AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRAURY 12, 1999
REGISTRATION NO. 333-66099
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 5 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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DIGITAL LAVA INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
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Delaware 7371 95-4584080
(State or Other (Primary Standard (I.R.S.
Jurisdiction of Industrial Classification Employer identification
Incorporation Or Code Number) No.)
Organization)
10850 Wilshire Boulevard, Suite 1260 10850 Wilshire Boulevard, Suite 1260
Los Angeles, CA 90024 Los Angeles, CA 90024
(310) 470-1149 (Address of Principal Place or
(Address and Telephone Number Intended Principal Place
of Principal Executive Offices) of Business)
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Joshua D.J. Sharfman
Chief Executive Officer
Digital Lava Inc.
10850 Wilshire Boulevard, Suite 1260
Los Angeles, California 90024
(310) 470-1149
(Name, Address, And Telephone Number Of Agent For Service)
COPIES TO:
Jeffrey D. Abbey, Esq. Lawrence B. Fisher, Esq.
Ehrenreich Eilenberg Krause & Zivian LLP Orrick, Herrington & Sutcliffe LLP
11 East 44th Street 30 Rockefeller Plaza
New York, New York 10017 New York, New York 10112
(212) 986-9700 (212) 506-5000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this registration statement becomes effective.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify directors and officers as well as other employees and
individuals against expenses (including attorneys' fees), judgements, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with any threatened, pending or completed actions, suits or
proceedings in which such person is made a party by reason of such person being
or having been a director, officer, employee or agent to the Registrant. The
Delaware General Corporation Law provides that Section 145 is not exclusive of
other rights to which those seeking indemnification may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or otherwise.
Article __ of the Registrant's Bylaws provides for indemnification by the
Registrant of its directors, officers and employees to the fullest extent
permitted by the Delaware General Corporation Law.
Section 102(b)(7) of the Delaware General Corporation Law permits a
corporation to provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
unlawful payments of dividends or unlawful stock repurchases, redemptions or
other distributions, or (iv) for any transaction from which the director derived
an improper personal benefit. The Registrant's Certificate of Incorporation
provides for such limitation of liability.
The Registrant intends to obtain directors, and officers, insurance
providing indemnification for certain of the Registrant's directors, officers
and employees for certain liabilities.
Reference is also made to the Underwriting Agreement to be filed as Exhibit
1.1 to the registration Statement for information concerning the Underwriters'
obligation to indemnify the registrant and its officers and directors in ceratin
circumstances.
Item 25. Other Expenses of Issuance and Distribution.
SEC Registration Fee $ 11,867
American Stock Exchange Listing Fee $ 32,500
NASD Filing Fee $ 4,768
Accounting Fees and Expenses* $250,000
Printing and Engraving* $100,000
Legal Fees and Expenses* $350,000
Blue Sky Fees and Expenses* $ 20,000
Transfer Agent and Registrar Fees* $ 5,000
Miscellaneous Expenses* $ 25,865
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Total $800,000
========
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* Estimated.
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Item 26. Recent Sales of Unregistered Securities.
The following discussion gives retroactive effect to the one for 9.139
reverse stock split and the recapitalization to be effected immediately prior to
the completion of this offering. Since its organization in July 1995, the
Company, and in several instances members of management and principal
stockholders, has sold and issued the following unregistered securities in
transactions which were exempt from registration under the Securities Act of
1933, as amended, pursuant to Section 4(2) of the Securities Act, as they were
transactions not involving a public offering. The Company believes that all such
purchasers either were "accredited investors" and/or had access to and had an
opportunity to review all relevant information concerning the Company and
sufficient knowledge and experience in business and financial matters to
evaluate the merits and risks of such an investment. The Company believes that
all of the investors were "sophisticated investors."
The Company relied on several factors in concluding that its investors had
the requisite financial status and sophistication to invest in the Company's
securities. The Company's founders or its counsel were personally familiar with
all of its original equity investors and many of the subsequent bridge loan
investors and had direct knowledge of their financial status and prior
investment activities. In addition, the Company relied on detailed investor
questionnaires which required potential investors to confirm their salaries and
net worth. For those bridge loan transactions in which the Company used finders,
the Company had an opportunity to meet many of the potential investors prior to
their investments in the Company's securities. Through discussions with such
potential investors or with the finders who introduced such investors, the
Company was able to learn about the financial status and sophistication of its
investors and their previous investments in bridge loans and similar types of
transactions.
For those investors not personally known by the Company or with whom the
Company did not have an opportunity to meet, the Company relied on the detailed
questionnaires completed by such investors and on personal knowledge of such
investors by the Company's finders and placement agents.
In July 1995, the Company issued an aggregate of 809,565 shares of Common
Stock to Roger Berman, James Stigler, Thomas Stigler and Kenneth Mendoza for
nominal consideration in connection with the formation of the Company.
From August 1995 to June 1996, the Company sold an aggregate of 200,826
shares of Common Stock to 26 individuals, 19 of whom were accredited investors
and 7 of whom were non-accredited investors for $686,599 in cash. Each of the
investors received an offering memorandum which contained appropriate risk
factors and a detailed description of the Company's business. Each of the
investors completed a questionnaire regarding their financial status and
investment history.
From March to June 1996, the Company issued an aggregate of 29,334 shares
of Common Stock to a consultant and its legal counsel, Eilenberg & Zivian, in
consideration for services performed for the Company.
In September 1996, in connection with a $450,000 bridge financing completed
in such month, the Company issued warrants to purchase an aggregate of 70,265
shares of Common Stock to two accredited investors, one of which received a
portion of its warrants as a finder. Each of the investors received an offering
memorandum which contained appropriate risk factors and a detailed description
of the Company's business. Each of the investors completed a questionnaire
regarding their financial status and investment history.
In November 1996, the Company issued 110,732 shares of Common Stock to
Joshua Sharfman, Chief Executive Officer of the Company, in consideration for
services performed for the Company.
In November 1996 and January 1997, the Company issued warrants to purchase
an aggregate of 23,212 shares of Common Stock to Eilenberg & Zivian in
consideration for services performed for the Company.
In January 1997, certain members of management and principal stockholders
of the Company granted to Judson Cooper options to acquire 13,958 of their
shares of series A convertible preferred stock and 19,941 of their shares of
common stock in exchange for services provided to the Company.
In January and March 1997, the Company issued 4,377 shares of common stock
to two consultants for services performed for the Company.
In May 1997, in connection with the issuance of an aggregate principal
amount of $187,500 of promissory notes, the Company issued warrants to purchase
an aggregate of 20,520 shares of Common Stock to five accredited investors. Each
of the investors received an offering memorandum which contained appropriate
risk factors and a detailed description of the Company's business. Each of the
investors completed a questionnaire regarding their financial status and
investment history.
In May 1997, in connection with a $817,500 bridge financing completed in
April and May 1997, the Company issued warrants to purchase an aggregate of
45,712 shares of Common Stock to three individuals who acted as finders in
connection with such financing. Each of the investors who participated in the
financing received an offering memorandum which contained appropriate risk
factors and a detailed description of the Company's business. Each of the
investors completed a questionnaire regarding their
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financial status and investment history.
In July 1997, in connection with a $902,000 bridge financing completed in
June and July 1997, the Company issued warrants to purchase an aggregate of
15,957 shares of Common Stock to three individuals who acted as finders in
connection with such financing. Each of the investors who participated in the
financing received an offering memorandum which contained appropriate risk
factors and a detailed description of the Company's business. Each of the
investors completed a questionnaire regarding their financial status and
investment history.
In December 1997, certain members of management and principal stockholders
of the Company granted to Eilenberg & Zivian Investments options to acquire
1,642 of their shares of series A convertible preferred stock in exchange for
certain legal and advisory services provided to the Company.
In February 1998, in connection with the issuance of an aggregate principal
amount of $775,000 of promissory notes, the Company issued warrants to purchase
an aggregate of 96,233 shares of Common Stock to ten accredited investors. Each
of the investors received an offering memorandum which contained appropriate
risk factors and a detailed description of the Company's business. Each of the
investors completed a questionnaire regarding their financial status and
investment history.
In February 1998, in connection with a $1,750,000 bridge financing
completed from December 1997 to February 1998, the Company issued warrants to
purchase an aggregate of 47,730 shares of Common Stock to two finders. Each of
the investors in the financing received an offering memorandum which contained
appropriate risk factors and a detailed description of the Company's business.
Each of the investors completed a questionnaire regarding their financial status
and investment history.
In May 1998, the Company issued warrants to purchase an aggregate of 10,943
shares of Common Stock to the Whitestone Group, in consideration for services
performed for the Company.
In September 1998, the Company issued warrants to purchase an aggregate of
21,885 shares of Common Stock to a finder in consideration for such finder's
release of any claims against the Company under the finder's agreement with the
Company.
In October 1998, the Company issued warrants to purchase an aggregate of
20,000 shares of Common Stock to Shahrokh Sedaghat in consideration for services
performed for the Company.
In December 1998, the Company issued warrants to purchase an aggregate of
13,131 shares of Common Stock to Schwartz Communications in consideration for
services performed for the Company.
In December 1998, the Company issued warrants to purchase an aggregate of
6,000 shares of Common Stock to four investors in consideration for such
investors' release of any claims against the Company.
In December 1998, in connection with the issuance of an aggregate principal
amount of $550,000 of subordinated promissory notes, the Company issued warrants
to purchase an aggregate of 275,000 shares of Common Stock to ten accredited
investors. Each of the investors received an offering memorandum which contained
appropriate risk factors and a detailed description of the Company's business.
Each of the investors completed a questionnaire regarding their financial status
and investment history.
In connection with the recapitalization to be completed immediately prior
to the completion of the offering, the Company will issue an aggregate of
846,600 shares of Common Stock to holders of an aggregate principal amount of
$2,832,000 of promissory notes in exchange for one-half of the outstanding
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<PAGE>
principal of their notes, the accrued interest on such notes and the warrants
received in connection with the issuance of such notes. All of such holders
received their notes and warrants in connection with bridge financings completed
from March 1996 through July 1997. In connection with such financings, each
holder received an offering memorandum which contained appropriate risk factors
and a detailed description of the Company's business. Each holder completed a
questionnaire regarding their financial status and investment history.
In connection with the recapitalization to be completed immediately prior
to the completion of the offering, the Company will issue an aggregate of 30,836
shares of Common Stock to holders of an aggregate principal amount of $925,000
of promissory notes in exchange for outstanding warrants to acquire 107,689
shares of Common Stock received in connection with the issuance of such notes.
All of such holders received their notes and warrants in connection a bridge
financing completed from December 1997 to February 1998. In connection with such
financing, each holder received an offering memorandum which contained
appropriate risk factors and a detailed description of the Company's business.
Each holder completed a questionnaire regarding their financial status and
investment history.
Item 27. Exhibits.
Exhibit
Number Description of Exhibits
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1(a)** Form of Underwriting Agreement
1(b)** Form of Financial Advisory Agreement
3(a)** Amended and Restated Certificate of Incorporation, in effect
as of the date hereof
3(b)** Form of Amendment to Amended and Restated Certificate of
Incorporation
3(c)** Form of Amended and Restated Certificate of Incorporation
3(d)* Bylaws of the Company, in effect as of the date hereof
3(e)*** Form of Amended and Restated Bylaws of the Company
4(a)* Form of Common Stock Certificate
4(b)** Form of Warrant Agreement
4(c)** Form of Representative's Warrant Agreement
4(d)* 1996 Incentive and Non-Qualified Stock Option Plan (1)
4(e)* Warrant Agreement dated as of September 30, 1996 between the
Company and Millenium Capital Management (2)
4(f)* Warrant Agreement dated as of September 30, 1996 between the
Company and Miracle Investments Co. (2)
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4(g)* Registration Rights Agreement between the Company, Miracle
Investments Co. and Millenium Capital Management
4(h)* Warrant Agreement dated November 1, 1996 between the Company
and Eilenberg & Zivian(2)(3)
4(i)* Warrant Agreement dated January 27, 1997 between the Company
and Eilenberg & Zivian (2)(3)
4(j)* Warrant Agreement dated May 30, 1997 between the Company and
certain investors and finders(2)
4(k)* Registration Rights Agreement dated May 30, 1997 between the
Company and certain investors and finders
4(l)* Letter Agreement dated October 6, 1998 between the Company
and certain investors
4(m)* Warrant Agreement dated July 11, 1997 between the Company
and certain investors and finders(2)
4(n)* Registration Rights Agreement dated July 11, 1997 between
the Company and certain investors and finders
4(o)** Warrant Agreement between the Company and Schwartz
Communications
4(p)* Warrant Agreement dated February 19, 1998 between the
Company and certain investors and finders (2)
4(q)* Registration Rights Agreement dated February 19, 1998
between the Company and certain investors and finders
4(r)* Form of Promissory Note dated February 19, 1998 between the
Company and certain investors
4(s)* Warrant Agreement dated May 1, 1998 between the Company and
The Whitestone Group (2)
4(t)* Registration Rights Agreement dated May 1, 1998 between the
Company and The Whitestone Group
4(u)* Letter Agreement between the Company and certain investors
and finders dated July 15, 1998
4(v)* Letter Agreement between the Company and certain investors
and finders dated July 16, 1998
4(w)* Letter Agreement between the Company and certain investors
and finders dated July 29, 1998
4(x)* Warrant Agreement dated as of October 7, 1998 between the
Company and certain consultants
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<PAGE>
4(y)* Registration Rights Agreement dated as of October 7, 1998
between the Company and certain consultants
4(z)* Letter Agreement as of October 7, 1998 between the Company
and certain investors
4(aa)* Amended and Restated Option Agreement dated as of May 1,
1998 between the Company, Judson Cooper and certain founders
of the Company (2)
4(ab)* Amended and Restated Option Agreement dated as of May 1,
1998 between the Company, E&Z Investments and certain
founders of the Company (2)
4(ac)*** Warrant Agreement between the Company and United Resources
Partners dated September 18, 1998
4(ad)** Warrant Agreement dated January 7, 1999 between the Company
and certain investors
4(ae)** Warrant Agreement between the Company and certain investors
dated December 7, 1998
4(af)** Registration Rights Agreemnt between the Company and certain
investors dated between December 7, 1998
4(ag)*** Registration Rights Agreement between the Company and United
Resources Partners dated September 18, 1998
5(a)**** Opinion of Ehrenreich Eilenberg Krause & Zivian LLP
10(a)* Employment Agreement dated September 1, 1998 between the
Company and Thomas Stigler
10(b)* Employment Agreement dated September 1, 1998 between the
Company and Joshua D.J. Sharfman
10(c)* Consulting Agreement dated September 1, 1998 between the
Company and Roger Berman
10(d)* Consulting Agreement dated September 1, 1998 between the
Company and Dr. James Stigler
10(e)* Consulting Agreement dated September 1, 1998 between the
Company and Prism Ventures LLC
10(f)** Consulting Agreement dated May 1, 1998 between the Company
and the Whitestone Group
10(g)** Consulting Agreement dated October 7, 1998 between the
Company and Shahrokh "Shawn" Sedaghat
10(h)***** Agreement dated January 8, 1998 between the Company and
RealNetworks, Inc.(4)
10(i)***** Agreement dated April 1, 1998 between the Company and
RealNetworks, Inc.(4)
10(j)***** Software License Agreement dated March 31, 1997 between the
Company and Cinax Designs, Inc.(4)
10(k)** Agreement dated August 8, 1998 between the Company and
Lesson Lab
23(a)**** Consent of Ehrenreich Eilenberg Krause & Zivian LLP
(included in opinion filed as Exhibit 5(a))
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<PAGE>
23(b)**** Consent of PricewaterhouseCoopers LLP
24(a)* Power of Attorney (included in Part II of the Registration
Statement under the caption Signatures")
27(a)** Financial Data Schedule
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* Filed with original SB-2 Registration Statement filed on October 23, 1998.
** Filed with Amendment No. 1 to SB-2 Registration Statement filed on January
12, 1999.
*** Filed with Amendment No. 2 to SB-2 Registration Statement.
**** Filed with Amendment No. 3 to SB-2 Registration Statement.
***** Filed with this Amendment No. 5 to SB-2 Registration Statement.
(1) Does not reflect increase in number of shares issuable under the Plan
pursuant to resolution of Board of Directors.
(2) These agreements were entered into prior to the reverse split of the
Company's Common Stock and, therefore, do not reflect such reverse split.
(3) These warrant agreements do not reflect exercise price changes made
pursuant to resolutions of the Board of Directors.
(4) Confidential information is omitted and identified by a * and filed
separately with the SEC pursuant to a request for Confidential Treatment.
Item 28. Undertakings.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the small business issuer pursuant to the foregoing provisions, or otherwise,
the undersigned Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the undersigned Registrant of expenses incurred or paid by a director, officer
or controlling person of the undersigned Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
undersigned Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(b) The undersigned Registrant in all instances will provide to the
Underwriter at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus
filed as part of a registration statement in reliance upon Rule
430A and contained in the form of prospectus filed by the
undersigned Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act of 1933 shall be deemed to be
part of the registration statement as of the time it was declared
effective; and
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
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(d) The undersigned Registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement; and
(iii) Include any additional or changed material information on
the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that
time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
undersigned Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Los Angeles, State of California, on the 11th
day of February, 1999.
DIGITAL LAVA INC.
By: /s/ Joshua D.J. Sharfman
----------------------------
Joshua D.J. Sharfman
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in their
respective capacities and on the respective dates set forth opposite their
names.
Signatures Title Date
- ---------- ----- ----
*
- ---------------------------
James Stigler Chairman and Director February 11, 1999
/s/ Danny Gampe
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Danny Gampe Chief Financial Officer February 11, 1999
(Principal Financial and
Accounting Officer)
*
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Roger Berman Director February 11, 1999
*
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Thomas Stigler Director February 11, 1999
*
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Gerald Porter Director February 11, 1999
/s/ Joshua D.J. Sharfman
- ---------------------------
Joshua D.J. Sharfman Chief Executive Officer February 11, 1999
and Director (Principal
Executive Officer)
*By: /s/ Joshua D.J. Sharfman
---------------------------
Joshua D.J. Sharfman
Attorney-in-fact
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January 8, 1998
Mr. Joshua D. J. Sharfman
CEO, Digital Lava Inc.
10850 Wilshire Boulevard, Suite 1260
Los Angeles, CA 90024
Dear Josh:
This letter shall serve as a formal Agreement between RealNetworks, Inc. ("RN")
and Digital Lava ("Customer"). Customer desires that RN perform consulting
services in connection with the Digital Lava RMA Client Renderer ("DL RMA
Renderer") as set forth below.
1. Services. RN shall provide the Services set forth on Attachment A hereto and
shall deliver to Customer all work product and results of such Services (the
"Deliverables") according to the Delivery Schedule set forth on Attachment A.
Customer will provide RN with unimpeded access to required hardware, software
and communications systems required to complete the Services during the
timeframe set forth in this Agreement. With respect to the performance of
Services, Customer will not direct or supervise RN's employees or staff with
respect to said individuals tasks or responsibilities without RN's express
written consent. RN intends to perform the substantial majority of the Services
at RN's premises.
2. Acceptance. Customer shall have [10] business days after delivery and
installation of the Deliverables (or re-installation resulting from correction
of defects by repair or replacement of the Deliverables) to evaluate and test
the Deliverables to determine that they conform with Attachment A hereto. If
Customer, in its best business judgment, determines that the Deliverables fail
to conform to the requirements of Attachment A, it shall immediately notify RN
in writing, specifying in detail the reasons that Customer believes the
Deliverables fail to conform. RN shall have [15] business days in which to
correct and resubmit the Deliverables to Customer. Customer shall then have [3]
business days in which to re-evaluate and test the Deliverables for conformance
with Attachment A, and shall notify RN as set forth above of any nonconformance.
RN shall have [5] business days in which to correct and resubmit the
Deliverables to Customer. Customer shall then have [2] business days to re-test
the Deliverables, and to provide RN with notice rejection of the Deliverables
for nonconformance. Silence shall be deemed to be acceptance. If RN fails to
correct the Deliverables to conform to Attachment A within such time period,
Customer may terminate this Agreement. Upon acceptance of such Deliverables, RN
shall provide ongoing maintenance and support pursuant to Section 3 of
Attachment A and Section 3 (b) of this Agreement.
3. Fees and Payment.
a. Progress Payments. In consideration for the rights and obligations set
forth herein, Customer will pay RN according to the Payment Schedule set forth
on Attachment A. By executing this Agreement, Customer confirms the budget for
the work, and the charges and purchases set forth in Appendix A hereto. If
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<PAGE>
Customer wishes to enlarge the scope of the Services or implement additional
features or subtasks, the parties shall agree upon the costs therefor in advance
in writing.
b. Upgrades and Support. If Customer desires to receive continuing support
and upgrades as set forth on Attachment A, it shall pay RN an amount equal to
*****(1) of Payments due for Services. Payment for upgrades and support shall be
payable through royalty/commission recovery. Any support and upgrade fees for
the first year not recovered by the anniversary date of the commencement of the
upgrade and support period will be due in cash at the anniversary date.
Subsequent year support and upgrade fees shall be payable in cash only on the
anniversary date of the commencement of the first year of support.
c. Expenses. Customer will reimburse RN for incidental expenses and
disbursements incurred by RN related to supplies, media (disks and CD-ROM
costs), travel and lodging, shipping, telephone charges, and any other
incidental expenses incurred in the performance of the Services. Customer will
reimburse RN for incidental expenses. RN shall bear sole responsibility for
expenses incurred to acquire the necessary tools to perform the Services. If RN
needs to procure any third party computer software, hardware, other office
supplies or any other subcontracted services or products to implement, perform,
or install items set forth in Attachment A, which purchase will exceed $1000, RN
will notify Customer in advance, and obtain approval for the amount of the
purchase plus any applicable sales tax.
d. Billing. RN will invoice Customer for expenses and any third party
purchases on a monthly basis. The invoice will include a report itemizing the
expenses and third party purchases. Customer shall pay all invoices within 30
days of receipt, and shall not make any deductions thereto.
e. Taxes. As RN is not an employee of Customer, RN understands that
Customer will not take any action or provide RN with any benefits or commitments
inconsistent with any of such undertakings by RN. In particular, Customer will
not: (i) withhold FICA (Social Security) from RN's payments; (ii) make state or
federal unemployment insurance contributions on behalf of RN; (iii) withhold
state and federal income tax from payments to RN; (iv) make disability insurance
contributions on behalf of RN; or (v) obtain workers' compensation insurance on
behalf of RN.
4. Termination.
a. By RN. Failure of Customer to make payments to RN in accordance with
this Agreement shall be considered substantial nonperformance and cause for
termination. If Customer fails to make payments when due, RN may, upon seven
days' written notice to Customer suspend performance under this agreement.
Unless payment in full is received by RN within seven days of the date of the
notice, the suspension shall take effect without further notice. In the event of
a suspension of services, RN shall have no liability to Customer for delay or
damage caused Customer because of such suspension of services.
b. By Customer. Customer shall have the right at any time to terminate this
Agreement on twenty one (21) days' written notice. In the event of such
termination, and provided termination is not as a result of RN's unremedied
breach of this Agreement, Customer shall pay RN then accrued payments due under
the Delivery Schedule, plus the pro-rated portion of the next payment, if any,
due with respect to items being worked on up to the time of termination, plus
reimbursable expenses, plus twenty percent (20%) of the total charges due
through the date of the termination. Should Customer wish to delete specific
subtasks,
- --------
(1) Confidential information is omitted and identified by a * and filed
separately with the SEC pursuant to a request for Confidential Treatment.
2
<PAGE>
Customer will notify RN immediately in writing. As long as said deletions
represent less than twenty percent of the labor cost for the project, Customer
shall not be liable for the twenty percent termination penalty.
c. Termination for Breach. Either party may terminate this Agreement upon
seven (7) days' written notice to the other party in the event the other party
materially breaches this Agreement and fails to cure such breach within fifteen
(15) days' written notice from the non-breaching party.
5. RMA Agreement. RN and Customer are concurrently negotiating RN's RealMedia
Architecture ("RMA") Partner Program Agreement (the "RMA Agreement"), which RN
has offered to Customer on its standard terms and conditions, and pursuant to
which RN will grant Customer a license to distribute the Deliverables within its
RMA-Enabled Applications. The Services and Deliverables to be provided by RN
under this Agreement have been requested by Customer to enable Customer to
finalize development of its RMA-Enabled Applications. Customer acknowledges that
the Deliverables provided hereunder may only be used by Customer subject to the
terms of the RMA Agreement. If RN and Customer fail, after good faith
negotiations, to finalize the RMA Agreement, all of Customer's rights in and to
the Deliverables shall immediately terminate.
6. Ownership. All right, title and interest in and to the object code only of
the Deliverables shall be owned by RN; provided, however, that Customer shall
have the perpetual, non-exclusive right to use the Deliverables as set forth in
this Agreement; and further provided that if Customer incorporates the
Deliverables into an RMA-Enabled Application, Customer's use of and rights in
and to the Deliverables for that purpose will be governed by the RMA Agreement.
No license or other rights in the Deliverables is granted hereby.
7. Warranties of RN. RN represents, warrants and covenants that: (i) it has the
full power to enter into this Agreement and perform the Services provided for
herein, and that such ability is not limited or restricted by any agreements or
understandings between RN and other persons or companies; (ii) any Deliverables,
information or materials developed for, or any advice provided to RN, shall not
rely or in any way be based upon confidential or proprietary information or
trade secrets obtained or derived by RN from sources other than RN unless RN has
received specific authorization in writing to use such proprietary information
or trade secrets; (iii) RN will not enter into any contracts or otherwise
obligate Customer in any way without Customer's express approval; and (iv) RN
will use its best efforts to complete the Services in a timely, competent and
professional manner.
8. Indemnification. Customer hereby agrees to indemnify, hold harmless and
defend RN and its employees, contractors and agents from all claims, damages,
costs and expenses, including reasonable attorneys' fees and litigation
expenses, arising out of or in connection with any Customer product by the
Customer, Customer's content, Customer's website or Customer's materials (not
including the Customer's client parties), including, without limitation: (i)
infringement or violation, or alleged infringement or violation, of any
copyright, patent, trademark, trade secret, right of publicity, right of
privacy, or other proprietary rights of any third party; and (ii) unfair trade
practice, defamation or misrepresentation. RN hereby agrees to indemnify, hold
harmless and defend Customer and its employees, contractors and agents from all
claims, damages, costs and expenses, including reasonable attorneys' fees and
litigation expenses, arising out of or in connection with the Deliverables,
including, without limitation: (i) infringement or violation, or alleged
infringement or violation, of any copyright, patent, trademark, trade secret,
right of publicity, right of privacy, or other proprietary rights of any third
party; and (ii) unfair trade practice, defamation or misrepresentation.
3
<PAGE>
9. Limitation of Liability. NEITHER PARTY SHALL, UNDER ANY CIRCUMSTANCES, BE
LIABLE FOR LOSS OF PROFITS OR CONSEQUENTIAL, INCIDENTAL, SPECIAL OR EXEMPLARY
DAMAGES, ARISING FROM OR RELATED TO THIS AGREEMENT, WHETHER SUCH CLAIM ARISES IN
TORT OR IN CONTRACT, AND EVEN IF THE PARTIES HAVE BEEN APPRISED OF THE
LIKELIHOOD OF SUCH DAMAGES OCCURRING. EXCEPT IN RESPECT OF LIABILITY WHICH IS BY
LAW INCAPABLE OF EXCLUSION, IN NO EVENT SHALL EITHER PARTY'S LIABILITY FOR ANY
REASON EXCEED THE TOTAL SUMS PAID UNDER THIS AGREEMENT.
10. Confidential Information. From the date of execution hereof for a period of
five (5) years from termination of this Agreement, neither party shall use,
disclose, or permit any person to obtain any confidential information of the
other party, including any materials developed or generated hereunder (whether
or not such confidential information is in written or tangible form), except as
specifically authorized by such party. As used herein, confidential information
shall mean a whole or any portion or phase of any marketing plans, business
plans, sales information, customer lists, scientific or technical information,
design, process, procedure, formula, or improvement relating to the development,
design, construction, and operation of a program that is valuable and not
generally known to a party's competitors and any other information of a party of
which the other party becomes aware of as a result of this Agreement and which
is indicated to be confidential or, if not so indicated, which could reasonably
be interpreted to be confidential. The parties agree that, in the event of a
breach or threatened breach of the terms of this confidentiality provision, the
non-breaching party shall be entitled to an injunction prohibiting any such
breach. Any such relief shall be in addition to and not in lieu of any
appropriate relief in the way of money damages. The parties acknowledge that
Confidential Information is valuable and unique and that disclosure in breach of
this confidentiality provision will result in irreparable injury to its owner.
11. No Assignment. Neither party shall assign, transfer or otherwise dispose of
this Agreement or any rights or duties hereunder without the prior written
consent of the other, provided that either party may assign this Agreement
pursuant to a sale of substantially all of its assets, a merger, or
consolidation. Notwithstanding the foregoing, if in the course of an authorized
assignment, Customer desires to assign the Customer product containing the
Deliverables to *****(1) , RN shall have a right of first refusal for the
exclusive rights to purchase such product on the same terms as the best offer
from *****(1)
12. Arbitration. Any controversy, dispute or question arising out of, in
connection with or in relation to this Agreement or its interpretation,
performance or nonperformance, or any breach thereof, shall be determined by
arbitration in the County of King, State of Washington, in accordance with the
rules then obtaining of the American Arbitration Association. The cost and
expenses of such arbitration including the compensation of the arbitrator(s),
the prevailing party's attorney's fees, and the stenographer employed by them,
shall be paid by the party against whom the arbitrator renders a decision. The
decision of the arbitrator shall be final and binding upon the parties hereto
and may be entered as a final decree or judgment in any court of competent
jurisdiction.
13. Miscellaneous. This Agreement and Attachment A attached hereto and
incorporated herein constitute the entire agreement between the parties, and
supersedes any and all agreements, whether written or oral, and may only be
amended or modified by a written instrument signed by both parties.
- --------
(1) Confidential information is omitted and identified by a * and filed
separately with the SEC pursuant to a request for Confidential Treatment.
4
<PAGE>
If the terms of this Letter Agreement are acceptable to you, please sign and
date where indicated below and return to RN.
Sincerely,
RealNetworks, Inc.
By: /s/ Ian Freed
-----------------------------
Ian Freed
General Manager, Consulting Group
Accepted and Agreed to this 8th day of January, 1998.
DIGITAL LAVA INC.
By: /s/ Joshua D.J. Sharfman
-----------------------------
Joshua D. J. Sharfman
CEO
5
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Attachment A: RMA Client
Development
Prepared for Digital Lava
January 21, 1998
This document contains trade secrets and proprietary information belonging to
RealNetworks, Inc. No use or disclosure of the information contained herein is
permitted without the prior written consent of RealNetworks, Inc.
6
<PAGE>
(C) 1997 RealNetworks, Inc. All rights reserved
Real Audio and RealVideo are registered trademarks of RealNetworks,
Inc., in the United States and other countries
Basic Server, Basic Server Plus, RealDeveloper, RealEncoder
RealFlash, RealMedia, RealNetwork, RealNetworks, RealPlayer,
RealPlayer Plus, RealPublisher, RealServer, RealSystem, the Real
Bubble, and the RealNetworks Media Type logotypes are trademarks of
RealNetworks, Inc., in the United States and other countries.
All other trade names, trademarks or registered trademarks are trade
names, trademarks or registered trademarks of their respective
companies.
The computer file for this document is
Digital Lava-attachement a -revision 1.doc
RealNetworks, Inc.
1111 Third Avenue, Suite 2900
Seattle, Washington 98101
(206) 674-2700.
7
<PAGE>
Table of Contents
Introduction.................................................................. 4
Section 1 Tasks and Deliverables.............................................. 5
1.1 System Design........................................................ 5
1.2 Software Development................................................. 6
1.3 Testing.............................................................. 7
1.4 Documentation........................................................ 7
1.5 Pre-Acceptance Support .............................................. 7
1.6 Post-Acceptance Support.............................................. 8
Section 2 Project Schedule.................................................... 9
2.1 Task Table .......................................................... 9
Section 3 Project Cost .......................................................10
8
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- --------------------------------------------------------------------------------
Introduction
- --------------------------------------------------------------------------------
Introduction
Digital Lava's VideoVisorTM product permits users to navigate, manipulate, and
integrate video content with other information including documents, images, and
web sites. Currently, VideoVisorTM can render DirectShow (ActiveMovie) video
files. Digital Lava would like to add the capability to render standard
RealVideo files (RM files) delivered via Real Media Architecture (RMA) servers
to their VideoVisorTM product. Digital Lava has asked the RealNetworks
Consulting Group (RN) to perform the software development required to design and
build the RM file rendering capability such that Digital Lava use RM file
rendering capability in any product that employs the RM file rendering
interface. To accomplish this, RN will create a "pure COM" version of the player
controls requested by Digital Lava.
We describe the project below in the following sections:
Tasks and Deliverables
o Project Schedule
o Project Cost
9
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Section 1 Tasks and Deliverables
Digital Lava's VideoVisorTM product is a viewer currently implemented in
Visual Basic 5.0 running over COM objects supplied by Microsoft's
ActiveMovie 1.0 SDK. In developing a RM file renderer for this system, RN
will perform the following major tasks:
o System Design
o Software Development
o Testing
o Documentation
o Pre-Acceptance Support
o Post-Acceptance Support
Each task is identified below in more detail
- --------------------------------------------------------------------------------
1.1 System Design
Digital Lava has provided RN with a specification for an Abstract Video Renderer
Interface (see Attachment B). Digital Lava needs to provide RN with access to
all the relevant code for the VideoVisorTM product prior to starting the project
so that we may build the RM file renderer for VideoVisorTM. This can be
accomplished by providing RN with test code that employs the same API calls as
the full VideoVisorTM application.
Based on our current understanding of the specification, the RM file will
include:
1. ability to pass through text messages such as errors
2. a video window interface for rendering streaming video
3. a file specification, URL, or other string for playing video
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4. ability to do random seeking based on time
5. ability to respond to current state requests
6. start, stop, and pause capability from and "seek" location
7. resizeable window
8. ability to reroute windows messages via subclassing (if necessary)
9. full screen mode using DirectDraw
10. ability to set or interrogate other properties or methods as identified in
Attachment B
11. ability to close the video file, eliminate visual artifacts in the window,
and disconnect programmatic hooks associated with the video window
Additionally, the RM file renderer will be able to be invoked from Microsoft
Visual Basic 5.0.
RN will use the aforementioned specification as well as the current VideoVisorTM
product and code as a basis for the RM renderer system design. The system design
will include a description of the major sections of code required for the RM
renderer. Once the System Design Document has been delivered and Digital Lava
has had an opportunity to review the design document, RN will build the RM file
renderer based on the system design.
Deliverable: System Design Document
- --------------------------------------------------------------------------------
1.2 Software Development
The software development phase of the project begins upon Digital Lava's review
of the system design document. The RM file renderer will be built so that it can
be fully integrated into the VideoVisorTM product developed in Microsoft Visual
Basic 5.0. The file renderer will recognize and render RealVideo files encoded
using RealNetworks' authoring tools supported by the RMA architecture. Currently
RealNetworks offers a free RealEncoder and a nominally priced RealPublisher for
authoring RealVideo content. These files may either be played locally or by
streaming them via an RMA server. Rendering of local files does not require
completion of the RMA server product. Rendering of files via streaming does
require completion of the RMA server application, which we currently anticipate
in late Q1 of 1998. As a result, delivery of a system that has been tested for
local files will occur prior to delivery of a system that has been tested for
streaming files.
Deliverables:
o RM file renderer for local files (in early February)
o RM file renderer for streaming files (in late March - dependent on RMA
server product completion)
11
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1.3 Testing
Once the RM file renderer for local files has been developed, RN will test the
application across a wide range of files encoded using different audio codecs,
different video framerates, image sizes, quality settings and types of content.
We will test all capabilities of the file renderer as identified in the system
design document. Once testing has occurred, we will deliver a result of these
tests to Digital Lava. Should test results require additional development work,
RN will perform this work and retest the RM file renderer.
Deliverables:
o Test results for local file system RM renderer
o Test results for streaming RMA RM renderer
- --------------------------------------------------------------------------------
1.4 Documentation
Concurrent with development of the RM file renderer for VideoVisorTM, RN will
provide documentation to Digital Lava for the RM file renderer. The
documentation includes end user documentation that can be incorporated in
VideoVisorTM manuals, as well as documentation for each major routine in the
code. The end user documentation explains how to open and view RealVideo files
using the VideoVisorTM either in local mode or streamed via the RMA server.
Application documentation includes a description of all relevant inputs and
outputs for each major subroutine, as well as any critical flags that need to be
set or can be interrogated. The documentation will also cover whatever steps are
required to integrate the installation of the Real Networks Renderer with the
VideoVisor installation process.
Deliverables:
o End-user manual sections
o Application documentation
- --------------------------------------------------------------------------------
1.5 Pre-Acceptance Support
Once the RM renderer for VideoVisorTM has been delivered and prior to
acceptance, RN will provide support required to meet the requirements identified
in the system design, or otherwise mutually agreed upon in writing. This support
will be provided until the time of acceptance of the RM renderer by Digital
Lava. Legal requirements of both parties governing acceptance are identified in
section 2 of the contract signed by both parties.
12
<PAGE>
- --------------------------------------------------------------------------------
1.6 Post-Acceptance Support
After acceptance, RN can provide both on-site and off-site support on an ongoing
basis at various rates. Support can be provided in any of the following ways:
o On-site support for a predetermined period of time for various rates.
o On-site support on an as-needed basis with various lead times for various
rates.
o Off-site telephone support on an as needed basis with 4-24 hour response at
various rates.
Provided Digital Lava purchases and pays for the yearly support and upgrades
option (see below for pricing), RN will provide any and all custom programming
required to keep the RM rendering capability up-to-date with additional versions
of our standard Intranet server product.
Section 2 Project Schedule
This section contains the proposed project schedule for deliverables. We assume
the project begins on December 22, 1997.
- --------------------------------------------------------------------------------
2.1 Tasks Table
The following table shows the estimated delivery date of the project tasks.
Table 2-1 - Tasks Schedule
- --------------------------------------------------------------------------------
Estimated
Task completion
Date
- --------------------------------------------------------------------------------
1. System Design January 27
2. Software Development February 16
3. Testing of local file delivery system by RN February 23
4. Documentation February 23
5. Acceptance testing of local file delivery system completed March 10
by Digital Lava
6. Software Development modifications for RMA streaming March 17*
system
7. Testing of RMA streaming delivery system by RN March 20*
8. Acceptance testing of RMA streaming system completed March 27*
by Digital Lava
* Note: Dependent on RMA server beta general availability delivery by RN
development
13
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Section 3 Project Costs
The following table shows the estimated milestone payments for the project.
Table 3-1 - Tasks Schedule
- --------------------------------------------------------------------------------
Estimated Estimated
Completion Milestone
Task Date Payments
- --------------------------------------------------------------------------------
Deposit January 27 *****(1)
- --------------------------------------------------------------------------------
1. System Design February 3 *****(1)
- --------------------------------------------------------------------------------
2. Software Development February 23 *****(1)
- --------------------------------------------------------------------------------
3. Testing of local file delivery system March 2
- --------------------------------------------------------------------------------
4. Documentation March 2
- --------------------------------------------------------------------------------
5. Acceptance testing of local file delivery March 10t *****(1)
system completed by Digital Lava
- --------------------------------------------------------------------------------
6. Software Development modifications for March 17*
RMA streaming system
- --------------------------------------------------------------------------------
7. Testing of RMA streaming delivery March 20* *****(1)
system
- --------------------------------------------------------------------------------
8. Acceptance testing of RMA streaming March 27* *****(1)
system completed by Digital Lava
- --------------------------------------------------------------------------------
Total *****(1)
- --------------------------------------------------------------------------------
Note: Digital Lava actually has until March 16 to complete acceptance testing,
but a preliminary indication from DL by March 10 will increase the likelihood of
final delivery by March 27.
The following table shows the optional upgrades and support payments for the
project.
Table 3-2 - Upgrades and Support
- --------------------------------------------------------------------------------
Estimated Last Payments
Task Payment
Date
- --------------------------------------------------------------------------------
1. 1st Year Upgrades and Support March 27, 1999'* *****(1)
- --------------------------------------------------------------------------------
2. 2nd Year Upgrades and Support March 27, 1999* *****(1)
- --------------------------------------------------------------------------------
3. 3rd Year Upgrades and Support March 27, 2000* *****(1)
- --------------------------------------------------------------------------------
* Note: Dependent on RMA server beta-general availability delivery by RN
development
- --------
(1) Confidential information is omitted and identified by a * and filed
separately with the SEC pursuant to a request for Confidential Treatment.
14
<PAGE>
<TABLE>
<CAPTION>
- ------------ -------------------------------------- ----------------------- ---------------------------------------
FILENAME Digital Lava-attachement a-revision LOCATION C:/ifreed/Proposals/Digital Lava-
1.doc (system:[drive] attachment a-revision 1.doc
:\directory\...)
- ------------ -------------------------------------- ----------------------- ---------------------------------------
------------------ ---------------
NAME/TITLE INITIAL
------------------ ---------------
- ------------ -------------------------------------- ----------------------------
<S> <C> <C> <C> <C>
CLIENT Digital Lava PREPARED BY
PROJECT RMA Client Renderer REVIEWD BY (1) Ian Freed
- ------------ -------------------------------------- ---------------------------- ------------------ ---------------
TITLE Attachment A:RMA (2)
Client Development
- ------------ -------------------------------------- ---------------------------- ------------------ ---------------
VERSION 1.0 (3)
- ------- --- ---
- ------------ -------------------------------------- ---------------------------- ------------------ ---------------
DATE 12/10/97 5:54 APPROVAL AUTHORITY
- ------------ -------------------------------------- ---------------------------- ------------------ ---------------
</TABLE>
Document Summary
Record of Changes
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15
RealMedia Architecture Partner Program Agreement with Digital Lava, Inc.
for Corporate Intranet Products and Internet Products
This Agreement is entered into as of April 1, 1998 (the "Effective Date") by and
between Real Networks, Inc., a Washington corporation with a principal place of
business at 1111 Third Avenue, Suite 2900, Seattle, Washington 98101 CRN') and
Digital Lava, Inc., a Delaware corporation with an address at 10850 Wilshire
Boulevard, Suite 1260, Los Angeles, CA 90024 ("Partner").
WHEREAS, RN has developed and owns all right, title and interest in the
RealMedia Architecture ("RMA", as further defined below), an open platform for
development of streaming media applications and tools, which allows software
developers to build new applications and extend current applications to
inter-operate with a wide variety of datatypes;
WHEREAS, RN has established a licensing program (the "Partner Program") which
would allow a partner participating in the Partner Program to create, market and
sublicense for distribution in corporate intranets and the internet,
applications based on RMA, and to receive other benefits of participating in the
Partner Program; and
WHEREAS, Partner desires to participate in the Partner Program and to receive
the attendant rights and benefits;
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. DEFINITIONS
1.1 License Key" means the authorization code that is generated by the License
Key Tool and that enables RMA Server Software to stream RealMedia datatypes.
License Keys that generate User-Streams and enable features of a Partner Product
are licensed to a Partner's end-user customers
1.2 "License Key Tool" means the version of the License Key Tool that is
provided to Partner by RN which is specific and unique to the Partner Product.
The License Key Tool is used to generate unique License Keys for a Partner
Product.
1.3 "Licensed Software" means RMA Players, the RealMedia SDK, including
associated RealMedia Libraries, RMA Server Software, in Object Code and/or
Source Code form, as applicable, License Key Tools and License Keys, and related
User Documentation and specifications.
1.4 "New Release" means a new major release of the RMA Servers or the Partner
1
<PAGE>
Products in which major new functionality has been added in addition to any
complement of bug fixes supplied, and which is designated as a change in the
digit to the left of the decimal point in the product version number [(x).x.x].
"Update" means a minor release, enhancement, revision, modification or upgrade
of the RMA Servers or Partner Products, designated as a change in the tenths
digit in the product version number [x.(x).x], or in the digit to the right of
the tenths digit in the product version number [x.x.(x)]. By way of
clarification, if either party markets a new and distinct product along with and
in addition to an existing program, then such new and distinct product shall be
treated as a New Release, not an Update.
1.5 "Object Code" means computer code assembled or compiled in magnetic binary
form on software media, which are readable and useable by machines, but not
generally readable by humans without reverse-engineering, reverse-compiling or
reverse-assembly.
1.6 "Partner Product(s)" means the products and applications developed by
Partner which are compatible with Licensed Software, as further described on
Exhibit A hereto. Partner Products shall include:
(a) "Partner Client Software," which means software that contains an RMA Player
as defined in Section 1.7(a), or that utilizes the RMA application programming
interfaces ("APIs");
(b) "Digital Lava Client Software" which means the products listed in Exhibit A
which incorporate the custom COM-component being built by RN under contract to
Partner;
(c) "Partner Tools," which means software tools that may import datatypes and
export datatypes using the RealMedia Libraries; and/or that are used to perform
RMA-related functions including, but not limited to, server administration,
plug-in file systems, server monitoring, and assembly; and
(d) "Partner Server Applications," which means software that interfaces with an
RMA Server and adds datatypes that can be streamed from an RMA Server.
1.7 "RealMedia Architecture" or "RMA' means the software platform developed by
RN that allows for the development of streaming media products and tools, and
which is designed specifically for use in the infrastructure of the internet and
corporate intranets. RMA includes the following components:
(a) "RMA Players," which are stand-alone applications that use an RMA Server or
any components of the RMA Player embedded in other applications of Partner that
play media files.
2
<PAGE>
(b) "RealMedia Datatypes," which are datatypes that can be streamed using RMA
Server APIs and played using RMA Player APIs.
(c) "RealMedia Libraries," which are contained in the RealMedia SDK and are
Object Code implementations of various APIs.
(d) "RealMedia SDK" or "SDK," which contains the tools and information used by
software developers to create tools for use in producing streaming media and to
adapt or build applications that stream from RMA Servers and play in RMA
Players. The SDK contains an RMA Player, RMA Player APIs, Server APIs, RealMedia
Libraries, Sample Source Code and RealMedia Server Software.
(e) "RMA Server Software" or "RMA Server" in Object Code form, which streams
files over networks, and which has the capabilities set forth on Exhibit B
hereto.
(f) "Sample Source Code," which provides an example of how to develop an RMA
application.
1.8 "RN Products" means the RealAudio and RealVideo intranet and internet
products.
1.9 "Term" is defined in Section 6.1.
1.10 "Territory" means the world, except as otherwise agreed by the parties.
1.11 "User Documentation" means RN's user manuals, technical manuals, release
notes including advertisements for RMA Servers, RMA Players, installation and
operation instructions, and other data and documentation describing the use of
RMA Servers and RMA Players normally supplied to RN's customers.
1.12 "User-Stream" means the stream of media-compatible data necessary to
deliver the media type associated with a Partner Product from an RMA Server to a
single end-user client computer. The number of User-Streams being delivered by a
given RMA Server is measured by counting the number of end-users simultaneously
served by User-Streams originating at that RMA Server.
2. GRANT OF LICENSES AND DISTRIBUTION RIGHTS.
2.1 License Grants to Partner.
(a) License to Use Real Media SDK to customize Partner Products for use with
Licensed Products.
3
<PAGE>
Subject to the terms and conditions of this Agreement, RN grants to Partner a
non-exclusive, non-assignable license to use and install the RealMedia SDK,
whether in Object Code or Source Code form, for the sole purpose of developing
Partner Products that interoperate with Licensed Products. Partner shall use the
SDK on a single computer or on a computer network. Partner may download
associated online documentation for purposes of using the SDK, but may not make
further copies of the documentation.
(b) License to Distribute Certain Products to Corporate lntranet Customers Only.
(i) License to Distribute Partner Products. Subject to the terms and
conditions of this Agreement, and payment of the applicable License Fees set
forth in Section 5.1, RN grants Partner a non-exclusive, non-assignable license
to market, sublicense, promote and distribute, to end-user corporate customers
only, directly or through authorized distributors who have agreed to comply with
the terms and conditions of this Agreement ("Authorized Distributors"), the
version of Partner Products containing any Licensed Software. The license to any
such end-user corporate customer is limited to such customer's intranet purposes
only, and is subject to such end-user corporate customer signing a EULA as
defined in Section 2.3 (b).
(ii) License to Use and Sublicense the Licensed Software. Subject to the
terms and conditions of this Agreement, and payment of the applicable License
Fees set forth in Section 5.1, RN also grants Partner a non-exclusive,
non-assignable license to market, sublicense, promote and distribute, to
end-user corporate customers only, directly or through Authorized Distributors,
pursuant to an executed EULA as defined in Section 2.3(b), only Object Code
copies of the Licensed Software, and only in combination with Partner Products,
for such customers' intranet purposes only.
(iii) License to Use and Sublicense the RealAudio and/or RealVideo Intranet
Products. Subject to the terms and conditions of this Agreement, and payment of
the applicable License Fees set forth in Section 5.1, RN also grants Partner a
non-exclusive, non-assignable license to market, sublicense, promote, and
distribute the RealVideo intranet products, to end-user corporate customers
only, directly or through Authorized Distributors, for such customers' intranet
purposes only, and only in combination with the Partner Products.
(c) License to Distribute RealVideo and RealAudio Internet Products. Subject to
the terms and conditions of this Agreement, and payment of the applicable
License Fees set forth in Section 5.1, RN also grants to Partner a
non-exclusive, non-assignable license to market, sublicense, promote, and
distribute, to internet web site customers, directly or through Authorized
Distributors, and only in combination with the Partner Products, the RealAudio
and/or RealVideo internet products, without the RMA Player.
(d) License to Display an RMA Server. RN grants to Partner and its Authorized
Distributors the non-exclusive, royalty-free right to license and publicly
display an RMA Server with 10 streams for the purpose of: 1) internal
development and testing, 2) demonstration; and 3) marketing.
4
<PAGE>
2.2 License Grant to RN. License to Use Partner Tools, Partner Client Software
and Partner Server Applications; License to Use and Distribute the Partner
Products. Partner hereby grants RN a non-exclusive, royalty-free license to use
and publicly display the Partner Tools, Partner Client Software, and Partner
Server Applications for internal testing, demonstration and marketing purposes.
2.3 Limitations. The grant of licenses, including Partner's right to sublicense
and distribute the Licensed Software and the RN Products as set forth above, are
subject to the following limitations:
(a) Except as provided in Section 2.1(b), the SDK may be used solely to develop
and test a Partner Product. It may not be used for any commercial,
non-commercial, educational or internal purpose, and may not be used in any way
that allows or causes the transmission of audio, video or other media files
across the Internet an intranet, or any computer network, unless the parties
otherwise agree.
(b) As a condition of receiving the sublicense from Partner to use and/or
distribute any of the Licensed Software and/or RN Products, Partner shall
require its Authorized Distributors and end-user customers to sign RN's standard
end-user License Agreement ("EULA"), which is contained in RN's product
packaging. The license granted in such EULA shall be between RN and Partner's
end-users and/or Authorized Distributors. Accordingly, Partner agrees that it
shall promptly provide to RN the names and addresses of all end-users and
Authorized Distributors to whom Partner distributes any Licensed Software or RN
Products, concurrently with the provision of monthly reports, as set forth in
Section 5.2.
(c) Except as expressly provided herein, Partner shall not directly or
indirectly, or allow third parties to, copy, modify, reproduce, display,
decompile, reverse engineer, disassemble, store, translate, sublicense, assign,
sell, lease or otherwise transfer or distribute any of the Licensed Software
(which includes the SDK and components of the Licensed Software) or RN Products,
or any of Partner's rights therein, in whole or in part, nor may Partner use any
of the Licensed Software or RN Products, to clone any client, server or other RN
product. Except as expressly provided herein, no license or right is hereby
granted, by implication or otherwise, with respect to the Licensed Software or
any other RN Products or any rights thereto.
(d) Nothing contained in this Agreement shall be deemed or construed to grant
Partner the exclusive right to develop, or have distributed by RN, Partner
Products for any particular category of datatypes.
(e) Partner's end-user license agreements for the Partner Products shall
prohibit further distribution of the RMA Libraries, any RMA files or other
components of RMA by Partner's end-users.
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(f) Partner shall include a prominent and valid copyright notice, in the form
requested by RN, in RMA-Compatible Partner Products specifying that components
of such products are owned by and used under license from RN and its suppliers.
Partner shall not alter or remove any copyright or trademark notices contained
in any Licensed Software, RN Products, or User Documentation or use such
copyright or trademark notices in combination with any other copyright or
trademark notices. In addition, Partner shall prominently display RN's "RMA
logo" and the words "RMA Compatible" on the product packaging and all product
manuals and documentation, in accordance with any Trademark Usage Guidelines
provided by RN.
(g) Partner may only distribute Partner Products that have been designed,
developed, and tested to function with an RMA Server. In creating the Partner
Products, Partner shall ensure that such Partner Products will enable any
datatypes to be played in the RMA Player. To ensure that all components of the
Partner Products interoperate properly and are compatible with the RMA Server,
RN may elect to test the Partner Products (excluding 1.6b), or, at RN's option,
will have the Partner Products (excluding 1.6b) tested by a third party testing
lab at Partner's expense. RN shall provide development support to Partner to aid
in Partner's resolution of problems discovered in the testing process, as set
forth in Section 4.1.
(h) Partner agrees to promptly deliver to RN all releases, including beta
releases, of its Partner Products, for use by RN.
(i) Partner or its Authorized Distributors shall market, sublicense and
distribute Object Code copies only of the RMA Server Software or RMA Player
Software and User Documentation to end-user corporate customers for their
internal corporate intranet use only either as (i) bundled with a Partner
Product on the same media (such as CD-ROM or diskette), or (ii) in the same
finished packaging as the Partner Product (a "Bundle").
(j) Partner shall generate License Keys with an authorized, RN-provided License
Key Tool, and duplicate, market and distribute License Keys associated with
Partner Products to end-user customers.
(k) Partner will determine the price at which it or its Authorized Distributors
will license and distribute the Partner Products, RMA Server Software and
License Keys to end-user customers, independent of any License Fee payable by
Partner to RN.
(l) Partner may either: (i) download RMA Servers from a private RN download
site; or (ii) place an order with RN for physical pre-packaged copies of the RMA
Servers. RN will ship all physical product to Partner or Partner's authorized
designee, by shipment method specified by Partner. All orders are shipped F.O.B.
RN's designated fulfillment location. As a convenience, RN may prepay freight
charges, and such charges will be billed to Partner. All risk of loss or damage
in transit will be borne by Partner. Partner shall inspect the RMA Servers upon
receipt at the delivery location. Acceptance shall be deemed to occur unless
Partner provides RN with notice of nonacceptance within three (3) days of
receipt. A Partner may only reject an RMA Server for one of the following
reasons: (i) missing labels or User Documentation, (ii) defective media,
performance.
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(m) Partner will deposit with Data Securities International, Inc. (the "Escrow
Agent", a complete and correct set of the Source and Object Code version of the
Partner Products (excluding 1.6b) to be held in escrow (the "Escrow Products")
and shall enter into the Escrow Agent's Master Preferred escrow agreement,
pursuant to which RN shall have the right to require that the Escrow Agent
provide some or all of the Escrow Products to RN or third parties if so required
by a governmental agency or court with jurisdiction over RN; in the event that
Partner undertakes or is subject to any of the actions set forth in Section
6.2(b); or in the event of Partner's material breach of this Agreement. Partner
shall pay any required escrow fee directly to the Escrow Agent.
(n) If Partner or its Authorized Distributors distributes the RMA Server
Software as part of a Bundle, RN's "RMA logo" and the words "RMA Compatible"
shall be prominently displayed on the product packaging and all product manuals
and documentation, in accordance with any Trademark Usage Guidelines provided by
RN.
(o) During the Term, Partner shall make available to RN at no charge, upon
release by Partner, a copy of all Updates and New Releases to the Partner
Products. Each Update or New Release shall, upon release by Partner, be subject
to all of the terms and conditions of the Agreement.
3. MARKETING CONSIDERATIONS
In consideration for participating in the Partner Program, and subject to the
terms and conditions of this Agreement, Partner shall be entitled to receive the
following marketing considerations from RN:
3.1 Trademark License. Partner shall have a non-exclusive non-transferable
license to use RN's trademarks and logos solely in connection with Partner's
user interfaces, packaging, collateral material and website, subject to
compliance with RN's Trademark Usage Guidelines, or as otherwise designated in
writing by RN from time to time. Partner agrees to furnish RN with samples of
any proposed usage of RN's trademarks or logos, and obtain RN's prior approval
for such usage, which approval will not be unreasonably withheld.
3.2 Customer Mailings. RN will send semi-annual e-mails to RN's customers
promoting the Partner Products. Such emails may list Partner's universal
resource locators ("URL's") so that prospective customers can obtain additional
information about the Partner Products. Additionally, RN will solicit from
existing RN customers their desire to receive
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collateral material from Partner. On Partner's behalf, providing that Partner
reimburses RN for its costs of mailing and supplies all collateral material, RN
will make one "bonded" mailing during the Term to RN's customers who indicate a
desire to receive collateral material about the Partner Products.
3.3 Participation in RN Events. RN agrees to feature Partner in the Partner Lab
at RN's RealMedia user conference. From time to time, RN will also include
Partner in RN press releases, and offer Partner the opportunity to participate
in trade shows and conference displays as RN deems appropriate.
3.4 Real Developer Program. RN will provide partner a complimentary membership
in the Real Developers program at the "Apps Developer" level for one year from
the Effective Date.
3.5 Advertising Impressions. During the Term, RN will provide Partner, without
charge, 5,000 page impressions of advertising on RN's website in such location
as RN determines in its discretion.
3.6 No Obligation to Include Partner Products. RN shall not be obligated to
include the Partner Client Software in any special versions of the RMA Player
provided to an RN-third party licensee if such licensee will not accept the
Partner Client Software.
4. SOFTWARE SUPPORT; UPGRADES
4.1 Development Support. RN shall provide complimentary technical support to
Partner in connection with Real Developers program for ninety (90) days from the
Effective Date. Such support includes unlimited telephone support and priority
e-mail support, and five (5) additional support calls after the expiration of
the 90-day period.
4.2 Technical Support by Partner. Partner shall be solely responsible for
providing, and agrees that it will provide, all technical and customer support
for any Partner Products licensed by Partner or for any Partner Products
licensed and distributed by RN pursuant to Section 2.2. Partner agrees that it
will provide primary technical and customer support, by telephone and e-mail and
in accordance with RN's minimum support requirements, for any Licensed Software
(excluding the RN Products which are subject to Section 4.3), licensed and
distributed by or for Partner pursuant to Section 2.1. RN will enroll Partner,
without charge, in a one-day RealMedia technical training seminar at RN's
facilities, to train Partner to provide technical support to its end-user
customers for the Licensed Software, excluding the RN
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Products. Partner shall be responsible for all out-of-pocket costs it incurs to
attend such seminar. RN shall provide back-up technical support, in the form of
telephone and e-mail, from 8:00 A.M. to 5:00 P.M. PST Monday through Friday to
Partner's primary support contact for the Licensed Software, excluding the RN
Products.
4.3 Technical Support by RN. RN will be solely responsible for providing
technical and customer support to those end-user customers to whom Partner has
licensed and distributed any RN Products pursuant to Section 2.1, in accordance
with the terms and conditions of a separate support agreement between RN and
each such end-user customer.
4.4 Updates; New Release. During the Term, each party shall make available to
the other party at no charge, upon public release by the party that created such
Updates and/or New Releases, a copy of all corresponding Updates or New
Releases, on the RN or Partner website, as applicable. Each Update or New
Release, upon release to either Partner or RN, shall be subject to all of the
terms and conditions of the Agreement.
5. PAYMENT
5.1(a) License Fees Paid by Partner. In consideration of the rights and licenses
granted herein, Partner agrees to pay RN certain license fees as follows:
(1) Partner shall pay RN the applicable license fees as set forth in
Schedules I and 2 ("License Fees").
(2) Notwithstanding Section 5.1 (a), Partner shall not owe RN any License
Fee on the sale of Partner Products and License Keys that enable datatypes,
other than *****(1) or *****(1), to customers who have also purchased either
*****(1) or *****(1), provided Partner does not distribute any additional
streams or New Releases to such customers.
(3) RN reserves the right to revise the License Fees set forth above within
thirty (30) days of the start of each calendar year and again upon the
commercial release of each New Release. RN shall provide Partner thirty (30)
days' written notice of any change in the License Fee.
5.2 Payment Terms. Partner will provide RN with a written report by the 20th day
of each month for the preceding calendar month setting forth: (a) the number of
RMA Servers distributed; (b) the number of Partner clients distributed; (c) the
names and address to whom the RMA Servers and/or RealAudio and/or RealVideo
products were distributed; (d) the number of Partner Products distributed; (e)
the number of License Keys distributed; (f) the number of RealAudio and/or
RealVideo products distributed; (g) the type and number of any other RMA-based
products or related licenses distributed; (h) the price per unit charged for
each of the foregoing; (i) gross revenue receivable by Partner (whether or not
actually collected); and (j) the amount due to RN pursuant to Section 5.1 for
the preceding month. The report shall be accompanied by the payment due.
Payments shall be calculated based on sales invoiced by Partner and its
Authorized Distributors, whether or not the revenue is actually collected. All
payments due hereunder
- --------
(1) Confidential information is omitted and identified by an * and filed
separately with the SEC pursuant to a request Confidential Treatment.
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shall be made in United States Dollars, without withholding or offset of any
kind. Interest shall accrue on all amounts past due hereunder at the monthly
rate of one and one-half percent (1.5%) or at the maximum legal rate, whichever
is less.
5.3 Books and Records. Partner shall keep books of account with respect to the
amounts due and the calculations required to be made under Section 5.1. Upon
RN's reasonable written request, and no more than once per year of the Term, RN
may audit and inspect all such books of account, through an independent third
party auditor and during normal business hours, provided that such auditor shall
undertake in writing to protect the confidentiality of the business data and
records of Partner. The cost of any such audit shall be paid by RN; provided,
however, that in the event RN initiates an audit under this Section 5.3 and it
is finally determined that the amount reported and paid by Partner pursuant to
Section 5.1 for the period(s) audited is, in the aggregate, less than
ninety-five per cent (95%) of the aggregate amount actually due, then Partner
shall pay the reasonable costs and expenses of said audit. If any such audit
reveals an underpayment of license fees, Partner shall make any correcting
payment within thirty (30) days. Any underpayment shall be subject to interest
of one and one-half percent (1.5%) per month or the maximum amount allowed by
law, whichever is less. Partner will maintain the books and records to each
reporting period for at least three years following the close of such period
6. TERM AND TERMINATION
6.1 Term. This Agreement shall commence as of the Effective Date, and terminate
on the earlier of eighteen (18) months from the commercial release of a Partner
Product or two (2) years from the Effective Date (the "Term"), unless earlier
terminated as provided herein. This Term shall automatically be extended for
additional one year periods (each a "Renewal Term") unless either party notifies
the other of its election not to so extend this Agreement no later than 90 days
prior to the end of the Term or a Renewal Term.
6.2 Termination by Either Party. Either party may terminate this Agreement
immediately upon written notice to the other party in the event of any of the
following:
(a) should the other party fail to perform any material term or condition
of this Agreement, which shall constitute a default of this Agreement, and such
default has not been corrected within thirty (30) days of written notice from
the non-breaching party. In the event of a breach of Section 9 no cure period
need be provided.
(b) should the other party (i) make a general assignment for the benefit of
creditors; (ii)institute proceedings to be adjudicated a voluntary bankrupt, or
consent to the filing of a petition of bankruptcy against it; (iii) be
adjudicated by a court of competent jurisdiction as being bankrupt or insolvent;
(iv) seek reorganization under any bankruptcy act, or
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consent to the filing of a petition seeking such reorganization; or (v) have a
decree entered against it by a court of competent jurisdiction appointing a
receiver, liquidator, trustee, or assignee in bankruptcy or in insolvency
covering all or substantially all of such party's property or providing for the
liquidation of such party's property or business affairs.
6.3 Termination by RN. RN may terminate this Agreement immediately upon written
notice to Partner in the event of any of the following:
(a) any attempted transfer or assignment of this Agreement or any right or
obligation hereunder, or any sale, transfer, relinquishment, voluntary or
involuntary, by operation of law or otherwise, of any interest in the direct or
indirect ownership or control of Partner without RN's prior written approval;
(b) any failure of Partner to pay, when due, any indebtedness owing by
Partner to RN, unless expressly waived in writing by RN.
6.4 Effect of Termination.
(a) Upon the effective date of termination of this Agreement for a material
breach by Partner, the licenses granted hereunder shall terminate immediately.
Partner will either immediately return all Licensed Software to RN or certify in
writing to RN that all copies of all Licensed Software have been destroyed. RN
may discontinue promotion and distribution of Partner Products or continue to
distribute Partner Products during the Sell-Off Period, set forth in Section
6.4(b), at its sole discretion. Notwithstanding anything in this Agreement to
the contrary, under no circumstances may Partner distribute Partner Client
Software after the expiration or termination of this Agreement, for any reason,
without RN's express written consent.
(b) For two (2) months after the expiration or termination of this
Agreement other than by reason of Partner's material breach ("Sell-Off Period"),
Partner may advertise and sell the Partner Products, Licensed Software, or RN
Products, in its inventory or necessary to fulfill orders confirmed as of the
expiration or termination date, and shall pay License Fees and render statements
in the same manner as during the Term. After the end of the Sell-Off Period,
Partner shall return to RN, at Partner's expense, all copies of the Partner
Products, Licensed Software and RN Products, or RN may instruct Partner to
destroy them. Partner shall furnish RN with affidavits certified by an officer
of Partner attesting to such destruction.
(c) Any termination of this Agreement shall not release Partner from paying
any amount that may then be owing to RN, or that may become due to RN in the
future.
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(d) Notwithstanding any other terms or conditions of the Agreement, the
rights of end-user customers to use any Licensed Software, RN Products and/or
Partner Products distributed by Partner shall survive any termination or
expiration of the Agreement, provided that License Fees for said Licensed
Software or RN Products or Partner Products have been paid to RN.
7. CONFIDENTIALITY
"Confidential Information" means any trade secret information or information
otherwise designated by a party as being confidential relating to either party's
products, product plans, designs, computer code, technical information, costs,
pricing, financing, marketing plans, business opportunities, personnel, research
and development or know-how. Confidential Information shall not include
information that (i) is or becomes generally known or available through no fault
of the receiving party, (ii) was known by or disclosed to the receiving party
prior to disclosure, (iii) is independently developed by the receiving party, or
(iv) is made generally available by the disclosing party without any
restriction. The parties shall use reasonable efforts and at least the same care
that each uses to protect its own Confidential Information of like importance,
to prevent unauthorized dissemination or disclosure of the other party's
confidential information during and for three (3) years following the last day
of the Term. Neither party will use the other's Confidential Information for
purposes other than those necessary to directly further the purposes of this
Agreement. Neither party will disclose to third parties the other's Confidential
Information without the prior written consent of the other party, provided,
however, that nothing will preclude a party from making disclosure to a third
party for the purpose of due diligence in a financing transaction, merger,
acquisition, business combination or other similar transaction, or from making
any disclosures to any governmental agency having jurisdiction over the
disclosing party, or unless otherwise required by law, government order or court
proceeding. Each party shall return the Confidential Information to the other
party upon termination of the Agreement or upon the request of the other party.
Except as expressly provided in this Agreement, no ownership or license right is
granted in any Confidential Information.
8. PROPRIETARY RIGHTS
8.1 Partner. Partner shall retain all right, title and interest in and to the
Partner Products, including any copyright, trademarks, patent, trade secret, or
other intellectual property rights therein, subject to RN's underlying ownership
in any Licensed Software or RN Products included therein, and in and to Partner
Confidential Information, regardless of the media or form on or in which the
Partner Products or Partner Confidential Information, or copies thereof, may
exist. Notwithstanding the foregoing, Partner agrees that it shall not register
or attempt to register any copyrights or trademarks, or to seek to obtain any
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patents in connection with any Partner Product, including, but not limited to,
in any device, process, method, function or invention included therein or
necessary for the operation thereof, which would in any way interfere with,
limit or prohibit RN's continued use, development or ownership of RMA.
8.2 RN. RN shall retain all right, title and interest in and to the Licensed
Software and RN Products, including any copyright, trademarks, patent, trade
secret, or other intellectual property rights therein, all RN trademarks and in
and to all RN Confidential Information, regardless of the media or form on or in
which the Licensed Software, the RN Products, or the RN Confidential
Information, or copies thereof, may exist. Partner acknowledges and agrees that
the Licensed Software and the RN Products are proprietary to RN, and is
protected by the copyright laws of the United States and international copyright
treaties. Unauthorized copying of the Licensed Software, or the RN Products,
including modification, merger or inclusion with any other software or products,
is expressly forbidden. Partner shall not be deemed, by anything contained in or
done pursuant to this Agreement, including by implication, to acquire any right,
title or interest in any trademark, copyright, patent or other intellectual
property of RN, and shall do nothing to prejudice the value or validity of RN's
rights therein or ownership thereof.
9. LIMITED WARRANTY
9.1 Limited Warranty. RN warrants, solely for the benefit of Partner, that for a
period of ninety (90) days from the date of delivery to Partner: (i) the
Licensed Software, if operated as directed, will substantially achieve the
functionality described in the User Documentation, and (ii) that the media
containing the Licensed Software, if provided by RN, is free in material
respects from defects in material and workmanship; provided, however, that the
foregoing warranty is expressly contingent (and shall be otherwise void) upon:
(1) the use of the Licensed Software strictly in accordance with the
instructions and User Documentation therefor; (2) the absence of misuse or
damage thereto; (3) the absence of any alteration or modification thereto; and
(4) Partner's acceptance of Licensed Software for distribution with knowledge
that the media upon which the Licensed Software are reproduced by Partner may
contain certain defects. RN makes no representation or warranty that the
information or functions contained in the Licensed Software will meet Partner's
requirements or that the use or operation of the Licensed Software will be
uninterrupted, error free or secure, or that any Licensed Software defects are
correctable or will be corrected. THE FOREGOING WARRANTY SHALL NOT APPLY TO THE
SAMPLE SOURCE CODE, WHICH IS PROVIDED TO PARTNER AS IS, WITHOUT WARRANTY OF ANY
KIND.
9.2 NO OTHER WARRANTIES. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, RN
AND ITS LICENSORS DISCLAIM ALL OTHER WARRANTIES, EITHER EXPRESS OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTIBILITY AND FITNESS
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FOR A PARTICULAR PURPOSE, WHICH ARE EXPRESSLY DISCLAIMED, WITH REGARD TO THE
LICENSED SOFTWARE, THE RN PRODUCTS, AND THE USER DOCUMENTATION. THIS LIMITED
WARRANTY GIVES PARTNER SPECIFIC LEGAL RIGHTS. PARTNER MAY HAVE OTHERS, WHICH
VARY FROM STATE/JURISDICTION TO STATE/JURISDICTION.
9.3 Remedies. RN's entire liability and Partner's exclusive remedy for any
breach of the limited warranty set forth in Section 9.1 shall be, in RN's sole
discretion: (i) to exercise reasonable efforts to replace in a timely manner,
defective media provided by RN to Partner, or defective media that is
sublicensed by Partner to a Partner's end-user corporate customer pursuant to
Section 2.1; or (ii) to advise Partner or Partner's corporate end-user, within a
reasonable period of time after notice is received from Partner of the defect,
how to achieve substantially the same functionality with the Licensed Software
as described in the User Documentation through a procedure different from that
set forth in the User Documentation. Repaired, corrected or replaced Licensed
Software and User Documentation shall be covered by this limited warranty for
the period remaining under the warranty that covered the original Licensed
Software, or if longer, for thirty (30) days after the date RN either shipped to
Partner the repaired or replaced Licensed Software or RN advised Partner as to
how to operate the Licensed Software so as to achieve the functionality
described in the Documentation, whichever is applicable.
10. INDEMNIFICATION
10.1 RN's Indemnification. RN shall defend Partner and its directors, officers,
agents, employees and representatives, in any third party action for
infringement by, or alleged infringement by the Licensed Software of any
trademark, service mark, patent, copyright, or misappropriation of any trade
secret by the Licensed Software, and will pay any final judgments awarded or
settlements entered into in any such action. Partner agrees that it shall notify
RN of all threats, claims and proceedings related to any such suit promptly
after such threat, claim or proceeding comes to the attention of Partner. RN
shall have sole control of the defense and/or settlement of any such suit, and
Partner shall furnish to RN, upon request, information available to Partner for
such defense, and shall provide RN with such assistance in defending such suits
as is requested by RN, at RN's expense. If Partner's use of the Licensed
Software under the terms of this Agreement is, or in RN's opinion is likely to
be, enjoined due to the type of infringement or misappropriation specified
above, then RN may, at its sole option and expense, either (i) procure for
Partner the right to continue using the Licensed Software under the terms of
this Agreement; or (ii) replace or modify the affected Licensed Software so that
it is noninfringing and substantially equivalent in function to the enjoined
Licensed Software. The foregoing obligation of RN does not apply (i) with
respect to versions of the Licensed Software or portions or components thereof:
(a) which are modified after shipment, if the alleged infringement relates to
such modification, and if such modification was not authorized, expressly
permitted or performed by RN; (b) which are combined with other products,
processes or materials, if the alleged infringement relates
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to such combination and if RN did not authorize or expressly permit the
combination; or (c)where Partner's use of the Licensed Software is not in
accordance with the license granted under this Agreement; or (ii) for use or
distribution of Licensed Software or otherwise not in accordance with the terms
and conditions of this Agreement.
10.2 Partner Indemnification. Partner shall defend RN and its directors,
officers, agents, employees and representatives, in any third party action for
infringement by, or alleged infringement by the Partner Products of any
trademark, service mark, patent, copyright, or misappropriation of any trade
secret by the Partner Products, and will pay any final judgments awarded or
settlements entered into in any such action. RN agrees that it shall notify
Partner of all threats, claims and proceedings related to any such suit promptly
after such threat, claim or proceeding comes to the attention of RN. Partner
shall have sole control of the defense and/or settlement of any such suit, and
RN shall furnish to Partner, upon request, information available to RN for such
defense, and shall provide Partner with such assistance in defending such suits
as is requested by Partner, at Partner's expense. If RN's use of the Partner
Products under the terms of this Agreement is, or in Partner's opinion is likely
to be, enjoined due to the type of infringement or misappropriation specified
above, then Partner may, at its sole option and expense, either (i) procure for
RN the right to continue using the Partner Products under the terms of this
Agreement; or (ii)replace or modify the affected Partner Products so that it is
noninfringing and substantially equivalent in function to the enjoined Partner
Products. The foregoing obligation of Partner does not apply (i) with respect to
versions of the Partner Products or portions or components thereof: (a)that are
modified after shipment, if the alleged infringement relates to such
modification, and if such modification was not authorized, expressly permitted
or performed by Partner; (b)that are combined with other products, processes or
materials, if the alleged infringement relates to such combination and if
Partner did not authorize or expressly permit the combination; or (c) where RN's
use of the Partner Products is not in accordance with the license granted under
this Agreement; or (ii) for use or distribution of Partner Products or otherwise
not in accordance with the terms and conditions of this Agreement.
11. LIMITATION OF LIABILITY
IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY SPECIAL, INDIRECT,
INCIDENTAL, OR CONSEQUENTIAL OR PUNITIVE DAMAGE OR LOSS OF ANY NATURE (E.G.,
DAMAGE TO PROPERTY, LOSS OF PROFITS, BUSINESS INTERRUPTION, LOST SAVINGS, LOSS
OF USE, LOST OR DAMAGED FILES OR DATA, INJURY TO PERSON, OR ANY CLAIMS OF THOSE
NOT A PARTY TO THE AGREEMENT)WHICH MAY ARISE IN CONNECTION WITH THE USE,
ADAPTATION, MERGER, CORPORATION,DISTRIBUTION, INSTALLATION, REMOVAL OR SUPPORT
OF THE LICENSED SOFTWARE, THE RN PRODUCTS, AND/OR THE PARTNER PRODUCTS PURSUANT
TO THIS AGREEMENT, REGARDLESS OF WHETHER SUCH CLAIMS ARE BASED IN WARRANTY,
CONTRACT, NEGLIGENCE, TORT, PRODUCTS LIABILITY OR OTHERWISE, EVEN IF THE PARTY
HAS BEEN ADVISED OF THE POSSIBILITY
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OF SUCH DAMAGE OR LOSS. BECAUSE SOME STATES/JURISDICTIONS DO NOT ALLOW THE
EXCLUSION OR LIMITATION OF LIABILITY FOR CONSEQUENTIAL OR INCIDENTAL, DAMAGES,
THE ABOVE LIMITATION MAY NOT APPLY, AND THE PARTIES MAY ALSO HAVE OTHER RIGHTS
WHICH VARY FROM STATE TO STATE.
12. DISPUTE RESOLUTION
12.1 Coverage. Any dispute arising out of or relating to this Agreement shall be
resolved in accordance with the procedures specified in this Section, which
shall be the sole and exclusive procedures for the resolution of any such
dispute. Other than actual or imminent material breaches of Sections 2, 7 and 8,
any dispute between the parties with respect to this Agreement shall be
submitted for structured negotiation. The commencement, and any resolution
reached as a result, of any dispute resolution under this Section shall be
considered Confidential Information and shall be treated as compromise and
settlement negotiations.
12.2 Structured Negotiation. Either party may invoke this procedure by giving
written notice set forth the details of and its position with respect to the
dispute to the other party, and designating therein a corporate officer with
appropriate authority to be its representative in negotiations relating to the
dispute. The other party shall designate a corporate officer with similar
authority within three (3) business days of its receipt of such notice. The
designated officers shall, following whatever investigation each deems
appropriate, but no event later than twenty (20) business days after the
original notice, enter into discussions concerning the dispute. If the
representatives do not resolve the dispute within an additional twenty (20)
business days of their initial meeting, either party may submit the matter to
binding arbitration under Section 12.3.
12.3 Binding Arbitration.
(a) Any dispute not settled by the parties by structured negotiation (other
than actions for injunctive relief including specific performance) shall be
submitted only to binding arbitration. The arbitration will be conducted in
accordance with the procedures set forth herein and the Arbitration Rules for
Commercial Arbitration Rules of the AAA. In the event of a conflict with such
rules, this Agreement will control.
(b) The arbitration shall take place in Seattle, Washington, before a panel
of three arbitrators appointed as follows: each party shall select a single
arbitrator, and the two (2) selected arbitrators shall mutually agree upon a
third. The arbitrators selected shall have knowledge and experience in the
computer software business. The arbitrators shall rule on the dispute by issuing
a written opinion setting forth findings of fact and the rationale for their
decision within thirty (30) days after the close of hearings. The decision
rendered by the arbitrators shall be final and binding and may be entered as a
judgment in any court of competent jurisdiction. The arbitrators shall control
the scheduling so as to process the matter expeditiously. The times specified in
this Section may be extended
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upon mutual agreement of the parties upon a showing of good cause. The parties
may submit written briefs. Discovery shall be controlled by the arbitrators and
shall be permitted as follows: each party may submit in writing to the other
party, and that party shall so respond, to a maximum of any combination of
thirty-five (35) (none of which may have subparts) of interrogatories, demands
to produce documents, and requests for admission. Unless provided otherwise in
the Agreement, the arbitrators may not award non-monetary or equitable relief of
any sort. They will have no power to award damages inconsistent with the
Agreement. In no event, even if any other portion of these provisions is held to
be invalid or unenforceable, shall the arbitrators have power to make an award
or impose a remedy that could not be made or imposed by a court deciding the
matter in the same jurisdiction.
(c) Any issue concerning the extent to which any dispute is subject to
arbitration, or concerning the applicability, interpretation, or enforceability
of these procedures, including any contention that all or part of these
procedures are invalid or unenforceable, shall be governed by the Federal
Arbitration Act and resolved by the arbitrators. No potential arbitrator may
serve on the panel unless he or she has agreed in writing to abide and be bound
by these.
(d) Each party shall bear its own costs of arbitration. A party seeking
discovery shall reimburse the responding party the costs of production of
documents (to include search time and reproduction costs). The parties shall
equally split the fees of the arbitration and the arbitrators.
12.4 Provisional Remedies. The procedures specified in this Section shall be the
sole and exclusive procedures for the resolution of disputes between the parties
arising out of or relating to this Agreement; provided, however that a party,
without prejudice to the mandatory procedures of this Section, may file a
complaint for statute of limitations or venue reasons, or seek a preliminary
injunction or other provisional judicial relief, if in its sole judgment such
action is necessary to avoid irreparable damage or to preserve the status quo.
Notwithstanding such action, the parties will continue to participate in good
faith in the procedures specified in this Section.
12.5 Tolling, Statute of Limitations. All applicable statutes or limitation and
defenses based upon the passage of time shall be tolled while the procedures
specified in this Section are pending. The parties will take such action, if
any, required to effectuate such tolling.
12.6 Performance to Continue. Each party agrees, and is required, to continue to
perform its obligations under this Agreement pending final resolution of any
dispute arising out of or relating to this Agreement.
17
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13. GENERAL
13.1 Notice. Any notice or other communication permitted or required under this
Agreement shall be given in writing and shall be deemed effective upon personal
delivery (including courier service), overnight mail delivery, upon confirmed
facsimile transmission, or five (5) days after deposit, postage prepaid, in the
first class mail of the United States properly addressed to the appropriate
party at the address set forth below:
RN: Real Networks, Inc.
1111 Third Avenue, Suite 2900
Seattle, Washington 98101
Point of contact: Len Jordan
Facsimile No.: 206-674-2699
With a copy to: General Counsel
Facsimile No.: 206-674-2695
Partner: Digital Lava Inc.
10850 Wilshire Boulevard, Suite 1260
Los Angeles, CA 90024
Point of contact: Danny Gampe, CFO
Facsimile No.: (310) 470-1769
Either party may from time to time change such address by giving the
other party notice of such change in accordance with this Section.
13.2 Independent Contractors. RN and Partner are independent contractors in all
relationships and actions under and contemplated by the Agreement.
Notwithstanding anything in this Agreement to the contrary, the parties do not
by this Agreement intend to form, nor shall this Agreement be construed to
constitute, a partnership, joint venture, employment, or agency relationship
between them, or to authorize Partner or any Authorized Distributors to enter
into any commitment or agreement binding on RN or to allow one party to accept
service of any legal process addressed to, or intended for, the other party.
Partner and Authorized Partners shall not make any warranties, guarantees or any
other commitments on behalf of RN pursuant to the Agreement.
13.3 No Assignment. Partner shall not assign, transfer or otherwise dispose of
this Agreement or any rights or duties hereunder without the prior written
consent of RN, provided that Partner may assign this Agreement without RN's
prior written consent pursuant to a sale of substantially all of Partner's
assets, or in connection with a merger, or consolidation. However, if the sale,
merger or consolidation by Partner is to or with a competitor of RN, Partner is
required to obtain RN's prior written consent. If the contemplated sale, merger
or consolidation by Partner is with *****(1), in addition to having the right to
refuse to consent, RN shall have a right of first refusal for the
- --------
(1) Confidential information is omitted and identified by an * and filed
separately with the SEC pursuant to a request Confidential Treatment.
18
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exclusive rights to purchase Partner's assets or stock on the same terms as the
best offer from *****(1).
13.4 Survival. The following provisions shall survive the expiration or
termination of this Agreement: the applicable provisions of Sections 2.3, 5.3,
6.4, and 7 through 12.
13.5 U.S. Government Restricted Rights and Export Restriction. The Licensed
Software, RN Products, and User Documentation are provided with RESTRICTED
RIGHTS. Use, duplication or disclosure by the Government is subject to
restrictions set forth in subparagraphs (a) through (d) of the Commercial
Computer Software--Restricted Rights at FAR 52.227-19 when applicable, or in
subparagraph (c)(l)(ii) of the Rights in Technical Data and Computer Software
clause at DFARS 252.227-7013, and in similar clauses in the NASA FAR supplement,
as applicable. Manufacturer is Real Networks, Inc./1111 Third Avenue, Suite 500/
Seattle, Washington, 98101. Partner acknowledges that none of the Licensed
Software, RN Products, or underlying information or technology may be downloaded
or otherwise exported or re-exported: (i) into (or to a national or resident of)
Cuba, Iran, Iraq, Libya, North Korea, Syria, Sudan or Angola or any other
country to which the U.S. has embargoed goods; or (ii) to anyone on the U.S.
Treasury Department's list of Specially Designated Nationals or the U.S.
Commerce Department's Table of Denial Orders.
13.6 Miscellaneous. This Agreement, and any exhibits and schedules attached
hereto and incorporated herein, constitute the complete and exclusive agreement
between RN and Partner with respect to the subject matter hereof, and supersedes
all oral or written understandings, communications or agreements not
specifically incorporated herein. If any provision in this Agreement is held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions will continue in full force without being impaired or
invalidated in any way. No waiver, amendment or modification of any provision of
this Agreement shall be effective unless it is in a document which expressly
refers to this Agreement and is signed by authorized representatives of both
parties. Except as specifically provided herein, failure or delay by either
party in exercising any rights or remedy under this Agreement shall not operate
as a waiver of any such right or remedy. Headings shall not be considered in
interpreting this Agreement. This Agreement shall be governed by the laws of the
State of Washington, without regard to its conflict of laws rules. The United
Nations Convention of Contracts for the International Sale of Goods is expressly
excluded.
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IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
Effective Date written above.
REAL NETWORKS, INC. DIGITAL LAVA INC.
By: /s/ Len Jordan By: /s/ Joshua D.J. Sharfman
----------------------- --------------------------
Name: Len Jordan Name: Joshua D. J. Sharfman
Title: Senior Vice President MSDIV Title: CEO
Date: 4/13/98 Date: 6 April '98
20
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EXHIBIT A
Partner Products
VideoVisor
vPrism
VideoVisor Publisher
21
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EXHIBIT B
RMA Server
The RMA Server includes the following:
1) installer for the appropriate operating system platform
2) operators manual
3) exposed interfaces to plug-in a monitor, administrator, file system,
datatype or broadcast datatype
4) base-level monitoring tool
5) ability to stream a datatype given a file format plug-in or broadcast
plug-in and license key
6) supports the following platforms: Windows NT; UNIX (Free BSD, Solaris 2.5,
Linux, DEC UNIX, BSDI, HP/UX, SunOS 4.1, IRIX and AIX)
22
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SCHEDULE I
Except for the RN Products, which are subject to Schedule 2, Partner shall pay
RN at the rate of *****(1) plus *****(1) of the total gross revenue receivable
by Partner from the sale, license or distribution of all RMA-based products,
including Partner Products, RMA Players, RMA Servers, License Keys, Updates, New
Release and any site licenses.
- --------
(1) Confidential information is omitted and identified by an * and filed
separately with the SEC pursuant to a request Confidential Treatment.
23
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SCHUEDULE 2
Partner shall pay RN at the discounted rate of *****(1) off from RN's listed
retail price for the RN Products.
- --------
(1) Confidential information is omitted and identified by an * and filed
separately with the SEC pursuant to a request Confidential Treatment.
24
SOFTWARE LICENSE AGREEMENT
This Agreement made effective as of the 31th day of March, 1997 between Cinax
Designs Inc. ("Cinax") having an office at #150-1152 Mainland Street, Vancouver,
B.C. Canada, V6B 4X2 and Digital LAVA (identified in subsection 3.1) on the
following terms and conditions:
1. SCOPE
1.1 Cinax shall create and license software to Digital LAVA who shall utilize
the software as defined below. The software to be supplied is set out in
Schedule A which may be amended from time to time by listing any additional
software to be licensed to Digital LAVA by Cinax on a replacement Schedule A
signed by the parties.
2. DEFINITIONS
2.1 "Engine" shall mean the MPEG software engine developed by Cinax to crop and
concatenate a series of MPEG clips plus the APl documentation. The purpose of
this Engine is to add an editing functionality into the Digital LAVA Product.
2.2 "Product" means the current production version of the Digital LAVA vPrism
software listed in Schedule A to this Agreement, and any future fixes, updates,
enhancements and modifications to those programs created by or for Digital LAVA,
but excluding any subsequent releases or enhancements of the Product which do
not incorporate the Engine.
2.3 "Services" means the design and development of the Engine in accordance with
the Specifications and delivery of the Deliverables.
2.4 "Specifications" means the Specifications for the engine and the contracted
Services, attached to this Agreement as Exhibit A. "Schedule" means the schedule
for completion of the Services, as set forth in the Specifications.
2.5 "Deliverables" means the various alpha, beta and final versions of the
Engine, and supporting documentation, as more fully described in the
Specifications.
2.6 "Errors" means defect(s) in a deliverable which prevent it from performing
in accordance with the Specifications and or a Severity Level 1, 2 or 3 error,
as such errors are described in Schedule B.
2.7 "Library" means the software development library developed by Cinax and used
in the development of the Engine under this Agreement.
2.8 "Derivative Technology" means: (i) for copyrightable or copyrighted
material, any translation (including translation into other computer languages)
portation, modification, correction, addition, extension, upgrade, improvement
compilation, abridgment, or other
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form in which an existing work may be recast, transformed or adapted; (ii) for
patentable or patented material, any improvement thereon; and (iii) for material
which is protected by trade secret, any new material derived from such existing
trade secret material, including any new material which may be protected by
copyright, patent and/or trade secret.
2.9 "Customer" means resellers, system integrators and software wholesale or
retail outlets, and, in the event of Digital LAVA direct sales, end-users.
3. PARTICULARS
3.1 Licensee - Licensee's name and key particulars are:
(a) full name: Digital LAVA Inc
(b) full address: Suite 1260, 10850 Wilshire Boulevard, Los Angeles, CA, USA,
90024
(c) telephone number: 310-470-1149
(d) fax number: 310-470-1769
(e) contact person: Josh Sharfman
(f) e-mail address: [email protected]
4 DEVELOPMENT
4.1 Services - Digital LAVA hereby retains Cinax to design, develop and test the
Engine. Cinax shall use their best efforts to perform the Services in a
workmanlike manner and in accordance with the Schedule and the Specifications.
Cinax is not obligated to perform any Services, and Digital LAVA has not
contracted for any Services, unless and until Exhibit A is executed by both
parties and attached hereto.
4.2 Acceptance of Software - For software executable code deliverables, where
Cinax delivers to Digital LAVA the alpha, beta and final versions of each
Deliverable, Digital LAVA shall evaluate and submit a written acceptance or
rejection to Cinax within five (5) business days of receipt of the alpha and
beta versions and seven (7) business days after receipt of the final version of
the Deliverables. Acceptance shall be in writing, and Digital LAVA shall not
unreasonably withhold its acceptance unless a Deliverable is not according to
the Specifications or is not according to Schedule A. If Digital LAVA identifies
Errors in a deliverable within the acceptance period, Cinax shall correct such
Errors following receipt thereof. Cinax shall use its best efforts to correct
Errors during acceptance testing for the alpha and beta versions of each
Deliverable and within the time specified in Schedule B with respect to errors
discovered during acceptance testing for the final version of each Deliverable.
4.3 Documentation- For documentation or report Deliverables, Digital LAVA shall
evaluate each version of such deliverable and in the event that corrections are
required Digital LAVA shall specify the corrections needed and Cinax shall
deliver an amended version of such documentation within five (5) business days.
4.4 Errors- If Cinax fails to deliver to Digital LAVA any deliverable within the
dates
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specified in the Schedule A or if any Errors discovered within the acceptance
period cannot be eliminated in the correction period specified in the
Specifications then Digital LAVA may, at its option: (i) retain the Deliverables
to date with rights as set forth in Section 10, and pay Cinax for all
outstanding payment milestones for which Digital LAVA has accepted corresponding
deliverables; (ii) extend a correction period to Cinax; or (iii) suspend Digital
LAVA's obligations under this Agreement and/or terminate this Agreement for
cause pursuant to paragraph 12.2.
4.5 Design Review and Specification Changes- Cinax understands that there may be
additions, deletions or other changes which may affect the Specifications at any
time during the term of this Agreement. Upon notice of any such changes by
Digital LAVA, Cinax and Digital LAVA agree to work together to make any
necessary changes to the Specifications, and Cinax shall alter the services in
order to accommodate any such changes to the Specifications.
5. GRANT OF LICENSE
5.1 License to Digital LAVA- Cinax hereby grants to Digital LAVA the
non-exclusive, non-transferable worldwide right and license of renewable term
to:
(i) use, copy, demonstrate and sub-license the Engine as a part of its
Product; and otherwise carry on the activities contemplated by and as set out in
this Agreement subject to the termination provisions contained in this
Agreement.
5.2 Royalty to Cinax - In return for such license Digital LAVA agrees to pay
Cinax a royalty based on the revenues or any portion thereof derived by Digital
LAVA from the resale, distribution or sub-license of the Digital LAVA-developed
Product or third party products using the Engine.
6. PURCHASE AND SALE OF PRODUCT
6.1 Reporting- Digital LAVA shall notify Cinax of all Product sales made on a
quarterly basis, in the format specified in Schedule C.
6.2 Title/Security Interest in Engine - Title to Engine shall remain in Cinax
and Cinax shall have a security interest in such units until Digital LAVA pays
Cinax in full for all amounts owing from Digital LAVA to Cinax in connection
with shipments of which the Engine forms a part. Digital LAVA shall sign all
instruments and do all acts that Cinax, acting reasonably, requires to effect,
perfect, register or record such retention of title and security interest.
3
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7. PAYMENT
7.1 Services - Digital LAVA shall pay Cinax for the Services performed as set
forth and in accordance with the applicable Schedule A, not to exceed *****(1)
provided that (i) Cinax has completed the milestones and delivered the
Deliverable; and (ii) Digital LAVA has accepted the Deliverables. Such payments
will be due net five (5) days from the later of (i) acceptance by Digital LAVA
of the Deliverable associated with any payment milestone or (ii) receipt by
Digital LAVA of a Cinax invoice associated with any payment milestone.
7.2 Up Front License Fee - Digital LAVA shall pay to Cinax an up front licensing
fee of *****(1) for use of the Engine. *****(1) will be due net thirty (30) days
from the later of (i) acceptance by Digital LAVA of the Final Deliverable or
(ii) receipt by Digital LAVA of a Cinax invoice associated with the Final
Deliverable, and the balance of *****(1) on the first reporting date as per
Schedule A.
7.3 Royalty free copies- The first seventy five (75) copies of the Product
shipped, including upgrades of the Product shipped to existing users, shall not
be subject to royalties.
7.4 Royalties Payable and Base - For each subsequent unit of the Product shipped
Digital LAVA shall pay to Cinax a royalty as set out in Schedule A. which amount
shall reflect the most of: *****(1) of the Product Net Sales Price invoiced by
Digital LAVA to the Customer, or at the royalty floor price of fifty dollars
($50) U.S.
7.5 Minimum Royalty - During each year the Agreement is in effect, Digital LAVA
shall license from Cinax not less than 200 copies of the Engine at the royalty
floor price of *****(1) U.S . Digital LAVA shall have the right to prepay
royalties to achieve the minimum in any given year. Failure by Digital LAVA to
license the minimum copies in a particular year of the Agreement shall be a
default of this Agreement on the part of Digital LAVA entitling Cinax to
terminate the Agreement.
7.6 The royalty charges applicable to Product are due upon invoice by Cinax and
Cinax shall invoice the Digital LAVA for such charges and all such invoices
according to Schedule C. Invoices are payable within 30 days of the invoice
receipt. Any amounts outstanding for 30 days shall be subject to interest at a
rate of 1% per month (12% per annum).
7.7 Digital LAVA shall pay all applicable sales, use, withholding and excise
taxes, and any other assessments against the Digital LAVA in the nature of
taxes, duties or charges however designated on the Product or its license or
use, on or resulting from this Agreement, exclusive of taxes based on the net
income of Cinax.
7.8 Inspection Rights - Cinax shall have the right to audit Digital LAVA's
records and
- --------
(1) Confidential information is omitted and identified by an * and filed
separately with the SEC pursuant to a request for Confidential Treatment.
4
<PAGE>
papers which are relevant to the resale, distribution or sub licensing of the
Product once per year. Such audits shall be performed by an independent
accounting firm and shall be conducted at Digital LAVA's headquarters. Written
notification of such audits shall be received by Digital LAVA at least thirty
(30) days prior to such audit. Audit costs shall be Cinax's responsibility,
unless audit determines a discrepancy of 25% or greater between Product shipped
and reported, in which case Digital LAVA shall be responsible for audit costs.
8. SUPPORT
8.1 Software Maintenance - Cinax shall provide software support and maintenance
services relative to the product as described herein:
a) Software Maintenance: Cinax shall use its best efforts to rectify any
problem with the Product which results in the Product not being in
substantial conformance to the functional specifications as contained in
the documentation in Schedule A;
b) Support Availability: Cinax shall provide reasonable telephone and e-mail
support for the Engine between the hours of 8:30 a.m. and 5:00 p.m.,
Pacific Standard Time, excluding weekends and Canadian statutory' holidays,
to Digital LAVA only.
c) Cost; there will be no support costs charged.
8.2 Suspension of Support- if Cinax terminates Agreement under Section 12.2 (b)
Cinax shall provide Digital LAVA with a copy of the Engine source code for the
express purpose of providing support, as described above, to end users of its
Product. Digital LAVA will not use the source for any other purpose, or in any
way use this source code to impinge the rights of Cinax as set out in Section
10- Rights and Ownership.
9. WARRANTY
9.1 Limited Warranty of Engine - Cinax warrants that Engine supplied hereunder
shall perform in accordance with the functional specifications as set out in the
documentation accompanying the Engine provided for 90 days following acceptance
of the Product. Cinax's sole obligation and liability hereunder shall be to use
reasonable efforts to remedy any such functional non-conformance which is
reported to Cinax in writing by Digital LAVA within the warranty period. In the
event such non-conformance is unable to be remedied by Cinax, using reasonable
efforts, Cinax shall, in its sole discretion, refund to Digital LAVA the royalty
payment and use reasonable efforts to find a replacement and this Agreement will
be automatically terminated.
9.2 SPECIFIC EXCLUSION OF OTHER WARRANTIES - THE WARRANTIES SET OUT IN SECTION
9.1 AND 10.1 ARE IN LIEU OF ALL OTHER WARRANTIES, AND THERE ARE NO OTHER
WARRANTIES, REPRESENTATIONS, CONDITIONS, OR GUARANTEES OR ANY KIND WHATSOEVER,
EITHER EXPRESS OR IMPLIED BY LAW (in contract or tort) OR CUSTOM, INCLUDING, BUT
NOT LIMITED TO THOSE REGARDING MERCHANTABILITY, FITNESS FOR PURPOSE,
CORRESPONDENCE TO SAMPLE, TITLE, DESIGN, CONDITION,
5
<PAGE>
OR QUALITY. WITHOUT LIMITING THE ABOVE, CINAX DOES NOT WARRANT THAT THE PRODUCT
SHALL MEET THE REQUIREMENT OF DIGITAL LAVA OR THAT THE OPERATION OF PRODUCT
SHALL BE FREE FROM INTERRUPTION OR ERRORS.
9.3 RESTRICTIONS ON WARRANTY - CINAX SHALL HAVE NO OBLIGATION TO REPAIR OR
REPLACE PRODUCT DAMAGED BY ACCIDENT OR OTHER EXTERNAL CAUSE, OR THROUGH THE
FAULT OR NEGLIGENCE OF ANY PARTY OTHER THAN CINAX.
9.4 NO INDIRECT DAMAGES - IN NO EVENT SHALL CINAX BE LIABLE TO DIGITAL LAVA OR
TO ANY OTHER PARTY FOR INDIRECT DAMAGES OR LOSSES (in contract or tort) IN
CONNECTION WITH PRODUCT, SOFTWARE SUPPORT SERVICES OR THIS AGREEMENT, INCLUDING
BUT NOT LIMITED TO DAMAGES FOR LOST PROFITS, LOST SAVINGS, OR INCIDENTAL,
CONSEQUENTIAL, OR SPECIAL DAMAGES, EVEN IF ClNAX SELLER HAS KNOWLEDGE OF THE
POSSIBILITY OF SUCH POTENTIAL LOSS OR DAMAGE.
9.5 LIMITS ON LIABILITY - IF FOR ANY REASON, CINAX BECOMES LIABLE TO DIGITAL
LAVA OR ANY OTHER PARTY FOR DIRECT OR ANY OTHER DAMAGES FOR ANY CAUSE
WHATSOEVER, AND REGARDLESS OF THE FORM OF ACTION (in contract or tort), INCURRED
IN CONNECTION WITH THIS AGREEMENT, THE PRODUCT, OR SOFTWARE SUPPORT SERVICES
THEN:
(A) THE AGGREGATE LIABILITY OF ClNAX FOR ALL DAMAGES, INJURY, AND LIABILITY
INCURRED BY DIGITAL LAVA AND ALL OTHER PARTIES IN CONNECTION WITH PRODUCT
AND SOFTWARE SUPPORT SERVICES SHALL BE LIMITED TO AN AMOUNT EQUAL TO THE
FEES AND ROYALTIES PAID TO CINAX FOR THE PRODUCT OR SOFTWARE SUPPORT
SERVICES WHICH GAVE RISE TO THE CLAIM FOR DAMAGES; AND
(B) DIGITAL LAVA MAY NOT BRING OR INITIATE ANY ACT OR PROCEEDING AGAINST SELLER
ARISING OUT OF THIS AGREEMENT OR RELATING TO PRODUCT OR SOFTWARE SUPPORT
SERVICES MORE THAN TWO YEARS AFTER THE CAUSE OF ACTION HAS ARISEN.
9.6 SEPARATE ENFORCEABILITY - SECTIONS 9.2, 9.3, 9.4 AND 9.5 ARE TO BE CONSTRUED
AS SEPARATE PROVISIONS AND SHALL EACH BE INDIVIDUALLY ENFORCEABLE.
9.7 Indemnity - Except to the extent of Cinax's obligations under sections 9.1
and 10.1, Digital LAVA shall defend, indemnify and save harmless Cinax, its
affiliates and their respective directors, officers and employees and each of
them from and against all actions, proceedings, demands, claims, liabilities,
losses, damages, judgments, costs and expenses including, without limiting the
generality of the foregoing, legal fees and disbursements on a solicitor and
client basis (together with all applicable taxes) which any indemnified person
hereunder may be liable to pay or may incur by reason of, or directly or
indirectly arising out of, any claim which may be advanced by any Customer
obtaining Product directly or indirectly through Digital LAVA.
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10. RIGHTS AND OWNERSHIP OF PRODUCT
10 1 Warranty of Title - Cinax warrants that it has all rights necessary to make
the grant of license herein by having all right, title and interest in and to
the Library and any other software libraries used to develop and/or implement
the Engine.
10 2 Retention of Rights by Cinax - All proprietary and intellectual property
rights, title and interest including copyright in and to the original and all
copies of the Engine and the documentation or any changes or modifications made
to the Engine or related documentation shall be and remain that of Cinax or its
licensor as the case may be. Digital LAVA has no proprietary and intellectual
property rights, title or interest in or to the Engine or related documentation
except as granted herein and Digital LAVA shall not at any time whether before
or after the termination of this Agreement contest or aid others in contesting,
or doing anything which otherwise impairs the va}idity of any proprietary and
intellectual property rights, title or interest of Cinax in and to the Engine or
related documentation.
10.4 Intellectual Property Indemnity - Cinax shall defend or settle any claim
made or any suit or proceeding brought against Digital LAVA insofar as such
claim, suit or proceeding is based on an allegation that any of the Product
supplied to Digital LAVA pursuant to this Agreement infringes the proprietary
and intellectual property rights of any third party in or to any invention,
patent, copyright or any other rights, provided that Digital LAVA shall notify
Cinax in writing promptly after the claim, suit or proceeding is known to
Digital LAVA and shall give Cinax information and such assistance as is
reasonable in the circumstances. Cinax shall have sole authority to defend or
settle the same at Cinax's expense. Cinax shall indemnify and hold Digital LAVA
harmless from and against any and all such claims and shall pay all damages and
costs finally agreed to be paid in settlement of such claim, suit or proceeding.
This indemnity does not extend to any claim, suit or proceeding based upon any
infringement or alleged infringement of copyright by the combination of the
Product with other elements not under Cinax's sole control nor does it extend to
any Product altered by Digital LAVA either by enhancement or by combination with
product(s) of the Digital LAVA's design or formula. The foregoing states the
entire liability of Cinax for proprietary and intellectual proprietary rights
infringement related to the Product. If the Product in any claim, suit or
proceeding are held to infringe any proprietary or intellectual property rights
of any third party and the use thereof is enjoined or, in the case of settlement
as referred to above, prohibited, Cinax shall have the option, at its own
expense, to either (i) obtain for Digital LAVA the right to continue using the
infringing item, or (ii) replace the infringing item or modify it so that it
becomes non-infringing; provided that no such replacement or modification shall
diminish the performance of the Product.
10.4 Infringement by Third Parties - Should either party become aware of
possible or
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threatened infringement of the Engine or the Library, or any patents or patent
applications in the same, it shall notify the other party forthwith. Each party
undertakes to cooperate fully with the other party in any action against any
such possible or threatened infringer. Cinax shall have the exclusive discretion
to determine whether to take action, and what action to take, to enter into any
settlement and to receive any proceeds or awards in respect of alleged
infringements of the Engine or Library.
10.5 Infringement of Third Party Rights- In the event either party becomes aware
of the threatened infringement of any third party patent rights or copyrights of
the Engine or the Library, it shall promptly notify the other party of such a
claim. Each party shall have the right to negotiate, settle or defend any claim
by a third party alleging infringement by the Engine or the Library of any
copyrights or patents.
11. CONFIDENTIALITY AND USE LIMITATION
11.1 Confidentiality - Digital LAVA shall not at any time whether before or
after the termination of this Agreement disclose, furnish, or make accessible to
anyone any confidential information, which confidential information is deemed to
include the source code of the Product or related technical documentation or any
part thereof, or permit the occurrence of any of the above.
11.2 Safeguards - Digital LAVA shall take reasonable precautions to prevent
Product in its care and control from being duplicated, stolen, disclosed or used
for unauthorized purposes.
11.3 Non-disclosure of Agreement - Digital LAVA shall not disclose the terms,
content or nature of this Agreement to any third party unless Digital LAVA must
disclose such information as a result of a duly issued legal process or a formal
due diligence process.
11.4 References - Digital LAVA agrees that the fact of its use of the Engine may
be disclosed to others and Digital LAVA shall become a reference account for
Cinax and the Engine.
11.5 Competition - The parties acknowledge that this Agreement does not restrict
or prohibit either party from making arrangements with any third parties or
dealing in any way with any other software or hardware even if such party or
said other software or hardware competes with the Engine or services offered by
Cinax or Digital LAVA. Nothing contained in this Agreement shall prevent Digital
LAVA from developing or having developed or from acquiring from third parties,
products similar to and competitive with the Engine. Furthermore, nothing herein
shall preclude Digital LAVA from marketing such Digital LAVA-developed or third
party acquired products to others.
12. TERM AND TERMINATION
12.1 Term - This Agreement shall subsist for an initial term of two (2) years
commencing on the execution date of this Agreement ("Initial Term"). This
Agreement shall be reviewed in one-year periods ("Renewal Terms"), provided that
Digital LAVA is
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not in default under this Agreement at the time of renewal. Renewal shall be on
the same terms and conditions as are set out herein.
12.2 Termination - This Agreement shall terminate in each of the following
events:
(a) at the option of either party if the other party materially defaults in the
performance or observance of any of its obligations hereunder and fails to
remedy the default within 60 days after receiving written demand therefor;
or
(b) at the option of either party if the other party becomes insolvent or
bankrupt or makes an assignment for the benefit of creditors, or if a
receiver or trustee in bankruptcy is appointed for the other party, or if
any proceeding in bankruptcy, receivership, or liquidation is instituted
against the other party and is not dismissed within 30 days following
commencement thereof;
provided that the right of termination shall be in addition to all other rights
and remedies available to the parties for default or wrong-doing by each other.
12.3 Suspension of Obligations - If either party should default in the
performance or observance of any of its obligations hereunder then in addition
to all other rights and remedies available to the non-defaulting party, the non
defaulting party may suspend performance and observance of any or all its
obligations under this Agreement, without liability, until the other party's
default is remedied, but this section shall not permit Digital LAVA to suspend
its obligation to make payments owing in respect of Product.
12.4 Return of Engine - If Digital LAVA discontinues sales of the Product or use
of the Engine, or in the event of termination of this Agreement by either party,
Digital LAVA shall immediately return to Cinax all copies of the Engine thereof
and certify in writing to Cinax that Digital LAVA has done so,
13. GENERAL
13.1 Complete Agreement
This is the complete and exclusive statement of the Agreement between the
parties with respect to the subject matter contained herein and supersedes and
merges all prior representations, proposals, understandings and all other
agreements, oral or written, express or implied, between the parties relating to
the matters contained herein. This Agreement may not be modified or altered
except by written instrument duly executed by both parties.
13.2 Force Majeure
Dates or times by which either party is required to perform under this Agreement
excepting the payment of any fees or charges due hereunder shall be postponed
automatically to the extent that any party is prevented from meeting them by
causes beyond its reasonable control.
13 3 Notices
All notices and requests in connection with this Agreement shall be given or
made upon
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the respective parties in writing and shall be deemed given as of the third day
following the day the notice is faxed, providing hard copy acknowledgment of
successful faxed notice transmission is retained Notice may also be deposited in
the Canadian or US mails, postage pre-paid, certified or registered, return
receipt requested, and addressed to the respective parties at the party's
address as indicated above
13.4 Governing Law
This Agreement and performance hereunder shall be governed by the taws of
British Columbia.
13.5 Enforceability
If any provision of this Agreement shall be held to be invalid, illegal or
unenforceable under any applicable statute or rule of law, the validity,
legality and enforceability of the remaining provisions shall in no way be
affected or impaired thereby.
13.6 Non-Assignment
Digital LAVA may not assign its rights, duties or obligations under this
Agreement except to a related, affiliated or associated company by way of
reorganization of Digital LAVA or a successor to substantially all of the assets
and undertaking of Digital LAVA, without the prior written consent of Cinax.
Digital LAVA's obligation to pay any fees or charges due hereunder is not
assignable.
13.7 Non-Waiver
The waiver or failure of either party to exercise in any respect any right
provided for herein shall not be deemed a waiver of any further right hereunder.
13.8 No Aqency
The parties acknowledge that each as an independent contractor and nothing
herein constitutes a joint venture or partnership and neither party has the
right to bind nor act for the other as agent or in any other capacity.
13.9 Enurement
All covenants, representatives, warranties and agreements of the parties
contained herein shall be binding upon and shall enure to the benefit of the
parties and their respective successors and permitted assigns.
13.10 Survival
Sections 6 and subsections 5.2, 9.2, 9.3, 9.4, 9.5, 9.7, 10.2, 11.1, 11.2, 11.3,
11.4 and 12.3 shall survive termination and expiration of the agreement.
13.11 Interlocutory Remedy
Both parties acknowledge that irreparable harm shall result to the other if
either breaches their obligations under sections 6 and 10 and both parties
acknowledge that such a breach would not be properly compensable by an award of
damages. Accordingly, each party agrees that remedies for any such breach may
include, in addition to other available remedies and damages, injunctive relief
or other equitable relief enjoining such breach at the earliest possible date.
13.12 Disputes - Except with respect to applications for injunctions, any
dispute arising out of or in connection with this Agreement or any legal
relationship associated therewith shall be finally resolved at the British
Columbia International Commercial Arbitration Center (BClCAC) by a sole
arbitrator pursuant to the rules of the BClCAC.
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IN WITNESS WHEREOF the parties thereto have executed this Agreement, through
their respective officers, duly authorized for such purpose, as they so declare
and represent, as the Effective Date.
Digital Lava Inc. Cinax Designs Inc.:
By: /s/ Joshua D.J. Sharfman By: /s/ Eric Camirand
------------------------------ ----------------------------
Joshua D.J. Sharrfman Eric Camirand
Authorized Signature Authorized Signature
Title: CEO Title: President
office of Company's representative office of Company's representative
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SCHEDULE A
SPECIFICATIONS, DELIVERABLES AND SCHEDULE
PRODUCT
Item Description Ownership List Price
- ---- ----------- --------- ----------
1. vPrism, Video Computing Suite Digital Digital Lava $16,500
PRODUCT FOR LICENSE
Item Description Documentation
- ---- ----------- -------------
1. Windows Engine MPEGEDIT.DLL APl doc
(MPEG crop and concat based on timecode inputs)
2. MAC Engine (Shared Library) APl doc
(MPEG crop and concat based on timecode inputs)
GENERAL SPECIFICATIONS
The APl specification, characterized as a C header file:
// The return information from crop(); supplies caller with all information
// required to locate in the output file the beginning and end of the
// section of video that was cropped from the source input video file.
Time values
// are in floating-point seconds.
//
// outputMarklnTimeCode output-file-relative time value of the first frame
cropped
// outputMarkOutTimeCode output-file-relative time value of the last frame
cropped
// outputFileLengthTime output file length in units of time struct cropInfo
{
double output MarklnTimeCode;
double outputMarkOutTimeCode;
double outputFileLengthTime;
};
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// Crop a section of video from a source file and create
// a video file containing the cropped video stream.
I// Input arguments:
// sourceFile source file specification
// destinationFile destination file specification
// marklnTimeCode time value of first frame to crop, in sourceFile
// markOutTimeCode time value of last frame to crop, in sourceFile
// Output argument:
// results a cropInfo record, containing output
// file-relative information and describing
// the location in the output file of the
// cropped section and the total length in time of the output file
// Function return value: zero if successful, else an error code
//
long crop(char *sourcefile,
char *destinationfile,
double markintimecode,
double markouttimecode,
struct cropInfo *results);
//
// Concatenate two video files into a single file.
//
// Input arguments:
// sourceFile1 file specification of the video file to be
// placed first in the concatenated output file
// sourceFile2 file specification of the video file to be
// placed second in the concatenated output fife
// destinationFile file
specification to be used for the output
// video file
// Function return value: zero if successful, else an error code
// Notes:
//.sourceFile1 and destinationFile may refer to the same file. If so,
// sourceFile2 is concatenated to the end of sourceFile1;
// If sourceFile1 and sourceFile2 are incompatible for concatenation,
// the error situation should be determined as nearly immediately as
// possible.
// long concat(char *sourceFile1,
char *sourceFile2,
char *destinationFile);
//
//Crop a section of video from a source file and append
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//it to an existing video file.
// Input arguments:
// sourceFile source file specification
// destinationFile file specification of video file to append
// the cropped section to
// marklnTimeCode time value of first frame to crop, in sourceFile
// markOutTimeCode time value of last frame to crop, in sourceFile
// Output argument:
// results a cropInfo record, containing output
// file-relative information and describing
// the location in the output file of the
// cropped section and the total length in
// time of the output file
// Function return value: zero if successful, else an error code
long cropAppend(char *sourceFile,
char *destinationFile,
double markintimecode,
double markouttimecode,
struct cropinfo *results);
PLATFORMS SUPPORTED:
1. Windows 95 and Windows NT compatible.
2. Mac OS System compatible
3. ActiveMovie MPEG-1 playback
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Stream supported:
1. Any ISO 11172 compliant MPEG system streams
DELIVERABLES
Alpha/Project Design- as per specifications
Beta- Mac and Windows version
Final Product- Working version of both Mac and Windows version
<TABLE>
<CAPTION>
SCHEDULE PRIME
TARGET DATE MILESTONE INVOICE AMOUNT (USD) RESPONSIBILITY
- ----------- --------- -------------------- ---------------
<S> <C> <C> <C>
March 31, 1997 Contract Start *****(1) Cinax
Project Design
April 15, 1997 Delivery of Windows Beta *****(1) Cinax
May 2, 1997 Delivery of MAC Beta *****(1) Cinax
May 12, 1997 Delivery of Documentation Delivery of *****(1) Cinax
Windows and MAC Final Product
May 16, 1997 License Commences *****(1) Digital LAVA
June 30, 1997 First Reporting Date *****(1) Digital LAVA
</TABLE>
- --------
(1) Confidential information is omitted and identified by an * and filed
separately with the SEC pursuant to a request for Confidential Treatment.
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SCHEDULE C
PRODUCT SALE REPORTING
Digital LAVA shall notify Cinax of all Product sales made on a quarterly basis,
on March 31, June 30, September 30 and December 31, in writing, in the format
specified below :
(i) the number of Product shipped (both Evaluation Copies and Production
Versions);
(ii) the date of shipment from Digital LAVA to third parties including Customers
(iii) the Extended Price of the Product, before shipping and taxes.
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