EXHIBIT 10(x)
2002/6/20R
DVD PATENT LICENSE AGREEMENT
This DVD PATENT LICENSE AGREEMENT is made between Toshiba Corporation
("Licensor"), a Japanese corporation having its principal place of business at
1-1, Xxxxxxxx 0-xxxxx, Xxxxxx-xx, Xxxxx 000-0000, Xxxxx, under authorization of
the members of the DVD Patent Licensing Group (or "Group", as listed in Exhibit
1 hereto, as may be amended from time to time by Licensor), and Metatec
International, Inc. ("Licensee"), a Ohio corporation having its principal place
of business at 0000 Xxxxxxx Xxxxxxxxx, Xxxxxx, XX 00000, XXX, and is effective
as of December 31, 2002 (the "Effective Date").
WHEREAS, members of the Group have been engaged in the research and
development of systems in which data encoded in digital form and stored on a
disc are read and outputted (whether as data or signals) by means of devices
using an optical read-out beam (such systems, the "DVD Systems"); and
WHEREAS, members of the Group and others have defined standards for the
DVD Systems, including standards for the production and use of DVD products
constituting the DVD Systems and providing for the interoperability of such DVD
products; and
WHEREAS, members of the Group own valuable patents (and patent
applications) that are Essential (hereinafter defined) to make, use and sell DVD
Products (as defined in Exhibit 3 hereto), as listed in Exhibit 2 hereto (the
"DVD Patents," as more specifically defined in Exhibit 3 hereto); and
WHEREAS, members of the Group believe that a non-exclusive joint
licensing program, under which licensees can obtain access to as many Essential
patents as possible in one transaction, is an efficient method for licensing DVD
Patents for the benefit of licensees and the public, and have granted Licensor
the right to grant such licenses with respect to the DVD Patents on their behalf
to licensees that wish to make, use or sell DVD Products; and
WHEREAS, Licensee wishes to obtain a license under the DVD Patents to
make, use and sell the DVD Products;
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
ADDITIONAL TERMS
1.1 In addition to the terms set forth herein, this Agreement shall
include as terms the DVD Patent License Conditions (the "Conditions"), as set
forth in Exhibit 3 hereto. Terms not defined herein shall have the meaning
ascribed to them in the Conditions, and vice versa.
1.2 Royalties payable by Licensee hereunder are specified in the
Conditions.
ARTICLE 2
DVD PATENT LICENSE AND RELEASE
2.1 Licensor hereby grants to Licensee and its Affiliates a
non-exclusive, non-transferable license to make, have made, use, sell, and
otherwise dispose of DVD Products under the DVD Patents or any of their claims
pursuant to the Conditions of Exhibit 3.
2.1.A DVD Players and DVD Decoders (as defined in Article 1 of
Exhibit 3) on which applicable royalties are paid pursuant to paragraph 2.4 of
Exhibit 3 are licensed for use only with DVD Discs for which royalties have been
paid pursuant to paragraph 2.3 of Exhibit 3. DVD Discs on which applicable
royalties are paid pursuant to paragraph 2.3 of Exhibit 3 are licensed for use
only with DVD Players and DVD Decoders for which royalties have been paid
pursuant to paragraph 2.4 of Exhibit 3.
2.2 Licensor hereby releases Licensee and its Affiliates and their
customers from any and all claims of infringement of the DVD Patents arising
from Licensee's or its Affiliates' manufacture, use, sale, or disposal by other
means of DVD Products for the period prior to the Effective Date of this
Agreement pursuant to the Conditions of Exhibit 3.
2.3 Instead of dealing with Licensor to obtain licenses for DVD Patents
of the members of the Group, Licensee shall have the option to negotiate and
take a license under any DVD Patents and other related patents owned by each
member of the Group pursuant to separate negotiations with each of the members
on fair, reasonable and non-discriminatory terms, whether or not Licensee
intends to manufacture and/or sell DVD Products in conformity with the DVD
Standard Specifications.
2.4 IT IS EXPRESSLY UNDERSTOOD THAT THE RIGHTS AND LICENSES GRANTED
PURSUANT TO THIS AGREEMENT DO NOT EXTEND TO ANY PRESENT OR FUTURE RIGHTS
WHATSOEVER TO USE THE DVD FORMAT BOOKS OR DVD LOGOS.
ARTICLE 3
LICENSE BACK
3.1 Licensee hereby agrees to grant to each member of the Group and its
Affiliates and each of the other licensees of Licensor under the DVD Patents, a
non-exclusive license to and release from any and all claims of infringement of
any patents that are or become Essential to make, use, or sell DVD Products and
with respect to which Licensee has or may in the future obtain rights to grant
such a license. Any such licenses and releases shall be granted upon fair,
reasonable, and non-discriminatory terms.
3.2 Licensor shall have the right to terminate the license granted
herein under any of the DVD Patents owned by any member of the Group in the
event that Licensee has brought a claim(s) that any DVD Product made, used or
sold by any member of the Group infringes any patent(s) that are Essential to
make, use, or sell DVD Products in a lawsuit or other proceeding against the
member of the Group, and Licensee has refused to grant such member of the Group
a license on fair and reasonable terms and conditions under such patents upon
which the lawsuit or other proceeding is based for the manufacture, use or sale
of DVD Products. In the event that any dispute arises between Licensee and
Licensor or any other member of the Group as to determination of the fair and
reasonable terms and conditions and cannot be settled between
the parties, the dispute shall be submitted to and determined by an expert
jointly appointed and paid by Licensee and Licensor or the other member of the
Group.
ARTICLE 4
WARRANTY AND DISCLAIMER
4.1 THE GROUP, LICENSOR AND MEMBERS OF THE GROUP MAKE NO REPRESENTATION
OR WARRANTY AS TO THE VALUE OR UTILITY OF THE DVD PATENTS, OR THE ABILITY OF
LICENSEE TO MAKE USE THEREOF OR TO SECURE INTERCHANGEABILITY WITH OTHER DVD
PRODUCTS. THE GROUP, LICENSOR AND THE MEMBERS OF THE GROUP MAKE NO WARRANTY WITH
RESPECT TO THE VALIDITY OF THE DVD PATENTS, NOR DO THEY WARRANT THAT LICENSEE'S
MANUFACTURE, USE, SALE, LEASE OR OTHER DISPOSITION OF DVD PRODUCTS WILL NOT
CAUSE INFRINGEMENT OF ANY PROPERTY RIGHT OWNED OR CONTROLLED BY ANY PERSON,
EXCEPT THAT LICENSOR WARRANTS THAT IT HAS BEEN AUTHORIZED BY THE MEMBERS OF THE
GROUP TO GRANT SUCH RIGHTS WITH RESPECT TO THE DVD PATENTS AS ARE SPECIFICALLY
SET FORTH HEREIN. THE GROUP, LICENSOR AND MEMBERS MAKE NO OTHER WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING THOSE OF MERCHANTABILITY, FITNESS FOR A PATICULAR
PURPOSE, OR NON-INFRINGEMENT. THE LICENSES GRANTED HEREIN ARE PROVIDED "AS IS."
4.2 Licensee covenants that, at Licensor's request, it shall place
appropriate patent markings on an exposed surface of the DVD Products made,
used, sold and/or otherwise disposed of hereunder. The content, form, location
and language used in such markings shall be in accordance with the laws and
practices of the country where such markings are used.
ARTICLE 5
TERM AND TERMINATION
5.1 This Agreement shall become effective as of the Effective Date and
shall continue in force until December 31, 2007, unless earlier terminated
pursuant to the terms hereof, and shall be automatically renewed for additional
five (5) year terms unless Licensee notifies Licensor in writing of its intent
to terminate this Agreement at least sixty (60) days prior to the date specified
above or the expiration date of such renewed periods, as the case may be.
5.2 Notwithstanding the provisions of Article 5.1, this Agreement shall
expire upon the expiration of the last to expire DVD Patent, if such expiration
would occur before the expiration date otherwise provided for in Article 5.1.
5.3 Either party may terminate this Agreement at any time on thirty
(30) days' written notice to the other party in the event that the latter shall
materially breach or fail to perform any material obligation under this
Agreement and such default is not remedied within thirty (30) days after notice
is given specifying the nature of the default. 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.
5.4 In the event that any Event of Bankruptcy occurs, then Licensor may
give notice to Licensee terminating this Agreement and this Agreement shall be
terminated in
accordance with the notice. An "Event of Bankruptcy" occurs if: (i) a decree or
order by a court having jurisdiction in the premises has been entered adjudging
Licensee a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, readjustment, arrangement, composition, winding up or
similar relief for Licensee under any applicable statute, or a decree or order
of a court having jurisdiction in the premises for the appointment of a
liquidator, receiver, administrator, trustee or assignee in bankruptcy or
insolvency or other similar person or official of Licensee or of a substantial
part of the property, or for the winding up or liquidation of the affairs of
Licensee has been entered and remains unstayed; or if any substantial part of
the property of Licensee has been sequestered or attached and has not been
returned to the possession of Licensee or released from such attachment within
14 days thereafter; whether any such act or event occurs in Japan, or any
foreign country, subdivision thereof, or any other jurisdiction; or (ii)
Licensee institutes proceedings to be adjudicated a voluntary bankrupt or
insolvent, consents to the filing of a bankruptcy or insolvency proceeding
against it, files a petition or answer or consent seeking reorganization,
readjustment, arrangement, composition, winding up, administration,
receivership, or similar relief under any applicable statute or consents to the
filing of any such petition or the entry of any such order, makes an assignment
for the benefit of creditors, is determined to be unable to pay its debts or
admits in writing its inability to pay its debts generally as they become due,
or voluntarily suspends transactions of a substantial portion of its usual
business; whether any such act or event occurs in Japan, or any foreign country,
subdivision thereof, or any other jurisdiction.
ARTICLE 6
MISCELLANEOUS
6.1 Except as provided in Article 6.1.1 of this Agreement, in the event
that Licensor grants a DVD Patents license to another party with royalty rates
more favorable than those set forth in Articles 2.3 and 2.4 of the DVD Patent
License Conditions attached hereto as Exhibit 3, whether or not such more
favorable royalty rates are on terms and conditions that are different from
those set forth herein, Licensor shall send written notice to Licensee
specifying the more favorable royalty rates and any terms and conditions that
are different from those set forth herein within thirty (30) days of the
granting of DVD Patents 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 those available to such other party
within thirty (30) days of receipt of such written notice from Licensor by
sending written notice to Licensor requesting such amendment; provided, however,
that this Agreement shall also be amended to include any additional benefits to
Licensor that may be included among the terms and conditions corresponding to
such royalty rates. Any amendment made pursuant to this Article 6.1 shall be
effective as of the date it is made, and such more favorable royalty rates shall
not be retroactively applicable in favor of Licensee, and shall not be a basis
for claiming any refund of royalties paid prior to such effective date.
6.1.1. Article 6.1 shall not apply to:
6.1.1.1 Settlement of litigation;
6.1.1.2 Determination by Licensor of back royalties
owed by a Licensee;
6.1.1.3 Compromise or settlement of royalty
payments owed by a Licensee in
financial distress;
6.1.1.4 Individual patent licenses or sublicenses
granted by an individual member of the
Group to a third party; and
6.1.1.5 An order of a court or an administrative body.
6.2 This Agreement and the rights granted hereunder shall be personal
to Licensee and shall not be assignable, except to an Affiliate, the survivor of
a merger with Licensee, or the acquiror of all or substantially all of
Licensee's assets. Licensee's right to sublicense any rights granted hereunder
shall be limited solely to the right to have a third party manufacture for
Licensee DVD Products. Licensee shall, in all such cases, ensure that the third
party undertakes to be bound by all of the terms of this Agreement. Licensee
shall be solely responsible for ensuring such third party's compliance with the
terms hereof.
6.3 This Agreement shall be governed and construed according to the
laws of New York, as if this Agreement were wholly executed and wholly performed
within New York, and without reference to the conflicts of laws principles
thereof.
6.4 All disputes between the parties hereto arising out of or in
connection with the interpretation or execution of this Agreement shall be
finally settled by the competent courts of federal or state courts located in
the county of New York in the state of New York, and each of the parties to this
Agreement hereby submits to the jurisdiction of such courts for the resolution
of such disputes and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in such courts or to the convenience
or inconvenience of conducting or pursuing any action or proceeding in any such
court.
6.5 This Agreement shall inure to the benefit of the parties hereto and
each of their respective Affiliates and permitted assigns, provided that (i)
such Affiliates shall comply with the terms of this Agreement, (ii) nothing
herein shall relieve any party of any of its obligations under the terms of this
Agreement; and (iii) a party shall be responsible for the acts and omissions of
its Affiliates as if such acts and omissions had been the acts and omissions of
such party.
6.6 Any notice or request with reference to this Agreement shall be
made by letter or facsimile, and shall be directed by one party to the other at
its respective address as follows:
In the case of Licensor to:
Yoshitaka Honda
General Manager, License Management
Toshiba DVD License Service, Inc.
5th Floor, Sumitomo-Hamamatsucho Bldg.,
18-16, Xxxxxxxxxxxx 0-xxxxx, Xxxxxx-xx,
Xxxxx 000-0000, Xxxxx
TEL:x00-0-0000-0000
FAX:x00-0-0000-0000
E-mail: xxxxxxxxx.xxxxx@xxxxxxx-xxxx.xx.xx
In the case of Licensee to:
Xxxx Xxxxxxxx
Chief Financial Officer
Metatec International, Inc.
0000 Xxxxxxx Xxxxxxxxx
Xxxxxx, XX 00000
XXX
TEL: 000-000-0000
FAX: 000-000-0000
E-mail: Xxxxxxxx@xxxxxxx.xxx
or to such other address(es) as either party may from time
to time designate as its address by notice in writing to the other. All notices
so addressed are effective when received.
6.7 This Agreement sets forth the entire agreement and understanding
between the parties as to the subject matter hereof and merges all prior
discussions between them and neither of the parties shall be bound by any
conditions, definitions, warranties, waivers, releases or representations
(either expressed or implied) with respect to the subject matter of this
Agreement, other than expressly provided for herein (including the exhibits
hereto), or as duly set forth on or subsequent to the date hereof in writing
signed by a duly authorized representative of the party to be bound thereby.
6.8 Under no circumstances shall the Group, Licensor or members of the
Group be liable to Licensee for any special, incidental, punitive or indirect
damages or for any economic consequential damages (including lost profits,
revenues and savings), even if advised in advance of the possibility of such
damages. In addition, in no event shall the Group, Licensor, or members of the
Group be liable for any third party claim against Licensee.
IN WITNESS WHEREOF, the parties have executed this Agreement by their
duly authorized representatives as of the Effective Date.
TOSHIBA CORPORATION Metatec International, Inc.
Licensor Licensee
_/s/ Yasuo Nishioka__________________ /s/ Xxxx X. Qualmann______________
By (Sign) By (Sign)
Xxxxx Xxxxxxxx Xxxx Xxxxxxxx
_____________________________________ __________________________________
Name (Print) Name (Print)
Vice President Chief Financial Officer
Strategic Partnership Division
Digital Media Network Company
Title Title
_____________________________________ __________________________________
_____________________________________ __________________________________
Date Date
EXHIBIT 1
DVD Patent Licensing Group members include:
Hitachi, Ltd.
International Business Machines Corporation
Matsushita Electric Industrial Co., Ltd.
Mitsubishi Electric Corporation
AOL Time Warner Inc.
Toshiba Corporation
Xxxxxx Company of Japan, Ltd.
EXHIBIT 2
[list of DVD Patents]
EXHIBIT 3
DVD PATENT LICENSE CONDITIONS
ARTICLE 1
DEFINITIONS
1.1 "AGREEMENT" shall mean the DVD Patent License Agreement to which
these Conditions are Exhibit 3.
1.2 "DVD STANDARD SPECIFICATIONS" shall mean the specifications of the
DVD Systems as agreed upon by the Group and others and as specified in the
document DVD Specifications for Read Only Disc version 1.0 of August 1996 and
its respective revisions or successive modified, amended or extended versions
thereof, as may be issued by the Group and others from time to time for DVD
Products.
1.3 "DVD PATENTS" shall mean all patents owned by members of the Group,
now, or hereafter during the term of this Agreement, that are Essential to make,
use or sell DVD Products. Such DVD Patents shall not include patents related to
"CSS" or "Content Scramble System" which is designed to provide reasonable
protection for the contents of DVD discs or MPEG-2 data compression patents that
may be applicable to DVD Systems. The currently issued DVD Patents are listed in
Exhibit 2, which Exhibit 2 may be amended from time to time by Licensor to
incorporate DVD Patents issued during the term of this Agreement.
1.4 "ESSENTIAL" with respect to the definition of DVD Patents shall
mean necessarily infringed when implementing the DVD Standard Specifications or
claiming technologies for which there is no realistic alternative in
implementing the DVD Standard Specifications.
1.5 "DVD-VIDEO DISC/DVD-ROM DISC" (collectively, "DVD Discs") shall
mean any replicated disc comprising any kind of information such as, but not
limited to, audio, video, text, and data-related information, encoded in digital
form, that is optically readable by a DVD Player, that conforms to the DVD
Standard Specifications and that practices a DVD Patent or with respect to which
use or manufacture thereof practices a DVD Patent.
1.6 "DVD-VIDEO PLAYER/DVD-ROM DRIVE" (collectively, "DVD Players")
shall mean a playback device conforming to the DVD Standard Specifications that
is specifically designed and manufactured for the reproduction of information
stored on a DVD Disc and conversion of such information into electrical signals,
which electrical signals are directly capable and intended to be used for visual
reproduction through standard television receivers or television monitors or for
reproduction of video, text, audio and data-related information through data
handling or data processing apparatus, and that practices a DVD Patent or with
respect to which use or manufacture thereof practices a DVD Patent.
1.7 "DVD DECODER" shall mean a decoder implemented in hardware or
software capable of receiving and decoding transmissions from a DVD-ROM Drive
over a computer system bus and that conforms to the DVD Standard Specifications
and practices a DVD Patent or with respect to which use or manufacture thereof
practices a DVD Patent.
1.8 "DVD PRODUCT" shall mean a DVD Player, DVD Disc or a DVD Decoder.
1.9 "AFFILIATE" shall mean, with respect to either party hereto, any
corporation, firm, partnership, proprietorship, or other form of business
entity, in whatever country organized or resident, directly or indirectly
controlled by such party. For the purpose of this definition, "control" shall
mean the power to direct or cause the direction of the management or policies of
such entity, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.
ARTICLE 2
PAYMENT
2.1 In consideration of the releases granted under Article 2.2 of this
DVD Patent License Agreement, Licensee shall pay to Licensor, within thirty (30)
days after the Effective Date of this Agreement, US$ , which shall be calculated
by applying the royalty rates specified in Article 2.3 for DVD Discs and Article
2.4 for DVD Players and DVD Decoders to the number of DVD Products sold by
Licensee and its Affiliates prior to the Effective Date of this Agreement.
2.2 Licensee shall be obligated to pay royalties to Licensor on all DVD
Products it and its Affiliates sell or otherwise transfer. Royalties shall
accrue and be payable as follows:
2.3 With respect to DVD Discs, the royalty payable shall be US $0.075
per disc made, sold or otherwise transferred, as may be applicable. The royalty
shall accrue when the disc is invoiced, or if not invoiced, when ownership or
possession is transferred to another party.
2.3.1 All royalties payable with respect to DVD Discs shall be paid to
Licensor in US dollars.
2.4 With respect to DVD Players, the royalty payable shall be 4% of the
Net Selling Price (hereinafter defined) of the DVD Player, or US$4.00 per DVD
Player, whichever is greater. With respect to DVD Decoders, the royalty payable
shall be 4% of the Net Selling Price of the DVD Decoder, or US$1.00 per DVD
Decoder, whichever is greater. The royalty shall accrue when a DVD Player or DVD
Decoder is invoiced, or if not invoiced, when ownership or possession is
transferred to another party.
2.4.1 With respect to DVD Products sold by Licensee or its Affiliates
to any third party in arm's length trade, Net Selling Price shall mean gross
sales price less normal discounts actually granted, insurance fees and packing
and transportation charges as invoiced to customers, and duties and sales taxes
actually incurred and paid by Licensee or its Affiliates in connection with the
delivery of such DVD Products.
2.4.2 With respect to DVD Products sold by Licensee or its Affiliates
to customers who do not deal at arm's length with Licensee or its Affiliates,
Net Selling Price shall mean the average Net Selling Price of the prior three
(3) months as defined above for similar DVD Products sold at arm's length trade
with third party customers.
2.4.3 All royalties payable with respect to DVD Players and DVD
Decoders shall be accrued and paid to Licensor in the currency reasonably
determined by Licensor, after advance consultation with Licensee.
2.4.4 If a DVD-ROM Drive or DVD Decoder is incorporated into a
subsequently manufactured personal computer, then a royalty shall be due on such
DVD-ROM Drive or DVD Decoder only and not on the personal computer. If both a
DVD-ROM Drive and a DVD Decoder are incorporated into a subsequently
manufactured personal computer, a royalty shall be due on both the DVD-ROM Drive
and the DVD-Decoder.
2.4.5 Royalties are due only on (i) DVD Players (including, without
limitation, DVD-ROM Drives), DVD Decoders and DVD Discs that are ready to be
used by the consumer without any further manufacturing, and (ii) DVD-ROM Drives
and DVD Decoders that are incorporated into personal computers by subsequent
manufacturers, (collectively, (i) and (ii), "Ready-To-Use Products"). A first
manufacturer shall pay a royalty on Ready-to-Use Products that are then sold to
a second manufacturer for incorporation into a personal computer. The second
manufacturer shall be relieved from paying any royalty beyond that due from and
paid by the first manufacturer on the product.
2.4.6 With respect to combination DVD Products, the royalty payable for
a single product (a) into which a DVD Player is incorporated by Licensee or
Licensee's Affiliates and (b) which consists of such DVD Player and one (1) or
more non-DVD Player product(s) or component(s) ("Non-DVD Player Product") (each
such single product, a "Combination Product") shall be the greater of (a) US
$4.00 or (b) 4% of the amount calculated under sub-clause (1) or (2) below:
(1) in the event that a DVD Player incorporated into a Combination Product
is substantially similar to a DVD Player that Licensee or Licensee's
Affiliates manufacture and sell independently of the Combination
Product, the Net Selling Price of such independently sold,
substantially similar DVD Player; or
(2) in the event that sub-clause (1) does not apply, the product of the
following formula:
NSP x [A + C x {A / (A + B)}] / (A+B+C)
where
A = the material cost of a DVD Player incorporated in a
Combination Product;
B = the material cost of a Non-DVD Player Product
incorporated in such Combination Product;
C = the material cost of the portion of such Combination
Product that is common to such DVD Player and such Non-DVD
Player Product, including, without limitation, the power
supply and cabinet; and
NSP = the Net Selling Price of such Combination Product.
2.5 Upon termination of this Agreement, royalties shall be due and
payable with respect to all DVD Products made by, or made for, Licensee but not
yet sold or transferred.
2.6 Within forty-five (45) days after March 31, June 30, September 30,
and December 31 of each year during the period this Agreement shall be in force
and effect, Licensee hereby undertakes to submit to Licensor, even if it makes
no sales of DVD Products, a statement in writing setting forth with respect to
the preceding quarterly period:
(1) The quantities of DVD Products manufactured (or manufactured for) and
sold by Licensee and its Affiliates, for each product type of DVD
Products in the case of DVD Players and DVD Decoders sold; and
(2) the trademarks or trade names used on or in connection with the DVD
Products sold, if any; and
(3) a computation of the royalties due under this Agreement.
Licensee shall pay Licensor in the manner and to the account Licensor may
indicate, and within ninety (90) days after the end of each quarterly period,
the royalty due hereunder. All royalties shall be calculated and paid, exclusive
of any taxes or other levies (except withholding taxes imposed by the governing
body of Licensee's domicile), which shall be borne by Licensee. With respect to
withholding taxes imposed by the governing body of Licensee's domicile, Licensee
shall pay such taxes and shall be entitled to deduct such taxes from royalties
paid, so long as Licensee provides Licensor with a tax certificate (or
equivalent document) evidencing such payment and/or obligation. Licensee
covenants to pay such taxes in a timely and lawful manner.
2.7 All payments which are not made on the due date specified in this
Agreement shall accrue interest at the rate of two percent (2%) per month.
2.8 Licensee agrees to keep accurate books with respect to sales, other
transfers, and royalties, and to permit Licensor to audit those books no more
than once annually. Such audits may cover the three year period preceding the
audit. Such audits shall be conducted by an independent auditor hired by
Licensor, and the costs thereof shall be borne by Licensor, except that if any
such audit should reveal an underpayment of royalties due hereunder of greater
than 3% for any period audited, Licensee shall bear the costs of such audit, as
well as pay the discrepancy.
ARTICLE 3
LIMITATION ON LICENSE GRANT
Notwithstanding anything to the contrary in Section 2.1 of this Agreement or any
other provision of this Agreement or of the Exhibits to this Agreement, no
licenses are granted under this Agreement for the sale, or other disposition of
either (a) DVD Products that are not Ready-to-Use Products or (b) DVD-ROM Drives
or DVD-Decoders that will ultimately be incorporated into DVD-Products other
than personal computers. DVD-ROM Drives or DVD-Decoders that will ultimately be
incorporated into DVD-Products other than personal computers shall only be
manufactured subject to licenses granted to the manufacturers of such DVD
Products (including, as applicable, subject to such manufacturers' "have made"
rights under such licenses); therefore the royalty shall be due on such
subsequently manufactured DVD Product. If, for any reason, a royalty is paid for
such a DVD-ROM Drive or DVD-Decoder, the manufacturer of such subsequently
manufactured DVD Product shall be entitled to subtract a credit for any royalty
already paid (and not refunded) on such DVD-ROM Drive or DVD-Decoder.
ARTICLE 4
CONFIDENTIALITY
Licensee and Licensee's Affiliates and Licensor agree that the royalty reports
required under Article 2.6 of this Exhibit 3, including competitively sensitive
information such as sales volume and selling prices of particular models of DVD
Products contained in such royalty reports, shall be deemed Licensee's
"Confidential Information" and shall be sent only to employees of Licensor who
are involved in licensing and accounting activities and who are not involved in
the business of selling or developing DVD Products. Such Confidential
Information shall be kept confidential by said employees and shall not be
disclosed by Licensor or its employees to members of the DVD Patent Licensing
Group or to third parties to this Agreement. Notwithstanding the foregoing,
Licensee agrees that members of the DVD Patent Licensing Group may have access
to the information contained in such reports regarding the names of licensees,
categories and model numbers of licensed products, total quantities of sales of
such products and total royalties due under this Agreement.
