<PAGE>
As filed with the Securities and Exchange Commission on October 26, 1999.
Registration No. 333-84033
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
AMENDMENT NO. 9
TO
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------------
INTERTRUST TECHNOLOGIES CORPORATION
(Exact Name of Registrant as Specified in its Charter)
----------------
Delaware 7371 52-1672106
(State or Other (Primary Standard Industrial (I.R.S. Employer
Jurisdiction of Classification Code Number) Identification Number)
Incorporation or
Organization)
4750 Patrick Henry Blvd., Santa Clara, CA 95054
(408) 855-0100
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
----------------
Victor Shear
Chief Executive Officer and Chairman of the Board
InterTrust Technologies Corporation
4750 Patrick Henry Blvd., Santa Clara, CA 95054
(408) 855-0100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Robert V. Gunderson, Jr., Esq. Laird H. Simons III, Esq.
Bennett L. Yee, Esq. Katherine Tallman Schuda, Esq.
William E. Growney, Jr., Esq. Tyler R. Cozzens, Esq.
Amy S. Cohen, Esq. Pamela A. Sergeeff, Esq.
Margaret E. Paige, Esq. Fenwick & West LLP
Gunderson Dettmer Stough Two Palo Alto Square
Villeneuve Franklin & Hachigian, LLP Palo Alto, California 94306
155 Constitution Drive (650) 494-0600
Menlo Park, California 94025
(650) 321-2400
----------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE CHART
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<TABLE>
<CAPTION>
Proposed
Proposed Maximum
Title of Each Class of Maximum Aggregate Amount of
Securities to be Amount to be Offering Price Offering Registration
Registered Registered(1) Per Share(2) Price(2) Fee(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.001 par
value
per share............. 7,475,000 $17.00 $127,075,000 $37,405
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Includes shares that the underwriters have the option to purchase to cover
over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(a).
(3) $23,630 of the Registration Fee was paid in connection with the original
filing on July 29, 1999, $5,463 of the Registration Fee was paid in
connection with the filing on September 8, 1999 and $8,312 of the
Registration Fee was paid in connection with this filing.
----------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to such Section 8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED OCTOBER 26, 1999
6,500,000 Shares
[LOGO OF INTERTRUST]
Common Stock
--------
Before this offering, there has been no public market for the common stock.
The initial public offering price is expected to be between $15.00 and $17.00
per share. We have applied to list the common stock on The Nasdaq Stock
Market's National Market under the symbol ITRU.
Of the 6,500,000 shares for sale in this offering, the underwriters have
reserved, at our request, up to 1,300,000 shares for sale at the initial public
offering price to current and potential customers, others with whom we do
business, existing stockholders, employees, and friends of InterTrust. In
addition, the underwriters have an option to purchase a maximum of 975,000
additional shares to cover over-allotments of shares.
Investing in the common stock involves risks. See Risk Factors on page 7.
<TABLE>
<CAPTION>
Proceeds to
Underwriting InterTrust
Price to Discounts and Technologies
Public Commissions Corporation
------------ ------------- ------------
<S> <C> <C> <C>
Per Share.................................. $ $ $
Total...................................... $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about ,
1999.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
Credit Suisse First Boston
J.P. Morgan & Co.
Salomon Smith Barney
SoundView Technology Group
The date of this prospectus is , 1999.
<PAGE>
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 4
Risk Factors............................................................. 7
Special Note Regarding Forward-Looking Statements........................ 17
Use of Proceeds.......................................................... 17
Dividend Policy.......................................................... 17
Capitalization........................................................... 18
Dilution................................................................. 20
Selected Consolidated Financial Data..................................... 22
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 23
Business................................................................. 35
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Management................................................................. 56
Related-Party Transactions................................................. 68
Principal Stockholders..................................................... 70
Description of Capital Stock............................................... 72
Shares Eligible for Future Sale............................................ 75
Underwriting............................................................... 77
Notice to Canadian Residents............................................... 80
Legal Matters.............................................................. 81
Experts.................................................................... 81
Where You Can Find More Information........................................ 81
Index to Consolidated Financial Statements................................. F-1
</TABLE>
------------
Dealer Prospectus Delivery Obligation
Until , 1999, 25 days after the commencement of this offering, all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealer's obligation to deliver a prospectus when acting
as an underwriter and with respect to unsold allotments or subscriptions.
3
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding InterTrust and the common stock being sold in this
offering in our consolidated financial statements and notes appearing elsewhere
in this prospectus and our risk factors beginning on page 7.
InterTrust Technologies Corporation
We have developed a general purpose digital rights management, or DRM,
platform to serve as a foundation for providers of digital information,
technology, and commerce services to participate in a global e-commerce system
for digital commerce. We license our DRM platform to partners to build digital
commerce services and applications. These partners intend to offer digital
commerce services and applications that collectively will form a global
commerce system, which we have branded as the MetaTrust Utility. We maintain
the MetaTrust Utility's foundation and will receive as a fee from our partners
a small percentage of the value of goods and services that run through the
system.
DRM technologies protect and manage rights and interests in digital
information. DRM is needed by any industry that distributes information that
can be put into digital form. These types of information include music, videos,
software, games, publications, business information, and images. DRM also
applies to organizations and individuals who want to protect the vast amount of
proprietary and personal information that has been computerized.
Our technology is designed to enable all these industries, organizations,
and individuals, and each of their constituencies, to protect and manage their
rights and interests in digital information. Holders of these rights and
interests can easily associate usage rules with the digital information and
persistently apply these rules throughout the lifecycle of the information.
When these rights and rules are based on a common foundation, they can form the
basis for a global system for digital commerce.
We believe our DRM platform represents a new computing technology that
addresses a key threat to digital commerce--the threat of a user who has been
authorized to receive and decrypt digital information and then seeks to use it
in an unauthorized way. Our DRM platform enables automation of many aspects of
the secure commercial exchange of digital information and is designed to allow
digital commerce to be conducted more efficiently.
We believe our platform provides the following benefits:
. robust security; . multiple content and media types;
. persistent protection and . efficient transaction processing;
management;
. new advertising models; and
. flexible business models;
. personalized marketing.
. superdistribution;
Our current partners include BMG Entertainment Storage Media, Computacenter,
Diamond Multimedia Systems, Matsushita Electric Industrial, Mediascience,
Mitsubishi Corporation, MusicMatch, National Westminster Bank, PublishOne,
Reciprocal, Samsung SDS, and Universal Music Group. We also have alliances with
Adobe Systems, Digital Theater Systems, Fraunhofer-Institut, Harris
Corporation, Portal Software, and Science Application Information Company. Some
4
<PAGE>
of our partners are conducting, or are planning to conduct, commercial trials,
and have announced that their applications and services will be commercially
available in the MetaTrust Utility in 2000.
Our goal is to empower multiple providers of content, technology, and
commerce services to build a global system for digital commerce based on our
DRM platform. The key elements of our strategy are to:
. expand our key strategic partnerships;
. promote widespread deployment of our technology;
. leverage our neutral MetaTrust Utility model; and
. maintain our technology lead.
We were incorporated in Delaware in January 1990. Our principal executive
offices are located at 4750 Patrick Henry Blvd., Santa Clara, California 95054,
and our telephone number is (408) 855-0100.
InterTrust, DigiBox, and our logo are our registered trademarks. MetaTrust,
MetaTrust Utility, InterRights, Powerchord, RightsWallet, and TrustMail are our
trademarks. This prospectus also contains trademarks of other companies.
----------------
Except as otherwise indicated, information in this prospectus is based on
the following assumptions:
. redesignation of our class A voting common stock as common stock upon the
closing of this offering;
. conversion of all outstanding shares of preferred stock and class B non-
voting common stock into shares of common stock upon the closing of this
offering;
. exercise of warrants to purchase 6,692 shares of our common stock
outstanding as of August 31, 1999;
. the filing of our sixth amended and restated certificate of incorporation
in the state of Delaware after completion of this offering; and
. no exercise of the underwriters' over-allotment option.
5
<PAGE>
THE OFFERING
<TABLE>
<C> <S>
Common stock offered by us................. 6,500,000 shares
Common stock to be outstanding after the 37,751,085 shares. This number is
offering.................................. based on the number of shares
outstanding as of June 30, 1999.
It excludes 6,741,411 shares of
common stock issuable upon the
exercise of options outstanding
as of June 30, 1999 at a weighted
average exercise price of $1.91
per share. It also excludes
325,000 shares of common stock
issuable upon the exercise of a
warrant with an exercise price of
$14.00 per share and 85,000
shares of common stock issued in
connection with our purchase and
license of technology. From July
1, 1999 through October 13, 1999,
we issued options to purchase
436,000 shares of common stock at
a weighted average exercise price
of $11.10.
Over-allotment option...................... 975,000 shares
Use of proceeds............................ General corporate purposes,
including working capital. For
more information about our use of
proceeds, please see the use of
proceeds section on page 17.
Dividend policy............................ Currently, we do not anticipate
paying cash dividends.
Nasdaq National Market symbol.............. ITRU
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
Six Months
Years Ended December 31, Ended June 30,
--------------------------------------------- -----------------
1994 1995 1996 1997 1998 1998 1999
------- ------- ------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statements
of Operations Data:
Total revenues.......... $ 850 $ -- $ 25 $ 1,100 $ 152 $ 50 $ 486
Loss from operations.... (1,549) (3,423) (8,140) (11,938) (19,667) (9,369) (11,613)
Net loss................ (1,588) (3,583) (7,960) (11,709) (19,662) (9,378) (11,411)
Basic and diluted net
loss per share......... $ (0.16) $ (0.35) $ (0.67) $ (0.86) $ (1.41) $ (0.68) $ (0.75)
======= ======= ======= ======== ======== ======= ========
Shares used in computing
basic and diluted net
loss per share......... 9,645 10,223 11,913 13,639 13,966 13,777 15,307
======= ======= ======= ======== ======== ======= ========
Pro forma basic and
diluted net loss per
share.................. $ (0.91) $ (0.43)
======== ========
Shares used in computing
pro forma basic and
diluted net loss per
share.................. 21,688 26,808
======== ========
</TABLE>
<TABLE>
<CAPTION>
June 30, 1999
-----------------------------
Pro Forma
Actual Pro Forma As Adjusted
------- --------- -----------
<S> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents......................... $15,295 $31,053 $126,623
Working capital................................... 11,970 28,728 124,298
Total assets...................................... 17,020 32,778 128,348
Total stockholders' equity........................ 4,645 21,403 116,973
</TABLE>
- --------
The pro forma column in the consolidated balance sheet data table above
reflects the sale of 1,309,700 shares of series E preferred stock for
approximately $15.7 million in cash and the issuance of 83,333 shares of series
E preferred stock on the conversion of a $1.0 million promissory note in
July 1999, the exercise of warrants to purchase 21,692 shares of common stock
for an aggregate exercise price of $42,000 and the conversion of all
outstanding shares of preferred stock and class B non-voting common stock into
shares of common stock upon completion of this offering.
The pro forma as adjusted column in the consolidated balance sheet data
table above reflects our sale of 6,500,000 shares of common stock in this
offering, at an assumed initial public offering price of $16.00 per share, and
after deducting estimated underwriting discounts and commissions and offering
expenses payable by us.
6
<PAGE>
RISK FACTORS
This offering and an investment in our common stock involve a high degree of
risk. You should carefully consider the following risk factors and the other
information in this prospectus before investing in our common stock. Our
business and results of operations could be seriously harmed by any of the
following risks. The trading price of our common stock could decline due to any
of these risks, and you might lose all or part of your investment.
Risks Related to Our Business
Our business model is new and unproven and we may not succeed in generating
sufficient revenue to sustain or grow our business.
Our business model is new and unproven and may not generate sufficient
revenue for us to be successful. The success of our business depends upon our
ability to generate transaction fees in the form of a percentage of fees
charged by our licensees in commercial transactions. However, our licensees
have not yet used our technology in the commercial distribution of their
products and we have not earned any transaction fees under this business model.
If our technology is commercially released, the volume of products and services
distributed using our technology may be too small to support or grow our
business. While some companies have licensed our technology, other companies
may wish to use other technology based on different business models, including
the payment of a one-time license fee without sharing in ongoing revenues. If
we are unable to generate revenues from transaction fees, our current revenues,
consisting of initial license fees and support fees, will be insufficient to
sustain our business.
Our quarterly operating results are volatile and difficult to predict. If we
fail to meet the expectations of public market analysts or investors, the
market price of our common stock may decrease significantly.
Our operating results have varied from period to period and, in some future
quarter or quarters, will likely fall below the expectations of securities
analysts or investors, causing the market price of our common stock to decline.
Our quarterly operating results may fail to meet these expectations for a
number of reasons, including:
. a quarterly decline in the overall demand for digital goods and services;
. a quarterly decline in the demand for our Commerce software product;
. our failure to quickly reduce costs in the event of unanticipated
declines in revenues in a given period;
. delays in the timing of licensing our Commerce software and services;
. the nature and types of our licensing arrangements;
. the inability of our licensees and their customers to commercialize our
technology, or delays or deferrals in this commercialization; and
. customer budget cycles and changes in these budget cycles.
7
<PAGE>
We have a history of losses, and we expect our operating expenses and losses to
increase significantly.
Our failure to increase our revenues significantly would seriously harm our
business. We have experienced operating losses in each quarterly and annual
period since inception, and we expect to incur significant and increasing
losses in the future. We incurred net losses of $8.0 million in 1996, $11.7
million in 1997, $19.7 million in 1998, and $11.4 million for the six months
ending June 30, 1999. As of June 30, 1999, we had an accumulated deficit of
$56.9 million. We expect to significantly increase our research and
development, sales and marketing, and general and administrative expenses. As a
result of these additional expenses, we must significantly increase our
revenues to become profitable. We expect to incur significant losses for at
least the next several years.
If third parties do not deploy our technology and create a market for digital
commerce, our business will be harmed.
Relationships with leading content, technology, and commerce service
providers are critical to our success. Our business and operating results would
be harmed to the extent our licensees fail, in whole or in part, to:
. deploy our technology;
. develop an infrastructure for the sale and delivery of digital goods and
services;
. generate transaction fees from the sale of digital content and services;
. develop and deploy new applications; and
. promote brand preference for InterTrust products and services and the
MetaTrust Utility.
We need to significantly increase the number of companies that license our
technology to sustain and grow our business.
We will not generate sufficient revenue to grow our business unless we
maintain relationships with existing licensees and significantly increase the
number of companies that license our technology and use it for the sale and
management of digital information and services. We have not yet attracted, and
may not in the future be able to attract, a sufficient number of these
companies. To date, only 13 companies have licensed our software for commercial
use. Our ability to attract new licensees will depend on a variety of factors,
including the following:
. the performance, reliability and security of our products and services;
. the scalability of our products and services--the ability to rapidly
increase deployment size from a limited number of end-users to a very
large number of end-users;
. the cost-effectiveness of our products and services; and
. our ability to market our products and services effectively.
8
<PAGE>
Our ability to attract new licensees will also depend on the performance of
our initial licensees and the overall success of the MetaTrust Utility. Many
potential licensees may resist working with us until our, and our licensees',
applications and services have been successfully introduced into the market and
have achieved market acceptance. We may not be able to attract a critical mass
of licensees that will develop products and establish clearinghouses and other
commerce services, and our licensees may not achieve the widespread deployment
of users we believe is necessary for us to become successful.
In addition, we may not be able to establish relationships with important
potential customers if we have already established relationships with their
competitors. Therefore, it is important that we are perceived as a neutral and
trusted technology and service provider. In addition, we require that products
and services operating within the MetaTrust Utility comply with specifications
administered by us. Potential licensees may be unwilling to be subject to the
control of these specifications.
The long and complex process of licensing our Commerce software could delay the
deployment of our technology and harm our business.
Licensing our Commerce software is a long and complex process. If initial
license fees are delayed or reduced as a result of this process, our future
revenue and operating results could be impaired. Before committing to license
our product, our licensees must generally consider a wide range of issues
including product benefits, installation and infrastructure requirements,
ability to work with existing computer systems, ability to support a large user
base, functionality, security, and reliability. The process of entering into a
licensing agreement with a company typically involves lengthy negotiations. As
a result of our long sales cycle, which in the past has generally ranged from
six months to 18 months, it is difficult for us to predict the quarter in which
a particular prospect might sign a license agreement.
Because our technology must be integrated into the products and services of our
licensees, there will be significant delay between our licensing the software
and our licensees' commercial deployment of their products and services, which
will delay our receipt of transaction fee revenue.
Our success depends upon the deployment of our technology by a potential
licensee in the use and sale of digital content. Our licensees undertake a
lengthy process of integrating our technology into their existing systems or a
new system. Until a licensee deploys our technology, we do not receive
transaction fees from that licensee.
We expect that the period between entering into a licensing arrangement and
the time our licensee commercially deploys applications based on our Commerce
software will be lengthy and will vary, which makes it difficult for us to
predict when revenue will be recognized.
Our Commerce software has only recently been used by our licensees in pilot
programs, making evaluation of our business and prospects difficult.
We began offering the general availability release of our Commerce software
in December 1998, and released version 1.2 in May 1999. Our licensees'
applications and services based on our Commerce software are in development or
have only been released for evaluation in very limited
9
<PAGE>
pilot programs. Our licensees have not yet commercially deployed their
applications or services. It is possible that we or our licensees may uncover
serious technical and other problems resulting in the delay or failure of the
commercial deployment of our licensees' implementation of our Commerce
software, including problems relating to security, the ability to support a
large user base, and interoperability of our software or the combination of our
software with our licensees' software. We may not successfully address any of
these problems and the failure to do so would seriously harm our business and
operating results.
Security breaches of our software and our licensees' software could result in
decreased demand for our technology by our licensees or their customers or in
litigation.
The secure transmission and trusted management of proprietary or
confidential information over the Internet are essential to establishing and
maintaining confidence in our Commerce software and the software and services
developed using our software. Without this confidence, potential or current
licensees may not use our technology and their customers may not trust and use
our licensees' products. Therefore, security concerns and security breaches of
our and our licensees' software could harm our business and operating results.
Advances in computer capabilities, new discoveries, or other developments could
result in a compromise or breach of the security technology, including
cryptography technology, that we and our licensees use to protect customer
digital content and transaction data. Security breaches could damage our
reputation and expose us to a risk of loss or litigation. Our insurance
policies have low coverage limits that may not be adequate to reimburse us for
losses caused by security breaches. We cannot guarantee that our security
measures will prevent security breaches.
Defects in our software and the software of our licensees could delay
deployment of our technology and reduce our revenues.
Defects or errors in current or future products could result in delayed or
failed deployment of our technology, lost revenues, or a delay in or failure to
achieve market acceptance, any of which could seriously harm our business and
operating results. Complex software products like ours often contain errors or
defects, including errors relating to security, particularly when first
introduced or when new versions or enhancements are released. Because this is a
system used for commerce, we believe the standards for reliability and
performance may be very high.
If our licensees' products and services contain errors or defects not
discovered in the process of development and pilot programs, it could seriously
undermine the perceived trust and security needed for a commercial system and
could delay or prevent market acceptance of digital commerce resulting in
serious harm to our business and operating results.
The deployment and use of our products expose us to substantial risks of
product liability claims because our products are expected to be used in
sensitive and valuable digital commerce transactions and because we require our
partners to comply with our specifications. Although our license agreements
typically contain provisions designed to limit our exposure to product
liability claims, it is possible that these limitations of liability provisions
may not be effective as a result of existing or future laws or unfavorable
judicial decisions. A product liability claim brought against us, even if not
successful, would likely be time consuming and costly to defend and could
significantly harm our business and operating results.
10
<PAGE>
If we are unable to continue obtaining third-party software and applications,
we could be forced to change our product offering or find alternative
suppliers, which could delay shipment of our product.
We integrate third-party software with our software. We would be seriously
harmed if the providers from which we license software ceased to deliver and
support reliable products, enhance their current products, or respond to
emerging industry standards. In addition, the third-party software may not
continue to be available to us on commercially reasonable terms or at all. The
loss of, or inability to maintain or obtain this software, could result in
shipment delays or reductions, or could force us to limit the features
available in our current or future product offerings. Either alternative could
seriously harm our business and operating results.
Year 2000 issues could force us to incur significant costs or cause our
customers to delay licensing of our products.
If our systems do not operate properly with date calculations involving the
year 2000 and subsequent dates, we could incur unanticipated expenses to remedy
any problems, which could seriously harm our business and operating results. We
may also experience reduced sales of our software and services as current or
potential customers reduce their budgets for enterprise software due to
increased expenditures on their own year 2000 compliance efforts. To the extent
our Commerce software is embedded with other companies' products that are not
year 2000 compliant, our reputation in the marketplace and use of our
technology by our partners could be harmed, both of which would harm our
business and operating results.
The market for digital rights management will be subject to rapid technological
change and new product introductions and enhancements that we may not be able
to address. We need to develop and introduce new products, technologies, and
services.
The market for digital rights management solutions is fragmented and marked
by rapid technological change, frequent new product introductions and
enhancements, uncertain product life cycles, and changes in customer demands.
To succeed, we must develop and introduce, in response to customer and market
demands, new releases of our Commerce software that offer features and
functionality that we do not currently provide. Any delays in our ability to
develop and release enhanced or new products could seriously harm our business
and operating results. In the past we have experienced delays in new product
releases, and we may experience similar delays in the future.
Our markets are highly competitive and we may not be able to compete
successfully against current or potential competitors, reducing our market
share and revenue growth.
Our markets are new, rapidly evolving, and highly competitive, and we expect
this competition to persist and intensify in the future. Our failure to
maintain and enhance our competitive position could reduce our market share and
cause our revenues to grow more slowly than anticipated or not at all. We
encounter current or potential competition from a number of sources, including:
. providers of secure digital distribution technology like AT&T, IBM,
Microsoft, Liquid Audio, Preview Systems, and Xerox;
. providers of hardware-based content metering and copy protection systems,
including Sony, Wave Systems, and the 4C Entity, comprised of IBM, Intel,
Matsushita, and Toshiba; and
11
<PAGE>
. operating system manufacturers, including Microsoft or Sun Microsystems,
that may develop or license digital rights management solutions for
inclusion in their operating systems.
Potential competitors may bundle their products or incorporate a digital
rights management component into existing products in a manner that discourages
users from purchasing our products. For example, we expect that future releases
of Microsoft's Windows operating system, which manages the programs on a
computer, will include components addressing digital rights management
functions. Furthermore, new competitors or alliances among competitors may
emerge and rapidly acquire significant market share. Our competitors may be
able to respond more quickly to new or emerging technologies and changes in
customer requirements than we do.
Some of our competitors have longer operating histories and significantly
greater financial, technical, marketing, and other resources than we do. Many
of these companies have more extensive customer bases and broader partner
relationships that they could leverage, including relationships with many of
our current and potential partners. These companies also have significantly
more established customer support and professional services organizations than
we do. In addition, these companies may adopt aggressive pricing policies. For
a more detailed description of our competitive position, including some of our
competitors and competitive products, please see "Business--Competition."
We and our licensees may be found to infringe proprietary rights of others,
resulting in litigation, redesign expenses, or costly licenses.
Digital rights management is an emerging field in which our competitors, may
obtain patents or other proprietary rights that would prevent, or limit or
interfere with, our, or our licensees', ability to make, use, or sell products.
Furthermore, companies in the software market are increasingly bringing suits
alleging infringement of their proprietary rights, particularly patent rights.
We and our licensees could incur substantial costs to defend or settle any
litigation, and intellectual property litigation could force us to do one or
more of the following:
. cease selling, incorporating, or using products or services that
incorporate the infringed intellectual property;
. obtain a license from the holder of the infringed intellectual property
right; or
. redesign products or services to avoid infringement.
Our licensees' products and services may be subject to a claim of patent
infringement independent of any infringement by our software.
In the past, we have received notices alleging potential infringement by us
of the proprietary rights of others. In January 1996, we received a letter from
an attorney representing E-Data Corporation containing an allegation of
infringement of a patent E-Data allegedly owns. We exchanged correspondence
with E-Data's attorneys ending in September 1996. We have not heard from any
representative of E-Data since that time. In November 1997, we received a
letter from representatives of TAU Systems Corporation informing us of two
patents held by TAU Systems. In the letter, the representatives stated their
opinion that our Commerce software contained various elements recited in the
two patents and requested that we discuss licensing the technology of these
patents. We responded to the letter stating that, although we had not
undertaken a detailed review of the patents, we were unaware of any of our
products having one of the elements required by the patent claims. We have not
received any further correspondence from TAU Systems. In May 1999,
12
<PAGE>
we received a letter from representatives of TechSearch LLC offering us a
license to a patent held by TechSearch. We have reviewed the patent and do not
believe that we need to obtain a license to this patent. In the future,
however, we or our licensees could be found to infringe upon the patent rights
of E-Data, TAU Systems, TechSearch, or other companies.
Protection of our intellectual property is limited and efforts to protect our
intellectual property may be inadequate, time consuming, and expensive.
Our success and ability to compete are substantially dependent on our
proprietary technology and trademarks, which we attempt to protect through a
combination of patent, copyright, trade secret, and trademark laws, as well as
confidentiality procedures and contractual provisions. These legal protections
afford only limited protection and may be time consuming and expensive.
Furthermore, despite our efforts, we may be unable to prevent third parties
from infringing upon or misappropriating our intellectual property. Also, our
competitors may independently develop similar, but not infringing, technology,
duplicate our products, or design around our patents or our other intellectual
property.
Our patent applications or trademark registrations may not be approved.
Moreover, even if approved, the resulting patents or trademarks may not provide
us with any competitive advantage or may be challenged by third parties. If
challenged, our patents might not be upheld or their claims could be narrowed.
Any litigation surrounding our rights could force us to divert important
financial and other resources away from our business operations. In addition,
we license our products internationally, and the laws of many countries do not
protect our proprietary rights as well as the laws of the United States.
To successfully license our product and grow our business, we must retain and
attract key personnel; competition for these personnel is intense.
Our success depends largely on the skills, experience, and performance of
the members of our senior management and other key personnel, including our
chairman of the board and chief executive officer, Victor Shear. None of our
senior management or other key personnel must remain employed for any specific
time period. In addition, we recently hired our executive vice chairman and
president and chief operating officer. If we lose one or more of these key
employees, our business and operating results could be significantly harmed. In
addition, our future success will depend largely on our ability to continue
attracting, integrating, and retaining highly skilled personnel. In addition,
competition for qualified sales and marketing personnel is intense. We may not
be able to hire enough qualified individuals in the future or in a timely
manner. New employees require extensive training and typically take at least
four to six months to achieve full productivity.
Failure to appropriately manage our growth and expansion could seriously harm
our business and operating results.
Our historical growth has placed, and any further growth is likely to
continue to place, a significant strain on our resources. Any failure to manage
growth effectively could seriously harm our business and operating results. We
have grown from 87 employees at December 31, 1997 to 144 employees at August
31, 1999. To be successful, we will need to implement additional management
information systems, improve our operating, administrative, financial and
accounting
13
<PAGE>
systems and controls, train new employees, and maintain close coordination
among our executive, engineering, accounting, finance, marketing, and
operations organizations.
Industry-Related Risks
Our revenues may not grow and our stock price may decline if digital music
commerce over the Internet does not develop.
We currently devote a significant portion of our time, resources, and
attention pursuing partnerships and business within the music industry. As a
result, if digital music commerce over the Internet does not develop, our
business and operating results will be significantly harmed. A number of
factors could delay or prevent the development of digital music commerce. These
factors include:
. music content providers' inability to attract significant music artists,
record labels, and recordings to be distributed in their format;
. lack of development and adoption of compression technology to facilitate
digital delivery of music or related information like music videos; and
. lack of development and adoption of consumer devices that are able to
play downloaded digital music.
We may not receive sufficient revenues to be successful and our stock price
will decline if use of the Internet for commercial distribution of digital
content is not widely accepted.
Acceptance and use of the Internet for commercial distribution of digital
content may not continue to develop at recent rates, and a sufficiently broad
base of consumers may not adopt, and continue to use, the Internet and other
online services as a medium for digital commerce. Because our transaction fees
are derived from digital commerce transactions, if digital commerce is not
accepted for any reason, our revenues would not grow sufficiently and our
business and operating results would be significantly harmed.
We depend on the widespread acceptance of commerce in digital information
over the Internet, through DVD, and other means. These methods for distribution
of digital information may not be commercially accepted for a number of
reasons, including:
. failure to develop the necessary infrastructure for communication of
digital information and for payment processing;
. failure to develop or deploy enabling technologies, including compression
or broadband technology necessary for distribution of particular digital
content over the Internet;
. reduced demand for paid digital content due to the widespread
availability of free content online and the ability to use and distribute
this content without restriction; and
. insufficient speed, access, and server reliability, as well as lengthy
download time for content.
If standards for digital rights management are not adopted, confusion among
content providers, distributors, and consumers may depress the level of digital
commerce, which would reduce our revenues.
If standards for digital rights management are not adopted or complied with,
content providers may delay distributing content until they are confident that
the technology by which the content is to be distributed will be commercially
accepted. Standards for the distribution of various digital content might not
develop or might be found to violate antitrust laws or fair use of copyright
policies. In
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<PAGE>
addition, the failure to develop a standard among device manufacturers may
affect the market for digital goods and services. As a result, consumers may
delay purchasing products and services that include our technology if they are
uncertain of commercial acceptance of the standards with which our technology
complies. Consequently, if a standard format for the secure delivery of content
on the Internet is not adopted, or if the standards are not compatible with our
digital rights management technology, our business and operating results would
likely be harmed.
We may face increased governmental regulation and legal uncertainties that
could increase our costs and provide a barrier to doing business.
Exports of software products utilizing encryption technology are generally
restricted by the United States and various foreign governments. Although we
have obtained approval to export our Commerce software, changes in export laws
and regulations may impose restrictions that affect our ability to distribute
products and services internationally, limiting our ability to gain revenue and
grow our business.
It is also possible that Congress or individual states could enact laws
regulating or taxing Internet commerce. In addition, several telecommunications
companies have petitioned the Federal Communications Commission to regulate
Internet service providers in a manner similar to long distance telephone
carriers and to impose access fees on these companies. Access fees, sales taxes
or any other taxes or fees could increase the cost of transmitting data over
the Internet and reduce the number or amount of transactions from which we get
our transaction fees.
Risks Related to this Offering
Our stock price may be particularly volatile and could decline substantially
because of the industry in which we compete.
The stock market in general has recently experienced extreme price and
volume fluctuations. In addition, the market prices of securities of technology
companies, particularly Internet-related companies, have been extremely
volatile, and have experienced fluctuations that have often been unrelated or
disproportionate to the operating performance of these companies. These broad
market fluctuations could adversely affect the market price of our common
stock. In addition, these fluctuations could lead to costly class action
litigation which could significantly harm our business and operating results.
Existing stockholders significantly influence us and could delay or prevent an
acquisition by a third party.
On completion of this offering, our executive officers, directors, their
affiliates, and other 5% stockholders will beneficially own, in the aggregate,
approximately 33.9% of our outstanding common stock, assuming no exercise of
the underwriters' over-allotment option and assuming that one of our existing
stockholders exercises in full its right to buy in this offering. We have
requested that the underwriters reserve up to 1,300,000 shares for sale at the
initial public offering price to current and potential customers, others with
whom we do business, existing stockholders, employees, and friends of
InterTrust. If our executive officers, directors, their affiliates, and other
5% stockholders purchase any of these shares in this offering from the
underwriters, their aggregate percentage ownership will
15
<PAGE>
increase. As a result, these stockholders will be able to significantly
influence all matters requiring stockholder approval, including the election of
directors and approval of significant corporate transactions, which could have
the effect of delaying or preventing a third party from acquiring control over
us. For information regarding the ownership of our outstanding stock by our
executive officers and directors and their affiliates, please see "Principal
Stockholders."
We have implemented anti-takeover provisions that could make it more difficult
to acquire us.
Our sixth amended and restated certificate of incorporation, our amended and
restated bylaws, and Delaware law contain provisions that could make it more
difficult for a third party to acquire us, even if its doing so would be
beneficial to our stockholders. These provisions include:
. authorizing the issuance of shares of undesignated preferred stock
without a vote of stockholders;
. prohibiting stockholder action by written consent; and
. limitations on stockholders' ability to call special stockholder
meetings.
We are also currently considering other anti-takeover measures, including a
stockholders' rights plan.
Substantial sales of our common stock could depress our stock price.
If our stockholders sell substantial amounts of our common stock in the
public market following this offering, the market price of our common stock
could fall. Based on shares outstanding as of August 31, 1999, upon completion
of this offering, we will have outstanding 37,961,011 shares of common stock.
Upon completion of this offering, 7,163,091 shares of common stock, including
the 6,500,000 shares being sold in this offering, will be eligible for sale in
the public market immediately, unless purchased by our affiliates or by some
participants in our directed share program who enter into lock up agreements.
Substantially all of our stockholders will be subject to agreements with the
underwriters or us that restrict their ability to transfer their stock for 180
days from the date of this prospectus. After these agreements expire, an
additional 27,144,146 shares will be eligible for sale in the public market.
As a new investor, you will incur substantial dilution as a result of this
offering and future equity issuances.
The initial public offering price is substantially higher than the book
value per share of our outstanding common stock. As a result, investors
purchasing common stock in this offering will incur immediate substantial
dilution of $12.90 per share. A warrant for up to 311,016 shares of our common
stock can no longer be exercised, and will be terminated, upon the initial
public offering of our common stock. If the exercisability of this warrant is
challenged and the warrant is found to be exercisable, there could be further
dilution to investors in this offering if the warrant is ultimately exercised.
In addition, we have issued options and a warrant to acquire common stock at
prices significantly below the initial public offering price. To the extent
outstanding options or the warrant are ultimately exercised, there will be
further dilution to investors in this offering. We have in the past and may in
the future issue equity securities to our partners. Any issuances to these
partners may cause further dilution to investors in this offering. If we issue
additional equity securities, stockholders may experience dilution, and the new
equity securities could have rights senior to those of existing holders of our
common stock.
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<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These statements relate
to future events or our future business or financial performance. In some
cases, you can identify forward-looking statements by terminology--for
instance, may, will, should, expect, plan, anticipate, believe, estimate,
predict, potential or continue, the negative of these terms, or other
comparable terminology. These statements are only predictions. Actual events or
results may differ materially. In evaluating these statements, you should
specifically consider various factors, including the risks outlined in the risk
factors section. These factors may cause our actual results to differ
materially from any forward-looking statement.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of the forward-
looking statements. We are under no duty to update any of the forward-looking
statements after the date of this prospectus to conform these statements to
actual results or to changes in our expectations.
USE OF PROCEEDS
Our net proceeds from the sale of the 6,500,000 shares of common stock we
are offering are estimated to be $95.6 million, at an assumed initial public
offering price of $16.00 per share and after deducting estimated underwriting
discounts and commissions and offering expenses payable by us. If the
underwriters' over-allotment option is exercised in full, we estimate that our
net proceeds will be approximately $110.1 million. We expect to use the net
proceeds for general corporate purposes, including working capital. A portion
of the net proceeds may also be used for the acquisition of businesses,
products and technologies that are complementary to ours. We have no current
agreements or commitments for acquisitions of complementary businesses,
products, or technologies. Pending these uses, we will invest the net proceeds
of this offering in investment grade and interest-bearing securities.
DIVIDEND POLICY
We have not paid any cash dividends since inception and do not currently
intend to pay any cash dividends.
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<PAGE>
CAPITALIZATION
The following table presents the following information:
. our actual capitalization as of June 30, 1999;
. our pro forma capitalization as of June 30, 1999, after giving effect to
the sale of 1,309,700 shares of series E preferred stock for
approximately $15.7 million in cash and the issuance of 83,333 shares of
series E preferred stock on the conversion of a $1.0 million promissory
note in July 1999, the exercise of warrants to purchase 21,692 shares of
common stock, and the conversion of all outstanding shares of preferred
stock and class B non-voting common stock into shares of common stock;
and
. our pro forma as adjusted capitalization as of June 30, 1999, to reflect
our receipt of the estimated net proceeds from our sale of 6,500,000
shares of common stock in this offering, at an assumed initial public
offering price of $16.00 per share and after deducting the estimated
underwriting discounts and commissions and offering expenses payable by
us, and the filing of a new certificate of incorporation after the
closing of this offering.
The number of shares outstanding excludes the following shares:
. 6,741,411 shares of common stock issuable upon the exercise of stock
options outstanding as of June 30, 1999 at a weighted average exercise
price of $1.91 per share;
. 138,124 shares of common stock available for issuance as of June 30, 1999
under our 1995 stock plan;
. 436,000 shares of common stock issuable upon exercise of stock options
granted between July 1, 1999 and October 13, 1999 at a weighted average
exercise price of $11.10 per share;
. 325,000 shares of common stock issuable upon the exercise of a warrant
outstanding as of September 9, 1999 at an exercise price of $14.00 per
share;
. 85,000 shares of common stock issued in connection with our purchase and
license of technology and related assets;
. 1,900,000 shares of common stock available for issuance under our 1999
equity incentive plan;
. 350,000 shares of common stock available for issuance under our 1999
employee stock purchase plan; and
. 350,000 shares of common stock available for issuance under our 1999 non-
employee directors option plan.
We intend to grant options to purchase 1,296,500 shares of common stock to
recently hired employees under our 1999 equity incentive plan at the same time
as this offering. Of these options, options to purchase 346,500 shares of
common stock will be at an exercise price equal to the initial public offering
price of the common stock and the remaining options to purchase 950,000 shares
of common stock, which includes an option to purchase 300,000 shares of common
stock to our new executive vice chairman and an option to purchase 500,000
shares of common stock to our new president and chief operating officer, will
be at an exercise price equal to 85% of the initial public offering price of
the common stock.
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<PAGE>
<TABLE>
<CAPTION>
June 30, 1999
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Convertible promissory note..................... $ 1,000 $ -- $ --
-------- -------- --------
Stockholders' equity:
Convertible preferred stock, 20,000,000 shares
authorized, 12,492,410 shares outstanding
actual; 20,000,000 shares authorized, no
shares outstanding pro forma; 10,000,000
shares authorized, no shares outstanding pro
forma as adjusted............................ 12 -- --
Class A voting common stock, 50,000,000 shares
authorized, 15,003,082 shares outstanding
actual; 50,000,000 shares authorized,
31,251,085 shares outstanding pro forma;
120,000,000 shares authorized, 37,751,085
shares outstanding pro forma as adjusted...... 15 31 38
Class B non-voting common stock, 20,000,000
shares authorized, 2,340,868 shares
outstanding actual; 20,000,000 shares
authorized, no shares outstanding pro forma;
no shares authorized, no shares outstanding
pro forma as adjusted......................... 2 -- --
Additional paid-in capital...................... 65,801 82,557 178,120
Deferred stock compensation..................... (4,078) (4,078) (4,078)
Notes receivable from stockholders.............. (236) (236) (236)
Accumulated deficit............................. (56,871) (56,871) (56,871)
-------- -------- --------
Total stockholders' equity...................... 4,645 21,403 116,973
-------- -------- --------
Total capitalization........................... $ 5,645 $ 21,403 $116,973
======== ======== ========
</TABLE>
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<PAGE>
DILUTION
Our pro forma net tangible book value as of June 30, 1999 was $21.4 million,
or approximately $0.68 per share. Net tangible book value per share represents
the amount of stockholders' equity, less intangible assets, divided by
31,251,085 shares of common stock outstanding after giving effect to the
following transactions:
. the sale of 1,309,700 shares of series E preferred stock for
approximately $15.7 million in cash and the issuance of 83,333 shares of
series E preferred stock on the conversion of a $1.0 million promissory
note in July 1999;
. the exercise of warrants to purchase 21,692 shares of common stock; and
. the conversion of all outstanding shares of preferred stock and class B
non-voting common stock into shares of common stock upon completion of
this offering.
Net tangible book value dilution per share to new investors represents the
difference between the initial public offering price and the net tangible book
value per share immediately after completion of this offering. Our net tangible
book value as of June 30, 1999 would have been $117.0 million or $3.10 per
share after giving effect to the sale of shares of our common stock in this
offering less estimated discounts, commissions and expenses. This amount
represents an immediate increase in net tangible book value to existing
stockholders and an immediate dilution in net tangible book value to purchasers
of common stock in the offering, as illustrated in the following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................. $16.00
Pro forma net tangible book value per share as of June 30,
1999.......................................................... $ 0.68
Increase per share attributable to new investors............... 2.42
------
Pro forma net tangible book value per share after the offering... 3.10
------
Dilution per share to new investors.............................. $12.90
======
</TABLE>
The following table presents as of June 30, 1999, on the pro forma basis
described above, the differences between the existing stockholders and the
purchasers of common stock in this offering relating to the number of shares
purchased from us, the total consideration paid to us and the average price per
share paid to us:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ ------------------- Price Per
Number Percent Amount Percent Share
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders.......... 31,251,085 82.8% $77,960,000 42.8% $2.49
New investors ................. 6,500,000 17.2 104,000,000 57.2 $16.00
---------- ----- ----------- -----
Totals....................... 37,751,085 100.0% 181,960,000 100.0%
========== ===== =========== =====
</TABLE>
As of June 30, 1999, there were outstanding options to purchase a total of
6,741,411 shares of common stock at a weighted average exercise price of $1.91
per share. In addition, as of September 9, 1999, there was an outstanding
warrant to purchase 325,000 shares of common stock at an exercise price of
$14.00 per share. Between July 1, 1999 and October 13, 1999, we issued options
to purchase 436,000 shares of common stock at a weighted average exercise price
of $11.10 per
20
<PAGE>
share. To the extent these outstanding options or this warrant are exercised,
there will be further dilution to new investors. We also issued 85,000 shares
of common stock in October 1999 in exchange for technology and related assets
we purchased and licensed. We intend to grant options to purchase
1,296,500 shares of common stock to recently hired employees under our 1999
equity incentive plan at the same time as this offering. Of the options,
options to purchase 346,500 shares of common stock will be at an exercise price
equal to the initial public offering price of the common stock and the
remaining options to purchase 950,000 shares of common stock, which includes an
option to purchase 300,000 shares of common stock to our new executive vice
chairman and an option to purchase 500,000 shares of common stock to our new
president and chief operating officer, will be at an exercise price equal to
85% of the initial public offering price of the common stock.
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with, and are qualified by reference to, the consolidated financial
statements and related notes and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" appearing elsewhere in this
prospectus. The consolidated statements of operations data for the years ended
December 31, 1996, 1997 and 1998, and the consolidated balance sheet data at
December 31, 1997 and 1998 are derived from our consolidated financial
statements, which have been audited by Ernst & Young LLP, independent auditors,
and are included elsewhere in this prospectus. The consolidated statements of
operations data for the years ended December 31, 1994 and 1995, and the
consolidated balance sheet data at December 31, 1994, 1995 and 1996 are derived
from our consolidated financial statements not included in this prospectus,
which have been audited by Ernst & Young LLP, independent auditors. The
consolidated statements of operations data for the six months ended June 30,
1998 and 1999 and the consolidated balance sheet data at June 30, 1999 are
derived from unaudited consolidated financial statements included elsewhere in
this prospectus and, in the opinion of our management, include all adjustments,
consisting only of normal recurring adjustments, that are necessary for a fair
presentation of the results of operations for these periods. The historical
results are not necessarily indicative of future results.
<TABLE>
<CAPTION>
Six Months
Years Ended December 31, Ended June 30,
--------------------------------------------- -----------------
1994 1995 1996 1997 1998 1998 1999
------- ------- ------- -------- -------- ------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statements
of Operations Data:
Revenues:
Licenses............... $ 850 $ -- $ -- $ 1,000 $ -- $ -- $ 309
Software support and
training services..... -- -- 25 100 152 50 177
------- ------- ------- -------- -------- ------- --------
Total revenues....... 850 -- 25 1,100 152 50 486
Cost of revenues:
Licenses............... -- -- -- -- -- -- 42
Software support and
training services..... -- -- 5 102 191 84 208
------- ------- ------- -------- -------- ------- --------
Total cost of
revenues............ -- -- 5 102 191 84 250
------- ------- ------- -------- -------- ------- --------
Gross profit (loss)..... 850 -- 20 998 (39) (34) 236
Operating costs and
expenses:
Research and
development........... 1,469 2,620 4,852 8,287 13,041 6,358 7,088
Sales and marketing.... -- -- 1,573 2,717 3,870 1,902 2,449
General and
administrative........ 930 803 1,735 1,932 2,717 1,075 2,117
Amortization of
deferred stock
compensation.......... -- -- -- -- -- -- 195
------- ------- ------- -------- -------- ------- --------
Total operating costs
and expenses........ 2,399 3,423 8,160 12,936 19,628 9,335 11,849
------- ------- ------- -------- -------- ------- --------
Loss from operations.... (1,549) (3,423) (8,140) (11,938) (19,667) (9,369) (11,613)
Interest income
(expense), net......... (39) (160) 180 229 5 (9) 202
------- ------- ------- -------- -------- ------- --------
Net loss................ $(1,588) $(3,583) $(7,960) $(11,709) $(19,662) $(9,378) $(11,411)
======= ======= ======= ======== ======== ======= ========
Basic and diluted net
loss per share......... $ (0.16) $ (0.35) $ (0.67) $ (0.86) $ (1.41) $ (0.68) $ (0.75)
======= ======= ======= ======== ======== ======= ========
Shares used in computing
basic and diluted net
loss per share......... 9,645 10,223 11,913 13,639 13,966 13,777 15,307
======= ======= ======= ======== ======== ======= ========
Pro forma basic and
diluted net loss per
share.................. $ (0.91) $ (0.43)
======== ========
Shares used in computing
pro forma basic and
diluted net loss per
share.................. 21,688 26,808
======== ========
</TABLE>
<TABLE>
<CAPTION>
December 31,
------------------------------------- June 30,
1994 1995 1996 1997 1998 1999
------ ------ ------ ------ ------ --------
Consolidated Balance Sheet
Data: (in thousands)
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents..... $ 9 $ 386 $8,359 $1,884 $5,575 $15,295
Working capital (deficit)..... (1,319) (4,590) 7,561 607 4,939 11,970
Total assets.................. 194 603 9,076 3,111 8,280 17,020
Total stockholders' equity
(deficit).................... (1,148) (4,387) 6,708 (847) (2,014) 4,645
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We have developed a general purpose digital rights management, or DRM,
platform to serve as a foundation for providers of digital information,
technology, and commerce services to participate in a global e-commerce system.
InterTrust was formed and incorporated in January 1990. From inception through
1998, our efforts were principally devoted to research and development, raising
capital, recruiting personnel, and establishing licensing relationships. As a
result, we were considered a development stage enterprise during this period.
We shipped the general availability version of our Commerce software at the end
of December 1998, and some of our partners are conducting or are about to
conduct pilot programs using this software.
We license our DRM platform to companies to build digital commerce services
and applications. Our goal is to license to content, technology, and commerce
services partners to achieve widespread dissemination of our technology, an
expanding consumer base, and broad participation by digital information
providers. We currently derive all of our revenues from initial license fees
and associated software support and training services. Our license agreements
also generally require our partners to pay a transaction fee that is a
percentage of amounts paid by users or charged by our partners in commercial
transactions and services that use our technology, and for sales of products
incorporating our technology. Our license agreements relating to uses of our
technology within enterprises for privately managing proprietary data may
require a per-user fee. Within the next several years, we anticipate that our
revenues will be derived primarily from transaction fees and, to a
significantly lesser extent, from initial license fees and software support and
training services fees. However, we do not expect to receive any transaction
fees in 1999. Any future transaction fees are dependent on the success of our
licensees and their customers in commercially deploying services and
applications.
We are targeting relationships that will establish our DRM platform in
several large markets, including entertainment, business information, and
publishing. To date, a significant part of our licensing efforts has been
focused on adoption of our technology by the music industry as we believe it
will be an early implementer of DRM technology. We believe that, if our general
purpose platform is adopted in the music market, we will be positioned to have
our platform adopted in additional entertainment markets, including games,
audio books, and video, and other markets, including business information and
publications.
We have three basic types of license agreements: commerce service licenses,
business licenses, and applications licenses. These agreements provide
different rights and technology depending on the commercial plans of our
partners. Initial license fees received from these agreements may vary in
amount depending on factors such as partner commitments, scope of the license
as it relates to commercial markets, territory, and term of agreement. Examples
of partner commitments include deploying licensed products within a specified
time frame, exclusively using portions of our software, and using and publicly
promoting us as the partner's preferred digital rights management technology.
We have in the past decided, and may in the future decide, to reduce or
eliminate initial license fees based on these factors. We do not believe that
we can determine the amount of foregone revenue due to reduced or eliminated
license fees with any reliable degree of certainty. Our license fees are
23
<PAGE>
negotiated based on the terms and conditions of each individual agreement and
take into account the scope of the license, the term, and the other commitments
made by our partners that provide strategic value to us. In addition, we have
entered into a limited number of license agreements which have varying license
scopes and terms and which do not provide adequate comparable data to determine
the amount of foregone revenue. In connection with our strategy to promote
widespread deployment of our software, through June 30, 1999, we have on one
occasion received an initial license fee for our Commerce software in the form
of a minority equity position in the licensee. The value of the license fee was
determined based on the estimated fair value of the underlying equity
securities received. In the future, we may enter into other equity payment
arrangements.
Licenses of our Commerce software generally require the payment of an initial
license fee. Initial license revenue, net of any discounts granted, is
recognized upon execution of a license agreement and delivery of our software
if we have no remaining obligations relating to development, upgrades, new
releases, or other future deliverables, if the license fee is fixed or
determinable, and if collection of the fee is probable. Our license agreements
generally include the right to obtain access to upgrades and new releases, on a
when and if available basis, for a specified period. Under these circumstances,
the license payments received, net of any discounts granted, in advance of
revenue recognition are deferred and recognized on a subscription basis over
the period of obligation beginning upon delivery of the licensed product. In
addition, under license agreements where we are obligated to provide a
specified upgrade and do not have vendor specific objective evidence of fair
value of the specified upgrade, all of the license revenue is deferred until
the specified upgrade has been delivered. Upon delivery of the specified
upgrade, license revenue is recognized using the subscription method. We began
recognizing revenue under some license agreements in January 1999, after
shipping the general availability version of our Commerce software at the end
of December 1998. At June 30, 1999, we had approximately $7.7 million of
deferred license revenue that will be recognized in future periods.
In May 1999, we received a license fee in the form of a minority equity
position in a non-public entity in exchange for a seven year technology
license. We received approximately 1.7 million shares of common stock of the
licensee, which we believe represents approximately 10% of the outstanding
shares of the licensee as of June 30, 1999. Because the entity is a recently
formed, privately-held company and we were unable to obtain sufficient evidence
of the fair value of the common stock of the entity, we did not record revenue
or deferred revenue from the license fee. We are obligated to provide
unspecified upgrades and new releases, on a when and if available basis, to the
licensee over a two year period under the agreement for additional fees. We are
not obligated to provide any funding to the licensee for the development of the
licensee's software.
For contracts entered into before 1998, we recognize revenue as the amounts
are earned under the related agreements, provided no significant obligations
exist and the related receivable is determined to be collectible, consistent
with Statement of Position 91-1, Software Revenue Recognition. Our license
revenues in 1994 and 1997 were derived from licenses of pre-commercial versions
of our software.
Our license agreements also require the payment of a transaction fee that is
a percentage of revenues received by our partners from transactions and
services that use our technology and sales of products incorporating our
technology. Transactions involving the use of our technology to conduct the
sale, lease, rental, or licensing of commercial content require the payment of
a transaction fee based on the amounts paid by users or charged by our partners
for selling or distributing the content.
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<PAGE>
Transactions involving the use of our technology for commercial services
generally require the payment of a transaction fee based on the amounts paid by
users or charged by our partners for the services. Transactions involving the
sale, lease, rental, or licensing of products incorporating our technology
generally require the payment of a transaction fee based on the amounts paid by
users or charged by our partners for the product. Our partners are required to
pay all amounts due for transaction fees within specified periods, depending on
the licensing arrangement. Our revenue recognition policy relating to
transaction fees is to recognize the revenue when the amounts due are known,
which will generally be in the quarter after the transaction. Prepaid
transaction fees are recorded as deferred revenue and will be recognized when
the related transactions occur. We have received $1.5 million in prepaid
transaction fees which are included in deferred revenue as of June 30, 1999.
Prepaid transaction fees may generally be offset against a portion of
transaction fee amounts due in any given quarter. To date, we have not
recognized any transaction fees from commercial transactions or services, or
sales of products.
Software support and training services, which typically include the right to
telephone and online support and customer training, are generally provided for
in the license agreements for an agreed-upon amount. Software support and
training service revenue is recognized over the period in which the services
are provided, generally two years. Some of our partners were utilizing pre-
commercial versions of our product in the development of their own solutions
and, as a result, were utilizing our software support and training services
before the shipment of the general availability version of our software.
Through the end of 1998, we were in the development stage and had a limited
number of licensees. Mitsubishi, a stockholder, accounted for 91% of total
revenues in 1997 and 40% of total revenues in the six months ended June 30,
1999. Reciprocal accounted for 100% of total revenues in 1996, 9% in 1997, 66%
in 1998, 100% in the six months ended June 30, 1998, and 24% in the six months
ended June 30, 1999. Bertelsmann accounted for 21% of total revenues in 1998.
Computacenter accounted for 13% of total revenues in the six months ended June
30, 1999. Our success depends on significantly increasing the number of
companies that license our technology and use it for the sale and management of
digital content and services.
In view of the rapidly changing nature of our industry and our new and
unproven business model, we believe that period-to-period comparisons of
revenues and operating results are not necessarily meaningful and should not be
relied upon as indications of future performance. In addition, our business
model is new and unproven and has not succeeded in generating sufficient
revenue to sustain or grow our business. We also operate in an intensely
competitive market for highly qualified technical, sales and marketing, and
management personnel and periodically make salary and other compensation
adjustments to retain and hire employees. We anticipate that our operating
expenses will increase in future quarters. We expect to incur additional losses
for at least the next several years. As a result, we will need to generate
significant additional revenue to achieve and maintain profitability. In
addition, we have limited and delayed insight on consumer trends and sales,
which makes prediction of our future revenues difficult.
Recent Developments
Based on our preliminary analysis, total revenues increased by $108,000,
from $254,000 in the second quarter of 1999 to $362,000 in the third quarter of
1999. Total revenues during the third
25
<PAGE>
quarter were comprised of $186,000 from license revenues and $176,000 from
software support and training service revenues. Increased revenues during the
third quarter resulted from license fees recognized under agreements with new
and existing partners.
Our net loss increased from ($6.2 million) in the second quarter of 1999 to
($8.0 million) in the third quarter of 1999. Higher operating expenses offset
slightly higher revenues in the third quarter. We increased operating expenses
as we continued to expand our organization in all operating areas.
We believe that the unaudited financial information for the third quarter of
1999 contains all adjustments necessary to present fairly the information
discussed above, and that the adjustments made consist only of normal recurring
adjustments.
In October 1999, we purchased audio decoding and rendering technology and
related assets and received a license to video technology from a third party,
in exchange for 85,000 shares of our common stock and $100,000 in cash. The
purchase price, which will be capitalized as an intangible asset, was valued at
approximately $1.3 million. We will amortize the value of the technology
acquired over its estimated useful life, which has not yet been determined.
Results of Operations
Six Months Ended June 30, 1998 and 1999
Revenues
Total revenues increased from approximately $50,000 in the six months ended
June 30, 1998 to approximately $486,000 in the six months ended June 30, 1999.
Software support and training services accounted for 100% of total revenues in
the six months ended June 30, 1998. License fees and software support and
training services accounted for 64% and 36% of total revenues in the six months
ended June 30, 1999.
No license revenue was recognized in the six months ended June 30, 1998, as
the general availability release of our Commerce software was not delivered to
our partners until December 1998. License revenues were approximately $309,000
for the six months ended June 30, 1999, and represent the amortization of
deferred license fees.
Revenue from software support and training services increased from $50,000
in the six months ended June 30, 1998 to approximately $177,000 in the six
months ended June 30, 1999. This increase was due to support and training fees
from additional partner licensing agreements.
Cost of Revenues
Cost of license revenue consists primarily of the costs incurred to
manufacture, package, and distribute our products and related documentation.
Cost of software support and training services consists primarily of the cost
of personnel, travel related expenditures, and training materials. These
expenditures are incurred both onsite at our facilities as well as offsite at
partner locations. Total cost of revenues was approximately $84,000 in the six
months ended June 30, 1998 and approximately $250,000 in the six months ended
June 30, 1999. The period-over-period increase resulted from increased costs
incurred to support our new partners.
26
<PAGE>
No costs were incurred for licenses during the six months ended June 30,
1998, as we did not deliver the general availability release of our Commerce
software to our partners until December 1998. Cost of license revenue was
approximately $42,000 during the six months ended June 30, 1999. Cost of
license revenue is expected to increase from the amortization of purchased
technology and will fluctuate from period to period depending on the number of
new partners, the number of software releases, and the amount of software
documentation provided to our partners during the period.
Cost of software support and training services revenue increased from
approximately $84,000 for the six months ended June 30, 1998 to approximately
$208,000 for the six months ended June 30, 1999. The increase in cost of
software support and training services revenue represents the increase in
support personnel time required to provide technical assistance and training to
a greater number of partners. Software support and training services costs are
expected to increase as we license to new partners and may vary significantly
from period to period depending on the support requirements of our partners.
Research and Development
Research and development expenses consist principally of salaries and
related personnel expenses, consultant fees, and the cost of software used in
product development. Research and development expenses are expensed to
operations as incurred. Research and development spending was approximately
$6.4 million for the six months ended June 30, 1998 and approximately
$7.1 million for the six months ended June 30, 1999. This increase was
primarily attributable to a $742,000 increase in personnel costs and consultant
services associated with both product research and development. This increase
was partially offset by a $213,000 decrease in the cost of software used in
product development. Cost of purchased software used in product development
includes the amortization of purchased software as well as the cost of software
expensed to research and development when the software is determined to have no
alternative future use. We believe that continued investment in research and
development is critical to attaining our strategic product objective and we
expect these expenses to increase significantly in absolute dollars in future
periods.
Sales and Marketing
Sales and marketing expenses consist of salaries and related expenses for
personnel engaged in direct sales, partner development, marketing, field
service support, consultant fees and advertising, promotional material, and
trade show exhibit expenses. Sales and marketing expenses increased from
approximately $1.9 million for the six months ended June 30, 1998 to
$2.4 million for the six months ended June 30, 1999. This increase reflects the
costs associated with increased selling efforts. The increase in these costs is
comprised primarily of $285,000 in increased personnel costs, $121,000 in
increased public relations and other promotional costs, and $75,000 in
increased travel costs. We expect sales and marketing expenses to increase in
absolute dollars due to planned growth of our sales and partner development
organizations, including the establishment of additional offices in domestic
and international locales, and aggressive implementation of advertising and
promotional programs.
General and Administrative
General and administrative expenses consist primarily of salaries and
related expenses for executive, legal, accounting and administrative personnel,
professional service fees, and general corporate expenses. General and
administrative expenses increased from approximately $1.1 million for
27
<PAGE>
the six months ended June 30, 1998 to $2.1 million for the six months ended
June 30, 1999. This increase was primarily attributable to a $631,000 increase
in personnel costs, as a result of increased legal and accounting personnel,
and a $103,000 increase in costs associated with the filing of patent
applications, including the use of outside patent counsel. Expenses associated
with the preparation of new patent applications, patent application processing
fees, and attorneys costs associated with patent applications and maintaining
our patent portfolio totaled $88,000 for the six months ended June 30, 1998,
and $191,000 for the six months ended June 30, 1999. We expect general and
administrative expenses to increase in absolute dollars as we add personnel,
incur additional costs to support continued growth, and implement additional
operating systems necessary to support a public company.
Deferred Stock Compensation
We recorded total deferred stock compensation of approximately $4.3 million
in the six months ended June 30, 1999. This amount represents the difference
between the exercise prices of employee stock options and what were considered
to be the fair values of our common stock on the dates of the grants. We are
amortizing this amount over the vesting periods of the applicable options using
a graded vesting method. We recognized approximately $195,000 of related
compensation expense during the six months ended June 30, 1999. The total
charges to be recognized in future periods from amortization of deferred stock
compensation recorded as of June 30, 1999 are anticipated to be approximately
$1.1 million for the remaining six months of 1999, $1.6 million for 2000,
$835,000 for 2001, $410,000 for 2002, and $110,000 for 2003. These charges will
increase as a result of the issuance of options to purchase 950,000 shares of
our common stock at 85% of the initial public offering price of our common
stock at the same time as this offering.
Interest Income (Expense), Net
Interest income (expense), net, consists primarily of interest earned on
cash and cash equivalents offset by interest expense incurred on convertible
promissory notes. We recognized no interest income in the six months ended June
30, 1998 and approximately $202,000 of interest income in the six months ended
June 30, 1999. The increase in interest income results primarily from increases
in the amount of interest-bearing investments outstanding. We recorded $9,000
in interest expense in the six months ended June 30, 1998 related to
convertible promissory notes that were subsequently converted to preferred
stock. We did not incur interest expense in the six months ended June 30, 1999.
Years Ended December 31, 1996, 1997 and 1998
Revenues
Total revenues were approximately $25,000 in 1996, $1.1 million in 1997, and
$152,000 in 1998. The increase in total revenues in 1997 was primarily related
to $1.0 million of revenue recognized from a limited term license.
Software support and training services accounted for 100% of total revenues
in the 1996, 9% of total revenues in 1997 and 100% of total revenues in 1998.
Software support and training services revenues increased from approximately
$25,000 in 1996, to approximately $100,000 in 1997, and to approximately
$152,000 in 1998. The increase from 1996 to 1997 was attributable to the
recognition of only six months of support and training fees from one partner in
1996 to a full year of fees in
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<PAGE>
1997. The increase from 1997 to 1998 was due to support and training fees from
additional partner licensing agreements.
Cost of Revenues
Total cost of revenues was related entirely to software support and training
services in 1996, 1997, and 1998. Total cost of revenues increased from
approximately $5,000 in 1996, to approximately $102,000 in 1997, and to
approximately $191,000 in 1998. The increase in the cost of software support
and training services revenue represents the increase in support personnel time
required to provide technical assistance and training to a greater number of
our partners.
Research and Development
Research and development expenses increased from approximately $4.9 million
in 1996 to approximately $8.3 million in 1997, and increased 57.4% to
approximately $13.0 million in 1998. These increases were primarily
attributable to increases in personnel costs and consultant services associated
with product research and development of $2.9 million in 1997 and $3.7 million
in 1998.
Sales and Marketing
Sales and marketing expenses increased from approximately $1.6 million in
1996 to approximately $2.7 million in 1997, and increased 42.4% to
approximately $3.9 million in 1998. The increase in 1997 was primarily
attributable to an $898,000 increase in personnel costs and consultant services
associated with increased selling efforts. The increase in 1998 was primarily
attributable to a $408,000 increase in personnel costs and consultant services
associated with increased selling efforts, and a $176,000 increase in public
relations costs and other promotional expenses.
General and Administrative
General and administrative expenses increased from approximately $1.7
million in 1996 to approximately $1.9 million in 1997, and increased 40.6% to
approximately $2.7 million in 1998. These increases were primarily attributable
to increases in legal and accounting personnel that resulted in increases in
personnel costs of $53,000 in 1997 and $371,000 in 1998. Expenses associated
with the preparation of new patent applications, patent application processing
fees, and attorneys costs associated with patent applications and maintaining
our patent portfolio totaled $312,000 for the year ended December 31, 1996,
$334,000 for the year ended December 31, 1997, and $237,000 for the year ended
December 31, 1998.
Interest Income (Expense), Net
Interest income (expense), net, was primarily derived from interest earned
on cash and cash equivalents offset by interest expense incurred on convertible
promissory notes. Net interest income increased from approximately $180,000 in
1996, to approximately $229,000 in 1997, and decreased to approximately $5,000
in 1998. Interest income decreased from approximately $261,000 in 1996, to
approximately $229,000 in 1997, and to approximately $42,000 in 1998. The
change in interest income results primarily from changes in the amount and rate
of interest bearing investments
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<PAGE>
outstanding during each period. We recorded $81,000 of interest expense in 1996
and $37,000 of interest expense in 1998 related to two separate convertible
promissory notes.
Income Taxes
We have incurred net losses since inception for federal and state tax
purposes and have not recognized any tax provision or benefit. As of December
31, 1998, we had approximately $36.2 million of federal and $4.3 million of
state net operating loss carryforwards to offset against future taxable income.
We also had $1.1 million of federal research and development tax credit
carryforwards. The related deferred tax assets have been fully reserved through
June 30, 1999. The federal net operating loss and tax credit carryforwards
expire in years 2007 through 2018, if not used. The state net operating loss
carryforwards expire in years 1999 through 2003, if not used. Utilization of
net operating losses and credits may be subject to a substantial annual
limitation due to the change in ownership provisions of the Internal Revenue
Code of 1986 and similar state provisions. The annual limitation may result in
the expiration of net operating losses and credits before utilization.
Quarterly Results of Operations
The following table contains, for the periods presented, selected data from
our consolidated statements of operations. The data has been derived from our
unaudited consolidated financial statements, and, in the opinion of our
management, include all adjustments, consisting only of normal recurring
adjustments, that are necessary for a fair presentation of the results of
operations for these periods. This unaudited information should be read in
conjunction with the consolidated financial statements and notes included
elsewhere in this prospectus. The operating results in any quarter are not
necessarily indicative of the results that may be expected for any future
period. We have incurred losses in each quarter since inception and expect to
continue to incur losses through at least the next several years.
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------------
Mar. June Sept. Dec. Mar. June
31, 30, 30, 31, 31, 30,
1998 1998 1998 1998 1999 1999
------- ------- ------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Licenses............... $ -- $ -- $ -- $ -- $ 167 $ 142
Software support and
training services..... 25 25 25 77 65 112
------- ------- ------- ------- ------- -------
Total revenues....... 25 25 25 77 232 254
Cost of revenues:
Licenses............... -- -- -- -- 32 10
Software support and
training services..... 40 44 50 57 87 121
------- ------- ------- ------- ------- -------
Total cost of
revenues............ 40 44 50 57 119 131
------- ------- ------- ------- ------- -------
Gross profit (loss)...... (15) (19) (25) 20 113 123
Operating costs and
expenses:
Research and
development........... 3,215 3,143 3,299 3,384 3,436 3,652
Sales and marketing.... 1,004 898 956 1,012 1,134 1,315
General and
administrative........ 554 521 683 959 759 1,358
Amortization of
deferred stock
compensation.......... -- -- -- -- 27 168
------- ------- ------- ------- ------- -------
Total operating costs
and expenses........ 4,773 4,562 4,938 5,355 5,356 6,493
------- ------- ------- ------- ------- -------
Loss from operations..... (4,788) (4,581) (4,963) (5,335) (5,243) (6,370)
Interest income
(expense), net.......... -- (9) (2) 16 42 160
------- ------- ------- ------- ------- -------
Net loss................. $(4,788) $(4,590) $(4,965) $(5,319) $(5,201) $(6,210)
======= ======= ======= ======= ======= =======
</TABLE>
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We began recognizing revenue on a subscription basis under a number of
license agreements in January 1999, after shipping the general availability
version of our product at the end of December 1998. The increase in software
support and training services revenue beginning in the quarter ended December
31, 1998 was the result of training services associated with new partner
agreements. Software support and training services revenue in the quarter ended
December 31, 1998 also included a one-time support fee related to a limited
term license. Quarter over quarter increases in the cost of software support
and training services reflect the increased effort of engineering personnel to
provide support services to our partners. During the quarter ended June 30,
1998, we reduced the amount of employee travel, limited the amount of hiring,
and reduced the number of consultants to InterTrust with the intention of
managing cash flow. As a result of these efforts, our operating costs and
expenses declined in all departments during the quarter ended June 30, 1998.
Overall increases in research and development spending since the quarter ended
March 31, 1998 are primarily attributable to increased headcount and spending
on software tools used in the development of our products. The decrease in
sales and marketing spending in the quarter ended June 30, 1998 also reflects a
reduction in marketing personnel. Increases in sales and marketing expenses
beginning in the quarter ended September 30, 1998 reflect additional headcount
as well as increased expenses for travel, trade shows, public relations, and
other promotional costs. General and administrative expenses generally
increased quarter over quarter beginning in the quarter ended September 30,
1998, primarily as a result of increased legal and accounting personnel and
costs associated with patent prosecution including filing and translation fees
and the use of outside patent counsel. General and administrative expenses in
the quarter ended December 31, 1998 also included higher than normal charges
for executive recruiting commissions, charges related to the writedown of
abandoned computer equipment, and higher building maintenance expenses.
We anticipate that research and development, sales and marketing, and
general and administrative expenses will increase in absolute dollars as a
result of new hires and related personnel costs. Sales and marketing spending
is expected to increase as a result of our spending on branding, trade shows,
advertising, and promotion. Beginning in the quarter ending December 31, 1999,
we also expect to incur increases in our quarterly operating costs and expenses
of approximately $260,000 as a result of the new facility lease we entered into
in July 1999.
We expect our revenues to vary. If our revenue levels fall below our
expectations, our net loss will increase because only a small portion of our
expenses varies with our revenues. In the future, our operating results may
fall below the expectations of securities analysts and investors. If this
occurs, the trading price of our common stock would likely decline.
Liquidity and Capital Resources
We have funded our cash requirements primarily through private placements of
equity securities. Through June 30, 1999, we had raised approximately $61.2
million through equity financings. In July 1999, we raised approximately $15.7
million through the sale of preferred stock.
Net cash used in operating activities totaled $14.1 million in 1998 and $8.8
million in the six months ended June 30, 1999. The $14.1 million of cash used
in 1998 is primarily attributable to the net loss of $19.7 million and an
increase in accounts receivable of $1.5 million, offset by an increase of $6.1
million in deferred revenue. The use of cash in the six months ended June 30,
1999 was
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primarily attributable to a net loss in the period of $11.4 million offset by a
decrease in accounts receivable of $1.1 million and increases in accounts
payable, accrued liabilities and deferred revenue.
Through June 30, 1999, our investing activities have consisted primarily of
capital expenditures totaling $509,000 in 1998 and $210,000 in the six months
ended June 30, 1999. Capital acquisitions have been principally comprised of
computer equipment and software used to support our product development and
growing employee base. Although to date our requirements for capital
expenditures have been moderate, we anticipate a substantial increase in
capital expenditures and lease commitments consistent with anticipated growth
in operations, infrastructure, and personnel.
Net cash provided by financing activities totaled $18.3 million in 1998 and
$18.8 million in the six months ended June 30, 1999. The proceeds in 1998 were
principally generated from the issuance of preferred stock totaling $14.8
million and the issuance of $3.0 million of convertible promissory notes. In
the six months ended June 30, 1999, proceeds from financing activities were
provided by the issuance of $14.7 million of preferred stock and approximately
$3.1 million from stock option and warrant exercises. During the six months
ended June 30, 1999, we also issued a convertible promissory note in the face
amount of $1.0 million which converted into preferred stock in July 1999.
At June 30, 1999, our principal source of liquidity included $15.3 million
in cash and cash equivalents. We believe that the net proceeds of this
offering, together with our cash and cash equivalents and credit facilities
with our equipment vendors, will be sufficient to meet our working capital
needs for at least the next 12 months. From then on, we may require additional
funds to support our working capital requirements or for other purposes and may
seek to raise additional funds through public or private equity financing or
from other sources. Additional financing may not be available at all or, if
available, may not be obtainable on terms favorable to us. In addition, any
additional financing may be dilutive and new equity securities could have
rights senior to those of existing holders of our common stock. If we need to
raise funds and cannot do so on acceptable terms, we may not be able to respond
to competitive pressures or anticipated requirements or take advantage of
future opportunities.
Impact of Year 2000
Many currently installed computer systems and software products are coded to
accept or recognize only two digit entries in the date code field. These
systems and software products will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and/or software used by many companies and governmental agencies may
need to be upgraded to comply with these year 2000 requirements or risk system
failure or miscalculations causing disruptions of normal business activities.
Our software and associated tools were designed to be year 2000 compliant.
Our year 2000 plan currently in progress will determine whether or not our
products, internal systems, computer hardware and software, and the products of
our critical vendors and suppliers are year 2000 compliant. Our assessment plan
consists of:
. quality assurance testing of our internally developed proprietary
software;
. contacting third-party vendors and licensors of material hardware,
software, and services that are directly or indirectly related to the
delivery of our DRM platform to our partners;
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. contacting vendors of the third-party systems;
. assessing repair or replacement requirements;
. implementing repair or replacement; and
. creating contingency plans if there are year 2000 failures.
Based on product evaluations and quality assurance testing, we believe that
our products are year 2000 compliant. We have contacted our third-party vendors
that supply our core technology infrastructure and obtained statements from
them regarding their compliance with the year 2000 issue. We have also
conducted an inventory of our information technology hardware and software
systems and anticipate that any year 2000 non-compliant hardware or software
will be replaced before January 2000.
Costs
To date, we have spent an immaterial amount on year 2000 compliance issues
but expect to incur an additional $35,000 to $50,000 of expense in connection
with identifying, evaluating, and addressing year 2000 compliance issues. Most
of our expenses have related to, and are expected to continue to relate to, the
operating costs associated with time spent by employees and consultants in the
evaluation process and year 2000 compliance matters generally. These expenses,
if higher than anticipated, could significantly harm our business and operating
results.
Risks
We are not currently aware of any year 2000 compliance problems relating to
our systems that would significantly harm our business and operating results,
without taking into account our efforts to avoid or fix these problems. We
might discover year 2000 compliance problems in our systems that will require
significant upgrading or replacement. In addition, third-party software,
hardware, or services incorporated into our material systems might need to be
fixed or replaced, all of which could be time-consuming and expensive. The
failure on our part to fix or replace our proprietary software or third-party
software, hardware, or services on a timely basis could result in lost
revenues, increased operating costs, the loss of customers, and other business
interruptions, any of which could significantly harm our business and operating
results. Moreover, our failure to address year 2000 compliance adequately could
result in claims of mismanagement, misrepresentation, or breach of contract and
related litigation, which could be costly and time-consuming to defend.
In addition, governmental agencies, utility companies, Internet access
companies, third-party service providers, and others outside of our control
might not be year 2000 compliant. The failure by these entities to be year 2000
compliant could result in a systemic failure beyond our control, for example, a
prolonged Internet, telecommunications, or electrical failure. We believe the
primary business risks, in the event of these failures, would include:
. loss of telecommunication tools to support our partners;
. lost transaction revenues;
. increased operating costs; and
. claims of mismanagement, misrepresentation or breach of contract.
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<PAGE>
Contingency Plan
We have developed our year 2000 contingency plans. The results of our year
2000 testing and the responses received from third-party vendors and service
providers will be taken into account in determining the nature and extent of
our contingency plans.
Recent Accounting Pronouncements
We adopted Statement of Position, or SOP, 97-2, Software Revenue Recognition
and SOP 98-4, Deferral of the Effective Date of a Provision of 97-2, as of
January 1, 1998. SOP 97-2 and SOP 98-4 provide guidance for recognizing revenue
on software transactions and supersede SOP 98-1. The adoption of SOP 97-2 and
SOP 98-4 did not have a material impact on our operating results.
In December 1998, the American Institute of Certified Public Accountants
issued SOP 98-9, Modifications of SOP 97-2, Software Revenue Recognition, With
Respect to Certain Transactions. SOP 98-9 amends SOP 98-4 to extend the
deferral of the application of some passages provided by SOP 98-4 though fiscal
years beginning on or before March 15, 1999. All provisions of SOP 98-9 are
effective for transactions entered into in fiscal years beginning after March
15, 1999. We believe the adoption of SOP 98-9 will not have a material effect
on our operating results or financial condition.
In June 1998, the Financial Accounting Standards Board issued Statement on
Financial Accounting Standards, or SFAS, No. 133, Accounting for Derivative
Instruments and Hedging Activities, which is required to be adopted in years
beginning after June 15, 1999. To date, we have not used derivatives, and
management anticipates that the adoption of SFAS 133 will not have a
significant effect on our operating results or financial position.
Qualitative and Quantitative Disclosures about Market Risks
We develop products in the United States and license our products to
partners in North America, Europe, and Asia. As a result, our financial results
could be affected adversely by various factors, including foreign currency
exchange rates or weak economic conditions in foreign markets. Transaction
revenues from our European and Asian partners will be primarily denominated in
foreign currencies and translated generally on a monthly basis to United States
dollars to determine the amount of fees due to us. As a result, we could be
affected adversely by fluctuations in foreign currency exchange rates.
Our interest income is sensitive to changes in the general level of United
States interest rates, particularly since the majority of our investments are
in short-term instruments. Due to the nature of our short-term investments, we
have concluded that there is no material market risk exposure. Therefore, no
quantitative tabular disclosures are required. At December 31, 1998 and June
30, 1999, our cash and cash equivalents consisted primarily of demand deposits
and money market funds held by a large institution in the United States.
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BUSINESS
Overview
We have developed a general purpose digital rights management, or DRM,
platform to serve as a foundation for providers of digital information,
technology, and commerce services to participate in a global e-commerce system.
We provide our DRM platform as software and tools to licensees, which we call
partners. These partners intend to offer digital commerce services and
applications that collectively will form a global commerce system, which we
have branded as the MetaTrust Utility.
DRM technologies protect and manage the rights and interests in digital
information of artists, authors, producers, publishers, distributors, traders
and brokers, enterprises, governments and other institutions, and consumers.
The Internet and the music industry have dramatized the need for protection and
management of digital information. The very characteristics that make the
Internet ideal for distributing digital information also make it ideal for
pirating. DRM is needed by any industry that distributes information that can
be put into digital form.
Our DRM platform provides a foundation for people and organizations to
define rules for using digital information and building commercial models. Our
technology is designed to protect digital information, apply rules persistently
after information is distributed, and automate many of the commercial
consequences of using the information. Our general purpose DRM platform is
designed to manage a broad range of rights across digital information and media
types.
Our current partners include BMG Entertainment Storage Media, Computacenter,
Diamond Multimedia Systems, Matsushita Electric Industrial, Mediascience,
Mitsubishi Corporation, MusicMatch, National Westminster Bank, PublishOne,
Reciprocal, and Universal Music Group. We also have alliances with Adobe
Systems, Digital Theater Systems, Fraunhofer-Institut, Harris Corporation,
Portal Software, and Science Application Information Company. These partners,
including alliance partners, actively endorse or promote our products and
services through various sales and marketing activities, including press
releases and trade shows. Some of our partners are conducting, or are planning
to conduct, commercial trials, and have announced that their applications and
services will be commercially available in the MetaTrust Utility in 2000.
Industry Background
The Internet has emerged not only as the fastest growing communications
medium in history, but also as one of the most efficient distribution channels
for commerce. According to International Data Corporation, total worldwide
Internet commerce spending was $50.4 billion in 1998 and is estimated to grow
to $1.3 trillion in 2003. International Data Corporation further estimates that
worldwide Internet commerce spending per online buyer will grow from $1,635 in
1998 to $7,216 per year in 2003.
While most Internet commerce to date has involved the delivery of physical
goods like books and compact discs ordered online, the Internet is poised to
become a leading distribution channel for digital goods as well. Today, most
content is in, or can be easily put into, digital form. This content includes
music, videos, games, software, publications, business information, and images.
The Internet can be used to disseminate this digital information efficiently to
broad audiences without geographic boundaries, and can eliminate many of the
traditional costs associated with manufacturing, packaging, and distribution.
The use of the Internet for digital goods is being supported both by the
growing
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number of households and businesses connected to the Internet, and by
electronic devices other than the personal computer, such as set-top boxes,
portable music players, mobile phones, and other hand-held devices, all of
which are becoming connected to the Internet. In addition, downloading digital
content is becoming significantly easier with the emergence and adoption of
broadband technologies including digital subscriber lines and cable modems, and
enhanced compression technologies including MP3 for music and MPEG-4 for video.
The Internet will add to the existing channels for distributing digital goods
on physical media like compact discs and DVDs.
The characteristics that make the Internet ideal for distributing digital
goods also make it ideal for pirating and misusing them. Digital goods, if not
protected and managed, can be easily copied without any degradation in quality,
altered and defaced, and distributed with the touch of a button to a large
number of recipients. These threats are increased by advances in broadband and
compression technologies, wider uses of portable devices, and wider
availability of re-writeable compact disc and DVD devices. As the number of
users connected to the Internet and the amount of digital information
transmitted over the Internet increases, these users and this information
become more vulnerable to parties who wish to interfere with the integrity of
digital information and digital transactions.
Recent events in the music industry provide the most visible example of an
industry facing the problem of protecting and managing its rights related to
digital information. A technology called MP3 that compresses music with near-
compact disc quality has rapidly become recognized as a major threat to the
industry. With readily available MP3-enabled software, music can be copied from
compact discs into computers, compressed to under 10% of its former size,
redistributed, played, and even copied back onto a blank compact disc for
private use or pirated resale. Songs in the MP3 format can be moved from
personal computers to new portable consumer devices and can then be played
through headphones or stereo speakers. Every compact disc published and
distributed is at risk of being copied. Already, many popular titles have been
digitized in MP3 form multiple times across the Internet and a new channel of
direct MP3 distribution is emerging.
Digital rights management is needed across all content industries, including
music, video, games, software, publications, business information, and images,
and by all of the constituencies in these industries. These constituencies,
including artists, authors, producers, publishers, and distributors, are all
concerned about protecting and managing their rights in digital content. All
parties want to get paid. Artists and authors want to protect the integrity of
their works. Consumers want easy transparent access to good content but are
concerned about protecting their privacy. Producers, publishers, and
distributors want to structure and optimally manage their business models.
DRM applies to more than content industries. The Internet is becoming a
principal means for digital interaction among organizations and individuals. A
vast amount of data about organizations and individuals is digitized on
computers, sent over networks, and stored in electronic form. Much of this
information is confidential and proprietary, including trade secrets and supply
chain and product information. Some of this information is also personal in
nature, including financial and medical records. This information is gathered,
stored, and exchanged among many entities, including corporations, governments,
schools, hospitals, and individuals. These organizations and individuals need
to manage their digital rights in the flow of proprietary and personal
information, so that only the appropriate people can use the information. DRM
is also useful for protecting rights as these information flows become more
automated, in trading, brokering, regulatory compliance, and other industries.
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Current computing environments and security techniques are not designed to
provide sufficient protection and management of digital rights. Historically,
computers, networks, and operating systems were designed primarily for
creating, processing, and distributing information. Similarly, security
technologies evolved to protect computers and networks from the outside
environment and to protect information during a point-to-point transmission,
not to protect information and rights once information has been received and
properly accessed by a user. In commercial transactions in current computing
environments, information is generally stored and transactions are processed at
remote mainframes or servers, even when it is less efficient, because the
client and other parts of the environment do not provide adequate protection
and security. As a result, these security technologies either do not consider
an authorized user as a potential threat, or fail to provide sufficient
mechanisms to prevent the improper use of information. With digital commerce,
the threat comes not only from the outside--a hacker trying to break into the
protected computer or decrypt an encrypted transmission. The threat comes also
from the inside--a user may be authorized initially to access digital
information but performs an unauthorized act, such as making or distributing
copies. Moreover, the requirement for centralized transaction processing and
information storage is less efficient, harder to scale, and more constrained in
use than systems that distribute secure processing.
Current techniques for DRM that are built on these centralized security
approaches generally only provide secure digital distribution. For example,
these techniques generally lack the ability to persistently manage digital
information, especially when offline, and essentially allow only a limited
number of inflexible business relationships that are predetermined by the
technology provider. These techniques usually require online interaction, which
increases costs, limits consumer convenience, and makes some business models
uneconomical.
A new computing technology is required to address all of these concerns--one
that, when distributed over a vast array of computers and devices, consistently
protects and manages rights related to digital information and processes,
online and offline, wherever this information and these processes may occur.
Creators, publishers, distributors, service providers, governments and other
institutions, and users must have the ability both to create and associate
rights and rules that persistently apply to digital information and processes,
and to modify the rights and rules, if permitted, even after the information is
distributed. These rights and rules might represent information regarding
ownership, access, payment, promotion, warranty, privacy, and other elements of
commerce in information. When these rights and rules are based on a common
foundation, they can form a basis for an interoperable global system for
digital commerce.
InterTrust Solution
We have developed a general purpose DRM platform to serve as a foundation
for providers of digital information, technology, and commerce services to
participate in a global system for digital commerce. Protected information can
flow from party to party, as it would in normal commerce, and be managed
throughout its lifecycle in compliance with specified rules. Our platform
consists of:
. DRM Software and Technology--We license platform software and tools to
partners that build products and operate commerce services. Our
technology is designed to operate on the personal computers, devices, and
servers in this global system and to provide the capability to package
and publish protected information with rules for use. These rules are
designed to be flexible, and can be applied and changed dynamically,
enabling our partners to develop and
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program their business models easily. The rules are designed to be
persistently enforced wherever the content may travel.
. MetaTrust Utility Services--We maintain and administer the specifications
that are designed to ensure the interoperability, security, and
trustedness of the global digital commerce system being built by our
partners. This utility service enables our DRM platform to offer a
common, neutral basis for publishers, merchants, organizations,
consumers, and other participants to conduct business and exchange
protected information.
Our focus on providing DRM technology and MetaTrust Utility services allows
our partners to develop their own commercial models. They build the
applications and operate the commerce services themselves. A content provider
can establish a relationship with one or more of our partners and have its
content managed consistently as it flows throughout the entire system. As in
traditional commerce, a content provider can select several commerce service
providers and provide users with a choice of payment methods.
Our general purpose DRM platform is designed to have broad capabilities to
address the needs of all parties seeking to distribute and manage digital
goods. We believe our platform provides the following benefits:
. Robust Security--Our highly sophisticated use of multiple layers of
security and tamper-resistance techniques are designed to provide varying
levels of security depending on the commercial value and nature of
digital information consistent with the rights and interests of all
parties.
. Persistent Protection and Management--Our platform is designed to allow
content providers to protect persistently both the information itself and
the rules of use. Persistent protection means that these rules continue
to apply even after the information arrives, online or offline, each time
the information is accessed, and even when it may be forwarded to other
people.
. Flexible Business Models--Our platform is designed to allow content
providers to specify and establish their own commercial models with fully
programmable rules that manage the use of digital information. These
rules can be easily changed, even after content is distributed, for
example to permit promotional offers, to accommodate changing commercial
circumstances, or to automatically present differing offers under
differing circumstances. Our platform is also designed so that these
rules can also adjust themselves dynamically to each consumer's unique
identity characteristics and circumstances of access, for example,
student or senior citizen discounts, membership in affinity groups, or
employment at a specific corporation.
. Superdistribution--We believe content providers can take advantage of
superdistribution-- allowing and encouraging consumers to become
redistributors of content in the system. Superdistribution means that
users of content, if permitted by rules, can forward content to others,
with persistent application of rules and protection of content. Our
platform is designed to enable providers to get paid and users to act
naturally by forwarding content they like to their associates or friends.
If these parties are not already part of the digital commerce system,
they have an incentive to join so that they may use the content.
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. Multiple Content and Media Types--Content providers can use our platform
for multiple content types. Our platform is designed to permit
distributors to employ various means of digital distribution, including
compact discs, DVDs, the Internet, and broadband. Consumers may sign up
to use any one content type, like music, but then can use our client
software for other content or services in the MetaTrust Utility system.
Payment processors can use our technology both for digital goods
transactions and to process payments for physical goods sold
electronically.
. Efficient Transaction Processing--We believe processing partners can take
advantage of significant increases in efficiency, including offline
processing, immediate payment across all participants in the chain of
distribution, and automated application of rules. Our platform is
designed to securely store usage and payment transactions that take place
offline, accumulate them until a minimum threshold is met, for example 30
days or $50, and then automatically forward the stored transactions for
processing. This allows both micropayments and efficient collection of
usage information. In addition, as required by provider-supplied rules,
when processing these transactions, immediate payment can be made
throughout the distribution chain, eliminating multiple parties handling
payment.
. New Advertising Models--Today, advertising on the Internet is largely
limited to viewing banners and other promotional materials on a web page.
With our technology, we believe advertising can be managed and audited
locally on a user's machine every time the user sees the advertisement,
whether the user is on-line or off-line. Our platform is designed to
allow a rule to be applied to a brief product placement, for example, the
appearance of a car within a music video, so that the car company
promotes its products and pays for the promotion each time the car is
viewed. This feature, combined with our ability to operate offline and
securely store and later forward collected data, enables new cost-
effective ways for companies to price content and generate revenue from
advertising.
. Personalized Marketing--Our platform is designed so that marketing
organizations can use many different aspects of our platform to identify
and profile individual consumers and match content, offers, and ads to
specific users or class of users, subject to user consent and privacy
rights. Because our technology is designed to locally process ads and
promotions as easily as digital content, this automated personalization
can occur on the network or offline on the consumer's personal computer.
The MetaTrust Utility
We license our DRM platform as software and tools to partners to build
applications and operate services for electronic commerce. By offering
commercial products and services based on our specifications and MetaTrust
Utility services, our partners can collectively build a global digital commerce
system, which we have branded as the MetaTrust Utility. Our DRM platform is
designed to enable creators, publishers, distributors, service providers,
governments and other institutions, and users to persistently associate rights
and rules with digital information.
The user experience with the MetaTrust Utility will typically begin by
activating our client software, called the InterRights Point, which our
partners will either preinstall or distribute through a variety of means,
including digital download and optical disk distribution. The user will
activate the
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InterRights Point by establishing a relationship with one of our commerce
service partners. Users will provide basic identity and authentication
information in a largely automated process. Once initialized, the InterRights
Point is designed to interact with any of the services and content available in
the system, from any of our partners. The following diagram illustrates the
lifecycle of content commerce in the system.
Commerce Flow Example
Narrative Description of Graphic on p. 40 of Business Section
Graphic titled "Commerce Flow Example." In the upper right hand corner is a box
titled "Key" in which there are four symbols. The first is a sphere with three
arrows pointing to its center labeled "InterRights Point." The second is a cube
labeled "DigiBox container." The third is the symbol "$" labeled "Payment." The
fourth is the letter "i" inside a circle labeled "Usage information."
In the center is a cube labeled "Distributor." Above and to the right is a
picture of a piece of paper titled "Usage Rules." From the cube an arrow with a
cube in the middle points down towards a box labeled "User." Inside the box is
a human form, a sphere with three arrows meeting in its center, and a picture
of a computer monitor with an image, entitled "Agree to Rules," projecting from
the screen.
From the box an arrow with a sphere in the middle points to the right to a
picture of an electronic device entitled "Information Appliance."
From the box an arrow points to the left to a box entitled "Commerce services
provider." In the middle of the arrow is a web brower labeled "www" next to two
compact disks and a floppy disk. Inside the box there are two buildings and a
sphere with three arrows that meet in its center. The building on the left is
marked with the symbol "$" in a circle. The building on the right is marked
with the letter "i" in a circle.
Two arrows, one with the symbol "$" in the middle and one with the letter "i"
in the middle, both in clear cubes, point to a box titled "Publisher." Inside
the box is a human form, a sphere with three arrows meeting in its center and a
computer monitor. Pointing towards the sphere is a picture of a piece of paper
captioned "Usage rules" and a sphere with the caption "Digital information." An
arrow with a cube in the middle points back to the cube in the center of the
graphic.
. Packaging Content--With an application developed by one of our partners
using our DRM technology, system participants can be both creators and
consumers of digital information. Working from a personal computer, in
this example, a user creates digital information and, using an
InterRights Point, associates business rules with the information and
packages the information securely in a DigiBox container.
. Distributing Content--The information is disseminated in DigiBox
containers over networks, on optical disks, or by other means of
delivering digital information. The information can securely travel
through unsecure networks, because the information in a DigiBox container
is itself protected. Distributors, portals, and web sites can, as enabled
by the rules of the publisher, add additional rules for use or modify the
rules--for example, mark up price, make promotional offers, bundle the
content with other content, or establish frequent buyer programs.
Importantly, rules for use can be easily changed, even after content is
distributed.
. Using Content--A user can receive content in a DigiBox container, select
the content and set in motion a secure process. The InterRights Point
compares identity characteristics of the user or machine with the rules
that have been associated with the requested event, for example, listen
or view, and presents the appropriate offers. The event occurs only as
permitted by the
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rules. If the rules permit, protected content can be transferred to other
devices. Our technology, if present, will continue to manage the
information's use.
. Processing Transactions--The InterRights Point can process transactions
involving both payment and usage information, for example, special
surveys or information on interaction with an advertisement. These
transactions could be processed immediately, much like a credit card
event, or deferred, much like running up a tab, or any combination of
immediate and deferred processing, as specified by the rules. The
InterRights Point forwards the transactions in secure DigiBox containers
to our processing partners which ensure that everyone who is supposed to
get paid gets paid, that usage information is made available to agreed
upon parties, and that the privacy of the individual is protected.
Strategy
Our goal is to empower multiple providers of digital information,
technology, and commerce services to build a global system for digital commerce
based on our DRM platform. The key elements of our strategy are:
Expand Key Strategic Partnerships
We are focused on bringing into the MetaTrust Utility an optimal combination
of digital information, technology, and commerce service participants. Through
this focus we intend to create mutually-reinforcing widespread dissemination of
our technology, an expanding consumer base, and ever-broader participation by
information providers. We are targeting relationships that will establish our
DRM initially in several large markets, including entertainment, business
information, and publishing. We intend to leverage early success in any one
market to help encourage adoption and usage in other markets. We encourage
potential participants to enter into relationships with us, as well as with our
partners, in the following key areas:
Content--We intend to continue entering into direct relationships with
premier and emerging publishers, distributors, and packagers of content. We
have established strategic relationships with Universal Music Group and BMG
Entertainment Storage Media. In addition, we will encourage premier content
providers to participate in the MetaTrust Utility through our partners.
Technology--We will continue to target leading technology and device
companies that can build our technology into the infrastructure of several
industries, including computers, consumer electronics, the Internet, and
communications. We have established a strategic relationship with Diamond
Multimedia Systems to build our technology into portable music devices and
software players.
Commerce Services--We are targeting partners with trusted brands and
operations, including Mitsubishi Corporation and National Westminster Bank. We
believe that these partners' reputations, markets, and customer base will
facilitate user acceptance of the MetaTrust Utility.
By having a combination of content, technology, and commerce service
participants in multiple markets in the MetaTrust Utility, we would not depend
on any one partner, any specific commercial model, or any specific vertical
market to succeed.
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Promote Widespread InterRights Point Deployment
We have designed our client technology and our licensing structure to
achieve efficient and rapid deployment. Our technology is designed so that it
can be conveniently activated by consumers. It is also designed so that it can
be flexibly deployed by our partners through a variety of means, including
digital download, optical disk distribution, and pre-installation. We will also
work with our partners to develop business models that promote rapid
deployment, for example, superdistribution which allows users to drive
InterRights Point deployment through redistribution of content.
Leverage the MetaTrust Utility Model
We believe that our neutral utility model is fundamental to achieving
widespread adoption of our DRM platform. We believe partners are more likely to
participate in building a global commerce system if they perceive that the
provider of the foundational technology is unlikely to engage in commercial
models that directly compete with them. We intend to provide technology and
maintain policies needed for an interoperable, secure, and trusted foundation
for all participants in the MetaTrust Utility. Partners can take advantage of
the global interoperability and general purpose nature of this system to build
on the success of our other partners; as more partners and users participate in
the system, participation in the system becomes more efficient and valuable. In
addition, by structuring our compensation as a small share of the value of
goods and services flowing through the system, we align our interests with
those of our partners. From time to time, we may provide special assistance to
new ventures using our technology and may in return take limited equity
positions if we believe it will not compromise our neutrality. In addition, we
have developed and plan to develop further special technology and services to
assist our partners in promoting the use of the MetaTrust Utility in various
vertical markets.
Maintain Technology Lead
We believe we are the leader in DRM technology and intend to continue
advancing the state-of-the-art of DRM. We have attracted a group of computer
scientists in both our engineering team and in STARLab, our electronic commerce
research facility, to focus on a broad range of topics important to advancing
DRM. These include commerce language, streaming media, security, software
tamper resistance, secure processing hardware, and watermarking. We currently
have been issued 11 United States patents, and will continue to develop our
intellectual property in the fields of digital rights management and electronic
commerce.
Strategic Partners and Markets
We license our DRM technology to our partners to build digital commerce
services and applications. In addition, we intend to leverage our partners'
activities as they bring their own partners and customers into the MetaTrust
Utility. While we have received initial license fees from our partners, over
time we anticipate that our revenues will be derived primarily from transaction
fees from our partners' and their customers' commercial deployment of
applications and services.
We currently have four basic types of partnering arrangements: commerce
service licenses, business licenses, applications licenses, and alliance
agreements. These partners actively endorse and promote our products at
marketing events, including trade shows and conferences, as well as through
press releases. A summary of our primary relationships follows.
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Commerce Services
Our commerce service partners have broad rights to process and clear
transactions for the MetaTrust Utility, and to create and deploy applications.
They operate data centers, provide various clearinghouse services, and may
distribute applications or host application services. These partners are
actively focused on establishing relationships with multiple digital content,
enterprise, and government customers. Our current commerce service partners
collectively have the ability to provide services both in the United States and
internationally, with bases of operations in the United States, Europe, and
Asia-Pacific.
Mitsubishi--Japan-based Mitsubishi Corporation is one of the largest trading
companies in the world. Mitsubishi's license to our Commerce software allows it
to create financial and usage clearinghouses, develop software applications,
and act as a deployment manager. Mitsubishi is also one of our stockholders.
NatWest--National Westminster Bank Plc is one of the world's largest banks
and a leading processor of credit card transactions and multi-currency credit
card clearing. NatWest recently announced a digital commerce service called
Magex, which is based on our Commerce software. NatWest's license allows it to
create financial and usage clearinghouses, develop software applications, and
act as a deployment manager.
Reciprocal--Reciprocal, Inc. is a venture-backed company formed in 1996 by
SOFTBANK Services Group to provide DRM solutions and clearinghouse services.
Reciprocal's license with us allows it to create financial and usage
clearinghouses, develop software applications, and act as a deployment manager.
Reciprocal has recently made public announcements concerning its initiatives
based on our DRM technology in various vertical markets including music,
business information, and education information.
Samsung SDS--Samsung SDS, part of the Samsung Group, is Korea's leading
information services company. Samsung SDS's license to our Commerce software
allows it to create financial and usage clearinghouses, develop software, and
act as a deployment manager in Korea, for commercial and enterprise customers.
Business
We have licensed business partners to operate services in one or more
content or application markets. We intend to license additional business
partners, and also believe that many content companies will participate in the
MetaTrust Utility through our partners.
ASPSecure.com--ASPSecure.com Corporation was founded in August 1999 to
develop applications and services based on our DRM technology. ASPSecure.com's
license to our Commerce software allows it to create a usage clearinghouse and
software applications and services for the application service provider, or
ASP, market. We licensed our Commerce software to ASPSecure.com and received an
initial license fee in the form of a minority equity position in ASPSecure.com.
Bertelsmann--BMG Entertainment Storage Media, a unit of Bertelsmann AG, one
of the world's leading media companies with significant interests in all areas
of media, services BMG
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Entertainment music labels and other Bertelsmann companies, including Random
House, Inc. BMG Entertainment Storage Media's license to our Commerce software
enables it to develop applications and services in a wide range of vertical
markets including music, business information, software, and computer games.
PublishOne--PublishOne Inc. was founded in February 1999 to develop digital
publishing applications and services based on our DRM technology. PublishOne's
license to our Commerce software allows it to create a usage clearinghouse and
software applications and services for publishing. PublishOne's initial focus
will be on business information, but it also plans to have future activities in
other content areas, including education. We licensed our Commerce software to
PublishOne and received an initial license fee in the form of a minority equity
position in PublishOne.
Reuters--Reuters is one of the largest news and information groups in the
world. Reuters has announced trials with NatWest and is a strategic business
partner of Reciprocal, both of which are our commerce services partners.
Reuters is one of our stockholders.
Universal--Universal Music Group is the largest of the five major music
labels. Universal's license to our Commerce software allows it to create a
financial and usage clearinghouse, to develop software applications, and act as
a deployment manager, for various entertainment markets. Universal is one of
our stockholders.
Applications
Application partners are licensed to develop applications, embed our
technology into software or devices, or perform hosting integration and other
services for users of our DRM technology.
Computacenter--UK-based Computacenter Plc is one of the largest European
information technology providers. Computacenter's license to our Commerce
software allows it to develop a usage clearinghouse for enterprises and to
develop applications and services for enterprises and commercial customers. We
will also work with Computacenter to establish them as a center of excellence
authorized to provide training, support, system integration, and other
services.
Diamond--Diamond Multimedia Systems, Inc. is a multimedia and hardware
device company. It introduced the Rio, the first commercially available
portable player of music files in the MP3 format, in November 1998. Diamond has
licensed our Commerce application developer's kit and additional InterTrust DRM
technology to use with the Diamond Rio player, and to develop software
applications for distributing music in connection with Diamond's Rioport.com
web site.
Mediascience--Mediascience, Inc. developed and distributes the Sonique MP3
player, which is one of the leading MP3 music players. Mediascience licensed a
music player-related application developer's kit to enable Mediascience to
develop a software music player with DRM capabilities.
MEI--Matsushita Electric Industrial Co., Ltd. is one of the largest consumer
electronics companies in the world. MEI has licensed our Commerce ADK to
develop applications and services for electronic music distribution.
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MusicMatch--MusicMatch, Inc. was the first company to introduce an MP3
jukebox music player, which is still one of the most popular MP3 music players.
Its music portal is among the most popular MP3 music sites. MusicMatch licensed
a music player-related application developer's kit to enable MusicMatch to
develop a software music player with DRM capabilities.
Our Commerce Services, Business and Applications Partners and Potential Markets
Through the end of 1998, we were in the development stage and had a limited
number of licensees. Mitsubishi, a stockholder, accounted for 91% of total
revenues in 1997 and 40% of total revenues in the six months ended June 30,
1999. Reciprocal accounted for 100% of total revenues in 1996, 9% in 1997, 66%
in 1998, 100% in the six months ended June 30, 1998, and 24% in the six months
ended June 30, 1999. Bertelsmann accounted for 21% of total revenues in 1998.
Computacenter accounted for 13% of total revenues in the six months ended June
30, 1999. Our success depends on significantly increasing the number of
companies that license our technology and use it for the sale and management of
digital content and services.
The following table shows the markets in which our partners have indicated
an interest in pursuing products and services using our DRM technology. This
table is based on our partners' current interest, which may change, and there
is no assurance that there will be any deployments by our partners in any of
these markets.
<TABLE>
<CAPTION>
Entertainment: Publishing: Regulated: Enterprise:
Market .music .business information .government .secure document
.video .financial information .healthcare exchange
.audio books .traditional media .education .enterprise
.games .images .telecommunications information portals
Partner .secure email .trading/brokering
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mitsubishi X X X X
- --------------------------------------------------------------------------------------------------
NatWest X X X
- --------------------------------------------------------------------------------------------------
Reciprocal X X X
- --------------------------------------------------------------------------------------------------
Samsung X X X X
- --------------------------------------------------------------------------------------------------
ASPSecure.com X X
- --------------------------------------------------------------------------------------------------
Bertelsmann X X
- --------------------------------------------------------------------------------------------------
PublishOne X
- --------------------------------------------------------------------------------------------------
Reuters X
- --------------------------------------------------------------------------------------------------
Universal X
- --------------------------------------------------------------------------------------------------
Computacenter X X X X
- --------------------------------------------------------------------------------------------------
Diamond X
- --------------------------------------------------------------------------------------------------
Mediascience X
- --------------------------------------------------------------------------------------------------
MEI X
- --------------------------------------------------------------------------------------------------
MusicMatch X
</TABLE>
45
<PAGE>
Alliances
We have entered into several alliance agreements to help us penetrate
various vertical markets. The alliance agreements provide for cooperative
activities regarding product development and targeting specific strategic
business opportunities. To date, we have entered into alliance agreements with
Adobe Systems, Digital Theater Systems Inc., Fraunhofer-Institut fur
Integrierte Schaltungen, Harris Corporation, Portal Software, and Science
Application Information Company.
Products and MetaTrust Utility Services
Our general purpose DRM platform is comprised of both proprietary software
and technology, and the utility services needed for security, interoperability,
and trustedness of the MetaTrust Utility.
Products
Our Commerce software is a general purpose DRM platform and includes systems
software, development tools, and applications for building, deploying, and
managing digital commerce applications. We shipped the general availability
version of our Commerce software at the end of December 1998. Digital
information providers and software companies can use the product to integrate
rights management capabilities into applications that securely manage, control
usage of, and fulfill digital information commerce through digital distribution
channels. Payment processing and Internet infrastructure companies can use the
product to provide various commerce services, including payment clearing, usage
reporting, market analysis and user profiling, advertising, regulatory
compliance, affinity marketing, and automated trading systems.
Our software is designed to be fully scalable and comes in several packages,
depending upon the scope of rights licensed by our partners. The key components
of our Commerce software are:
. InterRights Point--software that processes DigiBox containers, and
manages usage of digital information throughout its lifecycle. It may
function as a client or server, as determined by rules;
. Application Developer's Kit--software and tools for systems integrators,
applications developers, software vendors, and web sites enabling them to
develop end-user applications and services;
. Sample Applications--software and components that assist development of
applications and services;
. RightsWallet Application--client software that manage identities,
memberships, budgets, and transactions;
. Transaction Authority Framework--software and databases for handling
communications with InterRights Points and processing transactions; and
. Deployment Manager Application--software for activating and managing
InterRights Points.
We have an enterprise edition of our Commerce software designed for
enterprises to manage private information, including work flow information. It
provides an information security and policy management system for the
enterprise and selected secure document exchange applications.
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<PAGE>
We have developed and plan to develop further special technology to assist
our partners in promoting the adoption of our DRM platform in various vertical
markets. For example, we created Powerchord technology, comprised of tool kits
and full-featured demonstration applications, to help appropriate partners
accelerate the adoption of our DRM platform for protected digital music
distribution.
MetaTrust Utility Services
We plan to maintain the specifications and administer the interoperability,
security, and trustedness of the MetaTrust Utility. We do this through our
MetaTrust certification program, which has three essential elements:
. Specifications--Our partners and their products and services must comply
with our specifications. These specifications establish policies that
address technical, procedural, and related matters designed to promote
the security, trustedness, integrity, interoperability, and performance
of products and services in the MetaTrust Utility.
. Certification--We test and certify, or provide the means for testing and
certifying, that products and services of participants in the MetaTrust
Utility comply with our specifications. Certification applies to all
applications that interface with an InterRights Point as well as partner
sites and operations. We expect to provide various procedures designed to
make certification an easy process, including pre-certification of
components.
. Security--Our system addresses numerous areas of security, including
securing digital information after initial use and providing tamper
resistance in the InterRights Point software. We have designed, and plan
to continue to design, countermeasures that we intend to implement if
security is compromised. We also plan on assisting our partners in
cryptographic key management.
Technology
Our DRM platform is based on our proprietary software and technology that we
believe add fundamental new functionality to traditional computing
environments. By using proven security technologies plus this new
functionality, we have created platform software designed to enable computing
environments to perform a broad range of new operating functions relating to
managing, not merely protecting, rights in digital information.
Our DRM platform is general purpose and is
designed to enable digital commerce to operate in
compliance with provider-specified rules through a
network of independent, protected processing
environments, which we have branded as InterRights
Points. Our technology is currently implemented as
software and includes tools, components, sample
applications, documentation and training that allow
our partners and their customers to build digital
commerce applications and services and take
advantage of the reusable, common foundation of the
MetaTrust Utility. The accompanying diagram shows
the primary architectural elements of our platform.
Narrative Description of Graphic on p. 45 of Business Section
Box titled "InterTrust DRM Platform." Below the heading, the caption
"InterRights Point" next to a picture of a sphere with three arrows meeting in
its center; the caption "DigiBox container" next to a picture of a cube; the
caption "Usage rules" next to a picture of a piece of paper; and the caption
"Transaction authority" next to a picture of a building.
47
<PAGE>
. InterRights Point. The core element of our architecture is the
InterRights Point, which operates on personal computers and servers in
the MetaTrust Utility. DRM processing occurs at InterRights Points. Each
InterRights Point acts as a secure virtual machine, a software
application acting as a processing device, that is designed to manage
each party's digital rights remotely. Each InterRights Point creates a
local, secure database that stores the users' rights, identities,
transactions, budgets and keys. We are currently developing different
implementations of the InterRights Point for use in other electronic
devices. In particular, we are developing technology for securely
managing the transfer of digital information to portable electronic
devices like MP3 music players.
. DigiBox Container. Protected information in our system is encrypted and
stored in a format called a DigiBox container. Once in a DigiBox
container, the information can flow across unsecured networks, and only
an InterRights Point can access the information. Our design permits
information in a DigiBox container to remain protected even after a user
has accessed it, providing persistent protection of the information and
continuing control over its use regardless of where the information
travels.
. Usage Rules. Content usage is managed by rules, including price, payment
offer, play, view, print, copy, save, superdistribution, and others. We
offer a variety of tools designed to allow providers to create and change
rules and to associate them with digital information. Rules are protected
in the same way content is protected. Like content, they are stored in
DigiBox containers for distribution. Rules are designed to travel with
the information, or separately, allowing our partners the flexibility to
change any rule, including rights or price, after content has been
delivered. InterRights Points are designed to ensure that applicable
rules are followed every time an information usage event is requested.
. Transaction Authority Framework. InterRights Points connect into our
processing partners' data centers through a communications controller
system called the transaction authority framework. The transaction
authority framework is designed to receive transaction records from
InterRights Points, store the records, and forward them, as specified by
usage rules, for further processing, including payment fulfillment. The
transaction authority framework is also designed to store messages
resulting from this further processing, like payment confirmation, and
when the InterRights Point next connects to the data center, send these
messages to the InterRights Points. The transaction authority framework
includes administrative software, called the deployment manager, that is
designed to activate InterRights Points and manage them after activation,
including fraud detection, revocation, security updates, and back-up
services.
Currently most of our software runs on Windows 95, Windows NT, and Windows
98. Our transaction authority framework runs on Window NT and Solaris operating
system environments. Our software is currently being modified to run on
additional operating systems. These efforts are in the development stage.
Sales and Partner Development
Our sales activities are designed to establish the initial relationships
with potential partners and help them understand the services and applications
that can be developed using our technology. Our partner development
organization helps our partners and their potential customers understand both
48
<PAGE>
the business and the technical benefits of the products, and assists them in
expanding their businesses with our technology. The sales organization will
generally make the initial contact with a potential partner. The organization
assigns a representative that will serve as our primary contact point for
managing the potential relationship throughout the due diligence and business
discussion process. Our sales organization consisted of 11 employees as of
August 31, 1999, five in Sunnyvale, one in Washington D.C., three in London,
England and two in Sydney, Australia.
Our partner development organization provides a single point of coordination
for all interactions with the customers after they become partners. These
personnel are skilled in both business consulting and systems design to
facilitate the successful deployment of our products. The partner development
organization works with our partners on using our DRM as well as on developing
cross-partner and new customer relationships. Our partner development
organization consisted of six employees as of August 31, 1999.
Marketing
We market our products worldwide primarily through our partners in
combination with our own efforts. We conduct a variety of marketing programs
worldwide to educate our target market, create awareness and generate leads for
our MetaTrust Utility. To achieve these goals, we have engaged in marketing
activities including joint partner marketing, print and online advertising
campaigns and trade shows. These programs are targeted at key business unit
executives as well information technology officers. In addition, we conduct
comprehensive public relations programs that include establishing and
maintaining relationships with key trade press, business press, and industry
analysts. We have established consistent branding guidelines for all of our
partners to increase our brand awareness. Our programs are designed to assist
our partners in developing their internal marketing programs and capabilities.
Our marketing organization consisted of nine individuals as of August 31, 1999.
Research and Development; Training and Support
Our research and development organization is divided into product
development, training and support, and STARLab. To date, substantially all
software development costs have been expensed as incurred. Research and
development expenses were $8.3 million in 1997, $13.0 million in 1998, and $7.1
million for the six months ended June 30, 1999.
As of August 31, 1999, our research and development and training and support
organizations were comprised of 99 employees and nine contractors.
Product Development
The product development organization is responsible for designing,
developing, and supporting commercial implementations of our DRM and developing
future enhancements to our software. There are six engineering groups in the
product development organization: core rights technology, appliance technology,
applications and components, security and tamper resistance, product
architecture, and advanced development. These six engineering groups are
supported by quality assurance, product management, documentation, deployment
operations, and developer support. The
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<PAGE>
quality assurance group implements a process designed to identify software
defects through the entire development cycle, including operational
deployments. The product management group is responsible for all functional and
certification specifications, schedules, and overall project coordination. The
documentation group is responsible for end user, administrator and developer
documentation and support for our products. The deployment operations group is
responsible for MetaTrust Utility operations and management, including
emergency response, fraud detection, key management, and application
certification. Developer support is responsible for technical support to our
partners' engineering staffs.
Training and Support
Our training and support organizations work closely with the partner
development organization to provide partners with the training and support
contemplated under their license. We believe that customer satisfaction is
essential for our long-term success. In general, our license agreements provide
for a limited period of support and training, including onsite visits, and
email and web site support. We plan on providing our partners with a variety of
standard support packages after this initial support period. As our partner
base grows, we intend to increase the size of our support organization.
STARLab
We have attracted a group of computer science experts for STARLab, our
electronic commerce research organization. STARLab projects cover a broad range
of topics necessary for advanced DRM, including watermarking, commerce
language, streaming media, security, and secure processing hardware. The
activities of STARLab are integrated with our important strategic objectives,
including:
. extending our portfolio of intellectual property;
. developing and prototyping new digital rights management technology;
. providing an engineering consulting resource to assist product
development;
. participating in and leading standards efforts; and
. advising governmental, research, and other institutions.
Competition
The market for DRM solutions is new, intensely competitive, and rapidly
evolving. We expect competition to continue to increase both from existing
competitors and new market entrants. The DRM market is new and we are not aware
of any one competitor that has established a dominant position in the market.
However, it is possible that one or more companies could become a dominant,
competitive force in the future. Our primary competition currently comes from
or is anticipated to come from:
. companies offering secure digital distribution systems, including AT&T,
IBM, Liquid Audio, Microsoft, Preview Systems, and Xerox; and
. companies offering hardware-based content metering and copy protection
systems, including Sony, Wave Systems, and the 4C Entity, comprised of
IBM, Intel, Matsushita, and Toshiba.
50
<PAGE>
In addition to these two categories, in the future, operating system
manufacturers like Microsoft or Sun Microsystems may also develop or license
digital rights management solutions for inclusion in their operating systems.
The primary bases of competition for providers of DRM solutions include:
. range of content types and markets, from specific content type to general
purpose, multiple markets;
. flexibility of pricing and other business options, from narrow, fixed
rules to flexible, dynamic rules;
. price of solution, from as high as 30-40% to a nominal percentage of
transaction value;
. range of usage environments, from personal computer-based, online-only to
multiple devices, offline and online;
. choice of service providers, from being tied to a single vendor that also
provides DRM technology and processing services, to being able to choose
among multiple, competing service providers; and
. business model of DRM provider, from vertically-integrated technology
provider to neutral utility model.
We believe that our ability to compete depends on many other factors both
within and beyond our control, including:
. the ease of use, performance, features, and reliability of our solutions
and our partners' applications and services as compared to those of our
competitors;
. the timing and market acceptance of new solutions and enhancements to
existing solutions developed by us, our partners, and our competitors;
. the quality of our partner development and support organization and
similar organizations of our partners; and
. the effectiveness of our sales and marketing efforts, and of similar
efforts of our partners.
We believe that we currently compete favorably with our competitors in these
areas.
Some of our competitors have longer operating histories and significantly
greater financial, technical, marketing, and other resources than we do. Many
of these companies have broader customer relationships that could be leveraged,
including relationships with many of our customers. These companies also have
more established customer support and professional services organizations than
we do.
Intellectual Property
Our success will depend in part on our ability to protect our intellectual
property and other proprietary rights in our software and other technology. To
protect our proprietary rights, we rely on a combination of patent, trademark,
copyright, and trade secret law, and confidentiality and license agreements
with our employees, customers, partners, and others. Despite these protections,
others
51
<PAGE>
might use our intellectual property without our authorization. If this occurs,
a party might copy or obtain and use our products or technology to develop
similar technology. If we are unable to protect our intellectual property
adequately, it could materially affect our financial performance. Moreover,
potential competitors might be able to develop technologies or services similar
to ours without infringing our patents. In addition, if our agreements with
employees, consultants and others who participate in product and service
development activities are breached, we may not have adequate remedies, and our
trade secrets may become known or independently developed by competitors.
Patents
We have devoted substantial time, resources, and capital to protecting our
intellectual property. As of August 31, 1999, we held 11 United States patents
and one European patent. We also have filed 31 additional United States patent
applications, as well as counterpart foreign applications in many instances. We
believe that our issued patents and patent applications cover a broad range of
subjects generally relating to protecting electronic rights and content,
enabling secure electronic transactions, and applying DRM technology in the
digital economy. Expenses associated with the preparation of new patent
applications, patent application processing fees, and attorneys costs
associated with patent applications and maintaining our patent portfolio
totaled $312,000 for the year ended December 31, 1996, $334,000 for the year
ended December 31, 1997, $237,000 for the year ended December 31, 1998, and
$191,000 for the six months ended June 30, 1999.
Any pending or future patent applications may not be granted, existing or
future patents may be challenged, invalidated or circumvented, and the rights
granted under a patent that has issued or any patent that may issue may not
provide competitive advantages to us.
Many of our current and potential competitors dedicate substantial resources
to protection and enforcement of intellectual property rights, especially
patents. If a blocking patent has issued or issues in the future, we would need
either to obtain a license or to design around the patent. We might not be able
to obtain a required license on acceptable terms, if at all, or to design
around the patent.
In part due to the broad range of technologies included in InterTrust
technology, we have not conducted and do not conduct comprehensive patent
searches to determine whether technology that is used in our products infringes
patents held by other third parties. In addition, it is difficult to proceed
with certainty in a rapidly evolving technological environment in which there
may be numerous patent applications pending, many of which are confidential
when filed, relating to similar technologies. In the past, we have received
notices alleging potential infringements by us of the proprietary rights of
others. In January 1996, we received a letter from an attorney representing E-
Data Corporation containing an allegation of infringement of a patent E-Data
allegedly owns. We exchanged correspondence with E-Data's attorneys ending in
September 1996. We have not heard from any representative of E-Data since that
time. In November 1997, we received a letter from representatives of TAU
Systems Corporation informing us of two patents held by TAU Systems. In the
letter, the representatives stated their opinion that our Commerce software
contained various elements recited in the two patents and requested that we
discuss licensing the technology of these patents. We responded to the letter
stating that, although we had not undertaken a detailed review
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<PAGE>
of the patents, we were unaware of any of our products having one of the
elements required by the patent claims. We have not received any further
correspondence from TAU Systems. In May 1999, we received a letter from
representatives of TechSearch LLC offering us a license to a patent held by
TechSearch. We have reviewed the patent and do not believe that we need to
obtain a license to this patent. In the future, we could be found to infringe
upon the patent rights of E-Data, TAU Systems, TechSearch, or other companies.
Furthermore, companies in the software market are increasingly bringing suits
alleging infringement of their proprietary rights, particularly patent rights.
If we were to discover that our products violate third-party proprietary
rights, we might not be able to obtain licenses to continue offering these
products without substantial reengineering. Efforts to undertake this
reengineering might not be successful, licenses might be unavailable on
commercially reasonable terms, if at all, and litigation might not be avoided
or settled without substantial expense and damage awards.
Other Intellectual Property
We have received United States and selected foreign registrations for our
InterTrust and DigiBox trademarks. We also have pending applications for United
States and foreign registration of several of our trademarks and service marks,
including MetaTrust, the MetaTrust Utility, InterRights, TrustMail, and others.
We do not know if these marks will be approved. In addition, a significant
portion of our marks use the words inter, trust, meta, or digi. We are aware of
other companies that use one or more of these words in their marks, alone or in
combination with other words. We do not expect to be able to prevent all third-
party uses of these words. In addition, the laws of some foreign countries do
not protect our proprietary rights to the same extent as do the laws of the
United States, and effective patent, copyright, trademark, and trade secret
protection may not be available in these jurisdictions. We license our
proprietary rights to third parties, and these licensees may fail to abide by
compliance and quality control guidelines relating to our proprietary rights
may or take actions that would harm our business.
Our partners may rely in part on licenses included within the sealed
packaging of commercial software and licenses on a web site that are entered
into by clicking with a computer mouse on a button denoting assent to the terms
of the license displayed on the web site. These licenses, however, may be or
become unenforceable under the laws of some jurisdictions. As with other
software products, our products are susceptible to unauthorized copying and
uses that may go undetected. Policing unauthorized use is difficult.
Any claims relating to the infringement of third-party proprietary rights,
even if meritless, could result in the expenditure of significant financial and
managerial resources and could result in injunctions preventing us from
distributing particular products and services. These claims could harm our
business. We also rely on technology that we license from third parties,
including software that is integrated with internally developed software and
used in our products and services to perform key functions. Third-party
technology licenses may not continue to be available to us on commercially
reasonable terms. The loss of any of these technologies could harm our
business. Although we generally seek to be indemnified against claims that
technology licensed by us infringes the intellectual property rights of others,
we do not receive indemnification in some cases. In some cases indemnification
is not available for all types of intellectual property and proprietary rights,
and in
53
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other cases the scope of indemnification is limited. Even if we receive broad
indemnification, third-party indemnitors are not always well-capitalized and
may not be able to indemnify us in the event of infringement, resulting in
substantial liability to us. Infringement or invalidity claims may arise from
the incorporation of third-party technology, and our customers may make claims
for indemnification. These claims, even if meritless, could result in the
expenditure of significant financial and managerial resources in addition to
potential product or service redevelopment costs and delays, all of which could
harm our business.
Standards Bodies and Industry Groups
We participate in selected industry groups to promote digital rights
management in the computer, consumer electronics, and entertainment markets.
With this aim in mind, we have most recently been involved with the following
standards bodies and industry groups: Moving Picture Experts Group, Secure
Digital Music Initiative, Open Platform Initiative for Multimedia Access, The
Cross Industry Working Team, and Copy Protection Technical Working Group. We
believe our activities in the Moving Picture Experts Group and the Secure
Digital Music Initiative are of particular importance.
MPEG-4, the standard for multimedia software and devices, includes an
intellectual property management and protection architecture that permits DRM
systems to be used in future MPEG-4 systems, including set-top boxes, DVD
players, and game machines. We played a major role in the definition of the
intellectual property management and protection interface, which is consistent
with our technology. MPEG-4 content developers can use our technology to
incorporate intellectual property management and protection capabilities into
their applications.
The Secure Digital Music Initiative was started by the Recording Industry
Association of America, the International Federation of the Phonographic
Industry, and the Recording Industry Association of Japan shortly after the
first release of the Diamond Rio MP3 music player in an effort to establish a
standard for secure digital delivery and use of recorded music. We have
participated in the Secure Digital Music Initiative from the beginning. We have
been active as one of three vice-chairs of the first working group, which
devised the specifications for secure digital music compliant-portable devices.
Following the approval of the Secure Digital Music Initiative portable devices
specification, we believe our technology will enable the protection and
management of digital audio content on the Internet, personal computers, and
portable devices. We plan to continue participating actively and developing our
technology to be compliant with emerging Secure Digital Music Initiative
specifications.
Employees
At August 31, 1999, we had a total of 144 employees. Of the total, 99 were
in research and development and training and support, 26 were in marketing,
sales and partner development, and business development, and 19 were in
administration and finance. None of our employees is subject to a collective
bargaining agreement, and we believe that our relations with our employees are
good.
Our future operating results depend in significant part on the continued
service of our key technical, sales, and senior management personnel, none of
whom is bound by an employment
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agreement with specified terms. Our future success also depends on our
continuing ability to attract and retain highly qualified technical, sales, and
senior management personnel. Competition for these personnel is intense, and we
may not be able to retain our key technical, sales and senior management
personnel or to attract these personnel in the future. We have experienced
difficulty in recruiting qualified technical, sales, and senior management
personnel, and we expect to experience these difficulties in the future. If we
are unable to hire and retain qualified personnel in the future, this inability
could seriously harm our business.
Facilities
Our principal administrative, sales, marketing, and research and development
facility occupies approximately 66,000 square feet in Santa Clara, California
under a lease that terminates in September 2004. We have also entered into a
three-year lease for a research and development facility occupying
approximately 3,900 square feet in Portland, Oregon. This lease commences
October 1999. InterTrust International, our wholly-owned subsidiary, has an
office located in London, England.
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MANAGEMENT
Executive Officers and Directors
Our executive officers and directors, and their ages and positions as of
October 25, 1999, are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Victor Shear............ 52 Chairman of the Board and Chief Executive Officer
David C. Chance......... 42 Executive Vice Chairman of the Board
Peter van Cuylenburg.... 51 Director, President and Chief Operating Officer
Edmund J. Fish.......... 37 Director, Senior Operating Officer and
Executive Vice President, Corporate Development
Erwin N. Lenowitz....... 49 Vice Chairman of the Board,
Chief Financial Officer and Secretary
David P. Maher.......... 48 Chief Technology Officer
Douglas M. Armati....... 48 Senior Vice President, Strategic Sales and
Partner Development
Ann B. Cowan............ 44 Senior Vice President, TrustNet Products, Services and Operations
Duncan M. Davidson...... 46 Senior Vice President, Business Development
Richard H. Frank........ 57 Senior Vice President, Portable Device Group
B. Nicholas Garnett..... 45 Senior Vice President, Trust Utility of InterTrust International
Joseph W. Jennings...... 45 Senior Vice President, Marketing
Richard A. Landsman..... 47 Senior Vice President, Product Development and Support
David M. Van Wie........ 34 Director and Senior Vice President, Research
Patrick P. Nguyen....... 33 Vice President, Global Alliances
Bruce Fredrickson....... 56 Director
Satish K. Gupta......... 54 Director
</TABLE>
Victor Shear has served as chairman of the board and chief executive officer
of InterTrust since our inception in January 1990. Before founding InterTrust,
Mr. Shear co-founded Personal Library Software, Inc., a text and document
database company, in June 1986. Mr. Shear served as chairman, president and
chief executive officer of Data Scientific Corporation, a software developer of
scientific workstations, from May 1982 to February 1985. Mr. Shear received a
B.A. in sociology from Brandeis University.
David C. Chance joined InterTrust as an officer and board member with the
title executive vice chairman in October 1999. Before joining InterTrust, from
January 1994 to January 1998, Mr. Chance was deputy managing director of BskyB
Group Ltd., a leading United Kingdom pay-television and media company, and
continued to serve as a consultant and non-executive director until August
1999. In addition, Mr. Chance is a non-executive director of Modern Times
Group, the primary pay-television operator in Scandinavia, and Sunderland
football club. Mr. Chance also serves on the board of the New Millenium
Experience Company, responsible for the Millenium Dome project in London. Mr.
Chance received a B.S. in psychology, a B.A. in industrial relations, and an
M.B.A. from the University of North Carolina at Chapel Hill.
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Peter van Cuylenburg joined InterTrust as president, chief operating officer
and a director in October 1999. Before joining InterTrust, Mr. van Cuylenburg
served as president of the DLT & Storage Systems group of Quantum Corporation
from September 1996 to October 1999. Prior to joining Quantum, he served as
executive vice president at Xerox Corporation from 1993 to 1995, where he was
responsible for Xerox's systems sector. Mr. van Cuylenburg was president and
chief operating officer at NeXT Computer, Inc. from 1992 to 1993. From 1989 to
1992, Mr. van Cuylenburg was chief executive of Mercury Communications, a
subsidiary of Cable & Wireless plc in the United Kingdom. Mr van Cuylenburg
holds a diploma in electrical engineering and an honorary doctorate in
technology from Bristol Polytechnic in the United Kingdom.
Edmund J. Fish has served as a director and as senior operating officer and
executive vice president, corporate development of InterTrust since June 1999.
From September 1995 to June 1999, Mr. Fish served as general counsel and vice
president, corporate development of InterTrust. Before joining InterTrust,
Mr. Fish practiced law in the Silicon Valley, Washington D.C. and New York
offices of Weil, Gotshal & Manges, an international law firm, from August 1989
to August 1995. Mr. Fish received a B.S. in biomedical engineering from
Marquette University and a J.D. from Wayne State University.
Erwin N. Lenowitz has served as vice chairman of the board, chief financial
officer and secretary of InterTrust since January 1993. Before joining
InterTrust, Mr. Lenowitz served as vice president of business development and
planning for Sun Microsystems, Inc., an enterprise networking company, from
August 1989 to January 1992 and as controller from May 1984 to July 1989.
Mr. Lenowitz received a B.S. in econometrics from the City College of New York
and an M.B.A. from St. Johns University.
David P. Maher has served as chief technology officer of InterTrust since
June 1999. Before joining InterTrust, Mr. Maher served in various positions at
AT&T from June 1981 to June 1999, including as an AT&T fellow, a Bell Labs
fellow and head of the secure systems research department. At AT&T, Mr. Maher
developed secure wideband transmission systems, cryptographic key management
systems and secure communications devices. In addition, Mr. Maher was chief
architect for AT&T's STU-III secure device, data, and video products for secure
government communications. Mr. Maher has been a consultant for the National
Science Foundation, the National Security Agency, the National Institute of
Standards and Technology, and the Congressional Office of Technology
Assessment, and has taught electrical engineering, mathematics and computer
science at several institutions. Mr. Maher received B.A., M.S. and Ph.D.
degrees in mathematics from Lehigh University.
Douglas M. Armati has served as senior vice president, strategic sales and
partner development of InterTrust since April 1999. From June 1997 to March
1999, Mr. Armati served as vice president, strategic sales and managing
director of the United Kingdom branch of InterTrust International. From
December 1996 to June 1997, Mr. Armati served as an independent consultant to
InterTrust International. From January 1994 to December 1996, Mr. Armati was a
principal at Jackson Brevis Ltd., a British consulting firm, focusing on
electronic commerce and intellectual property rights in digital environments.
Mr. Armati received a B.Comm. from Murdoch University.
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Ann B. Cowan has served as senior vice president, TrustNet products,
services and operations since October 1999 and as vice president, systems
development of InterTrust from September 1996 to October 1999. Before joining
InterTrust, Ms. Cowan served as director of engineering at Silicon Graphics, a
software workstation and server developer, from June 1995 to September 1996.
Before joining Silicon Graphics, from August 1986 to September 1994, Ms. Cowan
held several management positions in research and product development at
Ingres, a relational database company, most recently as director of Ingres
database and connectivity. Ms. Cowan received a B.A. in computer science from
Texas Christian University.
Duncan M. Davidson has served as senior vice president, business development
of InterTrust since July 1997. Before joining InterTrust, Mr. Davidson was
managing partner of Gemini McKenna, an alliance between Gemini Consulting and
Regis-McKenna, Inc., and The McKenna Group, from August 1995 to July 1997. Mr.
Davidson also served as vice president of Gemini Consulting, the management
consulting arm of Cap Gemini, a systems integrator, and its predecessor, The
MAC Group, from April 1989 to August 1995. Mr. Davidson is a founder of Covad
Communications, a telecommunications company providing high speed data
services, and serves on its board of advisors. Mr. Davidson received a Sc.B. in
physics-mathematics from Brown University and a J.D. from the University of
Michigan.
Richard H. Frank is senior vice president, portable device group of
InterTrust and has served in various other capacities, including chief
technology officer, since joining InterTrust in February 1997. Before joining
InterTrust, Mr. Frank was a senior consultant to electronic commerce companies,
including Novell Corporation, a computer-networking company. From March 1991 to
September 1992, Mr. Frank served as vice president of development at Software
Publishing, a software development company, and as chief technology officer
from September 1992 to September 1994. From January 1979 to September 1984, Mr.
Frank served as chief executive officer at Sorcim, a personal computer software
company. Mr. Frank received a B.A. in chemistry from San Francisco State
University.
B. Nicholas Garnett has served as senior vice president, trust utility of
InterTrust International, our subsidiary, since August 1999. Before joining
InterTrust International, from March 1992 to July 1999, Mr. Garnett was the
director general and chief executive officer of the International Federation of
the Phonographic Industry, which was instrumental in establishing the recording
industry's worldwide anti-piracy structure. Mr. Garnett received an M.A. in law
from the University of Cambridge and a D.E.A. in French law from the University
of Bordeaux.
Joseph W. Jennings has served as senior vice president, marketing of
InterTrust since February 1998. Before joining InterTrust, Mr. Jennings served
as a consultant to the venture capital firms of Sigma Partners, Mohr Davidow
Ventures, and InnoCal Ventures from January 1995 to December 1997. From July
1994 to January 1998, Mr. Jennings served as president of GCI Jennings, a
technology marketing communications company. Mr. Jennings received a B.A. in
political science from Whitman College and an M.B.A from the University of
Washington.
Richard A. Landsman is senior vice president, product development and
support of InterTrust and has served in various other positions since joining
InterTrust in July 1997. Before joining InterTrust, from October 1992 to July
1997, Mr. Landsman worked for Borland International, Inc., a provider of
programming and data base tools, where he directed Borland's Java development
tools
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business and managed Borland's C++ class libraries and frameworks team. Before
joining Borland, Mr. Landsman served as a senior manager at Lotus Development,
a productivity applications software company, from January 1983 to October
1992. Mr. Landsman received a B.S. in management and finance from the
University of Massachusetts and an M.S. in computer science from Boston
University.
David M. Van Wie has served as senior vice president, research of InterTrust
since January 1996. From September 1992 to January 1996, Mr. Van Wie served as
our chief technology officer and in August 1995, Mr. Van Wie became a member of
our board of directors. From January 1991 to September 1992, Mr. Van Wie was
president and chief executive officer of CD-ROM Solutions, a technology
integrator for the CD-ROM marketplace. From February 1989 to January 1991,
Mr. Van Wie managed the development of a high-speed information retrieval
system for a subsidiary of Maxwell Communications. Mr. Van Wie attended Pomona
College and the University of Wisconsin.
Patrick P. Nguyen is vice president, global alliances, and has also served
as vice president, corporate development, since joining InterTrust in July
1998. Before joining InterTrust, from February 1993 to June 1998, Mr. Nguyen
worked at the Silicon Valley Office of Weil, Gotshal & Manges, where he was
made a partner in January 1998 and headed the corporate and technology
transaction group. Mr. Nguyen received a B.S. in computer science from the
University of California at Irvine and a J.D. from the University of California
at Los Angeles.
Bruce Fredrickson has served as a director of InterTrust since February
1993. Mr. Fredrickson has also served as president of Tactical Marketing
Ventures LLC, a marketing firm for computer hardware, software, and Internet
service companies, since September 1991. Before his position with Tactical
Marketing Ventures, Mr. Fredrickson served as vice president of marketing for
Ingram Micro, a computer products distributor, from February 1986 to August
1991. Mr. Fredrickson received a B.S. in liberal arts from St. Olaf College and
an M.S. in communications and media from the University of Colorado.
Satish K. Gupta has served as a director of InterTrust since February 1993.
Mr. Gupta has been the president and chief executive officer of Cradle
Technologies, a semiconductor company, since July 1998. From May 1994 to June
1998, Mr. Gupta was vice president of corporate marketing and business
development of Cirrus Logic, a semiconductor company, and from June 1991 to May
1994, he was vice president of strategic marketing and advanced development of
Media Vision, a multi-media peripherals company. Mr. Gupta received a B.E. in
electrical engineering in India from Birla Institute of Technology and Science,
an S.M. in electrical engineering from Massachusetts Institute of Technology,
and an M.S. in engineering and economic systems from Stanford University.
Board Committees
The board of directors has an audit committee and a compensation committee.
Audit Committee. The audit committee of the board of directors has
responsibility for reviewing and monitoring our corporate financial reporting
and external audits, including our internal control functions, the results and
scope of the annual audit and other services provided by our independent
auditors, and our compliance with legal matters that have a significant impact
on our financial reports. The audit committee also consults with management and
our independent auditors before the presentation of financial statements to
stockholders and, as appropriate, initiates inquiries
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into aspects of our financial affairs. In addition, the audit committee has the
responsibility to consider and recommend the appointment of, and to review fee
arrangements with, our independent auditors. The current members of the audit
committee are Messrs. Fredrickson and Gupta.
Compensation Committee. The compensation committee of the board of directors
reviews and makes recommendations to the board regarding all forms of
compensation provided to the executive officers and directors of InterTrust and
our subsidiary including stock compensation and loans. In addition, the
compensation committee reviews and makes recommendations on bonus and stock
compensation arrangements for all of our employees. As part of these
responsibilities the compensation committee also administers or will administer
our 1995 stock plan, 1999 equity incentive plan, and 1999 employee stock
purchase plan. The current members of the compensation committee are Messrs.
Fredrickson and Gupta.
Director Compensation
Messrs. Fredrickson and Gupta have each received options for 80,000 shares
of common stock at an exercise price of $0.625 per share. Upon and following
this offering, non-employee directors will receive automatic option grants
under our 1999 non-employee directors option plan.
Compensation Committee Interlocks and Insider Participation
The compensation committee of the board of directors currently consists of
Messrs. Fredrickson and Gupta. No interlocking relationship exists between any
member of our board of directors or our compensation committee and any member
of the board of directors or compensation committee of any other company, and
no interlocking relationship has existed in the past.
Indemnification
Our sixth amended and restated certificate of incorporation, to be effective
after the closing of this offering, includes a provision that eliminates the
personal liability of our directors and officers for monetary damages for
breach of fiduciary duty as a director or officer, except for liability:
. for any breach of the director's or officer's duty of loyalty to us or
our stockholders;
. for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
. under Section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; or
. for any transaction from which the director or officer derived an
improper personal benefit.
Our amended and restated bylaws provide that:
. we must indemnify our directors and officers to the fullest extent
permitted by Delaware law, subject to very limited exceptions;
. we may indemnify our other employees and agents to the same extent that
we indemnify our officers and directors; and
. we must advance expenses, as incurred, to our directors and officers in
connection with a legal proceeding to the fullest extent permitted by
Delaware law, subject to very limited exceptions.
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We have also entered into indemnification agreements with our officers and
directors containing provisions that may require us to indemnify our officers
and directors against liabilities that may arise by reason of their status or
service as directors or officers, other than liabilities arising from willful
misconduct of a culpable nature, to advance their expenses incurred as a result
of any proceeding against them for which they could be indemnified, and to
obtain directors' and officers' insurance if available on reasonable terms.
Executive Compensation
The following table presents information about compensation paid by us in
1998 for services by our chief executive officer and our four other highest-
paid executive officers whose total salary and bonus for the fiscal year
exceeded $100,000:
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
------------
Awards
------------
Annual
Compensation Securities
------------ Underlying
Name and Principal Position(s) Salary ($) Options (#)
- ------------------------------ ------------ ------------
<S> <C> <C>
Victor Shear......................................... $175,000 --
Chairman of the Board and Chief Executive Officer
Douglas M. Armati.................................... 169,751 --
Senior Vice President, Strategic Sales and Partner
Development
Duncan M. Davidson................................... 220,000 --
Senior Vice President, Business Development
Joseph W. Jennings................................... 167,340 320,000
Senior Vice President, Marketing
Erwin N. Lenowitz.................................... 175,000 --
Vice Chairman of the Board, Chief Financial Officer
and Secretary
</TABLE>
The table below shows each grant of stock options during 1998 to our chief
executive officer and our four other highest-paid executive officers. No stock
appreciation rights were granted to these individuals during 1998.
The percentage of total options granted to employees in the last fiscal year
is based on options to purchase a total of 1,616,000 shares granted to our
employees during 1998.
The exercise price of each option granted is equal to the fair market value
of our common stock as valued by our board of directors on the date of grant.
The exercise price may be paid in cash, in shares of our common stock valued at
fair market value on the exercise date or through a cashless exercise procedure
involving a same-day sale of the purchased shares. We may also finance the
option exercise by lending the option holder sufficient funds to pay the
exercise price for the purchased shares.
The potential realizable value is calculated based on the ten-year term of
the option at the time of grant. Annual stock price appreciation of 5% and 10%
is assumed in keeping with rules
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promulgated by the Securities and Exchange Commission and does not represent
our prediction of our stock price performance. The potential realizable value
at 5% and 10% appreciation is calculated by assuming that the exercise price on
the date of grant appreciates at the indicated rate for the entire term of the
option and that the option is exercised at the exercise price and sold on the
last day of its term at the appreciated price.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Individual Grants Value at Assumed
----------------------------------------------- Annual Rates of
Number of Stock Price
Securities % of Total Appreciation for
Underlying Options Granted Exercise Option Term
Options To Employees Price Expiration ---------------------
Name Granted(#) In Fiscal Year ($/share) Date 5%($) 10%($)
- ---- ---------- --------------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Victor Shear............ -- -- -- -- -- --
Douglas M. Armati....... -- -- -- -- -- --
Duncan M. Davidson...... -- -- -- -- -- --
Joseph W. Jennings...... 320,000 19.8% $2.50 6/4/08 $ 503,116 $ 1,274,994
Erwin N. Lenowitz....... -- -- -- -- -- --
</TABLE>
In addition to the option listed in the table, stock options were granted in
February 1999 to Mr. Armati under our 1995 stock plan for 80,000 shares at an
exercise price of $3.50 per share. Upon the completion of six months of
service, 12.5% of the option shares will vest. Upon the completion of each of
the next 42 months of service, an additional 1/48th of the option shares become
vested.
The table below presents for our chief executive officer and our four other
highest-paid executive officers any options exercised during 1998 and the value
realized from that exercise. It also presents the number and value of shares
underlying unexercised options that were held by these executive officers as of
December 31, 1998. No stock appreciation rights were exercised by these
executive officers in 1998, and no stock appreciation rights were outstanding
at the end of that year.
Upon the completion of six months of service, 12.5% of the option shares
listed in the table below became vested. Upon the completion of each of the
next 42 months of service, an additional 1/48th of the option shares become
vested. Our board may provide for the options to become immediately
exercisable; in that case, any unvested shares that are purchased by a holder
of an option may be repurchased by us at the original exercise price paid per
share if the option holder ceases service with us before vesting in these
shares.
The figures in the value of unexercised in-the-money options at fiscal year-
end column are based on the fair market value of our common stock at the end of
1998, less the exercise price payable for these shares. The fair market value
for class A voting common stock at the end of 1998 was $3.50 per share. Mr.
Armati and Mr. Jennings have options to purchase class A voting common stock.
The fair market value for class B non-voting common stock at the end of 1998
was $1.75 per share. Mr. Lenowitz has options to purchase class B non-voting
common stock. Mr. Davidson was granted options to purchase 160,000 shares of
class A voting common stock and 160,000 shares of class B non-voting common
stock, of which he has exercised and purchased 56,666 shares in 1998 and
190,000 shares in 1999.
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Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Value Of
Securities Underlying Unexercised
Unexercised Options In-the-Money Options
Shares at FY-End (#) at FY-End ($)
Acquired on Value ------------------------- -------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Victor Shear............ -- -- -- -- -- --
Douglas M. Armati....... -- -- 76,666 83,334 $153,332 $166,668
Duncan M. Davidson...... 56,666 $ 56,666 56,666 206,668 113,332 310,002
Joseph W. Jennings...... -- -- 66,666 253,334 66,666 253,334
Erwin N. Lenowitz....... -- -- 360,000 -- 405,000 --
</TABLE>
Employee Benefit Plans
1992 Stock Plan and 1995 Stock Plan
Our 1992 stock plan and 1995 stock plan will be terminated immediately
before the closing of this offering, and no additional options will be granted
after the closing of this offering under these plans. However, the termination
of these plans will not affect any options outstanding under these plans, which
will remain outstanding until they are exercised, terminate or expire, in
keeping with the terms of the related stock option agreements.
1999 Equity Incentive Plan
Our board of directors adopted our 1999 equity incentive plan on July 22,
1999. Our stockholders have also approved this plan. We have reserved 1,900,000
shares of our common stock for issuance under the 1999 equity incentive plan.
As of January 1 of each year, starting in 2000, the number of shares reserved
for issuance under our 1999 equity incentive plan will be increased
automatically by 4% of the total number of shares of common stock then
outstanding or, if less, 1,500,000 shares. No options have yet been granted
under the 1999 equity incentive plan.
Under the 1999 equity incentive plan, the persons eligible to receive awards
are:
. employees;
. non-employee members of the board of directors; and
. consultants.
The types of awards that may be made under the 1999 equity incentive plan
are:
. options to purchase shares of common stock;
. stock appreciation rights;
. restricted shares; and
. stock units.
Options may be incentive stock options that qualify for favorable tax
treatment for the option holder under Section 422 of the Internal Revenue Code
of 1986 or nonstatutory stock options not designed to qualify for favorable tax
treatment. With limited restrictions, if shares awarded under the 1999 equity
incentive plan are forfeited, those shares will again become available for new
awards under the 1999 equity incentive plan.
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The compensation committee of our board of directors will administer the
1999 equity incentive plan. The committee has complete discretion to make all
decisions relating to the interpretation and operation of our 1999 equity
incentive plan. The committee has the discretion to determine which eligible
individuals are to receive any award, and to determine the type, amount,
vesting requirements, and other features and conditions of each award.
The exercise price for incentive stock options granted under the 1999 equity
incentive plan must be at least 100% of the fair market value of our common
stock on the option grant date. The exercise price for nonstatutory options
granted under the 1999 equity incentive plan must be at least 85% of the fair
market value of our common stock on the option grant date.
Our 1999 equity incentive plan provides that no participant may receive
options or stock appreciation rights covering more than 500,000 shares in the
same year, except that a newly hired employee may receive options or stock
appreciation rights covering up to 1,000,000 shares in the first year of
employment.
The exercise price may be paid with:
. cash;
. outstanding shares of common stock;
. the cashless exercise method through a designated broker;
. a pledge of shares to a broker; or
. a promissory note.
The purchase price for newly issued restricted shares awarded under the 1999
equity incentive plan may be paid with:
. cash;
. a promissory note; or
. the rendering of past services.
The committee may reprice options and may modify, extend or assume
outstanding options and stock appreciation rights. The committee may accept the
cancellation of outstanding options or stock appreciation rights in return for
the grant of new options or stock appreciation rights. The new option or right
may have the same or a different number of shares and the same or a different
exercise price.
If a change in control of InterTrust occurs, an option or other award under
the 1999 equity incentive plan will become fully exercisable and fully vested
if the option or award is not assumed by the surviving corporation or its
parent or if the surviving corporation or its parent does not substitute
comparable awards for the awards granted under the 1999 equity incentive plan.
A change in control includes:
. a merger or consolidation of InterTrust after which our then-current
stockholders own less than 50% of the surviving corporation;
. a sale of all or substantially all of our assets;
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. a proxy contest that results in replacement of more than one-half of our
directors over a 24-month period; or
. an acquisition of 50% or more of our outstanding stock by a person other
than a person related to InterTrust, including a corporation owned by our
stockholders.
If a merger or other reorganization occurs, the agreement of merger or
reorganization may provide that outstanding options and other awards under the
1999 equity incentive plan shall be assumed by the surviving corporation or its
parent, shall be continued by InterTrust if it is the surviving corporation,
shall have accelerated vesting and then expire early, or shall be cancelled for
a cash payment.
Our board of directors may amend or terminate the 1999 equity incentive plan
at any time. If our board amends the plan, stockholder approval of the
amendment will be sought only if required by applicable law. The 1999 equity
incentive plan will continue in effect indefinitely unless the board terminates
the plan.
1999 Employee Stock Purchase Plan
Our board of directors adopted our 1999 employee stock purchase plan on July
22, 1999. Our stockholders have also approved this plan. We have reserved
350,000 shares of our common stock for issuance under our 1999 employee stock
purchase plan. As of January 1 each year, starting in 2000, the number of
shares reserved for issuance under this plan will be increased automatically by
2% of the total number of shares of common stock then outstanding or, if less,
350,000 shares. Our 1999 employee stock purchase plan is intended to qualify
under Section 423 of the Internal Revenue Code.
Eligible employees may begin participating in the 1999 employee stock
purchase plan at the start of an offering period. Each offering period, other
than the initial offering period, will last 24 months. Two overlapping offering
periods will start on May 1 and November 1 of each calendar year. However, the
first offering period will start on the effective date of this offering and end
on October 31, 2001. Purchases of our common stock will occur on or about April
30 and October 31 of each calendar year during an offering period.
Our compensation committee of our board of directors will administer this
plan. Each of our employees is eligible to participate if he is employed by us
for more than 20 hours per week and for more than five months per year.
Our 1999 employee stock purchase plan permits each eligible employee to
purchase common stock through payroll deductions. Each employee's payroll
deductions may not exceed 15% of cash compensation. The initial period during
which payroll deductions may be contributed will begin on the effective date of
this offering and end on April 30, 2000. Each participant may purchase up to
600 shares on any purchase date.
The price of each share of common stock purchased under our 1999 employee
stock purchase plan will be 85% of the lower of:
. the fair market value per share of our common stock on the date
immediately before the first date of the applicable offering period; or
. the fair market value per share of our common stock on the purchase date.
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In the case of the first offering period, the price per share under the plan
will be 85% of the lower of:
. the price offered to the public in this offering; or
. the fair market value per share of our common stock on the purchase date.
Employees may end their participation in the 1999 employee stock purchase
plan at any time. Participation ends automatically upon termination of
employment with InterTrust.
If a change in control of InterTrust occurs, our 1999 employee stock
purchase plan will end, and shares will be purchased with the payroll
deductions accumulated to date by participating employees, unless this plan is
assumed by the surviving corporation or its parent. Our board of directors may
amend or terminate the 1999 employee stock purchase plan at any time. If our
board of directors increases the number of shares of common stock reserved for
issuance under this plan, it must seek the approval of our stockholders.
1999 Non-Employee Directors Option Plan
Our board of directors adopted our 1999 non-employee directors option plan
on July 22, 1999. Our stockholders have also approved this plan. Only the non-
employee members of our board of directors will be eligible for automatic
option grants under this plan.
We have reserved 350,000 shares of our common stock for issuance under our
1999 non-employee directors option plan. As of January 1 each year, starting in
2000, the number of shares reserved for issuance under our 1999 non-employee
directors option plan will be increased automatically to restore the total
number of shares available under this plan to 350,000 shares. No shares have
yet been issued under our 1999 non-employee directors option plan.
The compensation committee of our board of directors will make any
administrative determinations under our 1999 non-employee directors option
plan. No discretionary decisions will be made by the compensation committee
under this plan.
The exercise price for options granted under our 1999 non-employee directors
option plan may be paid in cash or in outstanding shares of our common stock.
Options may also be exercised on a cashless basis through the same-day sale of
the purchased shares.
Each individual who is a member of our board of directors as a non-employee
director on the effective date of this offering will receive a fully vested
option for 15,000 shares of our common stock on the effective date of this
offering. The exercise price of this option will be the initial price offered
to the public in this offering.
Each individual who first joins our board of directors as a non-employee
director after the effective date of this offering will receive at that time a
fully vested option for 15,000 shares of our common stock. In addition, at each
of our annual stockholders' meetings, beginning in 2000, each non-employee
director who will continue to be a director after that meeting will
automatically be granted at that meeting a fully vested option for 5,000 shares
of our common stock. However, any non-employee director who receives an option
for 15,000 shares under this plan will first become
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eligible to receive the annual option for 5,000 shares at the annual meeting
that occurs during the calendar year following the year in which he received
the option for 15,000 shares.
Our board of directors may amend or modify the 1999 non-employee directors
option plan at any time. The 1999 non-employee directors option plan will
continue in effect indefinitely, unless our board of directors terminates the
plan.
Change of Control Arrangements
Joseph W. Jennings, our senior vice president, marketing, has received
option grants for 320,000 shares that provide that upon a change in control
transaction, the vesting of the option will accelerate and 50% of the then
unvested option shares will become vested. Duncan M. Davidson, our senior vice
president, business development, has received option grants for 320,000 shares
that provide that upon a change in control transaction, the vesting of the
option will accelerate and 100% of the then unvested option shares will become
vested. In addition, two of our other executive officers who are not among our
four highest-paid executive officers during 1998 were also granted options that
provide that upon a change in control transaction, the vesting of the options
will accelerate and 100% of the then unvested option shares will become vested.
If a change in control of InterTrust occurs, an option or other award under
the 1999 equity incentive plan will become fully exercisable and fully vested
if the option or award is not assumed by the surviving corporation or its
parent or if the surviving corporation or its parent does not substitute
comparable awards for the awards granted under the 1999 equity incentive plan.
Under our 1995 stock plan, upon a merger or asset sale, if the options or
stock purchase rights are not assumed by the surviving corporation or its
parent or subsidiary or if the surviving corporation or its parent or
subsidiary does not substitute comparable awards for the options or stock
purchase rights, then the options and stock purchase rights will terminate.
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RELATED-PARTY TRANSACTIONS
Since January 1996, there has not been, nor is there currently proposed, any
transaction or series of similar transactions to which we were or are to be a
party in which the amount involved exceeds $60,000 and in which any director,
executive officer, or holder of more than 5% of our common stock, or an
immediate family member of any of these individuals or entities, had or will
have a direct or indirect interest other than:
. compensation arrangements, which are described where required under
"Management;" and
. the transactions described below.
Series A Preferred Stock Financing. In March 1996, we issued and sold
1,174,168 shares of series A preferred stock to Kistler Associates, one of our
5% stockholders, at a per share purchase price of $2.555.
In June 1996, we issued and sold 97,846 shares of series A preferred stock
to SLF Partners IV, LP at a per share purchase price of $2.555. One of our
executive officers, Patrick P. Nguyen, is a limited partner of SLF Partners IV,
L.P.
Series B Preferred Stock Financing. In December 1997, we issued and sold
233,372 shares of series B preferred stock to Kistler Associates, and in March,
April, and December 1998, we issued and sold an aggregate of 466,744 shares of
series B preferred stock to Kistler Associates, in both cases at a per share
purchase price of $4.285.
In June 1997 and January 1998, we issued and sold an aggregate of 1,165,544
shares of series B preferred stock to Reuters New Media, Inc., an entity
affiliated with Reuters Group PLC, one of our 5% stockholders, at a per share
purchase price of $4.285.
In July and December 1998, we issued and sold an aggregate of 878,632 shares
of series B preferred stock to SLF Partners IV, L.P. at a per share purchase
price of $4.285.
In December 1998, we issued and sold 186,500 shares of series B preferred
stock to Ecomm Ventures I, LLC at a per share purchase price of $4.285. One of
our executive officers, Patrick P. Nguyen, is a director of Ecomm Ventures I,
LLC.
Series C Preferred Stock Financing. In March 1999, we issued and sold 29,645
shares of series C preferred stock to Kistler Associates at a per share
purchase price of $5.89.
Series D Preferred Stock Financing. In April 1999, we issued and sold
235,294 shares of series D preferred stock to Kistler Associates at a per share
purchase price of $8.50.
In April 1999, we issued and sold 479,412 shares of series D preferred stock
to SLF Partners IV, L.P. at a per share purchase price of $8.50.
In April 1999, we issued and sold 25,000 shares of series D preferred stock
to Tactical Marketing Ventures, LLC at a per share purchase price of $8.50.
Bruce Fredrickson, a director of InterTrust, is the president of Tactical
Marketing Ventures, LLC.
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In June 1999, we issued and sold 199,412 shares of series D preferred stock
to Ecomm Ventures II, LLC at a per share purchase price of $8.50. One of our
executive officers, Patrick P. Nguyen, is a director of Ecomm Ventures II, LLC.
Series E Preferred Stock Financing. In July 1999, we issued and sold 233,333
shares of series E preferred stock to Kistler Associates at a per share
purchase price of $12.00.
In July 1999, we issued and sold 416,667 shares of our series E preferred
stock to Blaxmill (Four) Limited, an entity affiliated with Reuters Group PLC,
at a per share purchase price of $12.00.
In July 1999, we issued and sold 50,001 shares of series E preferred stock
to Duncan M. Davidson, one of our executive officers, at a per share purchase
price of $12.00.
Option to Purchase Class B Non-Voting Common Stock. In October 1993, we
granted an option to purchase 160,000 shares of our class B non-voting common
stock to Electronic Ventures, LLC at an exercise price of $0.625. Erwin N.
Lenowitz, an executive officer of InterTrust, is a managing director of
Electronic Ventures, LLC.
Option to Purchase Common Stock. In October 1999, we agreed to grant on
consummation of this offering an option to purchase 300,000 shares of our
common stock at an exercise price equal to 85% of the initial public offering
price to David Chance, one of our executive officers.
Option to Purchase Common Stock. In October 1999, we agreed to grant on
consummation of this offering an option to purchase 500,000 shares of our
common stock at an exercise price equal to 85% of the initial public offering
price to Peter van Cuylenburg, one of our executive officers.
Loan to Executive Officer. In December 1997 and January 1998, we loaned an
aggregate of $62,290 to Edmund J. Fish, one of our directors and an executive
officer, secured by a stock pledge agreement. This note accrues interest at the
rate of 7% per year. The principal balance of this note and accrued interest is
due upon consummation of this offering.
Bonus to Executive Officer. In May 1999, our compensation committee approved
a bonus in the amount of $200,000 to Edmund J. Fish, which was paid in June
1999.
Indemnification. We have entered into an indemnification agreement with each
of our officers and directors. See "Management--Indemnification" for a
description of the indemnification available to our officers and directors
under these agreements.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The table on the next page presents selected information regarding
beneficial ownership of our outstanding common stock as of August 31, 1999, and
as adjusted to reflect the sale of the common stock being sold in this offering
for:
. each of our directors, our chief executive officer and our four other
highest-paid executive officers;
. each other person known by us to own beneficially more than 5% of our
common stock and one of our principal stockholders; and
. all of our directors and executive officers as a group.
Under the rules of the Securities and Exchange Commission, beneficial
ownership includes sole or shared voting or investment power over securities
and includes the shares issuable under stock options that are exercisable
within 60 days of August 31, 1999. Shares issuable under stock options
exercisable within 60 days are considered outstanding for computing the
percentage of the person holding the options but are not considered outstanding
for computing the percentage of any other person. Consequently, the table on
the next page includes information regarding shares issuable under stock
options exercisable within 60 days of August 31, 1999 for the following persons
and in the following amounts:
<TABLE>
<CAPTION>
Name Shares Subject to Options
---- -------------------------
<S> <C>
David M. Van Wie................................... 320,800
Erwin N. Lenowitz.................................. 160,000
Joseph W. Jennings................................. 133,332
Satish K. Gupta.................................... 80,000
Edmund J. Fish..................................... 18,333
Duncan M. Davidson................................. 10,000
Douglas M. Armati.................................. 6,667
</TABLE>
Percentage ownership calculations are based on 31,461,011 shares of common
stock outstanding as of August 31, 1999, as adjusted to reflect the conversion
of all outstanding shares of preferred stock and class B non-voting common
stock into common stock, and the exercise of warrants to purchase 6,692 shares
of common stock upon the closing of this offering. The numbers shown in the
table below assume no exercise by the underwriters of their over-allotment
option to purchase up to 975,000 shares and exclude 85,000 shares of common
stock issued in exchange for technology and related assets we purchased and
licensed in October 1999.
Unless otherwise indicated, the address for each listed stockholder is: c/o
InterTrust Technologies Corporation, 4750 Patrick Henry Blvd., Santa Clara,
California 95054. To our knowledge, except as indicated in the footnotes to
this table and under applicable community property laws, the persons or
entities identified in this table have sole voting and investment power over
all shares of common stock shown as beneficially owned by them.
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<PAGE>
<TABLE>
<CAPTION>
Percent of
Shares Outstanding
--------------------
Number of Shares Before the After the
Name of Beneficial Owner Beneficially Owned Offering Offering
- ------------------------ ------------------ ---------- ---------
<S> <C> <C> <C>
Victor Shear.......................... 7,712,000 24.5% 20.3%
Kistler Associates(1)................- 2,372,556 7.5 6.2
955 5th Avenue, Apt. 6B
New York, NY 10021
Reuters Group PLC(2).................. 1,582,211 5.0 4.2
85 Fleet Street
London EC4P 4AJ
United Kingdom
Entities affiliated with SLF 1,540,779 4.9 4.1
Partners(3).........................-
Attn: Steven L. Fingerhood, General
Partner
301 Mission Street, Suite 350
San Francisco, CA 94105
Erwin N. Lenowitz(4).................. 558,206 1.8 1.5
David M. Van Wie...................... 344,800 1.1 0.9
Duncan M. Davidson(5)................. 300,001 1.0 0.8
Edmund J. Fish(6)..................... 291,052 0.9 0.8
Douglas M. Armati(7).................. 157,720 0.5 0.4
Satish K. Gupta....................... 160,000 0.5 0.4
Bruce Fredrickson(8).................. 137,000 0.4 0.4
Joseph W. Jennings.................... 133,332 0.4 0.4
Executive officers and directors as a
group (17 persons)(9)(10)............ 10,844,685 33.2 27.7
</TABLE>
- --------
(1) Kistler Associates has the right to purchase shares of common stock in this
offering. If it exercises this right in full, it will own approximately
2,599,556 shares, or 6.8% of us.
(2) Represents 1,165,544 shares held of record by Reuters New Media, Inc. and
416,667 shares held of record by Blaxmill (Four) Limited.
(3) Represents 1,455,890 shares held of record by SLF Partners IV, L.P. and
84,889 shares held of record by SLF Partners V, L.P.
(4) Includes an option immediately exercisable for 160,000 shares held by
Electronic Ventures, LLC. Mr. Lenowitz, one of our directors and executive
officers, is a managing director of Electronic Ventures, LLC. Mr. Lenowitz
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest in Electronic Ventures, LLC. Also includes 13,218 shares
held as custodian for Jeremy Lenowitz and 13,218 shares held as custodian
for Jessica Lenowitz.
(5) Includes 210,001 shares held by the Davidson Family Revocable Trust of
which 76,667 shares are subject to a right of repurchase by us as of August
31, 1999. Mr. Davidson, one of our executive officers, is the trustee of
the Davidson Family Revocable Trust and exercises voting and investment
power over these shares. In connection with a loan to two InterTrust
employees, Mr. Davidson is taking a security interest in 80,624 shares of
common stock.
(6) Includes 3,334 shares subject to a right of repurchase by us as of August
31, 1999.
(7) Includes 56,667 shares subject to a right of repurchase by us as of August
31, 1999.
(8) Includes 25,000 shares held of record by Tactical Marketing Ventures, LLC.
Mr. Fredrickson is the chief executive officer of Tactical Marketing
Ventures, LLC and disclaims beneficial ownership of these shares, except to
the extent of his pecuniary interest arising from his interest in Tactical
Marketing Ventures, LLC.
(9) Includes 1,199,255 shares subject to options that are exercisable within 60
days of August 31, 1999 and the shares described in Notes 3 through 7.
(10) Includes 16,667 shares held by Patrick P. Nguyen, one of our executive
officers, subject to a right of repurchase by us as of August 31, 1999.
Also includes 186,500 shares held by Ecomm Ventures I, LLC and 199,412
shares held by Ecomm Ventures II, LLC. Mr. Nguyen is a director of both
entities. Mr. Nguyen disclaims beneficial ownership of these shares,
except to the extent of his pecuniary interest arising from his interest
in Ecomm Ventures II, LLC. Also includes 3,624 shares held by SLF Partners
IV, LP. Mr. Nguyen is a limited partner of SLF Partners IV, LP.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
General
Upon the consummation of this offering and giving effect to the filing of
our sixth amended and restated certificate of incorporation, we will be
authorized to issue 120,000,000 shares of common stock and 10,000,000 shares of
undesignated preferred stock. The following is a summary description of our
capital stock. Our amended and restated bylaws and our sixth amended and
restated certificate of incorporation, to be effective after the closing of
this offering, provide further information about our capital stock.
Common Stock
As of August 31, 1999, there were 31,461,011 shares of common stock
outstanding, as adjusted to reflect the conversion of all outstanding shares of
preferred stock and class B non-voting common stock into common stock, and the
exercise of warrants to purchase 6,692 shares of common stock, upon the closing
of this offering, that were held of record by approximately 307 stockholders.
There will be 37,961,011 shares of common stock outstanding, assuming no
exercise of the underwriters' over-allotment option and, no exercise after
August 31, 1999 of outstanding options or warrants, and excluding 85,000 shares
of common stock issued in exchange for technology and related assets we
purchased and licensed in October 1999, after giving effect to the sale of the
shares of common stock to the public offered in this prospectus.
The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may
be applicable to any outstanding preferred stock, the holders of common stock
are entitled to receive dividends, if any, as may be declared from time to time
by the board of directors out of funds legally available. In the event of our
liquidation, dissolution or winding up, the holders of common stock are
entitled to share ratably in all assets remaining after payment of liabilities,
subject to prior distribution rights of preferred stock, if any, then
outstanding. The common stock has no preemptive or conversion rights or other
subscription rights. There are no redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common stock are
fully paid and nonassessable, and the shares of common stock to be issued upon
completion of this offering will be fully paid and nonassessable.
Warrants
Immediately following the closing of this offering, there will be an
outstanding warrant to purchase a total of 325,000 shares of common stock at an
exercise price of $14.00 per share. The warrant expires in September 2004.
Preferred Stock
The board of directors has the authority, without action by the
stockholders, to designate and issue the preferred stock in one or more series
and to fix the rights, preferences, privileges, and related restrictions,
including dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption, redemption prices, liquidation preferences, and the number
of shares constituting any series or the designation of the series. The
issuance of preferred stock may have the effect of delaying, deferring, or
preventing a change in control of us without further action by the stockholders
and may adversely affect the voting and other rights of the holders of common
stock. The issuance of
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<PAGE>
preferred stock with voting and conversion rights may adversely affect the
voting power of the holders of common stock, including the loss of voting
control to others. At present, we have no plans to issue any of our preferred
stock.
Registration Rights
After this offering, the holders of approximately 19,014,401 shares of
common stock will be entitled to rights relating to the registration of these
shares under the Securities Act. Under the terms of the agreement between us
and the holders of these registrable securities, if we propose to register any
of our securities under the Securities Act, either for our own account or for
the account of other security holders exercising registration rights, these
holders are entitled to notice of registration and are entitled to include
their shares of common stock in the registration. Holders of 13,885,443 shares
of the registrable securities are also entitled to specified demand
registration rights under which they may require us to file a registration
statement under the Securities Act at our expense to register their shares of
common stock, and we are required to use our best efforts to effect this
registration. Further, the holders of these demand rights may require us to
file additional registration statements on Form S-3. All of these registration
rights are subject to conditions and limitations, among them the right of the
underwriters of an offering to limit the number of shares included in the
registration and our right not to effect a requested registration within six
months following the initial offering of our securities.
Anti-takeover Effects of Delaware Law, and Provisions of the Sixth Amended and
Restated Certificate of Incorporation and Amended and Restated Bylaws
Selected provisions of Delaware law, and our sixth amended and restated
certificate of incorporation and amended and restated bylaws, effective upon
the closing of this offering, could make more difficult the acquisition of
InterTrust by means of a tender offer or a proxy contest and the removal of
incumbent officers and directors. These provisions, summarized below, are
expected to discourage particular types of coercive takeover practices and
inadequate takeover bids and to encourage persons seeking to acquire control of
InterTrust to negotiate first with us. We believe that the benefits of
increased protection of our potential ability to negotiate with the proponent
of an unfriendly or unsolicited proposal to acquire or restructure InterTrust
outweigh the disadvantages of discouraging these proposals. For example,
negotiation of these proposals could result in an improvement of their terms.
However, these provisions could have the effect of discouraging others from
making tender offers for our shares and, as a consequence, they might also
inhibit fluctuations in the market price of our shares that could result from
actual or rumored takeover attempts.
Delaware Anti-Takeover Law. We are subject to Section 203 of the Delaware
General Corporation Law, an anti-takeover law. Generally, Section 203 of the
Delaware General Corporation Law prohibits a publicly held Delaware corporation
from engaging in a business combination with an interested stockholder for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless:
. before the date of the business combination, the transaction is approved
by the board of directors of the corporation;
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<PAGE>
. upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, the interested stockholder owns at
least 85% of the outstanding stock; or
. on or after the date of the business combination, the business
combination is approved by the board and by the affirmative vote of at
least 66 2/3% of the outstanding voting stock that is not owned by the
interested stockholder.
A business combination includes a merger, asset sale, or other transaction
resulting in a financial benefit to the stockholder. An interested stockholder
is a person who, together with affiliates and associates, owns, or within three
years did own, 15% or more of the corporation's voting stock. The existence of
this provision would be expected to have an anti-takeover effect when
transactions are not approved in advance by our board of directors, including
discouraging attempts that might result in a premium over the market price for
the shares of common stock held by stockholders.
Stockholder Meetings. Under our amended and restated bylaws, special
meetings of the stockholders can only be called by our board of directors or by
the chairman of the board, the chief executive officer or at the request of
stockholders holding at least 20% of our capital stock.
Requirements for Advance Notification of Stockholder Nominations and
Proposals. Our amended and restated bylaws establish advance notice procedures
regarding stockholder proposals and the nomination of candidates for election
as directors, other than nominations made by or at the direction of our board
of directors or a related committee.
Elimination of Stockholder Action By Written Consent. Our sixth amended and
restated certificate of incorporation eliminates the right of stockholders to
act by written consent without a meeting.
Undesignated Preferred Stock. The authorization of undesignated preferred
stock makes it possible for our board of directors to issue preferred stock
with voting or other rights or preferences that could impede the success of any
attempt to change control of InterTrust. These and other provisions may have
the effect of deferring hostile takeovers or delaying changes in control or
management of InterTrust.
Amendment of Restated Charter. The amendment of any of the above provisions
would require approval by holders of at least 66 2/3% of our outstanding common
stock.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is Boston EquiServe
L.P.
The Nasdaq National Market Listing
We have applied to list our common stock on The Nasdaq Stock Market's
National Market under the symbol ITRU.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
As of August 31, 1999, we will have 37,961,011 shares of common stock
outstanding upon completion of this offering, assuming no exercise by the
underwriters of their over-allotment option to purchase up to 975,000 shares
and assuming no exercise of options after August 31, 1999. This number also
excludes 85,000 shares of common stock issued in exchange for technology and
related assets we purchased and licensed in October 1999. Of these shares, the
6,500,000 shares sold in this offering will be freely tradable without
restriction or further registration under the Securities Act, except that any
shares held by persons that directly or indirectly control, or are controlled
by, or are under common control with us, may generally only be sold in
compliance with the limitations of Rule 144 of the Securities Act described
below.
Sales of Restricted Shares
The remaining 31,461,011 shares of common stock are treated as restricted
shares under Rule 144 of the Securities Act. The number of shares of common
stock available for sale in the public market is limited by restrictions under
the Securities Act and lock-up agreements under which the holders of the shares
have agreed not to sell or dispose of any of their shares for a period of
180 days after the date of this prospectus without the prior written consent of
Credit Suisse First Boston Corporation. On the date of this prospectus,
7,163,091 shares, including the 6,500,000 shares being sold in this offering,
will be eligible for sale unless purchased by our affiliates or by some
participants in our directed share program who enter into lock up agreements.
Beginning 180 days after the date of this prospectus, or earlier with the
consent of Credit Suisse First Boston Corporation, 27,144,146 restricted shares
will become available for sale in the public market subject to the limitations
of Rule 144 of the Securities Act.
In general, under Rule 144 of the Securities Act as currently in effect,
beginning 90 days after this offering, any person who has beneficially owned
restricted shares for at least one year is entitled to sell within any three-
month period a limited number of shares of common stock. The limit is the
greater of:
. 1% of the then-outstanding shares of our common stock, approximately
379,610 shares after giving effect to this offering; or
. the average weekly trading volume of our common stock on The Nasdaq
National Market during the four calendar weeks preceding this sale.
Sales under Rule 144 of the Securities Act are subject to restrictions
relating to manner of sale, notice and the availability of current public
information about us. A person who is not our affiliate at any time during the
90 days preceding a sale, and who has beneficially owned shares for at least
two years, may sell these shares immediately following this offering without
complying with the volume limitations, manner of sale provisions or notice or
other requirements of Rule 144 of the Securities Act. However, the transfer
agent may require an opinion of counsel that a proposed sale of shares
qualifies under Rule 144 of the Securities Act before effecting a transfer of
these shares.
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<PAGE>
Before this offering, there has been no public market for our common stock
and no predictions can be made of the effect, if any, that the sale or
availability for sale of shares of additional common stock will have on the
market price of our common stock. Nevertheless, sales of substantial amounts of
these shares in the public market, or the perception that these sales could
occur, could cause a reduction in the market price of the common stock and
could impair our future ability to raise capital through an offering of our
equity securities.
Options
As of August 31, 1999, options to purchase a total of 6,882,994 shares of
common stock were outstanding and options to purchase 3,256,634 shares of
common stock were exercisable. Substantially all of the shares subject to
options are subject to lock-up agreements. An additional 180,722 shares of
common stock were available as of August 31, 1999 for future option grants or
direct issuances under the 1995 stock plan. In addition, in July 1998, the
board of directors and a majority of stockholders approved an increase in the
1995 stock plan by an additional 500,000 shares. However, as of the date of
this offering, our 1995 stock plan will terminate and no future options will be
granted under this plan. In addition, in July 1999, 1,900,000 shares were
reserved for issuance under our 1999 equity incentive plan, 350,000 shares were
reserved for issuance under our 1999 employee stock purchase plan and 350,000
shares were reserved for issuance under our 1999 non-employee directors option
plan.
Rule 701 under the Securities Act provides that shares of our common stock
acquired on the exercise of outstanding options may be resold by persons other
than our affiliates, beginning 90 days after the date of this prospectus,
subject only to the manner of sale provisions of Rule 144. Rule 701 also
provides that shares of common stock acquired on the exercise of outstanding
options may be resold by our affiliates, beginning 90 days after the date of
this prospectus, subject to all provisions of Rule 144 except its one-year
minimum holding period.
We intend to file one or more registration statements on Form S-8 under the
Securities Act to register all shares of common stock subject to outstanding
stock options and common stock issued or issuable under our 1999 equity
incentive plan. We expect to file the registration statement covering shares
offered under our 1999 equity incentive plan and the 1999 employee stock
purchase plan and 1999 non-employee directors option plan approximately 30 days
after the closing of this offering. These registration statements are expected
to become effective upon filing. Shares covered by these registration
statements will then be eligible for sale in the public markets, subject to the
lock-up agreements, if applicable.
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<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 1999, we have agreed to sell to the underwriters
named below, for whom Credit Suisse First Boston Corporation, J.P. Morgan
Securities, Inc., Salomon Smith Barney Inc. and SoundView Technology Group,
Inc. are acting as representatives, the following respective numbers of shares
of common stock:
<TABLE>
<CAPTION>
Number
Underwriter of Shares
----------- ----------
<S> <C>
Credit Suisse First Boston Corporation............................
J.P. Morgan Securities, Inc. .....................................
Salomon Smith Barney Inc. ........................................
SoundView Technology Group, Inc. .................................
----------
Total........................................................... 6,500,000
==========
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that, if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to 975,000 additional shares at the initial public offering price
less the underwriting discounts and commissions. This option may be exercised
only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to broker/dealers may be changed by
the representatives.
The following table summarizes the compensation and estimated expenses we
will pay.
<TABLE>
<CAPTION>
Per Share Total
----------------------------- -----------------------------
Without With Without With
Over-Allotment Over-Allotment Over-Allotment Over-Allotment
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting discounts
and commissions paid by
us..................... $ $ $ $
Expenses payable by us.. $ $ $ $
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
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<PAGE>
We, our officers and directors, and substantially all of our stockholders
have agreed that we and they will not offer, sell, contract to sell, announce
our intention to sell, pledge or dispose of, directly or indirectly, or file
with the Securities and Exchange Commission a registration statement under the
Securities Act relating to, any shares of our common stock or securities
convertible into or exchangeable or exercisable for any of our shares of common
stock without the prior consent of Credit Suisse First Boston Corporation for a
period of 180 days after the date of this prospectus, except in our case
issuances resulting from the exercise of employee options outstanding on the
date of this prospectus.
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to 1,300,000 shares of the common stock for current
and potential customers, others with whom we do business, existing
stockholders, employees, and other persons associated with us who have
expressed an interest in purchasing common stock in the offering. The number of
shares available for sale to the general public in the offering will be reduced
to the extent these persons purchase the reserved shares. Any reserved shares
not so purchased will be offered by the underwriters to the general public on
the same terms as the other shares. In addition, of the 1,300,000 shares,
Kistler Associates has the right to purchase up to approximately 227,000 shares
in the offering and an affiliate of Amerindo Investment Advisors has the right
to purchase up to approximately 227,000 shares in the offering.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments that the underwriters may be required
to make in that respect.
We have made application to list our shares of common stock on The Nasdaq
Stock Market's National Market under the symbol ITRU.
Before this offering, there has been no public market for our common stock.
The initial public offering price will be determined by negotiation between the
representatives and us. The principal factors to be considered in determining
the public offering price include:
. the information in this prospectus or available to the underwriters;
. the history and the prospects for the industry in which we will compete;
. the ability of our management;
. the prospects for our future earnings;
. the present state of our development and our current financial condition;
. the general condition of the securities markets at the time of this
offering; and
. the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies.
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions, and penalty bids in compliance with Regulation
M under the Exchange Act.
. Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
. Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
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<PAGE>
. Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed to cover
syndicate short positions.
. Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a syndicate covering transaction to
cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the common stock to be higher than it would be in
the absence of these transactions. These transactions may be effected on The
Nasdaq National Market or elsewhere and, if commenced, may be discontinued at
any time.
In July 1999, an affiliate of Credit Suisse First Boston Corporation
purchased 41,666 shares of our series E preferred stock for a total purchase
price of $499,992.
You should rely only on information contained in this document or to which
we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
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<PAGE>
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. As as a result, any resale of the common
stock in Canada must comply with applicable securities laws, which will vary
depending on the relevant jurisdiction, and which may require resales to be
made under available statutory exemptions or under a discretionary exemption
granted by the applicable Canadian securities regulatory authority. Purchasers
are advised to seek legal advice before any resale of the common stock.
Representations of Purchasers
Each purchaser of common stock in Canada who receives a purchase
confirmation will be considered to represent to us and the dealer from which
the purchase confirmation is received:
. that the purchaser is entitled under applicable provincial securities
laws to purchase the common stock without the benefit of a prospectus
qualified under those securities laws;
. that where required by law, the purchaser is purchasing as principal and
not as agent; and
. that the purchaser has reviewed the text above under "Resale
Restrictions."
Rights of Action--Ontario Purchasers
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
Enforcement of Legal Rights
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada
upon the issuer or these persons. All or a substantial portion of the assets of
the issuer and these persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or these
persons in Canada or to enforce a judgment obtained in Canadian courts against
the issuer or these persons outside of Canada.
Notice to British Columbia Residents
A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that the purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by the purchaser in this offering. The report must be in
the form attached to British Columbia Securities Commission Blanket Order BOR
#95/17, a copy of which may be obtained from us. Only one report must be filed
for common stock acquired on the same date and under the same prospectus
exemption.
Taxation and Eligibility for Investment
Canadian purchasers of common stock should consult their own legal and tax
advisors about the tax consequences of an investment in the common stock in
their particular circumstances and about the eligibility of the common stock
for investment by the purchasers under relevant Canadian legislation.
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<PAGE>
LEGAL MATTERS
The validity of the common stock being offered will be passed upon for
InterTrust by Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP,
Menlo Park, California and for the underwriters by Fenwick & West LLP, Palo
Alto, California. As of the date of this prospectus, some members and employees
of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP beneficially
owned an aggregate of 17,916 shares of our common stock.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at December 31, 1997 and 1998, and for each of the three
years in the period ended December 31, 1998, as described in their report. We
have included our financial statements in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on
their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act relating to the common stock
being offered. This prospectus does not contain all of the information
presented in the registration statement and the exhibits to the registration
statement. For further information about InterTrust and the common stock we are
offering, reference is made to the registration statement and the exhibits
filed as a part of the registration statement. Statements contained in this
prospectus concerning the contents of any contract or any other document
referred to summarize only the provisions of these documents that are material
to investors. You should refer to the exhibits to this registration statement
for the complete contents of these contracts and documents. The registration
statement, including the exhibits, may be inspected without charge at the
public reference facilities maintained by the Securities and Exchange
Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies of all or any part may be obtained from this office after payment of
fees prescribed by the Securities and Exchange Commission. The Securities and
Exchange Commission maintains a world wide web site that contains reports,
proxy and information statements and other information regarding registrants,
including us, that file electronically with the Securities and Exchange
Commission. The address of the site is http://www.sec.gov.
81
<PAGE>
INTERTRUST TECHNOLOGIES CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........................... F-2
Consolidated Balance Sheets................................................. F-3
Consolidated Statements of Operations....................................... F-4
Consolidated Statements of Stockholders' Equity (Deficit)................... F-5
Consolidated Statements of Cash Flows....................................... F-6
Notes to Consolidated Financial Statements.................................. F-8
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
InterTrust Technologies Corporation
We have audited the accompanying consolidated balance sheets of InterTrust
Technologies Corporation as of December 31, 1997 and 1998, and the related
consolidated statements of operations, stockholders' equity (deficit), and cash
flows for each of the three years in the period ended December 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of InterTrust
Technologies Corporation at December 31, 1997 and 1998, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Palo Alto, California
February 19, 1999,
except for Note 6,
as to which the date is
May 5, 1999
F-2
<PAGE>
INTERTRUST TECHNOLOGIES CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Pro Forma
Stockholders'
December 31, Equity
----------------- June 30, (Deficit) at
1997 1998 1999 June 30, 1999
-------- ------- ----------- -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....... $ 1,884 $ 5,575 $ 15,295
Accounts receivable............. 25 1,545 399
Other current assets............ 156 132 304
-------- ------- --------
Total current assets.......... 2,065 7,252 15,998
Property and equipment, net....... 967 938 885
Other assets...................... 79 90 137
-------- ------- --------
$ 3,111 $ 8,280 $ 17,020
======== ======= ========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Accounts payable................ $ 654 $ 549 $ 899
Accrued compensation............ 387 560 740
Other accrued liabilities....... 417 610 720
Convertible promissory note..... -- -- 1,000
Deferred revenue................ -- 594 669
-------- ------- --------
Total current liabilities..... 1,458 2,313 4,028
Deferred revenue--long-term
portion.......................... 2,500 7,981 8,347
Commitments
Stockholders' equity (deficit):
Convertible preferred stock,
$0.001 par value, issuable in
series; 20,000,000 shares
authorized, 6,300,388,
10,500,387, and 12,492,410
shares issued and outstanding
at December 31, 1997 and 1998
and June 30, 1999,
respectively, and none pro
forma.......................... 6 10 12 $ --
Common stock, $0.001 par value,
issuable in classes; 70,000,000
shares authorized, 13,790,260,
14,670,648, and 17,343,950
shares issued and outstanding
at December 31, 1997 and 1998
and June 30, 1999,
respectively, and 29,919,693
shares issued and outstanding
pro forma...................... 14 15 17 30
Additional paid-in capital...... 24,999 43,697 65,801 66,800
Deferred stock compensation..... -- -- (4,078) (4,078)
Notes receivable from
stockholders................... (68) (276) (236) (236)
Accumulated deficit............. (25,798) (45,460) (56,871) (56,871)
-------- ------- -------- -------
Total stockholders' equity
(deficit).................... (847) (2,014) 4,645 $ 5,645
-------- ------- -------- =======
$ 3,111 $ 8,280 $ 17,020
======== ======= ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
INTERTRUST TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Years Ended Six Months Ended
December 31, June 30,
--------------------------- -----------------
1996 1997 1998 1998 1999
------- -------- -------- ------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Licenses..................... $ -- $ 1,000 $ -- $ -- $ 309
Software support and training
services.................... 25 100 152 50 177
------- -------- -------- ------- --------
Total revenues............. 25 1,100 152 50 486
Cost of revenues:
Licenses..................... -- -- -- -- 42
Software support and training
services.................... 5 102 191 84 208
------- -------- -------- ------- --------
Total cost of revenues..... 5 102 191 84 250
------- -------- -------- ------- --------
Gross profit (loss)............ 20 998 (39) (34) 236
Operating costs and expenses:
Research and development..... 4,852 8,287 13,041 6,358 7,088
Sales and marketing.......... 1,573 2,717 3,870 1,902 2,449
General and administrative... 1,735 1,932 2,717 1,075 2,117
Amortization of deferred
stock compensation.......... -- -- -- -- 195
------- -------- -------- ------- --------
Total operating costs and
expenses.................. 8,160 12,936 19,628 9,335 11,849
------- -------- -------- ------- --------
Loss from operations........... (8,140) (11,938) (19,667) (9,369) (11,613)
Interest income................ 261 229 42 -- 202
Interest expense............... (81) -- (37) (9) --
------- -------- -------- ------- --------
Net loss....................... $(7,960) $(11,709) $(19,662) $(9,378) $(11,411)
======= ======== ======== ======= ========
Basic and diluted net loss per
share......................... $ (0.67) $ (0.86) $ (1.41) $ (0.68) $ (0.75)
======= ======== ======== ======= ========
Shares used in computing basic
and diluted
net loss per share............ 11,913 13,639 13,966 13,777 15,307
======= ======== ======== ======= ========
Pro forma basic and diluted net
loss per share ............... $ (0.91) $ (0.43)
======== ========
Shares used in computing pro
forma basic and diluted
net loss per share............ 21,688 26,808
======== ========
</TABLE>
See accompanying notes.
F-4
<PAGE>
INTERTRUST TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Convertible Notes Total
Preferred Stock Common Stock Additional Deferred Receivable Stockholders'
----------------- ------------------ Paid-In Stock From Accumulated Equity
Shares Amount Shares Amount Capital Compensation Stockholders Deficit (Deficit)
---------- ------ ---------- ------ ---------- ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December
31, 1995............ -- $-- 10,454,240 $11 $ 1,732 $ -- $ -- $ (6,129) $(4,386)
Issuance of series
A preferred stock,
net................ 3,966,666 4 -- -- 9,513 -- -- -- 9,517
Issuance of series
B preferred stock,
net................ 1,400,234 1 -- -- 5,618 -- -- -- 5,619
Issuance of class A
common stock upon
exercise of war-
rants.............. -- -- 54,560 -- 41 -- -- -- 41
Conversion of con-
vertible promissory
notes and accrued
interest
into class A common
stock.............. -- -- 2,781,958 3 3,475 -- -- -- 3,478
Issuance of class A
common stock upon
exercise of op-
tions.............. -- -- 207,332 -- 136 -- -- -- 136
Issuance of class B
common stock upon
exercise of op-
tions.............. -- -- 179,700 -- 73 -- -- -- 73
Repurchase of class
A common stock..... -- -- (84,446) -- (53) -- -- -- (53)
Compensation re-
lated to stock op-
tions granted...... -- -- -- -- 244 -- -- -- 244
Net loss........... -- -- -- -- -- -- (7,960) (7,960)
---------- --- ---------- --- ------- ------- ----- -------- -------
Balance at December
31, 1996............ 5,366,900 5 13,593,344 14 20,779 -- -- (14,089) 6,709
Issuance of series
B preferred stock.. 933,488 1 -- -- 3,999 -- -- -- 4,000
Issuance of class A
common stock upon
exercise of war-
rant............... -- -- 16,000 -- 20 -- -- -- 20
Issuance of class A
common stock upon
exercise of op-
tions.............. -- -- 138,916 -- 115 -- (68) -- 47
Issuance of class B
common stock upon
exercise of op-
tion............... -- -- 42,000 -- 37 -- -- -- 37
Compensation re-
lated to stock op-
tion granted....... -- -- -- -- 49 -- -- -- 49
Net loss........... -- -- -- -- -- -- -- (11,709) (11,709)
---------- --- ---------- --- ------- ------- ----- -------- -------
Balance at December
31, 1997............ 6,300,388 6 13,790,260 14 24,999 -- (68) (25,798) (847)
Issuance of series
B preferred stock.. 3,484,144 3 -- -- 14,828 -- -- -- 14,831
Issuance of series
B preferred stock
upon conversion of
convertible note
payable and accrued
interest........... 715,855 1 -- -- 3,066 -- -- -- 3,067
Issuance of class A
common stock upon
exercise of op-
tions.............. -- -- 201,568 -- 228 -- (47) -- 181
Issuance of class B
common stock upon
exercise of op-
tions.............. -- -- 617,332 1 500 -- (319) -- 182
Forgiveness of note
receivable from
stockholder........ -- -- -- -- -- -- 106 -- 106
Issuance of class A
common stock upon
net exercise of op-
tions
and related compen-
sation............. -- -- 28,631 -- 50 -- -- -- 50
Issuance of class A
common stock upon
net exercise of
warrant
and related compen-
sation............. -- -- 32,857 -- 26 -- -- -- 26
Payments on notes
receivable from
stockholders....... -- -- -- -- -- -- 52 -- 52
Net loss........... -- -- -- -- -- -- -- (19,662) (19,662)
---------- --- ---------- --- ------- ------- ----- -------- -------
Balance at December
31, 1998............ 10,500,387 10 14,670,648 15 43,697 -- (276) (45,460) (2,014)
Issuance of series
C preferred stock
(unaudited)........ 850,000 1 -- -- 5,006 -- -- -- 5,007
Issuance of series
D preferred stock
(unaudited)........ 1,142,023 1 -- -- 9,706 -- -- -- 9,707
Issuance of class A
common stock upon
exercise
of options (unau-
dited)............. -- -- 1,560,798 1 2,267 -- -- -- 2,268
Issuance of class B
common stock upon
exercise
of options (unau-
dited)............. -- -- 819,196 1 519 -- -- -- 520
Issuance of class A
common stock upon
exercise
of warrants (unau-
dited)............. -- -- 293,308 -- 333 -- -- -- 333
Deferred stock com-
pensation (unau-
dited)............. -- -- -- -- 4,273 (4,273) -- -- --
Amortization of de-
ferred compensation
(unaudited)........ -- -- -- -- -- 195 -- -- 195
Forgiveness of note
receivable from
stockholders (unau-
dited)............. -- -- -- -- -- -- 40 -- 40
Net loss (unau-
dited)............. -- -- -- -- -- -- -- (11,411) (11,411)
---------- --- ---------- --- ------- ------- ----- -------- -------
Balance at June 30,
1999 (unaudited).... 12,492,410 $12 17,343,950 $17 $65,801 $(4,078) $(236) $(56,871) $ 4,645
========== === ========== === ======= ======= ===== ======== =======
</TABLE>
See accompanying notes.
F-5
<PAGE>
INTERTRUST TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended Six Months Ended
December 31, June 30,
--------------------------- -----------------
1996 1997 1998 1998 1999
------- -------- -------- ------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Operating activities
Net loss....................... $(7,960) $(11,709) $(19,662) $(9,378) $(11,411)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and
amortization................ 119 283 538 211 263
Amortization of deferred
stock compensation and other
stock related compensation
charges..................... 264 99 182 -- 275
Issuance of preferred stock
for accrued interest........ -- -- 37 -- --
Changes in operating assets
and liabilities:
Accounts receivable........ (25) -- (1,520) -- 1,146
Other current assets....... (33) (111) 24 (2) (172)
Accounts payable........... 261 187 (105) 229 350
Accrued compensation....... 172 190 173 101 180
Other accrued liabilities.. (326) 214 193 177 110
Deferred revenue........... 1,500 1,000 6,075 2,000 441
------- -------- -------- ------- --------
Net cash used in operating
activities.................... (6,028) (9,847) (14,065) (6,662) (8,818)
Investing activities
Capital expenditures........... (578) (662) (509) (116) (210)
Other noncurrent assets........ 15 (20) (11) 4 (47)
------- -------- -------- ------- --------
Net cash used in investing
activities.................... (563) (682) (520) (112) (257)
Financing activities
Proceeds from issuance of
convertible
promissory notes.............. -- -- 3,030 3,030 1,000
Repayment of convertible
promissory notes.............. (750) -- -- -- --
Proceeds from issuance of
preferred stock, net.......... 15,136 4,000 14,831 3,900 14,714
Proceeds from issuance of
common stock, net............. 178 54 363 115 3,081
Proceeds from repayment of
notes receivable from
stockholders.................. -- -- 52 -- --
------- -------- -------- ------- --------
Net cash provided by financing
activities.................... 14,564 4,054 18,276 7,045 18,795
------- -------- -------- ------- --------
Net increase (decrease) in cash
and cash equivalents.......... 7,973 (6,475) 3,691 271 9,720
Cash and cash equivalents at
beginning of period........... 386 8,359 1,884 1,884 5,575
------- -------- -------- ------- --------
Cash and cash equivalents at
end of period................. $ 8,359 $ 1,884 $ 5,575 $ 2,155 $ 15,295
======= ======== ======== ======= ========
</TABLE>
See accompanying notes.
F-6
<PAGE>
INTERTRUST TECHNOLOGIES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Six Months
Years Ended Ended June
December 31, 30,
------------------ ------------
1996 1997 1998 1998 1999
------ ---- ------ ---- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Supplemental schedule of cash flow information
Interest paid................................. $ 90 $ -- $ -- $ -- $ --
====== ==== ====== ==== =======
Supplemental schedule of noncash financing
activities
Conversion of convertible promissory notes and
accrued interest
into series B convertible preferred stock.... $ -- $ -- $3,067 $ -- $ --
====== ==== ====== ==== =======
Conversion of convertible promissory notes and
accrued interest into
class A common stock......................... $3,477 $ -- $ -- $ -- $ --
====== ==== ====== ==== =======
Increase in deferred stock compensation....... $ -- $ -- $ -- $ -- $(4,273)
====== ==== ====== ==== =======
</TABLE>
See accompanying notes.
F-7
<PAGE>
INTERTRUST TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
(Information as of June 30, 1999 and for the six months ended
June 30, 1998 and 1999 is unaudited)
1.ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
InterTrust Technologies Corporation (InterTrust) has developed a general-
purpose digital rights management (DRM) platform to serve as a foundation for
providers of digital information, technology, and commerce services to
participate in a global e-commerce system. DRM technologies manage rights and
interests in digital information. InterTrust was formed and incorporated in
January 1990. From inception through December 1998, InterTrust's efforts were
principally devoted to research and development, raising capital, recruiting
personnel, and establishing partner relationships. InterTrust shipped the
general availability version of its Commerce software at the end of fiscal
1998, and is therefore no longer in the development stage.
InterTrust has incurred operating losses to date and had an accumulated
deficit of $56.9 million at June 30, 1999. InterTrust's activities have been
primarily financed through private placements of equity securities. InterTrust
may need to raise additional capital through the issuance of debt or equity
securities. This financing may not be available on terms satisfactory to
InterTrust, if at all.
Principles of Consolidation
The consolidated financial statements include the accounts of InterTrust and
its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Interim Financial Information
The financial information as of June 30, 1999 and for the six months ended
June 30, 1998 and 1999 is unaudited but includes all adjustments, consisting
only of normal recurring adjustments, that InterTrust's management considers
necessary for the fair presentation of its financial position, operating
results, and cash flows for the interim date and periods. Results for the six
months ended June 30, 1999 are not necessarily indicative of results to be
expected for the full fiscal year of 1999 or for any future period.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Revenue Recognition
InterTrust recognizes revenue from license fees, transaction fees, and
software support and training services. License revenue, net of any discounts
granted, is recognized after execution of a
F-8
<PAGE>
INTERTRUST TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of June 30, 1999 and for the six months ended
June 30, 1998 and 1999 is unaudited)
license agreement and delivery of the product, provided there are no remaining
obligations relating to development, upgrades, new releases, or other future
deliverables, and provided that the license fee is fixed or determinable, and
collection of the fee is probable. For contracts entered after January 1, 1998,
InterTrust allocates revenue between the elements of the arrangements,
including the license, software support and training services, and the rights
to unspecified upgrades and new releases based on the vendor specific evidence
of the fair value of each of the elements. If Intertrust does not have vendor
specific objective evidence of the fair value of the undelivered elements,
license revenue is not recognized for the delivered elements. InterTrust's
license agreements generally include the right to obtain access to upgrades and
new releases, on a when and if available basis, for a specified period. Under
these circumstances, the license payments received in advance of revenue
recognition, are deferred and recognized on a subscription basis over the
period of obligation beginning upon delivery of the licensed product. In
addition, under license agreements where Intertrust is obligated to provide
specified upgrades and does not have vendor specific objective evidence of fair
value of the specified upgrade, all of the license revenue is deferred until
the specified upgrade has been delivered. Upon delivery of the specified
upgrade, license revenue is recognized using the subscription method.
InterTrust began recognizing revenue under some license agreements in
January 1999, subsequent to shipment of the general availability version of its
Commerce software at the end of fiscal 1998. Under license agreements with two
preferred stockholders, InterTrust had received a total of $4,000,000 from
nonrefundable license payments as of December 31, 1998.
In May 1999, InterTrust received a license fee in the form of a minority
equity position in a non-public entity in exchange for a seven year technology
license. InterTrust received approximately 1.7 million shares of common stock
of the licensee, which it believes represents approximately 10% of the
outstanding shares of the licensee as of June 30, 1999. Because the entity is a
recently formed, privately held company and we were unable to obtain sufficient
evidence of the fair value of the common stock of the entity, we did not record
revenue or deferred revenue from the license fee. InterTrust is obligated to
provide unspecified upgrades and new releases, on a when and if available
basis, to the licensee over a two year period under the agreement for
additional fees. InterTrust is not obligated to provide any funding to the
licensee for the development of the licensee's software.
For contracts entered into prior to 1998, InterTrust recognizes revenue as
the amounts are earned under the related agreements, provided no significant
obligations exist and the related receivable is deemed collectible, in
accordance with Statement of Position 91-1, "Software Revenue Recognition."
InterTrust's license revenue in 1997 was derived from a license of a pre-
commercial version of its software.
InterTrust's license agreements also require the payment of a percentage
transaction fee based on the fulfillment of a transaction that utilizes its
technology. InterTrust's partners are required to pay all amounts due for
transaction fees within 30 to 90 days after the end of each quarter.
InterTrust's
F-9
<PAGE>
INTERTRUST TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of June 30, 1999 and for the six months ended
June 30, 1998 and 1999 is unaudited)
revenue recognition policy relating to transaction fees is to recognize the
revenue when the amounts due are known, which will generally be in the quarter
subsequent to the transaction. Prepaid transaction fees are recorded as
deferred revenue and will be recognized when the related transactions occur.
InterTrust had received $1,000,000 in prepaid transaction fees from a preferred
stockholder, which is included in deferred revenue as of December 31, 1998 and
June 30, 1999. No transaction revenue has been recognized from commercial
transactions or services as of June 30, 1999.
Software support and training services, which typically include the right to
telephone and online support and customer training, are generally provided for
in the license agreements for an agreed upon amount. Software support and
training service revenue is recognized over the period in which the services
are provided, generally two years. Certain of InterTrust's partners were
utilizing pre-commercial versions of its product in the development of their
own solutions and, as a result, were utilizing InterTrust's software support
and training services prior to the shipment of its commercial release in
December 1998. Costs incurred to provide software support and training services
are included as a component of cost of revenues.
InterTrust adopted Statement of Position 97-2, "Software Revenue
Recognition" (SOP 97-2), and Statement of Position 98-4, "Deferral of the
Effective Date of a Provision of 97-2" (SOP 98-4), as of January 1, 1998.
SOP 97-2 and SOP 98-4 provide guidance for recognizing revenue on software
transactions and supersede SOP 91-1. The adoption of SOP 97-2 and SOP 98-4 did
not have a material impact on InterTrust's operating results.
In December 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-9, "Modifications of SOP 97-2, Software Revenue
Recognition With Respect to Certain Transactions" (SOP 98-9). SOP 98-9 amends
SOP 98-4 to extend the deferral of the application of some passages provided by
SOP 98-4 through fiscal years beginning on or before March 15, 1999. All
provisions of SOP 98-9 are effective for transactions entered into in fiscal
years beginning after March 15, 1999. InterTrust believes the adoption of SOP
98-9 will not have a material effect on its results of operations or financial
condition.
Cash and Cash Equivalents
InterTrust considers all highly liquid instruments with insignificant
interest rate risk and maturities of three months or less to be cash
equivalents. At December 31, 1998 and June 30, 1999, cash equivalents consist
of money market funds.
Concentration of Credit Risk
Financial instruments that potentially subject InterTrust to a concentration
of credit risk consist of cash, cash equivalents, and accounts receivable. Cash
and cash equivalents are deposited with a high-credit quality financial
institution. InterTrust's accounts receivable are primarily derived from
F-10
<PAGE>
INTERTRUST TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of June 30, 1999 and for the six months ended
June 30, 1998 and 1999 is unaudited)
customers located in North America, Europe, and Asia. InterTrust performs
ongoing credit evaluations of its customers but does not require collateral
from its customers. When required, InterTrust maintains allowances for credit
losses, and to date, these losses have been within management's expectations.
One customer, who is also a preferred stockholder, accounted for 91% of
total revenues in 1997 and 40% of total revenues in the six months ended June
30, 1999. A second customer, also a preferred stockholder, accounted for 100%,
9%, and 66% of total revenues in 1996, 1997, and 1998, respectively, and 100%
and 24% of total revenues in the six months ended June 30, 1998 and 1999,
respectively. Two customers accounted for 13% and 21% of total revenues in
1998. One customer accounted for 13% of total revenue for the six months ended
June 30, 1999. One customer accounted for 98% of accounts receivable at
December 31, 1998. Two customers accounted for 63% and 10% of accounts
receivable at June 30, 1999.
Fair Value of Financial Instruments
The carrying amounts of InterTrust's financial instruments, which include
cash and cash equivalents, accounts receivable, current liabilities, and notes
receivable from stockholders, approximate their fair value.
Investment in Non-Public Entity
In May 1999, InterTrust received an approximately 10% equity interest in a
non-public entity as consideration for a license fee. Because the entity is a
recently formed, privately held company and we were unable to obtain sufficient
evidence of the fair value of the common stock of the entity, we did not record
revenue or deferred revenue from the license fee.
Property and Equipment
Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets,
generally three years. Leasehold improvements are amortized using the straight-
line method over the shorter of the estimated useful lives of the assets or the
terms of the leases.
Stock-Based Compensation
InterTrust accounts for stock-based compensation for awards to employees
using the intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," and has adopted the
disclosure only alternative of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" (FAS 123). InterTrust accounts
for stock-based compensation awards to non-employees using the fair value
method prescribed in FAS 123.
F-11
<PAGE>
INTERTRUST TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of June 30, 1999 and for the six months ended
June 30, 1998 and 1999 is unaudited)
Research and Development
Research and development expenditures are expensed to operations as
incurred. Costs incurred in the development of new software and substantial
enhancements to existing software are expensed as incurred until technological
feasibility of the software has been established, at which time any additional
costs would be capitalized in accordance with Statement of Financial Accounting
Standards No. 86, "Accounting for the Costs of Computer Software to Be Sold,
Leased, or Otherwise Marketed." To date, InterTrust's software development has
been completed concurrently with the establishment of technological feasibility
and, as a result, no research and development costs have been capitalized.
Advertising Expense
InterTrust recognizes advertising expense as incurred. Advertising expense
has been immaterial in all periods since inception.
Comprehensive Loss
InterTrust adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" (FAS 130), as of December 31, 1998. Under FAS
130, InterTrust is required to display comprehensive income (loss) and its
components as part of the financial statements. Other comprehensive income
includes changes in equity that are excluded from net income (loss).
Specifically, FAS 130 requires unrealized holding gains and losses on
available-for-sale securities to be included in accumulated and other
comprehensive income. InterTrust has no material components of other
comprehensive loss and, as a result, the comprehensive loss is the same as the
net loss for all periods presented.
Net Loss Per Share, Pro Forma Net Loss per Share, and Pro Forma Stockholders'
Equity
Basic and diluted net loss per share are presented in conformity with
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (FAS
128), for all periods presented. Basic and diluted net loss per share have been
computed using the weighted average number of shares of common stock
outstanding during the period, less the weighted average number of shares
subject to repurchase.
Pro forma net loss per share has been computed as described above but also
gives effect, under Securities and Exchange Commission guidance, to the
conversion of convertible preferred stock not included above that will
automatically convert upon completion of InterTrust's initial public offering
into common stock (using the as-converted method). If the offering contemplated
by this prospectus is consummated, all of the convertible preferred stock
outstanding as of June 30, 1999 and the outstanding convertible promissory note
will automatically be converted into an aggregate of 12,575,743 shares of
common stock. The number of shares to be issued upon conversion of the
convertible promissory note was calculated using the price of the series E
financing completed in July 1999 (see note 7). Pro forma stockholders' equity
at June 30, 1999, as adjusted for the conversion of the convertible preferred
stock and convertible promissory note, is disclosed on the consolidated balance
sheet.
F-12
<PAGE>
INTERTRUST TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of June 30, 1999 and for the six months ended
June 30, 1998 and 1999 is unaudited)
Historical and pro forma basic and diluted net loss per share are as follows
(in thousands, except per share amounts):
<TABLE>
<CAPTION>
Six Months Ended
Years Ended December 31, June 30,
--------------------------- -----------------
1996 1997 1998 1998 1999
------- -------- -------- ------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Historical:
Net loss...................... $(7,960) $(11,709) $(19,662) $(9,378) $(11,411)
======= ======== ======== ======= ========
Basic and diluted shares:
Weighted average shares of
common stock outstanding.... 11,913 13,681 14,186 13,904 15,609
Less weighted average shares
subject to repurchase....... -- (42) (220) (127) (302)
------- -------- -------- ------- --------
Weighted average shares of
common stock outstanding
used in computing basic and
diluted net per loss share.. 11,913 13,639 13,966 13,777 15,307
======= ======== ======== ======= ========
Basic and diluted net loss
per share................... $ (0.67) $ (0.86) $ (1.41) $ (0.68) $ (0.75)
======= ======== ======== ======= ========
Pro Forma:
Net loss...................... $(19,662) $(11,411)
======== ========
Weighted average shares of
common stock
outstanding used in computing
basic and diluted
net loss per share........... 13,966 15,307
Adjustment to reflect the
assumed conversion of
convertible preferred stock
from the date of issuance.... 7,722 11,501
-------- --------
Weighted average shares used
in computing pro forma basic
and diluted net loss per
share........................ 21,688 26,808
======== ========
Pro forma basic and diluted
net loss per share .......... $ (0.91) $ (0.43)
======== ========
</TABLE>
If InterTrust had reported net income, diluted net income per share would
have included the shares used in the computation of pro forma net loss per
share as well as the treasury stock impact of approximately 6,172,000,
8,637,000, 9,084,000, 9,225,000, and 7,074,000 shares purchasable under
outstanding options and warrants not included above for the years ended
December 31, 1996, 1997, and 1998, and for the six months ended June 30, 1998
and 1999, respectively. The number of common equivalent shares from options and
warrants would be determined on a weighted average basis using the treasury
stock method. The convertible promissory note outstanding at June 30, 1999 was
excluded from the common equivalent share calculation, as it would have been
antidilutive. If InterTrust had reported net income, shares used in computing
diluted net income per share at June 30, 1999 would have included an additional
83,333 shares from the conversion of the convertible promissory note.
Segments
Effective January 1, 1998, InterTrust adopted Statement of Financial
Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and
Related Information" (FAS 131). FAS 131 changes the way companies report
selected segment information in annual financial statements and requires
companies to report selected segment information in interim financial reports
to
F-13
<PAGE>
INTERTRUST TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of June 30, 1999 and for the six months ended
June 30, 1998 and 1999 is unaudited)
stockholders. FAS 131 also establishes standards for related disclosures about
products and services, geographic areas, and major customers. InterTrust
operates solely in one segment, and therefore there is no impact on
InterTrust's financial statements as a result of adopting FAS 131. For the year
ended December 31, 1998, revenue from customers outside the United States was
$52,000 and was derived from customers in Europe. For the six months ended June
30, 1999, customers from Asia and Europe accounted for revenue totaling
approximately $194,000 and $130,000, respectively.
Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (FAS 133), which is required to be adopted in years
beginning after June 15, 2000. To date, InterTrust has not used derivatives,
and management anticipates that the adoption of FAS 133 will not have a
significant effect on InterTrust's results of operations or financial position.
2.PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and consist of the following (in
thousands):
<TABLE>
<CAPTION>
December 31,
-------------- June 30,
1997 1998 1999
------ ------ -----------
(Unaudited)
<S> <C> <C> <C>
Computer equipment and software..................... $1,271 $1,465 $ 1,665
Furniture and equipment............................. 119 193 203
Leasehold improvements.............................. 56 56 56
------ ------ -------
1,446 1,714 1,924
Accumulated depreciation and amortization........... (479) (776) (1,039)
------ ------ -------
$ 967 $ 938 $ 885
====== ====== =======
</TABLE>
3.COMMITMENTS
InterTrust leases its facilities under agreements expiring in August 1999
(see note 7). Rent under the agreements is expensed to operations on a
straight-line basis over the terms of the leases. Future minimum rental
commitments under operating leases entered into as of December 31, 1998 are
approximately $355,000 in 1999. Rent expense for all operating leases was
approximately $167,000, $258,000, $490,000, and $320,000 in 1996, 1997, 1998,
and the six months ended June 30, 1999, respectively.
F-14
<PAGE>
INTERTRUST TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of June 30, 1999 and for the six months ended
June 30, 1998 and 1999 is unaudited)
4.STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock
InterTrust is authorized to issue 20,000,000 shares of convertible preferred
stock, designated in series (see Note 7). A summary of convertible preferred
stock is as follows (in thousands, except share amounts):
<TABLE>
<CAPTION>
Issued and Outstanding Shares Liquidation Preference
-------------------------------- -----------------------
December 31,
Shares -------------------- June 30, December 31, June 30,
Designated 1997 1998 1999 1998 1999
---------- --------- ---------- ----------- ------------ ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Series A................ 5,000,000 3,966,666 3,966,666 3,966,666 $10,135 $10,135
Series B................ 6,533,722 2,333,722 6,533,721 6,533,721 27,997 27,997
Series C................ 850,000 -- -- 850,000 -- 5,007
Series D................ 1,294,118 -- -- 1,142,023 -- 9,707
--------- ---------- ---------- ------- -------
6,300,388 10,500,387 12,492,410 $38,132 $52,846
========= ========== ========== ======= =======
</TABLE>
The board of directors has the authority to issue the preferred stock in one
or more series and to fix its rights, preferences, privileges, and
restrictions, including dividend rights, dividend rates, conversion rights,
voting rights, terms of redemption, redemption prices, liquidation preferences,
and the number of shares constituting any series or designation of the series.
In compliance with the series A preferred stock financing, InterTrust is
restricted from authorizing or issuing any other equity securities,
reclassifying any equity securities resulting in preferences or priorities to
those holders of series A preferred stock, declaring or paying a dividend in
excess of 10% of its net income, amending or appealing the certificate of
incorporation so as to affect the voting rights of the series A stockholders,
or increasing or decreasing its total number of authorized shares without the
consent of a majority of the holders of series A preferred stock.
In the event of liquidation, the series A preferred stock has preference
over the series B, C, and D preferred stock and common stock in the amount of
$2.555 per share, plus declared but unpaid dividends. Remaining assets would
then be distributed pro rata based on (i) the number of shares of class A
common stock into which the series A preferred stock converts, (ii) three times
the number of shares of class A common stock into which the series B, C, and D
preferred stock converts, and (iii) the then outstanding shares of common
stock. Series A preferred stockholders are to receive distributions to a
maximum aggregate amount of $7.665 per share. Series B, C, and D preferred
stockholders are to receive distributions until their total distributions equal
the aggregate of their original purchase prices of $4.285, $5.89, and $8.50 per
share, respectively.
Each of the series B, C, and D stockholders will recommence participation in
the distribution of any remaining assets once the common stockholders receive
distributions equal to the original per share purchase price of the applicable
preferred stock. Participation would be pro rata with the common stock
outstanding, assuming a one-for-one conversion of the preferred stock to class
A common stock.
F-15
<PAGE>
INTERTRUST TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of June 30, 1999 and for the six months ended
June 30, 1998 and 1999 is unaudited)
Holders of preferred stock are entitled to one vote for each share of common
stock into which the shares are converted. Each share of series A preferred
stock entitles the holder to receive annual noncumulative dividends in
preference to holders of series B, C, D, and E preferred stock and common
stock, when and if declared by the board of directors. If dividends are
declared on series A preferred stock, the dividends must be declared at an
annual rate of $0.23 per share. After payment of any declared annual dividends,
the preferred stockholders will receive dividends, when and if declared by the
board of directors, on an as-if-converted basis in an amount equal to the
dividends paid to any other holders of outstanding stock. As of June 30, 1999,
no dividends had been declared.
Each share of preferred stock is convertible, at the option of the holder,
into class A common stock, subject to adjustments for antidilution. In
addition, the preferred shares will automatically convert into common stock
upon an underwritten public offering of InterTrust's common stock at not less
than $3.75 per share, that results in aggregate proceeds to InterTrust in
excess of $10,000,000. The holders of preferred stock also have registration
rights. InterTrust has a right of first refusal should any preferred
stockholder desire to sell or transfer its shares. The repurchase price must be
substantially the same price and the repurchase terms must be substantially the
same terms offered to the third party. The right of first refusal terminates
upon an underwritten public offering of InterTrust's common stock.
Common Stock
Authorized common stock has been designated as class A voting common stock
and class B nonvoting common stock. The rights, preferences, privileges, and
restrictions of class A voting common stock and class B nonvoting common stock
are identical in all respects except for voting rights. The class B non-voting
common stock will convert to class A voting common stock upon the consummation
of a public offering of InterTrust's common stock. A summary of common stock is
as follows:
<TABLE>
<CAPTION>
Issued and Outstanding Shares
---------------------------------
December 31,
Shares --------------------- June 30,
Designated 1997 1998 1999
---------- ---------- ---------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
Class A............................ 50,000,000 12,885,920 13,148,976 15,003,082
Class B............................ 20,000,000 904,340 1,521,672 2,340,868
---------- ---------- ----------
13,790,260 14,670,648 17,343,950
========== ========== ==========
</TABLE>
At December 31, 1998, common stock was reserved for issuance as follows:
<TABLE>
<S> <C>
Conversion of preferred stock................................... 10,500,387
Exercise of outstanding stock options........................... 8,457,989
Shares of common stock available for grant under the 1995 stock
option plan.................................................... 101,846
Exercise of warrants............................................ 626,016
----------
19,686,238
==========
</TABLE>
F-16
<PAGE>
INTERTRUST TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of June 30, 1999 and for the six months ended
June 30, 1998 and 1999 is unaudited)
During 1998, InterTrust received a note receivable in the amount of
approximately $319,000 from one of its officers upon his exercise of an option
to purchase 320,000 shares of common stock. As of December 31, 1998,
approximately 214,000 of these shares were subject to repurchase by InterTrust
at the original exercise price. The repurchase right lapses ratably over the
48-month vesting period of the underlying option. The note bears interest at 8%
per annum and is secured by the related stock and general assets of the
officer. The note and related interest are being forgiven over a period of four
years of employment. InterTrust is recording compensation expense as the note
is forgiven.
1995 Stock Option Plan
In October 1995, the board of directors adopted the 1995 stock option plan
(the 1995 option plan) for issuance of class A common stock to eligible
participants. Incentive stock options granted under the 1995 option plan are at
prices not less than the fair values as determined by the board of directors,
while nonstatutory options granted under the plan are at prices not less than
85% of the fair values on the respective dates of the grant. Options expire
after ten years. Options generally vest ratably over a period of no more than
five years.
Non Plan Stock Options
InterTrust's board of directors has granted to eligible participants
nonqualified stock options to purchase shares of class B common stock. The
options generally expire up to six years after the date of grant or earlier if
employment or relationship is terminated. The options generally become
exercisable ratably over a period of no more than four years. The exercisable
options may be exercised in whole or in part but no more frequently than twice
a year and in amounts of no less than 250 shares. There were no options to
purchase shares of class B common stock available for grant at December 31,
1998.
During 1996 and 1997, InterTrust issued options outside of the 1995 option
plan to purchase 160,000 shares of class A common stock at $1.25 per share and
298,332 shares of class A common stock at $1.50 per share, respectively.
F-17
<PAGE>
INTERTRUST TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of June 30, 1999 and for the six months ended
June 30, 1998 and 1999 is unaudited)
Information about stock option activity is summarized as follows:
<TABLE>
<CAPTION>
Shares of Common Stock
------------------------------------ Weighted
1995 Option Plan Average
----------------------- Nonplan Exercise
Available Outstanding Outstanding Price
---------- ----------- ----------- --------
<S> <C> <C> <C> <C>
Balance at December 31, 1995... 2,009,600 490,400 3,306,480 $0.51
Shares authorized............. 880,000 -- -- --
Options granted............... (2,326,000) 2,326,000 160,000 $1.16
Options exercised............. -- (207,332) (179,700) $0.54
Unvested shares repurchased... 84,446 -- -- --
Options canceled.............. 32,000 (32,000) (364,852) $0.35
---------- ---------- ----------
Balance at December 31, 1996... 680,046 2,577,068 2,921,928 $0.81
Shares authorized............. 1,600,000 -- -- --
Options granted............... (2,823,300) 2,823,300 882,332 $1.46
Options exercised............. -- (138,916) (92,000) $0.75
Options canceled.............. 720,044 (720,044) (274,016) $1.02
---------- ---------- ----------
Balance at December 31, 1997... 176,790 4,541,408 3,438,244 $1.08
Shares authorized............. 1,200,000 -- -- --
Options granted............... (1,536,000) 1,536,000 80,000 $2.64
Options exercised............. -- (259,275) (617,332) $0.91
Options canceled.............. 261,056 (261,056) -- $1.45
---------- ---------- ----------
Balance at December 31, 1998... 101,846 5,557,077 2,900,912 $1.39
Shares authorized
(unaudited).................. 750,000 -- -- --
Options granted (unaudited)... (933,600) 933,600 22,028 $4.75
Options exercised
(unaudited).................. -- (1,264,548) (1,117,528) $1.17
Options canceled (unaudited).. 219,878 (219,878) (70,252) $2.04
---------- ---------- ----------
Balance at June 30, 1999
(unaudited)................... 138,124 5,006,251 1,735,160 $1.91
========== ========== ==========
Exercisable and vested at
December 31, 1998............. 2,026,979 2,529,244
========== ==========
Exercisable and vested at June
30, 1999 (unaudited).......... 1,527,885 1,675,160
========== ==========
Shares of common stock subject
to repurchase at December 31,
1998.......................... -- 213,334
========== ==========
Shares of common stock subject
to repurchase at
June 30, 1999 (unaudited)..... -- 405,002
========== ==========
</TABLE>
F-18
<PAGE>
INTERTRUST TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of June 30, 1999 and for the six months ended
June 30, 1998 and 1999 is unaudited)
The following table summarizes information about options outstanding under
the 1995 option plan and nonplan options at December 31, 1998:
<TABLE>
<CAPTION>
Options Exercisable
Options Outstanding ---------------------
---------------------------------------------------
Weighted Weighted Weighted
Range of Average Average Average
Exercise Contractual Exercise Exercise
Prices Shares Life Price Shares Price
------------- --------- ----------- -------- --------- --------
(In years)
<S> <C> <C> <C> <C> <C>
$0.01 - $0.31 698,160 3.13 $0.17 698,160 $0.17
$0.63 - $0.75 2,106,838 5.67 $0.63 1,834,001 $0.63
$1.25 1,016,168 7.70 $1.25 604,393 $1.25
$1.50 2,681,107 8.03 $1.50 1,093,162 $1.50
$2.00 - $2.50 1,637,216 9.24 $2.37 318,551 $2.29
$3.50 318,500 9.73 $3.50 7,956 $3.50
--------- ---------
$0.01-$3.50 8,457,989 7.30 $1.39 4,556,223 $0.97
========= =========
</TABLE>
In July 1996, InterTrust extended the exercise period of some fully vested
options to purchase class B common stock for an additional six-year period. The
difference between the exercise price and what was considered to be the fair
value of the options at that date was approximately $220,000. This amount was
recorded as compensation expense in 1996.
In connection with the acceleration of vesting of some options at the time
of an employee termination, InterTrust recorded a charge of $49,166 in 1997.
Stock-Based Compensation
In connection with the grant of options to employees during the six months
ended June 30, 1999, InterTrust recorded deferred stock compensation of
approximately $4,273,000 for the difference between the exercise prices of
those options at their respective dates of grant and what was considered to be
the fair values for accounting purposes of the shares of common stock subject
to the options. These amounts are included as a reduction of stockholders'
equity and are being amortized on a graded vesting method. The compensation
expense of $195,000 during the six months ended June 30, 1999 relates to
options awarded to employees in all operating expense categories. These amounts
have not been separately allocated between operating expense categories.
Pro forma information regarding net income is required by FAS 123 as if
InterTrust had accounted for its stock-based awards to employees granted
subsequent to December 31, 1994 under the fair value method. The fair value was
estimated at the date of grant using the Black-Scholes option pricing model.
The Black-Scholes model was developed for use in estimating the fair value of
traded options that have no vesting restrictions and are fully transferable. In
addition, option valuation models require the input of highly subjective
assumptions, including the expected stock volatility. InterTrust is a nonpublic
company and is permitted to use a near-zero volatility factor in its
assumptions when applying the Black-Scholes model. Since InterTrust's stock-
based awards have
F-19
<PAGE>
INTERTRUST TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of June 30, 1999 and for the six months ended
June 30, 1998 and 1999 is unaudited)
characteristics significantly different from those of traded options and since
changes in the subjective input assumptions can materially affect the fair
value estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its stock-based awards.
The fair value of InterTrust's stock-based awards to employees was estimated
assuming no expected dividend; a risk-free interest rate of 6%, and expected
lives of two years for nonplan options and five years for options granted under
the 1995 option plan.
The weighted-average fair value of options granted during 1996, 1997, and
1998 was $0.40, $0.74, and $1.23 per share, respectively.
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------
1996 1997 1998
------- -------- --------
<S> <C> <C> <C>
Pro forma net loss................................ $(8,269) $(12,645) $(21,115)
======= ======== ========
Pro forma basic and diluted net loss per share.... $ (0.97)
========
</TABLE>
For purposes of pro forma disclosures, the estimated fair value of the above
stock-based awards is amortized to expense over the vesting period of the
award. Because FAS 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until
approximately 1999.
Warrants
As of December 31, 1998, warrants to purchase a total of 306,000 shares of
class A common stock at prices ranging from $0.63 to $2.56 per share were
outstanding. Warrants to purchase 40,000 shares were issued in January 1995 in
connection with convertible notes and were exercised in February 1999. Warrants
to purchase 16,000 shares were issued in May 1995 to a related party in
conjunction with convertible notes, of which 13,308 were exercised in May 1999
with the remaining shares exercisable through May 2000. Warrants to purchase
240,000 shares were issued in April 1996 in conjunction with convertible notes
and were exercised in April 1999. Warrants to purchase 10,000 shares were
issued in November 1996 and were exercised in August 1999.
As of December 31, 1998, warrants to purchase a total of 320,016 shares of
class B non-voting common stock were outstanding. A warrant to purchase 311,016
shares of class B non-voting common stock was issued in August 1996 in
conjunction with a license agreement. This warrant is exercisable beginning in
August 2003 through August 2006 but may be exercised at an earlier date upon
the occurrence of certain events at InterTrust's discretion. This warrant may
be terminated upon the closing of an initial public offering of InterTrust's
common stock. Warrants to purchase 9,000 shares of class B non-voting common
stock at a weighted average exercise price of $1.61 per share were issued in
1998 in connection with professional services. Of this amount, 5,000 shares
were exercised in August 1999 and 4,000 shares are exercisable through the
earlier of the completion of an initial public offering of InterTrust's common
stock or December 2003.
F-20
<PAGE>
INTERTRUST TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of June 30, 1999 and for the six months ended
June 30, 1998 and 1999 is unaudited)
5.INCOME TAXES
The difference between the amount of income tax benefit recorded and the
amount of income tax benefit calculated using the U.S. federal statutory rate
of 34% is primarily due to net operating losses not being benefited. For that
reason, there is no provision for income taxes for the years ended December 31,
1996, 1997, and 1998.
Significant components of InterTrust's deferred tax assets are as follows
(in thousands):
<TABLE>
<CAPTION>
December 31,
----------------
1997 1998
------- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............................. $ 8,100 $12,500
Capitalized research and development......................... 1,100 1,800
Research credit carryforwards................................ 800 1,700
Deferred revenue............................................. 400 1,000
Other........................................................ 600 1,500
------- -------
Gross deferred tax assets..................................... 11,000 18,500
Valuation allowances.......................................... (11,000) (18,500)
------- -------
Net deferred tax assets....................................... $ -- $ --
======= =======
</TABLE>
The Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," provides for the recognition
of deferred tax assets if realization of these assets is more likely than not.
Based upon the weight of available evidence, which includes InterTrust's
historical operating performance and the reported cumulative net losses in all
prior years, InterTrust has provided a full valuation allowance against its
gross deferred tax assets.
The valuation allowance increased by approximately $5,100,000 and $7,500,000
during the years ended December 31, 1997 and 1998, respectively. Approximately
$100,000 of the valuation allowance at December 31, 1998 relates to the tax
benefits of stock option deductions that will be credited to additional paid-in
capital when realized.
As of December 31, 1998, InterTrust had federal and state net operating loss
carryforwards of approximately $36,200,000 and $4,300,000, respectively.
InterTrust also had federal research and development tax credit carryforwards
of approximately $1,100,000. The federal net operating loss and tax credit
carryforwards expire in years 2007 through 2018, if not utilized. The state net
operating loss carryforwards expire in years 1999 through 2003, if not
utilized.
Utilization of the net operating loss and tax credit carryforwards may be
subject to a substantial annual limitation due to the change in ownership
provisions of the Internal Revenue Code of 1986, as amended, and similar state
provisions. The annual limitation may result in the expiration of net operating
loss and tax credit carryforwards before utilization.
F-21
<PAGE>
INTERTRUST TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of June 30, 1999 and for the six months ended
June 30, 1998 and 1999 is unaudited)
6.SUBSEQUENT EVENTS
In March, April, and May 1999, InterTrust issued 850,000 shares of series C
preferred stock at a price of $5.89 per share and 1,142,023 shares of series D
preferred stock at a price of $8.50 per share. The series C and D preferred
stock have rights and preferences similar to the previously issued series B
preferred stock.
7.EVENTS SUBSEQUENT TO DATE OF AUDITORS' REPORT (UNAUDITED)
In July 1999, InterTrust's stockholders approved a proposal to increase the
available shares under the 1995 option plan by an additional 500,000 shares.
In April 1999, in connection with executing a licensing arrangement,
InterTrust issued to the licensee, for an aggregate amount of $1,000,000, a
noninterest-bearing convertible promissory note. In July 1999, the note
converted into 83,333 shares of series E preferred stock of InterTrust at a
price of $12.00 per share.
In July 1999, the board of directors and stockholders approved the issuance
of up to 1,400,000 shares of series E preferred stock. During July 1999,
InterTrust issued 1,309,700 shares of the series E preferred stock at a price
of $12.00 per share. The series E preferred stock has similar rights and
preferences as the previously issued series B, C and D preferred stock.
In July 1999, InterTrust entered into a lease agreement for office space to
serve as its corporate headquarters and principal operating facility. The lease
period commences September 1, 1999 and extends for a period of 60 months. The
lease requires monthly rental payments of approximately $121,000 plus variable
operating expenses and is subject to increases of 4% per annum.
In July 1999, the board of directors adopted InterTrust's 1999 equity
incentive plan subject to stockholder approval, to be effective upon completion
of InterTrust's initial public offering of its common stock. This 1999 plan
provides for the grant of incentive stock options, nonstatutory stock options,
restricted stock purchase awards, and stock appreciation rights to eligible
participants. A total of 1,900,000 shares of common stock has been reserved for
issuance under this 1999 plan.
In July 1999, the board of directors adopted InterTrust's 1999 employee
stock purchase plan subject to stockholder approval, to be effective upon
completion of InterTrust's initial public offering of its common stock. A total
of 350,000 shares of common stock has been reserved for issuance under this
purchase plan. Eligible employees may purchase common stock at 85% of the
lesser of the fair market value of InterTrust's common stock on the first day
of the applicable two-year offering period or the last day of the applicable
six-month purchase period.
In July 1999, the board of directors adopted InterTrust's 1999 non-employee
directors option plan, subject to stockholder approval, to be effective upon
completion of InterTrust's initial public
F-22
<PAGE>
INTERTRUST TECHNOLOGIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of June 30, 1999 and for the six months ended
June 30, 1998 and 1999 is unaudited)
offering of its common stock. The director's plan provides for the automatic
grant of options to purchase shares of common stock to non-employee directors
of InterTrust. A total of 350,000 shares of common stock has been reserved for
issuance under the director's plan.
In September 1999, InterTrust entered into a financial consulting agreement
with Allen & Company Inc. Concurrently, InterTrust issued a warrant to Allen &
Company for 325,000 shares of common stock at an exercise price of $14.00 per
share. The warrant is exercisable as to 50% of the shares one year after the
date of grant and the balance of such shares two years after the date of grant
or immediately prior to a merger or sale of InterTrust. The warrant expires
five years from the date of grant and is subject to early termination upon the
sale or merger of InterTrust.
In October 1999, InterTrust purchased audio decoding and rendering
technology and related assets, and received a license to video decoding and
rendering technology from a third party, in exchange for 85,000 shares of
InterTrust's common stock and $100,000 in cash. The purchase price, which will
be capitalized as an intangible asset, was valued at approximately $1.3
million. InterTrust will amortize the value of the technology acquired over its
estimated useful life, which has not yet been determined.
From July 1, 1999 through October 13, 1999, InterTrust granted options to
purchase 436,000 shares of common stock under the 1999 equity incentive plan at
a weighted average exercise price of $11.10 per share. InterTrust intends to
grant options to purchase 1,296,500 shares of common stock to recently hired
employees under its 1999 equity incentive plan at the same time as this
offering. Of these options, options to purchase 346,500 shares of common stock
will be at an exercise price equal to the initial public offering price of the
common stock and the remaining options to purchase 950,000 shares of common
stock, which includes an option to purchase 300,000 shares of common stock to
InterTrust's new executive vice chairman and an option to purchase 500,000
shares of common stock to InterTrust's new president and chief operating
officer, will be at an exercise price equal to 85% of the initial public
offering price of the common stock.
F-23
<PAGE>
[LOGO OF INTERTRUST]
<PAGE>
PART II
Information Not Required in Prospectus
Item 13. Other Expenses of Issuance and Distribution
The following table presents the costs and expenses, other than underwriting
discounts and commissions, payable by us in connection with the sale of common
stock being registered. All amounts are estimates except the SEC registration
fee, the NASD filing fees, and The Nasdaq National Market listing fee.
<TABLE>
<S> <C>
SEC registration fee............................................. $ 37,405
NASD filing fee.................................................. 10,965
Nasdaq National Market listing fee............................... 90,000
Printing and engraving expenses.................................. 150,000
Legal fees and expenses.......................................... 450,000
Accounting fees and expenses..................................... 250,000
Road show expenses............................................... 50,000
Blue sky fees and expenses....................................... 5,000
Custodian and transfer agent fees................................ 15,000
Miscellaneous fees and expenses.................................. 91,630
----------
Total.......................................................... $1,150,000
==========
</TABLE>
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes a court to
award or a corporation's board of directors to grant indemnification to
directors and officers in terms sufficiently broad to permit indemnification
under limited circumstances for liabilities, including reimbursement for
expenses incurred, arising under the Securities Act of 1933, as amended (the
"Securities Act"). Article VI, Section 6.1 of our bylaws provides for mandatory
indemnification of our directors, officers, and employees to the maximum extent
permitted by the Delaware General Corporation Law. Our sixth amended and
restated certificate of incorporation provides that our officers and directors
shall not be liable for monetary damages for breach of the officers' or
directors' fiduciary duty as officers or directors to our stockholders and us.
This provision in the sixth amended and restated certificate of incorporation
does not eliminate the officers' or directors' fiduciary duty, and, in
appropriate circumstances, equitable remedies like injunctive or other forms of
non-monetary relief will remain available under Delaware law. In addition, each
officer or director will continue to be subject to liability for breach of the
officer's or director's duty of loyalty to us or our stockholders for acts or
omissions not in good faith or involving intentional misconduct, for knowing
violations of law, for actions leading to improper personal benefit to the
officer or director, and for payment of dividends or approval of stock
repurchases or redemptions that are unlawful under Delaware law. The provision
also does not affect an officer's or director's responsibilities under any
other law, like the federal securities laws or state or federal environmental
laws. We have entered into indemnification agreements with our officers and
directors, a form of which is attached as Exhibit 10.1 and incorporated by
reference. The indemnification agreements provide our officers and directors
with further indemnification to the maximum extent permitted by the Delaware
General Corporation Law. Reference is made to Section 7 of the underwriting
agreement contained in Exhibit 1.1 to this registration statement, indemnifying
our officers and directors against limited liabilities.
II-1
<PAGE>
Item 15. Recent Sales of Unregistered Securities
Since January 1, 1996, we have issued and sold the following securities:
1. We granted direct issuances or stock options to purchase 8,099,900 shares
of our common stock at exercise prices ranging from $0.625 to $14.00 per share
to employees, consultants, directors, and other service providers under our 1995
stock plan. At the closing of this offering, we will grant additional stock
options to purchase 1,296,500 shares of our common stock to employees and
directors under our 1999 stock plan. 950,000 of these options will be
exercisable at 85% of the initial public offering price and 346,500 of these
options will be exercisable at the initial public offering price 950,000 of
these options will be exercisable We granted direct issuances or stock options
to purchase 1,234,360 shares of our common stock at exercise prices ranging from
$0.01 to $7.65 per share to service providers outside of the 1995 stock plan and
1999 equity incentive plan.
2. We issued and sold an aggregate of 2,182,050 shares of our common stock
to employees, consultants, and other service providers for aggregate
consideration of approximately $3,028,423 under direct issuances or exercises
of options granted under our 1995 stock plan. We issued and sold an aggregate
of 1,902,200 shares of our common stock to employees, consultants, and other
service providers for aggregate consideration of approximately $1,215,131 under
direct issuances or exercises of options granted under our 1992 stock plan. We
issued and sold an aggregate of 320,360 shares of our common stock to
employees, consultants, and other service providers for aggregate consideration
of approximately $449,701 under direct issuances or exercises of options
granted outside of the stock plans.
3. On February 29, 1996, we issued a warrant to purchase 16,000 shares of
our class A voting common stock with an exercise price of $1.25 per share to
Alexander Communications in connection with the payment of a convertible
promissory note. The warrant was subsequently exercised and we issued 16,000
shares thereunder.
4. On April 24, 1996, we issued a warrant to purchase 8,000 shares of our
class A voting common stock with an exercise price of $1.25 per share to John
Holmgreen in connection with the payment of a convertible promissory note. The
warrant was subsequently exercised and we issued 8,000 shares thereunder.
5. On April 24, 1996, we issued two warrants to purchase a total of 200,000
shares of our class A voting common stock with an exercise price of $1.25 per
share to Otto Candies, LLC in connection with the payment of two convertible
promissory notes. The warrants were subsequently exercised and we issued
200,000 shares thereunder.
6. On April 27, 1996, we issued a warrant to purchase 32,000 shares of our
class A voting common stock with an exercise price of $1.25 per share to the
Hubbs Family Trust in connection with the payment of a convertible promissory
note. The warrant was subsequently exercised and we issued 32,000 shares
thereunder.
7. In March, April, and June 1996, we issued and sold 3,966,666 shares of
our series A preferred stock for an aggregate purchase price of approximately
$10,135,000 to a group of investors under a stock purchase agreement.
8. In August and October 1996, June and December 1997, and January, March,
April, July, August, September, November, and December 1998, we issued and sold
6,533,721 shares of our series B preferred stock for an aggregate purchase
price of approximately $27,997,000 to a group of investors under a stock
purchase agreement.
II-2
<PAGE>
9. On August 19, 1996, we issued a warrant to purchase 311,016 shares of our
class B non-voting common stock to Upgrade Corporation of America. The warrant
will be terminated upon the initial public offering of our common stock.
10. On November 1, 1996, we issued a warrant to purchase 10,000 shares of
our class A voting common stock with an exercise price of $2.56 per share to
the Rutherford Bolen Group. The warrant was subsequently exercised and we
issued 10,000 shares thereunder.
11. On April 28, 1998, we issued a warrant to purchase 2,000 shares of our
class B non-voting common stock with an exercise price of $1.50 per share to
Peter Williams. The warrant was subsequently exercised and we issued 2,000
shares thereunder.
12. On June 4, 1998, we issued a warrant to purchase 3,000 shares of our
class B non-voting common stock with an exercise price of $1.50 per share to
Peter Williams. The warrant was subsequently exercised and we issued 3,000
shares thereunder.
13. On December 21, 1998, we issued a warrant to purchase 4,000 shares of
our class B non-voting common stock with an exercise price of $1.75 per share
to Bill Horne.
14. In March 1999, we issued and sold 850,000 shares of our series C
preferred stock for an aggregate purchase price of approximately $5,007,000 to
a group of investors under a stock purchase agreement.
15. In April and May 1999, we issued and sold 1,142,023 shares of our series
D preferred stock for an aggregate purchase price of approximately $9,707,000
to a group of investors under a stock purchase agreement.
16. In July 1999, we issued and sold 1,309,700 shares of our series E
preferred stock for an aggregate purchase price of approximately $15,716,000 to
a group of investors under a stock purchase agreement and issued 83,333 shares
of our series E preferred stock upon the conversion of a $1.0 million
promissory note.
17. On September 7, 1999, we issued a warrant to purchase 325,000 shares of
our class A voting common stock with an exercise price of $14.00 per share to
Allen & Company Inc. in connection with a financial consulting agreement.
18. On October 12, 1999, we issued 85,000 shares of our class A voting
common stock to a Mpeg TV LLC in exchange for the purchase of audio decoding
and rendering technology and related assets and a license to video technology
valued at $1,190,000.
The sale of the above securities was determined to be exempt from
registration under the Securities Act in reliance upon Section 4(2) of the
Securities Act or Regulation D promulgated thereunder, or Rule 701 promulgated
under Section 3(b) of the Securities Act as transactions by an issuer not
involving any public offering or transactions under compensation benefit plans
and contracts relating to compensation as provided under Rule 701. The
recipients of securities in each transaction represented their intentions to
acquire the securities for investment only and not with a view to or for sale
in connection with any distribution and appropriate legends were affixed to the
share certificates issued in these transactions. All recipients had adequate
access, through their relationships with us, to information about us.
II-3
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1.1** Form of Underwriting Agreement.
3.1** Fifth Amended and Restated Certificate of Incorporation of the
Registrant.
3.2** Form of Sixth Amended and Restated Certificate of Incorporation to
be filed upon the closing of the offering made under this
Registration Statement.
3.3** Bylaws of the Registrant.
3.4** Amended and Restated Bylaws of the Registrant to be effective upon
the closing of the offering made under this Registration Statement.
4.1** Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4.
4.2** Form of Registrant's Common Stock certificate.
4.3** Form of Registration Rights under select Convertible Promissory
Notes.
4.4** Form of Registration Rights under select Class A Common Stock
Purchase Agreements.
4.5** Form of Series A Preferred Stock Registration Rights.
4.6** Form of Series B, C, D and E Preferred Stock Registration Rights.
4.7** Form of Registration Rights found in a Class B Non-Voting Common
Stock Warrant.
5.1** Opinion of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian,
LLP.
10.1** Form of Indemnification Agreement entered into by the Registrant
with each of its directors and executive officers.
10.2** 1999 Equity Incentive Plan and forms of agreements thereunder.
10.3** 1999 Employee Stock Purchase Plan.
10.4** 1999 Non-Employee Directors Option Plan.
10.5*** [This exhibit has been omitted]
10.6**** [This exhibit has been omitted]
10.7**** [This exhibit has been omitted]
10.8**** [This exhibit has been omitted]
10.9**** [This exhibit has been omitted]
10.10**** [This exhibit has been omitted]
10.11** Lease between Mission West Properties, L.P. and the Registrant dated
July 21, 1999.
10.12+ Technology Development, Marketing, and License Agreement by and
between the Registrant and National Westminster Bank PLC dated
August 18, 1998.
10.13+ Technology Development and License Agreement by and between the
Registrant and Universal Music Group, Inc. dated April 13, 1999.
10.14+ Technology Development and License Agreement by and between the
Registrant and Upgrade Corporation of America dated August 7, 1996
10.15+ Technology Development and License Agreement by and between the
Registrant and Mitsubishi Corporation dated October 7, 1996.
10.16** Warrant for the purchase of Class A Voting Common Stock made by the
Registrant and held by Allen & Company Incorporated, dated September
7, 1999
10.17** Amendment to Technology, Development, Marketing and License
Agreement by and between the Registrant and National Westminster
Bank dated August 18, 1998.
10.18** Amendment to Technology Development and License Agreement by and
between the Registrant and Universal Music Group, Inc. dated April
13, 1999
21.1** Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2** Consent of Counsel. Reference is made to Exhibit 5.1.
24.1** Power of Attorney.
27.1** Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
** Previously filed.
*** This warrant will be terminated upon the initial public offering.
**** These leases are no longer in existence.
+Confidential treatment has been requested for certain portions which have been
blacked out in the copy of the exhibit filed with the Securities and
Exchange Commission. The omitted information has been filed separately with
the Securities and Exchange Commission pursuant to the application for
confidential treatment.
II-4
<PAGE>
(b) Financial Statement Schedules
All schedules have been omitted because the information required to be
presented in them is not applicable or is shown in the consolidated financial
statements or related notes.
Item 17. Undertakings
We undertake to provide to the underwriters at the closing specified in the
underwriting agreement certificates in the denominations and registered in the
names as required by the underwriters to permit prompt delivery to each
purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrant under the Delaware General Corporation Law, our sixth amended and
restated certificate of incorporation or our amended and restated bylaws, the
underwriting agreement, or otherwise, we have been advised that in the opinion
of the Securities and Exchange Commission this indemnification is against
public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against these
liabilities, other than the payment by us of expenses incurred or paid by a
director, officer, or controlling person of ours in the successful defense of
any action, suit, or proceeding, is asserted by a director, officer, or
controlling person in connection with the securities being registered in this
offering, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether this indemnification by us is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of this issue.
We undertake that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by us under Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration statement as of
the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered,
and the offering of these securities at that time shall be deemed to be the
initial bona fide offering.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 9 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Santa Clara, State of California, on this 26th day of October, 1999.
Intertrust Technologies Corporation
By /s/ Victor Shear
-----------------------------------
Victor Shear
Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 9 to the Registration Statement has been signed by the following
persons on behalf of the Registrant and in the capacities and on the date
indicated:
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Victor Shear Chairman of the Board and October 26, 1999
- ------------------------------ Chief Executive Officer
Victor Shear (Principal Executive
Officer)
David C. Chance* Executive Vice Chairman October 26, 1999
- ------------------------------
David C. Chance
Peter van Cuylenburg* Director, President and October 26, 1999
- ------------------------------ Chief Operating Officer
Peter van Cuylenburg
Erwin N. Lenowitz* Vice Chairman of the October 26, 1999
- ------------------------------ Board, Chief Financial
Erwin N. Lenowitz Officer (Principal
Financial and Accounting
Officer) and Secretary
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Edmund J. Fish Director, Senior Operating October 26, 1999
- ------------------------------- Officer and Executive
Edmund J. Fish Vice President, Corporate
Development
David Van Wie* Director and Senior Vice October 26, 1999
- ------------------------------- President of Research
David Van Wie
Bruce Fredrickson* Director October 26, 1999
- -------------------------------
Bruce Fredrickson
Satish K. Gupta* Director October 26, 1999
- -------------------------------
Satish K. Gupta
*By: /s/ Victor Shear
---------------------------
Victor Shear
Attorney-in-fact
*By: /s/ Edmund J. Fish
---------------------------
Edmund J. Fish
Attorney-in-fact
</TABLE>
II-7
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1.1** Form of Underwriting Agreement.
3.1** Fifth Amended and Restated Certificate of Incorporation of the
Registrant.
3.2** Form of Sixth Amended and Restated Certificate of Incorporation to
be filed upon the closing of the offering made under this
Registration Statement.
3.3** Bylaws of the Registrant.
3.4** Amended and Restated Bylaws of the Registrant to be effective upon
the closing of the offering made under this Registration Statement.
4.1** Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4.
4.2** Form of Registrant's Common Stock certificate.
4.3** Form of Registration Rights under select Convertible Promissory
Notes.
4.4** Form of Registration Rights under select Class A Common Stock
Purchase Agreements.
4.5** Form of Series A Preferred Stock Registration Rights.
4.6** Form of Series B, C, D and E Preferred Stock Registration Rights.
4.7** Form of Registration Rights found in a Class B Non-Voting Common
Stock Warrant.
5.1** Opinion of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian,
LLP.
10.1** Form of Indemnification Agreement entered into by the Registrant
with each of its directors and executive officers.
10.2** 1999 Equity Incentive Plan and forms of agreements thereunder.
10.3** 1999 Employee Stock Purchase Plan.
10.4** 1999 Non-Employee Directors Option Plan.
10.5*** [This exhibit has been omitted]
10.6**** [This exhibit has been omitted]
10.7**** [This exhibit has been omitted]
10.8**** [This exhibit has been omitted]
10.9**** [This exhibit has been omitted]
10.10**** [This exhibit has been omitted]
10.11** Lease between Mission West Properties, L.P. and the Registrant dated
July 21, 1999.
10.12+ Technology Development, Marketing, and License Agreement by and
between the Registrant and National Westminster Bank PLC dated
August 18, 1998.
10.13+ Technology Development and License Agreement by and between the
Registrant and Universal Music Group, Inc. dated April 13, 1999.
10.14+ Technology Development and License Agreement by and between the
Registrant and Upgrade Corporation of America dated August 7, 1996
10.15+ Technology Development and License Agreement by and between the
Registrant and Mitsubishi Corporation dated October 7, 1996.
10.16** Warrant for the purchase of Class A Voting Common Stock made by the
Registrant and held by Allen & Company Incorporated, dated September
7, 1999
10.17** Amendment to Technology, Development, Marketing and License
Agreement by and between the Registrant and National Westminster
Bank dated August 18, 1998.
10.18** Amendment to Technology Development and License Agreement by and
between the Registrant and Universal Music Group, Inc. dated April
13, 1999
21.1** Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2** Consent of Counsel. Reference is made to Exhibit 5.1.
24.1** Power of Attorney.
27.1** Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
** Previously filed.
*** This warrant will be terminated upon the initial public offering.
**** These leases are no longer in existence.
+ Confidential treatment has been requested for certain portions which have
been blacked out in the copy of the exhibit filed with the Securities and
Exchange Commission. The omitted information has been filed separately with
the Securities and Exchange Commission pursuant to the application for
confidential treatment.
<PAGE>
CONFIDENTIAL
EXHIBIT 10.12
_______________________________________________________
TECHNOLOGY DEVELOPMENT, MARKETING, AND LICENSE
AGREEMENT
by and between
INTERTRUST TECHNOLOGIES CORPORATION
and
NATIONAL WESTMINSTER BANK PLC
_______________________________________________________
______________________________
August 18, 1998
______________________________
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. DEFINITIONS AND RULES OF CONSTRUCTION................................... 1
1.1 Definitions......................................................... 1
1.2 Rules of Construction............................................... 6
2. TECHNOLOGY ACCESS AND SUPPORT........................................... 6
2.1 Technology Access................................................... 6
2.2 Training, Assistance and Technical Support.......................... 7
2.3 Additional Assistance; Further Standard Support Packages............ 10
3. LIMITED LICENSE GRANT AND RESTRICTIONS.................................. 10
3.1 Limited License to InterTrust Technology and Modified Technology.... 10
3.2 Limited License to Perform Clearinghouse Functions.................. 11
3.3 License to InterTrust Trademarks.................................... 11
3.4 No Additional Licenses.............................................. 11
3.5 General Restrictions................................................ 11
4. NATWEST SUPPORT AND ADDITIONAL COVENANTS................................ 12
4.1 NatWest Support of InterTrust Technology............................ 12
4.2 Customer and Clearing Agreements.................................... 14
4.3 Notices and Branding................................................ 15
4.4 InterTrust Trademarks............................................... 17
4.5 NatWest's Use of NatWest Trademarks on NatWest Products............. 18
4.6 NatWest Trademarks.................................................. 18
5. LICENSE FEES AND PAYMENT TERMS.......................................... 19
5.1 Fees and Royalties.................................................. 19
5.2 Payment Procedure................................................... 21
5.3 Currency............................................................ 21
5.4 Taxes............................................................... 21
5.5 Interest............................................................ 21
5.6 Audit............................................................... 22
6. PROPRIETARY INFORMATION AND OWNERSHIP................................... 22
6.1 InterTrust Ownership................................................ 22
6.2 NatWest Ownership................................................... 22
6.3 NatWest Limited License to InterTrust............................... 23
6.4 Independent Technology.............................................. 23
7. JOINT ACTIVITIES AND FURTHER COVENANTS.................................. 23
7.1 Joint Press Releases................................................ 23
7.2 Promotion and Marketing............................................. 24
7.3 Technology Advisory Committee....................................... 24
7.4 Security Validation................................................. 25
8. PARTNERING COMMITMENTS
8.1 Intertrust Partnering Commitment.................................... 26
</TABLE>
(i)
<PAGE>
CONFIDENTIAL
<TABLE>
<S> <C>
8.2 NatWest Partnering Commitment........................................ 26
9. CONFIDENTIALITY......................................................... 29
9.1 Classification of Technology and Documents.......................... 29
9.2 Confidentiality Obligations......................................... 29
9.3 Confidentiality of Agreement and Publicity.......................... 29
9.4 Confidentiality of Payments, Audit and Certification Testing........ 30
10. REPRESENTATIONS AND WARRANTIES......................................... 30
10.1 Representations and Warranties of Both Parties..................... 30
10.2 Representations and Warranties of InterTrust....................... 30
10.3 Limitation......................................................... 31
10.4 Reporting and Other Covenants...................................... 31
11. INDEMNIFICATION AND REMEDIES........................................... 31
11.1 Indemnification.................................................... 31
11.2 Cumulative Remedies................................................ 32
11.3 Equitable Remedies................................................. 32
12. EXCLUSION OF DAMAGES................................................... 32
13. TERM AND TERMINATION................................................... 33
13.1 Agreement.......................................................... 33
13.2 Events of Termination.............................................. 33
13.3 Effect of Termination.............................................. 33
13.4 NatWest Continuing Rights.......................................... 34
13.5 Survival........................................................... 34
14. MISCELLANEOUS.......................................................... 34
14.1 Governing Law...................................................... 34
14.2 Venue and Jurisdiction............................................. 34
14.3 Compliance with Law and Export Controls............................ 35
14.4 Amendment or Modification; Assignment.............................. 35
14.5 Notices............................................................ 35
14.6 Waiver............................................................. 35
14.7 No Third Party Beneficiaries....................................... 36
14.8 No Agency.......................................................... 36
14.9 Recovery of Costs and Expenses..................................... 36
14.10 Severability...................................................... 36
14.11 No Solicitation of Employees...................................... 36
14.12 Counterparts; Facsimiles.......................................... 36
14.13 Entire Agreement.................................................. 37
</TABLE>
Exhibits A through H
(ii)
<PAGE>
CONFIDENTIAL
TECHNOLOGY DEVELOPMENT, MARKETING, AND LICENSE AGREEMENT
THIS TECHNOLOGY DEVELOPMENT, MARKETING, AND LICENSE AGREEMENT (this "Agreement")
---------
is made and entered into as of the 18/th/ day of August, 1998 (the "Effective
---------
Date") by and between INTERTRUST TECHNOLOGIES CORPORATION, a Delaware
- ----
corporation ("InterTrust"), with offices at 460 Oakmead Parkway, Sunnyvale,
----------
California 94086-4708 and NATIONAL WESTMINSTER BANK PLC, an English corporation
("NatWest") with offices at 41 Lothbury, London, England EC2P 2BP (each a
-------
"Party" and collectively, the "Parties"), with reference to the following:
----- -------
RECITALS
The following provisions form the basis for, and are hereby made a part of, this
Agreement.
A. InterTrust has developed and is continuing to develop a general purpose
architecture and technologies for, among other things, rights protection and
event management related to electronic commerce, including securely managing
electronic information delivery, use, and use consequences.
B. NatWest is a diversified, global financial services corporation. It desires
to provide financial and information clearing services, and related services,
based upon InterTrust technology.
C. The Parties mutually desire that NatWest become an InterTrust Core Partner
and establish product and service offerings using InterTrust Technology.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and
for other good and valuable consideration, the Parties agree to the following:
1. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1 Definitions. In addition to capitalized terms defined elsewhere in this
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Agreement, the following terms shall have the meanings set forth below.
"Application Product(s)" means any software application that: (i) is
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developed using InterTrust Technology and/or Modified Technology; (ii) directly
contains or incorporates InterTrust Technology solely in the form of Authorized
Application Software, and/or Modified Technology in Object Code and/or Source
Code in accordance with the licenses hereunder; (iii) is not enabled to permit
the performance of any Clearinghouse Functions; and (iv) is in Compliance with
InterTrust Specifications.
"Authorized Application Software" means software incorporating InterTrust
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Technology in Object Code and/or in Source Code (solely as such Object Code and
Source Code are identified and designated by InterTrust on Exhibit A hereto),
that is permitted for distribution in accordance with the applicable licenses
hereunder in such form solely as specified on Exhibit A, which Exhibit may be
amended from time to time by InterTrust to add Object Code and/or Source Code,
or to delete Object Code and/or Source Code to address issues with respect to
security, interoperability, standardization, market growth and/or architectural
and functional integrity (such as to correct Material Defects), and in a manner
consistent for all Core Partners.
"Authorized Clearinghouse Provider" means any Person that is expressly
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licensed by InterTrust to engage in specified Clearinghouse Function activities
and services, but only to the extent: (i) of the scope of such license; and
(ii) that such license is valid and in force.
NatWest/InterTrust Agreement August 18, 1998 ________/________
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CONFIDENTIAL
"Authorized Clearinghouse Software" means software incorporating InterTrust
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Technology, solely in Object Code form and solely as such Object Code is
identified and designated by InterTrust on Exhibit A, that is permitted for
distribution as incorporated in Clearinghouse Products in accordance with the
applicable licenses hereunder in such form solely as specified in such Exhibit
A, which Exhibit may be amended from time to time by InterTrust to add Object
Code, or to delete Object Code to address issues with respect to security,
interoperability, standardization, market growth and/or architectural and
functional integrity (such as to correct Material Defects), and in a manner
consistent for all Core Partners.
"Clearinghouse Function(s)" means any one or more activities, as well as
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services resulting therefrom, that use any InterTrust Technology and/or Modified
Technology, or use information derived at least in part from use of such
technology, to: (i) enable payment fulfillment or provision of other
consideration (including service fees, product fees or any other fees and/or
charges) based at least in part on a Control Use; (ii) perform audit, billing,
payment fulfillment (or provision of other consideration) and/or other clearing
activities involving more than one Person; and/or (iii) compile, aggregate, use
and/or provide information relating to more than one Person's use of one or more
Secure Containers and/or Content, including Contents of Secure Containers or any
other Content Managed at least in part using any InterTrust Technology and/or
Modified Technology. Clearinghouse Functions shall include activities, as well
as services resulting therefrom, that use any InterTrust Technology and/or
Modified Technology, or use information derived at least in part from use of
such technology, to, for example: (a) provide financial clearing; (b) provide
object registry services and rights, permissions, prices, and/or other Rules and
Controls information; (c) electronically certify information used with or
required by Rules and Controls, such as authenticating identity, class
membership or other attributes of identity context; (d) provide information
based upon usage auditing, user profiling, and/or market surveying related to
more than one Person's use of one or more Secure Containers and/or Content;
and/or (e) employ information derived from user exposure to Content, such as
advertising.
"Clearinghouse Product(s)" means any software application that: (i) is
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developed using InterTrust Technology and/or Modified Technology; (ii) directly
contains or incorporates InterTrust Technology solely in the form of Authorized
Clearinghouse Software, and/or Modified Technology only in Object Code, in
accordance with the licenses hereunder; (iii) is enabled to permit the
performance of any Clearinghouse Functions; and (iv) is in Compliance with
InterTrust Specifications.
"Commerce 1.0 (FCS Version)" means certain software having the
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functionality described in Exhibit A hereto that incorporates InterTrust
Technology, as provided by InterTrust to NatWest consistent herewith.
"Commerce 1.0 (GA Version)" means certain software having the functionality
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described in Exhibit A hereto (as such Exhibit may be modified from time to time
by InterTrust consistent with this Agreement) that incorporates InterTrust
Technology, as provided by InterTrust to NatWest consistent herewith, and is
intended for general commercial availability, dissemination in accordance
herewith, and use in accordance herewith in a widely distributed manner.
Commerce 1.0 (GA Version) shall have at least substantially the same
functionality as Commerce 1.0 (FCS Version).
"Commerce 2.0" means certain software constituting a New Release of
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InterTrust's Commerce 1.0 (FCS Version) software and Commerce 1.0 (GA Version)
software incorporating enhanced digital rights management functionality,
including at a minimum such functionality described in Exhibit A hereto that
incorporates InterTrust Technology, as provided by InterTrust to NatWest
consistent herewith.
"Compliance," "Complied" or "Compliant" means fully consistent with and
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fully conforming to all applicable portions of: (i) the most current version of
the InterTrust Specifications (as defined in Section 4.1((b)) hereof) existing
on the date of NatWest's first commercial use, distribution, sale or other
transfer of any applicable NatWest Product or first use of any such product in
connection with any service associated therewith, as the case may be; and
thereafter (ii) the most current version of InterTrust Specifications in
accordance with Section 4.1((b)) hereof, as applied to any such NatWest Product,
and/or associated service. A NatWest Product
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CONFIDENTIAL
and/or any associated service that has not passed any required certification
tests as set forth in Section 4.1 hereof shall be deemed non-Compliant with
InterTrust Specifications.
"Content(s)" means any analog or digital information representing text,
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graphics, video, digital linear motion pictures, sound and sound recordings,
still images, computer programs or executable or interpretable components
thereof, other data, or other such analog or digital information. Content shall
include any electronic representation of: (i) Rules and Controls; and (ii)
information derived from the Management of Content.
"Content Transaction" means any discrete electronic compensation event
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related to a specific overall Content compensation arrangement amongst Persons
(which may be comprised of component events and arrangements): (i) Managed, in
whole or in part, through the use of any InterTrust Technology and/or Modified
Technology; and (ii) in connection with which consideration of any kind
(including consideration directly related to such event) is due or payable at
any time to NatWest and/or any other one or more Persons, at least in part, for
any (a) initiated, consummated and/or performed sale, rental, lease, license,
vending and/or any other comparable provision of one or more rights related to
Content, or (b) use of, including any interaction with, Content (such as access
to Content, including production of modified Content).
"Control Use" means any use of InterTrust Technology and/or Modified
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Technology in compliance with InterTrust Specifications to Manage Content
including initiating and/or otherwise governing any consequence (electronic,
physical or otherwise) related to the use and/or processing of Content and/or
provision of goods or services conveyed by or associated with such Content.
Control Use shall include, for example: (i) metering, auditing, charging,
and/or billing, for access to or any other interaction with any Content; and/or
(ii) administering permitted and/or prohibited uses of Content.
"Core Partner" means any Person with whom InterTrust enters into an
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agreement or set of agreements, pursuant to which InterTrust: (i) directly
provides early access to InterTrust Technology prior to InterTrust's first
commercial release or provision of such technology to the general public; (ii)
grants a general purpose license to use InterTrust Technology in software
products, applications, and services (excepting limitations with respect to
performing Clearinghouse Functions); and (iii) grants a license to perform
Clearinghouse Functions of a substantially comparable or broader scope than the
licenses granted in Section 3.2 hereof (a "Core Partner Agreement")
"Core Technology" means those components of InterTrust Technology described
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by InterTrust on Exhibit A hereto as core technologies of such InterTrust
Technology, as such Exhibit may be amended from time to time by InterTrust.
"Customer" means any Person that receives or acquires a NatWest Product
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(directly or indirectly) from NatWest, and/or participates in an associated
service, pursuant to a Customer Agreement (as set forth in Section 4.2) to: (i)
use such product and/or associated service as an end-user, or further distribute
such product, without modification, to an end-user or to one or more other
Persons for distribution, without modification, to an end-user; or (ii) use such
product solely to (a) incorporate Authorized Application Software into their
products to provide an InterRights Point, or (b) develop and incorporate
software components that initiate interface and operation with an InterRights
Point provided by InterTrust Technology, each of which software components and
InterRights Point is Compliant with InterTrust Specifications; provided that
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Customer shall not include any Person who NatWest knows, or has reason to know,
has a present intention to use a NatWest Product and/or associated service for
any use not permitted in a Customer Agreement including, without limitation, the
performance of any Clearinghouse Function, unless such Person is an Authorized
Clearinghouse Provider.
"Documentation" means certain English language versions of documentation
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and/or instructions relating to use of InterTrust Technology that InterTrust may
from time to time provide with the InterTrust Technology, including such
documentation that InterTrust has specifically and in writing identified as
being suitable for general distribution by NatWest to Customers ("Distributable
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Documentation").
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CONFIDENTIAL
"Enterprise 1.0" means that software described in Exhibit A hereto (as such
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Exhibit may be amended from time to time by InterTrust) that incorporates
InterTrust Technology, as provided by InterTrust to NatWest consistent herewith,
intended solely for use within enterprises and/or for use by enterprises solely
in connection with such enterprise's Content and within the context solely of
products and/or associated services for direct customers of an enterprise or
other Persons having a value chain relationship with such enterprise (such as
suppliers, distributors, consultants, etc.). The initial delivery of such
software shall be in a GA version.
"Gross Commercial Value" means all sums of money as consideration, and/or
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the fair market value of any other provided consideration, relating directly to
or deriving directly from: (i) any Content Transaction; and/or (ii) performing
any other activity within the Clearinghouse Functions. Without limiting the
foregoing, such consideration shall include consideration based upon Management
of Content and/or information derived at least in part therefrom, including, for
example, consideration: (a) paid by a user as a consequence of, for example,
user exposure to, or other interaction with, Content; (b) paid by a user as a
consequence of the acquisition of one or more rights related to Content; and/or
(c) paid by a proxy or subsidizing payer (such as an advertiser) based upon user
exposure to Content, where, for example but without limitation, after (due to or
based on) receipt of information about user exposure to Content, such advertiser
pays consideration based at least in part on value resulting from such exposure.
Notwithstanding the foregoing Gross Commercial Value shall be reduced by any
included sales, use, value-added or other taxes (except withholding taxes)
imposed by any national, state, local or foreign government and paid by NatWest
as a consequence of clearing a Content Transaction and/or as a consequence of
performing any other directly related activities within the Clearinghouse
Functions.
"Intellectual Property Rights" mean all patent rights, copyrights,
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trademarks, trade secret rights, and other similar proprietary rights in any
jurisdiction, and all applications and registrations therefor.
"InterRights Point(s)" means certain InterTrust Technology (as set forth on
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Exhibit A hereto, as such Exhibit may be amended by InterTrust consistent with
this Agreement) that is a distributed rights and event management, and
distributed administration, virtual machine (i.e. node) that performs, at least
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in part, as an extension to basic electronic resource management, or is
integrated within such basic resource management.
"InterTrust Specifications" mean the InterTrust technology specifications
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provided to NatWest, as established and/or modified by InterTrust in accordance
with Section 4.1((b)) hereof. Such InterTrust Specifications may include: (i)
required design criteria for licensed products and/or associated services,
including, for example, criteria for ensuring the architectural and functional
integrity, standardization, security capability, and/or interoperability of
InterTrust-based technology, components, products and/or associated services
(such as, criteria for electronic environments employing InterTrust Technology
for rights and/or other event-related process management, for example the
operation of general purpose InterRights Points that interoperate with
InterRights Points distributed or normally used by other Persons); (ii)
procedures and requirements for installation, initialization, backup, restore
and/or security updates; and (iii) required certification tests and procedures
to verify Compliance.
"InterTrust Technology" means any and all technology developed by
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InterTrust and/or by a third Person for InterTrust and provided by InterTrust to
NatWest as set forth in this Agreement directly relating to distributed rights
management systems and methods, electronic content administration, peer-to-peer
trusted event management, and/or distributed electronic commerce automation and
process control systems and methods. For example, such technology includes the
Commerce 1.0 product, the Enterprise 1.0 product, pre-releases thereof, Update
Releases, New Releases and such other products as referenced in Exhibit A hereto
(as such Exhibit may be modified by InterTrust from time to time to provide, for
example, any product modification and/or reconfigurations made available
hereunder).
"InterTrust Trademarks" mean those InterTrust names, logos and other marks
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listed on Exhibit B hereto, as such Exhibit may be modified by InterTrust in
accordance with Section 4.4 hereof.
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CONFIDENTIAL
"Licensed Rights" mean all of InterTrust's worldwide Intellectual Property
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Rights (other than trademark rights) in and to the InterTrust Technology and/or
the Modified Technology, that InterTrust (at any time during the term of this
Agreement) owns or otherwise has the right to grant licenses of the scope
granted herein without the agreement of, or requirement for payment (or the
granting of other consideration) to, any Person.
"Manage(d)" or "Management" means any form of governance, regulation,
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management and/or control, at least in part, through any use of any software,
firmware, hardware (being able to carry out functions) or comparable electronic
means, or combinations thereof, of: (i) rights, processes and/or obligations
related to, or associated with, use of (including access to, transport of,
and/or storage of) Content, including Content related disposition and/or
consequences thereof; and/or (ii) events or event processes related to, or
associated in any manner with, the use of (including access to), attempted use
of, and/or disposition of, Content and/or events, including any consequences
thereof.
"Material Defect(s)" means defect(s) or bug(s) in the InterTrust products
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incorporating InterTrust Technology as delivered by InterTrust to NatWest,
wherein such defect(s) or bug(s) in such delivered products causes one or more
of such delivered InterTrust products to fail to perform: (i) materially in
conformance with (a) the capabilities ascribed to such products in the
applicable portions of InterTrust Specifications, or (b) features and functions
ascribed to such products as specified in Exhibit A; and (ii) in a commercially
reasonable manner in accordance with reasonable U.S. software industry
practices. Material Defects shall not include or mean any defects or bugs in
Modified Technology absent from InterTrust Technology.
"Modified Technology" means all modifications of, and enhancements and/or
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additions to, the InterTrust Technology created by (or for) NatWest as provided
hereunder, including without limitation all derivative works of the InterTrust
Technology (or other Modified Technology) as such term is defined in the U.S.
Copyright Act (17 U.S.C. (S) 101 et seq., as amended), but only if such
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modifications, enhancements, additions and/or derivative works are permitted
under Section 3.1((b)) and elsewhere in this Agreement.
"NatWest Product(s)" means any Application Product and/or Clearinghouse
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Product that is developed by (or, consistent with this Agreement, for) NatWest
and is branded and marketed in accordance with the provisions of Sections
4.3((c)), 4.5 and other provisions hereof.
"NatWest Trademarks" mean the names, logos and other marks listed in
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Exhibit B (as such Exhibit may be modified by NatWest from time to time
consistent with Section 4.6 hereof): (i) that are owned or licensed for use
exclusively by NatWest, that may be used as stipulated hereunder in connection
with, and are limited in use to representing exclusively, NatWest, NatWest
Products, and/or associated services permitted hereunder; and (ii) over which
NatWest exercises exclusive control with respect to the commercial use thereof.
"New Release" means any future release by InterTrust of a successor product
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of the Commerce 1.0 product line, the Enterprise 1.0 (GA version) and/or
additional Enterprise 1.0 product line products provided to NatWest hereunder
and (i) that (a) is designated by InterTrust as a numerical change to the
digit(s) to the left of the decimal point for the version number thereof (e.g.,
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Commerce X.0; Enterprise X.0); or (b) is designed to provide significantly
improved or enhanced functionality for Commerce 1.0's and/or Enterprise 1.0's
general purpose software platform for Distributed Peer-to-Peer Digital Rights
Management (as defined in Exhibit F attached hereto) for the desktop, portable,
minicomputer, mainframe, and/or server computing market(s), as compared to the
immediately preceding version; and (ii) that InterTrust may develop, or have
developed for it, from time to time and make generally available to its Core
Partners. New Releases will reflect additional functionality as determined by
InterTrust after reviewing and analyzing input of Core Partners through
activities of the Technology Advisory Committee (described in Section 7.3
hereof) with respect to current and anticipated market requirements and
reasonable commercial priorities).
"Object Code" shall mean the computer executable binary code derived from
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compiled Source Code for execution by a computing device or system.
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CONFIDENTIAL
"Person" means any individual, corporation, limited liability company,
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partnership, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, government body or agency, or other entity.
"Rules and Controls" mean any information that directs, enables, specifies,
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describes, and/or provides means for performing or not performing operations
related to Content, controlling, for example, usage consequences, and including,
for example, restricting the performance of operations, such as, for example, in
the performance of Management of such Content.
"Secure Container(s)" means electronic container(s) or other electronic
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data arrangement(s) that: (i) uses one or more cryptographic or other
obfuscation techniques to provide protection for Content; and (ii) supports the
use of Rules and Controls to Manage Content. Secure Container(s) shall not mean
Certificate Authority and/or Session Encryption as such terms are defined in
Exhibit F attached hereto.
"Source Code" means a human-readable, non-executable set of instructions
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for a computer program, from which it may be possible, together with related
source materials and documentation, to discern the logic, algorithms, internal
structure, and operating feature design characteristics of such computer
program.
"Standard Support Package(s)" means one or more technical support packages
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that InterTrust may establish and make available to certain or all customer
categories to provide, for example, training, consultation and other technical
assistance, as well as technical support in the form of correction of defects
(including Material Defects) and priority response times in connection
therewith.
"Update Release" means any future release of InterTrust software products
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that is a supplement to the Commerce 1.0 software, or a New Release (including
the Enterprise 1.0 software) provided to NatWest hereunder that: (i)(a) is
designed primarily to correct and/or mitigate known Material Defects in, and/or
to provide minor improvements to, such Commerce 1.0, Enterprise 1.0 or New
Release software, or (b) is designated by InterTrust as a numerical change to
the digit(s) right of the decimal point for the version number thereof (e.g.
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Commerce 1.XX; Enterprise 1.XX); and (ii) InterTrust may develop, or have
developed for it, from time to time and make generally available to its Core
Partners in accordance herewith.
1.2 Rules of Construction. As used in this Agreement, all terms used in the
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singular shall be deemed to include the plural, and vice versa, as context
requires. Hereof, herein and hereunder refer to this Agreement as a whole,
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including any exhibits hereto, as the same may from time to time be amended or
supplemented and not to any subdivision contained in this Agreement. Including
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shall mean including, without limitation; compliance, complied, or comply shall
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mean full compliance, fully complied or fully comply; for example shall mean for
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example without limitation; and InterTrust shall mean InterTrust and any lawful
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successor. Descriptive headings are inserted for convenience only, and shall not
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be utilized in interpreting this Agreement. This Agreement has been negotiated
by the Parties and their respective counsel and shall be fairly interpreted in
accordance with its terms and without any strict construction in favor of or
against either Party. Any and all rights exercisable, actions permitted to be
taken, or decisions to be made, by a Party under this Agreement may be made by
such Party in its sole discretion, except to the extent (and solely to the
extent) expressly provided herein to the contrary, meaning, for example, any use
of the word discretion related to a Party's decision means the sole discretion
of that Party.
2. TECHNOLOGY ACCESS AND SUPPORT.
2.1 Technology Access.
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(a) Initial Availability. Subject to the terms of this Agreement,
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InterTrust shall make available to NatWest: (i) the Commerce 1.0 (FCS version);
and (ii) the Documentation set forth in Exhibit A hereto. Such software and
Documentation shall be made available to NatWest promptly following the
execution of this Agreement, receipt of the amount specified in Section 5.1
((a))((i)) hereof, and NatWest's Compliance with the
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applicable InterTrust Specification concerning Site Certification in effect as
of the Effective Date. Further, InterTrust's Commerce 1.0 (GA Version) and
Enterprise 1.0 (GA Version), respectively, shall be supplied to NatWest at
reasonably the same time as (but in no event later than five (5) business days
after) such software is first made available to any Core Partner, and before
such software is made generally available publicly.
(b) Additional Technology. In addition to the foregoing, and subject to
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the terms and conditions of this Agreement, InterTrust shall make available to
NatWest: (i) Update Releases at no additional charge (beyond the Support Fee set
forth in Section 5.1((c)) hereof) for a period of [*] years following the
Effective Date; and (ii) New Releases (1) at no additional charge (beyond the
Support Fee) for a period of [*] years after the Effective Date and, (2) for the
subsequent [*] years on terms (including price) [*] and at a cost no greater
than reasonably consistent with applicable U.S. Software Industry practices.
Notwithstanding the foregoing, NatWest shall be entitled to obtain in accordance
with the provisions of this Section 2.1((b)): (A) at no additional charge
(beyond the Support Fee and/or such fees as set forth in Sections 5.1((a))((iv))
and 5.1((a))((v)) InterTrust's Commerce 2.0 software release and, whether in the
form of one or more New Releases and/or Update Releases, software that provides
those functions specified in Section I.B. of Exhibit A hereto (the "Requested
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Functionality"), as available from InterTrust at any time during the term of
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this Agreement; and (B) such portions of New Releases and/or Update Releases, as
applicable, made available by InterTrust after the end of the [*] year following
the Effective Date, if any, that are strictly necessary for NatWest Products and
associated services to remain in Compliance with then existing InterTrust
Specifications and/or subsequent New Specification pursuant to Section 4.1((b))
hereof, provided that such New Release and/or Update Release portions shall be
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made available to NatWest on terms (including price) [*] and at a cost no
greater than reasonably consistent with applicable U.S. Software Industry
practices. Further notwithstanding the foregoing, the revenue sharing royalties
set forth in Section 5.1((b)) shall be payable to InterTrust as set forth
therein. Any Update Releases and/or New Releases that NatWest is entitled to
receive pursuant to this Section 2.1((b)) shall be supplied to NatWest at
reasonably the same time (but in no event later than five (5) business days
after) when such software is first made available to any Core Partner and before
such product is made generally available publicly, except that the foregoing
shall not restrict InterTrust from providing Update Releases and/or New Releases
to customers and/or making such Update Releases generally available publicly
where such Update Releases and/or New Releases provide, in material part,
updated software responsive to security, interoperability and/or integrity
concerns. The Parties acknowledge and agree that nothing in this Section 2.1
shall be construed to require InterTrust to make any InterTrust technology
available to NatWest that has been developed by InterTrust as a custom or
specialized effort for, or jointly with, one or more current or prospective
development partners and/or other licensees of InterTrust. To the extent that
InterTrust and NatWest mutually agree in a separate written agreement to have
InterTrust develop any custom or specialized software for, or jointly with,
NatWest (other than the Requested Functionality), the terms and conditions of
such separate agreement shall specifiy whether such custom or specialized
software may be made available to any third Person.
(c) Acknowledgments. In accordance with the above, and subject to
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InterTrust representations set forth in Section 10.2 hereof, it is acknowledged
and agreed that the InterTrust Technology may employ or may operate with one or
more technologies that may not be proprietary to InterTrust but are included
within the Licensed Rights as specified on Exhibit A (the "Third Party
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Technology") and as may be modified from time to time by InterTrust. NatWest's
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use of the Third Party Technology is limited by the terms of any licenses or
rights that InterTrust may have therein and may sublicense to NatWest.
2.2 Training, Assistance and Technical Support. Subject to the terms and
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conditions of this Agreement, InterTrust agrees to provide NatWest with the
training, support and assistance set forth in this Section 2.2 for a period of
twenty-four (24) months from the Effective Date (the "Support Period") at no
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additional cost beyond the Support Fee specified in Section5.1((c)). Section
2.2((a)) hereof relates to the provision of Assistance (defined below) and
Section 2.2((b)) relates to technical support of software provided by InterTrust
hereunder. After the Support Period, Assistance and such technical support shall
be provided to NatWest through Standard Support Packages that NatWest may select
and pay for, all as set forth in Section 2.3; provided that at least one
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- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
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such Standard Support Package shall provide Assistance and technical support for
provided software (including the correction of Material Defects) reasonably
commensurate with provisions of Section 2.2((a)) and 2.2((b)) hereof.
(a) Training and Assistance. In order to assist NatWest in use of
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InterTrust Technology, InterTrust shall provide to NatWest, subject to
applicable terms and conditions of this Agreement, reasonable training, support,
and consulting assistance rendered by appropriately qualified, trained and
experienced personnel ("Assistance"). Up to a limit of two hundred (200) hours
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per annum of such Assistance shall be made available to NatWest during the
Support Period. Such Assistance shall be measured based upon InterTrust's
person-hours expended, shall exclude de minimus ad hoc communications and time
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spent on administrative tasks, and shall be subject to reasonable agreement
between the Parties on scheduling and availability of resources. Assistance
shall include: (i) lecture and hands-on training at InterTrust's facility
(unless otherwise agreed by the Parties) for up to six (6) NatWest personnel;
and (ii) access via e-mail, telephone, and/or video teleconferencing to
InterTrust's support personnel, consistent with applicable U.S. software
industry practices and the foregoing. NatWest shall have access to InterTrust's
automated technical support website in a manner no less favorable than
InterTrust provides to any other Core Partner. In addition, and as set forth in
Section 2.2((d)), InterTrust shall designate a support engineer as NatWest's
primary contact for technical support related matters. NatWest shall be
responsible for all expenses incurred by NatWest's personnel in traveling to and
attending any training and support meetings. In the event InterTrust's personnel
travel from InterTrust's facilities in connection with the provisions of such
Assistance (upon InterTrust's and NatWest's mutual agreement approving such
travel), NatWest shall promptly reimburse InterTrust for all reasonable out-of-
pocket travel expenses incurred by InterTrust's personnel. During the Support
Period, InterTrust shall make Assistance available to NatWest in support of at
least the then-current version of Commerce 1.X and Enterprise 1.X as provided to
NatWest by InterTrust, and those versions distributable in accordance with
InterTrust Specifications, all in accordance with Sections 2.2((a)) and 2.2((b))
hereof, and consistent with Section 4.1((b)) hereof.
(b) Correction of Material Defects.
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(i) General. In addition to InterTrust's own on-going quality
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assurance efforts, if NatWest brings any Material Defect to InterTrust's
attention in accordance with commercially reasonable and appropriate InterTrust
standard support policy notification procedures (and made available in writing
to NatWest), InterTrust shall use reasonable efforts in accordance with
applicable U.S. software industry practices, at InterTrust's expense, to correct
such Material Defect. If a Material Defect can not through the exercise of such
reasonable efforts be so corrected, or is not otherwise in good faith reasonably
foreseen to be so correctable with commercially reasonable application of
InterTrust resources, InterTrust will use such reasonably prompt efforts to
adjust InterTrust Technology to mitigate such Material Defect in a manner
reasonably commercially designed and/or intended to minimize material adverse
disruption to functionality of InterTrust Technology in current use. Consistent
with the foregoing, InterTrust's efforts to correct or mitigate Material Defects
shall be provided reasonably in a manner set forth in this Section 2.2((b)),
including, as applicable, for the level of NatWest commercial use of InterTrust
Technology. If NatWest requests and InterTrust agrees to commit resources beyond
the level required hereunder, such efforts will be subject to reasonable
reimbursement by NatWest to InterTrust as agreed by the Parties and as
consistent with reasonable industry practice. InterTrust's sole obligation with
respect to any Material Defect shall be InterTrust's correction or mitigation of
such Material Defect pursuant to the terms of this Section 2.2((b)),NatWest's
sole and exclusive remedies with respect to any Material Defect shall be: (i)
InterTrust's correction or mitigation of such Material Defect pursuant to the
terms of this Section 2.2((b)); (ii) NatWest's suspension of certain payments
during the pendency of Critical Material Defects pursuant to Section 5.1((f));
and/or (iii) NatWest's termination of this Agreement as provided in Section
2.2((b))((iii)) or as provided in Section 13.2((a)) in the event of a breach of
this Section 2.2((b)).
(ii) Classification of Priority. When InterTrust is made aware by
--------------------------
NatWest of a Material Defect in accordance with the notification procedures of
Section 2.2((b))((i)) and in the manner set forth below, InterTrust and NatWest
will work together to reasonably classify such Material Defect into the
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
8
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appropriate priority level consistent with the following: (1) a Material Defect
that renders the NatWest Products commercially unusable, resulting in total
business disruption of NatWest's Clearinghouse Function services ("Critical
--------
Material Defects"); (2) a Material Defect that substantially impairs the
- ----------------
commercial use of NatWest Products ("Priority Material Defects"); and (3) a
-------------------------
Material Defect that has lesser impact on the commercial use of NatWest
Products, and/or a Material Defect not described in the immediately preceding
subparagraphs (1) and/or (2) ("Other Material Defects"). In order for InterTrust
----------------------
and NatWest to make such classification and/or correct or mitigate a Material
Defect, NatWest shall describe the alleged defect in reasonable detail, in
writing to the extent possible (and orally to the extent this may expedite the
correction of any Critical Material Defect); provided that all descriptions must
-------- ----
be in sufficient detail to allow InterTrust to reliably reproduce such defect.
(iii) Critical Material Defects. In the event NatWest brings a
-------------------------
Critical Material Defect to InterTrust's attention in accordance with Section
2.2((b))((i)) and ((ii)) hereof, and subsequent to written notification by
NatWest to InterTrust that NatWest is performing live commercial transactions
involving the performance of Clearinghouse Functions on a meaningful commercial
scale, InterTrust will make good faith efforts to communicate an initial
response concerning such Critical Material Defect within six (6) hours.
InterTrust shall devote its support resources in a priority manner to work on
providing an urgent bug fix or workaround patch, process and/or procedure to
temporarily correct or mitigate such defect as soon as practicable, and in a
commercially reasonable manner, and, thereafter, use good faith efforts to work
toward a longer term solution within a commercially reasonable and practical
time frame as may be reasonably projected at such time by InterTrust after
consultation with NatWest, all of the foregoing taking into account the nature,
severity and complexity of such defect, the type and availability of engineering
resources required, and the magnitude of NatWest's commercial, revenue
generating use of InterTrust Technology. In the event a Critical Material Defect
causes a total disruption in one or more of NatWest's substantial live services
involving the performance of Clearinghouse Functions on a material scale as
compared to NatWest's overall services supported by InterTrust Technology, and
InterTrust has failed within sixty (60) days of receipt of notice from NatWest
in accordance with the provisions of Sections 2.2((b))((i)) and 2.2((b))((ii))
to provide an urgent bug fix or workaround patch, process and/or procedure to
temporarily correct or mitigate such defect to restore operation of such
services, NatWest may terminate this Agreement upon providing InterTrust with
ten (10) days prior written notice thereof.
(iv) Priority Material Defects. In the event NatWest brings a
-------------------------
Priority Material Defect to InterTrust's attention in accordance with Sections
2.2((b)))((i)) and 2.2((b))((ii)), and subsequent to written notification by
NatWest to InterTrust that NatWest is performing live commercial transactions
involving the performance of Clearinghouse Functions on meaningful commercial
scale, InterTrust will make good faith efforts to communicate an initial
response concerning such Priority Material Defect within forty-eight (48) hours.
InterTrust shall reasonably devote its support resources to work on providing a
bug fix or workaround patch, process and/or procedure to correct or mitigate
such defect within a practical and commercially reasonable time frame as may be
reasonably projected at such time by InterTrust after consultation with NatWest,
taking into account the nature, severity and complexity of such defect, the type
and availability of engineering resources required, and the magnitude of
NatWest's commercial, revenue generating use of InterTrust Technology.
(v) Other Material Defects. In the event NatWest brings an Other
----------------------
Material Defect to InterTrust's attention in accordance with Sections 2.2((b))
((i)) and 2.2((b))((ii)), InterTrust will make good faith efforts to: (1)
communicate a response promptly; and (2) thereafter correct or mitigate such
defect in manner consistent with Section ((b))((i)) hereof.
(c) Status Meetings. To assist the Parties in sharing information, and
---------------
coordinating and evaluating their efforts relating to InterTrust Technology and
their mutual technical and business objectives, following the Effective Date the
Parties shall meet from time to time to discuss, among other things: (i)
InterTrust's development progress; (ii) implementation of such technology by
NatWest; and (iii) feedback concerning Assistance provided to NatWest and
product development and marketing progress by NatWest (the "Status
------
9
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Meetings"). Such Status Meetings shall take place not less frequently than once
- --------
a quarter during the first twelve months following the Effective Date.
(d) Dedicated Personnel. InterTrust and NatWest will each appoint a
-------------------
relationship manager, to coordinate its activities pursuant to this Section 0,
and a technical project manager, to coordinate and facilitate the Assistance set
forth in Sections 2.2((a)) and 2.2((b)). InterTrust will reasonably and
consistently maintain such dedicated personnel. InterTrust will also promptly
respond to any NatWest concerns regarding such personnel. InterTrust may utilize
InterTrust resources located in the United Kingdom and/or Europe in part in
providing the Assistance and other services set forth in this Section 2.2.
2.3 Additional Assistance; Further Standard Support Packages. During the
--------------------------------------------------------
Support Period, additional Assistance may be made available by InterTrust to
NatWest beyond the two hundred (200) hours per annum allocated under Section
2.2((a)) ("Additional Assistance"). To the extent NatWest requests, and
InterTrust decides to provide such Additional Assistance, NatWest shall pay to
---------------------
InterTrust fees that are no higher than the lowest fees charged by InterTrust to
any other customers for such Additional Assistance under like circumstances and
at a cost no greater than reasonably consistent with applicable U.S. software
industry practices. Following the Support Period (or earlier if agreed by
NatWest and InterTrust), NatWest may select one or more Standard Support
Packages that InterTrust may offer, except that to the extent NatWest is using
InterTrust Technology and InterTrust requires its customers (who have license
rights and obligations comparable to NatWest) to maintain at least a certain
minimum level of support with respect to its licensed activities, NatWest shall
select and maintain at least such minimum level of support provided by a
Standard Support Package, which minimum level will have associated support fees
not materially in excess of the Support Fee (as adjusted upward for inflation or
to maintain support fees reasonably commensurate with industry standard support
fees in comparable circumstances) and shall provide support commensurate with
the level of support provided in Section 2.2((a)) and 2.2((b)) hereof. Such
support (including correction of Material Defects) shall be provided to NatWest
at a cost no higher than the lowest fees charged by InterTrust to any other Core
Partner for substantially the same level of support under like circumstances and
no greater than reasonably consistent with U.S. software industry practices.
3. LIMITED LICENSE GRANT AND RESTRICTIONS.
3.1 Limited License to InterTrust Technology and Modified Technology. Subject
----------------------------------------------------------------
to the terms and conditions of this Agreement, InterTrust grants to NatWest
during the term of this Agreement a limited, nonexclusive, nontransferable
(except as provided in Section 14.4), nonsublicensable (except as expressly
provided in subparagraph (d) and (e) below), worldwide right and license under
the Licensed Rights to:
(a) use and reproduce the InterTrust Technology and Modified Technology
solely for the purpose of: (1) designing, making, developing, and producing
NatWest Products; and (2) exercising the rights granted under Sections 3.1((b)),
3.1((c)), 3.1((d)), 3.1((e)) and 3.2 hereof;
(b) modify the InterTrust Technology, except any Core Technology, to: (1)
create Modified Technology solely for the purpose of enabling incorporation of
InterTrust Technology into NatWest Products; and (2) incorporate such Modified
Technology into NatWest Products;
(c) use NatWest Products and/or provide associated services in connection
therewith in Compliance with InterTrust Specifications, and otherwise solely in
accordance with this Agreement;
(d) market, distribute, offer for sale, sell, license for use, import,
export and/or otherwise transfer NatWest Products that are Application Products,
and Distributable Documentation, to NatWest Customers pursuant to a Customer
Agreement in accordance with, and as defined in, Section 4.2 hereof, and
otherwise solely in accordance with this Agreement; and
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(e) market, distribute, offer for sale, sell, license for use, import,
export and/or otherwise transfer NatWest Products that are Clearinghouse
Products, solely to Authorized Clearinghouse Providers pursuant to a Customer
Agreement specific to such Authorized Clearinghouse Providers supplied in
accordance with, and as defined in, Section 4.2 hereof, and otherwise solely in
accordance with this Agreement.
3.2 Limited License to Perform Clearinghouse Functions. Subject to the terms
- --- --------------------------------------------------
and conditions of this Agreement, InterTrust grants to NatWest during the term
of this Agreement a limited, nonexclusive, nontransferable (except as set forth
in Section 14.4), nonsublicensable (except as expressly provided in subparagraph
(ii) below), worldwide right and license under the Licensed Rights to: (i)
perform Clearinghouse Functions solely under NatWest Trademarks as specified
herein and in Compliance with InterTrust Specifications; and (ii) have
Authorized Clearinghouse Providers perform any and all tasks and functions
permitted by this Agreement to service InterRights Points provided to a Customer
by NatWest in accordance with Section 3.1((d)), to the extent such Authorized
Clearinghouse Provider has been granted by InterTrust rights of the scope
necessary to perform the immediately foregoing activities. Such Clearinghouse
Functions as set forth in subparagraph (i) of this Section 3.2 may be performed
to service solely InterRights Points that have been provided by (a) a NatWest
Product, and solely in connection with such NatWest Product, or (b) a Person
having a valid written license from InterTrust allowing such Person to permit
Authorized Clearinghouses Providers to service InterRights Points provided by
such Person.
3.3 License to InterTrust Trademarks. Subject to the terms and conditions of
--------------------------------
this Agreement, InterTrust grants to NatWest during the term of this Agreement a
limited, royalty-free, nonexclusive, nontransferable (except as set forth in
Section 14.4), nonsublicensable (except as expressly provided in Section
3.1((d)) and ((e)) and Section 3.2(ii)), worldwide license to use and display
the InterTrust Trademarks solely: (i) on NatWest Products and in connection with
associated services to indicate that such products and services are in
Compliance with InterTrust Specifications; (ii) on related Distributable
Documentation and marketing and sales materials to identify that InterTrust
Technology is being utilized by NatWest; and (iii) as otherwise set forth herein
or reasonably stipulated in writing by InterTrust's Chairman of the Board, or
any other InterTrust officer designated in a written communication to NatWest
signed by InterTrust's Chairman of the Board (an "InterTrust Designated
---------------------
Officer").
- -------
3.4 No Additional Licenses. NatWest understands and acknowledges that
----------------------
InterTrust is licensing to NatWest only certain limited rights to use InterTrust
Technology as described herein; and InterTrust understands that NatWest is
licensing to InterTrust only certain limited rights as expressly set forth
herein. Thus, notwithstanding the generality of any other provision herein: (i)
NatWest acknowledges and agrees that the licenses granted under Sections 3.1,
3.2, and 3.3 are the only licenses granted to NatWest; (ii) InterTrust
acknowledges that the licenses granted under Sections 4.6 and 6.3 are the only
licenses granted to InterTrust; and (iii) both Parties acknowledge that no other
licenses have been expressly, or by implication or estoppel, now or in the
future, granted except pursuant to a separate written agreement executed by an
authorized officer of NatWest and an InterTrust Designated Officer. Any and all
rights of InterTrust not expressly granted to NatWest under this Agreement are
reserved and retained by InterTrust. Any and all rights of NatWest not expressly
granted to InterTrust under this Agreement (including pursuant to Sections 4.6
and 6.3 hereof) are reserved and retained by NatWest.
3.5 General Restrictions. NatWest covenants that it shall not: (i) during the
--------------------
term of this Agreement (a) reverse engineer any portion of the Core Technology
or any technology that has been supplied to NatWest in Object Code form only,
(b) modify any portion of the Core Technology, and/or (c) engage in any "clean
room" activities designed to replicate the functionality of the Core Technology
for any use inconsistent with this Agreement; or (ii) after the term of this
Agreement, use or exploit the InterTrust Technology for any purpose whatsoever
(except as expressly provided in Section 13.3). Any material use by NatWest of
any portion of the InterTrust Technology and/or Modified Technology outside the
scope of the licenses granted by InterTrust hereunder shall constitute a
material breach of this Agreement. If the provisions of subsections (i)(a),
(i)(b) and/or (i)(c) of this Section 3.5 are prohibited by any jurisdiction
having competent jurisdiction over this Agreement and such prohibition cannot be
waived by a Party by nature of the foregoing language, or otherwise be
reasonably avoided by a Party (such as, for example, by developing, accessing
and/or using any relevant
11
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CONFIDENTIAL
portions of the InterTrust Technology outside of such jurisdiction), then (1)
before engaging in any of the activities set forth in such subsections (i)(a),
(i)(b) and/or (i)(c), NatWest shall provide InterTrust with ninety (90) days
prior written notice; and (2) all information and/or technology derived from
such activities (the "Derived Information") shall be treated as InterTrust
-------------------
Confidential Information (defined below) or Top Secret Information (defined
below) as the case may be, and shall be used solely within the scope of
NatWest's licenses granted under this Agreement and the other terms and
conditions hereof. Furthermore, any disassembly, decompilation or reverse
engineering undertaken in reliance upon such applicable jurisdiction' s
prohibiting law shall take place only where such disassembly, decompilation or
reverse engineering of any InterTrust software (or any part thereof) and
reproduction of the software and translation of its form are indispensable to
obtain the information necessary to achieve the interoperability of the software
with other programs, provided that: (A) these acts are performed by such Person
-------- ----
or by another Person having a right to use a copy of the software, or on their
behalf by a Person authorized under this Agreement to do so and where such acts
are not in violation of any applicable governing law; (B) the information
necessary to achieve reasonable interoperability has not previously been readily
available to the Persons referred to in subparagraph (A); and (C) these acts are
confined to the parts of the software which are necessary to achieve
interoperability (as interoperability may legally be most narrowly interpreted
under applicable law and precedent, for example to exclude from
"interoperability" any acts that compromise system security and/or undermine
basic viability or functionality of InterTrust Technology and/or NatWest
Products) and occur solely as is consistent with the licenses under this
Agreement, and where any rights to use any information derived from such acts
terminate immediately and fully upon any cessation or termination of applicable
licensed rights hereunder.
4. NATWEST SUPPORT AND ADDITIONAL COVENANTS
4.1 NatWest Support of InterTrust Technology.
----------------------------------------
(a) NatWest Use of InterTrust Technology. In accordance with the
------------------------------------
licenses granted to NatWest and the other terms hereunder, in addition to those
provisions of Section 8.1, NatWest agrees to make commercially reasonable, good
faith efforts to develop, produce, and distribute or use for commercial
purposes, in a commercially meaningful manner, a NatWest Product (as applicable)
as soon as commercially reasonable and practicable, and in any case within
twelve (12) months following the Effective Date. Such time period shall be
extended by any period in which there is a delay in InterTrust's delivery of the
Commerce 1.0 (GA Version) software beyond that set forth as of the Effective
Date in Exhibit A hereto, or there exists a Material Defect in the Commerce 1.0
software that materially impedes NatWest's development efforts as relevant, but
only for the period from the date that NatWest shows such efforts to have been
first materially impeded to the date such defect has been reasonably corrected
or mitigated as provided in Section 2.2((b)).
(b) Compliance with InterTrust Specifications.
-----------------------------------------
(i) Products and Services. NatWest shall not commence the
---------------------
distribution, sale or other transfer of any specific NatWest Product, or perform
any service directly relating to InterTrust Technology, unless such products
and/or services are in Compliance with InterTrust Specifications. Such
InterTrust Specifications shall be established and applied in a
nondiscriminatory and consistent manner with respect to all Persons regarding
similar products, services, and/or circumstances directly related to use.
InterTrust Specifications promulgated as of the Effective Date are set forth in
Exhibit C hereto.
(ii) Compliance with New Specifications. InterTrust may, from time to
---- ----------------------------------
time, modify InterTrust Specifications to accommodate changes in InterTrust
Technology, and/or any related InterTrust product development, for such purposes
as, for example, improving architectural integrity, functional capability,
standardization, security capability, efficiency, and/or interoperability of
technology, components, products and/or services that use InterTrust Technology
(a "New Specification"). InterTrust shall use commercially reasonable efforts to
-----------------
maintain compatibility between a New Specification and the then-preceding
Specification taking into account benefits of performance, functionality,
security enhancements, growth of installed base and
12
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CONFIDENTIAL
range of supported platforms, and potential burden resulting from version
incompatibility. Priority shall be given to considerations of security,
interoperability and platform support in evaluating when such compatibility is
not commercially appropriate. To the extent InterTrust releases a New
Specification that applies to any portion of a NatWest Product and/or service
associated with InterTrust Technology then being performed or distributed by
NatWest (as applicable), NatWest shall bring any further such products delivered
to Customers, and/or any such services (as applicable), into Compliance with
such New Specification as of the earliest to occur of: (A) the next version,
release, or production cycle of such NatWest Product and/or such associated
service (the "Next Version"), as earlier applicable, but only to the extent that
------------
NatWest receives notice of such New Specification within a reasonably sufficient
time of such Next Version to accommodate new aspects of such New Specification;
and (B) [*] months after NatWest receives a released copy of such New
Specification. InterTrust and NatWest further agree that NatWest shall, within
[*] months after receiving a released copy of such New Specification,
implement such new aspects of such New Specification for all applicable services
supporting and/or employing NatWest Products and/or any other products employing
InterTrust Technology provided to Customers and not meeting such New
Specification. Notwithstanding the foregoing, should serious technical
interoperability and/or security requirements commercially necessitate more
prompt action, NatWest and InterTrust will confer and agree upon more
aggressive, practical schedules (taking into account the severity of security
and interoperability concerns) feasible to ensure Compliance with the New
Specification for all NatWest Products and any services relating to InterTrust
Technology. Under such conditions, NatWest shall take whatever commercially
appropriate steps are reasonable and required under the circumstances to
minimize or eliminate (as may be necessary) a continuation of such
interoperability and/or security problems. InterTrust represents to NatWest that
all Core Partner Agreements existing as of the Effective Date contain
substantially similar commitments regarding compliance by such Core Partner with
InterTrust Specifications and New Specifications as provided for in this Section
4.1(b)(c). If during the term of this Agreement InterTrust enters into a
technology development and/or license agreement with any Core Partner having
terms [*] to such Core Partner than those contained in this Section 4.1((b)),
and pursuant to such agreement the requirements of Compliance with
Specifications [*] to such Core Partner than the set forth in this Section
4.1((b)), NatWest shall thereafter going forward be accorded [*] regarding the
requirements of Compliance with Specifications under this Section 4.1((b)), but
solely to the specific extent and nature of such [*].
(c) Compliance Testing.
------------------
(i) Purpose. NatWest acknowledges that:(1) in support of InterTrust
-------
Technology, InterTrust will implement one or more certification programs
designed to ensure that licensed products and/or associated services (including
NatWest Products) use InterTrust Technology and/or Modified Technology in
Compliance with InterTrust Specifications in accordance with this Agreement (the
"Certification Program(s)"); and (2) such Certification Program(s) is (are)
------------------------
critical to maintaining the reliability, interoperability, and tamper resistance
of products and services employing InterTrust Technology and/or Modified
Technology, and in maintaining public confidence in the integrity of InterTrust
Technology and/or brands as the resource for interoperable electronic commerce.
In establishing its Certification Programs, as may be modified from time to
time, InterTrust shall use reasonable efforts to establish policies supporting
efficient certification of products and services based upon InterTrust
Technology, subject, in InterTrust's discretion, to achieving the aforementioned
goals of certification. As appropriate under the circumstances as determined by
InterTrust, such alternatives may, under certain circumstances, include: (A) the
pre-certification of certain components of InterTrust Technology for use in
NatWest Products; (B) providing test programs or suites amenable for self
certification or preliminary assessment of certifiability; and/or (C) otherwise
supporting certification policies and/or technology that enables reasonable
certification efficiency and Compliance with InterTrust Specifications. Any
Certification Program(s) established by or for InterTrust for Development
Partners shall be applied in a nondiscriminatory and consistent manner with
respect to NatWest and all other Persons providing similar products and/or
services.
(ii) Certification Requirements. Consistent with the foregoing,
--------------------------
prior to NatWest's first commercial use, or distribution, sale, or other
transfer, of a NatWest Product or associated service (as applicable) InterTrust
may require NatWest's: (1) use of a suite of test software provided by
InterTrust (or an InterTrust
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
13
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CONFIDENTIAL
delegate ("Delegate") in accordance herewith) to test and verify that
--------
NatWest Products (and/or associated services) are, at least in part, in
Compliance with InterTrust Specifications; and/or (2) submission of samples to
InterTrust (and/or an InterTrust Delegate) of such NatWest Products (in Object
Code form unless Source Code is necessary or reasonably appropriate) and
associated programs, parameter data, and other information that may be
technically material to ascertain Compliance with InterTrust Specifications
and/or to allow InterTrust (or a Delegate) to perform confidential testing
("Certification Testing"). To the extent that options (1) or (2) immediately
---------------------
above do not, or can not reasonably be anticipated to, provide sufficient
information to verify Compliance, such Certification Program(s) may also require
the provision to InterTrust and/or an InterTrust Delegate of detailed
specifications and documentation related to NatWest's use of InterTrust
Technology and Modified Technology for NatWest Products, and/or any associated
services, but only to the extent that any such specifications and documentation
are reasonably requested for certification assessment purposes and may be
material to Certification Testing. All specifications and documentation provided
by NatWest in connection with any such Certification Program(s) shall be
authenticated in writing by an authorized representative of NatWest, and no
NatWest Product and/or associated service shall be made commercially available
hereunder unless it has become a Compliant Product (defined below). Any such
Delegate performing certification in connection with NatWest Products and
associated services hereunder shall: (A) not have commercial interests
materially adverse to NatWest; and (B) have agreed to enter into a
confidentiality agreement to maintain the confidentiality of NatWest
Confidential Information.
(iii) InterTrust Certification Response. In connection with any
---------------------------------
submissions made to InterTrust or an InterTrust Delegate in connection with a
Certification Program, InterTrust (or such Delegate) will respond in a
reasonably prompt manner recognizing product delivery time frames as appropriate
following receipt of submitted products and access to, or receipt of technology
supporting, such service, unless commercially reasonable factors result in
prolonging such response. Such response shall be in the form of: (1) a written
approval that the product or service is certified (a "Compliant Product")
-----------------
(NatWest Products and services relating to InterTrust Technology not being
Compliant until such certification has been granted); or (2) if not approved, a
summary, with reasonable details as feasible, of problems and, where feasible,
suggested solutions.
(iv) Costs. To defray costs associated with the performance and
-----
administration of the Certification Program, in connection with the
certification of any product or service NatWest shall be charged a reasonable
fee not to exceed U.S. software industry norms for similar testing activities as
may be available (and, if in part or in full conducted or managed by InterTrust,
not more than the full cost incurred by InterTrust in performing, administering,
and/or managing such tests, and, to the extent conducted by a Delegate, not more
than fees charged by such Delegate to NatWest and InterTrust). An estimate of
such fee shall be provided to NatWest, as applicable, as soon as reasonably
practical upon NatWest's submission of samples or documentation for and access
to services, for testing, and such fee shall be paid by NatWest in accordance
with standard U.S. software industry practices.
(d) Documentation Format. NatWest may modify the format of Distributable
--------------------
Documentation and supplement the content thereof, but only in a manner
consistent with such Distributable Documentation, to the extent reasonably
necessary to enable NatWest's Customers to utilize NatWest Products and/or
associated services. Subject to the provisions of this Agreement, NatWest may,
at its expense, translate, or have translated for it, the Distributable
Documentation into any appropriate language for purposes of delivery to its
Customers or its own internal use. InterTrust shall have the right to receive
and approve (to the extent referencing InterTrust Technology and/or capabilities
and/or functions enabled by InterTrust Technology) any non-English translations
made by or for NatWest of documentation provided by NatWest concerning NatWest
Products and any related services (including Distributable Documentation),
legends and notices required pursuant to Section 0 hereof and other required
notices, and all versions of InterTrust Technology.
4.2 Customer and Clearing Agreements.
--------------------------------
(a) Basic Requirements. NatWest shall distribute NatWest Products only to
------------------
Customers (and perform associated services only for Customers), and only after
NatWest shall have first notified and required
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such Person to become bound by a form of customer agreement ("Customer
--------
Agreement") for such NatWest Product (and/or associated service) appropriate for
- ---------
such Customer (such as whether such Customer is an end-user or intends to
further distribute NatWest Product) as provided by NatWest. Such Customer
Agreement forms shall have terms relating to InterTrust Technology and
InterTrust's rights and interests consistent with and reflective of the terms of
this Agreement. Such Customer Agreement shall also have terms consistent with,
reflective of, and based upon the items set forth in Exhibit D hereto
(collectively, the "InterTrust Terms"). Such InterTrust Terms shall be signed by
----------------
an InterTrust Designated Officer and appended to Exhibit D, and NatWest and
InterTrust may from time to time supplement or amend Exhibit D as provided in
Section 0(0).
(b) Additional Provisions. The approved InterTrust Terms shall be used
---------------------
by NatWest in all Customer Agreements unless and until: (i) NatWest requests a
modification of the InterTrust Terms and InterTrust consents in its discretion
in writing to such modification; or (ii) InterTrust reasonably requires that
NatWest alter the InterTrust Terms where such alteration is needed to prevent or
mitigate any impairment of any part of its Intellectual Property Rights, or any
impairment of the security and/or interoperability of InterTrust Technology and
applications and/or services based thereon, for example in view of court
decisions and/or applicable regulations and/or newly available information.
Such alteration to the InterTrust Terms shall be signed by an InterTrust
Designated Officer and attached to Exhibit D in accordance herewith. NatWest
agrees and acknowledges that NatWest's compliance with this Section 4.2((b))
with respect to any specific Customer shall constitute a condition precedent to
the licenses granted under Section 3 hereof with respect to any such Customer's
use of NatWest Products and/or associated services. To the extent any InterTrust
Terms are deemed, or are reasonably believed by InterTrust to have a substantial
likelihood of being deemed, unenforceable or otherwise ineffective in any
relevant jurisdiction, NatWest shall, upon becoming aware of such InterTrust
Terms being deemed unenforceable or otherwise ineffective, or upon receiving
written notice from InterTrust as to such reasonable belief, substitute new
terms provided by InterTrust concerning such unenforceable or ineffective
provision in such Customer Agreement forms or existing Customer Agreements, and
take other actions as reasonably specified by InterTrust related to such
unenforceability concerns, including reforming, modifying and/or canceling any
such Customer Agreement if necessary to provide InterTrust with the legally
enforceable protection contemplated hereunder.
(c) InterTrust Terms Review. Under no circumstances: (i) shall any such
-----------------------
review by InterTrust of InterTrust Terms and/or any terms of any Customer
Agreement subsequently be interpreted and/or used as comments of InterTrust to
be relied upon by NatWest in any manner whatsoever regarding compliance of such
InterTrust Terms and/or such Customer Agreement terms with the provisions of
this Agreement; and/or (ii) shall any such review or lack of review by
InterTrust be deemed (1) binding on InterTrust or constitute any waiver of any
rights whatsoever hereunder by InterTrust and/or (2) an admission or waiver of
any kind whatsoever under any circumstances whatsoever, except that NatWest may
rely on InterTrust Terms attached to Exhibit D hereto as amended from time to
time in accordance herewith.
(d) Clearing Agreement. Where NatWest is performing any Clearinghouse
------------------
Function services for a Person selling, acting as lessor or licensor of,
vending, or in any comparable manner providing rights related to Content, or
performing any other activities constituting a Content Transaction for
consideration for such Content (a "Vendor"), NatWest shall have a written
------
agreement with such Vendor concerning such performance of Clearinghouse
Functions, and such agreement shall contain (in addition to the InterTrust
Terms, as applicable), at minimum, provisions: (i) requiring such Vendor to
report and certify Customer's Portion Information (as defined in Section
5.1((b)) hereof) to NatWest in writing, and regularly update such reported
information (consistent with the timing of NatWest's obligation to remit
royalties pursuant to Section 5.2 hereof) in the event of any change thereof;
(ii) terminating such agreement in the instance that such reported information
is found to have been materially or intentionally misrepresented or repeatedly
negligently reported; and (iii) permitting InterTrust to act as a third party
beneficiary (with the right to enforce) those provisions set forth in the
preceding subparagraphs (i) and (ii) under the law of such jurisdiction and
venue as set forth in the InterTrust Terms, unless any such terms are prohibited
by applicable law, and then as reasonably agreed by the Parties.
4.3 Notices and Branding.
--------------------
15
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(a) Product Notices. NatWest shall place Notices (as hereinafter defined)
---------------
on all NatWest Products, and Distributable Documentation: (i) in the "about
box," or (ii) at such other equivalent location(s) as may be required to provide
legally sufficient notice and/or as reasonably agreed in writing by InterTrust
and NatWest, such as on certain screens generated by or including the NatWest
Products and/or any associated services, and at such other locations as
appropriate to protect InterTrust's Intellectual Property or as may be
reasonable practice in the U.S. software industry. For purposes of this
Agreement, the term "Notices" shall consist of: (i) Intellectual Property
Rights, warranty, and disclaimer notices; and (ii) field of use notices
consistent with the terms of this Agreement (including protection of InterTrust
rights recognized hereby) as all such notices may be reasonably amended by
InterTrust from time to time consistent with the provisions of Section
4.2((b)), and this Agreement. A representative version of such Notices as of
the Effective Date are attached hereto as Exhibit E. NatWest shall not remove,
alter, cover, obfuscate and/or otherwise deface any InterTrust Trademarks or
Notices on any InterTrust Technology or associated documentation, marketing and
advertising materials therefor, and shall contractually prohibit any and all
Customers from -- and take commercially reasonable efforts to enforce such
prohibitions against any Person known by NatWest to be in breach of such
provisions concerning -- removing, altering, covering, obfuscating or otherwise
defacing of any InterTrust Trademarks or Notices on any InterTrust Technology
or associated documentation, marketing and advertising materials therefor.
Compliance with subsections (i) and (ii) immediately above (following notice
and opportunity to cure in accordance with the provisions of Section 13.2
hereof) shall constitute a condition precedent to the licenses granted under
Section 3 hereof with respect to those specific NatWest Products and/or
associated services not in compliance herewith.
(b) InterTrust Branding. NatWest shall, in accordance with the provisions
-------------------
of this Section 4.3((b)) and InterTrust's reasonable instructions provided from
time to time by InterTrust to NatWest, place the InterTrust brands as specified
below on all NatWest Products and associated services, Distributable
Documentation, marketing, sales, and advertising materials therefor, packaging
for any physical media containing any such products or services, on
initialization and/or start-up screens of any NatWest Products and/or
associated services, or such screens generated by or including the NatWest
Products and/or any associated services.
The InterTrust brands shall be the symbol or mark denoting Compliance of such
NatWest Products and/or associated services with InterTrust Specifications,
including the statement that such NatWest Products or associated services are
"InterTrustworthy" or "InterTrustable" (as such symbol or mark may be amended by
InterTrust from time to time consistent with the provisions of Section 4.4((e))
hereof). Such branding shall be located and appear in the manner specified by
InterTrust, which shall be prominent, although secondary to the brands of
NatWest and/or a NatWest Customer on a NatWest Product and/or service. Such
InterTrust branding shall be prominent, but not unreasonably detract from, or
interfere with, such other brands. NatWest shall not remove, alter, cover,
obfuscate and/or otherwise deface any InterTrust brands and shall contractually
prohibit its Customers from, and take commercially reasonable efforts to enforce
such prohibitions against any Customer known to NatWest to be in breach of such
provision concerning, the removal, alteration, covering, obfuscation or
otherwise defacing of such InterTrust brands.
(c) NatWest Product Branding. NatWest Products that are: (i)
------------------------
Clearinghouse Products (and/or services associated therewith) shall be branded
and marketed solely under NatWest Trademarks; and (ii) Application Products
(and/or services associated therewith) shall be branded and marketed solely
under NatWest Trademarks or "Co-Branded" (as defined below) under a NatWest
----------
Trademark and the trademark of a Customer in accordance with the provisions
hereof (except where use of InterTrust Trademarks is also required herein, or
other trademarks of Persons are also included in a limited manner to identify
other technology or services associated with such NatWest Product and/or
associated service), and in all events in accordance with the provisions of
Section 4.5 and other provisions hereof. As used herein, "Co-Branded" means that
----------
both a NatWest Trademark brand and the brand of a NatWest Customer appear on a
NatWest Product and/or associated service; provided that the NatWest brand shall
-------- ----
at least be clearly evident and prominent in all instances of branding usage
without unreasonably detracting from or interfering with such NatWest Customer
brand. References to Clearinghouse Function services with, in, or otherwise
related to NatWest Products that are Application Products, and/or services
through which NatWest provides Clearinghouse Function services shall be
prominently branded solely under NatWest Trademarks (except as provided under
Section 4.3((b)) including prominent branding on screens and/or user interfaces
directly relating to initiating and/or reporting on transactions, and
16
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materially prominent, though potentially secondary, mention on other splash
screens and/or other relevant screens visible to end users. If NatWest is not
performing the Clearinghouse Function services for any NatWest Product and/or
associated service then, in addition to the foregoing with respect to a Co-
Branded Product, the NatWest Trademark Brand shall occupy not less than [*]
percent ([*]%) of the aggregate presentation area in any NatWest Product and/or
associated service dedicated to the presentation of any brands. In no event
shall branding be employed that may be in any manner unclear that the branding
and provision of Clearinghouse Products (and/or services associated therewith)
is provided solely by NatWest.
(d) Network Notices. At InterTrust's option and upon NatWest's approval,
---------------
which shall not be unreasonably withheld given the balance of commercial
reasons, NatWest Web pages that materially promote or otherwise support NatWest
Products, and/or associated services and InterTrust Technology (and/or at least
one NatWest Web page that materially promotes NatWest Products and/or associated
services if no Web pages materially promote or otherwise support InterTrust
Technology) shall contain a graphical banner provided by InterTrust and a link
to a Web page provided by InterTrust on the Internet or the equivalent thereof
on any other public electronic network that materially promotes InterTrust
Technology. At NatWest's option and upon InterTrust's approval, which shall not
be unreasonably withheld given the balance of commercial reasons, InterTrust Web
pages that materially promote or otherwise support InterTrust Technology and
NatWest Products and/or associated services (and/or at least one InterTrust Web
page that materially promotes InterTrust Technology if no Web pages materially
promote or otherwise support NatWest Products and/or associated services) shall
contain a graphical banner provided by NatWest and a link to a Web page provided
by NatWest on the Internet or the equivalent thereof on any other public
electronic network that materially promotes NatWest Products and/or associated
services so long as NatWest treats InterTrust as its preferred partner for
Secure Container and/or Digital Rights Management technologies.
(e) Prospective Notice. The Notices shall be effective beginning on the
------------------
date InterTrust gives NatWest written notice thereof and NatWest shall implement
and/or comply with applicable portions thereof as soon as reasonably
commercially practicable thereafter.
4.4 InterTrust Trademarks.
---------------------
(a) Standards. NatWest recognizes the importance of InterTrust's
---------
reputation and goodwill as the provider of a commercial trust environment and in
connection with NatWest's use and distribution of licensed products and services
bearing InterTrust Trademarks. Consequently, to maintain InterTrust's interest
in and rights to the InterTrust Trademarks NatWest shall utilize the InterTrust
Trademarks in accordance with reasonable trademark guidelines (which may include
approved samples and exemplars) as may be provided to NatWest by InterTrust.
Such trademark guidelines shall include a list of InterTrust Trademarks and
shall specify restrictions on use, if any, including permitted and prohibited
countries and jurisdictions. InterTrust Trademarks and trademark guidelines as
of the Effective Date are initially listed on Exhibit B attached hereto, and may
be modified by InterTrust from time to time upon InterTrust's provision to
NatWest of reasonable prior written notice. Any such modification shall not
include any names, logos or marks that substantially conflict, create a
likelihood of confusion with, or cause substantial or material dilution of any
then-existing trademark rights of NatWest.
(b) Trademark Ownership; Contestability. NatWest acknowledges and agrees
-----------------------------------
that all uses of InterTrust Trademarks as permitted hereunder, and goodwill
associated therewith, shall inure solely to the benefit of InterTrust. NatWest
shall not contest the validity of any InterTrust Trademarks (or registrations
thereof or applications with respect thereto), or InterTrust's exclusive
ownership of the InterTrust Trademarks or their associated goodwill: (i) with
respect to any InterTrust Trademarks included on Exhibit B as of the Effective
Date ("Initial Trademarks"); and/or (ii) with respect to any InterTrust
------------------
Trademarks later added to such Exhibit B in accordance with Section 4.4((a))
("Added Trademarks") (provided that NatWest uses such Added Trademarks in
----------------
commerce during the term hereof). NatWest agrees to make available to
InterTrust, upon request with reasonable notice, samples of records and other
documentary evidence as is (are) retained in the ordinary course of
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
17
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CONFIDENTIAL
NatWest's business regarding its use of the InterTrust Trademarks, and
information regarding first use of the InterTrust Trademarks by NatWest in each
country.
(c) Confusing Similarity. NatWest shall not use any marks identical with
--------------------
or confusingly similar to any of the Initial Trademarks, or Added Trademarks
used in commerce by NatWest at any time, and shall not register or attempt to
register any marks identical with or confusingly similar to any Initial
Trademarks or any Added Trademarks used in commerce by NatWest at any time
during the term hereof. NatWest also shall not knowingly permit to be used or
affixed (and shall take commercially reasonable steps to prohibit Customer from
using or affixing) any trademark on any NatWest Product supplied to such
Customer to the extent such trademark could reasonably be thought to be
confusingly similar to or create any market confusion with any trademarks used
by such Customer in connection with any products or services using Secure
Container technology (other than InterTrust Technology Secure Containers).
(d) Approvals. InterTrust shall have the right to review (reasonably
---------
prior to first commercial use) and to approve (which approval shall not be
unreasonably withheld or delayed) all uses of InterTrust Trademarks, including
any use thereof on NatWest Products, and in connection with associated services
(including performance of Clearinghouse Functions) provided by NatWest relating
to products and applications employing InterTrust Technology and/or Modified
Technology, and in related documentation and marketing materials. Uses or
ranges of uses of InterTrust Trademarks approved in writing by InterTrust may be
used by NatWest in connection with NatWest Products and/or associated services,
and all applicable related documentation and marketing materials until
InterTrust informs NatWest in writing that such use or range of uses is no
longer approved, and such notification shall take effect in the manner set forth
in Section 4.3((e)) hereof.
(e) Prospective Notice. Changes in the InterTrust Trademarks and
------------------
associated standards of quality shall be effective beginning on the date
InterTrust gives NatWest written notice thereof and NatWest shall, as soon as
reasonably commercially practicable thereafter, implement and/or comply with
such respective portions thereof.
4.5 NatWest's Use of NatWest Trademarks on NatWest Products. To promote the
-------------------------------------------------------
branded and distinct identity of any NatWest Products, or associated services,
NatWest acknowledges and agrees that any trademark or logo used by NatWest
and/or a NatWest Customer (with respect to Co-Branded NatWest Products) in
commerce to specifically identify, label or market any such products or services
(other than trademarks or logos that serve to generally identify NatWest or such
NatWest Customer) shall not, concurrently or thereafter, be used to identify any
product or service other than such NatWest Products, and associated services,
whether by NatWest, such NatWest Customer, or pursuant to license from NatWest.
4.6 NatWest Trademarks. InterTrust shall obtain permission from NatWest for any
------------------
use of NatWest's Trademarks in connection with marketing activities (which
permission shall not be unreasonably withheld or delayed) and shall comply with
NatWest's instructions provided in writing by NatWest concerning such further
use of any NatWest Trademarks, except that InterTrust shall have the royalty
free, nontransferable (except as provided in Section 14.4) worldwide right to
use the NatWest Trademarks and other NatWest trademarks as selected by NatWest,
solely in connection with any publicity in accordance with Sections 4.3((d)),
7.1, 7.2 and 9.3 hereof. InterTrust shall comply with all reasonable trademark
guidelines provided in writing by NatWest concerning such use of any NatWest
Trademarks which guidelines shall specify restrictions on use, including
permitted countries and jurisdictions. The provisions of Section 4.4 shall apply
reciprocally to InterTrust with respect to NatWest Trademarks as it applies to
NatWest with respect to InterTrust Trademarks, and InterTrust shall comply with
such provisions. NatWest Trademarks and trademark guidelines as of the Effective
Date are listed on Exhibit B attached hereto, and may be reasonably modified by
NatWest from time to time upon NatWest's provision to InterTrust of reasonable
prior written notice thereof. Any such modification will not include any names,
logos or marks that substantially conflict with, create a likelihood of
confusion with, or cause a substantial or material dilution of then-existing
trademark rights of InterTrust.
18
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5. LICENSE FEES AND PAYMENT TERMS.
5.1 Fees and Royalties.
------------------
(a) InterTrust Technology Fees. In consideration of the licenses granted
--------------------------
to NatWest herein and the other terms and conditions hereof, NatWest shall pay
to InterTrust the following nonrefundable license fees, net of any withholding
tax:
(i) concurrently with the execution hereof, [*] dollars ($US[*]);
(ii) within thirty (30) days after the delivery to NatWest of the
Commerce 1.0 (GA Version), [*] dollars ($US[*]);
(iii) upon the earlier of (1) NatWest's first commercial transfer
and/or use of a NatWest Product and/or associated services pursuant to Section
3.1((c)) and/or ((d)) hereof, or (2) one (1) year from the Effective Date, [*]
dollars ($US[*]), which payment shall be [*] due InterTrust in the manner set
forth in Section 5.2 below ("[*]");
(iv) within thirty (30) days after the delivery to NatWest of any
Update Release and/or New Release, which alone or in combination with previous
releases, contains all of Requested Functionality, [*] dollars ($US[*]), which
payment shall also be [*] due InterTrust in the manner set forth in Section 3.2
below as [*]; and
(v) within thirty (30) days after the delivery of Commerce 2.0 or
June 1, 2000 whichever is earlier, [*] dollars ($US[*]), and on the first day
of each calendar quarter for three calendar quarters, commencing with the first
calendar quarter after the payment set forth in Section 5.1((a))((iv)), [*]
dollars ($US[*]), all four of such payments shall also be [*] due InterTrust in
the manner set forth in Section 5.2 below as [*].
(b) InterTrust Technology Royalties. In consideration of the licenses
-------------------------------
granted to NatWest herein and the other terms and conditions hereof, for
NatWest's exercise of the license pursuant to Section 3.2 hereof NatWest shall
pay to InterTrust the following royalties, net of any withholding tax:
(i) six-tenths of one percent (0.6%) of the Gross Commercial Value
of each Content Transaction where such Content Transaction involves the
performance of a Clearinghouse Function;
(ii) two percent (2%) of the Gross Commercial Value received as
consideration for the complete or partial performance by or on behalf of NatWest
of any Clearinghouse Function, but not including those Clearinghouse Functions
that are set forth in Section 5.1((b))((i)) above;
provided that (x) in calculating the Gross Commercial Value of a Content
- -------- ----
Transaction in accordance herewith in the instance where a royalty due under
subparagraph (i) above is based on any consideration provided to one or more
Vendors other than through NatWest (such consideration the "Customer's
----------
Portion"), NatWest may, in exercise of its good faith, rely upon information
- -------
reported to it by such Vendors in accordance with the provisions of Section 0(0)
hereof quantifying sums of money as consideration, and/or the fair market value
of any other consideration, provided to such Person ("Customer's Portion
------------------
Information"); so long as NatWest has used reasonable efforts in accordance with
- -----------
applicable industry practices of the Payment Card Services industry to assess
and validate the accuracy of such Customer's Portion Information, where
reasonable grounds for suspicion exist. NatWest shall promptly discuss with an
InterTrust Designated Officer any such suspicions (including any apparent
inconsistencies or anomalies with Customer's Portion Information); (y) where
royalties both under subparagraphs (i) and (ii) immediately above would result
from such performance of Clearinghouse Functions for the same, identical,
discrete Content Transaction or other electronic event, then in such instance
only the greater of the two royalties described in (i) and (ii) above (measured
by the amount to be received by InterTrust
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
19
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CONFIDENTIAL
hereunder) shall be due and payable to InterTrust for such identical discrete,
Content Transaction or other electronic event; and/or (z) the Gross Commercial
Value received as consideration for the complete or partial performance by or on
behalf of NatWest of any Clearinghouse Function for purposes of subparagraph (i)
and (ii) above shall not include consideration received by NatWest or any Person
controlled by NatWest ("NatWest Affiliate") for the offering by NatWest or a
NatWest Affiliate of a NatWest or NatWest Affiliate product and/or service to an
end user wherein such NatWest or NatWest Affiliate product and/or service: (1)
has been positioned or offered based in whole or in part upon NatWest's and/or
NatWest Affiliate's use of information derived by NatWest at least in part from
the use of any InterTrust Technology and/or Modified Technology; (2) is
reasonably considered to be a financial industry product and/or service; and (3)
is not, for compensation, being provided in whole or in part to provide the end
user with any such derived information; and
(iii) for all revenue and the monetary value of any other
consideration, if any, received by NatWest directly in connection with the sale,
lease, license, distribution, transfer, or other use of NatWest Products and/or
services that utilize NatWest Products and/or InterTrust Technology (such as
service fees for packaging third party Content and/or fees for hosting Content
in connection with a NatWest service), and not based on performance of
Clearinghouse Functions, a royalty of two percent (2%) of all such revenue and
any such monetary value for other consideration received by NatWest, minus any
sales, use, value added or other taxes (except withholding taxes) imposed by any
national, state, local or foreign government and paid by and/or for NatWest on
such received revenue and/or any other consideration (as calculated according to
generally accepted accounting principles consistently applied with past
practices).
(c) Support and Maintenance Fee. Subject to the provisions hereof, in
---------------------------
partial consideration of InterTrust's provision of Support and Assistance set
forth in Section 2.2 hereof, and Upgrades and New Releases, during the Support
Period, NatWest shall pay to InterTrust the amount of [*] dollars (US$[*]) on an
annual basis (the "Support Fee"). NatWest shall pay the Support Fee in four
-----------
quarterly installments within thirty (30) days after each calendar quarter in
accordance with Section 0 hereof.
(d) [*]. If InterTrust [*] to such licensee than those granted to NatWest
hereunder (the Parties' acknowledging that license scope and partnering
commitments are important terms in the overall consideration), and pursuant to
such agreement: (i) [*] the type in [*], and/or [*] set forth in such sections
hereof; and/or (ii) the [*] or any [*] is [*] to the licensee thereof than that
set forth in Section [*] hereof, the [*] set forth in Section [*], and/or [*]
hereof shall [*], as applicable, to such [*] charged to such other licensee or
NatWest shall thereafter going forward be [*], as applicable. Upon NatWest's
written request which shall not be made more than [*] in any calendar year,
InterTrust will deliver a written confirmation certified by the General Counsel
of InterTrust as to whether the [*] under Section [*] remain applicable or
whether Natwest is entitled to [*] by virtue of this Section 5.1(d).
(e) Review of Royalty Rates; No Minimum Royalty. Upon the seventh (7th)
-------------------------------------------
anniversary of the Effective Date, or earlier if requested by NatWest in writing
as a result of significant market exigency, the Parties agree to discuss and
review the royalty rates set forth in Section 5.1((b))((i)), 5.1((b))((ii)),
and/or 5.1((b))((iii)) hereof. Any change in such rates shall be subject to
agreement in writing by NatWest and InterTrust in the exercise of each party's
discretion. Neither Party shall have any obligation whatsoever to agree to any
modification of such royalties. NatWest is under no obligation to meet any
royalty minimum usage requirements, and, provided that it complies with its
obligation of Section 5.1((a)) and 5.1((b)), NatWest shall have freedom to price
its Content Transactions and Clearinghouse Functions, including the option not
to charge its Customers.
(f) Suspension of Certain License Payments. In the event a [*] causes a
--------------------------------------
[*] in one or more of NatWest's services involving the commercial performance of
[*]
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
20
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CONFIDENTIAL
[*] and such service(s) with which the [*] is associated is a substantial
service in the context of the overall such services being delivered by
NatWest and supported by and employing InterTrust Technology, NatWest shall be
entitled to [*] that become due and payable under Section 5.1(a) during the
[*]-- i.e., from the time that [*] is reported to InterTrust as set forth in
----
Section 2.2 (b) (ii) until such time InterTrust has provided an [*] or [*]
and/or [*] to temporarily correct or mitigate such [*] in the manner set forth
an in Section 2.2(b)(ii) hereof.
5.2 Payment Procedure. Commencing upon the first payment by NatWest to
-----------------
InterTrust of royalties specified in Section 5.1((a))((iii) or 5.1((a))((v))
hereof NatWest shall be [*] percent ([*] %) of all [*] under Sections
5.1((b))((i)) and 5.1((b))((ii)) in a calendar quarter [*]; provided that the
-------- ----
total amount of all such [*] during the term shall not exceed [*] dollars
($US[*]) in the aggregate. Except as otherwise expressly provided in this
Agreement, within [*] days after the end of each calendar quarter, NatWest shall
pay InterTrust all amounts due and/or payable pursuant to the licenses and
support provided hereunder, and received during such calendar quarter. NatWest
shall make all payments hereunder by wire transfer to such account as designated
by InterTrust in writing. Concurrently with each royalty payment, NatWest shall
provide to InterTrust a written royalty report, certified to be accurate by an
officer of NatWest specifying: (i) the revenues derived by NatWest that are
subject to royalties during each calendar month of such quarter; (ii) the basis
for calculation of the amounts due and payable; and (iii) summaries of business
records employed by NatWest to arrive at the information set forth in (i) and
(ii) immediately above. The manner of calculation of the amounts due and payable
to InterTrust hereunder shall be determined in accordance with recognized and
generally accepted U.S. accounting procedures and principles that shall be
consistently applied to all such payments.
5.3 Currency. Gross Commercial Value and all consideration received by NatWest
--------
pursuant to Section 5.1((b)) in a currency other than U.S. dollars shall be
converted by NatWest to U.S. dollars on a monthly basis for purposes of payment
to InterTrust on a quarterly basis according to the rate of exchange for such
currency, as published by The Wall Street Journal (Western Edition) on the last
business day during each calendar month of a calendar quarter for which such
royalties are due. If The Wall Street Journal (Western Edition, or main edition
in absence of a Western Edition) ceases or fails to publish such rate of
exchange at any time during the term of this Agreement, the rate of exchange
during any such period of cessation shall be such rate as published by the Bank
of America (San Francisco, California) or its legal successor on the last
working day of such calendar quarter for which such royalties are due. In the
event all of the above cease to operate, the Parties shall reasonably agree upon
another internationally reputable source for such rate of exchange.
5.4 Taxes. NatWest shall pay taxes, including but not limited to withholding
-----
taxes, imposed by any foreign government or any other jurisdictions outside of
the United States, as applicable, on all fees and royalties payable to
InterTrust under this Agreement. NatWest shall be responsible for payment of
all sales, use, value-added and other taxes, duties and other charges that may
fall due with respect to the transfer to or licensing, reproduction,
distribution, and/or use by NatWest of the NatWest Products, and with respect to
NatWest's activities with respect to the Clearinghouse Functions. InterTrust
shall be responsible for payment of all sales, use, value-added and other taxes
that may be imposed by the United States government on InterTrust with respect
to the transfer or licensing to NatWest of the InterTrust Technology hereunder
or with respect to the payments received hereunder.
5.5 Interest. NatWest agrees that all sums owed or payable to InterTrust
--------
hereunder shall bear interest (compounded daily) at the rate of [*] percent
([*]%) per month or [*] percentage ([*]%) points above the U.S. Prime Rate on an
annualized basis as published at the end of a calendar quarter for which such
royalties are due, whichever is higher, or such lower rate as may be the maximum
rate permitted under applicable law, from the date upon which payment of the
same shall first become due up to and including the date of payment thereof
whether before or after judgment, and that NatWest shall be additionally liable
for all costs and expenses of collection, including, without limitation,
reasonable fees for attorneys and court costs. Notwithstanding the foregoing,
such specified rate of interest shall not excuse or in any way whatsoever be
construed as a waiver of NatWest's express obligation to timely provide any and
all payments due to InterTrust hereunder.
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
21
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CONFIDENTIAL
5.6 Audit. NatWest shall maintain during the term of this Agreement and for a
-----
period of five (5) years thereafter all books, records, accounts, and technical
materials regarding NatWest's activities in connection herewith sufficient to
determine and confirm NatWest's royalty obligations hereunder. Upon InterTrust's
request, NatWest will permit an independent auditor from one of the five largest
international accounting firms of InterTrust's choice (subject to NatWest's
consent, which shall not be unreasonably withheld or delayed) to examine and
audit, at InterTrust's expense, during a reasonable time (but no more than once
during a six (6) month period), such books, records, accounts, documentation and
materials, and take extracts therefrom or make copies thereof for the purpose of
verifying the correctness of reported royalty statements and payments provided
by NatWest. Prior to such audit, InterTrust shall cause such independent auditor
to execute a written confidentiality agreement supplied by NatWest, which shall
contain terms that are commercially reasonable under the circumstances and are
designed to reasonably protect the confidentiality of NatWest's information.
NatWest shall pay any unpaid delinquent amounts disclosed by such audit within
ten (10) days of InterTrust's request; provided that any such payment shall not
constitute an admission or waiver of any kind. To the extent such examination:
(i) discloses an underpayment of more than [*] dollars ($US[*]) and such
underpayment represents a sum greater than [*] of the sums paid to InterTrust by
NatWest during the applicable period subject to such audit; or (ii) discloses an
underpayment of more than [*] dollars ($US[*]), NatWest shall fully reimburse
InterTrust, promptly upon demand, for the reasonable fees and disbursements due
the auditor for such audit; provided that such prompt payment shall not be in
-------- ----
lieu of any other remedies or rights available to InterTrust hereunder. If an
audit reveals an overpayment, InterTrust shall notify NatWest of such
overpayment and NatWest will apply the amount of such overpayment against future
royalties due and payable to InterTrust (and such application against future
royalties shall not be subject to the provisions of Section 5.2 hereof
concerning the [*]).
6. PROPRIETARY INFORMATION AND OWNERSHIP.
6.1 InterTrust Ownership. NatWest acknowledges and agrees that, as between
--------------------
InterTrust and NatWest, InterTrust is the sole and exclusive owner of, and shall
retain and hereby reserves (and nothing herein shall alter InterTrust's
reservation of) all right, title and interest in: (i) the InterTrust Technology,
created by (or for) or owned by InterTrust, and all Intellectual Property Rights
embodied therein; (ii) all Intellectual Property Rights created or embodied in
any works (whether tangible or intangible) created independently and solely by
(and/or by any third party for) InterTrust in connection with its performance of
this Agreement; and (iii) Modified Technology not owned by NatWest pursuant to
Section 0 hereof, and all Intellectual Property Rights embodied therein
(collectively, the "InterTrust Property"). No provision contained in this
-------------------
Agreement shall be construed to transfer to NatWest or any other Person any
title or ownership interest in any InterTrust Property.
6.2 NatWest Ownership. As between NatWest and InterTrust, NatWest shall be the
-----------------
sole and exclusive owner of the portions of the following created independently
and solely by (and/or by any third party for) NatWest hereunder, and shall
retain and hereby reserves (and nothing herein shall alter NatWest's reservation
of) all right, title and interest in: (i) any NatWest Products, except with
respect to any InterTrust Property incorporated therein; (ii) Modified
Technology created in accordance with the terms hereof (except such Modified
Technology that merely re-implements the existing functionality of InterTrust
Technology provided to NatWest, including, for example, porting or translation
thereof, which shall be deemed InterTrust Property); and (iii) all Intellectual
Property Rights embodied in such part of NatWest Products or such Modified
Technology (collectively "NatWest Property") independently developed by NatWest
----------------
consistent with subparagraph ("i") and ("ii") above. No provision contained in
this Agreement shall be construed to transfer to InterTrust or any other Person
any title or ownership interest in any NatWest Property. As between NatWest and
InterTrust, NatWest shall be the sole and exclusive owner of any customer data
and usage information that is derived directly or indirectly by NatWest from a
NatWest Customer through any use of InterTrust Technology without any breach of
this Agreement or any obligations owed by any third Person to InterTrust;
provided that such data or information: (a) is not also communicated by such
- -------- ----
Customer or any third Person to InterTrust; and/or (b) does not relate to
InterTrust or include any InterTrust Technology. Nothing in the foregoing
portion of this paragraph
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
22
<PAGE>
CONFIDENTIAL
shall be construed in any manner whatsoever to transfer, license or grant any
license or right to any Intellectual Property Rights of InterTrust.
6.3 NatWest Limited License to InterTrust. In consideration of the licenses
-------------------------------------
granted, and other consideration provided, by InterTrust to NatWest under this
Agreement during the term of this Agreement, NatWest hereby grants:
(a) to InterTrust, its affiliates, and their successors, assigns, and
direct and indirect customers a nonexclusive, royalty-free and worldwide license
under all patent rights of NatWest to manufacture, have manufactured, use, sale,
offer for sale, license for use, import, distribution and/or otherwise
exploitation of: (i) InterTrust Technology; (ii) any technology that directly
interfaces with, or is necessary for applications built on top of InterTrust
Technology to be interoperable with, the API (Application Programming Interface)
of InterTrust Technology; and/or (iii) technology permitting the Management of
Content by the application and technical enforcement, at least in part of, Rules
and Controls, and/or distributed, peer-to-peer operating system technology; but
solely to the extent that such activities would, but for such license, infringe
any such patent rights of NatWest (including any patents disclosing and/or
claiming any Modified Technology); and
(b) to InterTrust, its affiliates and their successors a nonexclusive,
royalty-free and worldwide license under the Intellectual Property Rights (other
than trademarks, trade names, and service marks) of NatWest to use NatWest
Products solely in connection with InterTrust's internal development of any
product, or internal performance of any services, and/or evaluation of such
NatWest Products, provided that the foregoing provisions of this Section
6.3((b)) are for internal use only of NatWest Products and shall not be
construed to include external distribution of any NatWest Product or portion
thereof.
InterTrust represents to NatWest that all Core Partner Agreements existing as of
the Effective Date contain substantially similar commitments regarding the grant
by a Core Partner of certain patent licenses as provided for in this Section
6.3. If during the term of this Agreement InterTrust enters into any Core
Partner Agreement having terms [*].
6.4 Independent Technology. Except as provided in the provisions of Section
----------------------
8.2 hereof, nothing in this Agreement shall be construed to prohibit NatWest
from using, selling, licensing, transferring or otherwise exploiting any
technology that NatWest: (i) can demonstrate was developed by NatWest employees
or consultants without the use of, reliance on, or reference or access to, any
portion of InterTrust Technology and/or Modified Technology, and without any
breach of this Agreement or any other obligation owed to InterTrust, and in
which InterTrust does not have any patent rights; or (ii)(a) rightfully obtains
directly or indirectly from a third Person who has not (1) breached any legal
obligation owed to InterTrust and/or (2) obtained such InterTrust technology in
violation of any law, and (b) which does not infringe or misuse any InterTrust
Intellectual Property Rights or other legally cognizable rights of InterTrust of
any kind whatsoever; (collectively, "Independent Technology"). Nothing in this
----------------------
Section 6.4 shall be construed to grant any licenses or rights of any kind
whatsoever to NatWest with respect to such Independent Technology.
7. JOINT ACTIVITIES AND FURTHER COVENANTS.
7.1 Joint Press Releases. Promptly following the Effective Date, the Parties
--------------------
shall work together to publicly issue one or more mutually agreeable press
releases disclosing the existence of this Agreement, describing the Parties'
intentions to develop important electronic commerce products, services, and
technology, and generally promoting NatWest Products, the InterTrust Technology,
and the planned InterTrust-related services of NatWest (the "Joint Press
-----------
Releases"). Unless otherwise agreed in writing, all further public disclosures
- --------
by either Party
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
23
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CONFIDENTIAL
concerning the subject matter of the Joint Press Releases shall be consistent
with the content of the Joint Press Releases. All other disclosures with respect
to the terms hereof shall be made in accordance with Section 0.
7.2 Promotion and Marketing. Following the Effective Date, relevant personnel
-----------------------
of NatWest and InterTrust shall meet from time to time to discuss, frame and
prepare a joint activity marketing plan to promote their commercial relationship
hereunder. In connection with such marketing plan, the Parties shall jointly
and reasonably cooperate with each other, and participate in, from time to time,
promotional, marketing, and sales activities designed to: (i) increase industry
awareness of both InterTrust and InterTrust Technology, and NatWest Products;
(ii) promote the dissemination and use of InterTrust's technology as the general
purpose electronic rights standard solution for electronic commerce; and (iii)
promote NatWest as a primary electronic commerce service provider. InterTrust
shall reasonably: (a) assist and support NatWest in the establishment of
relevant NatWest brands on NatWest Products and associated services; and (b)
appropriately support NatWest's Clearinghouse Functions and related services by
communicating the availability of such services, as reasonable and appropriate
to potentially interested persons; provided that NatWest promotes and uses
-------- ----
InterTrust Technology in the Preferred Positioning manner set forth in Section
4.2. NatWest shall reasonably assist InterTrust with marketing activities
relating to the InterTrust Technology by, for example, displaying and endorsing
the display of certain InterTrust Trademarks on products and services (and
materials relating thereto) and jointly participating, as mutually agreed, in
trade shows and customer events. At no time shall NatWest or InterTrust make any
representation or warranty to any Person materially inconsistent with: (1)
InterTrust Specifications or Documentation; or (2) the efforts of the Parties
with respect to promotion, marketing or other matters under this Agreement. As
relevant and appropriate from time to time, and to encourage efficient
partnering efforts concerning approaching customers and staging their own
promotional and marketing activities, each Party agrees, in its reasonable
discretion, to share with the other, as appropriate (and subject, for example,
to the absence of a specific, material conflict in interest regarding the
disclosure of any specific marketing information), its marketing plans relevant
to the commercialization of InterTrust Technology, NatWest Products and
associated services, and/or other material InterTrust and/or NatWest electronic
commerce services and/or products, and related public relations activities.
7.3 Technology Advisory Committee. To further strategic opportunities among
-----------------------------
the Parties and to encourage feedback concerning InterTrust Technology,
InterTrust currently intends to establish a committee limited to representatives
of: (i) leading companies chosen from certain technology, financial and/or
content industry companies that have close technology strategic relationships
with InterTrust; and (ii) certain leading experts in technology or business
applicable to information and electronic commerce (the "Technology Advisory
-------------------
Committee"). The Technology Advisory Committee shall meet regularly at a forum
- ---------
to be selected by InterTrust for the purpose of: (a) discussing and exchanging
ideas for improving the functionality, interoperability, and market
acceptability of InterTrust Technology and related issues pertaining to the
electronic commerce industry; (b) providing input to InterTrust regarding
InterTrust product marketing, and development of Upgrade Releases and New
Releases; and (c) keeping Core Partners confidentially appraised as to planned
upcoming changes in InterTrust Technology or Specifications, as commercially
reasonable for InterTrust in its discretion. Upon the establishment of the
Technology Advisory Committee: (1) InterTrust shall grant NatWest the right to
have one seat as a member of the Technology Advisory Committee; and (2) NatWest,
at its option, may elect and notify InterTrust of its designation of an
executive (who may be an employee of NatWest and who shall not be involved in
Supporting Other Technology, and shall be an Agent of NatWest for
confidentiality purposes in accordance with Section 1 of Exhibit G attached
hereto) to serve on such committee. To the extent it participates, NatWest
shall: (A) be responsible for all acts and omissions of the representative in
connection with the Technology Advisory Committee; and (B) pay for all expenses
incurred by NatWest in connection with participation on such Committee.
NatWest's membership on the Technology Advisory Committee shall be contingent
upon (and subject to): (X) material adherence to generally applicable committee
rules, and the terms and conditions hereof; (Y) NatWest avoiding activities that
materially conflict with InterTrust's interests as determined by InterTrust; and
(Z) continuation of the Technology Advisory Committee.
7.4 Security Validation. Throughout the term hereof, InterTrust and NatWest
-------------------
will reasonably cooperate and work together to maintain, enhance and promote the
robustness of the security aspects of InterTrust Technology
24
<PAGE>
CONFIDENTIAL
and NatWest Products and associated services, as reasonably determined by
InterTrust and/or NatWest with respect to its technology, products or services,
as applicable, and taking into account and balancing relevant interests such as
commercial feasibility and desirability, the varying nature of applications and
implementations of NatWest Products, regulatory and governmental restrictions,
and overall commercial use of InterTrust Technology by NatWest. InterTrust
agrees to use commercially reasonable, practical and affordable efforts with
respect to InterTrust Technology, and NatWest agrees to use commercially
reasonable, practical and affordable efforts with respect to NatWest Products,
to establish and perform or have performed, security testing procedures and
practices, including use of appropriate, circumscribed, third party "tiger
testing." The Parties will further discuss and work together to consider, where
(and as) practical, affordable and appropriate, obtaining validation and/or
certification for appropriate portions of the respective Party's security
related technologies and/or services from one or more relevant and appropriate
third parties or organizations. Each Party agrees to share with the other
relevant aspects of test results for, and/or identified security breaches of,
InterTrust Technology and NatWest Products where practical, subject to
confidentiality obligations, requirements of law, and appropriate security
practices.
8. PARTNERING COMMITMENTS.
8.1 InterTrust Partnering Commitment.
--------------------------------
(a) Initial Commitment Period. Subject to the terms hereof (including
-------------------------
NatWest's performance of its partnering commitment set forth in Section 8.2),
and in the absence of NatWest's prior written consent, InterTrust shall not [*]
with (or [*]) any Banking Institution (as defined in Exhibit F attached
hereto) other than NatWest ("InterTrust Partnering Commitment") for a period of
[*] year from the Effective Date (the "Initial Commitment Period"); provided
------------------------- --------
that if InterTrust provides NatWest with the Commerce 1.0 (GA Version) release
- ----
after December 31, 1998, then the Initial Commitment Period shall be extended
beyond such period of [*] year by that number of days between December 31, 1998
and the date upon which such Commerce 1.0 (GA Version) is so provided.
Notwithstanding the foregoing, InterTrust shall be entitled to [*] (or [*])
with: (A) a Person that is not a US Bank or a Foreign Bank (each as defined in
Exhibit F) as of the effective date of the Core Partner agreement, provided that
if such Person is a Foreign Bank Affiliate as of the effective date thereof
InterTrust shall prohibit such Person in such Core Partner license agreement
from assigning any rights to perform any Payment Card Services that are (or are
broadly equivalent to) Clearinghouse Functions under such license agreement to
any Foreign Bank or other Foreign Bank Affiliate during the Commitment Period;
and/or (B) any non-sovereign state or government, and/or any foreign bank
controlled by a sovereign state or government outside of the European Union.
Further notwithstanding anything herein, InterTrust may from time to time inform
NatWest in writing of prospective Core Partners, but not more frequently than
[*] Core Partner requests per calendar quarter. Within ten (10) business days
thereafter NatWest shall notify InterTrust in writing whether such prospective
Core Partner is a Banking Institution (as defined in Exhibit F) or has a Foreign
Bank Affiliate. Where NatWest has notified InterTrust that such prospective Core
Partner is not deemed to be a Banking Institution, or has failed to so provide
notice within such time period, InterTrust shall have the right to [*] without
any obligation or liability hereunder. Such InterTrust Partnering Commitment
shall continue during the Initial Commitment Period only if NatWest devotes (and
NatWest hereby agrees that it shall devote) serious and substantial efforts and
resources to: (i) offer, provide, publicly promote, support and make available
in a commercially meaningful, expeditious, and general purpose manner one or
more competitive, global financial clearing services supporting licensed
InterTrust Technology users (assuming, where applicable, reasonable prior
agreement between NatWest and such users) (a "Global Clearing Service"); and
-----------------------
(ii) establishing definitive commercial relationships with two or more premier
financial or clearinghouse institutions or other relevant important parties to
provide infrastructure services using InterTrust technology to support Content
Transactions (for example, top-ranked, world-class Banking Institutions, or
other financial institutions or non-bank clearinghouses with major strategic
presence) as decided and agreed upon by each of the Parties ("Important
---------
Parties"), where such Important Parties agrees to support InterTrust
- -------
Technology in a manner comparable to NatWest as described herein and at least
through preferentially performing financial Clearinghouse Function services for
the Commitment Period (defined below) and a commercially meaningful period
thereafter (collectively, the "Performance Criteria"). At least one of such
--------------------
Important Parties shall be based in the United States and be a top-ranked
Banking Institution or financial/clearinghouse Important Party (including, for
example, [*]). The Parties anticipate NatWest having the primary direct
commercial relationship with such Important Parties; provided that such
-------- ----
Important Parties will need to obtain a license from InterTrust with respect to
InterTrust Technology. The InterTrust Partnering Commitment shall not limit in
any way whatsoever the rights of: (1) InterTrust to work with or license any
technology or Intellectual Property Rights to any Person so long as InterTrust
complies with this Section 8.1; and/or (2) any InterTrust Core Partner to
exercise its rights with respect to InterTrust technology (so long as any such
Core Partner is not a Banking Institution which first became a Core Partner
during the Commitment Period).
(b) InterTrust Partnering Commitment Extension. If, as of the close of
------------------------------------------
the Initial Commitment Period NatWest has complied with the provisions of
Section 8.2((a)), is publicly offering and providing a Global Clearing Services,
and has executed heads of agreement (containing substantially detailed
fundamental terms) ("Heads of Agreement(s)") with at least two (2) Important
---------------------
Parties as provided in Section 8.1((a)) and redacted copies of which are
provided to InterTrust (provided that the non-redacted provisions in such
-------------
Heads of Agreement must be sufficient to allow InterTrust to determine whether
NatWest's obligations in Section 8.1((a)) have been satisfied), then (except
where the Scaleback Option (defined below) has been exercised because NatWest
has decided to engage in those activities set forth in Section 8.2((c)) the
InterTrust Partnering Commitment shall be extended for an additional [*] year
period, except that such period shall earlier terminate three (3) months after
the expiration of the Initial Commitment Period if NatWest has failed to execute
binding definitive agreement to effectuate the Heads of Agreements with such
Important Parties prior to the end of such three (3) month period (the "Second
------
Commitment Period"; the Initial Commitment Period and any such extension or
- -----------------
further extension collectively, the "Commitment Period"). During the Second
-----------------
Commitment Period, if any, NatWest shall use serious and substantial efforts to
establish a global consortium of Important Parties committed to supporting
InterTrust Technology as the technology standard for Digital Rights Management
in the area of financial clearing services, and the Parties contemplate that
NatWest will have formed such consortium of Important Parties committed to
establishing InterTrust Technology as the de facto standard for Digital Rights
-- -----
Management (as defined in Exhibit F) and related financial clearing. If
InterTrust Technology has become the global de facto standard for Digital Rights
-- -----
Management, the InterTrust Partnering Commitment may be subject to a further
extension at InterTrust's discretion, and for such period as InterTrust may
notify NatWest in writing.
25
[*] CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL
8.2 NatWest Partnering Commitment. Subject to InterTrust's performance of its
-----------------------------
partnering commitment set forth in Section 8.1 and in partial consideration for
providing NatWest with early, substantial access to Confidential and Top Secret
Information, initial development rights and privileges concerning InterTrust
Technology, Intellectual Property Rights, and the rights granted to NatWest
hereunder (including certain "most favored" provisions and the InterTrust
Partnering Commitment), NatWest agrees to the following partnering commitment
(the "NatWest Partnering Commitment"):
-----------------------------
(a) Preferred Solution. During the Commitment Period, NatWest and its
------------------
respective units and controlled affiliates shall: (i) refrain from acting as a
clearinghouse for any Secure Container technology other than Secure Containers
of the InterTrust Technology, and/or performing any activities and/or services
that would constitute Clearinghouse Function activities and/or services if
InterTrust Technology, Modified Technology, or information derived at least in
part from use of such technology were used, where the foregoing activities and/
or services result from the use of any Secure Container technology other than
Secure Containers of the InterTrust Technology; and (ii) treat InterTrust
Technology as NatWest's preferred and primary Digital Rights Management
technology and/or Secure Container technology solution ("Preferred
---------
Positioning"). In providing such Preferred Positioning, NatWest shall: (1)
- -----------
recommend, endorse, and actively and publicly promote InterTrust Technology as
its preferred and primary Digital Rights Management and Secure Container
technology and business solution, and InterTrust as its preferred and primary
Digital Rights Management partner, provided that the foregoing in regard to any
-------- ----
press release shall also be consistent with the provisions of Section 7.1; and
(2) refrain from deploying, using, licensing, developing, marketing, negotiating
agreements related to, and/or otherwise supporting (including recommending,
promoting, or otherwise endorsing in a substantive manner (e.g., in any
----
promotional materials), and/or assisting another Person in the deployment, use,
license, development and/or marketing of) (hereafter, "Support[s][ing]") Digital
---------------
Rights Management and/or Secure Container technology other than Digital Rights
Management and Secure Container Technology of the InterTrust Technology ("Other
-----
Technology"). Notwithstanding the foregoing, "Support[s][ing]" for purposes of
- ----------
this Section 8.2 ((a)) shall not include the mere provision of and/or
arrangement of loans or other financings for Persons by affiliates or operating
units of NatWest other than Card Services, where such provision or arranging of
loans or financing is made in the ordinary course of its business. Further
notwithstanding the foregoing, if at any time any affiliate or operating unit of
NatWest other than Card Services decides to make, or otherwise approves, any
investment by NatWest in equity or similar securities in any Persons whose
business involves, or has announced either publicly or to NatWest that it plan
to engage in, the development, distribution, licensing or marketing of
Distributed Peer to Peer Rights Management technology (as defined in Exhibit F)
(but not including any investment made by NatWest pursuant to its employees
retirement investment fund or of another Person's funds acting on such other
Person's behalf (and where no equity participation is taken by NatWest for its
own account)) ("Non-Partnering Investment Decision"), NatWest shall immediately
----------------------------------
notify InterTrust in writing. Upon any such Non-Partnering Investment Decision,
InterTrust, as its sole and exclusive remedy, shall be entitled to terminate all
or any portion of its obligations under Section 8.1, which termination shall be
effective (notwithstanding any cure procedures set forth in Section 13.2) six
(6) months after the date of such Non-Partnering Decision. Exhibit F hereto sets
forth, as of the Effective Date, a sample list of products that, to InterTrust's
knowledge, claim to use Secure Containers and/or provide Digital Rights
Management solutions. Such list may be supplemented or amended from time to time
by InterTrust during the Commitment Period.
(b) Use of Other Technology Providers. If at any time during the
---------------------------------
Commitment Period NatWest decides to initiate activities Supporting any Other
Technology, NatWest shall promptly (and in all events as soon as reasonably
practical and before initiating such activity) notify InterTrust in writing of
such intent (a "Non-Partnering Event"). Such notice shall provide InterTrust
--------------------
with reasonable summary information regarding such Other Technology, including
generally the scope and nature of contemplated Supporting activity, and such
other information as may be reasonably useful in order to assist InterTrust in
deciding whether to exercise the Scaleback Option, except that such notice need
not disclose any detailed proprietary information (other than the fact that
NatWest is initiating Support of Other Technology) that may be subject to
confidentiality obligations
26
<PAGE>
CONFIDENTIAL
owed by NatWest to any third Person (the "NatWest Notice"). Similarly, if
--------------
InterTrust becomes aware of any information that causes InterTrust to believe
that a Non-Partnering Event may have occurred, InterTrust shall so notify
NatWest in writing and provide NatWest with reasonable information concerning
the nature of InterTrust's information ("InterTrust Notice"). In the event of
-----------------
such an InterTrust notice to NatWest, NatWest shall promptly thereafter provide
a written communication to InterTrust responding to InterTrust's notice and
providing information regarding such InterTrust-provided information as is
reasonably calculated to enable InterTrust to decide whether to exercise the
Scaleback Option, except that such communication need not disclose any detailed
proprietary information (other than the fact that NatWest is initiating Support
of Other Technology) that may be subject to confidentiality obligations owed by
NatWest to any third Person. After a NatWest Notice or InterTrust Notice has
been sent in accordance with this Section 8.2((b)), the Parties shall promptly
and reasonably cooperate with each other to gather and report such relevant
facts and circumstances as may be reasonably required by InterTrust to: (1) help
InterTrust determine whether a Non-Partnering Event has occurred; and (2) help
InterTrust decide whether to exercise its Scaleback Option.
(c) Scaleback Option; Remedies. If NatWest has delivered the NatWest
--------------------------
Notice, or if information available to InterTrust after the completion of the
process initiated pursuant to Section 8.2((b)) following the delivery by
InterTrust of the InterTrust Notice indicates to InterTrust that NatWest has
engaged (or is engaging) in a Non-Partnering Event that was the subject of such
notice, then InterTrust shall have the right, notwithstanding the provisions of
Section 8.l and/or other provisions of Section 8.2 hereof: (i) to scaleback the
InterTrust Partnering Commitment of Section 8.1((a)) such that InterTrust may
negotiate and enter into a Core Partner relationship with any Banking
Institution that grants such Banking Institution a license to use InterTrust
technology and perform Clearinghouse Functions in any field and in any manner
other than the provision of Payment Card Services (as defined below) under such
Banking Institution's brand; and (ii) if the Second Commitment Period or any
subsequent extension of such period is then in effect, InterTrust's Partnering
Commitment shall immediately terminate, or if such period has not yet commenced,
InterTrust Partnering Commitment shall not extend to the Second Commitment
Period nor any further extension period. Any failure by InterTrust to fully
exercise all of its rights under the Scaleback Option with respect to a
specific Non-Partnering Event shall not be deemed or construed to limit or
otherwise adversely affect in any manner whatsoever: (1) InterTrust's ability to
exercise the Scaleback Option with respect to other Non-Partnering Events, or
the specific Non-Partnering Events if circumstances about the nature of the
Non-Partnering Event, including available relevant information, change in the
future; and/or (2) seek or receive remedies at law or in equity with respect to
such specific or any other Non-Partnering Event except (and solely except) in
the circumstance expressly set forth in the following sentence. In the event a
material division, material business unit or controlled affiliate ("Unit") of
----
NatWest -- other, but solely other, than any such Unit having principal
responsibility for payment card services (including issuing credit, charge,
prepayment, or other payment cards (alone or in combination with other
services), and/or issuance of credit and/or performance of services for and/or
on behalf of merchants and/or cardholders concerning transactions involving such
cards) (collectively, the "Payment Card Services") -- Supports Other Technology
---------------------
in a manner in breach of Section 8.2((a)), InterTrust's sole remedy shall be
exercise of the Scaleback Option pursuant to this Section 8.2((c)) hereof. That
unit of NatWest having principal responsibility for Payment Card Services as of
the Effective Date is known as "Card Services" and shall not include any senior
business unit or function to which, or through which, Card Services reports (so
long as several Units report to or through such senior business unit or
function) and may, hereafter, if not held in a single unit, include other units
in combination to provide such Payment Card Services. Notwithstanding the
foregoing, if: (x) any Non-Partnering Event in accordance herewith involves
Other Technology that is a Distributed, Peer-to-Peer Digital Rights Management
Technology (defined in Exhibit F); (y) any Unit of NatWest participates in a
consortium not in existence as of the Effective Date Supporting Payment Card
Services for Other Technology (but not if that Unit of NatWest having principal
responsibility for Payment Card Services is directly Supporting Payment Card
Services for such Other Technology); and/or (z) any other terms and conditions
hereof (including Section 8.2((a)) are not complied with, then, in addition to
exercise of
27
<PAGE>
the Scaleback Option pursuant to this Section 8.2, InterTrust shall be entitled
to obtain such remedies as available at law or in equity.
(d) Limitations. Nothing in Section 8.2 of this Agreement shall be
-----------
construed to require NatWest to use InterTrust Technology in connection with any
particular NatWest payment services activity and/or product, if NatWest first
responds to any specific customer interest in any other product by using
commercially reasonable efforts to satisfy such customer request by recommending
the use of InterTrust Technology instead of an alternative requested technology
but such customer persists in requiring the use of such an alternative
technology. In addition, NatWest may: (i) act as an acquirer bank to provide
payment services to customers provided that no NatWest Trademark is apparent to
any end-user and NatWest is not acting directly under a license or sublicense to
provide clearing services supporting any Secure Container technology not
provided by InterTrust; and (ii) as an minor part of NatWest services, collate
and deliver Content of third Persons on a limited basis using Other Technology
solely for delivery of such Content, provided that (a) the owner or licensor of
-------- ----
such third party Content requires NatWest to use such Other Technology for the
delivery of such third Person's Content (and after NatWest has used commercially
reasonable efforts to persuade such third Person to allow the use of InterTrust
Technology in connection with such content delivery), (b) NatWest receives no
license to (and does not) modify, or otherwise customize such other Technology
in any manner, (c) NatWest refrains from associating any NatWest brand with such
third party Content (other than as generally indicated on such NatWest product
or service), and (d) NatWest does not promote the brand of the provider of such
Other Technology on any part of its general clearing services, marketing
materials or products, other than strictly to indicate that such Content is
being delivered using such Other Technology where necessary in the performance
of its service of delivering such Content.
(e) Clarification; Cooperation. During the Commitment Period, the Parties
--------------------------
shall reasonably cooperate with each other to appropriately and reasonably
address any questions and requests for clarification that are reasonably
provided and are consistent with this Agreement and that concern the nature and
applicability of the definitions of Digital Rights Management, Secure Containers
and other provisions of this Section 8 to specific situations; provided that in
-------- ----
all events the provisions of this Agreement, including, for example, Section
4.2((c)), shall apply to (and exclusive govern) all such discussions, and
nothing in responses to such questions and requests shall be deemed to modify
this Agreement or its terms and conditions in any manner whatsoever, unless
satisfying the requirements of Section 14.4 hereof.
28
<PAGE>
CONFIDENTIAL
9. CONFIDENTIALITY.
9.1 Classification of Technology and Documents. Technology, documents and
------------------------------------------
other information to be exchanged by the Parties shall be marked, as
appropriate, to identify the confidential or nonconfidential nature of the
information, and information exchanged orally or visually shall be described as
appropriate, to alert the recipient of the confidential or nonconfidential
nature of the information. As regards InterTrust Technology (including
Documentation) and other documents or information provided by InterTrust to
NatWest in tangible form, or provided orally or visually hereunder, such
information shall be marked, or indicated as: (i) "Unclassified"; (ii)
"Confidential"; or (iii) "Top Secret." NatWest information shall be marked or
indicated, as appropriate, as: (a) "Unclassified" or (b) "Confidential." A Party
and its authorized personnel shall exercise careful judgment when they are in
possession of information of the other Party that has not been marked or at the
time of such disclosure indicated to be within one of the above-described
classifications. If any information provided by one Party has not been marked or
indicated as above and is not known with certainty by the receiving Party to
have been either publicly released or otherwise classified as "Unclassified,"
then such other Party, its employees and any other Person authorized to possess
such information shall treat such information as "Confidential," except
information provided by InterTrust relating to security capabilities,
trustedness, and architecture (or design) integrity of the InterTrust
Technology, which shall be considered to be "Top Secret" and shall be handled as
provided by Section 0 of Exhibit G hereto.
9.2 Confidentiality Obligations. Subject to the provisions hereof, the Parties
---------------------------
(and their relevant personnel and agents) shall hold, maintain and treat
Confidential Information of NatWest or InterTrust, and/or Top Secret Information
of InterTrust, as applicable, in the manner set forth in Exhibit G hereto.
Subject to the provisions of this Section 9, upon the Effective Date of this
Agreement, information relating to the subject matter of this Agreement, when
disclosed after the Effective Date shall be covered by the confidentiality
provisions of this Section 9 and Exhibit G. Any information disclosed by one
Party to the other Party relating to the subject matter of this Agreement when
disclosed by one Party to the other Party prior to the Effective Date or
relating to subject matter outside of this Agreement shall be covered under the
Non-Disclosure/Non-Use Agreements between InterTrust and NatWest, as applicable,
dated 10 September 1997, 9 September 1997 and 14 April 1998.
9.3 Confidentiality of Agreement and Publicity. Except as otherwise provided
------------------------------------------
in Sections 7.1 and/or in Section 3 of Exhibit G, neither Party hereto shall at
any time, without the prior written consent of the other, disclose the specific
details of the terms and conditions of this Agreement to any Person, other than:
(i) as required by law, regulation or rules of a securities exchange or other
regulatory authority, for example, in connection with any initial public
offering of securities pursuant to a registration under the Securities Act of
1933, as amended (an "IPO"); (ii) to investors holding (or potential investors
---
who may purchase) approximately one percent (1%) or more of the outstanding
equity shares of such Party prior to an IPO and having no reasonably anticipated
conflict of interest with the other Party; and/or (iii) to Agents of a Party (as
defined in Exhibit G) having a substantial need to know, or financial
institutions or professional advisors having a reasonable need to know such
information and having no reasonably anticipated conflict of interest with the
other Party. In each and every case set forth above, the receiving Person shall
be bound by a confidentiality agreement sufficient in scope to protect the
Parties' rights and interests hereunder. Notwithstanding the foregoing
provisions of this Section 9.3: (a) either Party may publicly discuss or
otherwise disclose in general terms that an agreement exists between the Parties
to develop products and services using InterTrust Technology, but may provide no
further material details as to the specific activities and commitments of the
other Party, without the prior written consent of such other Party; and (b)
either Party may make such disclosures to the extent permitted under this
Section 9.3 in order to perform its obligations or exercise its rights under
this Agreement.
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
29
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CONFIDENTIAL
9.4 Confidentiality of Payments, Audit and Certification Testing. All
------------------------------------------------------------
information received during an audit or pursuant to a Certification Program as
provided herein, all information concerning Certification Testing (including any
results thereof and any information received pursuant to any Certification
Testing), and all payment information received pursuant to this Agreement, shall
be treated as "Confidential Information." Notwithstanding the foregoing,
information concerning whether a NatWest Product or any associated services
being disseminated or used in commerce is Compliant with InterTrust
Specifications shall not be treated as confidential information under any
provision of this Agreement.
10. REPRESENTATIONS AND WARRANTIES.
10.1 Representations and Warranties of Both Parties. Each Party represents and
----------------------------------------------
warrants to the other Party that as of the Effective Date:
(a) it is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction in which it is organized, with full
corporate power and authority to carry on its business as it is now being
conducted;
(b) the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by such Party, and neither the performance of this Agreement nor the
consummation of the transactions contemplated hereby will violate any provision
of the charter or organizational documents of such Party; and
(c) this Agreement constitutes a valid and binding obligation of such
Party, enforceable against such Party in accordance with its terms.
10.2 Representations and Warranties of InterTrust. In addition to Section 10.1
--------------------------------------------
above, InterTrust represents and warrants to NatWest that as of the Effective
Date:
(a) InterTrust has not, to the knowledge of the officers of InterTrust,
entered into a Core Partner arrangement with any organization that is a Banking
Institute.
(b) InterTrust owns or has the right to grant the licenses hereunder with
respect to the InterTrust Technology, including under applicable law;
(c) to the knowledge of the executive officers of InterTrust, the
InterTrust Technology does not infringe any Person's U.S. patent, trademark,
copyright, or trade secret right, and no active claims or allegations of any
such infringement are pending; PROVIDED THAT INTERTRUST MAKES NO WARRANTY WITH
-------- ----
RESPECT TO THE INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OTHER THAN THE
FOREGOING REPRESENTATION;
(d) InterTrust is unaware of, and has in good faith employed
commercially reasonable steps in accordance with the U.S. software industry
practices to prevent and/or minimize [*], [*], [*], or other similar
devices or mechanisms that are intended to [*], [*] or [*] the operation of the
InterTrust Technology or NatWest Products or cause such technologies to [*],
inconsistent with reasonable business practices. A summary of such reasonable
steps that have been taken is included in Exhibit H hereto.
(e) the InterTrust Technology as delivered to NatWest pursuant to this
Agreement will, when delivered, operate without [*] caused directly by the [*]
in the [*] to the [*], and will be able to accurately process (including [*]
and [*]) [*] and [*] associated with the [*], and recognize the [*] as a [*];
provided that NatWest agrees that InterTrust's sole obligation and NatWest's
- -------- ----
sole and exclusive remedy for any breach of this representation will
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
30
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CONFIDENTIAL
be to [*] set forth in Section 2.2(b) treating any such [*] to [*] or [*].
10.3 Limitation. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT TO THE
----------
CONTRARY: (i) THE INTERTRUST TECHNOLOGY AND PRODUCTS ARE PROVIDED "AS IS"
WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT
LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR PARTICULAR
REQUIREMENTS AND NONINFRINGEMENT; (ii) INTERTRUST SHALL ASSUME NO RISK AS TO THE
QUALITY, ACCURACY, INFRINGEMENT AND PERFORMANCE OF THE INTERTRUST TECHNOLOGY
PRODUCTS; AND (iii) INTERTRUST DOES NOT WARRANT THAT INTERTRUST TECHNOLOGY OR
THE INTERTRUST TECHNOLOGY PRODUCTS WILL MEET NATWEST'S REQUIREMENTS OR THOSE OF
ANY THIRD PARTY, OR THAT INTERTRUST TECHNOLOGY PRODUCTS WILL BE ERROR FREE OR
WILL OPERATE WITHOUT INTERRUPTION. NatWest specifically, and without
limitation, acknowledges that the Sample Applications, deployable applications
and deployable components (as each are described in Exhibit A) that may be
provided to NatWest as part of InterTrust Technology are intended, solely to aid
NatWest in its development efforts, should NatWest decide to use them.
10.4 Reporting and Other Covenants. InterTrust shall promptly inform NatWest,
--------------
in writing, of any breach by InterTrust of any provision hereunder that comes to
the attention of an InterTrust executive officer. NatWest shall promptly inform
InterTrust, in writing, of any breach by NatWest, of any provision hereof and/or
by a Customer of a Customer Agreement, that comes to the attention of a NatWest
officer or manager. InterTrust agrees that the representations set forth in
Sections 10.2(b)-(e) shall apply to each new delivery of InterTrust Technology
as if such representations were made as of the date of such delivery of
InterTrust Technology; provided that any InterTrust [*] of any and all
-------------
breach(es) of the foregoing shall be [*] to an [*] not to [*] in any and all
circumstances.
11. INDEMNIFICATION AND REMEDIES.
11.1 Indemnification.
---------------
(a) InterTrust Indemnification. InterTrust shall indemnify and hold
--------------------------
NatWest and its employees, officers and directors (the "NatWest Parties")
---------------
harmless from any and all liability, judgments, costs, damages, claims, suits,
actions, proceedings, expenses and/or other losses, including reasonable
attorneys' fees (collectively, "Claims") or portions thereof, to the extent
------
awarded by a court of competent jurisdiction or pursuant to a settlement as
provided hereunder, resulting from controversies or litigation asserted by any
third Person against the NatWest Parties arising directly or indirectly from:
(i) InterTrust's breach of any of its obligations under this Agreement, or its
representations and warranties set forth in Sections 10.1, 10.2, or 10.4
(subject to the provisions thereof); and (ii) NatWest's proper use of InterTrust
Trademarks as set forth herein; provided, however, that, this indemnity does not
-------- ------- ----
extend to any Claim (collectively, the "Indemnification Exclusions") relating
--------------------------
to: (1) any Modified Technology or other modifications thereto made by NatWest
or any third Person or combinations of the InterTrust Technology with any
product, technology or service of NatWest or of any Person, where such Claim
resulted from such modification or combination and not from the InterTrust
Technology by itself as contained in such modification or combination; or (2)
the use of any InterTrust Technology in any manner inconsistent with InterTrust
Specifications or Documentation to the extent that such Claim would have been
avoided in the absence of such inconsistent use.
(b) NatWest Indemnification. NatWest shall indemnify and hold
-----------------------
InterTrust, its employees, officers and directors (the "InterTrust Parties")
------------------
harmless from any and all Claims or portions thereof to the extent awarded by a
court of competent jurisdiction or pursuant to a settlement as provided
hereunder, resulting from controversies or litigation asserted by any Person
against the InterTrust Parties arising directly or indirectly from: (i)
NatWest's breach of any of its obligations, representations or warranties
hereunder; (ii) InterTrust's proper use of NatWest Trademarks as set forth
herein; (iii) the design, manufacture, use, distribution and/or disposition by
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
31
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CONFIDENTIAL
or for NatWest of Modified Technology, NatWest Products, performance of any
service associated with the foregoing, and/or other exercise by NatWest of the
licenses hereunder, except where such Claims would have arisen solely out of
InterTrust Technology as directly provided to NatWest by InterTrust in the
absence of NatWest activities hereunder, and further, except to the extent
NatWest is indemnified by InterTrust under Section 11.1 ((a)) hereof; and (iv)
any Claim relating to the Indemnification Exclusions.
(c) Third Party Claims. In case any Claim is brought by a third Person
------------------
for which Claim indemnification is or may be provided hereunder, the indemnified
Party shall provide prompt written notice thereof to the other Party. Where
obligated to indemnify such Claim, the indemnifying Party shall, upon the demand
and at the option of the indemnified Party, assume the defense thereof (at the
expense of the indemnifying Party) within thirty (30) days or at least ten (10)
days prior to the time a response is due in such case, whichever occurs first,
or, alternatively upon the demand and at the option of the indemnified Party,
pay to such Party all reasonable costs and expenses, including reasonable
attorneys' fees, incurred by such Party in defending itself. The Parties shall
cooperate reasonably with each other in the defense of any Claim, including
making available (except as expressly set forth herein to the contrary, and in
all events under the strongest protective order reasonably available) all
records necessary to the defense of such Claim, and the indemnified Party shall
have the right to join and participate actively in the indemnifying Party's
defense of the Claim. Notwithstanding the foregoing (and any other Section of
this Agreement), it is understood and acknowledged that InterTrust need not
under any circumstance provide Top Secret Information except as expressly
provided to the contrary in Section 3 of Exhibit G. Each Party shall be entitled
to prior notice of any settlement of any Claim to be entered into by the other
Party and to reasonable approval of a settlement to the extent such Party's
rights would be directly and materially impaired. Without limiting the
foregoing, in the event of any Claim or threatened Claim that [*] any [*]: (a)
upon NatWest's written request, InterTrust will use all reasonable efforts
(taking into account the gravity of the situation) to [*] or [*] NatWest (at
NatWest's expense) to [*] and otherwise [*] in accordance with the terms and
conditions hereof such portion of InterTrust Technology on [*] to [*], each in
the exercise of its own discretion; or (b) at InterTrust's sole discretion,
InterTrust may use [*] or [*] of the [*], as the case may be, so as to make such
portion of the [*] while [*] substantially [*] and [*] of such [*] or [*] of the
[*] that are material to NatWest's then-current use of such technology. If
options (a) and (b) are not [*]: (1) NatWest shall have the right, as its sole
and exclusive remedy in connection with such Claim, threatened Claim or action
of InterTrust in accordance with this Section 0(0), to terminate the licenses
granted hereunder upon thirty (30) days prior written notice; and (2) InterTrust
may, and without any liability whatsoever, terminate the licenses granted
hereunder as to such portion upon thirty (30) days prior written notice if in
the good faith opinion of InterTrust or its professional advisors, InterTrust
has a material risk of liability from NatWest's continued use of such portion of
InterTrust Technology.
11.2 Cumulative Remedies. Except as expressly provided herein to the contrary,
-------------------
no remedy made available to a Party by any of the provisions of this Agreement
is intended to be exclusive of any other remedy, and each and every remedy shall
be cumulative and shall be in addition to every other remedy given hereunder or
now or hereafter existing at law or in equity or by statute or otherwise.
11.3 Equitable Remedies. Each Party agrees that it may be impossible or
------------------
inadequate to measure and calculate a Party's damages from any material breach
of the covenants set forth in Sections 3.5, 5.6, 8,9, 13.2, 13.3, or 14.4
hereof. Accordingly, each Party agrees that if it or any of such Party's Agents
thereof materially breach or threaten a material breach or anticipatory
repudiation of any of such provisions, in addition to any other right or remedy
available, the other Party shall be entitled: (i) to obtain an injunction
against the breaching Party and such Party's Agents thereof, from a court of
competent jurisdiction restraining such breach or threatened breach; and (ii) to
specific performance of any such provision of this Agreement.
12. EXCLUSION OF DAMAGES.
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
32
<PAGE>
CONFIDENTIAL
EXCEPT AS SET FORTH IN THE IMMEDIATELY FOLLOWING SENTENCE, NEITHER PARTY SHALL
BE LIABLE TO THE OTHER PARTY, ITS AGENTS, AFFILIATES, CUSTOMERS, OR ANY OTHER
PERSONS, FOR ANY LOST PROFITS, INCIDENTAL, INDIRECT, OR CONSEQUENTIAL DAMAGES,
ARISING OUT OF THE BREACH OF THIS AGREEMENT. NOTWITHSTANDING THE IMMEDIATELY
PRECEDING SENTENCE, A PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ALL DAMAGES,
INCLUDING INCIDENTAL, INDIRECT, OR CONSEQUENTIAL DAMAGES TO THE EXTENT SUFFERED
OR INCURRED BY THE OTHER PARTY IN THE FOLLOWING CIRCUMSTANCES: (i) THE
MISAPPROPRIATION OF TRADE SECRETS OF THE DAMAGED PARTY BY THE LIABLE PARTY, OR
ITS AGENTS; (ii) THE WILLFUL MISCONDUCT OR MATERIAL BREACH OF THIS AGREEMENT IN
BAD FAITH BY THE LIABLE PARTY, OR ITS AGENTS; OR (iii) THE BREACH OF SECTIONS
6 AND/OR 9 HEREOF.
13. TERM AND TERMINATION.
13.1 Agreement. This Agreement shall commence on the Effective Date and,
---------
unless and until terminated earlier pursuant to Section 13.2, shall continue for
a period of twenty (20) years.
13.2 Events of Termination. This Agreement and the licenses granted hereunder
---------------------
shall be subject to termination upon the occurrence of any of the following
events and such other provisions hereof expressly so stating (each, an "Event of
--------
Termination"):
- -----------
(a) Except as expressly provided elsewhere in this Agreement, if either
Party materially defaults on any of its material obligations under this
Agreement, the non-defaulting Party shall have the right to initiate a
termination procedure under this Agreement by written notice describing with
reasonable specificity the nature of the default and requiring that such default
be cured in accordance herewith. Unless: (i) within sixty (60) calendar days of
receiving such written notice of such default, the defaulting Party remedies the
default; or (ii) in the case of a default that cannot with earnest due diligence
be cured within such sixty day period, the defaulting Party institutes, within
thirty (30) days of the commencement of the Cure Period, steps necessary to
remedy the default and thereafter employs best efforts to diligently prosecute
the same to completion (collectively, as applicable, the Cure Period"), at the
---------------
end of such Cure Period the non-defaulting Party may terminate this Agreement.
Notwithstanding the foregoing, the Cure Period associated with a NatWest breach
of its payment obligations under Section 5 shall be ten (10) days.
Notwithstanding any of the foregoing, a Party shall have the right both to
immediately terminate this Agreement and to obtain injunctive relief in the
event the other Party engages in any: (1) intentional, material unauthorized use
of technology known by such Party to be outside of the rights granted hereunder
(or, in the case of NatWest, any unauthorized disclosure of InterTrust Top
Secret Information) and/or (2) intentional, material unauthorized disclosure of
Confidential Information known by such Party to be a violation of this
Agreement;
(b) By a Party at its option, effective immediately upon written notice
to the other Party, in the event of: (i) the filing by the other Party of a
petition in bankruptcy or insolvency; (ii) the appointment of a receiver for the
other Party for all or substantially all of its property relevant to the
business activities under this Agreement; (iii) the making by the other Party of
any assignment or attempted assignment for the benefit of creditors for all or
substantially all of its properties relevant to its business activities under
this Agreement; or (iv) the institution of any proceedings for the liquidation
or winding up of the other Party's business or for the termination of its
corporate charter, if any such proceeding is not dismissed within one hundred
and twenty (120) days of institution;
(c) Upon thirty (30) days prior written notice to InterTrust, NatWest may
terminate this Agreement this Agreement in the event InterTrust is in breach of
the representations set forth in Section 10.2((b)); or
(d) Upon thirty (30) days prior written notice to NatWest, InterTrust may
terminate this Agreement in the event NatWest: (i) fails to release any NatWest
Products and/or associated service in a material, commercial fashion within [*]
months from the date InterTrust first delivers Commerce 1.0 (GA
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
33
<PAGE>
CONFIDENTIAL
Version) to NatWest in accordance with the provisions of Section 2.1 hereof,
and/or makes no release of any NatWest Product commercially available for any
consecutive [*] month period during the term of this Agreement,
provided that such time period shall be extended by any period in which there
exists a Material Defect in the Commerce 1.0 software that materially impedes
NatWest's development efforts as relevant, but only for the period from the date
that NatWest shows such effort to have been first materially impeded to the date
such defect has been reasonably corrected or mitigated as provided in Section
2.2(b); (ii) fails to timely make payments due under this Agreement on two or
more occasions over a twelve (12) month period; or (iii) engages in conduct
directly contrary to a partnering relationship by engaging in the licensing or
transferring to multiple third Persons of any technology (other than InterTrust
Technology) that contains or includes Secure Containers to Manage Content for
incorporation or use by such third Persons in products and/or applications for
other customers, including end users (and provided that the foregoing provisions
of this subparagraph (iii) shall not be construed to include licensed activities
as set forth herein).
13.3 Effect of Termination. Upon the expiration or termination of this
---------------------
Agreement: (i) all licenses granted hereunder shall automatically terminate;
(ii) InterTrust shall have the right to retain all sums already paid by NatWest
hereunder, and NatWest's only payment obligation under Sections 5.1((a)), ((b))
and ((c)) will be to pay to InterTrust all sums accrued but unpaid within thirty
(30) days thereafter; and (iii) NatWest shall discontinue use of InterTrust
Technology and the use of any portion of such InterTrust Technology in any
Modified Technology, as expeditiously as commercially practicable (and in all
events within thirty (30) days of such expiration or termination), and
discontinue making, using, selling or otherwise transferring or exploiting any
product or service that in the absence of a license hereunder would infringe any
InterTrust Intellectual Property Rights (including termination of distribution
of NatWest Products and any associated services); provided, however, that all
-------- ------- ----
licenses properly granted to end-users pursuant to the then-existing Customer
Agreements solely for Applications Products shall continue in full force and
effect in accordance with the terms thereof (but only where such licenses do not
provide any rights to such end-users with respect to Clearinghouse Functions,
other than as may be expressly provided hereunder and where one or more
Authorized Clearinghouse Providers (other than NatWest and/or its successors)
provide Clearinghouse Functions). Confidential and Top Secret Information shall
be returned to the Party and/or securely destroyed in the manner set forth in
Exhibit G hereto.
13.4 NatWest Continuing Rights. The Parties acknowledge that Section 365(n) of
-------------------------
Title 11 of the United States Code (collectively, the "Bankruptcy Code")
---------------
provides, in part that, in the event InterTrust undertakes a bankruptcy
proceeding under the Bankruptcy Code, NatWest as a licensee of InterTrust
Technology is entitled to retain and continue to exercise its licenses hereunder
in accordance with the terms of the Bankruptcy Code. All rights and licenses
granted under this Agreement shall be deemed to be for the purpose of such
Section 365(n), licenses of right to "intellectual property" as defined under
Section 101 of the Bankruptcy Code.
13.5 Survival. The respective rights and obligations of InterTrust and NatWest
--------
under the provisions of Sections 3,5, 4.5, 5.6 (but only for a period of five
years), 6.1, 6.2, 9, 11, 12, 14 and this Section 13.5 shall survive expiration
or termination of this Agreement.
14. MISCELLANEOUS.
14.1 Governing Law. This Agreement, any and all actions arising out of or in
-------------
any manner affecting the interpretation of this Agreement, and any actions
between the Parties involving the InterTrust Technology, any InterTrust
Property, Licensed Rights, InterTrust Intellectual Property and/or any
Confidential or Top Secret Information ("Party Disputes") shall be governed
--------------
solely by, and construed solely in accordance with, the laws of the United
States of America and the Commonwealth of Virginia, excluding that body of law
relating to conflict of laws. The Parties hereby acknowledge and agree that the
United Nations Convention on Contracts for the International Sale of Goods shall
not apply to this Agreement. To the extent permitted by law, the provisions of
this Agreement shall supersede any provisions of the Uniform Commercial Code as
adopted or made applicable to this Agreement in any competent jurisdiction.
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
34
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14.2 Venue and Jurisdiction. In connection with any litigation between the
----------------------
Parties involving a Party Dispute, each Party hereby unconditionally and
irrevocably consents to the exclusive jurisdiction and venue, in the Courts of
the Commonwealth of Virginia and in the U.S. Federal District Court, located in
the City of Alexandria, Virginia (or any direct successor thereto) and
irrevocably: (i) waives any objection and covenants that it shall refrain from
making any motion concerning personal jurisdiction, venue, transfer, or
convenience of the Parties with respect to a Party Dispute filed in said courts;
and (ii) consents to the service of process of said courts in any matter
relating to this Agreement by the mailing of process by registered or certified
mail, postage prepaid, at the addresses specified in this Agreement. If
necessary, NatWest shall appoint a registered agent in the Commonwealth of
Virginia for acceptance of service of process and/or other notices provided for
under this Agreement and shall notify InterTrust of the identity of such
registered agent within thirty (30) days after the Effective Date.
14.3 Compliance with Law and Export Controls. The Parties shall at all times
---------------------------------------
comply with all applicable U.S. and foreign federal, state, and local laws,
rules and regulations relating to the execution, delivery and performance of
this Agreement and to the InterTrust Technology Products and Modified
Technology. NatWest acknowledges that because one or more aspects of the
InterTrust Technology is likely to be subject to the export control laws,
regulations and requirements of the United States and other jurisdictions,
NatWest Products likely will require export and other approvals as well.
InterTrust shall use all commercially reasonable efforts at InterTrust's expense
to obtain any license or other approval, if any, that may be required by the
United States government for InterTrust to make the InterTrust Technology
Products and/or Documentation or information relating thereto generally
available internationally.
14.4 Amendment or Modification; Assignment. This Agreement may not be amended,
-------------------------------------
modified or supplemented by the Parties in any manner, except by an instrument
in writing signed by the InterTrust Designated Officer and a duly authorized
officer of NatWest. NatWest shall not assign or transfer (whether expressly, by
operation of law or otherwise) its rights or obligations hereunderto any Person
(including any affiliate): (i) who has commercial interests materially in
conflict with InterTrust's interests; or (ii) without InterTrust's prior written
consent, which consent shall not be unreasonably withheld; provided that NatWest
-------- ----
may, without the prior written consent of InterTrust, assign its rights and
obligations hereunder to (x) any wholly-owned NatWest affiliate or (y) any
Person in connection with any merger or sale of substantially all of NatWest's
assets and business; provided further that such affiliate or such Person, as
-------- ------- ----
applicable, does not have commercial interests materially in conflict with
InterTrust's interests and such successor in interest or transferee assumes in
writing NatWest's rights and obligations under this Agreement. InterTrust shall
not assign or transfer (whether expressly, by operation of law or otherwise)
this Agreement or its rights or obligations hereunder to any Person without
NatWest's prior written consent, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, InterTrust shall be entitled to assign
or transfer such rights or obligations hereunder in connection with any merger
or sale of substantially all of the assets or business related to this Agreement
without such NatWest consent; provided that the successor-in-interest or
-------- ----
transferee assumes in writing InterTrust's rights and obligations under this
Agreement and consents to the licenses hereunder. Subject to the foregoing,
this Agreement will benefit and bind the successors and permitted assigns of the
Parties. Any attempted transfer or assignment without such consent shall be
null and void ab initio and of no force or effect.
-- ------
14.5 Notices. Any notice hereunder shall be in writing and shall be either:
-------
(i) personally delivered; (ii) transmitted by postage prepaid registered or
certified airmail, return receipt requested; or (iii) by facsimile with a
confirmation copy deposited prepaid with an internationally recognized express
courier service. Unless otherwise provided herein, all notices shall be deemed
to have been duly given on: (a) the date of receipt (or if delivery is refused,
the date of such refusal) if delivered personally, by facsimile, or by express
courier; or (b) ten (10) days after the date of posting if transmitted by mail.
Notwithstanding the foregoing, communication of Confidential Information or Top
Secret Information shall be governed by practices adequate to appropriately
protect such information as may be specified herein or in the future by
InterTrust. Either Party may change its address for purposes hereof on not less
than three (3) days prior notice to the other Party. Notice hereunder shall be
directed:
35
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CONFIDENTIAL
If to InterTrust, to: If to NatWest, to:
460 Oakmead Parkway National Westminster Bank Plc
Sunnyvale, California 94086 41 Lothbury
Attn: General Counsel London, England EC2P 2BP3933
Fax: (408) 222-6144 Attn.: Company Secretary
Fax: (44) 171-726-1035
14.6 Waiver. Any provision of this Agreement may be waived by the Party
------
entitled to the benefit thereof. Neither Party shall be deemed, by any act or
omission, to have waived any of its rights or remedies hereunder unless such
waiver is in writing and signed by, in the case of InterTrust, InterTrust
Designated Officer, and in the case of NatWest, a NatWest authorized officer,
and then only to the extent specifically set forth in such writing. A waiver
with reference to one event shall not be construed as continuing or as a bar to
or waiver of any right or remedy as to a subsequent event.
14.7 No Third Party Beneficiaries. Nothing express or implied in this
----------------------------
Agreement is intended to confer, nor shall anything herein confer, upon any
Customer or any Person other than the Parties and any respective successors or
permitted assigns of the Parties, any rights, remedies, obligations or
liabilities whatsoever.
14.8 No Agency. Nothing herein contained shall be construed to constitute the
---------
Parties hereto as partners or joint venturers or the agent of the other Party in
any sense of those terms whatsoever. Neither Party assumes any liability of the
other Party nor shall have any authority to enter into any binding obligation on
behalf of the other Party.
14.9 Recovery of Costs and Expenses. If any Party to this Agreement brings an
------------------------------
action against the other Party to enforce its rights under this Agreement, the
prevailing Party shall be entitled to recover its costs and expenses, including
without limitation, reasonable attorneys' fees and costs incurred in connection
with such action, including any appeal of such action.
14.10 Severability. If the application of any provision or provisions of this
------------
Agreement to any particular facts or circumstances shall be held to be invalid
or unenforceable by any court of competent jurisdiction, then: (i) the validity
and enforceability of such provision or provisions as applied to any other
particular facts or circumstances and the validity of other provisions of this
Agreement shall not in any way be affected or impaired thereby; and (ii) such
provision or provisions shall be reformed without further action by the Parties
hereto and only to the extent necessary to make such provision or provisions
valid and enforceable when applied to such particular facts and circumstances.
14.11 No Solicitation of Employees. Each Party agrees that neither it nor any
----------------------------
of its affiliates will, without the prior written consent of the other Party,
directly or indirectly solicit or encourage any person employed by the other
Party to leave the employ of such other Party and become an employee such former
Party until two (2) years after such employee shall have ceased being employed
by such other Party.
14.12 Counterparts; Facsimiles. This Agreement may be executed in any number
------------------------
of counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute one and the same
instrument. Each Party shall receive a duplicate original of the counterpart
copy or copies executed by it. For purposes hereof, a facsimile copy of this
Agreement, including the signature pages hereto, shall be deemed to be an
original. Notwithstanding the foregoing, the Parties shall deliver original
execution copies of this Agreement to one another as soon as practicable
following execution thereof.
36
<PAGE>
CONFIDENTIAL
14.13 Entire Agreement. This Agreement represents the entire agreement of the
----------------
Parties with respect to the subject matter hereof and supersedes all prior
and/or contemporaneous agreements and understandings, written or oral between
the Parties with respect to the subject matter hereof (except as set forth in
Section 0 hereof).
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of
the date first written above by the undersigned duly authorized.
<TABLE>
<S> <C>
INTERTRUST TECHNOLOGIES NATIONAL WESTMINSTER BANK PLC
CORPORATION
By:___________________________________ By:_____________________________________
Name: Victor Shear Name: Patrick J. Boylan
Title: Chairman and Chief Executive Officer Title: Managing Director, Card Services
</TABLE>
37
<PAGE>
EXHIBIT A
TO THE TECHNOLOGY DEVELOPMENT, MARKETING AND LICENSE AGREEMENT
INTERTRUST TECHNOLOGY PRODUCT DELIVERABLES AND RELATED ITEMS
------------------------------------------------------------
I. INTERTRUST TECHNOLOGY: PRODUCTS AND DOCUMENTATION
II. INTERTRUST AUTHORIZED APPLICATION SOFTWARE
III. INTERTRUST AUTHORIZED CLEARINGHOUSE SOFTWARE
IV. INTERTRUST CORE TECHNOLOGY
<PAGE>
I. INTERTRUST TECHNOLOGY ESTIMATED PRODUCT DELIVERABLE
A. InterTrust Systems Developer's Kit Release 1.0
-----------------------------------------------
The InterTrust Systems Developer's Kit Release 1.0 provides a broad range of
software, components and sample applications that allow developers to
incorporate highly flexible and distributed digital rights management and the
persistent protection of digital information into computer software, and to
support e-commerce businesses, infrastructures and clearinghouses. In general,
this software:
. facilitates the rapid integration of InterTrust(TM) secure electronic
commerce and digital rights management technologies into customer-specific
applications;
. enables development of rights management tools for viewing, packaging and
editing;
. allows the creation of Secure Containers for music-, video-, text-, image-
based, and other forms of digital content. DigiBox containers provide
persistent protection of digital information across information networks and
through digital distribution channels;
. permits specification of conditions and consequences governing the use of
digital data and executables. These conditions may include distributed usage
management, auditing, and payment control related to client interaction with
(and usage of) digital information;
. has client and server support for Windows 95 and NT 4.0 and server support
for Windows NT 4.0 and Solaris 2.5.1;
. enables and integrates with customer-specific services, such as: payment,
financial and usage clearinghouses, multiple network protocols, database
systems, updates, etc; and
. supports deployment services for installation and registration.
The Systems Developer's Kit Release 1.0 comprises two announced product sets:
Commerce 1.0 and Enterprise 1.0. These products are, initially, comprised of
the same software, but are intended for different uses. The Commerce 1.0
product is intended as an interoperable secure foundation for global commerce
where InterRights Points serve as a general purpose resource for a variety of
application products, together Managing Content from, potentially, a wide
variety of unrelated Persons. Enterprise 1.0 is intended solely for use within
enterprises and/or for use by enterprises solely in connection with such
enterprise's Content and within the context solely of products and/or services
for direct customers of such enterprise or other persons having a value chain
relationship with such enterprise (such as suppliers, distributors, consultants,
etc.). Enterprise 1.0 comprises that software described above for Commerce 1.0,
used for such purposes described immediately above.
1. Systems Developer's Kit 1.0 Deliverables:
-----------------------------------------
Systems Developer's Kit 1.0 delivers software, development tools, and
documentation for creating InterTrust-aware applications and run-time
environments, and provides the framework for clearinghouse activities and
deployment activities, including deployment administration. Production-
<PAGE>
level core InterTrust software, application programming interfaces and tools,
and sample software applications are provided.
The deliverables represent product sets, each targeted to support a different
InterTrust rights functional area. They are:
. Application Developer's Kit ("ADK");
---
. Transaction Authority Framework(TM); and
. InterRights(TM) Point (Golden Master).
In Systems Developer's Kit 1.0, these product sets will be released together.
For future releases, and at InterTrust's discretion, these product sets may be
independently delivered and may be available as independent deliverables.
a. Applications Developer's Kit 1.0:
---------------------------------
The Application Developer's Kit provides programming libraries, sample
applications that demonstrate packaging and viewing, certain deployable
application and components, source code for the sample applications, pre-
activated (non-deployable) InterRights Points for test purposes, and
documentation.
. Core Technology Software - Object Code
- InterTrust Programming Libraries (including ITAPI, the Layout Interpreter
Library, Rights Management Library, and utility libraries);
. ITAPI: The programming interface to the InterRights Point software
includes functions that are used to package and read DigiBox
containers, specify business rules, and perform administrative
functions associated with use of DigiBox containers.
. InterTrust Interoperability Library ([*]): This interface uses
ITAPI to construct various governed elements, such as budget objects,
CHInfo objects, and CHAccount objects. It manages the construction of
the controls required for these objects and provides consistent use of
those controls to help enable interoperability of objects.
. InterTrust Layout Interpreter Library ([*]): The internal
organization of a DigiBox container usually is specified in a layout
template produced by the Layout Editor and interpreted by both
packaging and viewing applications using the Layout Interpreter
programming interface.
. Rights Management Library ([*]): Applications can use this class
library to create and manipulate controls (business rules) rather than
writing directly to the ITAPI to do so.
- Pre-activated InterRights Points (software to support the development
environment); and
- InterTrust Rights Wallet(TM) and core Rights Wallet(TM) applets: supports
administration of the
[*] CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
InterRights Point in the packaging and viewing environment. These provide
an administrative interface to the InterRights Point software to enable
users of the system to set budgets, set passwords, commence payment
activities, and perform other administrative functions associated with use
of DigiBox containers and the InterRights Point software.
. Applications and Components - Source Code and Object Code (include)
- InterTrust Layout Tool (executable and source code): a graphical editing
tool for creating DigiBox container layout templates that are later used
in packaging operations. This tool creates a content layout template that
specifies how the elements representing digital content in a DigiBox
container will be organized. NatWest can use the basic template supplied
with the InterTrust Packager, or can use this tool to create different
templates for its own content. Templates facilitate interoperability among
packaging and viewing applications that use the InterTrust software.
- InterTrust Rights Selector (executable and source code): an [*]
component, intended to be embedded in viewer applications, for displaying
rights controls in readily human-readable and manipulable format. The
Rights Selector component reads a set of business rules (controls) from a
DigiBox container and displays them in human-readable from.
- InterTrust Survey/License Control (executable and source code): an [*]
component, intended to be embedded in viewer applications, for presenting
HTML based survey and license agreements to consumers;
. Consumer Sample Applications and Components - Object Code and Source Code
for portions that may be altered
- InterTrust Packager: sample software that creates a DigiBox container,
places specified content into a DigiBox container, associates business
rules and specified controls with the content, and places such rules
inside the container as well;
- InterTrust Viewer: sample software that reads the contents of a DigiBox
container created with an InterTrustworthy Packager; displays the rules
that govern use of the content; and, after the user agrees to those rules,
displays, prints, or saves the content as specified by the business rules.
This application implements InterTrust defined [*] component
interfaces to invoke survey and license agreement mechanisms and supports
a plug-in interface for handling specific media types;
- InterTrust Media [*] Control: a sample [*] component that demonstrates how
to build plug-in media handlers; and
- InterTrust Installer.
b. Transaction Authority Software:
------------------------------
The Transaction Authority software provides the framework for Clearinghouse
activities and Deployment activities, including deployment administration.
. Core Technology: Object Code Format (except as noted):
[*] CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
- Transaction Authority Framework Software - secure communication
infrastructure and protocols, general processing of incoming data, and
database storage. The Transaction Authority Framework (TAF) software is a
software framework made up of several components that handle the secure
reception and processing of DigiBox containers. It is designed to enable
validation and processing of requests that require interaction between an
InterRights Point and some financial or management authority, called a
transaction authority. The TAF is the basis of any transaction authority
system, whether it is specialized as a financial clearinghouse, a usage
clearinghouse, or a Deployment Manager (DM):
The TAF accepts communications from the dispersed InterRights Points,
opens DigiBox containers within its own InterRights Point, manages work
flow, and hands off audit records and other messages to the clearinghouse
provided by InterTrust business partners. The TAF also packages
acknowledgment responses in DigiBox containers and sends them back to the
originating InterRights Points. Well-defined software interfaces are
provided so that partner software can interact with the TAF;
- Deployment Manager Software - a set of programs for secure node deployment
and initialization, provision of naming services to nodes, and provision
of secure date and time services to nodes. It initializes each InterRights
Point and authorizes addition of new users. It authorizes backup and
restores activities of provider and consumer systems. It is also
responsible for key distribution and name services within a deployment.
(Source Code provided for those portions of the software that may be
altered); and
- Installer Software: Software for tamper-resistant installation of the
InterRights Point (Source Code provided for those portions of the software
that may be altered).
. Clearinghouse Sample Applications and Components - Source Code and Object
Code:
- Usage Clearinghouse Application--sample software for gathering and
aggregating usage information, such as usage audits and user profiles;
- Financial Clearinghouse Application--sample software for performing
prototypical clearinghouse functions in the area of financial clearing;
- Deployment Service Prototype Component--sample software for customizing an
initialized InterRights Point (e.g., associating that InterRights Point
with a particular InterTrust deployment and obtaining installation
demographics)
c. InterRights Point (Golden Master):
---------------------------------
The Golden Master provides a deployable version of the InterRights Point
software that may be replicated for distribution. The InterRights Point is the
component that provides secure processing of DigiBox containers and enforces
business rules. In Commerce 1.0, the InterRights Point software is a
cooperating or server process that can run on Microsoft Windows95 and Windows NT
4.0. The InterRights Point software presents the InterTrust Application
Programming Interface (ITAPI) to applications. This interface has a proxy or
"client" portion that communicates via RPC with a "server" portion. This server
side of the ITAPI then makes requests of the Protected Processing
Environment(TM) (PPE) software in the InterRights Point. The PPE software does
the actual secure manipulation of containers.
<PAGE>
The client-server implementation used for ITAPI allows an application and the
InterRights Point to be located on the same machine or on different ones. The
interface supports multiple local and remote clients and also multiple
simultaneous users.
2. Commerce 1.0 Documentation:
---------------------------
- Commerce 1.0 Overview
- Commerce 1.0 Installation and Configuration Guide
- Commerce 1.0 Glossary
- Applications User's Guide
- Application Developer's Guide
- Application Developer's Kit: Supplemental Libraries
- Application Developer's Kit: ITAPI Vol 1 Concepts
- Application Developer's Kit: ITAPI Vol 2 Reference
- Application Developer's Kit: Interoperability Library
- Application Developer's Kit: Rights Metafile Format
- Clearinghouse Developer's Guide
- Deployment Manager Developer's Guide
3. Commerce 1.0 Schedule:
----------------------
. Beta Release: Shipped March 1998
. First Commercial Shipment (FCS): Shipped July 1998
. General Availability (target): October 1998
Note: Source (where applicable and made available). Object Code for Windows 95
and Windows NT 4.0 for client software and Windows NT 4.0 and Solaris 2.5.1 for
server software. Additional platforms under development, and to be supplied by
InterTrust as available and determined by InterTrust in its discretion.
InterTrust Rights Editor/Commerce Modeler product application to be made
available for internal use through provision of licensed developer copies (n/c).
4. Enterprise 1.0 (GA Version):
----------------------------
Functionality supportive of use of InterTrust technology within the Enterprise
context (described above).
B. Requested Functionality
-----------------------
The following functionalities, which will be incorporated into one or more New
Release(s) or Upgrade Release(s), constitutes the "Requested
Functionalities"):
. Prepayment: control mechanism which supports prepayment, including the
budget [top-up] procedure and local transaction maintenance applet.
. Aggregate Limits for Corporate Accounts: permits groups of users (for
example, all users within one company) to share an enforced limit on their
individual spending.
Support for User Multi-Currencies: permits users to convert monies in one
budget to equivalent monies in a budget of a different currency.
Note: Based at least in part upon further clarifications from NatWest with
respect to its product
<PAGE>
plan and timing, anticipated commercial use of InterTrust Technology and
desired attributes of the Requested Functionality, and subject to
commercial and technical feasibility and other commercially reasonable
factors, InterTrust will use reasonable efforts to develop and incorporate
the Requested Functionality in future Upgrade Releases and New Releases.
C. InterTrust Systems Developer's Kit Release 2.0 - Initial Description of
-----------------------------------------------------------------------
Features and Functionality
---------------------------
Systems Developer's Kit 2.0 will add greater value chain management capability
and independent delivery of control functionality to InterTrust Systems
Developer's Kit 1.0, and it is anticipated that the release will support the
following functionality:
. InterRights Point-based value-chain management, enabling support of chain
of control models directly within InterRights Point;
. Deliver controls independently of controlled digital information, enabling
complex updatable, control models for usage/advertising and trading
systems; and
. Additional major functionality under evaluation but not yet specified -
priority of additional functionality dependent, in part, on experience with
earlier releases, market priorities and timing of completion.
II. INTERTRUST AUTHORIZED APPLICATION SOFTWARE AND CORE TECHNOLOGY
Your Agreement contains provisions that: (1) prohibit modification of InterTrust
Technology (that is designated Core Technology) (files noted as "Core
Technology" may not be modified; files expressly noted herein to be
"Customizable" Technology may be modified), and (2) restrict redistribution of
any software except "Authorized Application Software" (files noted as
"Authorized Application Software" may be distributed, as applicable solely in
accordance with the terms and conditions hereof and in the Agreement; files not
expressly noted as "Authorized Application Software" may not be distributed).
(Any information concerning Customizable Technology or "Core Technology" found
in source files themselves may not be relied upon and shall be superseded by the
designations noted herein). Any and all further restrictions noted in the file
(or Agreement) concerning distribution (such as with the IRP Golden Master
process) must be adhered to or such file shall not be Authorized Application
Software. As of the Effective Date there is no Authorized Clearinghouse
Software.
LISTING OF CUSTOMIZABLE TECHNOLOGY AND AUTHORIZED APPLICATION SOFTWARE
REDISTRIBUTION OF NON-SOURCE FILES
All references to file and directory locations refer to the default installation
directories, which are set by the user at installation.
The binary and online help files listed below are "Authorized Application
Software" and may be redistributed, solely subject to terms and conditions of
the Agreement. All other files may not be redistributed (except as specifically
noted separately in the Source File section below):
[*]
[*] CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
[*]
[*] CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
[*]
SOURCE FILE CUSTOMIZATION AND REDISTRIBUTION
Source files contained in the directories listed in this section are
"Customizable" and may be modified solely as expressly provided therein. In
some cases, redistribution of the customized output is authorized and such files
are Authorized Application Software for redistribution solely subject to terms
and conditions of the Agreement. The paragraph preceding each section describes
the customization and redistribution restrictions. Source files in any
directory not listed in this section may not be modified or changed in any
manner.
* CUSTOMIZABLE, BUT REDISTRIBUTABLE ONLY VIA THE IRP GOLDEN MASTER PROCESS
The source files contained in the directories listed immediately below are
customizable but are redistributable only via the IRP Golden Master
redistribution process and solely subject to terms and conditions of your
Agreement:
[*]
* CUSTOMIZABLE BUT NOT REDISTRIBUTABLE (I.E., "CUSTOMIZABLE SOFTWARE" ONLY)
The source files contained in the directories listed immediately below are
customizable but not redistributable in any manner:
[*]
[*] CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
[*]
* REDISTRIBUTABLE ONLY
The source files contained in the directory listed immediately below are
redistributable (subject to terms and conditions of your Agreement) but may not
be modified or changed in any manner
[*]
* CUSTOMIZABLE AND REDISTRIBUTABLE (I.E., "CUSTOMIZABLE SOFTWARE" ONLY)
The source files contained in the directories listed immediately below are
customizable and redistributable (solely subject to terms and conditions of your
Agreement):
[*]
[*] CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
[*]
[*] CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
[*]
The source files contained in this directory are third-party files which are
customizable
if the instructions contained in those files are correctly followed:
[*]
III. SPECIAL ACKNOWLEDGMENTS AND THIRD PARTY LICENSE REQUIREMENTS
* It is acknowledged and agreed that the InterTrust Technology may employ or may
operate with one or more technologies that may not be proprietary to InterTrust
but are included within the licenses granted in Section 3.1 (the "Third Party
Technology") and as may be modified from time to time by InterTrust. Licensee's
use of the Third Party Technology is limited by the terms of any licenses or
rights that InterTrust may have therein and may sublicense to Licensee.
* This Software contains the following licensed Microsoft DLLs: msvcrt.dll,
msvcirt.dll, mfc42.dll, amovie.exe, atl.dll. These files: (i) may be used only
in conjunction with licensed Microsoft products; and (ii) may not be
redistributed to anyone and/or modified.
* Certain portions of the Software contain software provided under license to
InterTrust from Inso Corporation. The Inso software is contained in files in the
following directory, [*] (where [*] is the default installation directory which
is set by the user at the time of installation). As stipulated in InterTrust's
agreement with Inso, use of these files is for internal development and use, and
demonstration purposes only (except where the
----
terms and conditions of a separate agreement are satisfied).
* Certain portions of the Software contains software provided under license to
InterTrust from Basis Technology Corporation ("Basis"). The Basis Software is
contained in the [*] file in binary form. (c) Basis Technology. All Rights
Reserved. As stipulated in InterTrust's agreement with Basis, these files may
not be modified. You agree that use of the Basis Software shall occur solely (1)
in connection with internal development purposes, and archival copies; (2) as a
integral component of InterTrust technology or licensee's software directly
associated therewith; and (3) where such Basis Software is related as InterTrust
Confidential Information under the terms and conditions of this Agreement.
* Certain portions of the Software have used [*] and [*] to which this notice
applies: [*] Copyright (C) 1990-2, [*] Copyright (C) 1991-2, [*] Inc. All rights
reserved. License to copy and use this software is granted provided that it is
identified as the [*], Inc. [*], and/or [*], Inc.[*] in all material
mentioning or referencing this software or this function. License is also
granted to make and use derivative works provided that such works are identified
as "derived from the [*], Inc. [*], and/or derived from the [*], Inc.[*] in all
material mentioning or referencing the derived work. [*] Inc. makes no
representations concerning either the merchantability of this software or the
suitability of this software for any particular purpose. It is provided "as is"
without express or implied warranty of any kind. These notices must be retained
in any copies of any part of this documentation and/or software.
* Certain portions of the Software have used DES software, to which this notice
applies: des - fast & portable DES encryption & decryption Copyright (C) 1992
Dana L. How. THIS PROGRAM IS DISTRIBUTED WITHOUT ANY WARRANTY, INCLUDING THE
IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
[*] CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
* Certain portions of the Software (as indicated in such portions' source files)
have used [*] software, to which this notice applies: Copyright (c) 1995 by
[*]. Permission to use, copy, and modify this software without fee is hereby
granted, provided that this entire notice is included in all copies of any
software which is or includes a copy or modification of this software and in all
copies of the supporting documentation for such software. This software may be
subject to export controls. SOME PARTS OF [*] MAY BE RESTRICTED UNDER
UNITED STATES EXPORT REGULATIONS (HOWEVER, SUCH PARTS ARE NOT INCLUDED IN THE
SOFTWARE). THIS SOFTWARE IS BEING PROVIDED "AS IS", WITHOUT ANY EXPRESS OR
IMPLIED WARRANTY. IN PARTICULAR, NEITHER THE AUTHORS NOR [*] (NOR INTERTRUST
TECHNOLOGIES CORPORATION) MAKE ANY REPRESENTATION OR WARRANTY OF ANY KIND
CONCERNING THE MERCHANTABILITY OF THIS SOFTWARE OR ITS FITNESS FOR ANY
PARTICULAR PURPOSE.
* Certain portions of the Software (as indicated in such portions' source files)
have used [*] software, to which this notice applies: Copyright (C) 1994 [*]
Company. Permission to use, copy, modify, distribute and sell this software and
its documentation for any purpose is hereby granted without fee, provided that
both that copyright permission notice and this permission notice appear in
supporting documentation. [*] Company (and InterTrust Technologies Corporation)
make no representations about the suitability of this software for any purpose.
It is provided "as is" without express or implied warranty.
* Certain portions of the Customizable Technology (as indicated in such
portions' source files) have used Independent JPEG Group software and certain
portions of the Software supplied in executable format (as indicated in
Software's "About Box") are based in part upon the work of the Independent JPEG
Group. (C) 1991, 1992, 1993, 1994, 1995, Thomas G. Lane. The Graphics
Interchange Format (C) is the copyright property of CompuServe Incorporated. GIF
(sm) is a Service Mark property of CompuServe Incorporated. Certain portions of
the Independent JPEG Software were loosely based on giftoppm from the PBMPLUS
distribution as of February 1991 to which this notice applies: Copyright (C)
1990, David Koblas. Permission to use, copy, modify, and distribute this
software and its documentation for any purpose and without fee is hereby
granted, provided that the above copyright notice appears in all copies and that
both that copyright notice and this permission notice appear in supporting
documentation. This software is provided "as is" without express or implied
warranty.
[*] CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL
EXHIBIT B
TO THE TECHNOLOGY DEVELOPMENT, MARKETING AND LICENSE AGREEMENT
TRADEMARKS
----------
InterTrust Trademarks
---------------------
InterTrust
The InterTrust Logo
InterTrust Commerce Architecture
InterRights Point
InterTrustworthy
DigiBox
Virtual Process Control
Electronic Value Chain Management
Commerce 1.0
Commerce Modeler
Rights Editor
Enterprise Modeler
Commerce Appliance
InterTrustable
Rights Expression Tools
Trust Virtual Machine
Transaction Authority Framework
TrustMail
MailTrust
TrustPublish
ComplyTrust
PromoteTrust
PageForward
AssertTrust
NetTrust
TrustNet
Publish America
Commerce America
TrustStation
CommerceStation
RightsStation
RightsWallet
Electronic Express
<PAGE>
CONFIDENTIAL
NatWest Trademarks (registered)
-------------------------------
321 Zero
ActionLine
AD 1692
Airlease
AT THE THREE CROWNS IN THE STRAND NEXT DOOR TO THE CLOBE
TAVERN AD 1692
BankLine
BIS
Caller
CAMPBELL'S OFFICE
CF
Compass Computer Aided Share Service
Compsure
Counter Intelligence
Coutts
Coutts Card
COUTTS & CO.
COUTTS & CO. ACCOUNTACARD
COUTTS & CO. CAMPBELL'S OFFICE
COUTTS & CO. SELECT PORTFOLIO
COUTTS & CO. SHARE SELECTION SERVICE
Coutts CrownLine
Coutts CrownPay
COUTTS FINANCE CO.
COUTTS MORTGAGE RESERVE ACCOUNT
COUTTS RESERVE ACCOUNT
Coutts Portfolio Service
Credit Zone
D.A.L.A.S.
Decipher
Elevator Finance
HBS Heythrop Business School
Heythrop
HLN Heythrop Learning Network
IMMAS
INCS Institutional Nominee Custodial System
IntWest
Junior World Savers
Magex
National Westminster Bank
National Westminster bank SERVICETILL
National Westminster Relay
National Westminster the Action Bank
NatWest
NatWest - the Action Bank
NatWest 321Zero
NatWest Actionline
NatWest Advantage
<PAGE>
CONFIDENTIAL
NatWest Autopay
NatWest BankLine
NatWest BankLine Services
NatWest BrokerLine
NatWest Business Insurance Services
NatWest Business Line
NatWest C.A.R.E.S.
NatWest Cardline
NatWest Cash Bond
NatWest Corporate Quarterly
NatWest CQ
NatWest Crown Reserve
NatWest Currency Business Account
NatWest Currency Reserve Plus
NatWest Current Plus
NatWest Current Plus Account
NatWest Customer Service Line
NatWest Customerbridge
NatWest Datalink Service
NatWest Diamond Reserve
NatWest Dimensions
NatWest EuroCash
NatWest Export Ease
NatWest face 2 face with Finance
NatWest First Reserve
NatWest Global Financial Markets
NatWest Gold Plus Current Account
NatWest Gold Plus Service
NatWest HealthSense
NatWest Markets
NatWest Microcall Service
NatWest more than just a bank
NatWest NetWork
NatWest Network
NatWest On Line
NatWest One Two Three
NatWest Portfolio Reserve Scheme
NatWest Premium Investment Management Service
NatWest Premium Reserve
NatWest Primary
NatWest Privilege Banking
NatWest Relay
NatWest Reward Reserve
NatWest RoomrateR
NatWest Security Plus
NatWest Special Reserve
NatWest Streamline
NatWest Student Plus
NatWest StudentLine
NatWest the Piggy Bank
NatWest Touchscreen
<PAGE>
CONFIDENTIAL
NatWest TradeBridge
NatWest Treasury Reserve
NatWest Unit Trust Selection Service
NatWest Vehicle Concepts
NatWest Vehicle Services
NatWest VehicleFocus
NatWest VehicleSelect
NatWest World Money Centre
NWM
NWVS
Pace
PHAROS Single Market Advisor
Pioneer Fund
Primeline
PRIVATE PERSPECTIVE
PROTECTOR
Raid Cash Till
Rapid Deposit
SatWest
Streamline
Streamline EFT
The Action Bank
The Golden Key Package
The International Financial Centre London
The NatWest Exporter Forums and Awards
Three Crowns
World Savers
NatWest Trademarks (pending)
----------------------------
AIRLEASE
Bondline
CROWN ACCOUNTING SERVICE
FACEFLOW
FACTORNET
FIRST FOR FINANCE
Gartmore
Greenwich NatWest
GUIDE
Home Life
I.M.S Nova
KEYCASH
Lombard
L
L/L/L
L Lombard FIRST FOR FINANCE
L Lombard Direct
Lombard
Lombard L
<PAGE>
CONFIDENTIAL
LOMBARD DIRECT
Lombard FIRST FOR FINANCE
Lombard L Asset Finance
Lombard L Asset Management
Lombard L Bank
Lombard L Banking Services
Lombard L Business
Lombard L Corporate Finance
Lombard L Factoring Services
Lombard L Home Finance
Lombard L Invoice Discounting
Lombard L Motor
Lombard L Network systems
Lombard L Personal
Lombard L Sales Aid Finance
Lombard L Vendor programmers
Lombard Motorloan
LOMBARD NORTH CENTRAL
LOMBARD WHOLESALE FINANCE
L TRIPLE CHOICE
MAX CAT KID CLUB
MOTORVIEW
MV MOTORVIEW
NatWest Business Deposits Direct
NatWest Direct Business Banking
NatWest Directlink
NatWest ShareBuild
NatWest Vehicle Solutions
Protector
SIMCO
The Golden Arrow Package
The Golden Star Package
THE PERSONAL LOAN SERVICE FROM LOMBARD DIRECT
TRADING WINDOWS
ULSTER BANK
Ulster Bank Anytime
UPFRONT
Wheelease
Zenda
<PAGE>
EXHIBIT 4.7
FORM OF REGISTRATION RIGHTS
FOUND IN A CLASS B NON-VOTING COMMON STOCK WARRANT
Registration Rights. The Company agrees that the Shares issued or
-------------------
issuable upon exercise of this Warrant shall be deemed "Registrable Securities"
as such term is defined in the Company's Series B Preferred Stock Purchase
Agreement of even date herewith (the "Series B Agreement") solely for purposes
of granting "piggyback" registration rights under subSection 4.1(c) of the
Series B Agreement and the right to participate, but not demand registration,
under Section 4.1(b) of the Series B Agreement; provided, however, that in the
event of any cutback of securities requested by the underwriters, the Shares
shall be subject to cutback prior to any cutbacks on any holders of Common stock
issued or issuable upon conversion of the Company's Preferred Stock and then
only on a pro rata basis with other holders of Common Stock.
<PAGE>
CONFIDENTIAL
EXHIBIT D
TO THE TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
SPECIFIC INTERTRUST TERMS
-------------------------
At a minimum, the InterTrust Terms will contain terms that:
(i) prohibit Customers from disassembling, modifying or reverse
engineering any portion of the InterTrust Technology incorporated in the NatWest
Product (as relevant), and except as strictly prohibited by law (in which case
the provisions of Section 3.5 shall apply);
(ii) stipulate that such Customer has no right to use such product in any
manner whatsoever not licensed to NatWest hereunder, or notwithstanding any
other provision hereof, to engage in or perform any Clearinghouse Functions
whatsoever unless such customer is an Authorized Clearinghouse Provider;
(iii) grant such Customer only a limited license solely to use the
NatWest Product (as relevant), and, as applicable, to (A) incorporate Authorized
Application Software into such customer's software product to provide a
InterRights Point that is Compliant with InterTrust Specifications or (B)
develop and incorporate software components that provide the interface for, and
support operations in conjunction with, an InterRights Point provided by NatWest
under this Agreement;
(iv) permit such Customer to engage NatWest and/or another Authorized
Clearinghouse Provider (as determined by NatWest for its Customers) to perform
Clearinghouse Functions with respect to such customer's software product, but
solely in accordance with the provisions hereof;
(v) provide that if such Customer is permitted to modify any portion of
InterTrust Technology Source Code (as set forth above), such Customer shall
grant to InterTrust and InterTrust customers a license under such Customer's
patent rights, but solely to the extent necessary to permit InterTrust and
InterTrust customers to make, have made, use, offer for sale, sell and/or import
the InterTrust Technology;
(vi) brand NatWest Products that are Application Products solely in the
manner set forth in Section 4.3(c), and on Co-Branded Products communicate in a
prominent manner through the use of one or more NatWest brands for NatWest
InterTrustworthy clearing services (and as set forth in Section 4.3) that
Clearinghouse Function services are being performed by NatWest;
(vii) prohibit such Customer from removing, altering, covering,
obfuscating and/or otherwise defacing any InterTrust Trademarks or Notices on
any InterTrust Technology or associated documentation, marketing and advertising
materials therefor;
(viii) require such Customers to place Notices on products and associated
documentation, marketing and advertising materials therefor in the same manner
as in this Agreement;
(ix) provide that such agreement may be subject to modification as may be
reasonably required to protect InterTrust's rights, for example in InterTrust's
Intellectual Property Rights, to the fullest extent permitted by applicable law;
<PAGE>
CONFIDENTIAL
(x) provide that InterTrust shall be a third party beneficiary with the
right to enforce (according to the law and venue as provided in the Agreement)
those InterTrust Terms or provisions in the Customer Agreement that directly
concern (a) InterTrust's Intellectual Property Rights, and/or (b) disclosure or
use of InterTrust Technology or Confidential Information where such disclosure
or use (1) could adversely affect the security and/or interoperability of
InterTrust Technology and/or (2) supports or enables the performance of
Clearinghouse Functions by a Person other than an Authorized Clearinghouse
Provider; and
(xi) contain such other provisions as stipulated in Exhibit E of this
Agreement.
<PAGE>
CONFIDENTIAL
EXHIBIT E
TO THE TECHNOLOGY DEVELOPMENT, MARKETING AND LICENSE AGREEMENT
DRAFT PRODUCT LEGENDS AND NOTICES
---------------------------------
A) Placement. In addition to placement as specified in the Agreement, the
---------
Notices stipulated herein shall be placed in a human readable form and in a
conspicuous place:
. In a prominent position on all manuals for (or other documentation
provided with) NatWest Products and/or associated services
(collectively, the "Distributed Products"); and
--------------------
. On the outside of all packaging, floppy discs and other media
containing Distributed Products.
B) Content Of Required Notices For Distributed Products That Are Application
-------------------------------------------------------------------------
Products.
---------
1. Copyright Notices. A copyright notice shall be placed on Distributed Products
(and associated materials) as set forth in Section A hereof that shall reflect
the copyright ownership of InterTrust, as applicable, and the proper year as
follows:
Copyright (C) 1997-XXXX InterTrust Technologies Corporation
All rights reserved.
2. Patent Notices. Patent notices shall be placed on Distributed Products (and
---------------
associated materials) as set forth in Section A hereof that shall reflect
InterTrust patent rights as follows:
This product and its use may be covered by one or more of the following patents:
US 4,827,508, US 4,977,594, US 5,050,213, US 5,410,598, EP 329681, AT133305 and
DE3751678. Additional US and foreign patents are pending.
Such patent notice shall be modified to reflect any additional patents under the
Licensed Rights issued to InterTrust where NatWest is provided licenses under
such additional patent rights under this Agreement and/or such patents relate to
InterTrust Technology.
3. Trademark Notices. Trademark notices shall be placed on Distributed Products
------------------
(and associated materials) as set forth in Section A hereof and Trademark
Guidelines as attached below and from time to time to be provided to NatWest,
and shall have such content as set forth in the Trademark Guidelines.
4. Third Party Notices. The Documentation contains some references to trademarks
-------------------
owned by entities other than InterTrust. Other trademarks that are referenced
herein or in the Documentation are the property of their respective owners. For
example, Microsoft and Windows are registered trademarks of Microsoft
Corporation.
Certain portions of the InterTrust Technology may incorporate one or more of the
following software modules, and if such modules are used in NatWest Products,
NatWest shall include the following notices, as applicable:
* (C) 1997 Basis Technology. All rights reserved.
* Certain portions of the Software have used [*] and [*], to which this notice
applies: [*] Copyright (C) 1990-2, [*] Copyright (C) 1991-2, [*], Inc. All
rights reserved. License to copy and use this software is granted provided that
it is identified as the "[*], Inc. [*] [*]", and/or "[*], Inc. [*]" in all
material mentioning or referencing this software or this function. License is
also granted to make and use derivative works provided that such works are
identified as "derived from the [*], Inc. [*]", and/or "derived from the [*],
Inc. [*]" in all material mentioning or referencing the derived work. [*], Inc.
makes no representations concerning either the merchantability of this software
or the suitability of this software for any particular purpose. It is provided
"as is" without express or implied warranty of any kind. These notices must be
retained in any copies of any part of this documentation and/or software.
* Certain portions of the Software have used DES software, to which this notice
applies: des-fast & portable DES encryption & decryption Copyright (C) 1992
Dana L.How. THIS PROGRAM IS DISTRIBUTED WITHOUT ANY WARRANTY, INCLUDING THE
IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
* Certain portions of the Software (as indicated in such portions' source files)
have used [*] software, to which this notice applies: Copyright (c) 1995 by
[*]. Permission to use, copy, and modify this software without fee is hereby
granted, provided that this entire notice is included in all copies of any
software which is or includes a copy or modification of this software and in all
copies of the supporting documentation for such software. This software may be
subject to export controls. SOME PARTS OF [*] MAY BE RESTRICTED UNDER UNITED
STATES EXPORT REGULATIONS (HOWEVER, SUCH PARTS ARE NOT INCLUDED IN THE
SOFTWARE). THIS SOFTWARE IS BEING PROVIDED "AS IS", WITHOUT ANY EXPRESS OR
IMPLIED WARRANTY. IN PARTICULAR, NEITHER THE AUTHORS NOR [*] (NOR INTERTRUST
TECHNOLOGIES CORPORATION) MAKE ANY REPRESENTATION OR WARRANTY OF ANY KIND
CONCERNING THE MERCHANTABILITY OF THIS SOFTWARE OR ITS FITNESS FOR ANY
PARTICULAR PURPOSE.
* Certain portions of the Software (as indicated in such portions' source files)
have used [*] software, to which this notice applies: Copyright (C) 1994 [*]
Company. Permission to use, copy, modify, distribute and sell this
software and its documentation for any purpose is hereby granted without fee,
provided that both that copyright permission notice and this permission notice
appear in supporting documentation. [*] Company (and InterTrust Technologies
Corporation) make no representations about the suitability of this software for
any purpose. It is provided "as is" without express or implied warranty.
* Certain portions of the Customizable Technology (as indicated in such
portions' source files) have used Independent JPEG Group software and certain
portions of the Software supplied in executable format (as indicated in
Software's "About Box") are based in part upon the work of the Independent JPEG
Group. (C) 1991, 1992, 1993, 1994, 1995, Thomas G. Lane. The Graphics
Interchange Format (C) is the copyright property of CompuServe Incorporated. GIF
(sm) is a Service Mark property of CompuServe Incorporated. Certain portions of
the Independent JPEG Software were loosely based on giftoppm from the PBMPLUS
distribution as of February 1991 to which this notice applies: Copyright (C)
1990, David Koblas. Permission to use, copy, modify, and distribute this
software and its documentation for any purpose and without fee is hereby
granted, provided that the above copyright notice appears in all copies and that
both that copyright notice and this permission notice appear in supporting
documentation. This software is provided "as is" without express or implied
[*] CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL
[*]
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL
warranty.
5. Field of Use Notices. Field of Use notices shall be placed on Distributed
--------------------
Products (and associated materials) as set forth in Section A hereof as follows:
"This product is licensed and adapted only for certain limited, expressly
approved uses, and solely as provided in the Customer Agreement (or, as
applicable, the sublicense agreement) executed in connection with your receipt
of this Product. No other licenses are granted. Specifically and without
limitation no licenses: (i) to modify and/or reverse engineer this product;
and/or (ii) any performance of clearinghouse functions have been granted. As
more fully set forth in the Customer Agreement, clearinghouse functions are
those activities using this product or derived from use of this Product that:
(a) enable payment fulfillment or provision of consideration
(including service fees, product fees or any other fees and/or
charges) based at least in part on gathering and/or processing of
electronic information conveyed by or associated with contents of
DigiBox containers;
(b) perform any audit, billing, payment fulfillment (or provision of
other consideration) and/or other clearing activities involving
more than one person; or
(c) compile, aggregate, use and/or provide information relating to
more than one person's use of one or more DigiBox containers
and/or contents thereof for any consideration.
Clearinghouse Functions shall include, for example, any of the
following activities or services: (a) financial clearing; (b)
providing object registry services and rights, permission, prices,
and/or rules information for registered objects; (c) electronically
certifying information such as authenticating identity, class
membership or other attributes of identity context; (d) providing
information based upon usage auditing, user profiling, and/or market
surveying related to more than one person's use of one or more DigiBox
container and/or contents thereof; and (e) employing information
derived from user exposure to content such as advertising."
6. Warranty Notices and Disclaimers.
--------------------------------
The following warranty notices shall be placed on all Distributed Products (and
associated materials), as set forth in Section A hereof in the form here
specified, and in bold letters, the following warranty disclaimer:
"THE INTERTRUST SOFTWARE HAS BEEN PROVIDED BY INTERTRUST TECHNOLOGIES
CORPORATION ("INTERTRUST") SOLELY IN THE FORM OF MIDDLEWARE, "AS IS" AND WITHOUT
----------
WARRANTY BY INTERTRUST OF ANY KIND, AND, TO THE MAXIMUM EXTENT ALLOWED BY
APPLICABLE LAW, INTERTRUST DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY,
NONINFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE, REGARDING THIS PRODUCT.
THERE IS NO WARRANTY THAT THE FUNCTIONS CONTAINED IN THE INTERTRUST SOFTWARE
WILL MEET YOUR REQUIREMENTS OR THAT THE OPERATION THEREOF WILL BE UNINTERRUPED
OR ERROR-FREE. INTERTRUST DOES NOT WARRANT, GUARANTEE OR MAKE ANY
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL
REPRESENTATIONS REGARDING THE USE OR THE RESULTS OF THE USE OF THIS PRODUCT WITH
RESPECT TO ITS ACCURACY, RELIABILITY, SECURITY CAPABILITY, CURRENTNESS OR
OTHERWISE. NO ORAL OR WRITTEN INFORMATION OR ADVICE GIVEN BY ANY PERSON SHALL
CREATE A WARRANTY IN ANY WAY WHATSOEVER RELATING TO INTERTRUST. THE ENTIRE RISK
AS TO THE USE, PERFORMANCE AND RESULTS OF THIS PRODUCT IS ASSUMED BY YOU. THE
EXCLUSION OF IMPLIED WARRANTIES IS NOT PERMITTED BY SOME JURISDICTION THUS, THE
ABOVE EXCLUSION MAY NOT APPLY TO YOU."
NatWest shall also include, in the same place, disclaimer of liability language
as follows:
"YOU ACKNOWLEDGE TO AND FOR INTERTRUST'S BENEFIT AND THE BENEFIT OF THEIR
DIRECTORS, EMPLOYEES OR AGENTS ("AGENTS") THAT THE INTERTRUST SOFTWARE, AS WITH
MOST SOFTWARE, MAY CONTAIN BUGS AND IS NOT DESIGNED OR INTENDED FOR USE IN
HAZARDOUS ENVIRONMENTS REQUIRING FAIL-SAFE PERFORMANCE IN WHICH THE FAILURE OF
THE APPLICATION SOFTWARE COULD LEAD TO DEATH, PERSONAL INJURY OR PHYSICAL OR
ENVIRONMENTAL DAMAGE. INTERTRUST AND ITS AGENTS SHALL HAVE NO LIABILITY
WHATSOEVER FOR ANY LOSS SUFFERED AS THE RESULT OF A BREACH OF SECURITY INVOLVING
INTERTRUST SOFTWARE, WHETHER OR NOT SUCH BREACH RESULTS FROM THE DELIBERATE,
RECKLESS OR NEGLIGENT ACTS OF ANY PERSON.
UNDER NO CIRCUMSTANCES SHALL INTERTRUST OR ITS AGENTS BE LIABLE FOR ANY
UNAUTHORIZED USE OF ANY CONTENT OF ANY PERSON, OR ANY USE OF THE SOFTWARE TO
DEVELOP, DISTRIBUTE OR USE OF ANY MATERIAL THAT IS DEFAMATORY, SLANDEROUS,
LIBELOUS OR OBSCENE, THAT PORTRAYS ANY PERSON IN A FALSE LIGHT, THAT CONSTITUTES
AN INVASION OF ANY RIGHT TO PRIVACY OR AN INFRINGEMENT OF ANY RIGHT TO
PUBLICITY, THAT GIVES RISE TO ANY BREACH OF CONTRACT INVOLVING ANY THIRD PARTY
OR TO ANY BUSINESS TORT OR SIMILAR CLAIM OF A THIRD PARTY OR ANY VIOLATION OF
ANY FOREIGN, FEDERAL, STATE OR LOCAL STATUTE OR REGULATION, OR THAT OTHERWISE
CAN BE REASONABLY LIKELY TO EXPOSE DEVELOPER OR INTERTRUST TO CRIMINAL OR CIVIL
ACTIONS.
IN NO EVENT WILL INTERTRUST AND/OR ITS AGENTS BE LIABLE TO YOU FOR ANY
CONSEQUENTIAL, INCIDENTAL OR SPECIAL DAMAGES (INCLUDING DAMAGES FOR LOSS OF
BUSINESS PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION, AND THE
LIKE) ARISING OUT OF THE USE OR INABILITY TO USE THE SOFTWARE, EVEN IF
INTERTRUST AND/OR ITS AGENTS HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. BECAUSE SOME JURISDICTIONS DO NOT ALLOW THE EXCLUSION OR LIMITATION OF
LIABILITY FOR CONSEQUENTIAL OR INCIDENTAL DAMAGES, THE ABOVE LIMITATIONS MAY NOT
APPLY TO YOU. TO THE EXTENT AS APPLIED IN A PARTICULAR CIRCUMSTANCE ANY
DISCLAIMER OR LIMITATION ON DAMAGES OR LIABILITY SET FORTH HEREIN IS WHOLLY
PROHIBITED BY APPLICABLE LAW, THEN, INSTEAD OF THE PROVISIONS HEREOF IN SUCH
PARTICULAR CIRCUMSTANCE, INTERTRUST AND ITS AGENTS SHALL BE ENTITLED TO THE
MAXIMUM DISCLAIMERS AND/OR LIMITATIONS ON DAMAGES AND LIABILITY AVAILABLE AT LAW
OR IN EQUITY BY SUCH APPLICABLE LAW IN SUCH PARTICULAR CIRCUMSTANCE, IN NO EVENT
TO EXCEED US$10."
7. Confidentiality and Trade Secret Notices. Except as described below for
----------------------------------------
InterTrust Top Secret Information, NatWest shall place trade secret notices in
such places as specified in Section A hereof
<PAGE>
CONFIDENTIAL
(as applicable) and as applicable, conspicuously and prominently: (a) on the
cover, first page, and in noticeable form in the header or footer of all
subsequent pages, of all printed copies of any InterTrust Confidential
Information authorized under this Agreement, (b) on packaging of media
containing such information, such as floppy disks, and (c) on the initial screen
of all electronic copies of any InterTrust Confidential Information. For
Confidential Information, the content of such trade secret notice provided to
Licensee pursuant to the agreement between the parties.
CONFIDENTIAL INFORMATION OF INTERTRUST TECHNOLOGIES CORPORATION
Where InterTrust Technologies Corporation has provided NatWest with Top
Secret Information, NatWest shall provide notices as set forth immediately
above, having the following content:
TOP SECRET INTERTRUST INFORMATION, SUBJECT TO SPECIAL HANDLING PROCEDURES AS SET
FORTH IN THE AGREEMENT BETWEEN THE PARTIES. DO NOT COPY, DISCLOSE, OR
DISTRIBUTE.
<PAGE>
CONFIDENTIAL
Trademark Guidelines for Use of Trademarks of InterTrust Technologies
---------------------------------------------------------------------
Corporation
-----------
1. These Trademark Guidelines ("Guidelines") are provided pursuant to the
Technology Development, Marketing and License Agreement (the "Agreement")
between National Westminster Bank Plc ("Licensee") and InterTrust
Technologies Corporation ("InterTrust"). The trademarks of InterTrust
Technologies Corporation as listed on Exhibit B (as may be amended or
supplemented from time to time by InterTrust) ("InterTrust Trademarks") are
valuable intellectual property of InterTrust that identify genuine technology
and/or products licensed by InterTrust. Since the InterTrust Trademarks
signify a high standard of quality and reliability, InterTrust must maintain
control over how each of the InterTrust Trademarks is used. Therefore, these
Guidelines and the provisions of applicable sections of the Agreement must be
followed in their entirety in order to preserve and protect the InterTrust
Trademarks.
2. The InterTrust Trademarks must be used on products and/or services that
include InterTrust licensed technology or other material ("Licensed
Material") and/or that have been certified as InterTrustworthy by InterTrust
Certification Program; as provided for in the Agreement. The InterTrust
Trademarks must also be used on associated initial computer screens,
packaging, collateral documentation, manuals advertising, and promotional
materials. The InterTrust Trademarks may never be used on or in connection
with any other products or services, except as expressly provided for under
the Agreement.
3. At the first or a prominent occurrence of a InterTrust Trademark on a
computer screen and/or splash screen or in advertising, copy, promotional
materials, documentation, manuals, or packaging, it must be symbolically
indicated that the InterTrust Trademark used therein is a legal trademark
belonging to InterTrust. This can be done by (1) indicating the "TM" symbol
at the upper right corner of the trademark for an unregistered InterTrust
Trademark and indicating the circled "R" (R) symbol at the upper right corner
of the trademark for a registered trademark, and (2) appending an "*" after
the InterTrust Trademark and placing the appropriate statement selected from
the following on a suitably noticeable area (which shall generally occur near
the copyright notice in text or on screen) of each such copy:
(For an unregistered InterTrust Trademark)
*____________________ (insert InterTrust Trademark) is a trademark in the
USA and other countries of InterTrust Technologies Corporation and is used
by _____________________ (insert licensee name) under license.
(For a registered InterTrust Trademark)
*____________________ (insert InterTrust Trademark) is a trademark in the
USA and other countries of InterTrust Technologies Corporation (Reg. U.S.
Pat. and Tm. Off.) and is used by __________________(insert licensee name)
under license.
Some countries may require that a translated version of these above
statements be used. Licensee must comply with any such local laws.
4. InterTrust Trademarks may not be used in any manner that may cause confusion
as to the source of origin of products and/or services. InterTrust trademarks
are to be used in an evident, but potentially secondary manner to the main
brand on products and services. As a general matter, the only InterTrust
trademark that need directly and evidently appear on the product or service
is a mark indicating compliance with InterTrust's Specifications, as
designated by InterTrust - such as the mark "InterTrustWorthy". Under no
circumstances may InterTrust Trademarks be used or identified on a product or
in a business name or identifier of a business, InterTrust, product, or
service not connected with licensee's products incorporating the Licensed
Material. No variations, compounds, or imitations of the InterTrust
Trademarks may be used at any time, except as expressly authorized in writing
by the InterTrust Designated Officers.
5. All of the InterTrust Trademarks that are word marks must always be used
either as a symbol standing alone or as an adjective describing a noun, with
the noun being the generic name of the product to which the trademark
<PAGE>
CONFIDENTIAL
is applied. (For example, "an InterTrust rights protection system" not "an
InterTrust," or "a DigiBox secure container" not "a DigiBox.") Possessive
or plural forms of the InterTrust Trademark word marks are prohibited.
Additional guidelines regarding specific uses of InterTrust Trademarks and
logos may be provided by InterTrust from time to time.
6. The InterTrust Trademarks may not be used as part of or in any emblem or
insignia or on novelty items except as expressly authorized in writing by
the InterTrust Designated Officers. The InterTrust Trademarks may not be
used in combination with any other trademark, service mark or trade name
except as expressly authorized in writing by an InterTrust Designated
Officer.
7. InterTrust will provide its licensees with camera-ready artwork of the
InterTrust Trademarks. This is the form of the InterTrust Trademarks that
must be used, and this artwork shall not be altered in any way with the
exception of resizing, which may be done using conventional photographic
proportional processes. The InterTrust Trademarks may be used in black and
white, the exact color scheme specified by InterTrust in the artwork, or in
such other color treatments as may have been previously authorized in
writing by InterTrust. Such authorization may be rescinded at any time.
In addition, the area surrounding any use of a logotype form of a
InterTrust Trademark must be free of any other pattern or graphic element
for at least the width of a band that is itself at least 20% of the
logotype form of the InterTrust Trademark, unless the licensee has received
the prior written authorization of InterTrust, which may be rescinded in
writing at any time.
8. Exhibit B of the Agreement includes a listing of all current registered
InterTrust Trademarks, and InterTrust will provide prompt amendment of
Exhibit B as registrations are obtained.
9. Schedule 1 hereto lists those countries in which licensees' use of
InterTrust Trademarks is prohibited or otherwise restricted. InterTrust
will provide prompt amendment of Schedule 1 as changes occur.
10. Licensee will use InterTrust Trademarks solely in a manner consistent with
proper trademark usage and with the high standards of quality and
reliability that InterTrust Trademarks represent.
11. In addition to these Guidelines, InterTrust may amend these Guidelines at
any time and/or provide additional instructions from time to time which
must be followed in use of InterTrust Trademarks. Such amendment and/or
additional instructions shall not be inconsistent with the terms of the
Agreement.
<PAGE>
CONFIDENTIAL
SCHEDULE 1
Countries in Which Use of InterTrust Trademarks is Prohibited or Otherwise
Restricted
None
<PAGE>
CONFIDENTIAL
EXHIBIT F
TO THE TECHNOLOGY DEVELOPMENT, MARKETING AND LICENSE AGREEMENT
PARTNERING COMMITMENT ITEMS
---------------------------
I. DEFINITIONS
-----------
"Banking Institution" means a Person that: (i)() is either a Savings Association
or a Bank Holding Company as defined and registered under the Bank Holding
Company Act 12 U.S. 1841 et. seq. which is in effect as of the Effective Date
(or a direct or indirect subsidiary of either) that (a) itself or through an
affiliate (as defined in 12 U.S. 1841) either issues credit cards to customers
or processes credit card transactions on behalf of merchants who accept such
credit cards, and (b) is recognized, on its own or through an affiliate, as a
Visa or Master Card independent service organization (any such Person, a [*]);
or (ii) as to other Persons not provided in (i) immediately above, to
InterTrust's reasonable belief after reasonable examination, is, or is a direct
or indirect affiliate of, a "foreign bank" (as defined in 12 CFR Section
211.2(j) effective as of the Effective Date and whether or not actually subject
to the International Banking Act of 1978), that (a) has (together with its
direct or indirect affiliates on a consolidated basis) at least (1) thirty
percent (30%) of its assets devoted to the business of banking, or (2) at least
(A) $US 50 Billion of its assets devoted to the business of banking in the case
of a foreign bank organized under the laws of and headquartered in a country
that is a member of the European Union, or (B) $US 100 Billion of its assets
devoted to the business of banking in the case of a foreign bank organized under
the laws of or headquartered in a country other than a country that is a member
of the European Union; (b) by itself or through an affiliate either issues
credit cards to customers or processes credit card transactions on behalf of
merchants who accept such credit cards; and (c) is recognized, on its own or
through an affiliate, as a Visa or Proxy Card independent service organization
(collectively, with respect to such a "foreign bank," hereinafter a Foreign
Bank, and with respect to such an affiliate thereof, hereinafter a Foreign Bank
Affiliate). For purposes of subparagraph (ii)(a) immediately above, assets
devoted to activities listed in Section 211.5(d)(1)(7) (which regulation is in
effect as of the Effective Date) shall be considered banking assets; except that
with respect to a Person who is a "foreign bank," assets devoted to activities
listed in Section 211.5(d)(1)(14) (which regulation is in effect as of the
Effective Date) shall be considered banking assets.
"Digital Rights Management" means technology that can: (i) stipulate Rules and
-------------------------
Controls governing, Managing, regulating and/or controlling (a) interests (such
as rights, processes and/or obligations) in, related to, and/or associated with
use of any Content, and/or (b) securely manage events and/or event processes
related to or associated with use of, attempted use of, and/or disposition of,
Content or digital events; and (ii) enforce such Rules and Controls through
technical means. Neither Digital Rights Management nor Secure Container shall
mean (1) use of a certificate authority and/or digital certificate solely to
authenticate the identity of a Person provided that no Rules and Controls are
associated with either the certificate authority services and/or with said
digital certificates ("Certificate Authority"), or (2) use of session and/or
---------------------
link encryption to protect Content solely during transport provided that no
Rules and Controls are associated with such Content, and that such encryption is
used during transport only and does not permit persistent protection ("Session
-------
Encryption").
- ----------
"Distributed Peer to Peer Digital Rights Management" means an architecture in
--------------------------------------------------
which, generally speaking, plural distributed computers or other devices (i.e.,
----
nodes) have the potential to act as
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL
directly interacting peers in providing Digital Rights Management so that
trusted processes are not required to be performed at one or more centrally
located servers.
II. LIST OF OTHER TECHNOLOGY PROVIDERS--To aid in defining Digital Rights
----------------------------------
Management, Secure Container technologies and Distributed Peer to Peer Digital
Rights Management, the Parties agree that the following lists are exemplary and
not intended as exhaustive. Companies listed in Section A may be considered as
having, or representing they have, some form of Digital Rights Management
technology including simpler lock/unlock solutions:
A. Companies Providing Some Form of Secure Container (including simple
Lock/Unlock Control Technology) and/or other Digital Rights Management Software
or Hardware Component Capabilities. (We have not included water marketing
technology companies on this list, though they border and in some instance
cross over into rights management)
[*]
B. Companies Providing Distributed Peer-to-Peer Digital Rights Management
systems or Hardware Component Capabilities
None presently known as of the Effective Date.
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL
EXHIBIT G
TO THE TECHNOLOGY DEVELOPMENT, MARKETING AND LICENSE AGREEMENT
CONFIDENTIALITY PROVISIONS AND FORMS OF INTERTRUST CONFIDENTIALITY AGREEMENTS
-----------------------------------------------------------------------------
CONFIDENTIALITY PROVISIONS
--------------------------
1. InterTrust Information.
----------------------
(a) Confidential Information. To the extent that NatWest receives from
------------------------
InterTrust under this Agreement any InterTrust Technology or any other
information or technology that is marked "Confidential" when disclosed in
written form, or indicated as "Confidential" when disclosed orally ("InterTrust
----------
Confidential Information"), NatWest shall hold such InterTrust Confidential
- ------------------------
Information in strict confidence and in a manner that is: (i) sufficiently
secure for the character and content of the InterTrust Confidential Information;
and (ii) not less secure than procedures used by NatWest to protect its
comparably important information and technology. NatWest shall not, without the
prior written consent of an InterTrust Designated Officer, use, disclose,
provide or otherwise make available any InterTrust Confidential Information to
any Person, except to any employee, director, agent or professional consultant
(collectively "Agents") of NatWest who does not have a potential conflict of
------
interest with InterTrust Technology. Furthermore, in each case of disclosure to
an Agent of NatWest access to such InterTrust Confidential Information shall be
allowed only to Agents who have a reasonable need to know such InterTrust
Confidential Information, and then only to the extent necessary to enable
NatWest to use InterTrust Confidential Information solely to exercise its
license hereunder and/or as expressly allowed hereunder. NatWest shall, as the
case may be: (a) require their Agents having access to any portion of InterTrust
Confidential Information to strictly maintain its confidentiality; and (b)
ensure that each such Agent shall have executed with NatWest a written non-
disclosure/non-use agreement in the form set forth in this Exhibit G or as
subsequently provided by InterTrust, or NatWest's applicable form agreement
which shall effectively and comparably bind such Agent to an agreement of the
same scope as InterTrust's form agreement, and which such form agreement shall
be subject to InterTrust's reasonable prior written approval. Upon such
approval, the form agreement shall replace the pre-existing such form agreement.
NatWest shall notify InterTrust promptly in writing of any unauthorized
disclosure or other misuse or misappropriation of any portions of the InterTrust
Confidential Information which may come to the attention of a NatWest officer.
NatWest shall maintain a log of the Agents accessing and the location of all
originals and copies of material excerpts of technical Confidential Information.
NatWest shall be fully responsible for any breach of its obligations under this
Agreement by any Agent to whom such Confidential Information is disclosed. Any
obligation of NatWest to keep InterTrust Confidential Information in confidence
shall expire thirty-six (36) months after disclosure of such information by
InterTrust to NatWest; provided that InterTrust Technology shall be kept
-------- ----
confidential in perpetuity.
(b) Top Secret Information. In order to protect InterTrust's rights, the
----------------------
rights of InterTrust licensees, and the secure interoperability and reputation
of InterTrust implementations, NatWest shall treat any InterTrust Technology or
other confidential information that is either marked "Top Secret" when disclosed
in written form, or indicated as "Top Secret" when disclosed orally ("Top Secret
----------
Information") in a manner not less secure than NatWest's most secret information
- -----------
and, in all events in a manner sufficient to ensure the security of such Top
Secret Information, given such great sensitivity of such Top Secret Information.
NatWest shall allow disclosure of such Top Secret Information to no more than
[*] designated individual employees of NatWest at any time (and to no Agents
who are not employees), each of whom has a direct need to know such information
or be exposed to such Top Secret Information (as agreed in each case by
InterTrust) and then only to the extent necessary for NatWest to
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL
use Top Secret Information solely to exercise its rights and perform its
obligations under this Agreement. NatWest shall not substitute any employee
designated to receive Top Secret Information with another employee, unless such
designated employee's employment with NatWest has been terminated and such
person is no longer able to serve the intended role. None of such employees
shall receive a disclosure of any such Top Secret Information until: (i) such
employee executes an InterTrust Top Secrecy Agreement (in the form set forth in
this Exhibit G or as subsequently provided by InterTrust in writing) covering
such information and exposure; and (ii) an original executed copy of such
agreement is received by InterTrust, with return receipt provided to NatWest,
which such receipt may be provided by fax communication if so requested in
writing. Notwithstanding the foregoing, NatWest and NatWest employees described
above shall make no physical embodiments (for example, any reproduction or copy,
including descriptive notes) whatsoever of Top Secret Information, without the
prior express written authorization of an InterTrust Designated Officer, nor
shall NatWest or such NatWest employees disclose any Top Secret Information to
any Person, except as described in this Section 1 of this Exhibit G. If NatWest
becomes aware that any Top Secret Information has been disclosed or treated
other than as set forth in this Section 1 of this Exhibit G, and/or as specified
in a Top Secrecy Agreement, NatWest shall immediately inform InterTrust of such
occurrence and take immediate steps to correct such compromise. NatWest shall
maintain a log of the employees accessing and location of all originals and
other tangible embodiments of all Top Secret Information. NatWest shall be fully
responsible for any breach by any NatWest employee of this Agreement related to
the unauthorized use or disclosure of Top Secret Information.
2. NatWest Information. To the extent that InterTrust receives NatWest
-------------------
confidential information that is either marked "Confidential" when disclosed in
written form or indicated as "Confidential" when disclosed orally ("NatWest
-------
Confidential Information"), under this Agreement, InterTrust shall hold such
- ------------------------
NatWest Confidential Information in confidence in a manner that is sufficiently
secure for the character and content of the information and under no
circumstances shall such NatWest Confidential Information be held in a manner
that is less secure than procedures used by InterTrust in connection with its
comparably important information. Except as to the disclosure by NatWest of the
Modified Technology or such disclosures inherent in the Certification Testing of
NatWest Products and/or any associated services pursuant hereto, and only to the
extent expressly specified by InterTrust Specifications, NatWest shall not
disclose or otherwise provide or make available any NatWest Confidential
Information which is directly related to InterTrust Technology and InterTrust's
business activities, without first acquiring written approval from an InterTrust
Designated Officer. InterTrust shall not use, disclose, provide or otherwise
make available any NatWest Confidential Information it has received in any form
to any person except an Agent of InterTrust. In a disclosure to Agents of
InterTrust, access to NatWest Confidential Information shall be allowed only to
Agents who have a reasonable need to know such confidential information and only
to the extent necessary to enable InterTrust to use confidential information to
exercise its rights and perform its obligations hereunder. InterTrust shall:
(a) require its Agents having access to any portion of confidential information
to strictly maintain its confidentiality; and (b) ensure that each such Agent
shall have executed with InterTrust a written non-disclosure/non-use agreement
to be provided by NatWest, and attached as part of this Exhibit G, or
InterTrust's applicable form agreement which shall effectively and comparably
bind such Agent to an agreement of the same scope as NatWest's form agreement,
and which InterTrust form agreement shall be subject to NatWest's reasonable
prior written approval. Upon such approval, the InterTrust form agreement shall
replace the relevant portion of this Exhibit G. InterTrust agrees to notify
NatWest promptly in writing of any unauthorized disclosure or other misuse or
misappropriation of NatWest Confidential Information provided to InterTrust
which may come to the attention of an InterTrust officer. InterTrust shall be
fully responsible for any breach of InterTrust's obligations under this
Agreement by any Agent to whom such NatWest Confidential Information has been
disclosed. Any obligation of InterTrust to keep NatWest information in
confidence shall expire thirty-six (36) months after
<PAGE>
CONFIDENTIAL
disclosure of such information by NatWest to InterTrust.
3. Exceptions. Notwithstanding the provisions of Sections 1 and 2 above, the
----------
confidentiality restrictions herein shall not apply to information that the
recipient thereof can demonstrate: (i) is or becomes generally known to the
public through no breach of any of these obligations, as of the date such
information becomes so known; (ii) is or shall have been independently developed
by such recipient (as demonstrated by recipient's written records) by employees
who had no access to such information; or (iii) is or shall have been rightfully
received, with no obligation of confidentiality or non-use, by such recipient
from any Person (other than as a result of another Person's breach of an
obligation of confidentiality to the discloser of such information), as of the
date such information is so received. In the case of Top Secret Information,
however, the availability to NatWest of information that is, or is substantially
equivalent to Top Secret Information based upon Section (i), (ii) and/or (iii)
above shall not, in any manner, diminish NatWest's obligations with respect to
the Top Secret Information provided by InterTrust to NatWest (and all copies or
derivatives thereof), and NatWest shall be prohibited from further disclosing to
third parties any such information in NatWest's possession based upon the
foregoing subsection (i), (ii) and/or (iii). In the event any Party is required
by law, regulation or order of a court or other authority of competent
jurisdiction to disclose the other Party's Confidential Information, such Party
shall notify such other Party as promptly as possible, and shall, upon such
other Party's request, reasonably assist in challenging or restricting the scope
of such required disclosure. Top Secret information may be disclosed only for
in camera inspection, or otherwise upon the prior written approval of an
- -- ------
InterTrust Designated Officer. In all events, a Party subject to such required
disclosure shall disclose only such information that is strictly required
pursuant thereto and no further information.
4. Return/Destruction. Each Party shall deliver to the other Party within ten
------------------
(10) days from the date of termination of this Agreement or as soon as is
reasonably practicable thereafter (except as relates to Top Secret Information)
(and provided that in no event shall such period exceed thirty (30) days) all
copies of all materials protected as Confidential Information or Top Secret
Information under this Agreement (the "Return Period"). Such returned
-------------
information shall include all copies in the possession or under the control of
such Party or their Agents; provided that with respect to non-tangible copies of
-------- ----
such information, rather than returning such non-tangible copies the receiving
Party may elect to fully and securely destroy such copies (e.g., in the case of
----
a computer file, permanently deleting such files) and provide the disclosing
Party during the Return Period with an affidavit or declaration signed by an
officer with knowledge of the facts certifying that all such non-tangible copies
have been so destroyed. Return of Confidential Information shall be by
commercially secure means as reasonably specified by the disclosing Party.
Return of Top Secret Information shall be made, at InterTrust's option as
specified by an InterTrust Designated Officer by written instruction to NatWest:
(a) by physical and secure pickup at NatWest's offices by an InterTrust officer
designated in writing by such InterTrust Designated Officer; or (b) as otherwise
may be determined by InterTrust as commercially reasonable. Such delivery shall
be during normal business hours and in each instance to the hands of an
InterTrust officer who receives a listing of the contents of such delivery
certified by an officer of NatWest and audited and countersigned by such
InterTrust officer. Within one (1) month after the termination of this
Agreement in the case of Top Secret Information and two (2) months after the
termination of this Agreement in the case of Confidential Information, each
Party will certify in writing to the other Party (as applicable hereunder) that,
to the best of its knowledge, all such materials and tangible embodiments have
been delivered to the other Party.
<PAGE>
CONFIDENTIAL
TOP SECRECY AGREEMENT
---------------------
FOR CERTAIN INTERTRUST INFORMATION
----------------------------------
THIS AGREEMENT (this "Agreement") is made effective as of
---------
____________________ between INTERTRUST TECHNOLOGIES CORPORATION
("InterTrust"), a Delaware corporation, having a place of business at 460
----------
Oakmead Parkway, Sunnyvale, California 90486, and
___________________________________("Recipient"), an individual citizen of
---------
_______________, residing at __________, and an employee of National Westminster
Bank Plc ("NatWest"), a United Kingdom corporation with offices at 41 Lothbury,
-------
London, England.
The parties agree as follows:
1 Purpose.
-------
(a) Pursuant to a Technology Development, Marketing and License Agreement
dated August 18, 1998 between InterTrust and NatWest (the "License Agreement"),
-----------------
InterTrust may disclose to NatWest certain information including load module
related, encryption related, document manager related and/or other information
considered Top Secret and proprietary by InterTrust (hereinafter referred to as
the "InterTrust Top Secret Information") and which shall conspicuously be marked
---------------------------------
with a notice or legend with the phrase "Top Secret", as provided in the License
Agreement. In consideration for said information being provided to Recipient,
Recipient agrees to be bound by the terms of this Agreement.
(b) InterTrust wishes to protect the InterTrust Top Secret Information
from unauthorized use and disclosure. Disclosure of InterTrust Top Secret
Information to Recipient, and use and disclosure of Top Secret Information
received by Recipient shall occur only in accordance with the terms and
conditions of this Agreement.
2 Non-Disclosure and Restrictions on Use of InterTrust Extremely
--------------------------------------------------------------
Confidential.
- ------------
(a) Except as otherwise provided in an express written agreement signed
by InterTrust's Chairman, or other such person designated in writing by the
Chairman (a "Designated InterTrust Officer"), Recipient agrees that he or she
-----------------------------
shall: (i) hold in strictest confidence and not disclose any InterTrust Top
Secret Information to any person or entity either within or outside NatWest,
except to another NatWest employee who has also signed a Top Secrecy Agreement
and is authorized to receive Top Secret Information pursuant to the Licensed
Agreement, or as expressly permitted in writing by a Designated InterTrust
Officer; (ii) use InterTrust Top Secret Information solely for purposes
authorized by the License Agreement: (iii) use said Top Secret Information in no
other way whatsoever; (iv) apply the strictest feasible measures to protect the
secrecy of, and prevent unauthorized disclosure or use of, InterTrust Top Secret
information (which such measures shall not be less stringent than NatWest uses
to protect its own most highly sensitive and secret information); and (v)
produce no physical embodiments of any portion of the Top Secret Information
without the express written authorization of a Designated InterTrust Officer.
Recipient agrees to notify InterTrust promptly in writing of any unauthorized
disclosure or other misuse or misappropriation of the InterTrust Top Secret
Information which may come to Recipient's attention.
(b) Notwithstanding the foregoing, Recipient shall be entitled to
disclose Top Secret Information pursuant to a court order issued by a court of
competent jurisdiction or as otherwise required by law; provided that Recipient
-------- ----
shall provide prompt advance notice thereof to InterTrust to
<PAGE>
CONFIDENTIAL
enable InterTrust to seek a protective order or otherwise prevent such
disclosure, shall disclose no more than the minimum information required by such
court order or by law, and in all events any such disclosure shall be in camera
-- ------
only.
3 Return of Materials. Upon request of a Designated InterTrust Officer,
-------------------
Recipient shall immediately return to InterTrust by secure delivery means all
tangible embodiments of InterTrust Top Secret Information in Recipient's
possession or otherwise under Recipient's control.
4 Equitable Remedies. Recipient agrees that unauthorized disclosure or use of
------------------
InterTrust Top Secret Information will cause InterTrust substantial and
irreparable damage. Recipient further agrees that it may be impossible or
inadequate to measure and calculate InterTrust's damages from any breach of the
covenants set forth in Sections 2 and/or 3 hereof. Accordingly, Recipient
agrees that if he or she breaches or threatens breach of any of such sections,
InterTrust will have available, in addition to any other right or remedy
available, the right to obtain an injunction against him or her, from a court of
competent jurisdiction restraining such breach or threatened breach and to
specific performance of any such provision of this Agreement, and Recipient
hereby consents to the issuance of such injunction and to the ordering of
specific performance under such circumstances.
5 Governing Law: Jurisdiction and Venue. This Agreement shall be governed by
-------------------------------------
and construed under the laws of the United States of America and the
Commonwealth of Virginia, without reference to conflict of law principles. All
disputes arising out of or relating to the subject matter of this Agreement
shall be subject to the exclusive jurisdiction and venue of the United States
District Court for the Eastern District of Virginia, Alexandria Division
Virginia, or if jurisdiction does not properly lie in such court, the
Commonwealth courts in Alexandria, Virginia. The parties consent to the
personal and exclusive jurisdiction and venue of such court and waive any
argument that jurisdiction or venue in such court is improper or inconvenient.
6 Severability; Export Compliance. If any provision or portion thereof in
-------------------------------
this Agreement shall be found or be held to be illegal, invalid or unenforceable
in any jurisdiction in which this Agreement is being performed, then this
Agreement shall nevertheless be given full force and effect without said
provision or portion. Recipient certifies that no Top Secret Information, or
any portion thereof, will be exported to any country in violation of U.S. export
regulations or other regulations applicable to Recipient and such information.
7 Entire Agreement. This Agreement constitutes the entire agreement between
----------------
Recipient and InterTrust regarding the InterTrust Top Secret Information
disclosed hereunder and supersedes all oral or written agreements, either
entered prior to or contemporaneously with this Agreement, concerning the
InterTrust Top Secret Information, except the provisions of the License
Agreement, the provisions of which shall be deemed to be supplemented hereby as
of the date first written above. This Agreement may not be modified except by
written agreement dated subsequent to the date of this Agreement and signed by
both parties.
8 Successors. Subject to the limitations set forth in this Agreement, this
----------
Agreement will inure to the benefit of and be binding upon the parties, their
successors and assigns.
9 Notices. For all purposes hereof, any notice pursuant hereto shall be
-------
deemed given upon receipt by the Party at the address indicated above.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above
<PAGE>
CONFIDENTIAL
written.
INTERTRUST TECHNOLOGIES CORPORATION EMPLOYEE
--------
By:________________________ By:______________________
Name: ____________________ Name:
National Westminster Bank Plc
Title: ___________________ Title:_______________________
<PAGE>
CONFIDENTIAL
NON-DISCLOSURE AGREEMENT
------------------------
FOR INTERTRUST CONFIDENTIAL INFORMATION
---------------------------------------
THIS AGREEMENT (this "Agreement") is made effective as of ______________
---------
between INTERTRUST TECHNOLOGIES CORPORATION ("InterTrust"), a Delaware
----------
corporation, having a place of business at 460 Oakmead Parkway, Sunnyvale,
California 90486, and ___________("Recipient"), an individual citizen of
---------
__________________________, residing at
___________________________________________________________, and an employee of
National Westminster Bank Plc ("NatWest"), a United Kingdom corporation with
-------
offices at 41 Lothbury, London, England.
The parties agree as follows:
1. Pursuant to a Technology Development, Marketing and License Agreement dated
August 18, 1998 between InterTrust and NatWest (the "License Agreement"),
-----------------
InterTrust may disclose to NatWest certain confidential information including
technical information embodied in and/or associated with InterTrust's InterTrust
Technology including, without limitation, software products and/or other
developments related to distributed, secure rights and/or event management,
associated designs, inventions, plans, and other information (the "Confidential
------------
Information"), all of which such information shall conspicuously be marked with
- -----------
a notice or legend with the phrase "Confidential", as provided in the License
Agreement. In consideration for such Confidential Information being provided to
Recipient, Recipient agrees to be bound by the terms of this Agreement.
Disclosure of InterTrust Confidential Information to Recipient, and use and
disclosure of Confidential Information received by Recipient, shall occur only
in accordance with the terms and conditions of this Agreement.
2. For a period of three (3) years following the disclosure of any Confidential
Information (such period to extend in perpetuity with respect to InterTrust
Technology), Recipient will retain such Confidential Information in confidence,
and will discuss such Confidential Information only with other NatWest
employees, other individuals who are under the direct control of NatWest and
work full time on NatWest premises (an "Individual Consultant"), -- all of whom
---------------------
shall have a need to know said Confidential Information and who have executed a
copy of this Agreement. Recipient shall not, without the prior written
permission of InterTrust's Chairman or such other InterTrust Officer as who has
been designated in writing by InterTrust's Chairman (a "Designated InterTrust
---------------------
Officer"), disclose Confidential Information to any person other than as set
- -------
forth immediately above. Furthermore, without express written authorization of a
NatWest officer who is empowered by NatWest to provide such an authorization,
the Recipient will not make copies, in whole or in part, of the Confidential
Information, including translating, in whole or in part, the Confidential
Information into another language and/or shipping the Confidential Information,
in whole or in part, or any direct product thereof, to any other country. The
undersigned will not use the Confidential Information in any manner that is not
authorized by NatWest and in accordance with the License Agreement and the
undersigned will use the Confidential Information solely in the exercise of
NatWest's rights as provided by the License Agreement. Under no circumstances
will any information subject to the export or import laws of any jurisdiction be
transferred pursuant to their agreement without proper prior certification and
notification of appropriate regulatory offices in applicable jurisdictions and
InterTrust.
3. The undersigned will not use Confidential Information except in fulfillment
of the undersigned employee's and/or other individual's obligations with
NatWest, and for no other purposes whatsoever. The undersigned understands and
acknowledges that the unauthorized use of Confidential Information may cause
InterTrust very substantial damage, for which damages may be impossible to
measure or inadequate to compensate. Accordingly, Recipient agrees that if he or
she breaches or threatens breach of any of such sections, InterTrust will have
available, in addition to any other right or remedy available, the right to
obtain an injunction against him or her, from a court of competent jurisdiction
restraining such breach or threatened
<PAGE>
CONFIDENTIAL
breach and to specific performance of any such provision of this Agreement, and
Recipient hereby consents to the issuance of such injunction and to the ordering
of specific performance under such circumstances.
4. The undersigned will return all physical embodiments of Confidential
Information in the undersigned's possession to InterTrust promptly upon request
by InterTrust, and in no event later than fifteen (15) days thereafter.
5. Notwithstanding any thing else in this Agreement, the confidentiality
restrictions of this Agreement shall not apply to information that: (i) is or
becomes known to the public through no breach of any of the undersigned's
obligations under this Agreement, or NatWest's or any other NatWest employee's,
obligations of confidentiality to NatWest and/or to InterTrust; (ii) was known
to Recipient prior to its disclosure by InterTrust, as evidenced through written
documentation; (iii) shall have been independently developed by the Recipient
without any reliance on or use of any InterTrust Confidential Information, as
demonstrated through written documentation; or (iv) shall have been rightfully
supplied to Recipient, with no obligation of confidentiality or non-use from a
third party without any breach of any obligation of confidentiality to
InterTrust or NatWest (as applicable) as of the date such information is so
supplied. In addition, the Recipient shall be entitled to disclose Confidential
Information pursuant to a court order issued by a court of competent
jurisdiction or as otherwise required by law; provided that the undersigned
-------- ----
shall provide prompt advance notice thereof to InterTrust to enable InterTrust
to seek a protective order or otherwise prevent such disclosure and shall
disclose no more than the minimum information required by such court order or by
law.
6. If any provision or portion thereof in this Agreement shall be found
or be held by a court of competent jurisdiction to be illegal, invalid or
unenforceable in any jurisdiction in which this Agreement is being performed,
then this Agreement shall nevertheless be given full force and effect without
said provision or portion. This Agreement may not be modified except by written
agreement dated subsequent to the date of this Agreement and signed by both
parties. This agreement shall be governed by and construed under the laws of
the United States of America and the Commonwealth of Virginia, USA, without
reference to conflicts of laws principles. All disputes arising out of or
relating to the subject matter of this Agreement shall be subject to the
exclusive jurisdiction and venue of the United States District Court for the
Eastern District of Virginia, Alexandria Division Virginia, or if jurisdiction
does not properly lie in such court, the Commonwealth courts in Alexandria,
Virginia. The parties consent to the personal and exclusive jurisdiction and
venue of such court and waive any argument that jurisdiction or venue in such
court is improper or inconvenient.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
InterTrust Technologies Corporation Employee
By: _____________________ By:_________________________
Title:___________________ Title:______________________
<PAGE>
CONFIDENTIAL
EXHIBIT H
TO THE TECHNOLOGY DEVELOPMENT, MARKETING AND LICENSE AGREEMENT
The following are procedures and policies that InterTrust employees are
instructed to routinely follow to avoid or minimize potential infection of any
software virus: In addition, such checking is incorporated in QA testing before
any software release.
. Software code is routinely checked with commercially available third party
virus software for existence of any viruses.
. InterTrust currently has a site license to virus checking software by Network
Associates.
. InterTrust regularly receives from Network Associates updates designed to
detect the latest known software viruses.
. InterTrust's policy and practice is to keep source code under strict source
control, using Clear Case software.
. Employees are prohibited, under InterTrust's policies, from downloading or
incorporating any software from any third party (including through the
Internet) without first obtaining prior approval from an authorized technical
manager whose responsibility is to test such software for viruses before any
use by InterTrust employees.
. InterTrust regularly educates new and existing employees regarding these
procedures and policies.
<PAGE>
CONFIDENTIAL
EXHIBIT 10.13
_______________________________________________________
TECHNOLOGY DEVELOPMENT AND LICENSE
AGREEMENT
by and between
INTERTRUST TECHNOLOGIES CORPORATION
and
UNIVERSAL MUSIC GROUP, INC.
_______________________________________________________
______________________________
APRIL 13, 1999
______________________________
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL
<TABLE>
<S> <C>
1. Definitions and Rules of Construction......................................... 1
1.1 Definitions.............................................................. 1
1.2 Rules and Construction................................................... 11
2. ADDITION OF AUTHORIZED VENTURES............................................... 12
2.1 Addition of Authorized Ventures.......................................... 12
2.2 Interpretation of Definitions............................................ 15
3. TECHNOLOGY ACCESS AND SUPPORT................................................. 15
3.1 Technology Access........................................................ 16
3.2 Training, Assistance and Technical Support............................... 16
3.3 Additional Assistance; Further Support................................... 18
4. UNIVERSAL LICENSES and RESTRICTIONS........................................... 18
4.1 License Grant and Option................................................. 18
4.2 License to InterTrust Trademarks......................................... 19
4.3 Limited License to Clearinghouse Functions............................... 19
4.4 No Additional Licenses................................................... 20
4.5 General Restrictions..................................................... 20
5. USE OF CONTRACTORS; UNIVERSAL SUPPORT AND ADDITIONAL COVENANTS............... 20
5.1 Use of Contractors....................................................... 20
5.2 Universal Support of InterTrust Technology............................... 21
5.3 Notices and Branding..................................................... 24
5.4 InterTrust Trademarks.................................................... 26
5.5 Universal's Use of Universal Trademarks on Universal Products............ 27
5.6 Universal Trademarks..................................................... 27
5.7 Translation of Material in Foreign Languages............................. 28
6. LICENSE FEES AND PAYMENT TERMS................................................ 28
6.1 Fees and Royalties....................................................... 28
6.2 [*]...................................................................... 29
6.3 Payment Procedure........................................................ 30
6.4 Currency................................................................. 30
6.5 Taxes.................................................................... 30
6.6 Interest................................................................. 30
6.7 Audit.................................................................... 31
7. PROPRIETARY INFORMATION AND OWNERSHIP......................................... 31
7.1 InterTrust Ownership..................................................... 31
7.2 Universal Ownership...................................................... 31
7.3 Universal License to InterTrust.......................................... 32
8. JOINT ACTIVITIES AND PARTNERING COMMITMENT.................................... 32
8.1 Joint Press Release...................................................... 32
8.2 Promotion and Marketing.................................................. 33
8.3 Technology Advisory Committee............................................ 33
8.4 Partnering Commitment.................................................... 33
9. CONFIDENTIALITY............................................................... 34
9.1 Classification of Technology and Documents For Confidentiality Purposes.. 34
9.2 InterTrust Information................................................... 34
9.3 Universal Information.................................................... 36
9.4 Exceptions............................................................... 37
9.5 Confidentiality of Agreement and Publicity............................... 37
9.6 Confidentiality of Payments, Audit and Certification Testing............. 38
9.7 NDA...................................................................... 38
10. REPRESENTATIONS AND WARRANTIES................................................ 38
10.1 Representations and Warranties of Both Parties........................... 38
10.2 Representations and Warranties of InterTrust............................. 39
10.3 Limitation............................................................... 39
10.4 Reporting Covenants...................................................... 39
11. INDEMNIFICATION AND REMEDIES.................................................. 39
11.1 Indemnification.......................................................... 39
</TABLE>
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL
<TABLE>
<S> <C>
11.2 Cumulative Remedies...................................................... 41
11.3 Equitable Remedies....................................................... 41
12. EXCLUSION OF DAMAGES.......................................................... 41
13. TERM AND TERMINATION.......................................................... 42
13.1 Agreement................................................................ 42
13.2 Events of Termination.................................................... 42
13.3 Effect of Termination.................................................... 44
13.4 Survival................................................................. 45
14. MISCELLANEOUS................................................................. 45
14.1 Governing Law............................................................ 45
14.2 Venue and Jurisdiction................................................... 45
14.3 Compliance with Law and Export Controls.................................. 45
14.4 Amendment or Modification................................................ 46
14.5 No Assignment............................................................ 46
14.6 Notices.................................................................. 46
14.7 Waiver................................................................... 47
14.8 No Third Party Beneficiaries............................................. 47
14.9 No Agency................................................................ 47
14.10 Severability............................................................. 47
14.11 Counterparts; Facsimiles................................................. 47
14.12 Force Majeure............................................................ 47
14.13 Entire Agreement......................................................... 47
</TABLE>
<PAGE>
CONFIDENTIAL
EXHIBITS
A InterTrust Technology Estimated Product Deliverables
B InterTrust Specifications
C Trademarks
D Authorized Development Venture Signature Page
Authorized Clearinghouse Venture Signature Page
E Screening Procedures
F InterTrust Terms
G Product Legends and Notices
H InterTrust Mark Denoting Compliance
I Form of InterTrust Confidentiality Agreements
J Internal Procedures for Testing Viruses and Y2K Compliance
K Joint Press Release
<PAGE>
CONFIDENTIAL
TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
THIS TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT (this "Agreement") is made and
---------
entered into as of the ___ day of April, 1999 (the "Effective Date") by and
--------------
between: INTERTRUST TECHNOLOGIES CORPORATION ("InterTrust"), with offices at 460
----------
Oakmead Parkway, Sunnyvale, California; and UNIVERSAL MUSIC GROUP, INC.
("Universal,"), with offices at 70 Universal City Plaza, Universal City,
---------
California (each of InterTrust and Universal a "Party" and collectively the
-----
"Parties"), with reference to the following:
-------
RECITALS
A. InterTrust has developed and is continuing to develop a general purpose
architecture and technologies for, among other things, rights protection
and event management related to electronic commerce, including securely
managing electronic information delivery, use, and usage consequences.
Universal is involved in, among other things, the creation, publishing and
distribution of music content (and technology related thereto).
B. Universal desires to obtain a license from InterTrust to use, among other
things, certain InterTrust Technology so that Universal can: (i) with
respect to music content, develop and deploy computer software player
applications for managing music content distribution; (ii) upon exercise of
an option to expand the music content to include certain other
entertainment content, develop and deploy Content Management applications
to support a variety of Universal entertainment businesses; and (iii)
perform Clearinghouse Function services in the manner set forth herein.
C. As set forth herein, the Parties mutually desire that Universal become an
InterTrust Business Partner and offer products and services within the
music field, and optionally, other content fields using InterTrust
Technology.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Parties agree to the following terms and conditions:
1. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1 Definitions. In addition to the other capitalized terms defined
-----------
elsewhere in this Agreement, the following terms shall have the meanings set
forth below:
"Added InterTrust Marks" shall have the meaning set forth in Section
----------------------
5.4(a).
"[*]" shall have the meaning set forth in Section 6.1(a).
-----------------
"Agent(s)" shall have the meaning set forth in Section 9.2(a).
--------
"Application Product(s)" means any application software for use in the
----------------------
Entertainment Field, including but not limited to a music player, that: (i) is
developed by (or for) Universal hereunder using InterTrust Technology and/or
Modified Technology solely to directly Manage end-user interaction with, and
end-user administration of, Content; (ii) directly contains or incorporates
InterTrust Technology solely in the form of Authorized Application Software
and/or Modified Technology in Object Code and/or Source Code in accordance with
the licenses granted by InterTrust to Universal hereunder; (iii) is in
Compliance with InterTrust Specifications; and (iv) is not enabled to perform
any Clearinghouse Functions or to permit the performance of Clearinghouse
Functions by any Person other than an Authorized Clearinghouse Provider except
(and solely except) as directly relates to permitting a specific end-user and/or
an
Universal/InterTrust Agreement _______/_______
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
1
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Authorized Clearinghouse Provider, as appropriate, to pay bills on their behalf
and/or otherwise direct, review, and/or receive such end-user's usage history
information, or review and/or directly (at least in part) manage such end-user's
specific end-user rights and permissions, but solely as directly authorized and
set-up by, and subject to the direct control of an Authorized Clearinghouse
Provider for, and solely for both such end-user's specific use on a single
InterRights Point and for integrated cooperative operation with Clearinghouse
Functions operated at a remote data center under the direct control of an
Authorized Clearinghouse Provider for the purpose of efficiently providing: (a)
data to such data center for such Authorized Clearinghouse Provider's
Clearinghouse Function operations, and (b) certain Authorized Clearinghouse
Provider's Clearinghouse Functions to operate on such end-user's InterRights
Point on behalf of such Authorized Clearinghouse Provider and/or such specific
single end-user, all in Compliance with InterTrust Specifications.
"Assistance" shall have the meaning set forth in Section 3.2(a).
----------
"Authorized Application Software" means software representations of
-------------------------------
InterTrust Technology in Object Code and/or in Source Code (solely as such
Object Code and Source Code are identified and designated by InterTrust on
Exhibit A as defined herein), that is permitted for distribution as incorporated
in Application Products in accordance with the applicable licenses hereunder,
solely in such form as specified on Exhibit A and in Compliance with InterTrust
Specifications, as defined herein (or as otherwise designated in writing by
InterTrust to Universal or as marked by InterTrust on any tangible medium
representing InterTrust Technology provided to Universal hereunder); provided
--------
that any such designations or markings shall be made and applied by InterTrust
- ----
in a non-discriminatory and consistent manner with respect to all Business
Partners regarding similar products and/or services.
"Authorized Clearinghouse Provider(s)" means any Person(s) that is (are)
------------------------------------
expressly licensed by InterTrust to engage in specified Clearinghouse Function
activities and services in Compliance with InterTrust Specifications, but only
to the extent: (i) of the scope of such license; and (ii) that such license is
valid and in force.
"Authorized Clearinghouse Venture" shall have the meaning set forth in
--------------------------------
Section 2.1(b).
"Authorized Development Venture" shall have the meaning set forth in
------------------------------
Section 2.1(a).
"Authorized Venture" means the Development Venture and/or the
------------------
Clearinghouse Venture, as applicable in the context in which reference is made.
"Business Partner(s)" means any Person (other than a Core Partner) with
-------------------
whom InterTrust enters into an agreement or set of agreements, pursuant to which
InterTrust: (i)(a) directly provides early access to InterTrust Technology prior
to InterTrust's first commercial release of such technology to the general
public, (b) grants a general purpose license to use InterTrust Technology in
software products, applications and services within one or more specific, but
not most, fields, and (c) grants a license to perform Clearinghouse Functions
with no materially greater scope than the license fields granted in Section 4.3
hereof in one or more specific, but not most, fields; or (ii) directly provides
and grants those items of (i)(a) and (i)(b) above, or item (i)(c) above, to a
Person in the Entertainment Field (as defined as of the Effective Date without
exercise of the Option).
"California Venue" shall have the meaning set forth in Section 14.2.
----------------
"Certification Program(s)" shall have the meaning set forth in Section
------------------------
5.2(c)(i).
"Claims" shall have the meaning set forth in Section 11.1(a).
------
"Clearinghouse Function(s)" means any one or more activities including
-------------------------
providing products and/or services resulting therefrom, that use any InterTrust
Technology and/or Modified Technology, and/or use information derived at least
in part from use of such technology, in all instances in Compliance with
InterTrust Specifications to: (i) enable payment fulfillment and/or provision of
any other consideration (including service fees, product fees or any other fees
2
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CONFIDENTIAL
and/or charges) based at least in part on a Control Use; (ii) perform audit,
billing, payment fulfillment (and/or provision of any other consideration)
and/or other clearing activities involving more than one Person; and/or (iii)
compile, aggregate, use and/or provide information relating to more than one
Person's use of one or more InterTrust Technology Secure Containers and/or
Content, including Contents of such Secure Containers or any other Content
Managed at least in part using any InterTrust Technology and/or Modified
Technology. Clearinghouse Functions shall include, for example, the use of
InterTrust Technology and/or Modified Technology, and/or use of information
derived at least in part from any use of such technology, for: (a) financial
clearing; (b) providing object registry services and rights, permissions,
prices, and/or other Rules and Controls information for objects managed at least
in part through the use of InterTrust Technology; (c) electronically certifying
information used with or required by Rules and Controls, such as authenticating
identity, class membership and/or other attributes of identity context; (d)
providing information based upon auditing usage, user profiling, and/or market
surveying related to more than one Person's use of one or more InterTrust
Technology Secure Containers and/or Content; and/or (e) employing information
derived from user exposure to Content, such as advertising exposure information.
"Clearinghouse Product(s)" means (and is strictly limited to) any
------------------------
software application for use in the Entertainment Field that: (i) is developed
by (or for) Universal hereunder using InterTrust Technology and/or Modified
Technology; (ii) directly contains or incorporates InterTrust Technology and/or
Modified Technology solely in Object Code and as specified in Exhibit A, all in
accordance with the licenses hereunder; (iii) is enabled to permit the
performance of any Clearinghouse Functions; and (iv) is in Compliance with
InterTrust Specifications.
"Clearinghouse Venture" means a joint venture corporation or limited
---------------------
liability company Controlled by Universal alone or jointly with [*] and/or its
Controlled affiliates, and whose: (i) principal business purpose and activity is
to perform Clearinghouse Functions in the Entertainment Field and in accordance
with the terms and conditions of Section 2.1(b) and other applicable terms of
this Agreement; and (ii) constituent members and/or equity holders who are
Competitive Entities shall neither (a) have access to any InterTrust
Confidential Information or Top Secret Information by virtue of such Person's
involvement in the Clearinghouse Venture, nor (b) Govern, nor participate in any
manner in the Governance of, such corporation or company. Notwithstanding the
foregoing, Clearinghouse Venture shall not have [*] and/or any of its Controlled
affiliates (collectively, [*]) as a constituent member, equity holder, or
otherwise as a participant in the Clearinghouse Venture.
"Co-Branded" shall have the meaning set forth in Section 5.3(c).
----------
"Compliance," "Compl[y][ied]" or "Compliant" means fully (and without
----------- ------------- ---------
exception) consistent with and fully conforming to all applicable portions of
the InterTrust Specifications (as set forth in Section 5.2(b) hereof). A
Universal Product and/or any associated service that has not been certified to
have passed any required certification tests in the manner set forth in Section
5.2(c) hereof and/or that does not satisfy the preceding sentence hereof shall
be deemed non-Compliant with InterTrust Specifications.
"Compliant Product" shall have the meaning set forth in Section
-----------------
5.2(c)(iii).
"Commerce 1.1" means the software described in Exhibit A that
------------
incorporates InterTrust Technology, as provided by InterTrust to Universal
consistent herewith.
"Competitive Entity" means any Person who deploys and/or provides, or
------------------
positions itself as deploying and/or providing, Other Technology products and/or
associated services to other Persons. For purposes of this definition, the
development, marketing and distribution of Pre-Authorized Other Technology by
[*] and its Controlled affiliates (collectively, [*]) or [*] shall not be
construed to make [*] or [*], respectively, a Competitive Entity solely by
virtue of such development, marketing and distribution of Pre-Authorized Other
Technology.
"Compliance Update" shall have the meaning set forth in Section 3.1(b).
-----------------
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
3
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"Compromising Event" shall have the meaning set forth in Section
------------------
2.1(d)(ii).
"Confidential Information" shall have the meaning set forth in Section
------------------------
9.1.
"Confidentially Handled Information" shall have the meaning set forth in
----------------------------------
Section 2.1(d)(ii).
"Content(s)" means any digital information representing, for example,
----------
text, graphics, animation, video, digital linear or non-linear motion pictures,
sound and sound recordings, still images, computer programs or executable or
interpretable components, and data. Content shall include, for example, any
electronic representation of: (i) Rules and Controls; and/or (ii) information
derived from the Management of Content.
"Content Transaction" means any event or combination of events: (i)
-------------------
Managed, in whole or in part, through the use of any InterTrust Technology
and/or Modified Technology in Compliance with InterTrust Specifications; and
(ii) in connection with which consideration of any kind (including consideration
directly related to any such event or combination of events) is due and/or
payable at any time to Universal and/or any other one or more Persons, at least
in part, for any (a) initiated, consummated and/or performed sale, rental,
lease, license, vending and/or any other comparable provision of one or more
rights related to Content, and/or (b) any other use of, including any
interaction with, Content (such as access to Content, including production of
modified Content) where one or more rights are provided related to Content
interaction; provided that, the foregoing specifically does not include secure
-------- ----
transaction services that merely provide delivery and/or access to Content and
do not Manage one or more specific rights to purchase, vend, pass along, view,
read, listen, edit (including modify, cut, and/or paste), copy, play, print,
execute, re-distribute, and/or similarly directly otherwise interact with such
Content for a fee and/or the provision of any other consideration by one or more
users, user representatives, and/or proxy payers (such as advertisers paying fee
for user interaction with embedded promotional material).
"Contractor" means any Person, including consultants, who, in
----------
accordance with the provisions of Section 5.1 and other provisions hereof,
enters into an agreement with Universal to develop or assist in the development
of Universal Products for Universal (and/or provide other services directly
relating to this Agreement) and who, in that regard, has access to InterTrust
Technology and/or InterTrust Confidential Information; provided that such
-------- ----
agreement as relates to work being performed by such Contractor for Universal,
and further to any and all InterTrust Confidential Information and/or Top Secret
Information (as may be permitted under Section 9.2(b)): (i) binds such Person to
the applicable terms and conditions of this Agreement; (ii) requires such Person
to perform such work for Universal's exclusive benefit and under Universal's
direct and actual management, control, and supervision; and (iii) stipulates
that as between Contractor and Universal, Universal shall be the exclusive owner
of any work product produced by such Person for Universal (subject to
InterTrust's rights as set forth herein).
"Contractor Agreement" shall have the meaning set forth in Section 5.1.
--------------------
"Control(s)" means having, directly or indirectly, the power or right
----------
to elect the board of directors or similar managing authority and/or generally
direct Persons to, or make, or cause the making of, policies or management
decisions, whether through the ownership of voting securities, by contract or
otherwise. A "Controlled Person" means a Person under the Control of another
-----------------
Person.
"Control Use" means any use of InterTrust Technology and/or Modified
-----------
Technology, but solely in Compliance with InterTrust Specifications, to Manage
Content including initiating and/or otherwise governing any consequence
(electronic, physical or otherwise) related to the use and/or processing of
Content and/or provision of goods or services conveyed by or associated with
such Content. Control Use shall include, for example: (i) metering, auditing,
charging, and/or billing, for access to and/or any other interaction with any
Content; and/or (ii) administering permitted and/or prohibited uses of Content.
4
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"Core Partner" means any Person with whom InterTrust enters into an
------------
agreement or set of agreements, pursuant to which InterTrust: (i) directly
provides materially early access to InterTrust Technology prior to InterTrust's
first commercial release or provision of such technology to the general public;
(ii) grants a general purpose license to use InterTrust Technology in software
products, applications, and services; and (iii) grants a license to perform
Clearinghouse Functions of a broader scope than granted to Business Partners.
"Core Technology" means those components of InterTrust Technology
---------------
described by InterTrust on Exhibit A as core technologies of such InterTrust
Technology.
"CPI" means the Consumer Price Index published by the U.S. Department of
---
Labor, Bureau of Labor Statistics, or a successor agency.
"Cure Period" shall have the meaning set forth in Section 13.2(a).
-----------
"Customer" means any Person that receives or acquires a Universal Product
--------
directly or indirectly from Universal (as provided hereunder) and/or
participates in an associated service for the purpose of using Content and with
a present intention: (i) to use such product and/or associated service privately
as an end-user, including end-user activity while functioning as a provider of
Content, in any case without any modification whatsoever of such Universal
Product; (ii) to further distribute such Universal Product within the
Entertainment Field without any modification whatsoever to an end-user; or (iii)
to use such Universal Product, without any modification whatsoever, solely
within the Entertainment Field to (a) incorporate Authorized Application
Software into their products to provide an InterRights Point, or (b) develop and
incorporate software components that initiate interface and operation with an
InterRights Point provided by InterTrust Technology; each of which Authorized
Application Software, software components and InterRights Points are Compliant
with InterTrust Specifications. Customer shall not include any Person who has a
present intention to perform any activities in breach of such Person's Customer
Agreement.
"Customer Agreement" shall have the meaning set forth in Section 5.2(d).
------------------
"Default Notice" shall have the meaning set forth in Section 13.2(a).
--------------
"Development Venture" means a joint venture corporation or limited
-------------------
liability company whose: (i) principal business purpose and activity is to
engage in the development and marketing of Application Products and/or other
activities permitted under such corporation's or company's sublicense in
accordance with the provisions of Section 2.1(a); and (ii) constituent members
and/or equity holders who are a Competitive Entity shall neither (a) have access
to any InterTrust Confidential Information or Top Secret Information by virtue
of such party's involvement in the Development Venture, nor (b) Govern, nor
participate in any manner in the Governance of, the Development Venture;
provided that where [*] and [*] access to InterTrust Technology occurs solely
- -------- ----
in the context of Section 2.1(d)(iii) hereof or as otherwise agreed in
writing by Universal and a Designated InterTrust Officer (in each Party's,
-----------------------------
then the provision of discretion, the foregoing subparagraph (b) shall not apply
to [*] and [*].
"Digital Rights Management" means technology that can: (i) stipulate
-------------------------
Rules and Controls for Managing any interest(s) (as related, for example, to
rights and/or obligations) in and/or associated with use of any Content, device
and/or process, including, for example, securely Managing event(s), including
any event process(es), that is/are related to and/or otherwise associated with,
use of, attempted use of, and/or disposition of, any Content and/or digital
event; and (ii) enable the observance of (including, for example, to enforce) at
least a portion of such Rules and Controls through technical means.
"Documentation" means certain English language versions of documentation
-------------
and/or instructions as specifically designated by InterTrust that may assist
Universal in the use of InterTrust Technology (including such documentation that
InterTrust has specifically and in writing identified on Exhibit A as being
suitable for general distribution by Universal to
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
5
<PAGE>
CONFIDENTIAL
Customers ("Distributable Documentation")), that InterTrust may from time to
---------------------------
time provide with the InterTrust Technology as identified in Exhibit A (as such
Exhibit and such documentation may be modified in accordance herewith).
"Domain(s)" shall have the meaning set forth in Section 5.2(b)(i).
---------
"Domains of Usage" shall have the meaning set forth in Section 5.2(b)(i).
----------------
"Entertainment Field" means solely the business of publishing, selling,
-------------------
distributing and/or otherwise making available, directly or indirectly, Content
consisting solely of music, sound and sound recordings (including music), and
music video in all forms now known or that hereafter become available (so long
as such music video does not take a form reasonably considered to be a motion
picture, television show, game and/or other comparable such non-video
entertainment form), all of the foregoing for entertainment purposes to the mass
market for use generally by consumers and/or public performance venues. If, but
solely if, Universal effectively exercises the Option pursuant to Section 4.1(b)
hereof, then as of the effective date of the exercise of the Option,
Entertainment Field shall further include entertainment video of all forms (in
addition to music video), electronic games, and linear or non-linear motion
pictures and television shows, all of the foregoing for entertainment purposes
to the consumer mass market for use generally by consumers and/or public
performance venues. All such content may have additional Content (such as
textual materials) associated and co-packaged, co-delivered, and/or otherwise
directly coupled with it, so long as such additional content is directly and
substantially related to the associated entertainment Content, and so long as
such additional content is provided solely in a secondary and/or ancillary
manner. Examples of such additional content associated with music content in
such a secondary and ancillary manner include liner notes and lyrics that often
accompany CDs, and promotional and/or background material, including comparable
additional content located on websites reached by electronic links on the
Internet providing additional merchandising opportunities.
"Event of Termination" shall have the meaning set forth in Section 13.2.
--------------------
"Exhibit A" means that Exhibit A attached hereto as of the Effective
---------
Date and as such exhibit is modified from time to time by InterTrust in its
discretion; provided that all such modifications shall be provided to Universal
-------- ----
in writing and made and applied by InterTrust in a non-discriminatory and
consistent manner with respect to all Business Partners regarding similar
products and/or services.
"Govern[ed][ing][ance]" means: (i) having the power or right to Control a
---------------------
Person; and/or (ii) serving as an officer or similar management position of a
Person, or serving as a member of the board of directors of a Person and/or
serving as a member of a similar managing authority that makes, directs, or has
the authority to make or direct such Person to make, policies or management
decisions.
"Gross Commercial Value" means all sums of money and/or the monetary
----------------------
value of any other provided consideration, except for such sums reported as
intercompany revenues in the stand alone financial statements of wholly owned
and controlled Persons of Universal Music Group, Inc. that are eliminated in and
reflected in Universal Music Group Inc's consolidated financial statements
prepared in accordance with generally accepted accounting principles
consistently applied, relating directly to, including deriving directly from:
(i) any Content Transaction; and/or (ii) the performance of any Clearinghouse
Function, including any Clearinghouse Functions supporting a Content
Transaction. Without limiting the foregoing, such consideration shall include
consideration based upon Management of Content and/or information derived at
least in part therefrom, including, for example, any one or more of
consideration: (a) paid by a user as a consequence of, for example, user
exposure to, and/or any other interaction with, Content; (b) paid by a user as a
consequence of the acquisition of one or more rights related to Content; and/or
(c) paid by a proxy or subsidizing payer (such as an advertiser) based upon user
exposure to Content, where, for example but without limitation, after receipt of
information about user exposure to Content, such advertiser pays consideration
based at least in part on value resulting from, due to and/or based on such
exposure. Notwithstanding the foregoing Gross Commercial Value shall not include
any sales, use, value-added or other taxes (except withholding taxes) imposed by
any national, state, local or foreign
6
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government and paid by Universal as a consequence of clearing a Content
Transaction and/or as a consequence of performing any other activities within
the Clearinghouse Functions.
"Initial Fee" shall have the meaning set forth in Section 6.1(a).
-----------
"Initial InterTrust Marks" shall have the meaning set forth in Section
------------------------
5.4(a).
"Initial Support Period" shall have the meaning set forth in Section 3.2.
----------------------
"Initial Term" shall have the meaning set forth in Section 13.1.
------------
"Intellectual Property Rights" mean all patent rights, copyrights,
----------------------------
trademarks, trade secret rights, and other proprietary rights in any
jurisdiction, and all applications and registrations therefor.
"InterRights Point(s)" means certain InterTrust Technology as set forth
--------------------
on Exhibit A hereto that is a distributed rights and event management, peer,
server, and/or client (i.e., node) that performs, at least in part, as an
----
extension to basic electronic resource (for example, process) management and/or
is integrated within such basic electronic resource management. For the
purposes of this Agreement, the InterRights Point is at least in part integrated
within or otherwise operatively coupled to software applications, operating
systems (and/or extensions thereto), and/or electronic appliances (including
personal computers and consumer electronic devices) for supporting Management of
Content.
"InterTrust Confidential Information" shall have the meaning set forth in
-----------------------------------
Section 9.2(a).
"InterTrust Designated Officer" means: (i) InterTrust's Chairman of
-----------------------------
Board or EVP Corporate Development and General Counsel, or any other InterTrust
officer designated in a written communication to Universal signed by
InterTrust's Chairman of the Board or EVP Corporate Development and General
Counsel; and (ii) solely with respect to specified areas of responsibility,
other InterTrust management personnel designated in a written communication to
Universal signed by InterTrust's Chairman of the Board or EVP Corporate
Development and General Counsel, to act on behalf of InterTrust solely within
such specified areas.
"InterTrust Parties" shall have the meaning set forth in Section 11.1(b).
------------------
"InterTrust Preferred Cure Notice" shall have the meaning set forth in
--------------------------------
Section 13.1.
"InterTrust Property" shall have the meaning set forth in Section 7.1.
-------------------
"InterTrust Specifications" mean the InterTrust Technology
-------------------------
specifications, as established and/or modified by InterTrust in its discretion
and in accordance with Section 5.2(b) hereof, that are provided to Universal.
Such InterTrust Specifications may include: (i) required design criteria for
products and/or associated services employing InterTrust Technology and/or
Modified Technology, including, for example, product and related criteria for
ensuring the architectural and functional integrity, standardization, security
capability, and interoperability of InterTrust-based technology, components,
products and/or associated services (such as, for example, criteria for
electronic environments employing InterTrust Technology for rights and/or other
event related process management, for example the operation of general purpose
InterRights Points that interoperate with InterRights Points distributed or
normally used by other Persons); (ii) procedures and requirements for
installation, initialization, backup, restore and security updates; and (iii)
required certification tests and procedures to verify Compliance of Universal
Products and related services with such InterTrust Specifications. InterTrust
Specifications developed as of the Effective Date are included as Exhibit B
hereto.
"InterTrust Technology" means all or any portion of the technology
---------------------
developed by and/or for InterTrust that is provided, delivered or otherwise made
available by InterTrust to Universal as set forth in this Agreement and as
described in Exhibit A (as defined herein). Such technology directly relates to
distributed rights management systems and methods,
7
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peer-to-peer trusted event management and/or distributed electronic commerce
administration systems and methods, and includes the Commerce 1.1 product, any
Updates, and New Releases, and such other products referenced in Exhibit A
hereto.
"InterTrust Technology Products" shall have the meaning set forth in
------------------------------
Section 3.1(c).
"InterTrust Terms" shall have the meaning set forth in Section 5.2(d).
----------------
"InterTrust Trademarks" mean InterTrust's names, logos and other marks as
---------------------
listed on Exhibit C hereto, as such Exhibit may be modified by InterTrust from
time to time pursuant to Section 5.4 hereof.
"IP Dispute(s)" shall have the meaning set forth in Section 14.1.
-------------
"IPO" shall have the meaning set forth in Section 9.5.
---
"Joint Press Releases" shall have the meaning set forth in Section 8.1.
--------------------
"Legacy License" shall have the meaning set forth in Section 13.3(b).
--------------
"Legacy Products" shall have the meaning set forth in Section 13.3(b).
---------------
"Licensed Rights" mean all of InterTrust's worldwide Intellectual
---------------
Property Rights (other than trademark rights) in and to the InterTrust
Technology and/or the Modified Technology that InterTrust (during the term of
this Agreement) owns or otherwise has the right to grant licenses of the scope
granted herein (through acquisition or otherwise) without the agreement of, or
requirement for payment (or the granting of other consideration) to, any Person.
"[*] Project" means a pilot trial coordinated by [*], [*] and [*] that
-------
primarily uses [*] technology (currently known as [*]) to electronically
distribute music, with respect to which Universal may participate.
"Major Material Defect" shall have the meaning set forth in Section
---------------------
13.2(d).
"Manage(d)(ing)" or "Management" means any form of governance,
-------------- ----------
regulation, management and/or control, in any way and by any means, of, as
applicable in the context in which reference is made herein: (i) rights,
processes and/or obligations related to or associated with use of (including
access to, transport of, and/or storage of ) Content, including Content related
disposition and/or consequences thereof; and/or (ii) events or event processes
related or associated in any manner with the use of (including access to),
attempted use of, and/or disposition of, Content and/or events, including any
consequences thereof.
"Material Defect(s)" means defect(s) or bug(s) in the InterTrust
------------------
Technology as delivered by InterTrust to Universal and used by Universal,
wherein such defect(s) or bug(s) in such delivered technology cause the
InterTrust Technology to fail to perform: (i) materially in conformance with the
capabilities, characteristics, and characteristic combinations ascribed to
InterTrust Technology products in Exhibit A; and (ii) in a commercially
reasonable manner in accordance with reasonable software industry practices
relating to such capabilities. Material Defect shall not include any defects or
bugs introduced as a result of any modification of (or to) the InterTrust
Technology by Universal or any Person not a Party hereto, unless such
modification was expressly required by InterTrust Specifications and the
implementation of such modification has been expressly approved in writing by an
InterTrust Designated Officer, and then such modification shall be considered a
Material Defect solely to the extent strictly needed to satisfy such InterTrust
Specification requirement.
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
8
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"Modified Technology" means all modifications of, and enhancements and/or
-------------------
additions to, the InterTrust technology, created by (or for, as provided
hereunder) Universal, including without limitation all derivative works of the
InterTrust Technology (or other Modified Technology) as such term is defined in
the U.S. Copyright Act (17 U.S.C. (S) 101 et seq., as amended), but only if such
modifications, enhancements, additions and/or derivative works are permitted
under Sections 4.1(a)(i), 4.1(a)(ii), and elsewhere in this Agreement.
"New Release" means any future release of InterTrust software products
-----------
that is a successor product of the Commerce 1.1 product line provided to
Universal hereunder and: (i) (a) that is generally designated by InterTrust as a
numerical change to the digit(s) to the left of the decimal point for the
version number thereof (e.g., Commerce X.0), or (b) which release is designed to
---
provide new significant and/or materially improved or enhanced functionality
over the predecessor release and that is reasonably considered a successor
product of Commerce 1.1's general purpose platform for distributed peer-to-peer
digital rights management in accordance with reasonable U.S. software industry
practices (for example, Windows 98 is a successor to Windows 95); and (ii) that
InterTrust may develop, or have developed for it, from time to time and make
generally available to its Business Partners.
"New Specification" shall have the meaning set forth in Section
-----------------
5.2(b)(ii).
"New Version" shall have the meaning set forth in Section 5.2(b)(ii).
-----------
"Non-Partnering Venture Event" shall have the meaning set forth in
----------------------------
Section 2.1(d).
"Notices" shall have the meaning set forth in Section 5.3(a).
-------
"Object Code" means the computer executable binary code derived from
-----------
compiled Source Code for execution on a computing system.
"Option" shall have the meaning set forth in Section 4.1(b).
------
"Other Technology" means any Digital Rights Management and/or Secure
----------------
Container technology other than InterTrust technology.
"Other Special Advanced Technology" means any Special Advanced Technology
---------------------------------
other than InterTrust Technology.
"Party Disputes" shall have the meaning set forth in Section 14.1.
--------------
"Person" means any individual, corporation, limited liability company,
------
partnership, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, government body or agency, or other entity.
"Pre-Authorized Other Technology" means, as an exception to Other
-------------------------------
Technology, that specific copy protection technology currently: (i) designed,
developed and employed or specified and planned for deployment by [*] for use in
connection with its [*] digital music initiative; and/or (ii) designed and
developed by [*] for protecting transmission of digital information to DVD
appliances, and currently marketed and known as, the [*], [*], or for copy
protection on pre-recorded DVD audio disks; provided that under no circumstances
-------- ----
shall Pre-Authorized Other Technology be construed to include in any manner any
Other Special Advanced Technology or any technology or activities other than
that expressly set forth above including with respect to materially different
products and/or associated services.
"Preferred Technology" means taking the following actions: (i) marketing
--------------------
and representing to third Persons that InterTrust Technology is Universal's
primary, leading, principal and prominent foundation technology for Digital
Rights Management within the Entertainment Field; (ii) using InterTrust
Technology, at least in part, on the majority of
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
9
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CONFIDENTIAL
aggregated instances for Management of Content owned, exclusively licensed to,
or controlled by Universal; and (iii) displaying InterTrust Technology in (or
on, as applicable) any Universal Products and/or associated services as the
default and primary technology for Digital Rights Management, where such display
is substantially more prominent than any display of any Other Technology that is
expressly permitted under this Agreement.
"Rules and Controls" means any electronic information that directs,
------------------
enables,and specifies, describes, and/or provides contributing means for
performing or not-performing, permitted and/or required operations related to
Content, including, for example, restricting or otherwise governing the
performance of operations, such as, for example, Management of such Content.
"Screening Procedures" shall have the meaning set forth in Section
--------------------
2.1(d)(ii).
"Secure Container(s)" means electronic container(s) or electronic data
-------------------
arrangements that: (i) use one or more cryptographic or other obfuscation
techniques to provide protection for at least a portion of the Content thereof;
and (ii) supports the use of Rules and Controls to enable the Management of
Content.
"Source Code" means a human-readable, non-executable set of
-----------
instructions for a computer program, from which it may be possible, together
with related source materials and documentation, to discern logic, algorithms,
internal structure, and operating feature design characteristics of such
computer program.
"Special Advanced Technologies" mean: (i) designs or models involving a
-----------------------------
collection of distributed, and fully or partially interoperable, tamper
resistant electronic nodes in software, software/hardware, or hardware form,
such nodes supporting separate interoperable peers and/or those portions of
operating system nodes comprising at minimum comparable capabilities of such
peers, and where such nodes: (a) have the ability to securely communicate; (b)
employ Rules and Controls to Manage Content related events; and (c) will, in
some or all instances, support client and/or server capabilities; and/or (ii)
designs or models involving a collection of plural, distributed tamper resistant
clients and/or nodes where such clients and/or nodes employ Rules and Controls
to Manage Content related events and where (a) such Rules and Controls, in
conjunction with one or more such tamper resistant clients and/or nodes, can
help ensure persistent protection of Content subsequent to receipt of such
Content at a client and/or node, and (b) some or all attributes of such
persistent protection is set through the specification of one or more Rules and
Controls by one or more Persons providing such Content and/or having other
stakeholder (including any trust service, or societal organization or body)
interests, and (c) differing persistent protection Rules and Controls
arrangements can be employed to define, at least in part, differing Management
schemes for different Content deliverables. Notwithstanding the foregoing, in
no event shall the Pre-Authorized Other Technology be construed to be Special
Advanced Technologies.
"Standard Support" shall have the meaning set forth in Section 3.2(a).
----------------
"Status Meetings" shall have the meaning set forth in Section 3.2(c).
---------------
"Support" shall have the meaning set forth in Section 3.2.
-------
"Support Fee" shall have the meaning set forth in Section 6.1(c).
-----------
"Technology Advisory Committee" shall have the meaning set forth in
-----------------------------
Section 8.3.
"Term" shall have the meaning set forth in Section 13.1.
----
"Top Secret Disclosure Procedures" shall have the meaning set forth in
--------------------------------
Section 9.4.
"Top Secret Information" shall have the meaning set forth in Section
----------------------
9.2(b).
10
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CONFIDENTIAL
"Trademark Guidelines" shall have the meaning set forth in Section
--------------------
5.4(a).
"Universal Confidential Information" shall have the meaning set forth in
----------------------------------
Section 9.3.
"Universal Executive(s)" means any Universal officer or executive and/or
----------------------
other Universal senior management personnel who have direct operational
responsibility for Universal's activities hereunder and/or for Universal's
participation in an Authorized Venture.
"Universal Product(s)" means an Application Product and/or Clearinghouse
--------------------
Product that is developed by (or, consistent with this Agreement, for) Universal
hereunder and branded and marketed, as applicable, in accordance with the
provisions of Section 5.3 and other provisions hereof. Universal Products shall
include the Universal Reader Module and Universal Content Packager.
"Universal Reader Module" means an Application Product having as its
-----------------------
principal function the end-user use of Content secured by InterTrust Technology,
including enabling an end-user to interact with such Content under the
Management of an InterRights Point and subject to associated Rules and Controls.
"Universal Content Packager" means an Application Product having as its
--------------------------
principal functions the support for: (i) specification of Rules and Controls for
Content; (ii) description of further associations between certain Rules and
Controls and certain Content; and/or (iii) interaction with an InterRights Point
to enable the placement of Content and/or Rules and Controls into Secure
Containers of the InterTrust Technology such that a Universal Reader Module can
Manage user interaction with such Content in a manner consistent with applicable
Rules and Control (all of the foregoing in a manner compliant with such product
being as an Application Product, including Compliance with InterTrust
Specifications).
"Universal/InterTrust Trial" shall have the meaning set forth in Section
--------------------------
8.4(b).
"Universal Parties" shall have the meaning set forth in Section 11.1(a).
-----------------
"Universal Property" shall have the meaning set forth in Section 7.2.
------------------
"Universal Trademarks" means the names, logos and trademarks owned or
--------------------
licensed for use exclusively by Universal, that may be used solely as stipulated
hereunder in connection with Universal Products and/or associated services
permitted hereunder. Such Universal Trademarks may be modified by Universal
from time to time consistent with Section 5.6 hereof.
"Updates" means any future release of InterTrust software products that
-------
is a supplement to Commerce 1.1 and/or a New Release provided to Universal
hereunder that: (i)(a) is designed primarily to correct and/or to mitigate known
Material Defects in, and/or to provide minor improvements to, such Commerce 1.1
or New Release software, or (b) is generally designated by InterTrust as a
numerical change to the digit(s) right of the decimal point for the version
number thereof (e.g. Commerce 1.XX); and (ii) InterTrust may develop, or has
developed for it, from time to time and make generally available to Business
Partners.
"Venture Agent(s)" shall have the meaning set forth in Section
----------------
2.1(d)(ii).
"Venture Executive(s)" means: (i) any officer or executive of the
--------------------
Authorized Venture; and/or (ii) other personnel who have direct operational
responsibility for the activities of such Authorized Venture.
"Virginia Venue" shall have the meaning set forth in Section 14.2.
--------------
1.2 Rules and Construction. As used in this Agreement, all terms used
----------------------
in the singular shall be deemed to include the plural, and vice versa, as
context requires. The words hereof, herein, herewith and hereunder refer to this
------ ------ -------- ---------
Agreement
11
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CONFIDENTIAL
as a whole, including any Exhibits hereto, as the same may from time to time be
amended or supplemented, and not to any subdivision contained in this Agreement.
When used herein, including shall mean including, without limitation; consistent
--------- -----------------------------
shall mean fully consistent; discretion shall mean sole discretion; compliant
---------------- ---------- --------------- ---------
or compliance shall mean fully compliant or full compliance; in accordance
---------- ---------------------------------- -------------
shall mean in full accordance; and for example shall mean for example without
------------------ ----------- -------------------
limitation. Descriptive headings are inserted for convenience only, and shall
- ----------
not be utilized in interpreting this Agreement. This Agreement has been
negotiated by the Parties and their respective counsel and shall be fairly
interpreted in accordance with its terms and without any strict construction in
favor of or against either Party. Any and all rights exercisable, actions
permitted to be taken, or decisions to be made, by a Party under this Agreement
may be made by such Party in its sole discretion, except to the extent (and
solely to the extent) expressly provided herein to the contrary.
2. ADDITION OF AUTHORIZED Ventures.
2.1 Addition of Authorized Ventures.
-------------------------------
(a) Grant of Sublicense to Development Venture. Subject to
------------------------------------------
the terms and conditions hereof, Universal may create a Development Venture and,
in connection therewith, sublicense to the Development Venture those (and solely
those) rights, licenses and benefits -- and the Development Venture agrees to
assume the specified obligations -- expressly set forth in (i) Section 4.1(a)
(except that such rights, licenses, and benefits shall exclude all rights,
licenses, and benefits of Universal obtained pursuant to the proper exercise of
the Option under 4.1(b)), and (ii) Sections 4.2, 1, 3 (except that InterTrust
shall have no obligation whatsoever to provide any technology and/or services
beyond those set forth in such Section 3 including any duplicative deliverables
and/or perform, and/or have performed, any duplicative efforts due to such
sublicense and/or delegation in Section 2.1(b)), 4.4, 4.5, 5, 6.1(b), 6.3
(provided that amounts shall be due within thirty (30) days of the end of a
calendar quarter if Universal is not providing the primary accounting services
to and on behalf of the Development Venture), 6.4, 6.5, 6.6, 6.7, 7, 8.1, 8.2,
8.4, 9 (except Sections 9.5 and 9.7), 10.3, 10.4, 11, 12, 13 and 14 hereof (all
of the immediately foregoing listed sections collectively, the "Development Pass
----------------
Through Provisions"). Such sublicense shall exist and persist solely where all
- ------------------
of the provisions of this Section 2.1 have been, and continue during the
duration of such sublicense to be, complied with. Universal's right to grant
such sublicense shall expire if not made to the Development Venture in
accordance herewith within [*] months from the Effective Date. In the event
Universal during such [*] month period desires to grant a sublicense to the
Development Venture, Universal shall first provide to InterTrust: (1) written
notice setting forth information as required by this Agreement with respect to
such Development Venture and certifying that such Person qualifies as the
Development Venture; and (2) a signature page in the form attached hereto as
Exhibit D-1 that has been executed by the Development Venture. Upon written
acknowledgment by an InterTrust Designated Officer of receipt and acceptance of
such executed signature pages (which acknowledgment and acceptance shall not be
unreasonably withheld or delayed unless the proposed Development Venture does
not meet the requirements set forth herein) and the execution of a written
sublicense compliant with the provisions hereof, a copy of which (redacted to
omit economic terms) shall be delivered to InterTrust: (A) such Venture shall
automatically and with no further action become the "Authorized
Development Venture"; (B) such Authorized Development Venture shall be
- -------------------
entitled to certain benefits set forth in Section 3 to the extent Universal
directs InterTrust to provide such benefits to such Authorized Development
Venture, provided that InterTrust shall have no obligation whatsoever to
-------- ----
provide any technology and/or services beyond those set forth in Section 3
including any duplicative deliverables and/or perform (and/or have performed)
duplicative efforts due to such sublicense and/or delegation in Section 2.1(b);
(C) Universal and the Authorized Development Venture shall be jointly and
severally liable and responsible to InterTrust for the obligations of the
Authorized Development Venture under the provisions specified in this Section
2.1(a) and such sublicense agreement; and (D) Universal shall not thereafter
retain any right to grant any other sublicense under this Agreement (except as
set forth in Section 4.1(a)(iv) concerning transfer of Application Products).
The Authorized Development Venture shall have no right whatsoever to sublicense
its rights granted hereunder except (and solely except) as expressly set forth
in Section 4.1(a)(iv) concerning transfer of Application Products.
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
12
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(b) Delegation to Clearinghouse Venture. Subject to the
-----------------------------------
terms and conditions hereof, Universal may create a Clearinghouse Venture and,
in connection therewith, delegate during the Term to the Clearinghouse Venture
those (and solely those) rights, licenses and benefits -- and the Clearinghouse
Venture also assumes the obligations -- expressly set forth in: (i) Section 4.3
(except that such rights, licenses, and benefits shall exclude any rights of
Universal obtained pursuant to the proper exercise of the Option under 4.1(b))
and provided that all activities involving Clearinghouse Functions shall be
under a single brand in accordance herewith, to service solely information
derived from use of InterRights Points in connection with Universal Products
that are Application Products or the Development Venture-branded equivalent
thereof regarding as provided for herein functional purpose (all of the
foregoing to be treated as a "Universal Product" for purposes of this Agreement)
developed and marketed by the Development Venture using InterTrust Digital
Rights Management technology; and (ii) Sections 1, 3 (except that InterTrust
shall have no obligation whatsoever to provide any technology and/or services
beyond those set forth in Section 3 including any duplicative deliverables
and/or perform (and/or have performed) duplicative efforts due to such
delegation and/or sublicense in Section 2.1(a)), 4.2, 4.3, 4.4, 4.5, 5, 6.1(b),
6.2, 6.3 (provided that amounts shall be due within [*] days of the end of a
calendar quarter if Universal is not providing the primary accounting services
to and on behalf of the Clearinghouse Venture), 6.4, 6.5, 6.6, 6.7, 7, 8.1, 8.2,
8.4, 9 (except Sections 9.5 and 9.7), 10.3, 10.4, 11, 12, 13, and 14 hereof (all
of the immediately foregoing listed sections collectively, the
"Clearinghouse Pass Through Provisions" which together with the Development Pass
-------------------------------------
Through Provisions shall be referred to as the "Pass Through Provisions");
-----------------------
provided that such delegation shall exist and persist solely where all of the
- -------- ----
provisions of this Section 2.1 have been, and continue during the duration of
such delegation to be, complied with. In the event Universal desires to delegate
such rights and licenses to the Clearinghouse Venture, Universal shall first
provide to InterTrust: (1) written notice setting forth information as required
by this Agreement with respect to such Clearinghouse Venture and certifying that
such Person qualifies as the Clearinghouse Venture; and (2) a signature page in
the form attached hereto as Exhibit D-2 that has been executed by the
Clearinghouse Venture. Upon written acknowledgment by an InterTrust Designated
Officer of receipt and acceptance of such executed signature pages (which
acknowledgment and acceptance shall not be unreasonably withheld or delayed
unless the proposed Clearinghouse Venture does not meet the requirements set
forth herein) and the execution of a written delegation agreement compliant with
the provisions hereof, a copy of which (redacted to omit economic terms) shall
be delivered to InterTrust: (A) such Clearinghouse Venture shall automatically
and with no further action become the "Authorized Clearinghouse Venture"; (B)
--------------------------------
such Authorized Clearinghouse Venture shall be entitled to certain benefits set
benefits set forth in Section 3.1 to the extent Universal directs InterTrust to
provide such benefits to such Authorized Clearinghouse Venture except that
InterTrust shall have no obligation whatsoever to provide any technology and/or
services beyond those set forth in Section 3 including any duplicative
deliverables and/or perform (and/or have performed) duplicative efforts due to
such delegation and/or sublicense in Section 2.1(b); (C) Universal and the
Authorized Clearinghouse Venture shall be jointly and severally liable and
responsible to InterTrust for the obligations of the Authorized Clearinghouse
Venture under the provisions specified in this Section 2.1(b) and such
delegation agreement; and (D) Universal shall not thereafter retain any right to
exercise the rights and licenses under Section 4.3 nor to further grant or
delegate any rights thereunder (except as set forth in Section 4.1(a)(iv)
concerning transfer of Application Products). The Authorized Clearinghouse
Venture shall have no right whatsoever to sublicense or delegate its rights
hereunder.
(c) Further Procedures and Covenants. All clearing activities
--------------------------------
(i.e., any and all activities that would constitute Clearinghouse Functions if
----
performed using InterTrust Technology, Modified Technology and/or information
derived at least in part from use of such technology) that are performed by the
Authorized Clearinghouse Venture, for example at any data center or other
Authorized Clearinghouse Venture data handling location, or at any Customer
installation, shall be in Compliance with InterTrust Specifications and shall
use exclusively information received in or contained in Secure Containers of the
InterTrust Technology and/or Modified Technology, unless otherwise agreed in
writing by the Parties (in each Party's discretion). Such information received
in or contained in Secure Containers of InterTrust Technology and/or Modified
Technology shall be based on or derived at least materially in part from Content
Managed by InterTrust Technology and/or Modified Technology. InterTrust
Technology shall serve as each Authorized Venture's primary foundation Digital
Rights Management technology for such Content Management; provided that Other
-------- ----
Technology may be supported at Universal's discretion in a manner solely
consistent with the provisions hereof, but such support of Other Technology
shall not be construed in any way
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
13
<PAGE>
CONFIDENTIAL
whatsoever to be licensed under this Agreement for any use - in any manner
whatsoever and notwithstanding any interpretation of any other provisions
hereof -- with any InterTrust Technology or Licensed Rights received by
Universal under this Agreement. Each of the sublicense agreement set forth in
Section 2.1(a) and the delegation agreement set forth in Section 2.1(b) shall
provide that it is to and for InterTrust's benefit, and (i) in the event
Universal fails to promptly enforce the rights sublicensed hereunder, then such
rights may be enforced by InterTrust at its discretion as a third party
beneficiary (provided that notice is first provided to Universal and Universal
does not fully enforce such rights expeditiously thereafter), and/or (ii) with
respect to InterTrust's Intellectual Property Rights and/or rights in InterTrust
Technology or to payment of royalties or other fees for performance of
Clearinghouse Functions and/or royalties or other fees for distribution of
venture products and/or associated services using InterTrust Technology as would
be due InterTrust hereunder if performed or distributed (as applicable) by
Universal, such rights as specified in subparagraph "ii" above may be enforced
by InterTrust at its discretion, directly and/or as a third party beneficiary,
irrespective of any Universal enforcement actions. Universal shall promptly, in
a commercially reasonable time frame, from time to time and/or upon InterTrust's
written request provide an updated list of all officers, directors and equity
holders of each Authorized Venture and any changes thereto.
(d) Competitive Entity Restrictions.
-------------------------------
(i) General. If at any time any Competitive Entity participates
-------
in the Governance of an Authorized Venture or gains access to any InterTrust
Confidential Information and/or Top Secret Information directly or indirectly
from the Authorized Venture (a "Non-Partnering Venture Event"), then (1) such
----------------------------
Authorized Venture and/or Universal, upon any Venture Executive or Universal
Executive (as the case may be) becoming aware of such Non-Partnering Venture
Event, shall promptly provide written notice thereof to InterTrust and (B) such
Competitive Entity shall within thirty (30) days cease participation in the
Governance of any Authorized Venture and immediately cease to have access to
InterTrust Confidential Information. Under no circumstances shall a Competitive
Entity have any access to any Top Secret Information, and if any such access
occurs, the provisions of the immediately preceding sentence shall apply with
respect thereto. Within thirty (30) days after initiating such Non-Partnering
Venture Event, either: (x) such Competitive Entity and such Authorized Venture,
as of and when such Authorized Venture becomes aware of such Non-Partnering
Venture Event, shall have taken such action as necessary to fully divest such
Competitive Entity of all its equity interest and other securities in such
Authorized Venture, or (y) such Competitive Entity shall have ceased such Non-
Partnering Venture Event. If such Competitive Entity has neither completed the
divestiture of its equity interest in such Authorized Venture nor ceased such
Non-Partnering Venture Event within the thirty (30) day period, then InterTrust
shall have the right to immediately terminate the sublicense or the delegation
(as the case may be) and/or this Agreement. If such Non-Partnering Venture Event
is a material, intentional act participated in by a Competitive Entity with the
knowledge of an officer or executive of such Competitive Entity, then the
Authorized Venture shall take such actions as necessary to divest such
Competitive Entity of all its equity interest and other securities convertible
into equity interest in the Authorized Venture. To the extent a Competitive
Entity has ceased to participate in the Governance of the Authorized Venture and
to have access to InterTrust Confidential Information, shall have otherwise
returned in an appropriate, secure manner any such Confidential Information and
makes no use of such Confidential Information, and such intentional Non-
Partnering Venture Event by such Competitive Entity has not materially harmed
InterTrust, such Competitive Entity may otherwise participate in the Authorized
Venture in a manner consistent with this Agreement so long as such Non-
Partnering Venture Event did not occur with the knowledge of any Universal
Executive or Authorized Venture Executive and did not involve a Competitive
Entity gaining access to Top Secret Information. In no instance shall any such
divestiture or cessation of a Non-Partnering Event be deemed to limit in any
manner any other right InterTrust has under this Agreement, or at law or in
equity.
(ii) Management of Technology. In order to avoid potential
------------------------
conflicts or controversy with respect to development by personnel,
subcontractors, consultants, or other agents of Universal and/or any Authorized
Venture (each of the foregoing, "Venture Agent(s)") of any Other Technology,
----------------
Universal and each Authorized Venture shall establish and maintain at all times
during which any rights hereunder are in effect, the "Screening Procedures" set
--------------------
14
<PAGE>
CONFIDENTIAL
forth on Exhibit E hereto to prevent: (i) exposure of any member or personnel of
Universal or any Authorized Venture, as applicable, who has access and/or
exposure to InterTrust Confidential Information and/or Top Secret Information
from performing any work directly related to any Other Technology; and/or (ii)
exposure of any member or personnel of Universal or any Authorized Venture who
is performing, has performed on behalf of any Authorized Venture, or will,
solely as set forth herein, subsequently perform any technical work or analysis
directly relating to Other Technology from having access or exposure to, or
performing any work with respect to, InterTrust Confidential Information and/or
Top Secret Information (collectively, and along with information of the
Authorized Venture as provided in Exhibit E, "Confidentially Handled
----------------------
Information"). Such Screening Procedures shall be in place while licenses and
- -----------
the sublicense and/or delegation are in effect and for a period of twelve (12)
months thereafter. In no event shall more than an aggregate of twelve (12)
employees of Universal and the Authorized Ventures at any given point in time be
authorized to, and/or receive or otherwise gain access to, InterTrust Top Secret
Information, and then subject to the provision of Section 9.2(b) hereof. No
Venture Agent shall remove, or permit its personnel to remove, any InterTrust
Confidential Information and/or Top Secret Information from premises controlled
by the Authorized Venture, except as may be expressly provided for herein and/or
in InterTrust Specifications. If any Universal Executives or any Venture
Executives become aware of any breach of this Section 2.1(d) (a "Compromising
------------
Event"), such Person shall, as soon as reasonably possible under the
- -----
circumstances taking into account the nature and severity of the Compromising
Event, take such steps as appropriate considering the circumstances to cease
such Compromising Event and to prevent the reoccurrence of Compromising Events.
Such appropriate steps under the circumstances shall, at a minimum, include: (i)
promptly informing InterTrust in writing of the occurrence of and circumstances
surrounding a Compromising Event; (ii) investigating the nature and extent of
the contamination caused by the Compromising Event (and report such findings
promptly to InterTrust in writing); and (iii) taking effective measures to
remedy all material effects of such Compromising Event. In the event Universal
and any Authorized Venture fail to take the actions set forth in this Section
2.1(d), InterTrust shall be entitled to immediately terminate such sublicense or
delegation (as the case may be) and/or this Agreement, and Section 11.3 shall
apply, in addition to any other remedies available to InterTrust under this
Agreement, at law or in equity; provided that any such termination shall not
-------- ----
occur for Universal's or the Authorized Venture's failure, as applicable, to
comply with the provisions of the immediately preceding subparagraph (iii) where
Universal and such Authorized Venture, as applicable, used good faith efforts to
comply with the provisions of such subparagraph (iii) including following
InterTrust's reasonable instructions concerning remedying the effects of such
Compromising Event.
(iii) Exception for ADK Sublicense. To the extent that Universal
----------------------------
grants a sublicense to the Development Venture under the Development Pass
Through Provisions solely with respect to InterTrust Technology consisting of
those portions of the Commerce 1.1 Application Developer's Kit (as described in
Exhibit A) as provided by InterTrust (the "ADK Technology") and provides such
--------------
Development Venture no access to any InterTrust Technology other than the ADK
Technology, then: (1) the provisions of Sections 2.1(d)(i) and 2.1(d)(ii) shall
not restrict [*] or [*] from having access to InterTrust Confidential
Information contained in such ADK Technology; (2) such access and participation
shall not be construed to be a Non-Partnering Venture Event; (3) the Screening
Procedures set forth in Section 2.1(d)(ii) shall not apply to members and
personnel of the Development Venture who have access solely to the ADK
Technology and no other InterTrust Technology; and (4) the provisions of Section
9 shall not restrict the use by employees of [*] or [*] who are Agents of the
Development Venture of information that is learned by such Agents from exposure
to the ADK Technology pursuant hereto and retained in the memory of such Agents,
provided that all other confidentiality obligations (including non-disclosure
obligations) under Section 9 shall continue to apply in accordance herewith. The
provisions of this Section 2.1(d)(iii) shall be effective for eighteen (18)
months from the Effective Date, and thereafter for so long as [*] and [*] are
not Competitive Entities.
2.2 Interpretation of Definitions. In the event any of the Pass Through
-----------------------------
Provisions reference Universal or reference defined terms which refer to
Universal, such Pass Through Provisions and defined terms shall apply to the
appropriate Authorized Venture mutatis mutandis.
3. TECHNOLOGY ACCESS AND SUPPORT.
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
15
<PAGE>
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3.1 Technology Access.
-----------------
(a) Initial Availability. Subject to the terms and conditions of
--------------------
this Agreement, InterTrust shall make available, deliver, or otherwise provide
to Universal the Commerce 1.1 software and related Documentation (as the
foregoing are set forth on Exhibit A hereto) promptly following the execution of
this Agreement and receipt of the amount specified in Section 6.1(a) hereof.
(b) Additional Technology. In addition to the foregoing, and
---------------------
subject to the terms and conditions of this Agreement, InterTrust shall make
available to Universal for the first [*] years of the Term, all Updates and New
Releases. Further, subject to the terms and conditions hereof, from the [*] year
of the Term through the remainder of the Term or pursuant to Section 13.3(b),
InterTrust shall make available to Universal: (i) such portions of Updates
and/or New Releases, as applicable, made available by InterTrust after the end
of the [*] year, if any, as are necessary for Universal Products and associated
services to remain in Compliance with then existing InterTrust Specifications
and/or subsequent New Specifications that replace existing InterTrust
Specifications, but only to the extent necessary for Universal Products and/or
associated services then in Compliance with such InterTrust Specifications to
avoid becoming non-Compliant with such subsequent New Specifications (the
"Compliance Update(s)"); and (ii) those Updates and/or New Releases, as
--------------------
applicable, made available by InterTrust after the end of the [*] year of the
Term to the end of the Term, if any, in addition to Compliance Updates, that are
strictly applicable to digital distribution of music Content (as may be expanded
pursuant to Universal's exercise of the Option under Section 4.1(b) hereof),
provided that the Updates and New Releases of this subparagraph (ii) shall be
- -------------
made available to Universal if, and only if, Universal has at all times during
the period between eighteen (18) months from the Effective Date and the end of
such [*] year treated InterTrust Technology as its Preferred Technology in a
consistently uninterrupted manner in all material respects, and for so long, and
only for so long, as Universal continues after such [*] year to treat InterTrust
Technology as its Preferred Technology in a consistently uninterrupted manner in
all material respects. Notwithstanding the foregoing, a material breach of
subparagraph 3.1(b)(ii) above committed both without the intent of a Universal
Executive to willfully breach this Agreement and without reckless disregard in
such connection shall be subject to the Cure Period and procedures of Section
13.2(a) (so long as such Cure Period shall not exceed [*] days); provided that
-------------
any such breaches of such subparagraphs are infrequent and cured in accordance
with the provisions of Section 13.2(a) and this Section 3.1(b). Universal shall
be entitled to obtain all of the foregoing Updates and New Releases [*]. The
Parties acknowledge and agree that nothing in this Section 3.1 shall be
construed to require InterTrust to make any InterTrust Technology or InterTrust
Technology Products available to Universal that has been developed by InterTrust
as a custom or specialized effort for, or jointly with, one or more current or
prospective Business Partners and/or other licensees of InterTrust.
(c) Acknowledgments. In accordance with the above, it is
---------------
acknowledged and agreed that the InterTrust Technology may employ or may operate
with one or more technologies that may not be proprietary to InterTrust but are
included within the Licensed Rights as specified on Exhibit A (the "InterTrust
----------
Technology Products") and as may be modified from time to time by InterTrust in
- -------------------
its discretion, provided that such modifications shall be made and applied by
-------------
InterTrust in a nondiscriminatory and consistent manner with respect to all
Business Partners regarding similar products and/or services and provided to
Universal in writing. It is further acknowledged that the Sample Applications
and Components (as each are defined in Exhibit A) that may be provided to
Universal as part of InterTrust Technology would be provided, and are intended,
solely to aid Universal in its development efforts should Universal decide in
the exercise of its discretion to use them. Provision of such applications and
components is not intended to, and in no manner whatsoever should be construed
to, constitute a warranty or representation of fitness for a particular purpose
or of any other kind.
3.2 Training, Assistance and Technical Support. Subject to the terms and
------------------------------------------
conditions of this Agreement, InterTrust agrees to provide to Universal the
training, assistance and technical support set forth in this Section 3.2
("Support") for a period of twenty-four (24) months from the Effective Date (the
-------
"Initial Support Period").
----------------------
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(a) Training and Assistance. In order to assist Universal in its
-----------------------
use of InterTrust Technology, InterTrust shall provide to Universal, subject to
applicable terms and conditions of this Agreement, reasonable training, support
and consulting assistance as follows ("Assistance").
----------
(i) During the first twelve (12) months of the Initial
Support Period, InterTrust shall make InterTrust employee-equivalent time
available to Universal to provide up to a limit of five hundred (500) hours of
Assistance (to be measured based upon actual hours expended and reasonably
documented), subject to reasonable agreement between the Parties on scheduling,
availability of resources and related matters. Universal shall have secure
access to InterTrust's applicable relevant automated technical support website.
Consistent with the provisions hereof, Assistance shall be rendered by
appropriately reasonably skilled and qualified InterTrust personnel and include
(1) lecture and hands-on training (at InterTrust's site unless agreed otherwise
by the Parties) for up to four (4) Universal personnel, and (2) access via e-
mail and telephone during normal business hours to InterTrust support personnel,
consistent with InterTrust standard policies and consistent with applicable U.S.
software industry practices and the foregoing. Universal shall be responsible
for all expenses incurred by Universal's personnel in traveling to and attending
any training and support meetings (such meetings are normally held at an
InterTrust facility). In the event InterTrust's personnel travel from
InterTrust's facilities to provide Assistance (upon InterTrust's and Universal's
mutual agreement made in writing (including by email)), Universal shall
reimburse InterTrust for all actual, documented and reasonable travel, lodging,
and out-of-pocket expenses incurred by InterTrust's personnel. To the extent
InterTrust provides Assistance as set forth in this Section 3.2 for another
Person in the Entertainment Field, InterTrust shall also make such Assistance
available to Universal, at Universal's option, [*].
(ii) If, after the first twelve (12) months of the Initial
Support Period, InterTrust offers standard support package(s) to Business
Partners, at least one of which support packages is substantially commensurate
with the support provided by InterTrust to Universal during the first twelve
(12) months of the Initial Support Period and has economic terms [*] (as
adjusted upward for inflation to reflect the CPI, as set forth in Section 6.3,
or as adjusted upward to maintain support fees reasonably commensurate with
U.S. software industry standard support fees in comparable circumstances
("Standard Support"), Universal shall choose among such Standard Support
----------------
packages as may be available, and, thereafter, all Support and other
obligations as set forth in Section 3.2 hereof shall be exclusively governed
by the terms and conditions of the support package so chosen by Universal. If
Standard Support is not available as of the end of such first twelve (12)
months of the Initial Support Period, during the remainder of the Initial
Support Period Universal shall receive the same support it received during the
first twelve (12) months of the Initial Support Period on terms [*], which
terms shall be commercially reasonable consistent with U.S. software industry
practices.
(b) Correction of Material Defects. In addition to InterTrust's
------------------------------
own ongoing quality assurance efforts, if Universal brings a Material Defect to
InterTrust's attention in a writing describing the alleged defect in reasonable
detail, InterTrust shall use commercially reasonably prompt efforts in
accordance with applicable U.S. software industry practices, at InterTrust's
expense, to reasonably correct such Material Defect. If a Material Defect cannot
be reasonably so corrected InterTrust will use commercially reasonable prompt
efforts in accordance with applicable U.S. software industry practices to [*] or
[*] InterTrust Technology to mitigate such Material Defect while maintaining [*]
of InterTrust Technology as incorporated in Commerce 1.1, or as may be in
material, commercial (e.g. non-pilot and non-beta) distribution in Universal
----
Products. Universal agrees that it has the responsibility to reasonably test its
implementations employing InterTrust Technology and/or Modified Technology in
accordance with reasonable practices for consumer electronic commerce payment
and security products and services, and further in Compliance with InterTrust
Specifications. Notwithstanding the foregoing, InterTrust shall have no
obligation to: (i) correct or mitigate any Material Defect if such correction or
mitigation is commercially unreasonable for InterTrust, for example, it causes
InterTrust undue commercial burden; (ii) communicate on the subject of Material
Defect with any Person other than Universal and/or an Authorized Venture, as
applicable; (iii) correct any Material Defect
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
17
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that has been properly identified by Universal but that cannot be reproduced by
InterTrust using commercially reasonable diligence including reasonable
assistance by Universal in identifying and replicating such defect; or (iv)
perform any services relating to correction of Material Defect at any site other
than an InterTrust facility, except as may be agreed by InterTrust in the
exercise of its discretion.
(c) Status Meeting. To assist the Parties in coordinating and
--------------
evaluating their efforts relating to InterTrust Technology and their mutual
technical and business objectives, during the Term the Parties shall meet from
time to time to discuss, among other things: (i) InterTrust's progress in
development of the InterTrust Technology; (ii) implementation of such technology
by Universal; (iii) feedback concerning Assistance provided to Universal and
product development and marketing progress by Universal; and (iv) other issues
that reasonably concern the Parties' mutual technical and business objectives
(the "Status Meetings"). Such Status Meetings shall take place at InterTrust's
---------------
offices not less frequently than once a calendar quarter during the first twelve
(12) months of the Term.
(d) Dedicated Personnel. InterTrust and Universal will each
-------------------
appoint a relationship manager, to coordinate its activities pursuant to this
Section 3.2, and a technical project manager to coordinate and provide the
Assistance set forth in Sections 3.2(a) and 3.2(b).
3.3 Additional Assistance; Further Support. During the Initial Support
--------------------------------------
Period, additional Assistance may be made available by InterTrust to Universal
beyond the Assistance allocated under Section 3.2(a). To the extent Universal
requests, and InterTrust decides (in the exercise of its discretion) to provide
such additional Assistance, Universal shall pay to InterTrust such fees as
InterTrust customarily charges its preferred customers for such assistance under
like circumstances. Following the Initial Support Period all support or
assistance thereafter provided shall be according to InterTrust's standard
support policies and packages; provided that support at least commensurate with
-------------
the provisions of Section 3.2(b) shall be available to Universal so long as
Universal has materially, commercially employed InterTrust Technology. To the
extent InterTrust reasonably requires Business Partners who have license rights
and obligations comparable to Universal to maintain at least a certain minimum
level of support with respect to its licensed activities, Universal shall
maintain at least such minimum level of support. Such support shall be available
to Universal on reasonable terms consistent with industry practices, and [*].
4. UNIVERSAL LICENSES and RESTRICTIONS.
4.1 License Grant and Option.
------------------------
(a) License Grant. Subject to the terms and conditions of this
-------------
Agreement, InterTrust grants to Universal, during the Term of this Agreement a
limited, nonexclusive, nontransferable, nonsublicensable (except as set forth in
Section 2.1 or Section 4.1(a)(iv)), worldwide right and license under the
Licensed Rights, for use solely within the Entertainment Field, to:
(i) use and reproduce the InterTrust Technology solely for
the purpose of: (1) designing and developing Universal Products that are in
Compliance with the InterTrust Specifications; and (2) exercising the rights
granted under Sections 4.1(a)(ii), 4.1(a)(iii) and 4.1(a)(iv) hereof;
(ii) modify the InterTrust Technology, except the Core
Technology, to: (1) create Modified Technology solely for the purpose of
enabling incorporation of InterTrust Technology into Universal Products that are
in Compliance with InterTrust Specifications; and (2) incorporate such Modified
Technology into Universal Products in Compliance with InterTrust Specifications;
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(iii) use Universal Products, and/or provide services
associated therewith solely within the Entertainment Field, and solely for so
long as such Universal Product and/or associated services are Compliant with
InterTrust Specifications and are otherwise used in accordance with this
Agreement; and
(iv) distribute, offer for sale, sell, license for use,
import and/or otherwise transfer: (1) Universal Products solely if they are
Application Products, and (2) Distributable Documentation; both solely (A)
within the Entertainment Field to Universal's Customers pursuant to a Customer
Agreement in accordance with Section 5.2(d) and otherwise (B) in accordance with
this Agreement.
(b) Option. InterTrust grants to Universal the option, as set forth
------
in this Section 4.1(b), to expand the scope of the Entertainment Field to
include Content consisting of all forms of video, electronic games, television
shows, and linear and non-linear motion pictures (the "Option"). The right to
------
exercise the Option shall expire as of [*] months after the Effective Date,
unless prior to the expiration of such [*] month period InterTrust has received
from Universal written notice of Universal's decision to exercise the Option
(pursuant to the notice procedures of Section 14.6 hereof). To the extent that
Universal is then in compliance with this Agreement, and when Universal has
satisfied the foregoing option exercise procedures, InterTrust shall then
promptly notify Universal that such notice has been received and that the
Entertainment Field shall thereafter be so expanded under the applicable
licenses set forth in this Agreement.
4.2 License to InterTrust Trademarks. Subject to the terms and conditions
--------------------------------
of this Agreement, InterTrust grants to Universal during the Term of this
Agreement a limited, nonexclusive, nontransferable, nonsublicensable (except as
set forth in Sections 2.1 and 4.1(a)(iv)) worldwide license to use and display
the InterTrust Trademarks solely: (i) on applicable Universal Products and
associated services, for example in Compliance with InterTrust Specifications to
indicate that such products and services are in Compliance with InterTrust
Specifications; (ii) on related Distributable Documentation, marketing and sales
materials to identify that InterTrust Technology is being utilized by Universal;
and (iii) as set forth herein or otherwise reasonably stipulated in writing by
an InterTrust Designated Officer. InterTrust shall have the right to approve
uses and/or ranges of use in connection with InterTrust Trademarks, including
any use thereof on Universal Products, in connection with associated services
provided by Universal relating to products and applications employing InterTrust
Technology and/or Modified Technology, and in related documentation, marketing
and sales materials. Once approved, Universal may use such InterTrust Trademarks
in accordance herewith until InterTrust notifies Universal in writing to the
contrary and in accordance with the provisions hereof. In the event of any such
disapproval or modification of a provision previously approved in accordance
herewith, Universal shall conform its use of such InterTrust Trademarks
according to the terms and conditions of Section 5.4(d) hereof.
4.3 Limited License to Clearinghouse Functions. Subject to the terms and
------------------------------------------
conditions of this Agreement, InterTrust grants to Universal during the Term of
this Agreement a limited, nonexclusive, nontransferable, nonsublicensable
(except and solely except as expressly set forth in Section 2.1), worldwide
right and license under the Licensed Rights, solely within the Entertainment
Field, to: (i) perform Clearinghouse Functions solely under Universal Trademarks
as specified herein and in Compliance with InterTrust Specifications; and (ii)
have Authorized Clearinghouse Providers perform any and all tasks and functions
permitted by this Agreement solely to service InterRights Points provided to a
Customer by Universal in accordance with Section 4.1(a)(iv), to the extent such
Authorized Clearinghouse Provider has been granted by InterTrust rights of the
scope necessary to perform the immediately foregoing activities and solely for
use with Content Managed by InterTrust Technology licensed hereunder. Such
Clearinghouse Functions as set forth in subparagraph (i) of this Section 4.3 may
be performed to service InterRights Points that have been provided by (a) a
Universal Product, and solely in connection with such Universal Product, or (b)
a Person having a valid written license from InterTrust allowing such Person to
permit Authorized Clearinghouse Providers to service InterRights Points provided
by such Person. Subject to the terms and conditions hereof, Universal shall be
an Authorized Clearinghouse Provider within the scope of rights set forth within
this Section 4.3, and shall also be entitled to engage one or more Authorized
Clearinghouse Providers to perform Clearinghouse Functions with respect to
Universal Products solely in accordance with this Agreement and as permitted
under each such Authorized Clearinghouse Provider's license with
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
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InterTrust. InterTrust shall be compensated for any Clearinghouse Functions
performed by any such Authorized Clearinghouse Provider relating to Universal
Products in accordance with the terms of the license agreement between
InterTrust and such Authorized Clearinghouse Provider. Mitsubishi Corporation,
National Westminster Bank Plc. and Reciprocal, Inc. (formerly Rights Exchange,
Inc.) are currently designated as Authorized Clearinghouse Providers (subject to
continuing satisfaction by such providers of the terms and conditions of their
respective license agreements with InterTrust).
4.4 No Additional Licenses. Universal understands and acknowledges that
----------------------
InterTrust is licensing to Universal only certain limited rights to use
InterTrust Technology as described herein. Thus, notwithstanding the generality
of any other provision herein, Universal acknowledges and agrees that the
licenses granted under Sections 4.1, 4.2 and 4.3, and the license set forth in
Section 13.3(b), are the only licenses granted to Universal, and that no other
licenses whatsoever have been or shall be granted, expressly, or by implication
or estoppel, now or in the future unless, and solely unless, a written agreement
between the Parties (in the exercise of each Party's discretion) is executed in
a manner compliant with Section 14.4 hereof. Any and all rights possessed by
InterTrust and not expressly granted to Universal under this Agreement are
reserved and retained by InterTrust.
4.5 General Restrictions. Universal covenants that it shall not: (i)
--------------------
during the Term of this Agreement and during the period in which any rights
under Section 13.3(b) hereof are in effect (a) use or exploit any InterTrust
Technology or perform any Clearinghouse Functions outside of the Entertainment
Field or in any manner not Compliant with InterTrust Specifications, and/or (b)
reverse engineer any InterTrust Technology that has been supplied to Universal
in Object Code form only, or modify any portion of the Core Technology and/or
participate in "clean rooming" the Core Technology; (ii) after the Term, and/or
the grant of the sublicense of Section 2.1, as applicable as to the rights of
Section 2.1, use InterTrust Technology or exploit the Licensed Rights in any
unlicensed manner whatsoever; or (iii) after the rights of Section13.3(b) of
this Agreement have ceased in accordance with the provisions hereof, use or
exploit InterTrust Technology (in whole or in part) for any purpose whatsoever.
Any use by Universal of any portion of the InterTrust Technology and/or Modified
Technology outside the scope of the licenses granted by InterTrust hereunder
shall constitute a material breach of this Agreement.
5. USE OF CONTRACTORS; UNIVERSAL SUPPORT AND
ADDITIONAL COVENANTS.
5.1 Use of Contractors. Subject to the terms and conditions of this
------------------
Agreement, Universal may use Contractors in connection with the rights granted
herein; provided that: (i) InterTrust approves use of such Contractor in writing
-------------
(such approval not to be unreasonably withheld or delayed; reasonable grounds
for withholding such approval including such Contractor having a reasonably
known or anticipated material conflict of interest with InterTrust's business,
such as, for example, commercially or publicly using, deploying, or
participating in the commercial or public use or deployment of any Other
Technology; (ii) Universal shall be jointly and severally liable for actions of
its Contractors; and (iii) each such Contractor has executed and InterTrust has
received a copy of a form of contractor agreement protective of (a) InterTrust's
Technology and InterTrust's associated Intellectual Property Rights and (b) Top
Secret Information in accordance with the provisions hereof and/or InterTrust
Confidential Information, (all of the foregoing (as may be made available by
InterTrust under this Agreement)); and wherein the Parties, each in the exercise
of its reasonable discretion, agree to the form of such contractor agreement and
wherein such contractor agreement shall specify any physical location, security
provisions, as well as adherence to InterTrust Specifications and other
parameters necessary for secure handling of such information (such form to be
attached as an Exhibit hereto upon such approval by the Parties) (the
"Contractor Agreement"). All such use of Contractors by Universal shall be
--------------------
limited to that use of Contractors reasonably needed by Universal to effectively
and directly exercise its rights hereunder, and Universal acknowledges and
agrees that InterTrust may refuse to approve the use of Contractors (or
contractor sites) where InterTrust in good faith believes that the number of
Contractors and/or sites having access to InterTrust Technology and/or
InterTrust Confidential Information poses a material risk (1) to the security or
trustedness of InterTrust Technology-based deployments, or (2) concerning
disclosure or misuse of InterTrust Confidential Information; provided that use
-------------
of up to five (5) such Contractors shall not, in and of itself, be considered to
20
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exceed an acceptable number of Contractors hereunder. It is understood that
approval of Contractors with respect to access to Top Secret Information will be
more stringent given the nature of such information.
5.2 Universal Support of InterTrust Technology.
------------------------------------------
(a) Universal Use of InterTrust Technology. In accordance with the
--------------------------------------
licenses granted to Universal and the other terms and conditions hereof,
Universal agrees to use its commercially reasonable best efforts to develop,
produce, and generally distribute in a commercially meaningful manner one or
more Universal Products within [*] months following the Effective Date. Such
time period shall be extended by any period in which there exists a Material
Defect in the InterTrust Technology that reasonably impedes Universal's
development efforts in a material manner, but only for the period from the date
that Universal documents such defect as provided in Section 3.2(b) hereof to the
date InterTrust has reasonably corrected or mitigated such defect as provided in
Section 3.2(b) and only to the extent that such Material Defect has reasonably
impeded such development efforts in a material manner.
(b) Compliance with InterTrust Specifications.
-----------------------------------------
(i) Products and Services. Universal shall not for any
---------------------
reason commence the distribution, sale or other transfer of any specific
Universal Product, or perform any associated service relating to InterTrust
Technology or otherwise exercise any license right hereunder that is subject to
any InterTrust Specifications, unless such products and/or services, and/or
other exercise of any such license right, as applicable, (1) are in Compliance
with InterTrust Specifications existing on the date of Universal's commencement
of such distribution, sale, or other transfer of such specific Universal
Product, performance of any associated services, and/or other exercises of such
license rights hereunder, and (2) are otherwise performed in full compliance
with this Agreement, with no exceptions whatsoever. After such commencement of
such distribution, sale, or other transfer of a specific Universal Product,
performance of an associated service or other exercise of any such licensed
right hereunder, Universal shall continue to comply with InterTrust
Specifications, as such InterTrust Specifications may be changed or modified
from time to time in the manner and within the time frames set forth in Section
5.2(b)(ii). Such InterTrust Specifications shall be established and applied in a
nondiscriminatory and consistent manner with respect to all Persons regarding
similar products and/or services. Further, in making decisions regarding
InterTrust Specifications, InterTrust shall not [*] (defined below) so as to
result in unreasonable and different commercial burdens for [*] (defined below)
versus another [*], unless considerations of security, interoperability,
performance, commercial progress, functionality enhancement of InterTrust
Technology, or similar material considerations indicate that such distinctions
reasonably merit such formulation; provided that InterTrust has considered the
-------- ----
[*] to InterTrust Specifications, including,for example, the [*] and Compliant
products and/or associated services, wherein (A) any such modifications should
be, in InterTrust's [*], reasonable in the [*] of each of the following [*]
(each a "[*]", and, collectively, "[*]": [*], [*] (e.g., [*]), [*] (including
[*] and/or confidential information and high value [*] information), and (B)
such [*] takes into consideration the [*] and [*] of such differing [*] as they
operate, and/or will or can operate, together as an overall secure,
interoperable, distributed electronic commerce and communications environment.
(ii) Compliance with New Specifications. InterTrust may,
----------------------------------
from time to time in its discretion, change or enhance InterTrust
Specifications, or modify InterTrust Specifications, for example, to accommodate
changes in InterTrust Technology, and/or any related InterTrust product
development, for, without limitation, such purposes as, improving architectural
integrity, functional capability, standardization, security capability,
efficiency, and/or interoperability of technology, components, products and/or
services that use InterTrust Technology (a "New Specification"). InterTrust
-----------------
shall use commercially reasonable efforts to maintain compatibility between a
New Specification and the then-preceding Specification, unless considerations of
security, interoperability, performance, business development and/or
functionality enhancement indicate that such compatibility is not commercially
appropriate.
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
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To the extent InterTrust releases a New Specification that applies to any
portion of a Universal Product and/or service associated with InterTrust
Technology then being performed or distributed by Universal (as applicable),
Universal shall bring any further such products delivered to Customers, and/or
any such services (as applicable), into Compliance with such New Specification
as of the earliest to occur of: (1) the next version, release, or production
cycle of such Universal Product and/or such associated service (the "Next
----
Version"), as earlier applicable, but only to the extent that Universal receives
- -------
notice of such New Specification within a reasonably sufficient time prior to
the release of such Next Version to accommodate new aspects of such New
Specification; and (2) [*] months. InterTrust and Universal further agree that
Universal shall, within [*] months after receiving a released copy of such New
Specification, implement such new aspects of such New Specification for all
applicable services supporting and/or employing Universal Products and/or
associated services provided to Customers not meeting such New Specification
that were shipped to Customers prior to Universal fulfilling the requirement of
the immediately preceding sentence. Within the context of Technology Advisory
Committee meetings and/or communications with members of such Technology
Advisory Committee in accordance with the provisions of Section 8.3, InterTrust
will, as appropriate from time to time, inform Universal that a change in
InterTrust Specifications is pending in advance of InterTrust's release of a New
Specification; provided that: (i) InterTrust has made a final determination that
-------- ----
it will issue such a New Specification materially prior to providing such New
Specification to Universal, and, in InterTrust's exercise of good faith, the
modifications contained within such New Specification reasonably, commercially
merit an early disclosure; and (ii) in InterTrust's exercise of good faith the
content of such New Specification and the date upon which such New Specification
will be released are sufficiently certain such that, on balance, the benefit of
Core Partners and Business Partners knowing about such New Specification
materially outweighs the potential detriment to Core Partners and Business
Partners of the announcement of a pending New Specification prior to its
completion and release. The sole and exclusive remedy for any such lack of
notification by InterTrust shall be an extension of the [*] month period
specified in subsection (2) immediately above by one (1) month. Notwithstanding
the foregoing, should serious technical interoperability and/or security
requirements commercially necessitate more prompt actions, Universal and
InterTrust will confer and agree upon the most prompt, practical schedule
feasible (considering the circumstances of such serious technical
interoperability and/or security requirement) to ensure Compliance with the New
Specification for all Universal Products and any associated services relating to
InterTrust Technology. Under such conditions, Universal shall take whatever
commercially appropriate steps are reasonable and required under the
circumstances to eliminate (as may be necessary and feasible) a continuation of
such interoperability and/or security problems. As may be reasonable,
appropriate, and applicable in light of Universal Products and consistent with
the purposes of the New Specification, in response to a reasonable request by
Universal, the Parties will examine in good faith (and may mutually agree in
each Party's discretion) as to whether, and if whether, under what
circumstances, when, and, to what extent, any time period set forth in the
preceding portions of this Section 5.2(b)(ii) should be altered to accomodate
reasonable commercial factors that may result from the deployment of silicon
embedded hardware versions of InterTrust Technology as may be built directly
into consumer devices and/or computers.
(c) Compliance Testing.
------------------
(i) Purpose; Basic Parameters. Universal acknowledges that:
-------------------------
(1) in support of InterTrust Technology, InterTrust will implement one or more
certification programs designed to ensure that licensed products and/or
associated services (including Universal Products) use InterTrust Technology
and/or Modified Technology in Compliance with InterTrust Specifications and that
Universal Products and associated services are in compliance with this Agreement
(the "Certification Program(s)"); and (2) such Certification Program(s) is (are)
-----------------------
critical to maintaining the reliability, interoperability, and tamper resistance
of products and associated services employing InterTrust Technology and/or
Modified Technology, and in maintaining public confidence in the integrity of
InterTrust Technology and/or brands as the resource for interoperable electronic
commerce. In establishing its Certification Programs, as may be modified from
time to time, InterTrust shall use reasonable efforts to establish policies
supporting efficient certification of products and services based upon
InterTrust Technology, subject, in InterTrust's discretion, to achieving the
aforementioned goals of certification. As appropriate under the circumstances as
determined by InterTrust in its discretion, such alternatives may, under certain
circumstances, include: (A) the pre-certification of certain components of
InterTrust Technology for use in Universal Products; (B) providing test programs
or suites amenable for self certification or preliminary assessment of
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
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certifiability; and/or (C) otherwise supporting certification policies and/or
technology that reasonably enhance certification efficiency and Compliance with
InterTrust Specifications. Any Certification Program(s) established by or for
InterTrust for Business Partners, and all requirements with respect thereto,
shall be applied in a nondiscriminatory and consistent manner with respect to
Universal and all other Persons providing similar products and/or services.
(ii) Certification Requirements. Consistent with the
--------------------------
foregoing, in connection with any Certification Program InterTrust may, in
InterTrust's discretion, require the use of a suite of test software provided by
InterTrust (or an InterTrust delegate) for use by Universal to test and verify
that Universal Products (and/or associated services) are in Compliance with
InterTrust Specifications prior to the first distribution, sale, or other
transfer to, or use by, a Customer of such Universal Products (or associated
services, as applicable) or prior to further testing, as may be appropriate, by
InterTrust or a certifying authority authorized by InterTrust. If use of a test
suite is unsuitable, unavailable, impractical and/or inappropriate under the
circumstances as determined by InterTrust, InterTrust may require submission of
samples to InterTrust, or in InterTrust's discretion an InterTrust delegate, of
such Universal Products (and/or associated services) and associated programs,
parameter data, and other information (in Object Code form unless Source Code is
reasonably necessary) that may be technically material to Compliance with
InterTrust Specifications, so as to allow InterTrust (or an InterTrust delegate)
to perform confidential testing. To the extent that the foregoing procedures do
not, or can not reasonably be anticipated to, provide sufficient information to
verify Compliance, such Certification Program(s) may also require the provision
to InterTrust (or an InterTrust delegate) of full and detailed specifications
and documentation related to Universal's use of InterTrust Technology and
Modified Technology for Universal Products (and/or associated services) being
tested, and any additional Universal Products and materials reasonably required
for certification assessment purposes only, and are reasonably considered
material to Certification Testing. Universal shall comply with any Certification
Program established by InterTrust in accordance with the provisions of this
Section 5.2(c)(ii) and specifically acknowledges that such programs are
important in establishing a secure, trusted environment. All specifications and
documentation provided by Universal in connection with any such Certification
Program(s) shall be authenticated in writing by a Universal Executive, and no
Universal Product and/or associated service shall be made commercially available
hereunder unless it has become a Compliant Product (defined below).
(iii) InterTrust Certification Response. In connection with
---------------------------------
any submissions made to InterTrust or an InterTrust delegate in connection with
a Certification Program, InterTrust (or an InterTrust delegate) will respond in
a reasonably prompt manner following receipt of submitted products and access
to, or receipt of technology supporting, such service, unless commercially
reasonable factors necessitate prolonging such response, and in which case
written notification of such factors shall be provided to Universal. It is
acknowledged that InterTrust's (or an InterTrust delegate's) response time will
depend on factors such as ease of responsibly testing the product and quality of
implementation, including usability, reliability and clearness of code and
relevant documentation. Such response shall be in the form of: (1) a written
approval that the product or service is certified (a "Compliant Product"), such
-----------------
Universal Product and/or associated service relating to InterTrust Technology
not being Compliant until such certification has been granted; or (2) if not
approved, a detailed summary description of all identified factors causing it
not to be Compliant and, where known by InterTrust (or such delegate, as
applicable) and feasible, suggested solutions.
(iv) Costs. To defray costs associated with the performance
-----
and administration of the Certification Program, in connection with the
certification of any product or service Universal shall be charged a reasonable
fee not to exceed U.S. software industry norms for similar testing activities as
may be available (and, if conducted or managed by: (1) InterTrust, Universal
will be entitled such fee [*] or (2) an InterTrust delegate, Universal will pay
such fee that is charged by such InterTrust delegate to Universal and/or
InterTrust). A good faith estimate of such fee shall be provided to Universal by
InterTrust or an InterTrust delegate, as applicable, as soon as reasonably
practical upon Universal's submission of required samples or documentation for
testing, and such fee shall be paid by Universal at such time as is reasonably
required by InterTrust or such InterTrust delegate.
(d) Customer Agreements.
-------------------
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(i) Basic Requirements. Universal shall distribute
------------------
Universal Products and/or perform associated services only to, and/or for,
Customers for use solely within the Entertainment Field, and only after
Universal shall have first notified and required such Person to become bound by
a form of customer agreement for such Universal Product (and/or associated
service) and appropriate for such Customer (such as whether such Customer is an
end-user or intends to further distribute the Universal Product and/or
associated services, without modification whatsoever) (the "Customer
--------
Agreement(s)"), each such form of Customer Agreement having been provided by
- ------------
Universal, and such Customer having been bound under the terms and conditions of
such Customer Agreement. Such Customer Agreement forms shall have: (1) terms
relating to InterTrust Technology and InterTrust's rights and interests
consistent with and reflective of the terms of this Agreement; and (2) terms
consistent with, reflective of, and based upon the items set forth in Exhibit F
hereto (collectively, the "InterTrust Terms"), such InterTrust Terms shall be
-----------------
signed by an InterTrust Designated Officer and appended to Exhibit F, and
InterTrust may from time to time supplement or amend Exhibit F as provided in
this Section. The approved InterTrust Terms shall be used by Universal in all
Customer Agreements unless and until: (A) Universal requests a modification of
the InterTrust Terms and InterTrust consents in its discretion in writing to
such modification; or (B) InterTrust reasonably requires that Universal alter
the InterTrust Terms where such alteration is needed to protect InterTrust's
rights under this Agreement or to protect, or to prevent or mitigate any
impairment of any part of, its Intellectual Property Rights, for example in view
of court decisions and/or applicable regulations and/or newly available
information. Such alteration to the InterTrust Terms shall be signed by an
InterTrust Designated Officer and attached to Exhibit F in accordance herewith.
Universal agrees and acknowledges that Universal's compliance with this Section
5.2(d) shall constitute a condition precedent to the licenses granted under
Sections 4.1, 4.2, and 4.3 hereof with respect to any such Customer's use of
Universal Products and/or associated services. Universal agrees that to the
extent any of the InterTrust Terms are, or are likely to be, deemed
unenforceable or otherwise ineffective in any relevant jurisdiction, Universal
shall, upon any Universal Executive or General Counsel becoming aware of such
likelihood of being unenforceable or otherwise ineffective, including, for
example notification thereof by InterTrust, substitute new terms provided by
InterTrust concerning such unenforceable or ineffective provision in such
Customer Agreement forms and existing Customer Agreements, and take other
commercially reasonable actions as specified by InterTrust related to such
unenforceability concerns, including reforming, modifying and/or canceling any
such Customer Agreement if reasonably necessary to provide InterTrust with the
legally enforceable protection contemplated hereunder. Universal agrees and
acknowledges that Universal's performance of its obligations hereunder is
necessary for InterTrust to adequately protect its Intellectual Property Rights.
(ii) InterTrust Review of Customer Agreements. Unless an
----------------------------------------
InterTrust Designated Officer, in InterTrust's discretion, expressly and in
writing agrees otherwise, under no circumstances: (1) shall any such review by
InterTrust of InterTrust Terms and/or any term of any proposed Customer
Agreement subsequently be interpreted and/or used as comments of InterTrust to
be relied upon by Universal in any manner whatsoever regarding compliance of
such InterTrust Terms and/or such Customer Agreement with the provisions of this
Agreement; and/or (2) shall any such review or lack of review by InterTrust be
deemed (A) binding on InterTrust or constitute any waiver of any rights
whatsoever hereunder by InterTrust and/or (B) an admission or waiver of any kind
whatsoever under any circumstances whatsoever, except that Universal may rely on
InterTrust Terms attached to Exhibit F hereto as amended from time to time in
accordance herewith.
5.3 Notices and Branding.
--------------------
(a) Product Notices. Universal shall, in accordance with the
---------------
instructions and/or exemplars and samples attached hereto and/or provided from
time to time by InterTrust to Business Partners, place Notices (as hereinafter
defined) in a readable form and in a conspicuous place on all Universal
Products, associated services and Distributable Documentation: (i) in the "about
box;" (ii) on manuals and other documentation (including the Distributable
Documentation) for, and packaging for physical media containing, Universal
Products and/or associated services, and (iii) at such other equivalent
location(s) as may be reasonably specified by InterTrust and agreed to by
Universal, such agreement not to be unreasonably withheld, such as on certain
screens generated by or including the Universal Products
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and/or any associated services, and at such other locations as appropriate to
protect InterTrust's Intellectual Property Rights. For purposes of this
Agreement, the term "Notices" shall consist of: (i) Intellectual Property
-------
Rights, warranty, and disclaimer notices; and (ii) field of use notices
consistent with the terms of this Agreement. A representative version of such
Notices as of the Effective Date is attached hereto as Exhibit G; and such
Notices may be modified from time to time by InterTrust provided that (1)
written notice thereof is provided to Universal, (2) such modifications are
established and applied in a non-discriminatory and consistent manner with
respect to all Business Partners regarding similar products and/or services, and
(3) the provisions of Section 5.3(e) hereof shall apply thereto. Universal shall
not remove, alter, cover, obfuscate and/or otherwise deface any InterTrust
Trademarks or Notices on any InterTrust Technology or associated documentation,
marketing and advertising materials therefor, and shall not knowingly permit
(including by having a provision in Customer Agreements prohibiting) the
removal, alteration, covering, obfuscation or otherwise defacing of any
InterTrust Trademarks or Notices on any InterTrust Technology or associated
documentation, marketing and advertising materials therefor. Compliance with
subsections (i) and (ii) immediately above (following notice and opportunity to
cure in accordance with the provisions of Section 13.2(a) hereof) shall
constitute a condition precedent to the licenses granted under Sections 2.2,
4.1, 4.2 and/or 4.3 hereof.
(b) InterTrust Branding. Universal shall, in accordance with the
-------------------
provisions of this Section 5.3(b) and InterTrust's reasonable instructions
provided from time to time by InterTrust to Universal, place the InterTrust
brands as specified below on all Universal Products and associated services,
Distributable Documentation, marketing, sales, and advertising materials
therefor, packaging for any physical media containing any such products or
services, on initialization and/or start-up screens of any Universal Products
and/or associated services, or such screens generated by or including the
Universal Products and/or any associated services, except that Universal is not
required to place such InterTrust brands on any physical media surface (e.g.,
CD-ROM surface) which predominantly contains music Content that is not Managed
by InterTrust Technology and where Universal is not providing brand space on
such physical media surface for one or more other technologies that are employed
in support of one or more portions of Content stored on such physical media,
where, for example, such portions do not constitute the principal Content stored
on such physical media. Further, Universal shall also place InterTrust brands on
the primary player interface for any Universal Reader Module, but may place such
InterTrust brands in a secondary, though reasonably prominent, manner and
Universal shall not be required to place such brands on secondary interface
screens, except as may be common industry practice. The InterTrust brands shall
be the symbol or mark denoting Compliance of such Universal Products and/or
associated services with InterTrust Specifications as set forth on Exhibit H
hereto, including the statement that such Universal Products or associated
services are "MetaTrust Certified," "InterTrustworthy," or "InterTrustable" (as
such symbol or mark is selected and may be amended by InterTrust from time to
time consistent with the provisions of Section 5.4(d) hereof). Such branding
shall be located and appear in the manner reasonably specified by InterTrust,
which shall be prominent, although secondary to the brands of Universal, and/or
a Universal Customer on Universal Products and/or services. Such InterTrust
branding shall be prominent, but not unreasonably detract from, or interfere
with, such other brands. Universal shall not remove, alter, cover, obfuscate
and/or otherwise deface any InterTrust brands and shall not knowingly permit
(including by having a provision in Customer Agreements prohibiting) the
removal, alteration, covering, obfuscation or otherwise defacing of any such
InterTrust brands.
(c) Universal Product Branding. Universal Products that are
--------------------------
Application Products (and/or services associated therewith) shall be branded and
marketed solely under Universal Trademarks or "Co-Branded" (as defined below)
under a Universal Trademark and the trademark of a Customer in accordance with
the provisions hereof (except where use of InterTrust Trademarks is also
required herein, or other trademarks of Persons are also included in a limited
manner to identify other technology or services associated with such Universal
Product and/or associated service), and in all events in accordance with the
provisions of Section 4.5 and other provisions hereof. As used herein, "Co-
---
Branded" means that the Universal Trademark brand is not materially less
- -------
prominent than the brand of such Universal Customer that also appears on the
Universal Product, and in all events not less than essentially [*] percent
([*]%) of the aggregate presentation and visible area devoted to identification
of brands on a product or service offering (or in related materials) containing
references to any such brand. Any references to Clearinghouse Function services
with, in, or otherwise related to Universal Products that are Application
Products, and/or products or services through which Universal provides
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
25
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Clearinghouse Function services shall be branded and marketed solely under
Universal Trademarks (except where use of InterTrust Trademarks is also required
herein, or other trademarks of Persons are also included in a limited manner to
identify other technology or services associated therewith) and stipulated in
accordance with the provisions of Section 4.5. Such Clearinghouse Function
services shall be promoted in a prominent manner, including most prominent
mention on interfaces directly relating to initiating and/or reporting on
transactions, and materially prominent, mention on other splash screens and/or
other relevant interfaces. Co-branding may not be used in association with
Universal Clearinghouse Function services and products.
(d) Network Notices. At InterTrust's request and upon
---------------
Universal's approval, which shall not be unreasonably withheld, Universal World
Wide web pages that materially promote or otherwise support Universal Products,
and/or associated services and InterTrust Technology (and/or at least one
Universal Web page that materially promotes Universal Products and/or associated
services if no World Wide web pages materially promote or otherwise support
InterTrust Technology) shall contain a graphical icon provided by InterTrust
which is a link to a web page provided by InterTrust on the Internet or the
equivalent thereof on any other public electronic network that is controlled by
and materially promotes InterTrust Technology. At Universal's request and upon
InterTrust's approval, which shall not be unreasonably withheld, InterTrust Web
pages that materially promote or otherwise support InterTrust Technology and/or
Universal Products and/or associated services (and/or at least one InterTrust
Web page that materially promotes InterTrust Technology if no Web pages
materially promote or otherwise support Universal Products and/or associated
services) shall contain a graphical icon provided by Universal which is a link
to a Web page provided by Universal on the Internet or the equivalent thereof on
any other public electronic network that is controlled by and materially
promotes Universal Products and/or associated services so long as Universal
promotes InterTrust Technology as its Preferred Technology.
(e) Prospective Notice. The Notices shall be effective beginning
------------------
on the date InterTrust gives Universal written notice thereof (in accordance
with Section 14.6) and Universal shall implement and/or comply with applicable
portions thereof as soon as reasonably commercially practicable thereafter.
5.4 InterTrust Trademarks.
---------------------
(a) Standards. Universal recognizes the importance of
---------
InterTrust's reputation and goodwill, and of maintaining high, uniformly applied
standards of quality in connection with Universal's use and distribution of
products, applications, and services pursuant hereto bearing InterTrust
Trademarks. Consequently, to maintain InterTrust's interest in and rights to the
InterTrust Trademarks, products, and associated services, and to maintain in the
mind of the public and customers that InterTrust Technology and its components
represent high levels of quality, trust and reliability, Universal shall utilize
the InterTrust Trademarks in accordance with trademark guidelines ("Trademark
---------
Guidelines") (which may include approved samples and exemplars) as may be
- ----------
provided to Universal (and/or reasonably modified) by InterTrust from time to
time in its discretion (and the implementation thereof shall be consistent with
Section 5.4(d)). A copy of the current Trademark Guidelines is included in
Exhibit C hereto. Such Trademark Guidelines shall: (i) include a list of
InterTrust Trademarks and shall specify restrictions on use, if any, including
permitted and prohibited countries and jurisdictions; and (ii) may be revised
from time to time by InterTrust. InterTrust Trademarks, as listed on Exhibit C
hereto (the "Initial InterTrust Marks"), may be modified by InterTrust from time
------------------------
to time to include new Trademarks upon InterTrust's provision to Universal of
reasonable prior written notice ("Added InterTrust Marks") (and the
----------------------
implementation thereof shall be consistent with Section 5.4(d)). Any such Added
InterTrust Marks shall not include any names, logos or marks that are identical
with, substantially similar to, or substantially conflict or create a likelihood
of confusion with and/or significantly undermine the value of, any then-existing
trademark rights of Universal, or trademark rights with respect to any names,
logos or marks then used on any Universal Products, where Universal promptly
notifies InterTrust in writing that such new trademark is believed in good faith
by Universal to so conflict with, or significantly undermine the value of, then-
existing trademarks of Universal.
(b) Trademark Ownership; Contestability. Universal acknowledges
-----------------------------------
and agrees that all uses of InterTrust Trademarks as permitted hereunder, and
the goodwill associated therewith, shall inure solely to the benefit of
InterTrust.
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Universal agrees that except in the case of a breach of Section 5.6(b) hereof it
shall not contest the validity of any InterTrust Trademarks or registrations
thereof or applications with respect thereto, or InterTrust's exclusive
ownership of the InterTrust Trademarks or their associated goodwill. Universal
agrees to make available to InterTrust, upon request with reasonable notice,
samples of records and other documentary evidence as is/are retained in the
ordinary course of Universal's business regarding its use of the InterTrust
Trademarks, and Universal shall observe, at minimum, reasonable industry
standards for recording and maintaining such information, including, for
example, information regarding first use of the InterTrust Trademarks by
Universal in each country.
(c) Confusing Similarity. Subject to InterTrust's obligations
--------------------
under Section 5.4(a), Universal shall not use any marks identical with or
confusingly similar to any of the InterTrust Trademarks, or Added InterTrust
Trademarks used in commerce by InterTrust at any time, and shall not register or
attempt to register any marks identical with or confusingly similar to any of
the Initial InterTrust Marks, or Added InterTrust Marks. Universal also shall
not knowingly permit to be used or offered (and shall prohibit in its Customer
Agreements a Customer from using or affixing) any trademark on any Universal
Product (and/or associated service) supplied to such Customer to the extent such
trademark could reasonably be thought to substantially conflict or create a
likelihood of confusion with, and/or be significantly undermined in value by,
any trademarks used by such Customer in connection with any products or services
using any Other Technology.
(d) Prospective Notice. Changes in the InterTrust Trademarks and
------------------
associated standards of quality shall be effective beginning on the date
InterTrust gives Universal written notice thereof and Universal shall, as soon
as reasonably commercially practicable thereafter, implement and/or comply with
such respective portions thereof. In the event a change in the Trademark
Guidelines due to any judgment, agreement pursuant to settlement of a claim, or
other modification of Trademark Guidelines in connection with a potential
InterTrust liability, and upon written notice from InterTrust, Universal will
implement such changes and cease activities non-compliant with such changes in a
more expeditious manner taking into account the gravity of the circumstances.
5.5 Universal's Use of Universal Trademarks on Universal Products. To
-------------------------------------------------------------
promote the branded and distinct identity of Universal Products, and/or
associated services, Universal acknowledges and agrees that it shall not, at any
time, use (and it shall prohibit in its Customer Agreement any Person whose
trademark appears with Universal Product from using) any trademark or logo used
in commerce to specifically identify, label or market any such products or
associated services, to identify any product or service other than such
Universal Products, and associated services (other than trademarks or logos that
serve to generally identify Universal or to generally identify a Universal
Customer who has co-branding rights hereunder in regards to such Universal
Products and/or associated services).
5.6 Universal Trademarks. Subject to the terms and conditions of this
--------------------
Agreement, InterTrust shall have a royalty free right to use the Universal
Trademarks and other Universal trademarks as selected by Universal in its sole
discretion, solely in connection with any publicity in accordance with Section
8.1 and 8.2, and solely with the advance written approval of Universal, in each
instance, at the sole discretion of Universal. Universal hereby agrees that at
any time after the Joint Press release during the Term, InterTrust may display
Universal's corporate logo on InterTrust's website and/or promotional materials
solely to disclose that Universal is a licensee of InterTrust; provided however
that each such use of the Universal logo, including without limitation the form,
size and placement of such logo on any web page and promotional materials, shall
be subject to the advance written approval of Universal, in its sole discretion.
Further, in this connection:_
(a) Standards. InterTrust recognizes the importance of
---------
Universal's reputation and goodwill, and of maintaining high, uniformly applied
standards of quality in connection with InterTrust's use of Universal Trademarks
as permitted hereunder. Consequently, to maintain Universal's interest in and
rights to the Universal Trademarks, products, and associated services, and to
maintain in the mind of the public and customers that Universal products and
services represent high levels of quality, trust and reliability, InterTrust
shall utilize the Universal Trademarks in accordance with trademark guidelines
(which may include approved samples and exemplars) as may be provided to
InterTrust (and/or reasonably modified) by Universal from time to time in its
discretion. Such trademark guidelines may be revised from time
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to time. As to Universal Trademarks not in commercial use as of the Effective
Date, such trademarks shall not include any names, logos or marks that are
identical with, substantially similar to, or substantially conflict or create a
likelihood of confusion with and/or significantly undermine the value of any
then-existing trademark rights of InterTrust or Added InterTrust Trademarks,
where InterTrust promptly notifies Universal in writing that such new trademark
is believed in good faith by InterTrust to so conflict or significantly
undermine the value of such then-existing trademarks of InterTrust.
(b) Trademark Ownership; Contestability. InterTrust acknowledges
-----------------------------------
and agrees that all uses of Universal Trademarks as permitted hereunder, and the
goodwill associated therewith, shall inure solely to the benefit of Universal.
InterTrust agrees that except in the case of a breach of Section 5.4(a) hereof
it shall not contest the validity of any Universal Trademarks or registrations
thereof or applications with respect thereto, or Universal's exclusive ownership
of the Universal Trademarks or their associated goodwill. InterTrust agrees to
make available to Universal, upon request with reasonable notice, samples of
records and other documentary evidence as is/are retained in the ordinary course
of InterTrust's business regarding its use of the Universal Trademarks, and
InterTrust shall observe, at minimum, reasonable industry standards for
recording and maintaining such information, including, for example, information
regarding first use of the Universal Trademarks by InterTrust in each country.
(c) Confusing Similarity. InterTrust shall not use any marks
--------------------
identical with or confusingly similar to any of the Universal Trademarks and
shall not register or attempt to register any marks identical with or
confusingly similar to any of the Universal Trademarks.
(d) Prospective Notice. Changes in the Universal Trademarks and
------------------
associated standards of quality shall be effective beginning on the date
Universal gives InterTrust written notice thereof and InterTrust shall, as soon
as reasonably commercially practicable thereafter, implement and/or comply with
such respective portions thereof. In the event a change in the Universal
trademark guidelines due to any judgment, agreement pursuant to settlement of a
claim, or other modification of trademark guidelines in connection with a
potential Universal liability, and upon written notice from Universal,
InterTrust will implement such changes and cease activities non-compliant with
such changes in a more expeditious manner taking into account the gravity of the
circumstances.
5.7 Translation of Material in Foreign Languages. InterTrust shall
--------------------------------------------
have the right to receive and approve, such approval not to be unreasonably
withheld or delayed, any non-English translations made by or for Universal of
documentation, marketing and sales materials provided by Universal concerning
Universal Products and any related services (to the extent such documentation,
marketing, and/or sales materials reference InterTrust Technology and/or
capabilities and/or functions enabled by InterTrust Technology), legends and
notices required pursuant to Section 5.3 hereof and other required notices, and
all versions of InterTrust Technology. If InterTrust informs Universal of any
errors in such translations, Universal shall promptly correct such errors.
6. LICENSE FEES AND PAYMENT TERMS.
6.1 Fees and Royalties.
------------------
(a) InterTrust Technology and Option Fees. In consideration of
-------------------------------------
the licenses granted to Universal herein and the other terms and conditions
hereof, Universal shall pay to InterTrust the following amounts, net of any
withholding tax and concurrently with the execution hereof, a nonrefundable
payment of [*] dollars (US$[*]) (the "Initial Fee"), which will be [*] due
-----------
InterTrust in the manner set forth in Section 6.3 below ([*]) if (and only if)
Universal does not exercise the Option as set forth in Section 4.1(b) hereof.
Concurrently with Universal's exercise of the Option, Universal shall pay to
InterTrust a nonrefundable payment of [*] dollars (US$[*]). If Universal
directly receives any license fee from any Authorized Venture or the
participants of an Authorized Venture in connection with the grant of the
sublicense of Section 2.2 (or such Authorized Venture participants'
participation in an Authorized Venture), Universal shall pay to InterTrust [*]
percent ([*]%) of
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
28
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such fee, if any; provided that such license fee shall not include capital
-------- ----
contributions made by such Venture participants to an Authorized Venture.
(b) InterTrust Technology Royalties. In consideration of the
-------------------------------
licenses granted to Universal herein and the other terms and conditions hereof,
Universal (and/or an Authorized Clearinghouse Provider as may be permitted under
this Agreement) shall pay to InterTrust the following royalties, net of any
withholding tax:
(i) six-tenths of one percent (0.6%) of the Gross
Commercial Value of each Content Transaction where any Clearinghouse Function is
performed at least in part;
(ii) two percent (2%) of the Gross Commercial Value
received for the complete or partial performance of any Clearinghouse Functions
at least in part, but in no event including the payment of royalties for
Clearinghouse Functions under Section 6.1(b)(i) above; and
(iii) for all revenue and the monetary value of other
consideration, if any, actually received by Universal directly in connection
with the sale, lease, license, distribution, transfer, or other use of Universal
Products and/or services that utilize Universal Products and/or InterTrust
Technology (such as service fees for packaging third party Content and/or fees
for hosting Content in connection with a Universal service), and not based on
performance of Clearinghouse Functions, a royalty of two percent (2%) of all
such revenue and any such monetary value for other consideration received by
Universal, minus any sales, use, value added or other taxes (except withholding
taxes) imposed by any national, state, local or foreign government and paid by
and/or for Universal on such received revenue and/or any other consideration (as
calculated according to generally accepted accounting principles consistently
applied with past practices).
(c) Support Fee. Subject to the provisions hereof, in partial
-----------
consideration for InterTrust's provisions of Support set forth in Section 3.2
hereof and other maintenance activities as set forth herein, during the Initial
Support Period, Universal shall pay to InterTrust the amount of [*] dollars
(US$[*]) per quarter (the "Support Fee"). The Support Fee shall be paid within
-----------
thirty (30) days after the first day of each calendar quarter in accordance with
Section 6.4 hereof.
6.2 [*] If InterTrust [*] with: (i) a Business Partner in the
Entertainment Field [*] Universal hereunder, or (ii) another Business Partner
outside of the Entertainment Field who may provide products and/or services to
the Entertainment Field [*] where the [*] hereunder; and further pursuant to
either such agreement [*] wherein such [*] are also [*] than the [*] set forth
in such sections hereof, the [*], at Universal's option, to the [*] and [*]
provided by InterTrust [*] as may be employed to service the Entertainment
Field, as applicable.
6.3 Payment Procedure. In the instance, but solely in the instance,
-----------------
where Universal has not exercised its Option pursuant to Section 4.1(b) hereof,
Universal shall be entitled thereafter to [*] percent ([*]%) of all [*] by
Universal and [*] under Sections [*] and [*] in a calendar quarter [*] the
[*]; provided that the total amount of all such [*] under this Agreement shall
-------- ----
under no circumstances [*] dollars ($US[*]) in the aggregate. Except as
otherwise expressly provided in this Agreement, within [*] days after the end of
each calendar quarter, Universal shall pay InterTrust all amounts due and/or
payable pursuant to the licenses and support provided hereunder, and invoiced,
billed, transferred
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
29
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or received, whichever occurs first, during such calendar quarter. In the event
any rise in inflation during the later [*] days of such [*] day period
results in a decline in more than twenty-five (25%) of the value of any payment,
the Parties shall promptly and mutually agree on a method for making appropriate
adjustments to such payment to avoid such decline, which agreement shall not be
unreasonably withheld or delayed. Universal shall make payments hereunder by
wire transfer, or in the instance of quarterly payments, by check or wire
transfer, to such account as designated by InterTrust in writing. Concurrently
with each royalty payment, Universal shall provide to InterTrust a written
royalty report, certified to be accurate by an officer of Universal specifying:
(i) the revenues derived by Universal that are subject to royalties during each
calendar month of such quarter; (ii) the basis for calculation of the amounts
due and payable; and (iii) summaries of business records employed by Universal
to arrive at the information set forth in (i) and (ii) immediately above. The
manner of calculation of the amounts due and payable to InterTrust hereunder
shall be determined in accordance with recognized and generally accepted U.S.
accounting procedures and principles that shall be consistently applied to all
such payments.
6.4 Currency. Gross Commercial Value received by Universal subject to
--------
the royalties of Section 6.1(a) in a currency other than U.S. dollars shall be
converted by Universal to U.S. dollars on a monthly basis for purposes of
payment to InterTrust on a quarterly basis according to the rate of exchange for
such currency, as published by the Wall Street Journal (Western Edition or main
edition in absence of a Western edition) on the last business day during each
calendar month of a calendar quarter for which such royalties are due, or if The
Wall Street Journal ceases or fails to publish such rate of exchange at any time
during this Agreement, the rate of exchange during any such period of cessation
shall be such rate published by Bank of America (San Francisco, California) or a
comparable source as may be reasonably chosen by InterTrust for its Business
Partner and agreed by Universal, such agreement shall not be unreasonably
withheld.
6.5 Taxes. Universal shall pay taxes, including but not limited to
-----
withholding taxes, imposed by any foreign government or any other jurisdictions
outside of the United States, as applicable, on all fees and royalties payable
to InterTrust under this Agreement. To the extent international treaties permit
InterTrust to obtain, with minimal burden and expense to InterTrust, a valid
Certificate of Tax Exemption (or functional equivalent) from foreign
jurisdictions permitting Universal to make such fee and royalty payments free of
any such foreign jurisdiction withhold taxes, InterTrust and Universal shall
work together in good faith to obtain such certificate. In no event shall
InterTrust receive, in the aggregate, less than the fees and royalties set forth
in Section 6.1, including, for example, where Universal is required by a foreign
jurisdiction to reduce any fee or royalty payment owed to InterTrust by the
amount of withhold taxes. In addition, if InterTrust receives a refund from any
such foreign jurisdiction for any amount of withhold taxes paid by Universal,
InterTrust shall pay such amount to Universal. Universal shall be responsible
for payment of all sales, use, value-added and other taxes, duties, and other
charges that may fall due with respect to: (i) the transfer to or licensing,
reproduction, distribution, and/or use by Universal of, the Universal Products;
and (ii) Universal's activities in regards to the Clearinghouse Functions.
InterTrust shall be responsible for payment of all sales, use, value-added and
other taxes that may be imposed on InterTrust with respect to: (a) the transfer
to, or licensing to, Universal of the InterTrust Technology hereunder; or (b)
the payments received hereunder. Except as provided in this Section 6.5, each
Party shall be responsible for its own income tax liability imposed by any
government.
6.6 Interest. Universal agrees that: (i) all sums owed or payable to
--------
InterTrust hereunder shall bear interest (compounded daily) at the [*] Rate on
an annualized basis as published at the end of a calendar quarter for which such
royalties are due, or such lower rate as may be the maximum rate permitted under
applicable law, from the date upon which payment of the same shall first become
due up to and including the date of payment thereof whether before or after
judgment; and (ii) shall be additionally liable for all costs and expenses of
collection, including, without limitation, reasonable fees for attorneys and
court costs in that connection. Notwithstanding the foregoing, such specified
rate of interest shall not excuse or in any way whatsoever be construed as a
waiver of Universal's express obligation to timely provide any and all payments
due to InterTrust hereunder.
6.7 Audit. Universal shall maintain at a reasonable North American
-----
location during the Term of this Agreement for the Audit Period (as defined
below) all books, records, accounts, and other information regarding Universal's
activities
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
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in connection herewith sufficient according to reasonable accounting practices
to determine and confirm Universal's royalty obligations hereunder. Upon
InterTrust's prior written request, Universal will permit an internationally-
recognized top-five accounting firm of InterTrust's choice (subject to
Universal's consent, which shall not be unreasonably withheld or delayed) to
examine and audit, during normal business hours at the location where records
are normally kept (but no more than once every six (6) months), such books,
records, accounts, and other information, and take extracts therefrom or make
copies thereof for the purpose of verifying the correctness of Universal's
reported royalty statements and payments provided by Universal. Universal
shall pay any unpaid delinquent amounts within [*] days of InterTrust's
request. To the extent such examination discloses an annualized underpayment
of more than [*] percent ([*]%) of sums actually due InterTrust and/or an
underpayment of more than [*] dollars (US$[*]), Universal shall fully
reimburse InterTrust, promptly upon demand, for the fees and disbursements due
the auditor for such audit; provided that such prompt payment shall not be in
lieu of any other remedies or rights available to InterTrust hereunder. If an
audit reveals an overpayment, InterTrust shall promptly notify Universal of
such overpayment and Universal and InterTrust will reasonably discuss and
agree upon the methods for applying the amount of such overpayment against
future royalties in the next payment period or successive periods in a manner
reasonably balancing InterTrust's and Universal's commercial circumstances and
interests but such repayment shall be in a manner that does not cause undue
hardship for InterTrust and, in the absence of significant circumstances, any
such applied amount to effect repayment shall not exceed [*] percent ([*]%) of
royalties due in any payment period hereunder. As defined herein, with respect
to a royalty payment made hereunder for an applicable period, "Audit Period"
------------
shall mean four (4) years following such royalty payment. Any Claim for
delinquent or inaccurate payment of royalty for any particular quarterly royalty
period shall not be initiated by InterTrust for underpayment (or Universal for
overpayment) shall be commenced within one (1) year of the commencement of the
applicable audit; provided that the foregoing limitation shall not apply with
-------- ----
respect to any payment due InterTrust: (a) where an audit has been conducted
and an underpayment determined, InterTrust has informed Universal of such
determined underpayment, and such determined underpayment has not been made in
full to InterTrust; or (b) if Universal and/or its Agents have engaged in any
fraud, gross negligence, material misrepresentation or material omission with
respect to royalty payments and/or reports hereunder. All of the foregoing
shall be subject to statutes of limitation under applicable law.
7. PROPRIETARY INFORMATION AND OWNERSHIP.
7.1 InterTrust Ownership. Universal acknowledges and agrees that, as
--------------------
between InterTrust and Universal, InterTrust is the sole and exclusive owner of,
and shall retain and hereby reserves (and nothing herein shall alter
InterTrust's reservation of) all right, title and interest in: (i) the
InterTrust Technology, enhancements and modifications thereto, and derivative
works thereof created by or for, or acquired by, InterTrust, and all
Intellectual Property Rights embodied therein; (ii) all Intellectual Property
Rights created, or embodied in any works (whether tangible or intangible)
created or independently developed, by InterTrust in connection with its
performance of this Agreement; and (iii) Modified Technology not owned by
Universal pursuant to Section 7.2 hereof, and all Intellectual Property Rights
embodied therein (collectively, the "InterTrust Property"). No provision
-------------------
contained in this Agreement shall be construed to transfer to Universal or any
other Person any title or ownership interest in any InterTrust Property.
7.2 Universal Ownership. InterTrust acknowledges and agrees that, as
-------------------
between Universal and InterTrust, Universal shall be the sole and exclusive
owner of, and shall retain and hereby reserves (and nothing herein shall alter
Universal's reservation of) all right, title and interest in, the portions of
the following created solely by (or for) Universal hereunder: (i) any Universal
Products, except for any InterTrust Property therein; (ii) Modified Technology
created in accordance with the terms hereof (except (a) for any InterTrust
Property therein and/or (b) to the extent (and solely to the extent) such
Modified Technology merely reimplements the existing functionality of InterTrust
Technology provided to Universal (including, for example, porting or translation
thereof) and not to the extent that such Modified Technology adds new
functionality or enhanced functionality); and (iii) all Intellectual Property
Rights embodied in such Universal Products or such Modified Technology
("Universal Property") independently developed by or for Universal in accordance
-------------------
herewith. No provision contained in this Agreement shall be construed to
transfer to InterTrust or any other Person any title or ownership interest in
any Universal Property.
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
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7.3 Universal License to InterTrust. In consideration of the licenses
-------------------------------
granted and of other consideration provided by InterTrust to Universal under
this Agreement, during the Term of this Agreement and during the period in which
any rights under Section 13.3(b) are in effect, Universal hereby grants to:
(a) InterTrust, its affiliates, and their successors, assigns,
and direct and indirect customers (including users of InterTrust Technology) a
limited, nontransferable, nonsublicensable, nonexclusive, royalty-free and
worldwide license under the patent rights of Universal to make, use, sell, offer
for sale, import, distribute and/or otherwise exploit InterTrust Technology, any
products or services directly relating to the InterTrust Technology and/or
directly relating to electronic rights management, distributed electronic event
management, or distributed operating system technology, but solely to the extent
that such activities would, but for such license, infringe any such patent
rights of Universal (including any patents disclosing and/or claiming any
Modified Technology); and
(b) InterTrust, its affiliates, and their successors and
assigns a nonexclusive, royalty-free and worldwide license under the
Intellectual Property Rights (other than trademark, tradenames, and services
marks) of Universal to use Universal Products solely in connection with
InterTrust's internal testing, evaluation and enhancement of performance,
security and/or interoperability characteristics of InterTrust Technology with
such Universal Products, and not for redistribution, licensing, sale or other
transfer to any Person.
If during the Term of this Agreement InterTrust enters into any agreement with
my Business Partner in the Entertainment Field [*] under the licenses granted
under this Section 7.3, but solely to the specific extent nature of the terms
and conditions [*].
8. JOINT ACTIVITIES AND PARTNERING COMMITMENT.
8.1 Joint Press Release. Except as otherwise provided in this
-------------------
Agreement, promptly after the Effective Date, the Parties shall issue the press
release in the form attached hereto as Exhibit K (the "Joint Press Release"). In
-------------------
addition, Universal and InterTrust shall throughout the Term work together to
publicly issue additional mutually agreeable press releases disclosing the
future plans of the Parties relating to the use of InterTrust Technology and
support for the MetaTrust Utility (the "Followup Press Releases"). Upon
-----------------------
InterTrust's request from time to time, and so long as Universal is using
InterTrust Technology in development of or distribution of a pilot trial or in
development of or distribution of a commercial release of a Universal Product,
Universal will use reasonable efforts to meet with investors, potential
investors or licensees and/or financial and marketing analysts to promote and
clearly endorse, to InterTrust's benefit, InterTrust Technology, including
explaining for a minimum of twelve (12) months from the Effective Date that
InterTrust is Universal's preferred rights and distributed trust management
technology partner and Universal's direct and material support for the MetaTrust
Utility. Unless otherwise agreed in writing, all further public disclosures by
either Party concerning the subject matter of the Joint Press Release, the
Followup Press Releases and/or Section 8.2 hereof shall be consistent with, and
not exceed the scope of, the content of the Joint Press Release, the Followup
Press Releases, InterTrust Specifications and the other provisions hereof. All
other public disclosures with respect to the terms hereof shall be made in
accordance with Section 9.5.
8.2 Promotion and Marketing. The parties shall jointly participate
-----------------------
in, and from time to time (as they may agree) engage in, promotional, marketing,
and sales activities designed to: (i) increase industry awareness of Universal
Products (and associated services) and InterTrust Technology; and (ii) promote
the dissemination and use of InterTrust's technology as the general purpose
Digital Rights Management and Secure Container standard solution for electronic
commerce. Each Party will assist the other with marketing activities relating to
the Universal's use of InterTrust Technology by, for example, displaying certain
InterTrust Trademarks on products and services (and materials relating thereto)
and jointly participating in, as mutually agreed in each Party's discretion,
trade shows and customer events.
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
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8.3 Technology Advisory Committee. To further strategic opportunities
-----------------------------
among the Parties and to encourage feedback concerning InterTrust Technology,
InterTrust currently intends to establish a committee limited to representatives
of: (i) leading companies chosen from certain technology, financial and/or
content industry companies that have close technology strategic relationships
with InterTrust; and (ii) certain leading experts in technology or business
applicable to information and electronic commerce (the "Technology Advisory
-------------------
Committee"). The Technology Advisory Committee shall meet regularly at a forum
- ---------
to be selected by InterTrust for the purpose of discussing and exchanging ideas
for improving the functionality, interoperability, and market acceptability of
InterTrust Technology and related issues pertaining to the electronic commerce
industry. Upon the establishment of the Technology Advisory Committee: (a)
InterTrust shall grant Universal the right to have one seat as a member of the
Technology Advisory Committee; and (b) Universal, at its option, may elect and
notify InterTrust of its designation of an executive (who may be an employee of
Universal) to serve on such committee. Universal may propose that in place of
itself a representative of the Authorized Venture serve on behalf of, and as a
designee of, Universal on the Technology Advisory Committee, such designation
shall be subject to InterTrust's prior written approval. To the extent it
participates, Universal shall: (1) be responsible for all acts and omissions of
the representative in connection with the Technology Advisory Committee; and (2)
pay for all expenses incurred by Universal in connection with participation on
such Committee unless InterTrust pays for expenses of any other Business Partner
member, wherein such other Business Partner member's agreement has overall terms
substantially similar to the terms hereof. Universal's right to a seat on the
Technology Advisory Committee shall be contingent upon (and subject to): (A)
material compliance with generally applicable committee rules, and the terms and
conditions hereof; (B) avoidance of activities by Universal and/or Authorized
Venture (as applicable) that materially conflict with InterTrust's interests, as
determined by InterTrust in its discretion; and (C) continuation of the
Technology Advisory Committee. It is acknowledged that Universal's
representative on the Technology Advisory Committee will be exposed to
InterTrust Confidential Information, and may be exposed to confidential
information of other InterTrust partners.
8.4 Partnering Commitment
---------------------
(a) Basic Provisions. In recognition of and partial consideration for
----------------
providing Universal with material, early access to technology and highly
confidential InterTrust Technology and Intellectual Property, and the rights
hereunder, Universal agrees to the following partnering commitment. Without
obtaining the express prior written consent of an InterTrust Designated Officer,
in the exercise of InterTrust's discretion, during the first [*] ([*]) years of
the Term Universal shall not, in connection with the Management of Content in
the Entertainment Field (as such field may be further expanded upon the exercise
of the Option): (i) commercially or publicly use, deploy, or participate in the
commercial or public use or deployment of, any technology, products and/or
associated services that use or incorporate any Other Special Advanced
Technology, except that a Universal Reader Module may incorporate and support
(1) Pre-Authorized Other Technology for use in conjunction with InterTrust
Technology (where InterTrust Technology is the Preferred Technology) and where
the use of such InterTrust Technology is Compliant with InterTrust
Specifications; and (2) any Other Technology, provided that such use of such
Other Technology has been mutually approved in writing by Universal and an
InterTrust Designated Officer in each Party's good faith exercise of its
discretion, following discussion by the Parties of their respective commercial
interests; nor (ii) perform in whole or in part any clearinghouse functions
(that would be deemed Clearinghouse Functions if performed using InterTrust
Technology) using any Other Technology and/or for information that has been
derived at least in part from the use of any Other Technology (except and solely
except as incorporated in a Universal Reader Module in accordance with the
provisions of the immediate preceding subparagraph (i)). During such [*] ([*])
year period, upon InterTrust's prior written request, Universal agrees to
verbally endorse InterTrust Technology as its Preferred Technology to investors,
potential investors and/or licensees of InterTrust provided such verbal
endorsement need not be publicly made and will be subject to a non-disclosure
agreement unless otherwise agreed in writing (including by email) by an
InterTrust Designated Officer and a Universal Executive.
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(b) Caveats. Notwithstanding the foregoing, subparagraphs (i) and (ii) of
-------
Section 8.4(a) immediately above shall not be construed in any way to prohibit
Universal from participating in the [*]; provided that Universal does not
-------- ----
materially develop any Digital Rights Management technology for the project.
Universal shall not publicly promote and/or market the [*] to a greater degree
than the other participants in the [*], and, shall within [*] ([*]) months after
the Effective Date, launch, conduct and use reasonable efforts to have other
major music labels join in, a music trial project in the U.S. on a scale at
least reasonably comparable to the [*] using InterTrust Technology as its
principal Digital Rights Management technology (the "Universal/InterTrust
--------------------
Trial"). Further, nothing in Section 8.4(a) shall be construed to require
- -----
Universal to refrain from distributing Content intended for use with any Other
Special Advanced Technology or Other Technology where the artist or provider of
such Content individually instructs Universal to do so, provided that Universal
-------- ----
uses commercially reasonable efforts to recommend and promote the use of
InterTrust Technology with such Content instead of any Other Special Advanced
Technology or Other Technology; and further provided that for the [*] ([*]) year
------- -------- ----
period stated in Section 8.4(a), Universal does not use any Universal brand
directly with such Other Special Advanced Technology. Universal shall not
promote the brand of the provider, or provider products and/or services, of such
Other Special Advanced Technology or Other Technology on any part of its
marketing materials or products except to the minimum extent necessary as
required by any such artist or provider of such Other Special Advance Technology
or Other Technology, and then only directly regarding the specific use of such
Other Special Advanced Technology or Other Technology for such artist's or
provider's specific entertainment products.
9. CONFIDENTIALITY.
9.1 Classification of Technology and Documents For Confidentiality
--------------------------------------------------------------
Purposes. For ease in complying with the terms of this Section 9, information
and documents to be exchanged by the Parties shall be marked, as appropriate, to
identify the confidential or non-confidential nature of the information, and
information exchanged orally or visually shall be described, as appropriate, to
alert the recipient of the confidential or non-confidential nature of the
information. As regards InterTrust Technology (including Documentation) and
other documents or information provided by InterTrust to Universal in tangible
form, or provided orally or visually hereunder, such information shall be marked
or indicated, as appropriate, as: (i) "Unclassified"; (ii) "Confidential"; or
(iii) "Top Secret," and, as regards Universal information, such information
shall be marked as: (a) "Unclassified" or (b) "Confidential." All InterTrust
Confidential Information and Universal Confidential Information may be referred
to as "Confidential Information." A Party and its authorized personnel shall
------------------------
exercise careful judgment when they are in possession of information of the
other Party that has not been marked or indicated with one of the above-
described classifications. If any information provided by one Party has not
been marked or indicated as above and is not known with certainty by the
receiving Party to have been either publicly released or otherwise classified as
"Unclassified," then such other Party, its employees and any other Person
authorized to possess such information shall treat such information as
"Confidential," except that information provided by InterTrust to Universal
orally or visually regarding security (including tamper resistance and/or
cryptographic key management) aspects of InterTrust Technology which is
thereafter confirmed in writing by InterTrust that such information constitutes
Top Secret Information shall be treated as of the date of receipt of such
writing by Universal as Top Secret Information in accordance with Section 9.2(b)
hereof.
9.2 InterTrust Information.
-----------------------
(a) Confidential Information. To the extent that Universal
------------------------
receives from InterTrust under this Agreement any InterTrust Technology or any
other information or technology that is marked "Confidential" when disclosed in
written form, or indicated as "Confidential" when disclosed orally or visually
("InterTrust Confidential Information"), Universal shall hold such InterTrust
-----------------------------------
Confidential Information in strict confidence and in a manner that is: (i)
sufficiently secure for the character and content of the InterTrust Confidential
Information as reasonably determined by Universal to protect the interests of
InterTrust and the InterTrust Technology environment (and in accordance with the
provisions hereof); and (ii) not less secure than procedures used by Universal
to protect its comparably important information and technology. Universal shall
not in any manner whatsoever, without InterTrust's prior written consent, use,
disclose, provide or otherwise make available any InterTrust Confidential
Information to any person, except to any employee, director or Contractor
("Agent(s)") of Universal, each of whom shall operate under the same
--------
restrictions as Universal (in addition to
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL
complying with any other provision hereof relating to such agreement).
Furthermore, in each case of disclosure to an Agent of Universal, access to such
InterTrust Confidential Information shall be allowed only to such Agents who
have a reasonable need to know such InterTrust Confidential Information, and
then only to the extent necessary to enable Universal to use InterTrust
Confidential Information solely to exercise its rights or perform its obligation
hereunder and/or as expressly allowed hereunder. Universal shall: (1) require
its Agents having access to any portion of InterTrust Confidential Information
to strictly maintain its confidentiality; and (2) ensure that each such Agent
shall have executed with Universal a written non-disclosure/non-use agreement in
the form set forth on Exhibit I hereto or as subsequently provided by
InterTrust, or Universal's applicable form agreement which shall effectively and
comparably bind such Agent to an agreement of the same scope as InterTrust's
form agreement, and which such form agreement shall be subject to InterTrust's
reasonable prior written approval which approval will not be unreasonably
withheld or delayed. Upon such approval, the form agreement shall replace the
relevant portion of Exhibit I. In the case of a Contractor, such provisions
shall be in the Contractor Agreement. Universal shall notify InterTrust promptly
in writing of any unauthorized disclosure or other misuse or misappropriation of
any portions of the InterTrust Confidential Information upon any Universal
Executive becoming aware of such unauthorized disclosure or other such misuse or
misappropriation. Universal shall use reasonable efforts to maintain a log of
the Agents accessing and the location of all originals and copies of material
excerpts of technical InterTrust Confidential Information. Universal shall be
fully responsible for any breach of Universal's obligations under this Agreement
by an Agent to whom such InterTrust Confidential Information has been disclosed.
Subject to the provisions of Section 9.4, any obligation of Universal to keep
InterTrust Confidential Information in confidence shall expire thirty-six (36)
months after disclosure of such information by InterTrust to Universal, except
with respect to InterTrust Technology, in which case such obligation shall
continue in perpetuity.
(b) Top Secret Information. In order to protect InterTrust's
----------------------
rights, the rights of InterTrust licensees, and the secure operation and/or
interoperability and reputation of InterTrust implementations, Universal shall
treat any InterTrust Technology or other confidential information that it may
receive that is either marked "Top Secret - Do Not Copy" or similar legend
containing at least the words "Top Secret" (and at least on the cover page or in
comparable other places) when disclosed in written form, or indicated as "Top
Secret" when disclosed orally or visually and identified in writing to a
Universal Executive as Top Secret within thirty (30) days of such oral or visual
disclosure ("Top Secret Information") in a manner not less secure than
----------------------
Universal's most secret information and, in all events in a manner sufficient to
ensure the security of such Top Secret Information, given such great sensitivity
of such Top Secret Information. Universal shall allow disclosure of such Top
Secret Information to no more than an aggregate of twelve (12) designated
individual employees or approved Contractors of Universal and/or Authorized
Ventures (as such twelve individuals may be designated by Universal) at any one
time, each of whom has a direct need to know such information or be exposed to
such Top Secret Information (as agreed in each case by InterTrust in its
reasonable discretion) and then only to the extent necessary for Universal to
use Top Secret Information solely to exercise its rights and perform its
obligations under this Agreement. Universal shall not substitute any employee
designated to receive Top Secret Information with another employee, unless such
designated employee's employment with Universal has been terminated or such
person is no longer able to serve the intended role or is no longer
participating in the business projects conducted using InterTrust Technology,
provided that Universal shall use reasonable efforts to maintain continuity and
- -------- ----
minimize changes of such designated employees and no more than an aggregate of
eighteen (18) designated individual employees shall have been authorized within
any forty-eight (48) month period (in the absence of approval by an InterTrust
Designated Officer). None of such employees shall receive a disclosure of any
such Top Secret Information until: (i) such employee executes an InterTrust Top
Secrecy Agreement (in the form set forth in Exhibit I hereto or as subsequently
provided by InterTrust) covering such information and exposure; and (ii) an
executed copy of such agreement is received by InterTrust, with return receipt
provided to Universal, which such receipt may be provided by fax communication
if so requested in writing. Notwithstanding the foregoing, Universal and
Universal employees described above shall make no physical embodiments
whatsoever of Top Secret Information (for example, any reproduction or copy of
Top Secret Information, including descriptive notes containing any Top Secret
Information) without the prior express written authorization of an InterTrust
Designated Officer, nor shall Universal or such Universal employees disclose any
Top Secret Information to any Person (including to any Contractor), except as
described in this Section 9.2(b). Upon Universal's prior written request,
InterTrust will, where reasonable and appropriate in InterTrust's discretion
given the nature of the Top Secret Information, provide Universal with
additional copies of the Top Secret Information up to a limit of twelve (12)
copies. If any Universal
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Executive becomes aware that any Top Secret Information has been disclosed or
treated other than as set forth in this Section 9.2(b), and/or as specified in a
Top Secrecy Agreement, Universal shall immediately inform InterTrust of such
occurrence and take immediate steps to correct such compromise. Universal shall
maintain a log of the employees accessing and location of all originals and
other provided copies of all Top Secret Information. Universal shall be fully
responsible for any breach by any Universal employee of this Agreement related
to the unauthorized use or disclosure of Top Secret Information.
9.3 Universal Information. To the extent that InterTrust receives
---------------------
Confidential Information of Universal that is either marked "Confidential" when
disclosed in written form or indicated as "confidential" when disclosed orally
or visually ("Universal Confidential Information") under this Agreement,
----------------------------------
InterTrust shall hold such Universal Confidential Information in strict
confidence and in a manner that is: (i) sufficiently secure for the character
and content of the Universal Confidential Information as reasonably determined
by InterTrust to protect the interests of Universal (and in accordance with the
provisions hereof); and (ii) not less secure than procedures used by InterTrust
to protect its comparably important information and technology. Except as to
the disclosure by Universal of the Modified Technology or such disclosure
inherent in the Certification Testing of Universal Products and/or any
associated services pursuant hereto, and only to the extent expressly specified
by InterTrust Specifications, Universal shall not disclose or otherwise provide
or make available to InterTrust any Universal Confidential Information or other
third Person confidential or proprietary information comprising, containing or
directly concerning any Other Technology), without first acquiring written
approval from an InterTrust Designated Officer. InterTrust shall not in any
manner whatsoever, without Universal's prior written consent, use, disclose,
provide or otherwise make available any Universal Confidential Information to
any person, except an Agent of InterTrust each of whom shall operate under the
same restrictions as InterTrust (in addition to complying with any other
provision hereof relating to such Agreement). Furthermore, in each case of
disclosure to an Agent of InterTrust, access to such Universal Confidential
Information shall be allowed only to Agents who have a reasonable need to know
such Universal Confidential Information and only to the extent necessary to
enable InterTrust to use Universal Confidential Information to exercise its
rights and perform its obligations hereunder and/or as expressly allowed
hereunder. InterTrust shall: (a) require its Agents having access to any
portion of Universal Confidential Information to strictly maintain its
confidentiality; and (b) ensure that each such Agent shall have executed with
InterTrust a written non-disclosure/non-use agreement provided by Universal, or
InterTrust's applicable form agreement which shall effectively and comparably
bind such Agent to an agreement of the same scope as Universal's form agreement,
and which such form agreement shall be subject to Universal's reasonable prior
written approval. Upon such approval, the form agreement will replace the
relevant portion of Exhibit I. InterTrust shall notify Universal promptly in
writing of any unauthorized disclosure or other misuse or misappropriation of
any portions of the Universal Confidential Information. InterTrust shall use
reasonable efforts to maintain a log of the Agents accessing and the location of
all originals and copies of material excerpts of technical Universal
Confidential Information. InterTrust shall be fully responsible for any breach
of InterTrust's obligations under this Agreement by an Agent to whom such
Universal Confidential Information has been disclosed. Any obligation of
InterTrust to keep Universal information in confidence shall expire thirty-six
(36) months after disclosure of such information by Universal to InterTrust
provided that InterTrust confidentiality obligations hereunder with respect to
any Source Code provided to InterTrust in connection with any Certification
Program shall continue in perpetuity.
9.4 Exceptions. Notwithstanding the provisions of Sections 9.1, 9.2
----------
and 9.3 above, the confidentiality restrictions herein shall not apply to
information that the recipient thereof can demonstrate: (i) is or becomes
generally known to the public through no breach of any of these obligations, as
of the date such information becomes so known; (ii) is or shall have been
independently developed by such recipient by employees who had no access to such
information; or (iii) is or shall have been rightfully received, with no
obligation of confidentiality or non-use, by such recipient from any Person
(other than as a result of another Person's breach of an obligation of
confidentiality to the discloser of such information), as of the date such
information is so received. In the case of Top Secret Information, however, the
availability to Universal of information that is substantially equivalent to Top
Secret Information based upon subsection (i), (ii) and/or (iii) above shall not,
in any manner, diminish Universal's obligations with respect to the Top Secret
Information provided by InterTrust to Universal (and all copies or derivatives
thereof), and Universal shall be prohibited from further disclosing to
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third parties any such InterTrust Top Secret Information in Universal's
possession in accordance with the terms hereof; except that nothing contained
herein shall be construed to limit Universal's rights outside of this Agreement
with respect to information obtained through the foregoing subsection (i), (ii)
and/or (iii) and such separate information shall not be deemed Top Secret
Information for purposes of this Agreement. In the event any Party is required
by law, regulation or order of a court or other authority of competent
jurisdiction to disclose the other Party's Confidential Information or Top
Secret Information (as applicable), such Party shall notify such other Party as
promptly as possible, and shall, upon such other Party's request and expense,
reasonably assist in challenging or restricting the scope of such required
disclosure. Top Secret Information may be disclosed only upon InterTrust's prior
written approval; provided that if Universal notifies InterTrust that it has
-------- ----
received an order from a court of competent jurisdiction requiring disclosure of
Top Secret Information: (i) Universal shall use reasonable efforts to resist
disclosure (including filing motions to limit disclosure to in camera
inspection); and (ii) if despite resisting such disclosure Universal is required
to produce such Top Secret Information and faces material consequences should it
refuse to so comply, Universal shall not be construed to have breached this
Agreement by disclosing such required information. In all events, a Party
subject to such required disclosure shall disclose only such information that is
strictly required pursuant thereto and no further information and shall have
provided InterTrust notices of such events on a frequent basis as here relevant
(the "Top Secret Disclosure Procedures").
--------------------------------
9.5 Confidentiality of Agreement and Publicity. Except as otherwise
------------------------------------------
provided in Sections 8.1, 9.4 and this Section 9.5 hereof, neither Party hereto
shall at any time, without the prior written consent of the other Party,
disclose the specific details of the terms and conditions of this Agreement to
any Person, other than: (i) Agents having a substantial need to know; (ii) as
required by law, for example, in connection with any initial public offering of
securities pursuant to a registration under the Securities Act of 1933, as
amended (an "IPO"); (iii) investors holding approximately one percent (1%) or
---
more of the outstanding equity shares of such Party prior to an IPO and having
no reasonably anticipated conflict of interest with the disclosing party; (iv)
potential investors who may purchase approximately one percent (1%) or more of
the outstanding equity shares of such Party prior to an IPO and having no
reasonably anticipated conflict of interest with the other Party; and (v)
financial institutions, professional advisors and/or other consultants having a
reasonable need to know and having no reasonably anticipated conflict of
interest with the other Party. In each and every case set forth above, the
receiving Person shall be bound by a confidentiality agreement sufficient in
scope to protect the Parties' rights and interests hereunder. Notwithstanding
the above, Universal may provide to potential partners (including [*] and [*])
and substantial equity investors of the Development Venture or Clearinghouse
Venture an opportunity to review, or to obtain, one copy (1) each of this
Agreement which copy has been previously redacted by mutual agreement of the
Parties to exclude terms that are not directly relevant for evaluation of
whether to participate in such venture (including, for example, with respect to
potential participants in the Development Venture, licenses for Clearinghouse
Functions in Section 4.3, provisions regarding most favored treatment regarding
access to technology in Section 3.1, InterTrust Specifications in Section 5.2(b)
and/or grant-back of licenses in Section 7.3, payment terms in Section 6.1(a),
and partnering commitments provisions of Section 8.4 (except that Universal may
replicate (or, at Universal's option, expand) such partnering commitment
provisions in the sublicense or delegation agreement to the Authorized Venture
pursuant to the terms hereof); provided that such Person: (1) has a need to know
-------- ----
and has no reasonable anticipated conflict of interest with InterTrust (except
that [*] and [*] shall not be deemed to have a material conflict with
InterTrust with respect to their Pre-Authorized Other Technology), (2) is bound
by a confidentiality agreement sufficient in scope to protect InterTrust's
rights and interests hereunder including restricting the disclosure of the
contents of such copy and further from copying or reproducing such redacted copy
and from using this Agreement or the information contained herein for any
purpose other than for the purpose of evaluating whether to participate in the
Development Venture or Clearinghouse Venture, as applicable (including in
connection with any discussions or negotiations with InterTrust concerning a
direct license relationship with InterTrust); and (3) shall be required in
writing to promptly return such copy to Universal, and Universal shall seek and
use all reasonable efforts to effect such return, if such potential partner or
equity investor ceases to be a potential partner or equity investor, or does not
consummate a transaction in the Development Venture or Clearinghouse Venture
within a reasonable period of time, or if such potential partner or equity
investor develops a material conflict of interest with InterTrust. Without the
prior written authorization of an InterTrust Designated Officer, no more than
twelve (12) copies of such redacted versions of this Agreement shall be
distributed in the aggregate; provided that a summary document concerning the
-------- ----
Agreement may be proposed by the Parties in the exercise of their discretion for
use in accordance with the foregoing. InterTrust shall be provided with the
name, affiliation, and address of each such
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
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recipient so as to know what Persons are in possession of its Confidential
Information. Notwithstanding the foregoing provisions of this Section 9.5: (a)
either Party may publicly discuss or otherwise disclose in general terms that an
agreement exists between the Parties to develop products and services using
InterTrust Technology, but may provide no further material details as to the
specific activities and commitments of the other Party, without the prior
written consent of such other Party; and (b) either Party may make such
disclosures to the extent permitted under this Section 9.5 or Section 8.4in
order to perform its obligations or exercise its rights under this Agreement.
9.6 Confidentiality of Payments, Audit and Certification Testing. All
---------------------------
information received during an audit or pursuant to a Certification Program as
provided herein, all information concerning Certification Testing results
(including information received pursuant to any Certification Testing), and all
payment information received pursuant to this Agreement, shall be treated as
confidential information pursuant to Sections 9.2(a) and 9.3 hereof.
Notwithstanding the foregoing, information concerning whether a Universal
Product or any associated services being disseminated or used in commerce is
Compliant with InterTrust Specifications ("Compliance Information") shall not be
----------------------
treated as Universal Confidential Information if such Universal Product and/or
associated service is being disseminated or used in contravention of the terms
and conditions of this Agreement. InterTrust agrees to provide Universal with
written notice in the event InterTrust ceases to treat such Compliance
Information as Universal Confidential Information pursuant to the foregoing.
9.7 NDA. Subject to the provisions of this Section 9, upon the
---
Effective Date of this Agreement, information relating to the subject matter of
this Agreement, when disclosed after the Effective Date by one Party to the
other Party shall be covered by the confidentiality provisions of this Section
9. Any information disclosed by one Party to the other Party relating to the
subject matter of this Agreement when disclosed prior to the Effective Date or
relating to subject matter outside of this Agreement shall be covered under the
Non-Disclosure/Non-Use Agreements between InterTrust and Universal Music Group
dated January 16, 1997, and between InterTrust and Universal Studios, Inc. dated
October 30, 1997.
10. REPRESENTATIONS AND WARRANTIES.
10.1 Representations and Warranties of Both Parties. Each Party
----------------------------------------------
represents and warrants to the other Party that as of the Effective Date:
(a) such Party is a corporation or a limited liability company
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction in which it is organized, with full corporate power and authority
to carry on its business as it is now being conducted;
(b) the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by such Party. No other corporate or shareholder action or other
proceeding on the part of such Party or its shareholders is necessary to
authorize this Agreement and the consummation of the transactions contemplated
hereby ;
(c) this Agreement constitutes a valid and binding obligation of
such Party, enforceable against such Party in accordance with its terms, except
that such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium, or similar laws now or hereafter in effect relating to creditors'
rights; and
(d) neither the execution, delivery and performance of this
Agreement nor the consummation of the transactions contemplated hereby will
violate any provision of the charter or organizational documents of such Party
or any order or judgment of any court or government agency or authority.
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10.2 Representations and Warranties of InterTrust. In addition to the
--------------------------------------------
other representations and warranties contained herein, InterTrust represents and
warrants to Universal that as of the Effective Date:
(a) InterTrust owns or has all necessary rights, title and
interest to grant the licenses hereunder;
(b) to InterTrust's knowledge, neither the InterTrust
Technology, the InterTrust Trademarks nor the Licensed Rights infringe any
Person's patent, copyright or trade secret right, and there are no active claims
or allegations of any such infringement pending; PROVIDED THAT INTERTRUST
-------- ----
MAKES NO WARRANTY WITH RESPECT TO THE INFRINGEMENT OF ANY INTELLECTUAL PROPERTY
RIGHTS OTHER THAN THE FOREGOING REPRESENTIATON THAT IT IS UNAWARE OF ANY SUCH
INFRINGEMENT; and
(c) InterTrust has in good faith employed commercially
reasonable steps in accordance with the U.S. software industry practices to: (i)
[*] and/or [*] the inclusion in any InterTrust Technology of any [*] (or [*])
that are intended to [*], [*], [*] or otherwise [*] with the operation of the
InterTrust Technology or Universal Products or cause such technologies to [*]
in a [*] manner [*] with reasonable business practices; and (ii) design and
develop the InterTrust Technology as delivered to Universal pursuant to this
Agreement to operate without [*] caused directly by the [*] in the [*] to the
[*], and to accurately [*] (without material error) [*] and [*] associated with
the [*] and [*]. A summary of [*] that have been taken is included in Exhibit J
hereto.
10.3 Limitation. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT TO THE
----------
CONTRARY, THE INTERTRUST TECHNOLOGY IS PROVIDED "AS IS" WITHOUT WARRANTY OF ANY
KIND, EITHER EXPRESSED OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE IMPLIED
WARRANTIES OR MERCHANTABILITY, FITNESS FOR A PARTICULAR REQUIREMENTS AND
NONINFRINGEMENT AND INTERTRUST DOES NOT WARRANT AS TO ANY MATTER THAT INTERTRUST
TECHNOLOGY WILL MEET UNIVERSAL'S REQUIREMENTS OR THOSE OF ANY THIRD PARTY AND,
IN PARTICULAR, INTERTRUST DOES NOT WARRANT THAT THE INTERTRUST TECHNOLOGY WILL
BE ERROR FREE OR WILL OPERATE WITHOUT INTERRUPTION.
10.4 Reporting Covenants. InterTrust shall promptly inform Universal
-------------------
Executive, in writing, of any breach by InterTrust of any provision hereunder
that comes to the attention of an InterTrust Designate Officer. Universal shall
promptly inform an InterTrust Designated Officer, in writing, of any breach by
Universal, an Authorized Venture (including any participant therein), and/or
Customer hereunder, of any provision hereof, or of the applicable sublicense or
Customer Agreement, that comes to the attention of a Universal Executive.
11. INDEMNIFICATION AND REMEDIES.
11.1 Indemnification.
---------------
(a) InterTrust Indemnification. InterTrust shall indemnify,
--------------------------
defend and hold Universal and its employees, agents, officers and directors (the
"Universal Parties") harmless from any and all liability, judgments, costs,
-----------------
damages, claims, suits, actions, proceedings, expenses and/or other losses,
including reasonable attorneys' fees (collectively, "Claims") or portions
------
thereof, to the extent awarded by a court of competent jurisdiction or pursuant
to a settlement as provided hereunder, resulting from controversies or
litigation asserted by any third Person against the Universal Parties arising
directly or indirectly from: (i) InterTrust's breach of any of its obligations
under this Agreement, or its representations and warranties set forth herein;
and (ii) Universal's proper use of InterTrust Trademarks as set forth herein;
provided, however, that, with respect to InterTrust's representations under
- -------- ------- ----
Section 10.2(b) hereof, this indemnity does not extend to any Claim relating to:
(1) any Modified Technology or other modifications thereto made by Universal or
any third Person or combinations of the InterTrust Technology with any product,
technology or service of Universal or of any
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
39
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CONFIDENTIAL
Person where such Claim (to the extent directly related to such modifications or
combination) would have been avoided in the absence of such modification or
combination; or (2) the use of any InterTrust Technology in any manner
inconsistent with InterTrust Specifications or Documentation where such Claim
(to the extent directly related to such inconsistency) would have been avoided
in the absence of such inconsistent use.
(b) Universal Indemnification. Universal shall indemnify, defend
-------------------------
and hold InterTrust, its employees, agents, officers and directors (the
"InterTrust Parties") harmless from any and all Claims or portions thereof to
------------------
the extent awarded by a court of competent jurisdiction or pursuant to a
settlement as provided hereunder, resulting from controversies or litigation
asserted by any third Person against the InterTrust Parties arising directly or
indirectly from: (i) Universal's breach of any of its obligations under this
Agreement, or its representations and warranties set forth in Section 10 hereof;
(ii) InterTrust's proper use of Universal Trademarks as set forth herein; and
(iii) the design, manufacture, use, distribution and/or disposition by or for
Universal of Modified Technology, Universal Products, performance of any service
associated with the foregoing, and/or other exercise by Universal of the
licenses hereunder, except where such Claims (1) would have arisen solely out of
InterTrust Technology as directly provided to Universal by InterTrust in the
absence of Universal activities hereunder other than the development and
distribution of solely InterTrust Technology, or (2) arose out of modifications
to Universal Products which were expressly required by InterTrust Specifications
and the implementations of such modifications have been expressly approved in
writing by an InterTrust Designated Officer or an InterTrust delegate acting
under the direction of InterTrust pursuant to a Certification Program as set
forth in Section 5.2; and further, except to the extent Universal is indemnified
by InterTrust under Section 11.1(a) hereof.
(c) Third Party Claims. In case any Claim is brought by a third
-------------------
Person for which Claim indemnification is or may be provided hereunder the
indemnified Party shall provide prompt written notice thereof to the other
Party. Where obligated to indemnify such Claim, the indemnifying Party shall
assume the defense thereof (at the expense of the indemnifying Party) within
thirty (30) days or at least ten (10) days prior to the time a response is due
in such case, whichever occurs first. The Parties shall cooperate reasonably
with each other in the defense of any Claim, including making available (under
seal if desired, and if allowed) all records reasonably necessary to the defense
of such Claim, and the indemnified Party shall have the right to join and
participate actively in the indemnifying Party's defense of the Claim, at
indemnifying Party's expense for co-representation of counsel or at its own
expense for independent counsel, except that the indemnifying Party shall pay
for reasonable expense of independent counsel for the indemnified Party where
the indemnified Party is advised by outside legal counsel that a material
conflict of interest exists in such defense being provided by the indemnifying
Party. Notwithstanding the foregoing (and any other section of this Agreement),
it is understood and acknowledged that InterTrust need not under any
circumstance provide Top Secret Information related to the security capabilities
of InterTrust Technology to any Person except nothing in the immediately
foregoing shall apply to the Top Secret Disclosure Procedures in Section 9.4
hereof. Each Party shall be entitled to prior notice of any settlement of any
Claim to be entered into by the other Party and to reasonable approval of a
settlement to the extent such Party's rights would be directly and materially
impaired thereby. Without limiting the foregoing, in the event of any Claim or
threatened Claim that the InterTrust Technology infringes any third Person's
Intellectual Property Rights: (1) upon Universal's request, InterTrust will use
[*] to [*] the [*] or [*] for Universal to [*] and otherwise [*] in
accordance with the terms and conditions hereof such portion of [*] on [*]
reasonably acceptable to both Parties, each in the exercise of its own
discretion (except that Universal shall be solely responsible for paying all
[*] or [*] of any kind in connection with such [*] and, therefore, may
exercise its sole discretion with respect to reasonable approval of any terms
relating to [*] of any such [*]); or (2) at InterTrust's sole discretion,
InterTrust may use [*] to [*], [*] or [*] any such [*] of the [*], as the case
may be, so as to [*] of the [*] while maintaining [*] of such [*] or [*] of
the InterTrust Technology that are material to Universal's then-current use of
such technology. If options (1) and (2) are not [*] in each Party's reasonable
discretion: (A) Universal shall have the right, as its sole and exclusive
remedy in connection with such Claim, threatened Claim or action of InterTrust
in accordance with this Section 11.1(c), to terminate, without any liability,
the licenses granted hereunder, so long as such Claim or threatened Claim or
action of InterTrust relates materially to the performance of InterTrust
Technology as used by Universal; and (B)
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
40
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InterTrust shall have the right to, if it has a material risk of liability from
Universal's or its sublicensees' continued use of such portion of InterTrust
Technology (and further has not succeeded in obtaining or modifying the
technology in accordance with the foregoing subparagraphs (1) and (2)),
terminate, without any liability, the licenses granted hereunder, and any such
termination shall be upon thirty (30) days prior written notice. If at any time
during the Term InterTrust grants to any third Person in the Entertainment Field
in connection with a license to InterTrust Technology [*] set forth in the
immediately two preceding sentences, Universal [*], so long as Universal has
continuously treated and continues to treat, Intertrust Technology as its
Preferred Technology at all times in a consistently uninterrupted manner in all
material respects, and any evaluation of [*].
11.2 Cumulative Remedies. Except as expressly provided herein to the
-------------------
contrary, no remedy made available to a Party by any of the provisions of this
Agreement is intended to be exclusive of any other remedy, and each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
11.3 Equitable Remedies. Each Party agrees that it may be impossible
------------------
or inadequate to measure and calculate a Party's damages from any breach of the
covenants set forth in Sections 4.5, 5, 6.7, 7, 8.4, 9, 11.1(c) solely with
respect to the obligation to defend, 13.3(a), 14.5 and 14.8 hereof. Accordingly,
each Party agrees that if it or any of such Party's Agents thereof breach or
threaten a breach or anticipatory repudiation of any of such provisions, in
addition to any other right or remedy available, the other Party shall be
entitled: (i) to obtain an injunction against the breaching Party and such
Party's Agents thereof, from a court of competent jurisdiction restraining such
breach or threatened breach; and (ii) to specific performance of any such
provision of this Agreement; provided that the foregoing shall not relieve such
other Party from any legal requirement to show irreparable harm and likelihood
of success on the merits.
12. EXCLUSION OF DAMAGES.
EXCEPT AS SET FORTH IN THE IMMEDIATELY FOLLOWING SENTENCE, NEITHER PARTY SHALL
BE LIABLE TO THE OTHER PARTY, ITS AGENTS, AFFILIATES, CUSTOMERS, OR ANY OTHER
PERSONS, FOR ANY LOST PROFITS, INCIDENTAL, INDIRECT, OR CONSEQUENTIAL DAMAGES,
ARISING OUT OF THE BREACH OF THIS AGREEMENT OTHER THAN UNDER SECTIONS 7, AND 9
AS PROVIDED IN THE IMMEDIATELY FOLLOWING SENTENCE. NOTWITHSTANDING THE
IMMEDIATELY PRECEDING SENTENCE, A PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR
ALL DAMAGES, INCLUDING LOST PROFITS, INCIDENTAL, INDIRECT, OR CONSEQUENTIAL
DAMAGES SUFFERED OR INCURRED BY THE OTHER PARTY IN THE FOLLOWING CIRCUMSTANCES:
(i) THE MISAPPROPRIATION OF TRADE SECRETS OF THE DAMAGED PARTY BY THE LIABLE
PARTY, OR ITS AGENTS; (ii) THE BREACH OF SECTIONS 7, OR 9 HEREOF WITH RESPECT TO
ANY CONFIDENTIAL INFORMATION OR TOP SECRET INFORMATION DISCLOSED IN WRITING AND
MARKED AS CONFIDENTIAL OR TOP SECRET IN ACCORDANCE WITH SECTION 9 OR CONFIRMED
IN WRITING AS CONFIDENTIAL OR TOP SECRET (SUCH AS AFTER ORAL DISCLOSURE), BUT
SOLELY WHERE SUCH BREACH OCCURRED AFTER SUCH CONFIRMATION OR MARKING IN WRITING;
OR (iii) WILLFUL AND BAD FAITH BREACH OF THIS AGREEMENT OF ALL MATERIAL
OBLIGATIONS UNDER THIS AGREEMENT.
13. TERM AND TERMINATION.
13.1 Agreement. This Agreement shall commence on the Effective Date
---------
and, unless and until terminated earlier in accordance herewith, shall continue
for a period of ten (10) years (the "Initial Term"). At the end of such Initial
------------
Term, if and only if Universal shall have at all times during the Initial Term
(except for the initial eighteen (18) month period thereof) treated InterTrust
Technology as its Preferred Technology on a consistently uninterrupted manner in
all material respects, this Agreement shall continue for so long and solely for
so long, as Universal continues to treat InterTrust
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
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Technology as its Preferred Technology (the "Term"). If at any time Universal,
----
by decision of any of its executive management with authority to make such
decision, intentionally ceases, or decides to cease and takes material steps
towards ceasing, treating InterTrust Technology as its Preferred Technology,
Universal shall provide InterTrust with reasonably prompt written notice of such
actions or decision and, if the Initial Term has expired InterTrust may
terminate this Agreement upon thirty (30) days prior written notice. It is
acknowledged and agreed that Universal will have the opportunity to cure any
interruption in treatment of InterTrust Technology as its Preferred Technology
-- so long as such interruption was not the result of an intentional decision
of any of its executive management directed at ceasing the treatment of
InterTrust Technology as Universal's Preferred Technology -- in the same manner,
and in accordance with the timing and procedures set forth in Section 13.2(a)
after its receipt of any written notice from InterTrust describing in reasonable
detail the nature of any interruption known to InterTrust officers (the
"InterTrust Preferred Cure Notice"). In the event Universal fails to cure such
--------------------------------
interruption as specified previously above and reinstate the treatment of
InterTrust Technology as the [*] in accordance with the foregoing and the cure
provisions of Section 13.2(a), Universal shall be deemed to have failed to treat
InterTrust Technology as its [*] for purposes of this Section 13.1 and the
Initial Term shall not be extended or if the Initial Term is then already
extended InterTrust may immediately terminate this Agreement upon thirty (30)
days prior written notice.
13.2 Events of Termination. This Agreement and the licenses granted
---------------------
hereunder shall be subject to termination upon the occurrence of any of the
following events and such other provisions hereof expressly so stating (each, an
"Event of Termination"):
--------------------
(a) If either Party materially defaults on any of its material
obligations under this Agreement (or a Customer Agreement, as applicable) the
non-defaulting Party (or InterTrust in the case of a breach by a Universal
Customer) shall have the right, exercisable in its sole discretion, to initiate
a termination procedure under this Agreement by written notice (sent in
accordance with the provisions of Section 14.6 hereof) describing with
reasonable specificity the nature of the default and requiring that such default
be cured (the "Default Notice"), wherein such Default Notice shall automatically
--------------
result in termination unless: (i) within sixty (60) calendar days of receiving
such Default Notice (the "Cure Period"), the defaulting Party remedies the
-----------
default; or (ii) in the case of a default that cannot with earnest due diligence
be cured within the Cure Period, the defaulting Party institutes, by the date
upon which one half of the Cure Period shall have expired, steps necessary to
remedy the default and thereafter employs best efforts to diligently prosecute
the same to completion no later than six (6) months from the date of such
Default Notice. Notwithstanding the foregoing, the Cure Period associated with a
breach of payment obligations in accordance with Section 6 shall be thirty (30)
days. Notwithstanding any of the foregoing, a Party shall have the right both to
immediately terminate this Agreement and to injunctive relief as set forth in
Section 11.3 in the event the other Party or any of its Agents engages in any:
(1) intentional, material unauthorized use of technology outside of the rights
granted hereunder (or, in the case of Universal, any unauthorized disclosure of
information marked or confirmed by InterTrust in accordance herewith as
InterTrust Top Secret Information) and/or (2) willful, material unauthorized
disclosure of Confidential Information or Top Secret Information, provided that
such was conducted in intentional violation of this Agreement and where, in the
case of InterTrust any InterTrust Designated Officer or other executive manager,
and in the case of Universal any Universal Executive, had knowledge of such
intended unauthorized use or disclosure prior to the occurrence of any such
acts. The non-defaulting Party agrees to use reasonable efforts to advise the
defaulting Party after the occurrence of a default by the defaulting Party of
any material obligation under this Agreement promptly upon such non-defaulting
Party's officers or other executive management becoming aware of such default.
In the event a non-defaulting Party fails to provide a Default Notice within
ninety (90) days after officers or other executive management of such non-
defaulting Party (and in the case of InterTrust, executive management including
the Chairman and/or President, and General Counsel and/or VP, Legal), and in the
case of Universal, executive management including one or more Universal
Executives) have reviewed facts regarding a default (including any
correspondence between the Parties) that justifies termination of this Agreement
and has determined to commence termination of this Agreement under this
subparagraph (a) as such determination is represented in a written statement or
memorandum, such non-defaulting Party shall be deemed to have waived its right
of termination of this Agreement under this subparagraph (a); provided that such
waiver shall not limit any right to recover damages or other rights or remedies
of such non-defaulting Party under this Agreement or at law or in equity.
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
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(b) By a Party at its option, effective immediately upon
written notice to the other Party, in the event of: (i) the filing by the other
Party of a petition in bankruptcy or insolvency; (ii) the appointment of a
receiver for the other Party for all or substantially all of its property
relevant to the business activities under this Agreement; (iii) the making by
the other Party of any assignment or attempted assignment for the benefit of
creditors for all or substantially all of its properties relevant to its
business activities under this Agreement; or (iv) this institution of any
proceedings for the liquidation or winding up of the other Party's business or
for the termination of its corporate charter, if any such proceeding is not
dismissed within one hundred and twenty (120) days of institution ;
(c) Upon written notice to Universal, InterTrust may
immediately terminate this Agreement in its discretion in the event: (i)
Universal fails (1) to generally distribute any Universal Products within
eighteen (18) months from the date InterTrust first delivers the Commerce 1.1 to
Universal, and/or makes no release of any Universal Product materially
commercially available for any consecutive eighteen (18) month period during
this Agreement, provided that such time period shall be extended by any period
-------- ----
in which (A) there exists a Material Defect in the InterTrust Technology that
materially impedes Universal's development and distribution efforts, but only
for the period from the date that Universal documents such defect as provided in
Section 3.2(b) hereof to the date InterTrust has reasonably corrected or
mitigated such defect as provided in Section 3.2(b), or (B) there exists a delay
in InterTrust's response with respect to certification of Universal Product as
stipulated in Section 5.2(c)(iii), (2) after the Initial Support Period to
timely make payments due under this Agreement on three or more occasions over an
[*] month period where InterTrust has provided to Universal a written warning
notice after the second occasion that any further failure to timely make
payments will be subject to InterTrust's termination hereunder, or (3) engages
in conduct directly contrary to a partnering relationship by providing, or
positioning itself as a provider, to multiple third Persons (other than its
distributed labels who distribute music under the Universal Trademarks) of any
Special Advanced Technology (other than InterTrust Technology) wherein such
Special Advanced Technology has been developed specifically by and/or for
Universal (and provided that the foregoing provisions of this subparagraph (3)
shall not be construed to include licensed activities as set forth herein); or
(ii) any litigation is initiated against any Person entitled to the benefits of
the licenses under Section 7.3 arising out of or alleging infringement of any
intellectual property right of Universal or its Controlled affiliates, or
Persons acting under Universal's or such Controlled affiliate's direction and/or
control, where such intellectual property right would have been licensed under
Section 7.3 hereof had such intellectual property right been held by Universal;
and
(d) By Universal by providing written notice to InterTrust
within the thirty (30) days of the date which is eighteen (18) month after the
Effective Date where: (i) the Commerce 1.1 of InterTrust Technology contains [*]
that render such technology [*] and from being [*] in a software-only
implementation as would be reasonable for a distributed peer-to-peer software
instantiation ("[*]"); and (ii) Universal has provided InterTrust written notice
---
of such [*] in the same manner as set forth in Section 3.2(b) as early as
possible after discovery of such [*] and InterTrust has been given the
opportunity to review and undertake the cure procedures under Section 13.2(a).
The foregoing right of termination shall terminate and no longer be exercisable
if at any time Universal has transferred any Universal Product to third Persons
(other than Contractors and Persons participating in a non-commercial beta test
for no monetary remuneration). Upon the exercise of the foregoing termination
right under this subparagraph (d), notwithstanding any contrary provisions
contained herein, any and all rights and licenses of Universal under this
Agreement (including the rights and licenses under Section 13.3(b)) shall
immediately terminate.
13.3 Effect of Termination.
---------------------
(a) General. Upon the expiration or termination of this
-------
Agreement and except (and solely except) as set forth in Section 13.3(b) hereof:
(i) all licenses granted hereunder, and all sublicenses and delegations granted
or made hereunder, shall automatically terminate; (ii) InterTrust shall have the
right to retain all sums already paid by Universal hereunder, and Universal
shall pay to InterTrust within thirty (30) days thereafter all sums owed
InterTrust according to the terms and conditions hereof subject to adjustments
in accordance with Section 6.7; and (iii) Universal shall immediately
discontinue use of InterTrust Technology and/or the use of any portion of such
InterTrust Technology in
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
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any Modified Technology, and discontinue making, using, selling or otherwise
transferring or exploiting any product or service that in the absence of a
license hereunder would infringe any InterTrust Intellectual Property Rights
(including termination of distribution of Universal Products and any associated
services); provided, however, that all licenses properly granted to end-users
-------- ------- ----
pursuant to the then-existing Customer Agreements solely for Universal Products
shall continue in full force and effect in accordance with the terms thereof
(provided that such licenses do not provide any rights to such end-users with
respect to Clearinghouse Functions, other than as expressly provided hereunder).
Each Party shall deliver to the other Party within thirty (30) days from the
date of termination of this Agreement all copies of all materials protected as
Confidential Information or Top Secret Information under this Agreement,
including all copies under its control or under the control of its Agents.
Return of Confidential Information shall be by commercially secure means as
reasonably specified by the receiving Party. Return of Top Secret Information
shall be made, at InterTrust's option as specified by a InterTrust Designated
Officer by written instruction to Universal: (a) by physical and secure pickup
at Universal's offices by an InterTrust officer designated in writing by such
InterTrust Designated Officer; or (b) as otherwise may be determined by
InterTrust in its discretion, as commercially reasonable. Such delivery shall be
during normal business hours and in each instance to the hands of an InterTrust
officer who receives a listing of the contents of such delivery certified by an
officer of Universal and audited and countersigned by such InterTrust officer.
Within one (1) month after the termination of this Agreement, each Party will
certify in writing to the other Party that, to the best of its knowledge, all
such materials and tangible embodiments have been delivered to the other Party.
(b) Limited License for Maintenance of Legacy Content. Upon the
----------------------------------------------
expiration of the Term (and if Universal shall have complied with its
obligations under Sections 5.1, 7, 8.4 and 9 and other provisions of this
Agreement), Universal shall continue to have the [*] (the "Legacy License"),
--------------
for the term of the useful life of the Legacy Product (as defined below), solely
to: (i) [*] InterTrust Technology to [*] and [*] for Universal Products that
have then been [*] as of the date of such expiration or termination ("Legacy
Products"); (ii) [*] Compliance Updates to users of such Legacy Products in
accordance with the terms and conditions hereof; and (iii) have an Authorized
Clearinghouse Provider perform Clearinghouse Functions for InterRights Point [*]
such Legacy Products. The Legacy License (and Universal's exercise thereof)
shall at all times be contingent upon Universal compliance with: (1) Sections 1,
5.2, 5.3, 5.5, 5.7, 6.1, 6.3, 6.4, 6.5, 6.6, and 7.3; and (2) those Sections
that survive in accordance with Section 13.4. Nothing contained herein shall be
construed to grant Universal any right to, and Universal agrees not to, perform
any Clearinghouse Functions after the expiration of the Term or termination of
this Agreement pursuant to Section 13.1.
13.4 Survival. The respective rights and obligations of
--------
InterTrust and Universal under the provisions of Sections 4.4, 4.5, 5.2, 5.4,
5.5, 6.6, 6.7 (but only for a period of five (5) years), 7.1, 7.2, 8.4 (but only
in the event that Universal has breached this Agreement), 9, 10.3, 10.4, 11 (but
only 11.1(b), 11.1(c), 11.2 and 11.3 as applicable to Section 13.3(b)), 12, 14,
and this Section 13 shall survive expiration or termination of this Agreement.
14. MISCELLANEOUS.
14.1 Governing Law. This Agreement, any and all actions arising
-------------
out of or in any manner affecting the interpretation of this Agreement, and any
actions between the Parties involving the InterTrust Technology, any InterTrust
Property and/or any Confidential or Top Secret Information ("Party Disputes")
--------------
shall be governed solely by, and construed solely in accordance with, the laws
of the United States of America and: (i) the substantive and procedural law
(excluding that body of law involving conflicts of law) of the Commonwealth of
Virginia, where any claim, counterclaim or defense in such Party Dispute
involves a material issue based in whole or in part on, or concerning (including
where a decision as to such issue could directly affect the validity,
enforceability, ownership, scope or interpretation of any of the Party's
Intellectual Property Rights) any (a) InterTrust Confidential Information or Top
Secret Information, (b) InterTrust Property (as defined in Section 7.1), and/or
(c) Intellectual Property Rights (an "IP Dispute(s)"); and (ii) the substantive
-------------
and procedural law (excluding that body of law relating to conflict of laws) of
the State of California for Party Disputes that do not involve an IP Dispute,
unless trial and/or pre-trial preceding in such Party Dispute that does not
involve an IP Dispute
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
44
<PAGE>
CONFIDENTIAL
are joined and/or consolidated with an IP Dispute proceeding in accordance with
Section 14.2(iii), in which case the provisions of the immediately proceeding
subparagraph (i) shall apply to such Party Dispute. The Parties hereby
acknowledge and agree that the United Nations Convention on Contracts for the
International Sale of Goods shall not apply to this Agreement. To the extent
permitted by law, the provisions of this Agreement shall supersede any
provisions of the Uniform Commercial Code as adopted or made applicable to this
Agreement in any competent jurisdiction.
14.2 Venue and Jurisdiction. The Parties recognize the
----------------------
importance to: (i) InterTrust of having any litigation between the Parties
involving an IP Dispute adjudicated in the Federal District Court for the
Eastern District of Virginia (Alexandria Division) (or any direct successor
thereto), or, if required by law, the Commonwealth courts located in Alexandria,
Virginia (the "Virginia Venue"); and (ii) Universal of having any litigation
--------------
between the Parties not involving an IP Dispute adjudicated in the Federal
District Courts in California (or any direct successor thereto), or, if required
by law, such state courts there located (the "California Venue"). Therefore, in
----------------
connection with any litigation between the Parties involving an IP Dispute, each
Party hereby unconditionally and irrevocably consents to the exclusive
jurisdiction and venue in the Virginia Venue, and in any litigation between the
Parties not involving an IP Dispute, each Party hereby unconditionally and
irrevocably consents to the exclusive jurisdiction of the California Venue as
chosen by the plaintiff with respect to such claim. Consistent with the
immediately foregoing, each Party irrevocably: (i) waives any objection and
covenants that it shall refrain from making any motion concerning personal
jurisdiction, venue, transfer, or convenience of the Parties with respect to a
Party Dispute filed in said courts; (ii) consents to the service of process of
said courts in any matter relating to this Agreement by the mailing of process
by registered or certified mail, postage prepaid, at the addresses specified in
the Agreement (or if necessary, the appointment of a registered agent for
acceptance of service of process and/or other notices provided for under this
Agreement); and (iii) agrees that if any pending actions between the Parties are
required to be joined and/or consolidated in any manner (and one or more of such
actions involve an IP Dispute), the Virginia Venue shall be the venue that
exclusively presides over such joined and/or consolidated actions.
14.3 Compliance with Law and Export Controls. The Parties shall
---------------------------------------
at all times comply with all applicable U.S. and foreign federal, state, and
local laws, rules and regulations relating to the execution, delivery and
performance of this Agreement and to the InterTrust Technology Products and
Modified Technology. Additionally, Universal acknowledges that because one or
more aspects of the InterTrust Technology Products is likely to be subject to
the export control laws, regulations and requirements of the United States and
other jurisdictions, Universal Products likely will require export and other
approvals as well. InterTrust has obtained export approval concerning
implementations of Commerce 1.1, and with respect to additional InterTrust
Technology products, shall use commercially reasonable efforts at InterTrust's
expense and discretion to obtain additional license or other approvals, if any,
that may be required for InterTrust to make the InterTrust Technology and/or
Documentation or information relating thereto generally available
internationally. Universal shall use commercially reasonable efforts, at
Universal's expense, to comply with all applicable laws (including applicable
U.S. export control laws and regulations) and use commercially reasonable
efforts to obtain all necessary governmental consents and approvals in
connection with the distribution of or export or re-export of the Universal
Products (as well as other technology as expressly permitted hereunder) that
contain any part of the InterTrust Technology or Modified Technology in
accordance herewith. The Parties expressly agree that any failure to obtain or
any delay in obtaining such approval as to InterTrust Technology or in
connection with any Universal Product shall not relieve either Party from its
obligations under this Agreement.
14.4 Amendment or Modification. This Agreement may not be
-------------------------
amended, modified or supplemented by the Parties in any manner, except by an
instrument in writing signed by the President or Chairman of InterTrust and a
duly authorized officer of Universal.
14.5 No Assignment. Universal acknowledges that the licenses and
-------------
rights granted by InterTrust to Universal under this Agreement are personal to
Universal, and Universal shall not assign or transfer its rights or obligations
hereunder without the prior written consent of an InterTrust Designated Officer.
InterTrust shall not assign or transfer its rights or obligations hereunder
without Universal's prior written consent, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, InterTrust and/or
Universal shall be entitled to assign or transfer such rights or
45
<PAGE>
CONFIDENTIAL
obligations hereunder in connection with any merger or sale of substantially all
of assets, equity, or business of InterTrust and/or Universal (as applicable)
related to this Agreement provided that: (i) Universal may not assign or
transfer any such rights or obligations hereunder to a Person that is a
Competitive Entity; and (ii) any successor in interest to InterTrust shall, for
a period no less than six (6) months from the consummation of such merger or
sale, continue to actively and in good faith support InterTrust Technology in a
manner consistent with the practices of InterTrust immediately prior to a merger
or sale under this Agreement. Universal may assign this Agreement to Universal
Studios, Inc. or a Controlled affiliate thereof which, directly and/or
indirectly through its Controlled affiliates, own, control or have the exclusive
rights to license music Content branded under Universal Trademarks. Further,
Universal may not assign or transfer any such rights or obligations hereunder to
any Person that is materially coordinating material commercial efforts related
to content distribution or distributed Digital Rights Management with a Person
that is a Competitive Entity. Subject to the foregoing, this Agreement will
benefit and bind the successors and permitted assigns of the Parties. Any
attempted transfer or assignment without such approval shall be null and void ab
initio and of no force or effect; and the sole result of any failure to approve
such assignment or transfer of rights shall be termination of this Agreement in
accordance with the provision of Section 13.
14.6 Notices. Any notice or other communication to be given
-------
hereunder shall be in writing and shall be (as elected by the Party giving such
notice): (i) personally delivered; and (ii) transmitted by postage prepaid
registered or certified airmail, return receipt requested. Unless otherwise
provided herein, all notices shall be deemed to have been duly given on: (a) the
date of receipt (or if delivery is refused, the date of such refusal) if
delivered personally or by express courier; or (b) ten (10) days after the date
of posting if transmitted by mail. Notwithstanding the foregoing, communication
of Confidential Information or Top Secret Information shall be governed by
practices adequate to appropriately protect such information regarding Top
Secret Information or as may be specified herein or in the future by InterTrust.
Either Party may change its address for purposes hereof on not less than three
(3) days prior notice to the other Party. Notice hereunder shall be directed:
If to Universal: If to InterTrust:
70 Universal City Plaza, 3rd Floor 460 Oakmead Parkway
Universal City, California 91608 Sunnyvale, California94086
Attn: SVP Business & Legal Affairs Attn: General
Counsel
cc: Head of Electronic Commerce & Advance Technology
14.7 Waiver. Any provision of this Agreement may be waived by
------
the Party entitled to the benefit thereof. Neither Party shall be deemed, by any
act or omission, to have waived any of its rights or remedies hereunder unless
such waiver is in writing and signed by, in the case of InterTrust, InterTrust's
President or Chairman, and in the case of Universal, a Universal authorized
officer, and then only to the extent specifically set forth in such writing. A
waiver with reference to one event shall not be construed as continuing or as a
bar to or waiver of any right or remedy as to a subsequent event.
14.8 No Third Party Beneficiaries. Except as expressly provided
----------------------------
herein to the contrary, nothing in this Agreement is intended to confer, nor
shall anything herein confer, upon any Customer or any Person other than the
Parties and any respective successors or permitted assigns of the Parties, any
rights, obligations, or remedies hereunder.
14.9 No Agency. Nothing herein contained shall be construed to
---------
constitute the Parties hereto as partners or joint venturers or the agent of
the other Party in any sense of those terms whatsoever. Neither Party assumes
any liability of the other Party nor shall have any authority to enter into any
binding obligation on behalf of the other Party.
14.10 Severability. If the application of any provision or
------------
provisions of this Agreement to any particular facts or circumstances shall be
held to be invalid or unenforceable by any court of competent jurisdiction,
then: (i) the validity
46
<PAGE>
CONFIDENTIAL
and enforceability of such provision or provisions as applied to any other
particular facts or circumstances and the validity of other provisions of this
Agreement shall not in any way be affected or impaired thereby; and (ii) such
provision or provisions shall be reformed without further action by the Parties
hereto and only to the extent necessary to make such provision or provisions
valid and enforceable when applied to such particular facts and circumstances.
14.11 Counterparts; Facsimiles. This Agreement may be executed
------------------------
in any number of counterparts, each of which when so executed and delivered
shall be deemed an original, and such counterparts together shall constitute one
and the same instrument. Each Party shall receive a duplicate original of the
counterpart copy of copies executed by it. For purposes hereof, a facsimile copy
of this Agreement, including the signature pages hereto, shall be deemed to be
an original. Notwithstanding the foregoing, the Parties shall deliver original
execution copies of this Agreement to one another as soon as practicable
following execution thereof.
14.12 Force Majeure. Except as provided herein to the contrary,
-------------
if, by reason of labor dispute, strike, inability to obtain labor or materials,
fire or other action of the elements, accident, administrative or governmental
restriction or appropriation or other causes, whether like or unlike the
foregoing, beyond the reasonable control of a Party hereto, such Party is unable
to perform in whole or in part its obligations set forth in the Agreement, then
such Party shall be relieved of those obligations to the extent it is so unable
to perform, and such inability to perform, so caused, shall not make such Party
liable to the other Party. Notwithstanding the foregoing, in the event any such
cause delays either Party's performance of any of its material obligations under
this Agreement, the other Party may suspend its performance under this Agreement
of the period such delay continues. This Agreement may be terminated by notice
by the Party not seeking excuse from performance, if such event shall prevent
performance for longer than two hundred and seventy (270) days. The Party
subject to an event of force majeure shall use good faith efforts to comply as
closely as possible with the provisions of this Agreement and to avoid the
effects of such event to the extent possible.
14.13 Entire Agreement. This Agreement (together with Exhibits
----------------
hereto) represents the entire agreement of the Parties with respect to the
subject matter hereof and supersedes all prior and/or contemporaneous agreement
sand understandings, written or oral between the Parties with respect to the
subject matter hereof (except as set forth in Section 9.7 hereof).
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of
the date first written above by the undersigned duly authorized.
INTERTRUST TECHNOLOGIES UNIVERSAL MUSIC GROUP, INC.
CORPORATION
By:______________________________ By:___________________________
Name: Victor Shear Name:_________________________
Title: Chairman and Chief Executive Officer Title:________________________
47
<PAGE>
EXHIBIT A
TO THE TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
INTERTRUST TECHNOLOGY ESTIMATED PRODUCT DELIVERABLES
----------------------------------------------------
I. INTERTRUST TECHNOLOGY: PRODUCTS AND DOCUMENTATION
II. INTERTRUST AUTHORIZED APPLICATION SOFTWARE
III. INTERTRUST AUTHORIZED CLEARINGHOUSE SOFTWARE
IV. INTERTRUST CORE TECHNOLOGY
<PAGE>
I. INTERTRUST TECHNOLOGY ESTIMATED PRODUCT DELIVERABLE
A. InterTrust Commerce Release 1.1
-------------------------------
The InterTrust Commerce Release 1.1 provides a broad range of software,
components and sample applications that allow developers to incorporate highly
flexible and distributed Digital Rights Management and the persistent protection
of digital information into computer software, and to support e-commerce
businesses, infrastructures and clearinghouses. In general, this software:
. facilitates the rapid integration of InterTrust(TM) secure electronic commerce
and digital rights management technologies into customer-specific
applications;
. enables development of rights management tools for viewing, packaging and
editing;
. allows the creation of Secure Containers for music-, video-, text-, image-
based, and other forms of digital content. DigiBox containers, in combination
with other InterTrust Technology capabilities, provide persistent protection
of digital information across information networks and through digital
distribution channels in a software-only manner;
. permits specification of conditions and consequences governing the use of
digital data and windows design compliant executables. These conditions may
include distributed usage management, auditing, and payment control related to
client interaction with (and usage of) digital information;
. has client and server support for Windows 95, Windows 98, and NT 4.0 and
server support for Windows NT 4.0 and Solaris 2.5.1;
. enables integration with customer-specific services, such as: payment,
financial and usage clearinghouses, multiple network protocols, database
systems, updates, etc; and
. supports deployment services for installation and registration.
InterTrust Technology may have, and Material Defects shall not include,
differing security characteristics regarding differing levels of tamper
resistance resulting from, for example, employing differing combinations of
tamper resistance design and techniques. For example, it is recognized that
software tamper resistance techniques will not be as resistant to attack as
hardware tamper resistance techniques, and certain tamper resistance techniques
will be more resistant to attack than other tamper resistance techniques and
that the degree of tamper resistance normally results from a combination of
techniques and design decisions, wherein various combinations have differing
degrees and characteristics of tamper resistance.
1. Commerce 1.1 Deliverables:
--------------------------
Commerce 1.1 delivers software, development tools, and documentation for
creating InterTrust-aware applications and run-time environments, and provides
the framework for clearinghouse activities and deployment activities, including
deployment administration. Production-level core InterTrust software,
application programming interfaces and tools, and sample software applications
are provided.
The deliverables represent product sets, each targeted to support a different
are of InterTrust rights functionality. They are:
. Application Developer's Kit ("ADK");
---
. Transaction Authority Software, including the Clearinghouse Developer's Kit;
<PAGE>
. Deployment Manager Developer's Kit; and
. InterRights(TM) Point (Golden Master).
In Commerce 1.1, these product sets are released together. For future releases,
and at InterTrust's discretion, these product sets may be independently
delivered and may be available as independent deliverables.
a. Applications Developer's Kit 1.1:
---------------------------------
The Application Developer's Kit provides programming libraries, sample
applications that demonstrate packaging and viewing, certain deployable
application and components, source code for the sample applications, pre-
activated (non-deployable) InterRights Points for test purposes, and
documentation.
. Core Technology Software - Object Code
- InterTrust Programming Libraries (including ITAPI, the Layout Interpreter
Library, Rights Management Library, and utility libraries).
- Pre-activated InterRights Points (software to support the development
environment).
- ITAPI: The programming interface to the InterRights Point software
includes functions that are used to package and read DigiBox containers,
specify business rules, and perform administrative functions associated
with use of DigiBox containers.
- InterTrust Interoperability Library [*]: This interface uses ITAPI to
construct various governed elements, such as budget objects, [*] objects,
and [*] objects. It manages the construction of the controls required for
these objects and is intended to provide consistent use of those controls
to help enable interoperability of objects.
- InterTrust Layout Interpreter Library [*]: The internal organization of a
DigiBox container usually is specified in a layout template produced by the
Layout Editor and interpreted by both packaging and viewing applications
using the Layout Interpreter programming interface.
- Rights Management Library [*]: Applications can use this class library to
create and manipulate controls (business rules) rather than writing
directly to the ITAPI to do so.
. Applications and Components - Source Code and Object Code (include)
- InterTrust Rights Wallet(TM) and core Rights Wallet(TM) applets: supports
administration of the InterRights Point in the packaging and viewing
environment. These provide an administrative interface to the InterRights
Point software to enable users of the system to set budgets, set passwords,
commence payment activities, and perform other administrative functions
associated with use of DigiBox containers and the InterRights Point
software.
- InterTrust Layout Tool (executable and source code): a graphical editing
tool for creating DigiBox container layout templates that are later used in
packaging operations. This tool creates a content layout template that
specifies how the elements representing digital content in a DigiBox
container will be organized. XXX can use the basic template supplied with
the InterTrust Packager, or can use this tool to create different templates
for its own content. Templates facilitate interoperability among packaging
and viewing applications that use the InterTrust software.
- InterTrust Rights Selector (executable and source code): an [*] component,
intended to be embedded in viewer applications, for displaying rights
controls in readily human-readable and manipulable format. The Rights
Selector component reads a set of business rules (controls) from a DigiBox
container and displays them in human-readable form; and
[*] CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
- InterTrust Survey/License Control (executable and source code): an [*]
component, intended to be embedded in viewer applications, for presenting
HTML based survey and license agreements to consumers.
- InterTrust Packager: sample software that creates a DigiBox container,
places specified content into a DigiBox container, associates business
rules and specified controls with the content, and places such rules inside
the container as well;
- InterTrust Viewer: sample software that reads the contents of a DigiBox
container created with an InterTrustworthy Packager; displays the rules
that govern use of the content; and, after the user agrees to those rules,
displays, prints, or saves the content as specified by the business rules.
This application implements InterTrust defined [*] component interfaces to
invoke survey and license agreement mechanisms and supports a plug-in
interface for handling specific media types;
- InterTrust Media [*] Control: a sample [*] component that demonstrates how
to build plug-in media handlers; and
- InterTrust Installer.
b. Transaction Authority Software:
------------------------------
The Transaction Authority software provides the framework for Clearinghouse
activities and Deployment activities, including deployment administration.
. Core Technology: Object Code Format (except as noted):
- Transaction Authority Framework Software - secure communication
infrastructure and protocols, general processing of incoming data, and
database storage. The Transaction Authority Framework (TAF) software is a
software framework made up of several components that handle the secure
reception and processing of DigiBox containers. It is designed to enable
validation and processing of requests that require interaction between an
InterRights Point and some financial or management authority, called a
transaction authority.
- Deployment Manager Software - a set of programs for secure node deployment
and initialization, provision of naming services to nodes, and provision of
secure date and time services to nodes. It initializes each InterRights
Point and authorizes addition of new users. It authorizes backup and
restores activities of provider and consumer systems. It is also
responsible for key distribution and name services within a deployment.
(Source Code provided for those portions of the software that may be
altered).
- Installer Software: Software for tamper-resistant installation of the
InterRights Point (Source Code provided for those portions of the software
that may be altered).
. Clearinghouse Sample Applications and Components - Source Code and Object
Code:
- Usage Clearinghouse Application--sample software for gathering and
aggregating usage information, such as usage audits and user profiles;
- Financial Clearinghouse Application--sample software for performing
prototypical clearinghouse functions in the area of financial clearing;
- Deployment Service Prototype Component--sample software for customizing an
initialized InterRights Point (e.g., associating that InterRights Point
with a particular InterTrust deployment and obtaining installation
demographics)
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
c. InterRights Point (Golden Master):
---------------------------------
The Golden Master provides a deployable version of the InterRights Point
software that may be replicated for distribution. The InterRights Point is the
component that provides secure processing of DigiBox containers and enforces
business rules. In Commerce 1.1, the InterRights Point software is a
cooperating or server process that can run on Microsoft Windows95, Windows 98,
and Windows NT 4.0. The InterRights Point software presents the InterTrust
Application Programming Interface (ITAPI) to applications. This interface has a
proxy or "client" portion that communicates via RPC with a "server" portion.
This server side of the ITAPI then makes requests of the Protected Processing
Environment(TM) (PPE) software in the InterRights Point. The PPE software does
the actual secure manipulation of containers.
The client-server implementation used for ITAPI allows an application and the
InterRights Point to be located on the same machine or on different ones. The
interface supports multiple local and remote clients and also multiple
simultaneous users.
d. Additional Application: Commerce Modeler(TM) Software. (Provided for
----------------------
Internal use, but not redistribution, without change):
The Commerce Modeler is a rights/business rules programming environment. It
provides a graphical programming environment where simple to complex rights
based business models can be laid out on a visual canvas. Employing building
block components called "Intents", a user can layout a variety of business rule
sets that can be manually or automatically associated with content structural
elements defined through use of the Layout Tool. Layout sets can be composed of
logical, user determined combinations of rule Intents, as well as associated
parameter data.
2. Commerce 1.1 Documentation:
---------------------------
- Commerce 1.1 Overview
- Commerce 1.1 Installation and Configuration Guide
- Commerce 1.1 Glossary
- Applications User's Guide
- Application Developer's Guide
- Application Developer's Kit: Supplemental Libraries
- Application Developer's Kit: ITAPI Vol 1 Concepts
- Application Developer's Kit: ITAPI Vol 2 Reference
- Application Developer's Kit: Interoperability Library
- Application Developer's Kit: Rights Metafile Format
- Clearinghouse Developer's Guide
- Deployment Manager Developer's Guide
Note: Source (where applicable and made available). Object Code for Windows
95, Windows 98, and Windows NT 4.0 for client software and Windows NT 4.0 and
Solaris 2.5.1 for server software. Additional platforms under development,
and to be supplied by InterTrust as available and determined by InterTrust in
its discretion.
II. INTERTRUST AUTHORIZED APPLICATION SOFTWARE AND CORE TECHNOLOGY
Your Agreement contains provisions that: (1) prohibit modification of InterTrust
Technology (that is designated Core Technology) (files noted as "Core
Technology" may not be modified; files expressly noted herein to be
"Customizable" Technology may be modified), and (2) restrict redistribution of
any software except "Authorized Application Software" (files noted as
"Authorized Application Software" may be distributed, as applicable solely in
accordance with the terms and conditions hereof and in the Agreement; files not
expressly noted as "Authorized Application Software" may not be distributed).
(Any information concerning Customizable Technology or "Core Technology" found
in source files themselves may not be relied upon and shall be superseded by the
designations noted herein). Any and all further restrictions noted
<PAGE>
in the file (or Agreement) concerning distribution (such as with the IRP Golden
Master process) must be adhered to or such file shall not be Authorized
Application Software. As of the Effective Date there is no Authorized
Clearinghouse Software.
LISTING OF CUSTOMIZABLE TECHNOLOGY AND AUTHORIZED APPLICATION SOFTWARE
REDISTRIBUTION OF NON-SOURCE FILES
All references to file and directory locations refer to the default installation
directories, which are set by the user at installation.
The binary and online help files listed below are "Authorized Application
Software" and may be redistributed, solely subject to terms and conditions of
the Agreement. All other files may not be redistributed (except as specifically
noted separately in the Source File section below):
[*]
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
[*]
SOURCE FILE CUSTOMIZATION AND REDISTRIBUTION
Source files contained in the directories listed in this section are
"Customizable" and may be modified solely as expressly provided therein. In
some cases, redistribution of the customized output is authorized and such files
are Authorized Application Software for redistribution solely subject to terms
and conditions of the Agreement. The paragraph preceding each section describes
the customization and redistribution restrictions. Source files in any
directory not listed in this section may not be modified or changed in any
manner.
* CUSTOMIZABLE, BUT REDISTRIBUTABLE ONLY VIA THE IRP GOLDEN MASTER PROCESS
The source files contained in the directories listed immediately below are
customizable but are redistributable only via the IRP Golden Master
redistribution process and solely subject to terms and conditions of your
Agreement:
[*]
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
[*]
* CUSTOMIZABLE BUT NOT REDISTRIBUTABLE (I.E., "CUSTOMIZABLE SOFTWARE" ONLY)
The source files contained in the directories listed immediately below are
customizable but not redistributable in any manner:
[*]
* REDISTRIBUTABLE ONLY
The source files contained in the directory listed immediately below are
redistributable (subject to terms and conditions of your Agreement) but may not
be modified or changed in any manner
[*]
* CUSTOMIZABLE AND REDISTRIBUTABLE (I.E., "CUSTOMIZABLE SOFTWARE" ONLY)
The source files contained in the directories listed immediately below are
customizable and redistributable (solely subject to terms and conditions of your
Agreement):
[*]
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
[*]
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
[*]
The source files contained in this directory are third-party files which are
customizable
if the instructions contained in those files are correctly followed:
[*]
III. SPECIAL ACKNOWLEDGMENTS AND THIRD PARTY LICENSE REQUIREMENTS
It is acknowledged and understood that the certain software modules of the
Commerce 1.1 InterTrust Technology may employ or may operate with third Person
technology that is included with the technology made available by InterTrust to
Licensee under the Agreement. This information is also found in the source
files of the Commerce 1.1 software. The following describes the third Person
technology, the InterTrust software where such third Person technology is used,
and InterTrust's and Licensee's rights and licenses therein. Licensee's use of
the third Person technology is limited by the terms of any licenses or rights
that InterTrust may have therein and may sublicense to Licensee.
A. Third Person Technology Used in Certain Provided Sample Applications.
* Certain portions of the Software contain software provided under license to
InterTrust from Inso Corporation. The Inso software is contained in files in the
following directory, [*] (where [*] is the default
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
installation directory which is set by the user at the time of installation) and
is required by the InterTrust viewer application of the Software. InterTrust's
agreement with Inso provides that InterTrust has the perpetual right to use the
Inso Software to develop, use and support its viewer application (including
distributing the Inso software to its licensees and allowing further
distribution by InterTrust's licensees) solely in InterTrust's viewer
application as executable code as relates solely to distributable formats (HTML,
ASCII, ANSI, Unicode, MS Word, BMP, GIF, JPEG, WMF); provided that you abide by
-------- ----
the terms of InterTrust's license with Inso (which is attached as Attachment A-1
hereto). As relates to all other non-distributable formats, use of these files
by InterTrust and all licensees is for internal development and use, and
demonstration purposes only (except where the terms and conditions of a separate
----
agreement are satisfied). If you decide to use the InterTrust viewer application
in connection with non-distributable formats for redistribution to end-users,
you will need to obtain a license for such use from Inso.
* Certain portions of the Software contains software provided under license to
InterTrust from Basis Technology Corporation ("Basis"). The Basis Software is
contained in the [*] file in binary form. (c) Basis Technology All Rights
Reserved. InterTrust's agreement with Basis has a perpetual term that may be
terminated: (i) at will by InterTrust; and (ii) by Basis upon written notice to
InterTrust upon breach by InterTrust and 30 days opportunity to cure. Under the
agreement, InterTrust has a license to: (a) use the Basis Software for internal
software development and testing; (b) incorporate the Basis Software into
products and redistribute such software provided that it is an integral
component such products; (c) modify the Basis Software or combine the Basis
Software with other products, provided that the such derivative products remain
subject to the terms of the Basis agreement; (d) make archival or backup copies
of the Basis Software; and (v) to redistribute the Basis Software in object or
source code to customers authorized to use InterTrust technology and to allow
such customers to exercise the rights described in subsections (a)-(d) above,
provided that such customer agrees to abide by the terms of the Basis Software
License and Services Agreement attached hereto as Attachment A-2.
B. Third Person Technology Used In Core Technology.
* Certain portions of the Core Technology software (as indicated in such
portions' source files) have used [*] and [*], to which this notice applies and
which may be used by you provided that this notice is included: [*] Copyright
(C) 1990-2, [*] Copyright (C) 1991-2, [*] Inc. All rights reserved. License to
copy and use this software is granted provided that it is identified as the
"[*], Inc., [*] and/or [*], Inc. [*]" in all material mentioning or referencing
this software or this function. License is also granted to make and use
derivative works provided that such works are identified as "derived from the
[*], Inc. [*]", and/or "derived from the [*], Inc. [*]" in all material
mentioning or referencing the derived work. [*], Inc. makes no representations
concerning either the merchantability of this software or the suitability of
this software for any particular purpose. It is provided "as is" without express
or implied warranty of any kind. These notices must be retained in any copies of
any part of this documentation and/or software."
* Certain portions of the Core Technology software (as indicated in such
portions' source files) have used DES software, to which this notice applies and
which may be used by you provided that this notice is included: des-fast &
portable DES encryption & decryption Copyright (C) 1992 Dana L. How. THIS
PROGRAM IS DISTRIBUTED WITHOUT ANY WARRANTY, INCLUDING THE IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. A copy of the license is
included as attachment A-3 hereto.
* The Software contains software, [*], incorporated as a binary black-box
executable that is required by for use in the Software provided under license to
InterTrust from [*] Corporation. A [*] package is provided to you with the
Software, provided that, pursuant to the terms of InterTrust's agreement with
[*], you agree that you will: (i) not reverse engineer or modify in any way the
[*] Software; (ii) not use the [*] Software other than as incorporated into the
Software in any manner for the development or distribution of: an operating
system, a computer language compiler or interpreter, a general purpose
communication utility, a general purpose database of file handler, including a
general purpose database of file handler, including a general purpose Open
DataBase Connectivity ("ODBC") driver or a general purpose JAVA driver, or an
application development system;
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
and (iii) abide by the terms of the [*] License Agreement provided with the
Software and attached hereto as Exhibit A-1.
* Certain portions of the Core Technology (as indicated in such portions' source
files) have used [*] software, to which this notice applies and which may be
used by you provided that this notice is included: "Copyright (c) 1995 by [*].
Permission to use, copy, and modify this software without fee is hereby granted,
provided that this entire notice is included in all copies of any software which
is or includes a copy or modification of this software and in all copies of the
supporting documentation for such software. This software may be subject to
export controls. SOME PARTS OF [*] MAY BE RESTRICTED UNDER UNITED STATES EXPORT
REGULATIONS (HOWEVER, SUCH PARTS ARE NOT INCLUDED IN THE SOFTWARE). THIS
SOFTWARE IS BEING PROVIDED "AS IS", WITHOUT ANY EXPRESS OR IMPLIED WARRANTY. IN
PARTICULAR, NEITHER THE AUTHORS NOR [*] (NOR INTERTRUST TECHNOLOGIES
CORPORATION) MAKE ANY REPRESENTATION OR WARRANTY OF ANY KIND CONCERNING THE
MERCHANTABILITY OF THIS SOFTWARE OR ITS FITNESS FOR ANY PARTICULAR PURPOSE."
Such [*] Software may be obtained as of the date of the Agreement by email at
[*].
C. Miscellaneous.
* Certain software objects in the library [*] (as named upon default install)
were written by [*] ([*]). Such software is utilized by you solely upon
---
installation by you of the Software. Permission is given by [*] to use such
software provided neither the program nor code based upon the software is sold.
InterTrust is not selling such software to you and you should not sell it.
---
Rather, such software is included with other software, for install purposes,
such other software being subject to your license agreement.
* Certain portions of the software (as indicated in such portions' source files)
have used Independent JPEG Group software and certain portions of the Software
(relating solely to InterTrust images that appear in the "About Box" of the
Software) supplied in executable format (as indicated in Software's "About Box")
are based in part upon the work of the Independent JPEG Group. (C) 1991, 1992,
1993, 1994, 1995, Thomas G. Lane. The Graphics Interchange Format (C) is the
copyright property of CompuServe Incorporated. GIF (sm) is a Service Mark
property of CompuServe Incorporated. Certain portions of the Independent JPEG
Software were loosely based on giftoppm from the PBMPLUS distribution as of
February 1991 to which this notice applies: Copyright (C) 1990, David Koblas.
Permission to use, copy, modify, and distribute this software and its
documentation for any purpose and without fee is hereby granted, provided that
the above copyright notice appears in all copies and that both that copyright
notice and this permission notice appear in supporting documentation. This
software is provided "as is" without express or implied warranty.
* Certain portions of the Software (both Customizable and Non-Customizable) (as
indicated in such portions' source files) have used stl libraries derived from
[*] software, to which the following two notices apply and may be used by you
provided that these notices are included: Copyright (C) 1996 [*], Inc.
"Permission to use, copy, modify, distribute and sell this software and its
documentation for any purpose is hereby granted without fee, provided that both
that copyright permission notice and this permission notice appear in supporting
documentation. [*] makes no representations about the suitability of this
software for any purpose. It is provided "as is" without express or implied
warranty." "Copyright (C) 1994 [*] Company. Permission to use, copy, modify,
distribute and sell this software and its documentation for any purpose is
hereby granted without fee, provided that both that copyright permission notice
and this permission notice appear in supporting documentation. [*] Company make
no representations about the suitability of this software for any purpose. It is
provided "as is" without express or implied warranty."
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
* Microsoft Foundation Classes. The Commerce 1.1 software contains the
following licensed Microsoft DLLs which are generally available for use on all
Windows systems: msvcrt.dll, msvcirt.dll, mfc42.dll, amovie.exe, atl.dll.
These files will be required by all Microsoft Foundation Class-based
applications of the software and: (i) may be used by InterTrust and Licensee
only in conjunction with licensed Microsoft products; and (ii) may not be
redistributed by Licensee to anyone and/or modified, without license. Such a
license is generally provided with the purchase of Microsoft Visual Studio.
<PAGE>
CONFIDENTIAL INTERTRUST/INSOCHIAGO
1/9/98
INSO CORPORATION
LICENSE AGREEMENT
GENERAL TERMS AND CONDITIONS
This Agreement, effective as of the 31st day of December, 1997, is by
and between
INSO CHICAGO CORPORATION and INTERTRUST
d/b/a Inso Corporation TECHNOLOGIES CORPORATION
a corporation organized under the a corporation organized under the
laws of the State of Illinois laws of the State of Delaware
("Inso") and a wholly-owned subsidiary of (the "Licensee")
Inso Corporation
This Agreement includes all Exhibits now or hereafter appended hereto
by mutual written agreement of the parties.
WHEREAS, Inso is a developer of certain file-viewing technologies, and
WHEREAS, the Licensee desires rights to integrate and distribute
materials proprietary to Inso in connection with the Licensee's electronic
products,
NOW, THEREFORE, the parties agree as follows:
1. Definitions
-----------
1.1 The "Component(s)" refer(s) individually and collectively to
the software, documentation, and any other materials described on Exhibit A
hereto.
1.2 "Delivery" means that the Licensee has received the
Components and that the Components conform to applicable Documentation provided
by Inso, such as the specifications of Section 1 of Exhibit A.
1.3 "Documentation" shall mean the users manual generally
provided with the Components and the Licensed Product, as the case may be.
1.4 "Inso Confidential Information" refers to the following
elements of the Components which are deemed by Inso to be trade secrets:
(a) software documentation;
(b) Inso's proprietary techniques with regard to product
function, even if supplied to the Licensee solely as embodied in the
Components; and
attachment A-1
<PAGE>
CONFIDENTIAL INTERTRUST/INSOCHIAGO
1/9/98
(c) Any other information, oral or written, identified in
writing as confidential information of Inso; provided that such information
shall not include any information directly relating to secure digital rights
and/or event management, unless disclosure of such information to Licensee has
been approved in writing by Licensee's CEO or General Counsel.
All of the foregoing (a)-(c) shall be subject to the exclusions in
Section 5.3 below.
1.5 "Licensed Product" refers to the specific Licensee product or
products identified in Exhibit B; others may only be added by amendment to this
Agreement agreed to in writing by both parties.
1.6 An "Upgrade" is defined as a correction, improvement or other
modification of the Inso Components and/or the file filters included in the
Components which Inso makes generally available to its licensees but does not
include any custom development work performed specifically by Inso for a
licensee. Upgrades shall include for example the latest versions of the file
filters described in Exhibit A.
1.7 "Product Description" refers to the description contained in
Section 1 of Exhibit A attached to this Agreement.
1.8 "Operating System" refers to a computer software program,
routine or algorithm, or any combination thereof, that controls, manages or
allocates the internal computational resources of a computer and the
functionality and programs included therewith.
1.9 "InterTrust Licensee" refers to a person who receives a
license grant for the Licensed Product from Licensee or another InterTrust
Licensee for further distribution of Licensed Products and/or incorporation of
Licensed Products into their own products as set forth herein for use with
InterTrust Commerce Architecture and not for any of the uses set forth in
Section 2.7.
2. License Use, Term, Payment
--------------------------
2.1 Inso hereby grants, and the Licensee accepts, a non-
exclusive, worldwide license to use the Components and Documentation solely to
develop, use, and support Licensed Products in accordance with the terms and
conditions of this Agreement, including the limitations, if any, set forth in
Exhibit A provided that use of formats other than the Distributable Formats and
Upgrades thereto shall be for demonstration purposes only unless and until, with
respect to specific formats, Licensee and/or an applicable InterTrust Licensee
acquires from Inso commercial distribution rights with respect to such non-
distributable formats in accordance with the provisions hereof The right to use
the Components and Documentation for that purpose includes the right to use and
reproduce the Components and Documentation and to distribute Licensed Products
worldwide, directly or indirectly. Such License is subject to possible expansion
as provided in Exhibit C, paragraph 2.2 hereof.
2
<PAGE>
CONFIDENTIAL INTERTRUST/INSOCHIAGO
1/9/98
2.2 The Licensee's rights to use the Components as provided
herein shall continue only so long as the Licensee:
(a) distributes Licensed Products in which the Components
are included solely as executable code;
(b) pays Inso pursuant to this Agreement; and
(c) is in compliance with all other material terms of this
Agreement.
2.3 Except as provided in Section 2.8 below, the Licensee may
sublicense Licensed Products to InterTrust Licensees, including third party
distributors and dealers, and solely on terms as protective as the Licensee
requires for its own proprietary information of similar nature and which enable
the Licensee to meet its obligations under this Agreement. Sublicenses to end-
users shall provide that end-users shall be permitted to use the Components only
as part of the Licensed Products. Except as provided in Section 2.8 below, any
other sublicense shall be subject to the prior written approval of Inso. The
Licensee shall provide applicable parts of copies of its standard software
licenses to Inso upon prior written request.
2.4 The Licensee may subcontract the distribution of the Licensed
Products provided that the Licensed Products are distributed and marketed solely
under the name of the Licensee and not of said distributor or any other third
party. The Licensee will, as Inso may reasonably request, give Inso the names of
such subcontractors and other information on its procedures for protecting the
Licensed Products in the reproduction process.
2.5 The term of this Agreement is specified in Exhibit B attached
hereto, and the licenses granted herein shall terminate automatically on
expiration without any action by the parties, unless extended by the parties.
This Agreement and the licenses granted herein shall be terminated or suspended
prior to such expiration only as provided in Sections 2.2 and 11.
2.6 In consideration for the licenses granted herein, the
Licensee shall pay Inso royalties as set forth in Exhibit C attached hereto.
2.7 Notwithstanding anything to the contrary in this Agreement,
the Licensee, and the InterTrust Licensees, shall not:
(a) use the Components to integrate directly with any file
viewing APIs of the following:
(i) the Windows 95 Operating System, or any successor
Operating System shell, including, but not limited to, IFileViewer,
(ii) any existing or future Operating Systems;
3
<PAGE>
CONFIDENTIAL INTERTRUST/INSOCHIAGO
1/9/98
(iii) mail and messaging client (by way of example, but
not limitation, this shall include products such as Da Vinci Mail, MS Mail,
cc:Mail, Beyond Mail, and Lotus Notes) software APIs for viewing file
attachments; or
(iv) common dialog file viewing APIs outside of the
Licensed Product, under the Windows 95 operating environment;
(b) distribute, market, or sublicense the Components as a
stand-alone product;
(c) allow the Components to be accessed without the presence
and execution of applicable other applications of the Licensee and/or an
InterTrust Licensee;
(d) allow end-users to view documents using the Components
other than from within the Licensed Product;
(e) expose or publish any Component API to any third-party
including, without limitation, any customer, OEM, or business partner;
(f) use the Components to develop file viewer "plug-ins" for
Internet browser clients (by way of example, but not limitation, this shall
include Netscape's Internet browser clients). The Licensee and the InterTrust
Licensee may, however, use the Components to develop or create file viewer "plug
ins" for Internet browser clients that are used to access digital information
governed by the InterTrust Commerce Architecture.
(g) use the Components to develop or create ActiveX viewer
objects. The Licensee and the InterTrust Licensee may, however, use the
Components to develop or create Active X viewer objects that are used to access
digital information governed by the InterTrust Commerce Architecture.
(h) reverse engineer, reverse compile or otherwise
disassemble the Components except where such restriction is prohibited by law;
or
(i) write any file viewing, filtering, data, graphic or text
export or conversion function on top of Inso's Component Specifications.
2.8 The Licensee shall have the right at no additional cost to
sublicense the Licensed Products to InterTrust Licensees, in object code only,
under the Licensee's standard license terms and conditions, which terms shall i)
comply with the Licensee's obligations under this Agreement and ii) include a
provision which allows the InterTrust Licensee to further sublicense solely in
accordance herewith at no additional cost. InterTrust Licensees may receive the
Licensed Products but may only redistribute Licensed Products based on
Distributable Formats and any Upgrades thereto and/or develop and/or distribute
production applications using the Licensed Products based on the Distributable
Formats and any Upgrades thereto. InterTrust Licensees, before using any Inso
trademark or tradename, shall be required to submit to Inso for approval initial
text on packaging and
4
<PAGE>
CONFIDENTIAL INTERTRUST/INSOCHIAGO
1/9/98
representative copies of promotional materials and user documentation using the
name "Inso", the title of any Inso Product or publication and any other Inso
trademark or trade name appearing in connection with an InterTrust Licensees end
product
3. Delivery Acceptance
-------------------
3.1 Inso has delivered the Components and services, if any,
specified in the Product Description.
3.2 The Components will be deemed accepted upon Agreement
execution. Upon Agreement execution Inso shall be entitled to the license fee as
set out in Exhibit C, whether or not the Licensee subsequently develops and
markets the Licensed Products, subject to compliance herewith.
3.3 Any subsequent Components delivered will be deemed accepted
upon Delivery. Upgrades and support shall be provided InterTrust as set forth in
Exhibit A hereto.
4. Proprietary Rights and Notices
------------------------------
4.1 This Agreement does not transfer to the Licensee any title in
or ownership of the Components or any Inso or third party trademarks, nor
(except as provided herein) any right to use Inso or third party copyrighted
material, or Inso Confidential Information embodied therein except the rights to
use the Components in Licensed Products as expressly permitted by this
Agreement. The Components and Inso Confidential Information embodied therein are
and shall at all times remain the sole and exclusive property of Inso.
4.2 The Licensee may not use trademarks, logos, trade dress, or
titles of Inso Products in any way, except as provided herein or with Inso's
express prior written permission.
4.3 The Licensee shall notify Inso as promptly as reasonably
possible of any suspected unauthorized use or possession of the Components or
Licensed Product. In the event of unauthorized use arising from the Licensee's
or its permitted sublicensees' or distributors' custody of the Components, the
Licensee shall reasonably cooperate with Inso in any commercially appropriate
action Inso may take or request to protect its rights in the Components.
4.4 The Licensee and/or an InterTrust Licensee may at its option,
either convert Inso's Documentation to the Licensee's or as applicable
InterTrust Licensees' format or reproduce and distribute Inso's Documentation
with the Licensee's and/or InterTrust Licensees covers. If the Documentation is
converted to the Licensee's format, Licensee and/or InterTrust Licensees shall
not change any content (except for format and grammatical changes by the
Licensee's and/or InterTrust Licensees personnel, any such correction of
grammatical errors to be provided free of charge to Inso). The Licensee and/or
InterTrust Licensees shall be
5
<PAGE>
CONFIDENTIAL INTERTRUST/INSOCHIAGO
1/9/98
solely responsible for the results of such conversion, and Inso's review, or
lack thereof, shall not relieve the Licensee and/or InterTrust Licensee of its
responsibility.
4.5 Appropriate copyright and proprietary rights acknowledgment
(Outside In(R) Viewer Technology(C) 1992-1997 Inso Corporation. All rights
reserved.) will be stated on the Licensee's and its InterTrust Licensee user
manuals, as applicable, on the same or similar page(s) that the Licensee and/or
its InterTrust Licensee display third party credits and similar third party
notices; and, with other said third party acknowledgments, where such other
third party credits appear on, or in connection with the Licensed Products,
including but not limited to startup or "splash" screens and "Help" and "About"
boxes. In addition to acknowledgments in the Licensee's and/or InterTrust
Licensees documentation, the Licensee and its InterTrust Licensee shall, at a
minimum, and where applicable, provide Inso acknowledgment within the "Help"
and/or "About" boxes for the Licensed Products that are related to a viewer
window. Inso reserves the right to require the Licensee to make reasonable
changes to such notices to protect Inso copyrights and proprietary rights to be
implemented by the Licensee at the next reasonable opportunity.
5. Non-Disclosure of Confidential Information
------------------------------------------
5.1 In performing its obligations under this Agreement, the
Licensee may receive Inso Confidential Information. The Licensee shall take
reasonable steps to protect such Inso Confidential Information. Such steps shall
include, but not be limited to:
(a) designating the Licensee group responsible for
controlling access to such confidential information,
(b) following the procedures the Licensee takes to protect
its own confidential information of similar character;
(c) limiting disclosure to Licensee personnel solely on a
need to know basis, informing such personnel, by use of non-disclosure
agreements and display of confidentiality notices and other instructions, of the
restrictions on use, reproduction, and disclosure; and
(d) preventing disclosure to any third party without Inso's
prior written permission in such case, except that the Licensee may disclose
Inso Confidential Information to a consultant or subcontractor with a need to
know, providing services to the Licensee which directly relate to the rights or
obligations of the parties pursuant to this Agreement, provided that each such
consultant or subcontractor has signed an appropriate written agreement not to
disclose such confidential information or use such confidential information for
any purpose other than the performance of such services.
5.2 The Licensee shall not disclose the terms of this Agreement
or any Inso Confidential Information without Inso's prior consent or as may be
required by law or by order of court or request of government agency, and in the
case of such order or request, after
6
<PAGE>
CONFIDENTIAL INTERTRUST/INSOCHIAGO
1/9/98
notice to Inso that such disclosure has been requested Inso has been given a
reasonable opportunity to seek a protective order.
5.3 Notwithstanding any other provision hereof, the Licensee
shall be entitled to disclose information received from Inso in confidence if:
(a) such information was, prior to its receipt from Inso,
properly in the Licensee's possession or known to the Licensee;
(b) such information is developed by or for the Licensee
independently of Inso confidential information received hereunder;
(c) such information is or becomes public knowledge without
the fault of the Licensee; or
(d) such disclosure is required by court or government
action.
In the event that disclosure of Inso Confidential Information under
the circumstances described in Section 5.3(d) is required, the Licensee will
comply with the provisions of Section 5.2 hereof and otherwise use reasonable
efforts to ensure that such information does not become generally available to
the public.
5.4 The provisions of this Section 5 shall survive the
termination or expiration of this Agreement.
6. Warranties
----------
6.1 Inso warrants that it knows of no third party copyright,
trademark, trade secret, or patent that is infringed by the Components.
6.2 Inso warrants that the Components will perform substantially
as specified in the Outside In Viewer Technology Specification Version
(designated in Section 1 of the applicable Product Description.)
6.3 Inso shall not be responsible in any way for any portion of
software prepared by or added to the Components by the Licensee or any third
party.
6.4 THE FOREGOING WARRANTIES GIVEN BY INSO ARE IN LIEU OF ALL
OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, STATUTORY OR
OTHERWISE, UNDER OR RELATED TO THIS AGREEMENT OR THE COMPONENTS, INCLUDING BUT
NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
7
<PAGE>
CONFIDENTIAL INTERTRUST/INSOCHIAGO
1/9/98
7. Defense of Legal Claims; Notification
-------------------------------------
7.1 Inso will defend or settle any allegation or claim by a third
party ("Claim") against the Licensee that the Components infringe upon any
copyright, trade secret, United States, European Union and/or Japanese patent,
or other proprietary right of a third party, and shall indemnify the Licensee
and hold it harmless from any and all such Claims and all resulting costs,
expenses, compromises, damages, and attorneys' fees, provided that (i) Inso is
given prompt written notice of the Claim, (ii) Inso is given the sole authority
to defend or settle the Claim, and (iii) the Licensee does not compromise or
settle the Claim without Inso's prior written consent. The Licensee shall
cooperate fully with all reasonable requests of Inso in connection with any such
Claim. In lieu of defending a Claim, Inso may, at its sole option, procure for
the Licensee the right to continue using the disputed material, or modify the
Components so that they become non-infringing. Any such modification shall not
materially affect the functionality of the Components. Inso shall have no
obligation to defend or indemnify the Licensee for any Claim based upon the
combination, operation, or use of the Components with elements not supplied by
Inso, or upon modifications to the Components after Delivery, where such Claim
would not exist without such elements or modifications to the Components by the
Licensee.
7.2 The Licensee will defend or settle any Claim against Inso
involving elements of the Licensed Products other than the Components but solely
where such Claim arises solely out of elements of Licensed Products other than
Components and/or modifications made to Components by Licensee (and not where
such Claim is based upon any combination, operation, or use of Components
supplied by Inso with such elements of Licensed Products or modified Components,
or where such claim would exist in the absence of such modification) would not
exist without the Licensee's modification to the Components, and the Licensee
shall indemnify Inso and hold it harmless from any and all such Claims and all
resulting costs, expenses, compromises, damages, and attorney's fees, provided
that (i) the Licensee is given prompt written notice of the Claim, (ii) the
Licensee is given the sole authority to defend or settle the Claim, and (iii)
Inso does not compromise or settle the Claim without the Licensee's prior
written consent. Inso shall cooperate fully with all reasonable requests of the
Licensee in connection with any Claim described in this Section 7.2.
7.3 Each party shall provide prompt written notice to the other
party of any threatened or actual Claims that come to such party's attention
that the Components infringe upon any copyright, trade secret, patent, or other
proprietary right of a third party, or that would be subject to the provisions
of section 7.1 or 7.2. Such notice shall be signed by an officer of the sending
party and shall be sent to and signed by an of ricer of the receiving party.
8. Limitation of Liability
-----------------------
8.1 EXCEPT FOR A BAD FAITH BREACH BY EITHER PARTY OF THE
PROVISIONS OF SECTION 5 AS IT RELATES TO SOURCE CODE, NEITHER PARTY SHALL BE
LIABLE TO THE OTHER OR ANY THIRD PARTY FOR ANY LOSS OF PROFITS, OR SPECIAL,
CONSEQUENTIAL, OR INCIDENTAL DAMAGES ARISING OUT OF OR RELATING TO THIS
AGREEMENT, WHETHER SUCH CLAIM ARISES IN
8
<PAGE>
CONFIDENTIAL INTERTRUST/INSOCHIAGO
1/9/98
TORT OR CONTRACT AND EVEN IF ADVISED OF THE POSSIBILITY OF THE SAME, EXCEPT FOR
A BREACH BY EITHER PARTY OF THE PROVISIONS OF SECTION 5 AS IT RELATES TO SOURCE
CODE AND/OR SECTION 7.3 IN NO EVENT SHALL EITHER PARTY'S LIABILITY TO THE OTHER
FOR DAMAGES OR COSTS HEREUNDER, IF ANY, EXCEED THE AMOUNTS PAID OR PAYABLE TO
INSO BY THE LICENSEE FOR LICENSING THE COMPONENTS UNDER THIS AGREEMENT.
8.2 No action arising out of the licenses granted under this
Agreement, regardless of form, may be brought by any party more than one (1)
year after the cause of action has become known to the party bringing such
action, except that an action for nonpayment may be brought by Inso within one
(1) year of the later of due date of the last payment or license fee statement.
9. Export and other Regulations
----------------------------
9.1 The Licensee shall be responsible for meeting any other
requirement of any government and procuring government approvals, such as export
licenses, restrictions on export of technical data, or other procedures required
to make this Agreement effective and enforceable.
10. Assignment
----------
The Licensee shall not assign or transfer to any third party this
Agreement, nor any of its rights or obligations under this Agreement, without
Inso's prior written permission. A change in ownership or control of the
Licensee shall be deemed to be an assignment of this Agreement. For purposes of
this Section 10, "change" in ownership or control is defined as a sale or
transfer of shares which entitles a new holder to voting rights in excess of
fifty percent (50%) of the Licensee's outstanding voting securities or interests
(where such outstanding voting securities or interests are converted to a single
class of common stock). Inso may assign this Agreement, or any of its rights,
obligations or benefits hereunder, without the consent of the Licensee.
11. Default and Termination
-----------------------
11.1 Except as provided in Section 11.2 and 11.3 below, if
either party should breach any material provision of this Agreement, the non-
defaulting party may declare a default, and may terminate this Agreement in its
entirety if the other party should fail to remedy such default within thirty
(30) days after receipt of written notice thereof.
11.2 If the Licensee should materially breach the restrictions on
disclosure or use of Inso's confidential information as provided herein, Inso
may immediately terminate this Agreement or seek equitable relief to protect its
proprietary interests, or both, without waiting for any cure period to elapse.
11.3 If the Licensee should fail to make any of the payments
required by this Agreement, Inso may declare a default, and may terminate the
Agreement in its entirety
9
<PAGE>
CONFIDENTIAL INTERTRUST/INSOCHIAGO
1/9/98
should the Licensee fail to remedy such default within ten (10) days of receipt
of written notice thereof. At such time, all outstanding minimum license fee
payments and any other charges due Inso pursuant to this Agreement shall be
deemed to have accrued and shall immediately be payable in full to Inso
notwithstanding any other provision hereof. The Licensee's obligation to pay all
accrued charges shall survive the expiration or termination of this Agreement.
11.4 In the event that either party becomes insolvent, or a party
to bankruptcy, receivership, or similar proceedings affecting its financial
condition, or seeks to make a compromise, assignment, or other arrangement for
the benefit of its creditors, or ceases doing business in the ordinary course,
the other may terminate this Agreement, effective upon receipt of written notice
thereof, and take any steps to protect its proprietary information as may be
reasonable and appropriate.
11.5 Upon termination, the Licensee will immediately cease
development, distribution, and production of Licensed Products utilizing the
Components. The Licensee may permit sublicenses previously granted to end-users
to remain in effect, but shall return or certify destruction of all copies of
the Components and all Inso Confidential Information not needed to support end-
users. Any other permitted sublicenses shall terminate upon termination of the
Agreement between Inso and the Licensee.
11.6 Termination shall not relieve the Licensee from liability
for any breach occurring prior to such termination. All remedies hereunder and
under applicable law shall be cumulative.. In addition to these provisions
specifically mentioned elsewhere herein, the provisions of Sections 7,8, 12 and
this Section 11 shall survive expiration or termination hereof.
12. General Provisions
------------------
12.1 Entire Agreement. This Agreement, together with its
-----------------
Exhibits, constitutes the entire agreement between the parties with respect to
the Components, and may be modified only in writing, signed by an authorized
representative of each party. This Agreement supersedes all other
representations, proposals, and other communications between the parties
relating hereto with respect to the Components.
12.2 Waiver. Any waiver by either party of any requirement of
------
this Agreement shall not constitute a waiver of any other requirement of this
Agreement, nor of the same requirement on a separate occasion.
12.3 Notice. Any notice required under this Agreement shall be
------
in writing certified mail, express courier service or facsimile transmission
with a confirming copy sent via certified mail or express courier service, to
the address given in Exhibit B or to such other address as either party may
designate in writing to the other. Any notice thus given shall be deemed
effective upon sending.
12.4 No Agency. This Agreement shall not be construed as
---------
creating an agency, partnership, joint venture, or other relationship between
the parties other than one of independent contractors.
10
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CONFIDENTIAL INTERTRUST/INSOCHIAGO
1/9/98
12.5 Force Majeure. Neither party shall incur liability to the
-------------
other for any failure or delay in fulfilling its obligations under this
Agreement other than the making of required payments for causes beyond its
reasonable control, including, but without limiting the generality of the
foregoing, labor or industrial disturbances, acts of God, floods, lightning,
utility or communication failures, earthquakes, acts of the public enemy, riots,
insurrection, embargoes, blockages, actions, restrictions, regulations or orders
of any government, agency or subdivision thereof.
12.6 Interpretation. Whenever possible, each provision of this
--------------
Agreement shall be interpreted so as to be effective and valid under applicable
law, but if any portion of any provision should be invalid or prohibited by
applicable law, such portion shall not invalidate the remaining provisions of
this Agreement. All headings are for reference purposes only and shall not
affect the interpretation of this Agreement.
12.7 Governing Law. This Agreement shall be deemed a contract
-------------
made and performed in Massachusetts, shall be construed under and governed by
the laws of the Commonwealth of Massachusetts, and shall bind the parties, their
successors, and permitted assigns. The parties stipulate that the proper forum,
venue and court for any legal action arising from or in connection with this
Agreement shall be either (i) the state courts of the Commonwealth of
Massachusetts for Suffolk County or the United States District Court for the
District of Massachusetts or (ii) the state courts of California in San Jose,
California or the United States District Court for the Northern District of
California (San Jose Division). Neither party shall commence any action against
the other except in such courts.
11
<PAGE>
CONFIDENTIAL INTERTRUST/INSOCHIAGO
1/9/98
IN WITNESS WHEREOF, the parties execute this effective as of the date
first above written.
INTERTRUST TECHNOLOGIES INSO CHICAGO CORPORATION
CORPORATION d/b/a INSO CORPORATION
By: By:
---------------------- ----------------------
Signature Signature
Name: Bruce G. Hill
-------------------
Title: Corporate Secretary
------------------
12
<PAGE>
CONFIDENTIAL INTERTRUST/INSOCHIAGO
1/9/98
INTERTRUST/INSOCHIAGO
INSO CORPORATION
LICENSE AGREEMENT
EXHIBIT A
PRODUCT DESCRIPTION
Outside In(R) Viewer Technology, Version 5.1
1. Inso will provide the following object code deliverables:
1.1 Inso Components
(i) "Outside Ink Viewer Technology Software and
Specification Version 5. 1", and Upgrades thereto solely as set forth in
paragraph 6 below (if and when such upgrades are made available to Inso's other
Licensees), with support for viewing functionality only and;
(ii) All formats supported by the Outside Ink Viewer
Technology Specification and Upgrades.
1.2 Platforms Supported:
(i) Microsoft Windows (95 and subsequent versions during the
term) for Intel processors
(ii) Microsoft Windows NT(R) (including subsequent versions
during the term) for Intel processors
2. Inso will provide Upgrades for the file formats listed below if
and when Inso makes such Upgrades available generally for any of its customers.
3. Inso will assist the Licensee with its initial implementation of
the Components and provide information about the Licensee callable functions, as
reasonably requested, without charge to the Licensee for a period of ninety (90)
days from Effective date. Except as provided in Section 6.0, if, at the time of
the Licensee's initial implementation, Inso has developed a more recent version
of the Components, Inso will provide this latest version to the Licensee free of
charge. Support services as set forth above will be applicable to such new
version and Upgrades. Inso shall have no obligation to provide assistance
pursuant to this section in the event that Licensee is unable or unwilling to
provide information regarding the Licensed Product to Inso.
4. Inso will correct any defects identified by the Licensee during
the first ninety (90) days after the Components are shipped to the Licensee. A
"defect" is defined as a material error concerning of the Components that causes
the Components not to function in accordance with Section 1 of the applicable
Product Description and/or file formats supported. Inso shall have no
13
<PAGE>
obligation to provide assistance pursuant to this section in the event that
Licensee is unable or unwilling to provide information regarding the Licensed
Product to Inso needed by Inso to support its obligations hereunder.
5. If the Licensee requests that Inso provide consulting services in
addition to those support services specified above, including, for example,
modifications necessary to port the product to any Inso unwarranted platform,
and Inso agrees to provide such services, such services shall be provided at
terms mutually agreed in writing.
6. Notwithstanding the definition of Upgrades, any future additions
of functionality to the Outside In Viewer Technology, Version 5.1 that are
substantial enough to constitute a "new version" according to standard industry
practices are specifically excluded from this Agreement (for example, such
additional functionality that, according to industry practices would constitute
a change in version number to the left of the decimal point, e.g. 5.1 to 6.0,
would be excluded, whereas, for example, changes that would according to
industry practices occur to the right of the decimal point, e.g., 5.1 to 5.2
would be included). Inso reserves sole discretion to determine changes in the
Outside In Viewer Technology Specification.
If in its reasonable judgment Licensee needs, but does not obtain,
a license from Unisys Corporation concerning the use of the GIF Distributable
Format then, at Licensee's option and upon Licensee's prior written notification
to Inso, InterTrust and Inso shall agree in the exercise of good faith upon an
additional image file format to be included in the Distributable Formats.
Inso represents that it currently intends to reasonably revise its
HTML filter to Maintain compliance with W3C specifications including support for
data input using forms, support for IO redirection for href and src attributes
and interception of hyperlink activation.
Format support includes a limited number of Outside In Viewer Technology formats
as follows (the "Distributable Formats") such versions noted below current as of
the execution date:
<TABLE>
<CAPTION>
Generic Formats:
- ----------------
<S> <C>
HTML Version of execution date............ Microsoft Rich Text Format All versions
ASCII Text (7 & 8 bit versions available) .............................All versions
ANSI Text (7 & 8 bit) .................................................All versions
Unicode Text ..........................................................All versions
Word Processing (subject to the provisions of Exhibit C, Section 2.2):
- ---------------
Microsoft Word .............................. Version 7.0 only (Word for Office 95)
Standard Graphic Formats:
- ------------------------
BMP (including RLE,IC 0, CUR & OS/2 DIB) ...................................Windows
GIF - Graphics Interchange Format .......................................Compuserve
JPEG ..................................................................All versions
WMF................................................................... All versions
</TABLE>
14
<PAGE>
CONFIDENTIAL INTERTRUST/INSOCHIAGO
1/9/98
INTERTRUST/INS OCHIAGO
INSO CORPORATION
LICENSE AGREEMENT
EXHIBIT B
ADDITIONAL PROVISIONS
1. Term
----
1.1 The Effective Date shall be the date set forth at the
beginning of this Agreement.
1.2 The Expiration Date of this Agreement shall be December 31,
2000, which may be extended by the mutual agreement of the parties.
2. Licensed Products
-----------------
The Licensed Products as of execution of this Agreement consist of the
following:
(i) Those portions of the Licensee's secure rights management
and/or event management technology entitled "InterTrust Commerce Architecture"
technology incorporating Outside Ink Viewer Technology, as set forth in Exhibit
A including any Distributable Formats and/or upgrades thereto for purposes of
accessing digital information generated by InterTrust Commerce Architecture
document repository and not for general viewing purposes.
(ii) Platform: Windows 95 and Windows NT(and successive releases
when available), other InterTrust Commerce Architecture supported platforms,
(iii) Media: any
3. Access to Inso Confidential Information
---------------------------------------
As provided in Section 5 of the Agreement, the Licensee shall restrict
access to Inso Confidential Information to those specific personnel of Licensee
reasonably having a need to know such information in connection with the design,
development, deployment and/or support of Licensed Products incorporating
Components including Licensee's group expressly charged with development of
Licensed Products.
4. Addresses for Purposes of Notices
---------------------------------
To Inso: Inso Corporation
15
<PAGE>
CONFIDENTIAL INTERTRUST/INSOCHIAGO
1/9/98
330 N. Wabash Avenue, 15th Floor
Chicago, IL 60611
Attention: Rose Ann Brittain
with a copy to: Inso Corporation
31 St. James Ave., 11th Floor
Boston, MA 02116
Attention: Bruce G. Hill
To the Licensee: INTERTRUST TECHNOLOGIES CORPORATION
460 Oakmead Parkway
Sunnyvale, CA 94086
Attention: Mr. Edmund Fish
SVP, Corporate Development and
General Counsel
16
<PAGE>
CONFIDENTIAL INTERTRUST/INSOCHIAGO
1/9/98
INTERTRUST/INS OCHIAGO
INSO CORPORATION
LICENSE AGREEMENT
EXHIBIT C
PAYMENT OF LICENSE FEES
1. General Provisions
------------------
1.1 Payments shall be made by wire transfer of immediately
available funds to Inso's account at the following bank:
Fleet Bank N.A.,
Corporate Funds Transfer, RI OF 350
125 Dupont Drive
Providence, RI 02907
ABA No. 011500010
Account Number 050126899800101
Attention Inso Corporation
1.2 All payments shall be made in the United States dollars.
1.3 Inso shall have the right to reasonably inspect the Licensed
Product at the Licensee's premises upon reasonable prior written notice to
insure Licensee's compliance with this Agreement. Such inspection shall be
subject to InterTrust cofidentiality restrictions to protect InterTrust
information and shall not occur maore than once per annum.
2. Payment Schedule
----------------
2.1 A non-refundable license fee applies for the Licensed
Product(s). Inso is entitled to the license fee whether or not the Licensee
subsequently develops and markets the Licensed Products. The license fee is
$100,000, due upon Agreement execution and payable upon the following schedule:
<TABLE>
<CAPTION>
Date License Fee Cumulative License Fee
- ------------------------------ ------------------------------- -------------------------------
<S> <C> <C>
Agreement Execution $20,000.00 $ 20,000.00
March 15, 1998 $20,000.00 $ 40,000.00
June 15, 1998 $20,000.00 $ 60,000.00
September 15, 1998 $20,000.00 $ 80,000.00
December 15, 1998 $20,000.00 $100,000.00
</TABLE>
17
<PAGE>
CONFIDENTIAL INTERTRUST/INSOCHIAGO
1/9/98
2.2 If an InterTrust Licensee to whom InterTrust delivers a
subsequent version of the Microsoft Word filter as described in Exhibit A hereto
desires such Word filter to become a Distributable Format, then such Licensee
can have such Word filter become such a Distributable Format upon the payment to
Inso of fifteen thousand dollars ($15,000) (for example, a $15,000 fee will be
due for distribution of Word for Office `97, and a $15,000 fee would be due for
distribution of Office `98). In addition, as concerns such Word format and any
other supported format that is not a Distributable Format, if requested by
InterTrust or an InterTrust Licensee Inso shall cooperate in good faith with
InterTrust and/or such InterTrust Licensee and license such requested formats
upon reasonably favorable terms and conditions. The parties agree that if
InterTrust informs Inso in writing that it desires to expand the license, such
expansion may require additional license fees which the parties contemplate to
be solely incremental in nature.
3. Invoices for amounts due in Section 2.1 above shall be sent to:
InterTrust Technologies Corporation
Attn: Accounts Payable
460 Oakmead Parkway
Sunnyvale CA 94086
Phone: 408.222.6100
Fax: 408.222.6144
Inso's failure to provide invoices for non-refundable license fees or
additional license fees or Licensee's failure to receive such invoices shall not
relieve the Licensee of its obligation to make timely payments pursuant to
Section 2.1, above.
18
<PAGE>
AGREEMENT ID: CLU-INT-02
BASIS TECHNOLOGY CORP.
SOFTWARE LICENSE AND SERVICES AGREEMENT
This Agreement is between Basis Technology Corp., a Massachusetts
Corporation with its principal place of business at One Kendall Square,
Cambridge, MA 02139 ("Basis") and the customer whose name and address is set
forth below (the "Customer").
InterTrust Technologies Corporation
460 Oakmead Parkway
Sunnyvale, CA 94086
Attn: Richard Grace
TERMS AND CONDITIONS
Basis Technology Corp. ("Basis") and the Customer hereby agree that the
following terms and conditions will apply to each license granted and to all
services provided under this Agreement. Additional license may be granted and
services provided, subject to the terms and conditions of this Agreement, by
completing and submitting a signed copy of the Basic's Order Supplement
referencing this Agreement and its terms and conditions.
1. DEFINITIONS
1.1 "Commencement Date" shall mean the date on which the Software is
delivered to the Customer, or if no delivery is necessary, the
Effective Date set forth on the relevant Order Supplement.
1.2 "Software" shall mean the computer software owned or distributed by
Basis for which customer is granted a license pursuant to this
Agreement, and the related documentation, instruction, user's guides,
and subsequent updates, whether in hardcopy or softcopy form.
1.3 "Supported License" shall mean a license for which Customer has ordered
Technical Support for the relevant time period.
1.4 "Order Supplement" shall mean Basis's standard form for ordering
Software licenses and services. When completed and signed by both
parties, the Order Supplement (including the Signature Page of this
Agreement) shall document the Software licenses which have been granted
and the services which are to be provided under this Agreement.
2. SOFTWARE LICENSE
2.1 Rights Granted
A. Basis hereby grants in Customer a nonexclusive, nontransferable,
perpetual, worldwide, and royalty-free license to use and
redistribute the Software Customer obtains pursuant to this
Agreement, as follows:
(i) to use the Software on any number of processors and by any
number of people for the Customer's Internal software
development and testing activities.
(ii) to incorporate the Software into software products, and to
redistribute the Software to third parties in binary form
provided that the Software is incorporated as an integral
component of licensed software products;
(iii) to modify the Software, or combine them with other software
products, provided that the Software or such
attachment A-2
<PAGE>
portions thereof included in such derivative software
products remain subject to the provisions of this Agreement.
(iv) to copy the Software for archival or backup purposes. All
archival and backup copies of the Software are subject to the
provisions of this Agreement, and all titles, trademarks, and
copyright and restricted rights notices shall be reproduced in
such copies; and
(v) to redistribute the Software in binary and/or authorized to
use InterTrust customers authorized to use InterTrust
technology and incorporate InterTrust technology into their
products, and permit such customers to exercise those rights
set forth in the preceding Sections 2.1(A)(i), 2.1(a)(ii), and
2.1(A)(iv); provided, that InterTrust shall obligate such
customers to: (1) refrain from modifying, or permitting their
customers to modify, the Software, (2) agree that any
redistribution of the Software shall occur solely as permitted
in such Section 2.1(A)(i), 2.1(A)(ii), and 2.1(iv), and where
such Software is incorporated directly and as an integral
component of InterTrust technology and/or such customers'
software directly associated therewith; and (3) agree to the
other applicable terms and conditions hereof.
B. By virtue of this Agreement, Customer acquire only the right to the use of
the Software and does not acquire any rights of ownership. All rights,
title, and interest in the Software including the copies of the Software
delivered to Customer by Basis shall at all times remain the property of
Basis or Basis's licensor.
2.2 Documentation:
Basis will provide Customer with relevant user documentation. Copying
of the documentation, user guides, and other reference materials is
permitted for internal use only.
In connection with exercise of the rights of Section 2.1(v), Customer
may distribute relevant portions of user documentation, provided that
Basis shall be entitled to review and approve such documentation
portions and any such documentation shall be used solely for such
customer's internal use.
2.3 Transfer and Assignment
The rights granted herein are restricted for use solely by Customer and
may not be assigned or transferred to a third party without the prior
written permission of Basis.
3. ACCEPTANCE OF THE PROGRAM; TERM; TERMINATION
3.1 Acceptance of Software.
For each Software component delivered under this Agreement, Customer
shall have a 30-day Acceptance Period in which to evaluate this
component. During the Acceptance Period. Customer may cancel the
license by giving written notice to Basis and returning the Software in
accordance with Paragraph 3.6 below. Unless such cancellation notice is
given, the license will be deemed to have been accepted by Customer at
the end of the Acceptance Period.
3.2 Term.
This Agreement and each license granted hereunder shall remain in
effect perpetually (if not otherwise specified on the Order
Supplement), unless terminated as provided in Paragraph 3.3 or 3.4
below.
3.3 Termination by Customer.
Customer may terminate this Agreement or any license at any time.
<PAGE>
3.4 Termination by Basis.
Basis may terminate this Agreement or any license upon written notice
if Customer breaches this Agreement and fails to correct the breach
within 30 days following written notice specifying the breach.
3.5 Effect of Termination.
Termination of this Agreement or any license shall not limit either
party from pursuing any other remedies available to it, including
injunctive relief, nor shall such termination relieve Customer's
obligation to pay all fees that accrued prior to such termination.
3.6 Return of Software Upon Termination.
If a license granted in this Agreement expires or otherwise terminates,
Customer shall (a) stop using the applicable software, and (b) certify
to Basis within one month after termination that Customer has destroyed
or has returned to Basis the Software and all copies. This requirement
applies in copies in all forms, partial and complete, in all types of
media and computer memory, and whether or not modified or merged into
other materials; but shall not apply to (i) back-up copies of the
Software made by Customer during the ordinary course of Customer's
network archiving procedures, provided that all such back-up copies are
securely stored by Customer at a location remote from Customer's
premises such made and inaccessible to Customer's development personnel
and (ii) copies of the software that, as of the date of such
termination, have been redistributed to third parties in accordance
herewith. Any InterTrust customers receiving Software pursuant to the
provisions of Section 2.1(A)(5) hereof shall have agreed to be bound by
the provisions of this Section 3.6.
4. PAYMENT PROVISIONS
4.1 Invoicing and Payment.
Invoices for payment of license fees shall be payable on the
Commencement Date. Consulting, training, and technical support fees and
all other applicable fees shall be payable when invoiced. All fees
shall be deemed overdue if they remain unpaid 31 days after they become
payable.
4.2 Taxes.
The fees listed in this Agreement do not include taxes; if Basis is
required to pay sales, use property, value-added, or other federal,
state or local taxes based on the licenses granted in this Agreement or
on Customer's use of Software, then such taxes shall be billed to and
paid by Customer. This shall not apply to taxes based solely on Basis's
income.
Customer shall make such reasonable steps as may be necessary to make
payment of amounts due Basis hereunder from any deduction or
withholding tax. Basis shall take reasonable steps to assist Customer
in this regard, including compliance with the procedures for claiming
relief under applicable provisions of applicable tax treaties, if any,
provided that such steps are not prejudicial to Basis tax liability in
any jurisdiction. If Customer nevertheless is required by law or any
country to make any deduction, or withhold from any sum payable to
Basis by Customer hereunder, then the sum payable shall be increased to
the extent necessary to ensure that, after such deduction or
withholding, Basis receives and retains, free from liability for such
deduction or withholding, a net amount equal to the amount Basis would
have received and retained in the absence of such required deduction or
withholding.
5. PROTECTION OF PROGRAMS; CONFIDENTIAL INFORMATION
5.1 Protection of the Software.
Customer shall limit access to the Software to its employees and agents
whose responsibilities require such access, and Customer shall adopt
reasonable measures to assure that its employees and agents will make
no disclosure of the Software in other persons or legal entities.
Customer agrees to treat the Software as a reasonable asset of Basis.
Except (and solely except) as set forth in Section 2.1(A)(v) hereof,
Customer will not
<PAGE>
sell or otherwise redistribute the header files, source code, object
modules, or state libraries of object modules in any form to
unaffiliated person or legal entities.
5.2 Nondisclosure.
By virtue of this Agreement, the parties may have access to information
that is confidential to one another ("Confidential Information").
Confidential Information shall be limited to the Software and all other
information.
A party's Confidential information shall not include information which:
(a) is or becomes a part of the public domain through no act or
omission of the other party; or (b) was in the other party's lawful
possession prior to the disclosure and had not been obtained by the
other party either directly or indirectly from the disclosing party; or
(c) is lawfully disclosed to the other party by a third party without
restriction on disclosure; or (d) is independently developed by the
other party.
The parties agree, both during the term of this Agreement and for a
period of three years after termination of this Agreement and of all
licenses granted hereunder, to hold each other's Confidential
Information in confidence. The parties agree to make each other's
Confidential Information available in any form to any third party or to
use each other's Confidential Information for any purpose other than
the implementation of this Agreement. Each party agrees to make all
reasonable steps to ensure that Confidential Information is not
disclosed or distributed by its employees or agents in violation of the
provisions of this Agreement.
6. WARRANTIES, REMEDIES, LIMITATION OF LIABILITY
6.1 Warranties and Disclaimers.
A. Warranties
(i) Software License Warranties. For each Supported License, Basis
warrants for a period of one year from the Commencement Date
that the Software, unless modified by Customer, will perform
the functions described in the documentation provided by Basis
when operated on the designated hardware and operating system.
Basis will undertake to correct any reported error condition
in accordance with its Software Support Policies.
Basis does not warrant that the Software will meet Customer's
requirements; that the Software will operate in conjunction
with other system software which Customer may select for use;
that the operation of the Software will be uninterrupted or
error free; or that all Software errors will be corrected.
If Customer does not obtain Technical Support Services, the
Software is distributed "as is".
(ii) Y2K Compliance. Basis warrants that its Software is "Year 2000
Compliant" or "Century Compliant" and that all duties are
represented internally without ambiguity as to century.
(iii) Media Warranty. Basis warrants the tapes, diskettes or other
media to be free of defects in material and workmanship
under normal use for 90 days' from the Commencement Date.
During the 90-day period, Customer may return defective
media to Basis and it will be replaced without charge.
Replacement of media is Customer's sole remedy in the event
of a media defect.
(iv) Services Warranty. Basis warrants that its technical and
consulting services will be performed in a workmanlike
<PAGE>
manner. This warranty shall be valid for 90 days from
completion of service.
B. Limitations on Warranties.
(i) The warranties above are exclusive and in lieu of all other
warranties, whether express or implied, including without
limitation the implied warranties of merchantability and
fitness for a particular purpose. Basis and Customer hereby
agree that any statutory warranty provisions shall not be
applicable to this Agreement, but that the above warranties
shall be applicable.
(ii) As an accommodation to Customer, Basis may supply Customer
with preproduction releases of Software, labeled "Alpha" or
"Beta." These releases are not suitable for production use.
Basis does not warrant preproduction releases; these releases
are distributed "as is."
6.2 Exclusive Remedies.
For any breach of the warranties contained in Paragraph 6.1 above,
Customer's exclusive remedy, and Basis's entire liability, shall be:
A. For Software
The correction of Software errors or replacement of Software media. If
Basis is unable to make the Software operate is warranted. Customer
shall be entitled to recover the applicable license fees paid to
Basis.
B. For Services
The performance of the services. If Basis is unable to perform the
services as warranted, Customer shall be entitled to recover the fees
paid to Basis for the deficient services.
6.3 Limitation of Liability.
In no event shall either party be liable for any indirect, incidental,
exemplary, punitive, special or consequential damages, including loss of
profits, revenue, data, or use, incurred by the other party or any third
party, whether in an action in contract or tort, even if advised of the
possibility of such damages. Basis's liability for damages hereunder shall
in no event exceed the amount of fees paid by Customer under this
Agreement, and if such damages result from Customer's use of the Software,
such liability shall be limited to license fees paid, prorated over a five-
year term from the Commencement Date of the relevant license.
7. GENERAL TERMS
7.1 U.S. Government Restricted Rights.
If Customer is a U.S. government agency then it is provided with
Restricted Rights. Use, duplication, or disclosure by the U.S.
Government is subject to restriction as set forth in subparagraph
(c)(1)(II) of The Rights In Technical Data and Computer Software
clause at DFARS 252,227-7013, on subparagraphs (c)(1) and (2) of the
Commercial Computer Software--Restricted Rights at 48 CFR 52-227-19 on
clause 18-52.227-86(d) of the NASA Supplement to the FAR, as
applicable. Contractor/manufacturer is Basis Technology Corporation
located at One Kendall Square, Building 200, Cambridge, MA 02139,
U.S.A.
7.2 Entire Agreement.
This Agreement constitutes the complete agreement between the parties
and supersedes all previous agreements or representation, written or
oral, with respect to the Software and services specified herein. This
Agreement may not be modified or amended except in a writing signed by
a duly authorized representative of each party.
It is expressly agreed that any terms and conditions of a purchase
order issued by Customer for Software and Supported Licenses shall be
superseded by the terms
<PAGE>
and conditions of this Agreement. This Agreement shall also supersede
the terms of any unsigned license agreement included in a package for
Basis-furnished microcomputer software.
7.3 Severability.
Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or the remaining
provisions of this Agreement.
7.4 Waiver.
The waiver by either party of any default or breach of this Agreement
shall not constitute a waiver of any other or subsequent default or
breach.
7.5 Governing Law.
This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts, without reference to its choice of law provisions, and
shall be deemed to be executed under seal in Cambridge, Massachusetts.
7.6 Arbitration.
Any controversy or claim arising out of or relating to this contract,
or the breach thereof, shall be settled by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof.
7.7 Notice.
All notices, including notices of address change, required to be sent
hereunder shall be in writing and shall be deemed to have been given
when mailed to the first address listed in the relevant Order
Supplement (if to Customer) or to the Basis address listed in this
Agreement (if to Basis).
7.8 Introductions; Additional Relationships.
The parties will discuss, periodically and as appropriate during the
term of this Agreement, opportunities for promoting the relationship
between the parties and potential projects involving Basis and
InterTrust partners. InterTrust shall, as appropriate, inform
InterTrust partners about Basis and provide introductions to such
partners, and may with the approval of Basis deliver appropriate
materials supplied by Basis in connection with potential opportunities
concerning utilization of Basis services. InterTrust will cite Basis
in future press releases pertaining to any international offerings
incorporating technology licensed from Basis.
CUSTOMER:
Company: InterTrust Technologies Corporation
___________________________________
By: ___________________________________
(Authorized Signature)
Name: ___________________________________
(Type or Print)
Title: ___________________________________
Date: ___________________________________
BASIS TECHNOLOGY CORP:
By: ___________________________________
(Authorized Signature)
Name: ___________________________________
(Type or Print)
Title: ___________________________________
Date: ___________________________________
<PAGE>
DES CORE LICENSE AGREEMENT
--------------------------
THIS DES CORE LICENSE AGREEMENT (the "Agreement") is made and entered
into as of the 29th day of January, 1997 (the "Effective Date") by and between
Dana L. How, an individual of P.O.B. 4066, Stanford, California 94309 (the
"Licensor") and InterTrust Technologies Corporation, a Delaware corporation with
offices at 460 Oakmead Parkway, Sunnyvale, California 94086, and any successor
in interest thereto (the "Licensee"), with reference to the following:
RECITALS
WHEREAS, Licensor has developed a cryptographic program called the DES
CORE Program (the "Program"); and
WHEREAS, Licensee has developed and is continuing to develop a unique,
general purpose architecture for among other things, rights protection and event
management related to electronic commerce (the "InterTrust Technology"); and
WHEREAS, Licensor desires to license the Program to Licensee,
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree to the following
terms and conditions:
1. Licensor hereby grants to Licensee a perpetual, irrevocable,
worldwide license under Licensor's intellectual property rights (a) to use, copy
and distribute copies of the Program's source code, in any medium, (b) to permit
redistribution thereof provided that Licensee publishes on documentation
accompanying each copy the copyright notice and disclaimer of warranty set forth
on Exhibit A hereto, (c) and to modify such Program as described in Section 2
hereof.
A "work based on the Program" means either the Program or any
derivative work under copyright law: that is to say, a work containing the
Program or a portion of it, either verbatim or with modifications and/or
translated into another language. (Hereinafter, translation is included without
limitation in the term "modification".)
2. Licensee may modify its copy or copies of the Program or any
portion of it, thus forming a work based on the Program, and use, copy,
distribute and permit redistribution of such modifications or work under the
terms and conditions of Section 1 above.
If identifiable sections of a work are not derived from the Program,
and can be reasonably considered independent and separate works in themselves,
then this License, and its terms, do not apply to those sections when
distributed as separate works.
In addition, mere aggregation of another work not based on the Program
with the Program (or with a work based on the Program) on a volume of a storage
or distribution medium does not bring the other work under the scope of this
License.
attachment A-3
<PAGE>
3. In full and complete consideration of the license granted to
Licensee herein, Licensee shall pay to Licensor the sum of Five Hundred Dollars
($500) within thirty (30) days of the Effective Date of the Agreement.
4. Licensor specifically agrees that upon distribution and/or
redistribution of the Program or any work based on the Program, Licensee is not
required to provide the Program's corresponding machine-readable source code to
any third parties. The source code for a work means the preferred form of the
work for making modifications to it.
5. Licensee is not responsible for enforcing compliance by third
parties to this Agreement.
6. Licensor hereby represents and warrants that he has full power and
authority to enter into this Agreement, and that no other action or proceeding
is necessary to authorize this Agreement.
NO WARRANTY
-----------
7. THERE IS NO WARRANTY FOR THE PROGRAM, TO THE EXTENT PERMITTED BY
APPLICABLE LAW. EXCEPT WHEN OTHERWISE STATED IN WRITING THE LICENSOR PROVIDES
THE PROGRAM "AS IS" WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESSED OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE. THE ENTIRE RISK AS TO THE QUALITY AND
PERFORMANCE OF THE PROGRAM IS WITH LICENSEE. SHOULD THE PROGRAM PROVE DEFECTIVE,
LICENSEE ASSUMES THE COST OF ALL NECESSARY SERVICING, REPAIR OR CORRECTION.
8. IN NO EVENT UNLESS REQUIRED BY APPLICABLE LAW OR AGREED TO IN
WRITING WILL THE LICENSOR, BE LIABLE TO LICENSEE FOR DAMAGES, INCLUDING ANY
GENERAL, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THE USE OR
INABILITY TO USE THE PROGRAM (INCLUDING BUT NOT LIMITED TO LOSS OF DATA OR DATA
BEING RENDERED INACCURATE OR LOSSES SUSTAINED BY LICENSEE OR THIRD PARTIES OR A
FAILURE OF THE PROGRAM TO OPERATE WITH ANY OTHER PROGRAMS), EVEN IF LICENSOR HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
9. This Agreement constitutes the entire understanding and contract
between Licensor and Licensee with respect to the subject matter hereof and
supersedes any and all prior or contemporaneous oral or written representations
or communications with respect to the subject matter hereof as of the date
hereof.
2
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first written above by the undersigned duly authorized.
DANA L. HOW INTERTRUST TECHNOLOGIES
CORPORATION
- ------------------------------- -----------------------------
By: Edmund J. Fish, Vice President and
General Counsel
3
<PAGE>
EXHIBIT A TO THE DES CORE LICENSE AGREEMENT
Form of Copyright Notice and Disclaimer:
- ---------------------------------------
des - fast & portable DES encryption & decryption
Copyright (C) 1992 Dana L. How
THIS PROGRAM IS DISTRIBUTED WITHOUT ANY WARRANTY, INCLUDING THE IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
4
<PAGE>
Exhibit A-1
[*] License Amendment
This [*] License Amendment is entered into this 30th day of November, 1998, by
----
and between [*] Corporation, a [*] corporation, having its principal place of
business at [*]and InterTrust Technologies Corporation, a Delaware corporation,
having its principal place of business at 460 Oakmead Parkway, Sunnyvale,
California 94086-4708, ("Licensee").
WHEREAS, [*] and Licensee have previously entered into a [*] License Agreement,
identified by Serial Number 472125 ("Agreement"), attached hereto as Exhibit A
and made a part hereof by reference; and
WHEREAS, [*] and Licensee desire to amend the Agreement, but only in the
manner and for the purposes set forth herein; and
WHEREAS, the parties agree that the purpose of this Amendment is to amend the
Agreement to allow Licensee's use of [*] technology ("Software") in connection
with the development and distribution to its customers (and to its customers'
customers) of software products relating to the protection and management of
digital information, events and/or trusted transactions (the "Rights/Event
Management Field") into which the Software has been incorporated as a black box
binary executable ("InterTrust Products"); and
WHEREAS, the InterTrust Products are included as applications within a systems
developers kit currently identified as and marketed under the names Commerce 1.0
and Enterprise 1.0, are used and sold only in connection with the Rights/Event
Management Field, and the InterTrust Products' APIs do not expose any Software
interfaces.
NOW, Therefore, the parties hereto do hereby covenant and agree to amend the
Agreement as follows:
1. License. [*] hereby agrees to allow Licensee to use the Software to
-------
develop, and to incorporate the Software in, the InterTrust Products and to
allow Licensee to distribute the InterTrust Products to its customers
("Customers"), and allow Customers to distribute the InterTrust Products to
their customers, including directly or indirectly to end-users (such Customers'
customers including directly or indirectly to end-users, collectively, "Customer
End-Users"), subject, however, to all of the following terms, limitations and
conditions:
A. Within five (5) days of the execution of this Amendment, Licensee shall
pay to [*] a fee of One Thousand and No/100 US Dollars ($1,000.00); AND
B. [*] shall have the right, upon execution of an appropriate non-
disclosure agreement provided by Licensee, to review the InterTrust Products
from time to time only to the extent necessary to review the manner in which the
Software is incorporated into the InterTrust Products, and provided that any
such review shall occur not more than twice annually and under no circumstances
shall FairCom have any access whatsoever to security, tamper resistance, or
encryption aspects of the InterTrust Products, and/or any InterTrust information
labeled Top Secret Information; AND
C. [*] grants Licensee the right to distribute, and to permit
Customers to distribute to Customer End-Users, the Software in binary executable
format solely as incorporated into the InterTrust Products in binary executable
form and provided for herein provided that (1) the Software API is not able to
be exported to Customers or to Customer End-Users, and (2) the InterTrust
Products do not permit Customers or Customer End-Users to create Software data
files or index files in any manner; AND
- --------------------------------------------------------------------------------
Page 1
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
Exhibit A-1
D. Licensee may distribute the Software in object or source code form as
incorporated into the InterTrust Products if, and only if, each object or source
code version of the InterTrust Products are distributed with a complete [*]
package, including [*] License Agreement; AND
E. Licensee shall purchase all of the [*] packages to be distributed with
object or source code versions of the Products from [*]. [*] agrees to sell
Licensee said [*] packages at the then current retail price of [*]; AND
F. Licensee shall include in the InterTrust Products' license agreements
provisions which prohibit (1) reverse engineering of the Software, (2)
modification of the Software in any manner whatsoever (except pursuant to prior
written agreement with [*]), and (3) the use of the Software other than as
the Software is incorporated into the InterTrust Products in any manner for the
development or distribution of: an operating system; a computer language
compiler or interpreter; a general purpose communication utility; a general
purpose database or file handler, including a general purpose Open DataBase
Connectivity ("ODBC") driver or a general purpose JAVA driver; or an application
development system; AND
G. Licensee agrees to include in the InterTrust Products' license
agreements a provision under which the InterTrust Products' direct or indirect
licensees agree, with respect to the Software, to all applicable the terms,
limitations and conditions of the [*] License Agreement consistent with the
provisions hereof; AND
H. Licensee confirms that the Software in object or source code form as
incorporated into the InterTrust Products has not been distributed by InterTrust
to anyone without permission under the Agreement prior to the effective date of
this Amendment; AND
I. Licensee agrees that the minimum annual compensation to be paid by
Licensee to [*] in order to maintain the rights granted in this Amendment
shall be One Thousand and No/100 US Dollars ($1,000.00).
2. Copyright Notices. Licensee shall include in the InterTrust Products, and
-----------------
require inclusion by its Customers of, copyright notices (and, as appropriate,
patent notices) as required by law to protect [*] intellectual property
rights (including copyrights, trademarks, service marks, trade secrets, patents,
moral rights, contract rights, mask work rights, and other proprietary rights)
in the Software.
3. Archive Copies. Licensee may make an unlimited number of copies of the
--------------
Software for archival purposes only. Licensee shall not use any such copies of
the Software for any other purpose whatsoever.
4. Price Terms; Confidentiality. The price terms of this Amendment are
-----------------------------
confidential, and no press release or other written or oral disclosure of any
nature regarding the price terms of this Amendment shall be made by either party
without the other party's prior written approval; however, approval for such
disclosure shall be duly given to the extent required to comply with
governmental regulations, judicial procedure or court order.
5. Termination. Licensee may terminate this Amendment for any reason, or for no
------------
reason, upon giving ninety (90) days prior written notice to [*]. In the
event Licensee breaches any term, condition or limitation of this Amendment and
fails to correct the violation within ninety (90) days of notification the other
party may, at its sole option, immediately terminate this Amendment by giving
written notice of such termination and exercise any or all of its legal and
equitable remedies. Any amounts due and owing to [*] shall become due upon
termination of this Amendment for whatever reason. The licenses granted herein
to Customers and Customer End-Users shall survive for Customers and Customer
End-Users who receive InterTrust Products subject to and in accordance with the
terms hereof prior to termination of this Amendment.
6. Assignment. This Amendment may be assigned by [*]. Licensee shall not
-----------
assign this Amendment without the prior written consent of [*].
- --------------------------------------------------------------------------------
Page 2
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
Exhibit A-1
7. Benefit of Successors and Assigns. This Amendment shall be binding upon and
----------------------------------
inure to the benefit of each of the parties hereto and, subject to the
provisions of Section 4 above, their respective legal successors and assigns.
8. Notices. Except as otherwise expressly specified herein, all notices,
--------
requests or other communications required hereunder shall be in writing and
shall be deemed to have been given or made if delivered personally, or mailed by
certified or registered mail, postage prepaid, return receipt requested, to the
parties at their respective addresses first set forth above, or at such other
addresses as shall be specified in writing by either of the parties to the other
in accordance with the terms and conditions of this section. All notices,
requests or communications shall be deemed effective upon personal delivery or
five (5) days following deposit in the mail in accordance with this section.
9. Governing Law; Choice of Forum. This Amendment is deemed to have been
-------------------------------
executed and entered into in [*], and shall be construed according to the laws
of the State of [*]. Any dispute concerning or arising out of this Amendment
shall be commenced and prosecuted in the appropriate forum or court located in
[*], and Licensee hereby consents to personal jurisdiction in such forum or
court.
10. Affirmation. All other terms of the Agreement between the parties shall
------------
remain in full force and effect as if more fully set forth herein. In case of
conflict, this Amendment shall govern the Agreement.
11. Entire Agreement. This Amendment and the Agreement are the complete and
------------------
exclusive contract between the parties with respect to the subject matter
hereof, which supersedes and merges all prior proposals, understandings and all
other agreements, oral and written, between the parties relating to the subject
matter hereof.
12. Waiver. No failure to exercise, and no delay in exercising, on the part of
-------
either party, any privilege, any power or any rights hereunder, will operate as
a waiver thereof, nor will any single or partial exercise of any right or power
hereunder preclude further exercise of any other right hereunder.
13. Attorney Fees. [*] shall be entitled to recover its reasonable
--------------
attorney fees and costs (including fees and costs of appeal) awarded by a court
of competent jurisdiction and as permitted by law, incurred in connection with
any action or proceeding between [*] and Licensee arising out of or related to
this Amendment and finally resolved in [*] favor substantially according to [*]
prayer for relief.
14. Survival of Obligations. All of Licensee's obligations under the Agreement
------------------------
and this Amendment shall survive the termination of the Agreement and this
Amendment for any reason whatsoever.
IN WITNESS WHEREOF, the duly authorized representatives of the parties have
executed this Amendment the day and year first written above.
For [*] Corporation: For InterTrust Technologies Corporation:
460 Oakmead Parkway
[*] Sunnyvale, CA 94086-4708
/s/ [*] /s/ Edmund J. Fish
- -------------------------------- --------------------------------------
Signature Signature
[*] Edmund J. Fish, EVP & General Counsel
- --------------------------------------------------------------------------------
Page 3
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITTH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
Exhibit A
The two (2) following pages are Licensee's [*] License Agreement.
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
[*] License Agreement
CAREFULLY READ THE TERMS AND CONDITIONS OF THIS AGREEMENT BEFORE OPENING THE
ACCOMPANYING FAIRCOM MEDIA PACKAGE(S). OPENING THE FAIRCOM MEDIA PACKAGE(S)
INDICATES YOUR ACCEPTANCE OF THESE TERMS AND CONDITIONS. IF YOU DO NOT AGREE
WITH ANY TERM, CONDITION OR LIMITATION OF THIS AGREEMENT, PROMPTLY RETURN THE
UNOPENED MEDIA PACKAGE(S) AND ALL ITEMS ACCOMPANYING THE PACKAGE(S) TO YOUR
SUPPLIER.
This is a legally binding and enforceable Agreement between you (which is you
personally if you are acting on your own behalf, or which is the organization,
corporation or other entity on whose behalf you are acting) and [*]
Corporation, hereinafter called [*].
1. Grant of License. Subject to all of the terms, conditions and limitations
set forth herein, [*] grants you the non-exclusive right for one (1)
person ("Registered Programmer") to use the [*] (comprised of the
accompany [*] source code, documentation, sample and utility programs,
hereinafter collectively called the "Software"), to develop computer
applications. This License Agreement is effective upon your opening the
accompanying [*] Media Package(s) and shall continue in effect until
terminated. You may terminate this License Agreement at any time. In the
event you violate any term, condition or limitation of this License
Agreement, and fail to correct the violation within fourteen (14) days of
notification, [*] may, at its sole option, terminate this License
Agreement. Upon termination of this License Agreement by you or by [*] you
agree to immediately return the Software to [*], to continue to maintain
the Software confidential, and to immediately destroy all copies of the
Software, whether in whole or in part, whether or not modified, whether in
source, object or binary executable form.
2. Proprietary Information. You understand and agree that the Software is and
remains the confidential property of [*], and is protected by United
States copyright laws and international treaty provisions, You are hereby
informed that the Software contains certain "Proprietary Information" which
belongs only to [*].
As used in this Agreement, "Proprietary Information" means the [*] source
and object code and the inventions, algorithms, mathematical constraints,
know-how and ideas embodied in the [*] source and object code, the
documentation, sample and utility programs received by you from [*] or
from any third party under obligation with [*] to maintain such
information as confidential. You agree not to remove, disclose to any
third party, copy or make summaries of the Proprietary Information or
utilize said Proprietary Information for any purpose, except as
specifically granted herein.
3. Title. The Software is licensed, not sold, to you. This license does not
convey to you any ownership interest in the Software or any [*]
trademark or registered trademark, but only a limited right to use the
Software in accordance with all of the terms, conditions and limitations of
this License Agreement. The Software is distributed subject to limited
distribution and limited disclosure only. This license does not permit you,
or any other person to:
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
a) disclose or transfer the Software to any person or entity not bound by
this License Agreement; or
b) Translate the Software to another computer language; or
c) modify the copyright and/or statements of confidentiality embedded in the
Software; or
d) use the Software to develop a database server; an operating system; a
computer language compiler or interpreter; a general purpose communication
utility; a general purpose database or file handler, including a general
purpose Open DataBase Connectivity ("ODBC") driver or general purpose
JAVA/TM/ driver; or an application development system; or
e) distribute the Software or any application using the Software to any one
for the purpose of building a database server; an operating system; a
computer language compiler or interpreter; a general purpose communication
utility; a general purpose database or file handler, including a general
purpose ODBC driver or general purpose JAVA driver; or an application
development system.
4. Backup Copies. You are permitted to make a maximum of two (2) copies of the
Software for backup purposes only. Media which contains the Software in
source code for or in linkable object form, whether in whole or in part, and
whether or not modified, must display the following notice:
This computer software is the confidential and proprietary property
of [*] Corporation. Any unauthorized use, reproduction or transfer
of this computer software is strictly prohibited. Copyright 1984-
1998, [*] Corporation. This is an unpublished work, and is subject
to limited distribution and restricted disclosure only. All right
Reserved.
5. Application Distribution. You have a royalty-free right to reproduce and
distribute binary executable files which contain some or all of the
Software, also only in binary executable form, provided that:
a) the binary executable files constitute an application which is not a
database server; an operating system; a computer language compiler or
interpreter, a general purpose communication utility; a general purpose
database or file handler, including a general purpose ODBC driver or
general purpose JAVA driver, or an application development system; and
b) the media containing the binary executable files displays your copyright
notice; and
c) you display on the title page or page of any documentation which
contains other product copyright notices the following [*] legend
(art work or Postscript files provided by [*]) along with [*]
copyright and trademark registration notice shown below;
Portions copyright 1984-1998 [*] Corporation. "[*]" and "[*]" are
trademarks of [*] Corporation and are registered in the United
States and other countries. All Rights Reserved.
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
d) you display the [*] copyright and trademark notice:
i) on the Product start-up screen, or
ii) in the About Box, or
iii) on the media containing the application using the Software
e) and within forty-five (45) days of the initial transfer, delivery or
shipment of said binary executable files to anyone, you provide [*]
proof of your compliance with subparagraphs 5(c) and 5(d).
In the event you cannot comply with all of the provisions of this Section 5
contact [*] immediately regarding possible amendment of this License
Agreement.
6. Assignment of License. You may not rent, lease or share the Software, but
you may assign this Agreement, provided:
a) You retain absolutely no copies of the Software or the accompanying
documentation; and
b) the assignee agrees to and signs the [*] Software License Transfer
Agreement and delivers same to [*] prior to such assignment.
7. Trademarks. "[*]", "[*]" and [*] circular disc logo are registered
trademarks of [*] in the United States and other countries. No right or
ownership interest to such trademarks is granted to you herein. You hereby
agree that you will not use these trademarks, except as specifically
required by this License Agreement, without the express written consent of
[*]. Java and Java-based marks are trademarks or registered trademarks of
Sun Microsystems, Inc. in the United States and other countries. [*] is
independent of Sun Microsystems, Inc.
8. Disclaimer of Warranties. The entire risk as to the quality and performance
of the Software is with you. Should the Software prove defective, you assume
the entire cost of all necessary servicing, repair and correction. [*]
does not warrant that the functions contained in the Software will meet your
requirements or that the operation of the Software will be uninterrupted or
error free. THE SOFTWARE IS LICENSED "AS IS", AND [*] DISCLAIMS ANY AND
ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, ANY IMPLIED WARRANTIES OR MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
9. Limited Liability. [*] cumulative and total liability to you or any other
party for any claim, demand or action arising from or related to this
License Agreement or your use of the Software (whether in contract,
warranty, tort (including negligence), product liability, patent or
copyright infringement or any other theory whatsoever), including any
damages from computer viruses, shall not exceed the license fee paid to
[*] for the use of the Software. IN NO EVENT SHALL [*] BE LIABLE FOR ANY
INDIRECT, INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES, EXEMPLARY DAMAGES,
LOST PROFITS, OR DATA LOSS EVEN IF [*] IS ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES IN ADVANCE.
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
10. U.S. Government Restricted Rights. If you are acting on behalf of any unit
or agency of the government of the United States of America, hereinafter
called the "Government", the following provisions apply:
a) the Government acknowledges [*] representation that the Software
was developed exclusively at private expense and no part of it is in the
public domain;
b) the Government acknowledges [*] representation that the Software
is "restricted computer software" as that term is defined in Section
27.401 of the Federal Acquisition Regulations and is "commercial
computer software" as that term is defined in Section 227.401(1) of the
Department of Defense Federal Acquisition Regulation Supplement,
hereinafter called "DFARS";
c) the Government agrees that:
1. if the Software is supplied to the Department of Defense, the
Government is acquiring no more than the minimum restricted rights
in the Software, as the term "restricted rights" is defined in
Subparagraph (a)(17) of the Rights in Technical Data and Computer
Software clause at DFARS 252.227-7013, and the Government agrees
that the Software is marked as follows:
RESTRICTED RIGHTS LEGEND Use, duplication or disclosure by the
Government is subjected to restrictions as set forth in
Subparagraph(c)(1)(ii) of the Rights in Technical Data and Computer
Software clause at DFARS 252.227-7013. [*] Corporation [*].
2. if the Software is supplied to any unit or agency of the Government
other than the Department of Defense, the Government's rights in the
Software shall be no more than those rights set forth in
Subparagraphs (c)(1) and (c)(2) of the Commercial Computer
Software-Restricted Rights, at 48CFR52.227-19, and the Government
agrees that the Software is marked as follows:
This is an unpublished work, and is subject to limited distribution
and restricted disclosure only. All Rights Reserved.
11. Export Restrictions. You may not export or reexport the Software or any
files created under the license granted to you herein except as authorized
by United States law and the laws of the jurisdiction in which the Software
was obtained. In particular, but without limitation, the Software or any
files created under the license granted to you herein may not be exported
or reexported into (or to a national or resident of) Cuba, Iran, Iraq,
Libya, North Korea, Sudan, Syria or any other U.S. embargoed country or to
anyone on the U.S. Treasury Department's list of Specially Designated
Nationals or the U.S. Department of Commerce's Table of Denial Orders. You
shall not knowingly provide the Software or any files created under the
license granted to you herein to any organization which is (a) located in
any such country, or (b) under the control of a national or resident of any
such country or on any such list.
12. Governing Law. This License Agreement is deemed to have been executed and
entered into in [*], and shall be construed in accordance with the laws
of the State of [*]. Any dispute concerning or arising out of this
License Agreement shall be commenced and prosecuted in the appropriate
forum or court located in [*], and you hereby consent to personal
jurisdiction in such forum or court.
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
13. Access. You agree and authorize [*], or its authorized representative,
access to any location where the Software is being used in order to
verify that your use of the Software complies with all of the terms,
conditions and limitations set forth in this License Agreement.
14. Severability. Should any provision of this License Agreement be adjudged
invalid, void or unenforceable by a court of competent jurisdiction, such
judgment shall not affect the validity of any other section, term,
condition or limitation set forth herein.
15. Waiver. No failure to exercise, and no delay in exercising, on the part of
either party, any privilege, any power or right herein will operate as a
waiver thereof, nor will any single or partial exercise of any right or
power herein preclude further exercise of any right herein.
16. Entire Agreement. This License Agreement constitutes the entire
understanding between the parties hereto with respect to the subject matter
hereof and supersedes any and all prior or contemporaneous oral or written
agreements, understandings, representations or communications between the
parties.
17. Survival of Obligations. All of your obligations and responsibilities
under this License Agreement shall survive its termination for any reason.
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL
EXHIBIT B
TO THE TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
Exhibit B deleted by subsequent amendment.
B-1
*THIS EXHIBIT WAS DELETED BY AN AMENDMENT ATTACHED AS EXHIBIT 10.18 TO THE
REGISTRATION STATEMENT
<PAGE>
CONFIDENTIAL
EXHIBIT C
TO THE TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
TRADEMARKS
----------
InterTrust Trademarks
---------------------
AssertTrust PromoteTrust
AudioTrust Publish America
AvTrust PublishTrust
Chain of Handling and Control Protected Processing Environment
Commerce 1.X RightsBar
Commerce America Rights Editor
Commerce Appliance Rights Expression Language
Commerce Modeler Rights Expression Tools
CommerceStation Rights Metafile
ComplyTrust RightsCard
Computer Aided Business RightsCore
Deployment Manager RightsStation
DigiBox RightsWallet
Electronic Express SiliconAssist
Electronic Value Chain Management SoundRights
Enterprise Modeler The InterTrust Logo
InterRights Point Transaction Authority Framework
InterTrust Commerce Architecture Trust Virtual Machine (TVM)
InterTrust Commerce Node TrustCore
InterTrustable TrustMail
InterTrustworthy TrustNet
JBar TrustPublish
JPoint TrustServer
JTrust TrustStation
MailTrust Video Trust
MetaTrust Virtual Process Control
MMTrust
MPTrust
MP3Plus
MP3Trust
MPEGTrust
MultimediaTrust
NetTrust
OpenRights
PageForward
C-1
<PAGE>
CONFIDENTIAL
Trademark Guidelines for Use of Trademarks of InterTrust Technologies
---------------------------------------------------------------------
Corporation
-----------
1. These Trademark Guidelines ("Guidelines") are provided pursuant to the
Technology Development, Marketing and License Agreement (the "Agreement")
between Universal Music Group ("Licensee") and InterTrust Technologies
Corporation ("InterTrust"). The trademarks of InterTrust Technologies
Corporation as listed on Exhibit C (as may be amended or supplemented from
time to time by InterTrust) ("InterTrust Trademarks") are valuable
intellectual property of InterTrust that identify genuine technology and/or
products licensed by InterTrust. Since the InterTrust Trademarks signify a
high standard of quality and reliability, InterTrust must maintain control
over how each of the InterTrust Trademarks is used. Therefore, these
Guidelines and the provisions of applicable sections of the Agreement must
be followed in their entirety in order to preserve and protect the
InterTrust Trademarks.
2. The InterTrust Trademarks must be used on products and/or services that
include InterTrust licensed technology or other material ("Licensed
Material") and/or that have been certified as InterTrustworthy by
InterTrust Certification Program; as provided for in the Agreement. The
InterTrust Trademarks must also be used on associated initial computer
screens, packaging, collateral documentation, manuals advertising, and
promotional materials. The InterTrust Trademarks may never be used on or in
connection with any other products or services, except as expressly
provided for under the Agreement.
3. At any place where a InterTrust Trademark is used, it must be symbolically
indicated that the InterTrust Trademark used therein is a legal trademark
belonging to InterTrust. This can be done by (1) indicating the "TM" symbol
at the upper right corner of the trademark for an unregistered InterTrust
Trademark and indicating the circled "R" (R) symbol at the upper right
corner of the trademark for a registered trademark, and (2) appending an
"*" after the InterTrust Trademark and placing the appropriate statement
selected from the following on a suitably noticeable area (which shall
generally occur near the copyright notice in text or on screen) of each
such copy:
(For an unregistered InterTrust Trademark)
*___________________ (insert InterTrust Trademark) is a trademark in
the USA and other countries of InterTrust Technologies Corporation and
is used by ________________________ (insert licensee name) under
license.
(For a registered InterTrust Trademark)
*____________________ (insert InterTrust Trademark) is a trademark in
the USA and other countries of InterTrust Technologies Corporation
(Reg. U.S. Pat. and Tm. Off.) and is used by _________________ (insert
licensee name) under license.
Some countries may require that a translated version of these above
statements be used. Licensee must comply with any such local laws.
4. InterTrust Trademarks may not be used in any manner that may cause
confusion as to the source of origin of products and/or services. As a
general matter, the only InterTrust trademark that need directly and
evidently appear on the product or service is a mark indicating compliance
with InterTrust's Specifications, as designated by InterTrust - such as the
mark "InterTrustworthy".
C-2
<PAGE>
CONFIDENTIAL
Under no circumstances may InterTrust Trademarks be used or identified on a
product or in a business name or identifier of a business, InterTrust, product,
or service not connected with licensee's products incorporating the Licensed
Material. No variations, compounds, or imitations of the InterTrust Trademarks
may be used at any time, except as expressly authorized in writing by the
InterTrust Designated Officers.
5. All of the InterTrust Trademarks that are word marks must always be used
either as a symbol standing alone or as an adjective describing a noun,
with the noun being the generic name of the product to which the trademark
is applied. (For example, "an InterTrust rights protection system" not "an
InterTrust," or "a DigiBox secure container" not "a DigiBox.") Possessive
or plural forms of the InterTrust Trademark word marks are prohibited.
Additional guidelines regarding specific uses of InterTrust Trademarks and
logos may be provided by InterTrust from time to time.
6. The InterTrust Trademarks may not be used as part of or in any emblem or
insignia or on novelty items except as expressly authorized in writing by
the InterTrust Designated Officers. Except as specifically provided in the
Agreement, the InterTrust Trademarks may not be used in combination with
any other trademark, service mark or trade name except as expressly
authorized in writing by an InterTrust Designated Officer.
7. InterTrust will provide its licensees with camera-ready artwork of the
InterTrust Trademarks. This is the form of the InterTrust Trademarks that
must be used, and this artwork shall not be altered in any way with the
exception of resizing, which may be done using conventional and
commercially available processes. The InterTrust Trademarks may be used in
black and white, the exact color scheme specified by InterTrust in the
artwork, or in such other color treatments as may have been previously
authorized in writing by InterTrust. Such authorization may be rescinded at
any time as specified in the Agreement. In addition, the area surrounding
any use of a logotype form of a InterTrust Trademark must be free of any
other pattern or graphic element for at least the width of a band that is
itself at least 20% of the logotype form of the InterTrust Trademark,
unless the licensee has received the prior written authorization of
InterTrust, which may be rescinded in writing at any time.
8. Exhibit C of the Agreement includes a listing of all current registered and
unregistered InterTrust Trademarks, and InterTrust will provide prompt
amendment of Exhibit C as registrations are obtained.
9. Schedule 1 hereto lists those countries in which licensees' use of
InterTrust Trademarks is prohibited or otherwise restricted. InterTrust
will provide prompt amendment of Schedule 1 as changes occur.
10. In addition to these Guidelines, consistent with the Agreement, InterTrust
may amend these Guidelines at any time and/or provide additional
instructions from time to time which must be followed in use of InterTrust
Trademarks. Such amendment and/or instructions shall not be inconsistent
with the terms of the Agreement.
C-3
<PAGE>
CONFIDENTIAL
SCHEDULE 1
Countries in Which Use of InterTrust Trademarks is Prohibited or Otherwise
Restricted
None
C-4
<PAGE>
EXHIBIT D-1
TO THE TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
AUTHORIZED DEVELOPMENT VENTURE SIGNATURE PAGE
---------------------------------------------
By executing this SIGNATURE PAGE, effective as of __________, 199___ ("Effective
---------
Date"), the undersigned, on behalf of _______________, a _______ [corporation]
- ----
("Development Venture") certifies that it qualifies as the Development Venture
-------
in accordance with, and as such term is defined in, the TECHNOLOGY DEVELOPMENT
AND LICENSE AGREEMENT of April ___, 1999 between Universal Music Group, Inc.
("Universal") and InterTrust Technologies Corporation ("InterTrust") (the
- ----------- ----------
"Agreement") to which this SIGNATURE PAGE is attached, and agrees to be bound by
- ----------
all the terms and conditions thereof and hereof applicable to the Development
Venture and Universal as set forth in Sections 2.1(a), 2.1(c) and 2.2 of the
Agreement (except as set forth in the Agreement to the contrary) as if the
Development Venture executed the Agreement in place of Universal, to and for the
benefit of itself and the Parties hereto. All capitalized terms other than
those specifically defined herein shall have the meaning ascribed to such
term(s) in the Agreement. By executing the acknowledgment below, InterTrust
confirms that this entity is the Development Venture for the purposes of this
Agreement as of the Effective Date hereof; provided that the following terms and
-------- ----
conditions (and those terms and conditions set forth in the Agreement) are fully
met.
Development Venture hereby: (i) covenants that no Competitive Entity who owns
any capital stock, other equity interest, or security convertible into equity
interest of the Development Venture will at any time (and except as expressly
permitted with respect to [*] and [*] as concerns the ADK Technology pursuant
to Section 2.1(d)(iii): (1) Govern or participate in the Governance of the
Development Venture or (2) gain access or exposure to InterTrust Confidential
Information and/or Top Secret Information by virtue of such Person involvement
or participation in the Development Venture; (ii) acknowledges and agrees that
consistent with Section 2.1(c) of the Agreement, if any Competitive Entity is
involved in a Non-Partnering Venture Event, InterTrust shall have the right to
terminate the sublicense granted to the Development Venture, if such Competitive
Entity fails to comply with the provisions of Section 2.1(c) of the Agreement to
either (a) complete the divestiture of all its equity interest in such
Development Venture or (b) cease such Non-Partnering Venture Event; and (iii)
agrees to be bound by, to implement, and to maintain the Screening Procedures
pursuant to Section 2.2(b) hereof and Exhibit F.
Development Venture: _________________
By: __________________________________
Printed Name: ________________________
Title: _______________________________
Acknowledgment: Acknowledgment:
Universal Music Group, Inc. InterTrust Technologies Corporation
By: __________________________________ By: _______________________________
Printed Name: ________________________ Printed Name: _____________________
Title: _______________________________ Title: ____________________________
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
EXHIBIT D-2
TO THE TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
AUTHORIZED CLEARINGHOUSE VENTURE SIGNATURE PAGE
-----------------------------------------------
By executing this SIGNATURE PAGE, effective as of __________, 199___ ("Effective
---------
Date"), the undersigned, on behalf of _______________, a _______ [corporation]
- ----
("Clearinghouse Venture") certifies that it qualifies as the Clearinghouse
-------
Venture in accordance with, and as such term is defined in, the TECHNOLOGY
DEVELOPMENT AND LICENSE AGREEMENT of April ___, 1999 between Universal Music
Group, Inc. ("Universal") and InterTrust Technologies Corporation ("InterTrust")
--------- ----------
(the "Agreement") to which this SIGNATURE PAGE is attached, and agrees to be
---------
bound by all the terms and conditions thereof and hereof applicable to the
Clearinghouse Venture and Universal as set forth in Sections 2.1(b), 2.1(c) and
2.2 of the Agreement (except as set forth in the Agreement to the contrary) as
if the Clearinghouse Venture executed the Agreement in place of Universal, to
and for the benefit of itself and the Parties hereto. All capitalized terms
other than those specifically defined herein shall have the meaning ascribed to
such term(s) in the Agreement. By executing the acknowledgment below,
InterTrust confirms that this entity is the Clearinghouse Venture for the
purposes of this Agreement as of the Effective Date hereof; provided that the
-------- ----
following terms and conditions (and those terms and conditions set forth in the
Agreement) are fully met.
Clearinghouse Venture hereby: (i) covenants that no Competitive Entity who owns
any capital stock, other equity interest, or security convertible into equity
interest of the Clearinghouse Venture will at any time: (1) Govern or
participate in the Governance of the Clearinghouse Venture or (2) gain access or
exposure to InterTrust Confidential Information and/or Top Secret Information by
virtue of such Person involvement or participation in the Clearinghouse Venture;
(ii) acknowledges and agrees that consistent with Section 2.2(b) of the
Agreement, if any Competitive Entity is involved in a Non-Partnering Venture
Event, InterTrust shall have the right to terminate the delegation granted to
the Clearinghouse Venture, if such Competitive Entity fails to comply with the
provisions of Section 2.1(b) of the Agreement to either (a) complete the
divestiture of all its equity interest in such Clearinghouse Venture or (b)
cease such Non-Partnering Venture Event; and (iii) agrees to be bound by, to
implement, and to maintain the Screening Procedures pursuant to Section 2.1(b)
hereof and Exhibit E.
Clearinghouse Venture: _______________
By: __________________________________
Printed Name: ________________________
Title: _______________________________
Acknowledgment: Acknowledgment:
Universal Music Group, Inc. InterTrust Technologies Corporation
By: __________________________________ By: _______________________________
Printed Name: ________________________ Printed Name: _____________________
Title: _______________________________ Title: ____________________________
<PAGE>
CONFIDENTIAL
EXHIBIT E
TO THE TECHNOLOGY DEVELOPMENT, AND LICENSE AGREEMENT
SCREENING PROCEDURES
--------------------
Universal and each Authorized Venture (each a "Screening Party") agree to
implement and abide by the following Screening Procedures:
The "Screening Procedures" are to be implemented by the Screening Party to
separate (i) its Agents that have access to Confidentially Handled Information
from (ii) Agents that have access to confidential information of Other
Technology, and are intended to ensure that such Screening Party operates
without the occurrence of a Compromising Event, including ensuring that no
Confidentially Handled Information is advertently or inadvertently shared with,
disclosed to and/or learned by unauthorized Agents. The Screening Procedures
shall, at a minimum, be in place: (i) with respect to Universal, during the Term
and for twelve (12) months thereafter; and (ii) with respect to an Authorized
Venture, during the duration of a sublicense or delegation (as the case may be)
and for twelve (12) months thereafter, and have the following procedural
attributes, serving the purposes indicated:
(1) Group Composition and Lists. The purpose of group composition lists is to
---------------------------
keep the Parties and the Persons within specific groups informed as to who
should have access to information and who should not have such access. Each
Screening Party shall use commercially reasonable efforts to keep accurate lists
of:
(a) all Agents who have access to, work on, have responsibility for,
or are otherwise privy to, information concerning such Screening Party, or
are otherwise personnel of the Authorized Venture;
(b) all Agents who have access to, work on, have responsibility for,
or are otherwise privy to Confidentially Handled Information (the "InterTrust
----------
Technology Group");
----------------
(c) all Agents who have access to, work on, have responsibility for,
or are otherwise privy to contractually protected confidential information
concerning Other Technology, or concerning designs or plans concerning use
(or incorporation) of Other Technology into products and/or related services
of the Screening Party ("Other Technology Group"); and
----------------------
(d) all Authorized Executives (as defined below) who oversee both the
Other Technology Group and the InterTrust Technology Group.
"Authorized Executives" shall be strictly limited to senior business executives
---------------------
that: (i) have a direct need to know business information that is confidential
information relating to both the Other Technology Group and the InterTrust
Technology Group, and (ii) have no material active role in directing the
planning, direction, design or development of technology for such Screening
Party other than high level approval of such Screening Party's general direction
and efforts. Albhy Galuten, Lawrence Kenswil and Michael Bebel and their
successors shall at all times be considered Authorized Executives. Each
Screening Party shall ensure that only Persons who qualify as Authorized
Executives, and no other Person, are permitted to oversee personnel in both the
Other Technology Group and the InterTrust Technology Group.
Each Screening Party shall maintain copies of such lists, which shall be
available for inspection and review by InterTrust upon InterTrust's prior
written request.
E-1
<PAGE>
CONFIDENTIAL
(2) Information Security and Handling. The purpose of information security is
---------------------------------
to ensure that no Confidentially Handled Information is transferred between any
Other Technology Group participants and authorized Screening Party personnel
working with Confidentially Handled Information. The information security
procedures shall comprise, at a minimum, the following:
(a) procedures reasonably sufficient to ensure that a member of the
InterTrust Technology Group shall not discuss or disclose to persons
outside of such group (especially to any member of the Other Technology
Group) any Confidentially Handled Information of InterTrust or of such
Screening Party related to InterTrust, including any Confidentially Handled
Information regarding InterTrust Technology and/or plans, including, but
not limited to, technical and business activities, as well as any
Confidentially Handled Information of such Group or InterTrust (whether or
not such information includes information about InterTrust Technology or
information disclosed by InterTrust to Universal or such Screening Party)
except that the InterTrust Technology Group may disclose, to a commercially
reasonable extent for the purposes set forth below, such information to the
Screening Party's or Contractor's accounting, budget management, legal, or
other internal administrative departments, but solely for the purpose of
obtaining necessary administrative or non-technical support or consultant
services from such departments, or to fulfill reasonable reporting
responsibilities related to administrative management of, or high level
strategic planning for, the InterTrust Technology Group regarding its past,
present, and future activities, resources, and planning, but such reporting
shall not materially include InterTrust or InterTrust Technology Group
technical information that is Confidentially Handled Information.
(b) except to the extent expressly and reasonably in support of the
provisions of Section 2(a) immediately above, no documents (or summaries or
material portions thereof) containing Confidentially Handled Information of
InterTrust or the InterTrust Technology Group shall be disseminated or
disclosed by the Screening Party or the Contractor to any person outside of
the InterTrust Technology Group or InterTrust; and
(c) any InterTrust Technology Group information no longer in active
use must be securely disposed of, including, for example, cross-shredding
in a secure and effective manner.
(3) Computer/Network Security. The purpose of Computer/Network security is to
-------------------------
impede potential information flow between the InterTrust Technology Group and
any Other Technology Group by limiting access to electronic information. The
Computer/Network Security procedures shall comprise, at a minimum, the
following:
(a) no portable storage media (such as floppy disks, CDROM, etc.)
shall be passed between members of the InterTrust and any Other Technology
Groups unless such media has been examined and confirmed not to contain
confidential information of either group;
(b) no person or entity who is not in or working directly and closely
with, the InterTrust Technology Group, and who is not further expressly (i)
prohibited by written agreement from working with competitive technology of
the InterTrust Technology Group during the course of their work with the
Screening Party (including, as relates to any Authorized Venture, with its
participants) and (ii) bound under confidentiality and non-use provisions
that protect all InterTrust Rights in InterTrust Confidential Information
(as if they were a Universal employee as provided for in the Agreement),
shall be permitted to have access to the InterTrust Technology Group's
network resources, including file storage, printing, communications, and
other host or server resources;
E-2
<PAGE>
CONFIDENTIAL
(c) any server resources of the InterTrust Technology Group must be
protected against unauthorized access, at a minimum through the use of
individual user passwords; and
(d) no InterTrust Top Secret Information shall be stored on a server
(unless such server is used solely in connection with the InterTrust
Technology Group), or other storage media shared by persons not in the
InterTrust Technology Group, and no such InterTrust Top Secret Information
shall be included in any e-mail and other electronic communications between
members of the InterTrust Technology Group passing through any host or
server to which any member of any Other Technology Group has any access
rights. With respect to information relating to Confidentially Handled
Information other than Top Secret Information, all e-mail and other
electronic communication between members of the InterTrust Technology Group
containing any such information shall not pass through any host or server
to which any member of any Other Technology Group has any access rights
which enables users to access information as an administrator.
(4) Physical Security. The purpose of physical security is to impede potential
-----------------
flow of Confidentially Handled Information between the InterTrust Technology
Group and any Other Technology Group by physical separation. The physical
security procedures shall comprise, at a minimum, the following:
(a) no individual offices or work space may be shared by members of
the InterTrust Technology Group and any Other Technology Group; and
(b) any InterTrust Technology Group area (including areas containing
files of such Group) shall have locks and such other appropriate security
barriers sufficient to ensure that only authorized persons (including
building and administrative services) may enter or obtain access to such
areas or information contained therein. No Other Technology Group member
shall be authorized to enter such InterTrust Technology Group areas;
(5) Written Procedures and Education. Written procedures and education are
--------------------------------
intended to aid compliance with information procedures by making sure that
Screening Party employees (including members of the InterTrust Technology
Group or any Other Technology Group) are aware of the procedures they are
expected to follow. The Screening Party and its participants shall ensure
that relevant employees are informed of the Screening Procedures by, at a
minimum:
(a) memorializing the definition of a Compromising Event and the
Screening Procedures in a memorandum (the "Screening Procedures Memo") and
-------------------------
distributing the Screening Procedures Memo to each of the persons listed in
Section 1 hereof (including new members of the groups, as added);
(b) conducting one or more meetings promptly following the Effective
Date (and with new employees during an orientation meeting) to explain the
Screening Procedures to all affected personnel;
(c) periodically advising relevant employees of information which, if
not handled in accordance with these Procedures, could lead to a
Compromising Event, and of the necessity of following the Screening
Procedures; and
(d) posting the requirements of the Screening Procedures in
appropriate, prominent locations within the InterTrust Technology and Other
Technology Group areas to remind Screening Party and its participants and
their employees of their Screening Procedure obligations.
E-3
<PAGE>
CONFIDENTIAL
(6) Absence of any Other Technology Group. If none of the Screening Party or,
-------------------------------------
as relates to an Authorized Venture, any participants is engaged in
developing, marketing, distributing, promoting, or otherwise pursuing
business activities supportive of any Other Technology and such absence of
support for Other Technology is certified in writing by each such Person,
then, but only for so long as no such Party is involved in such support of
Other Technology, information, including Confidentially Handled Information
of InterTrust or of the InterTrust Technology Group, may be handled
according to the terms and conditions for Confidential Information and Top
Secret Information in the Agreement (and without such Screening
Procedures), but further only so long as: (a) no such Party becomes
involved in such support of Other Technology, and (b) the Screening Party
is compliant with the terms and conditions of this Agreement.
E-4
<PAGE>
CONFIDENTIAL
EXHIBIT F
TO THE TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
INTERTRUST TERMS
----------------
At a minimum, the Customer Agreements shall contain the terms:
(1) prohibit Customer from disassembling, modifying or
reverse engineering any portion of the InterTrust Technology incorporated in the
Universal Product (as relevant and to the maximum extent allowed under
applicable law);
(2) stipulate that such Customer has no right to use
such product in any manner whatsoever not licensed to Universal hereunder
(including outside of the Entertainment Field (except as related to use of the
InterRights Point with other licensed applications)), and/or to engage in or
perform any Clearinghouse Functions whatsoever unless such customer is an
Authorized Clearinghouse Provider;
(3) grant such Customer only the limited license, and
only such limited license as is strictly necessary, to use Universal Products
and/or associated services within the specific scope set forth in the definition
of Customer in Section 1 hereof (and/or to use an InterRights Point with other
licensed applications);
(4) permit such Customer to engage Universal and/or an
Authorized Clearinghouse Provider (as determined by Universal for its Customers)
to perform Clearinghouse Functions with respect to a Universal Product and/or
associated services, but solely in accordance with the provisions hereof;
(5) provide that if such Customer is permitted by
InterTrust, and if by InterTrust then by Universal, to modify any portion of
InterTrust Source Code, such Customer shall grant to InterTrust and InterTrust
customers a license under such Customer's patent rights, but solely to the
extent necessary to permit InterTrust and InterTrust customers to, during the
life of their use of InterTrust Technology, make, have made, use, offer for
sale, sell and/or import InterTrust Technology;
(6) brand all Universal Products that are Application
Products solely in the manner set forth in Section 5.3(c), and, further, on Co-
Branded Universal Products (as defined in Section 5.3(c)) communicate in a
significant and prominent manner through the use of one or more Universal brands
for Universal InterTrustworthy clearing services (and as set forth in Section
5.3) that Clearinghouse Function services are being performed by Universal or an
Authorized Venture, as applicable, in compliance with this Agreement;
(7) prohibit such Customer from removing, altering,
covering, obfuscating and/or otherwise defacing any InterTrust Trademarks or
Notices on any InterTrust Technology or associated documentation, marketing and
advertising materials therefor;
(8) require such Customers to place Notice on products
and associated documentation, marketing and advertising materials therefor in
full accordance with the terms and conditions of this Agreement;
F-1
<PAGE>
CONFIDENTIAL
(9) provide that such agreement may be subject to
modification as may be reasonably required to protect InterTrust's rights, for
example but without limitation, InterTrust's Intellectual Property Rights;
(10) provide that the Customer Agreement is to and for
InterTrust's benefit, and (a) in the event Universal fails to promptly enforce
its rights thereunder such rights may be enforced by InterTrust at its
discretion as a third party beneficiary (provided that notice is first provided
to Universal and Universal does not enforce its rights promptly thereafter),
and/or (b) with respect to InterTrust's Intellectual Property Rights and/or
rights in InterTrust Technology, may be enforced by InterTrust at its discretion
to enforce any of its rights in such intellectual property and technology; and
contain such other provisions as stipulated herein.
SELECT PROVISIONS TO BE INCLUDED IN END-USER AGREEMENTS
-------------------------------------------------------
1. [In the first paragraph of such Agreement] Except as expressly provided to
the contrary herein, each Transaction, as defined below, shall be subject to and
wholly governed by the then-current version of this ________________ Agreement
in force as of the date and time of such Transaction. A copy of such current
version can be located at ________________________________________ (or as
otherwise indicated by the Software). Customer agrees to abide by the terms and
conditions hereof (including pursuant to the Exhibit).
2. [Following the license provision concerning Universal software
("Software"):] Such object code version of such Software incorporates certain
software and technology (and documentation) provided by Universal under license
from InterTrust Technologies Corporation ("InterTrust"), for protecting and
managing digital information (collectively "InterTrust Software"), which is
-------------------
governed by this Agreement. In the case of any conflict with respect to (or
affecting) InterTrust Software between terms and conditions hereof set forth on
the Exhibit and terms and conditions set forth elsewhere in this Agreement, the
terms and conditions set forth on the Exhibit shall control.
3. Integrate InterTrust into standard "no modification, etc." clauses language
generally as follows: Customer's rights in the Software are for use only in
connection with the ordinary course of its business, and not for commercial
distribution of the Software to third parties or unless otherwise agreed by
Universal and InterTrust. All title and ownership rights in the Software
remains with Universal and its licensors, as applicable. Customer may make one
back-up copy of the Software for archival purposes, so long as such copy
contains the copyright and proprietary notices which are furnished with the
original copy. Customer may not modify, alter, decompile, disassemble, reverse
engineer, reverse compile or otherwise reduce the Software to human readable
form without the prior written consent of Universal, or as relates to InterTrust
Software, InterTrust; provided, however, that, notwithstanding anything
-------- -------
contained herein to the contrary, Universal's and/or InterTrust's authorization,
as applicable, shall not be required where reproduction of the Software and
translation of its form are indispensable in the European Union or Norway to
obtain the information necessary to achieve the interoperability of the Software
with other programs, provided that: (a) these acts are performed by Customer or
by another person having a right to use a copy of the Software, or on their
behalf by a person authorized to do so; (b) the information necessary to achieve
interoperability has not previously been readily available to the persons
referred to in subparagraph (a); and (c) these acts are confined solely to the
parts of the Software which are necessary to achieve interoperability.
F-2
<PAGE>
CONFIDENTIAL
4. Include InterTrust and/or "any of its licensors" in any Universal
exclusions from warranties or damages. And, in "no third party beneficiary"
clauses, include InterTrust specifically, for example, as follows: Customer
understands and acknowledges that the Services are being provided solely by
Universal and that neither the provision of the Services, nor this Agreement,
nor any other relationship between Universal and Customer creates any
relationship, contractual or otherwise, between Customer and InterTrust, or
makes Customer a third-party beneficiary of any relationship, contractual or
otherwise, between Universal and InterTrust. Accordingly, InterTrust will have
no liability whatsoever to Customer as a result of the provision of, or failure
to provide, the Services or this Agreement or any other relationship between
Universal and Customer.
5. In any "no amendment" clause, include reference to InterTrust as follows:
Except as expressly set forth herein, any change to this Agreement must be in
writing, signed by Universal and Customer, except in the case of changes being
made that materially affect InterTrust Software, which changes must be in
writing signed by Universal, Customer and InterTrust.
6. Each agreement must have a provision concerning the US Government as a
customer, substantially as follows: The Software is "commercial computer
software" or "commercial computer software documentation." If Customer is a
unit or agency of the United States Government, then the United States
Government's rights with respect to the Software are limited by the terms of
this Agreement, pursuant to FAR (S) 12.212(a) and/or DFARS (S) 227.7202-1(a), as
applicable.
7. Each agreement must have a provision concerning Export control
substantially as follows: Customer acknowledges that the Services, Software and
related technical data are subject to United States export controls imposed
under the Export Administration Regulations of the U.S. Department of Commerce
and other relevant regulations. Customer shall not export or "re-export"
(transfer) the Services, Software and related technical data unless Customer has
complied with all applicable U.S. export controls. U.S. law prohibits transfer
to any person or entity in Cuba, Iran, Iraq, Libya, North Korea, Sudan and
Syria, or to any person or entity who Customer knows or has reason to believe
will transfer the Services, Software or technical data to those locations. U.S.
law also prohibits transfer to a national of any of those countries, or to a
person or entity designated by U.S. export regulations as a "Specially
Designated National" or other Blocked Person, without the express authorization
of the United States Government. For a comprehensive description of all
applicable U.S. export controls, Customer should consult U.S. export
regulations.
8. The following Exhibit shall be included with each agreement:
EXHIBIT __
TO THE PROVISIONS CONCERNING SERVICE AND/OR RESELLER AGREEMENT
ADDITIONAL PROVISIONS RELATING TO INTERTRUST SOFTWARE
-----------------------------------------------------
1. License. The InterTrust Software that accompanies the _____________________
-------
is licensed to you solely in accordance with the terms as set forth hereof in
this Exhibit and elsewhere in the ______________________ (the "InterTrust
Software License"). Subject to the terms and conditions hereof, this InterTrust
Software License grants you a limited, personal, nonexclusive, nonsublicensable
right to use the InterTrust Software as such Software has been delivered to you
on a single computer solely: (a) as an end user or for end users; and (b) to
access and/or otherwise use content or other digital information under the
management and/or other governance of such
F-3
<PAGE>
CONFIDENTIAL
InterTrust Software, including but not limited to performing those limited
clearinghouse functions strictly and solely as set forth herein.
2. Restrictions; Prohibited Clearinghouse Use. The InterTrust Software
------------------------------------------
contains and/or embodies copyrighted material, trade secrets, patented
inventions and other proprietary material of InterTrust. In addition to those
prohibitions contained elsewhere herein, you may not (and agree that you shall
not) under this license: (a) rent, lease, loan or distribute the InterTrust
Software in whole or in part; and/or (b) use the software or any portion thereof
to create any tool or software product that can be used to create software
applications of any nature whatsoever. Except as expressly provided by the
InterTrust Software License, no other licenses or rights are granted, expressly,
or by implication or estoppel, now or in the future and all other licenses are
reserved by InterTrust. Without limiting the generality of the foregoing, this
InterTrust Software License specifically does not allow you to use, and you
agree to not control and direct the InterTrust Software or any portion thereof,
or any information derived at least in part from use of such software, to
perform any of the following functions (the "Clearinghouse Functions") except
those specific, express activities, on your own behalf (and/or on behalf of an
entity), directly authorized by, set-up by, and controlled by a provider of
clearinghouse function products and/or services acting pursuant to its license
with InterTrust:
(1) enable payment fulfillment or provision of other consideration
(including service fees, product fees or any other fees and/or charges) based at
le in part on access and/or other processing of electronic information under any
form of management, control, regulation or governance of InterTrust Software,
including information conveyed to, associated with, from, or generated by such
Software;
(2) perform any audit, billing, payment fulfillment (or provision of other
consideration) and/or other clearing activities involving more than one person;
or
(3) compile, aggregate, use and/or provide information relating to more
than one person's use of InterTrust Software and/or any digital information
and/or file structures managed, governed and/or regulated thereby, or provide
information relating to a person's use of InterTrust Software and/or any digital
information and/or file structures managed, governed and/or regulated thereby to
a third person for any commercial purpose.
Clearinghouse Functions shall include, for example, any of the following
activities or services: (A) financial clearing; (B) electronically certifying
information such as authenticating identity, class membership or other
attributes of identity context; and/or (C) providing and/or deriving information
based upon usage auditing, user profiling, and/or market surveying related to
more than one person's use of InterTrust Software and/or any digital information
managed, governed and/or regulated thereby, including compiling and/or employing
information to support advertising payment or other consideration.
You are permitted to pay bills or provide information related to your use of the
Software and observe and interact with your rights, permission and/or records
concerning use of content governed by the Software, to the extent and in the
manner provided by your Software and authorized, set-up and controlled by
________________________ pursuant to its license from InterTrust.
3. Additional Covenants. You acknowledge and agree that: (a) those aspects of
--------------------
this Agreement concerning InterTrust Software are entered into to and for the
benefit of InterTrust, and confer a third-party beneficiary right upon
InterTrust such that InterTrust shall be entitled (in its discretion) to pursue
any claim or action to enforce Customer's obligations hereunder as relate, or
otherwise
F-4
<PAGE>
CONFIDENTIAL
pursue remedies for any breach hereof concerning, InterTrust Software; and (b)
any unauthorized use of InterTrust technology contained in the InterTrust
Software would result in irreparable injury to InterTrust for which money
damages would be inadequate and in such event InterTrust shall have the right,
in addition to other remedies available at law and in equity, to immediate
injunctive relief to prevent any such unauthorized use. Nothing contained in
this Section 3 or elsewhere in this Agreement shall be construed to limit
remedies or relief available pursuant to statutory or other claims that
InterTrust may have under separate legal authority, including but not limited
to, any claim for intellectual property infringement. In addition to other
obligations hereunder, you further acknowledge and agree that you are not
licensed to (and shall not): (1) tamper with the InterTrust Software; or (2)
undertake any activity intended to bypass, modify, defeat or otherwise
circumvent (or having the intended effect of facilitating, modifying or
assisting the bypassing, defeating or circumventing of) proper and/or secure
operation of the InterTrust Software, and/or any mechanisms operatively linked
to such Software to detect and/or make more difficult attempts to bypass,
modify, defeat or otherwise circumvent the proper and/or secure operation of the
InterTrust Software.
4. Warranties. Any and all warranties that may be made with respect to the
----------
Software (including but not limited to the InterTrust Software) are made solely
by Universal and as set forth in the Service Agreement. You expressly
acknowledge and agree that as concerns InterTrust, the use of the Software is at
your own sole risk. THE INTERTRUST SOFTWARE HAS BEEN PROVIDED BY INTERTRUST
SOLELY IN THE FORM OF MIDDLEWARE, "AS IS" AND WITHOUT WARRANTY BY INTERTRUST OF
ANY KIND, AND, TO THE MAXIMUM EXTENT ALLOWED BY APPLICABLE LAW, INTERTRUST
EXPRESSLY DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT
LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, OR ANY WARRANTY OF NONINFRINGEMENT. THERE IS NO WARRANTY
THAT THE FUNCTIONS CONTAINED IN THE INTERTRUST SOFTWARE WILL MEET YOUR
REQUIREMENTS, OR THAT THE OPERATION THEREOF WILL BE UNINTERRUPTED OR ERROR-FREE.
INTERTRUST DOES NOT WARRANT, GUARANTEE OR MAKE ANY REPRESENTATIONS REGARDING THE
USE OR THE RESULTS OF THE USE OF THIS PRODUCT WITH RESPECT TO ITS PERFORMANCE,
ACCURACY, RELIABILITY, SECURITY CAPABILITY, CURRENTNESS OR OTHERWISE . NO ORAL
OR WRITTEN INFORMATION OR ADVICE GIVEN BY ANY PERSON SHALL CREATE A WARRANTY IN
ANY WAY WHATSOEVER RELATING TO INTERTRUST. THE ENTIRE RISK AS TO THE USE,
PERFORMANCE AND RESULTS OF THIS PRODUCT ISASSUED BY YOU. THE EXCLUSION OF
IMPLIED WARRANTIES IS NOT PERMITTED BY SOME JURISDICTION THUS, THE ABOVE
EXCLUSION MAY NOT APPLY TO YOU.
5. Further Limitation of Liability. In addition to the other provisions
-------------------------------
hereof, YOU ACKNOWLEDGE TO AND FOR INTERTRUST'S BENEFIT AND THE BENEFIT OF ITS
DIRECTORS, EMPLOYEES, OR AGENTS ("AGENTS") THAT THE INTERTRUST SOFTWARE, AS WITH
MOST SOFTWARE, MAY CONTAIN BUGS AND IS NOT DESIGNED OR INTENDED FOR USE IN
HAZARDOUS ENVIRONMENTS REQUIRING FAIL-SAFE PERFORMANCE IN WHICH THE FAILURE OF
THE APPLICATION SOFTWARE COULD LEAD TO DEATH, PERSONAL INJURY OR PHYSICAL OR
ENVIRONMENTAL DAMAGE. INTERTRUST AND ITS AGENTS SHALL HAVE NO LIABILITY
WHATSOEVER FOR ANY LOSS SUFFERED AS THE RESULT OF A BREACH OF SECURITY INVOLVING
INTERTRUST SOFTWARE, WHETHER OR NOT SUCH BREACH RESULTS FROM THE DELIBERATE,
RECKLESS OR NEGLIGENT ACTS OF ANY PERSON.
F-5
<PAGE>
CONFIDENTIAL
UNDER NO CIRCUMSTANCES SHALL INTERTRUST OR ITS AGENTS BE LIABLE FOR ANY
UNAUTHORIZED USE OF ANY CONTENT OF ANY PERSON, OR ANY USE OF THE SOFTWARE TO
DEVELOP, DISTRIBUTE OR USE OF ANY MATERIAL THAT IS DEFAMATORY, SLANDEROUS,
LIBELOUS OR OBSCENE, THAT PORTRAYS ANY PERSON IN A FALSE LIGHT, THAT CONSTITUTES
AN INVASION OF ANY RIGHT TO PRIVACY OR AN INFRINGEMENT OF ANY RIGHT TO
PUBLICITY, THAT GIVES RISE TO ANY BREACH OF CONTRACT INVOLVING ANY THIRD PARTY
OR TO ANY BUSINESS TORT OR SIMILAR CLAIM OF A THIRD PARTY OR ANY VIOLATION OF
ANY FOREIGN, FEDERAL, STATE OR LOCAL STATUTE OR REGULATION, OR THAT OTHERWISE
CAN BE REASONABLY LIKELY TO EXPOSE DEVELOPER OR INTERTRUST TO CRIMINAL OR CIVIL
ACTIONS.
IN NO EVENT WILL INTERTRUST AND/OR ITS AGENTS BE LIABLE TO YOU FOR ANY
CONSEQUENTIAL, INCIDENTAL OR SPECIAL DAMAGES (INCLUDING DAMAGES FOR LOSS OF
BUSINESS PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION, AND THE
LIKE) ARISING OUT OF THE USE OR INABILITY TO USE THE SOFTWARE, EVEN IF
INTERTRUST AND/OR ITS AGENTS HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. BECAUSE SOME JURISDICITONS DO NOT ALLOW THE EXCLUSION OR LIMITATION OF
LIABILITY FOR CONSEQUETNIAL OR INCIDENTAL DAMAGES, THE ABOVE LIMITATION MAY NOT
APPLY TO YOU. TO THE EXTENT AS APPLIED IN A PARTICULAR CIRCUMSTANCE ANY
DISCLAIMER OR LIMITATION ON DAMAGES OR LIABILITY SET FORTH HEREIN IS WHOLLY
PROHIBITED BY APPLICABLE LAW, THEN, INSTEAD OF THE PROVISIONS HEREOF IN SUCH
PARTICULAR CIRCUMSTANCE, INTERTRUST SHALL BE ENTITLED TO THE MAXIMUM DISCLAIMERS
AND/OR LIMITATIONS ON DAMAGES AND LIABILITY AVAILABLE AT LAW OR IN EQUITY BY
SUCH APPLICABLE LAW IN SUCH PARTICULAR CIRCUMSTANCE, IN NO EVENT TO EXCEED
US$10.
6. Term. In addition to the other provisions hereof, the InterTrust Software
----
License is subject to immediate termination without notice from Universal or
InterTrust, if you breach any provision of this Exhibit or other provision of
the _________________ with respect to InterTrust Software; provided that if such
-------- ----
termination without notice is expressly prohibited by applicable law, then such
termination shall occur based upon notice from Universal or InterTrust in the
event of any breach. Upon notice from Universal or InterTrust that this
Agreement has been terminated you must return to Universal all copies of the
Software, including any copies or partial copies.
7. Miscellaneous Provisions. Any and all actions arising out of or in any
------------------------
manner affecting the interpretation of the provisions of this Exhibit, the
InterTrust Software License, or other provisions hereof directly relating to
InterTrust Software, and any action involving the InterTrust Software, whether
under this Agreement or otherwise (collectively, an "InterTrust Software
Dispute") shall be governed solely by, and construed solely in accordance with,
the laws of the United States of America and Commonwealth of Virginia, excluding
(a) conflict of laws principles; (b) the United Nations Convention on Contracts
for the International Sale of Goods; (c) the 1974 Convention on the Limitation
Period in the International Sale of Goods; and (d) the Protocol amending the
1974 Convention, done at Vienna April 11, 1980. To the extent permitted by law,
the provisions of this Exhibit shall supersede any provisions of the Uniform
Commercial Code as adopted or made applicable to the InterTrust Software in any
competent jurisdiction. As concerns any InterTrust Software Dispute, you hereby
unconditionally and irrevocably consent to the exclusive jurisdiction and venue,
as relevant, in the Courts of the Commonwealth of Virginia and in the U.S.
Federal
F-6
<PAGE>
CONFIDENTIAL
District Court, located in the City of Alexandria, Virginia (or any direct
successor thereto) and irrevocably: (a) waive any objection whatsoever
(including any objection with respect to venue) that you may now or hereafter
have to the jurisdiction or venue of said courts; and (b) consent to the service
of process of said courts in any matter relating to this License by the mailing
of process by registered or certified mail, postage prepaid, at the addresses
specified therein. If for any reason a court of competent jurisdiction finds any
provision or portion of this License to be unenforceable, such provision or
portion shall be enforced to the maximum extent permissible consistent with the
terms hereof, and the remainder of this License shall continue in full force and
effect.
*********
F-7
<PAGE>
EXHIBIT G
TO THE TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
PRODUCT LEGENDS AND NOTICES
---------------------------
B) Content Of Required Notices For Distributed Products That Are Application
-------------------------------------------------------------------------
Products.
- ---------
1. Copyright Notices. A copyright notice shall be placed on Distributed
-----------------
Products (and associated materials) as set forth in Section Error! Reference
source not found. of the Agreement that shall reflect the copyright ownership
of InterTrust, as applicable, and the proper year as follows:
Copyright (C) 1997-XXXX InterTrust Technologies Corporation
All rights reserved.
2. Patent Notices. Patent notices shall be placed on Distributed Products (and
---------------
associated materials) as set forth in Section Error! Reference source not
found. of the Agreement that shall reflect InterTrust patent rights as
follows:
This product and its use may be covered by one or more of the following patents:
US 4,827,508, US 4,977,594, US 5,050,213, US 5,410,598, EP 329681, AT133305 and
DE3751678. Additional US and foreign patents are pending.
Such patent notice shall be modified to reflect any additional patents under the
Licensed Rights issued to InterTrust where Universal is provided licenses under
such additional patent rights under this Agreement and/or such patents relate to
InterTrust Technology.
3. Trademark Notices. Trademark notices shall be placed on Distributed Products
------------------
(and associated materials) as set forth in Section Error! Reference source
not found. of the Agreement and Trademark Guidelines as attached below and
from time to time to be provided to Universal as specified in the Agreement,
and shall have such content as set forth in the Trademark Guidelines.
4. Third Party Notices. The Documentation contains some references to
-------------------
trademarks owned by entities other than InterTrust. Other trademarks that are
referenced herein or in the Documentation are the property of their
respective owners. For example, Microsoft and Windows are registered
trademarks of Microsoft Corporation.
Certain portions of the InterTrust Technology may incorporate one or more of the
following software modules, and if such modules are used in Universal Products,
Universal shall include the following notices, as applicable:
* (C) 1997 Basis Technology. All rights reserved.
* Certain portions of the Software have used [*] and [*], to which this notice
applies: [*] Copyright (C) 1990-2, [*] Copyright (C) 1991-2, [*], Inc. All
rights reserved. License to copy and use this software is granted provided that
it is identified as the "[*], Inc. [*]", and/or "[*], Inc. [*]" in all material
mentioning or referencing this software or this function. License is also
granted to make and use derivative works provided that such works are identified
as "derived from the [*], Inc.
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
[*]", and/or "derived from the [*], Inc. [*]" in all material mentioning or
referencing the derived work. [*], Inc. makes no representations concerning
either the merchantability of this software or the suitability of this software
for any particular purpose. It is provided "as is" without express or implied
warranty of any kind. These notices must be retained in any copies of any part
of this documentation and/or software.
* Certain portions of the Software have used DES software, to which this notice
applies: des-fast & portable DES encryption & decryption Copyright (C) 1992 Dana
L. How. THIS PROGRAM IS DISTRIBUTED WITHOUT ANY WARRANTY, INCLUDING THE IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
* Certain portions of the Software (as indicated in such portions' source files)
have used [*] software, to which this notice applies: Copyright (c) 1995 by [*].
Permission to use, copy, and modify this software without fee is hereby granted,
provided that this entire notice is included in all copies of any software which
is or includes a copy or modification of this software and in all copies of the
supporting documentation for such software. This software may be subject to
export controls. SOME PARTS OF [*] MAY BE RESTRICTED UNDER UNITED STATES EXPORT
REGULATIONS (HOWEVER, SUCH PARTS ARE NOT INCLUDED IN THE SOFTWARE). THIS
SOFTWARE IS BEING PROVIDED "AS IS", WITHOUT ANY EXPRESS OR IMPLIED WARRANTY. IN
PARTICULAR, NEITHER THE AUTHORS NOR [*] (NOR INTERTRUST TECHNOLOGIES
CORPORATION) MAKE ANY REPRESENTATION OR WARRANTY OF ANY KIND CONCERNING THE
MERCHANTABILITY OF THIS SOFTWARE OR ITS FITNESS FOR ANY PARTICULAR PURPOSE.
* Certain portions of the Software (as indicated in such portions' source files)
have used [*] software, to which this notice applies: Copyright (C) 1994 [*]
Company. Permission to use, copy, modify, distribute and sell this software and
its documentation for any purpose is hereby granted without fee, provided that
both that copyright permission notice and this permission notice appear in
supporting documentation. [*] Company (and InterTrust Technologies Corporation)
make no representations about the suitability of this software for any purpose.
It is provided "as is" without express or implied warranty.
* Certain portions of the Customizable Technology (as indicated in such
portions' source files) have used Independent JPEG Group software and certain
portions of the Software supplied in executable format (as indicated in
Software's "About Box") are based in part upon the work of the Independent JPEG
Group. (C) 1991, 1992, 1993, 1994, 1995, Thomas G. Lane. The Graphics
Interchange Format (C) is the copyright property of CompuServe Incorporated. GIF
(sm) is a Service Mark property of CompuServe Incorporated. Certain portions of
the Independent JPEG Software were loosely based on giftoppm from the PBMPLUS
distribution as of February 1991 to which this notice applies: Copyright (C)
1990, David Koblas. Permission to use, copy, modify, and distribute this
software and its documentation for any purpose and without fee is hereby
granted, provided that the above copyright notice appears in all copies and that
both that copyright notice and this permission notice appear in supporting
documentation. This software is provided "as is" without express or implied
warranty.
* CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
5. Field of Use Notices. Field of Use notices shall be placed on Distributed
--------------------
Products (and associated materials) as set forth in Section Error! Reference
source not found. of the Agreement as follows:
"This product is licensed and adapted only for certain limited, expressly
approved uses, and solely as provided in the Customer Agreement (or, as
applicable, the sublicense agreement) executed in connection with your receipt
of this Product. No other licenses are granted. Specifically and without
limitation no licenses: (i) to modify and/or reverse engineer this product;
and/or (ii) any performance of clearinghouse functions have been granted. As
more fully set forth in the Customer Agreement, clearinghouse functions are
those activities using this product or derived from use of this Product that:
(a) enable payment fulfillment or provision of consideration
(including service fees, product fees or any other fees and/or
charges) based at least in part on gathering and/or processing of
electronic information conveyed by or associated with contents of
DigiBox containers;
(b) perform any audit, billing, payment fulfillment (or provision of
other consideration) and/or other clearing activities involving
more than one person; or
(c) compile, aggregate, use and/or provide information relating to
more than one person's use of one or more DigiBox containers
and/or contents thereof for any consideration.
Clearinghouse Functions shall include, for example, any of the
following activities or services: (a) financial clearing; (b)
providing object registry services and rights, permission, prices,
and/or rules information for registered objects; (c) electronically
certifying information such as authenticating identity, class
membership or other attributes of identity context; (d) providing
information based upon usage auditing, user profiling, and/or market
surveying related to more than one person's use of one or more DigiBox
container and/or contents thereof; and (e) employing information
derived from user exposure to content such as advertising."
6. Warranty Notices and Disclaimers.
--------------------------------
The following warranty notices shall be placed on all Distributed Products (and
associated materials), as set forth in Section Error! Reference source not
found. of the Agreement in the form here specified, and in bold letters, the
following warranty disclaimer:
"THE INTERTRUST SOFTWARE HAS BEEN PROVIDED BY INTERTRUST TECHNOLOGIES
CORPORATION ("INTERTRUST") SOLELY IN THE FORM OF MIDDLEWARE, "AS IS" AND WITHOUT
----------
WARRANTY BY INTERTRUST OF ANY KIND, AND, TO THE MAXIMUM EXTENT ALLOWED BY
APPLICABLE LAW, INTERTRUST EXPRESSLY DISCLAIMS ALL WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE, OR ANY WARRANTY OF NONINFRINGEMENT. THERE
IS NO WARRANTY THAT THE FUNCTIONS CONTAINED IN THE INTERTRUST SOFTWARE WILL MEET
YOUR
<PAGE>
REQUIREMENTS OR THAT THE OPERATION THEREOF WILL BE UNINTERRUPED OR ERROR-FREE.
INTERTRUST DOES NOT WARRANT, GUARANTEE OR MAKE ANY REPRESENTATIONS REGARDING THE
USE OR THE RESULTS OF THE USE OF THIS PRODUCT WITH RESPECT TO ITS ACCURACY,
RELIABILITY, SECURITY CAPABILITY, CURRENTNESS OR OTHERWISE. NO ORAL OR WRITTEN
INFORMATION OR ADVICE GIVEN BY ANY PERSON SHALL CREATE A WARRANTY IN ANY WAY
WHATSOEVER RELATING TO INTERTRUST. THE ENTIRE RISK AS TO THE USE, PERFORMANCE
AND RESULTS OF THIS PRODUCT IS ASSUMED BY YOU. THE EXCLUSION OF IMPLIED
WARRANTIES IS NOT PERMITTED BY SOME JURISDICTION THUS, THE ABOVE EXCLUSION MAY
NOT APPLY TO YOU."
Universal shall also include, in the same place, disclaimer of liability
language as follows:
"YOU ACKNOWLEDGE TO AND FOR INTERTRUST'S BENEFIT AND THE BENEFIT OF THEIR
DIRECTORS, EMPLOYEES OR AGENTS ("AGENTS") THAT THE INTERTRUST SOFTWARE, AS WITH
MOST SOFTWARE, MAY CONTAIN BUGS AND IS NOT DESIGNED OR INTENDED FOR USE IN
HAZARDOUS ENVIRONMENTS REQUIRING FAIL-SAFE PERFORMANCE IN WHICH THE FAILURE OF
THE APPLICATION SOFTWARE COULD LEAD TO DEATH, PERSONAL INJURY OR PHYSICAL OR
ENVIRONMENTAL DAMAGE. INTERTRUST AND ITS AGENTS SHALL HAVE NO LIABILITY
WHATSOEVER FOR ANY LOSS SUFFERED AS THE RESULT OF A BREACH OF SECURITY INVOLVING
INTERTRUST SOFTWARE, WHETHER OR NOT SUCH BREACH RESULTS FROM THE DELIBERATE,
RECKLESS OR NEGLIGENT ACTS OF ANY PERSON.
UNDER NO CIRCUMSTANCES SHALL INTERTRUST OR ITS AGENTS BE LIABLE FOR ANY
UNAUTHORIZED USE OF ANY CONTENT OF ANY PERSON, OR ANY USE OF THE SOFTWARE TO
DEVELOP, DISTRIBUTE OR USE OF ANY MATERIAL THAT IS DEFAMATORY, SLANDEROUS,
LIBELOUS OR OBSCENE, THAT PORTRAYS ANY PERSON IN A FALSE LIGHT, THAT CONSTITUTES
AN INVASION OF ANY RIGHT TO PRIVACY OR AN INFRINGEMENT OF ANY RIGHT TO
PUBLICITY, THAT GIVES RISE TO ANY BREACH OF CONTRACT INVOLVING ANY THIRD PARTY
OR TO ANY BUSINESS TORT OR SIMILAR CLAIM OF A THIRD PARTY OR ANY VIOLATION OF
ANY FOREIGN, FEDERAL, STATE OR LOCAL STATUTE OR REGULATION, OR THAT OTHERWISE
CAN BE REASONABLY LIKELY TO EXPOSE DEVELOPER OR INTERTRUST TO CRIMINAL OR CIVIL
ACTIONS.
IN NO EVENT WILL INTERTRUST AND/OR ITS AGENTS BE LIABLE TO YOU FOR ANY
CONSEQUENTIAL, INCIDENTAL OR SPECIAL DAMAGES (INCLUDING DAMAGES FOR LOSS OF
BUSINESS PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION, AND THE
LIKE) ARISING OUT OF THE USE OR INABILITY TO USE THE SOFTWARE, EVEN IF
INTERTRUST AND/OR ITS AGENTS HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. BECAUSE SOME JURISDICTIONS DO NOT ALLOW THE EXCLUSION OR LIMITATION OF
LIABILITY FOR CONSEQUENTIAL OR INCIDENTAL DAMAGES, THE ABOVE LIMITATIONS MAY NOT
APPLY TO YOU. TO THE EXTENT AS APPLIED IN A PARTICULAR CIRCUMSTANCE ANY
DISCLAIMER OR LIMITATION ON DAMAGES OR LIABILITY SET FORTH HEREIN IS WHOLLY
PROHIBITED BY APPLICABLE LAW, THEN,
<PAGE>
INSTEAD OF THE PROVISIONS HEREOF IN SUCH PARTICULAR CIRCUMSTANCE, INTERTRUST AND
ITS AGENTS SHALL BE ENTITLED TO THE MAXIMUM DISCLAIMERS AND/OR LIMITATIONS ON
DAMAGES AND LIABILITY AVAILABLE AT LAW OR IN EQUITY BY SUCH APPLICABLE LAW IN
SUCH PARTICULAR CIRCUMSTANCE, IN NO EVENT TO EXCEED US$10."
7. Confidentiality and Trade Secret Notices. Except as described below for
----------------------------------------
InterTrust Top Secret Information and unless the following already contains such
notices included by InterTrust, Universal shall place trade secret notices in
such places as specified in Section Error! Reference source not found. of the
Agreement (as applicable) and as applicable, conspicuously and prominently: (a)
on the cover, first page, and in noticeable form in the header or footer of all
subsequent pages, of all printed copies of any InterTrust Confidential
Information authorized under this Agreement, (b) on packaging of media
containing such information, such as floppy disks, and (c) on the initial screen
of all electronic copies of any InterTrust Confidential Information. For
Confidential Information, the content of such trade secret notice provided to
Licensee pursuant to the agreement between the parties.
CONFIDENTIAL INFORMATION OF INTERTRUST TECHNOLOGIES CORPORATION
Where InterTrust Technologies Corporation has provided Universal with Top
Secret Information, Universal shall provide notices as set forth immediately
above, having the following content:
TOP SECRET INTERTRUST INFORMATION, SUBJECT TO SPECIAL HANDLING PROCEDURES AS SET
FORTH IN THE AGREEMENT BETWEEN THE PARTIES. DO NOT COPY, DISCLOSE, OR
DISTRIBUTE.
<PAGE>
CONFIDENTIAL
EXHIBIT H
TO THE TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
INTERTRUST MARK DENOTING COMPLIANCE
-----------------------------------
[LOGO OF METATRUST CERTIFIED]
H-1
<PAGE>
CONFIDENTIAL
EXHIBIT I
TO THE TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
FORM OF INTERTRUST CONFIDENTIALITY AGREEMENTS
---------------------------------------------
InterTrust Top Secrecy Agreement
--------------------------------
InterTrust Non-Disclosure/Non-Use Agreement
-------------------------------------------
Universal Non-Disclosure/Non-Use Agreement
------------------------------------------
I-1
<PAGE>
CONFIDENTIAL
NON-DISCLOSURE AGREEMENT
------------------------
FOR INTERTRUST CONFIDENTIAL INFORMATION
---------------------------------------
THIS AGREEMENT (this "Agreement") is made effective as of ____ 199_ between
---------
INTERTRUST TECHNOLOGIES CORPORATION ("InterTrust"), a Delaware corporation,
----------
___________ having a place of business at 460 Oakmead Parkway, Sunnyvale,
California 90486, and ("Recipient"), an individual citizen of ________________,
---------
residing at __________________________, and an employee of Universal Music
Group, Inc. ("Universal"), a ______________________ corporation, with offices at
---------
70 Universal City Plaza, Universal City, California.
The parties agree as follows:
1. Pursuant to a Technology Development and License Agreement dated April ___,
1999 between InterTrust and Universal (the "License Agreement"), InterTrust may
-----------------
disclose to Universal certain confidential information including technical
information embodied in and/or associated with InterTrust's InterTrust
Technology including, without limitation, software products and/or other
developments related to distributed, secure rights and/or event management,
associated designs, inventions, plans, and other information, all of which such
information shall conspicuously be marked by InterTrust with a notice or legend
with the phrase "Confidential" or indicated as "Confidential" when disclosed
orally or visually as provided in the License Agreement (the "Confidential
------------
Information"). In consideration for such Confidential Information being
- -----------
provided to Recipient, Recipient agrees to be bound by the terms of this
Agreement. Disclosure of InterTrust Confidential Information to Recipient, and
use and disclosure of Confidential Information received by Recipient, shall
occur only in accordance with the terms and conditions of this Agreement.
2. For a period of three (3) years following the disclosure of any
Confidential Information (such period to extend in perpetuity with respect to
InterTrust technology), Recipient will retain such Confidential Information in
confidence, and will discuss such Confidential Information only with other
Universal employees and other individuals permitted to receive Confidential
Information under the License Agreement (an "Individual Consultant") -- all of
---------------------
whom shall have a need to know said Confidential Information and who have
executed a copy of this Agreement. Recipient shall not, without the prior
written permission of InterTrust's Chairman or such other InterTrust officer as
who has been designated in writing by InterTrust's Chairman (a "Designated
----------
InterTrust Officer"), disclose Confidential Information to any person other than
- ------------------
as set forth immediately above. Furthermore, without express authorization of
Universal as permitted by the License Agreement, the Recipient will not make
copies, in whole or in part, of the Confidential Information, including
translating, in whole or in part, the Confidential Information into another
language and/or shipping the Confidential Information, in whole or in part, or
any direct product thereof, to any other country. The undersigned will not use
the Confidential Information in any manner that is not authorized by Universal
and in full accordance with the License Agreement and the undersigned will use
the Confidential Information solely in the exercise of Universal's rights as
provided by the License Agreement. Under no circumstances will any Confidential
Information subject to the export or import laws of any jurisdiction be
transferred by Recipient without proper prior certification and notification of
appropriate regulatory offices in applicable jurisdictions and InterTrust.
3. The undersigned will not use Confidential Information except in fulfillment
of the undersigned's employee's and/or other individual's obligations with
Universal, and for no other purposes whatsoever. The undersigned understands
and acknowledges that the unauthorized use of Confidential Information may cause
InterTrust very substantial damage, for which damages may be impossible to
measure or inadequate to compensate. Accordingly, Recipient agrees that if he
or she breaches or threatens breach of any of such sections, InterTrust will
have available, in addition to any other right or remedy available, the right to
obtain an injunction
I-2
<PAGE>
CONFIDENTIAL
against him or her, from a court of competent jurisdiction restraining such
breach or demonstrable threatened breach and to specific performance of any such
provision of this Agreement, and Recipient hereby consents to the issuance of
such injunction and to the ordering of specific performance under such
circumstances.
4. In the event of a breach of this Agreement or the License Agreement or the
termination of Recipient's employment with Universal, the undersigned will
return by secure delivery means reasonably specified by InterTrust all physical
embodiments of Confidential Information in the undersigned's possession to
InterTrust promptly upon request by InterTrust, and in no event later than
fifteen (15) days thereafter.
5. Notwithstanding any thing else in this Agreement, the confidentiality
restrictions of this Agreement shall not apply to information that: (i) is or
becomes known to the public through no breach of any of the undersigned's
obligations under this Agreement, or Universal's or any other Universal
employee's obligations of confidentiality to Universal and/or to InterTrust;
(ii) was known to Recipient prior to its disclosure by InterTrust, as evidenced
through written documentation; (iii) shall have been independently developed by
the Recipient without any reliance on or use of any InterTrust Confidential
Information, as demonstrated through written documentation; or (iv) shall have
been rightfully supplied to Recipient, with no obligation of confidentiality or
non-use from a third party without any breach of any obligation of
confidentiality to InterTrust or Universal (as applicable) as of the date such
information is so supplied. In addition, the Recipient shall be entitled to
disclose Confidential Information pursuant to a court order issued by a court of
competent jurisdiction or as otherwise required by law; provided that the
-------- ----
undersigned shall provide prompt advance notice thereof to InterTrust to enable
InterTrust to seek a protective order or otherwise prevent such disclosure and
shall disclose no more than the minimum information required by such court order
or by law.
6. If any provision or portion thereof in this Agreement shall be found or be
held by a court of competent jurisdiction to be illegal, invalid or
unenforceable in any jurisdiction in which this Agreement is being performed,
then this Agreement shall nevertheless be given full force and effect without
said provision or portion. This Agreement may not be modified except by written
agreement dated subsequent to the date of this Agreement and signed by both
parties. This agreement shall be governed by and construed under the laws of
the United States and the Commonwealth of Virginia, USA, without reference to
conflicts of laws principles. All disputes arising out of or relating to the
subject matter of this Agreement shall be subject to the exclusive jurisdiction
and venue of the United States District Court for the Eastern District of
Virginia, Alexandria Division Virginia, or if jurisdiction does not properly lie
in such court, the Commonwealth courts in Alexandria, Virginia. The parties
consent to the personal and exclusive jurisdiction and venue of such court and
waive any argument that jurisdiction or venue in such court is improper or
inconvenient.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
InterTrust Technologies Corporation Recipient
By:_________________________________ By:________________________________
Name:_______________________________ Name:______________________________
Title:______________________________ Title:_____________________________
I-3
<PAGE>
CONFIDENTIAL
TOP SECRECY AGREEMENT
---------------------
FOR CERTAIN INTERTRUST INFORMATION
----------------------------------
THIS AGREEMENT (this "Agreement") is made effective as of _________ 199_
---------
between INTERTRUST TECHNOLOGIES CORPORATION ("InterTrust"), a Delaware
----------
corporation, having a place of business at 460 Oakmead Parkway, Sunnyvale,
California 90486, and ___________________________________("Recipient"), an
---------
individual citizen of _______, residing at ______________________________, and
an employee of Universal Music Group, Inc. ("Universal"), a ____________________
---------
corporation with offices at 70 Universal City Plaza, Universal City, California.
The parties agree as follows:
1. Purpose.
-------
(a) Pursuant to a Technology Development and License Agreement dated April
__, 1999 between InterTrust and Universal (the "License Agreement"), InterTrust
-----------------
may disclose to Universal certain information including load module related,
encryption related, security related document manager related and/or other
information considered Top Secret and proprietary by InterTrust and which shall
conspicuously be marked with a notice or legend with the phrase "Top Secret" or
confirmed as such after any oral or visual disclosure thereof as provided in the
License Agreement (hereinafter referred to as the "InterTrust Top Secret
---------------------
Information"). In consideration for said information being provided to
- -----------
Recipient, Recipient agrees to be bound by the terms of this Agreement.
(b) InterTrust wishes to protect the InterTrust Top Secret Information
from unauthorized use and disclosure. Disclosure of InterTrust Top Secret
Information to Recipient, and use and disclosure of Top Secret Information
received by Recipient shall occur only in accordance with the terms and
conditions of this Agreement.
2. Non-Disclosure and Restrictions on Use of InterTrust Extremely
--------------------------------------------------------------
Confidential.
------------
(a) Except as otherwise provided in an express written agreement signed by
InterTrust's Chairman or other such person designated in writing by the Chairman
or President (a "Designated InterTrust Officer"), Recipient agrees that he or
-----------------------------
she shall: (i) hold in strictest confidence and not disclose any InterTrust Top
Secret Information to any person or entity either within or outside Universal,
except to another Universal employee who has also signed a Top Secrecy Agreement
and is authorized to receive Top Secret Information pursuant to the Licensed
Agreement, or as expressly permitted in writing by a Designated InterTrust
Officer; (ii) use InterTrust Top Secret Information solely for purposes
authorized by the License Agreement: (iii) use said Top Secret Information in no
other way whatsoever; (iv) apply the strictest feasible measures to protect the
secrecy of, and prevent unauthorized disclosure or use of, InterTrust Top Secret
information (which such measures shall not be less stringent than Universal uses
to protect its own most highly sensitive and secret information); and (v)
produce no physical embodiments of any portion of the Top Secret Information
without the express written authorization of a Designated InterTrust Officer.
Recipient agrees to notify InterTrust promptly in writing of any unauthorized
disclosure or other misuse or misappropriation of the InterTrust Top Secret
Information which may come to Recipient's attention.
I-4
<PAGE>
CONFIDENTIAL
(b) In the event Recipient is required by law, regulation or order of a
court or other authority of competent jurisdiction to disclose InterTrust Top
Secret Information, Recipient shall notify InterTrust as promptly as possible,
and shall, upon InterTrust's request, reasonably assist in challenging or
restricting the scope of such required disclosure. InterTrust Top Secret
Information may be disclosed only upon InterTrust's prior written approval;
provided that if Recipient notifies InterTrust that it has received an order
- -------- ----
from a court of competent jurisdiction requiring disclosure of InterTrust Top
Secret Information: (i) Recipient shall use reasonable efforts to resist
disclosure (including filing motions to limit disclosure to in camera
inspection); and (ii) if despite resisting such disclosure Recipient is required
to produce such InterTrust Top Secret Information and faces material
consequences should Recipient refuse to so comply, Recipient shall not be
construed to have breached this Agreement or the License Agreement by disclosing
such required information. In all events, Recipient subject to such required
disclosure shall disclose only such information that is strictly required
pursuant thereto and no further information and shall have provided InterTrust
notices of such events on a frequent basis as here relevant.
3. Return of Materials. Upon request of a Designated InterTrust Officer at
-------------------
any time after a breach of this Agreement or the License Agreement or the
termination of Recipient's employment with Universal, Recipient shall
immediately return to InterTrust all tangible embodiments of InterTrust Top
Secret Information in Recipient's possession or otherwise under Recipient's
control by such secure delivery means as reasonably specified by InterTrust.
4. Equitable Remedies. Recipient agrees that unauthorized disclosure or use of
------------------
InterTrust Top Secret Information will cause InterTrust substantial and
irreparable damage. Recipient further agrees that it may be impossible or
inadequate to measure and calculate InterTrust's damages from any breach of the
covenants set forth in Sections 2 and/or 3 hereof. Accordingly, Recipient agrees
that if he or she breaches or threatens breach of any of such sections,
InterTrust will have available, in addition to any other right or remedy
available, the right to obtain an injunction against him or her, from a court of
competent jurisdiction restraining such breach or threatened breach and to
specific performance of any such provision of this Agreement, and Recipient
hereby consents to the issuance of such injunction and to the ordering of
specific performance under such circumstances.
5. Governing Law: Jurisdiction and Venue. This Agreement shall be governed by
-------------------------------------
and construed under the laws of the United States of America and the
Commonwealth of Virginia, without reference to conflict of law principles. All
disputes arising out of or relating to the subject matter of this Agreement
shall be subject to the exclusive jurisdiction and venue of the United States
District Court for the Eastern District of Virginia, Alexandria Division
Virginia, or if jurisdiction does not properly lie in such court, the
Commonwealth courts in Alexandria, Virginia. The parties consent to the
personal and exclusive jurisdiction and venue of such court and waive any
argument that jurisdiction or venue in such court is improper or inconvenient.
6. Severability; Export Compliance. If any provision or portion thereof in
-------------------------------
this Agreement shall be found or be held to be illegal, invalid or unenforceable
in any jurisdiction in which this Agreement is being performed, then this
Agreement shall nevertheless be given full force and effect without said
provision or portion. Recipient certifies that no Top Secret Information, or
any portion thereof, will be exported by Recipient to any country in violation
of U.S. export regulations or other regulations applicable to Recipient and such
information.
7. Entire Agreement. This Agreement constitutes the entire agreement between
----------------
Recipient and InterTrust regarding the InterTrust Top Secret Information
disclosed hereunder and supersedes all
I-5
<PAGE>
CONFIDENTIAL
oral or written agreements, either entered prior to or contemporaneously with
this Agreement, concerning the InterTrust Top Secret Information, except the
provisions of the License Agreement, the provisions of which shall be deemed to
be supplemented hereby as of the date first written above. This Agreement may
not be modified except by written agreement dated subsequent to the date of this
Agreement and signed by both parties.
8 Successors. Subject to the limitations set forth in this Agreement, this
----------
Agreement will inure to the benefit of and be binding upon the parties, their
successors and assigns.
9 Notices. For all purposes hereof, any notice pursuant hereto shall be
-------
deemed given upon receipt by the Party at the address indicated above.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
INTERTRUST TECHNOLOGIES RECIPIENT
CORPORATION
By:____________________________ By:____________________________
Name:__________________________ Name:__________________________
Title:_________________________ Title:_________________________
I-6
<PAGE>
CONFIDENTIAL
NON-DISCLOSURE AGREEMENT
-------------------------
FOR UNIVERSAL CONFIDENTIAL INFORMATION
--------------------------------------
THIS AGREEMENT (this "Agreement") is made effective as of ____ 199_ between
---------
Universal Music Group, Inc. ("Universal"), a Delaware corporation, with offices
at 100 Universal City Plaza, Universal City, California, and ___________________
("Recipient"), an individual citizen of ______, residing at ___________________,
----------
and an employee of InterTrust Technologies Corporation ("InterTrust"), a
----------
Delaware corporation, ___________________, having a place of business at 460
Oakmead Parkway, Sunnyvale, California 90486.
The parties agree as follows:
1. Pursuant to a Technology Development and License Agreement dated _____
between InterTrust and Universal (the "License Agreement"), Universal may
-----------------
disclose to InterTrust certain confidential information in accordance with the
terms of the License Agreement including technical information embodied in
and/or associated with Universal technology including, without limitation,
software products and/or other developments, associated designs, inventions,
plans, and other information all of which such information shall conspicuously
be marked with a notice or legend with the phrase "Confidential" or indicated as
"Confidential" when disclosed orally or visually as provided in the License
Agreement ("Confidential Information"). In consideration for such Confidential
Information being provided to Recipient, Recipient agrees to be bound by the
terms of this Agreement. Disclosure of Universal Confidential Information to
Recipient shall occur only in accordance with the terms and conditions of the
License Agreement, and use and disclosure of Confidential Information received
by Recipient shall occur only in accordance with the terms and conditions of
this Agreement.
2. For a period of three (3) years following the disclosure of any
Confidential Information, Recipient will retain such Confidential Information in
confidence, and will discuss such Confidential Information only with other
InterTrust employees or other individuals permitted to receive Confidential
Information under the License Agreement (an "Individual Consultant") all of
---------------------
whom shall have a need to know said Confidential Information and who have
executed a copy of this Agreement or other confidentiality agreement of
InterTrust. Recipient shall not, without the prior written permission of a
Universal officer (a "Designated Universal Officer"), disclose Confidential
-----------------------------
Information to any person other than as set forth immediately above.
Furthermore, without express authorization of InterTrust as permitted by the
License Agreement, the Recipient will not make copies, in whole or in part, of
the Confidential Information, including translating, in whole or in part, the
Confidential Information into another language and/or shipping the Confidential
Information, in whole or in part, or any direct product thereof, to any other
country. The undersigned will not use the Confidential Information in any manner
that is not authorized by InterTrust and in full accordance with the License
Agreement and the undersigned will use the Confidential Information solely in
the exercise of InterTrust's rights and obligations as provided by the License
Agreement. Under no circumstances will any Confidential Information subject to
the export or import laws of any jurisdiction be transferred by Recipient
without proper prior certification and notification of appropriate regulatory
offices in applicable jurisdictions and Universal.
3. The undersigned will not use Confidential Information except in fulfillment
of the undersigned's employee's and/or other individual's obligations with
InterTrust, and for no other purposes whatsoever. The undersigned understands
and acknowledges that the unauthorized use of Confidential Information may cause
Universal very substantial damage, for which damages may be impossible to
measure or inadequate to compensate. Accordingly, Recipient agrees that if he
or she breaches or threatens breach of any of such sections, Universal will have
available, in addition to any other right or remedy available, the right to
obtain an injunction
I-7
<PAGE>
CONFIDENTIAL
against him or her, from a court of competent jurisdiction restraining such
breach or demonstrable threatened breach and to specific performance of any such
provision of this Agreement, and Recipient hereby consents to the issuance of
such injunction and to the ordering of specific performance under such
circumstances.
4. In the event of a breach of this Agreement or the License Agreement or the
termination of Recipient's employment with InterTrust, the undersigned will
return by secure delivery means reasonably specified by Universal all physical
embodiments of Confidential Information in the undersigned's possession to
InterTrust promptly upon request by InterTrust, and in no event later than
fifteen (15) days thereafter.
5. Notwithstanding anything else in this Agreement, the confidentiality
restrictions of this Agreement shall not apply to information that: (i) is or
becomes known to the public through no breach of any of the undersigned's
obligations under this Agreement, or InterTrust's or any other InterTrust
employee's obligations of confidentiality to InterTrust and/or Universal; (ii)
was known to Recipient prior to its disclosure by Universal, as evidenced
through written documentation; (iii) shall have been independently developed by
the Recipient without any reliance on or use of any Universal Confidential
Information, as demonstrated through written documentation; or (iv) shall have
been rightfully supplied to Recipient, with no obligation of confidentiality or
non-use from a third party without any breach of any obligation of
confidentiality to Universal or InterTrust (as applicable) as of the date such
information is so supplied. In addition, the Recipient shall be entitled to
disclose Confidential Information pursuant to a court order issued by a court of
competent jurisdiction or as otherwise required by law; provided that the
-------- ----
undersigned shall provide prompt advance notice thereof to Universal to enable
Universal to seek a protective order or otherwise prevent such disclosure and
shall disclose no more than the minimum information required by such court order
or by law.
6. If any provision or portion thereof in this Agreement shall be found or be
held by a court of competent jurisdiction to be illegal, invalid or
unenforceable in any jurisdiction in which this Agreement is being performed,
then this Agreement shall nevertheless be given full force and effect without
said provision or portion. This Agreement may not be modified except by written
agreement dated subsequent to the date of this Agreement and signed by both
parties. This agreement shall be governed by and construed under the laws of
the United States and the Commonwealth of Virginia, USA, without reference to
conflicts of laws principles. All disputes arising out of or relating to the
subject matter of this Agreement shall be subject to the exclusive jurisdiction
and venue of the United States District Court for the Eastern District of
Virginia, Alexandria Division Virginia, or if jurisdiction does not properly lie
in such court, the Commonwealth courts in Alexandria, Virginia. The parties
consent to the personal and exclusive jurisdiction and venue of such court and
waive any argument that jurisdiction or venue in such court is improper or
inconvenient.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
Universal Limited Recipient
By:_______________________________ By:______________________________
Name:_____________________________ Name:____________________________
Title:____________________________ Title:___________________________
I-8
<PAGE>
EXHIBIT J
TO THE TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
INTERNAL PROCEDURES FOR TESTING VIRUSES AND Y2K COMPLIANCE
----------------------------------------------------------
The following are procedures and policies that InterTrust employees are
instructed to routinely follow to avoid or minimize potential infection of any
software virus. In addition, such checking is incorporated in QA testing before
any software release.
. Software code is routinely checked with commercially available third party
virus software for existence of any viruses.
. InterTrust currently has a site license to virus checking software by Network
Associates.
. InterTrust regularly receives from Network Associates updates designed to
detect the latest known software viruses.
. InterTrust's policy and practice is to keep source code under strict source
control, using Clear Case software.
. Employees are prohibited, under InterTrust's policies, from downloading or
incorporating any software from any third party (including through the
Internet) without first obtaining prior approval from an authorized technical
manager whose responsibility is to test such software for viruses before any
use by InterTrust employees.
. InterTrust regularly educates new and existing employees regarding these
procedures and policies.
As concerns Y2K, InterTrust Commerce 1.1 uses an internal representation for
time that is not likely to be affected by Y2K or 638K time problems. All
arithmetic and relational operations on time are performed using an internal
representation for time. Conversion between the internal representation and the
Gregorian calendar is based on well known tested algorithms that account for
leap years.
The master source of InterTrust Time for all InterRights Points is the
Transaction Authority. Each InterRights Point maintains what can be thought of
as a virtual InterTrust Time clock that is used as a source of time for all
operations within the InterRights Point. As necessary the virtual clock is re-
synchronized with the master source of time at the Transaction Authority system.
Persistent storage of a time value as part of a control or business rule, in a
DigiBox container or in the Protected Database utilizes a serialized byte stream
of the internal representation of time that should make the persistent value
platform independent.
<PAGE>
CONFIDENTIAL
EXHIBIT K
TO THE TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
JOINT PRESS RELEASE
-------------------
[LOGO OF INTERTRUST]
News Release
For further information contact:
Joseph Jennings, InterTrust Technologies Corp.: 408-222-6270,
[email protected]
XXXXXXXXXX, Universal: XXX-XXX-XXXX, [email protected]
Leigh Ann Varney, Varney Business Communications: 415-387-7250, [email protected]
UNIVERSAL MUSIC GROUP SELECTS INTERTRUST FOR DIGITAL RIGHTS MANAGEMENT
Universal Music Group Plans To Employ InterTrust Technology
Los Angeles and Sunnyvale, CA -- April XX, 1999 -- Universal Music Group
(Universal) and InterTrust Technologies Corporation (InterTrust), the MetaTrust
Utility(TM), today announced a long-term agreement regarding deploying and
disseminating MetaTrust Certified(TM) applications and services. A pilot project
exploring enhanced rights management and digital music merchandising will be
launched later this year.
Universal conducted a broad study of the existing and proposed digital
rights management technology solutions and selected InterTrust technology as its
preferred rights management platform for electronic commerce and management for
music. Universal selected InterTrust(R) technology because it provides
persistent protection of content, flexible business models, and can extend
stakeholder rights management to new entertainment and information appliances
such as secure MP3Player devices, set-top boxes, and DVD.
"We selected InterTrust as our preferred digital rights management platform
to enable Universal to facilitate music industry digital distribution," said
Lawrence Kenswil, Executive Vice President Universal Music Group. "InterTrust
products provide an unusually rich array of capabilities and many unique
features, and InterTrust has led the way in defining what is possible in the
realm of digital content distribution."
"We believe InterTrust products provide, in combination with other
technologies, provides
K-1
<PAGE>
CONFIDENTIAL
the tools our industry needs to meet the challenges, and realize the exciting
opportunities, of the rapidly developing digital world."
"We are pleased that Universal has chosen to partner with InterTrust in
meeting the challenges of the marketplace," said Victor Shear, founder, chairman
and chief executive officer of InterTrust. "Universal is a world leader in
entertainment products and services, and entertainment is a first mover in the
new digital economy. Universal can use InterTrust technology to change the
economics of the music industry, increase customer satisfaction, and combine
with other labels and technology companies to realize the huge growth potential
in music related digital products."
Universal Music Group
Need copy.
InterTrust
InterTrust Technologies Corporation, the MetaTrust Utility, provides a
groundbreaking, interoperable, trusted and secure foundation for efficient
electronic commerce. InterTrust software products and services enable the sale,
fulfillment and protection of digital content over any digital media, including
the Internet, DVD and future commerce appliances. InterTrust technology also
serves as a foundation for many other forms of trusted commercial interaction.
Since early 1990, InterTrust has been researching and inventing technologies
that enable fundamental elements of the future, interoperable digital commerce
world. In the entertainment and device markets, InterTrust technologies have
been a principal factor in the shaping of digital rights management industry
standards. For example, InterTrust played a formative role in the creation of
the MPEG-4 Intellectual Property Management and Protection (IPMP) interface and
the Open Platform Initiative for Multimedia Access (OPIMA). InterTrust is the
only company in the world to ship technology supporting MPEG-4 IPMP, and is the
only company providing a broad range rights management "plug-in" infrastructure
for secure MP3.
MetaTrust Utility core partners include Mitsubishi Corporation, National
Westminster Bank Plc. and Rights Exchange, Inc. (formerly SoftBank Net
Solutions). Builder partners include Computacenter (UK) Ltd., Science
Applications International Corporation (SAIC), and Fraunhofer IIS.
K-2
<PAGE>
CONFIDENTIAL
InterTrust's Strategic Technologies and Architectural Research Laboratory (STAR
Lab) is the world's first computer laboratory whose primary focus is electronic
commerce and digital rights management. Founded in 1990, InterTrust is a
privately held company with a staff of over 130, and has offices in Sunnyvale,
California, New York City, Washington, D.C., and the United Kingdom.
##
Copyright (C) 1999 InterTrust Technologies Corporation. All rights
reserved. InterTrust is the registered trademark of InterTrust Technologies
Corporation, and the InterTrust logo, MetaTrust, MetaTrust Utility and MP3Plus
are trademarks of InterTrust Technologies Corporation, all of which may or may
not be used in certain jurisdictions.
K-3
<PAGE>
CONFIDENTIAL
EXHIBIT 10.14
==============================
TECHNOLOGY DEVELOPMENT AND LICENSE
AGREEMENT
by and between
INTERTRUST TECHNOLOGIES CORPORATION
and
UPGRADE CORPORATION OF AMERICA
==============================
_________________________
August 7, 1996
_________________________
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
ARTICLE 1. DEFINITIONS AND RULES OF CONSTRUCTION................................... 2
1.1 Definitions............................................................. 2
-----------
1.2 Rules of Construction................................................... 8
---------------------
ARTICLE 2. AGREEMENT AND PARTY STATUS.............................................. 9
2.1 Nature and Effect of Closing............................................
----------------------------
2.2 Addition of SOFTBANK Internet Services.................................. 9
--------------------------------------
2.3 Joint and Several Obligations........................................... 9
-----------------------------
ARTICLE 3. TECHNOLOGY ACCESS AND SUPPORT........................................... 9
3.1 Pre-Release Technology Review and Assistance............................ 9
--------------------------------------------
3.2 Technology Access....................................................... 9
-----------------
3.3 Training, Assistance and Technical Support.............................. 11
------------------------------------------
3.4 Additional Assistance................................................... 12
---------------------
ARTICLE 4. COOPERATIVE PROJECTS AND APPLICATIONS................................... 13
4.1 Cooperative Projects.................................................... 13
--------------------
4.2 Potential Cooperative Applications...................................... 13
----------------------------------
ARTICLE 5. LICENSES AND RESTRICTIONS............................................... 14
5.1 License Grant to SSG.................................................... 14
--------------------
5.2 Sublicense Rights....................................................... 15
-----------------
5.3 No Additional Licenses.................................................. 16
----------------------
5.4 General Restrictions.................................................... 16
--------------------
ARTICLE 6. SSG SUPPORT AND ADDITIONAL COVENANTS.................................... 17
6.1 SSG Support of InterTrust Technology.................................... 17
------------------------------------
6.2 Customer Agreements..................................................... 19
-------------------
6.3 Legends and Notices..................................................... 20
-------------------
6.4 InterTrust Trademarks................................................... 21
---------------------
6.5 SSG's Use of SSG Trademarks on Cooperative Applications and SSG Products 22
------------------------------------------------------------------------
6.6 SSG Trademarks.......................................................... 22
--------------
ARTICLE 7. LICENSE FEES AND PAYMENT TERMS.......................................... 23
7.1 Fees and Royalties...................................................... 23
------------------
7.2 Payment Procedure....................................................... 25
-----------------
7.3 Currency................................................................ 25
--------
7.4 Taxes................................................................... 25
-----
7.5 Interest................................................................ 25
--------
7.6 Audit................................................................... 26
-----
ARTICLE 8. PROPRIETARY INFORMATION AND OWNERSHIP................................... 26
8.1 InterTrust Ownership.................................................... 26
--------------------
8.2 SSG Ownership........................................................... 27
-------------
8.3 Joint Ownership......................................................... 27
---------------
8.4 SSG License to InterTrust............................................... 27
-------------------------
ARTICLE 9. PROMOTION AND MARKETING................................................. 28
</TABLE>
<PAGE>
<TABLE>
<S> <C>
9.1 Joint Press Release..................................................... 28
-------------------
9.2 Promotion and Marketing................................................. 28
-----------------------
9.3 Marketing Program....................................................... 28
-----------------
9.4 Technology Advisory Committee........................................... 29
-----------------------------
ARTICLE 10. Partnering Commitments.................................................. 29
10.1 InterTrust Partnering Commitment........................................ 29
10.2 SSG Partnering Commitment............................................... 31
10.3 Additional Provisions................................................... 31
---------------------
ARTICLE 11. CONFIDENTIALITY......................................................... 32
11.1 Classification of Technology and Documents For Confidentiality Purposes. 32
------------------------------------------------------------------------
11.2 InterTrust Information.................................................. 32
----------------------
11.3 SSG Information......................................................... 34
---------------
11.4 Exceptions.............................................................. 34
----------
11.5 Confidentiality of Agreement and Publicity.............................. 35
------------------------------------------
11.6 Confidentiality of Payments, Audit and Certification Testing............ 35
------------------------------------------------------------
11.7 NDA..................................................................... 35
---
ARTICLE 12. REPRESENTATIONS AND WARRANTIES.......................................... 36
12.1 Representations and Warranties of Both Parties.......................... 36
----------------------------------------------
12.2 Representations and Warranties of InterTrust............................ 36
--------------------------------------------
12.3 Limitation.............................................................. 36
----------
ARTICLE 13. INDEMNIFICATION AND REMEDIES............................................ 37
13.1 Indemnification......................................................... 37
---------------
13.2 Cumulative Remedies..................................................... 38
-------------------
13.3 Equitable Remedies...................................................... 38
------------------
ARTICLE 14. EXCLUSION OF DAMAGES.................................................... 39
ARTICLE 15. TERM AND TERMINATION.................................................... 39
15.1 Agreement............................................................... 39
---------
15.2 Events of Termination................................................... 39
---------------------
15.3 Effect of Termination................................................... 41
---------------------
15.4 Survival................................................................ 41
--------
ARTICLE 16. MISCELLANEOUS........................................................... 41
16.1 Governing Law........................................................... 41
-------------
16.2 Venue and Jurisdiction.................................................. 42
----------------------
16.3 Compliance with Law and Export Controls................................. 42
---------------------------------------
16.4 Amendment or Modification............................................... 42
-------------------------
16.5 No Assignment........................................................... 43
-------------
16.6 Notices................................................................. 43
-------
16.7 Waiver.................................................................. 43
------
16.7 Waiver.................................................................. 44
------
16.8 No Third Party Beneficiaries............................................ 44
----------------------------
16.9 No Agency............................................................... 44
---------
16.10 Recovery of Costs and Expenses.......................................... 44
------------------------------
16.11 Severability............................................................ 44
------------
16.12 Counterparts; Facsimiles................................................ 44
------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
16.13 Force Majeure........................................................... 45
-------------
16.14 Entire Agreement........................................................ 45
----------------
EXHIBIT A............................................................................ A-1
EXHIBIT B............................................................................ B-1
EXHIBIT C............................................................................ C-1
EXHIBIT D............................................................................ D-1
EXHIBIT E............................................................................ E-1
EXHIBIT F............................................................................ F-1
EXHIBIT G............................................................................ G-1
EXHIBIT H............................................................................ H-1
</TABLE>
<PAGE>
CONFIDENTIAL
TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
THIS TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT (this "Agreement") is made and
---------
entered into as of the 7th day of August, 1996 (the "Effective Date") by and
--------------
between:
(i) INTERTRUST TECHNOLOGIES CORPORATION, formerly Electronic Publishing
Resources, Inc., a Delaware corporation ("InterTrust"), with offices
----------
at 460 Oakmead Parkway, Sunnyvale, California 94086-4708, on the one
hand; and
(ii) on the other hand:
(a) UPGRADE CORPORATION OF AMERICA, d/b/a SOFTBANK Services Group, a
Delaware corporation ("UCA"), with offices at 699 Hertel Avenue,
---
Buffalo, New York 14207-2398, and
(b) to the extent that it becomes a Party to this Agreement pursuant
to Section 2.1 hereof, SOFTBANK INTERNET SERVICES, INC. ("SIS"), a
---
corporation to be formed by UCA from certain business units of UCA.
(individually, a "Party", and collectively, the "Parties") with reference to the
----- -------
following:
RECITALS
A. InterTrust has developed and is continuing to develop a unique, general
purpose architecture for, among other things, rights protection and event
management related to electronic commerce, such architecture including
technologies for clearinghouse, certification and other commerce
administration technologies. InterTrust's technology is designed to support
an interoperable foundation for the electronic marketplace.
B. SSG (as hereinafter defined) is engaged in the business of transactional
systems development, software distribution and related clearinghouse
services, and is interested in: (i) developing comprehensive application
and service models enabling a broad reaching digital marketplace for
electronic content; and (ii) enabling electronic value chain models
supporting cyberspace distribution of software programs and components.
C. SSG, with the assistance of InterTrust, intends to develop electronic
commerce infrastructure tools and services and such Cooperative
Applications as the Parties may mutually agree, and InterTrust intends to
grant SSG certain licenses to use and incorporate InterTrust Technology in
certain products and services as set forth herein.
D. Pursuant to a closing as set forth in Section 2.1 hereof: (i) InterTrust
will issue to UCA a warrant to purchase shares of InterTrust Class B Common
Stock in the form attached hereto in Exhibit A (the "Warrant"); and (ii)
-------
InterTrust and SOFTBANK Holdings, Inc.,
SSG/InterTrust Agreement _______/_______
<PAGE>
CONFIDENTIAL
an entity that owns directly or through an Affiliate a majority interest in
UCA, will enter into a Series B Preferred Stock Purchase Agreement in the
====
form attached hereto in Exhibit A (the "Stock Purchase Agreement"). This
------------------------
Agreement, together with the Warrant and Stock Purchase Agreements
(collectively the "Other Transaction Documents"), set forth the terms and
conditions with respect to the Parties' relationship contemplated
hereunder.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Parties agree to the following terms and conditions:
ARTICLE 1. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1 Definitions. In addition to the other capitalized terms defined
-----------
elsewhere in this Agreement, the following terms shall have the meanings set
forth below:
"Affiliate" of a Person means any Person that controls, is controlled
---------
by, or is under common control with the first Person. For purposes hereof,
"control" means the right to: (i) elect the board of directors or other
similar managing authority; or (ii) generally make or cause the making of
management decisions directly; provided, however, that an Affiliate shall
-------- ------- ----
remain an Affiliate for only so long as such control remains in effect.
"Application Products" means any software tool, template, application
--------------------
system or other software product that: (i) is developed using InterTrust
Technology and/or Modified Technology; (ii) directly contains or
incorporates InterTrust Technology solely in the form of Authorized
Application Software, and/or Modified Technology in either Object Code
and/or Source Code in accordance with the licenses granted by InterTrust to
SSG hereunder; (iii) is not enabled to permit the performance of any
Clearinghouse Functions unless InterTrust has otherwise specified in
writing; and (iv) is in Compliance with InterTrust Specifications, except
as otherwise expressly provided in Section 3.2(b) hereof. Notwithstanding
the foregoing, any software tool, template, application system or other
software product specially designed, adapted or developed in whole or in
part to exploit, implement or facilitate the implementation of the
InterTrust proprietary business concepts set forth in Section 4.2 hereof
shall not constitute Application Products, unless developed as a
Cooperative Application.
"Authorized Application Software" means such software representations
-------------------------------
of InterTrust Technology in Object Code and/or in Source Code (solely as
such Object Code and Source Code are identified and designated by
InterTrust on Exhibit B), that are permitted for distribution in accordance
with the applicable licenses hereunder in such form as specified on Exhibit
B, which Exhibit may be amended from time to time by InterTrust in its sole
discretion and that are incorporated in Application Products according to
the terms and conditions of this Agreement.
-2-
<PAGE>
CONFIDENTIAL
"Authorized Clearinghouse Provider" means any Person that is expressly
---------------------------------
licensed by InterTrust to engage in specified Clearinghouse Function
activities and services, but only to the extent: (i) of the scope of such
license; and (ii) that such license is valid and in force.
"Authorized Clearinghouse Software" means such software
---------------------------------
representations of InterTrust Technology solely in Object Code form (and
solely as such Object Code is identified and designated by InterTrust on
Exhibit B, which Exhibit may be amended from time to time by InterTrust in
its sole discretion), that are permitted for distribution as incorporated
in Clearinghouse Products, in accordance with the applicable licenses
hereunder.
"Clearinghouse Function(s)" means any one or more activities, as well
-------------------------
as services resulting therefrom, that use any InterTrust Technology and/or
Modified Technology, or use information derived at least in part from use
of such technology, to: (i) enable payment fulfillment or provision of
other consideration (including service fees, product fees or any other fees
and/or charges) based at least in part on a Control Use; (ii) perform
audit, billing, payment fulfillment (or provision of other consideration)
and/or other clearing activities involving more than one Person; and/or
(iii) compile, aggregate, use and/or provide information relating to more
than one Person's use of one or more Secure Containers and/or Content,
including Contents of Secure Containers or any other Content Managed at
least in part using any InterTrust Technology and/or Modified Technology.
Clearinghouse Functions shall include, for example: (a) financial clearing;
(b) providing object registry services and rights, permissions, prices,
and/or other Rules and Controls information for registered objects; (c)
electronically certifying information used with or required by Rules and
Controls, such as authenticating identity, class membership or other
attributes of identity context; (d) providing information based upon usage
auditing, user profiling, and/or market surveying related to more than one
Person's use of one or more Secure Containers and/or Content; and (e)
employing information derived from user exposure to Content, such as
advertising.
"Clearinghouse Products" means any software tool, template,
----------------------
application system or other software product that: (i) is developed using
InterTrust Technology and/or Modified Technology; (ii) directly contains or
incorporates InterTrust Technology solely in the form of Authorized
Clearinghouse Software, and/or Modified Technology only in Object Code, in
accordance with the licenses granted by InterTrust to SSG hereunder; (ii)
is enabled to permit the performance of any Clearinghouse Function; and
(iii) is in Compliance with InterTrust Specifications, except as otherwise
expressly provided in Section 3.2(b) hereof.
"Compliance" or "Compliant" means fully consistent with and fully
---------- ---------
conforming to all applicable portions of: (i) the most current version of
the InterTrust Specifications (as defined in Section 6.1(b) hereof)
existing on the date of SSG's first commercial use, distribution, sale or
other transfer of any applicable SSG Product, Cooperative Application or
first use thereof in connection with any service associated therewith, as
the case may be; and thereafter (ii) the most current InterTrust
Specifications in accordance with Section 6.1(b) hereof, as applied to any
such SSG Product, Cooperative Application or service associated therewith.
A SSG Product, Cooperative Application or any service
-3-
<PAGE>
CONFIDENTIAL
associated therewith that has not passed any required certification tests
as set forth in Section 6.1 hereof shall be deemed non-Compliant with
InterTrust Specifications.
"Content(s)" means any analog or digital information representing, for
----------
example, text, graphics, animation, video, digital linear motion pictures,
sound and sound recordings, still images, computer programs or executable
or interpretable components, and data. Content shall include, for example,
any electronic representation of: (i) Rules and Controls; and (ii)
electronic information derived from the Management of Content.
"Content Transaction" means any event or combination of events: (i)
-------------------
Managed, in whole or in part, through the use of any InterTrust Technology
and/or Modified Technology; and (ii) in connection with which compensation
(or other consideration) is due or payable to SSG and/or any other one or
more Persons, at least in part, for any (a) sale, rental, lease, license,
vending and/or other comparable provision of one or more rights related to
Content, or (b) use of, including any interaction with, Content (such as
access to Content, including production of modified Content).
"Control Use" means any use of InterTrust Technology and/or Modified
-----------
Technology to Manage Content including initiating and/or otherwise
governing any consequence (electronic, physical or otherwise) related to
the use and/or processing of Content and/or provision of goods or services
conveyed by or associated with such Content. Control Use shall include, for
example: (i) metering, auditing, charging, and/or billing, for access to or
any other interaction with any Content; and/or (ii) administering permitted
and/or prohibited uses of Content.
"Cooperative Application(s)" means any Application Product and/or
--------------------------
Clearinghouse Product that is: (i) developed pursuant to an applicable
Cooperative Application Project Plan in accordance with Section 4.1 hereof;
and (ii) marketed solely under any SSG Trademarks (except where use of
InterTrust Trademarks is also required hereunder, or other trademarks of
Persons are included in a secondary manner to identify technology or
services associated therewith), all in accordance with Section 6.5 and
other provisions hereof. Examples of possible Cooperative Applications
include those applications proprietary to InterTrust and described in
Section 4.2 hereof.
"Core Partner" means any Person (other than a Party) with whom
------------
InterTrust may directly enter into any agreement or set of agreements as
permitted hereunder, pursuant to which InterTrust directly: (i) provides
early access to InterTrust Technology prior to InterTrust's first
commercial release thereof to the general public; (ii) may undertake one or
more cooperative application projects of a substantially comparable nature
as set forth in Article 3 hereof; and (iii) grants a general purpose
license to use InterTrust Technology and to perform, and sublicense others
to perform, Clearinghouse Functions of a substantially comparable scope as
granted in Sections 5.1(b) and 5.2 hereof.
"Core Technology" means those components of InterTrust Technology
---------------
described by InterTrust on Exhibit B hereto as core technologies of such
InterTrust Technology, as such Exhibit may be amended from time to time by
InterTrust in its sole discretion.
-4-
<PAGE>
CONFIDENTIAL
"Customer" means any Person that receives or acquires a SSG Product or
--------
Cooperative Application from SSG (as provided hereunder) with a present
intention: (i) to use such application or product privately as an end-user,
or further distribute such application or product, without modification, to
an end-user or one or more other Persons for distribution, without
modification, to an end-user; or (ii) to use such product or application
solely to (a) incorporate Authorized Application Software into Customer's
software products to provide a Rights User Node or (b) develop and
incorporate software components that initiate interface and operation with
a Rights User Node provided by InterTrust Commerce Technology, each of
which software components and Rights User Node is Compliant with InterTrust
Specifications. Customer shall not include any Person who has a present
intention to perform any Clearinghouse Function, unless such Person is an
Authorized Clearinghouse Provider.
"Distributable Documentation" means such portions of the Documentation
---------------------------
that InterTrust has specifically and in writing identified on Exhibit B as
being suitable for general distribution by SSG to Customers, as such
portions of the Documentation may from time to time be cataloged by
InterTrust and provided to SSG in its discretion, wherein such
specification of such authorized documents and the content thereof may be
modified by InterTrust through amendment of the Distributable Documentation
identified and described on Exhibit B, in accordance with this Agreement.
"Documentation" means certain English language versions of
-------------
documentation and/or instructions as specifically designated by InterTrust
that may assist SSG and/or its Customers in the use of InterTrust
Technology and that InterTrust may from time to time provide with the
InterTrust Technology (including any Distributable Documentation) and as
initially identified in Exhibit B hereto, wherein such documents and the
content thereof may be modified by InterTrust in its discretion through
amendment of the Documentation identified and described on Exhibit B, in
accordance with this Agreement.
"Gross Commercial Value" means all sums of money, and/or the fair
----------------------
market value of any other consideration, charged or provided in connection
with any Content Transaction, and/or in connection with performing any
other activity within the Clearinghouse Functions. Such consideration shall
include consideration based upon Management of Content or information
derived at least in part therefrom, including, for example, consideration:
(i) paid by a user as a consequence of, for example, user exposure to, or
other interaction with, Content; (ii) paid by a user as a consequence of
the acquisition of one or more rights related to Content; or (iii) paid by
a proxy or subsidizing payer (such as an advertiser) based upon user
exposure to Content, where, for example, after (due to or based on) receipt
of information about user exposure to Content, such advertiser pays
consideration based at least in part on value resulting from such exposure.
Notwithstanding the foregoing, Gross Commercial Value shall not include any
sales, use, value-added or other taxes (except withholding taxes) imposed
by any national, state, local or foreign government and paid by SSG as a
consequence of clearing a Content Transaction and/or as a consequence of
performing any other activities within the Clearinghouse Functions.
-5-
<PAGE>
CONFIDENTIAL
"Intellectual Property Rights" means all patent rights, copyrights,
----------------------------
trademarks, trade secret rights, and other proprietary rights in any
jurisdiction, and all applications and registrations therefor.
"InterTrust (TM) Commerce Technology" means certain InterTrust
-----------------------------------
technology directly relating to distributed rights management, electronic
content administration and/or distributed electronic commerce automation
and process control systems and methods, including, without limitation, the
InterTrust products described in Exhibit B hereto.
"InterTrust Specifications" means the InterTrust Technology
-------------------------
specifications, as established or modified by InterTrust in its sole
discretion and in accordance with Section 6.1(b) hereof, that are provided
to SSG and that are applicable to licensees or Core Partners of InterTrust
Technology, as relevant. Such InterTrust Specifications may include: (i)
required design criteria for products and services employing InterTrust
Technology and/or Modified Technology, including, for example, product and
related criteria for ensuring the architectural and functional integrity,
standardization, security capability, and interoperability of InterTrust-
based technology, components, products and services (such as, for example,
criteria for electronic environments employing InterTrust Commerce
Technology for rights and/or other event related process management); (ii)
procedures and requirements for installation, initialization, backup,
restore and security updates; and (iii) required certification tests and
procedures to verify Compliance of SSG Products, Cooperative Applications
and related services with such InterTrust Specifications.
"InterTrust Technology" means technology developed by and/or for
---------------------
InterTrust and directly related to electronic rights and/or event
management, including the commercial administration thereof, and supplied
by InterTrust to SSG as set forth in this Agreement. Such technology shall
include InterTrust Commerce Technology and DigiBox Technology contained in
the SDK, TDK and CDK products and Documentation as referenced in Exhibit B
hereto (as such Exhibit may be modified by InterTrust in its sole
discretion from time to time to accommodate, for example, any updates and
upgrade releases, and product reconfigurations made available pursuant to
Sections 3.1 and 3.2 hereof); provided that any technology not described on
-------- ----
Exhibit B hereto as of the Effective Date shall become InterTrust
Technology hereunder only if and to the extent such technology is supplied
to SSG in the manner set forth in Section 3.2(b).
"InterTrust Trademarks" means InterTrust's names, logos and other
---------------------
marks as listed on Exhibit C hereto, as such Exhibit may be modified by
InterTrust from time to time pursuant to Section 6.4(a) hereof.
"Licensed Rights" means all of InterTrust's worldwide Intellectual
---------------
Property Rights (other than trademark rights) in and to the InterTrust
Technology, the Modified Technology and/or the Cooperative Applications,
that InterTrust (during the term of this Agreement) owns or has the right
to grant licenses of the scope granted herein without the agreement of, or
requirement for payment (or the granting of other consideration) to, any
Person.
-6-
<PAGE>
CONFIDENTIAL
"Manage or Management" means any form of governance, regulation,
--------------------
management and/or control, in any way and by any means, of, as applicable
in the context in which reference is made herein: (i) rights, processes
and/or obligations related to or associated with use of (including access
to, transport of, and/or storage of) Content, including Content related
disposition and/or consequences thereof; and/or (ii) events or event
processes related or associated in any manner to the use of (including
access to), attempted use of, and/or disposition of, Content and/or events,
including any consequences thereof.
"Material Defects" means defects or bugs in the InterTrust products
----------------
incorporating InterTrust Technology (as defined in Exhibit B hereto) and as
delivered by InterTrust to SSG, wherein such defects or bugs cause one or
more such InterTrust products to fail to perform: (i) materially in
conformance with the capabilities ascribed to such products in the
applicable portions of InterTrust Specifications; and (ii) in a
commercially reasonable manner in accordance with reasonable software
industry practices relating to such capabilities. Material Defects shall
not include any defects or bugs introduced as a result of any modification
of (or to) the InterTrust Technology by SSG or any Person.
"Modified Technology" means all modifications of, and enhancements
-------------------
and/or additions to, the InterTrust Technology, created by (or for, as
provided hereunder) SSG, including without limitation all derivative works
of the InterTrust Technology (or other Modified Technology) as such term is
defined in the U.S. Copyright Act (17 U.S.C. ' 101 et seq., as amended),
-- ---
but only to the extent that such modifications, enhancements, additions
and/or derivative works are permitted under Article 5 and elsewhere in this
Agreement. Modified Technology shall not include any modifications,
enhancements, additions and/or derivative works of InterTrust Technology
(or of other Modified Technology) whatsoever, made by or for SSG or any
Person that fall outside the scope of this Agreement.
"Object Code" shall mean the computer executable binary code derived
-----------
from compiled Source Code for execution on a computing system.
"Person" means any individual, corporation, limited liability company,
------
partnership, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, government body or agency, or other entity.
"Rights User Node" means a client installation that supports
----------------
Management of Content.
"Rules and Controls" means any information that describes, and/or
------------------
provides means for performing, permitted and/or required operations related
to Content, including restricting the performance of operations, such as,
for example, Management of such Content.
"Secure Containers" means electronic containers that: (i) employ
-----------------
cryptographic techniques to provide protection for Content; and (ii)
support the use of Rules and Controls to Manage Content.
-7-
<PAGE>
CONFIDENTIAL
"Source Code" means a human-readable, non-executable set of
-----------
instructions for a computer program, from which it may be possible,
together with related source materials and documentation, to discern the
logic, algorithms, internal structure, and operating feature design
characteristics of such computer program.
"SDK 1.0" or "Systems Developer's Kit 1.0" or means certain software
------- ---------------------------
tools and applications described in Exhibit B hereto (as such Exhibit may
be modified from time to time by InterTrust in its discretion) that
incorporate InterTrust Technology, as provided by InterTrust to SSG in
accordance with this Agreement.
"SSG" means individually or collectively, as applicable in the context
---
in which such reference is made: (i) Upgrade Corporation of America; and
(ii) SOFTBANK Internet Services, Inc., a corporation to be formed from
certain business units of Upgrade Corporation of America, to the extent
that SOFTBANK Internet Services, Inc. is joined as a Party pursuant to
Section 2.2 hereof.
"SSG Product(s)" means any Application Product(s) and/or Clearinghouse
--------------
Product(s) (other than Cooperative Application(s)) that: (i) is developed
by or for SSG as permitted hereunder; and (ii) is branded and marketed
solely under the SSG Trademarks (except where use of InterTrust Trademarks
is also required herein, or other trademarks of Persons are also included
in a secondary manner to identify technology or services associated
therewith) and as stipulated in Section 6.5 and other provisions hereof.
"SSG Trademarks" means any names, logos and other marks owned or
--------------
licensed for use exclusively by SSG or SOFTBANK Holdings, Inc. (hereinafter
"SOFTBANK"), that may be used as stipulated hereunder in connection with,
--------
and are limited in use to representing exclusively, the SSG Products,
services permitted hereunder, and/or identities of such companies and over
which SSG or SOFTBANK exercise exclusive control with respect to the
commercial use thereof. Such SSG or SOFTBANK Trademarks are listed on
Exhibit C hereto, as such Exhibit C may be modified by SSG from time to
time pursuant to Section 6.6 hereof.
1.2 Rules of Construction. As used in this Agreement, all terms used in
---------------------
the singular shall be deemed to include the plural, and vice versa, as the
context may require. The words hereof, herein and hereunder refer to this
------ ------ ---------
Agreement as a whole, including any exhibits hereto, as the same may from time
to time be amended or supplemented and not to any subdivision contained in this
Agreement. When used herein, including shall mean including, without
--------- ------------------
limitation; discretion shall mean sole discretion; and InterTrust shall mean
---------- ---------------- ----------
InterTrust and any lawful successor thereto. References herein to section
- -------------------------------------------
and/or exhibit shall be to the applicable section and/or exhibit in this
Agreement, as such exhibit may be modified from time to time pursuant to the
terms of this Agreement. Descriptive headings are inserted for convenience only,
and shall not be utilized in interpreting this Agreement. This Agreement has
been negotiated by the Parties and their respective counsel and shall be fairly
interpreted in accordance with its terms and without any strict construction in
favor of or against either Party. References to specific forms of technology
representations such as electronic, digital, or analog shall include all future
successors and replacement forms of representations whether or not currently
contemplated, invented or conceived.
-8-
<PAGE>
CONFIDENTIAL
ARTICLE 2. AGREEMENT AND PARTY STATUS.
2.1 Nature and Effect of Closing
(a) Closing. As partial consideration for InterTrust's execution of
-------
this Agreement, UCA and SOFTBANK Holdings, Inc. hereby irrevocably commit
to execute the Other Transaction Documents relevant to it and make such
payments contemplated thereby, and consummate a closing, on or before
August 19, 1996 (the "Closing"), at the Washington D.C. offices of Sullivan
-------
& Cromwell, or at such other place as to which both Parties agree. At or
before such Closing, SOFTBANK shall: (i) execute and deliver the Stock
Purchase Agreement to InterTrust; (ii) pay to InterTrust by wire transfer
such sums as set forth in Schedule A of the Stock Purchase Agreement; and
(iii) consummate the transactions contemplated by the Stock Purchase
Agreement. In the event UCA and SOFTBANK fully comply with the terms of
this Section 2.1(a) and other terms of this Agreement, at the Closing
InterTrust shall: (i) execute and deliver the Stock Purchase Agreement to
SOFTBANK; and (ii) execute and issue the Warrant to UCA. UCA acknowledges
and agrees that to the extent the Closing fails to occur as the result of
UCA and/or SOFTBANK's failure to comply with this Section 2.1(a) or other
terms of this Agreement, as applicable, InterTrust shall have the right,
exercisable in its discretion, to terminate this Agreement pursuant to
Section 15.2(a) hereof without refund to SOFTBANK of any kind, in addition
to any and all remedies available to InterTrust at law or in equity. UCA
hereby irrevocably waives any right to contest or challenge, and covenants
not to contest or challenge, InterTrust's exercise of such right of
termination.
(b) Effect of Rights and Obligations. During the period from the date
--------------------------------
of execution hereof until the later of the Closing or termination of this
Agreement, the rights and obligations of the parties under Sections 5.4,
7.1(a)(i)(1), 7.4, 8.1, 8.2 and 8.3, and Articles 1, 10, 11, 12, 13, 14, 15 and
16 hereof shall be effective, and no other provisions of this Agreement shall
take effect. Upon the Closing and thereafter during the term of this Agreement,
all provisions of this Agreement shall be effective.
(c) Representation and Warranty. In addition to the representations
---------------------------
and warranties set forth in Section 12, as applicable, UCA and SOFTBANK jointly
and severally represent and warrant to InterTrust that (and InterTrust has
relied upon such representation and warranty that) the delay experienced in
closing the Stock Purchase Agreement was occasioned by Japanese government
regulatory processes for the export of funds from SOFTBANK Japan to SOFTBANK,
such funds being necessary for SOFTBANK to provide the payments due under this
Agreement and the Stock Purchase Agreement.
2.2 Addition of SOFTBANK Internet Services. UCA currently intends to form
--------------------------------------
SIS from certain business units of UCA. SIS will focus on developing certain
electronic commerce transaction and related technology utilizing the InterTrust
Technology. To the extent that SIS is formed and incorporated on or before
December 31, 1996 and qualifies as an Affiliate of SOFTBANK with substantially
similar equity ownership structure as UCA, within thirty (30) days of such
formation and incorporation, SIS may automatically become a Party to this
Agreement upon: (i) the execution of the Signature Page, attached hereto as
Exhibit D, by SIS; and (ii) the receipt of the original of such Signature Page
by InterTrust.
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<PAGE>
CONFIDENTIAL
2.3 Joint and Several Obligations. By executing the Signature Page, SIS
-----------------------------
shall be bound by all the terms and conditions thereof applicable to UCA, from
the date such terms and conditions took effect with respect to UCA. By executing
this Agreement and approving SIS' addition as a Party, UCA and SIS, further
acknowledge and agree that: (i) each of UCA and SIS is jointly and severally
liable and responsible to InterTrust for the obligations of SSG under this
Agreement; and (ii) InterTrust's performance of its obligations under this
Agreement with respect to, or for the benefit of, either UCA or SIS shall fully
discharge its obligations to the other (and to SSG).
ARTICLE 3. TECHNOLOGY ACCESS AND SUPPORT.
3.1 Pre-Release Technology Review and Assistance. To expose SSG to, and
--------------------------------------------
demonstrate the status and functionality of, the SDK 1.0 and certain other
InterTrust Technology described in Exhibit B hereto, prior to the delivery to
SSG of SDK 1.0 for beta testing, InterTrust personnel will conduct technical
meetings with SSG personnel from time to time as mutually convenient to both
Parties (as is consistent with InterTrust's Assistance and support obligations
described in Section 3.3 hereof and taking into consideration the need to avoid
adversely affecting InterTrust's development efforts). Such technical meetings
will include presentations on technical strategies and reviews of the progress
of InterTrust's development effort, and afford SSG the opportunity to review and
comment upon, as appropriate SDK 1.0 design documents, schematics and
architectural models, working samples, prototypes and code (such meetings
between the Parties shall constitute Assistance, as defined in Section 3.3(a)
hereof, after thirty (30) man-hours have been expended by InterTrust personnel
therefor). The Parties expect, in addition, to meet periodically during such
same time period, as may be mutually agreed, to discuss and plan product
deployment and marketing strategies and activities; provided, however, that any
-------- ------- ----
time expended in these activities shall not constitute Assistance.
3.2 Technology Access.
-----------------
(a) Delivery of InterTrust Technology. Subject to the terms of this
---------------------------------
Agreement, InterTrust shall make available to SSG such InterTrust Technology as
set forth on Exhibit B hereto (as such Exhibit may be amended by InterTrust from
time to time pursuant to this Agreement). Such InterTrust Technology may employ
or may operate with one or more technologies that may not be proprietary to
InterTrust but are included within the Licensed Rights as specified by
InterTrust, in its sole discretion, on Exhibit B (the "InterTrust Technology
---------------------
Products"). InterTrust Technology as made available hereunder will contain the
- --------
SDK 1.0, with the functionality ascribed thereto, as set forth on Exhibit B.
InterTrust's initial estimated schedule for the InterTrust Technology Products
is set forth on Exhibit B and SSG recognizes that such schedule may change in
the future. SSG acknowledges and agrees that Clearinghouse Prototype Components
and Sample Applications (as each are defined in Exhibit B) that may be provided
to SSG as part of InterTrust Technology are not designed, intended or warranted
by InterTrust in any manner for commercial use. For a period of [*] ([*]) years
after the Effective Date and pursuant to the terms and conditions of this
Agreement, InterTrust will make available to SSG all update and upgrade releases
as well as product reconfigurations and modifications to the InterTrust
Technology that InterTrust develops from time to time and makes generally
available to its Core Partners and shall, with respect to such update and
upgrade releases, product
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
-10-
<PAGE>
CONFIDENTIAL
reconfigurations and modifications [*]; provided that SSG shall be entitled to
-------- ----
such [*] as set forth in this Section 3.2(a) or elsewhere herein, only where
SSG, SOFTBANK, and any SOFTBANK Affiliate: (i) to the extent SSG, SOFTBANK, or
any SOFTBANK Affiliate perform any transaction clearing services, perform such
clearing services primarily for transactions related to and/or derived from use
of SSG Products or otherwise as set forth in Section 5.1(b); and (ii) refrain
from (a) developing, promoting, or acquiring any technology directly competitive
with InterTrust Special Advanced Technologies (as defined in Exhibit F hereto)
or InterTrust Secure Container technology (the "Competitive Technology"); and
----------------------
(b) licensing Competitive Technology, other than as necessary for SSG clearing
transactions as limited under subparagraph (i) above.
(b) Provision of Additional Technology and Documentation. Before
----------------------------------------------------
providing SSG with any technology or documentation other than the InterTrust
Technology and Documentation set forth on Exhibit B hereto as of the Effective
Date ("Additional InterTrust Technology/Documentation"), InterTrust shall
----------------------------------------------
provide SSG with notice of its intent to deliver such technology and/or
documentation, along with a summary description of the Additional InterTrust
Technology/Documentation. Provided that such Additional InterTrust
Technology/Documentation is not related to security and/or interoperability
aspects of InterTrust Technology, within ten (10) days thereafter, SSG may, at
its discretion, notify InterTrust that it does not wish to receive such
Additional InterTrust Technology/Documentation. Any decision by SSG to receive
or decline to receive Additional InterTrust Technology/Documentation shall have
no effect on any of SSG's obligations hereunder (including, but not limited to,
Sections 5.3 and 6.1) and no licenses of any kind under any of InterTrust's
Intellectual Property Rights shall be granted or deemed to have been granted
(expressly or by implication) with respect to any use of declined Additional
Technology/Documentation. To the extent that SSG declines to receive any
Additional InterTrust Technology/Documentation, every portion of any SSG product
(and any directly related services permitted hereunder) not at the time
immediately preceeding the effective date of InterTrust Specifications
applicable to such declined Additional Technology/Documentation, but containing
any technology relating to declined Additional Technology/Documentation, shall
be, thereafter, in accordance with the procedures of Section 6.1(b): (i) be
Compliant with all applicable InterTrust Security Related Specifications (as
defined immediately below) and InterTrust Specifications for the Special
Advanced Capabilities; and (ii) be Interoperable (as defined immediately below)
with all products Compliant with InterTrust Specifications. "Security Related
----------------
Specifications" means the InterTrust Specifications and all subsequent versions
- --------------
thereof related to: (a) trusted systems techniques and technologies, interfaces,
and/or processes (such as, for example, security kernel structures, reference
monitor functions and structures, internal software protection structures and/or
any aspect having the potential to compromise the protection, secrecy, and/or
integrity of different InterTrust installations or DigiBox Secure Containers
created, processed, and/or used by different InterTrust installations); (b)
other security aspects of the InterTrust Technology, including cryptographic
algorithms, secure communications protocols, secure objects and/or data
structures, and/or interfaces related to any of the foregoing; and (c) ensuring
that trusted and/or other secure functions of the InterTrust Technology are
Interoperable in different installations and/or operating contexts.
"Interoperable" means producing materially identical output or results based on
- --------------
identical events or input.
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3.3 Training, Assistance and Technical Support. Subject to the terms of
------------------------------------------
this Agreement, InterTrust agrees to provide the following training, assistance
and technical support to SSG for a period of thirty-six (36) months from the
Effective Date (the "Support Period"):
--------------
(a) Training and Assistance. In order to assist SSG in its evaluation
-----------------------
and/or use of InterTrust Technology products, the InterTrust Dedicated
Personnel (as defined in Section 3.3(d)) shall provide to SSG account
management, at no further cost to SSG and subject to applicable terms and
conditions of this Agreement, training, consulting, relationship
assistance, project management, and other assistance directly related
thereto ("Assistance") [*]. Such Dedicated Personnel shall provide up to
----------
two thousand (2,000) hours per annum of such Assistance, as described in
Section 3.3(d) hereof, so long as SSG is entitled to favorable treatment
under this Article 3. InterTrust shall further provide, as may be requested
by SSG, up to one hundred (100) hours of Assistance by persons other than
the Dedicated Personnel for general training and support purposes. All such
Assistance will be measured based upon InterTrust's man-hours expended
(excluding time expended to travel or perform administrative tasks related
to the relationship), and shall be subject to reasonable agreement between
the Parties on scheduling, availability of resources and related matters.
As appropriate, such Assistance may include certain training sessions to
which certain other InterTrust licensees (in addition to SSG) may be
invited to attend. In such an event, InterTrust will notify SSG in advance
of such other participants. SSG shall be responsible for all expenses
incurred by SSG's personnel in traveling to and attending any training and
support meetings. In the event InterTrust's personnel travel from
InterTrust's facilities (upon InterTrust's and SSG's mutual agreement), SSG
shall reimburse InterTrust for all actual and reasonable travel, living and
out-of-pocket expenses incurred by InterTrust's personnel based on SSG's
standard policies and procedures for reimbursement of its independent
contractors and its own employees.
(b) Correction of Material Defects. In addition to InterTrust's own
------------------------------
ongoing quality assurance efforts, InterTrust shall use reasonable prompt
efforts in accordance with reasonable U.S. software industry practices, at
InterTrust's expense and subject to InterTrust's standard support policies
as relevant, to correct Material Defects, or otherwise reasonably adjust
InterTrust Technology to mitigate Material Defects, identified by SSG to
InterTrust in a writing describing the alleged Material Defects in detail.
InterTrust shall have no obligation to: (i) investigate or correct any
Material Defects at any site other than an InterTrust facility, except that
InterTrust will visit SSG's facilities as may be required in the reasonable
judgment of both InterTrust and SSG to investigate Material Defects that
severely and critically degrade operation of InterTrust Technology and
cannot otherwise be diagnosed by SSG; (ii) communicate on the subject of
Material Defects with any Person other than SSG; or (iii) correct any
Material Defects that have been properly identified by SSG but that cannot
be reliably reproduced. Notwithstanding the foregoing, SSG shall reimburse
InterTrust for all actual and reasonable travel, living and out-of-pocket
expenses incurred by InterTrust's personnel (based on SSG's standard
policies and procedures for reimbursement of its independent contractors
and its own employees) for any site visit referenced in this Section 3.3(b)
after the second such site visit per calendar year.
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(c) Status Meetings. To assist the Parties in sharing information,
---------------
and coordinating and evaluating their efforts relating to InterTrust
Technology and their mutual technical and business objectives, following
the Effective Date the Parties shall meet from time to time to discuss,
among other things: (i) InterTrust's progress in development of the
InterTrust Technology; (ii) implementation of such technology by SSG; (iii)
feedback concerning Assistance provided to SSG and product development and
marketing progress by SSG; and (iv) other issues concerning the Parties'
mutual technical and business objectives (the "Status Meetings"). Such
---------------
Status Meetings shall: (1) be attended at a minimum by each Party's
Relationship Manager and Technical Project Manager (as defined in Section
3.3(d)); and (2) take place not less frequently than once every two (2)
months until January 1, 1998, and, thereafter, as may be agreed by the
Parties.
(d) Dedicated Personnel. InterTrust and SSG will each appoint a
-------------------
relationship manager, to coordinate its activities pursuant to this Section
3.3 and Article 4 ("Relationship Manager"), and a technical project
--------------------
manager, to coordinate and provide the Assistance set forth in Section
3.3(a) and 3.3(b), 3.3(b) ("Technical Project Manager") (collectively, the
-------------------------
"Dedicated Personnel"). Not less than one-half (1/2) of such InterTrust
-------------------
Relationship Manager's and such InterTrust Technical Project Manager's
working time shall be devoted exclusively to providing services and
Assistance for SSG as set forth herein, if reasonably required by the
circumstances or reasonably requested by SSG, so long as SSG is entitled to
most favored treatment under Section 3.2(b) hereof.
3.4 Additional Assistance. During the Support Period, additional
---------------------
Assistance may be made available by InterTrust to SSG beyond the one hundred
(100) hours allocated under Section 3.3(a) hereunder. To the extent SSG
requests, and InterTrust decides (in the exercise of its sole discretion) to
provide, such additional Assistance, and SSG continues to be entitled to most
favored treatment under Section 3.2(b) hereof, SSG shall pay to InterTrust [*].
After the Support Period, any further support or Assistance desired by SSG shall
be subject to InterTrust's standard support policies and support packages, and
any fees charged to SSG in this regard shall be [*]. To the extent InterTrust
requires all of its Core Partners or customers who have license rights and
obligations comparable to SSG, as may be applicable, to maintain a basic level
of support, SSG shall maintain such basic support policy in the same manner as
is generally provided by InterTrust Core Partners or customers.
ARTICLE 4. COOPERATIVE PROJECTS AND APPLICATIONS.
4.1 Cooperative Projects. From time to time during the term of this
--------------------
Agreement, the Parties may discuss the terms and conditions under which they may
cooperate with respect to Cooperative Applications, including discussing the
types of projects and formulating the terms of a project plan (a "Cooperative
-----------
Application Project Plan"), which, upon agreement of the Parties, shall be
- ------------------------
attached as an Exhibit hereto. The Parties shall negotiate reasonably in an
attempt to agree on the terms and conditions upon which they may cooperate with
respect to one or more Cooperative Applications (which may include the
applications set forth in Section 4.2 below), but agreement to such terms and
conditions shall be in the reasonable discretion of each Party, and any failure
to agree shall not constitute a breach of this Agreement. The Parties' intent
with
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respect to information to be contained within a Cooperative Application Project
Plan is described in Exhibit E hereto, as may be amended from time to time upon
the mutual agreement of the Parties (each in the exercise of its sole
discretion). Exhibit E further includes other information appropriate to
represent any agreement between the Parties related to any such project plan.
The provisions of this Agreement shall govern the Parties' actions in
implementing any Cooperative Application Project Plan to which the Parties
agree, except to the extent that such provisions herein are inconsistent with
explicit provisions of that specific Cooperative Application Project Plan, in
which event the provision of such Cooperative Application Project Plan shall
govern. A breach of a Cooperative Application Project Plan, other than those
terms relating to Intellectual Property Rights, ownership or licenses thereof
granted by InterTrust, shall not constitute a material breach of this Agreement,
unless expressly stipulated to the contrary in such Cooperative Application
Project Plan.
4.2 Potential Cooperative Applications. The Parties have, to date, had
----------------------------------
preliminary discussions concerning two potential Cooperative Applications:
(i) an information delivery model, tentatively denominated
"Electronic Express(TM)," supporting security for, and the auditing, validation,
and/or authentication of electronically delivered information (e.g., contracts
or other documents, multimedia, video transmissions, etc.), and further
including (a) a third party service provider that receives and/or can access
information that may be used to identify or validate at least a portion of the
delivered information for the purpose of verifying or reconstructing (in whole
or in part) facts relating to delivery of the information (e.g., the
transmitting party, transmitted content, and/or the receipt, identity and/or use
by the intended recipient of transmitted content) and/or (b) the distribution of
content in software containers to recipients employing secure, interoperable,
auditing and control means that make accessible to sending and/or receiving
parties explicit event validation and/or one or more facts for potential
identification purposes, wherein: (1) such containers have specified Rules and
Controls that manage use of the content and (2) one or more potential uses of
the content are controlled, at least in part, by one or more Rules and Controls
specified by a sending party; and
(ii) an application, tentatively denominated "Publish America(TM),"
that enables individual users and organizations to become cyberspace publishers
through the packaging of digital content in Secure Containers utilizing one or
more material portions of any Special Advanced Technologies.
ARTICLE 5. LICENSES AND RESTRICTIONS.
5.1 License Grant to SSG.
--------------------
(a) Licenses to InterTrust Technology and Modified Technology.
---------------------------------------------------------
Subject to the terms and conditions of this Agreement, InterTrust grants to
SSG during the term of this Agreement a limited, nonexclusive,
nontransferable (except as expressly provided in Section 5.2) worldwide
right and license under the Licensed Rights to:
(i) use and reproduce the InterTrust Technology solely for the
purpose of (a) designing, making, developing, producing and using SSG
Products and/or
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Cooperative Applications that are in Compliance with the InterTrust
Specifications; and (b) exercising the rights granted under Sections
5.1(a)(ii), 5.1(a)(iii), 5.1(a)(iv), and 5.1(b) hereof;
(ii) modify, enhance and create derivative works of the
InterTrust Technology, except the Core Technology, to create the
Modified Technology and use such Modified Technology solely for the
purpose of enabling incorporation of InterTrust Technology into SSG
Products and/or Cooperative Applications that are in Compliance with
InterTrust Specifications;
(iii) distribute, offer for sale, sell, license, import and/or
otherwise transfer SSG Products and Cooperative Applications that are
Application Products, and Distributable Documentation, to SSG's
Customers pursuant to a Customer Agreement in accordance with, and as
defined in, Section 6.2 hereof; and
(iv) distribute, offer for sale, sell, license, import and/or
otherwise transfer SSG Products and Cooperative Applications that are
Clearinghouse Products, solely to Authorized Clearinghouse Providers
under Section 5.2(b) pursuant to a Customer Agreement specific to such
Authorized Clearinghouse Providers, supplied in accordance with, and
as defined in, Section 6.2 hereof.
(b) License to Perform Clearinghouse Functions. Subject to the terms
------------------------------------------
and conditions of this Agreement, InterTrust grants to SSG during the term
of this Agreement a limited, nonexclusive (except as expressly provided in
Section 10.1), nontransferable (except as expressly provided in Section
5.2), worldwide right and license under the Licensed Rights to perform
Clearinghouse Functions solely under the SSG Trademarks, and solely in
cases in which SSG performs and controls such Clearinghouse Functions in
Compliance with InterTrust Specifications. Such Clearinghouse Functions may
be performed solely: (i) to service Rights User Nodes, each such node
having been provided by (1) an SSG Product and/or Cooperative Application,
and solely in connection with such SSG Product and/or Cooperative
Application, or (2) such Compliant products for which InterTrust has
expressly granted a license to have Authorized Clearinghouse Providers
service Rights User Nodes thereof, and/or (ii) pursuant to a sublicense
from an Authorized Clearinghouse Provider having an express, written
license from InterTrust allowing such Authorized Clearinghouse Provider to
enter into such sublicense.
(c) License to InterTrust Trademarks. Subject to the terms and
--------------------------------
conditions of this Agreement, InterTrust grants to SSG during the term of
this Agreement a limited, nonexclusive, nontransferable, worldwide license
to use and display the InterTrust Trademarks solely: (i) on SSG Products,
Cooperative Applications, and with respect to associated services to
indicate that such products, applications and services are in Compliance
with InterTrust Specifications; (ii) on related Distributable Documentation
and marketing materials to identify that InterTrust Technology is being
utilized by SSG; and (iii) as set forth herein or otherwise reasonably
stipulated in writing by InterTrust. InterTrust shall have the right to
approve all uses of InterTrust Trademarks, including use thereof on SSG
Products and Cooperative Applications, in connection with services
(including performance of Clearinghouse Functions) provided by SSG relating
to
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products and applications employing InterTrust Technology and/or Modified
Technology, and in related documentation and marketing materials.
5.2 Sublicense Rights. In accordance with the terms of this Section 5.2,
-----------------
SSG may enter into sublicense agreements pursuant to which SSG may authorize
certain other entities to perform portions of the actions licensed to SSG under
Sections 5.1(a) and 5.1(b) hereof. Sublicense agreements relating to SSG's
rights under: (i) Sections 5.1(a)(i), 5.1(a)(ii), 5.1(a)(iii) and 5.1(a)(iv)
shall be governed by Section 5.2(a), below; and (ii) Section 5.1(b) shall be
governed by Section 5.2(b), below. All sublicensees must enter into a written
sublicense agreement with SSG, the form and content of which agreement (or
agreements, as appropriate) are fully consistent with the provisions of this
Section 5.2 and have been previously approved by InterTrust in writing (such
approval not to be withheld unless such form agreements do not reasonably
protect InterTrust's rights as set forth in this Agreement or its Intellectual
Property Rights). Upon approval, each sublicense form shall be attached as an
Exhibit hereto and may be used by SSG as appropriate under the circumstances,
unless and until InterTrust reasonably requires that one or more approved
sublicense forms be modified, to accommodate, for example, modified provisions
or additional provisions reasonable under the circumstances. Such sublicense
form agreement shall, at minimum, require each sublicensee to agree in writing:
(a) to be subject to SSG's obligations under this Agreement; (b) to perform
obligations identical to the obligations of SSG under Sections 5.1, 5.3, 5.4,
6.1, 6.2, 6.3, 6.4, 6.5 (to the extent any sublicensee marks may be used in
connection with products), 6.6 and 10.2, and Articles 7, 8, 11, 12, 13, 15 and
16 of this Agreement to the extent of their activities under the sublicense, and
(c) to agree to provisions substantially as set forth in Sections 8.4 and 10.2.
In addition, each sublicensee shall enter into a written agreement with
InterTrust, in the form of a certification form to be attached as an Exhibit to
the sublicense agreement, pursuant to which such sublicensee agrees that
InterTrust shall have the right to enforce the terms of the sublicense agreement
between SSG and such sublicensee. Prior to granting any such sublicense, SSG
shall provide InterTrust with the name of the proposed sublicensee and a
certification that the proposed sublicense agreement includes all of the
provisions contained in the approved sublicense form. Where the proposed
sublicensee is not a SSG and/or SOFTBANK Affiliate, InterTrust shall have thirty
(30) days to authorize such proposed sublicensee. InterTrust's decision to
authorize or refuse to authorize a proposed sublicensee that is not a SSG and/or
SOFTBANK Affiliate shall be in InterTrust's sole discretion, and can be
exercised on any basis. If InterTrust fails to authorize the sublicensee, the
sublicense agreement shall not take effect. Any sublicense granted to an
Affiliate of SSG or SOFTBANK shall remain effective only so long as such
sublicensee remains an Affiliate of SSG or SOFTBANK. SSG shall guarantee and
remain liable to InterTrust for all sublicensees' performance of such
obligations. Sublicensees shall have no further right to sublicense any right
received. SSG agrees and acknowledges that SSG's performance of its obligations
hereunder is necessary for InterTrust to adequately protect its Intellectual
Property Rights made available hereunder, and such performance shall constitute
a condition precedent to the granting of other licenses under Article 5 hereof.
(a) Non-Clearinghouse Sublicenses. SSG may enter into sublicense
-----------------------------
agreements pursuant to which SSG may grant sublicensees some or all of the
rights licensed to SSG under Sections 5.1(a)(i), 5.1(a)(ii), 5.1(a)(iii),
5.1(a)(iv) and 5.1(c). In addition to other terms set forth in this Section
5.2 above, such sublicenses shall be subject to the following terms and
conditions:
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(i) SSG shall grant sublicenses only to SOFTBANK or its
Affiliates (and only while SSG is a SOFTBANK Affiliate);
(ii) Products distributed to, and/or services performed by,
Persons other than SSG must be performed and branded solely under SSG
Trademarks or, as applicable, other SSG Affiliate or SOFTBANK
Affiliate trademarks as set forth herein (except where use of
InterTrust Trademarks is required herein), but in the case of a SSG or
SOFTBANK Affiliate, only for so long as such SSG or SOFTBANK Affiliate
remains such an Affiliate;
(iii) Activities authorized under the sublicense shall be
limited to the development of SSG Products or Cooperative
Applications.
(b) Clearinghouse Function Sublicenses. SSG may enter into sublicense
----------------------------------
agreements pursuant to which SSG may authorize performance of some or all
of the activities licensed to SSG under Section 5.1(b) by any Person, but
solely to perform Clearinghouse Functions on behalf of SSG, and solely
under SSG Trademarks or, as applicable hereunder, any other SSG or SOFTBANK
Affiliate trademarks as set forth herein and in accordance with Section
5.1(b) hereof.
5.3 No Additional Licenses. SSG understands and acknowledges that
----------------------
InterTrust is licensing to SSG only certain limited rights to use InterTrust
Technology (including performing Clearinghouse Functions and sublicensing
certain rights granted SSG) as described herein. Thus, notwithstanding the
generality of any other provision herein, SSG acknowledges and agrees that the
licenses granted under Sections 5.1 and 5.2 are the only licenses granted to
SSG, and that no other licenses are granted, expressly, or by implication or
estoppel, now or in the future. All rights not expressly granted to SSG under
this Agreement are reserved and retained by InterTrust.
5.4 General Restrictions. SSG covenants that it shall not: (i) during
--------------------
the term of this Agreement, reverse engineer any technology that has been
supplied to SSG in Object Code form only, or emulate the functionality of,
and/or modify any portion of the Core Technology; or (ii) after the term of this
Agreement, use or exploit the InterTrust Technology for any purpose whatsoever.
Any use by SSG of any portion of the InterTrust Technology and/or Modified
Technology outside the scope of the licenses granted by InterTrust hereunder
shall constitute a material breach of this Agreement.
ARTICLE 6. SSG SUPPORT AND ADDITIONAL COVENANTS.
6.1 SSG Support of InterTrust Technology.
------------------------------------
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(a) SSG Use of InterTrust Technology. In accordance with the
--------------------------------
licenses granted to SSG and the other terms hereunder, SSG agrees to
develop, produce, and generally distribute, or use for commercial purposes,
a SSG Product and/or a Cooperative Application as soon as commercially
reasonable and practicable, and in any case within eighteen (18) months
following the date InterTrust makes available to SSG the System Developer
Kit 1.0 in beta format. Such time period shall be extended by any period in
which: (i) there exists a Material Defect in the InterTrust Technology that
materially impedes SSG's development efforts as relevant, but only from the
date that SSG documents such defect as provided in Section 3.3(b) hereof to
the date InterTrust has reasonably corrected or removed such Material
Defect as provided hereunder; or (ii) InterTrust materially fails to
provide any of the support services required in Section 3.3 (other than
Section 3.3(b)) and such material failure actually impedes SSG's
development efforts, as relevant, but only to the extent of any delay
reasonably and solely attributable to such material failure.
(b) Compliance with InterTrust Specifications. SSG shall not commence
-----------------------------------------
the distribution, sale or other transfer of any specific SSG Product or
Cooperative Application, or perform any service directly relating to such
products or applications, unless such SSG Product, Cooperative Application
and/or service is in Compliance with InterTrust Specifications. InterTrust
may, from time to time in its sole discretion, modify InterTrust
Specifications to accommodate changes in InterTrust Technology, and any
related InterTrust product development, for purposes of, for example,
improving architectural integrity, functional capability, standardization,
security capability, efficiency, and/or interoperability of InterTrust
Commerce-based technology, components, products and services (a "New
---
Specification"). InterTrust shall use commercially reasonable efforts to
-------------
maintain compatibility between a New Specification and the then-preceding
Specification, unless considerations of security, interoperability,
performance, or functionality enhancement indicate that such compatibility
is not commercially appropriate. To the extent InterTrust releases a New
Specification that applies to any portion of a Cooperative Application, SSG
Product and/or service then being performed or distributed by SSG (as
applicable), SSG shall bring any further such products delivered to
customers, and/or any services for any such products (as applicable), into
Compliance with such New Specification as of the earliest to occur of: (i)
the next version, release, or production cycle of such Cooperative
Application, SSG Product and/or service (the "Next Version"), as earlier
------------
applicable, but only to the extent that SSG receives notice of such New
Specification within a reasonably sufficient time of such Next Version to
accommodate new aspects of such New Specification; and (ii) [*] ([*])
months after SSG receives a released copy of such New Specification.
InterTrust and SSG further agree that SSG shall, within [*] ([*]) months
after receiving a released copy of such New Specification, implement such
new aspects of such New Specification for all applicable services
supporting and/or employing SSG Products and Cooperative Applications
and/or any other products employing InterTrust Technology provided to
customers and not meeting such New Specification. Notwithstanding the
foregoing, should serious technical interoperability and/or security
requirements commercially necessitate more prompt action, SSG and
InterTrust will confer and agree upon the most aggressive, practical
schedule feasible to ensure Compliance with the New Specification for all
SSG Products, Cooperative Applications, and any services relating to such
products or applications. Under such conditions, SSG shall take whatever
commercially
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appropriate steps are reasonable and required under the circumstances to
minimize or eliminate a continuation of such interoperability and/or
security problems.
(c) Compliance Testing. SSG acknowledges that: (i) in support of
------------------
InterTrust Technology, InterTrust may implement one or more certification
programs designed to ensure that licensed products and/or associated
services (including SSG Products and any Cooperative Applications) use
InterTrust Technology and/or Modified Technology in Compliance with
InterTrust Specifications in accordance with this Agreement (the
"Certification Program(s)"); and (ii) such a Certification Program(s) is
------------------------
important to maintaining the reliability of products and services employing
InterTrust Technology and/or Modified Technology, and in maintaining public
confidence in the integrity of InterTrust brands as the resource for
interoperable electronic commerce. Such Certification Programs may, in
InterTrust's sole discretion, require, for example, SSG: (a) to use a suite
of test software provided by InterTrust for use by SSG to test and verify
that Cooperative Applications and SSG Products (and/or associated services)
are in Compliance with InterTrust Specifications; (b) to submit samples of
Cooperative Applications and SSG Products and associated programs,
parameter data, and other information (in object code form unless source
code is necessary or reasonably appropriate) that may be technically
material to Compliance with InterTrust Specifications, prior to first
commercial distribution, sale, other transfer to, or use by, a customer or
SSG service, as applicable, so as to allow InterTrust (or an InterTrust
delegate) to perform confidential testing ("Certification Testing"); and
---------------------
(c) to the extent that options (a) or (b) immediately above do not, or can
not reasonably be anticipated to, provide sufficient information to verify
Compliance, to provide InterTrust with full and detailed specifications and
documentation related to SSG's use of InterTrust Technology and Modified
Technology for SSG Products, Cooperative Applications, and any associated
services, but only to the extent that any such specifications and
documentation may be material to Certification Testing. SSG shall comply
with any Certification Program established by InterTrust in accordance
herewith, and all specifications and documentation provided shall be
certified by an authorized representative of SSG. In connection with any
such Certification Testing, particularly the testing of products and/or
services, as applicable, InterTrust (or an InterTrust delegate) will
respond in a reasonably prompt manner following receipt of submitted
products and access to, or receipt of technology supporting, such service,
unless commercially reasonable factors prolong such testing. Such response
shall be in the form of: (1) a written approval that the product or service
is certified (such SSG Products and Cooperative Applications not being
Compliant until such certification has been granted); or (2) if not
approved, a detailed summary of problems and, where feasible, suggested
solutions. InterTrust (or an InterTrust delegate) will apply the
Certification Program, as applicable, in a non-discriminatory and
consistent manner with respect to similar products and/or services.
InterTrust's rights under this Section 6.1 shall not be affected in any
manner by an InterTrust decision not to perform such Certification Testing.
(d) Costs. To defray costs associated with the performance and
-----
administration of the Certification Program, in connection with the
certification of any product or service SSG shall be charged a reasonable
fee not to exceed industry norms for similar testing activities (and, if
conducted by InterTrust, the full cost incurred by InterTrust in performing
and administering such tests). An estimate of such fee shall be provided to
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SSG, as applicable, as soon as reasonably practical upon SSG's submission
of samples, or documentation for and access to services, for testing, and
such fee shall be paid by SSG in accordance with standard industry
practices, as available.
(e) Translation of Material in Foreign Languages. InterTrust shall
--------------------------------------------
have the right to receive and approve (to the extent referencing InterTrust
Technology or capabilities and/or functions enabled by InterTrust
Technology) any non-English translations made by or for SSG of
documentation provided by SSG concerning SSG Products, and Cooperative
Applications, and any related services (including Distributable
Documentation), legends and Notices required pursuant to Section 6.3 hereof
and other required notices, and all versions of InterTrust Technology.
6.2 Customer Agreements. SSG shall not distribute any Cooperative
-------------------
Application or SSG Product to any Person unless SSG shall have first notified
and required such Person to execute a form of customer agreement (the "Customer
--------
Agreement(s)") provided by SSG, such Customers Agreement forms having: (i)
- ------------
terms relating to InterTrust Technology and InterTrust's rights and interests
consistent with and reflective of the terms of this Agreement; and (ii) been
previously approved in writing by InterTrust (such approval not to be withheld
unless such Customer Agreement(s) does not reasonably protect InterTrust's
rights under this Agreement or sufficiently protect InterTrust's Intellectual
Property Rights. Once approved by InterTrust, the Customer Agreement(s) shall be
set forth as an Exhibit to this Agreement and may be used, as applicable, by SSG
as a form agreement unless and until: (a) SSG modifies such agreement (provided
that InterTrust has approved such modification in writing); or (b) InterTrust
reasonably requires that SSG alter the Customer Agreement to protect
InterTrust's rights under this Agreement or to protect its Intellectual Property
Rights, for example in view of court decisions and/or applicable regulations
under the circumstances. At a minimum, the Customer Agreement forms will: (i)
prohibit customers from disassembling, modifying or reverse engineering any
portion of the InterTrust Technology incorporated in the SSG Product or
Cooperative Application; (ii) stipulate that such customer has no right to use
the SSG Product or Cooperative Application to engage in or perform any
Clearinghouse Functions whatsoever unless such customer is an Authorized
Clearinghouse Provider or an authorized sublicensee under Section 5.2 hereof;
(iii) grant such customer only a limited license to use the Cooperative
Application or SSG Product, and, as applicable, to (A) incorporate Authorized
Application Software into such customer's software product to provide a Rights
User Node that is Compliant with InterTrust Specifications or (B) develop and
incorporate software components that provide the interface for and support
operation in conjunction with a Rights User Node provided by InterTrust Commerce
Technology; (iv) permit such customer to engage SSG and/or an Authorized
Clearinghouse Provider to perform Clearinghouse Functions with respect to such
software product; (v) provide that if such customer is permitted to modify any
portion of InterTrust Technology, such customer shall grant to InterTrust a
license on substantially the same terms as Section 8.4; (vi) provide that the
Customer Agreement is to and for InterTrust's benefit and may be enforced by
InterTrust at its discretion; and (vii) contain such other provisions as
stipulated herein. SSG agrees that to the extent any form of Customer Agreement
might be deemed to be unenforceable or otherwise ineffective in any
jurisdiction, SSG shall, upon notification by InterTrust, substitute other forms
of Customer Agreements, or take other actions, as reasonably specified by
InterTrust, including, for example, specifying other generally accepted, legally
effective forms of Customer Agreement, if such exists for a given jurisdiction,
in order to provide InterTrust with legally enforceable protection contemplated
hereunder. SSG agrees and acknowledges that SSG's
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performance of its obligations hereunder is necessary for InterTrust to
adequately protect its Intellectual Property Rights made available hereunder,
and such performance shall constitute a condition precedent to the licenses
granted under Article 5 hereof. SSG shall not be obligated to file any claim in
litigation to enforce the terms of Customer Agreement(s); provided that SSG
-------- ----
shall, if requested by InterTrust, terminate such Customer Agreement(s) upon a
material breach by such customer(s).
6.3 Legends and Notices.
-------------------
(a) Product Legends and Notices. SSG shall, in accordance with
---------------------------
InterTrust's instructions and/or approved exemplars and samples provided
from time to time by InterTrust to SSG, place Notices (as hereinafter
defined) on all Cooperative Applications, SSG Products, documentation,
marketing and advertising materials therefor, and for associated services,
on all packaging for any physical media containing any such products, and
on all initialization and/or start-up screens of any stand-alone software
developed by or for SSG using or incorporating InterTrust Technology and/or
Modified Technology. For purposes of this Agreement, the term Notices shall
include: (i) Intellectual Property Rights, warranty, and disclaimer
notices; (ii) any symbols or marks stipulating Compliance with InterTrust
Specifications; (iii) a notice stating that SSG Products and Cooperative
Applications are "InterTrustworthy" and are being delivered using
InterTrust Technology (as such notices may be amended by InterTrust from
time to time); and (iv) other field of use and product notices stipulated
by InterTrust, so long as such notices (a) in the opinion of InterTrust's
counsel, assist in protecting InterTrust intellectual property and other
InterTrust rights under the laws of any relevant jurisdiction, (b) are
commercially reasonable means to protect InterTrust rights without being
overly intrusive or unreasonably costly to SSG's sales and marketing
efforts, and (c) in InterTrust's reasonable opinion or upon written opinion
of InterTrust's outside legal counsel, cannot be adequately addressed in
the Customer Agreement. Before any Notices are omitted pursuant to
subsections (b) and (c) immediately above, SSG shall advise InterTrust in
writing of the circumstances and the Parties' Project Managers shall
directly discuss the issue. SSG shall not, and shall not permit any Person
to, remove, alter, cover, obfuscate or otherwise deface any InterTrust
Trademarks or Notices on any InterTrust Technology or associated
documentation, marketing and advertising materials therefor. Compliance
with subsections (i) and (iv) above shall constitute conditions precedent
to the licenses granted under Article 5 hereof.
(b) Network Notices. SSG shall, in accordance with InterTrust's
---------------
instructions or approved exemplars and samples provided from time to time
by InterTrust to SSG: (i) place Notices specified by InterTrust, which
Notices shall not unreasonably detract from, or interfere with, SSG content
or branding, on all of SSG's start-up screens or initial user interface
menus of any server host environment generated by or referencing the
Cooperative Applications and/or the SSG Products or any associated
services; and (ii) include a link from any home pages or any Web page of
SSG, any other SOFTBANK Affiliate, and any SSG customer or licensee (who
does not object to such link), that uses InterTrust Commerce Technology in
its products or in connection with its services, which materially promotes
or otherwise supports SSG Products, Cooperative Applications and associated
services, to a home page that InterTrust may provide for such purpose on
the World Wide Web or the equivalent thereof on any other electronic
network.
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Notwithstanding the foregoing, neither SSG nor any SOFTBANK Affiliate shall
have any obligation to provide any such link to the extent that
InterTrust's home page: (a) references any software distributor other than
SSG, SOFTBANK, or a SOFTBANK Affiliate as an InterTrust provider of
software distribution clearinghouse transaction services; or (b) contains
materials, or points to another website that contains materials, directly
and substantially in conflict with SSG's material commercial interests.
Before any such link is removed or not established for the reasons set
forth in subsection (a) and (b) immediately above, SSG shall provide
InterTrust with four (4) days prior written notice describing any such
material conflict and afford InterTrust the opportunity to comment upon
and, if appropriate, correct such conflict. InterTrust shall be afforded
the opportunity to have a link re-established promptly upon any
rectification of a material conflict.
(c) Prospective Notice. The Notices shall be effective beginning on
------------------
the date InterTrust gives SSG written notice thereof and SSG shall as soon
as reasonably commercially practicable implement and/or comply with
applicable portions thereof.
6.4 InterTrust Trademarks.
---------------------
(a) Standards. SSG expressly recognizes the importance of
---------
InterTrust's reputation and goodwill, and of maintaining high, uniformly
applied standards of quality in connection with SSG's use and distribution
of products, applications, and services pursuant hereto bearing InterTrust
Trademarks. Consequently, to maintain InterTrust's interest in and rights
to the InterTrust Trademarks, products, and associated services, and to
maintain in the mind of the public and customers that InterTrust Technology
and its components represent sufficient levels of quality, trust and
reliability, SSG shall utilize the InterTrust Trademarks in accordance with
trademark guidelines (including approved samples and exemplars) as provided
herein and as may be provided to SSG by InterTrust. Such trademark
guidelines shall: (i) include a list of InterTrust trademarks that have
been registered, or applied for, and shall specify restrictions on use, if
any, including permitted and prohibited countries and jurisdictions; and
(ii) may be revised from time to time by InterTrust. InterTrust Trademarks,
as listed on Exhibit C attached hereto, may be reasonably modified by
InterTrust from time to time upon InterTrust's provision to SSG of
reasonable prior written notice. Any such modification shall not include
any names, logos or marks that substantially conflict with any then-
existing trademark rights of SSG.
(b) Trademark Ownership; Contestability. SSG acknowledges and agrees
-----------------------------------
that all uses of InterTrust Trademarks as permitted hereunder, and the
goodwill associated therewith, shall inure solely to the benefit of
InterTrust. SSG agrees that it shall not contest the validity of any
InterTrust Trademarks or registrations thereof or applications with respect
thereto, or InterTrust's exclusive ownership of the InterTrust Trademarks
or their associated goodwill. SSG agrees to make available to InterTrust,
upon request, copies of SSG's records and such other documentary evidence
as is/are retained in the ordinary course of business regarding its use of
the InterTrust Trademarks, and information regarding first use of the
InterTrust Trademarks by SSG in each country.
(c) Confusing Similarity. SSG shall not use any marks identical with
--------------------
or confusingly similar to any of the InterTrust Trademarks, shall not
register or attempt to
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register any marks identical with or confusingly similar to InterTrust's
Trademarks, and shall not permit any SOFTBANK Affiliate to use or affix any
trademark of such Affiliate on any SSG Product supplied to such Affiliate,
to the extent such Affiliate distributes, provides services for, or
transfers to others any product other than a product incorporating
InterTrust Technology, using Secure Containers that bears a trademark of
such Affiliate.
(d) Prospective Notice. Changes in the InterTrust Trademarks and such
------------------
standards of quality shall be effective beginning on the date InterTrust
gives SSG written notice thereof and SSG shall, as soon as reasonably
commercially practicable thereafter, implement and/or comply with such
respective portions thereof.
6.5 SSG's Use of SSG Trademarks on Cooperative Applications and SSG
---------------------------------------------------------------
Products. To promote the branded and distinct identity of any InterTrust
- --------
Compliant Cooperative Application, SSG Products, associated services or any
other such products used in commerce by SSG and/or distributed, sold or
otherwise transferred by SSG to Customers as provided hereunder, SSG
acknowledges and agrees that any trademark or logo used by SSG in commerce to
specifically identify, label or market a Cooperative Application, SSG Product,
or services associated therewith (other than trademark or logos that serve to
generally identify SSG or SOFTBANK, or any Affiliate or sublicensee thereof)
shall not, concurrently or thereafter, be used to identify any product or
services other than such SSG Products, Cooperative Applications and associated
services, whether by SSG or pursuant to license or sublicense from SSG.
6.6 SSG Trademarks. Subject to the terms and conditions of this
--------------
Agreement, SSG grants to InterTrust during the term of this Agreement a limited,
nonexclusive, royalty-free, worldwide license, without the right of sublicense
except to InterTrust's Affiliates, to use the SSG Trademarks solely in
connection with any publicity pursuant to Article 8 hereof, unless otherwise
agreed by SSG. InterTrust shall obtain permission from SSG for any further use
of SSG's Trademarks and shall comply with SSG instructions provided in writing
by SSG concerning such further use of any SSG Trademarks. InterTrust shall
comply with any reasonable guidelines provided in writing by SSG concerning such
use of any SSG Trademarks and shall comply with the provisions of Section 6.4 as
reasonably applied to the use of SSG Trademarks. Such SSG Trademark guidelines
shall include a list of SSG Trademarks that have been registered, applied for,
or used in interstate commerce and shall specify restrictions on use, including
permitted countries and jurisdictions. SSG Trademarks, as listed on Exhibit C
attached hereto, may be reasonably modified by SSG from time to time upon SSG's
provision to InterTrust of reasonable prior written notice thereof. Any such
modification will not include any names, logos or marks that substantially
conflict with then-existing trademark rights of InterTrust.
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ARTICLE 7. LICENSE FEES AND PAYMENT TERMS.
7.1 Fees and Royalties.
------------------
(a InterTrust Technology Fees and Royalties. In consideration of
----------------------------------------
the licenses granted to SSG herein and the other terms and conditions
hereof, SSG shall pay to InterTrust the following amounts, net of any
withholding tax; provided that no fees or royalties shall be due hereunder
-------- ----
for any set-up, interfacing, or development fees paid to SSG and associated
with the initial establishment of commercial services by SSG, but not in
lieu of any fees or royalties for commercial services:
(i) Nonrefundable license fees totaling in the aggregate [*]
dollars (US$[*]), which shall be [*] InterTrust as set forth in
Sections 7.1(a)(ii) and 7.1(a)(iii) below, in accordance with Section
7.1(b) hereof (the [*]), and payable in the following amounts:
(1 [*] dollars (US$[*]), payable concurrently with the
execution hereof;
(2 [*] dollars (US$[*]), payable within seven (7) days
after InterTrust has made available the beta version of
the SDK 1.0 to SSG; and
(3 [*] dollars (US$[*]), payable upon the earlier of such
time that SSG first transfers, distributes or uses for
commercial purposes a SSG Product or Cooperative
Application, or first performs for commercial purposes
any Clearinghouse Function;
(ii) based at least in part on the performance of Clearinghouse
Functions:
(1) a royalty of six-tenths of one percent (0.6%) of the
Gross Commercial Value of each Content Transaction;
(2) a royalty of two percent (2%) of all revenue and/or
other consideration received pursuant to this Agreement for
performance of such Clearinghouse Functions, but not
including Content Transactions as set forth in Section
7.1(a)(ii)(1) above (an "Alternative Transaction"); or
(3) where a single instance of the performance of
Clearinghouse Functions includes at least one aspect
involving a Content Transaction and at least one other
aspect involving an Alternative Transaction, a royalty
consisting of the sum of a royalty calculated pursuant to
section 7.1(a)(ii)(1) for such Content Transaction aspect
and a royalty calculated pursuant to section
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
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7.1(a)(ii)(2) for such Alternative Transaction aspect.
The Alternative Transaction aspect will be calculated
only on any value received above and beyond the Gross
Commercial Value of the Content Transaction.
(iii) for all revenue or other consideration, if any, derived
by SSG in connection with the sale, distribution or other use of
Cooperative Applications and/or SSG Products:
a royalty of [*] percent ([*]%) of all such revenue and
consideration.
(b [*] and [*]. Commencing on January 1, 1998
-----------
and continuing until December 31, 2002, SSG shall be entitled to [*] of
all [*] under Sections [*] and [*] in a calendar quarter [*]; provided
--------
that the total amount of all such [*] during such period shall not exceed
----
[*] ($[*]) in the aggregate.
(c Support Fee. In partial consideration of InterTrust's provision
-----------
of the Assistance and other technical support set forth in Section 3.3
hereof, SSG shall pay to InterTrust the amount of [*] dollars (US$[*]) per
year during the Support Period (the "Support Fee"). Such fee shall be
-----------
adjusted from year to year, in proportion with changes in the consumer
price index published by the Bank of America, or its equivalent in the
absence of the availability thereof. SSG shall pay the Support Fee in four
quarterly installments within thirty (30) days after each calendar quarter
in accordance with Section 7.2 hereof. Such Support Fee will no longer be
payable if InterTrust discontinues the support and Assistance set forth in
Section 3.3 for any reason.
(d) [*]. If InterTrust [*] to such Core Partner than those granted
---
SSG hereunder, and pursuant to such agreement: (i) [*] of the type in [*] are
[*] than the [*] set forth in such sections hereof; and/or (ii) the [*] or any
[*] is [*] than that set forth in Section [*] hereof, then, from the effective
date of such [*] and for so long as SSG is entitled to receive certain favorable
treatment as set forth in Section 3.2(b), as applicable, the [*] set forth in
Sections [*] hereof shall henceforth be reduced to such lower [*] to such Core
Partner, and/or SSG shall thereafter be accorded such [*].
7.2 Payment Procedure. Except as otherwise expressly provided in this
-----------------
Agreement, within [*] ([*]) days after the end of each calendar quarter, SSG
shall pay InterTrust all amounts due and/or payable pursuant to the licenses
granted hereunder, and received during such calendar quarter. SSG shall make all
payments hereunder by corporate check (except corporate checks shall not be used
for payments due under Section 7.1(a)(i)(1) and (2)) or by wire transfer to such
account as designated by InterTrust in writing. Concurrently with each royalty
payment, SSG shall provide to InterTrust a written royalty report, certified to
be accurate by an officer of
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
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Upgrade Corporation of America and/or SOFTBANK Internet Services, Inc., as
applicable, specifying: (i) the revenues derived by SSG that are subject to
royalties during each calendar month of such quarter; (ii) the basis for
calculation of the amounts due and payable; and (iii) summaries of business
records employed by SSG to arrive at the information set forth in (i) and (ii)
immediately above. The manner of calculation of the amounts due and payable to
InterTrust hereunder shall be determined in accordance with recognized and
generally accepted U.S. accounting procedures and principles that shall be
consistently applied to all such payments.
7.3 Currency. Gross Commercial Value and all consideration received by
--------
SSG pursuant to Sections 7.1(a)(ii) or 7.1(a)(iii) in a currency other than U.S.
dollars shall be converted by SSG to U.S. dollars on a monthly basis for
purposes of payment to InterTrust on a quarterly basis (unless otherwise
specified by InterTrust in its sole discretion to be paid in another single
alternative currency upon providing ninety (90) days prior written notice
thereof) according to the official rate of exchange for such currency, as
published by the Marine Midland Bank on the last business day during each
calendar month of a calendar quarter for which such royalties are due. If the
Marine Midland Bank ceases or fails to publish such official rate of exchange at
any time during the term of this Agreement, the official rate of exchange during
any such period of cessation shall be such rate as published by the Bank of
America (San Francisco, California) or its legal successor on the last working
day of such calendar quarter for which such royalties are due.
7.4 Taxes. SSG shall pay taxes, including but not limited to withholding
-----
taxes, imposed by any foreign government or any other jurisdictions outside of
the United States, as applicable, on all fees and royalties payable to
InterTrust under this Agreement. SSG shall be responsible for payment of all
sales, use, value-added and other taxes, duties and other charges that may fall
due with respect to the transfer to or licensing, reproduction, distribution,
and/or use by SSG of the Cooperative Applications and the SSG Products, and with
respect to SSG's activities with respect to the Clearinghouse Functions.
InterTrust shall be responsible for payment of all sales, use, value-added and
other taxes that may be imposed by the United States government on InterTrust
with respect to the transfer to or licensing to SSG of the InterTrust Technology
hereunder or with respect to the payments received hereunder.
7.5 Interest. SSG agrees that all sums owed or payable to InterTrust
--------
hereunder shall bear interest (compounded daily) at the rate of [*] percent
([*]%) per month or [*] ([*]) points above the U.S. Prime Rate on an annualized
basis as published at the end of a calendar quarter for which such royalties are
due, whichever is higher, or such lower rate as may be the maximum rate
permitted under applicable law, from the date upon which payment of the same
shall first become due up to and including the date of payment thereof whether
before or after judgment, and that SSG shall be additionally liable for all
costs and expenses of collection, including, without limitation, reasonable fees
for attorneys and court costs. Notwithstanding the foregoing, such specified
rate of interest shall not excuse or in any way whatsoever be construed as a
waiver of SSG's express obligation to timely provide any and all payments due to
InterTrust hereunder.
7.6 Audit. SSG shall maintain at its principal place of business during
-----
the term of this Agreement and for a period of five (5) years thereafter all
books, records, accounts, and technical materials regarding SSG's activities in
connection herewith sufficient to determine and confirm SSG's royalty
obligations and other material obligations hereunder. Upon InterTrust's request,
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
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SSG will permit an auditor or agent of InterTrust's choice (subject to SSG's
consent, which shall not be unreasonably withheld or delayed) to examine and
audit, during a reasonable time (but no more than once every six (6 months),
such books, records, accounts, documentation and materials, and take extracts
therefrom or make copies thereof for the purpose of verifying the correctness of
SSG's reported royalty statements and payments provided by SSG or compliance
with the license terms and other material obligations hereunder. SSG shall pay
any unpaid delinquent amounts within ten (10) days of InterTrust's request. To
the extent such examination: (a) discloses an underpayment of more than [*]
dollars ($[*]) and such underpayment represents a sum greater than [*] percent
([*]%) of the sums paid to InterTrust by SSG during the applicable period
subject to such audit; or (b) discloses an underpayment of more than [*] dollars
($[*]), SSG shall fully reimburse InterTrust, promptly upon demand, for the fees
and disbursements due the auditor for such audit; provided that such prompt
payment shall not be in lieu of any other remedies or rights available to
InterTrust hereunder. If an audit reveals an overpayment, InterTrust shall
notify SSG of such overpayment and SSG will apply the amount of such overpayment
against future royalties due and payable to InterTrust. Notwithstanding the
foregoing, within thirty (30) days of a request by SSG, InterTrust shall
reimburse SSG up to [*] dollars ($[*]) of any such overpayment amount; provided
that InterTrust posted a profit in accordance with GAAP in the calendar year
preceding such request. Any balance will be paid from future royalties as
provided for above.
ARTICLE 8. PROPRIETARY INFORMATION AND OWNERSHIP.
8.1 InterTrust Ownership. SSG acknowledges and agrees that, as between
--------------------
InterTrust and SSG, InterTrust is the sole and exclusive owner of, and shall
retain and hereby reserves (and nothing herein shall alter InterTrust's
reservation of) all right title and interest in: (i) the InterTrust Technology,
enhancements and modifications thereto, and derivative works thereof created by
or for InterTrust, and all Intellectual Property Rights embodied therein; (ii)
all Intellectual Property Rights created, or embodied in any works (whether
tangible or intangible) created, independently by InterTrust in connection with
its performance of this Agreement, including participation in any Cooperative
Application Project Plan; and (iii) Modified Technology not owned by SSG
pursuant to Section 8.2 hereof, and all Intellectual Property Rights embodied
therein (collectively, the "InterTrust Property"). No provision contained in
-------------------
this Agreement shall be construed to transfer to SSG or any other Person any
title or ownership interest in any InterTrust Property.
8.2 SSG Ownership. Subject to InterTrust's ownership rights under Section
-------------
8.1, as between SSG and InterTrust, SSG shall be the sole and exclusive owner of
the portions of the following created solely by SSG hereunder: (i) any SSG
Products; (ii) Modified Technology (except such Modified Technology that merely
reimplements the existing functionality of InterTrust Technology provided to
SSG, including, for example, porting or translation thereof); (iii) all
Intellectual Property Rights created, or embodied in any works (whether tangible
or intangible) created, independently by SSG in connection with its performance
of this Agreement, including participation in any Cooperative Application
Project Plan to the extent permitted under its licenses hereunder; and (iv)
modifications or derivative works that are created by SSG and/or incorporated by
SSG into products unless prior to creation and/or incorporation SSG knows that
such modifications or derivative works fall outside the scope of its licenses
hereunder. SSG further agrees that with respect to any technology subject to
Section (iv) immediately above or
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
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any Intellectual Property Rights in such technology, SSG shall have no right to
use, transfer, assign, license or otherwise exploit in any manner any portion
thereof for any purpose whatsoever unless SSG shall have first negotiated and
obtained on terms acceptable to InterTrust and SSG in their discretion a
cooperative use agreement with InterTrust therefor.
8.3 Joint Ownership. The Parties may from time to time discuss and
---------------
mutually agree in writing upon the division of ownership rights appropriate for
a Cooperative Application as to be set forth in the applicable Cooperative
Application Project Plan in accordance with Section 4.1 hereof. Except as
otherwise set forth in a Cooperative Application Project Plan or otherwise
expressly provided herein, to the extent any Intellectual Property or tangible
embodiment thereof (the "Joint Intellectual Property") is deemed by applicable
---------------------------
law to be jointly created by the Parties under this Agreement, InterTrust and
SSG shall jointly own such Joint Intellectual Property and neither Party shall
be required to account to the other Party for profits from any exploitation
thereof.
8.4 SSG License to InterTrust. In consideration of the licenses granted,
-------------------------
and other consideration provided, by InterTrust to SSG under this Agreement,
during the term of this Agreement, SSG hereby grants to InterTrust, its
Affiliates, and their successors, assigns, and direct and indirect customers a
nonexclusive, royalty-free and worldwide license under the Intellectual Property
Rights of SSG (i) to make, have made, use, sell, offer for sale, import,
distribute and/or otherwise exploit any products or perform any services
directly relating to the InterTrust and/or DigiBox Technology, but solely to the
extent that such activities would, but for such license, infringe any patent
rights of SSG, or its sublicensees; (ii) to use Cooperative Applications and SSG
Products solely in connection with InterTrust's internal development of any
product or performance of any services; and (iii) to make, have made, use, sell,
offer for sale, import, distribute and/or otherwise exploit any products or
perform any services directly relating to electronic rights management,
distributed electronic event management, or distributed operating system
technology, but solely to the extent that, but for such license, such products
or services would infringe any claims of a patent disclosing and/or claiming any
Modified Technology.
ARTICLE 9. PROMOTION AND MARKETING
9.1 Joint Press Release. Promptly after the Effective Date, the Parties
-------------------
shall work together to publicly issue one or more mutually agreeable press
releases disclosing the existence of this Agreement (but excluding any reference
to either Party's partnering commitments set forth in Article 10 hereof),
describing the Parties' intentions to develop important electronic commerce
industry standards, services, and technology and generally promoting the
InterTrust Technology and the InterTrust secure, general purpose interoperable
commerce environment, SSG Products, and InterTrust related services of SSG (the
"Joint Press Releases").
--------------------
Unless otherwise agreed in writing, all further public disclosures by either
Party concerning the subject matter of the Joint Press Releases shall be
consistent with the content of the Joint Press Releases. All other public
disclosures with respect to the terms hereof shall be made in accordance with
Section 11.5.
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9.2 Promotion and Marketing. The Parties shall jointly participate in
-----------------------
and, in addition to the Marketing Program commitments set forth in Section 9.3,
from time to time (as they may agree) fund, promotional, marketing, and sales
activities designed to: (i) increase industry awareness of both InterTrust and
InterTrust Technology, including in particular InterTrust, and SSG, SSG Products
and any associated services, any other InterTrust Compliant products or services
marketed and labeled under a SOFTBANK or SOFTBANK Affiliate trademark as
provided herein, and Cooperative Applications and any services associated
therewith; (ii) attract content developers and users; (iii) encourage the
development of tools and applications that employ InterTrust Technology, SSG
Products and Cooperative Applications; (iv) identify potential InterTrust
related development and/or licensing partners for InterTrust and/or SSG and/or
other SOFTBANK Affiliates, as appropriate; and (v) encourage broad adoption of
InterTrust Technology in the industry. At no time shall SSG make any
representation or warranty to any Person materially inconsistent with: (a)
InterTrust Specifications or Documentation; or (b) the efforts of the Parties
with respect to promotion, marketing or other matters under this Agreement.
9.3 Marketing Program. SSG shall conduct a marketing program, commencing
-----------------
promptly following the Effective Date and continuing through the period six (6)
months after SSG's first commercial distribution or use of any SSG Product or
related service (the "Marketing Project Period") to promote InterTrust Commerce
------------------------
Technology-based products and services as follows:
(a) Prior to October 1, 1996, SSG, with InterTrust's assistance,
shall develop a detailed outline for the marketing program (the "Marketing
---------
Outline"), which shall be subject to each Party's reasonable approval. The
-------
Marketing Outline will set forth, at a minimum, detailed proposed Marketing
Activities (as defined below) on a quarterly basis, and a proposed
schedule, budget, and expense allocation (the "Allocated Expenses") for
--------- --------
SSG's cooperative marketing efforts in connection with the Marketing
Activities (such allocation to include, as mutually and reasonably agreed
by the Parties, pro rata portions of overhead and expenses as appropriate).
(b) The Marketing Outline shall include, at minimum, the following
activities, and other activities as the Parties may agree (collectively,
the "Marketing Activities"): (i) advertisement of InterTrust prominently
--------------------
in conjunction with SSG-advertised electronic commerce activities of SSG
products and/or services; (ii) prominent placement on SSG's, and, as
relevant, SOFTBANK Affiliates' primary world wide web page(s) of the
InterTrust logo and such other reasonable, limited marketing statements
that InterTrust may provide to SSG and that are mutually agreeable to both
Parties; and (iii) such other activities as the Parties may mutually agree
in order to feature InterTrust, such as utilization of the marketing and
promotional means of certain SSG and/or SOFTBANK Affiliates (such as, for
example, Phoenix Publishing Systems, Inc., SOFTBANK COMDEX Inc., and Ziff
Davis Publishing Company)
(c) During the Marketing Project Period, SSG shall directly expend at
least one million dollars (US$1,000,000) in Allocated Expenses to carry out
the activities set forth in the Marketing Outline. Such expenditure shall
be deemed to be a material obligation of SSG hereunder. If at the end of
the Marketing Project Period SSG has spent less than one million dollars
(US$1,000,000) pursuant to the marketing program (the
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amount so spent subtracted from $1,000,000 constituting the "Deficit
-------
Amount"), SSG shall pay the entirety of such Deficit Amount directly to
------
InterTrust within thirty (30) days of the end of the Marketing Project
Period.
9.4 Technology Advisory Committee. To further strategic opportunities
-----------------------------
among the Parties and to encourage feedback concerning InterTrust Technology,
InterTrust currently intends to establish a committee limited to representatives
of: (i) leading companies chosen from certain technology, financial and/or
content industry companies that have close technology strategic relationships
with InterTrust; and (ii) certain leading experts in technology or business
applicable to information and electronic commerce (the "Technology Advisory
-------------------
Committee"). The Technology Advisory Committee will meet regularly at a forum
- ---------
to be selected by InterTrust for the purpose of discussing and exchanging ideas
for improving the functionality, interoperability, and market acceptability of
InterTrust Technology and related issues pertaining to the electronic commerce
industry. Upon the establishment of the Technology Advisory Committee: (a)
InterTrust shall grant SSG the right to have one seat as a member thereof for a
period of three (3) years; and (b) SSG shall promptly elect and notify
InterTrust of its designation of an executive (who may be an employee of SSG,
SOFTBANK, or an Affiliate) to serve on such committee. SSG shall: (1) be
responsible for all acts and omissions of the representative in connection with
the Technology Advisory Committee; and (2) pay for all expenses incurred by SSG
in connection with participation on such Committee. SSG and its representative
shall abide by all commercially reasonable rules and policies established by
InterTrust for the Technology Advisory Committee. Notwithstanding the foregoing
portion of this Section 9.4, SSG membership on the Technology Advisory Committee
shall be subject to termination (in InterTrust's sole discretion) in the event
that: (A) SSG's representative materially fails to comply with any of the rules
established by InterTrust for the Technology Advisory Committee; (B) SSG
materially breaches any of its representations, warranties or obligations under
this Agreement; (C) SOFTBANK and/or UCA sells or transfers all or any portion of
InterTrust securities obtained pursuant to the Stock Purchase Warrant Agreements
to an initial public offering of InterTrust's securities); (D) SSG engages in
any activities that materially conflict with InterTrust's interests; or (E)
InterTrust, in its discretion, dissolves or discontinues the Technology Advisory
Committee.
ARTICLE 10. Partnering Commitments.
10.1 InterTrust Partnering Commitment. In consideration for SSG's obligations
--------------------------------
hereunder, its commitment pursuant to Section 10.2, and the funds to be spent by
SSG to develop SSG Products and related services, InterTrust agrees to the
following partnering commitment (the "InterTrust Partnering Commitment").
--------------------------------
Without obtaining the express prior written consent of SSG, which consent SSG
may grant or deny in its sole discretion, commencing on the Effective Date and
continuing until six months after the date on which InterTrust provides its SDK
1.0 (beta version) product to SSG (the "First Period"), InterTrust shall refrain
------------
from granting to any of the entities listed on Exhibit H hereto a license under
the Licensed Rights to perform financial and usage information Clearinghouse
Function services in connection with the administration of the distribution and
use of software executables (i.e., personal and business productivity software
applications and applets) ("Software Executables"). The InterTrust Partnering
--------------------
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Commitment shall not in any way be construed to extend beyond the narrow scope
herein provided, including, but not limited to, any of the excluded areas
("Excluded Areas") set forth on Exhibit H hereto. Such First Period may be
--------------
extended for a period of time ending eighteen (18) months from the Effective
Date (the "Additional Period"), to the extent that SSG executes an agreement
-----------------
with [*] or three (3) of UCA's five (5) largest ISV/OEM customers (as determined
on a UCA-received revenue basis), whereby [*] or such ISV/OEM customers adopt,
as a primary means of electronic distribution of its software products or as its
transaction system, InterTrust Technology in the form of SSG Products, SSG
Application Products and/or Cooperative Applications or wherein each such
applicable company commits to incorporate InterTrust packaging and/or viewing
capabilities in such companies' software application products (including update
and update releases, as well as product reconfigurations and modifications
thereof) that in the aggregate exceed six (6) million units (including
application products and client software) shipped annually (based on annualized
volumes measured in the highest volume quarter for such units within the
previous five (5) calendar quarters preceding such agreement, or reasonably
projected for such units in the next four (4) calendar quarters if such
application product has not been shipped in each of the previous five (5)
quarters). The Additional Period shall cease immediately (i) upon a failure by
SSG to spend four million dollars ($4,000,000) in the aggregate in the technical
development and/or promotion and sale of SSG Products or Cooperative Application
Products directly related to supporting Clearinghouse Function services on or
before the first anniversary of SSG's receipt of InterTrust's SDK 1.0 (beta
version) (such amount to be calculated in accordance with generally accepted US
accounting principles consistently applied (GAAP) and excluding any fees or
royalties paid to InterTrust pursuant to this Agreement) or (ii) should SSG fail
to commercially release a SSG Product on or before twelve (12) months after
InterTrust has provided SSG with its SDK 1.0 (beta version). InterTrust may, at
any time, relieve itself of all of the obligations set forth in this Section
10.1 by, at its discretion, either: (a) paying to SSG an amount equal to twice
SSG's direct expenses (the "Direct Expenses") incurred, limited to the amount of
---------------
money that SSG can demonstrate through financial records (kept in accordance
with GAAP) that it has directly expended in connection with the technical
development or promotion and sale of SSG Products or Cooperative Applications as
contemplated hereunder, provided that such payment amount shall not exceed ten
million dollars ($10,000,000) in the aggregate; or (ii) transferring to SSG (at
no cost) 174,947 shares of InterTrust's equity securities, such type of equity
securities being Class A Common Stock or a more senior security, and otherwise
the type of security being within InterTrust's sole reasonable commercial
discretion, and the method of transfer being such method as upon which the
Parties may agree in the exercise of their discretion. Notwithstanding the
foregoing, in the event that InterTrust chooses to transfer such 174,947 shares
to SSG and the fair market value of such shares, as determined by InterTrust's
board of directors in the exercise of good faith, is less than the Direct
Expenses, InterTrust shall pay to SSG an amount equivalent in cash and/or the
value of additional shares equal to the difference between the amount of the
Direct Expenses and such fair market value of such shares. To the extent
InterTrust complies with this Section 10.1, InterTrust shall not be restricted
from working with or licensing any technology or Intellectual Property to any
Person.
10.2 SSG Partnering Commitment. In partial consideration for: (i)
-------------------------
InterTrust's performance of its obligations hereunder, including providing to
SSG material access to confidential InterTrust Technology and Intellectual
Property; (ii) the rights granted to SSG hereunder; and (iii) InterTrust's
partnering commitment to SSG as set forth in Section 10.1 hereof, SSG agrees to
the following partnering commitment (the "SSG Partnering Commitment"). Without
-------------------------
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
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obtaining the express prior written consent of a Designated Officer of
InterTrust (as defined in Section 11.2(b) hereof), which consent InterTrust may
grant or deny in its sole discretion, during the First Period, SSG shall: (a)
exclusively use the InterTrust Technology as its Secure Container and rights
management technology solution and refrain from performing any transactions or
engaging in the creation of any business relationships relating to Secure
Containers other than those employing the InterTrust Technology; and (b) not
participate in, assist, or promote the development, use or exploitation of any
technology or products (other than the InterTrust Technology) that contain or
include any material portion of the capabilities set forth in the "Special
-------
Advanced Technologies" as described in Exhibit F attached hereto. With respect
- ---------------------
to the subject matter of subparagraph (b) immediately above, the First Period
shall automatically (and without any further action) be extended for a period
ending eighteen (18) months from the Effective Date. Notwithstanding the
foregoing: (1) any obligation pursuant to this Section 10.2 shall immediately
cease, at SSG's option (upon the agreement of both UCA and SIS), if InterTrust
has not provided the SDK 1.0 to SSG by the end of the second quarter (Q2) 1997;
and (2) after such First Period, SSG may participate in, assist, or promote the
development, use or exploitation of (A) any technology or products, so long as
such technology or products do not include, and are not specially adapted to
enable, any material portion of the Special Advanced Technologies and (B) any
technology or products that include, or are specially adapted to enable, any
material portion of the Special Advanced Technologies to the extent that such
Special Advanced Technologies may be incorporated by InterTrust in InterTrust
Technology or rightfully provided to SSG by another InterTrust licensee, and
whereby such right to use said Special Advanced Technologies is derived
exclusively from and used solely pursuant to this Agreement, or from such other
InterTrust licensee as expressly allowed in its license agreement with
InterTrust. To the extent SSG complies with this Section 10.2, SSG shall not be
restricted from developing or pursuing any business models or activities
consistent with its licenses hereunder with any Person.
10.3 Additional Provisions. Any material breach of the foregoing
---------------------
provisions by a Party shall be subject to the specific remedies set forth in
Section 13.3, in addition to other remedies available to thee other party under
this Agreement, at law, or in equity. If one Party has been relieved of its
Partner Commitment as set forth in this Article 10, the other Party shall be
relieved of its Partnering Commitment as well. In all events (except pursuant
to Section 15.4 hereof), neither Party's Partnering Commitment to the other
shall extend beyond eighteen (18) months after the Effective Date.
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ARTICLE 11. CONFIDENTIALITY.
11.1 Classification of Technology and Documents For Confidentiality
--------------------------------------------------------------
Purposes. For ease in complying with the terms of this Article 11, information
- --------
and documents to be exchanged by the Parties shall be marked, as appropriate, to
identify the confidential or nonconfidential nature of the information. As
regards InterTrust Technology (including Documentation) and other documents or
information provided by InterTrust to SSG hereunder, such information shall be
marked or indicated as: (i) "Unclassified"; (ii) "Confidential"; or (iii) "Top
Secret." SSG information shall be marked as: (a) "Unclassified" or (b)
"Confidential." A Party and its authorized personnel shall exercise careful
judgment when they are in possession of information of the other Party that has
not been marked or indicated with one of the above-described classifications.
If any information provided by one Party has not been marked or indicated as
above and is not known with certainty by the receiving Party to have been either
publicly released or otherwise classified as "Unclassified," then such other
Party, its employees and any other person authorized to possess such information
shall treat such information as "Confidential" except information provided by
InterTrust relating to security capabilities, trustedness, and architecture (or
design) integrity of the InterTrust Technology, which shall be considered to be
"Top Secret" and shall be handled as provided by Section 11.2(b) hereof.
11.2 InterTrust Information.
----------------------
(a) Confidential Information. To the extent that SSG receives from
------------------------
InterTrust under this Agreement any InterTrust Technology or any other
information or technology that is marked "Confidential" when disclosed in
written form, or indicated as "Confidential" when disclosed orally
("InterTrust Confidential Information"), SSG shall hold such InterTrust
-------------------------------------
Confidential Information in strict confidence and in a manner that: (i) is
sufficiently secure for the character and content of the InterTrust
Confidential Information; and (ii) is not less secure than procedures used
by SSG to protect its comparably important information and technology. SSG
shall not, without InterTrust's prior written consent, use, disclose,
provide or otherwise make available any InterTrust Confidential Information
to any person, except to any employee, director, consultant, agent or
professional consultant ("Agents") of SSG or one or more of SSG's permitted
------
sublicensees as authorized under the terms and conditions of this
Agreement, and their Agents of which each shall operate under the same
restrictions as SSG. Furthermore, in each case of disclosure to an Agent
of SSG or an authorized sublicensee, access to such InterTrust Confidential
Information shall be allowed only to Agents who have a reasonable need to
know such InterTrust Confidential Information, and then only to the extent
necessary to enable SSG or any such authorized sublicensee to use
InterTrust Confidential Information solely to exercise its license (or
sublicense) hereunder and/or as expressly allowed hereunder. SSG and any
such sublicensees, as the case may be, shall: (a) require their Agents
having access to any portion of InterTrust Confidential Information to
strictly maintain its confidentiality; and (b) ensure that each such Agent
shall have executed with SSG and/or an authorized sublicensee (as
applicable) a written non-disclosure/non-use agreement in the form set
forth on Exhibit G at all hereto or as subsequently provided by InterTrust,
or SSG's or such sublicensee's applicable form agreement which shall
effectively and comparably bind such Agent to the same scope as
InterTrust's form agreement, and which SSG's or sublicensee's form
agreement shall be subject to InterTrust's reasonable prior written
approval. SSG shall notify InterTrust
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promptly in writing of any unauthorized disclosure or other misuse or
misappropriation of any portions of the InterTrust Confidential
Information. SSG and any sublicensee (as appropriate) shall be fully
responsible for any breach of SSG's or sublicensees' obligations under this
Agreement by any Agent to whom such InterTrust Confidential Information has
been disclosed. Any obligation of SSG to keep InterTrust Confidential
Information in confidence shall expire thirty-six (36) months after
disclosure of such information by InterTrust to SSG.
(b) Top Secret Information. In order to protect InterTrust's rights,
----------------------
the rights of InterTrust licensees, and the secure interoperability and
reputation of InterTrust implementations, SSG shall treat any InterTrust
Technology or other confidential information that is either marked "Top
Secret" when disclosed in written form, or indicated as "Top Secret" when
disclosed orally ("Top Secret Information") in a manner not less secure
----------------------
than SSG's most secret information and, in all events in a manner
sufficient to reasonably ensure the security of such Top Secret
Information, given such great sensitivity of such Top Secret Information.
SSG shall allow disclosure of such Top Secret Information to no more than
six (6) designated individual employees of SSG at any time (and to no
sublicensee Agents), each of whom has a direct need to know such
information or be exposed to such Top Secret Information (as agreed in each
case by InterTrust) and then only to the extent necessary for SSG to use
Top Secret Information solely to exercise its rights and perform its
obligations under this Agreement. SSG shall not substitute any employee
designated to receive Top Secret Information with another employee, unless
such designated employee's employment with SSG has been terminated and such
person is no longer able to serve the intended role. None of such employees
shall receive a disclosure of any such Top Secret Information until: (i)
such employee becomes bound by personally executing an InterTrust Top
Secrecy Agreement (in the form set forth in Exhibit G hereto or as
subsequently provided by InterTrust) covering such information and
exposure; and (ii) an original executed copy of such agreement is received
by InterTrust, with return receipt provided to SSG, which such receipt may
be provided by fax communication if so requested in writing.
Notwithstanding the foregoing, SSG and SSG employees described above shall
make no physical embodiments (for example, any reproduction or copy,
including descriptive notes) whatsoever of Top Secret Information, without
the prior express written authorization from InterTrust's Chairman of
Board, President or any other InterTrust Officer designated in a written
communication to SSG signed by InterTrust's Chairman of the Board (the
"Designated Officers"), nor shall SSG or such SSG employees disclose any
--------------------
Top Secret Information to any Person, except as described in this Section
11.2(b). If SSG becomes aware that any Top Secret Information has been
disclosed or treated other than as set forth in this Section 11.2(b),
and/or as specified in a Top Secrecy Agreement, SSG shall immediately
inform InterTrust of such occurrence and take immediate steps to correct
such compromise. SSG shall maintain a log of the employees accessing and
location of all originals and other tangible embodiments of all Top Secret
Information. SSG shall be fully responsible for any breach by any SSG
employee of this Agreement related to the unauthorized use or disclosure of
Top Secret Information.
11.3 SSG Information. To the extent that InterTrust receives SSG
---------------
confidential information that is either marked "confidential" when disclosed in
written form or indicated as "confidential" when disclosed orally ("SSG
---
Confidential Information"), under this Agreement,
- ------------------------
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InterTrust shall hold said SSG Confidential Information in confidence in a
manner that is sufficiently secure for the character and content of the
information and under no circumstances shall such SSG Confidential Information
be held in a manner that is less secure than procedures used by InterTrust in
connection with its comparably important information. Except as to the
disclosure by SSG of the Modified Technology or such disclosures inherent in the
Certification Testing of SSG Products, Cooperative Applications and/or any
associated services pursuant hereto and only to the extent expressly specified
by InterTrust Specifications, SSG shall not disclose or otherwise provide or
make available any SSG Confidential Information which is directly related to
InterTrust Technology and InterTrust's business activities, without first
acquiring written approval from a Designated Officer of InterTrust. InterTrust
shall not use, disclose, provide or otherwise make available any SSG
Confidential Information it has received in any form to any person except an
Agent of InterTrust. In a disclosure to Agents of InterTrust, access to SSG
Confidential Information shall be allowed only to Agents who have a reasonable
need to know such confidential information and only to the extent necessary to
enable InterTrust to use confidential information to exercise its rights and
perform its obligations hereunder. InterTrust shall: (a) require its Agents
having access to any portion of confidential information to strictly maintain
its confidentiality; and (b) ensure that each such Agent shall have executed
with InterTrust a written non-disclosure/non-use agreement provided by SSG, or
InterTrust's applicable form agreement which shall effectively and comparably
bind such Agent to the same scope as SSG's form agreement, and which InterTrust
form agreement shall be subject to SSG's reasonable prior written approval. Upon
such approval the SSG form agreement will be attached as an Exhibit hereto.
InterTrust agrees to notify SSG promptly in writing of any unauthorized
disclosure or other misuse or misappropriation of SSG Confidential Information
provided to InterTrust which may come to the attention of an InterTrust officer.
InterTrust shall be fully responsible for any breach of InterTrust's obligations
under this Agreement by any Agent to whom such SSG Confidential Information has
been disclosed. Any obligation of InterTrust to keep SSG information in
confidence shall expire thirty-six (36) months after disclosure of such
information by SSG to InterTrust.
11.4 Exceptions. Notwithstanding the provisions of Sections 11.2 and 11.3
----------
above, and except as to "Top Secret" information as provided in Section 11.2(b),
the confidentiality restrictions herein shall not apply to information that the
recipient thereof can demonstrate: (i) is or becomes generally known to the
public through no breach of any of these obligations, as of the date such
information becomes so known; (ii) is or shall have been independently developed
by such recipient by employees who had no access to such information; or (iii)
is or shall have been rightfully received, with no obligation of confidentiality
or non-use, by such recipient from any Person (other than as a result of another
Person's breach of an obligation of confidentiality to the discloser of such
information), as of the date such information is so received. In the event any
Party is required by law, regulation or order of a court or other authority of
competent jurisdiction to disclose the other Party's Confidential Information,
such Party shall notify such other Party as promptly as possible, and shall,
upon such other Party's request, reasonably assist in challenging or restricting
the scope of such required disclosure. Top Secret information may be disclosed
only upon InterTrust's prior written approval. In all events, a Party subject
to such required disclosure shall disclose only such information that is
strictly required pursuant thereto and no further information.
11.5 Confidentiality of Agreement and Publicity. Except as otherwise
------------------------------------------
provided in Sections 9.1 and 11.4 hereof, neither Party hereto shall at any
time, without the prior written
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consent of the other Party, disclose the specific details of the terms and
conditions of this Agreement to any Person, other than: (i) Agents having a
substantial need to know; (ii) as required by law in connection with any initial
public offering of securities pursuant to a registration under the Securities
Act of 1933, as amended (an "IPO") (iii) investors holding approximately one
percent (1%) or more of the outstanding equity shares of such Party prior to an
IPO and having no reasonably anticipated conflict of interest with the
disclosing party; (iv) potential investors who may purchase approximately one
percent (1%) or more of the outstanding equity shares of such Party prior to an
IPO and having no reasonably anticipated conflict of interest with the
disclosing party; and/or (v) financial institutions, professional advisors
and/or other consultants having a reasonable need to know and having no
reasonably anticipated conflict of interest with the disclosing party. In each
and every case set forth above, the receiving Person shall be bound by a
confidentiality agreement sufficient in scope to protect the Parties' rights and
interests hereunder. Notwithstanding the foregoing provisions of this Section
11.5: (a) either Party may publicly discuss or otherwise disclose that an
agreement exists between the Parties to develop InterTrust Compliant electronic
commerce industry standards, products and services, but may provide no further
material details as to the specific activities or commitments of the other Party
without the prior written consent of the other Party; and (b) either Party may
make such disclosures to the extent permitted under this Section 11.5 in order
to comply with its obligations or enforce its rights under this Agreement.
11.6 Confidentiality of Payments, Audit and Certification Testing. All
------------------------------------------------------------
information received during an audit or pursuant to a Certification Program as
provided herein, all information concerning Certification Testing (including any
results thereof and any information received pursuant to any Certification
Testing), and all payment information received pursuant to this Agreement, shall
be treated as confidential information pursuant to Sections 11.2(a), 11.3 and
11.4 hereof. Notwithstanding the foregoing, information concerning whether a
SSG Product, Cooperative Application or an associated services being
disseminated or used in commerce is Compliant with InterTrust Specifications
shall not be treated as confidential information under any provision of this
Agreement.
11.7 NDA. Subject to the provisions of this Article 11, upon the Effective
---
Date of this Agreement, information relating to the subject matter of this
Agreement, when disclosed after the Effective Date shall be covered by the
confidentiality provisions of this Article 11. Any information disclosed
relating to the subject matter of this Agreement when disclosed prior to the
Effective Date or relating to subject matter outside of this Agreement shall be
covered under the Non-Disclosure/Non-Use Agreement between InterTrust and
SOFTBANK dated March 6, 1996.
ARTICLE 12. REPRESENTATIONS AND WARRANTIES.
12.1 Representations and Warranties of Both Parties. Each Party hereto
----------------------------------------------
represents and warrants to the other Party that as of the Effective Date:
(a) such Party is a corporation duly incorporated, validly existing
and in good standing under the laws of the jurisdiction in which it is
organized, with full corporate power and authority to carry on its business
as it is now being conducted;
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(b) the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by such Party. No other corporate or shareholder action or other
proceeding on the part of such Party or its shareholders is necessary to
authorize this Agreement and the consummation of the transactions
contemplated hereby;
(c) this Agreement constitutes a valid and binding obligation of
such Party, enforceable against such Party in accordance with its terms,
except that such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium, or similar laws now or hereafter in effect
relating to creditors' rights; and
(d) neither the execution, delivery and performance of this
Agreement nor the consummation of the transactions contemplated hereby will
violate any provision of the charter or organizational documents of such
Party.
12.2 Representations and Warranties of InterTrust. In addition to Section
--------------------------------------------
12.1 above, InterTrust represents and warrants to SSG that as of the Effective
Date:
(a) InterTrust owns or has the right to grant the licenses hereunder
with respect to the InterTrust Technology and the Licensed Rights; and
(b) to InterTrust's knowledge, neither the InterTrust Technology nor
the Licensed Rights infringe any Person's valid U.S. patent, copyright, or
trade secret right, and no claims or allegations of any such infringement
have been made (except as disclosed by InterTrust to SSG), PROVIDED THAT
-------- ----
INTERTRUST MAKES NO WARRANTY WITH RESPECT TO THE INFRINGEMENT OF ANY
TRADEMARK RIGHTS, OR ANY PATENT RIGHTS OTHER THAN THE FOREGOING
REPRESENTATION THAT IT IS UNAWARE OF ANY SUCH INFRINGEMENT.
12.3 Limitation. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT TO THE
----------
CONTRARY: (i) THE INTERTRUST TECHNOLOGY PRODUCTS ARE PROVIDED "AS IS" WITHOUT
WARRANTY OF ANY KIND, EITHER EXPRESSED OR IMPLIED, INCLUDING BUT NOT LIMITED TO
THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
NONINFRINGEMENT; AND (ii) THE ENTIRE RISK AS TO THE QUALITY, ACCURACY,
INFRINGEMENT AND PERFORMANCE OF THE INTERTRUST TECHNOLOGY PRODUCTS IS WITH SSG.
INTERTRUST DOES NOT WARRANT THAT INTERTRUST TECHNOLOGY OR THE INTERTRUST
TECHNOLOGY PRODUCTS WILL MEET SSG'S PRODUCTS OR THOSE OF ANY THIRD PARTY AND, IN
PARTICULAR, INTERTRUST DOES NOT WARRANT THAT THE INTERTRUST TECHNOLOGY PRODUCTS
WILL BE ERROR FREE OR WILL OPERATE WITHOUT INTERRUPTION.
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ARTICLE 13. INDEMNIFICATION AND REMEDIES.
13.1 Indemnification.
---------------
(a) InterTrust Indemnification. InterTrust shall indemnify and hold
--------------------------
SSG and its employees, officers and directors (the "SSG Parties") harmless
-----------
from any and all liability, judgments, costs, damages, claims, suits,
actions, proceedings, expenses and/or other losses, including reasonable
attorneys' fees (collectively, "Claims") or portions thereof, to the extent
------
awarded by a court of competent jurisdiction or pursuant to a settlement as
provided hereunder, resulting from controversies or litigation asserted by
any Person against the SSG Parties arising directly or indirectly from:
(i) InterTrust's breach of any of its obligations under this Agreement, or
its representations and warranties set forth in Article 12; and (ii) SSG's
proper use of InterTrust Trademarks as set forth herein; provided, however,
-------- -------
that, with respect to InterTrust's representations under Section 12.2(b),
----
12.2(b) hereof, this indemnity does not extend to any Claim relating to:
(1) any Modified Technology or other modifications thereto made by SSG or
any Person or combinations of the InterTrust Technology with any product,
technology or service of SSG or of any Person where such Claim would have
been avoided in the absence of such modification or combination; or (2) the
use of any InterTrust Technology in any manner inconsistent with InterTrust
Specifications or Documentation (collectively, the "Indemnification
---------------
Exclusions").
----------
(b) SSG Indemnification. Each of UCA and SIS shall jointly and
-------------------
severally indemnify and hold InterTrust, its employees, officers and
directors (the "InterTrust Parties") harmless from any and all Claims or
------------------
portions thereof to the extent awarded by a court of competent jurisdiction
or pursuant to a settlement as provided hereunder, resulting from
controversies or litigation asserted by any Person against the InterTrust
Parties arising directly or indirectly from: (i) SSG's or any of its
sublicensees' breach of any of its obligations, representations or
warranties hereunder; (ii) InterTrust's proper use of SSG Trademarks as set
forth herein; (iii) the design, manufacture, use, distribution and/or
disposition by or for SSG of Modified Technology, Cooperative Applications
or SSG Products, or performance of any service associated therewith, that
would not have otherwise arisen out of SSG's use of the InterTrust
Technology alone, except to the extent SSG is indemnified by InterTrust
under Section 13.1(a) hereof; (iv) any Claim relating to the
Indemnification Exclusions; and (v) any exercise by SSG or any of its
sublicensees of the licenses hereunder that would not have otherwise arisen
out of SSG's use of the InterTrust Technology alone, except to the extent
SSG is indemnified by InterTrust under Section 13.1(a) hereof.
(c) Third Party Claims. In case any Claim is brought by a third
party for which Claim indemnification is or may be provided hereunder the
indemnified Party shall provide prompt written notice thereof to the other
Party. Where obligated to indemnify such Claim, the indemnifying Party
shall, upon the demand and at the option of the indemnified Party, assume
the defense thereof (at the expense of the indemnifying Party) within
thirty (30) days or at least ten (10) days prior to the time a response is
due in such case, whichever occurs first, or, alternatively upon the demand
and at the option of the indemnified Party, pay to such Party all
reasonable costs and expenses, including reasonable attorneys' fees,
incurred by such Party in defending itself. The Parties shall
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cooperate reasonably with each other in the defense of any Claim,
including making available (under seal if desired, and if allowed) all
records reasonably necessary to the defense of such Claim, and the
indemnified Party shall have the right to join and participate actively
in the indemnifying Party's defense of the Claim. Notwithstanding the
foregoing (and any other section of this Agreement), it is understood and
acknowledged that InterTrust need not under any circumstance provide Top
Secret Information related to the security capabilities of InterTrust
Technology to any Person. Each Party shall be entitled to prior notice of
any settlement of any Claim to be entered into by the other Party and to
reasonable approval of a settlement to the extent such Party's rights
would be directly and materially impaired. Without limiting the
foregoing, in the event of any Claim or threatened Claim of [*] involving
a portion of the [*]: (a) upon SSG's request and at SSG's expense,
InterTrust will attempt to [*] the [*] or [*] SSG to continue to [*] and
[*] in accordance with the terms hereof such portion of [*] on [*] to
InterTrust (except that SSG may reasonably approve any terms relating to
payment of any fees or royalties); or (b) at InterTrust's sole
discretion, InterTrust may [*], [*] or [*] any [*] of the [*], as the
case may be, so as to make [*] of the [*] while maintaining [*] of [*] or
[*] of the [*] that are material to SSG's then-current or demonstrably
anticipated use of such technology. If options (a) and (b) are not [*] as
to such portion: (1) SSG may terminate the licenses granted hereunder in
its sole discretion; and (2) to the extent InterTrust used reasonable
commercial efforts to obtain a license or modify the technology as set
forth in subsections (a) or (b), and InterTrust is reasonably exposed to
liability from SSG's or its sublicensee's continued use of such portion
of InterTrust Technology, InterTrust may in its discretion terminate the
licenses granted hereunder with respect to such portion.
13.2 Cumulative Remedies. Except as expressly provided herein to the
-------------------
contrary, no remedy made available to a Party by any of the provisions of this
Agreement is intended to be exclusive of any other remedy, and each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
13.3 Equitable Remedies. Each Party agrees that it may be impossible or
------------------
inadequate to measure and calculate a Party's damages from any breach of the
covenants set forth in Sections 5.3, 5.4, 6.1, 6.2, 6.3, 6.4, 6.5, 6.6, 7.6,
10.1, 10.2, 15.3, 16.5 and 16.8 and Articles 8 and 11 hereof. Accordingly, each
Party agrees that if it or any of such Party's Agents thereof breach or threaten
a breach or anticipatory repudiation of any of such provisions, in addition to
any other right or remedy available, the other Party shall be entitled: (i) to
obtain an injunction against the breaching Party and such Party's Agents
thereof, from a court of competent jurisdiction restraining such breach or
threatened breach; and (ii) to specific performance of any such provision of
this Agreement. In addition, each Party agrees that, in the event a Party
breaches any of its Partnering Commitments under Article 10 to the other Party,
the non-breaching Party shall be entitled, in addition to any other remedies
available at law or in equity, to extend the Partnering Commitment by the
amount of time left on such period (measured from the later of the date such
breach is admitted by breaching Party or established by a final judgment
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
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<PAGE>
CONFIDENTIAL
pursuant to which all appeal rights have been exhausted), and each Party hereby
irrevocably agrees to an award of specific performance of such provision in the
other Party's favor.
ARTICLE 14. EXCLUSION OF DAMAGES.
EXCEPT AS SET FORTH IN THE IMMEDIATELY FOLLOWING SENTENCE, NEITHER PARTY
SHALL BE LIABLE TO THE OTHER PARTY, ITS AGENTS, AFFILIATES, CUSTOMERS, OR ANY
OTHER PERSONS, FOR ANY LOST PROFITS, INCIDENTAL, INDIRECT, OR CONSEQUENTIAL
DAMAGES, ARISING OUT OF THE BREACH OF THIS AGREEMENT OTHER THAN UNDER ARTICLES
5, 8 AND 10. NOTWITHSTANDING THE IMMEDIATELY PRECEDING SENTENCE, A PARTY SHALL
BE LIABLE TO THE OTHER PARTY FOR ALL DAMAGES, INCLUDING LOST PROFITS,
INCIDENTAL, INDIRECT, OR CONSEQUENTIAL DAMAGES SUFFERED OR INCURRED BY THE OTHER
PARTY IN THE FOLLOWING CIRCUMSTANCES: (i) THE MISAPPROPRIATION OF TRADE SECRETS
OF THE DAMAGED PARTY BY THE LIABLE PARTY, OR ITS AGENTS; (ii) THE GROSS
NEGLIGENCE OF THE LIABLE PARTY, OR ITS AGENTS; (iii) THE WILLFUL MISCONDUCT OR
MATERIAL BREACH OF THIS AGREEMENT IN BAD FAITH BY THE LIABLE PARTY, OR ITS
AGENTS; OR (iv) THE BREACH OF ARTICLES 5, 8 OR 10 HEREOF. IN ANY DISPUTE AS TO
DAMAGES, THE LIABLE PARTY SHALL BE REQUIRED TO PROVE THE ABSENCE OF MATERIAL
NEGLIGENCE, WILLFUL MISCONDUCT AND/OR INTENTIONAL MATERIAL BREACH OF THIS
AGREEMENT IN BAD FAITH, AS THE CASE MAY BE, REFERRED TO IN THE IMMEDIATELY
PRECEDING SENTENCE.
ARTICLE 15. TERM AND TERMINATION.
15.1 Agreement. This Agreement shall commence on the Effective Date and
---------
shall continue for a period of twenty-five (25) years therefrom unless and until
terminated earlier pursuant to Section 15.2. At the end of such twenty-five (25)
year term, this Agreement shall automatically renew for subsequent one (1) year
periods unless and until a Party notifies the other in writing of its intent not
to renew this Agreement prior to sixty (60) days before the beginning of the
next such one (1) year period.
15.2 Events of Termination. This Agreement, the licenses granted
---------------------
hereunder, and/or all Cooperative Application Project Plans shall be subject to
termination upon the occurrence of any of the following events and such other
provisions hereof expressly so stating (each, an "Event of Termination"):
--------------------
(a) If either Party, or, as relevant, any of its permitted
sublicensees, materially defaults on any of its material obligations under
this Agreement, the non-defaulting Party shall have the right, exercisable
in its sole discretion, to initiate a termination procedure under this
Agreement by written notice (sent in accordance with the provisions of
Section 16.6 hereof) describing with reasonable specificity the nature of
the default and requiring that such default be cured, wherein such
termination notice shall automatically result in termination unless: (i)
within sixty (60) calendar days of receiving such written notice of such
default (the "Cure Period"), the defaulting Party (or such sublicensee)
-----------
remedies the default; or (ii) in the case of a default that cannot with
earnest due diligence
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CONFIDENTIAL
be cured within the Cure Period, the defaulting Party or such sublicensee
institutes, by the date upon which one half of the Cure Period shall have
expired, steps necessary to remedy the default and thereafter employs best
efforts to diligently prosecute the same to completion. Notwithstanding the
foregoing, the Cure Period associated with SSG's breach of its payment
obligations in accordance with Section 7.1 shall be five (5) business days.
Notwithstanding any of the foregoing, a Party shall have the right both to
immediately terminate this Agreement and to obtain injunctive relief in the
event the other Party or any of its Agents or authorized sublicensees
engages in any: (a) intentional, material unauthorized use of technology
outside of the rights granted hereunder (or, in the case of SSG, any
unauthorized disclosure of InterTrust Top Secret Information) and/or (b)
willful, material unauthorized disclosure of Confidential Information.
Further notwithstanding the foregoing, in the event the Closing fails to
occur on or before August 19, 1996 pursuant to Section 2.1 hereof, SSG
shall be in material breach of this Agreement and InterTrust may
immediately, upon providing written notice to SSG and without opportunity
to cure, terminate this Agreement.
(b) By a Party at its option, effective immediately upon written
notice to the other Party, in the event of: (i) the filing by the other
Party of a petition in bankruptcy or insolvency; (ii) the appointment of a
receiver for the other Party for all or substantially all of its property
relevant to the business activities under this Agreement; (iii) the making
by the other Party of any assignment or attempted assignment for the
benefit of creditors for all or substantially all of its properties
relevant to its business activities under this Agreement; or (iv) the
institution of any proceedings for the liquidation or winding up of the
other Party's business or for the termination of its corporate charter, if
any such proceeding is not dismissed within one hundred and twenty (120)
days of institution;
(c) Upon written notice to SSG, InterTrust may immediately terminate
this Agreement in its sole discretion in the event SSG fails: (i) to
distribute SSG Products and/or Cooperative Applications within sixty (60)
months from the date InterTrust first delivers the SDK 1.0 to SSG, subject
to any extension permitted under Section 6.1(a); (ii) to comply with the
terms of Section 10.2 hereof; (iii) to terminate any sublicense pursuant to
which the sublicensee thereunder materially defaults its obligations under
this Agreement for a period of sixty (60) days after the date of written
notice thereof from InterTrust or SSG, whichever is earlier; or (iv) fails
to timely make payments due under this Agreement on two or more occasions
over a twelve (12) month period. Upon written notice to InterTrust, SSG may
immediately terminate this Agreement in its sole discretion in the event
InterTrust fails to comply with the terms of Section 10.1 hereof.
(d) A party to a Cooperative Application Project Plan shall have the
right to terminate such plan if the other party thereto materially breaches
any of its material obligations thereunder.
15.3 Effect of Termination. Upon the expiration or termination hereof: (i)
---------------------
all licenses granted hereunder, all sublicenses granted by SSG pursuant to
Section 5.2, and all cooperative development efforts then being conducted
pursuant to all Cooperative Application Project Plans shall automatically
terminate; (ii) InterTrust shall have the right to retain all sums already paid
by SSG (and all SSG sublicensees) hereunder, and SSG (and all SSG sublicensees)
shall pay to
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InterTrust all sums accrued but unpaid within thirty (30) days thereafter; and
(iii) SSG (and all SSG sublicensees) shall immediately discontinue use of
InterTrust Technology and/or the use of any portion of such InterTrust
Technology in any Modified Technology, and discontinue making, using, selling or
otherwise transferring or exploiting any product or service that in the absence
of a license hereunder would infringe any InterTrust Intellectual Property
Rights (including termination of distribution of Cooperative Applications and
SSG Products and any associated services); provided, however, that all licenses
-------- ------- ----
granted to end-users pursuant to the then-existing Customer Agreements solely
for Applications Products shall continue in full force and effect in accordance
with the terms thereof (provided that such licenses do not provide any rights to
such end-users with respect to Clearinghouse Functions, other than as expressly
provided hereunder). Each Party shall deliver to the other Party within ten (10)
days from the date of termination of this Agreement all copies of all materials
protected as confidential information or Top Secret Information under this
Agreement, including all copies under its control of its sublicensees or their
Agents. Return of confidential information shall be by commercially secure means
as reasonably specified by the receiving Party. Return of Top Secret Information
shall be made, at InterTrust's option as designated by a Designated Officer by
written instruction to SSG: (a) by physical and secure pickup at SSG's offices
by an InterTrust officer designated in writing by such Designated Officer; or
(b) as otherwise may be determined by InterTrust in its discretion, as
commercially reasonable. Such delivery shall be during normal business hours and
in each instance to the hands of an InterTrust officer who receives a listing of
the contents of such delivery certified by an officer of SSG and audited and
countersigned by such InterTrust officer. Within one (1) month after the
termination of this Agreement, each Party will certify in writing to the other
Party that, to the best of its knowledge, all such materials and tangible
embodiments have been delivered to the other Party.
15.4 Survival. The respective rights and obligations of InterTrust and SSG
--------
under the provisions of Sections 5.4, 6.5, 7.6 (but only for a period of five
years), 8.1, 8.2, 8.3, 8.4 (but only provision (i) thereof), 15.3, this Section
15.4, and Articles 11, 13 and 16 hereof shall survive expiration or termination
of this Agreement. Section 10.1 shall survive termination to the extent the
Agreement is properly terminated by SSG due to a material breach of the
Agreement by InterTrust pursuant to Section 15.2(a) hereof. Sections 9.3(c) and
10.2 shall survive termination to the extent the Agreement is properly
terminated by InterTrust due to a material breach of the Agreement by SSG
pursuant to Section 15.2(a) hereof. In the event that such a termination
pursuant to Section 15.2(a) occurs prior to delivery of SDK 1.0, such Partnering
Commitment as set forth in Sections 10.1 and 10.2, as applicable, shall run from
the Estimated date for delivery of such SDK as set forth on Exhibit B hereto as
of the Effective Date.
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CONFIDENTIAL
ARTICLE 16. MISCELLANEOUS.
16.1 Governing Law. This Agreement, any and all actions arising out of or
-------------
in any manner affecting the interpretation of this Agreement, and any actions
between the Parties involving the InterTrust Technology, any InterTrust Property
and/or any Confidential or Top Secret Information ("Party Disputes") shall be
--------------
governed solely by, and construed solely in accordance with, the laws of the
United States of America and the Commonwealth of Virginia, excluding that body
of law relating to conflict of laws. The Parties hereby acknowledge and agree
that the Convention on Contracts for the International Sale of Goods shall not
apply to this Agreement. To the extent permitted by law, the provisions of this
Agreement shall supersede any provisions of the Uniform Commercial Code as
adopted or made applicable to this Agreement in any competent jurisdiction.
16.2 Venue and Jurisdiction. In connection with any litigation between the
----------------------
Parties involving a Party Dispute, each Party hereby unconditionally and
irrevocably consents to the exclusive jurisdiction and venue, as relevant, in
the Courts of the Commonwealth of Virginia and in the U.S. Federal District
Court, located in the City of Alexandria, Virginia (or any direct successor
thereto), and irrevocably: (i) waives any objection whatsoever (including any
objection with respect to venue) that any Party may now or hereafter have to the
jurisdiction or venue of said courts; and (ii) irrevocably consents to the
service of process of said courts in any matter relating to this Agreement by
the mailing of process by registered or certified mail, postage prepaid, at the
addresses specified in this Agreement. If necessary, SSG shall appoint a
registered agent in the State of Virginia for acceptance of service of process
and/or other notices provided for under this Agreement and shall notify
InterTrust of the identity of such registered agent within thirty (30) days
after the Effective Date.
16.3 Compliance with Law and Export Controls. The Parties shall at all
---------------------------------------
times comply with all applicable U.S. and foreign federal, state, and local
laws, rules and regulations relating to the execution, delivery and performance
of this Agreement and to the InterTrust Technology Products and Modified
Technology. Additionally, SSG acknowledges that because one or more aspects of
the InterTrust Technology Products is likely to be subject to the export control
laws, regulations and requirements of the United States and other jurisdictions,
SSG Products and Cooperative Applications likely will require export and other
approvals as well. InterTrust shall use reasonable efforts at InterTrust's
expense, and SSG shall at InterTrust's request reasonably assist InterTrust at
SSG's expense, to obtain any license or other approval, if any, that may be
required for InterTrust to make the InterTrust Technology Products and/or
Documentation or information relating thereto available to and SSG or SOFTBANK
Affiliates. SSG shall, at SSG's expense, comply with all applicable laws
(including applicable U.S. export control laws and regulations) and obtain all
necessary governmental consents and approvals in connection with any sublicense
or with respect to the distribution of or export or re-export of the SSG
Products and Cooperative Applications (as well as other technology as expressly
permitted hereunder) that contain any part of the InterTrust Technology Products
or Modified Technology in accordance herewith. The Parties expressly agree that
any failure to obtain or any delay in obtaining such approval as to InterTrust
Technology or in connection with any SSG Product or Cooperative Application
shall not relieve SSG from its obligations under this Agreement. As relevant and
applicable, SSG and InterTrust shall: (a) promptly deliver to the other, as
available, documentation reasonably confirming that it has complied with its
responsibilities under this Section 16.3; and (b) obtain such consents and
approvals from appropriate governmental entities
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CONFIDENTIAL
as reasonably determined to be necessary for such further distribution,
exportation or re-exportation.
16.4 Amendment or Modification. This Agreement may not be amended,
-------------------------
modified or supplemented by the Parties in any manner, except by an instrument
in writing signed by the President or Chairman of InterTrust and a duly
authorized officer of SSG.
16.5 No Assignment. Except as expressly provided in Section 5.2, SSG shall
-------------
not assign or transfer its rights or obligations hereunder, without InterTrust's
prior written consent, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, SSG shall be entitled to assign or transfer such
rights or obligations hereunder to a SOFTBANK Affiliate in connection with any
merger or sale of substantially all of SSG's assets or business related to this
Agreement to such SOFTBANK Affiliate without such InterTrust consent; provided
--------
that such SOFTBANK Affiliate does not own, control, or is not developing,
- ----
promoting, licensing or acquiring any Competitive Technology. InterTrust shall
not assign or transfer this Agreement or its rights or obligations hereunder to
any Person without SSG's prior written consent, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, InterTrust shall be
entitled to assign or transfer such rights or obligations hereunder in
connection with any merger or sale of substantially all of assets or business
related to this Agreement without such SSG consent. Subject to the foregoing,
this Agreement will benefit and bind the successors and permitted assigns of the
Parties. Any attempted transfer or assignment without such approval shall be
null and void ab initio and of no force or effect.
-- ------
16.6 Notices. Any notice or other communication to be given hereunder
-------
shall be in writing and shall be (as elected by the Party giving such notice):
(i) personally delivered; (ii) transmitted by postage prepaid registered or
certified airmail, return receipt requested; or (iii) by facsimile with a
confirmation copy deposited prepaid with an internationally recognized express
courier service. Unless otherwise provided herein, all notices shall be deemed
to have been duly given on: (a) the date of receipt (or if delivery is refused,
the date of such refusal) if delivered personally or by express courier; or (b)
ten (10) days after the date of posting if transmitted by mail. Notwithstanding
the foregoing, communication of Confidential Information or Top Secret
Information shall be governed by practices adequate to appropriately protect
such information regarding Top Secret Information or as may be specified herein
or in the future by InterTrust. Either Party may change its address for purposes
hereof on not less than three (3) days prior notice to the other Party. Notice
hereunder shall be directed:
If to SSG, to:
75 Earhart Drive
Amhearst, NY 14221
Attn.: Ron Schreiber
Fax: (716) 871-6400
If to InterTrust, to:
460 Oakmead Parkway
Sunnyvale, California 94086
Attn: Edmund J. Fish, Esq.
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CONFIDENTIAL
VP, Corporate Development and General Counsel
Fax: (408) 222-6144
with a copy to:
Weil, Gotshal & Manges LLP
2882 Sand Hill Road, Suite 280
Menlo Park, California 94025
Attn: Patrick P. Nguyen, Esq.
Fax: (415) 854-3713
16.7 Waiver. Any provision of this Agreement may be waived by the Party
------
entitled to the benefit thereof. Neither Party shall be deemed, by any act or
omission, to have waived any of its rights or remedies hereunder unless such
waiver is in writing and signed by, in the case of InterTrust, InterTrust's
President or Chairman, and in the case of SSG, a SSG authorized officer, and
then only to the extent specifically set forth in such writing. A waiver with
reference to one event shall not be construed as continuing or as a bar to or
waiver of any right or remedy as to a subsequent event.
16.8 No Third Party Beneficiaries. Nothing express or implied in this
----------------------------
Agreement is intended to confer, nor shall anything herein confer, upon any
Customer or any Person other than the Parties and any respective successors or
permitted assigns of the Parties, any rights, remedies, obligations or
liabilities whatsoever. Notwithstanding the foregoing, to the extent permitted
by law, SSG grants InterTrust the right to enforce against any of SSG's
sublicenses the terms of the applicable sublicenses or agreements between SSG
and its sublicensees for the purpose of asserting SSG's rights in order to
protect and enforce InterTrust's rights to InterTrust Property and any other
InterTrust rights under this Agreement.
16.9 No Agency. Nothing herein contained shall be construed to constitute
---------
the Parties hereto as partners or joint venturers or the agent of the other
Party in any sense of those terms whatsoever. Neither Party assumes any
liability of the other Party nor shall have any authority to enter into any
binding obligation on behalf of the other Party.
16.10 Recovery of Costs and Expenses. If any Party to this Agreement
------------------------------
brings an action against the other Party to enforce its rights under this
Agreement, the prevailing Party shall be entitled to recover its costs and
expenses, including without limitation, reasonable attorneys' fees and costs
incurred in connection with such action, including any appeal of such action.
16.11 Severability. If the application of any provision or provisions of
------------
this Agreement to any particular facts or circumstances shall be held to be
invalid or unenforceable by any court of competent jurisdiction, then: (i) the
validity and enforceability of such provision or provisions as applied to any
other particular facts or circumstances and the validity of other provisions of
this Agreement shall not in any way be affected or impaired thereby; and (ii)
such provision or provisions shall be reformed without further action by the
Parties hereto and only to the extent necessary to make such provision or
provisions valid and enforceable when applied to such particular facts and
circumstances.
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CONFIDENTIAL
16.12 Counterparts; Facsimiles. This Agreement may be executed in any
------------------------
number of counterparts, each of which when so executed and delivered shall be
deemed an original, and such counterparts together shall constitute one and the
same instrument. Each Party shall receive a duplicate original of the
counterpart copy or copies executed by it. For purposes hereof, a facsimile copy
of this Agreement, including the signature pages hereto, shall be deemed to be
an original. Notwithstanding the foregoing, the Parties shall deliver original
execution copies of this Agreement to one another as soon as practicable
following execution thereof.
16.13 Force Majeure. Except as provided herein to the contrary, if, by
-------------
reason of labor dispute, strike, inability to obtain labor or materials, fire or
other action of the elements, accident, administrative or governmental
restriction or appropriation or other causes, whether like or unlike the
foregoing, beyond the reasonable control of a Party hereto, such Party is unable
to perform in whole or in part its obligations set forth in this Agreement, then
such Party shall be relieved of those obligations to the extent it is so unable
to perform, and such inability to perform, so caused, shall not make such Party
liable to the other Party. Notwithstanding the foregoing, in the event any such
cause delays either Party's performance of any of its material obligations under
this Agreement, the other Party may suspend its performance under this Agreement
for the period such delay continues. This Agreement may be terminated by notice
by the Party not seeking excuse from performance, if such event shall prevent
performance for longer than one hundred and twenty (120) days. The Party subject
to an event of force majeure shall use good faith efforts to comply as closely
as possible with the provisions of this Agreement and to avoid the effects of
such event to the extent possible.
16.14 Entire Agreement. This Agreement represents the entire agreement of
----------------
the Parties with respect to the subject matter hereof and supersedes all prior
and/or contemporaneous agreements and understandings, written or oral between
the Parties with respect to the subject matter hereof (except as set forth in
Section 11.7 hereof).
[The following space is intentionally omitted]
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CONFIDENTIAL
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of
the date first written above by the undersigned duly authorized.
INTERTRUST TECHNOLOGIES UPGRADE CORPORATION OF
CORPORATION AMERICA
By:_________________________ By:_________________________
Name: Victor Shear Name: Ronald Schreiber
Title: Chairman and Chief Executive Title: Co-Chief Executive Officer
Officer
SOFTBANK HOLDINGS, INC., solely for the purposes
Of Section 2.1 hereof:
By:_________________________
Name: Gary Rieschel
Title: Senior Vice President
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CONFIDENTIAL
EXHIBIT A
TO THE TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
WARRANT & STOCK PURCHASE AGREEMENTS
-----------------------------------
A-1
<PAGE>
Execution Copy
--------------
INTERTRUST TECHNOLOGIES CORPORATION
SERIES B PREFERRED
STOCK PURCHASE AGREEMENT
August 1, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
Page
----
<S> <C>
1. Purchase and Sale of Stock........................................... 1
1.1 Sale and Issuance of Series B Preferred Stock.................. 1
1.2 Closing........................................................ 1
1.3 Subsequent Sale of Series B Preferred Stock.................... 1
2. Representations and Warranties of the Company........................ 1
2.1 Organization, Good Standing and Qualification.................. 2
2.2 Capitalization and Voting Rights............................... 2
2.3 Subsidiaries................................................... 3
2.4 Authorization.................................................. 3
2.5 Valid Issuance of Preferred and Common Stock................... 3
2.6 Governmental Consents.......................................... 3
2.7 Offering....................................................... 4
2.8 Litigation..................................................... 4
2.9 Patents and Other Intangible Assets............................ 4
2.10 No Violations; Compliance with Other Instruments............... 4
2.11 Agreements; Action............................................. 4
2.12 Related-Party Transactions..................................... 5
2.13 Permits........................................................ 5
2.14 Financial Statements........................................... 5
2.15 Taxes.......................................................... 6
2.16 Employee Benefits.............................................. 6
2.17 Proprietary Information and Inventions Assignment Agreements... 6
3. Representations and Warranties of the Purchasers..................... 6
3.1 Authorization.................................................. 6
3.2 Purchase Entirely for Own Account.............................. 6
3.3 Disclosure of Information...................................... 7
3.4 Investment Experience.......................................... 7
3.5 Accredited Purchaser........................................... 7
3.6 Restricted Securities.......................................... 7
3.7 Further Limitations on Disposition............................. 7
3.8 Legends........................................................ 8
4. Additional Covenants................................................. 8
4.1 Registration Rights............................................ 8
4.2 Restriction on Transfer; Right of First Refusal................ 18
4.3 Mergers and Other Extraordinary Transactions................... 19
4.4 Financial Information.......................................... 20
4.5 Confidentiality................................................ 21
</TABLE>
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<TABLE>
<S> <C>
5. California Commissioner of Corporations............................. 21
5.1 Corporate Securities Law...................................... 21
6. Conditions of Purchaser's Obligations at Closing.................... 21
6.1 Representations and Warranties................................ 21
6.2 Performance................................................... 21
6.3 Compliance Certificate........................................ 21
6.4 Qualifications................................................ 21
6.5 Proceedings and Documents..................................... 22
6.6 Certificate of Designations, Preferences and Rights........... 22
6.7 Opinion of Company Counsel.................................... 22
6.8 No Injunction................................................. 22
7. Conditions of the Company's Obligations at Closing.................. 22
7.1 Representations and Warranties................................ 22
7.2 Payment of Purchase Price..................................... 22
7.3 Qualifications................................................ 22
8. Miscellaneous....................................................... 22
8.1 Survival of Representations, Warranties and Covenants......... 22
8.2 Successors and Assigns........................................ 22
8.3 Governing Law................................................. 23
8.4 Counterparts.................................................. 23
8.5 Titles and Subtitles.......................................... 23
8.6 Notices....................................................... 23
8.7 Finder's Fee.................................................. 23
8.8 Amendments and Waivers........................................ 24
8.9 Entire Agreement.............................................. 24
8.10 Severability.................................................. 24
8.11 Aggregation of Stock.......................................... 24
8.12 No Third Party Beneficiaries.................................. 24
</TABLE>
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<PAGE>
INTERTRUST TECHNOLOGIES CORPORATION
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES B PREFERRED STOCK PURCHASE AGREEMENT is made as of the 1st
day of August 1996, by and between InterTrust Technologies Corporation, a
Delaware corporation (the "Company"), and the purchasers listed on Schedule A
----------
hereto, each of whom is herein referred to as a "Purchaser."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
--------------------------
1.1 Sale and Issuance of Series B Preferred Stock.
---------------------------------------------
(a) The Company shall adopt and file with the Secretary of
State of Delaware on or before the Closing (as defined below) the Certificate of
Designations, Preferences and Rights in the form attached hereto as Exhibit A
---------
(the "Certificate of Designations, Preferences and Rights").
(b) Subject to the terms and conditions of this Agreement,
each Purchaser agrees, severally, to purchase at the Closing and the Company
agrees to sell and issue to each Purchaser at the Closing that number of shares
of the Company's Series B Preferred Stock set forth opposite each Purchaser's
name on Schedule A hereto at a purchase price of $8.57 per share, for an
----------
aggregate purchase price set forth on Schedule A.
----------
1.2 Closing. The purchase and sale of the Series B Preferred
-------
Stock shall take place at the offices of the Company at 460 Oakmead Parkway,
Sunnyvale, California 94086, concurrently with the execution and delivery of
this Agreement or at such other time and place as the Company and Purchasers
acquiring in the aggregate more than half the shares of Series B Preferred Stock
sold pursuant hereto mutually agree upon orally or in writing (which time and
place are designated the "Closing"). At the Closing the Company shall deliver to
each Purchaser a certificate representing the Series B Preferred Stock that such
Purchaser is purchasing against payment of the purchase price therefor by check
or wire transfer.
1.3 Subsequent Sale of Series B Preferred Stock. The Company may
-------------------------------------------
sell up to the balance of the authorized number of shares of Series B Preferred
Stock not sold at the Closing to such purchasers as it shall select, at a price
not less than $8.57 per share, in one or more subsequent closings.
2. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to each Purchaser that, except as set forth on a
Schedule of Exceptions (the "Schedule of Exceptions") attached hereto as Exhibit
-------
B, which exceptions shall be deemed to be representations and warranties as if
- -
made hereunder:
<PAGE>
2.1 Organization, Good Standing and Qualification. The Company is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as now conducted. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure to so qualify would have a material adverse effect on its financial
condition, business, prospects or results of operations.
2.2 Capitalization and Voting Rights. The authorized capital of the
--------------------------------
Company consists, or will consist immediately prior to the Closing, of:
(a) Preferred Stock. 10,000,000 shares of Preferred Stock (the
---------------
"Preferred Stock"), 2,500,000 of which shares have been designated Series A
Preferred Stock (the "Series A Preferred Stock") and 1,399,575 of which shares
have been designated Series B Preferred Stock (the "Series B Preferred Stock").
1,983,333 shares of Series A Preferred Stock are issued and outstanding. The
rights, privileges and preferences of the Series A Preferred Stock are as stated
in the Company's Restated Certificate of Incorporation. The rights, privileges
and preferences of the Series B Preferred Stock will be as stated in the
Certificate of Designations, Preferences and Rights.
(b) Common Stock. 50,000,000 shares of Common Stock ("Common
------------
Stock"), 30,000,000 of which are designated Class A Voting Common Stock, and
20,000,000 of which are designated Class B Non-Voting Common Stock. 6,384,059
shares of Class A Voting Common Stock are issued and outstanding. 379,170 shares
of Class B Non-Voting Common Stock are issued and outstanding.
(c) The outstanding shares of Common Stock and the outstanding
shares of Series A Preferred Stock are all duly and validly authorized and
issued, fully paid and nonassessable, and were issued in accordance with the
registration or qualification provisions of the Securities Act of 1933, as
amended (the "Act") and any relevant state securities laws or pursuant to valid
exemptions therefrom.
(d) Except for the conversion privileges of the Series A
Preferred Stock, the conversion privileges of the Series B Preferred Stock to be
issued under this Agreement, outstanding options issued to directors, employees
and consultants to purchase 653,500 shares of Class A Voting Common Stock and
1,570,564 shares of Class B Non-Voting Common Stock, warrants outstanding which
are exercisable for 176,000 shares of Class A Voting Common Stock and 155,508
shares of Class B Non-Voting Common Stock, there are no outstanding options,
warrants, rights (including conversion or, except as set forth on the Schedule
of Exceptions, any preemptive rights) or agreements for the purchase or
acquisition from the Company of any shares of its capital stock. In addition to
the foregoing, the Company has reserved 516,500 shares of its Class A Voting
Common Stock for issuance upon exercise of additional options to be granted
under the Company's 1995 Stock Plan. The Company is not a party or subject to
any agreement or understanding, and, to the best of the Company's knowledge,
there is no agreement or understanding between any persons and/or entities,
which
-2-
<PAGE>
affects or relates to the voting or giving of written consents with respect to
any security or by a director of the Company.
2.3 Subsidiaries. The Company does not presently own or control,
------------
directly or indirectly, any interest in any other corporation, association, or
other business entity. The Company is not a participant in any joint venture,
partnership, or similar arrangement.
2.4 Authorization. All corporate action on the part of the Company,
-------------
its officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement, the performance of all obligations of
the Company hereunder, and the authorization, issuance (or reservation for
issuance), sale and delivery of the Series B Preferred Stock being sold
hereunder and the Class A Voting Common Stock issuable upon conversion of the
Series B Preferred Stock has been taken or will be taken prior to the Closing,
and this Agreement constitutes a valid and legally binding obligation of the
Company, enforceable in accordance with its terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of
general application affecting enforcement of creditors' rights generally, and
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies.
2.5 Valid Issuance of Preferred and Common Stock. The Series B
--------------------------------------------
Preferred Stock that is being purchased by the Purchasers hereunder, when
issued, sold and delivered in accordance with the terms of this Agreement for
the consideration expressed herein, will be duly authorized and validly issued,
fully paid, and nonassessable, and will be free of restrictions on transfer
other than restrictions on transfer under this Agreement and under applicable
state and federal securities laws. The Class A Voting Common Stock issuable
upon conversion of the Series B Preferred Stock purchased under this Agreement
has been duly authorized and validly reserved for issuance and, upon issuance in
accordance with the terms of the Certificate of Designations, Preferences and
Rights, will be duly authorized and validly issued, fully paid, and
nonassessable and free of any liens or encumbrances created by the Company and
will be free of restrictions on transfer other than restrictions on transfer
under this Agreement and under applicable state and federal securities laws.
2.6 No Violation; Governmental Consents.
-----------------------------------
(a) The Company has complied with all federal, state, local and
foreign laws, regulations and orders applicable to its business except where the
failure to so comply would not have a material adverse effect on its financial
condition, business, prospects or results of operations. The execution,
delivery and performance of this Agreement and consummation of the transactions
contemplated hereby will not violate or be in conflict with any provision of
law, any order, rule or regulation of any court or other agency of government.
(b) No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement, except for the filing pursuant to Section 25102(f)
-3-
<PAGE>
of the California Corporate Securities Law of 1968, as amended, and the rules
thereunder and the filing under Regulation D under the Act.
2.7 Offering. Subject in part to the truth and accuracy of each
--------
Purchaser's representations set forth in Section 3 of this Agreement, the offer,
sale and issuance of the Series B Preferred Stock as contemplated by this
Agreement are exempt from the registration requirements of the Act.
2.8 Litigation. Except as set forth on the Schedule of Exceptions,
----------
there is no action, suit, proceeding or investigation pending or, to the
knowledge of the Company, currently threatened against the Company that
questions the validity of this Agreement or the right of the Company to enter
into this Agreement, or to consummate the transactions contemplated hereby, or
that would result, either individually or in the aggregate, in any material
adverse changes in the financial condition or results of operations of the
Company. The Company is not a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or that the Company intends to initiate.
2.9 Patents and Other Intangible Assets. The Company owns all of its
-----------------------------------
granted, pending or common law rights in its patents, trademarks, tradenames and
copyrights. The Company has a license under any and all patents, patent
applications, trademarks, trade names, brand names, inventions, processes,
formulae or copyrights not owned by it to the extent that the Company knows to
be necessary for the operation of the business of the Company as now conducted
and as proposed to be conducted (the "Necessary Intellectual Property").
Without having conducted any special infringement or patent search, except as
set forth on the Schedule of Exceptions the Company is unaware of any
infringement of or conflict with the rights of others with respect to the
Necessary Intellectual Property.
2.10 Compliance with Other Instruments. The Company is not in
---------------------------------
violation or default in any respect of any provision of its Restated Certificate
of Incorporation or Bylaws, or any instrument, judgment, order, writ, decree or
material contract to which it is a party or by which it is bound. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not result in any such violation or be
in conflict with or constitute, with or without the passage of time and giving
of notice, either a default under any such provision, instrument, judgment,
order, writ, decree or contract or an event that results in the creation of any
lien, charge or encumbrance upon any assets of the Company or the suspension,
revocation, impairment, forfeiture, or nonrenewal of any material permit,
license, authorization, or approval applicable to the Company, its business or
operations or any of its assets or properties.
2.11 Agreements; Action. Except as set forth in the Financial
------------------
Statements (defined below) and the Schedule of Exceptions:
(a) There are no instruments, judgments, orders, writs, decrees
or contracts to which the Company is a party or by which it is bound that may
involve (i) obligations (contingent or otherwise) of, or payments to the Company
in excess of $50,000, or
-4-
<PAGE>
(ii) the license of any patent, copyright, trade secret or other proprietary
right to or from the Company, or (iii) provisions restricting the development or
distribution of the Company's products or services.
(b) The Company has not (i) declared or paid any dividends or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred or guaranteed any indebtedness for money
borrowed individually in excess of $50,000 or, in the case of indebtedness
and/or liabilities individually less than $50,000, in excess of $100,000 in the
aggregate, (iii) made any loans or advances in excess of $10,000 to any person,
other than ordinary advances for travel expenses, or (iv) sold, exchanged or
otherwise disposed of any of its assets or rights.
(c) For the purposes of subsections (a) and (b) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
2.12 Related-Party Transactions. Except as set forth in the Schedule
--------------------------
of Exceptions, no officer or director of the Company or member of his or her
immediate family is indebted to the Company, nor is the Company indebted (or
committed to make loans or extend or guarantee credit) to any of them. To the
best of the Company's knowledge, none of such persons has any direct or indirect
ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation that competes with the Company, except that officers or directors of
the Company and members of their immediate families may own stock in publicly
traded companies that may compete with the Company. No member of the immediate
family of any officer or director of the Company is directly or indirectly
interested in any material contract with the Company.
2.13 Permits. The Company has all franchises, permits, licenses, and
-------
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
financial condition or results of operations of the Company, and the Company
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as planned to be conducted. The Company is not
in default in any material respect under any of such franchises, permits,
licenses, or other similar authority.
2.14 Financial Statements. The Company has furnished to each
--------------------
Purchaser its audited balance sheet and related statements of operations,
stockholders' equity and cash flows for the years ended December 31, 1994 and
1995 and its unaudited balance sheet and related unaudited statements of
operations, stockholders' equity and cash flows for the quarters ended March 31,
1996 and June 30, 1996 (the "Financial Statements"). The Financial Statements
have been prepared in accordance with generally accepted accounting principles
(except for the omission of footnotes, and subject to year-end adjustments as
may be required under generally accepted accounting principles in the case of
the unaudited statements) and fairly present the
-5-
<PAGE>
financial position of the Company as of the date thereof and the results of its
operations and cash flows for the period then ended. Except as disclosed or
provided for in the balance sheets as of December 31, 1995 or June 30, 1996 or
in the Schedule of Exceptions, there are no material liabilities of the Company
of any kind whatsoever, whether accrued, contingent or otherwise, other than
liabilities incurred in the ordinary course of business consistent with past
practice since the date of such balance sheets. Since June 30, 1996, there has
not been any material adverse change in the financial position or the earnings
or operations of the Company.
2.15 Taxes. The Company has prepared and timely filed all income tax
-----
returns and other material tax returns which are required to be filed, and has
paid, or made provision for the payment of, all taxes which have or may have
become due pursuant to said returns or pursuant to any assessment which has been
received by it. No federal or state income or sales tax returns of the Company
have been audited, and no deficiency assessment or proposed adjustment of the
Company's United States income tax, state or municipal taxes or sales taxes is
pending.
2.16 Employee Benefit Plans. Except as set forth in the Schedule of
----------------------
Exceptions, the Company does not have any "Employee Benefit Plan" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). No officer, director or employee of the Company has committed a
material breach of any responsibility or obligation imposed upon fiduciaries by
Title I of ERISA with respect to any Employee Benefit Plan. Each Employee
Benefit Plan has at all times prior hereto been maintained in accordance with
its terms and all applicable laws, except where the failure to do so would not
have a material adverse effect upon the Company. With respect to each Employee
Benefit Plan, other than ordinary claims for benefits pursuant to the terms of
such plan, there is no claim pending or, to its knowledge, threatened against or
involving such plan by any person or governmental authority.
2.17 Proprietary Information and Inventions Assignment Agreements.
------------------------------------------------------------
Each employee, officer and consultant of the Company has executed a Company
Proprietary Information and Inventions Assignment Agreement. The Company is not
aware that any of its employees, officers or consultants are in violation
thereof.
3. Representations and Warranties of the Purchasers. Each Purchaser
------------------------------------------------
hereby represents and warrants, severally, that:
3.1 Authorization. Such Purchaser has full power and authority to
-------------
enter into this Agreement and each such Agreement constitutes its valid and
legally binding obligation, enforceable in accordance with its terms, except as
limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium,
and other laws of general application affecting enforcement of creditors' rights
generally, and (ii) laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies.
3.2 Purchase Entirely for Own Account. This Agreement is made with
---------------------------------
such Purchaser in reliance upon such Purchaser's representation to the Company,
which by such Purchaser's execution of this Agreement such Purchaser hereby
confirms, that the Series B
-6-
<PAGE>
Preferred Stock to be received by such Purchaser and the Class A Voting Common
Stock issuable upon conversion thereof (collectively, the "Securities") will be
acquired for investment for such Purchaser's own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof,
and that such Purchaser has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this
Agreement, such Purchaser further represents that such Purchaser does not have
any contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person or to any third person, with
respect to any of the Securities.
3.3 Disclosure of Information. Such Purchaser represents that it has
-------------------------
received all the information it considers necessary or appropriate for deciding
whether to purchase the Series B Preferred Stock. Such Purchaser further
represents that it has had an opportunity to ask questions and receive answers
from the Company regarding the terms and conditions of the offering of the
Series B Preferred Stock and the business, properties, prospects, financial
condition and results of operations of the Company.
3.4 Investment Experience. Such Purchaser is an investor in
---------------------
securities of companies in the development stage and acknowledges that he is
able to fend for himself, can bear the economic risk of his investment, and has
such knowledge and experience in financial or business matters that he is
capable of evaluating the merits and risks of the investment in the Series B
Preferred Stock. If other than an individual, Purchaser also represents either
(i) that it has not been organized for the purpose of acquiring the Series B
Preferred Stock or (ii) that if such Purchaser has been organized for the
purpose of acquiring the Series B Preferred Stock, that each of the equity
owners of such Purchaser is an investor of companies in the development stage
who is able to fend for himself, bear the economic risk of his investment in the
Purchaser and has such knowledge and experience in financial or business matters
that he is capable of evaluating the merits and risks of his investment in such
Purchaser.
3.5 Accredited Investor. Such Purchaser is an "accredited investor"
-------------------
within the meaning of Securities and Exchange Commission ("SEC") Rule 501 of
Regulation D under the Act, as presently in effect.
3.6 Restricted Securities. Such Purchaser understands that the
---------------------
Securities are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such Securities may be resold without registration under
the Act only in certain limited circumstances. In this connection, such
Purchaser represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the Act.
3.7 Further Limitations on Disposition. Without in any way limiting
----------------------------------
the representations set forth above, such Purchaser further agrees not to make
any disposition of all or any portion of the Securities unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 3 and:
-7-
<PAGE>
(a) There is then in effect a registration statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) Such Purchaser shall have notified the Company of the
proposed disposition and shall have furnished the Company, if reasonably
requested by the Company, with an opinion of counsel, reasonably satisfactory to
the Company that such disposition will not require registration of such shares
under the Act.
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by a Purchaser that is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the date
hereof, or to a shareholder of an investment corporation, or to the estate of
any such partner or retired partner or shareholder or the transfer by gift, will
or intestate succession of any such partner or shareholder to his or her spouse
or to the siblings, lineal descendants or ancestors of such partner or
shareholder or his or her spouse, if the transferee agrees in writing to be
subject to the terms hereof to the same extent as if he or she were an original
Purchaser hereunder.
3.8 Legends. It is understood that the certificates evidencing the
-------
Securities may bear one or all of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not required or unless
sold pursuant to Rule 144 of such Act."
(b) "The sale or transfer of these securities is restricted under
the terms of a Series B Preferred Stock Purchase Agreement dated as of August 1,
1996 between the Company and the purchasers listed on Schedule A thereto, a copy
of which agreement is on file at the principal office of the Company."
(c) Any legend required by the laws of the State of California,
including any legend required by the California Department of Corporations and
Sections 417 and 418 of the California Corporations Code.
4. Additional Covenants.
--------------------
4.1 Registration Rights.
-------------------
(a) Definitions. The following terms shall have the following
-----------
respective meanings:
(i) "Expenses of Registration" shall have the meaning
specified in Section 4.1(e).
-8-
<PAGE>
(ii) "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(iii) "Holder" or "Holders" means any holder of
outstanding Registrable Securities.
(iv) "Holder or Holders of Series A Registrable
Securities" means any holder of outstanding Series A Registrable Securities.
(v) "Holder or Holders of Series B Registrable
Securities" means any holder of outstanding Series B Registrable Securities.
(vi) "Initiating Holders" means any Holder or Holders who
individually or in the aggregate hold not less than 25% of the Registrable
Securities.
(vii) "Initial Public Offering" means the Company's sale
of its Common Stock in a bona fide underwriting pursuant to a registration
statement under the Act, the public offering price of which is not less than
$7.50 per share (as adjusted for stock dividends, stock splits or
recapitalizations) and for an aggregate offering price, net of underwriters'
discounts and commissions, of more than $10,000,000.
(viii) "Lead Series A Investor" means ATGF II, a fund
organized under the laws of Panama, its affiliates, or its transferees permitted
under Section 4.1(i) of the Series A Preferred Stock Agreement.
(ix) "register", "registered" and "registration" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Act, and the declaration or ordering of the effectiveness of
such registration statement.
(x) "Other Series Registrable Securities" means the
Registrable Securities described in clauses (ii) and (iii) of the definition of
Registrable Securities in Section 4.1(a)(xi).
(xi) "Registrable Securities" means (i) the shares of
Class A Voting Common Stock issuable or issued upon conversion of the
outstanding Series A Preferred Stock and any other shares of the Common Stock
issued as (or issuable upon conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to or exchange for or replacement of, the outstanding Series A Preferred Stock,
(ii) the shares of Class A Voting Common Stock issuable or issued upon
conversion of the outstanding Series B Preferred Stock and any other share of
the Common Stock issued as (or issuable upon conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to or exchange for or replacement of the outstanding
Series B Preferred Stock, and (iii) the shares of the Common Stock issuable or
issued upon conversion of any series of Preferred Stock that may from time to
time come into existence as to
-9-
<PAGE>
which the Company may grant rights to have such shares of the Common Stock
registered and any other shares of the Common Stock issued as (or issuable upon
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to or exchange for or
replacement of such series of Preferred Stock, excluding in all cases, however,
any Registrable Securities sold by a person in a transaction in which a Holder's
rights under this Agreement, under the Series A Preferred Stock Agreement or
under the agreement(s) pursuant to which any series of Preferred Stock that may
from time to time come into existence may be purchased are not assigned;
provided, however, that Registrable Securities shall only be treated as
- -------- -------
Registrable Securities if, and so long as, they have not been (A) sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, or (B) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Act under Section 4(1)
thereof so that all transfer restrictions and restrictive legends with respect
thereto may legally be removed upon the consummation of such sale.
(xii) "Series A Preferred Stock Agreement" means that
certain Series A Preferred Stock Purchase Agreement dated March 15, 1996 between
the Company and the purchasers listed on Schedule A thereto and all amendments
and supplements thereto.
(xiii) "Series A Registrable Securities" means the
Registrable Securities described in clause (i) of the definition of Registrable
Securities in Section 4.1(a)(xi) hereof.
(xiv) "Series B Registrable Securities" means the
Registrable Securities described in clause (ii) of the definition of Registrable
Securities in Section 4.1(a)(xi) hereof.
(b) Demand Registration.
-------------------
(i) Request for Registration. In case the Company shall
------------------------
receive from Initiating Holders a written request (the "Request") that the
Company effect any registration with respect to not less than 25% of the
Registrable Securities then outstanding, or any lesser percentage of Registrable
Securities if the anticipated aggregate offering price, net of underwriters'
discounts and commissions, would exceed $3,000,000, the Company wil l
(1) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders in accordance
with Section 8.6; and
(2) as soon as practicable, use its reasonable efforts
to effect such registration (including, without limitation, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Act and any
other governmental requirements or regulations) as may be so requested and as
would permit or facilitate the sale and distribution of all or such portion of
such Registrable Securities as are specified in the Request, together with all
or such portion of the Registrable Securities of any Holder or Holders joining
in the Request as are specified in a written notice received by the Company
within twenty (20) days after such Holder's receipt of written notice provided
by the Company pursuant to Section 4.1(b)(i)(1); provided, however, that
-10-
<PAGE>
the Company shall not be obligated to take any action to effect any such
registration pursuant to this Section 4.1(b):
A. In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration unless the Company is already subject to service in
such jurisdiction and except as may be required by the Act;
B. Prior to 270 days following the effective date of
the Initial Public Offering;
C. During the period starting with the date of filing
of, and ending on the date 180 days immediately following the effective date of,
any general form of registration statement pertaining to sale by the Company of
Common Stock or securities which are immediately convertible at the option of
the holder or convertible within twelve (12) months from the date of issuance
into Common Stock, provided that the Company is actively employing in good faith
all reasonable efforts to cause such registration statement to become effective;
D. After the Company has effected one (1) such
registration pursuant to this Section 4.1(b) provided that if the first
--------
registration pursuant to this Section 4.1(b) shall be underwritten and if less
than 50% of the Series B Registrable Securities then outstanding held by the
Initiating Holder and all Holders who join in the Request in the manner, and at
the time, specified in Section 4.1(b)(i)(2) shall be, or shall have been,
included in such underwriting and in any underwriting described in Section
4.1(c)(ii) which has been consummated prior to the date of such underwriting,
then the Company shall be obligated to effect an additional registration
pursuant to this Section 4.1(b); or
E. If the Company shall furnish to such Initiating
Holders a certificate signed by the Chief Executive Officer of the Company
stating that in the good faith judgment of the Company's Board of Directors it
would be seriously detrimental to the Company or its stockholders for a
registration statement to be filed at the date filing would be required, in
which case the Company's obligation to use its reasonable efforts to register
under this Section 4.1(b) shall be deferred for a period not to exceed 120 days
from the date of receipt of the Request, provided that the Company may not
exercise this deferral right more than once during any twelve (12) month period.
(ii) Underwriting. If any registration pursuant to Section
------------
4.1(b) shall be underwritten, the right of any Holder to registration pursuant
to Section 4.1(b) shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in such
underwriting as prescribed herein (unless otherwise mutually agreed by a
majority in interest of the Initiating Holders and each such Holder). The
Company shall (together with all Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected by the Company for such
underwriting (the "Managing Underwriter"). Notwithstanding any other provision
of this Section 4.1(b), if the Managing Underwriter advises
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<PAGE>
the Initiating Holders or the Company in writing that the number of Registrable
Securities proposed to be registered by such Initiating Holder or Holders
exceeds the maximum number of such shares which the Managing Underwriter
considers, in good faith, to be appropriate based upon market conditions and
other relevant factors (the "Maximum Number"), then (1) the Company shall so
advise all Holders, (2) the Lead Series A Investor shall be entitled to include
Registrable Securities in such underwriting up to the Maximum Number, (3) if the
Lead Series A Investor elects to include in such underwriting a number of its
Registrable Securities which is less than the Maximum Number (the "Series A
Portion"), the Initiating Holders of Series A Registrable Securities (if
different than the Lead Series A Investor) and those Holders of Series A
Registrable Securities (other than the Lead Series A Investor) joining in the
Request shall be entitled to include in such underwriting their pro-rata share
of Series A Registrable Securities up to that number of shares equal to the
difference between the Maximum Number and the Series A Portion and (4) if the
Holders of Series A Registrable Securities (including the Lead Series A
Investor) elect to include in such underwriting a number of their Registrable
Securities which is less than the Maximum Number, the Holders of Other Series
Registrable Securities joining in the Request shall be entitled to include in
such underwriting their pro-rata share of Other Series Registrable Securities up
to that number of shares equal to the difference between the Maximum Number and
the total number of shares that the Holders of Series A Registrable Securities
(including the Lead Series A Investor) elect to include in such underwriting.
For purposes of the preceding sentence, (x) a Holder's "pro-rata share of Series
A Registrable Securities" shall mean the quotient obtained by dividing the
number of Series A Registrable Securities held by such Holder by the sum of all
of the Series A Registrable Securities held by the Initiating Holders (if
different than the Lead Series A Investor) and those Holders of Series A
Registrable Securities (other than the Lead Series A Investor) joining in the
Request and (y) a Holder's "pro-rata share of the Other Series Registrable
Securities" shall mean the quotient obtained by dividing the number of Other
Series Registrable Securities held by such Holder by the sum of all of the Other
Series Registrable Securities held by the Initiating Holders and those Holders
of Other Series Registrable Securities joining in the Request. No Registrable
Securities excluded from the underwriting by reason of the Managing
Underwriter's marketing limitation shall be included in such underwriting. To
facilitate the allocation of shares in accordance with the above provisions, the
Company or the underwriters may round the number of shares allocated to any
Holder to the nearest 100 shares. If any Holder declines to participate upon
review of the terms of the underwriting, such Holder may elect to withdraw
therefrom by written notice to the Company, the Managing Underwriter and the
Initiating Holders. The Registrable Securities and/or other securities so
withdrawn shall also be withdrawn from registration, and such Registrable
Securities shall not be transferred in a public distribution prior to 180 days
after the effective date of such registration, or such other shorter period of
time as the underwriters may require. If the underwriter has not limited the
number of Registrable Securities to be underwritten, or if Holders have elected
to include less than the Maximum Number in such underwriting, the Company may
include securities for its own account (or for the account of other
stockholders) in such registration if the Managing Underwriter so agrees and if
the number of Registrable Securities that would otherwise have been included in
such registration and underwriting will not thereby be limited.
-12-
<PAGE>
(iii) The Company shall pay the Expenses of Registration
for one (1) registration requested pursuant to this Section 4.1(b).
Notwithstanding the immediately preceding sentence, in the event that the
Company is obligated to effect an additional registration pursuant to the
proviso to Section 4.1(b)(2)(D), then the Company shall pay the Expenses of
Registration for two (2) registrations requested pursuant to this Section
4.1(b).
(c) Company Registration.
--------------------
(i) Notice of Registration. If (but without any obligation
----------------------
to do so) at any time after the Initial Public Offering the Company proposes to
register any of its Common Stock or other securities under the Act in connection
with the public offering of such securities solely for cash (other than a
registration relating either to the sale of securities to participants in a
Company stock option, stock purchase or similar plan or to an SEC Rule 145
transaction, or a registration on Form S-8, Form S-4 or any successors to such
forms, the Company shall, at such time, promptly give each Holder written notice
of such registration. Upon the written request of any Holder given within twenty
(20) days from receipt of such notice by the Company in accordance with Section
8.6, the Company shall, subject to the provisions of Section 4.1(c)(ii) and
4.1(d), cause to be registered under the Act all of the Registrable Securities
that each such Holder has requested to be registered.
(ii) Underwriting Requirements. In connection with any
-------------------------
offering pursuant to this Section 4.1(c), the Company shall not be required to
include any of the Holders' securities in such underwriting unless they accept
the terms of the underwriting as agreed upon between the Company and the
underwriters selected by it, and then only in such quantity as will not, in the
opinion of the underwriters, adversely affect the success of the offering by the
Company. If the total amount of securities, including Registrable Securities,
requested by stockholders to be included in such offering exceeds the amount of
securities sold other than by the Company that the underwriters reasonably
believe would not adversely affect the success of the offering, then the Company
shall be required to include in the offering only that number of such
securities, including Registrable Securities, which the underwriters believe
will not adversely affect the success of the offering (the securities so
included to be apportioned first to the Company, then second pro rata among the
selling Holders of Series A Registrable Securities according to the total amount
of Series A Registrable Securities owned by each selling Holder, then third pro
rata among the selling Holders of Other Series Registrable Securities according
to the total amount of Other Series Registrable Securities owned by each selling
Holder and then fourth to all other selling stockholders, or in such other
proportions as shall mutually be agreed to by all such parties), it being
understood that all Registrable Securities may be excluded from the registration
on this basis. For any selling stockholder which is a holder of Registrable
Securities and which is a partnership or corporation, the partners, retired
partners and stockholders of such holder, or the estates and family members of
any such partners and retired partners and any trusts for the benefit of any of
the foregoing persons shall be deemed to be a single "selling stockholder," and
any pro rata reduction with respect to such "selling stockholder" shall be based
upon the aggregate amount of Registrable Securities owned by all entities and
individuals included in such "selling stockholder," as defined in this sentence.
-13-
<PAGE>
(iii) The Company shall pay the Expenses of
Registration for two (2) registrations requested pursuant to this Section
4.1(c).
(d) Furnish Information. It shall be a condition precedent
-------------------
to the obligations of the Company to take any action pursuant to this Section
4.1 with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities.
(e) Expenses of Registration. The term "Expenses of
------------------------
Registration" means all expenses other than underwriting discounts and
commissions incurred in connection with registrations, filings or qualifications
pursuant to this Section 4.1, including (without limitation), all registration,
filing and qualification fees, printers and accounting fees, fees and
disbursements of counsel for the Company. Expenses of Registration does not
include the fees and disbursements of counsel for the selling Holders.
(f) No Delay of Registration No Holder shall have any right
------------------------
to obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 4.1.
(g) Indemnification In the event any Registrable Securities
---------------
are included in a registration statement under this Section 4.1:
(i) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder of Series B Registrable Securities, any
underwriter (as defined in the Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the Act or the
Securities Exchange Act of 1934, as amended (the "1934 Act"), against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) that arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
of a material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Act, the 1934 Act, any state securities law or any rule or
regulation promulgated under the Act, the 1934 Act or any state securities law;
and the Company will pay, as incurred, to each such Holder, underwriter or
controlling person, to the extent (and only to the extent) that such losses,
claims, damages, or liabilities arise out of a Violation, any legal or other
expenses reasonably incurred by any person intended to be indemnified pursuant
to this Section 4.1(g) in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section 4.1(g) shall not apply to amounts paid in
settlement of any such loss, claim, damage,
-14-
<PAGE>
liability, or action if such settlement is effected without the consent of the
Company, nor shall the Company be liable in any such case for any such loss,
claim, damage, liability, or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Holder, underwriter or controlling person.
(ii) To the extent permitted by law, each selling Holder
of Series B Registrable Securities will indemnify and hold harmless the Company,
each of its directors, each of its officers who has signed the registration
statement, each person, if any, who controls the Company within the meaning of
the Act, any underwriter, any other Holder selling securities in such
registration statement and any controlling person of any such underwriter or
other Holder, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the
Act, the 1934 Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with information
furnished by such Holder expressly for use in connection with such registration;
and each such Holder will pay, as incurred, any legal or other expenses
reasonably incurred by any person intended to be indemnified pursuant to this
Section 4.1(g)(ii), in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section 4.1(g)(ii) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder. Nothing contained in
this Section 4.1(g)(ii) is intended to preclude the underwriters in any offering
from requiring broader indemnities from the Holders participating in such
offering.
(iii) Promptly after receipt by an indemnified party under
this Section 4.1 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 4.1, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain separate counsel of its own, with the reasonable fees
and expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding; provided further that the indemnifying party shall not be
responsible for the fees and expenses of more than one separate counsel for all
indemnified parties. The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action, if
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
4.1 (to the extent of such prejudicial effect), but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 4.1.
-15-
<PAGE>
(iv) No indemnifying party, in the defense of any claim
arising out of a Violation shall, except with the consent of each indemnified
party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation and, in the event the terms of such judgment or
settlement include any term other than the payment by the indemnifying party of
money damages, the indemnifying party shall not so consent or enter into such a
settlement without the consent of each indemnified party (which will not be
unreasonably withheld) whether or not the terms thereof include such a release.
(v) The obligations of the Company and Holders under this
Section 4.1 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 4.1, and otherwise.
(h) Form S-3 Registration. In case the Company shall receive
---------------------
from any Holder or Holders a written request that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:
(i) Promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders;
and
(ii) As soon as practicable, effect such registration and
all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in a written request
given within twenty (20) days after receipt of such written notice from the
Company in accordance with Section 8.6; provided, however, that the Company
shall not be obligated to effect any such registration, qualification or
compliance, pursuant to this Section 4.1(h):
(1) If Form S-3 is not available for such offering
by the Holders;
(2) Unless the Holders, together with the holders of
any other securities of the Company entitled to inclusion in such registration,
propose to sell either (x) Registrable Securities having an aggregate price to
the public (net of any underwriters' discounts and commissions) in excess of
$2,000,000; or (y) not less than 15% of the Registrable Securities then
outstanding;
(3) If the Company shall furnish to the Holders a
certificate signed by the Chief Executive Officer of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company for such Form S-3 registration to be
effected at such time, in which event the Company shall have the right to defer
the filing of the Form S-3 registration statement for a period of not more than
120 days after receipt of the request of the Holder or Holders under this
-16-
<PAGE>
Section 4.1(h); provided, however, that the Company shall not utilize this right
more than once in any twelve (12) month period;
(4) If the Company has completed its Initial Public
Offering within 180 days of the Company's receipt of the request for the Form S-
3 registration; or
(5) In any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.
(iii) Notwithstanding anything to the contrary herein, the
Company shall not be obligated to effect more than two (2) registrations
pursuant to this Section 4.1(h), and no more than one (1) such registration in
any twelve (12) month period.
(iv) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. The Company shall pay the Expenses of
Registration for two (2) registrations requested pursuant to this Section
4.1(h). Registrations effected pursuant to this Section 4.1(h) shall not be
counted as registrations effected pursuant to Sections 4.1 (b) or (c).
(i) Assignment of Registration Rights. The rights to cause the
---------------------------------
Company to register Registrable Securities pursuant to this Section 4.1 may only
be assigned by a Holder to a transferee who acquires all of such Holder's
shares, provided the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee; and
provided, further, that such assignment shall be effective only if immediately
following such transfer the further disposition of such securities by the
transferee or assignee is restricted under the Act. Notwithstanding the
immediately preceding sentence, a Purchaser may assign the rights to cause the
Company to register Registrable Securities pursuant to this Section 4.1 to an
investment fund or funds managed by it (a "Permitted Fund Transferee") which
acquires less than all of the Purchaser's shares if prior to such assignment and
transfer, the Purchaser submits to the Company an irrevocable, joint and several
undertaking for the benefit of the Company executed by the Purchaser and the
Permitted Fund Transferee(s) to exercise all of their rights to register
Registrable Securities pursuant to this Section 4.1 in tandem, in a manner
consistent with holding such rights as a group and exclusively represented on
all matters arising under this Agreement by a single Purchaser or Permitted Fund
Transferee appointed in such undertaking by the other parties thereto.
(j) "Market Stand-Off" Agreement. Each Purchaser hereby agrees
---------------------------
that during the 180 day period following the effective date of each of (i) a
registration statement of the Company filed under the Act in connection with the
Initial Public Offering and (ii) the registration statement filed under the Act
with respect to an underwritten offering of Common Stock (or securities which
are immediately convertible at the option of the holder or convertible within
twelve (12) months from the date of issuance into Common Stock) after the
Initial Public Offering, it shall not sell, offer to sell, or otherwise transfer
or dispose of any capital stock of the
-17-
<PAGE>
Company held by it at any time during such period except to the extent such
Purchaser participates as a selling stockholder in such registrations. To
enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to the Registrable Securities of the Purchaser (and
the shares or securities of every other person subject to the foregoing
restriction) until the end of such period. Each Holder agrees to execute the
form of such market stand-off agreement as may be reasonably requested by the
underwriters.
(k) Termination or Amendment of Registration Rights. The
-----------------------------------------------
registration rights granted under this Section 4.1 may be terminated, waived or
amended with the written consent of the Company and the Holders of 66% of the
Series B Registrable Securities then outstanding. In addition, no Holder of
Series B Registrable Securities shall be entitled to exercise any right provided
for in this Agreement (a) after four (4) years following the closing of the
Initial Public Offering or (b) at such time following the Initial Public
Offering and for so long as such Holder may sell all of such Holder's Series B
Registrable Securities in any ninety (90) day period pursuant to Rule 144(k) (or
such successor rule as may be adopted).
(l) Registration Rights of Holders of Series A Registrable
------------------------------------------------------
Securities. The rights granted to the Holders of Series B Registrable Securities
- ----------
in Sections 4.1(b), 4.1(c) and 4.1(h) of this Agreement to have Series B
Registrable Securities owned by them registered shall be subject to the rights
granted to the Holders of Series A Registrable Securities in Sections 4.1(b),
4.1(c) and 4.1(h) of the Series A Preferred Stock Agreement to have Series A
Registrable Securities owned by them registered.
4.2 Restriction on Transfer; Right of First Refusal.
-----------------------------------------------
(a) Restriction on Transfer. Neither any Purchaser nor any
-----------------------
transferee of any Purchaser shall sell or transfer in any manner any shares of
Series B Preferred Stock purchased hereunder (or any shares of the Class A
Voting Common Stock into which such shares of Series B Preferred Stock may be
converted) to any person or entity engaged in, or reasonably anticipated by the
Company to become engaged in, the business of providing electronic commerce
solutions or related technology (a "Restricted Party"). A Purchaser or any
transferee of any Purchaser may request that the Company waive the restriction
on the sale or transfer of shares described in the preceding sentence to a
Restricted Party as to a particular, proposed sale or transfer, but the Company
shall have no obligation to waive such restriction on the sale or transfer of
any such shares to any Restricted Party.
(b) Right of First Refusal. In the event, at any time after the
----------------------
date of this Agreement, any Purchaser or its transferee desires to sell or
transfer in any manner any shares of Series B Preferred Stock purchased
hereunder (or any shares of the Class A Voting Common Stock into which such
shares of Series B Preferred Stock have been converted) to a person or entity
which is not a Restricted Party, it shall first offer such shares for sale to
the Company at substantially the same price, and upon substantially the same
terms (or terms as similar as reasonably possible) upon which it is proposing or
is to dispose of such shares; provided that a Purchaser may transfer all or part
of its shares of Series B Preferred Stock (or any shares of the Class A Voting
Common Stock into which such shares of Series B Preferred Stock
-18-
<PAGE>
have been converted) to a Permitted Fund Transferee or Transferees without first
making such offer to the Company. Said right of first refusal shall be provided
to the Company for a period of fifteen (15) days following receipt by the
Company of written notice (the "Proposed Transfer Notice") by the Purchaser of
the terms and conditions of said proposed sale or transfer and the name, address
and phone number of each proposed buyer or transferee. The Company may exercise
such right of first refusal as to all, or some portion which is less than all,
of the shares proposed to be transferred by notifying the Purchaser in writing
within such fifteen day period, and paying such Purchaser within thirty (30)
days following receipt by the Company of the Proposed Transfer Notice the
relevant consideration therefor. If the Company and its assigns do not complete
the purchase of shares of Series B Preferred Stock (or any shares of the Class A
Voting Common Stock into which such shares of Series B Preferred Stock have been
converted) identified in the Proposed Transfer Notice within thirty (30) days
following receipt by the Company of the Proposed Transfer Notice, the Purchaser
may sell or transfer such shares in accordance with the terms and conditions set
forth in the Proposed Transfer Notice to the person or entity identified in the
Proposed Transfer Notice. If the Purchaser desires to sell or transfer in any
manner such shares either (i) upon terms and conditions which are different than
those specified in the Proposed Transfer Notice or to a person or entity other
than the person or entity identified in the Proposed Transfer Notice or (ii)
more than sixty (60) days after the Company's receipt of the Proposed Transfer
Notice, then the Purchaser shall comply with the provisions of this Section
4.2(b) again prior to effecting any such sale or transfer.
(c) Assignment. The Company may assign the rights granted to it
----------
pursuant to this Section 4.2 in whole or in part to any stockholder or
stockholders of the Company or other persons or organizations.
(d) Restrictions Binding on Transferees. All transferees of
-----------------------------------
shares purchased pursuant to this Agreement, shares of the Class A Voting Common
Stock issued upon the conversion of such shares or any interest therein will
receive and hold such shares or interest subject to the provisions of this
Section 4.2.
(e) Termination of Right of First Refusal. The right of first
-------------------------------------
refusal granted the Company in Section 4.2(b) shall terminate upon consummation
of the Initial Public Offering, with such termination retroactive to the
effectiveness of the registration statement relating to the Initial Public
Offering.
4.3 Mergers and Other Extraordinary Transactions.
--------------------------------------------
(a) Agreement. Each Purchaser shall either (i) take all actions
---------
necessary to vote all shares of the Series B Preferred Stock (and all shares of
the Class A Voting Common Stock into which such shares of Series B Preferred
Stock may be converted) owned or held of record by such Purchaser at any annual
or special meeting of the Company (or by written consent in lieu of such
meeting) held for the approval of any merger, consolidation or sale or exchange
of all or substantially all of the Company's assets which has been approved by
the Board of Directors in favor of any such merger, consolidation or sale or
exchange of all or substantially all of the Company's assets and all
transactions and other matters incident thereto
-19-
<PAGE>
or (ii) refrain from taking any action with respect to any merger, consolidation
or sale or exchange of all or substantially all of the Company's assets which
has been approved by each of the Board of Directors and the majority of the
outstanding stock of the Company entitled to vote thereon which prevents,
restricts or otherwise inhibits such merger, consolidation or sale or exchange
of all or substantially all of the Company's assets from being accorded pooling
accounting treatment. Without limiting the generality of clause (ii) of the
preceding sentence, the Purchaser agrees to refrain from asserting any appraisal
rights that it may have as a consequence of any transaction described in the
immediately preceding sentence if such assertion of appraisal rights would
prevent, restrict or otherwise inhibit such transaction from being accorded
pooling accounting treatment.
(b) Agreement Binding on Transferees. All transferees of shares
--------------------------------
purchased pursuant to this Agreement, shares of the Class A Voting Common Stock
issued upon the conversion of such shares or any interest therein will receive
and hold such shares or interest subject to the provisions of this Section 4.3.
(c) Termination of Agreement. The agreement of this Section 4.3
------------------------
shall terminate at the earlier of (i) consummation of the Initial Public
Offering or (ii) ten (10) years from the Closing Date.
4.4 Financial Information.
---------------------
(a) Annual and Quarterly Information. The Company will mail the
--------------------------------
following reports to each Purchaser for so long as such Purchaser is a holder
(or such Purchaser and a Permitted Fund Transferee or Transferees are the
collective holders) of at least eighty (80%) percent of shares of Series B
Preferred Stock purchased by such person hereunder (or shares of Class A Voting
Common Stock issued upon conversion of shares of Series B Preferred Stock):
(i) As soon as practicable after the end of each fiscal
year, and in any event within 120 days thereafter, audited consolidated balance
sheets of the Company and its subsidiaries, if any, as of the end of such fiscal
year, and consolidated statements of income, consolidated statements of changes
in financial position and consolidated statements of stockholders' equity of the
Company and its subsidiaries, if any, for such year, prepared in accordance with
generally accepted accounting principles ("GAAP") and setting forth in each case
in comparative form the figures for the previous fiscal year; and
(ii) As soon as practicable after the end of each fiscal
quarter in each fiscal year of the Company and in any event within 60 days
thereafter, an unaudited consolidated balance sheet of the Company and its
subsidiaries, if any, as of the end of each such quarter, and unaudited
consolidated statements of income, unaudited consolidated statements of cash
flow and unaudited consolidated statements of stockholders' equity of the
Company and its subsidiaries, if any, for such period and for the current fiscal
year to date, prepared in accordance with GAAP (subject to normal year-end audit
adjustments).
-20-
<PAGE>
(b) Termination of Covenants. The covenants set forth in
------------------------
this Section 4.4 shall terminate upon consummation of the Initial Public
Offering, with such termination retroactive to the effectiveness of the
registration statement relating to the Initial Public Offering.
4.5 Confidentiality. Each Purchaser shall maintain in strictest
---------------
confidence all financial information furnished to it by the Company pursuant to
Section 4.4 or otherwise and shall not use any of such financial information for
any purpose other than monitoring its equity investment in the Company. All
transferees of shares purchased pursuant to this Agreement, shares of the Class
A Voting Common Stock issued upon the conversion of such shares or any interest
therein will receive and hold such shares or interest subject to the provisions
of this Section 4.5.
5. California Commissioner of Corporations.
---------------------------------------
5.1 Corporate Securities Law. THE SALE OF THE SECURITIES THAT ARE
------------------------
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
6. Conditions of Purchaser's Obligations at Closing. The obligations of
------------------------------------------------
each Purchaser under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions:
6.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
6.2 Performance. The Company shall have performed and complied with
-----------
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
6.3 Compliance Certificate. The Chief Executive Officer or the Vice
----------------------
President, Corporate Development of the Company shall deliver to each Purchaser
at the Closing a certificate stating that the conditions specified in Sections
6.1 and 6.2 have been fulfilled.
6.4 Qualifications. All authorizations, approvals, or permits, if
--------------
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be duly obtained and effective
as of the Closing.
-21-
<PAGE>
6.5 Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Purchasers or to the Purchasers' special counsel, and they
shall have received all such counterpart original and certified or other copies
of such documents as they may reasonably request.
6.6 Certificate of Designations, Rights and Preferences. The Company
---------------------------------------------------
shall have filed the Certificate of Designations, Rights and Preferences with
the Secretary of State of Delaware.
6.7 Opinion of Company Counsel. Each Purchaser shall have received
--------------------------
from Dickstein Shapiro Morin & Oshinsky LLP, counsel for the Company, an
opinion, dated as of the Closing, in the form attached hereto as Exhibit C.
---------
6.8 No Injunction. No preliminary or permanent injunction or other
-------------
binding order, decree or ruling issued by a court or governmental agency shall
be in effect which shall have the effect of preventing the consummation of the
transactions contemplated by this Agreement.
7. Conditions of the Company's Obligations at Closing. The obligations
--------------------------------------------------
of the Company to each Purchaser under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by that
Purchaser:
7.1 Representations and Warranties. The representations and
------------------------------
warranties of the Purchaser contained in Section 3 shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the Closing.
7.2 Payment of Purchase Price. The Purchaser shall have delivered
-------------------------
the purchase price specified in Section 1.2.
7.3 Qualifications. All authorizations, approvals, or permits, if
--------------
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be duly obtained and effective
as of the Closing.
8. Miscellaneous.
-------------
8.1 Survival of Representations, Warranties and Covenants. All
-----------------------------------------------------
representations and warranties made by the Company in this Agreement or in any
certificate delivered pursuant to this Agreement shall survive the Closing Date
for a period of two (2) years. All representations and warranties made by any
Purchaser in this Agreement shall survive the Closing Date for a period of two
(2) years. All covenants made by the parties in this Agreement shall survive
the Closing Date.
8.2 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective
-22-
<PAGE>
successors and assigns of the parties (including transferees of any Securities).
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
8.3 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
8.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may be
executed by facsimile signature, which signature shall be deemed an original.
8.5 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
8.6 Notices.
-------
(a) All notices, requests, demands and other communications
under this Agreement or in connection herewith shall be given to or made upon
the respective parties as follows:
To the Company: InterTrust Technologies Corporation
460 Oakmead Parkway
Sunnyvale, California 94086
Telephone: (408) 222-6100
Telecopy: (408) 222-6144
Attention: Vice President, Corporate Development
To a Purchaser: At such Purchaser's address (or facsimile) as set forth on
Schedule A, as applicable, hereto.
(b) All notices, requests, demands and other communications
given or made in accordance with the provisions of this Agreement shall be in
writing, and shall be sent by airmail, return receipt requested, overnight mail,
or by telex or telecopy (facsimile) with confirmation of delivery, and shall be
deemed to be given or made when delivery is so confirmed.
(c) Any party may, by written notice (in accordance with this
Section 8.6) to the other, alter its address.
8.7 Finder's Fee. Each Purchaser represents solely on its own behalf
------------
that it neither is nor will be obligated for any finders' fee or commission in
connection with this transaction. The Company represents that, with the
possible exception set forth on the Schedule
-23-
<PAGE>
of Exceptions, it neither is or will be obligated for any finders' fee or
commission in connection with this transaction. Each of the Company and the
Purchaser agrees to indemnify and to hold harmless the other party from any
liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or the Purchaser, as the case may be, or any of
its officers, partners, employees, or representatives is responsible.
8.8 Amendments and Waivers. Except as provided elsewhere herein, any
----------------------
term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the holders of a majority of the Class A Voting Common Stock issued or
issuable upon conversion of the Series B Preferred Stock. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any securities purchased under this Agreement at the time outstanding
(including securities into which such securities are convertible), each future
holder of all such securities, and the Company.
8.9 Entire Agreement. This Agreement, the Schedule and Exhibits
----------------
hereto and the certificate delivered pursuant hereto constitute the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof and supersede all prior written or oral negotiations, commitments,
representations and agreements.
8.10 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
8.11 Aggregation of Stock. All shares of the Preferred Stock held or
--------------------
acquired by affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
8.12 No Third Party Beneficiaries. This Agreement is intended and
----------------------------
agreed to be solely for the benefit of the parties hereto, and no third party
shall accrue any benefit, claim or right of any kind whatsoever pursuant to,
under, by or through this Agreement. Without limiting the generality of the
preceding sentence, the Holders of Series A Registrable Securities shall not
accrue any rights to have Series A Registrable Securities registered which are
greater than, or in addition to, the rights granted the Holders of Series A
Registrable Securities in the Series A Preferred Stock Agreement to have Series
A Registrable Securities owned by them registered.
-24-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
INTERTRUST TECHNOLOGIES CORPORATION
By:_____________________________________
Name:
Title:
SOFTBANK HOLDINGS INC.
By:_____________________________________
Name:
Title:
-25-
<PAGE>
SCHEDULE A
PURCHASERS
----------
Number of Aggregate Purchase
Purchaser Shares Price
--------- ------ -----
SOFTBANK Holdings Inc. 583,431 $ 5,000,000
10 Langley Road
Suite 403
Newton Center, MA 02159
Attn: Ronald D. Fisher
Fax: (617) 928-9301
-------------------------------------------
TOTAL 583,431 $ 5,000,000
-26-
<PAGE>
EXHIBIT A
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF SERIES B PREFERRED STOCK
OF
INTERTRUST TECHNOLOGIES CORPORATION
Pursuant to the provisions of Section 151 of the General Corporation Law of
the State of Delaware.
INTERTRUST TECHNOLOGIES CORPORATION, a Delaware corporation (the
"Corporation"), certifies that pursuant to the authority conferred in Article
IVB of its Amended and Restated Certificate of Incorporation, and in accordance
with the provisions of Section 151 of the General Corporation Law of the State
of Delaware, its Board of Directors has adopted the following resolution
creating a series of 1,399,575 shares of Preferred Stock designated as Series B
Preferred Stock:
RESOLVED, that a series of the Corporation's Preferred Stock consisting of
1,399,575 shares of Preferred Stock, be and hereby is designated as "Series B
Preferred Stock," par value $.001 per share, and that the Series B Preferred
Stock shall have the designations, powers, preferences and relative,
participating, optional or other rights and such qualifications, limitations and
restrictions as set forth in the Certificate of Designations, Preferences and
Rights of Series B Preferred Stock.
This Certificate states that the Board of Directors does hereby fix and
herein state and fix such designations, powers, preferences, rights,
qualifications, limitations and restrictions thereof as follows:
1. Designation and Amount. The shares of such series shall be
----------------------
designated as "Series B Preferred Stock" and the number of shares constituting
such series shall be 1,399,575.
2. Dividends and Distributions.
---------------------------
(a) Subject to the rights of Series A Preferred Stock of the
Corporation, par value $0.001 per share (the "Series A Preferred Stock") and any
other series of Preferred Stock of the Corporation, par value $0.001 per share
(the "Preferred Stock") that may from time to time come into existence, the
holders of outstanding Series B Preferred Stock shall be entitled to receive the
same per share dividend as declared or paid on shares of Common Stock of the
Corporation, par value $0.001 per share (the "Common Stock") (other than
dividends on shares of Common Stock payable solely in shares of the Common
Stock). Such dividends will be in an amount determined by the Board of
Directors of this Corporation (the "Board of Directors") and shall be payable,
when, as and if declared by the Board of Directors out of funds legally
available therefor. Subject to the rights of Series A Preferred Stock and the
rights of other series of Preferred Stock that may from time to time come into
existence, dividends or distributions (other than dividends payable solely in
shares of Common Stock) may
<PAGE>
be declared and paid upon Common Stock in any fiscal year of this Corporation
only if dividends shall have been paid on or declared and set apart upon all
shares of Series B Preferred Stock on the same per share basis. The right to
such dividends on shares of Series B Preferred Stock shall not be cumulative and
no right shall accrue to holders of Series B Preferred Stock by reason of the
fact that dividends on such shares are not declared in any prior year, nor shall
any undeclared or unpaid dividend bear or accrue interest.
(b) In the event this Corporation shall declare a distribution to
the holders of Common Stock (other than distributions payable solely in shares
of Common Stock) payable in cash, securities of other persons, evidences of
indebtedness issued by this Corporation or other persons, assets or options or
rights to purchase any such securities or evidences of indebtedness, then, in
each such case the holders of the Series B Preferred Stock shall be entitled to
a proportionate share of any such distribution as though the holders of the
Series B Preferred Stock were the holders of the number of shares of Class A
Voting Common Stock of the Corporation, par value $0.001 per share (the "Class A
Voting Common Stock") into which their respective shares of Series B Preferred
Stock are convertible as of the record date fixed for the determination of the
holders of Common Stock of this Corporation entitled to receive such
distribution.
3. Liquidation Preference.
----------------------
(a) For purposes hereof, the original purchase price (the
"Original Series B Purchase Price") of the Series B Preferred Stock is $8.57 per
share of Series B Preferred Stock.
(b) In the event of the liquidation, dissolution or winding up of
the Corporation, either voluntary or involuntary, subject to the rights of
series of Preferred Stock that may from time to time come into existence, the
holders of the Series A Preferred Stock will be entitled to receive out of the
assets of this Corporation, as a first preference prior and in preference to any
distribution of any of the assets or surplus funds of this Corporation to the
holders of Series B Preferred Stock and Common Stock by reason of their
ownership thereof, an amount per share equal to $5.11 per share (the "Original
Series A Purchase Price"), as appropriately adjusted for stock splits and
combinations, plus all declared and unpaid dividends with respect thereto. If
upon the occurrence of such event the assets and funds thus distributed among
the holders of the Series A Preferred Stock are insufficient to permit the
payment to such holders of the full amount of the first preference, then,
subject to the rights of series of Preferred Stock that may from time to time
come into existence, the entire assets and funds of the Corporation legally
available for distribution will be distributed ratably among the holders of the
Series A Preferred Stock (so that each holder receives for each share of Series
A Preferred Stock the same percentage of the applicable amount of the first
preference). Upon completion of the first preference distributions and any other
distribution that may be required with respect to any series of Preferred Stock
that may from time to time come into existence, the remaining assets of the
Corporation available for distribution to shareholders shall be distributed as a
second preference among the holders of Series A Preferred Stock, Series B
Preferred Stock and Common Stock pro rata based on (i) the number of shares of
Class A Voting Common Stock into which the then outstanding shares of Series A
Preferred Stock may be converted (assuming conversion into Class A Voting Common
Stock of all such Series A Preferred Stock at the then effective conversion
price as specified in the Corporation's Certificate of Incorporation) (the
"Series A Conversion Shares"), (ii) three times the number of shares of Class A
Voting Common Stock into which the then outstanding shares of Series B Preferred
Stock may be converted (assuming
-2-
<PAGE>
conversion into Class A Voting Common Stock of all of such Series B Preferred
Stock at the then effective Conversion Price, as defined in Section 5(a)) (the
"Series B Conversion Shares") and (iii) the number of the then outstanding
shares of Common Stock until the holders of the Series B Preferred Stock shall
have received an aggregate of the Original Series B Purchase Price; provided,
--------
that upon the holders of Series A Preferred Stock receipt of an aggregate of
$15.33 per share (including any other amounts paid pursuant to this Section
3(b)), the holders of the Series A Preferred Stock shall not be entitled to any
further distribution of the remaining assets of the Corporation available for
distribution to shareholders and such remaining assets shall be distributed
among the holders of Series B Preferred Stock and Common Stock pro rata based on
(m) three times the number of Series B Conversion Shares and (n) the sum of the
number of the then outstanding shares of Common Stock and the number of Series A
Conversion Shares until the holders of the Series B Preferred Stock shall have
received an aggregate amount per share equal to the Original Series B Purchase
Price, as appropriately adjusted for stock splits and combinations. Upon
completion of such second preference distributions and any other distribution
that may be required with respect to any series of Preferred Stock that may from
time to time come into existence, the remaining assets of the Corporation
available for distribution to shareholders shall be distributed as a third
preference among the holders of Series A Preferred Stock and Common Stock pro
rata based on (q) the number of Series A Conversion Shares and (r) the number of
shares of Common Stock then outstanding until the holders of Common Stock shall
have received an aggregate amount per share equal to the Original Series B
Purchase Price (including any other amounts paid pursuant to this Section 3(b)),
as appropriately adjusted for stock splits and dividends; provided, that upon
--------
the holders of Series A Preferred Stock receipt of an aggregate of $15.33 per
share (including any other amounts paid pursuant to this Section 3(b)), the
holders of Series A Preferred Stock shall not be entitled to any further
distribution of the remaining assets of the Corporation available for
distribution to shareholders. Thereafter, subject to the rights of series of
Preferred Stock that may from time to time come into existence, if any assets or
funds remain in this Corporation, all such remaining assets or funds shall be
distributed as a fourth preference among the holders of Series A Preferred
Stock, Series B Preferred Stock and Common Stock pro rata based on (v) the
number of Series A Conversion Shares, (w) the number of Series B Conversion
Shares and (x) the number of the then outstanding shares of Common Stock;
provided, that upon the holders of Series A Preferred Stock receipt of an
- --------
aggregate of $15.33 per share (including any other amounts paid pursuant to
Section 3(b)), the holders of Series A Preferred Stock shall not be entitled to
any further distribution of the remaining assets of the Corporation available
for distribution to shareholders and such remaining assets shall be distributed
among the holders of Series B Preferred Stock and Common Stock pro rata based on
(y) the number of Series B Conversion Shares and (z) the number of shares of
Common Stock then outstanding.
(c) For purposes of this Section 3 neither (i) an acquisition of
this Corporation by means of merger, consolidation or other form of corporate
reorganization nor (ii) a sale, lease or other transfer of all or substantially
all of the assets of this Corporation, shall
-3-
<PAGE>
be treated as a liquidation, dissolution or winding up of this Corporation
within the meaning of this Section 3 unless such sale, lease or other transfer
shall be in connection with a plan of liquidation, dissolution or winding up of
the Corporation.
(d) Any securities to be delivered to the holders of the Preferred
Stock and/or Common Stock pursuant to this Section 3 shall be valued as follows:
(i) Securities not subject to investment letter or other
similar restrictions on free marketability:
(A) If traded on a securities exchange or The Nasdaq
National Market or its successor or equivalent, the value shall be deemed to be
the average of the closing prices of the securities on such exchange over the
30-day period ending three (3) days prior to the closing;
(B) If actively traded over-the-counter, the value shall
be deemed to be the average of the closing bid prices over the 30-day period
ending three (3) days prior to the closing; and
(C) If there is no active public market, the value shall
be the fair market value thereof, as determined in good faith by the Board of
Directors.
(ii) The method of valuation of securities subject to
investment letter or other restrictions on free marketability shall be to make
an appropriate discount from the market value determined as above in (i) (A),
(B) or (C) to reflect the approximately fair market value thereof, as determined
in good faith by the Board of Directors.
4. Voting Rights. Except as otherwise expressly provided in Section
-------------
6 or as required by law, the holder of each share of Series B Preferred Stock
shall be entitled to the number of votes equal to the number of shares of Class
A Voting Common Stock into which such share of Series B Preferred Stock could
then be converted, and with respect to such share, shall have full voting rights
and powers equal to the voting rights and powers of the holders of Common Stock
(except as otherwise expressly provided herein or as required by law), voting
together with the Common Stock as a single class, and shall be entitled to
notice of any stockholders' meeting in accordance with the Bylaws of this
Corporation. Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the above formula (after aggregating all
shares into which shares of Series B Preferred Stock held by each holder could
be converted) shall be rounded to the nearest whole number (with one-half being
rounded upward).
-4-
<PAGE>
5. Conversion Rights.
-----------------
(a) Right to Convert.
----------------
(i) Optional Conversion. Each share of Series B Preferred
-------------------
Stock will be convertible, at the option of the holder thereof, at the office of
this Corporation or any transfer agent for the Preferred Stock, into Class A
Voting Common Stock. The number of shares of Class A Voting Common Stock into
which each share of Series B Preferred Stock will be converted will be equal to
the Original Series B Purchase Price of such Series B Preferred Stock divided by
the Conversion Price (as hereafter defined) for such Series B Preferred Stock,
such conversion ratio being referred to as the "Conversion Rate" for such Series
B Preferred Stock. The initial Conversion Price for the Series B Preferred Stock
will be the Original Purchase Price of such Series B Preferred Stock. The
initial Conversion Price for the Series B Preferred Stock will be subject to
adjustment as provided herein and the term "Conversion Price" shall mean, as of
any date, the initial Conversion Price as the same has been adjusted from time
to time pursuant to the provisions of Sections 5(c) and 5(d).
(ii) Automatic Conversion of Preferred Stock. Each share of
---------------------------------------
Series B Preferred Stock will be converted automatically into shares of Class A
Voting Common Stock at the then effective Conversion Rate for such Series B
Preferred Stock (i) upon the written approval of a majority of the holders of
the shares of Series B Preferred Stock then outstanding, voting together as a
series or (ii) immediately prior to the closing of a public offering pursuant to
a registration statement (other than a registration statement relating either to
the sale of securities to employees of the Corporation pursuant to a stock
option, stock purchase or similar plan or a transaction pursuant to Rule 145
under the Securities Act of 1933, as amended (the "Act")) under the Act covering
the Common Stock with a price per share in excess of $7.50 and aggregate
proceeds to the Corporation, net of underwriting discounts and commissions, in
excess of $10,000,000 (the "Initial Public Offering").
(iii) Fractional Shares Upon Conversion. No fractional shares
---------------------------------
of Class A Voting Common Stock will be issued upon conversion of the Series B
Preferred Stock and any fractional share which otherwise would result from
conversion by a holder of all of his or her shares of Series B Preferred Stock
(with all the shares of a series taken together as a group) will be redeemed by
payment in an amount equal to the fair market value thereof as determined by the
Board of Directors for such series as promptly as funds are legally available
therefor. If more than one share of Series B Preferred Stock is surrendered for
conversion at any one time by the same holder, the number of full shares of
Class A Voting Common Stock to be issued upon conversion shall be computed on
the basis of the aggregate number of shares of Series B Preferred Stock so
surrendered.
(b) Mechanics of Conversion. Before any holder of Series B
-----------------------
Preferred Stock will be entitled to convert the same into shares of Class A
Voting Common Stock, such holder will surrender the certificate or certificates
therefor, duly endorsed, at the office of this Corporation or of any transfer
agent for the Preferred Stock, and he will give written notice to the
Corporation stating the name or names in which the certificate or certificates
for shares of Class A Voting Common Stock are to be issued. This Corporation, as
soon as reasonably practicable
-5-
<PAGE>
thereafter, will issue and deliver at such office to such holder or to the
nominee or nominees of such holder, a certificate or certificates for the number
of shares of Class A Voting Common Stock to which such holder will be entitled
as aforesaid. Such conversion will be deemed to have been made immediately prior
to the close of business on the date of notice of conversion provided by the
holder to this Corporation, and the person or persons entitled to receive the
shares of Class A Voting Common Stock issuable upon conversion will be treated
for all purposes as the record holder or holders of such shares of Class A
Voting Common Stock on such date. If the conversion is in connection with the
Initial Public Offering, the conversion will be conditioned upon the closing
with the underwriter of the sale of securities pursuant to such offering, in
which event the persons entitled to receive the Class A Voting Common Stock
issuable upon such conversion of the Series B Preferred Stock shall not be
deemed to have converted such Series B Preferred Stock until immediately prior
to the closing of such sale of securities.
(c) Adjustment for Subdivisions or Combinations of Common Stock.
-----------------------------------------------------------
In the event this Corporation at any time or from time to time after the
effective date of the initial sale of Series B Preferred Stock (in each case,
the "Original Issue Date" for such series) effects a subdivision or combination
of its outstanding Common Stock into a greater or lesser number of shares
without a proportionate and corresponding subdivision or combination of its
outstanding shares of Series B Preferred Stock, then the existing Conversion
Price for such Series B Preferred Stock will be decreased or increased
proportionately.
(d) Adjustment for Dividends, Distributions and Common Stock
--------------------------------------------------------
Equivalents. In the event this Corporation at any time or from time to time
- -----------
after the Original Issue Date for the Series B Preferred Stock, as applicable,
makes or issues, or fixes a record date for the determination of holders of
Common Stock (but not holders of such Series B Preferred Stock) entitled to
receive a dividend or other distribution payable in additional shares of Common
Stock or other securities or rights (hereinafter referred to as "Common Stock
Equivalents") convertible into or entitling the holder thereof to receive
additional shares of Common Stock without payment of any consideration by such
holder for such Common Stock Equivalents or the additional shares of Common
Stock, for the purpose of protecting the holders of Series B Preferred Stock
from any dilution in connection therewith, then and in each such event the
maximum number of shares (as set forth in the instrument relating thereto
without regard to any provisions contained therein for a subsequent adjustment
of such number) of Common Stock issuable in payment of such dividend or
distribution or upon conversion or exercise of such Common Stock Equivalents
will be deemed to be issued and outstanding as of the time of such issuance or,
in the event such a record date has been fixed, as of the close of business on
such record date. In each such event the then existing Conversion Rate for
Series B Preferred Stock will be increased as of the time of such issuance or,
in the event such a record date has been fixed, as of the close of business on
such record date, by multiplying the Conversion Rate for such Series B Preferred
Stock by a fraction,
-6-
<PAGE>
(1) the numerator of which will be the total number of shares
of Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date plus the number of shares
of Common Stock issuable in payment of such dividend or distribution or upon
conversion or exercise of such Common Stock Equivalents; and
(2) the denominator of which will be the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date; provided, however,
(i) if such record date has been fixed and such dividend is not fully paid or if
such distribution is not fully made on the date fixed therefor, the Conversion
Rate for the Series B Preferred Stock will be recomputed accordingly as of the
close of business on such record date and thereafter the Conversion Rate for the
Series B Preferred Stock will be adjusted pursuant to this Section as of the
time of actual payment of such dividends or distribution; (ii) if such Common
Stock Equivalents provide, with the passage of time or otherwise, for any
decrease in the number of shares of Common Stock issuable upon conversion or
exercise thereof, the Conversion Rate for the Series B Preferred Stock shall,
upon any such decrease becoming effective, be recomputed to reflect such
decrease insofar as it affects the rights of conversion or exercise of the
Common Stock Equivalents then outstanding, and (iii) upon the expiration of any
conversion rights or exercise under any unexercised Common Stock Equivalents,
the Conversion Rate for the Series B Preferred Stock computed upon the original
issue thereof shall, upon such expiration, be recomputed as if the only
additional shares of Common Stock issued were the shares of such stock, if any,
actually issued upon the conversion or exercise of such Common Stock
Equivalents.
(e) No Impairment. This Corporation, whether by amendment of its
-------------
Certificate of Incorporation or through any reorganization, transfer of assets,
merger, dissolution, issue or sale of securities or any other voluntary action,
will not avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed hereunder by this Corporation, but at all
times in good faith will assist in the carrying out of all of such action as may
be necessary or appropriate in order to protect the conversion rights pursuant
to this Section 5(e) of the holders of the Series B Preferred Stock against
impairment.
(f) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Rate for the Series B Preferred
Stock pursuant to this Section 5, the Corporation at its expense promptly will
compute such adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to each holder of such Series B Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. This
Corporation, upon the written request at any time of any holder of Series B
Preferred Stock, will furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Rate for the Series B Preferred Stock at the time in effect, and
(iii) the number of shares of Class A Voting Common Stock and the amount, if
any, of other property which at the time would be received upon the conversion
of the Series B Preferred Stock held by such holder.
-7-
<PAGE>
(g) Notices of Record Date. In the event of any taking by this
----------------------
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any Common Stock
Equivalents or any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to receive
any other right, the Corporation will mail to each holder of Series B Preferred
Stock at least ten (10) days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution or rights, and the amount and character of such
dividend, distribution or right.
(h) Reservation of Stock Issuable Upon Conversion. This
---------------------------------------------
Corporation at all times will reserve and keep available out of its authorized
but unissued shares of Class A Voting Common Stock solely for the purpose of
effecting the conversion of the shares of Series B Preferred Stock such number
of its shares of Class A Voting Common Stock as from time to time will be
sufficient to effect the conversion of all then outstanding shares of Series B
Preferred Stock; and if at any time the number of authorized but unissued shares
of Class A Voting Common Stock is not sufficient to effect the conversion of all
then outstanding shares of Series B Preferred Stock, in addition to such other
remedies as may be available to the holders of Series B Preferred Stock for such
failure, the Corporation will take such corporate action as, in the opinion of
its counsel, may be necessary to increase its authorized but unissued shares of
Class A Voting Common Stock to such number of shares as will be sufficient for
such purpose.
(i) Notices. Any notices required by the provisions of this
-------
Section 5 to be given to the holders of shares of Series B Preferred Stock shall
be given in writing and shall be conclusively deemed effectively given to
persons located in the United States five days after deposit in the United
States mail, by registered or certified mail postage prepaid, or upon actual
receipt if given by any other method or to persons located outside of the United
States, addressed to such holder at his address appearing on the books of the
Corporation. To persons located outside of the United States, such notice will
be sent by telex or facsimile in cases where the corporation has notice of a
telex or facsimile number for such person.
(j) Recapitalizations. If at any time or from time to time there
-----------------
shall be a recapitalization of the Common Stock (other than a subdivision or
combination provided for in Section 5(d)), provision shall be made so that the
holders of the Series B Preferred Stock shall thereafter be entitled to receive
upon conversion of such shares of such Series B Preferred Stock the number of
shares of stock or other securities or property of the Corporation or otherwise,
to which a holder of Common Stock deliverable upon conversion of such Series B
Preferred Stock would have been entitled on such recapitalization.
6. Protective Provisions. So long as any shares of Series B
---------------------
Preferred Stock are outstanding, this Corporation shall not without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of a majority of the then outstanding shares of Series B Preferred
Stock;
-8-
<PAGE>
(a) take any action that reclassifies any outstanding shares of
this Corporation's capital stock into shares of capital stock having preferences
or priority as to assets senior to the preferences and priority of the Series B
Preferred Stock;
(b) authorize or issue, or obligate itself to issue, any equity
security other than the Series A Preferred Stock, including any other security
convertible into or exercisable for any equity security, having a preference or
priority as to assets senior to the preferences and priorities of the Series B
Preferred Stock;
(c) amend or repeal Section 4 in any manner adversely affecting
the voting rights granted to the Series B Preferred Stock; or
(d) amend this Section 6.
IN WITNESS WHEREOF, INTERTRUST TECHNOLOGIES CORPORATION has caused this
Certificate of Designations, Preferences and Rights of Series B Preferred Stock
to be executed by its Chairman and Chief Executive Officer and attested by its
Secretary, this 1st day of August, 1996.
INTERTRUST TECHNOLOGIES CORPORATION
By:
------------------------------
Victor Shear, Chairman and
Chief Executive Officer
ATTEST:
By:______________________
Erwin N. Lenowitz
Secretary
-9-
<PAGE>
EXHIBIT B
SCHEDULE OF EXCEPTIONS
Set forth below are exceptions to the representations and warranties of the
Company made in Sections 2 and 8.7 of the Agreement. All disclosures and
exceptions set forth below modify all of the Company's representations and
warranties and a disclosure in one section of this Schedule shall modify the
representation and warranty set forth in another section of this Schedule even
if such disclosure is not repeated in the other section.
2.2 Capitalization and Voting Rights.
--------------------------------
The Company has granted the following preemptive rights with respect
to its capital stock:
1. Four of the Company's eight outstanding Common Stock Purchase
Warrants provide their respective holders with a right of first
offer with respect to certain issuances by the Company of its
equity securities. The Company has made a written request that such
holders waive their right of first offer with respect to the
transactions contemplated by this Agreement. All of such holders
have waived their rights of first offer with respect to the
transactions contemplated by this Agreement.
2. The Company has granted certain holders of shares of Series A
Preferred Stock a right of first offer with respect to certain
sales by the Company of certain of its securities in Section 4.2 of
the Series A Preferred Stock Agreement. The Company has made a
written request that such holders waive their right of first offer
with respect to the transactions contemplated by this Agreement.
All but one of such holders have waived their rights of first offer
with respect to the transactions contemplated by this Agreement;
the holder which did not waive did not exercise its right of first
offer within the time period prescribed by the Series A Preferred
Stock Agreement.
2.08 Litigation.
----------
1. On February 28, 1996 the Company received a letter from E-Data
Corp. drawing the Company's attention to Patent No. 4,528,643 and
alleging the need for the Company to obtain a license with respect
to such patent. Upon review of the materials submitted with the
February 28, 1996 letter, the Company believes that the claims made
therein are based upon incorrect assumptions and premature and the
Company so advised E-Data Corp. by letter dated March 12, 1996. As
of July 17, 1996, the Company has not received any response to its
March 12, 1996 letter to E-Data Corp.
2. On June 26, 1996 the Company received a letter from Dorsey &
Whitney LLP, counsel to Digi International, Inc. ("DI"), drawing
the Company's attention to U.S. Trademark Reg. No. 1,666,495 of DI
for DIGIBOARD (R) and, among other things, requesting that the
Company cease any planned use of the name DIGIBOX. The
-36-
<PAGE>
Company has initiated a dialogue with counsel to DI and believes
that the demand and claims in the June 26, 1996 letter are
unjustified.
2.09 Patents and Other Intangible Assets.
-----------------------------------
1. Item 1 of Section 2.08 of this Schedule is incorporated by this
reference.
2. Item 2 of Section 2.08 of this Schedule is incorporated by this
reference.
2.11 Agreements; Action.
------------------
1. The Company has an agreement with Personal Library Software, Inc.
that upon the sale, lease or license to a third party of United
States Patent Nos. 5,050,213, 4,977,594, 4,827,508 or 5,410,598,
European Patent Application No. 87907181.9, or hardware products
directly related to the foregoing patents, the Company will pay to
Personal Library Software, Inc. a fee ranging from 3% - 6% of
license fees up to a total aggregate payment which shall not exceed
$250,000.00
2. On March 28, 1994 the Company entered into an agreement with
National Semiconductor, Inc. pursuant to which the Company granted
National certain licenses to manufacture and sell certain products
incorporating the Company's technology or covered by certain of the
Company's patents. To date the Company has received non-refundable
license fees totaling $850,000. The license is subject to
termination should National fail to tender additional amounts to
the Company promptly following the Company's delivery of certain
technology to National.
3. On August __, 1996, the Company entered into an agreement with
SOFTBANK Group Services, Inc. ("SGS") pursuant to which the Company
granted SGS certain licenses to use and incorporate the Company's
InterTrust technology in products and services made, used, sold and
otherwise transferred by SGS, subject to certain terms and
conditions. This agreement contains certain restrictions applicable
to the Company with respect to licenses granted to third parties
for clearing transactions.
4. On October 24, 1995 the Company's Board of Directors approved a
resolution allowing the officers of the Company to offer warrants
to certain service providers in consideration of services rendered
by such service providers. The Company is currently negotiating
with certain of its service providers to issue such service
providers warrants for the purchase of Class A Voting Common Stock
and/or Class B Non-Voting Common Stock in lieu of services
rendered, and anticipates that it will be necessary to issue
warrants for the purchase of no more than an aggregate of 25,000 of
such shares to such service providers.
5. The Company has entered into an agreement with Robertson, Stephens
& Co. for the purposes of raising capital and pursuing strategic
relationships. The fees structure for this agreement ranges from 4%
to 6% with stipulated minimums and other terms and conditions.
-37-
<PAGE>
2.12 Related-Party Transactions.
--------------------------
1. The Company is indebted to Victor Shear in an amount approximating
$50,000 for travel and miscellaneous corporate expenses.
2. On March 1, 1996, the Company and Seymour I. Rubinstein Micropro
Trust (the "Trust"), a trust controlled by director Seymour
Rubinstein, entered into a Modification Agreement pursuant to which
the Class A Common Stock Purchase Warrant held by the Trust was
amended to terminate a right of first refusal held by the Trust and
to provide that a private equity financing would not require such
warrant to be exercised or terminated.
3. Erwin N. Lenowitz, the Company's Chief Financial Officer and a
director of the Company, can be considered to have a beneficial
ownership interest in Electronic Ventures, L.C., a Texas limited
liability corporation, which owns shares of the Class A Voting
Common Stock and has an option to purchase shares of the Class B
Non-Voting Common Stock.
2.16 Employee Benefit Plans.
----------------------
The Company provides a health insurance plan and a non-contributory
401(k) plan for its employees.
8.7 Finder's Fee.
------------
Item 5 of Section 2.11 of this Schedule is incorporated by this
reference.
-38-
<PAGE>
EXHIBIT C
FORM OF LEGAL OPINION OF COUNSEL TO THE COMPANY
-----------------------------------------------
<PAGE>
August , 1996
SOFTBANK Holdings Inc.
10 Langley Road
Suite 403
Newton Center, Massachusetts 02159
Ladies and Gentlemen:
We have acted as counsel to InterTrust Technologies Corporation, a
Delaware corporation (the "Company"), in connection with the sale by the Company
of 583,431 shares of Series B Preferred Stock, $.001 par value, of the Company
(the "Series B Preferred Shares" ) pursuant to the Series B Preferred Stock
Purchase Agreement dated as of August 1, 1996 (the "Purchase Agreement") between
the Company and SOFTBANK Holdings Inc., a Delaware corporation (the
"Purchaser"). This opinion is being delivered pursuant to Section 6.7 of the
Purchase Agreement. Capitalized terms used and not otherwise defined herein
shall have the respective meanings assigned to such terms in the Purchase
Agreement.
In connection with this opinion, we have examined and relied upon
originals or copies, certified or otherwise identified to our satisfaction, of
the Purchase Agreement and such other documents (including, without limitation,
corporate records of the Company and certificates of public officials) as we
have deemed necessary or appropriate as a basis for the opinions set forth
below. In our examination we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, and the conformity to authentic original documents
of all documents submitted to us as certified or photostatic copies. In
rendering the opinions set forth below, we have relied solely on certificates
from public officials as to the matters stated in such certificates. As to
questions of fact material to this opinion, we have relied upon representations
(including, without limitation, representations set forth in the Purchase
Agreement) and certificates of the Company and its officers and of public
officials, and we have not inquired of third parties or searched the records or
files of any governmental authority.
Further, we have assumed that: (a) the Purchaser is duly organized
and validly existing under the laws of its jurisdiction of incorporation and has
full power, authority and legal right to enter into and perform its obligations
under the Purchase Agreement; (b) the Purchase Agreement has been duly
authorized, executed and delivered by the Purchaser; (c) the Purchase Agreement
is the legal, valid and binding obligation of the Purchaser, enforceable against
the Purchaser in accordance with its terms; and (d) the Purchaser has received,
or will receive by the time required, and will, to the extent required by
applicable law, maintain in force and elect, all governmental approvals required
for the due execution, delivery and performance by the Purchaser of the Purchase
Agreement, and that such execution, delivery and performance by the Purchaser
does not conflict with any provision of applicable law.
Members of this firm are admitted to the bar of the District of
Columbia. We express no opinion as to the laws of any jurisdiction other than
(i) the present Federal laws of the
<PAGE>
SOFTBANK Holdings Inc.
August , 1996
Page 3
United States of America and the District of Columbia, and to the extent
required by the opinions expressed below, the General Corporation Law of the
State of Delaware, and our opinion is limited to and applies only insofar as
such laws may be concerned.
Based upon and subject to the foregoing, and subject to the other
qualifications, exceptions, limitations and assumptions set forth below, we are
of the opinion that:
1. The Company is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. The Company
has the requisite corporate power and authority to execute, deliver and perform
the Purchase Agreement, to issue, sell and deliver the Series B Preferred Shares
and to issue and deliver the shares of Class A Voting Common Stock, $.001 par
value per share, of the Company issuable upon conversion of the Series B
Preferred Shares (the "Conversion Shares").
2. The Purchase Agreement has been duly authorized, executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms.
3. The execution and delivery by the Company of the Purchase
Agreement, the performance by the Company of its obligations thereunder, the
sale of the Series B Preferred Shares to the Purchaser and, upon conversion
thereof in accordance with the Certificate of Designations, Preferences and
Rights, the issuance and delivery of the Conversion Shares will not violate any
provision of the Certificate of Designations, Preferences and Rights, the
Restated Certificate of Incorporation or By-laws of the Company.
4. To our knowledge, there are no actions, suits, proceedings or
investigations pending or threatened against the Company before any court or
governmental agency that, either in any individual case or in the aggregate,
could reasonably be expected to result in any material adverse change in the
business or financial condition of the Company and none that questions the
validity of the Agreement or any action to be taken in connection therewith.
5. The Series B Preferred Shares and the Conversion Shares have been
duly authorized. Upon issuance and delivery of the Series B Preferred Shares,
against payment of the consideration provided in the Purchase Agreement, the
Series B Preferred Shares will be validly issued and fully paid and
nonassessable. The issuance and delivery of the Conversion Shares, upon
conversion of the Series B Preferred Shares in accordance with the Certificate
of Designations, Preferences and Rights, have been duly authorized by all
requisite corporate action, the Conversion Shares have been duly reserved for
issuance upon conversion of the Series B Preferred Shares in accordance with the
Certificate of Designations, Preferences and Rights and, when so issued, will be
duly authorized, validly issued, fully paid and nonassessable. Neither the
issuance, sale or delivery of the Series B Preferred Shares nor the issuance or
delivery of the Conversion Shares is subject to any preemptive right of
stockholders of the Company arising under law or the Certificate of
Designations, Preferences and Rights, the
<PAGE>
SOFTBANK Holdings Inc.
August , 1996
Page 4
Restated Certificate of Incorporation or Bylaws of the Company or, to our
knowledge, any contractual right of first refusal or other right which has not
heretofore either been waived or not exercised by the holder thereof.
6. Assuming the accuracy of the representations and warranties of the
Purchaser set forth in Section 3 of the Purchase Agreement, no registration or
filing by the Company with, and no consent or approval of, or other action by
any Federal, state or other governmental agency or instrumentality is or will be
necessary for the valid execution and delivery by the Company of the Purchase
Agreement, the sale of the Series B Preferred Shares, or, upon conversion
thereof in accordance with the Certificate of Designations, Preferences and
Rights, the issuance and delivery of the Conversion Shares, other than the
filing pursuant to Section 25102(f) of the California Corporate Securities Law
of 1968, as amended, and the rules thereunder.
7. Assuming the accuracy of the representations and warranties of the
Purchaser set forth in Section 3 of the Purchase Agreement, the sale of the
Series B Preferred Shares to the Purchaser on the Closing Date, under the
circumstances contemplated by the Purchase Agreement, is exempt from the
registration requirements of the Securities Act of 1933, as amended, and the
issuance and delivery of the Conversion Shares, upon conversion of such Series B
Preferred Shares in accordance with the Certificate of Designations, Preferences
and Rights, will be exempt from such registration requirements.
The opinions set forth above are subject to the following limitations
and qualifications:
(A) We express no opinion as to (i) compliance with applicable
antifraud provisions of Federal or state securities laws or, except to the
extent set forth in paragraph 6, any matters arising under or relating to state
securities laws or "blue sky" laws; (ii) the validity, binding effect or
enforceability of any provision of the Purchase Agreement relating to
indemnification, contribution or exculpation in connection with violations of
any securities laws or statutory duties or public policy, or in connection with
willful, reckless or criminal acts or gross negligence of the indemnified or
exculpated party or the party to receive contribution; and (iii) the
enforceability of any provision or term of the Purchase Agreement which may be
found by a court to be rendered unenforceable due to the indefinite or
incomplete nature of such provision or term.
(B) Our opinion with respect to enforceability set forth in
paragraph 2 above is subject to (i) applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally; (ii) general equitable principles (regardless of whether such
principles are considered in a proceeding at law or in equity); and (iii) the
effect of judicial decisions which have held that certain provisions are
unenforceable when their enforcement would violate the implied covenant of good
faith and fair dealing, or would be commercially unreasonable, or where their
breach is not material. We have assumed with your permission in providing our
opinion with respect to enforceability set forth in paragraph 2 above that the
laws
<PAGE>
SOFTBANK Holdings Inc.
August , 1996
Page 5
of the District of Columbia are the same as the laws of the State of California
(the laws governing the construction of the Purchase Agreement).
This opinion is rendered solely for your benefit in connection with
the transaction referred to in the first paragraph of this opinion, and may not
be relied upon in any manner or for any purpose by any other person or entity
without our prior written consent. This opinion is based on our knowledge of
the law and the facts as of the date hereof, and we undertake no obligation to
update or supplement this opinion after the date hereof
Very truly yours,
<PAGE>
CONFIDENTIAL
NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE HEREUNDER HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND AS SUCH MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED EXCEPT PURSUANT TO A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT TO SUCH WARRANT OR SECURITIES, OR DELIVERY OF AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE
WITH THE ACT OR UNLESS SOLD IN FULL COMPLIANCE WITH RULE 144
PROMULGATED UNDER THE ACT.
INTERTRUST TECHNOLOGIES CORPORATION
Class B Common Stock Warrant
August ____, 1996
THIS CERTIFIES THAT for value received, and subject to the provisions
and upon the terms and conditions hereinafter set forth, Upgrade Corporation of
America (the "Holder") is entitled to subscribe for and purchase shares (the
"Shares") of Class B Common Stock of InterTrust Technologies Corporation, a
Delaware corporation (the "Company"), at a price per share of $50.00, which
price may be reduced to $12.86 per share pursuant to the terms below (such price
and such other price as shall result, from time to time, from adjustments
specified below is referred to herein as the "Warrant Price"). The term "Grant
Date" shall mean the date set forth above.
1. Voluntary Exercise. This Warrant may be exercised in full or in
------------------
part at any time or from time to time after the seven-year anniversary of the
Grant Date (the "Exercise Date") at a per share price of $50.00; provided,
however, that this Warrant may be exercised prior to the Exercise Date upon the
earlier to occur of the following events: (i) the Holder (alone or in
combination with other affiliates of Softbank Holding Ltd.) expends an aggregate
of $3,000,000 to develop, promote and market compliant electronic clearinghouse
technology and services using the Company's technology pursuant to the
Technology Development and License Agreement dated as of the date hereof (the
"Technology License") whereby such development, promotion or marketing activity
is specifically directed toward clearinghouse transactions involving the
original equipment manufacturer ("OEM") and independent software vendor ("ISV")
markets, and such aggregate amount is expended by the Holder within twenty-four
(24) months of the date the Company provides its SDK 1.0 product to the Holder
under the Technology License; or (ii) the Holder executes agreements with ten
(10) of its largest thirty (30) ISV and/or OEM customers (measured, consistent
with the Holder's practices, according to the
<PAGE>
CONFIDENTIAL
Holder's revenue generated by such customers) to incorporate capabilities that
enable DigiBox creation and use within software programs produced by such
customers (and wherein such agreements can be publicly announced by the Holder
and the Company) (each of (i) and (ii) of this Paragraph 1 being referred to
herein as an "Early Exercise Event"). Upon the occurrence of an Early Exercise
Event, this Warrant shall be exercisable (a) at a price per share of $12.86
(subject to adjustment provided herein), and (b) for a period of 24 months after
the later of (x) the Early Exercise Event or (y) the consummation by the Company
of an IPO (as hereinafter defined) after which time this Warrant shall
terminate and be of no further force and effect. Notwithstanding the foregoing,
Holder's right to exercise this Warrant at the Warrant Price of $12.86 is
subject to Holder's continued commitment to the exploitation of the InterTrust
Technology, by Holder: (i) performing clearing services primarily for
transactions related to and/or derived from use of SSG Products (as defined in
the Technology License) or performed pursuant to the Clearinghouse Function
license granted in the Technology License; and (ii) refraining from: (a)
developing, promoting, or acquiring any technology directly competitive with
InterTrust Special Advanced Technologies or InterTrust Secure Container
technology (as such terms are defined in Exhibit F and Article 1, respectively,
of the Technology License) (the "Competitive Technology"); and (b) licensing
Competitive Technology, other than as necessary for clearing transactions
(collectively the "InterTrust Commitment").
2. Termination. Notwithstanding paragraph 1 above, this Warrant
-----------
shall terminate and be of no further force and effect upon the earlier of: (i)
the ten (10) year anniversary of the Grant Date; (ii) at the sole discretion of
the Company, upon the consummation of an underwritten public offering of the
Company's equity securities pursuant to a registration statement (an "IPO")
under the Securities Act of 1933, as amended (the "Act"), in which case this
Warrant shall be exercisable immediately prior to the consummation of the IPO at
a Warrant Price equal to the lower of $12.86 or the IPO Price (the "IPO Price"
shall be the initial "Price to Public" specified in the final prospectus with
respect to the IPO); and (iii) at the sole discretion of the Company, upon the
closing of (a) a sale of all or substantially all of the Company's assets or (b)
the merger or consolidation of the Company with another corporation whereby the
Company's stockholders immediately prior to such merger or consolidation will
hold less than 50% of the outstanding securities of the surviving corporation
immediately following such merger or consolidation (such sale, merger or
consolidation shall be referred to herein as a "Sale of the Company"), in which
case this Warrant shall be exercisable immediately prior to the consummation of
the Sale of the Company at a Warrant Price equal to the lower of $12.86 or the
value received for each share of Class B Common Stock in the Sale of the Company
(the "Sale Price"); provided, however that holder's right to exercise this
Warrant under subparagraphs 2(ii) and 2(iii) above at either Warrant Price is
subject to Holder's prior continuous InterTrust Commitment. If Holder (i)
exercises this Warrant at either the IPO Price or the Sale Price and (ii) has
not previously satisfied either Early Exercise Event, or within twenty-four (24)
months of the date the Company provides its SDK 1.0 product to the Holder under
the Technology License fails to satisfy either Early Exercise Event, then Holder
shall immediately remit to the Company or, in the case of the Sale of the
Company, to the successor company, an amount equal to the following:
If this Warrant is exercised in connection with an IPO, the amount
equal to the product of multiplying (x) and (y) where:
<PAGE>
CONFIDENTIAL
(x)=the number of shares received upon exercise of this Warrant; and
(y)=the difference between $12.86 and the IPO Price.
If this Warrant is exercised in connection with a Sale of the Company,
the amount equal to the product of multiplying (x) and (y) where:
(x)=the number of shares received upon exercise of this Warrant; and
(y)=the difference between $12.86 and the Sale Price.
3. Number of Shares. Subject to the terms and conditions hereinafter
----------------
set forth, the Holder is entitled, upon surrender of this Warrant, to purchase
One Hundred Fifty-Five Thousand Five Hundred Eight (155,508) shares of Class B
Common Stock from the Company.
4. Method of Exercise; Net Issue Exercise.
--------------------------------------
a. Method of Exercise; Payment; Issuance of New Warrant. The
----------------------------------------------------
purchase right represented by this Warrant may be exercised by the Holder, in
whole or in part, from time to time at the election of the Holder, by the
surrender of this Warrant (with the notice of exercise form attached hereto as
Exhibit A duly executed) at the principal office of the Company and by the
- ---------
payment to the Company, by check, of an amount equal to the then applicable
Warrant Price per share multiplied by the number of Shares then being purchased.
A new warrant for the remaining purchase rights will be issued if the Warrant is
exercised in part. The person or persons in whose name(s) any certificate(s)
representing Shares shall be issuable upon exercise of this Warrant shall be
deemed to have become the holder(s) of record of, and shall be treated for all
purposes as the record holder(s) of, the shares represented thereby (and such
shares shall be deemed to have been issued) immediately prior to the close of
business on the date or dates upon which this Warrant is exercised. In the
event of any exercise of the rights represented by this Warrant, certificates
for the shares of stock so purchased shall be delivered to the Holder as soon as
possible and in any event within thirty (30) days of receipt of such notice and,
unless this Warrant has been fully exercised or expired, a new warrant
representing the portion of the Shares, if any, with respect to which this
Warrant shall not then have been exercised shall also be issued to the Holder as
soon as possible and in any event within such thirty (30)-day period.
b. Net Issue Exercise. In lieu of exercising this Warrant
------------------
pursuant to subparagraph 4(a) above and subject to the Company's prior written
consent, the Holder may elect to receive shares equal to the value of this
Warrant (or the portion thereof being canceled) by surrender of this Warrant at
the principal office of the Company together with notice of such election in
which event the Company shall issue to the Holder a number of Shares computed
using the following formula:
X=Y(A-B)
------
A
Where: X= The number of Shares to be issued to the Holder.
3
<PAGE>
CONFIDENTIAL
Y= the number of Shares purchasable under this Warrant (or the
portion thereof being canceled) at the time of such
exercise.
A= the fair market value of one share of Class B Common Stock
at the time of such exercise.
B= Warrant Price (as adjusted to the date of such calculation).
For purposes of this subparagraph 4(b), the fair market value of the Class B
Common Stock shall be determined as follows:
(i) if this Warrant is exercised prior to an initial
public offering of the Company's Common Stock, the fair market value of the
Class B Common Stock shall be determined by the Company's Board of Directors;
(ii) if the exercise is in connection with an initial
public offering of the Company's Common Stock, and if the Company's registration
statement relating to such public offering has been declared effective by the
Securities and Exchange Commission ("SEC"), then the fair market value per share
shall be the initial "Price to Public" specified in the final prospectus with
respect to the offering; or
(iii) if this Warrant is exercised after, and not in
connection with, the Company's initial public offering, and:
(a) if traded on a securities exchange, the fair
market value shall be deemed to be the average of the closing
prices over the ten (10) day trading period immediately preceding
three days before the day the current fair market value of the
securities is being determined; or
(b) if actively traded over-the-counter, the fair
market value shall be deemed to be the average of the closing bid
and asked prices quoted on the Nasdaq system (or similar system)
over the ten (10) day trading period immediately preceding three
days before the day the current fair market value of the
securities is being determined.
5. Stock Fully Paid; Reservation of Shares. All Shares that may be
---------------------------------------
issued upon the exercise of the rights represented by this Warrant shall, upon
issuance, be fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the issue thereof. During the period within which the
rights represented by the Warrant may be exercised, the Company will at all
times have authorized and reserved for the purpose of issuance upon exercise of
the purchase rights evidenced by this Warrant, a sufficient number of shares of
Class B Common Stock to provide for their exercise of the right represented by
this Warrant.
6. Adjustment of Warrant Price and Number of Shares. The number and
-----------------------------------------------
kind of securities purchasable upon the exercise of the Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events as follows:
<PAGE>
CONFIDENTIAL
a. Reclassification. In case of any reclassification, change or
----------------
conversion of Class B Common Stock issuable upon exercise of this Warrant (other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination), the Company
shall execute a new Warrant (in form and substance satisfactory to the Holder,
as the holder of this Warrant) providing that the Holder shall have the right to
exercise such new Warrant and upon such exercise to receive, in lieu of each
share of Class B Common Stock theretofore issuable upon exercise of this
Warrant, the kind and amount of shares of stock, other securities, money and
property receivable upon such reclassification or change by a holder of one
share of Class B Common Stock. Such new Warrant shall provide for adjustments
that shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Paragraph 6. The provisions of this subparagraph 6(a)
shall similarly apply to successive reclassifications or changes.
b. Subdivisions or Combination of Shares. If the Company at any
-------------------------------------
time while this Warrant remains outstanding and unexpired shall subdivide or
combine its Class B Common Stock, the Warrant Price and the number of shares of
Class B Common Stock issuable upon exercise hereof shall be proportionately
adjusted such that the aggregate exercise price of this Warrant shall at all
times remain equal.
c. Dividends. If the Company at any time prior to the
---------
expiration of this Warrant shall pay a dividend with respect to the Company's
Class B Common Stock payable in shares of Class B Common Stock, or make any
distribution with respect to the Company's Class B Common Stock, then the
purchase price per share shall be appropriately decreased, and the number of
Shares shall be appropriately increased in proportion to such dividend.
d. Merger or Consolidation. Subject to Paragraph 2 above, upon
-----------------------
a Sale of the Company, the Company, or such successor or purchasing corporation,
as the case may be, shall execute a new Warrant (in form and substance
satisfactory to the Holder) providing that the HOlder shall have the right to
exercise such new Warrant and upon such exercise to receive, in lieu of each
share of Class B Common Stock theretofore issuable upon exercise of this
Warrant, the kind and amount of shares of stock, other securities, money and
property receivable upon such merger or consolidation by a holder of one share
of Class B Common Stock. Such new Warrant shall provide for adjustments that
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Paragraph 6. The provisions of this subparagraph 6(d) shall
similarly apply to successive mergers and consolidations.
e. No Impairment. The Company will not, by amendment of its
-------------
Restated Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Paragraph 6 and in the taking of
all such action as may be necessary or appropriate in order to protect the
rights of the Holder as the holder of this Warrant against impairment.
<PAGE>
CONFIDENTIAL
f. Notices of Record Date. In the event of any taking by the
----------------------
Company of a record of its stockholders for the purpose of determining
stockholders who are entitled to receive payment of any dividend (other than a
cash dividend) or other distribution, any right to subscribe for, purchase or
otherwise acquire any share of any class or any other securities or property, or
to receive any other right, or any proposed liquidation, dissolution or winding
up of the Company, the Company shall mail to the Holder, as the holder of the
Warrant, at least twenty (20) days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right.
g. Automatic Conversion. Upon the consummation of an IPO, each
---------------------
share issued upon exercise of this Warrant shall automatically convert into one
share (subject to stock splits and combinations as permitted by this Warrant) of
the securities issued in the IPO.
7. Notice of Adjustments. Whatever the Warrant Price shall be
---------------------
adjusted pursuant to the provisions hereof, the Company shall within twenty (20)
days of such adjustment deliver a certificate signed by its chief financial
officer to the Holder as the registered holder hereof setting forth, in a
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the Warrant
Price after giving effect to such adjustment.
8. Right of First Refusal: Restriction on Transfer.
------------------------------------------------
a. Grant. The Company is hereby granted the right of first
-----
refusal (the "First Refusal Right"), exercisable in connection with any proposed
transfer of the shares. For purposes of this Paragraph 8, the term "transfer"
shall include any sale, assignment, pledge, encumbrance or other disposition for
value of the shares intended to be made by the Holder; provided, however, that
the Holder may transfer any Shares to an investment fund or funds managed by
Holder or an affiliate of Holder (a "Permitted Transferee"), and provided that
Holder submits to the Company an irrevocable joint and several undertaking for
the benefit of the Company executed by the Holder or an affiliate of Holder and
the Permitted Transferee(s) that Holder or an affiliate of Holder may represent
the Permitted Transferee(s) on all matters related to the Shares, without first
making such an offer to the Company.
b. Notice of Intended Disposition. In the event the Holder
-----------------------------
desires to accept a bona fide third-party offer for any or all of the shares
(the shares subject to such offer to be hereinafter call the "Target Shares"),
Holder shall promptly deliver to the Corporate Secretary of the Company written
notice (the "Disposition NOtice") in accordance with this Warrant of the terms
and conditions of the offer, including the purchase price and the identity of
the third-party offeror.
c. Exercise of Right. The Company (or its assignees) shall, for
-----------------
a period of thirty (30) days following receipt of the Disposition Notice, have
the right to repurchase all but not less than all of the Target Shares specified
in the Disposition Notice upon substantially the same terms and conditions
specified therein. Such right shall be exercisable by delivery of written
notice (the "Exercise Notice") in accordance with this Warrant to Holder prior
to the
<PAGE>
CONFIDENTIAL
expiration of the thirty (30) day exercise period. If the First Refusal Right
is exercised with respect to the Target Shares specified in the Disposition
Notice, then the Company (or its assignees) shall effect the repurchase of the
Target Shares, including payment of the purchase price, not more than fifteen
(15) business days after delivery of the Exercise Notice; and at such time
Holder shall deliver to the Company the certificates representing the Target
Shares to be repurchased, each certificate to be properly endorsed for transfer.
d. Non-Exercise of Right. In the event that Exercise Notice is not
---------------------
given to Holder within thirty (30) days following the date of the Company's
receipt of the Disposition Notice, Holder shall have a period of forty-five (45)
days thereafter in which to sell or otherwise dispose of the Target Shares to
the third-party offeror identified in the Disposition Notice upon terms and
conditions (including the purchase price) no more favorable to such third-party
offeror than those specified in the Disposition Notice. The third-party offeror
shall acquire the Target Shares subject to the Company's First Refusal Right
hereunder. In the event Holder does not effect such sale or disposition of the
Target Shares within the specified forty-five (45) day period, the Company's
First Refusal Right shall continue to be applicable to any subsequent
disposition of the Target Shares by Holder until such right lapses in accordance
with subparagraph 8(f).
e. Restriction on Transfer. Except with the Company's prior written
-----------------------
consent, neither the Holder nor any transferee of Holder shall sell or transfer
in any manner (the "Transfer Restriction") any Shares purchased hereunder to any
person or entity engaged in, or reasonably anticipated by the Company to become
engaged in, the business of providing electronic commerce solutions or related
technology (a "Restricted Party"). The Holder or any transferee of Holder may
request that the Company waive the restriction on the sale or transfer of Shares
described in the preceding sentence to a Restricted Party as to a particular
proposed sale or transfer, but the Company shall have no obligation to waive
such restriction on the sale or transfer, but the Company shall have no
obligation to waive such restriction on the sale or transfer of any such Shares
to any Restricted Party.
f. Lapse. The First Refusal Right and Transfer Restriction under
-----
this Paragraph 8 shall lapse and cease to have effect upon the closing of an
IPO.
9. Fractional Shares. No fractional shares of Class B Common Stock shall
-----------------
be issued in connection with any exercise hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor upon the basis
of the Warrant Price then in effect.
10. Transfers and Exchanges. This Warrant may only be transferred to a
-----------------------
Permitted Transferee.
11. Rights as Stockholder. The Holder, as the holder of the Warrant, shall
---------------------
not be entitled to vote or receive dividends and shall not be deemed the holder
of Class B Common Stock, nor shall anything contained herein be construed to
confer upon the Holder as the holder of this Warrant, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to receive
notice of meetings, or to receive dividends or subscription rights or otherwise
until
7
<PAGE>
CONFIDENTIAL
this Warrant shall have been exercised and the shares of Class B Common Stock
purchasable upon the exercise hereof shall have become deliverable, as provided
herein.
12. Representations and Warranties of the Company. This Warrant is
---------------------------------------------
issued and delivered on the basis of the following:
a. Due Authorization. This Warrant has been duly authorized and
-----------------
executed by the Company and when delivered will be the valid and binding
obligation of the Company enforceable in accordance with its terms.
b. Due Issuance. The shares of Class B Common Stock purchasable
------------
upon the exercise hereof have been duly authorized and reserved for issuance by
the Company and when issued in accordance with the terms hereof, will be validly
issued, fully paid and nonassessable.
13. Representations and Warranties of the Holder.
--------------------------------------------
a. Investment Intent. Holder hereby warrants and represents
-----------------
that Holder is acquiring this Warrant, and any Shares issued upon exercise of
this Warrant, for Holder's own account and not with a view to their resale or
distribution.
b. Exempt from Registration. Holder acknowledges that this
------------------------
Warrant has not been registered under the Act on the ground that the issuance
of this Warrant is exempt from registration pursuant to Section 4(2) of the Act,
and that the Company's reliance on such exemption is predicated on the
representations of Holder set forth herein.
c. Investment Experience. In connection with the investment
---------------------
representations made herein Holder represents that it is able to fend for itself
in the transactions contemplated by this Warrant, has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of its investment, has the ability to bear the economic risks
of its investment, and has been furnished with and has had access to such
information as it has requested and deemed appropriate to its investment
decision.
d. Restricted Securities. Holder hereby confirms that Holder
---------------------
has been informed that this Warrant, and the Shares issued upon exercise of this
Warrant, are restricted securities under the Act and may not be resold or
transferred unless this Warrant, and the Shares issued upon exercise of this
Warrant, are first registered under the federal securities laws or unless an
exemption from such registration is available. Accordingly, Holder hereby
acknowledges that Holder is prepared to hold this Warrant, and the Shares issued
upon exercise of this Warrant, for an indefinite period and that Holder is aware
that Rule 144 of the Securities and Exchange Commission issued under the Act is
not presently available to exempt the issuance of this Warrant from the
registration requirements of the Act.
e. Disposition of Shares. Holder hereby agrees that Holder
---------------------
shall make no disposition of this Warrant, and the Warrant Shares issued upon
exercise of this Warrant, unless and until:
8
<PAGE>
CONFIDENTIAL
(a) Holder shall have notified the Company of the proposed
disposition and provided a written summary of the terms and
conditions of the proposed disposition;
(b) Holder shall have complied with all requirements of
this Agreement applicable to the disposition; and
(c) Holder shall have provided the Company with written
assurances, in form and substance satisfactory to the Company,
that (i) the proposed disposition does not require registration
of the Purchased Shares under the Act, or (ii) all appropriate
action necessary for compliance with the registration
requirements of the Act or of any exemption from registration
available under the Act (including Rule 144) has been taken.
f. Restrictive Legends. In order to reflect the restrictions on
-------------------
disposition of the Shares issued upon exercise of this Warrant, the stock
certificates for the Shares will be endorsed with the following restrictive
legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. THE SHARES MAY NOT BE SOLD OR
OFFERED FOR SALE IN THE ABSENCE OF (a) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SHARES UNDER SUCH ACT, (b) A 'NO ACTION' LETTER OF
THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH SALE OR
OFFER, OR (c) SATISFACTORY ASSURANCES TO ELECTRONIC PUBLISHING
RESOURCES, INC. THAT REGISTRATION UNDER SUCH ACT IS NOT REQUIRED WITH
RESPECT TO SUCH SALE OR OFFER."
g. Market Stand-Off. Holder hereby agrees that, during the
----------------
period of duration (not to exceed 180 days) specified by the Company and an
underwriter of Common Stock or other securities of the Company, following the
effective date of any registered underwritten public offering of Company
securities, it shall not, to the extent requested by the Company and such
underwriter, directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of (other than to donees who agree to be similarly
bound) any securities of the COmpany held by it at any time during such period
except Common Stock included in such registration; provided, however, that all
officers and directors of the COmpany, and all other persons with registration
rights (whether or not pursuant to this Agreement) enter into similar
agreements.
14. Modification and Waiver. This Warrant and any provision hereof
-----------------------
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the Company and the Holder.
9
<PAGE>
CONFIDENTIAL
15. Notices. Any notice, request or other document required or
-------
permitted to be given or delivered to the Holder or the Company shall be
delivered, or shall be sent by certified or registered mail, postage prepaid, to
such Holder's address as shown on the books of the Company or to the Company at
the address indicated on the signature page of this Warrant.
16. Successors and Assigns. The terms and provisions of this
-----------------------
Warrant shall be binding upon the Company, the Holder, and their respective
successors and assigns, subject at all times to the restrictions set forth in
this Warrant.
17. Lost Warrants or Stock Certificates. The Company covenants to
-----------------------------------
the holder hereof that upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of any indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, or like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
18. Descriptive Headings. The descriptive headings of the several
--------------------
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
19. Governing Law. This Warrant shall be construed and enforced in
-------------
accordance with, and the rights of the parties shall be governed by, the laws
of the State of California.
20. Entire Agreement. This Warrant and the exhibits hereto embody
----------------
the entire agreement and understanding of Holder and Company with respect to the
subject matter hereof, and supersede all prior and contemporaneous agreements
and understandings, oral or written, relative to said subject matter.
21. Attorney's Fees. If any action at law or in equity is necessary
---------------
to enforce or interpret the terms of this Warrant, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
22. No Impairment. The Company, whether by amendment of its
-------------
Certificate of Incorporation, a copy of which is attached hereto as Exhibit B,
---------
or through any recapitalization, split, reverse split, subdivision, merger,
consolidation or combination, will not seek to impair the rights of shares of
Class B Common Stock acquired hereunder relative to the Company's Class A Common
Stock, other than differences currently existing between the two classes of
stock.
23. Registration Rights. The Company agrees that the Shares issued
-------------------
or issuable upon exercise of this Warrant shall be deemed "Registrable
Securities" as such term is defined in the Company's Series B Preferred Stock
Purchase Agreement of even date herewith (the "Series B Agreement") solely for
purposes of granting "piggyback" registration rights under subSection 4.1 (c) of
the Series B Agreement and the right to participate, but not demand
registration, under Section 4.1(b) of the Series B Agreement; provided, however,
that in the event
10
<PAGE>
CONFIDENTIAL
of any cutback of securities requested by the underwriters, the Shares shall be
subject to cutback prior to any cutbacks on any holders of Common Stock issued
or issuable upon conversion of the Company's Preferred Stock and then only on a
pro rata basis with other holders of Common Stock.
IN WITNESS WHEREOF, InterTrust Technologies Corporation has caused
this Warrant to be executed by its officers hereunto duly authorized effective
as of the date first above written.
INTERTRUST TECHNOLOGIES
CORPORATION
By: _______________________________
Victor Shear, Chairman and
Chief Executive Officer
Address: 460 Oakmead Parkway
Sunnyvale, CA 94086
AGREED AND ACKNOWLEDGED:
UPGRADE CORPORATION OF AMERICA
By: ____________________________
_________________________________
Please Print Name
_________________________________
Title, if applicable
11
<PAGE>
CONFIDENTIAL
EXHIBIT A
---------
NOTICE OF EXERCISE
To: InterTrust Technologies Corporation
460 Oakmead Parkway
Sunnyvale, CA 94086
Attn: Victor Shear, Chairman and Chief Executive Officer
1. The undersigned hereby elects to purchase
_____________ shares of Class B Common Stock of InterTrust
Technologies Corporation pursuant to the terms of the
attached Warrant, and tenders herewith payment of the
purchase price of such shares in full.
2. Please issue a certificate or certificates
representing said shares in the name of the undersigned or
in such other name or names as are specified below:
Name: ______________________________________
Address: ______________________________________
______________________________________
______________________________________
3. The undersigned represents that the foregoing
shares being acquired for the account of the undersigned
are for investment and not with a view to, or for resale in
connection with, the distribution thereof and that the
undersigned has no present intention of distributing or
reselling such shares.
___________________________________________
Signature
____________________________
(Date)
<PAGE>
EXHIBIT B
TO THE TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
INTERTRUST TECHNOLOGY PRODUCTS AND RELATED MATTERS
--------------------------------------------------
I. INTERTRUST TECHNOLOGY PRODUCTS
A. Systems Developer's Kit (SDK) 1.0, 1.1, 2.0
B. Tools Developer's Kit (TDK) 1.0
C. Content Developer's Kit (CDK) 2.0
II. INTERTRUST CORE TECHNOLOGY
III. INTERTRUST AUTHORIZED APPLICATION SOFTWARE
IV. INTERTRUST AUTHORIZED CLEARINGHOUSE SOFTWARE
V. INTERTRUST DOCUMENTATION
B-1
<PAGE>
I. InterTrust Technology Products
I.A.1 InterTrust Systems Developer's Kit (SDK) Release 1.0
- ----------------------------------------------------------
The SDK technology will provide support for the following functionality:
Content-vending infrastructure, including support for interfacing with at
least one payment and metering infrastructure
Ability to integrate the InterTrust commerce architecture with customer-
specific services, such as: payment, financial and usage
clearinghouses, multiple network protocols, database systems, etc.
Ability to build application suites or tools that integrate support for
InterTrust Commerce Technology viewing, packaging, and control
Ability to create DigiBox containers for existing text-based and simple
image-and video- based content
Support of single-tier controls (i.e. for a single-point distribution
system)
Client and server support for Windows 95 and NT
Ability to integrate with at least one financial clearinghouse
Deployment services for installation, registration
. Documented APIs
Note: Source Code and Object Code available for Win95 and WinNT operating
systems; additional platforms, such as Unix, to be supplied as they become
available, and at InterTrust's discretion.
SDK 1.0 Deliverables:
- ---------------------
Core Technology Software--Object Code Format:
Node Server: includes DigiBox container library and other core
services
Systems Services: e.g. time, cryptographic services
----
. Node database and database access routines
Node Client Interface DLLs
Deployment Services - used to deploy and initialize the set of nodes
in an InterTrust Commerce Technology deployment
Clearinghouse Prototype Components--Source Code and Object Code Format:
Usage clearinghouse application--sample software for performing
specific clearinghouse functions in the area of usage auditing,
profiling, etc.
Financial clearinghouse application--sample software for performing
specific, prototypical clearinghouse functions in the area of
financial clearing
Sample Applications--Source Code and Object Code Format:
InterTrust Packager--places content into DigiBox containers with
user-specified controls
InterTrust Plug-in for InterTrust-supported browsers (Netscape,
Microsoft Explorer)--browser plug-in that controls viewing,
storing, and printing of content in a DigiBox.
InterTrust Administrator--configures and manages an InterTrust node
B-2
<PAGE>
InterTrust HTML Daemon--automatically creates HTML pages referring to
content in DigiBox containers
SDK 1.0 Estimated Schedule:
- ---------------------------
Beta: October 1996
First Commercial Shipment (FCS): Q1 1997
IA. InterTrust Systems Developer's Kit (SDK) Release 1.1
- --------------------------------------------------------
SDK 1.1 will add the following functionality:
Application of one InterTrust control set template to multiple new DigiBox
containers Automation of deployment and installation of InterTrust nodes
SDK 1.1 Deliverables:
- ---------------------
Additional functionality (as described above)
SDK 1.1 Estimated Schedule:
- ---------------------------
Beta: None
FCS: Q2 1997
I.A.2 InterTrust Systems Developer's Kit (SDK) Release 2.0
- ----------------------------------------------------------
SDK 2.0 will add system level value chain management and independent delivery of
control functionality tools to InterTrust SDK 1.1 to support the following
functionality:
Persistent, trusted value-chain management, enabling support of chain of
control models directly within InterTrust
Deliver controls independently of controlled digital information, enabling
complex updatable, control models for usage/advertising, trading
systems, and other rights management for digital information value
chains
Note: Source Code and Object Code will be initially available for Win95 and
WinNT operating systems; additional platforms, such as Unix, to be supplied as
they become available, and at InterTrust's discretion.
SDK 2.0 Deliverables:
- ---------------------
Updated SDK Object Code and Source Code, as applicable
SDK 2.0 Estimated Schedule:
- ---------------------------
Beta: Calendar Q3 1997
FCS: Calendar Q4 1997
B-3
<PAGE>
I.B. InterTrust Tool Developer's Kit (TDK) Release 1.0
- -------------------------------------------------------
The TDK product is specifically aimed at tool developers. It will facilitate
creation of software-development and content-development tools that integrate
InterTrust packaging and viewing support.
Note: Source Code and Object Code will be initially available for Win95 and
WinNT operating systems; additional platforms, such as Unix, to be supplied as
they become available, and at InterTrust's discretion.
TDK 1.0 Deliverables:
- ---------------------
Core Technology Software--Object Code Format:
InterTrust APIs and libraries--for integration of InterTrust
technology into software and content development tools.
Test Environment--Object Code Format:
Facilitates testing of tools developed with TDK API's and libraries
Sample Applications--Source Code:
Sample packaging, viewing applications
Other:
Standard InterTrust control set templates--a set of model business
rules
TDK 1.0 Estimated Schedule:
- ---------------------------
Beta: Calendar Q1 1997
FCS: Calendar Q2 1997
I.C. InterTrust Content Developer's Kit (CDK) Release 2.0 Deliverables
- ----------------------------------------------------------------------
The CDK is aimed at large and medium-sized content developers. It will simplify
packaging of content into DigiBox containers, encompass embedded value chain
management and independent delivery of controls.
Note: Object Code will be initially available for Win95 and WinNT operating
systems; additional platforms, such as Unix, to be supplied as they become
available, and at InterTrust's discretion.
CDK 2.0 Deliverables:
- ---------------------
Client Application--Object Code Format:
InterTrust viewing and packaging applications, including the control
set editor
Other:
Standard InterTrust control set templates
B-4
<PAGE>
CDK 2.0 Estimated Schedule:
- ---------------------------
Beta: Calendar Q4 1997
FCS: Calendar Q1 1998
II. INTERTRUST CORE TECHNOLOGY
Object Code Format:
. Node Server
. Systems Services for Node Utilization
. Node database and database access routines
. Node Client Interface DLLs
. Node Deployment Services
InterTrust may provide other such applications at its discretion.
III. INTERTRUST AUTHORIZED APPLICATION SOFTWARE
Only the following InterTrust Technology may be distributed to any Person, and
such technology may be distributed only in Object Code form.
Sample Applications:
InterTrust Packager
InterTrust Plug-in for InterTrust-supported browsers
. InterTrust Administrator
. InterTrust HTML Daemon
Core Technology Application:
Node Server:
Systems Services
Node database and database access routines
Node Client Interface DLLs
B-5
<PAGE>
IV. INTERTRUST AUTHORIZED CLEARINGHOUSE SOFTWARE
Only the following Authorized Clearinghouse Software may be distributed to an
Authorized Clearinghouse Provider or a sublicense under Section 5.2, and such
technology may be distributed only in Object Code form.
Usage Clearinghouse Application
Financial Clearinghouse Application
V. DOCUMENTATION
IV.A. SDK Documentation:
- ------------------------
User documentation
. InterTrust Application Programmer's Guide and Reference
IV.B. TDK Documentation:
- ------------------------
User documentation
. InterTrust Application Programmer's Guide and Reference
. Source material for end-user documentation
IV.C. CDK Documentation:
- ------------------------
User documentation
B-6
<PAGE>
CONFIDENTIAL
EXHIBIT C
TO THE TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
TRADEMARKS
----------
InterTrust Trademarks
---------------------
InterTrust
The InterTrust Logo
InterTrust Commerce Architecture
InterTrust Commerce Node
InterTrustworthy
DigiBox
NetTrust
Virtual Process Control
Electronic Value Chain Management
SSG Trademarks
--------------
C-1
<PAGE>
EXHIBIT D
TO THE TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
SIGNATURE PAGE
--------------
By executing this SIGNATURE PAGE, the undersigned entity agrees to be a Party in
accordance with, and as such term is defined in, the TECHNOLOGY DEVELOPMENT AND
LICENSE AGREEMENT of _______________, 1996 (the "Agreement") to which this
SIGNATURE PAGE is attached, and to be bound by all the terms and conditions
thereof applicable to SSG, to and for the benefit of itself and the other
Parties thereto.
Entity: SOFTBANK Internet Services, Inc.
By:
--------------------------------------------
Printed Name:
----------------------------------
Title:
-----------------------------------------
Date:
------------------------------------------
D-1
<PAGE>
CONFIDENTIAL
EXHIBIT E
TO THE TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
COOPERATIVE APPLICATION PROJECT PLAN
------------------------------------
As a general matter, a Cooperative Application Project Plan will: (i) set forth
terms and conditions (such as development milestones, cost estimates,
development fees, special licensing arrangements (if any), etc.) for the
development of a Cooperative Application; and (ii) outline and embody a staged
approach for the entire development process, from project planning through
quality and acceptance testing of generated code.
It is contemplated that Cooperative Application Project Plan will incorporate,
as agreed to by the Parties, the following terms:
. a schedule for completion of various targets and stages (as further set
forth below) for development of a Cooperative Application;
. a definition of the tasks for which each participating Party shall be
responsible with respect to the Cooperative Application project;
. acceptance testing procedures and criteria for determining that the
Cooperative Application conforms to the specifications therefor and to
InterTrust Specifications;
. a business plan, including one or more businesses and associated
marketing analyses and marketing plans for the exploitation of the
Cooperative Application;
. an estimate of the costs for the project, a development plan containing
budgets and milestones and specification of a formula for calculating
any cost and expense sharing related to the project SSG may pay to
InterTrust, including any development fees consistent with Section 3.3
hereof;
. provisions concerning ownership of Intellectual Property Rights and
other rights relating to the Cooperative Application, if terms and
conditions related to such rights differ in any way from this Agreement;
and
. provisions concerning revenue sharing relationships, if any, and
additional licensing or other fees, as applicable and as agreed,
concerning the licensing, use or other exploitation, a Cooperative
Application and/or directly related services.
E-1
<PAGE>
CONFIDENTIAL
EXHIBIT F
TO THE TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
SPECIAL ADVANCED TECHNOLOGIES
-----------------------------
"Special Advanced Technologies" means technology, systems and/or
-----------------------------
applications that enable at least one of the following rights management and/or
distributed event management advanced capabilities: (i) Dynamic Rules and
Controls; (ii) Independent Rules and Controls; (iii) Chain of Handling and
Control; (iv) Rights Operating System; (v) Traveling Objects; and (vi) Event
Nodes.
The foregoing capitalized terms are defined below. All capitalized terms
not defined on this Exhibit E, shall have the meaning set forth in the
Agreement.
"Chain of Handling and Control" means technology that at least in part
-----------------------------
allows or enables the persistence of all or any portion of Dynamic Rules and
Controls as such Dynamic Rules and Controls are provided for use to one or more
sequences of Persons.
"Dynamic Rules and Controls" means technology that, at least in part,
--------------------------
supports the use of control structures to: (i) Manage (for example, govern
access to or other use of) Content in accordance with Rules and Controls
associated with such Content; and (ii) accept the (a) modification and/or
replacement of at least a portion of any such Rules and Controls, and/or (b)
addition of Rules and Controls, all in a manner consistent with pre-existing
Rules and Controls.
"Event Nodes" means distributed and fully or partially interoperable
-----------
electronic nodes, each of which employs Rules and Controls to Manage events
based at least in part upon plural nodal activity relating to Content; Event
Nodes may be used in systems that support inter-nodal electronic process
management.
"Independent Rules and Controls" means technology enabling the independent
------------------------------
and separate provision of Rules and Controls, whether or not said Rules and
Controls are, for example, delivered in the same cryptographic container, or at
the same time, as related Content.
"Rights Operating System" means one or more general purpose computer
-----------------------
control programs that, independently or in combination with a host operating
system, contributes to rights-related interoperability among plural nodes and
enables application of Dynamic Rules and Controls and/or Independent Rules and
Controls.
"Traveling Objects" means technology supporting the use and/or re-use of
-----------------
Content subject to persistent Rules and Controls which Manage Content, so that,
when such Content is passed from one user to another such Content does not
require a specific authorization by a remote authority in each instance to
enable a first use by a new user when such Content is passed to such new user.
F-1
<PAGE>
CONFIDENTIAL
EXHIBIT G
TO THE TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
FORM OF INTERTRUST CONFIDENTIALITY AGREEMENTS
---------------------------------------------
G-1
<PAGE>
TOP SECRECY AGREEMENT
---------------------
FOR CERTAIN INTERTRUST INFORMATION
----------------------------------
THIS AGREEMENT (this "Agreement") is made effective as of 1996
between INTERTRUST TECHNOLOGIES CORPORATION ("InterTrust"), a Delaware
corporation, having a place of business at 460 Oakmead Parkway, Sunnyvale,
California 90486, and ________________________ ("Recipient"), an individual
citizen of the United States, residing at ____________________, and an employee
of SOFTBANK Services Group, a Delaware corporation.
These parties agree as follows:
1. Purpose.
(a) Pursuant to a Technology Development and License Agreement dated
__________ between InterTrust and SSG (the "License Agreement"), InterTrust may
disclose to SSG certain information including load module related, encryption
related, document manager related and/or other information considered Top Secret
and proprietary by InterTrust (hereinafter referred to as the "InterTrust Top
Secret Information") and which shall conspicuously be marked with a notice or
legend with the phrase "Top Secret", as provided in the License Agreement. In
consideration for said information being provided to Recipient, Recipient agrees
to be bound by the terms of this Agreement.
(b) InterTrust wishes to protect the InterTrust Top Secret Information
from unauthorized use and disclosure. Disclosure of InterTrust Top Secret
Information to Recipient, and use and disclosure of Top Secret Information
received by Recipient shall occur only in accordance with the terms and
conditions of this Agreement.
2. Non-Disclosure and Restrictions on Use of InterTrust Extremely
--------------------------------------------------------------
Confidential.
- ------------
(a) Except as otherwise provided in an express written agreement signed by
InterTrust's Chairman or President, or other such person designated in writing
by the Chairman or President (a "Designated InterTrust Officer"), Recipient
agrees that he or she shall: (i) hold in strictest confidence and not disclose
any InterTrust Top Secret Information to any person or entity either within or
outside SSG except as expressly permitted in writing by a Designated InterTrust
Officer; (ii) use InterTrust Top Secret Information solely for purposes
authorized by the License Agreement: (iii) use said Top Secret Information in no
other way whatsoever; (iv) apply the strictest feasible measures to protect the
secrecy of, and prevent unauthorized disclosure or use of, InterTrust Top Secret
information (which such measures shall not be less stringent than in SSG uses to
protect its own most highly sensitive and secret information); and (v) shall
produce no physical embodiments of any portion of the Top Secret Information
without the express written authorization of a Designated InterTrust Officer.
Recipient agrees to notify InterTrust promptly in writing of any unauthorized
disclosure or other misuse or misappropriation of the InterTrust Top Secret
Information which may come to Recipient's attention.
(b) Notwithstanding the foregoing, Recipient shall be entitled to disclose
Top Secret Information pursuant to a court order issued by a court of competent
jurisdiction or as otherwise required by law; provided that Recipient shall
provide prompt advance notice thereof to InterTrust to enable InterTrust to seek
a protective order or otherwise prevent such disclosure and shall disclose no
more than the minimum information required by such court order or by law.
3. Return of Materials. Upon request of a Designated InterTrust Officer,
-------------------
Recipient shall immediately return to InterTrust all tangible embodiments of
InterTrust Top Secret Information in Recipient's possession or otherwise under
Recipient's control.
<PAGE>
4. Equitable Remedies. Recipient agrees that unauthorized disclosure or use
------------------
of InterTrust Top Secret Information will cause InterTrust substantial damage.
Recipient further agrees that it may be impossible or inadequate to measure and
calculate InterTrust's damages from any breach of the covenants set forth in
Sections 2 and/or 3 hereof. Accordingly, Recipient agrees that if he or she
breaches or threatens breach of any of such sections, InterTrust will have
available, in addition to any other right or remedy available, the right to
obtain an injunction against him or her, from a court of competent jurisdiction
restraining such breach or threatened breach and to specific performance of any
such provision of this Agreement, and Recipient hereby consents to the issuance
of such injunction and to the ordering of specific performance under such
circumstances.
5. Governing Law: Jurisdiction and Venue. This Agreement shall be governed by
-------------------------------------
and construed under the laws of the State of Virginia, without reference to
conflict of law principles. All disputes arising out of or relating to the
subject matter of this Agreement shall be subject to the exclusive jurisdiction
and venue of the United States District Court for the Eastern District of
Virginia, Alexandria Division Virginia, or if jurisdiction does not properly lie
in such court, the Commonwealth courts in Alexandria, Virginia. The parties
consent to the personal and exclusive jurisdiction and venue of such court and
waive any argument that jurisdiction or venue in such court is improper or
inconvenient.
6. Severability. If any provision or portion thereof in this Agreement shall
be found or be held to be illegal, invalid or unenforceable in any jurisdiction
in which this Agreement is being performed, then this Agreement shall
nevertheless be given full force and effect without said provision or portion.
7. Entire Agreement. This Agreement constitutes the entire agreement between
----------------
Recipient and InterTrust regarding the InterTrust Top Secret Information
disclosed hereunder and supersedes all oral or written agreements, either
entered prior to or contemporaneously with this Agreement, concerning the
InterTrust Top Secret Information, except the provision, of the License
Agreement or the Non-Disclosure Agreement between InterTrust and Softbank
Holdings Limited dated March 6, 1996, the provisions of which shall be deemed to
be supplemented hereby as of the date first written above. This Agreement may
not be modified except by written agreement dated subsequent to the date of this
Agreement and signed by both parties.
8. Successors. Subject to the limitations set forth in this Agreement, this
----------
Agreement will inure to the benefit of and be binding upon the parties, their
successors and assigns.
9. Notices. For all purposes hereof, any notice pursuant hereto shall be
deemed given upon receipt by the Party at the address indicated above.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
INTERTRUST TECHNOLOGIES RECIPIENT
CORPORATION ---------
- -----------------------
By:__________________________ By:____________________________
Name:________________________ Name:__________________________
SSG
Title:_______________________ Title:_________________________
<PAGE>
NON-DISCLOSURE AGREEMENT
------------------------
FOR INTERTRUST CONFIDENTIAL INFORMATION
---------------------------------------
THIS AGREEMENT (this "Agreement") is made effective as of________1996
between INTERTRUST TECHNOLOGIES CORPORATION ("InterTrust"), a Delaware
corporation, having a place of business at 460 Oakmead Parkway, Sunnyvale,
California 90486, and _______________________ ("Recipient"), an individual
citizen of the United States, residing at_____________________________________,
and an employee of SOFTBANK Services Group, a Delaware corporation.
The parties agree as follows:
1. Pursuant to a Technology Development and License Agreement dated__________
between InterTrust and SSG (the "License Agreement"), InterTrust may disclose to
SSG certain confidential information including technical information embodied
in and/or associated with InterTrust's InterTrust Technology including, without
limitation, software products and/or other developments related to distributed,
secure rights and/or event management, associated designs, inventions, plans,
and other information (the "Confidential Information"), all of which such
information shall conspicuously be marked with a notice or legend with the
phrase "Confidential", as provided in the License Agreement. In consideration
for such Confidential Information being provided to Recipient, Recipient agrees
to be bound by the terms of this Agreement. Disclosure of InterTrust
Confidential Information to Recipient, and use and disclosure of Confidential
Information received by Recipient, shall occur only in accordance
with the terms and conditions of this Agreement.
2. Recipient will retain such Confidential Information in confidence, and will
discuss such Confidential Information only with other SSG employees, and/or with
other individuals who are under the direct control of SSG and work full time on
SSG premises (an "Individual Consultant"), who have a need to know said
Confidential Information and who have executed a copy of this Agreement.
Recipient shall not, without the prior written permission of InterTrust's
Chairman, President, or such other InterTrust Officer as who has been designated
in writing by InterTrust's Chairman (a "Designated InterTrust Officer"),
disclose Confidential Information to any non-SSG employee other than an
Individual Consultant. Furthermore, without express written authorization of a
SSG officer who is empowered by SSG to provide such an authorization, the
Recipient will not make copies, in whole or in part, of the Confidential
Information into another language and/or shipping the Confidential Information,
in whole or in part, or any direct product thereof, to any country foreign to
the United States of America. The undersigned will not use the Confidential
Information in any manner that is not authorized by SSG and in accordance with
the License Agreement and the undersigned will use the Confidential Information
solely in the exercise of SSG's rights as provided by the License Agreement.
3. The undersigned will not use Confidential Information except in fulfillment
of the undersigned's employee's and/or other individual's obligations with SSG,
and for no other purposes whatsoever. The undersigned understands and
acknowledges that the unauthorized use of Confidential Information may cause
InterTrust very substantial damage, for which damages may be impossible to
measure or inadequate to compensate. Accordingly, Recipient agrees that if he or
she breaches or threatens breach of any of such sections, InterTrust will have
available, in addition to any other right or remedy available, the right to
obtain an injunction against him or her, from a court of competent jurisdiction
restraining such breach or threatened breach and to specific performance of any
such provision of this Agreement, and Recipient hereby consents to the issuance
of such injunction and to the ordering of specific performance under such
circumstances.
4. The undersigned will return all physical embodiments of Confidential
Information in the undersigned's possession to SSG promptly upon request by SSG,
and in no event later than fifteen (15) days thereafter.
5. Notwithstanding any thing else in this Agreement, the confidentiality
restrictions of this Agreement shall not apply to information that: (i) is
or becomes known to the public through no breach of any of the undersigned's
obligations under this Agreement, or SSG's or any other SSG employee's,
Individual Consultant's or other SSG consultant's, and/or agent's
<PAGE>
obligations of confidentiality to SSG and/or to InterTrust; (ii) was known to
Recipient prior to its disclosure by InterTrust, as evidenced through written
documentation; (iii) shall have been independently developed by the Recipient
without any reliance on or use of any InterTrust Confidential Information, as
demonstrated through written documentation; or (iv) shall have been
rightfully supplied to Recipient with no obligation of confidentiality or
non-use. In addition, the Recipient, shall be entitled to disclose Confidential
Information pursuant to a court order issued by a court of competent
jurisdiction or as otherwise required by law; provided that the undersigned
-------------
shall provide prompt advance notice thereof to InterTrust to enable InterTrust
to seek a protective order or otherwise prevent such disclosure and shall
disclose no more than the minimum information required by such court order or by
law.
6. If any provision or portion thereof in this Agreement shall be found or be
held by a court of competent jurisdiction to be illegal, invalid or
unenforceable in any jurisdiction in which this Agreement is being performed,
then this Agreement shall nevertheless be given full force and effect without
said provision or portion. This Agreement may not be modified except by written
agreement dated subsequent to the date of this Agreement and signed by both
parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
InterTrust Technologies Corporation Recipient
By:___________________________________ Employee: _______________________
Title:________________________________ By:______________________________
Date:_________________________________ Title:___________________________
Date:____________________________
<PAGE>
CONFIDENTIAL
EXHIBIT H
TO THE TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
List of Restricted Companies and
--------------------------------
Exclusions From InterTrust Partnering Commitment
------------------------------------------------
Restricted Companies
- --------------------
. U.S.-based: (i) Independent Software Vendors ("ISVs"), whose primary business
----
is the development or distribution of Software Executables; or (ii) computer
hardware Original Equipment Manufacturers ("OEMs"), other than OEMs solely to
----
the extent of developing, manufacturing, distributing and/or licensing
semiconductor-based solutions supporting any form of rights management,
electronic commerce and/or security activity. Such semiconductor-based
solutions shall not include performance of central clearinghouse services by
such OEM.
. [*]
. [*]
. [*]
. [*]
. [*]
. [*]
. [*]
. [*]
. [*]
. [*]
. [*]
. [*]
. [*]
. [*]
. [*]
. [*]
. [*]
. [*]
Excluded Areas
- --------------
The InterTrust Partnering Commitment shall not be construed as extending
to (or otherwise limiting InterTrust's intended rights with regard to granting
licenses to perform Clearinghouse Functions with respect to:
(i) financial or usage Clearinghouse Functions for any form of digital
information other than the Software Executables. For example, digital
information resources, or games or other entertainment, education,
training, or interactive software products, or any other digital
products containing software executables whose principal purpose is not
to function as business or personal productivity software applications
or applets);
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
H-1
<PAGE>
CONFIDENTIAL
(ii) uses of Clearinghouse Functions for EDI systems, trading system
applications, financial infrastructure tools other than desktop
financial productivity tools, electronic advertising applications, or
any large scale or custom special purpose software systems or
applications, for example, large scale or custom special purpose
systems, that are not normally distributed as retail or shareware
software products.
Under no circumstances shall the InterTrust Partnering Commitment be construed
to include any obligation to refrain from: (a) licensing entities other than
those listed on this Exhibit H immediately above to perform any Clearinghouse
Functions whatsoever; and/or (b) licensing any entity that is listed on this
Exhibit H immediately above to perform any Clearinghouse Functions other than in
connection with financial and usage Clearinghouse Function services for such
Software Executables.
H-2
<PAGE>
EXHIBIT 10.15
==========================
TECHNOLOGY DEVELOPMENT AND LICENSE
AGREEMENT
by and between
INTERTRUST TECHNOLOGIES CORPORATION
and
MITSUBISHI CORPORATION
==========================
__________________________
October 7, 1996
__________________________
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1. DEFINITIONS AND RULES OF CONSTRUCTION........................... 2
1.1 Definitions..................................................... 2
1.2 Rules of Construction........................................... 9
ARTICLE 2. TECHNOLOGY ACCESS AND SUPPORT................................... 10
2.1 Technology Access............................................... 10
2.2 InterTrust Assistance........................................... 10
2.3 Correction of Material Defects.................................. 11
2.4 Status Meetings................................................. 11
2.5 Dedicated Personnel............................................. 11
ARTICLE 3. COOPERATIVE DEVELOPMENT......................................... 11
3.1 Cooperative Development of Trading Model Application............ 11
3.2 Additional Cooperative Applications............................. 12
3.3 Development Fees................................................ 13
ARTICLE 4. LIMITED LICENSE GRANT AND RESTRICTIONS.......................... 13
4.1 License Grant During Option Period.............................. 13
4.2 License Restrictions and Related Covenants...................... 14
ARTICLE 5. MBC OPTION FOR BROADER INTERTRUST LICENSE....................... 14
5.1 MBC Option...................................................... 14
5.2 License Grant................................................... 15
5.3 Sublicense Rights............................................... 16
5.4 No Additional Licenses.......................................... 17
5.5 General Restrictions............................................ 18
ARTICLE 6. MBC SUPPORT AND ADDITIONAL COVENANTS............................ 18
6.1 MBC Support of InterTrust Technology............................ 18
6.2 Customer Agreements............................................. 24
6.3 Legends and Notices............................................. 24
6.4 InterTrust Trademarks........................................... 25
6.5 MBC's Use of MBC Trademarks on Cooperative
Applications and MBC Products................................... 26
6.6 MBC Trademarks.................................................. 26
</TABLE>
<PAGE>
<TABLE>
<S> <C>
6.7 Technology Advisory Committee.................................. 26
ARTICLE 7. LICENSE FEES AND PAYMENT TERMS................................. 27
7.1 Fees and Royalties............................................. 27
7.2 Other Fees..................................................... 29
7.3 Payment Procedure.............................................. 29
7.4 Currency....................................................... 29
7.5 Taxes.......................................................... 30
7.6 Interest....................................................... 30
7.7 Audit.......................................................... 30
ARTICLE 8. PROPRIETARY INFORMATION AND OWNERSHIP.......................... 31
8.1 InterTrust Ownership........................................... 31
8.2 MBC Ownership.................................................. 31
8.3 Joint Ownership................................................ 31
8.4 MBC License.................................................... 31
ARTICLE 9 CONFIDENTIALITY................................................. 32
9.1 InterTrust Technical Information............................... 32
9.2 MBC Technical Information...................................... 34
9.3 Exceptions..................................................... 34
9.4 Confidentiality of Agreement and Publicity..................... 34
9.5 Confidentiality of Payments, Audit and
Certification Testing.......................................... 35
9.6 Survival of the NDA............................................ 35
ARTICLE 10 REPRESENTATIONS AND WARRANTIES................................. 35
10.1 Representations and Warranties of Both Parties................. 35
10.2 Representations and Warranties of InterTrust................... 36
10.3 Limitation..................................................... 36
ARTICLE 11. INDEMNIFICATION AND REMEDIES................................... 36
11.1 Indemnification................................................ 36
11.2 Cumulative Remedies............................................ 38
11.3 Equitable Remedies............................................. 38
11.4 Exclusion of Damages........................................... 39
ARTICLE 12. TERM AND TERMINATION........................................... 39
12.1 Agreement...................................................... 39
12.2 Events of Termination.......................................... 39
12.3 Effect of Termination.......................................... 41
</TABLE>
<PAGE>
<TABLE>
<S> <C>
12.4 Survival...................................................... 41
ARTICLE 13. EXPORT........................................................ 42
13.1 Compliance with Law and Export Controls....................... 42
13.2 Failure to Obtain Export Approval............................. 42
ARTICLE 14. MISCELLANEOUS................................................. 43
14.1 Governing Law................................................. 43
14.2 Venue and Jurisdiction........................................ 43
14.3 Amendment or Modification..................................... 44
14.4 No Assignment................................................. 44
14.5 Notices....................................................... 44
14.6 Waiver........................................................ 45
14.7 No Third Party Beneficiaries.................................. 45
14.8 No Agency..................................................... 45
14.9 Recovery of Costs and Expenses................................ 45
14.10 Severability.................................................. 46
14.11 Counterparts; Facsimiles...................................... 46
14.12 Force Majeure................................................. 46
14.13 English Translation........................................... 46
14.14 Entire Agreement.............................................. 46
EXHIBIT A................................................................. A-1
EXHIBIT B................................................................. B-1
EXHIBIT C................................................................. C-1
EXHIBIT D................................................................. D-1
EXHIBIT E................................................................. E-1
EXHIBIT F................................................................. F-1
EXHIBIT G................................................................. G-1
</TABLE>
<PAGE>
CONFIDENTIAL
TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
THIS TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT (this "Agreement") is made and
---------
entered into as of the _____ day of October, 1996 (the "Effective Date") by and
--------------
between:
(i) INTERTRUST TECHNOLOGIES CORPORATION, formerly Electronic Publishing
Resources, Inc., a Delaware corporation ("InterTrust"), with offices
----------
at 460 Oakmead Parkway, Sunnyvale, California 94086-4708; and
(ii) MITSUBISHI CORPORATION, a Japanese corporation ("MBC"), with offices
---
at 6-3, Marunouchi 2-Chome, Chiyoda-ku, Tokyo, Japan;
(individually, a "Party", and collectively, the "Parties") with reference to the
----- -------
following:
RECITALS
A. InterTrust has developed and is continuing to develop a unique, general
purpose architecture for, among other things, rights protection and event
management related to electronic commerce. InterTrust's technology is
designed to support an interoperable foundation for the electronic
marketplace.
B. MBC is engaged in the business of trading goods and services and is
interested in: (i) developing and establishing an electronic trading
environment incorporating InterTrust's technology, including electronic
commerce trading capabilities on the Internet's World Wide Web; (ii)
developing and establishing advertising technology and services to serve
the World Wide Web; (iii) providing clearinghouse services for transactions
that are performed in connection with such electronic trading and
advertising environments; and (iv) providing further electronic commerce
applications and services related thereto.
C. As discussed by the Parties and as described in the Parties' Memorandum of
Understanding dated April 2, 1996: (i) MBC, with the assistance of
InterTrust, intends to develop a trading model for electronic trading and
such other Cooperative Applications as the Parties may mutually agree; and
(ii) InterTrust intends to grant MBC certain licenses to use and
incorporate InterTrust Technology in MBC's products and services for use in
connection with electronic commerce activities as set forth herein.
D. In furtherance of the relationship between the Parties, InterTrust and MBC
will also enter into a Series B Preferred Stock Purchase Agreement (in the
form attached hereto as Exhibit A) (the "Stock Purchase Agreement") at a
------------------------
closing to be held concurrent with the receipt by InterTrust of the sum set
forth in Section 7.1 (a)(i) hereof (the "Closing").
-------
MBC/Intertrust Agreement
<PAGE>
E. This Agreement, together with the Stock Purchase Agreement, sets forth the
terms and conditions with respect to, respectively: (i) the licensing of
InterTrust Technology and cooperative development of the Trading Model
Cooperative Application and certain other Cooperative Applications; and
(ii) MBC's investment in InterTrust.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Parties agree to the following terms and conditions:
ARTICLE 1. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1 Definitions. In addition to the other capitalized terms defined
-----------
elsewhere in this Agreement, the following terms shall have the meanings set
forth below:
"Active Key Technology" means: (i) MBC's proprietary metering system
---------------------
that is based on a central server that securely performs certain metering
and fulfillment functions by (a) transmitting a decryption key from such
central server to a user's computing system each time such user engages in
the decrypting of encrypted content and (b) auditing and recording the
transmission of such decryption keys from such central server to enable
payment fulfillment; and (ii) such extensions, modifications, improvements
or alterations made to such technology in the future.
"Affiliate" or a Person "affiliated" with another Person, means a
---------
Person that directly or indirectly owns or controls more than fifty percent
(50%) of the ownership interest of such other Person, which interest
represents the right to: (i) elect the board of directors or other similar
managing authority; or (ii) generally make or cause the making of
management decisions directly; provided, however, that an Affiliate shall
-------- ------- ----
remain an Affiliate for only so long as such ownership interest remains in
effect.
"Application Products" means any software tool, template, application
--------------------
system or other software product that: (i) is developed using InterTrust
Technology and/or Modified Technology; (ii) directly contains or
incorporates InterTrust Technology solely in the form of Authorized
Application Software, and/or Modified Technology in either Object Code
and/or Source Code, in accordance with the licenses granted by InterTrust
to MBC hereunder; (iii) is not enabled to permit the performance of any
Clearinghouse Functions; and (iv) is in Compliance with InterTrust
Specifications.
"Authorized Application Software" means such software representations
-------------------------------
of InterTrust Technology in Object Code and/or in Source Code (solely as
such Object Code and Source Code are identified and designated by
InterTrust on Exhibit B, which Exhibit may be amended from time to time by
InterTrust in its sole discretion), that are permitted
CONFIDENTIAL
2
<PAGE>
for distribution in accordance with the applicable licenses hereunder and
as incorporated in Application Products in such form as specified on
Exhibit B.
"Authorized Clearinghouse Provider" means any Person that is expressly
---------------------------------
licensed by InterTrust to engage in specified Clearinghouse Function
activities and services, but only to the extent: (i) of the scope of such
license; and (ii) that such license is valid and in force.
"Authorized Clearinghouse Software" means such software
---------------------------------
representations of InterTrust Technology in Object Code form (solely as
such Object Code is identified and designated by InterTrust on Exhibit B,
which Exhibit may be amended from time to time by InterTrust in its sole
discretion), that are permitted for distribution, as incorporated in
Clearinghouse Products, in accordance with the applicable licenses
hereunder.
"Clearinghouse Function(s)" means any one or more activities, as well
-------------------------
as services resulting therefrom, that use any InterTrust Technology and/or
Modified Technology, or use information derived at least in part from use
of such technology, to: (i) enable payment fulfillment or provision of
other consideration (including service fees, product fees or any other fees
and/or charges) based at least in part on a Control Use; (ii) perform
audit, billing, payment fulfillment (or provision of other consideration)
and/or other clearing activities involving more than one Person; and/or
(iii) compile, aggregate, use and/or provide information relating to more
than one Person's use of one or more Secure Containers and/or Content,
including Contents of Secure Containers or any other Content Managed at
least in part using any InterTrust Technology and/or Modified Technology.
Clearinghouse Functions shall include, for example: (a) financial
clearing; (b) providing object registry services and rights, permissions,
prices, and/or other Rules and Controls information for registered objects;
(c) electronically certifying information used with or required by Rules
and Controls such as authenticating identity, class membership or other
attributes of rights context; (d) providing information based upon usage
auditing, user profiling, and/or market surveying related to more than one
Person's use of one or more Secure Containers and/or Content; and (e)
employing information derived from user exposure to Content, such as
advertising.
"Clearinghouse Products" means any software tool, template,
----------------------
application system or other product that: (i) is developed using
InterTrust Technology and/or Modified Technology; (ii) directly contains or
incorporates InterTrust Technology solely in the form of Authorized
Clearinghouse Software, and/or Modified Technology only in Object Code, in
accordance with the licenses granted by InterTrust to MBC hereunder; (iii)
is enabled to permit the performance of any Clearinghouse Functions; and
(iv) is in Compliance with InterTrust Specifications.
"Clearinghouse Prototype Components" means certain software components
----------------------------------
of InterTrust Technology, as set forth on Exhibit B as part of the SDK 1.0,
that are designed to provide sample software for development of
Clearinghouse Products.
CONFIDENTIAL
3
<PAGE>
"Compliance" or "Compliant" means fully consistent with and fully
---------- ---------
conforming to all applicable portions of: (i) the most current version of
the InterTrust Specifications (including, as applicable, any New
Specification, as defined in Section 6.1(b) hereof) existing on the date of
MBC's first distribution, sale or other transfer of any applicable
Cooperative Application, MBC Product, or first use thereof in connection
with any service associated therewith, as the case may be; and thereafter
(ii) the most current InterTrust Specifications in accordance with Section
6.1(b) hereof, as applied to any such Cooperative Application, MBC Product
or service associated therewith. A Cooperative Application, MBC Product,
or any service associated therewith that has not passed any required
certification tests as set forth in Section 6.1 hereof shall be deemed non-
Compliant with InterTrust Specifications.
"Content(s)" means any analog or digital information representing, for
----------
example: text, graphics, animation, video, sound, still images, computer
programs or executable components, and data. Content shall include, for
example, any electronic representation of: (i) Rules and Controls; and
(ii) electronic information derived from the Management of Content.
"Content Transaction" means any event or combination of events: (i)
-------------------
Managed, in whole or in part, through the use of any InterTrust Technology
and/or Modified Technology; and (ii) in connection with which compensation
(or other consideration) is due or payable to MBC and/or any other one or
more Persons, at least in part, for any (a) sale, rental, lease, license,
vending and/or other comparable provision of rights related to Content, or
(b) use of, including any interaction with, Content (including provision of
access to Content or production of modified Content).
"Control Use" means any use of InterTrust Technology and/or Modified
-----------
Technology to Manage Content including initiating and/or otherwise
governing any consequence related to the use and/or processing of Content
and/or provision of goods or services conveyed by or associated with such
Content. Control Use shall include, for example: (i) metering, auditing,
charging, and/or billing, for access to or any other interaction with any
Content; and/or (ii) administering permitted and/or prohibited uses of
Content.
"Cooperative Application(s)" means any Application Product and/or
--------------------------
Clearinghouse Product that: (i) is developed pursuant to the Trading
Model Cooperative Project Plan or an applicable Cooperative Application
Project Plan in accordance with Sections 3.1 and 3.2 hereof, respectively;
(ii) is marketed solely under any MBC Trademarks (except where use of
InterTrust Trademarks is also required hereunder, or other trademarks of
Persons are also included in a limited manner to identify technology or
services associated therewith) all in accordance with Section 6.5 and other
provisions hereof; (iii) is in Compliance with the InterTrust
Specifications; and (iv) directly contains or incorporates InterTrust
Technology solely in the form of, as applicable, Authorized Application
Software or Authorized Clearinghouse Software, and/or Modified
CONFIDENTIAL
4
<PAGE>
Technology solely in Object Code, in accordance with the licenses granted
by InterTrust to MBC hereunder.
"Customer" means any Person that receives or acquires a Cooperative
--------
Application or Licensed Product from MBC (as provided hereunder) with a
present intention: (i) to use such application or product privately as an
end-user, or further distribute such application or product, without
modification, to an end-user or one or more other Persons for distribution,
without modification, to an end-user; or (ii) to use such products solely
to develop and market a Vertical Application under MBC Trademarks.
Customer shall not include any Person who has a present intention to
perform any Clearinghouse Function unless such Person is an Authorized
Clearinghouse Provider.
"DigiBox(TM) Technology" means certain InterTrust technology designed
----------------------
to implement Secure Containers and assist in the Management of Content
associated with Secure Containers.
"Distributable Documentation" means such portions of the Documentation
---------------------------
that InterTrust has specifically and in writing identified as being
suitable for general distribution by MBC to Customers, as such portions of
the Documentation may from time to time be cataloged by InterTrust and
provided to MBC.
"Documentation" means certain English language versions of
-------------
documentation and/or instructions as specifically designated by InterTrust
that may assist MBC and/or its Customers (as specified by InterTrust) in
the use of InterTrust Technology and that InterTrust may from time to time
provide with the InterTrust Technology (including any Distributable
Documentation) as initially identified in Exhibit B hereto, which Exhibit
may be amended from time to time by InterTrust in its sole discretion.
"Gross Commercial Value" means all sums of money, and/or the fair
----------------------
market value of any other consideration, charged or provided in connection
with a Content Transaction, and/or in connection with performing any other
activity within the Clearinghouse Functions. Such consideration shall
include consideration based upon Management of Content or information
derived at least in part therefrom, including, for example, consideration:
(i) paid by a user as a consequence of, for example, user exposure to, or
other interaction with, Content; (ii) paid by a user as a consequence of
the acquisition of one or more rights related to said Content; or (iii)
paid by a proxy or subsidizing payer (such as an advertiser) based upon
user exposure to or other interaction with Content, where, for example,
after (due to or based on) receipt of information about user exposure to
Content, such advertiser pays consideration based at least in part on value
resulting from such exposure or interaction. Notwithstanding the
foregoing, Gross Commercial Value shall not include any sales, use, value-
added or other taxes (except withholding taxes) imposed by any national,
state, local or foreign government and paid by MBC as a consequence of
clearing a Content Transaction and/or as a consequence of performing any
other activities within the Clearinghouse Functions.
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"Intellectual Property Rights" means all patents, patent rights,
----------------------------
copyrights, trademarks, trade secrets, and other proprietary rights in any
jurisdiction, and all applications and registrations therefor.
"InterTrust Commerce Technology" means certain InterTrust technology
------------------------------
directly relating to distributed rights management and/or distributed
electronic commerce Management systems and methods, including, without
limitation, the InterTrust products described in Exhibit B hereto.
"InterTrust Specifications" means the InterTrust Technology
-------------------------
specifications, as established or modified by InterTrust in its sole
discretion in accordance with Section 6.1(b) hereof, that are provided to
MBC. Such InterTrust Specifications may include: (i) required design
criteria for products and services employing InterTrust Technology and
Modified Technology, including, for example, product and related criteria
for ensuring the architectural and functional integrity, standardization,
security capability, and interoperability of InterTrust based technology,
components, products and services (including, for example, criteria for
electronic environments employing InterTrust Commerce Technology for rights
and/or other event related process management); (ii) procedures and
requirements for installation, initialization, backup, restore and security
updates; and (iii) required certification tests and procedures to verify
Compliance of Licensed Products, Cooperative Applications and related
services with such InterTrust Specifications.
"InterTrust Technology" means any technology developed by and/or for
---------------------
InterTrust directly related to electronic rights and/or event management
and made available by InterTrust to MBC under this Agreement including,
without limitation, certain InterTrust Commerce Technology and
Documentation, as referenced in Exhibit B hereto (as such Exhibit may be
modified by InterTrust in its sole discretion from time to time to
accommodate, for example, any updates and upgrade releases made available
pursuant to Section 2.1 hereof).
"InterTrust Trademarks" means InterTrust's names, logos and other
---------------------
marks as listed on Exhibit C hereto, as such Exhibit may be modified by
InterTrust from time to time.
"Japanese Company" means any entity organized under the laws of Japan
----------------
that is not owned or controlled, directly or indirectly, by an Affiliate
organized under the laws of any jurisdiction other than the laws of Japan.
"Kernel Technology" means those components of InterTrust Technology
-----------------
described by InterTrust on Exhibit B hereto as core technologies of such
InterTrust Technology, as such core technologies thereon may be amended
from time to time by InterTrust in its sole discretion.
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"Licensed Rights" means all of InterTrust's worldwide Intellectual
---------------
Property Rights (other than trademark rights) in and to the InterTrust
Technology, the Modified Technology and/or the Cooperative Applications,
that InterTrust (during the term of this Agreement) owns or has the right
to grant licenses of the scope granted herein without the agreement of, or
requirement for payment (or the granting of other consideration) to, any
Person.
"MBC Product(s)" means any Application Product(s) and/or Clearinghouse
--------------
Product(s) (other than Cooperative Application(s)) that: (i) is developed
by MBC; and (ii) is branded and marketed solely under the MBC Trademarks
(except where use of InterTrust Trademarks is also required herein, or
other trademarks of Persons are also included in a limited manner to
identify technology or services associated therewith) and as stipulated in
Section 6.5 and other provisions hereof.
"MBC Trademarks" means any names, logos and other marks owned or
--------------
licensed for use exclusively by MBC or its Affiliates, that are limited in
use exclusively to representing the identities of such companies and over
which MBC and/or such Affiliates exercise exclusive control with respect to
the commercial use thereof. Such MBC Trademarks are listed on Exhibit C
hereto, as such Exhibit C may be modified by MBC from time to time.
"Manage" or "Management" means any form of electronic governance,
----------------------
regulation, management and/or control, in any way and by any means, of, as
applicable in the context in which reference is made herein: (i) rights,
processes and/or obligations related to or associated with use of
(including access to, transport of, and/or storage of), Content, including
Content related disposition, and/or consequences thereof; and/or (ii)
events or event processes related or associated in any manner to the use of
(including access to), attempted use of, and/or disposition of, Content,
including any consequences thereof.
"Material Defects" means defects or bugs in the InterTrust products
----------------
incorporating InterTrust Technology (as defined in Exhibit B hereto) and as
delivered by InterTrust to MBC, wherein such defects or bugs cause one or
more such InterTrust products to fail to perform: (i) materially in
conformance with the capabilities ascribed to such products in the
applicable portions of InterTrust Specifications; and (ii) in a
commercially reasonable manner in accordance with reasonable software
industry practices relating to such capabilities. Material Defects shall
not include any defects or bugs introduced as a result of any modification
of (or to) the InterTrust Technology by MBC or any Person.
"Modified Technology" means all modification of, and enhancements
-------------------
and/or additions to, the InterTrust Technology, created by MBC, including
without limitation all "derivative works" as such term is defined in the
U.S. Copyright Act (17 U.S.C. (S) 101 et seq., as amended), but only to the
-- ---
extent such modifications, enhancements, additions and/or derivative works
are permitted under Article 4 and/or Article 5, as applicable, and
elsewhere in this Agreement. Modified Technology shall not include any
modifications, enhancements, additions and/or derivative works of
InterTrust Technology (or of other
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<PAGE>
Modified Technology) whatsoever, made by or for MBC or any Person that fall
outside the scope of this Agreement.
"Object Code" shall mean the computer executable binary code derived
-----------
from compiled Source Code for execution on a computing system.
"Person" means any individual, corporation, partnership, firm, joint
------
venture, association, joint-stock company, trust, unincorporated
organization, government body or agency, or other entity not a Party to
this Agreement.
"Prime Partner" means any Japanese Company or group of Japanese
-------------
Companies with whom InterTrust may enter into any agreement or set of
agreements, pursuant to which InterTrust directly: (i) provides early
access to InterTrust Technology prior to InterTrust's first commercial
release thereof to the general public; (ii) undertakes one or more
cooperative development projects to jointly develop products based upon
InterTrust Technology; (iii) grants a general purpose license to use
InterTrust Technology in Japan (excepting limitations with respect to
performing Clearinghouse Functions); and (iv) grants a license to perform,
and sublicense others to perform, clearing services of a substantially
comparable or broader scope than the licenses granted in Sections 5.2 and
5.3 hereof.
"Rights User Node" means a client installation that supports
----------------
Management of Content.
"Rules and Controls" means any information that describes, and/or
------------------
provides means for performing, permitted and/or required operations related
to Content, including, for example, Management of such Content.
"Secure Containers" means electronic containers that: (i) employ
-----------------
cryptographic techniques to provide protection for Content; and (ii)
support the use of Rules and Controls to Manage Content.
"Source Code" shall mean a human-readable, non-executable set of
-----------
instructions for a computer program, from which it may be possible,
together with related source materials and documentation, to discern the
logic, algorithms, internal structure, operating features and any other
design characteristic of such computer program.
"Special Advanced Technology Commitment Period" means the period
---------------------------------------------
commencing on the Effective Date and continuing for twenty-four (24) months
after the cessation of any development work on a first commercial version
of the Trading Model Cooperative Application (as provided in Section 3.1,
including as an MBC Product pursuant thereto) and/or any other Cooperative
Application pursuant to Section 3.2 hereof, but no less than twenty-four
(24) months from the date on which InterTrust first makes available to MBC
the System Development Kit 1.0 (as set forth on Exhibit B hereto);
provided that if MBC ceases such development work and, thereafter,
-------- ----
recommences such
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<PAGE>
development work in accordance herewith, such recommenced development work
shall not serve to restart the Commitment Period.
"Systems Developer's Kit 1.0" or "SDK 1.0" means the software tools
--------------------------- -------
and applications incorporating the InterTrust Technology, as provided by
InterTrust to MBC under this Agreement and described in Exhibit B hereto
(as such Exhibit may be modified from time to time by InterTrust in its
discretion).
"Vertical Applications" means any one or more software programs and/or
---------------------
services employed to support a business model addressing a specific area of
business activity, but not broadly: (i) providing general purpose
electronic commerce tools; or (ii) supporting other business models,
wherein such other models have substantially different characteristics and
business operations. Vertical Applications include, for example, software
applications employed to support each of the following: (a) electronic
Content super-distribution and Content metering; (b) secure banking and
funds transfer; or (c) smart card security and control systems.
1.2 Rules of Construction. As used in this Agreement, all terms used
---------------------
in the singular shall be deemed to include the plural, and vice versa, as the
context may require. The words "hereof," "herein" and "hereunder" refer to this
------ ------ ---------
Agreement as a whole, including any exhibits hereto, as the same may from time
to time be amended or supplemented and not to any subdivision contained in this
Agreement. When used herein, "including" shall mean "including, without
--------- --------- -------
limitation," and "discretion" shall mean "sole discretion." References herein
- ---------- ---------- ---------------
to section and/or exhibit shall be to the applicable section and/or exhibit in
this Agreement. Descriptive headings are inserted for convenience only, and
shall not be utilized in interpreting this Agreement. This Agreement has been
negotiated by the Parties and their respective counsel and shall be fairly
interpreted in accordance with its terms and without any strict construction in
favor of or against either Party. In the event this Agreement is translated
into any language other than English, the English language version hereof shall
be the sole definitive version.
ARTICLE 2. TECHNOLOGY ACCESS AND SUPPORT
2.1 Technology Access. InterTrust shall make available to MBC such
-----------------
InterTrust Technology as set forth on Exhibit B hereto (as such Exhibit may be
amended from time to time by InterTrust pursuant to this Agreement), that may
include certain related technology that may not be proprietary to InterTrust
(the "InterTrust Technology Requirements") (subject to InterTrust's obtaining
----------------------------------
appropriate permits and licenses under export control laws as further set forth
in Article 13 hereof). InterTrust Technology as made available hereunder will
contain the SDK 1.0, with the functionality ascribed thereto as set forth on
Exhibit B, and other products that may be specified by InterTrust in its
discretion on Exhibit B. InterTrust's estimated schedule for the InterTrust
Technology Requirements is initially set forth on Exhibit B and may be revised
by InterTrust as reasonably appropriate, in InterTrust's sole reasonable
determination. MBC acknowledges and agrees that Clearinghouse Prototype
Components and Sample Applications (as defined in Exhibit B) that may be
provided to MBC as part of InterTrust Technology are not
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<PAGE>
designed, intended or warranted by InterTrust in any manner for commercial use.
For a period of ten (10) years after the Effective Date, InterTrust will make
available to MBC all standard update and upgrade releases to the InterTrust
Technology that InterTrust develops from time to time and makes generally
available to its Prime Partners. MBC shall be entitled to obtain such update and
upgrade releases [*].
2.2 InterTrust Assistance. After the Closing, InterTrust shall provide
---------------------
reasonable training and consulting assistance ("Assistance") to MBC to assist
----------
MBC in its evaluation and/or use of such InterTrust Technology Requirements (as
InterTrust generally makes such Assistance available to its Prime Partners). It
is contemplated that such Assistance shall commence in the fourth quarter of
1996, subject, as appropriate, to availability of resources and any requirements
of law. Up to a limit of two hundred (200) hours of such Assistance, to be
measured based upon InterTrust's man-hours expended, shall be made available to
MBC per year for a period of three (3) years following the Effective Date,
without charge except as specified below, subject to reasonable agreement
between the Parties on scheduling, availability of resources and related
matters. Such Assistance may include certain training sessions to which certain
other InterTrust licensees (in addition to MBC) may be invited to attend. In
such an event, InterTrust will notify MBC in advance of such other participants.
MBC shall be responsible for all expenses: (i) incurred by MBC's personnel in
traveling to and attending any training and support meetings; and (ii) in
connection with any needed translation services in regards to such training and
support meetings. In the event InterTrust's personnel are required to travel
from InterTrust's facilities, MBC shall reimburse InterTrust for all actual and
reasonable travel, living and out-of-pocket expenses incurred by InterTrust's
personnel. In the event that InterTrust or an Affiliate opens an office in
Japan, some or all of such Assistance may be made available at such Japanese
location in accordance with this Section 2.2. Additional Assistance may be made
available by InterTrust to MBC: (a) during the three (3) year period following
the Effective Date beyond the two hundred hours (200) allocated; and (b) after
such three (3) year period. To the extent requested by MBC to provide such
additional Assistance, InterTrust shall decide, in the exercise of its sole
discretion, whether to provide such Assistance and, if so, the Parties shall
discuss in good faith the appropriate fees to be paid by MBC to InterTrust for
any such additional Assistance.
2.3 Correction of Material Defects. In addition to InterTrust's own
------------------------------
ongoing quality assurance efforts, for a period of ten (10) years from the
Effective Date, unless the Parties mutually agree in writing otherwise,
InterTrust shall use reasonable efforts to correct Material Defects or otherwise
reasonably adjust InterTrust Technology to mitigate Material Defects, identified
by MBC to InterTrust in a writing describing the alleged Material Defects in
detail. InterTrust shall have no obligation to: (i) independently investigate or
correct any Material Defects at any site other than an InterTrust facility; (ii)
communicate on the subject of Material Defects with any Person other than MBC;
(iii) correct any Material Defects that have been properly identified by MBC but
that cannot be reliably reproduced; or (iv) perform any services relating to
correction of Material Defects at any site other than an InterTrust facility.
2.4 Status Meetings. To assist the Parties in sharing information,
---------------
and coordinating and evaluating their efforts relating to InterTrust Technology
and their mutual technical and
CONFIDENTIAL
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
10
<PAGE>
business objectives, following the Closing the Parties shall meet from time to
time to discuss, among other things: (i) InterTrust's progress in development of
the InterTrust Technology; (ii) implementation of such technology by MBC; (iii)
feedback concerning Assistance provided to MBC; and (iv) other issues concerning
the Parties' mutual technical and business objectives (the "Status Meetings").
---------------
Such Status Meetings shall: (a) be attended at a minimum by each Party's project
manager (as provided in Section 2.5) and two other Senior Engineers involved in
activities pursuant to this Agreement; and (b) take place not less frequently
than bimonthly until January 1, 1998, and, thereafter, as may be agreed by the
Parties.
2.5 Dedicated Personnel. InterTrust and MBC will each appoint a project
-------------------
manager to coordinate its activities pursuant to Sections 2.2 , 2.3, 2.4 and
Article 3. If MBC exercises the Option as provided in Section 5.1, not less than
one half (2) of such InterTrust project manager's working time shall be devoted
exclusively to MBC during the three (3) year period in which Assistance is
provided.
ARTICLE 3. COOPERATIVE DEVELOPMENT
3.1 Cooperative Development of Trading Model Application.
----------------------------------------------------
(a) Scope of Trading Model Cooperative Application Project. Promptly
------------------------------------------------------
following the Closing, the Parties shall discuss the terms and conditions
under which they may cooperate in the development of a trading model that
shall be based upon the InterTrust Technology. The Parties contemplate
that such development will involve some degree of consultation by
InterTrust and/or customized joint development involving both Parties, but
that MBC shall retain primary responsibility for the development,
management, implementation and support of applications that embody the
trading model (the "Trading Model Cooperative Applications"). The Parties
--------------------------------------
shall negotiate reasonably in an attempt to agree on such terms and
conditions, but agreement to such terms and conditions shall be in the
reasonable discretion of each Party, and any failure to agree shall not
constitute a breach of this Agreement. If the Parties fail to agree on
such terms and conditions, MBC shall be entitled to develop such trading
model as an MBC Product.
(b) Project Description. The Trading Model Cooperative Application
-------------------
shall comprise foundation technology for an electronic environment that
enables participants in distribution value chains (such as purchasers,
manufacturers, distributors, financial institutions, insurance companies
and others) to engage in electronic commerce and fulfillment of payments
therefor, including Chain of Handling and Control (as defined in Exhibit F
hereto) as related thereto. The Trading Model Cooperative Application
shall also provide for, without limitation, specifications for host server
software trading systems, software tools, and host and distributed client
applications that may operate therewith, all of which specifications,
technical descriptions and functionality requirements shall be Compliant
with InterTrust Specifications.
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<PAGE>
(c) Trading Model Cooperative Project Plan. Upon agreement between
--------------------------------------
the Parties concerning the trading model, the Parties shall use
commercially reasonable efforts to agree upon a project plan (the "Trading
-------
Model Cooperative Project Plan"). A statement of the Parties' current
------------------------------
intent with respect to information to be contained within the Trading Model
Cooperative Project Plan includes the information as described on Exhibit
D, as well as other information appropriate to represent the agreement
between the Parties related to such project. The Trading Model Cooperative
Project Plan shall not become effective until each Party has agreed in
writing to the terms of such plan. The provisions of this Agreement, as
supplemented by the Trading Model Cooperative Project Plan consistent with
this Agreement, shall govern the Parties' rights and obligations with
respect to the Trading Model Cooperative Applications.
(d) Progress. In connection with the Trading Model Cooperative
--------
Project Plan, the InterTrust and MBC project managers, and any other
appropriate personnel selected by each Party, shall from time to time, but
no less than once per calendar quarter: (i) meet to discuss and evaluate
the progress of the Trading Model Cooperative Application; (ii) evaluate
development issues for the Trading Model Cooperative Application; (iii) set
mutual action items as may be agreed to by both Parties; and (iv) modify,
amend or adjust the Trading Model Cooperative Project Plan as the Parties
may deem reasonably necessary and appropriate.
3.2 Additional Cooperative Applications. From time to time during the
-----------------------------------
term of this Agreement, the Parties may discuss the terms and conditions under
which they may cooperate with respect to Cooperative Applications in addition to
the Trading Model Cooperative Application. The Parties agree to follow
substantially the same terms and conditions set forth in Sections 3.1(a),
3.1(c), and 3.1(d) with respect to each Cooperative Application (to the extent
applicable), including discussing the types of projects and formulating the
terms of a project plan (a "Cooperative Application Project Plan"), which, upon
------------------------------------
agreement of the Parties, shall be attached as an Exhibit hereto. Without
limiting the foregoing, the Parties shall negotiate reasonably in an attempt to
agree on the terms and conditions to cooperate with respect to one or more
Cooperative Applications, but agreement to such terms and conditions shall be in
the reasonable discretion of each Party, and any failure to agree shall not
constitute a breach of this Agreement. The provisions of this Agreement shall
govern the Parties' actions in implementing any Cooperative Application Project
Plan to which the Parties agree, except to the extent that such provisions
herein are inconsistent with explicit provisions of that specific Cooperative
Application Project Plan, in which event the provision of such Cooperative
Application Project Plan shall govern. A breach of a Cooperative Application
Project Plan, other than those terms relating to Intellectual Property Rights,
ownership or licenses thereof granted by InterTrust, shall not constitute a
material breach of this Agreement, unless expressly stipulated to the contrary
in such Cooperative Application Project Plan.
3.3 Development Fees. The Parties agree that InterTrust shall not be
----------------
obligated to incur costs and expenses for development of Cooperative
Applications under Sections 3.1 and 3.2 hereof that exceed one hundred thousand
dollars (US$100,000) per calendar year, or two hundred thousand dollars
(US$200,000) during the term of this Agreement. For purposes of
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<PAGE>
determining whether such limits have been reached, InterTrust's costs and
expenses from the Trading Model Cooperative Application and all Cooperative
Applications shall be aggregated together. If InterTrust's costs and expenses
exceed such limits, MBC shall reimburse InterTrust no later than thirty (30)
days after submission by InterTrust to MBC of commercially reasonable
documentation of such costs and expenses above such limits, except insofar as
alternative cost and expense terms and conditions are required by any
Cooperative Application Project Plan, such as prepayment for contemplated costs
to be incurred. Calculations of InterTrust's costs and expenses shall be made
net of reimbursement payments made by MBC (e.g., if MBC reimburses InterTrust
---
for costs and expenses in excess of US$100,000 during a calendar year, such
reimbursed costs and expenses shall not count against such US$200,000 limit).
ARTICLE 4. LIMITED LICENSE GRANT AND RESTRICTIONS
4.1 License Grant During Option Period. Subject to the terms and
----------------------------------
conditions of this Agreement, during the Option Period (as defined in Section
5.1) InterTrust grants to MBC a limited, nonexclusive, nonsublicensable and
nontransferable worldwide right and license under the Licensed Rights to:
(a) use and reproduce the InterTrust Technology solely for the
purpose of (i) designing, making, and developing MBC Products and/or
Cooperative Applications that are in Compliance with the InterTrust
Specifications; and (ii) exercising the rights granted under Sections
4.1(b) hereof; and
(b) modify the InterTrust Technology, except the Kernel Technology,
to create the Modified Technology and use such Modified Technology solely
for the purpose of enabling incorporation of InterTrust Technology into MBC
Products and/or Cooperative Applications that are in Compliance with
InterTrust Specifications.
4.2 License Restrictions and Related Covenants. MBC understands and
------------------------------------------
acknowledges that the license granted to it under Section 4.1 hereof does not
include any license under the InterTrust Trademarks or any license under the
Licensed Rights other than expressly granted in Section 4.1. Accordingly, MBC
covenants that it shall not, in the absence of its proper exercise of the Option
granted in Article 5 hereof:
(a) during the Option Period: (i) distribute, offer for sale, sell,
import and/or otherwise transfer MBC Products, Cooperative Applications,
and/or any technology or product incorporating any InterTrust Technology or
Modified Technology to any Person, (ii) perform any Clearinghouse
Functions, and/or (iii) perform or have performed for it any activities
whatsoever under the Licensed Rights other than those activities expressly
set forth in Section 4.1 hereof; and
(b) after the Option Period, except and solely as expressly provided
in Article 5 hereof, (i) perform or have performed for it any activities
or services whatsoever under the Licensed Rights; and/or (ii) continue to
use, reproduce, modify or otherwise exploit in
CONFIDENTIAL
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any manner InterTrust Technology, Modified Technology, MBC Products,
Cooperative Applications, and/or any products or technology incorporating
or derived from any of the foregoing.
Any breach of this Section 4.2 shall constitute a material breach of this
Agreement.
ARTICLE 5. MBC OPTION FOR BROADER INTERTRUST LICENSE
5.1 MBC Option. Upon the Closing, InterTrust shall grant to MBC the
----------
option, as set forth in this Section 5.1, to obtain a license of the scope set
forth in Sections 5.2 through 5.5, such license to be subject to all of the
terms and conditions set forth herein (the "Option"). The Option shall continue
------
during the term hereof and, unless effectively exercised by MBC as set forth in
this Section 5.1, shall expire as of the earlier to occur of: (i) 5:00 p.m.
(Pacific Time) on March 31, 1997; and (ii) the termination of this Agreement for
any reason (the "Option Period"). Notwithstanding the foregoing, if
-------------
InterTrust's release of the beta version of its SDK 1.0 product is delayed
beyond the time set forth on Exhibit B hereof as of the Effective Date
("Estimated Date"), then such Option Period shall be extended by the number of
---------------
days between the actual release of the SDK 1.0 beta version and the Estimated
Date. For any exercise of the Option to be effective, prior to the expiration
of the Option Period, InterTrust must have received from MBC: (a) written notice
from MBC of MBC's decision to exercise the Option (pursuant to the notice
procedures of Section 14.5 hereof); and (b) the payment set forth in Section
7.1 (a)(ii) hereof (according to the payment procedures set forth in Section
7.3) (the "Option Exercise Procedures"). Upon satisfaction of the Option
--------------------------
Exercise Procedures by MBC, InterTrust shall promptly notify MBC that such
notice has been received and that the licenses as set forth in Sections 5.2
through 5.5 hereof shall thereafter be in effect.
5.2 License Grant. Upon MBC's exercise of the Option in accordance
-------------
with Section 5.1, MBC shall receive the following rights, subject to such
restrictions and limitations as set forth herein:
(a) Licenses to InterTrust Technology and Modified Technology.
---------------------------------------------------------
Subject to the terms and conditions of this Agreement, InterTrust grants to
MBC during the term of this Agreement a limited, nonexclusive,
nontransferable (except as expressly provided in Section 5.3) worldwide
right and license under the Licensed Rights to:
(i) use and reproduce the InterTrust Technology solely for the
purpose of (1) designing, making, developing, producing and using MBC
Products and/or Cooperative Applications that are in Compliance with
the InterTrust Specifications; and (2) exercising the rights granted
under Sections 5.2 (a)(ii), 5.2 (a)(iii), 5.2 (a)(iv), 5.2 (b) and 5.2
(c) hereof;
(ii) modify the InterTrust Technology, except the Kernel
Technology, to create the Modified Technology and use such Modified
Technology solely for the purpose of enabling incorporation of
InterTrust Technology into MBC
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<PAGE>
Products and/or Cooperative Applications that are in Compliance with
InterTrust Specifications;
(iii) distribute, offer for sale, sell, import and/or otherwise
transfer MBC Products and Cooperative Applications that are
Application Products, and Distributable Documentation, to MBC's
Customers pursuant to a Customer Agreement in accordance with, and as
defined in, Section 6.2 hereof; and
(iv) distribute, offer for sale, sell, import and/or otherwise
transfer MBC Products and Cooperative Applications that are
Clearinghouse Products, solely to Authorized Clearinghouse Providers
under Section 5.2 (b) pursuant to a Customer Agreement specific to
such Authorized Clearinghouse Providers supplied in accordance with,
and as defined in, Section 6.2 hereof.
(b) License to Perform Clearinghouse Functions. Subject to the terms
------------------------------------------
and conditions of this Agreement, InterTrust grants to MBC during the term
of this Agreement a limited, nonexclusive, nontransferable (except as
expressly provided in Section 5.3), worldwide right and license under the
Licensed Rights to perform Clearinghouse Functions solely under the MBC
Trademarks, and solely in cases in which MBC performs and controls such
Clearinghouse Functions in Compliance with InterTrust Specifications. Such
Clearinghouse Functions may be performed solely: (i) to service Rights
User Nodes, each such node having been provided by (1) an MBC Product
and/or Cooperative Application, and solely in connection with such MBC
Product and/or Cooperative Application, or (2) a Person having a valid
written license from InterTrust allowing such Person to permit Authorized
Clearinghouses to service Rights User Nodes provided by it; and/or (ii)
pursuant to a sublicense from an Authorized Clearinghouse Provider having
an express, written license from InterTrust allowing such Authorized
Clearinghouse Provider to enter into such sublicense.
(c) Exclusive License to Trading Model Cooperative Application.
----------------------------------------------------------
Subject to the terms and conditions of this Agreement, during the
term of this Agreement, MBC shall be entitled to exclusively use,
distribute, and sublicense the use of, the Source Code and Object
Code developed solely for (and representing) the Trading Model
Cooperative Application to MBC's Customers pursuant to a Customer
Agreement in accordance with Section 6.2 hereof (the "Trading
--------
Model Exclusive Right"). Any and all licenses under the Licensed
----------------------
Rights or any Intellectual Property Rights under the InterTrust
Property (as hereinafter defined) with respect to the Trading
Model Exclusive Right shall be solely of the scope granted
pursuant to Sections 4.1 and 5.2(a) hereof, as applicable.
(d) License to InterTrust Trademarks. Subject to the terms and
--------------------------------
conditions of this Agreement, InterTrust grants to MBC during the term of
this Agreement a limited, nonexclusive, nontransferable, worldwide license
to use and display the InterTrust Trademarks solely: (i) on MBC Products,
Cooperative Applications, and with respect to associated services to
indicate that such products, applications and services are in Compliance
with InterTrust Specifications; (ii) on related Distributable Documentation
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and marketing materials to identify that InterTrust Technology is being
utilized by MBC; and (iii) as may be reasonably stipulated in writing by
InterTrust. InterTrust shall have the right to approve all uses of
InterTrust Trademarks, including use thereof on MBC Products and
Cooperative Applications, in connection with services (including
performance of Clearinghouse Functions) provided by MBC relating to such
products and applications, and in related documentation and marketing
materials. MBC shall comply with InterTrust's trademark guidelines as set
forth herein, including in Section 6.4 hereof.
5.3 Sublicense Rights. Upon MBC's exercise of the Option in accordance
-----------------
with Section 5.1, and solely as stipulated in this Section 5.3, MBC may enter
into sublicense agreements pursuant to which MBC may authorize certain other
entities to perform portions of the actions licensed to MBC under Sections
5.2(a) and 5.2(b) hereof. Sublicense agreements relating to MBC's rights under:
(i) Sections 5.2(a)(i), 5.2(a)(ii) and 5.2(a)(iii) shall be governed by Section
5.3(a), below; and (ii) Section 5.2(b) shall be governed by Section 5.3(b),
below. All sublicensees must, at a minimum, enter into an agreement with MBC and
with InterTrust pursuant to which such sublicensee agrees in writing to perform
all obligations of MBC and to be bound by all restrictions on MBC under Sections
5.2, 5.4, 5.5, 6.1, 6.2, 6.3, 6.4 and 6.5, and Articles 7, 8, 9, 10, 11, 12, 13
and 14 of this Agreement. In addition, MBC shall guarantee and remain liable to
InterTrust for all sublicensees' performance of such obligations. Sublicensees
shall have no further right to sublicense any right under this Agreement. Prior
to granting any such sublicenses, MBC shall provide InterTrust with the name of
the proposed sublicensee and a copy of the proposed sublicense agreement.
InterTrust shall then have thirty (30) days to authorize such proposed
sublicense in which event InterTrust shall provide MBC with a copy of an
agreement containing the terms upon which InterTrust grants such authorization,
that shall be executed by InterTrust, MBC and the sublicensee prior to the
execution of any sublicense agreement hereunder. InterTrust's decision to
authorize or refuse to authorize the sublicensee shall be in InterTrust's sole
discretion, and can be exercised on any basis. If InterTrust fails to authorize
the sublicense, the sublicense agreement shall not take effect.
(a) Non-Clearinghouse Sublicenses. MBC may enter into sublicense
-----------------------------
agreements with a maximum of [*] sublicensees, pursuant to which MBC may
grant such sublicensees some or all of the rights licensed to MBC under
Sections 5.2 (a)(i), 5.2 (a)(ii) and 5.2 (a)(iii). In addition to other
terms set forth in this Section 5.3 above, such sublicenses shall be
subject to the following terms and conditions:
(i) Products distributed to, and/or services performed by,
Persons other than MBC, must be performed solely under MBC Trademarks
(except where use of InterTrust Trademarks is required herein); and
(ii) Activities authorized under the sublicense shall be limited
to: (a) the development of MBC Products or Cooperative Applications,
which MBC Products or Cooperative Applications shall be solely owned
by MBC; and (b) the development, manufacturing and marketing of
Vertical Applications of InterTrust Technology.
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(b) Clearinghouse Function Sublicenses. MBC may enter into sublicense
----------------------------------
agreements pursuant to which MBC may authorize performance of some or all
of the activities licensed to MBC under Section 5.2 (b) by Persons that are
Authorized Clearinghouse Providers, wherein such Persons have been
expressly authorized by InterTrust in writing to perform those
Clearinghouse Functions that form the basis of such sublicense.
5.4 No Additional Licenses. MBC understands and acknowledges that
----------------------
InterTrust is licensing to MBC only certain limited rights to use InterTrust
Technology, which are further limited in certain ways and with respect to
certain fields of use (such as the performance of Clearinghouse Functions),
subject to the terms and conditions herein. Thus, notwithstanding the
generality of any other limitations or restrictions contained in this Agreement,
MBC acknowledges and agrees that the licenses that may be granted under Sections
5.2 and 5.3 are the only licenses granted to MBC, and that no other licenses are
granted, expressly, or by implication or estoppel, now or in the future. In
particular, and without limitation, MBC acknowledges that it: (i) shall have no
license to perform Clearinghouse Functions, or to authorize or assist others to
perform Clearinghouse Functions, other than as expressly set forth in Section
5.2(b); (ii) shall have no license to distribute to any Person any software or
hardware representation of InterTrust Technology other than the Application
Software and/or Authorized Clearinghouse Software as provided herein; and (iii)
shall have no right to enter into sublicenses other than as expressly set forth
in Section 5.3.
5.5 General Restrictions. Whether pursuant to Articles 4 or 5 hereof,
--------------------
and except as specifically provided in this Agreement, MBC covenants that it
shall not during the term of this Agreement or thereafter make, have made, use,
have used, import, lease, sell, transfer, distribute, practice, or have
practiced, make derivative works of, commercially or publicly display or
perform, emulate the functionality of, reverse engineer and/or modify the
InterTrust Technology, the Kernel Technology and/or the Modified Technology. Any
use by MBC of any InterTrust Technology, the Cooperative Applications, the
Kernel Technology and/or Modified Technology outside the scope of the licenses
granted by InterTrust hereunder shall constitute a material breach of this
Agreement.
ARTICLE 6. MBC SUPPORT AND ADDITIONAL COVENANTS
6.1 MBC Support of InterTrust Technology.
------------------------------------
(a) MBC Use of InterTrust Technology. If MBC exercises its Option in
--------------------------------
accordance with Article 5 hereof, in connection with the licenses granted
to MBC and the other terms hereunder, MBC agrees to develop, produce and
generally distribute an MBC Product, the Trading Model Cooperative
Application and/or a Cooperative Application as soon as commercially
reasonable and practicable, and in any case within twenty-four (24) months
following the date InterTrust makes available to MBC the System Developer
Kit 1.0. If MBC has good reason to believe that SDK 1.0 does not provide
functionality necessary to develop a commercially reasonable trading model
and such technology is not reasonably otherwise available, the Parties
will, in good faith, enter into discussions
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concerning possible extensions to such time period. Such time period may be
extended in a project plan pursuant to Article 3 or by mutual written
agreement of the Parties, as applicable; provided that: (i) the Parties
-------- ----
shall have no obligation to agree to any such extension; and (ii) in no
case shall the total period from first delivery of any InterTrust
Technology Requirements exceed forty-two (42) months.
(b) Compliance with InterTrust Specifications. In addition to such
-----------------------------------------
other restrictions as provided herein, MBC shall not commence the
distribution, sale or other transfer of any MBC Product and/or Cooperative
Application, or perform any service using such MBC Product and/or
Cooperative Application, unless such MBC Product, Cooperative Application
and/or such service is in Compliance with InterTrust Specifications.
InterTrust may, from time to time in its sole discretion, modify InterTrust
Specifications to accommodate progress in InterTrust Technology and related
product development, and, among other things, to promote architectural and
functional integrity, standardization, security capability and
interoperability of InterTrust-based technology, components, products and
services (a "New Specification"). Such modifications shall be made at such
-----------------
times and involve such modifications as reasonably determined by InterTrust
in view of applicable prevailing U.S. software industry standards and the
circumstances motivating such modification. InterTrust shall use
commercially reasonable efforts to maintain compatability between a New
Specification and the then preceding Specification, unless considerations
of security, interoperability, performance, or functionality enhancement
indicate that such compatibility is not commercially appropriate. To the
extent InterTrust modifies or revises an InterTrust Specification, or
releases a new InterTrust Specification, and such New Specification applies
to any portion of a Cooperative Application and/or MBC Product then being
used to perform services, and/or being distributed, by MBC (as applicable),
MBC shall bring such products and/or services into Compliance with such New
Specification as of the earliest to occur of: (i) the next version,
release, or production cycle of such Cooperative Application, MBC Product
and/or the next use thereof to provide any service related thereto (the
"Next Version"), as earlier applicable, but only to the extent that MBC
-------------
receives notice of such New Specification (in accordance with the
procedures of Section 14.5 hereof) within a reasonably sufficient time of
such Next Version to accommodate new aspects of such New Specification; and
(ii) [*] months after MBC receives a released copy of such New
Specification (pursuant to the notice provision of Section 14.5 hereof).
Subject to reasonable business circumstances, InterTrust and MBC may agree
in writing, each in their sole discretion, to a set period of time longer
than such [*] month period, but no longer than [*] months after MBC
receives a released copy of such New Specification (pursuant to the notice
provision of Section 14.5) to accommodate such new aspects of such New
Specification for certain or all applicable, previously existing MBC
Products, Cooperative Applications and/or related services. Notwithstanding
the foregoing, should serious technical interoperability and/or security
requirements commercially necessitate more prompt action, MBC and
InterTrust will confer and agree upon the most aggressive, practical
schedule feasible to reach Compliance with the New Specification, and MBC
shall take whatever commercially
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<PAGE>
appropriate steps are reasonable and required under the circumstances to
minimize or eliminate a continuation of such interoperability and/or
security problems.
(c) Compliance Testing. In order to maintain secure interoperability,
------------------
reliability, and system-wide InterTrust integrity, MBC acknowledges that in
support of InterTrust Technology, InterTrust may implement one or more
certification programs designed to ensure that licensed products and/or
associated services (including MBC Products and Cooperative Applications)
use InterTrust Technology and/or Modified Technology in Compliance with
InterTrust Specifications (the "Certification Program(s)"). Such
------------------------
Certification Programs may, in InterTrust's sole discretion require, for
example, MBC to: (i) use a suite of test software provided by InterTrust
for use by MBC to internally test and verify that Cooperative Applications,
MBC Products and/or associated services are in Compliance with InterTrust
Specifications; (ii) submit samples of Cooperative Applications and MBC
Products and any associated programs, parameter data, and any other product
information that may be technically material to Compliance with InterTrust
Specifications prior to first use, distribution, sale, or other transfer to
a Customer other than limited beta testing and pilot model operation as
specified by InterTrust Specifications, so as to allow InterTrust (or an
InterTrust delegate) to perform confidential testing ("Certification
-------------
Testing"); and/or (iii) provide InterTrust with full and detailed
-------
specifications and documentation related to MBC's use of InterTrust
Technology and Modified Technology for MBC Products, Cooperative
Applications and any associated services, wherein such specifications and
documentation are material to such compliance testing and wherein all such
specifications and documentation shall be certified by an authorized
representative of MBC. MBC understands and acknowledges that such a
Certification Program is critical to maintaining the reliability of
products and services employing InterTrust Technology and/or Modified
Technology, and in maintaining public confidence in the integrity of
InterTrust brands as the resource for interoperable electronic commerce.
MBC shall comply with the Certification Program established by InterTrust
including, without limitation, provisions relating to delivery of samples,
correction of non-Compliant products, and applications and associated
services, and inclusion of certification marks or logos on Cooperative
Applications, MBC Products and associated services. In connection with any
Certification Testing, particularly the testing of submitted products
and/or services, as applicable, InterTrust (or an InterTrust delegate) will
respond in a prompt manner, and in no event later than one hundred twenty
(120) days following its receipt of such submitted products, unless
commercially reasonable factors prolong such testing. Such response shall
be in the form of: (a) a written approval that the product or service is
certified (such products and services not being Compliant until such
certification has been granted); or (b) if not approved, a detailed summary
of problems and, where feasible, suggested solutions. InterTrust (or an
InterTrust delegate) will apply the Certification Program, as applicable,
in a non-discriminatory and consistent manner with respect to similar
products and/or services. InterTrust's rights under this Section 6.1 shall
not be affected in any manner by an InterTrust decision not to perform such
Certification Testing.
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(d) Costs of Certification Program. To defray costs associated with
------------------------------
the performance and administration of the Certification Program, in
connection with the certification of any MBC Product, Cooperative
Application, and/or any related service, MBC shall be charged a reasonable
fee not to exceed industry norms for similar testing activities (and, if
conducted by InterTrust, the full cost of performing and administering such
tests, except as set forth below concerning InterTrust payment of a portion
of such costs). A written estimate of such fee shall be provided to MBC, as
applicable, as soon as reasonably practical upon MBC's submission of
samples (or other required material) for testing. Such fees shall be paid
by MBC, in accordance with standard industry practices, except that
InterTrust shall pay [*] of such fees for any specific certification test
(once such fees in the aggregate have exceeded [*] dollars ($US[*]));
provided that InterTrust's contribution to such fees for such certification
-------- ----
tests shall not exceed [*] dollars ($US[*]) in the aggregate.
(e) Translation. MBC agrees that InterTrust shall have the right to
-----------
approve all versions of InterTrust Technology, documentation provided by
MBC concerning MBC Products and Cooperative Applications (including
Distributable Documentation), legends and Notices required pursuant to
Section 6.3 hereof and other required notices that may be translated by or
for MBC into any language other than English.
(f) Promotion and Marketing. The Parties shall jointly participate
-----------------------
in, and from time to time (as they may agree) jointly fund, promotional,
marketing, and sales activities designed to: (i) increase industry
awareness of both InterTrust and InterTrust Technology, including, in
particular, InterTrust, and MBC, MBC Products, Cooperative Applications and
any services associated therewith; (ii) attract content developers and
users; (iii) encourage the development of tools and applications that
employ InterTrust Technology, MBC Products and/or Cooperative Applications;
(iv) identify potential development and/or licensing partners for
InterTrust and/or MBC; and (v) encourage broad adoption of InterTrust
Technology in the industry. At no time shall MBC make any representation
or warranty to any Person materially inconsistent with: (a) InterTrust
Specifications or Documentation; or (b) the efforts of the Parties with
respect to promotion, marketing or other matters under this Agreement.
(g) Joint Press Releases. After the Effective Date, the Parties may
--------------------
decide, each in their discretion, to make one or more mutually agreeable
press releases (the "Joint Press Releases"). The content and timing of any
--------------------
Joint Press releases will be subject to mutual agreement of the Parties.
Any such Joint Press Releases might disclose, for example, the existence of
this Agreement and the Parties' intentions to develop important electronic
commerce industry standards and the Trading Model Cooperative Application.
All other public disclosures with respect to the terms hereof shall be made
in accordance with Section 9.4.
(h) Partnering Commitment. During the Special Advanced Technology
---------------------
Commitment Period, MBC shall not participate in, assist or promote in any
manner the development, use or exploitation of any technology or products
that enable or include any material portion of the Special Advanced
Technologies (as defined in Exhibit F hereto) at least one embodiment of
which is originally constructed and developed, or designed, by InterTrust,
except to the extent such Special Advanced Technologies may be incorporated
by InterTrust in the InterTrust Technology. However, nothing in the
foregoing shall be construed to restrict MBC from the development, use or
exploitation of any technology or the conduct of any business in the
electronic commerce area, so long as such technology or business
substantially differs from, and does not include any material portion of,
the Special Advanced Technologies. If MBC becomes aware that any of its
planned activities may be subject to the restrictions of this Section
6.1(h), MBC shall inform InterTrust in writing of the nature of such
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<PAGE>
planned activity, and, thereafter, the parties shall engage in good faith
discussions having the objective of determining whether such activities are
subject to the restrictions of this Section 6.1(h). On the other hand, as a
precaution for MBC, InterTrust shall, from time to time, during the Special
Advanced Technology Commitment Period inform MBC of any electronic commerce
business which may become commercially available and is substantially similar to
the Special Advanced Technologies if InterTrust senior management become aware
of such substantially similar electronic commerce business.
Notwithstanding the foregoing and it being understood that (a) a research group
within MBC is currently developing the Active Key Technology (the "Active Key
----------
Group") and certain Independently Developed Technology (as defined below) and
(b) MBC has the opinion that such Active Key Technology was originally
developed from ideas and technology not falling within the Special Advanced
Technologies, MBC shall not be restricted from pursuing the Active Key
Technology and such Independently Developed Technology in the current
development stage thereof. Nonetheless, due to both Parties' concern that such
Active Key Technology and/or such Independently Developed Technology might be
developed in the future in a manner falling within the Special Advanced
Technologies (even if developed independently of and without reference to
InterTrust confidential information), to avoid potential conflicts or
controversy with respect to such development, the Parties agree (1) to set up
the following procedures and (2) that this Section 6.1(h) shall not preclude MBC
from promoting, using or exploiting any such Active Key Technology not based on
InterTrust confidential information and any Independently Developed Technology
so long as MBC abides by the following procedures:
(A) MBC, prior to the Effective Date, establishes "Chinese Wall"
procedures, including such procedures set forth on Exhibit G hereto, and
throughout the duration of the Special Advanced Technology Commitment
Period actively maintains such procedures, to prevent the exposure of any
member of the Active Key Group to any Chinese Wall Information (as such
term is defined in this Section 6.1 (h), below)--such procedures including
mechanisms established to effectively separate the working activities of
members of the Active Key Group from all persons and groups within MBC that
may have knowledge of, or access or exposure to, such Chinese Wall
Information;
(B) MBC employees and consultants follow such "Chinese Wall"
procedures; and
(C) MBC provides InterTrust with written notice thirty (30) days
before taking any action to plan or develop any product or service that may
include any Special Advanced Technologies in any manner whatsoever, whether
or not based on Independently Developed Technology (or disclosing such
plan or development to any Person, or entering into discussions aimed at
allowing any Person to implement or employ such planned or developed
product or service).
As set forth above, "Independently Developed Technology" means any technology
----------------------------------
developed without access to, including any benefit from, any confidential
Intertrust Technology, Modified Technology and/or any related Confidential or
Top Secret Information (as such terms are defined in Section 9.1 hereof), or any
InterTrust Technology Group information (as defined in Exhibit G) that should be
reasonably maintained as confidential to protect InterTrust's commercial
interests under this Agreement, whether or not such technology embodies or
includes any portion of the Special Advanced Technologies (such technology and
information to be defined collectively as "the Chinese Wall Information").
----------------------------
If MBC becomes aware of any breach of Sections (A) through (C) immediately above
(a "Compromising Event"), MBC shall immediately take such steps as appropriate
under the circumstances to cease such Compromising Event and to prevent the
reoccurrence of Compromising Events. MBC shall also, at a minimum: (W)
immediately inform InterTrust in writing of the occurrence of and
circumstances surrounding a Compromising Event; and (x) investigate the nature
and extent of the contamination caused by the Compromising Event (and report
such findings to InterTrust in writing). In addition, MBC shall take immediate
and effective
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measures to remedy all effects of such Compromising Event. If MBC fails to take
those actions set forth in subparagraphs (A), (C), and/or (w) and (x) of this
Section 6.1(h), or to promptly cure any other breach of this Section 6.1(h) in
the manner specified herein and in Section 12.2 (b) hereof, InterTrust shall be
entitled to immediately terminate this Agreement and to the specific remedies
set forth in Section 11.3, in addition to any other remedies available to
InterTrust under this Agreement, at law or in equity.
Promptly following an MBC notification to InterTrust as provided in subsection
(C) of this Section 6.1(h), InterTrust and MBC shall initiate discussions in
good faith with the objective of determining whether such planned product or
service would include any material portion of the Special Advanced Technologies.
If, as a result of such discussions, InterTrust and MBC agree that such product
or service: (y) would not include any material portion of the Special Advanced
Technologies, then this Section 6.1(h) shall not restrict MBC's pursuit of such
product or service; or (z) would include a material portion of the Special
Advanced Technologies, then MBC shall have the option to promptly give up any
pursuit of such technology or service using a material portion of the Special
Advanced Technologies or to terminate this Agreement upon thirty (30) days prior
written notice to InterTrust and fulfillment of the terms of Section 7.2 (ii),
hereof. If, despite such discussions, the Parties cannot agree and InterTrust
believes that such planned product or service would include any material portion
of the Special Advanced Technologies, InterTrust shall notify MBC in writing of
such belief and allow MBC to make the choice set forth in subparagraph z
immediately above; provided that if MBC has not notified InterTrust of its
-------- ----
decision within forty-five (45) days thereafter, InterTrust may immediately
terminate this Agreement and MBC shall be obligated to pay InterTrust the sum
specified in Section 7.2(ii).
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6.2 Customer Agreements. In addition to other provisions hereof, MBC
-------------------
shall not distribute any Cooperative Application or MBC Product to any Person
unless MBC shall have first notified and required such Person to execute a
customer agreement: (i) provided by InterTrust; or (ii) provided by MBC that
(a) has been previously approved in writing by InterTrust and (b) is in
accordance with the terms of this Section 6.2 (the "Customer Agreement"). The
------------------
terms of such Customer Agreement relating to InterTrust Technology may be
amended from time to time by InterTrust as may be reasonably necessary to
protect InterTrust's rights hereunder, but solely for subsequent executions of
such Customer Agreement and as herein provided. The Customer Agreement shall
contain, at minimum and as relevant hereunder, terms that: (1) notify MBC
customers of the restrictions on MBC's rights with respect to performing
Clearinghouse Functions, granting sublicenses, and otherwise restricting the
rights of such customers with respect to use of the MBC Product or Cooperative
Application, as applicable, especially the InterTrust Technology incorporated
therein; (2) prohibit customers from disassembling, modifying or reverse
engineering any portion of the InterTrust Technology incorporated in the MBC
Product or Cooperative Application; (3) stipulate that such customer has no
right to use the MBC Product or Cooperative Application to engage in or perform
any Clearinghouse Functions whatsoever without InterTrust's express
authorization pursuant to a written license agreement directly between such
customer and InterTrust; (4) prohibit such customer from using the Cooperative
Application or MBC Product to make and/or exploit any commercial product other
than a Vertical Application; (5) provide that the Customer Agreement is to and
for InterTrust's benefit and may be enforced by InterTrust at its discretion;
and (6) contain such other provisions as stipulated herein. MBC agrees that to
the extent any form of Customer Agreement might be deemed to be unenforceable or
otherwise ineffective in any jurisdiction, MBC shall substitute other forms of
Customer Agreements, or take other actions, as reasonably specified by
InterTrust, including, for example, specifying other generally accepted, legally
effective forms of Customer Agreement, if such exists for a given jurisdiction,
in order to provide InterTrust with legally enforceable protection contemplated
hereunder, including protection against implied licenses and claims of patent
exhaustion relating to InterTrust Technology. MBC agrees and acknowledges that
MBC's performance of its obligations hereunder is necessary for InterTrust to
adequately protect its Intellectual Property Rights made available hereunder,
and such performance shall constitute a condition precedent to the licenses
granted under Article 5 hereof.
6.3 Legends and Notices.
-------------------
(a) Product Legends and Notices. MBC shall, in accordance with
---------------------------
InterTrust's instructions and/or approved exemplars and samples provided
from time to time by InterTrust to MBC, place Notices (as hereinafter
defined) on all physical embodiments of InterTrust Technology and/or
Modified Technology or materials that describe such
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physical embodiments used by MBC including, but not limited to, the
Cooperative Applications and MBC Products, documentation, marketing and
advertising materials therefor, and for associated services, on all
packaging for any physical media containing any such products, and on all
initialization and/or start-up screens of any stand-alone software
developed by or for MBC using or incorporating InterTrust Technology and/or
Modified Technology. For purposes of this Agreement, the term "Notices"
shall include: (i) Intellectual Property Rights, warranty, and disclaimer
notices; (ii) any symbols or marks stipulating Compliance with InterTrust
Specifications; (iii) a notice stating that MBC Products and Cooperative
Applications are "InterTrust Aware" and are being "delivered using
InterTrust DigiBox and InterTrust Technology" (as such notices may be
amended by InterTrust from time to time); and (iv) other field of use and
product notices stipulated by InterTrust, so long as such notices, in the
reasonable opinion of InterTrust's counsel, assist in protecting InterTrust
intellectual property and other InterTrust rights under the laws of any
relevant jurisdiction. MBC shall not, and shall not permit any Person to,
remove, alter, cover, obfuscate or otherwise deface any InterTrust
Trademarks or Notices on any InterTrust Technology or associated
documentation, marketing and advertising materials therefor. Compliance
with subsections (i) and (iv) above shall constitute conditions precedent
to the licenses granted under Article 5 hereof.
(b) Network Notices. MBC shall, in accordance with InterTrust's
---------------
instructions or approved exemplars and samples provided from time to time
by InterTrust to MBC: (i) place Notices specified by InterTrust, which
Notices shall not unreasonably detract from, or interfere with, MBC content
or branding, on all of MBC's start-up screens or initial user interface
menus of any server host environment generated by or referencing the
Cooperative Applications and/or the MBC Products, and that are accessible
by any Person on any computer network; and (ii) include a link from MBC
home pages or any MBC Web page which materially promotes or otherwise
supports MBC Products, Cooperative Applications and associated services, to
a home page that InterTrust may establish for such purpose on the World
Wide Web or the equivalent thereof on any other electronic network.
(c) Prospective Notice. The Notices shall be effective beginning on
------------------
the date InterTrust gives MBC written notice thereof and MBC shall as soon
as practicable implement and/or comply with applicable portions thereof.
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6.4 InterTrust Trademarks
---------------------
(a) Standards. MBC expressly recognizes the importance of
---------
InterTrust's reputation and goodwill, and of maintaining high, uniformly
applied standards of quality in connection with MBC's use and distribution
of products, applications, and services pursuant hereto bearing InterTrust
Trademarks. Consequently, to maintain InterTrust's interest in and rights
to the InterTrust Trademarks, products, and associated services, and to
maintain in the mind of the public and customers that InterTrust Technology
and its components represent sufficient levels of quality, trustedness and
reliability, MBC shall utilize the InterTrust Trademarks in accordance with
trademark guidelines (including approved samples and exemplars) as provided
herein and as may be provided to MBC by InterTrust.
(b) Trademark Ownership; Contestability. MBC acknowledges and
-----------------------------------
agrees that all uses of InterTrust Trademarks as permitted hereunder, and
the goodwill associated therewith, shall inure solely to the benefit of
InterTrust. MBC agrees that it shall not contest the validity of any
InterTrust Trademarks or registrations thereof or applications with respect
thereto, or InterTrust's exclusive ownership of the InterTrust Trademarks
or their associated goodwill. MBC agrees to make available to InterTrust,
upon request, copies of MBC's records and such other documentary evidence
as is/are retained in the ordinary course of business regarding its use of
the InterTrust Trademarks, and information regarding first use of the
InterTrust Trademarks by MBC in each country.
(c) Confusing Similarity. MBC shall not use any marks identical
--------------------
with or confusingly similar to any of the InterTrust Trademarks, and shall
not register or attempt to register any marks identical with or confusingly
similar to InterTrust's Trademarks.
(d) Prospective Notice. Changes in the InterTrust Trademarks and
------------------
such standards of quality shall be effective beginning on the date
InterTrust gives MBC written notice thereof and MBC shall, as soon as
reasonably practicable thereafter, implement and/or comply with such
respective portions thereof.
6.5 MBC's Use of MBC Trademarks on Cooperative Applications and MBC
---------------------------------------------------------------
Products. To promote the branded and distinct identity of any Cooperative
- --------
Application, MBC Products, associated services or any other products
distributed, sold or otherwise transferred by MBC to Customers as provided
hereunder, MBC acknowledges and agrees that any trademark or logo used by MBC in
commerce to specifically identify a Cooperative Application, MBC Product, or
services associated therewith (other than trademark or logos that serve to
generally identify MBC) shall not, concurrently or thereafter, be used to
identify any product other than MBC Products, Cooperative Applications, or other
products or services licensed hereunder, whether by MBC or pursuant to license
or sublicense from MBC.
6.6 MBC Trademarks. Subject to the terms and conditions of this
--------------
Agreement, MBC grants to InterTrust during the term of this Agreement a limited,
nonexclusive, royalty-free, worldwide license, without the right of sublicense
except to InterTrust's Affiliates, to use the
CONFIDENTIAL
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MBC Trademarks; provided that, unless otherwise agreed by MBC, such trademarks
-------------
shall be used together with MBC's corporate name or other trademarks as
reasonably directed by MBC from time to time, and solely in connection with any
publicity pursuant to Sections 6.1 (f) or 6.1(g) hereof. InterTrust shall obtain
permission from MBC for any further use of MBC's name and shall comply with MBC
instructions provided in writing by MBC concerning such further use of any MBC
Trademarks.
6.7 Technology Advisory Committee. InterTrust currently intends to
-----------------------------
establish a committee limited to representatives of: (i) leading companies
chosen from certain technology, financial and/or content industries that have
close strategic technology relationships with InterTrust; and (ii) certain
leading experts in technology and business applicable to information and
electronic commerce (the "Technology Advisory Committee"). The Technology
-----------------------------
Advisory Committee will meet regularly at a forum to be selected by InterTrust
for the purpose of discussing and exchanging ideas for improving the
functionality, interoperability, and market acceptability of InterTrust
Technology and related issues pertaining to the electronic commerce industry.
Upon the establishment of the Technology Advisory Committee: (a) InterTrust
shall grant MBC the right to have a seat as a member thereof for a period of
three (3) years, such seat after the Option Period to be contingent upon MBC's
exercise of the Option as set forth in Section 5.1; and (b) MBC shall promptly
notify InterTrust of MBC's designation of an executive to serve on such
committee. MBC shall: (1) be responsible for all acts and omissions of its
representative in connection with the Technology Advisory Committee; and (2) pay
for all its expenses incurred in connection with participation on such
Committee. MBC and its representative shall abide by all rules and policies
established by InterTrust for the Technology Advisory Committee. MBC's
membership on the Technology Advisory Committee shall be subject to termination
in the event that: (A) MBC or its representative materially fails to comply
with any of the rules established by InterTrust for the Technology Advisory
Committee; (B) MBC materially breaches any of its representations, warranties or
obligations under this Agreement; (C) MBC sells or transfers all or any portion
of InterTrust securities obtained by MBC pursuant to the Stock Purchase
Agreement (prior to an initial public offering of InterTrust's equity
securities); (D) MBC engages in any activities that materially conflict with
InterTrust's interests; or (E) InterTrust, in its discretion, dissolves or
discontinues the Technology Advisory Committee.
ARTICLE 7. LICENSE FEES AND PAYMENT TERMS
7.1 Fees and Royalties.
------------------
(a) InterTrust Technology Fees and Royalties. In consideration of the
----------------------------------------
licenses and the Option granted to MBC herein and the other terms and
conditions hereof, MBC shall pay to InterTrust the following amounts, net
of any withholding tax:
(i) within two (2) weeks of the execution hereof, an initial
nonrefundable payment of [*] dollars (US$[*]);
CONFIDENTIAL
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
26
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(ii) upon exercise of the Option as set forth in Section 5.1
hereof, a nonrefundable payment of [*] dollars (US$[*]), which
amount may be [*] as set forth in Section 7.1 (c);
(iii) upon the later of the first anniversary of the Effective
Date or InterTrust's delivery to MBC of the Systems Developer Kit 1.0
(as further described in Exhibit B hereto as such Exhibit may be
modified by InterTrust from time to time) a nonrefundable payment of
[*] dollars (US$[*]), which amount may be [*] as set forth in
Section [*];
(iv) on the first day of each calendar quarter in 1998,
commencing on January 1, 1998, a nonrefundable royalty payment of
[*] dollars (US$[*]), which shall be [*] due InterTrust as set forth
in Sections 7.1 (a)(v) and 7.1 (a)(vi) below, in accordance with
Section 7.1 (c) hereof (the [*]);
(v) based at least in part on the performance of Clearinghouse
Functions and related services:
(1) a royalty of six-tenths of one percent (0.6%) of the
Gross Commercial Value of each Content Transaction; and
(2) a royalty of two percent (2%) of all revenue and/or
other consideration received pursuant to this Agreement,
but not including Content Transactions as set forth in
Section 7.1(a)(v)(1) above; and
(vi) for all revenue or other consideration, if any, derived by
MBC in connection with the sale, distribution or other use of
Cooperative Applications and/or MBC Products:
a royalty of two percent (2%) of all such revenue and
consideration.
(b) Sublicense Portion. In consideration of the licenses and the
------------------
Option, MBC shall pay to InterTrust [*] percent ([*]%) of any
amounts or consideration received by MBC from a Person that receives a
sublicense under Section 5.3 hereof; provided that InterTrust shall be
-------- ----
entitled to receive no more than [*] dollars (US$[*]) in the
aggregate from MBC pursuant to this Section 7.1(b).
(c) Royalty [*] and [*]. Commencing on January 1, 1999,
-------------------
MBC shall be entitled to [*] of all aggregate royalties accrued under
Sections 7.1 (a)(v) and 7.2 (a)(vi) in a calendar quarter [*] the [*] until
such [*] equals a limit not exceeding [*] dollars ($[*]) in the aggregate.
In addition, the fees to be paid to InterTrust by MBC pursuant to Sections
7.1 (a)(ii) and 7.1 (a)(iii) shall be [*] by an amount equal to the
CONFIDENTIAL
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
27
<PAGE>
[*] (as defined below) made directly to InterTrust on or before the day
that such fee becomes due; provided that the [*] to be [*] shall not
-------- ----
exceed [*] ($[*]) in the aggregate and any [*] shall occur on a one-time,
dollar for dollar basis not exceeding the fee then due. As used herein,
"Sublicense Payments" shall mean: (i) any license fees paid by an MBC
sublicensee pursuant to Section 5.3 hereof directly to InterTrust and
accepted by InterTrust (provided that such license fees shall not include
any recurring royalties, such as royalties of the kind specified in
Sections 7.1 (a)(v) and 7.1 (a)(vi); and (ii) such amount of money (up to
US$1,000,000) paid to InterTrust by Mitsubishi Electric in connection with
the purchase of InterTrust securities pursuant to a stock purchase
agreement, provided that on or before expiration of the Option Period
-------- ----
Mitsubishi Electric becomes an MBC sublicensee or an InterTrust Prime
Partner.
7.2 Other Fees. In addition to the fees specified above: (i) in partial
----------
consideration for the Option and other terms and conditions hereof, if MBC does
not exercise the Option within the Option Period and on or before March 31,
1998, MBC develops or is developing any technology that includes any portion of
the Special Advanced Technologies, before transferring such technology to any
Person, including such technology in any product or service, or otherwise
commercially exploiting such technology in any manner, MBC shall pay to
InterTrust the sum of [*] dollars ($[*]); and (ii) in partial consideration
for InterTrust's efforts hereunder, if MBC chooses to terminate this Agreement
as provided in Section 6.1(h) hereof, before such termination shall be
effective MBC shall pay to InterTrust a fee of [*] dollars (US$[*]).
7.3 Payment Procedure. Except as otherwise expressly provided in this
-----------------
Agreement, within [*] ([*]) days after the end of each calendar quarter, MBC
shall pay InterTrust all amounts due and/or payable pursuant to the licenses
granted hereunder, and received during such calendar quarter. All such payments
shall be made in U.S. dollars ($US) and by wire transfer to such account as
designated by InterTrust in writing. Concurrently with such royalty payment,
MBC shall provide to InterTrust a written royalty report, certified to be
accurate by an officer of MBC, specifying: (i) the revenues derived by MBC that
are subject to royalties during each calendar month of such quarter; (ii) the
basis for calculation of the amounts due and payable; and (iii) summaries of
business records employed by MBC to arrive at the information set forth in (i)
and (ii) immediately above. The manner of calculation of the amounts due and
payable to InterTrust hereunder shall be determined in accordance with
recognized and generally accepted U.S. accounting procedures and principles that
shall be consistently applied to all such payments.
7.4 Currency. Gross Commercial Value and all consideration to be paid to
--------
InterTrust by MBC pursuant to Sections 7.1 (a)(v), 7.1 (a)(vi) or 7.1 (b) in a
currency other than U.S. dollars shall be converted by MBC to U.S. dollars on a
quarterly basis (unless otherwise specified by InterTrust in its sole discretion
to be paid in an alternative currency) according to the official rate of
exchange for such currency, as published in the Wall Street Journal (Western
Edition) on its last publication day during each calendar quarter for which such
royalties are due. If the Wall Street Journal (Western Edition) ceases to
publish such official rate of
CONFIDENTIAL
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
28
<PAGE>
exchange at any time during the term of this Agreement, the official rate of
exchange during any such period of cessation shall be such rate as published by
the Bank of America on the last working day of such calendar quarter for which
such royalties are due.
7.5 Taxes. MBC shall pay taxes, including but not limited to withholding
-----
taxes, imposed by the government of Japan or other jurisdictions outside of the
United States on all fees and royalties payable to InterTrust under this
Agreement. MBC shall be responsible for payment of all sales, use, value-added
and other taxes, duties and other charges that may fall due with respect to the
transfer to or licensing, reproduction or distribution by MBC of the Cooperative
Applications or the MBC Products, or with respect to MBC's activities in the
Clearinghouse Functions. InterTrust shall be responsible for payment of all
sales, use, value-added and other taxes that may be imposed by the United States
government on InterTrust with respect to the transfer to or licensing to MBC of
the InterTrust Technology hereunder or with respect to the payments received
hereunder.
7.6 Interest. MBC agrees that all sums owed or payable to InterTrust
--------
hereunder shall bear interest (compounded daily) at the rate of [*] ([*]%) per
month or [*] ([*]) points above the U.S. Prime Rate on an annualized basis as
published at the end of a calendar quarter for which such royalties are due,
whichever is higher, or such lower rate as may be the maximum rate permitted
under applicable U.S. law, from the date upon which payment of the same shall
first become due up to and including the date of payment thereof whether
before or after judgment, and that MBC shall be additionally liable for all
costs and expenses of collection, including, without limitation, reasonable
fees for attorneys and court costs. Notwithstanding the foregoing, such
specified rate of interest shall not excuse or in any way whatsoever be
construed as a waiver of MBC's express obligation to timely provide any and
all payments due to InterTrust hereunder.
7.7 Audit. MBC shall maintain at its principal place of business during
-----
the term of this Agreement and for a period of five (5) years thereafter all
books, records, accounts, and technical materials regarding MBC's activities in
connection herewith sufficient to determine and confirm MBC's royalty
obligations and other material obligations hereunder. Upon InterTrust's
request, MBC will permit an auditor or agent of InterTrust's choice to examine
and audit, during a reasonable time (but no more than once every six (6)
months), such books, records, accounts, documentation and materials, and take
extracts therefrom or make copies thereof for the purpose of verifying the
correctness of MBC's reported royalty statements and payments provided by MBC or
compliance with the license terms and other material obligations hereunder. MBC
shall pay any unpaid delinquent amounts within ten (10) days of InterTrust's
request and shall apply any overpayment toward future royalties due and payable
to InterTrust. To the extent such examination discloses an underpayment greater
than [*] percent ([*]%) of the sums paid to InterTrust by MBC during the
applicable period subject to such audit, and such underpayment is not due to
fraud or errors made by Persons other than MBC (except where such fraud or
errors should have been discovered by MBC in the exercise of reasonable
diligence), MBC shall fully reimburse InterTrust, promptly upon demand, for the
fees and disbursements due the auditor for such audit; provided that such prompt
-------- ----
payment shall not be in lieu of any other remedies or rights available to
InterTrust hereunder.
CONFIDENTIAL
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
29
<PAGE>
ARTICLE 8. PROPRIETARY INFORMATION AND OWNERSHIP.
8.1 InterTrust Ownership. MBC acknowledges and agrees that, as between
--------------------
InterTrust and MBC, InterTrust is the sole and exclusive owner of, and shall
retain and hereby reserves (and nothing herein shall alter InterTrust's
reservation of) all right title and interest in: (i) the InterTrust Technology,
enhancements and modifications thereto, and derivative works thereof created by
or for InterTrust, and all Intellectual Property Rights embodied therein; (ii)
all Intellectual Property Rights created, or embodied in any works (whether
tangible or intangible) created, independently by InterTrust in connection with
its performance of this Agreement, including participation in the Trading Model
Cooperative Project Plan or any Cooperative Application Project Plan; and (ii)
Modified Technology not owned by MBC pursuant to Section 8.2 hereof or other
modifications or derivative works created by or for MBC that fall outside the
scope of its licenses hereunder, and all Intellectual Property Rights embodied
therein (collectively, the "InterTrust Property"). No provision contained in
-------------------
this Agreement shall be construed to transfer to MBC or any other Person any
title or ownership interest in any InterTrust Property.
8.2 MBC Ownership. Subject to InterTrust's ownership rights under Section
-------------
8.1, as between MBC and InterTrust, MBC shall be the sole and exclusive owner of
the portions of the following created solely by MBC hereunder: (i) any MBC
Products; (ii) Modified Technology (except such Modified Technology that merely
reimplements the existing functionality of InterTrust Technology provided to
MBC, including, for example, porting or translation thereof); (iii) all
Intellectual Property Rights created, or embodied in any works (whether tangible
or intangible) created, independently by MBC in connection with its performance
of this Agreement, including participation in the Trading Model Cooperative
Project Plan and any Cooperative Application Project Plan to the extent
permitted under its licenses hereunder; and (iv) all tangible embodiments of the
Trading Model Cooperative Applications developed by either Party under this
Agreement.
8.3 Joint Ownership. The Parties may from time to time discuss and
---------------
mutually agree in writing upon the division of ownership rights appropriate for
a Cooperative Application as to be set forth in the applicable Cooperative
Application Project Plan in accordance with Section 3.2 hereof. Except as
otherwise set forth in a Cooperative Application Project Plan or otherwise
expressly provided herein, to the extent any Intellectual Property or tangible
embodiment thereof (the "Joint Intellectual Property") is deemed by applicable
---------------------------
law to be jointly created by the Parties under this Agreement, InterTrust and
MBC shall jointly own such Joint Intellectual Property and neither Party shall
be required to account to the other Party for profits from any exploitation
thereof.
8.4 MBC License. In consideration of the licenses granted, and other
-----------
consideration provided, by InterTrust to MBC under this Agreement, during the
term of this Agreement, MBC hereby grants to InterTrust, its Affiliates, and
their successors, assigns, and direct and indirect customers a royalty-free and
worldwide license under the Intellectual Property Rights of MBC
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<PAGE>
and its Affiliates to make, have made, use, sell, offer for sale, import,
distribute and/or otherwise exploit any products or perform any services
relating to the InterTrust or DigiBox Technology, that would, but for such
license, infringe any Intellectual Property Rights of MBC or its Affiliates.
ARTICLE 9. CONFIDENTIALITY.
9.1 InterTrust Technical Information.
--------------------------------
(a) Classification of InterTrust Technology and Documents. InterTrust
-----------------------------------------------------
Technology (including Documentation) and other documents provided by
InterTrust to MBC hereunder shall be marked as one of the following: (i)
"Unclassified"; (ii) "Confidential"; or (iii) "Top Secret." MBC and its
employees shall exercise careful judgment when they are in possession of an
InterTrust document that has not been marked with one of the above-
described classifications. If any document provided by InterTrust to MBC
contains any technical information that is not marked as indicated above
and is not known with certainty to have been either publicly released by
InterTrust or otherwise classified as "Unclassified" by InterTrust, then
MBC, its employees and any other Person authorized to possess such
information shall treat the document as "Confidential," as provided under
Section 9.1 (b) hereof.
(b) Confidential Information. To the extent that MBC receives from
------------------------
InterTrust under this Agreement any InterTrust Technology or any other
information or technology that is marked "Confidential" when disclosed in
written form, or indicated as "Confidential" when disclosed orally
("Confidential Information"), MBC shall hold such Confidential Information
--------------------------
in strict confidence and in a manner that: (i) is sufficiently secure for
the character and content of the Confidential Information; and (ii) is not
less secure than procedures used by MBC to protect its comparably important
information and technology. MBC shall not, without InterTrust's prior
written consent, use, disclose, provide or otherwise make available any
Confidential Information to any Person, except to one or more of MBC's
permitted sublicensees as authorized under the terms and conditions of this
Agreement, and their employees. Each of such sublicensees and employees
shall have a reasonable need to know such Confidential Information, and
each shall operate under the same restrictions as MBC. Furthermore, in each
case of disclosure to an employee or authorized sublicensee, access to such
Confidential Information shall be allowed only to the extent necessary to
enable MBC or any such authorized sublicensee to exercise its license (or
sublicense) hereunder and/or as expressly allowed hereunder. MBC and any
such sublicensees, as the case may be, shall: (a) require their employees
having access to any portion of Confidential Information to strictly
maintain its confidentiality; and (b) ensure that each such employee shall
have executed with MBC and/or an authorized sublicensee (as applicable) a
written non-disclosure/non-use agreement in the form set forth on Exhibit E
hereto or as subsequently provided by InterTrust, or MBC's or such
sublicensee's applicable form agreement which shall effectively and
comparably bind such employee
CONFIDENTIAL
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to the same scope as InterTrust's form agreement, and which MBC's or
sublicensee's form agreement shall be subject to InterTrust's reasonable
prior written approval. MBC shall notify InterTrust promptly in writing of
any unauthorized disclosure or other misuse or misappropriation of any
portions of the Confidential Information. MBC and any sublicensee (as
appropriate) shall be fully responsible for any breach of MBC's or
sublicensees' obligations under this Agreement by any person to whom such
Confidential Information has been disclosed. Any obligation of MBC with
respect to Confidential Information pursuant to this Section 9.1(b) shall
expire thirty-six (36) months after disclosure of such information by
InterTrust to MBC.
(c) Top Secret Information. In order to protect InterTrust's rights,
----------------------
the rights of InterTrust licensees, and the secure interoperability and
reputation of InterTrust implementations, MBC shall treat any InterTrust
Technology or other confidential information that is either marked "Top
Secret" when disclosed in written form, or indicated as "Top Secret" when
disclosed orally ("Top Secret Information") in a manner not less secure
----------------------
than MBC's most secret information and, in all events in a manner
sufficient to reasonably ensure the security of such Top Secret
Information, given such great sensitivity of such Top Secret Information.
MBC shall not use, disclose, provide or otherwise make available such Top
Secret Information to any Person, except to not more than six (6)
individual employees of MBC, each of whom has a direct need to know such
information or be exposed to such Top Secret Information (as agreed in each
case by InterTrust) and then only to the extent necessary for MBC to
exercise its rights and perform its obligations under this Agreement, and
none of whom shall receive a disclosure of any such Top Secret Information
until: (i) such employee becomes bound by personally executing an
InterTrust Top Secrecy Agreement (in the form set forth in Exhibit E hereto
or as subsequently provided by InterTrust) covering such information and
exposure; and (ii) an original executed copy of such agreement is received
by InterTrust, with return receipt provided to MBC, which such receipt may
be provided by fax communication if so requested in writing.
Notwithstanding the foregoing, MBC and MBC employees described above shall
make no physical embodiments (for example, any reproduction or copy,
including descriptive notes) whatsoever of Top Secret Information, without
the prior express written authorization from InterTrust's Chairman of
Board, President or any other InterTrust Officer designated in a written
communication to MBC signed by InterTrust's Chairman of the Board (the
"Designated Officers"), nor shall MBC or such MBC employees disclose any
-------------------
Top Secret Information to any Person, except as described in this Section
9.1 (c). If MBC becomes aware that any Top Secret Information has been
disclosed or treated other than as set forth in this Section 9.1 (c),
and/or as specified in a Top Secrecy Agreement, MBC shall immediately
inform InterTrust of such occurrence and take immediate steps to correct
such compromise. MBC shall maintain a log of the employees accessing and
location of all originals and other tangible embodiments of all Top Secret
Information. MBC shall be fully responsible for any breach by any MBC
employee of this Agreement related to the unauthorized use or disclosure of
Top Secret Information.
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9.2 MBC Technical Information. To the extent that InterTrust receives MBC
-------------------------
confidential information that is either marked "confidential" when disclosed in
written form or indicated as "confidential" when disclosed orally, under this
Agreement, InterTrust shall hold said MBC confidential information in confidence
in a manner that is sufficiently secure for the character and content of the
information and under no circumstances shall such confidential information be
held in a manner that is less secure than procedures used by InterTrust in
connection with its comparably important information. Except as to the
disclosure by MBC to InterTrust of the Modified Technology or such disclosures
inherent in the Certification Testing of MBC Products, Cooperative Applications
and/or any associated services pursuant hereto, and only to the extent expressly
specified by InterTrust Specifications, MBC shall not disclose or otherwise
provide or make available any confidential information of MBC which is directly
related to InterTrust Technology and InterTrust's business activities, without
first acquiring written approval from a Designated Officer of InterTrust.
InterTrust shall not disclose, otherwise provide or make available any MBC
confidential information it has received in any form to any Person who is not
bound by an applicable confidentiality agreement and has a reasonable need to
know such information. InterTrust agrees to notify MBC promptly in writing of
any unauthorized disclosure of MBC confidential information provided to
InterTrust which may come to the attention of an InterTrust officer. InterTrust
shall be fully responsible for any breach of InterTrust's obligations under this
Agreement by InterTrust or its employees, consultants, directors, principals, or
Affiliates. Any obligation of InterTrust to keep MBC information in confidence
shall expire thirty-six (36) months after disclosure of such information by MBC
to InterTrust.
9.3 Exceptions. Notwithstanding the provisions of Sections 9.1 (a), 9.1
----------
(b) and 9.2 above, and except as to "Top Secret" information as provided in
Section 9.1 (c), the confidentiality restrictions herein shall not apply to
Confidential Information that the recipient thereof can demonstrate: (i) is or
becomes generally known to the public through no breach of any of these
obligations, as of the date such information becomes so known; (ii) is or shall
have been independently developed by such recipient's employees who had no
access to such information; or (iii) is or shall have been rightfully received,
with no obligation of confidentiality or non-use, by such recipient from any
Person (other than as a result of another Person's breach of an obligation of
confidentiality to InterTrust), as of the date such information is so received.
9.4 Confidentiality of Agreement and Publicity. Except as otherwise
------------------------------------------
provided in Sections 6.1(h) and 9.3 hereof or as required by law or in
connection with a dispute between the Parties regarding the terms hereof,
neither Party hereto shall at any time, without the prior written consent of the
other Party, disclose the specific details of the terms and conditions of this
Agreement to any Person, other than Affiliates, employees, directors, investors
holding approximately one percent (1%) or more of the outstanding equity shares
and having no reasonably anticipated conflict of interest with the disclosing
party, potential investors who may purchase approximately one percent (1%) or
more of the outstanding equity shares, and/or financial institutions,
professional advisors and/or other consultants having a reasonable need to know
and covered by a confidentiality agreement sufficient in scope to protect the
Parties' rights and interests hereunder. Notwithstanding the foregoing
provisions of this Section 9.4: (i) either
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Party may publicly discuss or otherwise disclose that an agreement exists
between the Parties to develop electronic commerce industry standards and the
Trading Model Cooperative Application, but may provide no further material
details as to the specific activities or commitments of the other Party without
the prior written consent of the other Party; and (ii) either Party may make
such disclosures to the extent permitted under this Section 9.4 in order to
comply with its obligations or enforce its rights under this Agreement.
9.5 Confidentiality of Payments, Audit and Certification Testing. All
------------------------------------------------------------
information received during an audit or pursuant to a Certification Program as
provided herein, and all information concerning Certification Testing (including
any results thereof), and any and all payment information received by either
Party pursuant to this Agreement, and/or pursuant to any Certification Testing,
shall be treated as confidential information pursuant to Section 9.4 hereof.
Notwithstanding the foregoing, information concerning whether a MBC Product,
Cooperative Application or an associated services being disseminated or used in
commerce is Compliant with InterTrust Specifications shall not be treated as
confidential information under any provision of this Agreement.
9.6 Survival of the NDA. Subject to the provisions of this Article 9, the
-------------------
Non-Disclosure/Non-Use Agreement between InterTrust and MBC dated February 7,
1996, shall terminate upon the execution of this Agreement, except with respect
to any terms thereof that survive termination, including confidentiality and
non-use obligations relating to information disclosed by InterTrust to MBC prior
to the Effective Date.
ARTICLE 10. REPRESENTATIONS AND WARRANTIES.
10.1 Representations and Warranties of Both Parties. Each Party hereto
----------------------------------------------
represents and warrants to the other Party that as of the Effective Date:
(a) such Party is a corporation duly incorporated, validly existing
and in good standing under the laws of the jurisdiction in which it is
organized, with full corporate power and authority to carry on its business
as it is now being conducted;
(b) the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by such Party. No other corporate or shareholder action or other
proceeding on the part of such Party or its shareholders is necessary to
authorize this Agreement and the consummation of the transactions
contemplated hereby;
(c) this Agreement constitutes a valid and binding obligation of such
Party, enforceable against such Party in accordance with its terms, except
that such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium, or similar laws now or hereafter in effect
relating to creditors' rights; and
CONFIDENTIAL
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(d) neither the execution, delivery and performance of this Agreement
nor the consummation of the transactions contemplated hereby will violate
any provision of the charter or organizational documents of such Party.
10.2 Representations and Warranties of InterTrust. In addition to Section
--------------------------------------------
10.1 above, InterTrust represents and warrants to MBC that as of the Effective
Date:
(a) InterTrust owns or has the right to grant the licenses hereunder
with respect to the InterTrust Technology and the Licensed Rights; and
(b) to its knowledge, neither the InterTrust Technology nor the
Licensed Rights infringe any Person's U.S. copyright or trade secret right,
PROVIDED THAT InterTrust MAKES NO WARRANTY WITH RESPECT TO THE INFRINGEMENT
-------- ----
OF ANY TRADEMARK OR PATENT RIGHTS.
10.3 Limitation. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT TO THE
----------
CONTRARY: (i) THE INTERTRUST TECHNOLOGY REQUIREMENTS ARE PROVIDED "AS IS"
WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESSED OR IMPLIED, INCLUDING BUT NOT
LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, TITLE AND NONINFRINGEMENT; AND (ii) THE ENTIRE RISK AS TO THE QUALITY,
ACCURACY, INFRINGEMENT AND PERFORMANCE OF THE INTERTRUST TECHNOLOGY REQUIREMENTS
IS WITH MBC. INTERTRUST DOES NOT WARRANT THAT INTERTRUST TECHNOLOGY OR THE
INTERTRUST TECHNOLOGY REQUIREMENTS WILL MEET MBC'S REQUIREMENTS OR THOSE OF ANY
THIRD PARTY AND, IN PARTICULAR, INTERTRUST DOES NOT WARRANT THAT THE INTERTRUST
TECHNOLOGY REQUIREMENTS WILL BE ERROR FREE OR WILL OPERATE WITHOUT INTERRUPTION.
CONFIDENTIAL
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ARTICLE 11. INDEMNIFICATION AND REMEDIES.
11.1 Indemnification.
---------------
(a) InterTrust Indemnification. InterTrust shall indemnify and
--------------------------
hold MBC and its employees, officers and directors (the "MBC Parties")
-----------
harmless from any and all liability, judgments, costs, damages, claims,
suits, actions, proceedings, expenses and/or other losses, including
reasonable attorneys' fees (collectively, "Claims") or portions thereof, to
------
the extent awarded by a court of competent jurisdiction or pursuant to a
settlement as provided hereunder, resulting from controversies or
litigation asserted by any Person against the MBC Parties arising directly
or indirectly from: (i) InterTrust's breach of any of its obligations under
this Agreement, or its representations and warranties set forth in Article
10; and (ii) MBC's use of InterTrust Trademarks pursuant hereto; provided,
--------
however, that, with respect to InterTrust's representations under Section
------- ----
10.2 (b) hereof, this indemnity does not extend to any Claim relating to:
(1) any Modified Technology or other modifications thereto made by MBC or
any Person or combinations of the InterTrust Technology with any product,
technology or service of MBC or of any Person; or (2) the use of any
InterTrust Technology in any manner inconsistent with InterTrust
Specifications or Documentation (collectively, the "Indemnification
---------------
Exclusions").
----------
(b) MBC Indemnification. MBC shall indemnify and hold InterTrust, its
-------------------
employees, officers and directors (the "InterTrust Parties") harmless from
------------------
any and all Claims or portions thereof to the extent awarded by a court of
competent jurisdiction or pursuant to a settlement as provided hereunder,
resulting from controversies or litigation asserted by any Person against
the InterTrust Parties arising directly or indirectly from: (i) MBC's or
any of its sublicensees' breach of any of any obligations, representations
or warranties hereunder; (ii) InterTrust's use of MBC Trademarks pursuant
hereto; (iii) the design, manufacture, use, distribution and/or disposition
of Modified Technology, Cooperative Applications or MBC Products, or
performance of any service associated therewith, that would not have
otherwise arisen out of MBC's use of the InterTrust Technology alone,
except to the extent MBC is indemnified by InterTrust under Section 11.1
(a) hereof; (iv) any Claim relating to the Indemnification Exclusions; and
(v) any exercise by MBC or any of its sublicensees of the licenses
hereunder that would not have otherwise arisen out of MBC's use of the
InterTrust Technology alone, except to the extent MBC is indemnified by
InterTrust under Section 11.1 (a) hereof.
(c) Third Party Claims. In case any Claim is brought by a third
------------------
party for which Claim indemnification is provided hereunder: (i) the
indemnified Party shall provide prompt written notice thereof to the Party
obligated to indemnify such Claim; and (ii) the indemnifying Party shall,
upon the demand and at the option of the indemnified Party, assume the
defense thereof (at the expense of the indemnifying Party) within thirty
(30) days or at least ten (10) days prior to the time a response is due in
such case, whichever occurs first, or, alternatively upon the demand and at
the option of the indemnified Party, pay to such Party all reasonable costs
and expenses, including
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reasonable attorneys' fees, incurred by such Party in defending itself. The
Parties shall cooperate reasonably with each other in the defense of any
Claim, including making available (under seal if desired, and if allowed)
all records reasonably necessary to the defense of such Claim, and the
indemnified Party shall have the right to join and participate actively in
the indemnifying Party's defense of the Claim. Notwithstanding the
foregoing (and any other section of this Agreement), it is understood and
acknowledged that InterTrust need not under any circumstance provide Top
Secret Information related to the security capabilities of InterTrust
Technology to any Person. Each Party shall be entitled to reasonable
approval of the settlement of any Claim to be entered into by the other
Party. Without limiting the foregoing, if as a result of such defense or
settlement, an injunction is entered or threatened or an agreement is
reached prohibiting MBC from using any portion of the InterTrust
Technology, as MBC's sole remedy for such prohibition of such continued
use, InterTrust may at InterTrust's sole option either: (a) [*] for MBC to
[*] and [*] in accordance with the terms hereof such portion (at MBC's
expense, should MBC desire to so continue to [*] such portion); (b) [*] or
[*] of the [*] or Licensed Rights, as the case may be, so as to make it
[*]; or (3) if options (a) and (b) are not [*] in InterTrust's
determination, terminate the licenses granted hereunder as to such portion.
In addition, as to any such portion, InterTrust may, at any time after such
Claim is brought or threatened, notify MBC that InterTrust is electing one
of the options (a), (b) or (c) as to such portion to be effective
immediately or at such time specified by InterTrust subject in (a) to MBC's
agreement.
11.2 Cumulative Remedies. Except as expressly provided herein to the
-------------------
contrary, no remedy made available to a Party by any of the provisions of this
Agreement is intended to be exclusive of any other remedy, and each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
11.3 Equitable Remedies. Each Party agrees that it may be impossible or
------------------
inadequate to measure and calculate a Party's damages from any breach of the
covenants set forth in Sections 4.2, 5.4, 5.5, 6.1(b), 6.1(h), 6.2, 6.3, 6.4,
6.5, 7.7, 12.3 and 14.7 and Articles 8 and 9 hereof. Accordingly, each Party
agrees that if it or any of such Party's employees, licensees, divisions or
Affiliates or agents thereof breach or threaten a breach or anticipatory
repudiation of any of such provisions, in addition to any other right or remedy
available, the other Party shall be entitled: (i) to obtain an injunction
against the breaching Party and such Party's employees, licensees, divisions,
Affiliates, and/or agents thereof, from a court of competent jurisdiction
restraining such breach or threatened breach; and (ii) to specific performance
of any such provision of this Agreement. In addition, MBC agrees that, in the
event MBC breaches any of its obligations under Section 6.1(h), InterTrust shall
be entitled, in addition to any other remedies available at law or in equity, to
extend the Special Advanced Technology Commitment Period for an additional
twenty-four (24) month period (measured from the later of the date such breach
is admitted by MBC or established by a final judgment pursuant to
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- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
37
<PAGE>
which all appeal rights have been exhausted), and MBC hereby irrevocably agrees
to an award of specific performance of such provision in InterTrust's favor.
11.4 EXCLUSION OF DAMAGES. EXCEPT AS SET FORTH IN THE IMMEDIATELY
--------------------
FOLLOWING SENTENCE, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY, ITS
AFFILIATES, DIVISIONS, CUSTOMERS, EMPLOYEES, OR ANY OTHER PERSONS, FOR ANY LOST
PROFITS, INCIDENTAL, INDIRECT, OR CONSEQUENTIAL DAMAGES, ARISING OUT OF THE
BREACH OF THIS AGREEMENT OTHER THAN UNDER SECTION 6.1(h) AND ARTICLES 8 AND 9.
NOTWITHSTANDING THE IMMEDIATELY PRECEDING SENTENCE, A PARTY SHALL BE LIABLE TO
THE OTHER PARTY FOR ALL DAMAGES, INCLUDING LOST PROFITS, INCIDENTAL, INDIRECT,
OR CONSEQUENTIAL DAMAGES SUFFERED OR INCURRED BY THE OTHER PARTY IN THE
FOLLOWING CIRCUMSTANCES: (i) THE MISAPPROPRIATION OF TRADE SECRETS OF THE
DAMAGED PARTY BY THE LIABLE PARTY, ITS DIRECTORS, OFFICERS, EMPLOYEES,
CONSULTANTS OR AGENTS; (ii) THE GROSS NEGLIGENCE OF THE LIABLE PARTY, ITS
DIRECTORS, OFFICERS, EMPLOYEES, CONSULTANTS OR AGENTS; (iii) THE WILLFUL
MISCONDUCT OR MATERIAL BREACH OF THIS AGREEMENT IN BAD FAITH BY THE LIABLE
PARTY, ITS DIRECTORS, OFFICERS, EMPLOYEES, CONSULTANTS OR AGENTS; OR (iv) THE
BREACH OF SECTION 6.1(h) AND ARTICLES 8 OR 9 HEREOF. IN ANY DISPUTE AS TO
DAMAGES, THE LIABLE PARTY SHALL BE REQUIRED TO PROVE THE ABSENCE OF MATERIAL
NEGLIGENCE, WILLFUL MISCONDUCT AND/OR INTENTIONAL MATERIAL BREACH OF THIS
AGREEMENT IN BAD FAITH, AS THE CASE MAY BE, REFERRED TO IN THE IMMEDIATELY
PRECEDING SENTENCE.
ARTICLE 12. TERM AND TERMINATION.
12.1 Agreement. This Agreement shall commence on the Effective Date and
---------
shall continue for a period of twenty-five (25) years therefrom unless and until
terminated earlier pursuant to Section 12.2 below. At the end of such twenty-
five (25) year term, this Agreement shall automatically renew for subsequent one
(1) year period unless and until a Party notifies the other in writing of its
intent not to renew this Agreement prior to sixty (60) days before the beginning
of the next such one (1) year period.
12.2 Events of Termination. This Agreement, the licenses granted
---------------------
hereunder, and/or the Trading Model Cooperative Project Plan and all Cooperative
Application Project Plans shall be subject to termination upon the occurrence of
any of the following events and such other provisions hereof expressly so
stating (each, an "Event of Termination"):
--------------------
(a) Expiration of this Agreement;
(b) If either Party, or, as relevant, any of its permitted
sublicensees, materially defaults on any of its material obligations under
this Agreement, the non-defaulting Party shall have the right, exercisable
in its sole discretion, to initiate a
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<PAGE>
termination procedure under this Agreement by written notice (sent in
accordance with the provisions of Section 14.5 hereof) describing with
reasonable specificity the nature of the default and requesting that such
default be cured, wherein such termination notice shall automatically
result in termination unless: (i) within sixty (60) calendar days of
receiving such written notice of such default (the "Cure Period"), the
-----------
defaulting Party (or such sublicensee) remedies the default; or (ii) in the
case of a default that cannot with due diligence be cured within the Cure
Period, the defaulting Party or such sublicensee institutes, by the date
upon which one half of the Cure Period shall have expired, steps necessary
to remedy the default and thereafter employs best efforts to diligently
prosecute the same to completion. Notwithstanding the foregoing, the Cure
Period associated with MBC's breach of its payment obligations in
accordance with Sections 7.1 and 7.2 shall be five (5) business days.
Notwithstanding any of the foregoing, InterTrust shall have the right both
to immediately terminate this Agreement and to obtain injunctive relief in
the event of any: (a) unauthorized disclosure of Top Secret Information or
intentional, material unauthorized use of the InterTrust Technology or the
Licensed Rights; and/or (b) willful, material unauthorized disclosure of
Confidential Information, except as expressly provided for by this
Agreement.
(c) By a Party, effective immediately upon written notice to the
other Party, in the event of: (i) the filing by the other Party of a
petition in bankruptcy or insolvency; (ii) the appointment of a receiver
for all or substantially all of its property relevant to the business
activities under this Agreement; (iii) the making by the other Party of any
assignment or attempted assignment for the benefit of creditors for all or
substantially all of its properties relevant to its business activities
under this Agreement; or (iv) the institution of any proceedings for the
liquidation or winding up of the other Party's business or for the
termination of its corporate charter, if any such proceeding is not
dismissed within one hundred and twenty (120) days of institution;
(d) Upon written notice to MBC, InterTrust may immediately terminate
this Agreement in its sole discretion in the event: (i) MBC fails to make
the payment as provided in Section 7.1 (a)(i) hereof ; (ii) MBC fails to
properly exercise the option during the Option Period in accordance with
Section 5.1; (iii) MBC does not develop the Trading Model Cooperative
Application or an MBC Product implementing the Trading Model within forty-
two (42) months from the date InterTrust first delivers any InterTrust
Technology Requirements to MBC; (iv) MBC fails to terminate any sublicense
pursuant to which the sublicensee thereunder materially defaults its
obligations under this Agreement for a period of sixty (60) days after the
date of written notice thereof from InterTrust or MBC, whichever is
earlier; (v) MBC breaches any of its obligations under Section 6.1(h); or
(vi) MBC fails to perform one or more of its material obligations under
this Agreement on two or more occasions over a [*] year period. Upon thirty
(30) days prior written notice to MBC, InterTrust may terminate this
Agreement in its sole discretion if MBC notifies InterTrust, as provided in
Section 6.1(h), that it plans to develop or employ a product or service
within the Special Advanced Technologies employing Independently Developed
Technology, or if it fails to so notify InterTrust as provided hereunder.
CONFIDENTIAL
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
39
<PAGE>
(e) A Party to a Trading Model Cooperative Project Plan or a
Cooperative Application Project Plan shall have the right to terminate such
plan if the other Party thereto materially breaches any of its material
obligations thereunder.
12.3 Effect of Termination. Upon termination hereof: (i) all licenses
---------------------
granted hereunder, all sublicenses granted by MBC pursuant to Section 5.3, and
all cooperative development efforts then being conducted pursuant to the Trading
Model Cooperative Project Plan and any Cooperative Application Project Plan
shall automatically terminate; (ii) InterTrust shall have the right to retain
all sums already paid by MBC (and all MBC sublicensees) hereunder, and MBC (and
all MBC sublicensees) shall pay to InterTrust all sums accrued but unpaid within
thirty (30) days thereafter; and (iii) MBC (and all MBC sublicensees) shall
immediately discontinue its use of InterTrust Technology and/or Modified
Technology, and discontinue any service associated therewith (including
termination of distribution of Cooperative Applications and MBC Products
incorporating or using InterTrust Technology and/or Modified Technology);
provided, however, that all licenses properly granted to end-users pursuant to
- -------- ------- ----
the then-existing Customer Agreements shall continue in full force and effect in
accordance with the terms thereof (provided that such licenses shall in no event
provide any rights with respect to Clearinghouse Functions). Each Party shall
deliver to the other Party within ten (10) days from the date of termination of
this Agreement all copies of all materials protected as Confidential Information
or Top Secret Information under this Agreement. Return of Confidential
Information shall be by commercially secure means as reasonably specified by the
receiving Party. Return of Top Secret Information shall be made, at InterTrust's
option as designated by a Designated Officer by written authorization to MBC:
(a) by physical and secure pickup at MBC's offices by an InterTrust officer; (b)
by physical and secure delivery to InterTrust's offices in Japan (upon
establishment of such offices); and (c) as otherwise may be determined by
InterTrust as commercially reasonable. Such delivery shall be during normal
business hours and in each instance to the hands of an InterTrust officer who
audits and countersigns such delivery. Each Party shall return within said ten
(10) days to the other Party all copies of all confidential materials of such
other Party, including all physical embodiments of Confidential Information in
the possession or control of the other Party, its sublicensees, their employees,
consultants, or other agents. Within one (1) month after the termination of this
Agreement, each Party will certify in writing to the other Party that, to the
best of its knowledge, all such materials and tangible embodiments have been
delivered to the other Party.
12.4 Survival. The respective rights and obligations of InterTrust and
--------
MBC under the provisions of Sections 4.2(ii), 5.5, 6.1(h), 6.5, 7.2, 7.7 (but
only for a period of four years), 8.1, 8.2, 8.3, 12.3, this Section 12.4, and
Articles 9, 11, 13 and 14 hereof shall survive expiration or termination of this
Agreement.
ARTICLE 13. EXPORT.
13.1 Compliance with Law and Export Controls. The Parties shall at all
---------------------------------------
times comply with all applicable U.S., Japanese and foreign federal, state, and
local laws, rules and regulations relating to the execution, delivery and
performance of this Agreement and to the
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<PAGE>
InterTrust Technology Requirements and Modified Technology. Additionally, MBC
acknowledges that one or more aspects of the InterTrust Technology Requirements,
and/or Documentation and Assistance with respect thereto, is likely to be
subject to the export control laws, regulations and requirements of the United
States and other jurisdictions. InterTrust shall use reasonable efforts at
InterTrust's expense, and MBC shall at InterTrust's request reasonably assist
InterTrust at MBC's expense, to obtain any license or other approval that may be
required for InterTrust's initial export of the InterTrust Technology
Requirements and/or Documentation or information relating thereto from the
United States to Japan and MBC understands and agrees that certain modifications
to InterTrust Technology Requirements and/or Documentation may be required by
U.S. law and/or regulatory process and agrees to the implementation of such
modification by InterTrust, as necessary. In the event that InterTrust is unable
to comply with its obligations hereunder due to an inability to obtain any such
license or other approval, such inability to obtain approval shall be considered
a force majeure event under Section 14.12. MBC shall, at MBC's expense (subject
to InterTrust's right of approval), comply with all applicable laws (including
applicable U.S. export control laws and regulations) and obtain all necessary
governmental consents and approvals to: (i) further distribute the MBC Products
and Cooperative Applications (as well as other technology as expressly permitted
hereunder) that contain any part of the InterTrust Technology Requirements or
Modified Technology in accordance herewith; and (ii) further export and re-
export the InterTrust Technology Requirements and/or Modified Technology. MBC
shall: (a) promptly deliver, as available, to InterTrust documentation
confirming to InterTrust's reasonable satisfaction MBC's compliance with MBC's
responsibilities under this Section 13.1; and (b) obtain such consents and
approvals from appropriate governmental entities as InterTrust's counsel may
reasonably determine to be necessary (as relates to InterTrust Technology
Requirements or Modified Technology) for such further distribution, exportation
or re-exportation.
13.2 Failure to Obtain Export Approval. In the event MBC exercises its
---------------------------------
Option and, thereafter, InterTrust has not yet received and further fails to
obtain approval from relevant authorities ("Export Approval") to export SDK 1.0
---------------
to MBC within six (6) months after InterTrust's first commercial shipment of its
FCS SDK 1.0 product to a Person not subject to such Export Approval (the
"Conversion Date"), MBC shall receive a warrant (the "Warrant") to receive that
- ---------------- -------
number of shares of InterTrust stock (the "Warrant Shares") determined by the
--------------
following mathematical formula:
Number of Shares = License Fee/ Price Per Share
Where "License Fee" is equal to the license fee paid to InterTrust pursuant to
Section 7.1(a)(i) hereof and,
"Price Per Share" = Valuation/Outstanding Shares
Where "Valuation" is a number that is the greater of: (a) $US100,000,000; and
(b) one half (1/2) of the then-current value of InterTrust as determined in good
faith by InterTrust's Board of Directors as of the Conversion Date, and
"Outstanding Shares" is equal to the total number of InterTrust shares issued
and outstanding as of the Conversion Date. The Warrant Shares shall
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<PAGE>
be shares of InterTrust common stock and/or preferred stock as determined by
InterTrust's Board of Directors in good faith.
The Warrant shall be a written agreement with InterTrust containing terms and
provisions as reasonably established by InterTrust in view of, among other
things, the class of InterTrust stock to which such Warrant Shares belong and
InterTrust's extant agreements. Such Warrant shall not be convertable by MBC for
six (6) months after the Conversion Date and at any time during such six (6)
month period the Warrant shall terminate if InterTrust obtains Export Approval
and, notwithstanding any termination hereof, delivers or offers to deliver SDK
1.0 to MBC on the terms provided herein. If at any time subsequent to the
Conversion of such Warrant InterTrust obtains Export Approval and makes such SDK
1.0 available to MBC, and MBC accepts delivery of such SDK 1.0, InterTrust shall
have the right, exercisable in its discretion, to reacquire all such shares from
MBC by tendering to MBC such reasonable amount of interest on the sums then
tendered by MBC to InterTrust pursuant to Section 7.1(a) hereof as determined by
InterTrust's Board of Directors in good faith and as shall be set forth in the
Warrant Agreement.
ARTICLE 14. MISCELLANEOUS.
14.1 Governing Law. This Agreement, any and all actions arising out of or
-------------
in any manner affecting the interpretation of this Agreement or the Stock
Purchase Agreement, and any actions between the Parties involving the InterTrust
Technology, and any InterTrust Property and any Confidential or Top Secret
Information ("Party Disputes") shall be governed solely by, and construed solely
--------------
in accordance with, the laws of the United States of America and the
Commonwealth of Virginia, excluding that body of law relating to conflict of
laws. The Parties hereby acknowledge and agree that the Convention on Contracts
for the International Sale of Goods shall not apply to this Agreement.
14.2 Venue and Jurisdiction. In connection with any litigation between the
----------------------
Parties involving a Party Dispute, each Party hereby unconditionally and
irrevocably consents to the jurisdiction and venue in the Courts of the
Commonwealth of Virginia and in the U.S. Federal District Court, located in the
City of Alexandria, Virginia (or any direct successor thereto) as relevant, and
irrevocably: (i) waives any objection whatsoever (including any objection with
respect to venue) that any Party may now or hereafter have to the jurisdiction
or venue of said courts; and (ii) consents to the service of process of said
courts in any matter relating to this Agreement by the mailing of process by
registered or certified mail, postage prepaid, at the addresses specified in
this Agreement. If necessary, MBC shall appoint a registered agent in the State
of Virginia for acceptance of service of process and/or other notices provided
for under this Agreement and shall notify InterTrust of the identity of such
registered agent within thirty (30) days after the Effective Date.
14.3 Amendment or Modification. This Agreement may not be amended,
-------------------------
modified or supplemented by the Parties in any manner, except by an instrument
in writing signed by the President or Chairman of InterTrust and a duly
authorized officer of MBC.
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14.4 No Assignment. Except as expressly provided in Section 5.3, this
-------------
Agreement is personal to MBC and no rights or obligations of MBC hereunder shall
be delegated, assigned or transferred to any Person (whether expressly, by
implication, or by operation of law including any merger or sale of assets or
business) without the prior written consent of InterTrust, in its sole
discretion. Any such purported transfer, assignment or delegation by MBC without
the appropriate prior written approval shall be null and void ab initio and of
-- ------
no force or effect. InterTrust shall have the right to delegate, assign or
transfer this Agreement and/or its rights or obligations hereunder to any
Person, but only in the event that such Person undertakes to assume InterTrust's
outstanding obligations.
14.5 Notices. Any notice or other communication to be given hereunder shall
-------
be in writing and shall be (as elected by the Party giving such notice): (i)
personally delivered; (ii) transmitted by postage prepaid registered or
certified airmail, return receipt requested; or (iii) by facsimile with a
confirmation copy deposited prepaid with an internationally recognized express
courier service. Unless otherwise provided herein, all notices shall be deemed
to have been duly given on: (a) the date of receipt (or if delivery is refused,
the date of such refusal) if delivered personally or by express courier; or (b)
ten (10) days after the date of posting if transmitted by mail. Notwithstanding
the foregoing, communication of Confidential Information or Top Secret
Information shall be governed by practices adequate to appropriately protect
such information regarding Top Secret Information or as may be specified herein
or in the future by InterTrust. Either Party may change its address for purposes
hereof on not less than three (3) days prior notice to the other Party. Notice
hereunder shall be directed:
If to MBC, to:
3-1 Marunouchi 2-Chome,
Chiyoda-ku,
TOKYO 100-86, Japan
Attn: Norio Okaido
General Manager, Multimedia Business Department
Fax: 81-3-3210-9144
If to InterTrust, to:
460 Oakmead Parkway
Sunnyvale, California 94086
Attn: Edmund J. Fish, Esq.
Vice President and General Counsel
Fax: (408) 222-6144
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with a copy to:
Weil, Gotshal & Manges LLP
2882 Sand Hill Road, Suite 280
Menlo Park, California 94025
Attn: Patrick P. Nguyen, Esq.
Fax: (415) 854-3713
14.6 Waiver. Any of the provisions of this Agreement may be waived by the
------
Party entitled to the benefit thereof. Neither Party shall be deemed, by any act
or omission, to have waived any of its rights or remedies hereunder unless such
waiver is in writing and signed by, in the case of InterTrust, InterTrust's
President or Chairman, and in the case of MBC, MBC's authorized officer, and
then only to the extent specifically set forth in such writing. A waiver with
reference to one event shall not be construed as continuing or as a bar to or
waiver of any right or remedy as to a subsequent event.
14.7 No Third Party Beneficiaries. Nothing express or implied in this
----------------------------
Agreement is intended to confer, nor shall anything herein confer, upon any
Customer or any Person other than the Parties and the respective successors or
permitted assigns of the Parties, any rights, remedies, obligations or
liabilities whatsoever. Notwithstanding the foregoing, to the extent permitted
by law, MBC grants InterTrust the right to enforce against any of MBC's
sublicenses the terms of the applicable sublicenses or agreements between MBC
and its sublicensees for the purpose of asserting MBC's rights in order to
protect and enforce InterTrust's rights to InterTrust Property and any other
InterTrust rights under this Agreement.
14.8 No Agency. Nothing herein contained shall be construed to constitute
---------
the Parties hereto as partners or joint venturers or the agent of another Party
in any sense of those terms whatsoever. Neither Party assumes any liability of
the other Party nor shall have any authority to enter into any binding
obligation on behalf of the other Party.
14.9 Recovery of Costs and Expenses. If any Party to this Agreement
------------------------------
brings an action against the other Party to enforce its rights under this
Agreement, the prevailing Party shall be entitled to recover its costs and
expenses, including without limitation, reasonable attorneys' fees and costs
incurred in connection with such action, including any appeal of such action.
14.10 Severability. If the application of any provision or provisions of
------------
this Agreement to any particular facts or circumstances shall be held to be
invalid or unenforceable by any court of competent jurisdiction, then: (i) the
validity and enforceability of such provision or provisions as applied to any
other particular facts or circumstances and the validity of other provisions of
this Agreement shall not in any way be affected or impaired thereby; and (ii)
such provision or provisions shall be reformed without further action by the
Parties hereto and only to the extent necessary to make such provision or
provisions valid and enforceable when applied to such particular facts and
circumstances.
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14.11 Counterparts; Facsimiles. This Agreement may be executed in any
------------------------
number of counterparts, each of which when so executed and delivered shall be
deemed an original, and such counterparts together shall constitute one and the
same instrument. Each Party shall receive a duplicate original of the
counterpart copy or copies executed by it. For purposes hereof, a facsimile copy
of this Agreement, including the signature pages hereto, shall be deemed to be
an original. Notwithstanding the foregoing, the Parties shall deliver original
execution copies of this Agreement to one another as soon as practicable
following execution thereof.
14.12 Force Majeure. If, by reason of labor dispute, strike, inability to
-------------
obtain labor or materials, fire or other action of the elements, accident,
administrative or governmental restriction or appropriation or other causes,
whether like or unlike the foregoing, beyond the reasonable control of a Party
hereto, such Party is unable to perform in whole or in part its obligations set
forth in this Agreement, then such Party shall be relieved of those obligations
to the extent it is so unable to perform, and such inability to perform, so
caused, shall not make such Party liable to the other Party. Notwithstanding the
foregoing, in the event any such cause delays either Party's performance of any
of its material obligations under this Agreement, the other Party may suspend
its performance under this Agreement for the period such delay continues. Except
in the case of application of this Section 14.12 due to the provisions of
Article 13 hereof, this Agreement may be terminated by notice by the Party not
seeking excuse from performance, if such event shall prevent performance for
longer than one hundred and twenty (120) days. The Party subject to an event of
force majeure shall use good faith efforts to comply as closely as possible with
the provisions of this Agreement and to avoid the effects of such event to the
extent possible.
14.13 English Translation. Any documents, materials, notices, products,
-------------------
royalty reports, agreements (including sublicense agreements), copies of
promotional materials or other information required to be provided to InterTrust
or for InterTrust's review and/or approval hereunder shall be provided in the
English language. Any and all translation costs in this regard shall be borne by
MBC.
14.14 Entire Agreement. This Agreement represents the entire agreement of
----------------
the Parties with respect to the subject matter hereof and supersedes all prior
and/or contemporaneous agreements and understandings, written or oral between
the Parties with respect to the subject matter hereof (except as set forth in
Section 9.6 hereof) including, without limitation, the MOU except such
provisions therein that survive in accordance with the terms thereof.
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<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of
the date first written above by the undersigned duly authorized.
INTERTRUST TECHNOLOGIES MITSUBISHI CORPORATION
CORPORATION
By:____________________________ By:____________________________
Name:__________________________ Name:__________________________
Title:_________________________ Title:_________________________
CONFIDENTIAL
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<PAGE>
Exhibit A to the Technology Development and License Agreement
INTERTRUST TECHNOLOGIES CORPORATION
SERIES B PREFERRED
STOCK PURCHASE AGREEMENT
October __, 1996
CONFIDENTIAL
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Purchase and Sale of Stock.......................................... 1
1.1 Sale and Issuance of Series B Preferred Stock................. 1
1.2 Closing....................................................... 1
1.3 Subsequent Sale of Series B Preferred Stock................... 1
2. Representations and Warranties of the Company....................... 1
2.1 Organization, Good Standing and Qualification................. 1
2.2 Capitalization and Voting Rights.............................. 2
2.3 Subsidiaries.................................................. 2
2.4 Authorization................................................. 2
2.5 Valid Issuance of Preferred and Common Stock.................. 3
2.6 Governmental Consents......................................... 3
2.7 Offering...................................................... 3
2.8 Litigation.................................................... 3
2.9 Patents and Other Intangible Assets........................... 4
2.10 No Violations; Compliance with Other Instruments.............. 4
2.11 Agreements; Action............................................ 4
2.12 Related-Party Transactions.................................... 5
2.13 Permits....................................................... 5
2.14 Financial Statements.......................................... 5
2.15 Taxes......................................................... 6
2.16 Employee Benefits............................................. 6
2.17 Proprietary Information and Inventions Assignment Agreements.. 6
3. Representations and Warranties of the Purchasers.................... 6
3.1 Authorization................................................. 6
3.2 Purchase Entirely for Own Account............................. 6
3.3 Disclosure of Information..................................... 7
3.4 Investment Experience......................................... 7
3.5 Accredited Purchaser.......................................... 7
3.6 Restricted Securities......................................... 7
3.7 Further Limitations on Disposition............................ 7
3.8 Legends....................................................... 7
4. Additional Covenants................................................ 8
4.1 Registration Rights............................................ 8
4.2 Restriction on Transfer; Right of First Refusal................ 18
4.3 Mergers and Other Extraordinary Transactions................... 19
4.4 Financial Information.......................................... 20
4.5 Confidentiality................................................ 20
</TABLE>
CONFIDENTIAL
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<PAGE>
<TABLE>
<S> <C>
5. California Commissioner of Corporations............................. 20
5.1 Corporate Securities Law...................................... 20
6. Conditions of Purchaser's Obligations at Closing.................... 21
6.1 Representations and Warranties................................ 21
6.2 Performance................................................... 21
6.3 Compliance Certificate........................................ 21
6.4 Qualifications................................................ 21
6.5 Proceedings and Documents..................................... 21
6.6 Opinion of Company Counsel.................................... 21
6.7 No Injunction................................................. 21
7. Conditions of the Company's Obligations at Closing.................. 22
7.1 Representations and Warranties................................ 22
7.2 Payment of Purchase Price..................................... 22
7.3 Qualifications................................................ 22
8. Miscellaneous....................................................... 22
8.1 Survival of Representations, Warranties and Covenants......... 22
8.2 Successors and Assigns........................................ 22
8.3 Governing Law................................................. 22
8.4 Counterparts.................................................. 22
8.5 Titles and Subtitles.......................................... 22
8.6 Notices....................................................... 23
8.7 Finder's Fee.................................................. 23
8.8 Amendments and Waivers........................................ 23
8.9 Entire Agreement.............................................. 24
8.10 Severability.................................................. 24
8.11 Aggregation of Stock.......................................... 24
8.12 No Third Party Beneficiaries.................................. 24
</TABLE>
CONFIDENTIAL
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<PAGE>
INTERTRUST TECHNOLOGIES CORPORATION
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES B PREFERRED STOCK PURCHASE AGREEMENT is made as of the ___
day of October 1996, by and between InterTrust Technologies Corporation, a
Delaware corporation (the "Company"), and the purchasers listed on Schedule A
----------
hereto, each of whom is herein referred to as a "Purchaser."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
--------------------------
1.1 Sale and Issuance of Series B Preferred Stock. Subject to the
---------------------------------------------
terms and conditions of this Agreement, each Purchaser agrees, severally, to
purchase at the Closing and the Company agrees to sell and issue to each
Purchaser at the Closing (as defined below) that number of shares of the
Company's Series B Preferred Stock set forth opposite each Purchaser's name on
Schedule A hereto at a purchase price of $8.57 per share, for an aggregate
- ----------
purchase price set forth on Schedule A.
----------
1.2 Closing. The purchase and sale of the Series B Preferred
-------
Stock shall take place at the offices of the Company at 460 Oakmead Parkway,
Sunnyvale, California 94086, concurrently with the execution and delivery of
this Agreement or at such other time and place as the Company and Purchasers
acquiring in the aggregate more than half the shares of Series B Preferred Stock
sold pursuant hereto mutually agree upon orally or in writing (which time and
place are designated the "Closing"). At the Closing the Company shall deliver
to each Purchaser a certificate representing the Series B Preferred Stock that
such Purchaser is purchasing against payment of the purchase price therefor by
check or wire transfer.
1.3 Subsequent Sale of Series B Preferred Stock. The Company may
-------------------------------------------
sell up to the balance of the authorized number of shares of Series B Preferred
Stock not sold at the Closing to such purchasers as it shall select, at a price
not less than $8.57 per share, in one or more subsequent closings.
2. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to each Purchaser that, except as set forth on a
Schedule of Exceptions (the "Schedule of Exceptions") attached hereto as Exhibit
-------
A, which exceptions shall be deemed to be representations and warranties as if
- -
made hereunder:
2.1 Organization, Good Standing and Qualification. The Company
---------------------------------------------
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business as now conducted. The Company is duly
qualified to transact business and is in good standing in each jurisdiction in
which the failure to so qualify would have a material adverse effect on its
financial condition, business, prospects or results of operations.
CONFIDENTIAL
<PAGE>
2.2 Capitalization and Voting Rights. The authorized capital of the
--------------------------------
Company consists, or will consist immediately prior to the Closing, of:
(a) Preferred Stock. 10,000,000 shares of Preferred Stock (the
---------------
"Preferred Stock"), 2,500,000 of which shares have been designated Series A
Preferred Stock (the "Series A Preferred Stock") and 1,399,575 of which shares
have been designated Series B Preferred Stock (the "Series B Preferred Stock").
1,983,333 shares of Series A Preferred Stock and 583,431 shares of Series B
Preferred Stock are issued and outstanding. The rights, privileges and
preferences of the Series A Preferred Stock are as stated in the Company's
Restated Certificate of Incorporation. The rights, privileges and preferences
of the Series B Preferred Stock are as stated in the Company's Certificate of
Designations, Preferences and Rights of Series B Preferred Stock (the
"Certificate of Designations, Preferences and Rights").
(b) Common Stock. 50,000,000 shares of Common Stock ("Common
------------
Stock), 30,000,000 of which are designated Class A Voting Common Stock, and
20,000,000 of which are designated Class B Non-Voting Common Stock. 6,384,059
shares of Class A Voting Common Stock are issued and outstanding. 391,170 shares
of Class B Non-Voting Common Stock are issued and outstanding.
(c) The outstanding shares of Common Stock and the outstanding
shares of Series A Preferred Stock are all duly and validly authorized and
issued, fully paid and nonassessable, and were issued in accordance with the
registration or qualification provisions of the Securities Act of 1933, as
amended (the "Act") and any relevant state securities laws or pursuant to valid
exemptions therefrom.
(d) Except for the conversion privileges of the Series A
Preferred Stock, the conversion privileges of the Series B Preferred Stock,
outstanding options issued to directors, employees and consultants to purchase
1,259,700 shares of Class A Voting Common Stock and 1,420,964 shares of Class B
Non-Voting Common Stock, warrants outstanding which are exercisable for 176,000
shares of Class A Voting Common Stock and 155,508 shares of Class B Non-Voting
Common Stock, there are no outstanding options, warrants, rights (including
conversion or, except as set forth on the Schedule of Exceptions, any preemptive
rights) or agreements for the purchase or acquisition from the Company of any
shares of its capital stock. In addition to the foregoing, the Company has
reserved 430,300 shares of its Class A Voting Common Stock for issuance upon
exercise of additional options to be granted under the Company's 1995 Stock
Plan. The Company is not a party or subject to any agreement or understanding,
and, to the best of the Company's knowledge, there is no agreement or
understanding between any persons and/or entities, which affects or relates to
the voting or giving of written consents with respect to any security or by a
director of the Company.
2.3 Subsidiaries. The Company does not presently own or control,
------------
directly or indirectly, any interest in any other corporation, association, or
other business entity. The Company is not a participant in any joint venture,
partnership, or similar arrangement.
2.4 Authorization. All corporate action on the part of the Company,
-------------
its officers, directors and stockholders necessary for the authorization,
execution and delivery of this
CONFIDENTIAL
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<PAGE>
Agreement, the performance of all obligations of the Company hereunder, and the
authorization, issuance (or reservation for issuance), sale and delivery of the
Series B Preferred Stock being sold hereunder and the Class A Voting Common
Stock issuable upon conversion of the Series B Preferred Stock has been taken or
will be taken prior to the Closing, and this Agreement constitutes a valid and
legally binding obligation of the Company, enforceable in accordance with its
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies.
2.5 Valid Issuance of Preferred and Common Stock. The Series B
--------------------------------------------
Preferred Stock that is being purchased by the Purchasers hereunder, when
issued, sold and delivered in accordance with the terms of this Agreement for
the consideration expressed herein, will be duly authorized and validly issued,
fully paid, and nonassessable, and will be free of restrictions on transfer
other than restrictions on transfer under this Agreement and under applicable
state and federal securities laws. The Class A Voting Common Stock issuable
upon conversion of the Series B Preferred Stock purchased under this Agreement
has been duly authorized and validly reserved for issuance and, upon issuance in
accordance with the terms of the Certificate of Designations, Preferences and
Rights, will be duly authorized and validly issued, fully paid, and
nonassessable and free of any liens or encumbrances created by the Company and
will be free of restrictions on transfer other than restrictions on transfer
under this Agreement and under applicable state and federal securities laws.
2.6 No Violation; Governmental Consents.
-----------------------------------
(a) The Company has complied with all federal, state, local and
foreign laws, regulations and orders applicable to its business except where the
failure to so comply would not have a material adverse effect on its financial
condition, business, prospects or results of operations. The execution, delivery
and performance of this Agreement and consummation of the transactions
contemplated hereby will not violate or be in conflict with any provision of
law, any order, rule or regulation of any court or other agency of government.
(b) No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement, except for the filing pursuant to Section 25102(f) of the
California Corporate Securities Law of 1968, as amended, and the rules
thereunder and the filing under Regulation D under the Act.
2.7 Offering. Subject in part to the truth and accuracy of each
--------
Purchaser's representations set forth in Section 3 of this Agreement, the offer,
sale and issuance of the Series B Preferred Stock as contemplated by this
Agreement are exempt from the registration requirements of the Act.
2.8 Litigation. Except as set forth on the Schedule of Exceptions,
----------
there is no action, suit, proceeding or investigation pending or, to the
knowledge of the Company, currently
CONFIDENTIAL
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<PAGE>
threatened against the Company that questions the validity of this Agreement or
the right of the Company to enter into this Agreement, or to consummate the
transactions contemplated hereby, or that would result, either individually or
in the aggregate, in any material adverse changes in the financial condition or
results of operations of the Company. The Company is not a party or subject to
the provisions of any order, writ, injunction, judgment or decree of any court
or government agency or instrumentality. There is no action, suit, proceeding or
investigation by the Company currently pending or that the Company intends to
initiate.
2.9 Patents and Other Intangible Assets. The Company owns all of its
-----------------------------------
granted, pending or common law rights in its patents, trademarks, tradenames and
copyrights. The Company has a license under any and all patents, patent
applications, trademarks, trade names, brand names, inventions, processes,
formulae or copyrights not owned by it to the extent that the Company knows to
be necessary for the operation of the business of the Company as now conducted
and as proposed to be conducted (the "Necessary Intellectual Property"). Without
having conducted any special infringement or patent search, except as set forth
on the Schedule of Exceptions the Company is unaware of any infringement of or
conflict with the rights of others with respect to the Necessary Intellectual
Property.
2.10 Compliance with Other Instruments. The Company is not in
---------------------------------
violation or default in any respect of any provision of its Restated Certificate
of Incorporation or Bylaws, or any instrument, judgment, order, writ, decree or
material contract to which it is a party or by which it is bound. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not result in any such violation or be in
conflict with or constitute, with or without the passage of time and giving of
notice, either a default under any such provision, instrument, judgment, order,
writ, decree or contract or an event that results in the creation of any lien,
charge or encumbrance upon any assets of the Company or the suspension,
revocation, impairment, forfeiture, or nonrenewal of any material permit,
license, authorization, or approval applicable to the Company, its business or
operations or any of its assets or properties.
2.11 Agreements; Action. Except as set forth in the Financial
------------------
Statements (defined below) and the Schedule of Exceptions:
(a) There are no instruments, judgments, orders, writs, decrees
or contracts to which the Company is a party or by which it is bound that may
involve (i) obligations (contingent or otherwise) of, or payments to the Company
in excess of $50,000, or (ii) the license of any patent, copyright, trade secret
or other proprietary right to or from the Company, or (iii) provisions
restricting the development or distribution of the Company's products or
services.
(b) The Company has not (i) declared or paid any dividends or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred or guaranteed any indebtedness for money
borrowed individually in excess of $50,000 or, in the case of indebtedness
and/or liabilities individually less than $50,000, in excess of $100,000 in the
aggregate, (iii) made any loans or advances in excess of $10,000 to any
CONFIDENTIAL
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<PAGE>
person, other than ordinary advances for travel expenses, or (iv) sold,
exchanged or otherwise disposed of any of its assets or rights.
(c) For the purposes of subsections (a) and (b) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
2.12 Related-Party Transactions. Except as set forth in the Schedule
--------------------------
of Exceptions, no officer or director of the Company or member of his or her
immediate family is indebted to the Company, nor is the Company indebted (or
committed to make loans or extend or guarantee credit) to any of them. To the
best of the Company's knowledge, none of such persons has any direct or indirect
ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation that competes with the Company, except that officers or directors of
the Company and members of their immediate families may own stock in publicly
traded companies that may compete with the Company. No member of the immediate
family of any officer or director of the Company is directly or indirectly
interested in any material contract with the Company.
2.13 Permits. The Company has all franchises, permits, licenses, and
-------
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
financial condition or results of operations of the Company, and the Company
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as planned to be conducted. The Company is not
in default in any material respect under any of such franchises, permits,
licenses, or other similar authority.
2.14 Financial Statements. The Company has furnished to each
--------------------
Purchaser its audited balance sheet and related statements of operations,
stockholders' equity and cash flows for the years ended December 31, 1994 and
1995 and its unaudited balance sheet and related unaudited statements of
operations, stockholders' equity and cash flows for the quarters ended March 31,
1996 and June 30, 1996 (the "Financial Statements"). The Financial Statements
have been prepared in accordance with generally accepted accounting principles
(except for the omission of footnotes, and subject to year-end adjustments as
may be required under generally accepted accounting principles in the case of
the unaudited statements) and fairly present the financial position of the
Company as of the date thereof and the results of its operations and cash flows
for the period then ended. Except as disclosed or provided for in the balance
sheets as of December 31, 1995 or June 30, 1996 or in the Schedule of
Exceptions, there are no material liabilities of the Company of any kind
whatsoever, whether accrued, contingent or otherwise, other than liabilities
incurred in the ordinary course of business consistent with past practice since
the date of such balance sheets. Since June 30, 1996, there has not been any
material adverse change in the financial position or the earnings or operations
of the Company.
CONFIDENTIAL
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<PAGE>
2.15 Taxes. The Company has prepared and timely filed all income tax
-----
returns and other material tax returns which are required to be filed, and has
paid, or made provision for the payment of, all taxes which have or may have
become due pursuant to said returns or pursuant to any assessment which has been
received by it. No federal or state income or sales tax returns of the Company
have been audited, and no deficiency assessment or proposed adjustment of the
Company's United States income tax, state or municipal taxes or sales taxes is
pending.
2.16 Employee Benefit Plans. Except as set forth in the Schedule of
----------------------
Exceptions, the Company does not have any "Employee Benefit Plan" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). No officer, director or employee of the Company has committed a
material breach of any responsibility or obligation imposed upon fiduciaries by
Title I of ERISA with respect to any Employee Benefit Plan. Each Employee
Benefit Plan has at all times prior hereto been maintained in accordance with
its terms and all applicable laws, except where the failure to do so would not
have a material adverse effect upon the Company. With respect to each Employee
Benefit Plan, other than ordinary claims for benefits pursuant to the terms of
such plan, there is no claim pending or, to its knowledge, threatened against or
involving such plan by any person or governmental authority.
2.17 Proprietary Information and Inventions Assignment Agreements.
------------------------------------------------------------
Each employee, officer and consultant of the Company has executed a Company
Proprietary Information and Inventions Assignment Agreement. The Company is not
aware that any of its employees, officers or consultants are in violation
thereof.
3. Representations and Warranties of the Purchasers. Each Purchaser
------------------------------------------------
hereby represents and warrants, severally, that:
3.1 Authorization. Such Purchaser has full power and authority to
-------------
enter into this Agreement and each such Agreement constitutes its valid and
legally binding obligation, enforceable in accordance with its terms, except as
limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium,
and other laws of general application affecting enforcement of creditors' rights
generally, and (ii) laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies.
3.2 Purchase Entirely for Own Account. This Agreement is made with
---------------------------------
such Purchaser in reliance upon such Purchaser's representation to the Company,
which by such Purchaser's execution of this Agreement such Purchaser hereby
confirms, that the Series B Preferred Stock to be received by such Purchaser and
the Class A Voting Common Stock issuable upon conversion thereof (collectively,
the "Securities") will be acquired for investment for such Purchaser's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that such Purchaser has no present
intention of selling, granting any participation in, or otherwise distributing
the same. By executing this Agreement, such Purchaser further represents that
such Purchaser does not have any contract, undertaking,
CONFIDENTIAL
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<PAGE>
agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to any of the
Securities.
3.3 Disclosure of Information. Such Purchaser represents that it has
-------------------------
received all the information it considers necessary or appropriate for deciding
whether to purchase the Series B Preferred Stock. Such Purchaser further
represents that it has had an opportunity to ask questions and receive answers
from the Company regarding the terms and conditions of the offering of the
Series B Preferred Stock and the business, properties, prospects, financial
condition and results of operations of the Company.
3.4 Investment Experience. Such Purchaser is an investor in
---------------------
securities of companies in the development stage and acknowledges that he is
able to fend for himself, can bear the economic risk of his investment, and has
such knowledge and experience in financial or business matters that he is
capable of evaluating the merits and risks of the investment in the Series B
Preferred Stock. If other than an individual, Purchaser also represents either
(i) that it has not been organized for the purpose of acquiring the Series B
Preferred Stock or (ii) that if such Purchaser has been organized for the
purpose of acquiring the Series B Preferred Stock, that each of the equity
owners of such Purchaser is an investor of companies in the development stage
who is able to fend for himself, bear the economic risk of his investment in the
Purchaser and has such knowledge and experience in financial or business matters
that he is capable of evaluating the merits and risks of his investment in such
Purchaser.
3.5 Accredited Investor. Such Purchaser is an "accredited investor"
-------------------
within the meaning of Securities and Exchange Commission ("SEC") Rule 501 of
Regulation D under the Act, as presently in effect.
3.6 Restricted Securities. Such Purchaser understands that the
---------------------
Securities are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such Securities may be resold without registration under
the Act only in certain limited circumstances. In this connection, such
Purchaser represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the Act.
3.7 Further Limitations on Disposition. Without in any way limiting
----------------------------------
the representations set forth above, such Purchaser further agrees not to make
any disposition of all or any portion of the Securities unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 3 and:
(a) There is then in effect a registration statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) Such Purchaser shall have notified the Company of the
proposed disposition and shall have furnished the Company, if reasonably
requested by the Company, with
CONFIDENTIAL
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<PAGE>
an opinion of counsel, reasonably satisfactory to the Company that such
disposition will not require registration of such shares under the Act.
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by a Purchaser that is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the date
hereof, or to a shareholder of an investment corporation, or to the estate of
any such partner or retired partner or shareholder or the transfer by gift, will
or intestate succession of any such partner or shareholder to his or her spouse
or to the siblings, lineal descendants or ancestors of such partner or
shareholder or his or her spouse, if the transferee agrees in writing to be
subject to the terms hereof to the same extent as if he or she were an original
Purchaser hereunder.
3.8 Legends. It is understood that the certificates evidencing the
-------
Securities may bear one or all of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not required or unless
sold pursuant to Rule 144 of such Act."
(b) "The sale or transfer of these securities is restricted under
the terms of a Series B Preferred Stock Purchase Agreement dated as of October
__, 1996 between the Company and the purchasers listed on Schedule A thereto, a
copy of which agreement is on file at the principal office of the Company."
(c) Any legend required by the laws of the State of California,
including any legend required by the California Department of Corporations and
Sections 417 and 418 of the California Corporations Code.
4. Additional Covenants.
--------------------
4.1 Registration Rights.
-------------------
(a) Definitions. The following terms shall have the following
-----------
respective meanings:
(i) "Expenses of Registration" shall have the meaning
specified in Section 4.1(e).
(ii) "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
CONFIDENTIAL
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<PAGE>
(iii) "Holder" or "Holders" means any holder of
outstanding Registrable Securities.
(iv) "Holder or Holders of Series A Registrable
Securities" means any holder of outstanding Series A Registrable Securities.
(v) "Holder or Holders of Series B Registrable
Securities" means any holder of outstanding Series B Registrable Securities.
(vi) "Initiating Holders" means any Holder or Holders who
individually or in the aggregate hold not less than 25% of the Registrable
Securities.
(vii) "Initial Public Offering" means the Company's sale
of its Common Stock in a bona fide underwriting pursuant to a registration
statement under the Act, the public offering price of which is not less than
$7.50 per share (as adjusted for stock dividends, stock splits or
recapitalizations) and for an aggregate offering price, net of underwriters'
discounts and commissions, of more than $10,000,000.
(viii) "Lead Series A Investor" means ATGF II, a fund
organized under the laws of Panama, its affiliates, or its transferees permitted
under Section 4.1(i) of the Series A Preferred Stock Agreement.
(ix) "register", "registered" and "registration" refer
to a registration effected by preparing and filing a registration statement in
compliance with the Act, and the declaration or ordering of the effectiveness of
such registration statement.
(x) "Other Series Registrable Securities" means the
Registrable Securities described in clauses (ii) and (iii) of the definition of
Registrable Securities in Section 4.1(a)(xi).
(xi) "Registrable Securities" means (i) the shares of
Class A Voting Common Stock issuable or issued upon conversion of the
outstanding Series A Preferred Stock and any other shares of the Common Stock
issued as (or issuable upon conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to or exchange for or replacement of, the outstanding Series A Preferred Stock,
(ii) the shares of Class A Voting Common Stock issuable or issued upon
conversion of the outstanding Series B Preferred Stock and any other share of
the Common Stock issued as (or issuable upon conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to or exchange for or replacement of the outstanding
Series B Preferred Stock, and (iii) the shares of the Common Stock issuable or
issued upon conversion of any series of Preferred Stock that may from time to
time come into existence as to which the Company may grant rights to have such
shares of the Common Stock registered and any other shares of the Common Stock
issued as (or issuable upon conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to or exchange for or replacement of such series of Preferred Stock, excluding
in all cases, however, any Registrable Securities sold by a person in a
transaction in which a Holder's rights under this
CONFIDENTIAL
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<PAGE>
Agreement, under the Series A Preferred Stock Agreement or under the
agreement(s) pursuant to which any series of Preferred Stock that may from time
to time come into existence may be purchased are not assigned; provided,
--------
however, that Registrable Securities shall only be treated as Registrable
- -------
Securities if, and so long as, they have not been (A) sold to or through a
broker or dealer or underwriter in a public distribution or a public securities
transaction, or (B) sold in a transaction exempt from the registration and
prospectus delivery requirements of the Act under Section 4(1) thereof so that
all transfer restrictions and restrictive legends with respect thereto may
legally be removed upon the consummation of such sale.
(xii) "Series A Preferred Stock Agreement" means that
certain Series A Preferred Stock Purchase Agreement dated March 15, 1996 between
the Company and the purchasers listed on Schedule A thereto and all amendments
and supplements thereto.
(xiii) "Series A Registrable Securities" means the
Registrable Securities described in clause (i) of the definition of Registrable
Securities in Section 4.1(a)(xi) hereof.
(xiv) "Series B Registrable Securities" means the
Registrable Securities described in clause (ii) of the definition of Registrable
Securities in Section 4.1(a)(xi) hereof.
(b) Demand Registration.
-------------------
(i) Request for Registration. In case the Company shall
------------------------
receive from Initiating Holders a written request (the "Request") that the
Company effect any registration with respect to not less than 25% of the
Registrable Securities then outstanding, or any lesser percentage of Registrable
Securities if the anticipated aggregate offering price, net of underwriters'
discounts and commissions, would exceed $3,000,000, the Company will
(1) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders in accordance
with Section 8.6; and
(2) as soon as practicable, use its reasonable efforts
to effect such registration (including, without limitation, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Act and any
other governmental requirements or regulations) as may be so requested and as
would permit or facilitate the sale and distribution of all or such portion of
such Registrable Securities as are specified in the Request, together with all
or such portion of the Registrable Securities of any Holder or Holders joining
in the Request as are specified in a written notice received by the Company
within twenty (20) days after such Holder's receipt of written notice provided
by the Company pursuant to Section 4.1(b)(i)(1); provided, however, that the
Company shall not be obligated to take any action to effect any such
registration pursuant to this Section 4.1(b):
A. In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such
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registration unless the Company is already subject to service in such
jurisdiction and except as may be required by the Act;
B. Prior to 270 days following the effective
date of the Initial Public Offering;
C. During the period starting with the date of
filing of, and ending on the date 180 days immediately following the effective
date of, any general form of registration statement pertaining to sale by the
Company of Common Stock or securities which are immediately convertible at the
option of the holder or convertible within twelve (12) months from the date of
issuance into Common Stock, provided that the Company is actively employing in
good faith all reasonable efforts to cause such registration statement to become
effective;
D. After the Company has effected one (1) such
registration pursuant to this Section 4.1(b) provided that if the first
--------
registration pursuant to this Section 4.1(b) shall be underwritten and if less
than 50% of the Series B Registrable Securities then outstanding held by the
Initiating Holder and all Holders who join in the Request in the manner, and at
the time, specified in Section 4.1(b)(i)(2) shall be, or shall have been,
included in such underwriting and in any underwriting described in Section
4.1(c)(ii) which has been consummated prior to the date of such underwriting,
then the Company shall be obligated to effect an additional registration
pursuant to this Section 4.1(b); or
E. If the Company shall furnish to such
Initiating Holders a certificate signed by the Chief Executive Officer of the
Company stating that in the good faith judgment of the Company's Board of
Directors it would be seriously detrimental to the Company or its stockholders
for a registration statement to be filed at the date filing would be required,
in which case the Company's obligation to use its reasonable efforts to register
under this Section 4.1(b) shall be deferred for a period not to exceed 120 days
from the date of receipt of the Request, provided that the Company may not
exercise this deferral right more than once during any twelve (12) month period.
(ii) Underwriting. If any registration pursuant to Section
------------
4.1(b) shall be underwritten, the right of any Holder to registration pursuant
to Section 4.1(b) shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in such
underwriting as prescribed herein (unless otherwise mutually agreed by a
majority in interest of the Initiating Holders and each such Holder). The
Company shall (together with all Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected by the Company for such
underwriting (the "Managing Underwriter"). Notwithstanding any other provision
of this Section 4.1(b), if the Managing Underwriter advises the Initiating
Holders or the Company in writing that the number of Registrable Securities
proposed to be registered by such Initiating Holder or Holders exceeds the
maximum number of such shares which the Managing Underwriter considers, in good
faith, to be appropriate based upon market conditions and other relevant factors
(the "Maximum Number"), then (1) the
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Company shall so advise all Holders, (2) the Lead Series A Investor shall be
entitled to include Registrable Securities in such underwriting up to the
Maximum Number, (3) if the Lead Series A Investor elects to include in such
underwriting a number of its Registrable Securities which is less than the
Maximum Number (the "Series A Portion"), the Initiating Holders of Series A
Registrable Securities (if different than the Lead Series A Investor) and those
Holders of Series A Registrable Securities (other than the Lead Series A
Investor) joining in the Request shall be entitled to include in such
underwriting their pro-rata share of Series A Registrable Securities up to that
number of shares equal to the difference between the Maximum Number and the
Series A Portion and (4) if the Holders of Series A Registrable Securities
(including the Lead Series A Investor) elect to include in such underwriting a
number of their Registrable Securities which is less than the Maximum Number,
the Holders of Other Series Registrable Securities joining in the Request shall
be entitled to include in such underwriting their pro-rata share of Other Series
Registrable Securities up to that number of shares equal to the difference
between the Maximum Number and the total number of shares that the Holders of
Series A Registrable Securities (including the Lead Series A Investor) elect to
include in such underwriting. For purposes of the preceding sentence, (x) a
Holder's "pro-rata share of Series A Registrable Securities" shall mean the
quotient obtained by dividing the number of Series A Registrable Securities held
by such Holder by the sum of all of the Series A Registrable Securities held by
the Initiating Holders (if different than the Lead Series A Investor) and those
Holders of Series A Registrable Securities (other than the Lead Series A
Investor) joining in the Request and (y) a Holder's "pro-rata share of the Other
Series Registrable Securities" shall mean the quotient obtained by dividing the
number of Other Series Registrable Securities held by such Holder by the sum of
all of the Other Series Registrable Securities held by the Initiating Holders
and those Holders of Other Series Registrable Securities joining in the Request.
No Registrable Securities excluded from the underwriting by reason of the
Managing Underwriter's marketing limitation shall be included in such
underwriting. To facilitate the allocation of shares in accordance with the
above provisions, the Company or the underwriters may round the number of shares
allocated to any Holder to the nearest 100 shares. If any Holder declines to
participate upon review of the terms of the underwriting, such Holder may elect
to withdraw therefrom by written notice to the Company, the Managing Underwriter
and the Initiating Holders. The Registrable Securities and/or other securities
so withdrawn shall also be withdrawn from registration, and such Registrable
Securities shall not be transferred in a public distribution prior to 180 days
after the effective date of such registration, or such other shorter period of
time as the underwriters may require. If the underwriter has not limited the
number of Registrable Securities to be underwritten, or if Holders have elected
to include less than the Maximum Number in such underwriting, the Company may
include securities for its own account (or for the account of other
stockholders) in such registration if the Managing Underwriter so agrees and if
the number of Registrable Securities that would otherwise have been included in
such registration and underwriting will not thereby be limited.
(iii) The Company shall pay the Expenses of Registration for
one (1) registration requested pursuant to this Section 4.1(b). Notwithstanding
the immediately preceding sentence, in the event that the Company is obligated
to effect an additional registration pursuant to the proviso to Section
4.1(b)(2)(D), then the Company shall pay the Expenses of Registration for two
(2) registrations requested pursuant to this Section 4.1(b).
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(c) Company Registration.
--------------------
(i) Notice of Registration. If (but without any obligation
----------------------
to do so) at any time after the Initial Public Offering the Company proposes to
register any of its Common Stock or other securities under the Act in connection
with the public offering of such securities solely for cash (other than a
registration relating either to the sale of securities to participants in a
Company stock option, stock purchase or similar plan or to an SEC Rule 145
transaction, or a registration on Form S-8, Form S-4 or any successors to such
forms, the Company shall, at such time, promptly give each Holder written notice
of such registration. Upon the written request of any Holder given within twenty
(20) days from receipt of such notice by the Company in accordance with Section
8.6, the Company shall, subject to the provisions of Section 4.1(c)(ii) and
4.1(d), cause to be registered under the Act all of the Registrable Securities
that each such Holder has requested to be registered.
(ii) Underwriting Requirements. In connection with any
-------------------------
offering pursuant to this Section 4.1(c), the Company shall not be required to
include any of the Holders' securities in such underwriting unless they accept
the terms of the underwriting as agreed upon between the Company and the
underwriters selected by it, and then only in such quantity as will not, in the
opinion of the underwriters, adversely affect the success of the offering by the
Company. If the total amount of securities, including Registrable Securities,
requested by stockholders to be included in such offering exceeds the amount of
securities sold other than by the Company that the underwriters reasonably
believe would not adversely affect the success of the offering, then the Company
shall be required to include in the offering only that number of such
securities, including Registrable Securities, which the underwriters believe
will not adversely affect the success of the offering (the securities so
included to be apportioned first to the Company, then second pro rata among the
selling Holders of Series A Registrable Securities according to the total amount
of Series A Registrable Securities owned by each selling Holder, then third pro
rata among the selling Holders of Other Series Registrable Securities according
to the total amount of Other Series Registrable Securities owned by each selling
Holder and then fourth to all other selling stockholders, or in such other
proportions as shall mutually be agreed to by all such parties), it being
understood that all Registrable Securities may be excluded from the registration
on this basis. For any selling stockholder which is a holder of Registrable
Securities and which is a partnership or corporation, the partners, retired
partners and stockholders of such holder, or the estates and family members of
any such partners and retired partners and any trusts for the benefit of any of
the foregoing persons shall be deemed to be a single "selling stockholder," and
any pro rata reduction with respect to such "selling stockholder" shall be based
upon the aggregate amount of Registrable Securities owned by all entities and
individuals included in such "selling stockholder," as defined in this sentence.
(iii) The Company shall pay the Expenses of Registration for
two (2) registrations requested pursuant to this Section 4.1(c).
(d) Furnish Information. It shall be a condition precedent to
-------------------
the obligations of the Company to take any action pursuant to this Section 4.1
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such
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information regarding itself, the Registrable Securities held by it, and the
intended method of disposition of such securities as shall be required to effect
the registration of such Holder's Registrable Securities.
(e) Expenses of Registration. The term "Expenses of
------------------------
Registration" means all expenses other than underwriting discounts and
commissions incurred in connection with registrations, filings or qualifications
pursuant to this Section 4.1, including (without limitation), all registration,
filing and qualification fees, printers and accounting fees, fees and
disbursements of counsel for the Company. Expenses of Registration does not
include the fees and disbursements of counsel for the selling Holders.
(f) No Delay of Registration. No Holder shall have any right to
------------------------
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 4.1.
(g) Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under this Section 4.1:
(i) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder of Series B Registrable Securities, any
underwriter (as defined in the Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the Act or the
Securities Exchange Act of 1934, as amended (the "1934 Act"), against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) that arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
of a material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Act, the 1934 Act, any state securities law or any rule or
regulation promulgated under the Act, the 1934 Act or any state securities law;
and the Company will pay, as incurred, to each such Holder, underwriter or
controlling person, to the extent (and only to the extent) that such losses,
claims, damages, or liabilities arise out of a Violation, any legal or other
expenses reasonably incurred by any person intended to be indemnified pursuant
to this Section 4.1(g) in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section 4.1(g) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company, nor shall the Company
be liable in any such case for any such loss, claim, damage, liability, or
action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any such Holder,
underwriter or controlling person.
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<PAGE>
(ii) To the extent permitted by law, each selling Holder of
Series B Registrable Securities will indemnify and hold harmless the Company,
each of its directors, each of its officers who has signed the registration
statement, each person, if any, who controls the Company within the meaning of
the Act, any underwriter, any other Holder selling securities in such
registration statement and any controlling person of any such underwriter or
other Holder, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the
Act, the 1934 Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with information
furnished by such Holder expressly for use in connection with such registration;
and each such Holder will pay, as incurred, any legal or other expenses
reasonably incurred by any person intended to be indemnified pursuant to this
Section 4.1(g)(ii), in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section 4.1(g)(ii) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder. Nothing contained in
this Section 4.1(g)(ii) is intended to preclude the underwriters in any offering
from requiring broader indemnities from the Holders participating in such
offering.
(iii) Promptly after receipt by an indemnified party under
this Section 4.1 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 4.1, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain separate counsel of its own, with the reasonable fees
and expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding; provided further that the indemnifying party shall not be
responsible for the fees and expenses of more than one separate counsel for all
indemnified parties. The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action, if
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
4.1 (to the extent of such prejudicial effect), but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 4.1.
(iv) No indemnifying party, in the defense of any claim
arising out of a Violation shall, except with the consent of each indemnified
party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation and, in the event the terms of such judgment or
settlement include any term other than the payment by the indemnifying party of
money
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<PAGE>
damages, the indemnifying party shall not so consent or enter into such a
settlement without the consent of each indemnified party (which will not be
unreasonably withheld) whether or not the terms thereof include such a release.
(v) The obligations of the Company and Holders under this
Section 4.1 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 4.1, and otherwise.
(h) Form S-3 Registration. In case the Company shall receive
---------------------
from any Holder or Holders a written request that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:
(i) Promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders;
and
(ii) As soon as practicable, effect such registration and
all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in a written request
given within twenty (20) days after receipt of such written notice from the
Company in accordance with Section 8.6; provided, however, that the Company
shall not be obligated to effect any such registration, qualification or
compliance, pursuant to this Section 4.1(h):
(1) If Form S-3 is not available for such offering by
the Holders;
(2) Unless the Holders, together with the holders of
any other securities of the Company entitled to inclusion in such registration,
propose to sell either (x) Registrable Securities having an aggregate price to
the public (net of any underwriters' discounts and commissions) in excess of
$2,000,000; or (y) not less than 15% of the Registrable Securities then
outstanding;
(3) If the Company shall furnish to the Holders a
certificate signed by the Chief Executive Officer of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company for such Form S-3 registration to be
effected at such time, in which event the Company shall have the right to defer
the filing of the Form S-3 registration statement for a period of not more than
120 days after receipt of the request of the Holder or Holders under this
Section 4.1(h); provided, however, that the Company shall not utilize this right
more than once in any twelve (12) month period;
(4) If the Company has completed its Initial Public
Offering within 180 days of the Company's receipt of the request for the Form S-
3 registration; or
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<PAGE>
(5) In any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.
(iii) Notwithstanding anything to the contrary herein, the
Company shall not be obligated to effect more than two (2) registrations
pursuant to this Section 4.1(h), and no more than one (1) such registration in
any twelve (12) month period.
(iv) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. The Company shall pay the Expenses of
Registration for two (2) registrations requested pursuant to this Section
4.1(h). Registrations effected pursuant to this Section 4.1(h) shall not be
counted as registrations effected pursuant to Sections 4.1 (b) or (c).
(i) Assignment of Registration Rights. The rights to cause the
---------------------------------
Company to register Registrable Securities pursuant to this Section 4.1 may only
be assigned by a Holder to a transferee who acquires all of such Holder's
shares, provided the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee; and
provided, further, that such assignment shall be effective only if immediately
following such transfer the further disposition of such securities by the
transferee or assignee is restricted under the Act.
(j) "Market Stand-Off" Agreement. Each Purchaser hereby agrees
---------------------------
that during the 180 day period following the effective date of each of (i) a
registration statement of the Company filed under the Act in connection with the
Initial Public Offering and (ii) the registration statement filed under the Act
with respect to an underwritten offering of Common Stock (or securities which
are immediately convertible at the option of the holder or convertible within
twelve (12) months from the date of issuance into Common Stock) after the
Initial Public Offering, it shall not sell, offer to sell, or otherwise transfer
or dispose of any capital stock of the Company held by it at any time during
such period except to the extent such Purchaser participates as a selling
stockholder in such registrations. To enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to the Registrable
Securities of the Purchaser (and the shares or securities of every other person
subject to the foregoing restriction) until the end of such period. Each Holder
agrees to execute the form of such market stand-off agreement as may be
reasonably requested by the underwriters.
(k) Termination or Amendment of Registration Rights. The
-----------------------------------------------
registration rights granted under this Section 4.1 may be terminated, waived or
amended with the written consent of the Company and the Holders of 66% of the
Series B Registrable Securities then outstanding. In addition, no Holder of
Series B Registrable Securities shall be entitled to exercise any right provided
for in this Agreement (a) after four (4) years following the closing of the
Initial Public Offering or (b) at such time following the Initial Public
Offering and for so long as such Holder may sell all of such Holder's Series B
Registrable Securities in any ninety (90) day period pursuant to Rule 144(k) (or
such successor rule as may be adopted).
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(l) Registration Rights of Holders of Series A Registrable
------------------------------------------------------
Securities. The rights granted to the Holders of Series B Registrable Securities
- ----------
in Sections 4.1(b), 4.1(c) and 4.1(h) of this Agreement to have Series B
Registrable Securities owned by them registered shall be subject to the rights
granted to the Holders of Series A Registrable Securities in Sections 4.1(b),
4.1(c) and 4.1(h) of the Series A Preferred Stock Agreement to have Series A
Registrable Securities owned by them registered.
4.2 Restriction on Transfer; Right of First Refusal.
-----------------------------------------------
(a) Restriction on Transfer. Neither any Purchaser nor any
-----------------------
transferee of any Purchaser shall sell or transfer in any manner any shares of
Series B Preferred Stock purchased hereunder (or any shares of the Class A
Voting Common Stock into which such shares of Series B Preferred Stock may be
converted) to any person or entity engaged in, or reasonably anticipated by the
Company to become engaged in, the business of providing electronic commerce
solutions or related technology (a "Restricted Party"). A Purchaser or any
transferee of any Purchaser may request that the Company waive the restriction
on the sale or transfer of shares described in the preceding sentence to a
Restricted Party as to a particular, proposed sale or transfer, but the Company
shall have no obligation to waive such restriction on the sale or transfer of
any such shares to any Restricted Party.
(b) Right of First Refusal. In the event, at any time after the
----------------------
date of this Agreement, any Purchaser or its transferee desires to sell or
transfer in any manner any shares of Series B Preferred Stock purchased
hereunder (or any shares of the Class A Voting Common Stock into which such
shares of Series B Preferred Stock have been converted) to a person or entity
which is not a Restricted Party, it shall first offer such shares for sale to
the Company at substantially the same price, and upon substantially the same
terms (or terms as similar as reasonably possible) upon which it is proposing or
is to dispose of such shares; provided that a Purchaser may transfer all or part
of its shares of Series B Preferred Stock (or any shares of the Class A Voting
Common Stock into which such shares of Series B Preferred Stock have been
converted) to a corporation or other entity which is not a Restricted Party and
not less than fifty-one (51%) percent of whose outstanding capital stock or
other equity interests is owned beneficially and of record by the Purchaser
without first making such offer to the Company. Said right of first refusal
shall be provided to the Company for a period of fifteen (15) days following
receipt by the Company of written notice (the "Proposed Transfer Notice") by the
Purchaser of the terms and conditions of said proposed sale or transfer and the
name, address and phone number of each proposed buyer or transferee. The Company
may exercise such right of first refusal as to all, or some portion which is
less than all, of the shares proposed to be transferred by notifying the
Purchaser in writing within such fifteen day period, and paying such Purchaser
within thirty (30) days following receipt by the Company of the Proposed
Transfer Notice the relevant consideration therefor. If the Company and its
assigns do not complete the purchase of shares of Series B Preferred Stock (or
any shares of the Class A Voting Common Stock into which such shares of Series B
Preferred Stock have been converted) identified in the Proposed Transfer Notice
within thirty (30) days following receipt by the Company of the Proposed
Transfer Notice, the Purchaser may sell or transfer such shares in accordance
with the terms and conditions set forth in the Proposed Transfer Notice to the
person or entity identified
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in the Proposed Transfer Notice. If the Purchaser desires to sell or transfer in
any manner such shares either (i) upon terms and conditions which are different
than those specified in the Proposed Transfer Notice or to a person or entity
other than the person or entity identified in the Proposed Transfer Notice or
(ii) more than sixty (60) days after the Company's receipt of the Proposed
Transfer Notice, then the Purchaser shall comply with the provisions of this
Section 4.2(b) again prior to effecting any such sale or transfer.
(c) Assignment. The Company may assign the rights granted to it
----------
pursuant to this Section 4.2 in whole or in part to any stockholder or
stockholders of the Company or other persons or organizations.
(d) Restrictions Binding on Transferees. All transferees of
-----------------------------------
shares purchased pursuant to this Agreement, shares of the Class A Voting Common
Stock issued upon the conversion of such shares or any interest therein will
receive and hold such shares or interest subject to the provisions of this
Section 4.2.
(e) Termination of Right of First Refusal. The right of first
-------------------------------------
refusal granted the Company in Section 4.2(b) shall terminate upon consummation
of the Initial Public Offering, with such termination retroactive to the
effectiveness of the registration statement relating to the Initial Public
Offering.
4.3 Mergers and Other Extraordinary Transactions.
--------------------------------------------
(a) Agreement. Each Purchaser shall either (i) take all actions
---------
necessary to vote all shares of the Series B Preferred Stock (and all shares of
the Class A Voting Common Stock into which such shares of Series B Preferred
Stock may be converted) owned or held of record by such Purchaser at any annual
or special meeting of the Company (or by written consent in lieu of such
meeting) held for the approval of any merger, consolidation or sale or exchange
of all or substantially all of the Company's assets which has been approved by
the Board of Directors in favor of any such merger, consolidation or sale or
exchange of all or substantially all of the Company's assets and all
transactions and other matters incident thereto or (ii) refrain from taking any
action with respect to any merger, consolidation or sale or exchange of all or
substantially all of the Company's assets which has been approved by each of the
Board of Directors and the majority of the outstanding stock of the Company
entitled to vote thereon which prevents, restricts or otherwise inhibits such
merger, consolidation or sale or exchange of all or substantially all of the
Company's assets from being accorded pooling accounting treatment. Without
limiting the generality of clause (ii) of the preceding sentence, the Purchaser
agrees to refrain from asserting any appraisal rights that it may have as a
consequence of any transaction described in the immediately preceding sentence
if such assertion of appraisal rights would prevent, restrict or otherwise
inhibit such transaction from being accorded pooling accounting treatment.
(b) Agreement Binding on Transferees. All transferees of shares
--------------------------------
purchased pursuant to this Agreement, shares of the Class A Voting Common Stock
issued upon the conversion of such shares or any interest therein will receive
and hold such shares or interest subject to the provisions of this Section 4.3.
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(c) Termination of Agreement. The agreement of this Section 4.3
------------------------
shall terminate at the earlier of (i) consummation of the Initial Public
Offering or (ii) ten (10) years from the Closing Date.
4.4 Financial Information.
---------------------
(a) Annual and Quarterly Information. The Company will mail the
--------------------------------
following reports to each Purchaser for so long as such Purchaser is a holder
(or such Purchaser and a Permitted Fund Transferee or Transferees are the
collective holders) of at least eighty (80%) percent of shares of Series B
Preferred Stock purchased by such person hereunder (or shares of Class A Voting
Common Stock issued upon conversion of shares of Series B Preferred Stock):
(i) As soon as practicable after the end of each fiscal
year, and in any event within 120 days thereafter, audited consolidated balance
sheets of the Company and its subsidiaries, if any, as of the end of such fiscal
year, and consolidated statements of income, consolidated statements of changes
in financial position and consolidated statements of stockholders' equity of the
Company and its subsidiaries, if any, for such year, prepared in accordance with
generally accepted accounting principles ("GAAP") and setting forth in each case
in comparative form the figures for the previous fiscal year; and
(ii) As soon as practicable after the end of each fiscal
quarter in each fiscal year of the Company and in any event within 60 days
thereafter, an unaudited consolidated balance sheet of the Company and its
subsidiaries, if any, as of the end of each such quarter, and unaudited
consolidated statements of income, unaudited consolidated statements of cash
flow and unaudited consolidated statements of stockholders' equity of the
Company and its subsidiaries, if any, for such period and for the current fiscal
year to date, prepared in accordance with GAAP (subject to normal year-end audit
adjustments).
(b) Termination of Covenants. The covenants set forth in this
------------------------
Section 4.4 shall terminate upon consummation of the Initial Public Offering,
with such termination retroactive to the effectiveness of the registration
statement relating to the Initial Public Offering.
4.5 Confidentiality. Each Purchaser shall maintain in strictest
---------------
confidence all financial information furnished to it by the Company pursuant to
Section 4.4 or otherwise and shall not use any of such financial information for
any purpose other than monitoring its equity investment in the Company. All
transferees of shares purchased pursuant to this Agreement, shares of the Class
A Voting Common Stock issued upon the conversion of such shares or any interest
therein will receive and hold such shares or interest subject to the provisions
of this Section 4.5.
5. California Commissioner of Corporations.
---------------------------------------
5.1 Corporate Securities Law. THE SALE OF THE SECURITIES THAT ARE
------------------------
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
CONFIDENTIAL
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<PAGE>
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH
SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF
SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS
SO EXEMPT.
6. Conditions of Purchaser's Obligations at Closing. The obligations of
------------------------------------------------
each Purchaser under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions:
6.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
6.2 Performance. The Company shall have performed and complied with
-----------
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
6.3 Compliance Certificate. The Chief Executive Officer or the Vice
----------------------
President, Corporate Development of the Company shall deliver to each Purchaser
at the Closing a certificate stating that the conditions specified in Sections
6.1 and 6.2 have been fulfilled.
6.4 Qualifications. All authorizations, approvals, or permits, if
--------------
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be duly obtained and effective
as of the Closing.
6.5 Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Purchasers or to the Purchasers' special counsel, and they
shall have received all such counterpart original and certified or other copies
of such documents as they may reasonably request.
6.6 Opinion of Company Counsel. Each Purchaser shall have received
--------------------------
from Dickstein Shapiro Morin & Oshinsky LLP, counsel for the Company, an
opinion, dated as of the Closing, in the form attached hereto as Exhibit B.
---------
6.7 No Injunction. No preliminary or permanent injunction or other
-------------
binding order, decree or ruling issued by a court or governmental agency shall
be in effect which shall have the effect of preventing the consummation of the
transactions contemplated by this Agreement.
CONFIDENTIAL
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<PAGE>
7. Conditions of the Company's Obligations at Closing. The obligations
--------------------------------------------------
of the Company to each Purchaser under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by that
Purchaser:
7.1 Representations and Warranties. The representations and
------------------------------
warranties of the Purchaser contained in Section 3 shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the Closing.
7.2 Payment of Purchase Price. The Purchaser shall have delivered
-------------------------
the purchase price specified in Section 1.2.
7.3 Qualifications. All authorizations, approvals, or permits, if
--------------
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be duly obtained and effective
as of the Closing.
8. Miscellaneous.
-------------
8.1 Survival of Representations, Warranties and Covenants. All
-----------------------------------------------------
representations and warranties made by the Company in this Agreement or in any
certificate delivered pursuant to this Agreement shall survive the Closing Date
for a period of two (2) years. All representations and warranties made by any
Purchaser in this Agreement shall survive the Closing Date for a period of two
(2) years. All covenants made by the parties in this Agreement shall survive
the Closing Date.
8.2 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any Securities). Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
8.3 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
8.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may be
executed by facsimile signature, which signature shall be deemed an original.
8.5 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
CONFIDENTIAL
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<PAGE>
8.6 Notices.
-------
(a) All notices, requests, demands and other communications
under this Agreement or in connection herewith shall be given to or made upon
the respective parties as follows:
To the Company: InterTrust Technologies Corporation
460 Oakmead Parkway
Sunnyvale, California 94086
Telephone: (408) 222-6100
Telecopy: (408) 222-6144
Attention: Vice President, Corporate Development
To a Purchaser: At such Purchaser's address (or facsimile) as set forth on
Schedule A, as applicable, hereto.
(b) All notices, requests, demands and other communications
given or made in accordance with the provisions of this Agreement shall be in
writing, and shall be sent by airmail, return receipt requested, overnight mail,
or by telex or telecopy (facsimile) with confirmation of delivery, and shall be
deemed to be given or made when delivery is so confirmed.
(c) Any party may, by written notice (in accordance with this
Section 8.6) to the other, alter its address.
8.7 Finder's Fee. Each Purchaser represents solely on its own behalf
------------
that it neither is nor will be obligated for any finders' fee or commission in
connection with this transaction. The Company represents that, except as set
forth on the Schedule of Exceptions, it neither is or will be obligated for any
finders' fee or commission in connection with this transaction. Each of the
Company and the Purchaser agrees to indemnify and to hold harmless the other
party from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Company or the Purchaser, as the case may be,
or any of its officers, partners, employees, or representatives is responsible.
8.8 Amendments and Waivers. Except as provided elsewhere herein, any
----------------------
term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the holders of a majority of the Class A Voting Common Stock issued or
issuable upon conversion of the Series B Preferred Stock. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any securities purchased under this Agreement at the time outstanding
(including securities into which such securities are convertible), each future
holder of all such securities, and the Company.
CONFIDENTIAL
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<PAGE>
8.9 Entire Agreement. This Agreement, the Schedule and Exhibits
----------------
hereto and the certificate delivered pursuant hereto constitute the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof and supersede all prior written or oral negotiations, commitments,
representations and agreements.
8.10 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
8.11 Aggregation of Stock. All shares of the Preferred Stock held or
--------------------
acquired by affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
8.12 No Third Party Beneficiaries. This Agreement is intended and
----------------------------
agreed to be solely for the benefit of the parties hereto, and no third party
shall accrue any benefit, claim or right of any kind whatsoever pursuant to,
under, by or through this Agreement. Without limiting the generality of the
preceding sentence, the Holders of Series A Registrable Securities shall not
accrue any rights to have Series A Registrable Securities registered which are
greater than, or in addition to, the rights granted the Holders of Series A
Registrable Securities in the Series A Preferred Stock Agreement to have Series
A Registrable Securities owned by them registered.
CONFIDENTIAL
-24-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
INTERTRUST TECHNOLOGIES CORPORATION
By:________________________________________
Name:
Title:
MITSUBISHI CORPORATION
By:________________________________________
Name:
Title:
CONFIDENTIAL
-25-
<PAGE>
SCHEDULE A
PURCHASERS
----------
<TABLE>
<CAPTION>
Number of Aggregate Purchase
Purchaser Shares Price
--------- ------ -----
<S> <C> <C>
Mitsubishi Corporation 116,686 $1,000,000
6-3, Marunouchi 2-Chome, Chiyoda-Ku,
Tokyo 100-86, JAPAN
Attn: Norio Okaido
General Manager
Multimedia Business Dept.
Fax: (03) 3210-9144
-------------------------------------------------------
TOTAL 116,686 $1,000,000
</TABLE>
CONFIDENTIAL
-26-
<PAGE>
EXHIBIT A
SCHEDULE OF EXCEPTIONS
Set forth below are exceptions to the representations and warranties of the
Company made in Sections 2 and 8.7 of the Agreement. All disclosures and
exceptions set forth below modify all of the Company's representations and
warranties and a disclosure in one section of this Schedule shall modify the
representation and warranty set forth in another section of this Schedule even
if such disclosure is not repeated in the other section.
2.2 Capitalization and Voting Rights.
--------------------------------
The Company has granted the following preemptive rights with respect to its
capital stock:
1. Four of the Company's eight outstanding Common Stock Purchase Warrants
provide their respective holders with a right of first offer with
respect to certain issuances by the Company of its equity securities.
The Company has made a written request that such holders waive their
right of first offer with respect to the transactions contemplated by
this Agreement. All of such holders have waived their rights of first
offer with respect to the transactions contemplated by this Agreement.
2. The Company has granted certain holders of shares of Series A Preferred
Stock a right of first offer with respect to certain sales by the
Company of certain of its securities in Section 4.2 of the Series A
Preferred Stock Agreement. The Company has made a written request that
such holders waive their right of first offer with respect to the
transactions contemplated by this Agreement. All but one of such holders
have waived their rights of first offer with respect to the transactions
contemplated by this Agreement; the holder which did to waive did not
exercise its right of first offer within the time period prescribed by
the Series A Preferred Stock.
2.08 Litigation.
----------
1. On February 28, 1996 the Company received a letter from E-Data Corp.
drawing the Company's attention to Patent No. 4,528,643 and alleging the
need for the Company to obtain a license with respect to such patent.
Upon review of the materials submitted with the February 28, 1996
letter, the Company believes that the claims made therein are based upon
incorrect assumptions and premature and the Company so advised E-Data
Corp. by letter dated March 12, 1996. The Company has received no
substantial response.
2. On June 26, 1996 the Company received a letter from Dorsey & Whitney
LLP, counsel to Digi International, Inc. ("DI"), drawing the Company's
attention to U.S. Trademark Reg. No. 1,666,495 of DI for DIGIBOARD (R)
and, among other things, requesting that the Company cease any planned
use of the name DIGIBOX. The
CONFIDENTIAL
-27-
<PAGE>
Company believes that the demand and claims in the June 26, 1996 letter
are unjustified, and initiated a dialogue with counsel to DI.
2.09 Patents and Other Intangible Assets.
-----------------------------------
1. Item 1 of Section 2.08 of this Schedule is incorporated by this
reference.
2. Item 2 of Section 2.08 of this Schedule is incorporated by this
reference.
2.11 Agreements; Action.
------------------
1. The Company has an agreement with Personal Library Software, Inc. that
upon the sale, lease or license to a third party of United States Patent
Nos. 5,050,213, 4,977,594, 4,827,508 or 5,410,598, European Patent
Application No. 87907181.9, or hardware products directly related to the
foregoing patents, the Company will pay to Personal Library Software,
Inc. a fee ranging from 3% - 6% of license fees up to a total aggregate
payment which shall not exceed $250,000.00
2. On March 28, 1994 the Company entered into an agreement with National
Semiconductor, Inc. pursuant to which the Company granted National
certain licenses to manufacture and sell certain products incorporating
the Company's technology or covered by certain of the Company's patents.
To date the Company has received non-refundable license fees totaling
$850,000. The license is subject to termination should National fail to
tender additional amounts to the Company promptly following the
Company's delivery of certain technology to National.
3. On August 5, 1996, the Company entered into an agreement with SOFTBANK
Services Group, Inc. ("SSG") pursuant to which the Company granted SSG
certain licenses to use and incorporate the Company's InterTrust
technology in products and services made, used, sold and otherwise
transferred by SSG, subject to certain terms and conditions.
4. On October 24, 1995 the Company's Board of Directors approved a
resolution allowing the officers of the Company to offer warrants to
certain service providers in consideration of services rendered by such
service providers. The Company is currently negotiating with certain of
its service providers to issue such service providers warrants for the
purchase of Class A Voting Common Stock and/or Class B Non-Voting Common
Stock in lieu of services rendered, and anticipates that it will be
necessary to issue warrants for the purchase of no more than an
aggregate of 25,000 of such shares to such service providers.
5. The Company has entered into an agreement with Robertson, Stephens & Co.
for the purposes of raising capital and pursuing strategic
relationships. The fees structure for this agreement ranges from 4% to
6% with stipulated minimums and other terms and conditions.
CONFIDENTIAL
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<PAGE>
2.12 Related-Party Transactions.
--------------------------
1. The Company is indebted to Victor Shear in an amount approximating
$50,000 for travel and miscellaneous corporate expenses.
2. On March 1, 1996, the Company and Seymour I. Rubinstein Micropro Trust
(the "Trust"), a trust controlled by director Seymour Rubinstein,
entered into a Modification Agreement pursuant to which the Class A
Common Stock Purchase Warrant held by the Trust was amended to terminate
a right of first refusal held by the Trust and to provide that a private
equity financing would not require such warrant to be exercised or
terminated.
2. Erwin N. Lenowitz, the Company's Chief Financial Officer and a director
of the Company, can be considered to have a beneficial ownership
interest in Electronic Ventures, L.C., a Texas limited liability
corporation, which owns shares of the Class A Voting Common Stock and
has an option to purchase shares of the Class B Non-Voting Common Stock.
2.16 Employee Benefit Plans.
----------------------
The Company provides a health insurance plan and a non-contributory
401(k) plan for its employees.
8.7 Finder's Fee.
------------
Item 5 of Section 2.11 of this Schedule is incorporated by this
reference.
CONFIDENTIAL
-29-
<PAGE>
EXHIBIT B
FORM OF LEGAL OPINION OF COUNSEL TO THE COMPANY
-----------------------------------------------
[To Be Provided on or Before Closing]
CONFIDENTIAL
-30-
<PAGE>
DICKSTEIN SHAPIRO MORIN & OSHINSKY LLP
2101 L Street NW - Washington, DC 20037-1526
Tel (202) 785-9700 - Fax (202) 887-0689
October __, 1996
Mitsubishi Corporation
3-1 Marunouchi 2-Chome, Chiyoda-Ku,
TOKYO 100-86, Japan
Ladies and Gentlemen:
We have acted as counsel to InterTrust Technologies Corporation, a
Delaware corporation (the "Company"), in connection with the sale by the Company
of 116,685 shares of Series B Preferred Stock, $.001 par value, of the Company
(the "Series B Preferred Shares") pursuant to the Series B Preferred Stock
Purchase Agreement dated as of October 7, 1996 (the "Purchase Agreement")
between the Company and Mitsubishi Corporation, a Japanese corporation (the
"Purchaser"). This opinion is being delivered pursuant to Section 6.6 of the
Purchase Agreement. Capitalized terms used and not otherwise defined herein
shall have the respective meanings assigned to such terms in the Purchase
Agreement.
In connection with this opinion, we have examined and relied upon
originals or copies, certified or otherwise identified to our satisfaction, of
the Purchase Agreement and such other documents (including, without limitation,
corporate records of the Company and certificates of public officials) as we
have deemed necessary or appropriate as the basis for the opinions set forth
below. In our examination we have assumed the genuineness of all signatures,
the legacy capacity of natural persons, the authenticity of all documents
submitted to us as originals, and the conformity to authentic original documents
of all documents submitted to us as certified or photostatic copies. In
rendering the opinions set forth below, we have relied solely on certificates
from public officials as to the matters stated in such certificates. As to
questions of fact material to this opinion, we have relied upon representations
(including without limitation, representations set forth in the Purchase
Agreement) and certificates of the Company and its officers and of public
officials, and we have not inquired of third parties or searched the records or
files of any governmental authority.
Further, we have assumed that: (a) the Purchaser is duly organized
and validly existing under the laws of its jurisdiction of incorporation and has
full power, authority and legal right to enter into and perform its obligations
under the Purchase Agreement; (b) the Purchase Agreement has been duly
authorized, executed and delivered by the Purchaser, (c) the Purchase Agreement
is the legal, valid and binding obligation of the Purchaser, enforceable against
the Purchaser in accordance with in terms; and (d) the Purchaser has received,
or will receive by the time required, and will, to the extent required by
applicable law, maintain in full force and effect,
<PAGE>
Mitsubishi Corporation
October __, 1996
Page 2
all governmental approvals required for the due execution, delivery and
performance by the Purchaser of the Purchase Agreement, and that such
execution, delivery and performance by the Purchaser does nor conflict with
any provision of applicable law.
Members of this firm are admitted to the bar of the District of
Columbia. We express no opinion as to the laws of any jurisdiction other than
(i) the present Federal laws of the United States of America and the District of
Columbia, and to the extent required by the opinions expressed below, the
General Corporation Law of the State of Delaware, and our opinion is limited and
applies only insofar as such laws may be concerned.
Based upon and subject to the foregoing, and subject to the other
qualifications, exceptions, limitations and assumptions set forth below, we are
of the opinion that:
1. The Company is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. The Company
has the requisite corporate power and authority to execute, deliver and
perform the Purchase Agreement, to issue, sell and deliver the Series B
Preferred Shares and to issue and deliver the shares of Class A Voting Common
Stock, $.001 par value per share, of the Company issuable upon conversion of
the Series B Preferred Shares (the " Conversion Shares").
2. The Purchase Agreement has been duly authorized, executed and
delivered by the Company and constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
3. The execution and delivery by the Company of the Purchase
Agreement, the performance by the Company of its obligations thereunder, the
sale of the Series B Preferred Shares to the Purchaser and, upon conversion
thereof in accordance with the Certificate of Designations, Preferences and
Rights, the issuance and delivery of the Conversion Shares will not violate
any provision of the Certificate of Designations, Preferences and Rights, the
Restated Certificate of Incorporation or By-laws of the Company.
4. To our knowledge, there are no actions, suits, proceedings or
investigations pending or threatened against the Company before any court or
governmental agency that, either any individual case or in the aggregate,
could reasonably be expected to result in any material adverse change in the
business or financial condition of the Company and none that questions the
validity of the Agreement or any action to be taken in connection therewith.
5. The Series B Preferred Shares and the Conversion Shares have
been duly authorized. Upon issuance and delivery of the Series B Preferred
Shares, against payment of the consideration provided in the Purchase
Agreement, the Series B Preferred Shares will be validly issued and fully paid
and nonassessable. The issuance and delivery of the Conversion Shares, upon
conversion of the Series B Preferred Shares in accordance with the Certificate
of Designations, Preferences and Rights, have been duly authorized by all
requisite corporate action, the Conversion Shares have been duly reserved for
issuance upon conversion of the Series B Preferred Shares in accordance with
the Certificate of Designations, Preferences and
<PAGE>
Mitsubishi Corporation
October __, 1996
Page 3
Rights and, when so issued, will be duly authorized, validly issued, fully
paid and nonassessable. Neither the issuance, sale or delivery of the Series B
Preferred Shares nor the issuance or delivery of the Conversion Shares is
subject to any preemptive right of stockholders of the Company arising under
law or the Certificate of Designations, Preferences and Rights, the Restated
Certificate of Incorporation or Bylaws of the Company or, to our knowledge,
any contractual right of first refusal or other right which has not heretofore
either been waived or not exercised by the holder thereof.
6. Assuming the accuracy of the representations and warranties of
the Purchaser set forth in Section 3 of the Purchase Agreement, no
registration or filing by the Company with, and no consent or approval of, or
other action by any Federal, state or other governmental agency or
instrumentality is or will be necessary for the valid execution and delivery
by the Company of the Purchase Agreement, the sale of the Series B Preferred
Shares, or, upon conversion thereof in accordance with the Certificate of
Designations, Preferences and Rights, the issuance and delivery of the
Conversion Shares, other than the filing pursuant to Section 25102(f) of the
California Corporate Securities Law of 1968, as amended, and the rules
thereunder.
7. Assuming the accuracy of the representations and warranties of
the Purchaser set forth in Section 3 of the Purchase Agreement, the sale of
the Series B Preferred Shares to the Purchaser on the Closing Date, under the
circumstances contemplated by the Purchase Agreement, is exempt from the
registration requirements of the Securities Act of 1933, as amended, and the
issuance and delivery of the Conversion Shares, upon conversion of such Series
B Preferred Shares in accordance with the Certificate of Designations,
Preferences and Rights, will be exempt from such registration requirements.
The opinions set forth above are subject to the following limitations
and qualifications:
(A) We express no opinion as to (i) compliance with applicable
antifraud provisions of Federal or state securities laws or, except to the
extent set forth in paragraph 6, any matters arising under or relating to
state securities laws or "blue sky" laws; (ii) the validity, binding effect or
enforceability of any provision of the Purchase Agreement relating to
indemnification, contribution or exculpation in connection with violations of
any securities laws or statutory duties or public policy, or in connection
with willful, reckless or criminal acts or gross negligence of the indemnified
or exculpated party or the party to receive contribution; and (iii) the
enforceability of any provision or term of the Purchase Agreement which may be
found by a court to be rendered unenforceable due to the indefinite or
incomplete nature of such provision or term.
(B) Our opinion with respect to enforceability see forth in
paragraph 2 above is subject to (i) applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally; (ii) general equitable principles (regardless of whether such,
principles are considered in a proceeding at law or in equity); and (iii) the
effect of judicial decisions which have held that certain provisions are
unenforceable when their enforcement
<PAGE>
Mitsubishi Corporation
October __, 1996
Page 4
would violate the implied covenant of good faith and fair dealing, or would be
commercially unreasonable, or where their breach is not material. We have
assumed with your permission in providing our opinion with respect to
enforceability set forth in paragraph 2 above that the laws of the District of
Columbia are the same as the laws of the State of California (the laws
governing the construction of the Purchase Agreement).
This opinion is rendered solely for your benefit in connection with
the transaction referred to in the first paragraph of this option, and may not
be relied upon in any manner or for any purpose by any other person or entity
without our prior written consent. This opinion is based on our knowledge of
the law and the facts as of the date hereof, and we undertake no obligation to
update or supplement this opinion after the date hereof.
<PAGE>
EXHIBIT B
TO THE TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
INTERTRUST TECHNOLOGY REQUIREMENTS
----------------------------------
I. INTERTRUST TECHNOLOGY REQUIREMENTS: PRODUCTS
A. Systems Developer's Kit (SDK) 1.0, 1.1, 2.0
B. Tools Developer's Kit (TDK) 1.0
C. Content Developer's Kit (CDK) 2.0
II. INTERTRUST KERNEL
III. INTERTRUST AUTHORIZED APPLICATION SOFTWARE
IV. INTERTRUST AUTHORIZED CLEARINGHOUSE SOFTWARE
V. INTERTRUST DOCUMENTATION
B-1
<PAGE>
I. InterTrust Technology Requirements: Products
I.A.1 InterTrust Systems Developer's Kit (SDK) Release 1.0
- ----------------------------------------------------------
The SDK technology will provide support for the following functionality:
Content-vending infrastructure, integrated with a payment and metering
infrastructure
Ability to integrate the InterTrust architecture with customer-specific
services, such as: payment, financial and usage clearinghouses, multiple
network protocols, database systems, etc.
Ability to build application suites or tools that integrate support for
InterTrust viewing and packaging
Ability to create DigiBox containers for existing text-based and simple
image-and video- based content
Support of single-tier controls (i.e. for a single-point distribution
system)
Client and server support for Windows 95 and NT
Ability to integrate with at least one financial clearinghouse
Deployment services for installation, registration
. Documented APIs
Note: Source Code and Object Code available for Win95 and WinNT operating
systems; additional platforms to be supplied as they become available, at
InterTrust's discretion. Novell Netware support is currently planned to be
available in 1997 by InterTrust and/or an InterTrust core partner.
SDK 1.0 Deliverables:
- ---------------------
Kernel Software--Object Code Format:
Node Server: includes DigiBox container library and other core
services Systems Services, e.g. time, cryptographic services
----
. Node database and database access routines
Node Client Interface DLLs
Deployment Services - used to deploy and initialize the set of nodes
in an InterTrust deployment
Clearinghouse Prototype Components--Source Code and Object Code Format:
Usage clearinghouse application--sample software for performing
specific clearinghouse functions in the area of usage auditing,
profiling, etc.
Financial clearinghouse application--sample software for performing
specific, prototypical clearinghouse functions in the area of
financial clearing
Sample Applications--Source Code and Object Code Format:
InterTrust Packager--places content into DigiBox containers with
user-specified controls
InterTrust Plug-in for InterTrust-supported browsers (Netscape,
Microsoft Explorer)--browser plug-in that controls viewing,
storing, and printing of content in a Digibox.
InterTrust Administrator--configures and manages an InterTrust node
B-2
<PAGE>
InterTrust HTML Daemon--automatically creates HTML pages referring to
content in DigiBox containers
SDK 1.0 Estimated Schedule:
- ---------------------------
Beta: December 1996
First Commercial Shipment (FCS): Q1 1997
IA. InterTrust Systems Developer's Kit (SDK) Release 1.1
- --------------------------------------------------------
SDK 1.1 will contain bug fixes for SDK 1.0 and add the following functionality:
Application of one InterTrust control set template to multiple new DigiBox
containers
Automation of deployment and installation of InterTrust nodes
SDK 1.1 Deliverables:
- ---------------------
Bug Fixes
Additional functionality (as described above)
SDK 1.1 Estimated Schedule:
- ---------------------------
Beta: None
FCS: Q2 1997
I.A.2 InterTrust Systems Developer's Kit (SDK) Release 2.0
- ----------------------------------------------------------
SDK 2.0 will add value chain management and independent delivery of control
functionality to InterTrust SDK 1.0 and will support the following
functionality:
Value-chain management, enabling support of chain of control models
directly within InterTrust
Deliver controls independently of controlled digital information, enabling
complex updatable, control models for usage/advertising and trading
systems
Note: Source Code and Object Code will be initially available for Win95 and
WinNT operating systems and Novell Netware is currently expected to be available
from InterTrust or an InterTrust core partner upon release; additional platforms
to be supplied as they become available, at InterTrust's discretion.
SDK 2.0 Deliverables:
- ---------------------
Updated SDK Object Code and Source Code, as applicable
SDK 2.0 Estimated Schedule:
- ---------------------------
Beta: Late 1997
FCS: Calendar Q1 1998
B-3
<PAGE>
I.B. InterTrust Tool Developer's Kit (TDK) Release 1.0
- -------------------------------------------------------
The TDK product is specifically aimed at tool developers. It will facilitate
creation of software-development and content-development tools that integrate
InterTrust packaging and viewing support.
Note: Source Code and Object Code will be initially available for Win95 and
WinNT operating systems and Novell Netware is currently expected to be available
from InterTrust or an InterTrust core partner; additional platforms to be
supplied as they become available, at InterTrust's discretion.
TDK 1.0 Deliverables:
- ---------------------
Kernel Software-- Object Code Format:
InterTrust APIs and libraries--for integration of InterTrust technology
into software and content development tools.
Test Environment--Object Code Format:
Facilitates testing of tools developed with TDK API's and libraries
Sample Applications--Source Code:
Sample packaging, viewing applications
Other:
Standard InterTrust control set templates--a set of model business rules
TDK 1.0 Estimated Schedule:
- ---------------------------
Beta: Calendar Q2 1997
FCS: Calendar Q3 1997
I.C. InterTrust Content Developer's Kit (CDK) Release 2.0 Deliverables
- ----------------------------------------------------------------------
The CDK is aimed at large and medium-sized content developers. It will
facilitate packaging of content into DigiBox containers, encompass embedded
value chain management and independent delivery of controls.
Note: Object Code will be initially available for Win95 and WinNT operating
systems and Novell Netware is currently expected to be available from InterTrust
or an InterTrust core partner; additional platforms to be supplied as they
become available, at InterTrust's discretion.
CDK 2.0 Deliverables:
- ---------------------
Client Application--Object Code Format:
InterTrust viewing and packaging applications, including the control
set editor
Other:
Standard InterTrust control set templates
B-4
<PAGE>
CDK 2.0 Estimated Schedule:
- ---------------------------
Beta: Calendar Late 1997
FCS: Calendar Q1 1998
II. INTERTRUST KERNEL
Object Code Format:
Node Server
Systems Services
. Node database and database access routines
. Node Client Interface DLLs
. Deployment Services
III. INTERTRUST AUTHORIZED APPLICATION SOFTWARE
Only the following InterTrust Technology may be distributed to any Person, and
such technology may be distributed only in Object Code form.
Sample Applications:
InterTrust Packager
InterTrust Plug-in for InterTrust-supported browsers
InterTrust Administrator
InterTrust HTML Daemon
Kernel Application:
Node Server
Systems Services
Node database and database access routines
Node Client Interface DLLs
IV. INTERTRUST AUTHORIZED CLEARINGHOUSE SOFTWARE
Only the following Authorized Clearinghouse Software may be distributed to an
Authorized Clearinghouse Provider or a sublicense under Section 6.3, and such
technology may be distributed only in Object Code form:
Usage Clearinghouse Application
Financial Clearinghouse Application
V. DOCUMENTATION
B-5
<PAGE>
IV.A. SDK Documentation:
- ------------------------
User documentation
. InterTrust Application Programmer's Guide and Reference
IV.B. TDK Documentation:
- ------------------------
User documentation
. InterTrust Application Programmer's Guide and Reference
. Source material for end-user documentation
IV.C. CDK Documentation:
- ------------------------
User documentation
B-6
<PAGE>
EXHIBIT C
TO THE TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
TRADEMARKS
----------
INTERTRUST Trademarks
---------------------
InterTrust
The InterTrust Logo
InterTrust Commerce Architecture
InterTrust Commerce Node
InterTrustworthy
DigiBox
NetTrust
Virtual Process Control
Electronic Value Chain Management
MBC Trademarks
--------------
(Diamond Mark) Mitsubishi Corporation
CONFIDENTIAL
<PAGE>
EXHIBIT D
TO THE TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
TRADING MODEL COOPERATIVE PROJECT PLAN
--------------------------------------
As a general matter, the Trading Model Cooperative Project Plan will: (i) set
forth terms and conditions (such as development milestones, cost estimates,
development fees, etc.) for the development of the Trading Model Cooperative
Application; and (ii) outline and embody a staged approach for the entire
development process, from project planning through quality and acceptance
testing of generated code.
It is contemplated that Trading Model Cooperative Project Plan will incorporate,
as agreed to by the Parties, the following terms:
. a schedule for completion of various targets and stages (as further
set forth below) for development of the Trading Model Cooperative
Application;
. a definition of the tasks for which each participating Party shall be
responsible with respect to the Trading Model Cooperative Application
project;
. acceptance testing procedures and criteria for determining that the
Trading Model Cooperative Application conforms to the specifications
therefor and to InterTrust Specifications;
. an estimate of the costs for the Trading Model project, a development
plan containing budgets and milestones and a specification of a
formula for calculating any consideration that the MBC may pay to
InterTrust, including any development fees consistent with Section 3.3
hereof; and
. provisions concerning ownership of Intellectual Property Rights and
other rights relating to the Trading Model Cooperative Application, if
terms and conditions related to such rights differ in any way from
this Agreement.
Furthermore, it is contemplated that the Trading Model Cooperative Project Plan
will comprise the development stages as set forth below:
. description of the Trading Model project and formulation of the
desired behavior of the Trading Model Cooperative Application(s) from
users' perspectives including preconditions, results and a textual
description of the system's behavior (the "Use Cases"), and creating a
---------
document that describes such Use Cases;
. creation of a requirements document (the "Requirements Document")
---------------------
based on the Use Cases, that precisely defines the criteria that the
Trading Model Cooperative Application must or may meet when completed,
including staged criteria reflecting
CONFIDENTIAL
<PAGE>
commercial releases of the Trading Model Cooperative Application over
a period of time;
. development of object, functional, and process models that reflect an
architecture for the Trading Model Cooperative Application that
addresses the detailed Requirements, in particular for first stage
releases (the "Object Models");
-------------
. formulation of a design, reflective of the Object Models with
sufficient detail to serve as a coding specification (the "Design
------
Models");
------
. creation of a test plan for the Design Models (the "Test Plan");
---------
. production of code that implements the Design Models (the "Application
-----------
Code") and the Test Plan (the "Test Code"); and
---- ---------
. validation of the Application Code through the use of the Test Code;
. design for real world beta test of first stage implementation
including thorough bug and security evaluation;
. process for multiple party pilot operation of the first stage release
implementation including comprehensive users' feedback and bug
assessments and formal implementation critique; and
. stepped commercial release of first stage model.
CONFIDENTIAL
<PAGE>
EXHIBIT E
TO THE TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
FORM OF INTERTRUST CONFIDENTIALITY AGREEMENTS
---------------------------------------------
InterTrust Top Secrecy Agreement
--------------------------------
InterTrust Non-Disclosure/Non-Use Agreement
-------------------------------------------
E-1
<PAGE>
NON-DISCLOSURE AGREEMENT
------------------------
FOR INTERTRUST CONFIDENTIAL INFORMATION
---------------------------------------
THIS AGREEMENT (this "Agreement") is made effective as of _________ 199_
between INTERTRUST TECHNOLOGIES CORPORATION ("InterTrust"), a Delaware
corporation, having a place of business at 460 Oakmead Parkway, Sunnyvale,
California 90486, and __________________________________________ ("Recipient"),
an individual citizen of _________________ residing at ________________________,
and an employee of Mitsubishi Corporation ("MBC"), a Japanese corporation with a
place of business at 6-3, Marunouchi 2-Chome, Chiyoda-ku, Tokyo 100-86, Japan.
This parties agree as follows:
1. Pursuant to a Technology Development and License Agreement dated __________
between InterTrust and MBC (the "License Agreement"), InterTrust may disclose to
MBC certain confidential information including technical information embodied in
and/or associated with InterTrust's InterTrust Technology including, without
limitation, software products and/or other developments related to distributed,
secure rights and/or event management, associated designs, inventions, plans,
and other information (the "Confidential Information"), all of which such
information shall conspicuously be marked with a notice or legend with the
phrase "Confidential", as provided in the License Agreement. In consideration
for such Confidential Information being provided to Recipient, Recipient agrees
to be bound by the terms of this Agreement. Disclosure of InterTrust
Confidential Information to Recipient, and use and disclosure of Confidential
Information received by Recipient, shall occur only in accordance with the terms
and conditions of this Agreement.
2. For a period of three (3) years following the disclosure of any
Confidential Information, Recipient will retain such Confidential Information in
confidence, and will discuss such Confidential Information only with other MBC
employees, other individuals who are under the direct control of MBC and work
full time on MBC premises (an "Individual Consultant"), and any employees or
Individual Consultant's of an MBC sublicensee as permitted in (or upon the terms
of) the License Agreement -- all of whom shall have a need to know said
Confidential Information and who have executed a copy of this Agreement.
Recipient shall not, without the prior written permission of InterTrust's
Chairman, President, or such other InterTrust Officer as who has been designated
in writing by InterTrust's Chairman (a "Designated InterTrust Officer"),
disclose Confidential Information to any person other than as set forth
immediately above. Furthermore, without express written authorization of a MBC
officer who is empowered by MBC to provide such an authorization, the Recipient
will not make copies, in whole or in part, of the Confidential Information,
including translating, in whole or in part, the Confidential Information into
another language and/or shipping the Confidential Information, in whole or in
part, or any direct product thereof, to any other country. The undersigned will
not use the Confidential Information in any manner that is not authorized by MBC
and in accordance with the License Agreement and the undersigned will use the
Confidential Information solely in the exercise of MBC's rights as provided by
the License Agreement. Under no circumstances will any information subject to
the export or import laws of any jurisdiction be transferred pursuant to their
agreement without proper prior certification and notification of appropriate
regulatory offices in applicable jurisdictions and InterTrust.
3. The undersigned will not use Confidential Information except in fulfillment
of the undersigned's employee's and/or other individual's obligations with MBC,
and for no other purposes whatsoever. The undersigned understands and
acknowledges that the unauthorized use of Confidential Information may cause
InterTrust very substantial damage, for which damages may be impossible to
measure or inadequate to compensate. Accordingly, Recipient agrees that if he
or she breaches or threatens breach of any of such sections, InterTrust will
have available, in addition to any other right or remedy available, the right to
obtain an injunction against him or her, from a court of competent jurisdiction
restraining such breach or threatened breach and to specific performance of any
such provision of this Agreement, and Recipient hereby consents to the issuance
of such injunction and to the ordering of specific performance under such
circumstances.
4. The undersigned will return all physical embodiments of Confidential
Information in the undersigned's possession to
E-2
<PAGE>
possession to InterTrust promptly upon request by InterTrust, and in no event
later than fifteen (15) days thereafter.
5. Notwithstanding any thing else in this Agreement, the confidentiality
restrictions of this Agreement shall not apply to information that: (i) is or
becomes known to the public through no breach of any of the undersigned's
obligations under this Agreement, or MBC's or any other MBC employee's,
Individual Consultant's, or other MBC consultant's, and/or agent's obligations
of confidentiality to MBC and/or to InterTrust, (ii) was known to Recipient
prior to its disclosure by InterTrust, as evidenced through written
documentation; (iii) shall have been independently developed by the Recipient
without any reliance on or use of any InterTrust Confidential Information, as
demonstrated through written documentation; or (iv) shall have been rightfully
supplied to Recipient, with no obligation of confidentiality or non-use. In
addition, the Recipient shall be entitled to disclose Confidential Information
pursuant to a court order issued by a court of competent jurisdiction or as
otherwise required by law; provided that the undersigned shall provide prompt
-------- ----
advance notice thereof to InterTrust to enable InterTrust to seek a protective
order or otherwise prevent such disclosure and shall disclose no more than the
minimum information required by such court order or by law.
6. If any provision or portion thereof in this Agreement shall be found or be
held by a court of competent jurisdiction to be illegal, invalid or
unenforceable in any jurisdiction in which this Agreement is being performed,
then this Agreement shall nevertheless be given full force and effect without
said provision or portion. This Agreement may not be modified except by written
agreement dated subsequent to the date of this Agreement and signed by both
parties. This agreement shall be governed by and construed under the laws of
the Commonwealth of Virginia, USA, without reference to conflicts of laws
principles.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
InterTrust Technologies Corporation Recipient
By:____________________________________ Employee:______________________
Title:_________________________________ By:____________________________
Date:__________________________________ Title:_________________________
Date:__________________________
E-3
<PAGE>
TOP SECRECY AGREEMENT
---------------------
FOR CERTAIN INTERTRUST INFORMATION
----------------------------------
THIS AGREEMENT (this "Agreement") is made effective as of
____________________ 199_ between INTERTRUST TECHNOLOGIES CORPORATION
("InterTrust"), a Delaware corporation, having a place of business at 460
Oakmead Parkway, Sunnyvale, California 90486, and _______________("Recipient"),
an individual citizen of _______________, residing at _______________________,
and an employee of Mitsubishi Corporation ("MBC"), a Japanese corporation with a
place of business at 6-3, Marunouchi 2-Chome, Chiyoda-ku, Tokyo 100-86, Japan.
The parties agree as follows:
1 Purpose.
-------
(a) Pursuant to a Technology Development and License Agreement dated
__________________ between InterTrust and MBC (the "License Agreement"),
InterTrust may disclose to MBC certain information including load module
related, encryption related, document manager related and/or other information
considered Top Secret and proprietary by InterTrust (hereinafter referred to as
the "InterTrust Top Secret Information") and which shall conspicuously be marked
with a notice or legend with the phrase "Top Secret", as provided in the License
Agreement. In consideration for said information being provided to Recipient,
Recipient agrees to be bound by the terms of this Agreement.
(b) InterTrust wishes to protect the InterTrust Top Secret Information from
unauthorized use and disclosure. Disclosure of InterTrust Top Secret
Information to Recipient, and use and disclosure of Top Secret Information
received by Recipient shall occur only in accordance with the terms and
conditions of this Agreement.
2 Non-Disclosure and Restrictions on Use of InterTrust Extremely
--------------------------------------------------------------
Confidential.
------------
(a) Except as otherwise provided in an express written agreement signed by
InterTrust's Chairman or President, or other such person designated in writing
by the Chairman or President (a "Designated InterTrust Officer"), Recipient
agrees that he or she shall: (i) hold in strictest confidence and not disclose
any InterTrust Top Secret Information to any person or entity either within or
outside MBC, except to another MBC employee who has also signed a Top Secrecy
Agreement and is authorized to receive Top Secret Information pursuant to the
Licensed Agreement, or as expressly permitted in writing by a Designated
InterTrust Officer; (ii) use InterTrust Top Secret Information solely for
purposes authorized by the License Agreement: (iii) use said Top Secret
Information in no other way whatsoever; (iv) apply the strictest feasible
measures to protect the secrecy of, and prevent unauthorized disclosure or use
of, InterTrust Top Secret information (which such measures shall not be less
stringent than MBC uses to protect its own most highly sensitive and secret
information); and (v) produce no physical embodiments of any portion of the Top
Secret Information without the express written authorization of a Designated
InterTrust Officer. Recipient agrees to notify InterTrust promptly in writing
of any unauthorized disclosure or other misuse or misappropriation of the
InterTrust Top Secret Information which may come to Recipient's attention.
(b) Notwithstanding the foregoing, Recipient shall be entitled to disclose
Top Secret Information pursuant to a court order issued by a court of competent
jurisdiction or as otherwise required by law; provided that Recipient shall
-------- ----
provide prompt advance notice thereof to InterTrust to enable InterTrust to seek
a protective order or otherwise prevent such disclosure and shall disclose no
more than the minimum information required by such court order or by law.
3 Return of Materials. Upon request of a Designated InterTrust Officer,
-------------------
Recipient shall immediately return to InterTrust all tangible embodiments of
InterTrust Top Secret Information in Recipient's possession or otherwise under
Recipient's control.
E-4
<PAGE>
4 Equitable Remedies. Recipient agrees that unauthorized disclosure or use of
------------------
InterTrust Top Secret Information will cause InterTrust substantial and
irreparable damage. Recipient further agrees that it may be impossible or
inadequate to measure and calculate InterTrust's damages from any breach of the
covenants set forth in Sections 2 and/or 3 hereof. Accordingly, Recipient
agrees that if he or she breaches or threatens breach of any of such sections,
InterTrust will have available, in addition to any other right or remedy
available, the right to obtain an injunction against him or her, from a court of
competent jurisdiction restraining such breach or threatened breach and to
specific performance of any such provision of this Agreement, and Recipient
hereby consents to the issuance of such injunction and to the ordering of
specific performance under such circumstances.
5 Governing Law: Jurisdiction and Venue. This Agreement shall be governed by
-------------------------------------
and construed under the laws of the Commonwealth of Virginia, without reference
to conflict of law principles. All disputes arising out of or relating to the
subject matter of this Agreement shall be subject to the exclusive jurisdiction
and venue of the United States District Court for the Eastern District of
Virginia, Alexandria Division Virginia, or if jurisdiction does not properly lie
in such court, the Commonwealth courts in Alexandria, Virginia. The parties
consent to the personal and exclusive jurisdiction and venue of such court and
waive any argument that jurisdiction or venue in such court is improper or
inconvenient.
6 Severability; Export Compliance. If any provision or portion thereof in
-------------------------------
this Agreement shall be found or be held to be illegal, invalid or unenforceable
in any jurisdiction in which this Agreement is being performed, then this
Agreement shall nevertheless be given full force and effect without said
provision or portion. Recipient certifies that no Top Secret Information, or
any portion thereof, will be exported to any country in violation of U.S. export
regulations or other regulations applicable to Recipient and such information.
7 Entire Agreement. This Agreement constitutes the entire agreement between
----------------
Recipient and InterTrust regarding the InterTrust Top Secret Information
disclosed hereunder and supersedes all oral or written agreements, either
entered prior to or contemporaneously with this Agreement, concerning the
InterTrust Top Secret Information, except the provisions of the License
Agreement, the provisions of which shall be deemed to be supplemented hereby as
of the date first written above. This Agreement may not be modified except by
written agreement dated subsequent to the date of this Agreement and signed by
both parties.
8 Successors. Subject to the limitations set forth in this Agreement, this
----------
Agreement will inure to the benefit of and be binding upon the parties, their
successors and assigns.
9 Notices. For all purposes hereof, any notice pursuant hereto shall be
-------
deemed given upon receipt by the Party at the address indicated above.
E-5
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
INTERTRUST TECHNOLOGIES RECIPIENT
CORPORATION ---------
By: By:
------------------------------- -------------------------------
Name: Name:
----------------------------- -----------------------------
MBC
Title: Title:
---------------------------- ----------------------------
E-6
<PAGE>
EXHIBIT F
TO THE TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
SPECIAL ADVANCED TECHNOLOGIES
-----------------------------
"Special Advanced Technologies" means technology, systems and/or applications
-----------------------------
that enable at least one of the following rights management and/or distributed
event management advanced capabilities: (i) Dynamic Rules and Controls; (ii)
Independent Rules and Controls; (iii) Chain of Handling and Control; (iv) Rights
Operating System; (v) Traveling Objects; and (vi) Event Nodes. Without limiting
in any way the generality of the terms defined on this Exhibit F, the concepts
represented therein are further clarified in InterTrust Intellectual Property
(for example, [*], titled [*]), other InterTrust patent applications, and
documents and information that InterTrust may provide under this Agreement.
The foregoing capitalized terms are defined below. All capitalized terms not
defined on this Exhibit F, shall have the meaning set forth in the Agreement.
"Chain of Handling and Control" means technology that at least in part allows
-----------------------------
or enables the persistence of all or any portion of Dynamic Rules and Controls
as such Dynamic Rules and Controls are provided for use to one or more sequences
of Persons.
"Dynamic Rules and Controls" means technology that, at least in part, supports
--------------------------
the use of control structures to: (i) Manage (for example, govern access to or
other use of) Content in accordance with Rules and Controls associated with such
Content; and (ii) accept the (a) modification and/or replacement of at least a
portion of any such Rules and Controls, and/or (b) addition of Rules and
Controls, all in a manner consistent with pre-existing Rules and Controls.
"Event Nodes" means distributed and fully or partially interoperable
-----------
electronic nodes, each of which employs Rules and Controls to Manage events
based at least in part upon plural nodal activity relating to Content.
"Independent Rules and Controls" means technology enabling the independent and
------------------------------
separate provision of Rules and Controls, whether or not said Rules and Controls
are, for example, delivered in the same cryptographic container, or at the same
time, as related Content.
"Rights Operating System" means one or more general purpose computer control
-----------------------
programs that, independently or in combination with a host operating system,
contributes to rights-related interoperability among plural nodes and enables
application of Dynamic Rules and Controls and/or Independent Rules and Controls.
"Traveling Objects" means technology supporting the use and/or re-use of
-----------------
Content subject to persistent Rules and Controls which Manage Content, so that,
when such Content is passed from one user to another such Content does not
require a specific authorization by a remote
CONFIDENTIAL
- ---------- * CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTION HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
authority in each instance to enable a first use by a new user when such Content
is passed to such new user.
CONFIDENTIAL
<PAGE>
EXHIBIT G
TO THE TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
CHINESE WALL PROCEDURES
-----------------------
The "Chinese Wall" to be implemented to separate the Active Key Group, and other
employees and/or consultants of MBC that have access to InterTrust Technology or
information, is intended to ensure that the Active Key Technology project is an
independent development effort not employing any Chinese Wall Information,
including insuring that no sensitive or confidential InterTrust Technology or
Modified Technology is advertently or inadvertently shared with, disclosed to
and/or learned by any individual working on or directing the Active Key
Technology project at MBC. The Chinese Wall shall, at a minimum, have the
following procedural attributes, serving the purposes indicated:
(1) Group Composition and Lists. The purpose of group composition lists is to
---------------------------
keep the Parties and the persons within specific groups informed as to who
should have access to information and who should not have such access. MBC shall
keep accurate lists of:
(a) all MBC employees and/or consultants that have access to, work on, have
responsibility for, or are privy to, information concerning MBC's Active Key
Technology, or are otherwise members of MBC's Active Key Group;
(b) all MBC employees and/or consultants that have access to, work on, have
responsibility for, or are privy to (1) information concerning (A)
InterTrust Technology, (B) the Trading Model Cooperative Project, (C) any
other Cooperative Application, (D) Modified Technology and/or (E) any MBC
designs or plans concerning use (or incorporation) of InterTrust Technology
with MBC products, Cooperative Applications and/or related services, or (2)
information provided by InterTrust to MBC (including InterTrust Confidential
Information and InterTrust Top Secret Information (the "InterTrust
----------
Technology Group:); and
----------------
(c) any MBC employee that is a member of both the Active Key Group and the
InterTrust Technology Group; provided that (1) MBC employees and/or
-------------
consultants that are members of both the Active Key Group and the InterTrust
Technology Group shall be strictly limited to senior MBC executives or
members of MBC's Board of Directors that have a direct need to know business
information relating to both groups, and (2) no such person that is a member
of both the Active Key Group and the InterTrust Technology Group shall have
any active role in the planning, direction or development of the Active Key
Technology other than high level approval of such Group's general direction
and efforts.
MBC shall provide copies of such lists to InterTrust and shall immediately
update such lists whenever a change in the composition of a relevant group
occurs and, within ten (10) business days thereafter, provide InterTrust with a
copy of such updated list(s);
(2) Information Security and Handling. The purpose of information security is to
---------------------------------
ensure that no relevant Confidential or Top Secret Information is transferred
between the Active Key Group
CONFIDENTIAL
<PAGE>
and InterTrust Technology Group. The information security procedures shall
comprise, at a minimum, the following:
(a) a member of the InterTrust Technology Group shall not discuss or
disclose to persons outside of such group (especially to any member of the
Active Key Group) any information concerning the activities of the
InterTrust Technology Group including, but not limited to technical and
business activities, as well as any confidential information of such group
or of InterTrust (whether or not such information includes information about
InterTrust Technology or information disclosed by InterTrust to MBC) until
the InterTrust Technology Group's business development activities reasonably
require the involvement of other MBC employees for the purpose of marketing,
sales, and technical support for public beta and product releases of an MBC
product, and then only to the extent necessary to directly support such
activities for such product and upon thirty (30) days prior written
notification to InterTrust; provided, however, that the InterTrust
-------- ------- ----
Technology Group may disclose, to the extent reasonably required for the
purposes set forth below, such information to its own accounting, budget
management, legal, or other internal administrative department solely for
the purpose of obtaining necessary administrative or nontechnical consultant
services from such departments.
(b) except to the extent expressly and reasonably in support of the
provisions of Section 2(a) immediately above, no documents (or summaries or
material portions thereof) shall be disseminated or disclosed to any person
outside of the InterTrust Technology Group;
(c) except for such MBC employees described in Section (1)(c) above, during
the Special Advanced Technologies Commitment Period no person who is or has
at any time has been part of the InterTrust Technology Group shall be or
become part of the Active Key Group, and thereafter, any such person may
not, under any circumstances, use any InterTrust Confidential Information or
Top Secret Information for the benefit of the Active Key Group; and
(d) any InterTrust Group information no longer in active use must be
shredded or otherwise securely disposed of.
(3) Computer/Network Security. The purpose of Computer/Network security is to
-------------------------
impede potential information flow between the InterTrust Technology Group and
the Active Key Group by limiting access to electronic information. The
Computer/Network Security procedures shall comprise, at a minimum, the
following:
(a) no portable storage media (such as floppy disks, Mo, etc.) shall be
passed between members of the InterTrust and Active Key groups whether or
not such media is thought to contain confidential information of either
group;
(b) no member of the Active Key Group, or any MBC or third party technical
personnel, shall have access to the InterTrust Technology Group=s network
resources, including file storage, printing, communications, and other host
or server resources;
CONFIDENTIAL
<PAGE>
(c) any server resources of the InterTrust Technology Group must be
protected against unauthorized access, at a minimum through the use of
individual user passwords; and
(d) no InterTrust Top Secret Information shall be stored on a server (unless
such server is used solely in connection with the InterTrust Technologies
Group), or other storage media shared by persons not in the InterTrust
Technology Group, and no such InterTrust Top Secret Information shall be
included in any e-mail and other electronic communications between members
of the InterTrust Technology Group passing through any host or server to
which any member of the Active Key Group has any access rights. With respect
to Chinese Wall Information other than Top Secret Information, all e-mail
and other electronic communication between members of the InterTrust
Technology Group containing any such information shall not pass through any
host or server to which any member of the defined Key Group has any access
rights which enables users to access information as an administrator.
(4) Physical Security. The purpose of physical security is to impede potential
-----------------
information flow between the InterTrust Technology Group and Active Key Groups
by physical separation. The physical security procedures shall comprise, at a
minimum, the following:
(a) no offices or work space may be shared by members of the InterTrust
Technology Group and Active Key Group;
(b) any InterTrust Technology Group area (including areas containing files
of such Group) shall have locks and such other appropriate security barriers
sufficient to ensure that only authorized persons may enter or obtain access
to such areas or information contained therein. No Active Key Group member
shall be authorized to enter such InterTrust Technology Group areas; and
(c) maintenance of a written log shall be kept of persons other than
InterTrust Technology Group members who enter any InterTrust Technology
Group work area.
(5) Written Procedures and Education. Written procedures and education are
--------------------------------
intended to aid compliance with information procedures by making sure that
employees (including member of the InterTrust Technology Group or the Active Key
Group) are aware of the procedures they are expected to follow. MBC shall ensure
that relevant employees are informed of the Chinese Wall procedures by, at a
minimum:
(a) memorializing the definition of Chinese Wall Information and the Chinese
Wall procedures in a memorandum (the "Chinese Wall Memo") and distributing
-----------------
the Chinese Wall Memo to each of the persons listed in Section 1 hereof
(including new members of the groups, as added; and
(b) conducting one or more meetings promptly following the Effective Date
(and with new employees during an orientation meeting) to explain the
Chinese Wall procedures to all affected personnel;
CONFIDENTIAL
<PAGE>
(c) periodically advise relevant employees of information considered to be
Chinese Wall Information and of the necessity of following the Chinese Wall
procedures; and
(d) posting the requirements of the Chinese Wall procedures in appropriate,
prominent locations within the InterTrust Technology Group area to remind
Group employees of their Chinese Wall obligations.
CONFIDENTIAL
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Selected
Financial Data" and "Experts" and to the use of our report dated February 19,
1999, except for Note 6, as to which the date is May 5, 1999, with respect to
InterTrust Technologies Corporation in Amendment No. 9 to the Registration
Statement (Form S-1) and related Prospectus of InterTrust Technologies
Corporation for the registration of 7,475,000 shares of its common stock.
/s/ Ernst & Young LLP
Palo Alto, California
October 25, 1999
