EXHIBIT 10.1
DVD Video and DVD ROM 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, Philips, Sony Corporation of Japan ("Sony"), Pioneer Corporation of
Japan ("Pioneer"), Hitachi Ltd. of Japan, Matsushita Electric Industrial Co.
Ltd. of Japan, Mitsubishi Electric Corporation of Japan, Thomson Multimedia of
France, Time Warner Entertainment Company L.P. of the USA, Toshiba Corporation
of Japan, and Xxxxxx Company of Japan Ltd. of Japan, have defined a new system,
which has been presented under the name DVD-Video System, as well as a system,
which has been presented under the name DVD-ROM System, said systems hereinafter
defined, and collectively referred to as the "DVD Systems";
WHEREAS, the DVD Systems result from research and development efforts of each of
the companies mentioned above;
WHEREAS, the DVD Systems specifications and the right to use the DVD logo can be
obtained from the entity known as the DVD Format/Logo Licensing Corporation,
based in Tokyo, Japan;
WHEREAS, Philips, Sony and Pioneer each own certain patents relating to the DVD
Systems;
WHEREAS, Philips has been authorized by Sony and Pioneer to grant licenses under
certain patents relating to the DVD Systems, which are owned or controlled by
Sony and its Associated Companies (as hereinafter defined) and by Pioneer and
its Associated Companies respectively, as well as such patents relating to the
DVD Systems which are jointly owned by Pioneer, Sony and/or Philips, while Sony
and Pioneer each retain the right also to license their respective patents
relating to the DVD Systems separately so that interested manufacturers may opt
to take out individual licenses under the relevant patents of each of Philips,
Sony and Pioneer instead of a combined license;
WHEREAS, Licensee has requested from Philips a license under the relevant
patents of Philips, Sony and Pioneer relating to DVD-Discs and wishes such
DVD-Discs to be compatible with devices conforming to the DVD Standard
Specifications for any of the relevant DVD Systems; and
WHEREAS, Philips is willing to grant Licensee a license under the relevant
patents 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 one or more information layers 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 "DVD-VIDEO DISC" shall mean a replicated Disc comprising any kind of
information including, but not limited to, audio, video, text, and/or
data related information, encoded in digital form, which is optically
readable by a DVD-Video Player and by a DVD-ROM Player (as hereinafter
defined) and which conforms to the DVD-Video Standard Specifications
and the DVD-ROM Standard Specifications, parts 1, 2 and 3 (as
hereinafter defined).
1.03 "DVD-ROM DISC" shall mean a replicated Disc comprising any kind of
information including, but not limited to, audio, video, text, and/or
data related information, encoded in digital form, which is optically
readable by a DVD-ROM Player (as hereinafter defined) and which
conforms to the DVD-ROM Standard Specifications (as hereinafter
defined).
The DVD-Video Disc and DVD-ROM Disc together are referred to as
"DVD-Disc".
1.04 "DVD-VIDEO SYSTEM" shall mean the Digital Versatile Disc Video System
which is capable of storing and reproducing video and sound signals in
digital form on DVD-Video Discs.
1.05 "DVD-ROM SYSTEM" shall mean the Digital Versatile Disc ROM System which
is capable of storing and reproducing data signals in digital form on
DVD-ROM Discs.
1.06 "DVD-ROM STANDARD SPECIFICATIONS" shall mean the specifications for the
DVD-ROM System, as specified in the document "DVD Specification for
Read-Only Disc, version 1.0 (parts 1 and 2)" of August 1996, or any
updated version thereof, as issued by the DVD Format/Logo Licensing
Corporation.
1.07 "DVD-VIDEO STANDARD SPECIFICATIONS" shall mean the specifications for
the DVD-Video System, as specified in the document "DVD Specification
for Read-Only Disc, version 1.0 (part 3)" of August 1996, or any
updated version thereof, as issued by the DVD Format/Logo Licensing
Corporation.
The DVD-ROM Standard Specifications and the DVD-Video Standard
Specifications together are referred to as the "DVD Standard
Specifications".
1.08 "PLAYER" shall mean a playback device for optically reading information
stored on a Disc and converting such information into electrical
signals for reproduction purposes.
1.09 "DVD-VIDEO PLAYER" shall mean a Player capable of reproducing
information stored on a DVD-Video Disc and converting such information
into electrical signals, in accordance with
the DVD Standard Specifications, which electrical signals are directly
capable and intended to be used for visual reproduction through
standard television receivers and/or video monitors. Such DVD-Video
Player may, in addition to reproducing information on a DVD-Video Disc,
also be capable of reproducing information stored on a CD-Audio Disc.
1.10 "DVD-ROM PLAYER" shall mean a Player capable of reproducing information
stored on a DVD-ROM Disc and/or a DVD-Video Disc and converting such
information into electrical signals, in accordance with the DVD-ROM
Standard Specifications or the DVD Standard Specifications, which
electrical signals are directly capable and intended to be used for
reproduction of video, text and data-related information through data
handling and/or data processing equipment. Such DVD-ROM Player may, in
addition to reproducing information stored on a DVD-Disc, also be
capable of reproducing information stored on a CD-Audio Disc and/or a
CD-ROM Disc.
The DVD-Video Player and DVD-ROM Player together referred to as
"DVD-Player".
1.11 "LICENSED PRODUCT(S)" shall mean a DVD-Video Disc and/or a DVD-ROM
Disc, having either a single or dual information layer(s) (which is/are
readable from one side of the disc) or two single or dual information
layers (which are readable from opposite sides of the disc),
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.
1.12 "LICENSED PATENTS" shall mean the patents listed in the relevant
Exhibits as selected by Licensee pursuant to Option A and B below.
OPTION A: Licensee chooses the essential patents listed in Exhibit I,
for the use of any one or more of these patents, exclusively for the
manufacture and/or sale of DVD-ROM Discs.
OPTION B: Licensee chooses the essential patents listed in Exhibit II,
for the use of any one or more of these patents, exclusively for the
manufacture and/or sale of DVD-Video Discs.
Option(s): o A o B o A and B (please tick 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 DVD Systems.
Philips will commission an independent patent expert to review the
European, Japanese and US patents listed as essential in Exhibits I and
II in order to confirm the essentiality of such patents. In the event
that said independent expert would find that any of the patents would
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 4.02, provided that,
in the event that none of the Licensed Patents would be infringed
by the manufacture of Licensed Products within the Territory, 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 Pioneer (or any of their
Associated Companies) would have additional patents (other than patents
acquired from third parties after the date of January 1, 1997) in their
respective patent portfolio 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 January 1,
1997, 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.
1.13 "Associated Company" shall mean any one or more business entities (1)
owned or controlled by Philips, Sony, Pioneer or Licensee, (2) owning
or controlling Philips, Sony, Pioneer or Licensee, or (3) owned or
controlled by the business entity owning or controlling Philips, Sony,
Pioneer 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.
For the purpose of this Agreement, Discovision Associates shall not be
deemed an Associated Company of Pioneer.
1.14 "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 1.12 to manufacture Licensed
Products within the Territory in accordance with the relevant DVD
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 and Pioneer, 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, Sony and/or Pioneer 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, Sony and
Pioneer and their respective Associated Companies have or 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 4.02.
2.03 Philips, also on behalf of Sony and Pioneer, 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, Sony and/or Pioneer respectively, to manufacture DVD-Players
and to sell or otherwise dispose of such DVD-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
DVD-Players for which Philips, Sony and/or Pioneer and their respective
Associated Companies have or 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 10, for a period of
ten years from the Effective Date (as hereinafter defined) Licensee
agrees to grant to Philips, Sony, Pioneer 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 DVD-Discs, non-exclusive,
non-transferable licenses, on reasonable, non-discriminatory conditions
comparable to those set forth herein, to manufacture, sell or otherwise
dispose of DVD-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 DVD-Discs as correspond
with the Licensed Patents selected by Licensee pursuant to Article 1.12
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
1.12 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 and 2.03 and similar undertakings by third party licensees
of Philips or any of its Associated Companies and without prejudice to
the provisions of Article 10, for a period of ten years from the
Effective Date, Licensee agrees to grant to Philips, Sony, Pioneer 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 DVD-Players, non-exclusive,
non-transferable licenses, on reasonable, non-discriminatory
conditions, to manufacture, sell or otherwise dispose of such
DVD-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 DVD-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 DVD-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 DVD-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 DVD-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 METHODS OR THE MANUFACTURE OR SALE OF EQUIPMENT FOR
COMPRESSION AND/OR DECOMPRESSION OF AUDIO SIGNALS (INCLUDING
BUT NOT LIMITED TO THE SYSTEM KNOWN AS MPEG-2 AUDIO) OR FOR
THE COMPRESSION OR DECOMPRESSION OF VIDEO SIGNALS IN
ACCORDANCE WITH THE SYSTEM KNOWN UNDER THE NAME MPEG-2 VIDEO,
NOR 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 DVD SYSTEMS;
(II) THE RIGHTS AND LICENSES GRANTED UNDER THIS AGREEMENT APPLY
ONLY TO SUCH PART OF A COMBINATION OF ONE OR MORE LICENSED
PRODUCTS OR DVD PLAYERS WITH ANY OTHER ELEMENTS, PRODUCTS,
SYSTEMS, EQUIPMENT OR SOFTWARE WHICH IS IN COMPLIANCE WITH THE
DVD STANDARD SPECIFICATIONS.
ARTICLE 3 - HAVE MADE
---------------------
3.01 The rights granted to Licensee pursuant to Article 2 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 DVD-Video
Discs and/or DVD-ROM 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 4 - ROYALTIES, REPORTS AND PAYMENTS
-------------------------------------------
4.01 In consideration of the rights granted by Philips, Licensee shall, upon
execution of this Agreement, make a non-refundable payment of US$
10,000 (ten thousand US Dollars) to Philips. From this amount of US$
10,000, an amount of US$ 5,000 (five thousand US Dollars) shall be
regarded as an advance payment against royalties payable pursuant to
Article 4.02.
4.02 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
Patent(s) is (are) used, irrespective of whether such Licensed
Patent(s) is (are) used in the country of manufacture, sale or other
disposal.
This royalty shall amount to US$ 0.05 (five US Dollar cents) for each
such Licensed Product.
Provided that Licensee is in full compliance with its obligations under
this Agreement, and subject to Article 5.01, the royalty applicable to
Licensed Products sold after July 1, 2002 shall amount to US$ 0.0375
(three and three quarters of a US Dollar cent) instead of the
aforementioned rate of US$ 0.05 for each Licensed Product. In the event
that Licensee fails to comply at any time with any of its obligations
hereunder, a royalty rate of US$ 0.05 shall apply to Licensee's
manufacture and sale of Licensed Products instead of the royalty rate
of US$ 0.0375, 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 3 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.
4.03 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 DVD-Discs manufactured by Licensee specified
per individual type of DVD-Disc;
(2) the quantities of DVD-Discs purchased from other licensed
manufacturers in accordance with the provisions of Article 3,
specified per individual type of DVD-Disc;
(3) on a per-country basis, specifying for each individual type of
DVD-Disc:
(a) the quantities of DVD-Discs sold or otherwise
disposed of, specifying the identity of the buyers
and the trademarks used on or in connection with the
DVD-Discs;
(b) the quantities of DVD-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
DVD-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 US Dollars.
4.04 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 4.03, 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).
4.05 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 4.10.
4.06 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 4.02, 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 4.06 shall be without prejudice to the provisions
of Article 10.06.
4.07 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.
4.08 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.
4.09 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. However, in the event that the government of a country
imposes any income taxes on payments made 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.
4.10 In order that the royalty statements provided for in this Article 4 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.
In order to verify the correctness of the aforementioned royalty
statements, Philips shall have the right to inspect the books and
records of Licensee from time to time. 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 4.03 and Article 4.05, 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 4.10 shall
survive termination or expiration of this Agreement.
4.11 Without prejudice to the provisions of Article 4.10, 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.
4.12 As a condition precedent to the entry into force of this Agreement,
Licensee shall submit to Philips a royalty statement in respect of
DVD-Discs manufactured and sold or otherwise disposed of by Licensee
before the Effective Date of this Agreement in accordance with the
provisions of Article 4.03. Within 7 days following the execution of
this Agreement, Licensee shall pay to Philips the royalties on such
DVD-Discs, calculated by applying the royalty rate of US$ 0.05 for each
such DVD-Disc. The royalty statement shall similarly be subject to
Philips' right of audit as set out in Article 4.10. 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 5
MANUFACTURING EQUIPMENT IDENTIFICATION SYSTEM
---------------------------------------------
5.01 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 4.05. 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 royalty rate of US$ 0.0375 referred to in
Article 4.02 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 4.05. In the event
that Licensee puts into use newly acquired manufacturing equipment
(i.e. manufacturing equipment acquired after May 6, 2002) which has
been used for the manufacture of Licensed Products prior to the
acquisition by Licensee, the royalty rate of US$ 0.0375 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 5.01, a royalty rate of US$ 0.05 shall apply to Licensee's
manufacture and sale of Licensed Products instead of the royalty rate
of US$ 0.0375.
ARTICLE 6 - MOST FAVOURABLE CONDITIONS
--------------------------------------
6.01 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 7 - NO WARRANTY AND INDEMNIFICATION
-------------------------------------------
7.01 Philips makes no representation or warranty as to the ability of
Licensee to achieve interchangeability with respect to Licensed
Products. Philips makes no warranty whatsoever that the use of
information supplied by Philips does not infringe or may not cause
infringement of any industrial or intellectual property rights owned or
controlled by third parties, or any industrial or intellectual property
rights owned or controlled by Philips, Sony, Pioneer or their
respective Associated Companies not licensed pursuant to Article 2.
7.02 It is acknowledged by Licensee that third parties may own industrial
and/or intellectual property rights in the field of DVD-Discs. Licensee
acknowledges and agrees that Philips, Sony, Pioneer and their
respective Associated Companies make no warranty whatsoever that the
manufacture, sale or other disposal of any Licensed Product does not
infringe or will not cause infringement of any industrial and/or
intellectual property rights other than the Licensed Patents. Philips,
Sony, Pioneer 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 DVD-Discs manufactured, sold or
otherwise disposed of by Licensee.
ARTICLE 8 - CONFIDENTIALITY
---------------------------
8.01 Licensee shall, during the term of this Agreement as specified in
Article 10.01 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.
8.02 PHILIPS SHALL, DURING THE TERM OF THIS AGREEMENT AS SPECIFIED IN
ARTICLE 10.01 AND FOR A PERIOD OF 3 YEARS THEREAFTER, NOT DISCLOSE TO
ANY THIRD PARTY ANY CONFIDENTIAL INFORMATION OBTAINED IN CONNECTION
WITH ARTICLE 4.03, ARTICLE 4.05 AND/OR ARTICLE 5, 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 8.01.
ARTICLE 9 - NO ASSIGNMENT
-------------------------
9.01 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 10 - TERM AND TERMINATION
---------------------------------
10.01 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 10.
10.02 Without prejudice to the provisions of Article 10.03 through 10.06,
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 royalties or other payment obligations under this Agreement
accrued prior to such termination.
10.03 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.
10.04 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 a
serious act of piracy with respect to copyrights of third parties.
10.05 Philips shall have the right to terminate this Agreement forthwith or
to revoke the license granted under any of Philips', Sony's or
Pioneer's respective patents in the event that Licensee or any of its
Associated Companies brings a claim for infringement of any of its
essential patents relating to DVD-Discs or DVD Players against Philips,
Sony, Pioneer or any of their respective Associated Companies and
Licensee refuses to license such patents on fair and reasonable
conditions.
10.06 Upon the termination of this Agreement by Philips for any reason
pursuant to Article 10.02 through 10.05, Licensee shall immediately
cease the manufacture, sale or other disposal of DVD-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.
10.07 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 11 - MISCELLANEOUS
--------------------------
11.01 Any notice required under this Agreement to be sent by either party
shall be given in writing by means of a letter or facsimile 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
P.O. Box 80002, Building SFF-8
5600 JB Eindhoven
The Netherlands
Fax.x00 00 0000000
with a copy to:
U.S. Philips Corporation
000 Xxxxx Xxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
or such other address as may have been previously specified in writing
by either party to the other.
11.02 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.
11.03 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 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,
Pioneer 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.
11.04 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.
11.05 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.
11.06 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
-------------------------- ------------------------
