to be charged by the Licensing Administrator under applicable law.

3.9.1 Any payment received more than [***] after becoming due as set forth in Section 3.5 of this Agreement shall be deemed late for purposes of this Agreement.

3.9.2 Any interest charged or paid in excess of the maximum rate permitted by applicable law shall be deemed the result of a mistake and interest paid in

***CONFIDENTIAL TREATMENT REQUESTED

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MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

excess of the maximum rate shall be promptly credited or refunded (at Licensee's option) to Licensee.

3.10    Dishonored Checks.    If a payment due under this Agreement is made by Licensee's check and the check is dishonored, the payment may, at the Licensing Administrator's option, be deemed not to have been made. The Licensing Administrator may, at its option, by written notice to Licensee, require subsequent payments to be made by wire transfer or cashier's check in immediately available funds.

3.11    Statements.    Licensee shall provide the Licensing Administrator with a statement for each period as defined in subparagraph 3.5.1. Such statement shall, when applicable, prominently identify under which paragraph and/or subparagraph of Article 3 Licensee has elected to pay royalties. For Licensees which have elected to pay royalties pursuant to subparagraphs 3.1.1.1, 3.1.2.1, 3.1.3.1, 3.1.4.1, 3.1.5.1(i), 3.1.5.2(i), 3.1.6.1, 3.1.7.1, 3.1.8.1(i), 3.1.8.2(i), 3.1.9.1, 3.1.10.1, 3.1.11, 3.1.12.1 and 3.1.13.1 such statements shall show in reasonable detail and separately identify for each MPEG-4 Visual Royalty Product both (i) the quantity and country of Manufacture of any and all MPEG-4 Visual Royalty Products Sold by Licensee during such reporting period and (ii) the quantity and country of Sale of any and all MPEG-4 Visual Royalty Products Sold by Licensee during such reporting period, and a calculation of the royalties, if any, which are payable by virtue of such Manufacture and Sale of MPEG-4 Visual Royalty Products during the period when the payment, if any, accrued. For Licensees which have elected to pay royalties pursuant to subparagraph 3.1.1.2, 3.1.2.2, 3.1.3.2, 3.1.4.2, 3.1.5.1(ii), 3.1.5.2(ii), 3.1.6.2, 3.1.7.2, 3.1.8.1(ii), 3.1.8.2(ii), 3.1.9.2, 3.1.10.2, 3.1.12.2 and 3.1.13.2 such statements shall show in reasonable detail and separately identify for each MPEG-4 Visual Product the quantity Sold during such period, and a calculation of the royalties, if any, which are payable by virtue of such Sale of MPEG-4 Visual Royalty Products during the period when the payment, if any, accrued. For Licensees which have elected to pay royalties pursuant to Sections 3.1.1.3, 3.1.2.3, 3.1.3.3, 3.1.4.3, 3.1.5.3, 3.1.6.3, 3.1.7.3, 3.1.8.3, 3.1.9.3, 3.1.10.3, 3.1.12.3 and 3.1.14 ("Non-Reporting Licensees") no statement is required.

3.11.1 All such statements shall be certified by an employee of Licensee authorized to make such certification.

3.11.2 The Licensing Administrator shall maintain all information in such statements of Licensee as Confidential Information in accordance with Article 5 of this Agreement, except to the extent that the information is needed by the Licensing Administrator to report to the Licensors the aggregate royalties paid by all sublicensees of the Licensing Administrator. In no event shall the Licensing Administrator provide to any of the Licensors information on royalties paid on a licensee-by-licensee basis unless required by law, court order, or rule or regulation.

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MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

3.12    Audits.

3.12.1    Books and Records.    All Licensees, except Non-Reporting Licensees which have paid royalties in each Calendar Year, shall keep and maintain accurate and detailed books and records for each Calendar Year adequate for the Licensing Administrator to ascertain the royalties payable hereunder. Such books and records shall be maintained for [***] from the end of each period when royalties are payable.

3.12.2    Audit Rights.    Except with respect to Non-Reporting Licensees which have paid royalties in each Calendar Year, the Licensing Administrator shall have the right to audit or have audited the books and records of Licensee relating to payments hereunder for the sole purpose of verifying the amounts due and payable hereunder, not more than [***] per Calendar Year (unless any audit reveals a shortfall as provided in this section) upon reasonable notice to the Licensee. All such audits shall be conducted during reasonable business hours of the Licensee.

3.12.2.1 Any such audit shall be performed by an independent certified public accountant(s) or equivalent ("Auditor") acceptable to Licensee, whose consent shall not be unreasonably withheld, in the country where the audit is to take place. Licensee shall fully cooperate with Auditor in conducting such audit and shall permit Auditor to inspect and copy such portions of the Licensee's books and records that the Auditor deems appropriate and necessary in accordance with the professional standards applicable to the Auditor in the country where the audit is to take place.

3.12.2.2 Licensing Administrator shall have the Auditor (and each member or employee thereof participating in the audit) agree not to disclose any information learned by the Auditor in the audit to any Licensor, nor use any such information, except for providing the Licensing Administrator with a statement of payments due by Licensee.

3.12.2.3 The cost of an audit in accordance with Paragraph 3.12.2 of this Agreement shall be at the expense of the Licensing Administrator; provided, however, the Licensee shall bear the cost of the audit if the audit reveals any underpayment which in the aggregate is greater than [***] of the amount actually due for the period being audited.

3.12.2.4 Within [***] after receiving notice from the Licensing Administrator of any shortfalls uncovered, Licensee shall pay any shortfalls plus interest as set forth in Section 3.9

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MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

herein, as measured from the date when such shortfall should have been paid.

4.     REPRESENTATIONS AND WARRANTIES

4.1   The Licensing Administrator represents and warrants that it has the authority, power and right to grant the rights and licenses to Licensee under this Agreement.

4.2   The Licensing Administrator makes no representation or warranty that the MPEG-4 Visual Patent Portfolio Patent(s) sublicensed hereunder includes all MPEG-4 Visual Essential Patent(s) throughout the world, or that the making, using or selling of products, or providing services covered by the claims of the MPEG-4 Visual Patent Portfolio Patent(s) licensed hereunder will not infringe, directly, contributorily, by inducement or otherwise, any patent or other intellectual property right of a party other than the Licensors.

4.3   Licensee represents and warrants that it is entering into this Agreement for its own convenience in acquiring patent rights necessary for compliance with the MPEG-4 Visual Standard from multiple Licensors in a single transaction rather than entering into separate license agreements with individual Licensors, and that Licensee is fully aware that the Patents in the MPEG-4 Visual Patent Portfolio may not include all present and future MPEG-4 Visual Essential Patent(s), and that this Agreement may not provide Licensee with all the patent or other rights needed to perform the activities contemplated by Licensee in entering into this Agreement. The Licensing Administrator and Licensee recognize that Licensee has the right to separately negotiate a license with any or all of the Licensors under any and all of the MPEG-4 Visual Patent Portfolio Patents under terms and conditions to be independently negotiated by each Licensor.

4.4   Licensee represents and warrants that it has not granted an exclusive license under an MPEG-4 Visual Essential Patent owned by Licensee and has not assigned an MPEG-4 Visual Essential Patent in anticipation of entering into this Agreement. Notwithstanding anything to the contrary in this Agreement, Licensors reserve the right to grant to Licensing Administrator an exclusive license under any MPEG-4 Visual Patent Portfolio Patent with respect to any particular party.

4.5   Each party represents and warrants that it will comply with all applicable laws, regulations or ordinances pertaining to its performance hereunder.

4.6   Each party represents and warrants that this Agreement and the transactions contemplated hereby do not violate any agreements to which it is subject as a party or otherwise.

4.7   Each party further represents and warrants that in executing this Agreement it does not rely on any promises, inducements, or representations made by any party or third party with respect to this Agreement or any other business dealings with any party or third party, now or in the future.

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MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

4.8   Each party represents and warrants that it is not presently the subject of a voluntary or involuntary petition in bankruptcy or the equivalent thereof, does not presently contemplate filing any such voluntary petition, and does not presently have reason to believe that such an involuntary petition will be filed against it.

4.9   Other than the express warranties of this Article, there are NO OTHER WARRANTIES, EXPRESS OR IMPLIED.

5.     CONFIDENTIAL INFORMATION

5.1   For a period of [***] as measured from the date of first disclosure pursuant to this Agreement, the Licensing Administrator agrees to use reasonable care and discretion, commensurate with that degree of care it uses to protect similar information of its own, to avoid disclosure, publication, or dissemination of received Confidential Information, outside of those employees, officers or consultants of the Licensing Administrator who have a need to know Confidential Information.

5.2   Disclosure by the Licensing Administrator of Confidential Information under Section 5.1 of this Agreement shall be permitted in the following circumstances; provided, that the Licensing Administrator shall have first given reasonable notice to Licensee that such disclosure is to be made:

5.2.1 In response to an order of a court, legal process or other governmental body;

5.2.2 As otherwise required by law;

5.2.3 As necessary to establish rights under this Agreement; or

5.2.4 If necessary in a proceeding before a governmental tax authority.

5.3   Notwithstanding any other provisions of this Agreement, the obligations specified in Section 5.1 of this Agreement will not apply to any information that:

5.3.1 Is or becomes publicly available without breach of this Agreement; or

5.3.2 Is released for disclosure by written consent of the Licensee.

6.     TERM AND TERMINATION

6.1    Term and Certain Royalty Rates on Renewal.    This Agreement shall expire on December 31, 2008. Upon expiration, this Agreement shall be automatically renewed for successive five (5) year periods for the life of any MPEG-4 Visual Patent Portfolio Patent (unless terminated pursuant to Section 6.4) upon notice of renewal to Licensee by the Licensing Administrator. Renewal may be conditioned upon compliance with any reasonable amendments or changes to the terms and conditions of this Agreement as set forth in such notice. Such

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MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

reasonable change or amendment may take into account prevailing market conditions, changes in technological environment, and available commercial products at the time of each five (5) year renewal. In no event shall the royalty rates applicable to each specific Licensed Product increase upon each renewal of this Agreement by more than [***] of the royalty rates applicable to such specific Licensed Product and specific license grant as set forth in the sublicense immediately prior to renewal.

6.2    Termination for Material Breach.    The Licensing Administrator shall have the right to terminate this Agreement upon breach of a material provision thereof by the Licensee. Subject to Paragraph 6.5.5, such termination for material breach shall become effective upon the Licensing Administrator sending written notice to the Licensee specifying the breach, and the failure of the Licensee to demonstrate, to the satisfaction of the Licensing Administrator, that Licensee has cured such breach within [***] of the sending of such notice. A material breach as that term is used herein shall include, but is not limited to:

6.2.1 Failure of the Licensee to make payments and provide statements in accordance with this Agreement; or

6.2.2 Failure of the Licensee to maintain adequate books and records or to permit an audit in accordance with Article 3 of this Agreement; or

6.2.3 Failure of the Licensee to grant licenses to MPEG-4 Visual Essential Patent(s) licensable or sublicensable by Licensee in accordance with Article 8 of this Agreement; or

6.2.4 Failure of the Licensee to provide notice to customers as provided in Article 7 of this Agreement.

6.3    Partial Termination in the Event of Litigation.    The Licensing Administrator, upon the instruction of a Licensor, shall terminate Licensee's sublicense under any MPEG-4 Visual Patent Portfolio Patent(s) licensed or sublicensed to the Licensing Administrator by such Licensor in the event that the Licensee has brought a lawsuit or other proceeding for infringement of an MPEG-4 Visual Related Patent(s) and/or an MPEG-4 Visual Essential Patent(s) against such Licensor, and Licensee has refused to grant the Licensor a license on fair and reasonable terms and conditions under the MPEG-4 Visual Related Patent(s) and/or MPEG-4 Visual Essential Patent(s) upon which the lawsuit or other proceeding is based. For purposes of this Section 6.3 only, the Licensor's per patent share of royalties payable pursuant to Article 3 of this Agreement shall be presumed to be a fair and reasonable royalty rate for Licensee's Patent(s) considering the essential nature of Licensor's Patent(s) licensed hereunder.

6.4    Voluntary Termination.    Licensee may terminate this Agreement by providing [***] written notice to the Licensing Administrator.

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MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

6.5    Other Terminations.    This Agreement may be terminated by the Licensing Administrator upon the occurrence of the following events:

6.5.1 If Licensee files a petition in bankruptcy or the equivalent thereof, or is the subject of an involuntary petition in bankruptcy that is not dismissed within sixty (60) days after the filing date thereof, or is or becomes insolvent, or admits of a general inability to pay its debts as they become due.

6.5.2 Upon the de facto or de jure nationalization or expropriation of Licensee by governmental or military action, whether or not with valid authority.

6.5.3 Upon any failure by Licensee to provide, within thirty (30) days after written notice from the Licensing Administrator, satisfactory and adequate assurances that Licensee is able and willing to fully and effectively perform its obligations under this Agreement.

6.5.4 Upon Licensee's failure on more than two occasions during the term of this Agreement to pay royalties and provide statements as required by this Agreement.

6.5.5 In the event that any of the events listed in Paragraphs 6.5.1, 6.5.2, 6.5.3 or 6.5.4 hereof occur, this Agreement may be terminated by the Licensing Administrator upon [***] written notice to Licensee, without right to cure.

6.6    Survival.    The following provisions of this Agreement shall survive expiration or termination of this Agreement:

6.6.1 The obligation of Licensee to pay all royalties accrued as of the effective date of expiration or termination pursuant to Article 3 hereof;

6.6.2 The obligation of Licensee to provide statements under Section 3.11 of this Agreement;

6.6.3 The obligation of the Licensing Administrator to maintain confidentiality under Article 5 of this Agreement; and

6.6.4 The obligations of Licensee pursuant to Sections 8.3 and 8.4.

7.     NOTICE TO CUSTOMERS

7.1    Notice.    As a condition to the licenses granted pursuant to Article 2 hereof, Licensee agrees to provide to any party that receives from Licensee an MPEG-4 Visual Royalty Product the applicable notices as set forth below:

7.1.1 With respect to a Licensee offering MPEG-4 Visual Consumer Recorded Video Decoders and/or Encoders the following notice shall be given: USE

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OF THIS PRODUCT IN ANY MANNER THAT COMPLIES WITH THE MPEG-4 VISUAL STANDARD IS PROHIBITED, EXCEPT FOR USE BY A CONSUMER ENGAGING IN PERSONAL AND NON-COMMERCIAL ACTIVITIES.

7.1.2 With respect to a Licensee offering MPEG-4 Visual Internet, Mobile, and Unique Use Video Encoders the following notice shall be given: USE OF THIS PRODUCT IN ANY MANNER THAT COMPLIES WITH THE MPEG-4 VISUAL STANDARD IS PROHIBITED, EXCEPT FOR USE DIRECTLY RELATED TO (A) DATA OR INFORMATION ENCODED BY A CONSUMER FOR PERSONAL AND NON-COMMERCIAL USE WITHOUT REMUNERATION; AND (B) OTHER USES SPECIFICALLY AND SEPARATELY LICENSED BY MPEG LA, L.L.C.

7.1.3 With respect to a Licensee offering MPEG-4 Visual Internet, Mobile, and Unique Use Video Decoders the following notice shall be given: USE OF THIS PRODUCT IN ANY MANNER THAT COMPLIES WITH THE MPEG-4 VISUAL STANDARD IS PROHIBITED, EXCEPT FOR USE DIRECTLY RELATED TO (A) DATA OR INFORMATION (i) GENERATED BY AND OBTAINED WITHOUT CHARGE FROM A CONSUMER NOT THEREBY ENGAGED IN A BUSINESS ENTERPRISE, AND (ii) FOR PERSONAL USE ONLY; AND (B) OTHER USES SPECIFICALLY AND SEPARATELY LICENSED BY MPEG LA, L.L.C.

7.2   Licensing Administrator and Licensee agree that the obligations of Article 7 are a material part of this Agreement and are subject to the terms set forth in Section 6.2 of this Agreement, and that products sold in violation of Article 7 shall not be licensed under the terms of this Agreement.

7.3   In the event a Licensee fails to comply with the Notice requirements of Section 7.1, the Licensing Administrator and/or Licensors may assert against Licensee rights for indemnification for damages caused thereby.

8.     MISCELLANEOUS PROVISIONS

8.1    Assignment.

8.1.1 In the event that the right of the Licensing Administrator to grant MPEG-4 Visual Patent Portfolio Licenses is transferred to a successor Licensing Administrator, this Agreement shall be deemed assigned to the successor Licensing Administrator.

8.1.2 This Agreement may not be assigned by the Licensee.

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MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

8.2    Notice.

8.2.1 All notices required or permitted under this Agreement to Licensee or Licensing Administrator shall be sent by either Certified Mail with return receipt requested, overnight delivery by commercial or other service which can verify delivery, fax to the number indicated herein, or by email to the address indicated herein. Such notice so sent shall be effective as of the date it is sent. Notwithstanding anything to the contrary herein, amendments to Attachment 1 hereto, if any, shall be effective upon the posting of the new Attachment 1 on the website of the Licensing Administrator and such posting shall constitute notice pursuant to this Section.

8.2.2 All notices from the Licensing Administrator to Licensee shall be sent to:

Name:	Jordan Greenhall
Title:	CEO
Company:	DivXNetworks, Inc.
Address:	10350 Science Center Drive Building 14, Suite 140
	San Diego, CA 92121
Tel:	858-909-5303
Fax:	858-909-5301
E-mail:	jgreenhall@DivXNetworks
CC:
Name:
Title:
Company:
Address:
Tel:
Fax:
E-mail:

34

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

8.2.3 All notices from the Licensee to the Licensing Administrator or its successor shall be sent to:

Baryn S. Futa
Manager and Chief Executive Officer
MPEG LA, L.L.C.
250 Steele Street, Suite 300
Denver, Colorado, U.S.A. 80206
Tel: 303-331-1880
Fax: 303-331-1879
E-mail: bfuta@mpegla.com
Website: www.mpegla.com

8.3    Licensee Grant.    Upon full execution of this Agreement, Licensee agrees to grant a worldwide, nonexclusive license and/or sublicense (commensurate to the scope of the licenses which Licensee has selected hereunder) under any and all MPEG-4 Visual Essential Patent(s) that Licensee has the right to license and/or sublicense, to any Licensor or any sublicensee of the Licensing Administrator desiring such a license and/or sublicense on fair and reasonable terms and conditions. For purposes of this Section 8.3 only, the Licensors' per patent share of royalties which are payable pursuant to Article 3 of this Agreement shall be presumed to be a fair and reasonable royalty rate for the aforementioned license and/or sublicense to be granted by the Licensee.

8.4    Licensee's Option.    In lieu of Section 8.3, Licensee shall have the option to hereby grant a worldwide, nonexclusive, nontransferable, except to a successor Licensing Administrator, license and/or sublicense under any and all of its MPEG-4 Visual Essential Patent(s) to the Licensing Administrator with the right by the Licensing Administrator to grant MPEG-4 Visual Patent Portfolio Licenses that include the MPEG-4 Visual Essential Patent(s) that Licensee has the right to license or sublicense. Licensee shall identify to the Licensors any and all of its Patents which Licensee believes in good faith to be MPEG-4 Visual Essential Patent(s). Licensors shall determine whether each of the patent(s) identified by Licensee is an MPEG-4 Visual Essential Patent(s) according to an established procedure applicable to all new Patents identified to the Licensors. The terms and conditions of the license and/or sublicense granted by the Licensee to the Licensing Administrator under this Section 8.4 shall be identical to the terms and conditions of the license and/or sublicense granted by each Licensor to the Licensing Administrator. If Licensee elects the option set forth in this Section 8.4, it shall enter into an agreement referred to as the "Agreement Among Licensors," and other associated agreements which have been entered into by all Licensors.

8.5    Licensee Covenants.

8.5.1 Licensee hereby covenants to promptly notify the Licensing Administrator in the event that any allowed patent application(s) published for

35

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

opposition, which is licensed or sublicensed to the Licensing Administrator pursuant to Section 8.4 of this Agreement as an MPEG-4 Visual Essential Patent(s), does not issue as an MPEG-4 Visual Essential Patent(s).

8.5.2 Licensee shall promptly identify to the Licensing Administrator each patent(s), except for MPEG-4 Visual Patent Portfolio Patents of the Licensors, licensable or sublicensable by Licensee, which Licensee believes in good faith to be an MPEG-4 Visual Essential Patent(s) within [***] of execution of this Agreement.

8.5.3 In the event that Licensee has granted an exclusive license to a third party under an MPEG-4 Visual Essential Patent(s) prior to the date of Licensee's execution of this Agreement, Licensee shall advise the Licensing Administrator of such an exclusive license and identify to the Licensing Administrator such third party.

8.6    Licensing Administrator Covenants.

8.6.1 The Licensing Administrator covenants that if during the term of this Agreement it acquires rights to grant sublicenses under additional MPEG-4 Visual Essential Patent(s), the MPEG-4 Visual Patent Portfolio License herein will be supplemented to include such additional MPEG-4 Visual Essential Patent(s).

8.6.2 The Licensing Administrator covenants that, with the exception of partial termination under Section 6.3 of this Agreement, any deletion from the MPEG-4 Visual Patent Portfolio shall occur only upon a determination by the Licensors, or upon a final adjudication of a tribunal of competent jurisdiction from which no appeal is taken or allowed, that the deleted Patent(s) is invalid or unenforceable in the country which issued or published the Patent(s), and that any addition to the MPEG-4 Visual Patent Portfolio shall occur only upon the determination by the Licensors that the additional Patent(s) is an MPEG-4 Visual Essential Patent(s) in the country which issued or published the Patent(s).

8.6.3 The Licensing Administrator further covenants that if any Patent(s) in the MPEG-4 Visual Patent Portfolio sublicensed by the Licensing Administrator to Licensee pursuant to the terms hereof is found not to be an MPEG-4 Visual Essential Patent(s) in the country which issued or published the Patent(s), either by the Licensors or upon a final adjudication of a tribunal of competent jurisdiction from which no appeal is taken or allowed, and such Patent(s) which is licensed to Licensee is to be deleted from the MPEG-4 Visual Patent Portfolio, the Licensing Administrator shall give notice to Licensee of such deletion, and Licensee shall have the option to retain its sublicense under the deleted Patent(s) for

***CONFIDENTIAL TREATMENT REQUESTED

36

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

the remainder of the term of this Agreement, including any renewal pursuant to Section 6.1 hereunder.

8.6.4 The Licensing Administrator covenants that it shall not delete from or add to the MPEG-4 Visual Patent Portfolio for reasons other than stated in Paragraphs 8.6.1, 8.6.2, 8.6.3 and Section 6.3 herein.

8.6.5 The Licensing Administrator covenants that the royalties for specific Licensed Products as set forth in Article 3 of this Agreement [***].

8.7    Most Favorable Royalty Rates.    Except as provided in Paragraph 8.7.1 of this Agreement, in the event that the Licensing Administrator grants an MPEG-4 Visual Patent Portfolio License to another party with royalty rates more favorable than those set forth in Article 3 of this Agreement as they pertain to the specific products which are licensed hereunder, whether or not such more favorable royalty rates are on terms and/or conditions that are different than those set forth herein, the Licensing Administrator shall send written notice to Licensee specifying the more favorable royalty rates and any terms and/or conditions that are different than those set forth herein within [***] of the granting of the MPEG-4 Visual Patent Portfolio License providing for such more favorable royalty rates. Licensee shall be entitled to an amendment of this Agreement to the extent of providing for royalty rates as favorable as that available to such other party within [***] of sending written notice to the Licensing Administrator requesting such amendment; provided, however, that this Agreement shall also be amended to include any additional terms provided in connection with the more favorable royalty rate as specified by the Licensing Administrator. Any amendment made pursuant to this Section 8.7 shall be effective as of the date it is made, and such more favorable royalty rates shall not be retroactively applicable in favor of the Licensee, and shall not be a basis for claiming any refund of royalties paid or accrued prior to such effective date.

8.7.1 Section 8.7 shall not apply to:

8.7.1.1 Settlement of litigation;

8.7.1.2 Determination by the Licensing Administrator of back royalties owed by a licensee, including any determination made by the Licensing Administrator pursuant to Section 3.5.2;

8.7.1.3 Compromise or settlement of royalty payments owed by a licensee in financial distress;

8.7.1.4 Individual licenses or sublicenses granted by a Licensor to a third party;

8.7.1.5 An order of a court or an administrative body; and

***CONFIDENTIAL TREATMENT REQUESTED

37

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

8.7.1.6 An unauthorized act of the Licensing Administrator.

8.8    Freedom of Independent Development.    Nothing in this Agreement shall be construed as prohibiting or restricting Licensors or Licensee from independently developing any product or service regardless of whether such product or service is competitive with the products or services licensed hereunder.

8.9    Relationship.    Nothing in this Agreement shall be construed to create a principal-agent relationship, partnership or joint venture between the parties, or give rise to any fiduciary duty from one party to the other party.

8.10    Severability.    If any provision of this Agreement is held by a court or tribunal of competent jurisdiction to be unenforceable or contrary to law, the remaining provisions of the Agreement will remain in full force and effect to the extent that the interests of the parties in entering into this Agreement can be realized.

8.11    No Waiver.    The failure of either party at any time to require performance by the other party of any provision of this Agreement shall not be construed as acquiescence or waiver of such failure to perform such provision. The failure of either party to take action upon the breach of any provision of this Agreement shall not be construed as acquiescence or waiver of any such breach.

8.12    Binding on Successors.    This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns to the extent assignment is permitted by this Agreement.

8.13    Article and Section Headings.    The Article and Section headings contained in this Agreement are for reference purposes only and shall not in any way control the meaning or interpretation of this Agreement.

8.14    Representation of Counsel; Mutual Negotiation.    Each party has had the opportunity to be represented by counsel of its choice in negotiating this Agreement. This Agreement shall therefore be deemed to have been negotiated at arm's length, with the advice and participation of counsel, and prepared at the joint request, direction, and instruction of the parties, and shall be interpreted in accordance with its terms without favor to any party.

8.15    English Language.    The parties have agreed that this Agreement and all documents relating thereto be written in English.

8.16    Bankruptcy.

8.16.1 In the event that the Licensing Administrator should file a petition under the federal bankruptcy laws, or that an involuntary petition shall be filed against the Licensing Administrator, the parties intend that Licensee shall be protected in the continued enjoyment of its rights as licensee under the MPEG-4 Visual Patent Portfolio Patents sublicensed hereunder to the maximum feasible extent including, without limitation,

38

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

if it so elects, the protection conferred upon licensees under 11 U.S.C. section 365(n). The Licensing Administrator agrees that it will give Licensee notice of the filing of any voluntary or involuntary petition under the federal bankruptcy laws.

8.16.2 The MPEG-4 Visual Patent Portfolio Patents sublicensed hereunder shall be deemed to be "intellectual property" as the term is defined in 11 U.S.C. section 101(35A). All written agreements entered into in connection with the parties' performances hereunder from time to time shall be considered agreements "supplementary" to this Agreement for purposes of 11 U.S.C. section 365(n).

8.17    Choice of Law.    The validity, construction and performance of this Agreement shall be governed by the substantive law of the State of New York, United States of America, without regard to the conflict of law rules. Licensee hereby irrevocably consents to the personal jurisdiction of the courts located within the State of New York for the resolution of any dispute arising under or in connection with this Agreement.

8.18    Third Party Beneficiaries.    Except as provided in this Section 8.18, nothing in this Agreement shall be construed to give rise to any obligation on either party hereto for the benefit of a third party other than the Licensors or to confer any rights on any third party other than the Licensors. Notwithstanding anything to the contrary herein, any licensee under an MPEG-4 Visual Patent Portfolio License which is in full compliance with its obligations under such License shall be deemed a third party beneficiary of the obligations under Article 8.3 of any other licensee.

8.19    Entire Agreement.

8.19.1 The provisions of this Agreement, including its attachments and any amendments, constitute the entire Agreement between the parties, and supersede any and all prior communications and understandings, oral or written, between the parties or Licensors relating to the subject matter hereof.

8.19.2 Except for supplementation of or deletion from the MPEG-4 Visual Patent Portfolio by the Licensing Administrator, no amendment of this Agreement shall be effective unless such amendment is in writing and specifically references this Agreement, and is signed by all parties hereto. The Licensing Administrator shall promptly notify Licensee of any supplementation of or deletion from the MPEG-4 Visual Patent Portfolio.

8.19.3 Notwithstanding anything to the contrary herein, the Licensing Administrator reserves the right to amend this Agreement in light of

39

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

changing market conditions to effectuate the purpose of the parties in entering into the Agreement.

8.20    Execution in Counterparts.    This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

9.     USE OF MPEG LA, L.L.C. NAME AND LOGO

        Subject to the written approval of the Licensing Administrator, which approval shall not be unreasonably withheld: (1) Licensee shall have the right to indicate on or in connection with its MPEG-4 Visual Royalty Products on which a royalty has been paid pursuant to the terms of this Agreement that such products are licensed by the Licensing Administrator, and (2) Licensee shall have the right to use an MPEG LA, L.L.C. logo on or in connection with its MPEG-4 Visual Royalty Products on which a royalty has been paid pursuant to the terms of this Agreement

		(Licensee)
Date:	5/22/03	By:	/s/ Jordan Greenhall
		MPEG LA, L.L.C.
Date:	Jun 8, 2003	By:	/s/ Baryn S. Futa
			Baryn S. Futa, Manager and CEO

40

FAX TRANSMITTAL

35 Wisconsin Circle, Suite 520
Chevy Chase, Maryland 20815
301 986-6660
FAX 301 986-8575

[MPEG LA LOGO]

Date    November 26, 2002

To    Mr. Jordan Greenhall, DivXNetworks, Inc. (DIVX)

Title    CEO and President

FAX    858-909-5301

From    Michelle Peters, Assistant to the Vice President, Licensing

Pages    3

Re    MPEG-4 Visual Patent Portfolio License

Dear Jordan,

        In an effort to get the license out to you as quickly as possible, we did not enclose a cover letter. See attached cover letter.

Happy Thanksgiving,

/s/ Michelle Peters

35 Wisconsin Circle, Suite 520
Chevy Chase, Maryland 20815
301 986-6660
FAX 301 986-8575

[MPEG LA LOGO]

November 26, 2002

Mr. Jordan Greenhall
CEO and President
DivXNetworks, Inc. (DIVX)
10350 Science Center Drive
Bldg. 14, Suite 140
San Diego, CA 92121

Dear Mr. Greenhall:

        Thank you for your interest in MPEG LA's MPEG-4 Visual Patent Portfolio License.

        We are pleased to offer this License as a convenience to MPEG-4 users in providing fair, reasonable, nondiscriminatory one-stop access to essential MPEG-4 Visual patents owned by 20 different patent owners. Enclosed is the information packet you requested. It contains an execution copy of the MPEG-4 Visual Patent Portfolio License, together with some explanatory information (information also may be found at www.mpegla.com, then go to "MPEG-4 Visual").

        Dean Skandalis (dskandalis@mpegla.com) or I will be glad to answer your questions and walk you through the License execution process, but I want to take this opportunity to point out four features that should simplify your review:

•

The License covers MPEG-4 Visual products from January 1, 2000 forward, but for Licensees that sign the License by [***], no royalties will be payable on products sold through [***].



•

The License provides sublicenses to fit different business models (Section 2 and Attachment A). The sublicenses are organized into five categories so each Licensee can focus on those that apply to its business(es):

(1)    MPEG-4 Visual Consumer Recorded Video (Sections 2.1-2.2)
(2)    MPEG-4 Visual Internet Video (Sections 2.3-2.5)
(3)    MPEG-4 Visual Mobile Video (Sections 2.6-2.8)
(4)    MPEG-4 Visual Unique Use Video (Sections 2.9-2.11)
(5)    MPEG-4 Visual Stored Video (Sections 2.12-2.13)

        An Enterprise License covering Sections 2.1 - 2.12 (but not 2.13) is provided in Section 2.14

***CONFIDENTIAL TREATMENT REQUESTED

•

Royalties corresponding to the Section 2 sublicenses are provided in Section 3.1 and Attachment B (the numbering of the royalty provisions in Section 3.1 corresponds with the numbering of the sublicenses in Section 2).



•

We understand that you may need the benefit of additional business or market information developed over the next several months before you will be able to make the royalty payment elections in Section 3.1 (also Attachment B). Therefore, since royalties will not be payable on products until [***] (for those who sign up early), you may sign the License now but take until [***] to make the election of royalty payment options (Section 3.3). Then, when you are ready to make these elections, you may simply complete Attachment B and send it to us at that time.

        We at MPEG LA hope the MPEG-4 Visual Patent Portfolio License will help you meet your marketplace objectives.

Best regards,

/s/ Lawrence A. Horn

Lawrence A. Horn
Vice President, Licensing

Enc: MPEG-4 Patent Portfolio License

***CONFIDENTIAL TREATMENT REQUESTED

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

ATTACHMENT A

        For the Calendar Year ending on December 31, 2003, ("Initial Period") Licensee has elected to accept a license under the provisions initialed below. If Licensee elects an Enterprise License it must initial the "MPEG-4 Visual Enterprise License" and, at its option, it may also initial only the MPEG-4 Visual Stored Video "Encoder and Encode Use" provision:

[***]

Date:	5/03/22	By:	/s/ R. Jordan Greenhall
			(Licensee)

***CONFIDENTIAL TREATMENT REQUESTED

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

ATTACHMENT A

        For the Calendar Year ending on December 31, 2004, ("Initial Period") Licensee has elected to accept a license under the provisions initialed below. If Licensee elects an Enterprise License it must initial the "MPEG-4 Visual Enterprise License" and, at its option, it may also initial only the MPEG-4 Visual Stored Video "Encoder and Encode Use" provision:

[***]

Date:	4/10/06	By:	/s/ R. Jordan Greenhall
			(Licensee)

***CONFIDENTIAL TREATMENT REQUESTED

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

ATTACHMENT A

        For the Calendar Year ending on December 31, 2005, ("Initial Period") Licensee has elected to accept a license under the provisions initialed below. If Licensee elects an Enterprise License it must initial the "MPEG-4 Visual Enterprise License" and, at its option, it may also initial only the MPEG-4 Visual Stored Video "Encoder and Encode Use" provision:

[***]

Date:	4/10/06	By:	/s/ R. Jordan Greenhall
			(Licensee)

***CONFIDENTIAL TREATMENT REQUESTED

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

ATTACHMENT A

        For the Calendar Year ending on December 31, 2006, ("Initial Period") Licensee has elected to accept a license under the provisions initialed below. If Licensee elects an Enterprise License it must initial the "MPEG-4 Visual Enterprise License" and, at its option, it may also initial only the MPEG-4 Visual Stored Video "Encoder and Encode Use" provision:

[***]

Date:	4/10/06	By:	/s/ R. Jordan Greenhall
			(Licensee)

***CONFIDENTIAL TREATMENT REQUESTED

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

ATTACHMENT B

        For the Calendar Year ending in December 31, 2003, Licensee has elected to pay royalties for Licensed Products pursuant to the following provisions:

[***]

***CONFIDENTIAL TREATMENT REQUESTED

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

[***]

***CONFIDENTIAL TREATMENT REQUESTED

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

[***]

Date:	4/10/06	By:	/s/ R. Jordan Greenhall
			(Licensee)

***CONFIDENTIAL TREATMENT REQUESTED

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

ATTACHMENT B

        For the Calendar Year ending in December 31, 2004, Licensee has elected to pay royalties for Licensed Products pursuant to the following provisions:

[***]

***CONFIDENTIAL TREATMENT REQUESTED

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

[***]

***CONFIDENTIAL TREATMENT REQUESTED

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

[***]

Date:	11/21/03	By:	/s/ R. Jordan Greenhall
			(Licensee)

***CONFIDENTIAL TREATMENT REQUESTED

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

ATTACHMENT B

        For the Calendar Year ending in December 31, 2005, Licensee has elected to pay royalties for Licensed Products pursuant to the following provisions:

[***]

***CONFIDENTIAL TREATMENT REQUESTED

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

[***]

***CONFIDENTIAL TREATMENT REQUESTED

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

[***]

Date:	4/10/06	By:	/s/ R. Jordan Greenhall
			(Licensee)

***CONFIDENTIAL TREATMENT REQUESTED

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

ATTACHMENT B

        For the Calendar Year ending in December 31, 2006, Licensee has elected to pay royalties for Licensed Products pursuant to the following provisions:

[***]

***CONFIDENTIAL TREATMENT REQUESTED

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

[***]

***CONFIDENTIAL TREATMENT REQUESTED

MPEG-4 VISUAL PATENT PORTFOLIO LICENSE (cont'd)

[***]

Date:	4/10/06	By:	/s/ R. Jordan Greenhall
			(Licensee)

***CONFIDENTIAL TREATMENT REQUESTED

July 1, 2004
Revised August 12, 2004

MPEG-4 Visual Attachment 1

Canon, Inc.

US 4,982,270

Competitive Technologies

US 6,580,834

Curitel Communications, Inc.

US 6,215,905
KR 303,685

US 6,351,563

KR 211,917
CNZL 96120293.9

JP 2,823,843

KR 237,359

KR 374,717

France Télécom, société anonyme

US 4,796,087
FR 2,599,577
DE 3767919
GB 248,711
IT 248,711
SE 248,711

US 4,933,762

Fujitsu Limited

US 5,235,618

US 6,104,434

US 6,282,243

US 6,333,949

July 1, 2004
Revised August 12, 2004

MPEG-4 Visual Attachment 1

General Electric Capital Corporation

US 5,068,724

GE Technology Development, Inc.

US 4,706,260

US 4,813,056
DE 3855203
FR 395,709
GB 395,709
JP 2,790,509

Hitachi, Ltd.

JP 2,998,741

JP 3,092,610

JP 3,092,613

JP 3,191,935

JP 3,303,869

US 6,295,376

US 6,574,371
DE 69817460
ES 2205323
FI 884,912
FR 884,912
GB 884,912
IT 884,912
KR 393,123
NL 884,912
SE 884,912

KDDl Corporation

JP 1,835,550

July 1, 2004
Revised August 12, 2004

MPEG-4 Visual Attachment 1

Koninklijke Philips Electronics N.V.

US 4,901,075
JP 2,711,665
KR 118,698

LG Electronics Inc.

US 4,654,484*

US Re.37,568

KR 86,346

Matsushita Electric Industrial Co., Ltd.

US Re.35,910

US 5,223,949

US 5,937,095

US 6,148,109
JP 3,118,237
JP 3,149,417
JP 3,149,418
JP 3,157,144

US 6,292,588

US 6,345,123

US 6,370,276

US 6,408,096

JP 3,135,061
JP 3,135,062

JP 3,186,775
JP 3,197,264

JP 3,232,080
JP 3,232,081

*

Expired March 31, 2004

July 1, 2004
Revised August 12, 2004

MPEG-4 Visual Attachment 1

Microsoft Corporation

US 5,748,789

Mitsubishi Electric Corporation

US 5,072,295
DE 69027820
FR 414,193
GB 414,193
IT 414,193
JP 2,128,624
KR 77,808
NL 414,193
SE 414,193

US 6,097,759

US 6,301,301

JP 1,869,940

JP 2,510,456

JP 3,197,420

Oki Electric Industry Co.

JP 2,898,212

Robert Bosch GmbH

DE 3769306
FR 279,053
GB 279,053
IT 279,053
NL 279,053

Samsung Electronics Co., Ltd.

US 5,654,706

US 6,002,812
KR 252,010

July 1, 2004
Revised August 12, 2004

MPEG-4 Visual Attachment 1

US 6,016,111

US 6,680,975

JP 3,369,422

JP 3,442,028

KR 11,609

KR 132,895

KR 313,870

CNZL 98122956.5

KR 359,093

KR 375,345

SANYO Electric Co., Ltd.

JP 2,812,446

Sharp Kabushiki Kaisha

US 5,815,601

US 5,963,257

US 5,978,515

US 6,023,299

JP 2,951,861

JP 3,122,445

JP 3,145,908

JP 3,408,104

Sony Corporation

US Re.37,222
DE 69031107

July 1, 2004
Revised August 12, 2004

MPEG-4 Visual Attachment 1

FR 424,026
GB 424,026
JP 2,712,645

US 5,191,436
DE 69127224
FR 456,433
GB 456,433
JP 2,874,745
JP 2,877,225
JP 2,969,782
KR 221,889

US 5,298,991
DE 69229153
FR 527,011
GB 527,011

US 5,343,248
JP 2,977,104

US 5,428,396

US 5,481,553
AT 185663
BE 638,218
CH/LI638,218
DE 69421135
DK 638,218
ES 2,137,358
FR 638,218
GB 638,218
GR 3,032,133
IE 638,218
IT 638,218
LU 638,218
MC 638,218
NL 638,218
PT 638,218
SE 638,218

Telenor Communication II AS

US 5,579,413

July 1, 2004
Revised August 12, 2004

MPEG-4 Visual Attachment 1

Toshiba Corporation

US 5,852,469
DE 69624276
FR 732,855
GB 732,855

US 5,930,395

US 6,025,881
DE 69619002
FR 731,614
GB 731,614

US 6,052,150

US 6,408,098

JP 3,011,680

JP 3,030,028

JP 3,164,806

JP 3,233,360

JP 3,275,003

JP 3,417,933

JP 3,417,934

Victor Company of Japan, Ltd.

US Re.34,965
DE 69024235
DE 69030819
FR 379,217
FR 572,046
GB 379,217
GB 572,046
JP 2,072,546

US Re.35,158
DE 69031045

July 1, 2004
Revised August 12, 2004

MPEG-4 Visual Attachment 1

FR 584,840
GB 584,840
JP 2,137,325
NL 584,840

EX-10.17

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 10.17

 *** Text Omitted and Filed Separately
CONFIDENTIAL TREATMENT REQUESTED
Under 17 C.F.R. §§ 200.80(b)(4) and 230.406

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GOOGLE TOOLBAR™ AND GOOGLE DESKBAR™ PROMOTION AND DISTRIBUTION AGREEMENT

        This Google Toolbar and Google Deskbar Promotion and Distribution Agreement, including all exhibits hereto, (collectively referred to as the "Agreement"), effective as of June 18, 2004 (the "Effective Date"), is made by and between DivXNetworks Inc., with offices at 10350 Science Center Drive, San Diego, CA 92121 ("Distributor"), and Google Inc., with offices at 1600 Amphitheater Parkway, Mountain View, CA 94043 (which, with its affiliates, shall be referred to herein as "Google").

SECTION 1.    DEFINITIONS

        The following capitalized terms shall have the meanings set forth below:

1.1   "Bundle" means the Products bundled solely with either DivX or DivX Pro Trial.

1.2   "Deskbar" means the machine-readable binary code version of the Google Deskbar provided, at Google's option, to Distributor in connection with this Agreement, and any modifications, updates or upgrades thereto that Google may provide to Distributor hereunder.

1.3   "Deskbar Installer" means the machine-readable binary code version of the installer provided by Google that installs the Deskbar.

1.4   "Distributor App" means DivX or DivX Pro Trial.

1.5   [ *** ]

1.6   "Distributor Trademarks" means all names, trade names, trademarks, and logos used by Distributor.

1.7   "DivX" means the software bundle that consists of the DivX Player and the DivX codec for PC.

1.8   "DivX Pro" means the software bundle that consists of the DivX Player, the DivX Pro Trial codec for PC, and the software application known as Electrokompressiongraph (EKG) for PC.

1.9   "Downloadable Applications" means any application, software, plug-in, helper, component or other executable code.

1.10 "End User" means an end user of Distributor App.

1.11 "End User License Agreement" or "EULA" means the applicable language and/or country version of the Google Toolbar (or Google Deskbar, as applicable) end user license agreement, which may be updated or modified by Google in its sole discretion from time to time. The EULA will be posted and publicly accessible on the Google web site at http://toolbar.google.com/terms-divx, http://toolbar.google.com/intl/fr/terms-divx, http://toolbar.google.com/intl/de/terms-divx, and http://toolbar.google.com/intl/ja/terms-divx ("URLs") and such URLs will remain in place for the term of this agreement.

1.12 [ *** ]

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1.13 "Google Trademarks" means all names, trade names, trademarks, and logos used by Google in connection with the Products.

1.14 "Products" means the machine-readable binary code versions of the Toolbar and the Toolbar Installer, and, as applicable, the machine-readable binary code versions of the Deskbar and the Deskbar Installer.

1.15 "Successful Installation" means an installation of the Toolbar on an End User's computer and subsequent communication of such Toolbar with a Google server as determined by Google [ *** ] Successful Installation shall not include (a) [ *** ] (b) [ *** ] (c) [ *** ] (d) [ *** ]

1.16 "Tier A Countries" means those countries identified as Tier A in Exhibit B.

1.17 "Tier B Countries" means those countries identified as Tier B in Exhibit B.

1.18 "Tier C Countries" means those countries identified as Tier C in Exhibit B.

1.19 "Toolbar" shall mean the machine-readable binary code version of the Google Toolbar provided to Distributor in connection with this Agreement, and any modifications or updates thereto that Google may provide to Distributor hereunder.

1.20 "Toolbar Installer" shall mean the machine-readable binary code version of the installer provided by Google that installs the Toolbar.

SECTION 2.    LICENSE GRANTS AND RESTRICTIONS

2.1   Products License Grant.    Subject to the terms and conditions of this Agreement, Google hereby grants to Distributor a royalty-free, nontransferable, nonsublicensable, nonexclusive license during the Term to reproduce, market, and distribute Products, in machine-readable binary code format only, directly [ *** ] to End Users and only as bundled solely with Distributor App in accordance with the terms of this Agreement.

2.2   License Grant Restrictions.    Distributor shall not, and shall not allow any third party [ *** ] to: (i) disassemble, de-compile or otherwise reverse engineer the Products or otherwise attempt to learn the source code or algorithms underlying the Products; (ii) except as expressly set forth in this Agreement, provide, sell, license, lease, lend, or disclose the Products to any third party; (iii) use the Products for timeshare, service bureau, or other unauthorized purposes; (iv) distribute the Products bundled or in connection with any software or service other than Distributor App; or (v) exceed the scope of any license granted to Distributor hereunder.

2.3   Trademark License and Use.    Subject to the terms and conditions of this Agreement, Google hereby grants to Distributor a limited, non-exclusive, non-transferable, nonsublicensable, royalty-free license during the Term to use the Google Trademarks, in accordance with Google's usage guidelines, solely to market and promote the Toolbar consistent with this Agreement; provided that all use of the Google Trademarks shall strictly comply with Google's trademark usage guidelines. Google agrees that the Google's trademark usage guidelines applicable to Distributor shall be substantially similar to the usage guidelines generally applicable to other distributors of Google client applications. All uses of Google's Trademark, and all goodwill associated therewith, shall inure solely to the benefit of Google.

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Distributor acknowledges that the Google Trademarks are owned solely by Google, and agrees to use the Google Trademarks only in the form and manner prescribed by Google. Google acknowledges that all Distributor Trademarks are owned solely by Distributor, and agrees to use the Distributor Trademarks only in the form and manner prescribed by Distributor.

2.4   Trademark Restrictions. Distributor shall not remove, modify, adapt, or prepare derivative works of any Google Trademarks, Google copyright notices, or other Google proprietary rights notices.

SECTION 3.    DISTRIBUTION AND OTHER OBLIGATIONS

3.1   Launch; Form of Distribution Offering.    Distributor will begin distribution of Bundles in accordance with this Agreement ("Launch") within [ *** ] following the Effective Date (the "Launch Date"). Distributor will provide written notice of Launch to Google promptly following the Launch Date. The form of any offering of the Toolbar or the Deskbar by Distributor shall be in the form set forth in Exhibit A. No Product, either in whole or in part, shall be offered or distributed in any other way, except with the prior written consent of Google. Without limiting the foregoing sentence, except for End Users as expressly set forth in this Agreement and except as expressly set forth in Section 3.2 below, Distributor shall not offer or distribute the Products to any third party. [ *** ]

3.2   [ *** ]

3.3   Guidelines for Applications.    Distributor agrees that it will comply with the Guidelines for Applications set forth in Exhibit C attached hereto.

3.4   Minimum Distribution Commitment; Underperformance.

        a)    Minimum Distribution Commitment.    Distributor shall distribute Bundles to End Users in Tier A Countries so that either (a) at least [ *** ] ([ *** ]) Bundles per

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calendar month are downloaded by End Users in Tier A Countries, or (b) there are at least [ *** ] ([ *** ]) Successful Installations per calendar month in Tier A Countries (the "Tier A Minimum Distribution Commitment"). The foregoing (b) shall be referred to as the "Tier A Successful Installation Minimum." Distributor shall distribute Bundles to End Users in Tier B Countries so that either (c) at least [ *** ] ([ *** ]) Bundles per calendar month are downloaded by End Users in Tier B Countries, or (d) there are at least [ *** ] ([ *** ]) Successful Installations per calendar month in Tier B Countries (the "Tier B Minimum Distribution Commitment"). The foregoing (d) shall be referred to as the "Tier B Successful Installation Minimum."

b)    Underperformances.    In the event that Distributor fails to achieve either the Tier A Minimum Distribution Commitment or the Tier B Minimum Distribution Commitment in any [ *** ] months during the Term (the "Underperformances Months"), despite Distributor's use of no less than commercially reasonable efforts to achieve the Tier A Minimum Distribution Commitment and the Tier B Minimum Distribution Commitment during such Underperformance Months, then [ *** ] shall have the right to terminate this Agreement by providing the other party with [  *** ] advanced written notice thereof (the "Underperformance Termination Right"); provided, however, [ *** ]

3.5   Maximum Distribution Commitment.    In no event shall any payments be owed, due or payable to Distributor following the achievement of [ *** ] under this Agreement (the "Maximum Distribution Commitment"). For purposes of clarification, the foregoing sentence shall not relieve Google of any payment obligations that have accrued prior to the achievement of the Maximum Distribution Commitment. Google will use commercially reasonable efforts to provide Distributor with [ *** ] advance notice of achievement of the Maximum Distribution Commitment.

3.6   Exclusivity.    [ *** ]

3.7   Installation and Access by End Users.    Notwithstanding anything to the contrary, Distributor's distribution of the Toolbar (or the Deskbar, as applicable) under this Agreement shall include distribution of the Toolbar Installer (or the Deskbar Installer, as applicable) provided by Google. As part of the installation process for the Distributor App, End Users will be provided with an opportunity to install the Toolbar (or the Deskbar, as applicable), [ *** ], solely as set forth in Exhibit A. [ *** ]

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3.8   Language Version(s); Appropriate Bundling.    The parties acknowledge that as of the Effective Date of this Agreement the English, French, German, and Japanese-language versions of the Distributor App are currently available and that Distributor plans to make other language versions available in the future. Upon Distributor's release of additional language versions of the Distributor App, Google will provide corresponding language versions of the Products as available. [  *** ]

3.9   End User License Agreement.    In connection with Distributor's distribution of the Toolbar (or the Deskbar, as applicable) under this Agreement, and before the Toolbar (or the Deskbar, as applicable) can be installed by an End User, Distributor shall provide each End User with (i) a clear statement inviting the End User to agree to the terms of the EULA, (ii) the opportunity for each End User to review the EULA via a hyperlink to the EULA, and (iii) a button on which each End User may click indicating agreement to the terms of the EULA. In the event that an End User does not affirmatively agree to install the Toolbar (or the Deskbar, as applicable), by clicking on the button to agree to the terms of the EULA, then the Toolbar (or the Deskbar, as applicable) shall not be installed on such End User's computer.

3.10 Product Integrity.

        a)    Accurate Reproduction.    Distributor agrees that it will accurately reproduce the Products and will not insert into the Products any viruses, worms, date bombs, time bombs, or other code that is specifically designed to use the Products to cease operating, or to damage, interrupt, or interfere with any Products or End User data. [ *** ]

b)    Product Updates.    In the event Google provides modifications or updates to the Products hereunder, Distributor agrees to within [ *** ] from receipt of such modifications or updates use such modifications or updates in place of and/or as part of prior versions of the Products as appropriate in its distribution of Products hereunder [ *** ]

3.11 Reporting.

        a)    By Distributor.    During the Term, Distributor shall on a [ *** ] basis provide Google [ *** ]

b)    By Google.    During the Term, Google shall on a [ *** ] basis provide Distributor [ *** ]

3.12 Determination of End User Geographic Locations. [ *** ]

3.13 [ *** ]

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[ *** ]

SECTION 4.    DELIVERY; PAYMENT

4.1   Delivery.    Google shall deliver the Products electronically to Distributor at a mutually agreed upon time, but no later than [ *** ] following execution of this Agreement. Google may elect during the Term to provide Distributor with modifications or updates to the Products.

4.2   Payments.

        a)    [ *** ]

b)    [ *** ]

c)     Tier A Installation Payment.    During the Term, if Distributor achieves the Tier A Successful Installation Minimum in a calendar month then, [ *** ], Google shall pay to Distributor either (1) the Tier A Installation Payment for each additional Successful Installation in Tier A Countries during such calendar month, or (2) [  *** ]

d)    Tier B Installation Payment.    During the Term, if Distributor achieves the Tier B Successful Installation Minimum in a calendar month then, [ *** ], Google shall pay to Distributor either (1) the Tier B Installation Payment for each additional Successful Installation in Tier B Countries during such calendar month, or (2) [ *** ]

e)     Tier C Installation Payment.    During the Term, Google shall pay to Distributor either (1) [ *** ] (US$[ *** ]) (the "Tier C Installation Payment") for each Successful Installation in Tier C Countries during each calendar month, or (2) [ *** ]

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f)     [ *** ]

4.3   Payment Terms.    All payments under this Agreement shall be made within [  *** ] following the last day of the calendar month for which the payments are applicable. In the event that the Launch Date or the effective date of expiration or termination of this Agreement occurs on a day other than the first day of a calendar month then the Tier A Minimum Distribution Commitment, the Tier B Minimum Distribution Commitment, and all applicable payment amounts under Section 4.2 of this Agreement shall be pro rated. By way of example only, if the Launch Date is June 12, 2004 then the Tier A Minimum Distribution Commitment only for June of 2004 will be multiplied by 19 divided by 30, the Tier B Minimum Distribution Commitment will be multiplied by 19 divided by 30, and all applicable payment amounts will be multiplied by 19 divided by 30. [  *** ]

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4.4   Taxes.    All payments under this Agreement are exclusive of taxes imposed by any governmental entity. Distributor shall pay any applicable taxes, including sales, use, personal property, value-added, excise, customs fees, import duties or stamp duties or other taxes and duties imposed by governmental agencies of whatever kind and imposed with respect to the transactions under this Agreement, including penalties and interest, but specifically excluding taxes based upon Google's net income. When Google has the legal obligation to collect any applicable taxes, the appropriate amount shall be invoiced to and paid by Distributor "net [  ***  ]" from the data of invoice or other notification. Distributor shall promptly provide to Google: (i) original or certified copies of all tax payments or other sufficient evidence of tax payments at the time such payments are made by Distributor pursuant to this Agreement; or (ii) a valid certificate of Distributor's exemption from obligation to pay such taxes as authorized by the appropriate taxing authority.

4.5   Audit Rights.    During the Term of this Agreement and for a period of [  *** ] following the expiration or termination thereof, either party may, at its own expense, retain a nationally recognized independent auditor mutually agreed to by the parties to review and audit the other party's relevant records pertaining to this Agreement to verify the performance of obligations under this Agreement upon [  *** ] prior written notice. Such audit may be performed up to [  *** ] per [  *** ] and shall: (a) be subject to the other party's reasonable security and confidentiality requirements; and (b) transpire during the other party's normal business hours. In no event shall any audit under this Section 4.5 be performed during the last [  ***  ] of any calendar quarter.

SECTION 5.    TERM AND TERMINATION

5.1   Term.    The initial term of this Agreement shall commence on the Effective Date and, unless earlier terminated as set forth herein, shall end on [  *** ] (the "Initial Term"). This Agreement may be renewed for a period of [  *** ] upon mutual written agreement of the parties (the "Renewal Term"). [  *** ] The Initial Term and the Renewal Term, if any, shall be collectively referred to as the "Term."

5.2   Termination.    Either party may terminate this Agreement: (a) if the other party breaches a material term or condition of this Agreement and fails to cure such breach within [  *** ] after receiving written notice thereof; or (b) if the other party becomes insolvent or makes any assignment for the benefit of creditors or similar transfer evidencing insolvency, or suffers or permits the commencement of any form of insolvency or receivership proceeding, or has any petition under bankruptcy law filed against it, which petition is not dismissed within [  *** ] of such filing, or has a trustee, administrator or receiver appointed for its business or assets or any part thereof. [  *** ]

5.3   Effect of Termination.    Upon expiration or termination of this Agreement: (i) all rights and licenses granted hereunder shall immediately cease; (ii) Distributor will immediately stop reproducing, marketing and distributing the Products; (iii) Distributor will use commercially reasonable efforts to cause all Third Party Distributors to immediately stop offering and distributing the Products; (iv) Distributor shall return or destroy (and a duly appointed officer of Distributor shall certify to such destruction) all copies of the Products and any other Google Confidential Information in its possession; and (v) the fees payable to Distributor hereunder shall immediately cease accruing and Google shall within [  *** ] following such expiration or termination pay to Distributor any undisputed amounts payable which have accrued from the time of the most recent payment to Distributor through the date of termination or expiration of

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this Agreement. Neither party shall be liable to the other for any damages resulting solely from termination of this Agreement as permitted for under this Agreement.

5.4   Survival.    The provisions of Sections 1 (Definitions), 4.3 (Payment Terms) (for a period not to exceed [  *** ] following the end of the calendar month during which the effective date of expiration or termination of this Agreement occurs), 4.5 (Audit Rights) (for the period specified therein), 5.4 (Survival), 6 (Confidential Information), 7 (Proprietary Rights), 8 (Disclaimer of Warranties), 9 (Limitation of Liability), 10 (Indemnification) and 11 (General) shall survive expiration or termination of this Agreement.

SECTION 6.    CONFIDENTIAL INFORMATION

        Each party (the "Receiving Party") agrees that all software (including without limitation binary code), inventions, algorithms, know-how, ideas, business information, customer lists, technical information, and financial information it obtains from the other (the "Disclosing Party") are the confidential property of the Disclosing Party ("Confidential Information"), if conspicuously labeled as "proprietary" or "confidential" or some similar designation or, if disclosed orally or visually, is confirmed in writing labeled as "proprietary" or "confidential" or some similar designation within [  *** ] of such oral or visual disclosure. The Toolbar, the Toolbar Installer, the Deskbar, and the Deskbar Installer are hereby identified as Google's Confidential Information. Except as expressly and unambiguously allowed herein, the Receiving Party will hold in confidence and not use or disclose any of the Confidential Information and shall similarly bind its employees and contractors in writing. The Receiving Party shall not be obligated under this Section 6 with respect to information the Receiving Party can document: (a) is or has become readily publicly available without restriction through no fault of the Receiving Party or its employees or agents; (b) was received without restriction from a third party lawfully in possession of such information and lawfully empowered to disclose such information; (iii) was rightfully in the possession of the Receiving Party without restriction prior to its disclosure by the Disclosing Party; (iv) is independently developed by the Receiving Party by employees without access to the Confidential Information; or (v) is required by law or order of a court, administrative agency or other governmental body to be disclosed by the Receiving Party. Each party's obligation with respect to the other party's Confidential Information shall continue until such time as all of such other party's Confidential Information disclosed under this Agreement becomes publicly known and made generally available through no action or inaction of the receiving party. Each party acknowledges that its breach of this Section 6 may cause irreparable injury to the other for which monetary damages are not an adequate remedy. Accordingly, without limiting any remedies at law or otherwise, either party shall be entitled to injunctions and other equitable remedies in the event of such breach by the other.

SECTION 7.    PROPRIETARY RIGHTS

        Google and/or its licensors own all right, title and interest, including without limitation all rights in copyrights, trademarks, trade secrets, patents and know-how, in and to the Products and the Google Trademarks. Distributor has, and shall acquire, no rights in the foregoing except those expressly granted by this Agreement. Google shall not be restricted from selling, licensing, modifying, or otherwise distributing the Products to any third party. Distributor and/or its licensors own all right, title and interest, including without limitation all rights in copyrights, trademarks, trade secrets, patents and know-how, in and to the Distributor App and the Distributor Trademarks. Google has, and shall acquire, no rights in the foregoing except those expressly granted by this Agreement. Except as set forth in Section 3.3, Distributor shall not be restricted from selling, licensing, modifying, or otherwise distributing the Distributor App (where such Distributor App is not part of a Bundle) to any third party.

SECTION 8.    DISCLAIMER OF WARRANTIES

        THE PRODUCTS ARE PROVIDED "AS IS" AND WITHOUT WARRANTY OF ANY KIND AND GOOGLE EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES, WHETHER EXPRESS, IMPLIED, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT.

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SECTION 9.    LIMITATION OF LIABILITY

        EXCEPT FOR (I) AMOUNTS PAYABLE TO THIRD PARTIES PURSUANT TO THE PARTIES' INDEMNIFICATION OBLIGATIONS, (II) BREACHES OF CONFIDENTIALITY OBLIGATIONS, (III) BREACHES BY DISTRIBUTOR OF SECTION 2 (LICENSE GRANTS AND RESTRICTIONS), (IV) BREACHES BY DISTRIBUTOR OF SECTION 3.2 ([  *** ]), (V) BREACHES BY DISTRIBUTOR OF SECTION 3.6 (EXCLUSIVITY), (VI) BREACHES BY DISTRIBUTOR OF SECTION 3.9 (END USER LICENSE AGREEMENT), AND (VII) BREACHES BY DISTRIBUTOR OF SECTION 3.10(A) (PRODUCT INTEGRITY), NEITHER PARTY WILL BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES, INCLUDING BUT NOT LIMITED TO DAMAGES FOR LOST DATA, LOST PROFITS, LOST REVENUE OR COSTS OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES, HOWEVER CAUSED AND UNDER ANY THEORY OF LIABILITY, INCLUDING BUT NOT LIMITED TO CONTRACT OR TORT (INCLUDING PRODUCTS LIABILITY, STRICT LIABILITY AND NEGLIGENCE), AND WHETHER OR NOT SUCH PARTY WAS OR SHOULD HAVE BEEN AWARE OR ADVISED OF THE POSSIBILITY OF SUCH DAMAGE. EXCEPT FOR (A) AMOUNTS PAYABLE TO THIRD PARTIES PURSUANT TO THE PARTIES' INDEMNIFICATION OBLIGATIONS, (B) BREACHES OF CONFIDENTIALITY OBLIGATIONS, (C) BREACHES BY DISTRIBUTOR OF SECTION 2 (LICENSE GRANTS AND RESTRICTIONS), (D) BREACHES BY DISTRIBUTOR OF SECTION 3.2 ([  *** ]), (E) BREACHES BY DISTRIBUTOR OF SECTION 3.6 (EXCLUSIVITY), (F) BREACHES BY DISTRIBUTOR OF SECTION 3.9 (END USER LICENSE AGREEMENT), AND (G) BREACHES BY DISTRIBUTOR OF SECTION 3.10(A) (PRODUCT INTEGRITY), IN NO EVENT SHALL EITHER PARTY'S TOTAL AGGREGATE LIABILITY FOR ALL CLAIMS ARISING OUT OF THE AGREEMENT EXCEED [  *** ] (US$[  *** ]). THE FOREGOING LIMITATIONS SHALL APPLY NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY STATED HEREIN. The parties agree that (i) the mutual agreements made in this Section reflect a reasonable allocation or risk, and (ii) that each party would not enter into the Agreement without these limitations on liability.

SECTION 10.    INDEMNIFICATION

10.1 [  *** ]

10.2 [  *** ]

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10.3 Conditions of Indemnification.    The obligations set forth in this Section 10 shall exist only if the party seeking indemnification ("Indemnitee"): (i) promptly notifies the Indemnitor of such claim, (ii) provides the Indemnitor with reasonable information, assistance and cooperation in defending the lawsuit or proceeding, and (iii) gives the Indemnitor full control and sole authority over the defense and settlement of such claim. The Indemnitee may join in defense with counsel of its choice at its own expense. THE FOREGOING STATES THE PARTIES' ENTIRE LIABILITY AND EXCLUSIVE REMEDY WITH RESPECT TO INFRINGEMENT OF A THIRD PARTY'S INTELLECTUAL PROPERTY RIGHTS AS SET FORTH ABOVE.

SECTION 11.    GENERAL

11.1 Contact Persons and Notice.    The parties designate the persons below to represent Google or Distributor regarding the activities described in this Agreement and to receive all notices required hereunder.

Distributor:	Google:
Attn: [  *** ] 10350 Science Center Drive Building 14, Suite 140 San Diego, CA 92075 Voice: [  *** ] E-mail: [  *** ]	Attn: [  *** ] 1600 Amphitheatre Parkway Mountain View, CA 94043 Voice: [  *** ] E-mail: [  *** ]
With a copy to:	With a copy to:
DivXNetworks Legal Department 10350 Science Center Drive Building 14, Suite 140 San Diego, CA 92075 Email: drlchter@divxnetworks.com	Google Legal Department 1600 Amphitheatre Parkway Mountain View, CA 94043

Notice shall be deemed given (i) upon receipt when delivered personally, (ii) upon written verification of receipt from overnight courier, (iii) upon verification of receipt of registered or certified mail or (iv) upon verification of receipt via facsimile, provided that such notice is also sent simultaneously via first class mail.

11.2 No Assignment.    This Agreement may not be assigned, in whole or in part, by either party without the prior written consent of the other party[  *** ]

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11.3 Independent Contractors.    The parties hereto are and shall remain independent contractors and nothing herein shall be deemed to create any agency, partnership, or joint venture relationship between the parties. Neither party shall be deemed to be an employee or legal representative of the other nor shall either party have any right or authority to create any obligation on behalf of the other party.

11.4 Force Majeure.    Neither party shall be liable for failing or delaying performance of its obligations resulting from any condition beyond its reasonable control, including but not limited to, governmental action, acts of terrorism, earthquake, fire, flood or other acts of God, labor conditions, power failures, and Internet disturbances.

11.5 Non-Waiver.    Failure by either party to enforce any provision of this Agreement shall not be deemed a waiver of future enforcement of that or any other provision.

11.6 Severability.    If any provision of this Agreement is adjudged by a court of competent jurisdiction to be unenforceable, invalid or otherwise contrary to law, such provision shall be interpreted so as to best accomplish its intended objectives and the remaining provisions of this Agreement shall remain in full force and effect.

11.7 Governing Law; Venue.    The laws of California, excluding California's choice of law rules, and applicable federal U.S. laws shall govern this Agreement. Each party agrees to submit to the personal and exclusive jurisdiction of the courts located in Santa Clara County, California. The parties specifically exclude from application to this Agreement the United Nations Convention on Contracts for the International Sale of Goods and the Uniform Computer Information Transactions Act.

11.8 Entire Agreement; Modification.    This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof. This Agreement supersedes any other prior or collateral agreements, whether oral or written, with respect to the subject matter hereof. Any amendments or modifications to this Agreement must (i) be in writing, (ii) refer to this Agreement, and (iii) be executed by an authorized representative of each party. The Agreement shall be construed as if both parties jointly wrote it.

11.9 Counterparts.    This Agreement may be executed in counterparts, including facsimile counterparts.

11.10 Headings.    The headings and captions used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

11.11 Compliance with Laws.    Each party shall comply with all applicable laws, rules and regulations, if any, including without limitation export laws and regulations, required in performing its obligations under the Agreement.

11.12 Language.    This Agreement is in the English language only, which language shall be controlling in all respects, and all versions hereof in any other language shall not be binding on the parties hereto. All communications and notices to be made or given pursuant to this Agreement shall be in the English language.

11.13 Publicity.    Neither party will issue any public statement or press release regarding this Agreement without the prior written approval of the other party.

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        IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives.

DivXNetworks Inc.		Google Inc.
By:	/s/ Kevin Hell	By:	/s/ Joan Braddi
Name:	Kevin Hell	Name:	Joan Braddi
Title:	Chief Marketing Officer	Title:	VP, Search Services
Date:	6-18-04	Date:	June 18, 2004

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EXHIBIT A
DivX 5.2/Google installer flowchart

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DivX 5.2/Google installer screens

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[GRAPHICS]

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[GRAPHICS]

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[GRAPHICS]

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EXHIBIT B

[ *** ]

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EXHIBIT C
Guidelines for Applications

[ *** ]

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[ *** ]

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[ *** ]

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[ *** ]

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[ *** ]

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[ *** ]

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[ *** ]

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EXHIBIT D

[ *** ]

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EXHIBIT E

[ *** ]

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EXHIBIT F

[ *** ]

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AMENDMENT NUMBER ONE TO THE
GOOGLE TOOLBAR™ AND GOOGLE DESKBAR™ PROMOTION AND
DISTRIBUTION AGREEMENT

        This Amendment Number One ("Amendment One") to the Google Toolbar and Google Deskbar Promotion and Distribution Agreement entered into by and between DivXNetworks Inc. and Google Inc. with an effective date of June 18, 2004 ("Agreement") is entered into as of August 11, 2004 (the "Amendment One Effective Date") by and between DivXNetworks Inc., with offices at 10350 Science Center Drive, San Diego, CA 92121 ("Distributor"), and Google Inc., with offices at 1600 Amphitheatre Parkway, Mountain View, California 94043 ("Google").

        Whereas, Distributor and Google are parties to the Agreement; and

        Whereas, Distributor and Google desire to amend the Agreement as set forth herein.

        NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties agree as follows,

1.

Definitions. For purposes of this Amendment One, the capitalized terms used, but not defined herein, shall have the same meanings set forth in the Agreement.

2.

"[  ***  ]" shall be added to the list of [  ***  ] set forth in Exhibit F of the Agreement.

3.

The following sentence shall be added to the end of Section 3.2;

"[  ***  ]"

4.

Except as modified by this Amendment One, the Agreement shall remain in full force and effect.

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        IN WITNESS WHEREOF, the parties have caused this Amendment One to be executed by their duly authorized representatives.

DivXNetworks Inc.		Google Inc.
By:	/s/ R. Jordan Greenhall	By:	/s/ Joan Braddi
Name:	Jordan Greenhall	Name:	Joan Braddi
Title:	CEO	Title:	VP, Search Services
Date:	19 Aug 2004	Date:	9.29.04

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AMENDMENT NUMBER TWO TO THE
GOOGLE TOOLBAR™ AND GOOGLE DESKBAR™ PROMOTION AND
DISTRIBUTION AGREEMENT

        This Amendment Number Two ("Amendment Two") to the Google Toolbar and Google Deskbar Promotion and Distribution Agreement entered into by and between DivXNetworks Inc. and Google Inc. with an effective date of June 18, 2004 ("Agreement") as amended by Amendment Number One to the Google Toolbar and Google Deskbar Promotion and Distribution Agreement entered into by and between DivXNetworks Inc. and Google Inc. with an effective date of August 11, 2004 ("Amendment One") is entered into as of October 29, 2004 (the "Amendment Two Effective Date") by and between DivXNetworks, Inc., with offices at 10350 Science Center Drive, San Diego, CA 92121 ("Distributor"), and Google Inc., with offices at 1600 Amphitheatre Parkway, Mountain View, California 94043 ("Google").

        Whereas, Distributor and Google are parties to the Agreement, as amended by Amendment One (the Agreement as amended, the "Amended Agreement"); and

        Whereas, Distributor and Google desire to amend the Amended Agreement as set forth herein.

        NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties agree as follows,

1.

For purposes of this Amendment Two, the capitalized terms used, but not defined herein, shall have the same meanings set forth in the Amended Agreement.

2.

Section 1.4 of the Amended Agreement shall be replaced in its entirety by the following:

"1.4    "Distributor App" means each of DivX, DivX Pro Trial and DivX Player."

3.

Exhibit A of the Amended Agreement shall be replaced in its entirety by Exhibit A to this Amendment Two.

4.

The following new Section 1.21 shall be added to the Amended Agreement:

"1.21    [  ***  ]

5.

The third sentence of Section 3.1 of the Amended Agreement shall be replaced by the following:

"The form of any offering of the Toolbar or the Deskbar by Distributor by any method other than [  ***  ] shall be in the form set forth in Exhibit A, and the form of any offering of the Toolbar or the Deskbar by Distributor via [  ***  ] shall be in the form set forth in Exhibit A-1. For the avoidance of doubt, the install screens viewed by the End User in connection with the [  ***  ] of DivX and DivX Pro Trial shall substantially comply with the install screen mock-ups for DivX Player set forth in Exhibit A-1."

6.

Exhibit A-1 to this Amendment Two shall be added as a new Exhibit A-1 to the Amended Agreement.

7.

Except as modified by this Amendment Two, the Amended Agreement shall remain in full force and effect.

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        IN WITNESS WHEREOF, the parties have caused this Amendment Two to be executed by their duly authorized representatives.

DivXNetworks Inc.		Google Inc.
By:		By:	/s/ Joan Braddi
Name:		Name:	Joan Braddi
Title:	President	Title:	VP, Search Services
Date:	3 Nov 2004	Date:	11.03.04

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EXHIBIT A

Installation flowchart
(Product Installers)

[CHART]

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[GRAPHIC]

1 — Language Selection

[GRAPHIC]

2 — Welcome

[GRAPHIC]

3 — DivX Pro 6 Month Trial offer

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EXECUTION DRAFT

[GRAPHIC]

4 — License Agreement

[GRAPHIC]

5 — Component Selection

[GRAPHIC]

6 — Choose installation folder

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EXECUTION DRAFT

[GRAPHIC]

7 — Google Toolbar offer

[GRAPHIC]

8 — Installing files

[GRAPHIC]

9 — Installation complete (Including Google Toolbar)

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[GRAPHIC]

10 — Installation complete (Not including Google Toolbar)

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EXHIBIT A-1

Installation flowchart
(Product updates system)

[CHART]

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[GRAPHIC]

1 — Update notification

[GRAPHIC]

2 — Current configuration

[GRAPHIC]

[  ***  ]

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[GRAPHIC]

4 — DivX license agreements

[GRAPHIC]

5 — [  ***  ]

[GRAPHIC]

6 — [  ***  ]

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[GRAPHIC]

7 — Google Toolbar offer

[GRAPHIC]

8 — [  ***  ]

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AMENDMENT NUMBER THREE TO THE
GOOGLE TOOLBAR™ AND GOOGLE DESKBAR™ PROMOTION AND
DISTRIBUTION AGREEMENT

        This Amendment Number Three ("Amendment Three") to the Google Toolbar and Google Deskbar Promotion and Distribution Agreement entered into by and between DivXNetworks, Inc. and Google Inc. with an effective date of June 18, 2004 ("Agreement") as amended by (i) Amendment Number One to the Google Toolbar and Google Deskbar Promotion and Distribution Agreement entered into by and between DivXNetworks, Inc. and Google Inc. with an effective date of August 11, 2004 ("Amendment One"), and (ii) Amendment Number Two to the Google Toolbar and Google Deskbar Promotion and Distribution Agreement entered into by and between DivXNetworks, Inc. and Google Inc. with an effective date of November 3, 2004 ("Amendment Two") is entered into as of the date written by Google below (the "Amendment Three Effective Date") by and between DivXNetworks, Inc., with offices at 4780 Eastgate Mall, San Diego, CA 92121 ("Distributor"), and Google Inc., with offices at 1600 Amphitheatre Parkway, Mountain View, California 94043 ("Google").

        Whereas, Distributor and Google are parties to the Agreement, as amended by Amendment One and Amendment Two (the Agreement as amended, the "Amended Agreement"); and

        Whereas, Distributor and Google desire to amend the Amended Agreement as set forth herein.

        NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties agree as follows.

1.     For purposes of this Amendment Three, the capitalized terms used, but not defined herein, shall have the same meanings set forth in the Amended Agreement.

2.     Section 1.2 of the Amended Agreement is deleted in its entirety.

3.     Section 1.3 of the Amended Agreement is deleted in its entirety.

4.     Section 1.11 of the Amended Agreement is replaced in its entirety by the following:

        "1.11    "End User License Agreement" or "EULA" means the applicable language and/or country version of the Google Toolbar end user license agreement or Google Desktop Search end user license agreement, as applicable, each of which may be updated or modified by Google in its sole discretion from time to time. [  ***  ]

5.     Section 1.14 of the Amended Agreement is replaced in its entirety by the following:

        "1.14    "Products" means the machine-readable binary code versions of the Toolbar and the Toolbar Installer, and, following the Desktop Search Date, Desktop Search and the Desktop Search Installer."

6.     Section 1.21 of the Amended Agreement is replaced in its entirety by the following:

        "1.21    [  ***  ]

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7.     The following new Section 1.22 is added to the Amended Agreement:

        "1.22    "Desktop Search" means the machine-readable binary code version of Google Desktop Search provided to Distributor in connection with this Agreement, and any modifications or updates thereto that Google may provide to Distributor hereunder."

8.     The following new Section 1.23 is added to the Amended Agreement:

        [  ***  ]

9.     The following new Section 1.24 is added to the Amended Agreement:

        "1.24    "Desktop Search Installer" means the machine-readable binary code version of the installer provided by Google that installs Desktop Search."

10.   The third sentence of Section 3.1 of the Amended Agreement is replaced by the following:

        [  ***  ]

11.   Section 3.2 of the Amended Agreement is replaced in its entirety by the following:

        "3.2    [  ***  ]

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[  ***  ]"

12.   Section 3.6 of the Amended Agreement is replaced in its entirety by the following:

        "3.6    Exclusivity.    [  ***  ]"

13.   Section 3.7 of the Amended Agreement is replaced in its entirety by the following:

        "3.7    Installation and Access by End Users.    Notwithstanding anything to the contrary, Distributor's distribution of the Toolbar under this Agreement shall include distribution of the Toolbar

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Installer and Distributor's distribution of Desktop Search under this Agreement shall include distribution of the Desktop Search Installer. [  ***  ]"

14.   In Section 3.8 of the Amended Agreement, "Toolbar (or Deskbar, as applicable)" is replaced by "Toolbar and Desktop Search".

15.   Section 3.9 of the Amended Agreement is replaced in its entirety by the following:

        "3.9 End User License Agreement.    In connection with Distributor's distribution of the Products under this Agreement, and before any such Product can be installed by an End User, Distributor shall provide each End User with (i) a clear statement inviting the End User to agree to the terms of the applicable EULA, (ii) the opportunity for each End User to review such EULA via a hyperlink to such EULA, and (iii) a button on which each End User may click indicating agreement to the terms of such EULA. In the event that an End User does not affirmatively agree to install a particular Product by clicking on the button to agree to the terms of the applicable EULA, then such Product shall not be installed on such End User's computer."

16.   Section 3.13 of the Amended Agreement is replaced in its entirety by the following:

        [  ***  ]

17.   [  ***  ]

18.   Section 4.2(f) of the Amended Agreement is deleted in its entirety.

19.   The first sentence of Section 5.1 of the Amended Agreement is replaced by the following:

"The initial term of this Agreement shall commence on the Effective Date and, unless earlier terminated as set forth herein, shall end on [  ***  ] (the "Initial Term")"

20.   The following new Section 4.6 is added to the Amended Agreement:

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        [  ***  ]

21.   The second sentence of Section 6 of the Amended Agreement is replaced in its entirety by the following:

        "Without limiting the foregoing in this Section 6, the Products are hereby identified as Google's Confidential Information."

22.   In Section 10.1 of the Amended Agreement, both instances of "the Toolbar, the Toolbar Installer, the Deskbar, the Deskbar Installer" are replaced by "the Products."

23.   Except as modified by this Amendment Three, the Amended Agreement shall remain in full force and effect.

        IN WITNESS WHEREOF, the parties have caused this Amendment Three to be executed by their duly authorized representatives.

DivXNetworks Inc.		Google Inc.
By:	/s/ R. Jordan Greenhall	By:	/s/ Joan Braddi
Name:	R. Jordan Greenhall	Name:	Joan Braddi
Title:	CEO	Title:	VP, Search Services
Date:	1/10/05	Date:	1/11/05

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AMENDMENT NUMBER FOUR TO THE
GOOGLE TOOLBAR™ AND GOOGLE DESKBAR™ PROMOTION AND
DISTRIBUTION AGREEMENT

        This Amendment Number Four ("Amendment Four") to the Google Toolbar and Google Deskbar Promotion and Distribution Agreement entered into by and between DivX, Inc. (formerly, DivXNetworks, Inc.) and Google Inc. with an effective date of June 18, 2004 ("Agreement") as amended by (a) Amendment Number One to the Google Toolbar and Google Deskbar Promotion and Distribution Agreement with an effective date of August 11, 2004 ("Amendment One"), (b) Amendment Number Two to the Google Toolbar and Google Deskbar Promotion and Distribution Agreement with an effective date of October 29, 2004 ("Amendment Two"), and (c) Amendment Number Three to the Google Toolbar and Google Deskbar Promotion and Distribution Agreement with an effective date of January 11, 2005 ("Amendment Three"), is entered into as of December 28, 2005 (the "Amendment Four Effective Date") by and between DivX, Inc. with offices at 4780 Eastgate Mall, San Diego, CA 92121 ("Distributor"), and Google Inc., with offices at 1600 Amphitheatre Parkway, Mountain View, California 94043 ("Google").

        Whereas, Distributor and Google are parties to the Agreement, as amended by Amendment One, Amendment Two, and Amendment Three (the Agreement as amended, the "Amended Agreement"); and

        Whereas, Distributor and Google desire to amend the Amended Agreement as set forth herein.

        NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties agree as follows

1.

The reference to "December 31, 2005" in the first sentence of Section 5.1 of the Amended Agreement is replaced by "January 31, 2006".

2.

Except as modified by this Amendment Four, the Amended Agreement shall remain in full force and effect.

        IN WITNESS WHEREOF, the parties have caused this Amendment Four to be executed by their duly authorized representatives.

DivX, Inc.		Google Inc.
By:	/s/ David Richter	By:	/s/ Jeff Shardell
Name:	David J. Richter	Name:	Jeff Shardell
Title:	SVP Corporate Development & General Counsel	Title:	Director, Web Search & Sync
Date:	December 22, 2005	Date:	December 22, 2005

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AMENDMENT NUMBER FIVE TO THE
GOOGLE TOOLBAR™ AND GOOGLE DESKBAR™ PROMOTION AND
DISTRIBUTION AGREEMENT

        This Amendment Number Five ("Amendment Five") to the Google Toolbar and Google Deskbar Promotion and Distribution Agreement entered into by and between DivX, Inc. (formerly, DivXNetworks, Inc.) and Google Inc. with an effective date of June 18, 2004 ("Agreement"), as amended by (a) Amendment Number One to the Google Toolbar and Google Deskbar Promotion and Distribution Agreement with an effective date of August 11, 2004 ("Amendment One"), (b) Amendment Number Two to the Google Toolbar and Google Deskbar Promotion and Distribution Agreement with an effective date of October 29, 2004 ("Amendment Two"), (c) Amendment Number Three to the Google Toolbar and Google Deskbar Promotion and Distribution Agreement with an effective date of January 11, 2005 ("Amendment Three"), and (d) Amendment Number Four to the Google Toolbar and Google Deskbar Promotion and Distribution Agreement with an effective date of December 28, 2005 ("Amendment Four"), is entered into as of January 1, 2006 (the "Amendment Five Effective Date") by and between DivX, Inc., with offices at 4780 Eastgate Mall, San Diego, CA 92121 ("Distributor"), and Google Inc., with offices at 1600 Amphitheatre Parkway, Mountain View, California 94043 ("Google"). For purposes of this Amendment Five, the capitalized terms used, but not defined herein, shall have the same meanings set forth in the Amended Agreement (as defined below).

        WHEREAS, Distributor and Google are parties to the Agreement, as amended by Amendment One, Amendment Two, Amendment Three, and Amendment Four (the Agreement as amended, the "Amended Agreement"); and

        WHEREAS, Distributor and Google desire to amend the Amended agreement with respect to the Distributor's distribution of Products on or after the Amendment Five Effective Date as set forth herein.

        NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties agree to amend the Amended Agreement as follows.

1.     DEFINITIONS.

        1.1   Bundle.    Section 1.1 of the Amended Agreement is replaced in its entirety by the following:

        "1.1 "Bundle" means the Products bundled solely with a Distributor App; provided that, for the purposes of Sections 3.4 and 4.2 of the Amended Agreement as amended by this Amendment Five, until the [ *** ] Launch, "Bundle" shall have the same meaning as Prior Bundle (as defined at Section 3.1 of this Amendment Five). [ *** ]

1.2   Distributor App.    Section 1.4 of the Amended Agreement is replaced in its entirety by the following:

        "1.4 "Distributor App" means DivX Play or DivX Create."

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1.3   DivX Play.    Section 1.7 of the Amended Agreement is replaced In its entirety by the following:

        "1.7 "DivX Play" means the software bundle that consists of the DivX Player, DivX codec, and/or such other software as may be mutually agreed upon by the parties in writing (including by email from an employee of a party who is director level or higher)."

1.4   DivX Create.    Section 1.8 of the Amended Agreement is replaced in its entirety by the following:

        "1.8 "DivX Create" means the software bundle that consists of the DivX Player, DivX Pro codec, DivX Converter and/or such other software as may be mutually agreed upon by the parties in writing (including by email from an employee of a party who is director level or higher)."

1.5   EULA.    The first sentence of Section 1.11 of the Amended Agreement is replaced in its entirety by the following:

        "1.11 "End User License Agreement" or "EULA" means the applicable language and/or country version of the end user license agreement for each Product, which may be updated or modified by Google in its sole discretion from time to time."

1.6   Products.    Section 1.14 of the Amended Agreement is replaced in Its entirety by the following:

        "1.14 "Products" means the machine-readable binary code versions of the Toolbar and the Toolbar Installer (including the Firefox version of the Toolbar and Toolbar Installer), Desktop Search and the Desktop Search Installer, and, except for purposes of Sections 1.13, and 10.1, [ *** ]

1.7   [ *** ]

1.8   [ *** ]

1.9   [ *** ]

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1.10 [ *** ]

1.11 [ *** ]

1.12 [ *** ]

1.13 Successful [ *** ] Installation.    The following new Section 1.30 is added to the Amended Agreement:

        "1.30 "Successful [ *** ] Installation" means an installation of the [ *** ] containing the applicable version of the Toolbar, as the default browser on an End User's computer in accordance with this Agreement and subsequent communication of such [ *** ] with a Google server as determined by Google [ *** ]"

1.14 Successful Firefox Toolbar Installation.    The following new Section 1.31 is added to the Amended Agreement:

        "1.31 "Successful Firefox Toolbar Installation" means an installation of the Toolbar on an End User's computer in accordance with this Agreement and subsequent communication of such Toolbar with a Google server as determined by Google [ *** ]"

2.     [ *** ]

        2.1   Trademark License and Use.    The following sentence is added to the end of Section 2.3:

        [ *** ]

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2.2   Trademark Restrictions.    The following sentence is added to the end of Section 2.4:

        [ *** ]

3.     DISTRIBUTION AND OTHER OBLIGATIONS.

        3.1   [ *** ]

3.2   Form of Distribution Offering.    

        (a)   The third and forth sentences of Section 3.1 of the Amended Agreement are replaced in their entirety by the following:

        "The form of any offering of any Product by Distributor by any method other than AutoUpdate shall be in the form set forth as Exhibit A, and the form of any offering of any Product by Distributor via [ *** ] shall be in the form set forth in Exhibit A-1."

        (b)   With respect to Distributor's distribution of Products on or after the [ *** ], Exhibit A to the Amended Agreement is replaced in its entirety by Exhibit A to this Amendment Five.

        (c)   With respect to Distributor's distribution of Products on or after the [ *** ], Exhibit A-1 to the Amended Agreement shall be as replaced by an installation flowchart mutually agreed upon by the parties in writing (including by email from an employee of a party who is director level or higher).

3.3   Minimum Distribution Commitment.    Section 3.4(a) of the Amended Agreement is replaced in its entirely by the following:

        "a)  Minimum Distribution Commitment.    Distributor shall distribute Bundles to End Users in Tier A Countries so that either (a) at least [ *** ] ([ *** ]) Bundles per calendar month are downloaded by End Users in Tier A Countries, or (b) there are at least [ *** ] ([ *** ]) Successful Browser Installations per calendar month in Tier A Countries (the "Tier A Minimum Distribution Commitment"). The foregoing (b) shall be referred to as the "Tier A Successful Installation Minimum." Distributor shall distribute Bundles to End Users in Tier B Countries so that either (c) at least [ *** ] ([ *** ]) Bundles per calendar month are downloaded by End Users in Tier B Countries, or (d) there are at least [ *** ] ([ *** ]) Successful Browser Installations per calendar month in Tier B Countries (the "Tier B Minimum Distribution Commitment."). The foregoing (d) shall be referred to as the "Tier B Successful Installation Minimum." Distributor shall distribute Bundles to End Users in Tier C Countries so that either (e) at least [ *** ] ([ *** ]) Bundles per calendar month are downloaded by End Users in Tier C Countries, or (f) there are at least [[ *** ] ([ *** ]) Successful Browser Installations per calendar month in Tier C Countries (the "Tier C Minimum Distribution

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Commitment"). The foregoing (f) shall be referred to as the "Tier C Successful Installation Minimum."

3.4   Maximum Distribution Commitment.    Section 3.5 of the Amended Agreement is replaced in its entirety by the following:

        "3.5 Maximum Distribution Commitment.    

        a)    Notwithstanding anything to the contrary, in no event shall any payments be owed, due or payable to Distributor for [ *** ] in connection with this Agreement, nor shall Google have any obligations to Distributor regarding the Products once Google has paid Distributor, in excess of [ *** ] ("Maximum Distribution Commitment"), the date upon which the requisite number of [ *** ] has occurred to achieve the Maximum Distribution Commitment to be defined as "Maximum Distribution Date." [ *** ]

        b)    [ *** ]

        c)     [ *** ]

3.5   Installation and Access by End Users.    The first two sentences of Section 3.7 of the Amended Agreement are replaced In their entirety by the following:

"Notwithstanding anything to the contrary, but subject to the third sentence of Section 1.1: [ *** ]

3.6   Language Version(s); Appropriate Bundling.    In Section 3.8 of the Amended Agreement, "Toolbar and Desktop Search" is replaced by "the Products".

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3.7   Reporting.    

        (a)   Section 3.11(a) of the Amended Agreement is replaced in its entirety by the following:

        "b) By Distributor.    During the Term, Distributor shall make commercially reasonable efforts to provide Google within [ *** ] following the end of each calendar month with a report [ *** ]

        (b)   In Section 3.11(b) of the Amended Agreement, "Successful Installations" is replaced by: [ *** ]

3.8   Toolbar Activation.    [ *** ]

4.     PAYMENTS.

        4.1   Payments.    Section 4.2 of the Amended Agreement is replaced in its entirety by the following:

        "4.2 Payments. 

        a)    [ *** ]

        b)    [ *** ]

        c)     [ *** ]

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        d)    Tier A Installation Payment.        During the Term, in addition to the payment set forth in Section 4.2(a) above, Google shall pay to Distributor an amount equal to [ *** ] (US$[ *** ]) for (1) each Successful Firefox Toolbar Installation in Tier A Countries in such calendar month, and (2) [ *** ] The foregoing amounts, in addition to the payment set forth in the second sentence of Section 4.2(a) above, shall be collectively referred to as the "Tier A Installation Payments". [ *** ]

        e)    Tier B Installation Payment.        During the Term, in addition to the payment set forth in Section 4.2(b) above, Google shall pay to Distributor an amount equal to [ *** ] (US$[ *** ]) for (1) each Successful Firefox Toolbar Installation in Tier B Countries in such calendar month, and (2) [ *** ] The foregoing amounts, in addition to the payment set forth in the second sentence of Section 4.2(b) above, shall be collectively referred to as the "Tier B Installation Payments". [ *** ]

        f)     Tier C Installation Payment.        During the Term, in addition to the payment set forth in Section 4.2(c) above, Google shall pay to Distributor an amount equal to [ *** ] (US$[ *** ]) for (1) each Successful Firefox Toolbar Installation in Tier C Countries in such calendar month, and (2) [ *** ] The foregoing amounts, in addition to the payment set forth in the second sentence of Section 4.2(c) above, shall be collectively referred to as the "Tier C Installation Payments". [ *** ]

[ *** ]

4.2   Exhibit B.    Exhibit B of the Amended Agreement is replaced in its entirety by Exhibit B to this Amendment Five.

4.3   [ *** ]

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[ *** ]

5.     TERM.        The first sentence of the Amended Agreement is replaced by the following:

"The initial term of this Agreement shall commence on the Effective Date and, unless earlier terminated as set forth herein, shall end on the earlier of (a) December 31, 2006, or (b) the Maximum Distribution Date (the "Initial Term")."

6.     [ *** ]

7.     INDEMNIFICATION.        Section 10.1 of the Amended Agreement is amended by inserting:

[ *** ]

Google Confidential

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8.     GENERAL.        The foregoing amendments shall only apply to Distributor's distribution of any Products on or after the Amendment Five Effective Date. Distributors distribution of the Products prior to the Amendment Five Effective Date shall be subject to the terms and conditions of the Amended Agreement. Except as modified by this Amendment Five, the Amended Agreement shall remain in full force and effect.

        IN WITNESS WHEREOF, the parties have caused this Amendment Five to be executed by their duly authorized representatives.

DivX, Inc.		Google Inc.
By:	/s/ R. Jordan Greenhall	By:	/s/ Jeff Shardell
Name:	R. Jordan Greenhall	Name:	Jeff Shardell
Title:	CEO	Title:	Director, Web Search & Sync
Date:	1/30/06	Date:	Jan 30, 2006

Google Confidential

***CONFIDENTIAL TREATMENT REQUESTED

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Exhibit A to Amendment Five

INSTALLATION FLOWCHART

[CHART]

Google Confidential

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Exhibit B to Amendment Five

COUNTRIES/TIERS AND PAYMENT AMOUNTS

[CHART]

Google Confidential

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GOOGLE TOOLBAR™ AND GOOGLE DESKBAR™ PROMOTION AND DISTRIBUTION AGREEMENT
EXHIBIT A DivX 5.2/Google installer flowchart
DivX 5.2/Google installer screens
EXHIBIT B
EXHIBIT C Guidelines for Applications
EXHIBIT D
EXHIBIT E
EXHIBIT F
AMENDMENT NUMBER TWO TO THE GOOGLE TOOLBAR™ AND GOOGLE DESKBAR™ PROMOTION AND DISTRIBUTION AGREEMENT
EXHIBIT A Installation flowchart (Product Installers)
EXHIBIT A-1 Installation flowchart (Product updates system)
AMENDMENT NUMBER THREE TO THE GOOGLE TOOLBAR™ AND GOOGLE DESKBAR™ PROMOTION AND DISTRIBUTION AGREEMENT
AMENDMENT NUMBER FOUR TO THE GOOGLE TOOLBAR™ AND GOOGLE DESKBAR™ PROMOTION AND DISTRIBUTION AGREEMENT
AMENDMENT NUMBER FIVE TO THE GOOGLE TOOLBAR™ AND GOOGLE DESKBAR™ PROMOTION AND DISTRIBUTION AGREEMENT
INSTALLATION FLOWCHART
COUNTRIES/TIERS AND PAYMENT AMOUNTS

EX-21.1

Exhibit 21.1

Subsidiaries of DivX, Inc.:

NAME:	JURISDICTION OF FORMATION:
DivX International, Inc.	Delaware
DivXNetworks (Europe) GmbH	Germany

EX-23.1

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Exhibit 23.1

Consent of Ernst & Young LLP, independent registered public accounting firm

We consent to the reference to our firm under the caption "Experts" and to the use of our report dated April 27, 2006, in the Registration Statement (Form S-1) and related Prospectus of DivX, Inc. expected to be filed on or about May 5, 2006.

Our audits also included the financial statement schedule of DivX, Inc. listed in Item 16(b). This schedule is the responsibility of DivX, Inc.'s management. Our responsibility is to express an opinion based on our audits. In our opinion, as to which the date is April 27, 2006, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

/s/ Ernst & Young LLP

San Diego, California
May 3, 2006

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Consent of Ernst & Young LLP, independent registered public accounting firm

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