EXHIBIT 10.4
CD Disc Patent License Agreement dated August 9, 2002, between
Koninklijke Philips Electronics N.V. and Metatec International, Inc.
This Agreement is entered into this 9th day of August, 2002 by and between
KONINKLIJKE PHILIPS ELECTRONICS N.V., having its registered office in Eindhoven,
The Netherlands, (hereinafter referred to as "Philips")
and
METATEC INTERNATIONAL, INC., having its registered office in 0000 Xxxxxxx Xxxx.,
Xxxxxx, Xxxx 00000 (hereinafter referred to as "Licensee")
WHEREAS, the Philips' group of companies has for many years been engaged in
research and development of systems, in which signals encoded in digital form
and stored on a disc are read and reproduced by means of devices using an
optical read-out beam, and has acquired valuable know-how and expertise therein;
WHEREAS, one of the achievements of such research and development efforts has
been a revolutionary high-fidelity sound storage and reproduction system, of
which the specifications have been further defined in a joint research and
development co-operation with Sony Corporation of Japan ("Sony") and which has
been presented under the name "Compact Disc Digital Audio System" (CD-Audio
System);
WHEREAS, on the basis of the CD-Audio System Philips and Sony have developed a
further system, which has been presented under the name "Compact Disc Data
System" (CD-ROM System);
WHEREAS, Philips and Sony have developed an additional multi-session CD system,
which has been presented under the name "Enhanced Music Compact Disc System"
("Enhanced Music CD System" or "CD Extra System" (the CD-Audio System, the
CD-ROM System and the CD Extra System together are referred to as "the CD
Systems");
WHEREAS, Philips and Sony own certain patents relating to the CD Systems;
WHEREAS, Philips has been authorized by Sony to grant licenses under certain
patents relating to the CD Systems, which are owned or controlled by Sony and
its Associated Companies (as hereinafter defined), as well as such patents
relating to the CD Systems which are jointly owned by Philips and Sony, while
Philips and Sony each retain the right also to license their respective patents
relating to the CD Systems separately, so that interested manufacturers may opt
to take out separate licenses under the relevant patents of each of Philips and
Sony, instead of a combined license;
WHEREAS, Licensee has requested from Philips a license under the relevant
patents of Philips and Sony relating to CD-Discs and wishes such CD-Discs to be
compatible with CD-Players conforming to the Standard Specifications for any of
the relevant CD Systems; and
WHEREAS, Philips is willing to grant Licensee a license under the relevant
patents and to make available certain basic information relating to the CD
Systems, on the conditions set forth herein; NOW, THEREFORE, in consideration of
the mutual obligations and covenants hereinafter set forth, the parties hereto
have agreed as follows:
ARTICLE 1 - DEFINITIONS
-----------------------
The following terms used in this Agreement shall have the meanings set out
below:
1.01 "DISC" shall mean a non-recordable reflective disc-shaped information
carrier comprising any kind of information including, but not limited
to, audio, video, text and/or data-related information, which is
irreversibly stored in a layer during and as an integral part of the
manufacturing process of the disc in a form which is optically readable
by playback devices using a laser-beam.
1.02 "CD-AUDIO DISC" shall mean a Disc comprising audio information encoded
in digital form, which is optically readable by a CD-Audio Player (as
hereinafter defined) and which conforms to the CD-Audio Standard
Specifications (as hereinafter defined).
1.03 "CD-AUDIO MAXI-SINGLE" shall mean a CD-Audio Disc which, in addition,
conforms to the CD-Audio Maxi-Single Standard Specifications.
1.04 "CD-ROM DISC" shall mean a Disc comprising information encoded in
digital form, which is optically readable by a CD-ROM Player (as
hereinafter defined) and which conforms to the CD-ROM Standard
Specifications (as hereinafter defined).
1.05 "ENHANCED MUSIC CD DISC/CD EXTRA DISC" shall mean a Disc comprising
information encoded in digital form, which is optically readable by a
CD-Audio Player and which conforms to the CD-Audio Standard
Specifications, a CD-ROM Player and which conforms to the CD-ROM
Standard Specifications and an Enhanced Music CD Player (as hereinafter
defined) which conforms to the Enhanced Music CD Standard
Specifications (as hereinafter defined).
The CD-Audio Disc, the CD-Audio Maxi-Single, the CD-ROM Disc and the CD
Extra Disc together are referred to as "CD-Discs".
1.06 "CD-AUDIO STANDARD SPECIFICATIONS" shall mean the specifications for
the CD-Audio System, including the Subcode/Control and Display System,
Channels R .W, Chapter 5.8, The CD-TEXT mode, as made available,
modified or extended from time to time.
1.07 "CD-AUDIO MAXI-SINGLE STANDARD SPECIFICATIONS" shall mean the
specifications for the CD-Audio Maxi-Single system, specifying among
other things a maximum playing time of 30 minutes, as made available,
modified or extended from time to time. For the purpose of this
Agreement, the CD-Audio Maxi-Single Standard Specifications shall be
considered to form part of the CD-Audio Standard Specifications.
1.08 "CD-ROM STANDARD SPECIFICATIONS" shall mean the specifications for the
CD-ROM System as made available, modified or extended from time to
time.
1.09 "ENHANCED MUSIC CD STANDARD SPECIFICATIONS" shall mean the
specifications for the Enhanced Music CD System as made available,
modified or extended from time to time.
The CD-Audio, CD-Audio Maxi-Single, CD-ROM and Enhanced Music CD
Standard Specifications together are referred to as the "CD Standard
Specifications".
1.10 "PLAYER" shall mean a playback device for optically reading information
stored on a Disc and converting such information into electrical
signals for reproduction purposes.
1.11 "CD-AUDIO PLAYER" shall mean a Player solely capable of reproducing
information stored on a CD-Audio Disc or CD-Audio Maxi-Single and
converting such information into electrical signals, in accordance with
the CD-Audio Standard Specifications, which electrical signals are
directly capable of and intended to be used for sound reproduction
through amplifiers and loudspeakers.
1.12 "CD-ROM PLAYER" shall mean a Player solely capable of reproducing
information stored on a CD-ROM Disc and converting such information
into electrical signals, in accordance with the CD-ROM Standard
Specifications, which electrical signals are directly capable of and
intended to be used for the reproduction of computer related data
through data handling and/or data processing equipment.
1.13 "ENHANCED MUSIC CD PLAYER" shall mean a Player solely capable of
reproducing information stored on a CD Extra Disc and converting such
information into electrical signals, in accordance with the Enhanced
Music CD Standard Specifications, which electrical signals are directly
capable of and intended to be used for the reproduction of video, text
and/or computer related data through data handling and/or data
processing equipment.
1.14 "COMBI-PLAYER" shall mean a Player which is any combination of a
CD-Audio Player, a CD-ROM Player and/or an Enhanced Music CD Player.
The CD-Audio Player, the CD-ROM Player, the Enhanced Music CD Player
and the Combi-Player together are referred to as the "CD-Players".
1.15 "LICENSED PRODUCT" shall mean a CD-Audio Disc, a CD-Audio Maxi-Single,
a CD-ROM Disc and/or a CD Extra Disc, as correspond with the Licensed
Patents selected by Licensee pursuant to Article 1.16, manufactured
and/or sold in accordance with the provisions hereof, which has been
duly reported and on which the royalties due hereunder are paid in
accordance with the provisions of this Agreement.
1.16 "LICENSED PATENTS" shall mean the patents listed in the relevant
Exhibits as selected by Licensee pursuant to the Options below.
OPTION A1: Licensee chooses the essential patents listed in Xxxxxxx X0,
for the use of any one or more of these patents, exclusively for the
manufacture and/or sale of CD-Audio Discs and/or CD-Audio Maxi Singles,
which conform to the CD-Audio Standard Specifications. Option A2:
Licensee chooses the essential patents listed in Exhibit E1 and Xxxxxxx
X0, for the use of any one or more of these patents, exclusively for
the manufacture and/or sale of CD-ROM Discs, which conform to the
CD-ROM Standard Specifications.
OPTION A3: Licensee chooses the essential patents listed in Exhibit E1,
Exhibit E2 and Xxxxxxx X0, for the use of any one or more of these
patents, exclusively for the manufacture and/or sale of CD Extra Discs,
which conform to the Enhanced Music CD Standard Specifications.
OPTION A4: Licensee chooses, in addition to Option A1 and/or A3 the
essential patents listed in Xxxxxxx X0, for the use of any one or more
of these patents, exclusively for the manufacture and/or sale of
CD-Discs, excluding CD-ROM Discs, containing CD Text information.
OPTION A5: Licensee chooses the non-essential patents listed in Xxxxxxx
X0, for the use of any one or more of these patents, exclusively for
the manufacture and/or sale of CD Extra Discs.
Option(s): o A1 o A2 o A3 o A4 o A5
----------
(please tick any combination as appropriate)
Initial: ______________
The term "ESSENTIAL" as used in relation to patents in this Agreement
shall refer to patents, the use of which is necessary (either directly
or as a practical matter) for compliance with the Standard
Specifications defining the relevant CD System(s).
Philips will commission an independent patent expert to review the
European, Japanese and US patents listed as essential in Xxxxxxxx X0,
X0, X0 and E4 in order to confirm the essentiality of such patents. In
the event that such independent expert would find that any of the
patents does not qualify as essential as defined in this Agreement,
Philips shall delete such patent (as well as the equivalent national
patents) from the relevant Exhibit and such patent will be put on the
relevant Exhibit of non-essential patents. Any such finding and
deletion however, shall not affect the obligation of Licensee to pay
the royalty on each Licensed Product as specified in Article 5.02,
provided that, in the event that the manufacture by Licensee of
Licensed Products within the Territory would not infringe any of the
Licensed Patents, Licensee shall have no obligation to pay royalties in
respect of Licensed Products manufactured within the Territory and
which are directly sold for final use within the Territory or directly
exported for final use to a country in which no Licensed Patents
subsist. Notwithstanding such deletion, Licensee shall retain the right
to continue the use of such deleted patent(s) in accordance with this
Agreement, without any additional payment, unless Licensee explicitly
notifies Philips in writing of its decision to waive such right.
In the event that Philips or Sony (or any of their respective
Associated Companies) would have additional patents relevant to
CD-Audio Discs (except for CD Text information and other than patents
acquired from third parties after the date of January 1, 1983), CD-ROM
Discs (other than patents acquired from third parties after the date of
January 1, 1985), CD Extra Discs (other than patents acquired from
third parties after the date of January 1, 1996) or the CD Text mode of
CD-Discs, excluding CD-ROM Discs, (other than patents acquired from
third parties after the date of October 1, 1996) in their respective
patent portfolios which are essential to the manufacture, sale or other
disposal of Licensed Products and which have a filing date or are
entitled to a so-called priority date prior to either January 1, 1983
for CD-Audio Discs, January 1, 1985 for CD-ROM Discs, January 1, 1996
for CD Extra Discs or October 1, 1996 for the CD Text mode of CD-Discs,
excluding CD-ROM Discs, but which
have not been listed as essential patents in the respective Exhibits
hereto, Philips will notify Licensee accordingly and such additional
patents will be added to the Licensed Patents. Any patents as may be
added as essential patents to any of the respective Exhibits hereto,
will similarly be subject to the review by the independent patent
expert in accordance with the preceding paragraph.
The patent lists provided to Licensee upon execution of the Agreement
are subject to change in accordance with the provisions of this
Agreement. With regard to the rights granted to Licensee hereunder, the
patent lists published by Philips on its website
(xxx.xxxxxxxxx.xxxxxxx.xxx) or otherwise communicated by Philips to
Licensee after the date of execution hereof shall prevail over the
lists provided to Licensee upon execution of this Agreement.
1.17 "ASSOCIATED COMPANY" shall mean any one or more business entities (1)
owned or controlled by Philips, Sony or Licensee, (2) owning or
controlling Philips, Sony or Licensee, or (3) owned or controlled by
the business entity owning or controlling Philips, Sony or Licensee at
the material time. For the purposes of this definition a business
entity shall be deemed to own and/or to control another business entity
if more than 50% (fifty per cent) of the voting stock of the latter
business entity, ordinarily entitled to vote in the election of
directors, (or, if there is no such stock, more than 50% (fifty per
cent) of the ownership of or control in the latter business entity) is
held by the owning and/or controlling business entity.
1.18 "TERRITORY" shall mean the geographic area known as the United States
of America, its territories and possessions.
ARTICLE 2 - GRANT OF RIGHTS
---------------------------
Subject to the conditions of this Agreement:
2.01 For the term of this Agreement, Philips hereby grants to Licensee a
non-exclusive, non-transferable license under the Licensed Patents
selected by Licensee pursuant to Article 1.16 to manufacture Licensed
Products within the Territory in accordance with the relevant CD
Standard Specifications and to sell or otherwise dispose of Licensed
Products so manufactured in all countries of the world.
2.02 Philips, also on behalf of Sony, further agrees, for as long as this
Agreement is in force and effect and Licensee is in full compliance
with its obligations hereunder, to grant Licensee, upon Licensee's
request, a non-exclusive, non-transferable license, either by means of
a sub-license arrangement or by means of individual licenses from
Philips and/or Sony respectively, on reasonable, non-discriminatory
conditions, to manufacture Licensed Products in the Territory and to
sell or otherwise dispose of Licensed Products so manufactured in all
countries of the world, under any patents not yet licensed hereunder
and which are essential to the manufacture, sale or other disposal of
Licensed Products, for which Philips and/or Sony and their respective
Associated Companies may hereafter acquire from third parties the free
right to grant licenses. It is acknowledged and agreed that in respect
of the patents as may be licensed pursuant to this Article 2.02,
additional royalties may have to be paid over and above the royalties
specified in Article 5.02.
2.03 Philips, also on behalf of Sony, further agrees, for as long as this
Agreement is in force and effect and Licensee is in full compliance
with its obligations hereunder, to grant Licensee upon Licensee's
request as well as to those of Licensee's Associated Companies who so
request, a non-exclusive, non-transferable license, on reasonable,
non-discriminatory conditions either by means of a sub-license
arrangement or by means of individual licenses from Philips and/or Sony
respectively, to manufacture CD-Audio Players, CD-ROM Players, Enhanced
Music CD Players and/or Combi-Players and to sell or otherwise dispose
of such Players so manufactured in all countries of the world, under
any and all present and future patents essential to the manufacture,
sale or other disposal of such Players, for which Philips and/or Sony
and their respective Associated Companies may hereafter acquire the
free right to grant licenses.
2.04 In consideration of the undertakings set forth in Articles 2.01, 2.02
and 2.03 and similar undertakings by third party licensees of Philips
and without prejudice to the provisions of Article 12, for a period of
ten years from the Effective Date (as hereinafter defined) Licensee
agrees to grant to Philips, Sony and their respective Associated
Companies and to other third parties who have entered or will enter
into a license agreement with Philips or an Associated Company of
Philips concerning CD-Discs, non-exclusive, non-transferable licenses,
on reasonable, non-discriminatory conditions comparable to those set
forth herein, to manufacture, sell or otherwise dispose of CD-Discs,
under any and all present and future patents, for which Licensee or its
Associated Companies have or may hereafter acquire the right to grant
licenses and which are essential to the manufacture, sale or other
disposal of such CD-Discs as correspond with the Licensed Patents
selected by Licensee pursuant to Article 1.16 and which patents were
first filed in any country of the world prior to the date of
termination of this Agreement. For the avoidance of doubt, the
undertaking set out in the preceding sentence shall only apply to those
companies which have made the same selection pursuant to Article 1.16
as Licensee and which in that respect accept or have accepted a similar
undertaking as contained in this Article 2.04.
2.05 In addition, in consideration of the undertakings set forth in Articles
2.01, 2.02, 2.03 and 2.04 and similar undertakings by third party
licensees of Philips or any of its Associated Companies and without
prejudice to the provisions of Article 12, for a period of ten years
from the Effective Date, Licensee agrees to grant to Philips, Sony and
their respective Associated Companies and to other third parties who
have entered or will enter into a license agreement with Philips or an
Associated Company of Philips concerning Players, non-exclusive,
non-transferable licenses on reasonable, non-discriminatory conditions,
to manufacture, sell or otherwise dispose of such CD-Audio Players,
CD-ROM Players, Enhanced Music CD Players and/or Combi-Players under
any and all present and future patents, for which Licensee or its
Associated Companies have or may hereafter acquire the right to grant
licenses and which are essential to the manufacture, sale or other
disposal of such Players and which patents were first filed in any
country of the world prior to the date of termination of this
Agreement. For the avoidance of doubt, the undertaking set out in the
preceding sentence shall only apply to those companies which accept or
have accepted a similar undertaking as contained in this Article 2.05.
2.06 Philips undertakes that it will offer, at the request of any of
Licensee's Associated Companies to any such Associated Company, a
non-exclusive and non-transferable license under the Licensed Patents
on reasonable and non-discriminatory conditions comparable to those set
forth herein, to manufacture, sell or otherwise dispose of CD-Discs.
In consideration of Philips' undertaking as set out in the preceding
paragraph, Licensee undertakes that all of its Associated Companies
which have or may hereafter acquire patents essential to the
manufacture, sale or other disposal of CD-Discs and which patents were
first filed in any country of the world prior to the date of
termination of this Agreement, shall make available licenses under such
patents, on reasonable, non-discriminatory conditions comparable to
those set forth herein to Philips, any of Philips' Associated Companies
and to other third parties who have entered or will enter into a
license agreement with Philips or an Associated Company of Philips in
respect of CD-Discs.
2.07 IT IS EXPRESSLY ACKNOWLEDGED AND AGREED THAT:
(I) THE LICENSES AND LICENSE UNDERTAKINGS HEREIN CONTAINED WITH
RESPECT TO THE MANUFACTURE OF LICENSED PRODUCTS DO NOT EXTEND
TO MASTER RECORDING MACHINES, MACHINES, EQUIPMENT OR METHODS
FOR THE REPLICATION OF DISCS, NOR TO THE MANUFACTURE OF
MATERIALS OR REPRODUCTION RIGHTS FOR INFORMATION (SUCH AS
AUDIO, VIDEO, TEXT AND/OR DATA-RELATED INFORMATION), CONTAINED
ON DISCS TO BE PLAYED BACK ON A PLAYER/RECORDER. FURTHER, THE
LICENSE UNDERTAKINGS WITH RESPECT TO THE MANUFACTURE OF
RECORDING/PLAYBACK DEVICES DO NOT EXTEND TO THE MANUFACTURE OF
COMPONENTS FOR RECORDING/PLAYBACK DEVICES (INCLUDING BUT NOT
LIMITED TO SEMICONDUCTOR DEVICES, INTEGRATED CIRCUITS, LASERS,
MOTORS AND LENSES), EXCEPT FOR PATENTS RELATING TO CIRCUITRY
AND/OR SYSTEM ASPECTS SPECIFIC TO THE CD SYSTEMS (AND SIMILAR
OPTICAL READ-OUT SYSTEMS);
(II) THE RIGHTS AND LICENSES GRANTED UNDER THIS AGREEMENT DO NOT
EXTEND TO ANY COMBINATION OF ONE OR MORE LICENSED PRODUCTS OR
PLAYERS, RECORDING/PLAYBACK DEVICES WITH ANY OTHER ITEMS,
PRODUCTS, SYSTEMS, STRUCTURES, EQUIPMENT OR SOFTWARE OTHER
THAN THE COMBINATION OF A LICENSED PRODUCT AND A PLAYER OR
RECORDING/PLAYBACK DEVICE.
ARTICLE 3 - STANDARD SPECIFICATIONS,
------------------------------------
TECHNICAL INFORMATION AND SUPPORT
---------------------------------
3.01 Upon receipt of the payment provided for in Article 5.01 and the
payment provided for in Article 5.12, Philips shall make available to
Licensee for use by Licensee in accordance with the provisions hereof,
a copy of the then current version of the respective CD Standard
Specifications, as correspond with the Licensed Patents selected by
Licensee pursuant to Article 1.16, together with such other information
and support as Philips considers necessary for the interpretation
and/or correct application of the relevant CD Standard Specifications.
3.02 Licensee shall be notified in writing of any addition or modification
to any of the relevant CD Standard Specifications and shall be provided
with relevant information in connection therewith.
3.03 Philips and Licensee undertake to keep each other generally informed of
developments or initiatives, which may have an impact on the relevant
CD Standard Specifications.
ARTICLE 4 - HAVE MADE
---------------------
4.01 The rights granted to Licensee pursuant to Article 2 and the right to
use the information pursuant to Article 3, include the right for
Licensee to have Licensed Products made for it by third party
manufacturers, duly licensed by Philips under an agreement similar to
this
Agreement, provided that Licensee will properly identify such third
party manufacturer in the royalty reporting forms to be submitted to
Philips hereunder, together with the quantities of Licensed Products so
purchased.
Conversely, Licensee shall refrain from purchasing or selling CD-Discs
manufactured by any third party not licensed by Philips, where such
purchase or sale would constitute an act of infringement of any of the
Licensed Patents.
ARTICLE 5 - ROYALTIES, REPORTS AND PAYMENTS
-------------------------------------------
5.01 In consideration of the rights granted by Philips and the information
to be provided by Philips hereunder, Licensee shall, upon execution of
this Agreement, make a non-refundable, non-recoupable payment of US$
25,000 (twenty-five thousand US Dollars) to Philips.
5.02 In further consideration of the rights granted hereunder by Philips to
Licensee, Licensee agrees to pay to Philips a royalty on each Licensed
Product sold by Licensee, in which any one or more of the Licensed
Patents is (are) used, irrespective of whether such Licensed Patent(s)
is (are) used in the country of manufacture, sale or other disposal.
These royalties shall amount to:
(a) US$ 0.03 (three US Dollar cents) for each Licensed Product
being a CD-Audio Disc with an outer diameter greater than 90
mm; and
(b) US$ 0.02 (two US Dollar cents) for each Licensed Product being
a CD-Audio Disc with an outer diameter smaller than 90 mm; and
(c) US$ 0.027 (two point seven US Dollar cents) for each Licensed
Product being a CD-Audio Maxi-Single; and
(d) US$ 0.03 (three US Dollar cents) for each Licensed Product
being a CD-ROM Disc with an outer diameter greater than 90 mm;
and
(e) US$ 0.02 (two US Dollar cents) for each Licensed Product being
a CD-ROM Disc with an outer diameter smaller than 90 mm; and
(f) US$ 0.045 (four and a half US Dollar cents) for each Licensed
Product being a CD Extra Disc with an outer diameter greater
than 90 mm; and
(g) US$ 0.03 (three US Dollar cents) for each Licensed Product
being a CD Extra Disc with an outer diameter smaller than 90
mm,
such rates hereinafter referred to as "Standard Rates".
With respect to Licensed Products sold after July 1, 2002, provided
that Licensee is in full compliance with its obligations under this
Agreement and subject to Article 6.01, the royalties shall amount to:
(a) US$ 0.0175 (one and three quarters of a US Dollar cent) for
each Licensed Product being a CD-Audio Disc with an outer
diameter greater than 90 mm; and
(b) US$ 0.0115 (one and fifteen hundredths of a US Dollar cent)
for each Licensed Product being a CD-Audio Disc with an outer
diameter smaller than 90 mm; and
(c) US$ 0.0155 (one and fifty-five hundredths of a US Dollar cent)
for each Licensed Product being a CD-Audio Maxi-Single; and
(d) US$ 0.0175 (one and three quarters of a US Dollar cent) for
each Licensed Product being a CD-ROM Disc with an outer
diameter greater than 90 mm; and
(e) US$ 0.0115 (one and fifteen hundredths of a US Dollar cent)
for each Licensed Product being a CD-ROM Disc with an outer
diameter smaller than 90 mm;
(f) US$ 0.03 (three US Dollar cents) for each Licensed Product
being a CD Extra Disc with an outer diameter greater than 90
mm; and
(g) US$ 0.02 (two US Dollar cents) for each Licensed Product being
a CD Extra Disc with an outer diameter smaller than 90 mm,
such rates hereinafter referred to as "Compliance Rates".
In the event that Licensee fails to comply at any time with any of its
obligations hereunder, the Standard Rates, as applicable, shall apply
to Licensee's manufacture and sale of CD-Discs instead of the
Compliance Rates, as applicable, with immediate effect from the moment
of such non-compliance until such moment that Licensee's non-compliance
will have been remedied in full.
A Licensed Product shall be considered sold when invoiced or, if not
invoiced, when delivered to a party other than Licensee.
No royalties shall be payable on Licensed Products purchased by
Licensee on a "have made" basis in accordance with Article 4 from third
party manufacturers, duly licensed by Philips, provided that Licensee
can demonstrate to Philips' satisfaction, that such third party
manufacturer has paid to Philips the royalties due in respect of such
Licensed Products.
For the avoidance of doubt, in the event that the manufacture by
Licensee of Licensed Products within the Territory would not infringe
any of the Licensed Patents, Licensee shall have no obligation to pay
royalties in respect of Licensed Products manufactured within the
Territory and which are directly sold for final use within the
Territory or directly exported for final use to a country in which no
Licensed Patents subsist.
5.03 Within 30 days following 31 March, 30 June, 30 September and 31
December of each year during the term of this Agreement, Licensee shall
submit to Philips (even in the event that no sales have been made) a
written statement in the form as attached hereto as Exhibit C3 (Royalty
Reporting Form) signed by a duly authorized officer on behalf of
Licensee, setting forth with respect to the preceding quarterly period:
(1) the quantities of CD-Discs manufactured by Licensee, specified
per individual type of CD-Disc;
(2) the quantities of CD-Discs purchased from other licensed
manufacturers in accordance with the provisions of Article 4,
specified per individual type of CD-Disc;
(3) on a per-country basis, specifying for each individual type of
CD-Disc:
(a) the quantities of CD-Discs sold or otherwise disposed
of, specifying the identity of the buyers and the
trademarks used on or in connection with the
CD-Discs;
(b) the quantities of CD-Discs sold to other
manufacturers, duly licensed by Philips, specifying
the identity of such other manufacturers and the
trademarks used on or in connection with the
CD-Discs;
(4)a computation of the royalties due under this
Agreement.
Licensee shall pay the royalties due to Philips within 30 days after
the end of each quarterly period, in such US Dollars.
5.04 In the event that Licensee fails to submit to Philips a Royalty
Reporting Form for any royalty reporting period within 30 days from the
end of the relevant reporting period in accordance with the provisions
of Article 5.03, Licensee shall be obliged to pay to Philips within 30
days after the end of the relevant quarterly period for which the
Royalty Reporting Form was not submitted, an estimated royalty
(hereinafter referred to as an "Advance"), being an amount equal to the
highest amount of royalties due for any royalty reporting period over
the preceding eight royalty reporting periods (or over all preceding
royalty reporting periods if fewer than eight). Such payment shall be
treated as a non-refundable advance, primarily against the royalties
and interest for the relevant royalty reporting period and then, if any
sum remains, against any future royalties or other payments payable by
Licensee hereunder. Licensee acknowledges and agrees that any Advance
shall not be due by way of penalty but that such payment shall
constitute a non-refundable advance as aforesaid. For the avoidance of
doubt, such payment shall be payable without any further notice or
action by Philips, legal or otherwise, and shall take effect by virtue
of the failure to submit a Royalty Reporting Form on time; the payment
by Licensee of an Advance shall not affect Licensee's obligation to
submit a Royalty Reporting Form; the payment by Licensee of an Advance
shall be without prejudice to any other rights or remedies of Philips,
including, without limitation, Philips' right to charge 2% interest per
month on overdue payments (including overdue payments of the Advance),
and Philips' right to terminate this Agreement in accordance with its
provisions. The Advance will not be set off against other sums due to
Philips until a Royalty Reporting Form has been submitted in respect of
the relevant royalty reporting period. In respect of any royalty
reporting period for which an Advance has been paid and the Royalty
Reporting Form subsequently submitted, Philips will first set off
against the Advance all royalties and interest due for that period. Any
remaining sum from the Advance will be set off against further royalty,
interest or Advance payments due to Philips hereunder (if any).
5.05 Licensee shall submit to Philips, once per calendar year, an audit
statement by its external auditors, who shall be public certified
auditors, confirming that the quarterly royalty statements as submitted
by Licensee to Philips for the last four quarterly periods, are true,
complete and accurate in every respect. Such statement must meet
Philips' requirements as specified in the Audit Guidelines attached
hereto as Exhibit C1 and shall be submitted to Philips within 90 days
following the end of Licensee's financial year. The correctness of this
audit statement shall be verified by Philips by means of a work paper
review, conducted by one of the public certified auditors selected by
Philips. Notwithstanding this audit statement, Philips reserves the
right to inspect the books and records of Licensee from time to time in
accordance with Article 5.10.
5.06 Within 30 days following the expiration or termination of this
Agreement, Licensee shall submit to Philips a certified report on the
number of Licensed Products in stock at the time of expiration or
termination of this Agreement. Royalties, calculated in accordance with
Article 5.02 and Article 5.12, shall be due and payable on all Licensed
Products manufactured prior to, but remaining in stock with Licensee on
the date of expiration or termination of this Agreement. For the
avoidance of doubt, this Article 5.06 shall be without prejudice to the
provisions of Article 12.06.
5.07 Any payment under this Agreement which is not made on the date(s)
specified herein, shall accrue interest at the rate of 2% (two per
cent) per month (or part thereof) or the maximum amount permitted by
law, whichever is lower.
5.08 All payments to Philips under this Agreement shall be made by transfer
in such currency, convertible in the sense of Articles VIII and XIX of
the Articles of Agreement of the International Monetary Fund, as
designated by Philips. The rate of exchange for converting the currency
of the Territory shall be the telegraphic transfer selling rate of the
designated currency as officially quoted in the Territory by the
officially authorized foreign exchange bank for payment of currency
transactions on the day that the amount is due and payable.
5.09 All costs, stamp duties, taxes and other similar levies arising from or
in connection with the conclusion of this Agreement shall be borne by
Licensee. In the event that the government of a country imposes any
income taxes on payments by Licensee to Philips hereunder and requires
Licensee to withhold such tax from such payments, Licensee may deduct
such tax from such payments. In such event, Licensee shall promptly
provide Philips with tax receipts issued by the relevant tax
authorities so as to enable Philips to support a claim for credit
against income taxes which may be payable by Philips and/or its
Associated Companies in The Netherlands and to enable Philips to
document, if necessary, its compliance with tax obligations in any
jurisdiction outside The Netherlands.
5.10 In order that the royalty statements provided for in this Article 5 may
be verified, Licensee shall keep complete and accurate books and
records and shall keep the books and records available for a period of
5 years following the manufacture, sale or other disposal of each
Licensed Product.
Philips shall have the right to inspect the books and records of
Licensee from time to time, in order to verify the correctness of the
aforementioned royalty statements. Any such inspection shall take place
no more than once per calendar year and shall be conducted by a public
certified auditor appointed by Philips. Philips shall give Licensee
written notice of such inspection at least 7 days prior to the
inspection. Licensee shall willingly co-operate and provide all such
assistance in connection with such inspection as Philips and/or the
auditor may require. The inspection shall be conducted at Philips' own
expense, provided that in the event that Licensee has failed to submit
royalty statements and/or yearly written statement(s) by its external
auditors, as provided for in Article 5.03 and Article 5.05, in respect
of the period to which the inspection relates or in the event that any
discrepancy or error exceeding 3% (three per cent) of the monies
actually due is established, the cost of the inspection shall be borne
by Licensee, without prejudice to any other claim or remedy as Philips
may have under this Agreement or under applicable law.
Philips' right of inspection as set out in this Article 5.10 shall
survive termination or expiration of this Agreement.
5.11 Without prejudice to the provisions of Article 5.10, Licensee shall
provide all relevant additional information as Philips may reasonably
request from time to time, so as to enable Philips to ascertain which
products manufactured, sold or otherwise disposed of by Licensee are
subject to the payment of royalties to Philips hereunder, the patents
which have been used in connection with such products, and the amount
of royalties payable.
5.12 As a condition precedent to the entry into force of this Agreement,
Licensee shall submit to Philips a royalty statement in respect of
CD-Discs manufactured and sold or otherwise disposed
of by Licensee before the Effective Date of this Agreement in
accordance with the provisions of Article 5.03. Within 7 days following
the execution of this Agreement, Licensee shall pay to Philips the
royalties on such CD-Discs, calculated by applying the royalty rates of
(a) US$ 0.03 for each CD-Audio Disc or CD-ROM Disc with an outer
diameter greater than 90 mm, (b) US$ 0.02 for each CD-Audio Disc or
CD-ROM Disc with an outer diameter smaller than 90 mm, (c) US$ 0.027
for each CD-Audio Maxi-Single and (d) US$ 0.045 or US$ 0.048 for each
CD Extra Disc, depending on the selection made by Licensee in Schedule
I to the Enhanced Music CD Disc License Agreement. The royalty
statement shall similarly be subject to Philips' right of audit as set
out in Article 5.10. Within 45 days following the execution of this
Agreement, Licensee shall submit to Philips an audit statement by its
external auditors, who shall be public certified auditors, confirming
that this royalty statement is true, complete and accurate in every
respect.
ARTICLE 6 - MANUFACTURING EQUIPMENT IDENTIFICATION SYSTEM
---------------------------------------------------------
6.01 Upon signing of the Agreement, Licensee shall submit to Philips an
overview of its manufacturing equipment used for the manufacture of
Licensed Products. Further, upon any acquisition, transfer or disposal
of manufacturing equipment used for the manufacture of Licensed
Products, Licensee shall submit to Philips details of any such
adjustment(s) to its manufacturing equipment. Further, Licensee shall
submit to Philips an overview containing all adjustments to its
manufacturing equipment during the preceding year, together with and
confirmed by the audit statement referred to in Article 5.05. Such
overview shall be in the form as attached hereto as Exhibit C2
(Manufacturing Equipment List), signed by a duly authorized officer on
behalf of Licensee. The Compliance Rates referred to in Article 5.02
shall only apply to Licensed Products manufactured by Licensee using
manufacturing equipment properly identified in the Manufacturing
Equipment List and shall be conditional upon Licensee submitting to
Philips the audit statement meeting Philips' requirements as set out in
the Audit Guidelines, in accordance with the provisions in Article
5.05. In the event that Licensee puts into use newly acquired
manufacturing equipment which has been used for the manufacture of
Licensed Products prior to the acquisition by Licensee, the Compliance
Rates shall only apply if Licensee can demonstrate to Philips' full
satisfaction, that the newly acquired manufacturing equipment
originates from and has been used by a company which was properly
licensed by Philips for the manufacture of Licensed Products and in
full compliance with its obligations under its license agreement at the
time of the acquisition of the newly acquired manufacturing equipment
by Licensee. In the event that Licensee is unable to comply with the
requirements under this Article 6.01, the Standard Rates shall apply to
Licensee's manufacture and sale of Licensed Products instead of the
Compliance Rates.
ARTICLE 7 - MOST FAVOURABLE CONDITIONS
--------------------------------------
7.01 In the event that licenses under the patents referred to in Article 2
are granted by Philips for Licensed Products to a third party under
substantially similar conditions, but at a royalty rate more favourable
than the rate payable by Licensee under this Agreement, Licensee shall
be entitled to the same royalty rate as applicable to such third party,
provided always that this right of Licensee shall not apply in respect
of cross-license agreements or other agreements providing for a
consideration which is not exclusively based on payment of royalties
and further provided that this right of Licensee shall not apply in
respect of licenses or other arrangements made pursuant to a court
decision or the settlement of a dispute between Philips and a third
party, irrespective of the nature of such dispute, the terms of the
court decision or the settlement terms.
ARTICLE 8 - NO WARRANTY AND INDEMNIFICATION
-------------------------------------------
8.01 Whereas Philips has made efforts to ensure that the information to be
supplied by it hereunder is complete and accurate, Philips makes no
representation or warranty as to the accuracy or completeness of such
information, nor with respect to the ability of Licensee to achieve
interchangeability with respect to Licensed Products through the use of
such information.
8.02 It is acknowledged by Licensee that third parties may own industrial
and/or intellectual property rights in the field of CD-Discs. Philips
and Sony make no warranty whatsoever that the manufacture, sale or
other disposal of Licensed Products or the use of information supplied
by Philips hereunder, does not infringe or will not cause infringement
of any industrial and/or intellectual property rights other than
Licensed Patents. Philips, Sony and their respective Associated
Companies shall be fully indemnified and held harmless by Licensee from
and against any and all third party claims in connection with CD-Discs
manufactured, sold or otherwise disposed of by Licensee.
ARTICLE 9 - CONFIDENTIALITY
---------------------------
9.01 Licensee shall at all times maintain strict confidentiality with regard
to the CD Standard Specifications and shall not disclose same to any
third party without the prior written consent of Philips.
9.02 Without prejudice to Article 9.01, Licensee shall, during the term of
this Agreement as specified in Article 12.01 and for a period of 3
years thereafter, not disclose to any third party any information
acquired from Philips or any of Philips' Associated Companies in
connection with this Agreement, or use such information for any other
purpose than the manufacture or disposal of Licensed Products in
accordance with this Agreement. This obligation shall not apply to the
extent information so acquired:
(a) was known to Licensee prior to the date on which such
information was acquired from Philips or any of Philips'
Associated Companies, as shown by records of Licensee or
otherwise demonstrated to Philips' satisfaction;
(b) is or has become available to the public through no fault of
Licensee;
(c) was or is received from a third party who was under no
confidentiality obligation in respect of such information.
In protecting information acquired from Philips or any of Philips'
Associated Companies, Licensee shall take all necessary measures and
precautions, including but not limited to measures requiring its
present and future employees to give suitable undertakings of secrecy
both for the period of their employment and thereafter, and shall
protect such information in the same manner and with the same degree of
care (but no less than a reasonable degree of care) with which Licensee
protects its own information of a confidential nature.
9.03 The obligations concerning confidentiality contained in Article 9.01
and Article 9.02 shall survive termination of this Agreement
9.04 Philips shall, during the term of this Agreement as specified in
Article 12.01 and for a period of 3
years thereafter, not disclose to any third party any confidential
information obtained by Philips in connection with Article 5.03 and/or
Article 5.05, except that Philips may disclose such information to its
external auditors, legal representatives and to the competent courts to
the extent this is necessary for Philips in connection with the
enforcement of its rights hereunder. Further, Philips shall not use
such information for other purposes than to verify Licensee's
compliance with its royalty reporting and payment obligations as
provided in this Agreement and to enforce Philips' rights hereunder.
Philips' obligations set out in this paragraph shall not apply to
information referred to in sections a, b and/or c of Article 9.02.
ARTICLE 10 - LOGO
-----------------
10.01 For the term of this Agreement and subject to the full and timely
performance and observance by Licensee of all its undertakings and
obligations hereunder, Licensee shall be entitled to use on the
Licensed Products as well as in advertisements and sales literature
with respect to Licensed Products sold by Licensee, a logo (hereinafter
referred to as "the Logo") in accordance with the instructions laid
down in the CD-Logo Guide which shall be made available to Licensee
together with the Standard Specifications.
10.02 Licensee acknowledges and agrees that Philips makes no warranty
whatsoever that any use of the Logo does not infringe or will not cause
infringement of any third party intellectual property rights.
ARTICLE 11 - NO ASSIGNMENT
--------------------------
11.01 This Agreement shall inure to the benefit of and be binding upon each
of the parties hereto and their respective assignees. It may not be
assigned in whole or in part by Licensee without the prior written
consent of Philips.
ARTICLE 12 - TERM AND TERMINATION
---------------------------------
12.01 This Agreement shall enter into force on the "Effective Date", being
the date first written above. In the event that validation of this
Agreement is required by the competent governmental authorities, the
Effective Date shall be the date of such validation. This Agreement
shall remain in force for a period of 10 years from the Effective Date
unless terminated earlier in accordance with the provisions of this
Article 12.
12.02 Without prejudice to the provisions of Article 12.03 through 12.06,
each party may terminate this Agreement at any time by means of written
notice to the other party in the event that the other party fails to
perform any obligation under this Agreement and such failure is not
remedied within 30 days after receipt of a notice specifying the nature
of such failure and requiring it to be remedied. Such right of
termination shall not be exclusive of any other remedies or means of
redress to which the non-defaulting party may be lawfully entitled, and
all such remedies shall be cumulative. Any such termination shall not
affect any royalty or other payment obligations under this Agreement
accrued prior to such termination.
12.03 Philips may terminate this Agreement forthwith by means of notice in
writing to Licensee in the event that a creditor or other claimant
takes possession of, or a receiver, administrator or similar officer is
appointed over any of the assets of Licensee or in the event that
Licensee
makes any voluntary arrangement with its creditors or becomes subject
to any court or administration order pursuant to any bankruptcy or
insolvency law.
12.04 Additionally, insofar as legally permitted, Philips may terminate this
Agreement at any time by means of written notice to Licensee in case
Licensee or an Associated Company of Licensee has been found liable by
a competent court or administrative authority to have committed an act
of copyright piracy.
12.05 Philips shall have the right to terminate this Agreement forthwith or
to revoke the license granted under any of Philips' or Sony's
respective patents in the event that Licensee or any of its Associated
Companies brings a claim for infringement of any of Licensee's or any
of Licensee's Associated Companies essential patents relating to
CD-Discs or CD-Players against Philips, Sony or any of their respective
Associated Companies and Licensee refuses to license such patents on
fair and reasonable conditions.
12.06 Upon the termination of this Agreement by Philips for any reason
pursuant to Article 12.02 through 12.05, Licensee shall immediately
cease the manufacture, sale or other disposal of CD-Discs in which any
one or more of the Licensed Patents are used. Further, upon such
termination, any and all amounts outstanding hereunder shall become
immediately due and payable.
12.07 All provisions of this Agreement which are intended to survive (whether
express or implied) the expiry or termination of this Agreement, shall
so survive.
ARTICLE 13 - MISCELLANEOUS
--------------------------
13.01 Any notice required under this Agreement to be sent by either party
shall be given in writing by means of a letter, facsimile or electronic
mail directed:
in respect of Licensee, to:
Metatec International, Inc.
0000 Xxxxxxx Xxxx.
Xxxxxx, Xxxx 00000
Fax: (000) 000-0000
in respect of Philips, to:
Koninklijke Philips Electronics N.V.
c/o Philips International B.V.
Intellectual Property & Standards - Legal Department
X.X. Xxx 000, Xxxxxxxx XXX-0
0000 XX Xxxxxxxxx
Xxx Xxxxxxxxxxx
Fax: x00 00 0000000
with a copy to:
U.S. Philips Corporation
000 Xxxxx Xxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
or to such other address as may have been previously specified in
writing by either party to the other.
13.02 This Agreement sets forth the entire understanding and agreement
between the parties as to the subject matter hereof and supersedes and
replaces all prior arrangements, discussions and understandings between
the parties relating thereto. Neither party shall be bound by any
obligation, warranty, waiver, release or representation except as
expressly provided herein, or as may subsequently be agreed in writing
between the parties.
13.03 Nothing contained in this Agreement shall be construed:
(a) as imposing on either party any obligation to instigate any
suit or action for infringement of any of the patents licensed
hereunder or to defend any suit or action brought by a third
party which challenges or relates to the validity of any of
such patents. Licensee shall have no right to instigate any
such suit or action for infringement of any of the patents
licensed by Philips hereunder, nor the right to defend any
such suit or action which challenges or relates to the
validity of any such patent licensed by Philips hereunder;
(b) as imposing any obligation to file any patent application or
to secure any patent or to maintain any patent in force;
(c) as conferring any license or right to copy or imitate the
appearance and/or design of any product of Philips, Sony or
any of their Associated Companies;
(d) as conferring any license to manufacture, sell or otherwise
dispose of any product or device other than a Licensed
Product.
13.04 Neither the failure nor the delay of either party to enforce any
provision of this Agreement shall constitute a waiver of such provision
or of the right of either party to enforce each and every provision of
this Agreement.
13.05 Should any provision of this Agreement be finally determined void or
unenforceable in any
judicial proceeding, such determination shall not affect the operation
of the remaining provisions hereof, provided that, in such event,
Philips shall have the right to terminate this Agreement by written
notice to Licensee.
13.06 This Agreement shall be governed by and construed in accordance with
the laws of The State of New York.
Any dispute between the parties hereto in connection with this
Agreement (including any question regarding its existence, validity or
termination) shall be submitted to any state or federal courts in The
State of New York, provided always that, in case Philips is the
plaintiff, Philips may at its sole discretion submit any such dispute
either to the state or federal courts in the venue of Licensee's
registered office, or to any of the state or federal courts in the
Territory having jurisdiction. Licensee hereby irrevocably waives any
objection to the jurisdiction, process and venue of any such court and
to the effectiveness, execution and enforcement of any order or
judgment (including, but not limited to, a default judgment) of any
such court in relation to this Agreement, to the maximum extent
permitted by the law of any jurisdiction, the laws of which might be
claimed to be applicable regarding the effectiveness, enforcement or
execution of such order or judgment.
AS WITNESS, the parties hereto have caused this Agreement to be signed on the
date first written above.
KONINKLIJKE PHILIPS ELECTRONICS METATEC INTERNATIONAL, INC.
N.V.
/s/ B. Mache /s/ Xxxx X. Xxxxxxxx
------------------------------- ------------------------------
Name: Bernd Mache Name: Xxxx X. Xxxxxxxx
Title: Chief Financial Officer Title: Chief Financial Officer
------------------------- ------------------------
Date: August 13, 2002 Date: August 9, 2002
-------------------------- -------------------------
