SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 2-93668-FW
CURTIS MATHES HOLDING CORPORATION
(Exact name of Registrant as specified in its charter)
Texas 75-1975147
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10911 Petal Street, 75238
Dallas, Texas (Zip Code)
(Address of principal executive offices)
(214) 503-8880
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES [X] NO
At March 31, 1997, there were 35,091,532 shares of Registrant's
common stock outstanding.
<PAGE>
GENERAL INDEX
Page Number
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 7
PART II.
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 8
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 9
SIGNATURES 9
EXHIBIT INDEX 10
<PAGE>
CURTIS MATHES HOLDING CORPORATION
and Subsidiaries
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
A. BASIS OF INTERIM FINANCIAL STATEMENT PREPARATION
The interim financial statements and summarized notes included
herein were prepared, without audit, pursuant to rules and regulations of
the Securities and Exchange Commission. Because certain information and
notes normally included in financial statements prepared in accordance
with generally accepted accounting principles were condensed or omitted
pursuant to such rules and regulations, it is suggested that these
financial statements be read in conjunction with the Consolidated
Financial Statements and the Notes thereto, included in the Company's
Annual Report on Form 10-K for the preceding fiscal year. These interim
financial statements and notes hereto reflect all adjustments which are,
in the opinion of management, necessary for a fair statement of results
for the interim periods presented. Such financial results, however,
should not be construed as necessarily indicative of future earnings.
CURTIS MATHES HOLDING CORPORATION
Consolidated Balance Sheets (Unaudited)
31-Mar-97 30-Jun-96
ASSETS
Current Assets
Cash & cash equivalents $ 1,925,884 $ 4,150,481
Subscriptions receivable 1,311,000 4,351,500
Accounts receivable 25,000 48,445
Notes receivable 487,570 354,807
Inventory 246,042 646,929
Current portion of restricted cash -- 47,423
Prepaid expenses and other 1,115,038 585,583
Total current assets 5,110,535 10,185,168
Long-term notes receivable 2,164 --
Property & equipment 3,280,653 1,327,448
Less depreciation (972,700) (671,346)
Product development, net of amortization 2,521,345 --
Less amortization (72,604) --
Goodwill 4,915,755 4,915,755
Less amortization (761,634) (577,389)
Other assets 108,103 30,770
TOTAL ASSETS $ 14,131,616 $ 15,210,406
<PAGE>
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 332,309 $ 807,847
Current maturities of obligations under
capital leases 38,296 109,487
Trade accounts payable 804,406 134,522
Accrued & other current liabilities 782,778 649,456
Deferred gain -- 1,252,461
Total Current Liabilities 1,957,790 2,953,773
Long-Term Debt
Obligations under notes payable,
less current maturities 165,156 186,310
Obligations under capital leases,
less current maturities 17,989 88,876
Other liabilities 298,499 257,915
Total Long-Term Liabilities 481,644 533,101
Stockholders' Equity
Preferred stock, cumulative, $1.00 par value;
1,000,000 shares authorized:
Series A, 140,000 shares (liquidation
preference of $140,000) $ 140,000 $ 140,000
Series G, zero and 117,305 shares
liquidation preference
of $0 and $1,173,050) -- 117,305
Series H, 3 and 55 shares (liquidation
preference of $75,000 and $1,375,000) 3 55
Series I, zero and 5,385 shares (liquidation
preference of $0 and $5,385,000) -- 5,385
Common stock, $.01 par value; 80,000,000 shares
authorized; 35,091,532 and 24,311,188 shares
issued and outstanding at March 31,
and June 30, 1996 350,915 243,112
Additional paid-in-capital 26,728,723 22,193,525
Accumulated deficit, since July 1, 1993
quasi reorganization in which an accumulated
deficit of $4,140,595 was eliminated (10,975,850) (10,975,850)
Current year profit (loss) (4,551,609) --
Total Stockholders' Equity $ 11,692,183 $ 11,723,532
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 14,131,616 $ 15,210,406
<PAGE>
<TABLE>
CURTIS MATHES HOLDING CORPORATION
Consolidated Statements of Operations (Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31 March 31 March 31
1997 1996 1997 1996
<S> <C> <C> <C> <C>
REVENUE
Sales Revenues $ -- $ 1,881,184 $ 2,503,583 $ 7,648,483
Other Income -- -- -- --
TOTAL REVENUE $ -- $ 1,881,184 $ 2,503,583 $ 7,648,483
COSTS & EXPENSES
Costs of Goods Sold $ -- $ 1,701,605 $ 2,335,739 $ 6,910,408
Amortization 99,761 61,248 248,515 183,745
Financing Expense 3,201 69,174 20,948 824,638
Freight Expense 1,847 51,199 45,799 140,705
Occupancy & Office Expense 394,977 431,301 816,211 893,166
Payroll & Related Expenses 478,884 303,254 1,022,710 1,027,427
Professional Services/Fees 87,969 101,171 323,666 488,600
Travel & Entertainment 44,074 21,300 180,643 72,325
Taxes 19,449 133,714 60,000 251,220
Warranty Provision 314,859 -- 518,160 207,018
Advertising 462,316 -- 1,973,324 --
Other Expenses 642,182 106,832 877,734 440,840
TOTAL COSTS & EXPENSES $ 2,549,519 $ 2,980,798 $ 8,423,449 $ 11,440,092
OTHER INCOME:
Deferred gain on early
payoff of debt -- -- 1,252,498 --
Interest income 111,414 -- 300,281 --
Gain (loss) on sale
of assets (184,522) -- (184,522) --
TOTAL OTHER INCOME (73,108) -- 1,368,257 --
INCOME/(LOSS) FROM
CONTINUING OPERATIONS $(2,622,628) $ (1,099,614) $ (4,551,609) $ (3,791,609)
INCOME/(LOSS) FROM
DISCONTINUED OPERATIONS -- -- -- --
NET INCOME/(LOSS) $(2,622,628) $ (1,099,614) $ (4,551,609) $ (3,791,609)
NET INCOME/(LOSS) Per Share
Continued Operations (0.077) (0.063) (0.134) (0.258)
NET INCOME/(LOSS) Per Share (0.077) (0.063) (0.134) (0.258)
WEIGHTED AVERAGE
SHARES OUTSTANDING 33,943,831 17,350,234 33,943,831 14,711,318
</TABLE>
<PAGE>
<TABLE>
CURTIS MATHES HOLDING CORPORATION
Consolidated Statements of Cash Flows (Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31 March 31 March 31
1997 1996 1997 1996
<S> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Income/(Loss) $ (2,622,628) $ (1,099,614) $ (4,551,609) $ (3,791,609)
Adjustments to reconcile net profit/(loss)
to net cash used by operating activities
Amortization 248,515 61,248 248,515 183,745
Depreciation 122,440 151,049 301,354 313,208
Increase (decrease) in accounts payable 416,265 (102,133) 669,884 (481,856)
Increase (decrease) in accrued & other liabilities 249,672 (65,606) 173,906 (1,227,029)
Increase (decrease) in pre-petition liabilities -- (5,309) -- (39,897)
Increase (decrease) in warranty reserves 95,349 (18,817) 168,939 9,045
Increase (decrease) in deferred gain -- -- (1,252,461) --
Decrease (increase) in accounts receivable (21,688) 77,999 23,445 1,057,149
Decrease (increase) in subscriptions receivable (1,311,000) -- 3,040,500 --
Decrease (increase) in inventory 211,470 2,271,580 400,887 4,650,699
Decrease (increase) in other current assets 218,086 85,967 (529,455) 108,833
Decrease (increase) on other assets (107,633) (32,456) (77,333) 211,056
Decrease (increase) in restricted cash -- 24,000 47,423 208,632
Cash provided (used) by operating activities (2,501,151) 1,347,908 (1,336,004) 1,201,976
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of fixed assets (1,164,862) -- (1,953,205) (173,474)
Decrease (increase) in product development (1,889,770) -- (2,521,345) --
Cash used by investing activities (3,054,632) -- (4,474,550) (173,474)
CASH FLOW FROM FINANCING ACTIVITIES
Increase (decrease) in credit line advances -- (2,649,242) -- (5,124,354)
Issuance of long-term debt -- (405,058) -- --
Issuance of notes payable -- 7,215 -- 500,000
Issuance of notes receivable (239,232) 119,069 (132,763) --
Payments on notes receivable 8,606 -- -- (255,956)
Payments on long-term debt (109,235) -- (638,770) (972,253)
Increase - deferred gain/extinguishment of debt -- 1,223,729 -- 1,223,729
Redemption of preferred stock -- -- (1,170,305) (14,958)
Conversion of preferred stock to common stock (324,000) -- (2,189,475) --
Issuance of common stock for preferred stock 324,000 -- 2,189,475 --
Proceeds from common stock 3,591,000 386,314 3,591,000 3,645,225
Proceeds from preferred stock -- -- 1,936,795 --
Cash provided (used) by financing activities 3,251,139 (1,317,973) 3,585,957 (998,567)
NET INCREASE (DECREASE) IN CASH (2,304,643) 29,935 (2,224,597) 29,935
CASH AT BEGINNING OF PERIOD 4,230,527 190,712 4,150,481 190,712
CASH AT END OF PERIOD $ 1,925,884 $ 220,647 $ 1,925,884 $ 220,647
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
The following discussion provides information to assist in the
understanding of the Company's financial condition and results of
operations for the fiscal quarter ended March 31, 1997. It should be
read in conjunction with the Consolidated Financial Statements and Notes
thereto appearing in the Company's Annual Report on Form 10-K for fiscal
year ended June 30, 1996.
Results of Operations
Revenues. The Company reports no revenue in the third fiscal quarter
ended March 31, 1997 compared to $1,881,184 for the same quarter last
year. This decrease in revenue is primarily due to the elimination of
commodity products (television screen sizes of 27" or less), VCR's, and
other low margin products. Sales are expected to remain at low levels
until the introduction of the Company's Internet related product line
("uniViewTM") during the fourth fiscal quarter.
Net Sales. Net sales are net of discounts and are recognized
upon shipment of an order to a customer. The Company reports no net
sales for the third fiscal quarter, compared to $1,881,184 for the same
quarter last year.
Gross Profit. Gross Profit equals net sales less cost of goods sold
(both labor and material), non-direct, fixed manufacturing costs (such as
salaries, leasing costs, and depreciation charges related to production
operations), and non-direct, variable manufacturing costs (such as
supplies and employee benefits). In the third fiscal quarter, the
Company reports no Gross Profit compared to $179,579 for the same quarter
last year.
Selling, General and Administrative Expenses. Selling, general
and administrative expenses (SGA expense) consists primarily of non-
manufacturing salaries, sales commissions, and other general expenses.
The Company reports SGA expense of $2,549,519 for the third fiscal
quarter, compared to $1,279,193 for the same quarter last year. The
increase in these expenses is primarily due to the Company's commitment
to make uniView a superior Internet related product line, and the
resulting ramp-up costs of designing, producing, and implementing this
exciting new technology.
Net Income. As a result of the above factors, the Company reports
a net loss of $(2,622,627) for the third fiscal quarter, which translates
into a $(0.077) loss per share, compared to a net loss for the same
period last year of $(1,099,614), or loss per share of $(0.063). This
net loss is attributable to several factors: (1) significant advertising
and marketing expenses related to the introduction of the Company's new
Internet related products; (2) increased payroll and related expenses
required for ramp-up of the new product lines; and (3) accruals related
to reserves.
Interest Expense. The Company reports interest expense for the
third fiscal quarter of $3,201, compared to $69,174 for the same quarter
last year. Interest expense continued to decline during the third
quarter due to sufficient cash reserves on hand which alleviated the need
to use debt funds.
<PAGE>
Liquidity and Capital Resources
Management believes that sufficient cash resources and credit
facilities are available or can be obtained to support the Company's
continued growth and continues to evaluate additional sources of equity
and/or credit facilities to maintain and increase the growth and
profitability of the Company.
Quarterly Results
Management believes that, as a consumer electronics firm, the
Company's business is affected by the same seasonal factors that affect
the industry as a whole. The Company's sales and earnings may vary from
quarter to quarter, which are contingent upon demand for such product.
The Company's operating results for any particular quarter, therefore,
may not be indicative of the results for any future quarter or year.
Forward Looking Statements
This report may contain "Forward Looking Statements," which are
Company plans and projections which may or may not materialize, and which
are subject to various risks and uncertainties. For a discussion of risk
factors associated with some of these plans and projections, please refer
to the section entitled "Risk Factors" beginning on page 4 of the
Company's S-2 Registration Statement, as well as the Company's other SEC
filings, which contain additional discussion about those factors which
could cause actual results to differ from management's expectations.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On November 2, 1994, a class action suit was filed against wholly
owned subsidiary Curtis Mathes Corporation ("CM") alleging various
violations of the Minnesota consumer protection laws arising out of
certain rent-to-own transactions between certain former Curtis Mathes
dealers located in Minnesota and their customers. Damages were
unspecified and management believes that CM has no liability. However,
as with any litigation of this type and magnitude, defense costs and the
timing and degree of potential liability are uncertain and there can be
no assurance that these proceedings will not have an adverse impact on
the Company in the future. The action is currently pending and set for
trial during the summer of 1997 in the United States District Court for
the District of Minnesota, Fourth Division, under Cause No. Cv. 4-95-682,
styled Charlene Powell v. Curtis Mathes Corporation; 99 cent Video, Inc.,
d/b/a Curtis Mathes; CDM Enterprises, Inc., d/b/a Curtis Mathes Home
Entertainment Center; and John Doe, corporations d/b/a Curtis Mathes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Reference is made to the Exhibit Index beginning on page 10 of
this Form 10-Q for a list of all exhibits filed with and
incorporated by reference in this report.
(b) Reports on Form 8-K
During the three months ended March 31, 1997 the Company filed
one Current Report on Form 8-K, dated March 14, 1997, reporting
Sales of Equity Securities Pursuant to Regulation S.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Curtis Mathes Holding Corporation
(Registrant)
By: /s/ F. Shelton Richardson, Jr.
F. Shelton Richardson, Jr.
Vice President - Chief Financial Officer
(Principal Financial and Duly Authorized
Officer)
Date: May 15, 1997
CURTIS MATHES HOLDING CORPORATION
and Subsidiaries
EXHIBIT INDEX
Exhibit
Number Description of Exhibits
10.1* Amended Trademark License Agreement dated as of April
17, 1996 between Curtis Mathes Corporation, as
Licensor, and Curtis Mathes Marketing Corporation, as
Licensee, relating to Curtis Mathes trademark license
for uniViewT product category.
10.2* Trademark License Agreement dated as of January 10,
1997 between Curtis Mathes Corporation, as Licensor,
and Curtis Mathes Xpressway Corporation, as Licensee,
relating to Curtis Mathes trademark license for
Internet access and online services.
10.3* Manufacturing and Consulting Services Agreement dated
as of December 6, 1996 between Curtis Mathes
Marketing Corporation and McDonald Technologies
International, Inc., relating to the manufacture of
Curtis Mathes uniViewT set-top units.
10.4* RiscOS Licence and Development Agreement dated as of
February 20, 1997 between Curtis Mathes Marketing
Corporation and Acorn Computers Limited, relating to
the license and development of the Curtis Mathes
uniViewT technology.
10.5* Technology License and Distribution Agreement dated
as of March 28, 1997 between Curtis Mathes Marketing
Corporation and Sun Microsystems, Inc., relating to a
license of the Java technology.
27* Financial Data Schedule.
_______________
* Filed herewith.
<PAGE>
AMENDED TRADEMARK LICENSE AGREEMENT
AGREEMENT made this date by and between CURTIS MATHES CORPORATION
(hereinafter called ''Licensor''), and CURTIS MATHES MARKETING
CORPORATION (hereinafter called ''Licensee''):
WHEREAS Licensor owns the valuable federally registered trademark
''Curtis Mathes (and design)" (hereinafter referred to as the
''Trademark''), said Trademark having been used over the facilities of
numerous stations in radio and/or television broadcasting in allied
fields, and in promotional and advertising material in different
businesses and being well known and recognized by the general public and
associated in the public mind with Licensor, and
WHEREAS Licensee desires to utilize the Trademark upon and in
connection with the manufacture, sale and distribution of articles
hereinafter described,
NOW, THEREFORE, in consideration of the mutual promises herein
contained, it is hereby agreed:
1. GRANT OF LICENSE.
(a) LICENSED PRODUCTS. Upon the terms and conditions hereinafter
set forth, Licensor hereby grants to Licensee the right and license to
use the Trademark, and Licensee hereby accepts the right, license and
privilege of utilizing the Trademark solely and only upon and in
connection with the manufacture, sale and distribution of the following
articles:
uniViewTM large screen televisions (31" and larger),
specialized VCRs, other electronic appliances
(including uniViewTM Set-top units), and related
products.
such articles being hereinafter referred to as the "Licensed Products."
["uniViewTM" is a trademark of Licensee which pertains to a category of
electronic appliances manufactured and sold by Licensee utilizing
proprietary hardware and software which operates through the television
medium to provide access to the Internet, e-mail, fax capabilities,
current television program listings, and a full duplex speaker phone,
among other features.]
(b) TERM. The term of the license hereby granted shall be
effective on the date of execution of this Agreement and shall continue
for fifteen (15) years, unless sooner terminated in accordance with the
provisions hereof. At the end of this term, and at the end each term
thereafter, this license shall be automatically renewed for a five (5)
year term, unless either party hereto shall be given written notice to
the contrary at least one year prior to the expiration date of the then
current term. Licensor agrees that it will exercise its option of
nonrenewal only for good cause shown.
2. TERMS OF PAYMENT.
(a) RATE. Licensee agrees to pay to Licensor as royalty a sum
equal to one and one-half percent (1.5%) of gross receipts from sales of
the Licensed Products by Licensee or any of its affiliated, associated or
subsidiary companies. The term ''gross receipts'' shall mean gross
monies actually collected by Licensee, less returns.
(b) ROYALTY PAYMENTS. Royalties shall be due within thirty (30)
days after the close of each calendar quarter in which earned, during the
term of this Agreement or any extension hereof, and payment shall
accompany the statements furnished as required below. The receipt or
acceptance by Licensor of any of the statements furnished pursuant to
this Agreement or of any royalties paid hereunder (or the cashing of any
royalty checks paid hereunder) shall not preclude Licensor from verifying
the correctness thereof at any time, and in the event that any
inconsistencies or mistakes are discovered in such statements or
<PAGE>
payments, they shall immediately be rectified and the appropriate payment
made by Licensee.
(c) PERIODIC STATEMENTS. (i) Within thirty (30) days after the
close of each calendar quarter during the term of this Agreement or any
extension hereof, Licensee shall furnish to Licensor, a complete and
accurate statement certified to be accurate by Licensee showing the
number, description, gross sales price, itemized deductions from gross
sales price, and gross receipts from the sale of the Licensed Products
distributed and/or sold by Licensee during the preceding calendar
quarter, together with any returns made during the preceding calendar
quarter. Such statements shall be furnished to Licensor whether or not
any of the Licensed Products have been sold during the preceding calendar
quarter.
(ii) Within sixty (60) days after the end of each calendar
year during the term of this Agreement or any extension hereof, Licensee
shall furnish to Licensor, a statement showing the number, description,
gross sales price, itemized deductions from gross sales price, and gross
receipts from the sale of the Licensed Products distributed and/or sold
by Licensee during the preceding calendar year, together with any returns
made during the preceding calendar year, as shown on Licensee's business
books and records. If such statement discloses any underpayment of
royalties for that year, Licensee shall pay the amount of the
underpayment to Licensor at the time of the statement required under this
paragraph. Any overpayment shall be credited by Licensor to Licensee's
account.
(iii) All books and records maintained by Licensee relating to
operations concerning this License shall be available for inspection by
Licensor or any of its designated representatives at any reasonable,
mutually agreeable time and Licensee shall cooperate with any person
making such examination on behalf of Licensor. All books of account and
records shall be kept available for at least two (2) years after the
termination of this license.
3. EXCLUSIVITY. Nothing in this Agreement shall be construed to
prevent Licensor from granting any other licenses for the use of the
Trademark or from otherwise utilizing the Trademark in connection with
products not covered by this Agreement. Licensor agrees that it will not
use, and will grant no other licenses for the use of, the Trademark in
connection with the sale of the Licensed Products during the term of this
Agreement or any extension hereof.
4. ADVERTISING. Licensee agrees to use its best efforts to advertise
and promote the sale of the Licensed Products during the term of this
Agreement or any extension hereof.
5. GOOD WILL. Licensee recognizes the great value of the good will
associated with the Trademark, and acknowledges that the Trademark and
all rights therein and good will pertaining thereto belong exclusively to
Licensor, and that the Trademark has a secondary meaning in the mind of
the public.
6. MAINTENANCE OF TRADEMARK. Licensor will use its best efforts to
maintain, or cause to be maintained, the Trademark in the areas in which
the Licensed Products are sold to enable the Licensed Products to be
distributed and sold in those areas under the Trademark as provided
herein. Licensor will not permit any other person to use the Trademark
in connection with the Licensed Products.
7. PROTECTION OF TRADEMARK. Licensee and Licensor both agree to assist
the other to the extent necessary in the procurement of any protection or
to protect any of Licensor's rights to the Trademark, and either party
may commence or prosecute any claims or suits in its own name or join the
other as a party thereto. Licensee shall notify Licensor in writing of
<PAGE>
any action that Licensee takes on account of any infringements or
imitations by others in the Trademark.
8. INDEMNIFICATION BY LICENSEE AND PRODUCT LIABILITY INSURANCE.
Licensee hereby indemnifies Licensor and undertakes to defend itself
and/or Licensor against and hold Licensor harmless from any claims,
suits, loss and damage arising out of any allegedly unauthorized use of
any trademark, patent, process, idea, method or device by Licensee in
connection with the Licensed Products or any other alleged action by
Licensee and also from any claims, suits, loss and damage arising out of
alleged defects in the Licensed Products. Licensee agrees that it will
obtain, at its own expense, product liability insurance in a reasonable
amount from a recognized insurance company, providing adequate protection
for Licensor (as well as for Licensee) against any claims, suits, loss or
damage arising out of any alleged defects in the Licensed Products. As
proof of such insurance, a fully paid certificate of insurance naming
Licensor as an additional insured party will be furnished to Licensor by
Licensee before any Licensed Product is distributed or sold. Any
proposed change in certificates of insurance shall be furnished to
Licensor within thirty (30) days after such change. Licensor shall be
entitled to a copy of the then prevailing certificate of insurance, which
shall be furnished to Licensor by Licensee within thirty (30) days after
request by Licensor.
9. QUALITY OF LICENSED PRODUCTS. Licensee agrees that the Licensed
Products shall be of high standard and of such style, appearance and
quality as to be adequate and suited to their exploitation to the best
advantage and to the protection and enhancement of the Trademark and the
good will pertaining thereto, that such articles will be manufactured,
sold and distributed in accordance with all applicable Federal, State and
local laws, including but not limited to, product safety and labelling,
and that the same shall not reflect adversely upon the good Trademark of
Licensor. Licensee shall use the Trademark only with the Licensed
Products manufactured by or for the Licensee in accordance with
specifications, directions, and processes approved by the Licensor or its
representatives or agents from time to time and the quality of the
Licensed Products shall be according to industry standards as approved by
Licensor, which approvals shall not be unreasonably withheld.
10. WARRANTY AND SERVICING. Licensee agrees to provide for the warranty
and servicing of all Licensed Products manufactured, distributed or sold
by Licensee, unless otherwise agreed in writing.
11. LABELING. (a) Licensee agrees that it will cause to appear on or
within each Licensed Product sold by it under this license and on or
within all advertising, promotional or display material bearing the
Trademark the appropriate statutory notice of registration thereof. In
the event that any Licensed Product is marketed in a carton, container
and/or packing or wrapping material bearing the Trademark, such notice
shall also appear upon the said carton, container and/or packing or
wrapping material. Each and every tag, label, imprint or other device
containing any such notice and all advertising, promotional or display
material bearing the Trademark shall be submitted to Licensor for its
approval, which shall not be unreasonably withheld. Approval by Licensor
shall not constitute a waiver of Licensor's rights or Licensee's duties
under any provision of this Agreement.
(b) Licensee agrees to cooperate fully and in good faith with
Licensor for the purpose of securing and preserving Licensor's rights in
and to the Trademark. Nothing contained in this Agreement shall be
construed as an assignment or grant to the Licensee of any right, title
or interest in or to the Trademark, it being understood that all rights
relating thereto are reserved by Licensor, except for the license
hereunder to Licensee of the right to use and utilize the Trademark only
<PAGE>
as specifically and expressly provided in this Agreement. Licensee
hereby agrees that at the termination or expiration of this Agreement,
including any extension hereof, Licensee will be deemed to have assigned,
transferred and conveyed to Licensor any rights, equities, good will,
titles or other rights in and to the Trademark which may have been
obtained by Licensee or which may have vested in Licensee in pursuance of
any endeavors covered hereby, and that Licensee will execute any
instruments requested by Licensor to accomplish or confirm the foregoing.
Any such assignment, transfer or conveyance shall be without other
consideration than the mutual covenants and considerations of this
Agreement.
(c) Licensee hereby agrees that its every use of such Trademark
shall inure to the benefit of Licensor and that Licensee shall not at any
time acquire any rights in such Trademark by virtue of any use it may
make of such Trademark.
12. PROMOTIONAL MATERIAL. In all cases where Licensee desires artwork
involving Licensed Products, the cost of such artwork and the time for
the production thereof shall be borne by Licensee. All artwork and
designs involving the Trademark, or any reproduction thereof, shall,
notwithstanding their invention or use by Licensee, be and remain the
property of Licensor and Licensor shall be entitled to use the same and
to license the use of the same by others.
13. DISTRIBUTION. Licensee agrees that during the term of this license
it will use its best efforts to manufacture, distribute and sell the
Licensed Products and that it will make and maintain adequate arrangement
for their distribution.
14. TERMINATION. (a) Should the Licensee fail to comply with any
material provision of this Agreement, the Licensor may terminate this
license upon sixty (60) days' written notice to the Licensee, provided
that the Licensee has not corrected such default during the notice
period.
(b) Termination of the license under the provisions of this
paragraph shall be without prejudice to any rights which Licensor may
otherwise have against Licensee. Upon the termination of this license,
notwithstanding anything to the contrary herein, all royalties on sales
theretofore made shall become immediately due and payable.
15. FINAL STATEMENT UPON TERMINATION OR EXPIRATION. Sixty (60) days
before the expiration of this license and, in the event of its
termination, ten (10) days after receipt of notice of termination,
Licensee shall furnish to Licensor a statement showing the number and
description of Licensed Products on hand or in process. Licensor shall
have the right to take a physical inventory to ascertain or verify such
inventory and statement, and refusal by Licensee to submit to such
physical inventory by Licensor shall forfeit Licensee's right to dispose
of such inventory, Licensor retaining all other legal and equitable
rights Licensor may have in the circumstances.
16. DISPOSAL OF STOCK UPON TERMINATION OR EXPIRATION. After
termination of the license under the provisions of paragraph 14, Licensee
may, except as otherwise provided in this Agreement, dispose of Licensed
Products which are on hand or in process at the time notice of
termination is received. Such disposal may occur for a period of six (6)
months after notice of termination, provided advances and royalties with
respect to that period are paid and statements are furnished for that
period in accordance with paragraph 2. Notwithstanding anything to the
contrary herein, Licensee shall not manufacture, sell or dispose of any
Licensed Products after an expiration or a termination of this license
which is based on the failure of Licensee to affix notice of trademark
registration or any other notice to the Licensed Products, cartons,
containers, or packing or wrapping material or advertising, promotional
<PAGE>
or display material, or because of the departure by Licensee from the
quality and style approved by Licensor pursuant to paragraph 9.
17. EFFECT OF TERMINATION OR EXPIRATION. Upon and after the
expiration or termination of this license, all rights granted to Licensee
hereunder shall forthwith revert to Licensor, who shall be free to
license others to use the Trademark in connection with the manufacture,
sale and distribution of the Licensed Products and Licensee will refrain
from further use of the Trademark or any further reference to it, direct
or indirect, or anything deemed by Licensor to be similar to the
Trademark in connection with the manufacture, sale or distribution of
Licensee's products, except as provided in paragraph 16.
18. NOTICES. All notices and statements to be given, and all payments
to be made hereunder, shall be given or made at the current respective
addresses of the parties unless notification of a change of address is
given in writing, and the date of mailing shall be deemed the date the
notice or statement is given.
19. NO JOINT VENTURE. Nothing herein contained shall be construed to
place the parties in the relationship of partners or joint venturers, and
neither party shall have the power to obligate or bind the other in any
manner whatsoever.
20. NO WAIVER. None of the terms of this agreement can be waived or
modified except by an express agreement in writing signed by both
parties. There are no representations, promises, warranties, covenants
or undertakings other than those contained in this Agreement, which
represents the entire understanding of the parties. The failure of
either party hereto to enforce, or the delay by either party in
enforcing, any of its rights under this Agreement shall not be deemed a
continuing waiver or a modification thereof and either party may, within
the time provided by applicable law, commence appropriate legal
proceeding to enforce any or all of such rights. No person, firm, group
or corporation (whether included in the Trademark or otherwise) other
than Licensee and Licensor, and their successors, shall be deemed to have
acquired any rights by reason of anything contained in this Agreement.
IN WITNESS WHEREOF, the parties have caused this instrument to be
duly executed as of April 17, 1996.
LICENSOR: LICENSEE:
CURTIS MATHES CORPORATION CURTIS MATHES MARKETING
CORPORATION
By:____/s/ Bill Park____ By:_____/s/ Pat Custer______
Bill Park, Vice President Patrick A. Custer,President
Chief Operating Officer
<PAGE>
TRADEMARK LICENSE AGREEMENT
AGREEMENT made this date by and between CURTIS MATHES CORPORATION
(hereinafter called ''Licensor''), and CURTIS MATHES XPRESSWAY
CORPORATION (hereinafter called ''Licensee''):
WHEREAS Licensor owns the valuable federally registered trademark
''Curtis Mathes (and design)" (hereinafter referred to as the
''Trademark''), said Trademark having been used over the facilities of
numerous stations in radio and/or television broadcasting in allied
fields, and in promotional and advertising material in different
businesses and being well known and recognized by the general public and
associated in the public mind with Licensor, and
WHEREAS Licensee desires to utilize the Trademark upon and in
connection with providing Internet access and online services to
subscribers to the Licensee's Internet services as hereinafter described,
NOW, THEREFORE, in consideration of the mutual promises herein
contained, it is hereby agreed:
1. GRANT OF LICENSE.
(a) LICENSED SERVICES. Upon the terms and conditions hereinafter
set forth, Licensor hereby grants to Licensee the right and license to
use the Trademark, and Licensee hereby accepts the right, license and
privilege of utilizing the Trademark solely and only upon and in
connection with the sale and distribution of the following services:
Internet access and online services provided to
subscribers to the Curtis Mathes XpresswayT, which
may be accessed through uniViewTM or uniView-type
products.
such services being hereinafter referred to for all purposes as the
"Licensed Services."
["uniViewTM" is a trademark of Curtis Mathes Marketing Corporation which
pertains to a category of electronic appliances manufactured and sold by
Curtis Mathes Marketing Corporation utilizing proprietary hardware and
software which operates through the television medium to provide access
to the Internet, e-mail, fax capabilities, current television program
listings, and a full duplex speaker phone, among other features.]
(b) TERM. The term of the license hereby granted shall be
effective on the date of execution of this Agreement and shall continue
for fifteen (15) years, unless sooner terminated in accordance with the
provisions hereof. At the end of this term, and at the end each term
thereafter, this license shall be automatically renewed for a five (5)
year term, unless either party hereto shall be given written notice to
the contrary at least one year prior to the expiration date of the then
current term. Licensor agrees that it will exercise its option of
nonrenewal only for good cause shown.
2. TERMS OF PAYMENT.
(a) RATE. Licensee agrees to pay to Licensor as royalty a sum
equal to one and one-half percent (1.5%) of gross receipts from sales of
the Licensed Services by Licensee or any of its affiliated, associated or
subsidiary companies. The term ''gross receipts'' shall mean gross
monies actually collected by Licensee, less refunds.
(b) ROYALTY PAYMENTS. Royalties shall be due within thirty
(30) days after the close of each calendar quarter in which earned,
during the term of this Agreement or any extension hereof, and payment
shall accompany the statements furnished as required below. The receipt
or acceptance by Licensor of any of the statements furnished pursuant to
this Agreement or of any royalties paid hereunder (or the cashing of any
royalty checks paid hereunder) shall not preclude Licensor from verifying
the correctness thereof at any time, and in the event that any
inconsistencies or mistakes are discovered in such statements or
<PAGE>
payments, they shall immediately be rectified and the appropriate payment
made by Licensee.
(c) PERIODIC STATEMENTS. (i) Within thirty (30) days after the
close of each calendar quarter during the term of this Agreement or any
extension hereof, Licensee shall furnish to Licensor, a complete and
accurate statement certified to be accurate by Licensee showing the
number, description, gross sales price, itemized deductions from gross
sales price, and gross receipts from the sale of the Licensed Services
distributed and/or sold by Licensee during the preceding calendar
quarter, together with any refunds made during the preceding calendar
quarter.
(ii) Within sixty (60) days after the end of each calendar
year during the term of this Agreement or any extension hereof, Licensee
shall furnish to Licensor, a statement showing the number, description,
gross sales price, itemized deductions from gross sales price, and gross
receipts from the sale of the Licensed Services distributed and/or sold
by Licensee during the preceding calendar year, together with any refunds
made during the preceding calendar year, as shown on Licensee's business
books and records. If such statement discloses any underpayment of
royalties for that year, Licensee shall pay the amount of the
underpayment to Licensor at the time of the statement required under this
paragraph. Any overpayment shall be credited by Licensor to Licensee's
account.
(iii) All books and records maintained by Licensee relating to
operations concerning this License shall be available for inspection by
Licensor or any of its designated representatives at any reasonable,
mutually agreeable time and Licensee shall cooperate with any person
making such examination on behalf of Licensor. All books of account and
records shall be kept available for at least two (2) years after the
termination of this license.
3. EXCLUSIVITY. Nothing in this Agreement shall be construed to
prevent Licensor from granting any other licenses for the use of the
Trademark or from otherwise utilizing the Trademark in connection with
products or services not covered by this Agreement. Licensor agrees that
it will not use, and will grant no other licenses for the use of, the
Trademark in connection with the sale of the Licensed Services during the
term of this Agreement or any extension hereof.
4. ADVERTISING. Licensee agrees to use its best efforts to advertise
and promote the sale of the Licensed Services during the term of this
Agreement or any extension hereof.
5. GOOD WILL. Licensee recognizes the great value of the good will
associated with the Trademark, and acknowledges that the Trademark and
all rights therein and good will pertaining thereto belong exclusively to
Licensor, and that the Trademark has a secondary meaning in the mind of
the public.
6. MAINTENANCE OF TRADEMARK. Licensor will use its best efforts to
maintain, or cause to be maintained, the Trademark in the areas in which
the Licensed Services are sold to enable the Licensed Services to be
distributed and sold in those areas under the Trademark as provided
herein. Licensor will not permit any other person to use the Trademark
in connection with the Licensed Services.
7. PROTECTION OF TRADEMARK. Licensee and Licensor both agree to assist
the other to the extent necessary in the procurement of any protection or
to protect any of Licensor's rights to the Trademark, and either party
may commence or prosecute any claims or suits in its own name or join the
other as a party thereto. Licensee shall notify Licensor in writing of
any action that Licensee takes on account of any infringements or
imitations by others in the Trademark.
<PAGE>
8. INDEMNIFICATION BY LICENSEE AND PRODUCT LIABILITY INSURANCE.
Licensee hereby indemnifies Licensor and undertakes to defend itself
and/or Licensor against and hold Licensor harmless from any claims,
suits, loss and damage arising out of any allegedly unauthorized use of
any trademark, patent, process, idea, method or device by Licensee in
connection with the Licensed Services or any other alleged action by
Licensee and also from any claims, suits, loss and damage arising out of
alleged defects in the Licensed Services. Licensee agrees that it will
obtain, at its own expense, product liability insurance in a reasonable
amount from a recognized insurance company, providing adequate protection
for Licensor (as well as for Licensee) against any claims, suits, loss or
damage arising out of any alleged defects in the Licensed Services. As
proof of such insurance, a fully paid certificate of insurance naming
Licensor as an additional insured party will be furnished to Licensor by
Licensee before any Licensed Service is distributed or sold. Any
proposed change in certificates of insurance shall be furnished to
Licensor within thirty (30) days after such change. Licensor shall be
entitled to a copy of the then prevailing certificate of insurance, which
shall be furnished to Licensor by Licensee within thirty (30) days after
request by Licensor.
9. QUALITY OF LICENSED SERVICES. Licensee agrees that the Licensed
Services shall be of high standard and of such style, appearance and
quality as to be adequate and suited to their exploitation to the best
advantage and to the protection and enhancement of the Trademark and the
good will pertaining thereto, that such services will be sold and
distributed in accordance with all applicable Federal, State and local
laws, and that the same shall not reflect adversely upon the good
Trademark of Licensor. Licensee shall use the Trademark only with the
Licensed Services sold and distributed by the Licensee in accordance with
specifications, directions, and processes approved by the Licensor or its
representatives or agents from time to time and the quality of the
Licensed Services shall be according to industry standards as approved by
Licensor, which approvals shall not be unreasonably withheld.
10. WARRANTY AND SERVICING. Licensee agrees to provide for the warranty
and servicing of all Licensed Services distributed or sold by Licensee,
unless otherwise agreed in writing.
11. LABELING. (a) Licensee agrees that it will cause to appear on or
within each Licensed Service sold by it under this license and on or
within all advertising, promotional or display material bearing the
Trademark the appropriate statutory notice of registration thereof. Each
and every label, or imprint containing any such notice and all
advertising, promotional or display material bearing the Trademark shall
be submitted to Licensor for its approval, which shall not be
unreasonably withheld. Approval by Licensor shall not constitute a waiver
of Licensor's rights or Licensee's duties under any provision of this
Agreement.
(b) Licensee agrees to cooperate fully and in good faith with
Licensor for the purpose of securing and preserving Licensor's rights in
and to the Trademark. Nothing contained in this Agreement shall be
construed as an assignment or grant to the Licensee of any right, title
or interest in or to the Trademark, it being understood that all rights
relating thereto are reserved by Licensor, except for the license
hereunder to Licensee of the right to use and utilize the Trademark only
as specifically and expressly provided in this Agreement. Licensee
hereby agrees that at the termination or expiration of this Agreement,
including any extension hereof, Licensee will be deemed to have assigned,
transferred and conveyed to Licensor any rights, equities, good will,
titles or other rights in and to the Trademark which may have been
obtained by Licensee or which may have vested in Licensee in pursuance of
<PAGE>
any endeavors covered hereby, and that Licensee will execute any
instruments requested by Licensor to accomplish or confirm the foregoing.
Any such assignment, transfer or conveyance shall be without other
consideration than the mutual covenants and considerations of this
Agreement.
(c) Licensee hereby agrees that its every use of such Trademark
shall inure to the benefit of Licensor and that Licensee shall not at any
time acquire any rights in such Trademark by virtue of any use it may
make of such Trademark.
12. PROMOTIONAL MATERIAL. In all cases where Licensee desires artwork
involving Licensed Services, the cost of such artwork and the time for
the production thereof shall be borne by Licensee. All artwork and
designs involving the Trademark, or any reproduction thereof, shall,
notwithstanding their invention or use by Licensee, be and remain the
property of Licensor.
13. DISTRIBUTION. Licensee agrees that during the term of this license
it will use its best efforts to distribute and sell the Licensed Services
and that it will make and maintain adequate arrangement for their
distribution.
14. TERMINATION. (a) Should the Licensee fail to comply with any
material provision of this Agreement, the Licensor may terminate this
license upon sixty (60) days' written notice to the Licensee, provided
that the Licensee has not corrected such default during the notice
period.
(b) Termination of the license under the provisions of this
paragraph shall be without prejudice to any rights which Licensor may
otherwise have against Licensee. Upon the termination of this license,
notwithstanding anything to the contrary herein, all royalties on sales
theretofore made shall become immediately due and payable.
15. EFFECT OF TERMINATION OR EXPIRATION. Upon and after the
expiration or termination of this license, all rights granted to Licensee
hereunder shall forthwith revert to Licensor, who shall be free to
license others to use the Trademark in connection with the sale and
distribution of the Licensed Services and Licensee will refrain from
further use of the Trademark or any further reference to it, direct or
indirect, or anything deemed by Licensor to be similar to the Trademark
in connection with the sale or distribution of Licensee's services.
16. NOTICES. All notices and statements to be given, and all payments
to be made hereunder, shall be given or made at the current respective
addresses of the parties unless notification of a change of address is
given in writing, and the date of mailing shall be deemed the date the
notice or statement is given.
17. NO JOINT VENTURE. Nothing herein contained shall be construed to
place the parties in the relationship of partners or joint venturers, and
neither party shall have the power to obligate or bind the other in any
manner whatsoever.
18. NO WAIVER. None of the terms of this agreement can be waived or
modified except by an express agreement in writing signed by both
parties. There are no representations, promises, warranties, covenants
or undertakings other than those contained in this Agreement, which
represents the entire understanding of the parties. The failure of
either party hereto to enforce, or the delay by either party in
enforcing, any of its rights under this Agreement shall not be deemed a
continuing waiver or a modification thereof and either party may, within
the time provided by applicable law, commence appropriate legal
proceeding to enforce any or all of such rights. No person, firm, group
<PAGE>
or corporation (whether included in the Trademark or otherwise) other
than Licensee and Licensor, and their successors, shall be deemed to have
acquired any rights by reason of anything contained in this Agreement.
IN WITNESS WHEREOF, the parties have caused this instrument to be
duly executed as of January 10, 1997.
LICENSOR: LICENSEE:
CURTIS MATHES CORPORATION CURTIS MATHES XPRESSWAY
CORPORATION
By:_____/s/ Bill Park___ By:___/s/ Pat Custer_____________
Bill Park, Vice President Patrick A. Custer, President
Chief Operating Officer
<PAGE>
MANUFACTURING and CONSULTING SERVICES AGREEMENT
THIS Manufacturing and Consulting Agreement ("Agreement") is made
and entered into by and between MCDONALD TECHNOLOGIES INTERNATIONAL,
INC., a Texas corporation having its principal office at 2434 McIver
Lane, Carrollton, Texas 75006, ("McDonald Technologies"), and CURTIS
MATHES MARKETING CORPORATION, a corporation having its principal office
at 10911 Petal Street, Dallas, Texas 75238, U.S.A. ("Curtis Mathes").
This Agreement states the terms and conditions which shall govern the
manufacture by McDonald Technologies and the purchase by Curtis Mathes of
certain models of its uniView Set-top Units ("Product"), and which shall
govern consultation provided by McDonald Technologies on the overall
Product project (the "uniView Project").
1. Services Provided
(a) Curtis Mathes will design and develop the Product.
(b) McDonald Technologies will manufacture and deliver to Curtis Mathes,
certain models of the Product, on a contract basis as evidenced by
periodic purchase orders.
(c) Pursuant to the consulting agreement outlined below, Curtis Mathes
may obtain McDonald Technologies' advice concerning overall management
and coordination of the uniView Project.
2. Definitions: The following definitions shall apply for all purposes
of this Agreement:
(a) "Critical Defect" shall mean a defect that has caused or is
reasonably likely to cause a significant injury to persons or to property
because of a hazardous or unsafe condition to individuals using or
maintaining the Product.
(b) "Major Defect" shall mean a defect other than Critical Defect that
renders the Product unusable or significantly reduces the reliability or
quality of performance.
(c) "Minor Defect" shall mean a defect that is neither a Critical Defect
nor a Major Defect which is not likely to materially reduce the usability
of the Product, but does result in some slight deterioration in quality
or appearance.
(d) "Shipment" shall mean finished Product which is or may be delivered
at one time to Curtis Mathes or its designee.
(e) "uniView" shall mean the Curtis Mathes trademark associated with the
functionality of a universal communication appliance with the capability
of making the television set the information and entertainment center for
the household, the features of which include, without limitation, access
to the Internet, telephony, e-mail, and fax capabilities, as well as
enhanced interaction between the owner and television programming. This
functionality is provided to the owner by a stand alone set-top unit (the
Product covered by Part 1 of this Agreement) or through such an appliance
built into a television set, and by Internet support services (the
"Backroom") delivered through connection of the appliance to a Curtis
Mathes Internet Service Provider (ISP) network.
(f) "uniView Project" shall mean the combination of all of the
activities necessary to bring uniView to market.
Part 1: Product Manufacturing
3. Quantity and Orders:
(a) McDonald Technologies agrees to manufacture, according to Curtis
Mathes' specifications, units of Product, the quantity of which shall be
determined by each duly executed purchase order ("Purchase Orders"), for
Curtis Mathes according to the following standards: 0.0% Critical Defect
(safety) Acceptable Quality Level (AQL), 1.5% Major Defect AQL, and 4.0%
Minor Defect AQL, tested in accordance with the sampling procedures in
MIL STD 105 Level II.
<PAGE>
(b) Curtis Mathes agrees to pre-purchase the inventory required to
produce the Product at such time and under such terms as the parties may
mutually agree.
(c) Purchase and delivery of Product shall be made pursuant to separate
purchase orders issued to McDonald Technologies by Curtis Mathes. Each
purchase order shall be non-cancelable except as described in paragraph
(d) of Article 11 hereof, shall be in writing and shall indicate the
price, quantities, shipping schedules and such other terms of sale as may
be mutually agreed ("Purchase Orders"), and shall be effective only upon
written acceptance by McDonald Technologies.
(d) Unless the parties otherwise agree in writing, Curtis Mathes agrees
to provide, at least sixty (60) days prior to each month-end delivery
date, (the "Proposed Delivery Date"), a by-model, by-month estimate of
anticipated orders for the ensuing 12-month delivery period (the
"Forecast").
4. Production Unit Prices: Production unit prices will be based on
actual material costs plus mutually negotiated material overhead rates
and labor rates per unit, all as evidenced by each written Purchase Order
signed by the parties. Payment on production units shall be due ten (10)
days after receipt of invoices by Curtis Mathes. Curtis Mathes shall be
responsible for pre-payment of agreed material liabilities. Invoices of
finished Product will be net of prepaid material costs and negotiated
prepaid overhead.
5. Shipment and Delivery:
(a) Curtis Mathes and its designated consultants will provide
information to McDonald Technologies, including specifications, bills of
material, and schematics, which will enable McDonald Technologies to make
reasonable efforts to strive for the best possible Delivery Date for
Product, based on the date of receipt of final design, specifications,
and bills of material.
(b) The final production and delivery schedule for Product will be
determined by mutual agreement of the parties upon finalization of the
Product design, as evidenced by a Purchase Order.
(c) All sales of Product shall be FOB McDonald Technologies' warehouse
and Curtis Mathes will make all freight arrangements.
(d) McDonald Technologies shall exercise reasonable commercial efforts
to have available for Curtis Mathes on or before each Proposed Delivery
Date the Product specified in the Purchase Order for such delivery date.
(e) Curtis Mathes shall use reasonable commercial efforts to ship or
take delivery of such finished Product on or about the Proposed Delivery
Date.
6. Paragraph deleted.
7. Serialization and Labeling: McDonald Technologies shall apply to
each Product manufactured under this Agreement the Curtis Mathes' brand
name, model number designated by Curtis Mathes, serial number and F.C.C.
identifier, as coordinated between the parties. McDonald Technologies
shall also apply to all applicable shipping cartons, a label indicating
the Curtis Mathes' brand name, model number, serial number and other
pertinent information. The serial number will be such as will enable
determination of the actual date of production of each unit. Each
shipping invoice shall contain the serial numbers for the finished
Product shipped under that invoice.
8. Printed Materials: All printed materials, including, without
limitation, the Product Operator's Manual and Warranty Materials, shall
be prepared by Curtis Mathes or at its direction and timely provided to
McDonald Technologies in sufficient quantities to be packed in the carton
with each unit of the Product.
<PAGE>
9. Trademarks: No proprietary or other rights with respect to the
trademarks, trade names or brand names of either party is conferred upon
the other party by this Agreement, either expressly or by implication.
10. Product Liability:
(a) Insurance: Effective at the first delivery of Product under this
agreement, each party shall obtain and maintain, at its own expense,
product liability insurance in a responsible insurance company or
companies licensed to do business in the State of Texas and rated A+XII
or better in Best's Insurance Guide, with broad form vendor's endorsement
naming the other party as additional insured, with a combined single
limit (including bodily injury and/or property damage) in at least the
amount of $1,000,000 each occurrence/$2,000,000 aggregate with each
policy naming the other party as a co-insured. Insurance obtained by
McDonald Technologies shall cover manufacturing defects in the Product;
all Product design defects shall be covered by insurance obtained by
Curtis Mathes. Evidence of renewals, changes, or termination of product
liability insurance will require ten (10) days written notice to the
other party. Each party shall timely furnish the other with certificates
of insurance and evidence of renewals. This provision in no way modifies
either parties' obligation to indemnify the other as set forth hereunder.
(b) Indemnification:
(1) McDonald Technologies shall indemnify and hold harmless Curtis
Mathes against any and all causes of action, claims, demands,
losses, expenses, damages and judgments incurred (a) as a result of
a workmanship defect in the Product, made by McDonald Technologies,
and (b) as a result of injury or death to any person or damage to
any property which results or is alleged to have resulted from
defective workmanship in the Product or the use or servicing of the
Product by Curtis Mathes in accordance with McDonald Technologies'
instructions. McDonald Technologies shall be responsible for the
defense of all such actions, causes, claims and demands as well as
any resulting expenses, damages and judgments. Curtis Mathes, at
its option, shall have the right to jointly defend such cause of
actions, claims and demands and to participate in the settlement of
the same. Curtis Mathes will cooperate with all reasonable requests
relating to the defense of the same and McDonald Technologies will
not allow any consent judgment entered against Curtis Mathes without
prior written consent. McDonald Technologies shall keep Curtis
Mathes fully apprised of the current status of each cause of action,
claim or demand upon Curtis Mathes' request.
(2) Curtis Mathes shall indemnify and hold harmless McDonald
Technologies against any and all third party causes of action,
claims, demands, losses, expenses, damages and judgments incurred
(a) as a result of any design defects in the Product, and (b) as a
result of injury or death to any person or damage to any property
which results or is alleged to have resulted from defective design
in the Product or the use or the installation or the servicing of
the Product by Curtis Mathes independent of McDonald Technologies.
Curtis Mathes shall be responsible for the defense of all such
actions, causes, claims and demands as well as the expenses, damages
and judgments. McDonald Technologies, at its option, shall have the
right to jointly defend such cause of actions, claims and demands
and to participate in the settlement of the same. McDonald
Technologies will cooperate with all reasonable requests relating to
the defense of the same and McDonald Technologies will not allow any
consent judgment entered against McDonald Technologies without prior
written consent. Curtis Mathes shall keep McDonald Technologies
fully apprised of the current status of each cause of action, claim
or demand upon McDonald Technologies' request.
<PAGE>
(c) Patent Indemnity: Each party represents and warrants that it has
the authority to use any patented property used in the manufacture of the
Product. Each party shall defend at its own expense, any suit or
proceeding brought against the other so far as based on a claim that any
goods, or the normal use thereof, furnished under this Agreement
constitute any infringement of any patent of the United States or any
foreign country, if such patent is provided by such indemnitor party, and
if such indemnitor party is notified promptly in writing and given
authority, information and assistance for the defense of same, and such
indemnitor party shall pay all damages and costs awarded therein against
the other party.
11. Incoming Inspection:
(a) If any Shipment of Product inspected hereunder does not meet the
standard of 0.0% Critical Defect (safety) Acceptable Quality Level
("AQL"), 1.5% Major Defect AQL, and 4.0% Minor Defect AQL in accordance
with the sampling procedures in MIL STD 105 Level II, Curtis Mathes shall
notify McDonald Technologies within seven (7) days after the completion
of its inspection of its rejection of the units of Product comprising the
inspected Shipment. Said inspection shall be completed within twenty-one
(21) days after arrival at Curtis Mathes' designated location.
(b) Within fifteen (15) days of receipt of Curtis Mathes' notice of
rejection of such units by reason of their defects, and after McDonald
Technologies has had an opportunity to inspect the Product Shipment to
verify the defects, McDonald Technologies shall, at its sole option and
election, advise Curtis Mathes that it will: (i) repair the units within
thirty (30) days of notice, at McDonald Technologies' expense, at the
place designated by mutual agreement of both parties, subject to the
availability of parts, or (ii) reimburse Curtis Mathes its reasonable,
actual cost to repair said units, provided, however, said reimbursement
shall not exceed the unit price of Product, or (iii) accept return and
replacement of the units, pursuant to a Return Material Authorization
("RMA") issued by McDonald Technologies, at McDonald Technologies'
expense.
(c) If, after notice of rejection and McDonald Technologies' opportunity
to inspect, the parties agree that a Shipment contains a Critical Defect,
it may be returned to McDonald Technologies at McDonald Technologies'
expense. McDonald Technologies shall then repair such Critical Defect,
and deliver the Product freight prepaid to Curtis Mathes within thirty
(30) days from receipt of such returned Product.
(d) Curtis Mathes, without cost, has the right to terminate this
Agreement by sending a sixty (60) days prior written notice, except for
Product already delivered and accepted, as well as such Product, raw
materials and parts as mentioned hereinbelow, in the event defective
Product in three (3) consecutive Shipments exceeds the Critical Defect or
Major Defect AQL provided hereinabove. Paragraph (b) and (c) of Article
26 hereof shall apply to such termination.
12. Epidemic Failure and Warranty: In the event that units of a
particular Product model containing the same Critical Defect or Major
Defect in workmanship discovered within eighteen (18) months of the date
of manufacture shall exceed three percent (3%) of the total of such
Product manufactured within a particular calendar year, McDonald
Technologies shall, at its sole option, remedy such defects, by: (1)
repairing such units, (2) replacing such units, (3) crediting Curtis
Mathes for such units at the contract unit price, or (4) reimbursing
Curtis Mathes for its reasonable expense including labor and materials in
correcting such defect. McDonald Technologies reserves the right to
inspect allegedly defective Product. Curtis Mathes shall notify McDonald
<PAGE>
Technologies of any claim of such Critical Defect or Major Defect within
thirty (30) days after discovery of such part or component in the same
application.
13. Servicing and Spare Parts:
(a) Servicing for Product shall be the responsibility of Curtis Mathes,
except in circumstances set out in Article 11 above (Incoming Shipment
Rejection).
(b) Spare parts for Product will be supplied to Curtis Mathes on a
commercial basis according to Curtis Mathes' written Purchase Order.
Complete and current spare parts lists, including prices, as identified
in a bill of materials, will be furnished to Curtis Mathes (i) prior to
the first delivery of Product, and (ii) periodically, as such lists are
updated. Payment for spare parts shall be made in accordance with
Article 4 hereof. Price of spare parts shall be FOB McDonald
Technologies' dock.
(c) All spare parts for Product remaining on hand after the date of the
last delivery of Product to Curtis Mathes shall belong to Curtis Mathes
if all of McDonald Technologies' invoices with respect to such parts have
been paid. Such parts shall include, without limitation, electrical
parts, cosmetic parts, assembled parts such as printed circuit board and
mechanism parts, and parts exclusively needed for Product.
14. Governmental Regulations: Curtis Mathes shall, with the assistance
of McDonald Technologies, ensure that all Product complies with all
applicable United States federal, state and local governmental
requirements including, without limitation, the requirements of the
Federal Communications Commission ("FCC"), Department of Health and Human
Services ("DHHS"), and Underwriters Laboratories ("UL") if elected,
and/or any applicable association certification on all Product for which
standards for sales operation, consumption and performance guidelines
have been established.
15. Changes: The parties may mutually agree upon commercially
reasonable changes in Product specifications at any time in order to
improve reliability, quality or safety, or to comply with applicable
laws, or to adapt to changes in materials or component sources and any
such change shall be reflected in a duly executed Purchase Order.
Part 2: Consulting Services
16. Consulting Services: McDonald Technologies agrees to act as a
consultant and to advise Curtis Mathes with respect to the coordination
of services provided to the uniView Project by any other third parties,
including without limitation, coordination with Acorn, negotiating
technical impacts upon feasibility and functionality of the Product, and
other services as provided in Exhibit "A" attached hereto.
17. Time of Essence: Both Parties acknowledge and agree that time is of
the essence in the timely introduction of uniView to market. Each party
has agreed to use commercially reasonable efforts to deliver the
necessary services required to complete the Product.
18. Compensation and Expenses: McDonald Technologies shall be paid in
accordance with the rate and in the manner reflected in previous invoices
which have been submitted to, and paid by, Curtis Mathes for all
consulting services rendered and expenses incurred prior to the execution
of this Agreement. All payments received by McDonald Technologies prior
to the execution of this Agreement have been for consulting services
only.
19. Equipment: Except for services that must be performed on or with
Curtis Mathes' equipment, McDonald Technologies shall provide the
equipment used in performing the services described in this Agreement
<PAGE>
20. Communication and Reports: Communication may be written or oral
between McDonald Technologies' representatives, Curtis Mathes'
representatives, and any other third party contributing to the uniView
Project. McDonald Technologies shall have access to and the authority to
communicate with all other third parties contributing to the uniView
Project. On Curtis Mathes' request, McDonald Technologies shall prepare
any reports or other written documents that are reasonable or mutually
agreed upon.
21. Meetings: McDonald Technologies and Curtis Mathes shall attend
weekly program review meetings as may be mutually agreed and scheduled.
22. Noncompetition: McDonald Technologies agrees that, during the term
of this Agreement, McDonald Technologies shall not engage or participate
in any competitive consulting activity relating to uniView, either
directly or indirectly, as an employee, employer, consultant, agent,
principal, partner, stockholder, corporate officer, director, or in any
other individual or representative capacity.
23. Ownership of Patent, Design, and Copyright:
(a) With respect to all consulting services in connection with uniView
and pursuant to this Agreement, McDonald Technologies makes no claim to
(i) all intellectual property including, without limitation, all ideas
and concepts contained in computer programs and software, documentation
or other literature or illustrations that are conceived, developed,
written, or contributed by McDonald Technologies; (ii) all rights in all
works prepared by McDonald Technologies, including patent rights and
copyrights applicable to any of the intellectual property described
above, which shall constitute "works made for hire" for purposes of
copyright law; (iii) any and all Inventions made, developed, perfected,
devised, conceived or reduced to practice by McDonald Technologies as a
result of the consulting services performed by McDonald Technologies in
connection with uniView and pursuant to this Agreement; and (iv) any and
all original works of authorship (and all copyrights therein) created by
McDonald Technologies as a result of the consulting services performed by
McDonald Technologies in connection with uniView pursuant to this
Agreement.
(b) McDonald Technologies agrees that any and all of the intellectual
property described above ("Intellectual Property") is the sole property
of Curtis Mathes, and McDonald Technologies hereby assigns and agrees to
assign to Curtis Mathes, its successors and assigns, any and all of
McDonald Technologies right, title, and interest in and to any and all
such Intellectual Property. McDonald Technologies will, at any time
during the term of this Agreement or thereafter, upon reasonable request
and without further compensation therefor, but at no expense to McDonald
Technologies, do all lawful acts reasonably required by Curtis Mathes,
including the execution of papers and oaths and the giving of testimony,
that in the reasonable opinion of Curtis Mathes, its successors and
assigns, may be necessary or desirable to assign any claim of ownership
in the Intellectual Property to Curtis Mathes.
(c) McDonald Technologies shall ensure that each and every one of its
representatives, employees, and agents have signed and are bound by a
separate agreement containing provisions substantially similar to, and
consistent with, those contained hereinabove and contained in the
Confidentiality and Nondisclosure Agreement between the parties dated
October 21, 1996 concerning access to and the treatment of confidential
information, as defined therein, and concerning ownership and assignment
of work products, inventions, and original works of authorship created by
McDonald Technologies in connection with the performance of McDonald
Technologies' duties pursuant to this Agreement or any other agreement
with Curtis Mathes. McDonald Technologies shall timely furnish Curtis
Mathes with copies of such signed agreements upon request.
<PAGE>
24. Use of Copyrighted Materials: Each party hereto warrants to the
other that any materials provided by one party for use by the other party
pursuant to this Agreement shall not contain any proprietary material
owned by any third party that is protected under the Copyright Act or any
other similar law. Each party shall be solely responsible for ensuring
that any materials it provides pursuant to this Agreement satisfy this
requirement and each party hereto agrees to hold the other party harmless
from all liability or loss to which such other party is exposed on
account of such parties' failure to perform this duty.
General Conditions
25. Term: This Agreement shall be deemed to be effective as of December
6, 1996 and shall remain in effect until the earlier of (a) termination
by either party according to the terms hereof, or (b) fulfillment of the
purposes of this Agreement; provided that, with respect to Product
ordered during the term hereof, the provisions of this Agreement shall
govern.
26. Termination:
(a) This Agreement may be terminated by either party upon written notice
to the other (i) in the event of a breach by the other party of any
material term, condition or warranty of this Agreement and the failure to
cure said breach within thirty (30) days after written notice thereof or
within such other time as may be set forth in this Agreement, except that
in the case of nonpayment by Curtis Mathes of any amounts owed to
McDonald Technologies hereunder, (whether an invoice for Product, pre-
payment of materials, or otherwise) such breach must be cured within
twenty-one (21) days after written notice thereof; or (ii) at any time
upon or after the filing by the other party of a petition in bankruptcy
on insolvency, or upon or after any adjudication that the other party is
insolvent, or after the filing by the other party of any petition or
answer seeking reorganization, readjustment or arrangement of the
business of the other party under any law relating to bankruptcy or
insolvency, or upon or after the appointment of a receiver for all or
substantially all the property of the other party, or upon or after the
making by the other party of any assignment or attempted assignment for
the benefit of creditors, or upon or after 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, or upon or
after the making of any petition in bankruptcy, insolvency or for
reorganization filed against said other party and not removed within
ninety (90) days thereafter.
(b) The termination or expiration of this Agreement shall not affect or
impair the rights and obligations of either party regarding Product which
is subject to a valid Purchase Order, nor relieve any party of any
obligation or liability accrued under this Agreement prior to such
termination or expiration; nor affect or impair the rights of either
party arising under this Agreement prior to such termination or
expiration.
(c) In the event of a breach of this agreement and failure timely to
cure as provided above, Purchase Orders accepted but not yet executed at
the time of such termination may be canceled by either party,
notwithstanding Article 3 hereof. However, if McDonald Technologies
possesses finished Product manufactured under such Purchase Orders, at
the time of such termination, Curtis Mathes shall accept and purchase
such finished Product. McDonald Technologies shall make an outgoing
inspection and confirm no Critical Defect or Major Defect before delivery
of such finished Product. Curtis Mathes shall further accept and
purchase all raw materials and parts which are to be exclusively used for
Product for Curtis Mathes and which McDonald Technologies has, at the
time of such termination, already arranged for procurement in accordance
<PAGE>
with Curtis Mathes' outstanding Purchase Orders. Curtis Mathes shall
have no other liability to McDonald Technologies, and in particular
Curtis Mathes shall not be liable for lost profits, overhead, incidental
or consequential damages.
27. Independent Contractor: McDonald Technologies shall perform its
duties under this Agreement as an independent contractor. McDonald
Technologies is not to be deemed an employee of Curtis Mathes, and shall
not have or claim any right arising from employee status. McDonald
Technologies has the sole discretion to determine the manner in which the
consultation services are to be performed. However, Curtis Mathes
retains the right to exercise final judgment with respect to the ultimate
development of the uniView Project and has responsibility for such
development.
28. Force Majeure: Neither McDonald Technologies nor Curtis Mathes
shall be liable for delay or failure in the performance of its
obligations under this Agreement arising from any of the following
events: (i) fire, flood, earthquake, explosion or other similar or
dissimilar act of God, strikes, lockouts, picketing and other labor
disturbances, war (declared or undeclared) or other matter beyond the
reasonable control of the party claiming benefit under this Article; or
(ii) an act of governmental or quasi-governmental authorities or the
United States or any political subdivision, department or agency thereof,
or regulations or restrictions of law or of a court of competent
jurisdiction; provided, however, that the party claiming benefit hereof
shall resume performance promptly upon the removal of the cause for
delay, and provided, further, that said party shall notify the other
party promptly of the occurrence of said cause.
29. Notices: All notices required or permitted hereunder shall be in
writing and shall be deemed duly given when personally delivered or sent
by certified mail, return receipt requested, or by telecopy facsimile,
immediately confirmed by letter posted as aforesaid, as follows:
To Curtis Mathes: Curtis Mathes Marketing Corporation
10911 Petal Street
Dallas, Texas 75238
Attn: Bill Park, Vice President, Chief Operating Officer
To McDonald Technologies: McDonald Technologies International, Inc.
2434 McIver Lane
Carrollton, Texas 75006
Attn: David LaCava, Operations/Contracts Manager
and to the attorney for each party in respect of notices of breach of
this Agreement, as follows:
McDonald Technologies': Cleve Clinton
Brown, McCarroll & Oaks, Hartline
300 Crescent Court, Suite 1400
Dallas, Texas 75201
Curtis Mathes Marketing Corporation: Billy J. Robinson, General Counsel
10911 Petal Street
Dallas, Texas 75238
or to such other address as either party or its attorney may hereafter
designate in writing by like notice.
30. Entire Agreement, Amendments, and Modification: Except for the
Confidentiality and Nondisclosure Agreement between the parties dated
October 21, 1996, and the consulting services currently being performed
by McDonald Technologies (including but not limited to the services
identified in the attached Exhibit A) which shall remain in full force
and effect, this Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all
previous agreements or understandings made or had by the parties. No
addition to, deletion from, or modification of any of the provisions of
<PAGE>
this Agreement shall be binding upon the parties unless it is made in
writing, references this Agreement and is signed by both parties. Both
parties agree however, upon request of the other party, to review the
financial, technical, and schedule status of the Product supply portion
of this Agreement and to make such adjustments as may be required in good
faith to accomplish the purposes of this Agreement.
31. Applicable Law: This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas.
32. Delays and Waivers: All waivers under this Agreement shall be in
writing. The delay or omission by Curtis Mathes or McDonald Technologies
in exercising any right or remedy hereunder shall not be a waiver thereof
or of any other right or remedy in the future. All rights and remedies
of Curtis Mathes and McDonald Technologies under and pursuant to this
Agreement are cumulative.
33. Secrecy: Curtis Mathes and McDonald Technologies agree that the
timing and content of any release of information to the public or
other third parties with respect to this Agreement shall be only as
mutually agreed in writing between the parties. McDonald Technologies
hereby designates David LaCava as its representative to address all
inquiries from third parties concerning this Agreement. Curtis Mathes
hereby designates Neal J. Katz as its representative to address all
inquiries from third parties concerning this Agreement.
IN WITNESS WHEREOF, each party hereto has caused this Agreement to
be executed by its duly authorized officer or representative to be
effective as of December 6, 1996.
CURTIS MATHES MARKETING CORPORATION
By:___/s/ Bill Park________________________
Bill Park, Vice President
Chief Operating Officer
MCDONALD TECHNOLOGIES INTERNATIONAL, INC.
By:____/s/ David LaCava__________________
David LaCava
Operations/Contract Manager
Exhibit "A"
Consulting Services:
Consumer Electronics Show - McDonald Technologies will provide
technical support in preparation for the consumer electronics show in
January 1997. This will consist of preparation of product, both
television and set-top box, and actual booth setup and support at the
show.
Other Trade Shows - McDonald Technologies will provide technical
support as required by Curtis Mathes at other trade shows during the term
of this agreement.
Design/Program Management - McDonald Technologies will provide
technical interface and communications between various subcontractors
involved in the hardware design. McDonald Technologies will deal
directly with other Curtis Mathes subcontractors as required to work
producibility issues.
Backbone Hardware Design and Installation - McDonald Technologies
will provide independent verification and validation of the backbone
hardware design and installation.
uniView Specification - McDonald Technologies will draft a
specification for the uniView product. McDonald Technologies will also
assist in the modification and updating of this document as it changes
throughout the course of uniView development and production.
<PAGE>
Software Issues - McDonald Technologies will provide technical
assistance as required in the coordination and development of software
for uniView.
Sales Demos - McDonald Technologies will help to produce "semi-
functional sales demonstration" units for pre production demonstrations.
DLP TV - McDonald Technologies will provide necessary design and
producibility engineering for DLP television development
Document Review - McDonald Technologies will Review all documents
produced by other parties contracted on the uniView project for adherence
to the uniView spec.
Production Engineering - McDonald Technologies will do all necessary
production engineering necessary to bring the uniView product to
development.
<PAGE>
RISCOS LICENCE AND DEVELOPMENT AGREEMENT
This Licence and Development Agreement (the "Agreement") is entered into
this 20th day of February, 1997 (the "Effective Date") between Acorn
Computers Limited ("Acorn") with its principal place of business at
Acorn House 645 Newmarket Road, Cambridge CB5 8PB, England and Curtis
Mathes Marketing Corporation with its principal place of business at
10911 Petal Street, Dallas, Texas 75238, United States of America
("Licensee").
WHEREAS
(A) Acorn has developed and owns certain Technology, Source Material and
Derivative Works; and
(B) Licensee which is in the business of designing, developing and
marketing various types of TV based consumer products and services,
desires to manufacture, distribute and sublicence Licensee Products
based on the Technology; and
(C) Acorn is willing to licence its Technology to Licensee for the sole
and limited purpose of enabling Licensee to manufacture and distribute
and sublicence the right to manufacture and distribute Licensee Products
based upon and incorporating the Technology on the terms and conditions
contained herein; and
(D) Acorn is willing and able to provide certain technical services to
assist Licensee; and
(E) Acorn wishes to protect and promote certain trademarks and other
Intellectual Property Rights used in connection with or related to the
Technology.
NOW THEREFORE, Acorn and Licensee enter into this Licence and Development
Agreement on the following terms.
1. Definitions
1.1 "Acorn Hardware" means ARM microprocessor based hardware designs
developed by or on behalf of Acorn which are suitable for incorporation
in interactive devices.
1.2 "Authorised Sublicensee" means a third party which has executed a
sublicence in accordance with Clause 3.5 subsequent to written approval
by Acorn.
1.3 "CM Implementation" means the specific implementation of the
Technology developed by Acorn (pursuant to Clause 2) the features and
functions of which are described in Schedule 3.
1.4 "Conditions of Contract" shall mean Acorn's standard terms of
business, a copy of which is attached at Exhibit B.
1.5 "Confidential Information" means the Technology, Source Material and
information which relates to (i) Acorn hardware or software, (ii)
Licensee hardware or software, (iii) the customer lists, business plans
and related information of either party, and (iv) any other technical or
business information of the parties, including the terms and conditions
of this Agreement.
1.6 "Derivative Work(s)" means: (i) for material subject to copyright,
registered or unregistered design protection, any work which is based
upon one or more pre-existing works of the Technology, such as a
revision, modification, translation, abridgement, condensation,
expansion, collection, compilation or any other form in which such pre-
existing works may be recast, transformed or adapted, (ii) for
patentable or patented materials, any adaptation, subset, addition,
improvementor combination of the Technology, and (iii) for material
subject to trade secret protection, any new material, information or data
relating to and derived from the Technology, including new material which
may be protectable by copyright, patent or other proprietary rights, and,
with respect to each of the above, the preparation and/or use of which,
<PAGE>
in the absence of this Agreement or other authorisation from the owner,
would constitute infringement under applicable law. "Derivative Works"
shall include, but shall not be limited to, the CM Implementation.
1.7 "Documentation" means reference manuals which Acorn provides for use
with the Technology together with ancillary documents which are more
particularly identified in Schedule 1.
1.8 "Functional Specification" means a functional specification for any
Phase submitted by Acorn and approved by Licensee in accordance with
Clause 2.2.
1.9 "Intellectual Property Rights" means all intellectual property rights
worldwide arising under statutory or common law, and whether or not
perfected, including, without limitation, all (i) patents, patent
applications and patent rights; (ii) rights associated with works of
authorship including copyrights, copyright applications, copyright
registrations, mask work rights, mask work applications, mask work
registrations; (iii) rights relating to the protection of trade secrets
and confidential information; (iv) any right analogous to those set forth
in this Clause 1.9 and any other proprietary rights relating to
intangible property; and (v) divisions, continuations, renewals, re-
issues and extensions of the foregoing (as and to the extent applicable)
now existing, hereafter filed, issued or acquired.
1.10 "Licensee Product" means any set-top box or Internet TV product
designed or distributed by Licensee or under a Licensee trademark into
which the Technology is integrated in whole or in part. The "Licensee
Product" must operate in conjunction with the Technology and shall not
be promoted as a technology which replaces or substitutes for the
Technology.
1.11 "Object Code" means a form of software code resulting from the
translation or processing of Source Code by a computer into machine
language or intermediate code, which thus is in a form that would not be
convenient to human understanding of the program logic, but which is
appropriate for execution or interpretation by a computer.
1.12 "Purpose" means the development of Licensee Product in accordance
with Clause 3.
1.13 "RiscOS Development System" means a development system as specified
in Schedule 2 Part III.
1.14 "Source Code" means a form in which a computer program's logic can
be deduced by a human being reasonably skilled in the art, such as a
printed listing of the program or a form from which a printed listing
can be easily generated.
1.15 "Source Code Material" means the Source Code versions of the browser
and device drivers more particularly identified in Schedule 2 Part II.
1.16 "Technical Proposal" means the proposed outline technical
solution, exhibited at Schedule 5.
1.17 "Technology" means the current (as at the Effective Date) Object
Code version of the operating system software developed by Acorn for use
with an ARM[7500] microprocessor, and known as RiscOS 3.6 as more
particularly identified in Schedule 2 Part 1 together with Acorn
Hardware, the Derivative Works developed by Acorn pursuant to Clause 2,
the Object Code versions of the Source Code Material and the Upgrades and
Updates.
1.18 "Trademark" means names, logos, designs, characters, and other
designations or brands used by Acorn in connection with the Technology.
1.19 "Updates" means any bug fixes, minor modifications or variations of
the Technology which Acorn generally licences as a standard part of the
Technology.
1.20 "Upgrades" means any new features or major enhancements of the
Technology. The term "Upgrades" does not include new versions of the
Technology bearing Acorn version numbers which are higher than 3.6.
<PAGE>
2. Development Work
2.1 Licensee currently wishes Acorn to undertake three (3) phases of
development and product integration work:
(a) Use of existing Technology to bring Licensee Product to market
quickly ("Phase I"). Target is Licensee Product shipments in April 1997.
(b) Appropriate modifications to Phase 1 Technology in order to reduce
product costs ("Phase II"). Target is Licensee Product shipments in
November 1997.
(c) High level integration of the Technology within a new, as yet
unspecified, custom chip (Phase III). Target is Licensee Product
shipments in November 1998.
2.2(a) The first deliverable of each Phase shall be a draft functional
specification which shall include:
(i) a detailed definition of the work to be undertaken by Acorn under
such Phase (including deliverables) which will further functionally
define and expand or limit the outline proposals contained in the
Technical Proposal;
(ii) a projected time schedule and cost estimate in respect of such
Phase;
(iii) acceptance criteria for such Phase.
(b) Licensee shall within ten (10) working days of receipt of a draft
functional specification approve the same in writing or request any
modifications or amendments which it reasonably considers necessary in
order to achieve compliance with the Technical Proposal. For the
avoidance of doubt Licensee shall not be entitled to withhold or delay
its written approval of a draft functional specification on any grounds
other than its failure to comply with the Technical Proposal. Within ten
(10) working days of receipt by Acorn of such a request Acorn shall
submit an amended draft functional specification to Licensee and the
approval process outlined above shall be repeated.
(c) If an amended draft functional specification submitted by Acorn is
not approved by Licensee in accordance with Clause 2.2 (b) either party
may terminate this Agreement upon written notice to the other whereupon
Licensee shall be deemed to have terminated the authorisation contained
in Clause 2.3 (a) and a reconciliation shall be undertaken in accordance
with Clause 2.6.
(d) Forthwith following its approval of a functional specification
Licensee shall issue a purchase order to Acorn consistent with the terms
of this Agreement authorising Acorn to proceed with the development of
the relevant Phase in accordance with the Functional Specification.
2.3 (a) Licensee hereby authorizes Acorn to proceed with the development
of Phase 1 in accordance with the Technical Proposal on a time and
materials basis, subject to the Conditions of Contract. In the event of
any conflict between the Conditions of Contract and any other provision
of this Agreement, the latter shall prevail.
(b) If at any time Licensee requests Acorn's agreement to an amendment of
the Technical Proposal, or functional specification Acorn shall not
(subject to resource availability) unreasonably withhold or delay its
agreement to such amendment. Licensee acknowledges that such amendments
may affect the delivery dates and costs contained in Functional
Specifications.
2.4 Licensee shall compensate Acorn for development costs relating to
Phase I inter alia by immediate initial advance payment against a
development cost to be calculated on a time and materials basis.
2.5 Acorn's development time shall be compensated at the agreed rate (the
"Basic Charge Rate") and actual development costs to date will be
reconciled with the above advance payment within fifteen (15) days after
the Effective Date hereof. Thereafter, for the duration
<PAGE>
of Phase I, and during Phases II and III, Acorn agrees to provide
Licensee with monthly statements no later than the twenty-first (21st)
day following each month end reflecting development charges and costs
(together with any additional agreed sums due to Acorn pursuant to this
Agreement including without limitation travel and subsistence expenses
and purchase price of products supplied to Licensee) incurred since the
previous monthly statement. Acorn shall be entitled to set-off all such
costs against the above advance. After the above advance is reduced to
L50,000, Licensee will make further advance payments against development
costs to the extent necessary for Acorn to retain L50,000 in escrow
("Escrow Fund"), against which monthly development costs will be
charged. Licensee will have fifteen (15) days following receipt of a
monthly statement from Acorn to pay the amount reflected in such monthly
statement, so that the Escrow Fund, is maintained at L50,000. Upon
completion of Phase III, any development costs and expenses (or other
agreed costs) incurred by Acorn under this Agreement since the previous
monthly statement will be reconciled and charged against the Escrow
Fund, and any underpayment will be paid to Acorn and any overpayment will
be refunded to Licensee within fifteen (15) days of the reconciliation.
The Escrow Fund may be maintained in any Acorn account, as long as the
running balance of the Escrow Fund is sufficiently monitored to
accomplish the purposes of this Clause 2.5. Statements and
reconciliations provided to Licensee hereunder may be unaudited, but will
be certified as true and correct by an Acorn company officer.
2.6 Licensee may terminate the said development work authorization upon
seven (7) days notice without cause subject to the payment by Licensee of
a cancellation charge equal in value to the accountable development
costs accrued up to the date of such notice of termination. In addition
Acorn shall be entitled to receive compensation for all of its
development time and materials and other costs and expenses accrued as of
the date of notice of termination. The said accrued development costs
and cancellation charge shall be reconciled against the advance payment
and any under or over payment shall be refunded or made within fifteen
(15) days of the date of termination.
2.7 Reasonable travel and subsistence expenses incurred by Acorn in
rendering services to Licensee shall be reimbursed to Acorn within thirty
(30) days of being invoiced to Licensee.
2.8 Acorn shall not be obliged to undertake any development work prior to
acceptance by Acorn of a purchase order relating thereto in an agreed
form duly signed on behalf of Licensee.
2.9 Licensee shall have fifteen (15) days from the receipt of each Phase
developed by Acorn to test whether such Phase materially conforms to the
acceptance criteria defined in the Functional Specification. If such
Phase fails in any material respect to conform to a material feature of
the acceptance criteria defined in the Functional Specification Licensee
shall notify Acorn in writing of the error promptly (during the said
fifteen day period) upon discovery thereof, and Acorn shall use all
reasonable efforts to correct such error promptly and notify Licensee
that such Phase is again ready for testing. Licensee shall have fifteen
(15) days to test each corrected Phase and if all errors have been
corrected, Licensee shall accept such Phase in writing. Failure of the
Licensee to notify Acorn in writing within the specified time period that
such Phase or corrected Phase materially fails to conform to a material
feature of the acceptance criteria defined in the Functional
Specification and that Licensee is rejecting such Phase shall be deemed
to constitute satisfactory completion and acceptance of such Phase. Any
shipment, by Licensee or an Authorised Licensee, of Licensee Products
incorporating deliverables from any Phase shall be deemed to constitute
acceptance by Licensee of such deliverables.
<PAGE>
3. Grant
3.1 Licence: Subject to the terms and conditions contained in this
Agreement Acorn hereby grants to Licensee, and Licensee hereby accepts,
under the Intellectual Property Rights of Acorn:
(a) a perpetual, non-exclusive, non-transferrable licence to use, copy
and modify the Source Code Material only for the purpose of creating
Derivative Works for use solely in conjunction with Licensee Products;
and
(b) a perpetual, worldwide, non-exclusive, non-transferable right
(together with a licence to permit Authorised Sublicensees to exercise
such right) to incorporate the Technology (in whole or in part) in
Licensee Products; and
(c) a perpetual, worldwide right to distribute Licensee Products and
permit Authorised Sub-licensees to distribute Licensee Products.
3.2 Restrictions (a) Licensee shall only use the Technology and the
Source Code Material for the Purpose and in a manner consistent with the
terms of this Agreement; and (b) Licensee shall use the Technology only
in a manner reasonably designed to avoid jeopardising or prejudicing
Acorn's Intellectual Property Rights therein; and
(c) Notwithstanding any other provision of this Agreement, save as an
integral component of a Licensee Product, Licensee shall not distribute
or provide access to the Technology, the Source Code Material or any
Derivative Works (or any part thereof) to any third party other than in
the exercise of the express rights granted in Clauses 3.1 and 3.7.
(d) Notwithstanding the provisions of Clause 3.4 Acorn undertakes that it
shall not grant a licence to any third party to exploit the CM
Implementation within the Internet TV or set top box market place prior
to the earlier of (i) the elapse of one (1) year following the date of
the first shipment for sale by Licensee of Licensee Product based upon
the (Phase 1; or (ii) the cumulative recorded sales of Licensee
Products reaching one million (1,000,000) units. Subsequent to the
expiration of the aforesaid restriction Acorn shall not grant a licence
to any third party to exploit the CM Implementation within the above
mentioned market place without first referring such third party to the
Licensee and providing the Licensee with a reasonable period of time in
which it may negotiate a sublicence or product sale to such third party.
Nothing contained in this Agreement shall have the effect of restricting
the right of Acorn to licence or otherwise exploit the Technology or any
part thereof (or combination of parts thereof) save for the above-
mentioned express restriction relating to the CM Implementation.
3.3 Documentation
Acorn hereby grants to Licensee and Licensee hereby accepts, under
Acorn's Intellectual Property Rights, a non-exclusive, non-transferable
licence (i) to use and modify the Documentation to create technically
accurate unaltered subsets of the Documentation which shall include all
the relevant Acorn copyrights, notices, and marks, and (ii) to translate
the Documentation into other languages.
3.4 Ownership
(a) Acorn retains all right, title and interest in the Technology
(including all Derivative Works), the Source Code Material,
Documentation, Trademarks and all associated Intellectual Property
Rights. Licensee agrees at Acorn's expense to execute (in recordable form
where appropriate) any instruments and/or documents as Acorn may
reasonably request to verify and maintain Acorn's ownership rights, or to
transfer any part of the same which may vest in Licensee for any reason.
(b) For the avoidance of doubt both parties acknowledge (i) that works
legally created by Licensee or its contractors which are inter-operable
with the Technology shall not be regarded as Derivative Works PROVIDED
that such works do not infringe the Intellectual Property Rights of
<PAGE>
Acorn, and (ii) that all right, title and interest in such works shall be
retained by Licensee PROVIDED FURTHER that nothing contained in this
Clause 3.4(b) or in any other provision of this Agreement shall have the
effect of assigning or transferring the ownership of any Intellectual
Property Rights in any part of the Technology including (without limiting
the generality of the foregoing) the Source Code Material to Licensee.
3.5 Sublicences
Licensee shall not grant any sublicence, permission or authorisation
relating to the Technology or any part thereof without the prior written
consent of Acorn which shall not be unreasonably withheld; and prior to
any such grant to an Authorised Sublicensee the Licensee shall;
(a) procure that such Authorised Sublicensees shall execute a form of
sublicence which is consistent with the terms and conditions of this
Agreement and is in a form acceptable to Acorn and contains appropriate
indemnities and undertakings from such Authorised Sublicensee which
protect Acorn's Intellectual Property Rights and Confidential Information
in a manner which is consistent with the protections contained in this
Agreement which shall include (without limiting the generality of the
foregoing) undertakings not to modify the Technology or any part thereof
and to abide by the relevant terms of this Agreement governing use,
distribution and confidentiality; and
(b) pay to Acorn in respect of each such sub-licence a non-refundable non-
recoverable sub-licence fee and a non-refundable advance royalty payment
which shall be credited against future royalties payable in connection
with the activities of the relevant Authorised Sublicensee, unless an
alternative amount and payment schedule is agreed in writing by Acorn and
Licensee.
3.6 No Other Grant
Each party acknowledges that this Agreement does not grant any right or
licence, under any Intellectual Property Rights of the other party, or
otherwise, except as expressly provided in this Agreement, and no other
right or licence is to be implied by or inferred from any provision of
this Agreement or by the conduct of the parties.
3.7 Contractors
Licensee may retain third parties to furnish services to it in connection
with the development of the Licensee Product; provided, however, that all
such third parties who perform work in furtherance of such activities
shall execute appropriate documents: (i) acknowledging their work-made-
for-hire status and/or effecting assignments of all Intellectual Property
Rights with respect to such work to Licensee or Acorn as appropriate,
and (ii) undertaking obligations of confidentiality and non-use with
respect to such work which are consistent with the terms of this
Agreement. Acorn may, upon its request, review any such form of documents
and agreements proposed for use by Licensee.
3.8 Source Code Escrow
Acorn agrees to deliver, within forty-five (45) days of Acceptance by
Licensee of each Phase a copy of the Source Code for the Technology
relating to such Phase to a mutually agreed escrow agent, such agreement
not to be unreasonably withheld PROVIDED that Licensee shall be
responsible for payment of all costs and fees charged by such escrow
agent and PROVIDED FURTHER that Acorn shall not be required to modify or
enhance the Documentation for the purpose of the escrow. The Parties
will make best efforts to negotiate an escrow agreement, prior to the
placement of the Source Code with the escrow agent. Under the terms of
such escrow agreement, Licensee shall have the right to obtain access to
such Source Code together with a copy of the documentation for the Source
Code solely for support purposes in the event that (i) Acorn materially
fails to comply with its support obligations pursuant to this Agreement;
<PAGE>
or (ii) Acorn shall be declared insolvent by a court of competent
jurisdiction. Licensee acknowledges that such Source Code is proprietary
to Acorn and agrees to hold the same in the strictest confidence and not
use the same for any purpose whatsoever except as necessary for support
purposes.
4. Technical Assistance/Support
4.1 Acorn will timely provide Licensee with one copy of the
Documentation.
4.2 Subject to commercially reasonable resource availability and the
prior submission by Licensee of a purchase order in an agreed form Acorn
will timely provide development resources, training and technical
assistance to Licensee or its designated agents, covering the
understanding, utilization and support of the Technology. Any such
development work, technical assistance or support will be carried out on
a time and materials basis at the rate of [L900] per man per day plus
agreed expenses pursuant to the Conditions of Contract. In the event of
any inconsistency or conflict between the said Conditions of Contract
and any other provision of this Agreement, the latter shall prevail. The
provision of such support shall also be subject to the terms and
conditions specified in Schedule 6.
4.3 Acorn will timely provide RiscOS Development systems and tools as
ordered by Licensee at the lower of cost plus 25% handling charge or
Acorn Product International Distributor Price.
4.4 Any revisions to the Licensee Products delivered by Acorn to Licensee
pursuant to an agreement for support services shall be treated for all
purposes under this Agreement as Licensed Products and all Intellectual
Property Rights therein shall be retained by Acorn.
4.5 Licensee shall provide appropriate loaned hardware and software,
access to appropriate systems, test equipment and systems at Licensee
premises, and shall provide accurate and timely information to enable
Acorn to perform its obligations hereunder. The parties acknowledge that
the full co-operation of both is necessary to enable the proposed
development work to be completed within the target time scales.
4.6 The personnel of each party shall observe the notified security
regulations, working rules, work hours and holiday schedules and other
policies of the other party while working on the other's premises. Each
party agrees to co-operate fully and provide any assistance necessary to
the other in the investigation of any security breaches which may involve
its employees, agents or subcontractors. Either party may restrict the
other's access to its premises, as reasonably necessary, to ensure that
there will be no interruption or interference with normal business
activities. The assistance or presence of Licensee personnel shall not
relieve Acorn of its responsibilities under this Agreement, including the
responsibility to commit sufficient Acorn personnel to successfully
perform its obligations hereunder.
4.7 Acorn shall, whilst it continues to be contracted to undertake
development work for Licensee, provide Updates to Licensee free of charge
and may, at its sole discretion, provide Upgrades to Licensee without
charge.
5. Payment
5.1 Licence Fee
In addition to the fees payable pursuant to Clauses 2 and 4, in
consideration of the rights granted to Licensee in Clause 3, Licensee
shall pay to Acorn a non-refundable product development fee. The said
access licence fee shall be payable in two instalments. The first
instalment shall be paid on or before the
<PAGE>
Effective Date and the second instalment shall be paid upon acceptance by
Licensee of Phase I pursuant to Clause 2.9.
5.2 Product Royalties
Licensee shall pay a royalty to Acorn in respect of every unit of
Licensee Product produced by Licensee or any Authorised Sublicensee in
accordance with Schedule 4.
5.3 Taxes
All payments required by this Agreement shall be made in Pounds Sterling
and are exclusive of non-UK taxes, and Licensee agrees to bear and be
responsible for the payment of all such taxes and duties which may be
levied or assessed in connection with this Agreement (excluding only
taxes based on Acorn's net income).
6. Additional Agreement of Parties
6.1 Notice of Breach or Infringement
Each party shall notify the other immediately in writing when it becomes
aware of any breach or violation of the terms of this Agreement, or when
Licensee becomes aware of any potential or actual infringement by a
third party of the Technology or Acorn's Intellectual Property Rights
therein.
6.2 Notices
Licensee shall not remove any copyright notices, trademark notices or
other proprietary legends of Acorn or its suppliers contained on or in
the Technology or Documentation. Each unit of Licensee Product
containing the Technology (or any part thereof) produced by (or with the
authorisation of) Licensee shall include in Licensee's (or other
manufacturer's) associated documentation notices substantially similar to
those contained on and in the Technology. Licensee shall incorporate in
every copy of the Technology, Source Code Material and Derivative Works
all the relevant Acorn copyrights, notices and marks.
6.3 Warranties to Third Parties
Licensee is not authorised to make any representation or warranty on
behalf of Acorn to third parties. Acorn shall not be responsible for
providing any support to any third party (including without limitation
Licensee customers).
6.4 Press Announcement
Licensee's and Acorn's initial press announcement concerning execution of
this Agreement must be approved in writing by the other party prior to
its release.
6.5 Use of Licensee's Name
Each party hereby authorises the other to use it's name in advertising,
marketing, collateral, customer lists and customer success stories
relating to the Technology or the Licensee Products, provided that the
other party will have the right to withdraw the authorisation for the
use of its name, such authorisation not to be unreasonably withdrawn.
Each party shall provide the other with a written copy of any such use.
6.6 Use of Trademarks
Licensee agrees that an Acorn Trademark (intended to take the form of a
peel-off sticker for front of bezel or swing-tag) shall be applied, in a
form and manner as may be mutually agreed to each Licensee Product
shipped by Licensee or Authorised Sublicensee. The Licensee Products, as
finally designed and built, may be sold under the Curtis Mathesr label
and trademark. Neither party shall have any right, except as expressly
contained in this Agreement, to use any trademark or trade name of the
other unless the parties first enter into a formal licence for the use
of such trademarks with suitable provisions for quality control.
<PAGE>
6.7 Compliance with Laws
Both parties shall comply with all relevant laws, rules, regulations,
governmental requirements in the exercise of its rights and performance
of its obligations pursuant to this Agreement.
7. Limited Warranty and Disclaimer
7.1 Limited Warranty
Acorn warrants to Licensee that:
(a) Acorn has not knowingly (but expressly without having undertaken any
searches for prior art) misappropriated from any third party any patent,
copyright, design right, registered design right, trademark or trade
secret in the development of the Technology; and
(b) as at the Effective Date Acorn has not received written notice of any
claim that the Technology infringes any third party intellectual
property; and
(c) Acorn has the right to enter into this Agreement; and
(d) the media on which the Technology is recorded will be free from
defects in materials and workmanship for a period of ninety (90) days
after delivery. Acorn's sole liability with respect to breach of this
warranty is to replace the defective media. Except as expressly provided
in this Section 7.1, Acorn provides the Technology and Documentation to
Licensee on an "AS IS" basis, subject to acceptance by Licensee pursuant
to Clause 2.9.
7.2 General Disclaimer
EXCEPT AS SPECIFIED IN THIS AGREEMENT, ALL EXPRESS OR IMPLIED
REPRESENTATIONS AND WARRANTIES, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NON- INFRINGEMENT,
ARE HEREBY DISCLAIMED.
7.3 Limitation
The warranties set forth in this Clause 7 are expressly subject to
Section 10. (Limitation of Liability).
8. Confidential Information
8.1 The parties agree that all disclosures of Confidential Information
shall be governed and treated in accordance with the terms of the
Confidentiality Agreement (the "NDA") attached hereto as Exhibit A and
incorporated herein by reference, modified as follows:
(a) the definition of "Confidential Information" shall be as set forth in
Clause 1.5 notwithstanding any definition set forth in the NDA; and
(b) use of Confidential Information shall be limited to the scope of the
licences provided in this Agreement.
9. Limited Indemnity
9.1 The parties agree that Acorn shall not be liable for any defects or
deficiencies in the Licensee Product or any process or design created by
Licensee or other parties with or in connection with the Technology.
Acorn will, subject to the above exclusions, provide to Licensee a
limited indemnity as described in Clauses 9.2 - 9.5 below.
9.2 Acorn will defend, at its expense, any legal proceeding brought
against Licensee or any Authorised Sublicensee, to the extent it is based
on a claim that use of the Technology or Documentation in accordance with
the express provisions of this Agreement, is a direct infringement of a
copyright in any country which is a signatory to the Berne Convention or
infringes any other intellectual property rights of a third party, and
will pay all damages awarded by a court of competent jurisdiction
attributable to such claim, provided that Licensee: (i) provides notice
of the claim promptly to Acorn; (ii) gives Acorn sole control of the
defence and settlement of the claim; (iii) provides to Acorn at Acorn's
expense, all available information, assistance and authority to defend;
and (iv) has not compromised or settled such proceeding without Acorn's
prior written consent..
<PAGE>
9.3 Should the Technology or any portion thereof become, or in Acorn's
reasonable opinion likely to become, the subject of a claim of
infringement for which indemnity is provided under Clause 9.2, Acorn
shall, as Licensee's sole and exclusive remedy, elect to: (i) obtain for
Licensee the right to use such Technology; (ii) replace or modify the
Technology to Licensee's reasonable satisfaction so that it becomes non-
infringing; or (iii) accept the return of the Technology and grant
Licensee a refund of all Licence fees and development fees paid to Acorn
by Licensee pursuant to this Agreement.
9.4 Acorn shall have no liability for any infringement or claim which
results from; (i) use of other than a current unaltered version of the
Technology, if such version was made available to Licensee; (ii) use of
the Technology in combination with any non-Acorn approved equipment,
software or data; or (iii) compliance with designs or specifications of
Licensee; if such infringement or claim would not have arisen in the
absence of circumstances specified in (i), (ii) or (iii) above.
9.5 NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT THIS CLAUSE 9
STATES THE ENTIRE LIABILITY OF ACORN WITH RESPECT TO INFRINGEMENT OF ANY
INTELLECTUAL PROPERTY RIGHTS ARISING FROM USE OR POSSESSION OF THE
TECHNOLOGY.
9.6 Indemnity by Licensee.
Licensee shall, at its expense subject to Clause 9.2 above, defend and
indemnify Acorn:
(a) from any and all claims brought against Acorn by third parties, and
shall pay all damages, awarded by a court of competent jurisdiction
attributable to such claims to the extent arising out of or in
connection with Licensee's use, reproduction or distribution of the
Technology or the Licensee Product except to the extent caused by Acorn's
negligence and wilful misconduct. Licensee's obligation to provide
indemnification under this Clause shall arise provided that Acorn; (i)
gives notice of the claim promptly to Licensee; (ii) gives Licensee sole
control of the defence and settlement of the claim; (iii) provides to
Licensee, at Licensee's expense, all available information, assistance
and authority to defend; and (iv) has
not compromised or settled such proceeding without Licensee's prior
written consent; and
(b) against any loss or damage suffered by Acorn as a result of a
material breach of this Agreement by Licensee.
10. Limitation of Liability
10.1 Limitation of Liability
Except for express undertakings to indemnify under this Agreement and/or
breach of Clauses 3, 8 or 9.2:
(a) Each party's liability to the other for claims relating to breach of
this Agreement, shall be limited to a sum equal to the total fees paid to
Acorn by Licensee pursuant to this Agreement.
(b) IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY INDIRECT, INCIDENTAL,
SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES IN CONNECTION WITH OR ARISING
OUT OF THIS AGREEMENT (INCLUDING LOSS OF PROFITS, USE, DATA, OR OTHER
ECONOMIC ADVANTAGE), NO MATTER WHAT THEORY OF LIABILITY, EVEN IF
THEEXCLUSIVE REMEDIES PROVIDED FOR IN THIS AGREEMENT FAIL THEIR ESSENTIAL
PURPOSE AND EVEN IF EITHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OR
PROBABILITY OF SUCH DAMAGES. FURTHER, LIABILITY FOR SUCH DAMAGE SHALL BE
EXCLUDED, EVEN IF THE EXCLUSIVE REMEDIES PROVIDED FOR IN THIS AGREEMENT
FAIL OF THEIR ESSENTIAL PURPOSE. The provisions of this Clause 10.
allocate the risks under this Agreement between Acorn and Licensee and
the parties have relied upon the limitations set forth herein in
determining whether to enter into this Agreement.
<PAGE>
10.2 High Risk Activities
The Technology is not fault-tolerant and is not designed, manufactured or
intended for use or resale as on-line control equipment in hazardous
environments requiring fail-safe performance, such as in the operation of
nuclear facilities, aircraft navigation or communication systems, air
traffic control, direct life support machines, or weapons systems, in
which the failure of the Technology or products incorporating the
Technology or any part thereof could lead directly to death, personal
injury, or severe physical or environmental damage ("High Risk
Activities"). Acorn specifically disclaims any express or implied
warranty of fitness for High Risk Activities. Licensee will ensure that
manufacturers customers and end-users of Licensee Products are provided
with a copy of the notice specified in the first sentence of this Clause
10.2.
11. Term and Termination
11.1 Term
The term of this Agreement shall begin on the Effective Date and shall
continue until terminated as provided below. Termination is permitted
either for material breach of this Agreement, upon thirty (30) days'
written notice to the other party and such party's failure to cure within
such thirty (30) day period, or upon any infringement by Licensee of
Intellectual Property Rights relating to the Technology.
11.2 Effect of Termination
In the event of termination of this Agreement by Acorn in accordance with
Clause 11.1 above, Licensee shall promptly return to Acorn all copies of
the Technology which remain in Licensee's possession or control and
provide Acorn with a written statement certifying that Licensee has
complied with the foregoing obligation except that Licensee may retain
one copy for archival purposes only which shall be used solely to
memorialize the scope of any confidential obligations it may have. All
rights and licenses granted to Licensee pursuant to Clause 3 shall
survive such termination unless it has arisen following an infringement
of Acorn's Intellectual Property Rights by Licensee in which event such
rights and licenses shall terminate upon such termination.
11.3 No Liability for Expiration or Lawful Termination
Neither party shall have the right to recover damages or to
indemnification of any nature, whether by way of lost profits,
expenditures for promotion, payment for goodwill or otherwise made in
connection with the business contemplated by this Agreement, due to the
expiration or permitted or lawful termination of this Agreement. EACH
PARTY WAIVES AND RELEASES THE OTHER FROM ANY CLAIM TO COMPENSATION OR
INDEMNITY FOR TERMINATION OF THE BUSINESS RELATIONSHIP UNLESS
TERMINATION IS IN MATERIAL BREACH OF THIS AGREEMENT.
11.4 No Waiver
The failure of either party to enforce any provision of this Agreement
shall not be deemed a waiver of that provision. The rights of Acorn and
Licensee under this Clause 11 are in addition to any other rights and
remedies permitted by law or under this Agreement.
11.5 Survival
The parties' rights and obligations under Clauses 5.2, 5.3, 6, 7, 8, 9,
10, 11, 12 and 13 shall survive expiration or termination of this
Agreement.
12. Records
12.1 Licensee shall keep proper books of accounts and records together
with copies of invoices and other relevant papers showing all orders
placed and executed in connection with the production and/or sale of
Licensee Products and shall allow a certified public accountant retained
by Acorn to have access to the said accounts records invoices and papers
for the purpose of auditing any information given by Licensee to Acorn
<PAGE>
or of obtaining information or data relevant to the performance of the
rights and duties of Licensee under this Agreement at all reasonable
times (whether this Agreement be terminated or not) until all duties and
obligations of Licensee have performed and discharged in full. Any such
audit shall be permitted within thirty (30) days of Licensee's receipt
of Acorn's written request to audit, during normal business hours at a
time mutually agreed upon by Acorn and Licensee. Unless an underpayment
or mis-statement by Licensee is discovered during an audit, such audits
shall not take place more frequently than once in any twelve (12) month
period. Such accountant shall operate under Licensee's standard
confidentiality and non-disclosure agreement with Licensee whereby only
information related directly to the performance of the Licensee's
obligations pursuant to this Agreement may be disclosed to Acorn and
whereby no other information may be disclosed to any third party. Acorn
shall promptly provide Licensee with a copy of any written report or
other reports of the audit received by Acorn. The expense incurred in
such examination shall be paid by Acorn unless such examination reveals
that underpayment of fees by Licensee during the entire audited period
exceeds five percent (5%) of the amount of fees actually due during such
period, in which case Licensee shall pay or reimburse Acorn for the costs
of the audit in addition to additional royalties due.
12.2Acorn shall likewise furnish a certified public accountant retained
by Licensee upon request such accounting information and documentation as
may be reasonably necessary to audit and analyse the accounting records
of Acorn pertaining to charges and assessments made against advance
payments. Any such audit shall be permitted within thirty (30) days of
Acorn's receipt of Licensee's written request to audit, during normal
business hours at a time mutually agreed upon by Acorn and Licensee.
Such audits shall not take place more frequently than once in any twelve
(12) month period. Licensee shall promptly provide Acorn with a copy of
any written report or other reports of the audit received by Licensee.
13. Miscellaneous
13.1 Notices
All notices must be in writing and delivered either in person or by
certified mail or registered mail, postage prepaid, return receipt
requested, to the person(s) and address specified below or to such other
person or address as may hereafter be designated by either party pursuant
to the provisions of this Clause 13.1. Such notice will be effective upon
receipt.
Acorn Licensee
Acorn House Curtis Mathes Marketing Corporation
645 Newmarket Road 10911 Petal Street
Cambridge Dallas,
CB5 8PB, England Texas 75238, USA
Attention: Company Secretary Attention: Chief Executive Officer
13.2 Partial Invalidity
If any term or provision of this Agreement is found to be invalid under
any applicable statute or rule of law then, that provision
notwithstanding, this Agreement shall remain in full force and effect
and such provision shall be deleted unless such a deletion would
frustrate the intent of the parties with respect of any material aspect
of the relationship established hereby, in which case, this Agreement and
the licences and rights granted hereunder shall terminate.
13.3 Complete Understanding
This Agreement and the Schedules and Exhibits hereto constitute and
express the final, complete and exclusive agreement and understanding
between the parties with respect to its subject matter and supersede all
previous communications, representations or agreements, whether written
or oral, with respect to the subject matter hereof. No terms of any
<PAGE>
purchase order or similar document issued by either party shall be
deemed to add to, delete or modify the terms and conditions of this
Agreement. This Agreement may not be modified, amended, rescinded,
cancelled or waived, in whole or part, except by a written instrument
signed by the parties.
13.4 Language
This Agreement is in the English language only, which language shall be
controlling in all respects, and all versions of this Agreement in any
other language shall be for accommodation only and shall not be binding
on the parties to this Agreement. All communications and notices made or
given pursuant to this Agreement, and all documentation and support to be
provided, unless otherwise noted, shall be in the English language.
13.5 Governing Law
This Agreement is made under and shall be governed by and construed under
the laws of England and Wales and the parties hereto hereby irrevocably
submit to the non-exclusive jurisdiction of the High Court of Justice in
London for the purpose of hearing and determining any dispute arising
out of this Agreement.
13.6 Disclaimer of Agency
The relationship created hereby is that of licenser and licensee and the
parties hereby acknowledge and agree that nothing herein shall be deemed
to constitute either party as an agent of the other.
13.7 Assignment
This Agreement may not be assigned by either party without the prior
written consent of the other party, which consent shall not be
unreasonably withheld or delayed, except that Acorn may assign this
Agreement to its holding company or a majority-owned subsidiary.
13.8 Construction
This Agreement has been negotiated by Acorn and Licensee and by their
respective counsel. This Agreement will be fairly interpreted in
accordance with its terms and without any strict construction in favour
of or against either party.
13.9 Force Majeure
Except for the obligation to pay money, neither party shall be liable to
the other party for non-performance of this Agreement, if the non-
performance is caused by events or conditions beyond that party's
control and the party gives prompt notice under Clause 13.1 and makes all
reasonable efforts to perform.
13.10 Schedules
The following are included herein by reference as integral parts of this
Agreement:
Schedule 1 - Documentation
Schedule 2 - Technology Specification, Source Material and RiscOS
Development System configuration
Schedule 3 - CM Implementation
Schedule 4 - Product Royalties
Schedule 5 - Technical Proposal - Hardware Functional
Specification/Software Functional Specification
Schedule 6 - Support
Exhibit A - NDA
Exhibit B - Conditions of Contract
13.11 Clause References
Any reference contained herein to a clause of this Agreement shall be
meant to refer to all sub-sections of the clause.
13.12 No Competitive Restrictions
The Parties agree that nothing in this Agreement is intended to prohibit
Licensee from independently developing or acquiring technology which is
the same as or similar to the Technology, provided that the Licensee
does not do so in breach of Exhibit A to this Agreement.
<PAGE>
13.12 Poaching Restriction
(a) Acorn undertakes that during the continuance of this Agreement and
for a period of one year thereafter neither Acorn or its holding company
or any company controlled by Acorn or its holding company shall recruit,
hire or solicit for employment any member of Licensee's personnel who
has, during the twelve month period preceding any such recruitment,
hiring or solicitation, been engaged or associated with the exercise or
performance of the Licensee's rights or obligations under this
Agreement.
(b) Licensee undertakes that during the continuance of this Agreement and
for a period of one year thereafter neither Licensee or its holding
company or any company controlled by Licensee or its holding company
shall recruit, hire or solicit for employment any member of Acorn's
personnel who has, during the twelve month period preceding any such
recruitment, hiring or solicitation, been engaged or associated with
Acorn's performance of its obligations contained in this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorised representatives.
Acorn Computers Limited: Curtis Mathes Marketing Corporation:
By:_____/s/ DDicken____________ By: _____/s/ Pat Custer_________
Name: _____David Dicken________ Name: ___Patrick A. Custer________
(Print or type) (Print or type)
Title:_Business Development Manager_ Title:______President___________
Date:____20 Feb 1997_______ Date:_______2/20/97_____________
Schedule 1
(Documentation)
Complete bill of materials
Gerber files for circuit boards
Complete set of assembly drawings
Service manual information
Information required for governmental regulatory approval
Schematic diagrams
Hardware and software specifications together with any other
appropriate documentation which is reasonably necessary to provide
Licensee with sufficient time to arrange for the manufacture of Licensee
Products to meet the product delivery schedules set out in this
Agreement.
Part II (Source Code Material)
The initial release and phased update (as defined by Acorn) of the C
Source Code for the Acorn !Browse Application which provides World Wide
Web browsing functionality as referenced in Schedule 5 which will be
more particularly defined in an Funtional Specification plus any other
Source Code which Acorn believes is necessary to enable Licensee to
incorporate the Technology within a Licensee Product.
Schedule 3
(CM Implementation)
1. ROM Image
The specific implementation of RiscOs and all necessary extensions which
provide the functionality specified in Schedule 5 which will be more
particularly defined in a Functional Specification and which contains the
ASCI representation 'RISC OS 3.6CM'.
2. PCB Layout
The Gerber files which defined the PCB layout artwork which provides the
hardware functionality specified in Schedule 5 and which is annotated
with the phrase 'Acorn-Curtis Mathes Issue <x>', where <x> represents
the release level of the artwork supplied for acceptance.
<PAGE>
Schedule 6
(Support)
1. Acorn's Obligations
Acorn shall provide the following support services in respect of
Technology:
1.1 Problem reporting, tracking and monitoring by electronic mail:
All faults to be reported by Licensee in the following standard format:
FAULT REPORT
Submitted by: [NAME]
Reference: [Reference]
Severity: [Severity -Urgent|High|Low] (as defined
below
Repeatability: [Always|Frequently|Occasionally|Once]
(as defined below)
Supporting files: [No|Yes]
Hardware: [ ]
OS version: [3.60CM]
Memory size: [ ]
Monitor: [ ]
Software under test: [ ]
Release: [ ]
Software exhibiting fault: [ ]
Software version: [ ]
Component at fault: [ ]
Component version: [ ]
Summary: [Summary]
Severity
Urgent - Crashes O/S leading to data loss
High - Major functionality unuseable
- Crashes application in normal use
- Crashes O/S under unusual use
- Loss of user data
- Inaccurate documentation leading to
data loss
Low - Minor functionality unuseable or
impaired
- Crashes application under unusual use
- Inaccurate or imprecise documentation
Repeatability
Always - Happens every time a certain set of
actions is followed
Frequently - Happens often (though no tried and
tested set of actions)
Occasionally - Happened more than once but not easily
reproducible
Once - Happened once but haven't been able to
reproduce
1.2 Telephone, fax and email support for problem determination,
verification and resolution on a call-back basis during Acorn's normal
weekday business hours, excluding all holidays observed by Acorn.
1.3 Consultancy support for the integration of Upgrades and Updates into
Licensee Products,
1.4 Providing the maintenance and technical support described above, for
the current release level of the Technology.
<PAGE>
1.5 Working diligently to promptly resolve defects and errors in the
Technology and using commercially reasonable efforts to comply with the
following target schedule:
ERROR SEVERITY (1) RESPONSE (2) CLOSURE(3)
Urgent 24 hours 7 days
High 2 days 14 days
Low 30 days Next Update
(1) Severity: As defined in the fault report.
(2) Response: Response consists of providing, as appropriate, one of the
following: an existing correction; a new correction; a viable work
around; a request for more information to complete analysis of the
problem, or a proposal outlining how the problem will be corrected.
(3) Closure: Closure consists of providing an appropriate correction
pursuant to 2 above (Response) or alternatively a final correction or
work around of the problem including Updates and revised
Documentation as necessary.
In the event that Licensee falsely classifies the severity of any
fault, thereby obtaining an accelerated Response, Acorn reserves the
right to co-ordinate with the Licensee to reclassify the fault.
2. Licensee Obligations
Licensee agrees:
2.1 that the Designated Contact person(s) identified below (or such other
replacement individual as Licensee may designate) shall be the sole
contact for the coordination and receipt of the support services referred
to in Clause 1 of this Schedule 6, which person shall be knowledgeable
and trained in the use of the Technology;
2.2 to maintain an electronic mail link-up with Acorn via the Internet;
2.3 to provide accurate fault reports and reasonable supporting data to
aid in the identification of reported problems.
3. Licensee Designated Contacts:
Primary Contact: [contact 1]
Phone number: [phone 1]
Fax number: [fax 1]
E-Mail address: [E-Mail 1]
Secondary Contact: [contact 2]
Phone number: [phone 2]
Fax number: [fax 2]
E-Mail address: [E-Mail 2]
4. Acorn Designated Contacts:
Primary Contact: Fax number:
Phone number: E-Mail address:
Secondary Contact: Fax number:
Phone number: E-Mail address:
<PAGE>
TECHNOLOGY LICENSE
AND
DISTRIBUTION AGREEMENT
This Technology License and Distribution Agreement (the "Agreement") is
entered into this 28th day of March, 1997 (the "Effective Date") between
Sun Microsystems, Inc., acting by and through its JavaSoft business unit
("Sun") with its principal place of business at 2550 Garcia Avenue,
Mountain View, California 94043 and Curtis Mathes Marketing Corporation,
a Texas corporation with its principal place of business at 10911 Petal
Street, Dallas, Texas 75238 ("Licensee").
RECITALS
WHEREAS Sun wishes to license its JavaTM technology while maintaining
compatibility among Java language based products; and
WHEREAS Sun wishes to protect and promote certain trademarks used in
connection with Java technology; and
WHEREAS Licensee wishes to develop and distribute products based upon
Sun's Java technology;
NOW THEREFORE, Sun and Licensee enter into this Technology Licensing and
Distribution Agreement on the following terms.
1.0 DEFINITIONS
1.1 "Applet Application Programming Interface" or "AAPI" means (a) the
public application programming interface to the Java Applet Environment
reflected in the Technology as identified in Exhibit A, (b) the bytecode
specification in the Documentation entitled "Java Virtual Machine
Specification," (c) the Java language specification in the Documentation
entitled "Java Language Specification" and (d) the Java API
Specification; all as modified by Sun during the term of this Agreement.
1.2 "Applet" means a Java program which (i) conforms to the AAPI and
(ii) when compiled, consists of Java byte codes executable by the Java
Runtime Interpreter (but does not include or incorporate the Java Runtime
Interpreter or Java Classes).
1.3 "Derivative Work(s)" means: (i) for material subject to copyright or
mask work right protection, any work which is based upon one or more pre-
existing works of the Technology, such as a revision, modification,
translation, abridgement, condensation, expansion, collection,
compilation or any other form in which such pre-existing works may be
recast, transformed or adapted, (ii) for patentable or patented
materials, any adaptation, subset, addition, improvement or combination
of the Technology, and (iii) for material subject to trade secret
protection, any new material, information or data relating to and derived
from the Technology, including new material which may be protectable by
copyright, patent or other proprietary rights, and, with respect to each
of the above, the preparation, use and/or distribution of which, in the
absence of this Agreement or other authorization from the owner, would
constitute infringement under applicable law.
1.4 "Documentation" means the materials which Sun provides for use with
the Technology, as more particularly identified in Exhibit A.
1.5 "Field of Use" means the relevant market segments and/or product
areas identified in Exhibit B.
1.6 "Intellectual Property Rights" means all intellectual property
rights worldwide arising under statutory or common law, and whether or
not perfected, including, without limitation, all (i) patents, patent
applications and patent rights; (ii) rights associated with works of
authorship including copyrights, copyright applications, copyright
registrations, mask work rights, mask work applications, mask work
registrations; (iii) rights relating to the protection of trade secrets
and confidential information; (iv) any right analogous to those set forth
in this Section 1.6 and any other proprietary rights relating to
intangible property (other than trademark, trade dress, or service mark
<PAGE>
rights); and (v) divisions, continuations, renewals, reissues and
extensions of the foregoing (as and to the extent applicable) now
existing, hereafter filed, issued or acquired.
1.7 "Java Applet Environment" or "JAE" means the combination of the Java
Runtime Interpreter and the Java Classes.
1.8 "Java Classes" means the Source Code (and corresponding binary code)
of the Java packages identified in Exhibit A I.a.
1.9 "Java Runtime Interpreter" means the Source Code (and corresponding
binary code) which implements the Java virtual machine, as specified in
the Java Virtual Machine Specification.
1.10 "Licensee Open Classes" means extensions, or additions to the Java
Classes developed by Licensee which extend the AAPI, and which are made
available to third parties for use in the development of additional
software which outputs Java bytecodes and/or runs on a Java compatible
Runtime Interpreter. Licensee Open Classes do not include interfaces
within Products developed by Licensee which are used only internally by
Licensee.
1.11 "Platform Dependent Part" means those Source Code files (and
corresponding binary code) of the JAE which are not in a "share"
directory or subdirectory thereof.
1.12 "Product(s)" means Licensee hardware or software into which the
Technology is included or integrated, in whole or in part. A "Product"
including or integrating the JAE, or any portion thereof must: (i) have a
principal purpose which is substantially different from that of the stand-
alone JAE; (ii) represent a significant functional and value enhancement
to the JAE; (iii) operate in conjunction with the JAE; and (iv) not be
marketed as a technology which replaces or substitutes for the JAE. A
current list of Product(s) is specified in Exhibit B, which may be
amended by Licensee to add Product(s) from time to time.
1.13 "Shared Part" means those Source Code files (and corresponding
binary code) of the JAE which are in any "share" directory or
subdirectory thereof.
1.14 "Source Code" means the human readable version, in whole or in part,
of the Technology whether supplied by Sun or any other Java licensee and
any corresponding comments and annotations.
1.15 "Technology" means the JAE and Updates to the extent that Licensee
is entitled to receive them hereunder.
1.16 "Trademarks" means all names, logos, designs, characters, and other
designations or brands used by Sun in connection with the Technology.
1.17 "Updates" means bug fixes, modifications, variations, and
enhancements, to the extent included in a patch or dot release of the
Technology for the platform(s) specified in Exhibit C, which Sun
generally licenses as part of the Technology. The term "Updates" does not
include ports of the JAE to platforms other than those for which the fees
have been paid as specified in Exhibit C.
2.0 LICENSE GRANTS
2.1 Source Code License
a. Subject to the terms and conditions contained in this Agreement and
subject to Licensee's payments specified in Exhibit C, Sun hereby grants
to Licensee, under and to the extent of Sun's Intellectual Property
Rights and solely for the Field(s) of Use specified in Exhibit B, a
perpetual, worldwide, non-exclusive, non-transferable license, without
the right to sublicense (except as specified in Section 2.1b.(ii)), to:
(i) use the Source Code for internal development and porting, (ii) modify
the Source Code to create Derivative Works (provided that Licensee shall
be limited solely to creating Derivative Works that constitute
Product(s), Licensee Open Classes, and Licensee-implemented modifications
to the Platform Dependent Part ("Permitted Derivative Works")), and (iii)
compile the Source Code and Permitted Derivative Works thereof.
<PAGE>
Licensee may extend the AAPI by the development of Licensee Open Classes
provided that Licensee complies with the naming conventions of Section
2.5b. Except for the above-described extensions, Licensee shall have no
right to modify or subset the AAPI or to modify the functional behavior
of the Java Runtime Interpreter.Licensee may use the Source Code of the
Shared Part of the JAE to develop Product(s), Licensee Open Classes, and
Licensee-implemented modifications to the Platform Dependent Part, but if
it uses such Source Code, it must use all of it without modification.
Except as specified in Section 2.1b.(iii), Licensee shall have no right
to distribute the Source Code of the Technology, or Permitted Derivative
Works (to the extent that such Permitted Derivative Works include any of
the Source Code).
b. Porting.
(i) Licensee may port the Platform Dependent Part to platforms other
than those specified in Exhibit C.
(ii) If Licensee identifies any changes which are necessary to the
Shared Part to enable porting to other platforms, Sun will make
reasonable efforts to evaluate the feasibility of implementing such
changes or reclassifying the necessary code as Platform Dependent.
(iii) Licensee may sublicense and deliver a copy of the Source Code
of the Technology to third parties located in the United States only in
association with the delivery and sublicensing of Licensee Products, and
solely for the purpose of enabling such third party to port or localize
Products for Licensee. Any such sublicense shall be made no less
restrictive than the terms and conditions of this Agreement. Distribution
of Source Code outside the United States will require prior written
approval by Sun.
c. Bug Fixes. Licensee will inform Sun promptly, and no later than it
informs any third party, of any bugs identified in the Technology, and to
the extent that Licensee elects to correct such bugs, Licensee will make
the Source Code of such bug fixes promptly available to Sun free of all
restrictions as they are implemented.
2.2 Binary Code License
a. Internal Use. Sun hereby grants a non-exclusive, worldwide, fully
paid up license to reproduce and use an unlimited number of copies of the
Technology in binary form, for Licensee's internal use during the term of
this Agreement.
b. Worldwide Distribution. Sun hereby grants Licensee a worldwide,
nonexclusive license to distribute the Product(s), solely in binary form.
Licensee may use such distribution channels for binary distribution as
Licensee deems appropriate, including distributors, resellers, dealers
and sales representatives (collectively, "Distributors").
2.3 Documentation.
a. Sun hereby grants to Licensee, and Licensee hereby accepts, under
Sun's Intellectual Property Rights, a non-exclusive, non-transferable
license (i) to use the Documentation for internal development purposes,
(ii) to use, modify, translate, and subset the Documentation to create
technically accurate Licensee documentation and for on-line help messages
directly applicable to the Product(s) which shall include all the
relevant Sun copyrights, notices, and marks. Licensee is prohibited from
book publishing activities with respect to the Documentation. Licensee
may also use a pointer to the Sun Documentation on the Internet in
connection with distribution of the Product(s).
2.4 Compatibility
a. Java Compatibility.
(i) From time to time, Sun will make available test suites at no cost for
validating that the portion of Licensee's Product which interprets Java
bytecodes complies with the then-current AAPI as defined by Sun as of the
date of that test suite ("Java Test Suite").
<PAGE>
(ii) Each version of a Product released by Licensee that interprets Java
bytecodes must pass a Java Test Suite that was current within one hundred
twenty (120) days before the beta release of such version of the Product.
(iii) If Licensee provides Sun with written notice of the existence of a
bug in a current Java Test Suite, then Licensee shall be released from
compatibility with the minimum portion of such Java Test Suite necessary
to avoid the impact of such bug, until such time as Sun provides to
Licensee a corrected or new Java Test Suite.
(iv) Licensee shall use a logo specified by Sun that indicates
compatibility with the Java Test Suite (the "Compatibility Logo") in a
trademark manner on all Licensee Product(s) which include or integrate
the JAE distributed hereunder. The terms and conditions governing the
parties' agreement as to trademarks, logos, and branding shall be
governed by the Trademark License entered into herewith, attached as
Exhibit F hereto, and incorporated by reference herein.
b. Applet Tag Compatibility. Any Product that reads or writes
hypertext markup language (HTML) or standard generalized markup language
(SGML) shall use the Document Type Definition ("DTD") as specified in
Exhibit E when referencing the Applet tag, unless another DTD is defined
for the Applet tag by an industry standard.
2.5. Licensee Open Classes
a. Licensee shall deliver to Sun free of all restrictions the
specification for the application programming interface for Licensee Open
Classes as early as is reasonably possible but in no event later than the
date on which it first provides such specification or an implementation
thereof to any third party developer. Included with such specification
shall be an appropriate test suite sufficiently detailed to allow Sun and
third parties to produce implementations compatible with the
specification. Licensee shall use its reasonable commercial efforts to
clarify and correct the specification or the test suite upon written
request by Sun Licensee agrees to refrain from enforcing any Intellectual
Property Rights that it might have relating to the specification of
Licensee Open Classes and test suites.
b. Licensee shall only use names for all Licensee Open Classes that
begin with "COM.Licensee" or such other convention as Sun may reasonably
require, and shall not modify or extend the public class or interface
declarations whose names begin with "java", "sun.hotjava", "COM.sun" or
their equivalents in any subsequent naming convention. Licensee will make
reasonable commercial efforts to ensure that other software which it
distributes conforms to this convention.
c. Licensee hereby grants a non-exclusive, worldwide, fully-paid-up
license to use an unlimited number of copies of the Licensee Open
Classes, in binary form, for Sun's internal use, such use including but
not limited to demonstration rights. Licensee agrees to reasonably
negotiate in good faith with Sun the terms of a commercial license for
the source code of the Licensee Open Classes. The parties agree that the
fees and other terms and conditions of this Agreement are a reasonable
standard against which to judge such a license on a proportionate basis
comparing the scope and complexity of the Licensee Open Classes being
licensed to the scope and complexity of the Technology.
2.6 Ownership
a. Ownership by Sun. Sun retains all right, title and interest in the
Technology, Documentation, Updates, bug fixes, Trademarks, and Derivative
Works, (except for Permitted Derivative Works), and associated
Intellectual Property Rights. Licensee agrees to execute (in recordable
form where appropriate) any documents Sun may reasonably request to
verify and maintain Sun's ownership rights, or to transfer any part of
the same which may vest in Licensee for any reason. Licensee further
agrees to promptly deliver to Sun any Derivative Works (except for
<PAGE>
Permitted Derivatives) of the Technology created by Licensee pursuant to
and during the term of this Agreement. Sun shall have no obligations of
confidentiality to Licensee for such Derivative Works, nor shall Sun be
obligated to incorporate any such Derivative Works into the Technology.
b. Ownership by Licensee. Licensee retains all right, title and
interest in Permitted Derivative Works created by Licensee pursuant to
and during the term of this Agreement, subject to Sun's underlying rights
identified in Section 2.6a.
2.7 No Other Grant. Each party agrees that this Agreement does not
grant any right or license, under any Intellectual Property Rights of the
other party, except as expressly provided in this Agreement, and no other
right or license is to be implied by or inferred from any provision of
this Agreement or by the conduct of the parties.
2.8 Contractors. Licensee may retain third parties located in the
United States to furnish services to it in connection with the
development of Product(s); provided however, that all such third parties
shall execute appropriate documents: (i) acknowledging their work-made-
for-hire status and/or effecting assignments of all Intellectual Property
Rights with respect to such work to Licensee or Sun, as appropriate, and
(ii) undertaking obligations of confidentiality and non-use with respect
to such work. Sun may, upon its request, review any documents proposed
for use by Licensee prior to any use of such contractors.
2.9 Pre-Release. Licensee may release Product(s) based on alpha and
beta releases of the JAE licensed by Sun hereunder only for alpha or beta
testing Product(s).
3.0 UPDATES AND SUPPORT
During the term of the Agreement, Licensee shall offer adequate levels of
support to customers of the Products. Therefore, Licensee agrees to
contract for Full Support each year for the first two years and then
either Full Support or Limited Support for each remaining year at
Licensee's option.
3.1 Limited Support and Updates. Sun shall provide Licensee under the
terms and conditions of this Agreement, Updates, and email and telephone
support (during regular business hours PST) to answer questions related
to bugs identified in the Technology by Licensee. Licensee shall have
viewing access to the Sun Java web-site bug tracking database. Licensee
may designate a maximum of three (3) contacts within Licensee's
organization to interface with the Sun support engineer.
3.2 Full Support. Sun shall provide the equivalent of one half (1/2)
time engineer to support Licensee in addition to the Limited Support and
Updates specified above, during the term of this Agreement. The selection
of the support engineer shall be at Sun's sole discretion. The support
engineer will provide the following services:
a) arranging meetings or discussions with Sun technical and management
personnel;
b) response to bug reports from Licensee;
c) developing bug fixes;
d) bug tracking for releases
e) providing Updates as released;
f) providing interim releases if the need arises; and
g) providing existing and future Documentation.
4.0 PAYMENT
4.1 License and Support Fees. Licensee shall pay to Sun the License
fees set forth in Exhibit C within thirty (30) days from the Effective
Date of this Agreement. Licensee shall pay the annual Update and Support
fees in four (4) equal installments beginning thirty (30) days after the
Effective Date and each ninety (90) days thereafter during the term of
the Agreement.
<PAGE>
4.2 Royalty Payments. Payment of royalties shall be made quarterly,
shall be due thirty (30) days following the end of the calendar quarter
to which they relate and shall be submitted with a written statement
documenting the basis for the royalty calculation.
4.3 Taxes. All payments required by this Agreement shall be made in
United States dollars, are exclusive of taxes, and Licensee agrees to
bear and be responsible for the payment of all such taxes, including, but
not limited to, all sales, use, rental receipt, personal property or
other taxes and their equivalents which may be levied or assessed in
connection with this Agreement (excluding only taxes based on Sun's net
income).
4.4 Records. Licensee shall maintain account books and records
consistent with Generally Accepted Accounting Principles appropriate to
Licensee's domicile, as may be in effect from time to time, sufficient to
allow the correctness of the royalties required to be paid pursuant to
this Agreement to be determined.
4.5 Audit Rights. Sun shall have the right to audit such accounts upon
reasonable prior notice using an independent auditor of Sun's choice (the
"Auditor"). The Auditor shall be bound to keep confidential the details
of the business affairs of Licensee and to limit disclosure of the
results of any audit to the sufficiency of the accounts and the amount,
if any, of a payment adjustment that should be made. Such audits shall
not occur more than once each year (unless discrepancies are discovered
in excess of the five percent (5%) threshold set forth in Section 4.6, in
which case two consecutive quarters per year may be audited). Except as
set forth in Section 4.6 below, Sun shall bear all costs and expenses
associated with the exercise of its rights to audit.
4.6 Payment Errors. In the event that any errors in payments shall be
determined, such errors shall be corrected by appropriate adjustment in
payment for the quarterly period during which the error is discovered. In
the event of an underpayment of more than five percent (5%) of the proper
amount owed, upon such underpayment being properly determined by the
Auditor, Licensee shall reimburse Sun the amount of said underpayment and
all reasonable costs and expenses associated with the exercise of its
rights to audit, and interest on the overdue amount at the maximum
allowable interest rate from the date of accrual of such obligation.
5.0 ADDITIONAL AGREEMENT OF PARTIES
5.1 Notice of Breach or Infringement. Each party shall notify the other
immediately in writing when it becomes aware of any breach or violation
of the terms of this Agreement, or when Licensee becomes aware of any
potential or actual infringement by a third party of the Technology or
Sun's Intellectual Property Rights therein.
5.2 Notices. Licensee shall not remove any copyright notices, trademark
notices or other proprietary legends of Sun or its suppliers contained on
or in the Technology or Documentation. Each unit of Product(s)
containing the Technology distributed by Licensee shall include in
Licensee's documentation, or in other terms and conditions of sale,
notices substantially similar to those contained on and in the
Technology. Licensee or its Distributors shall require an end user
license agreement for each unit of Product(s) shipped and Licensee shall
provide Sun with a copy of such form agreement for review and approval.
If Licensee or its Distributors use a package design or label for the
Product(s), such package design or label shall include an acknowledgement
of Sun as the source of the Technology and such other notices as
specified in Exhibit F. In addition, Licensee shall comply with all
reasonable requests by Sun to include Sun's copyright and/or other
proprietary rights notices on the Product(s), documentation or related
materials, including but not limited to the notices and acknowledgements
as specified in Exhibit F.
<PAGE>
5.3 End User Support. Licensee shall provide technical and maintenance
support service for its distributors and end user customers in accordance
with Licensee's standard support practices. Sun shall not be responsible
for providing any support to Licensee's distributors or customers for the
Technology or the Product(s).
5.4 Marketing. Licensee will cooperate with Sun on mutually agreeable
marketing and promotional activities relating to the Technology.
Licensee's initial press announcement concerning execution of this
Agreement must be reviewed and approved by Sun prior to its release.
5.5 References to Licensee. Licensee hereby authorizes Sun to make
reference to Licensee as a user of the Technology in advertising,
marketing, collateral, customer lists and customer success stories
prepared by or on behalf of Sun for the Technology, provided that
Licensee will have the right to approve the use of its name, such
approval not to be unreasonably withheld or delayed.
6.0 LIMITED WARRANTY AND DISCLAIMER
6.1 Limited Warranty. Sun represents and warrants that the media on
which the Technology is recorded will be free from defects in materials
and workmanship for a period of ninety (90) days after delivery. Sun's
sole liability with respect to breach of this warranty is to replace the
defective media. Except as expressly provided in this Section 6.1, Sun
licenses the Technology and Documentation to Licensee on an "AS IS"
basis.
6.2 General Disclaimer. EXCEPT AS SPECIFIED IN THIS AGREEMENT, ALL
EXPRESS OR IMPLIED REPRESENTATIONS AND WARRANTIES, INCLUDING ANY IMPLIED
WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NON-
INFRINGEMENT, ARE HEREBY DISCLAIMED.
6.3 Logo Disclaimer. SUN MAKES NO WARRANTIES OF ANY KIND RESPECTING THE
COMPATIBILITY LOGO(s), INCLUDING THE VALIDITY OF SUN'S RIGHTS IN THE
COMPATIBILITY LOGO(s) IN ANY COUNTRY, AND DISCLAIMS ANY AND ALL
WARRANTIES THAT MIGHT OTHERWISE BE IMPLIED BY APPLICABLE LAW, INCLUDING
WARRANTIES AGAINST INFRINGEMENT OF THIRD PARTY TRADEMARKS.
6.4 Limitation. The warranties set forth in this Section 6.0 are
expressly subject to Section 9.0 (Limitation of Liability).
7.0 CONFIDENTIAL INFORMATION
7.1 Confidential Information. For the purposes of this Agreement,
"Confidential Information" means the Technology and that information
which relates to (i) Sun hardware or software, (ii) Licensee hardware or
software, (iii) the customer lists, business plans and related
information of either party, and (iv) any other technical or business
information of the parties, including the terms and conditions of this
Agreement. In all cases, information which a party wishes to be treated
as "Confidential Information" shall be marked as "confidential" or
"proprietary" (or with words of similar import) in writing by the
disclosing party on any tangible manifestation of the information
transmitted in connection with the disclosure, or, if disclosed orally,
designated as "confidential" or "proprietary" (or with words of similar
import) at the time of disclosure. Sun has no obligation of
confidentiality to Licensee with respect to Derivative Works and the
specifications of the Licensee Open Classes.
7.2 Preservation of Confidentiality. The parties agree that all
disclosures of Confidential Information (as defined under Section 7.1
above) shall be governed by and treated in accordance with the terms of
the Confidential Disclosure Agreement (the "CDA") attached hereto as
Exhibit D and incorporated herein by reference, modified as follows:
(a) the definition of "Confidential Information" shall be as set forth
in Section 7.1 above notwithstanding any definition set forth in the CDA;
(b) the use of Confidential Information shall be limited to the scope of
the licenses provided in this Agreement;
<PAGE>
(c) the obligations of confidentiality expressed in the CDA shall extend
three (3) years beyond termination of this Agreement, except with respect
to Sun Source Code which shall be held confidential in perpetuity; and
(d) the CDA shall remain in effect for the term of this Agreement.
8.0 LIMITED INDEMNITY
8.1 Licensee acknowledges that portions of the Technology may be in pre-
release form and that Sun shall not be liable for any defects or
deficiencies in the Technology or in any Product, process or design
created by, with or in connection with the Technology whether or not such
defects and/or deficiencies are caused, in whole or in part, by defects
or deficiencies in the design or implementation of the Technology. Sun
will provide to Licensee a limited indemnity as described in Sections 8.2-
8.5 below for the Technology as of the Effective Date.
8.2 Sun will defend, at its expense, any legal proceeding brought
against Licensee, to the extent it is based on a claim that use of the
FCS or subsequent version(s) of the Technology, (excluding pre-release
versions) ("FCS Technology") is an infringement of a Berne Convention
copyright, and will pay all damages awarded by a court of competent
jurisdiction attributable to such claim, provided that Licensee: (i)
gives notice of the claim promptly to Sun; (ii) gives Sun sole control
of the defense and settlement of the claim; (iii) provides to Sun, at
Sun's expense, all available information, assistance and authority to
defend; and (iv) has not compromised or settled such proceeding without
Sun's prior written consent.
8.3 Should any FCS Technology or any portion thereof become, or in Sun's
opinion be likely to become, the subject of a claim of infringement for
which indemnity is provided under Section 8.2, Sun shall, as Licensee's
sole and exclusive remedy, elect to: (i) obtain for Licensee the right
to use such FCS Technology; (ii) replace or modify the FCS Technology so
that it becomes non-infringing; or (iii) accept the return of the
Technology and grant Licensee a refund of the License Fee and royalties,
as depreciated on a five year straight-line basis.
8.4 Sun shall have no liability for any infringement or claim which
results from: (i) use of other than a current unaltered version of the
FCS Technology, if such version was made available to Licensee; (ii) use
of the FCS Technology in combination with any non-Sun-provided equipment,
software or data; or (iii) Sun's compliance with designs or
specifications of Licensee.
8.5 THIS SECTION STATES THE ENTIRE LIABILITY OF SUN WITH RESPECT TO
INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS BY THE TECHNOLOGY. SUN
SHALL HAVE NO OTHER LIABILITY WITH RESPECT TO INFRINGEMENT OF
INTELLECTUAL PROPERTY RIGHTS OF LICENSEE OR ANY THIRD PARTY AS A RESULT
OF USE, LICENSE, OR SALE OF TECHNOLOGY.
8.6 Indemnity by Licensee. Except with respect to claims for which Sun
is obligated to indemnify Licensee pursuant to Section 8.2, Licensee
shall defend and indemnify Sun from any and all claims brought against
Sun by third parties, and shall hold Sun harmless from all corresponding
damages, liabilities, costs and expenses, (including reasonable
attorneys' fees) incurred by Sun arising out of or in connection with
Licensee's use, reproduction or distribution of the Technology or
Product(s), or Licensee Open Classes. Licensee's obligation to provide
indemnification under this Section shall arise provided that Sun: (i)
provides notice of the claim promptly to Licensee; (ii) gives Licensee
sole control of the defense and settlement of the claim; (iii) provides
to Licensee, at Licensee's expense, all available information, assistance
and authority to defend; and (iv) has not compromised or settled such
proceeding without Licensee's prior written consent.
<PAGE>
9.0 LIMITATION OF LIABILITY
9.1 Limitation of Liability. Except for express undertakings to
indemnify under this Agreement and/or breach of Sections 2.4, 7.0 or 9.2:
a. Each party's liability to the other for claims relating to this
Agreement, whether for breach or in tort, shall be limited to the license
fees and royalties paid by Licensee for the Technology related to the
claims.
b. IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY INDIRECT, INCIDENTAL,
SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES IN CONNECTION WITH OR ARISING
OUT OF THIS AGREEMENT (INCLUDING LOSS OF PROFITS, USE, DATA, OR OTHER
ECONOMIC ADVANTAGE), NO MATTER WHAT THEORY OF LIABILITY, EVEN IF THE
EXCLUSIVE REMEDIES PROVIDED FOR IN THIS AGREEMENT FAIL OF THEIR ESSENTIAL
PURPOSE AND EVEN IF EITHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OR
PROBABILITY OF SUCH DAMAGES. FURTHER, LIABILITY FOR SUCH DAMAGE SHALL BE
EXCLUDED, EVEN IF THE EXCLUSIVE REMEDIES PROVIDED FOR IN THIS AGREEMENT
FAIL OF THEIR ESSENTIAL PURPOSE. The provisions of this Section 9.0
allocate the risks under this Agreement between Sun and Licensee and the
parties have relied upon the limitations set forth herein in determining
whether to enter into this Agreement.
9.2 High Risk Activities. The Technology is not designed or intended
for use in on-line control of aircraft, air traffic, aircraft navigation
or aircraft communications; or in the design, construction, operation or
maintenance of any nuclear facility. Sun disclaims any express or
implied warranty of fitness for such uses. Licensee agrees that it will
not use or license the Technology for such purposes, and that it will
ensure that its licensees and end users of the Technology are provided a
copy of the foregoing notice.
10.0 TERM AND TERMINATION
10.1 Term. The term of this Agreement shall begin on the Effective Date
and shall continue for a period of five (5) years, or until terminated as
provided below. Each year for five (5) consecutive years following
expiration of the initial five (5) year term, at Licensee's sole option,
Licensee may extend the term of this Agreement for one (1) additional
year. Licensee shall indicate its intent to extend the Agreement by
written notice to Sun within thirty (30) days prior to the expiration of
the preceding term. Termination is permitted either for breach of this
Agreement, upon thirty (30) days written notice to the other party and an
opportunity to cure within such thirty (30) day period, or upon any
action for infringement of Intellectual Property Rights relating to the
Technology by Licensee against Sun or any of Sun's licensees of the
Technology.
10.2 Effect of Expiration. Upon expiration of this Agreement, Sun shall
retain use, under the terms of this Agreement, of the Intellectual
Property Rights received hereunder, and Licensee shall be authorized to:
(i) distribute Product(s) containing the version of the Technology
incorporated therein at the time of expiration, subject to Licensee's
continued compliance with the Test Suites current at the time of
expiration, and payment of royalties, and (ii) retain one (1) copy of the
Technology in Source Code form to support customers having copies of
Product(s) distributed by Licensee. All other rights of Licensee shall
terminate upon such expiration.
10.3 Effect of Termination. In the event of termination of this
Agreement by Sun in accordance with Section 10.1 above, Licensee shall
promptly: (i) return to Sun all copies of the Technology and Derivative
Works thereof in tangible or electronic form, Documentation, and
Confidential Information (collectively "Sun Property") (excluding
Licensee Open Classes and Licensee-implemented modifications to the
Platform Dependent Part) in Licensee's possession or control; or (ii)
permanently destroy or disable all copies of the Sun Property in
<PAGE>
Licensee's possession or control, except as specifically permitted in
writing by Sun; and (iii) provide Sun with a written statement certifying
that Licensee has complied with the foregoing obligations. All rights and
licenses granted to Licensee shall terminate upon such termination.
10.4 No Liability for Expiration or Lawful Termination. Neither party
shall have the right to recover damages or to indemnification of any
nature, whether by way of lost profits, expenditures for promotion,
payment for goodwill or otherwise made in connection with the business
contemplated by this Agreement, due to the expiration or permitted or
lawful termination of this Agreement. EACH PARTY WAIVES AND RELEASES THE
OTHER FROM ANY CLAIM TO COMPENSATION OR INDEMNITY FOR TERMINATION OF THE
BUSINESS RELATIONSHIP UNLESS TERMINATION IS IN MATERIAL BREACH OF THIS
AGREEMENT.
10.5 No Waiver. The failure of either party to enforce any provision of
this Agreement shall not be deemed a waiver of that provision. The rights
of Sun under this Section 10.0 are in addition to any other rights and
remedies permitted by law or under this Agreement.
10.6 Survival. The parties' rights and obligations under Sections 2.0,
4.0, 5.2, 6.0, 7.0, 8.0, 9.0, 10.0, and 11.0 shall survive expiration or
termination of this Agreement, excluding in the event of breach by
Licensee, Licensee's rights under Section 2.0, which shall terminate.
10.7 Irreparable Harm. The parties acknowledge that breach of Sections
2.0, 5.2, 7.0, 9.2, or 11.6 may cause irreparable harm, the extent of
which would be difficult to ascertain. Accordingly, they agree that, in
addition to any other legal remedies to which a non-breaching party might
be entitled, such party may seek immediate injunctive relief in the event
of a breach of the provisions of such Sections.
11.0 MISCELLANEOUS
11.1 Notices. All notices must be in writing and delivered either in
person or by certified mail or registered mail, postage prepaid, return
receipt requested, to the person(s) and address specified below. Such
notice will be effective upon receipt.
Sun Licensee
Sun Microsystems, Inc. Curtis Mathes Marketing Corporation
2550 Garcia Avenue 10911 Petal Street
Mountain View, California 94043 Dallas, Texas 75238
Attn: JavaSoft Business Development Attn: Chief Operating Officer
cc: JavaSoft Legal Department cc: Legal Department
11.2 Partial Invalidity. If any term or provision of this Agreement is
found to be invalid under any applicable statute or rule of law then,
that provision notwithstanding, this Agreement shall remain in full force
and effect and such provision shall be deleted unless such a deletion
would frustrate the intent of the parties with respect to any material
aspect of the relationship established hereby, in which case, this
Agreement and the licenses and rights granted hereunder shall terminate.
11.3 Complete Understanding. This Agreement and the Exhibits hereto
constitute and express the final, complete and exclusive agreement and
understanding between the parties with respect to its subject matter and
supersede all previous communications, representations or agreements,
whether written or oral, with respect to the subject matter hereof. No
terms of any purchase order or similar document issued by Licensee shall
be deemed to add to, delete or modify the terms and conditions of this
Agreement. This Agreement may not be modified, amended, rescinded,
canceled or waived, in whole or part, except by a written instrument
signed by the parties.
11.4 Language. This Agreement is in the English language only, which
language shall be controlling in all respects, and all versions of this
Agreement in any other language shall be for accommodation only and shall
not be binding on the parties to this Agreement. All communications and
<PAGE>
notices made or given pursuant to this Agreement, and all documentation
and support to be provided, unless otherwise noted, shall be in the
English language.
11.5 U.S. Government Restricted Rights. If Licensee is licensing
Product or accompanying documentation to or on behalf of the U.S.
Government, it shall be made subject to "Restricted Rights", as that term
is defined in the Federal Acquisition Regulations ("FARs") in paragraph
52.227-19(c)(2), or its equivalent paragraph in the DOD Supplement to the
FARs. Contractor/Manufacturer is: Sun Microsystems Inc., 2550 Garcia
Ave., Mountain View, CA 94043.
11.6 Governing Law. This Agreement is made under and shall be governed by
and construed under the laws of the State of California, regardless of
its choice of laws provisions.
11.7 Compliance with Laws. The Technology, including technical data, is
subject to U.S. export control laws, including the U.S. Export
Administration Act and its associated regulations, and may be subject to
export or import regulations in other countries. Licensee agrees to
comply strictly with all such regulations and acknowledges that it has
the responsibility to obtain such licenses to export, re-export or import
the Technology or Product(s) as may be required after delivery to
Licensee.
Licensee shall make reasonable efforts to notify and inform its employees
having access to the Technology of Licensee's obligation to comply with
the requirements stated in this Section.
11.8 Disclaimer of Agency. Licensee is not authorized to make any
representation or warranty on behalf of Sun to its end users or third
parties. The relationship created hereby is that of licensor and licensee
and the parties hereby acknowledge and agree that nothing herein shall be
deemed to constitute Licensee as a franchisee of Sun. Licensee hereby
waives the benefit of any state or federal statutes dealing with the
establishment and regulation of franchises.
11.9 Delivery. As soon as practicable after the Effective Date, Sun shall
deliver to Licensee one (1) copy of each of the deliverables set forth in
Exhibit A. Licensee acknowledges that certain of the deliverables are in
various stages of completion and agrees to accept the deliverables as and
to the extent completed as of the date of delivery and "AS IS." In the
event any deliverable is already in the possession or custody of
Licensee, such item(s) shall, to the extent used in connection with the
rights granted in Section 2.0 above, be subject to the terms of this
Agreement, notwithstanding any pre-existing agreement or understanding
between Licensee and Sun with respect to such items.
11.10 Assignment and Change in Control. This Agreement may not be
assigned by either party without the prior written consent of the other
party except that Sun may assign this Agreement to a majority-owned
subsidiary.
11.11 Construction. This Agreement has been negotiated by Sun and
Licensee and by their respective counsel. This Agreement will be fairly
interpreted in accordance with its terms and without any strict
construction in favor of or against either party.
11.12 Force Majeure. Except for the obligation to pay money, neither
party shall be liable to the other party for non-performance of this
Agreement, if the non-performance is caused by events or conditions
beyond that party's control and the party gives prompt notice under
Section 11.1 and makes all reasonable efforts to perform.
<PAGE>
11.13 Exhibits. The following are incorporated herein by reference
as integral parts of this Agreement:
Exhibit A - Description of Technology and Documentation
Exhibit B - Identification of Licensee Product(s) and Field(s) of Use
Exhibit C - Schedule of Fees and Royalties
Exhibit D - Confidential Disclosure Agreement
Exhibit E - Document Type Definition
Exhibit F - Trademark License
11.14 Section References. Any reference contained herein to a
section of this Agreement shall be meant to refer to all subsections of
the section.
11.15 No Competitive Restrictions. The Parties agree that nothing in
this Agreement is intended to prohibit Licensee from independently
developing or acquiring technology that is the same as or similar to the
Technology, provided that Licensee does not do so in breach of its
obligations under this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives.
Sun Microsystems, Inc. Licensee: Curtis Mathes Marketing Corporation
By:___/s/ Lee Patch______ By:___/s/ F.Shelton Richardson, Jr._______
Name:____Lee Patch_______ Name:__ F.Shelton Richardson, Jr.______
(Print or Type) (Print or Type)
Title:___V.P., General Counsel_ Title:__V.P., Chief Financial Officer_____
Date:____3/28/97___ Date:______3/28/97__________________
EXHIBIT B
IDENTIFICATION OF LICENSEE PRODUCT(S) AND FIELD(S) OF USE
Any internet appliance designed, manufactured or distributed by Curtis
Mathes using the Curtis Mathes uniViewTM technology or derivatives
thereof, as well as connectivity to the Curtis Mathes XpresswayTM
backroom internet service provider operation.
EXHIBIT D
CONFIDENTIAL DISCLOSURE AGREEMENT
(to be attached)
EXHIBIT F
TRADEMARK LICENSE
Java-Compatible Logo
LICENSOR
SUN MICROSYSTEMS, INC.
2550 Garcia Avenue
Mountain View, CA 94303
U.S.A.
(415) 960-1300
LICENSEE
CURTIS MATHES MARKETING CORPORATION
10911 PETAL STREET
DALLAS, TEXAS 75238
U.S.A.
TRADEMARK LICENSE
The following terms and conditions governing Java compatibility branding
and trademarks generally ("License") are incorporated by reference into
the Technology License and Distribution Agreement ("TLDA") between Sun
and Licensee, attached hereto. Where this License is more specific than
or inconsistent with the TLDA, the terms of this License shall govern.
<PAGE>
Otherwise, the TLDA shall apply. The parties agree that:
1. DEFINITIONS
1.1.. "Branded Product" means all online software or tangible
copies or units of any version of Licensee's Products being distributed
in association with any Compatibility Logo.
1.2. "Compatibility Logo" means the Java-compatible logo supplied by
Sun to Licensee from time-to-time. The current version of the logo(s)
are depicted at the end of this License.
1.3. "Licensee's Products" means only the products described in
Exhibit B of the TLDA.
2. GRANT OF LICENSE
Sun grants to Licensee a non-exclusive, non-transferable, personal, paid-
up, royalty-free license, within the Territory in Section 3, to use the
Compatibility Logos ("License") as provided herein with respect to each
of Licensee's Products that fully meet the certification requirements of
Section 4. Licensee is granted no other right, title, or license to the
Compatibility Logos or any other Sun trademark, and is specifically
granted no right or license to sublicense the Compatibility Logos or any
other Sun trademarks. This License shall apply and pass through to
Licensee's distributors who distribute Licensee's Products as transferred
by Licensee (i.e., without any modifications to the Product, product
packaging, documentation or other materials) ("Distributors"). Licensee
shall provide notice of this License to and enforce its terms with
Distributors. Sun shall be entitled to enforce the terms of this License
directly against any Distributor in the event Licensee fails to do so.
All subsequent references herein to "Licensee" shall include and apply to
"Distributors".
3. TERRITORY
Licensee shall not use any Compatibility Logo on or in Licensee's
Products distributed via tangible media (e.g., CD or diskettes) or on any
other tangible materials (e.g., user documentation) in countries other
than those listed below ("Territory"), unless Sun expressly agrees in
writing beforehand to extend the Territory (which Sun may refuse to do in
its sole discretion). This territorial restriction shall not apply to on-
line distribution of Licensee's Products over the Internet. Licensee
shall pay all costs, including fees for legal services, registrations,
recordals, and foreign language translations associated with any
extension of the Territory requested by Licensee. Sun may eliminate any
country from the Territory if it determines in its sole judgement that
use or continued use of the Compatibility Logo in such country may
subject Sun or any third party to legal liability, or may jeopardize the
Compatibility Logos or any Sun trademark in that or any other country.
In such event, Licensee shall promptly cease all use of the Compatibility
Logos in such countries upon written notice from Sun.
Australia
Austria
Belgium
Benin
Netherlands
Luxembourg
Brazil
Burkino Faso
Cameroon
Canada
Central African Republic
Chad
Chile
China (P.R.C.)
Columbia
<PAGE>
Congo
Czech Republic
Denmark
Egypt
France
Gabon
Germany
Greece
Guinea
Hong Kong
Hungary
India
Indonesia
Israel
Italy
Ivory Coast
Japan
Mali
Malaysia
Mauritania
Mexico
New Zealand
Niger
Norway
Philippines
Portugal
Russia
Senegal
Singapore
South Korea
Spain
Sweden
Switzerland
Taiwan
Thailand
Togo
Turkey
Ukraine
UAE
U.K.
United States
Venezuela
4. CERTIFICATION
License applies only to versions of Licensee's Products that have
successfully passed the relevant Test Suites made available by Sun to
Licensee pursuant to the TLDA, and which otherwise fully comply with all
other compatibility and certification requirements of the TLDA. Upon
thirty (30) days written notice by Sun no more than two (2) times per
calendar year, Licensee shall permit Sun to inspect and test any Branded
Products at a mutually-agreeable location to ensure that they meet the
compatibility requirements of the TLDA. Upon request by Sun, Licensee
shall promptly make any modifications to any version of a Branded Product
necessary for it to meet such compatibility requirements.
5. LOGO AND TRADEMARK USAGE
Licensee shall use the Compatibility Logos only as specified in any
guidelines or policies made by Sun concerning the appearance, placement
or use of the Compatibility Logos ("Logo Guidelines"). Licensee shall:
(i) use only approved logo artwork provided by Sun, (ii) for tangible
media, display the Compatibility Logos on external product packaging,
<PAGE>
documentation, and media (disk, CD-ROM, tape, etc.); (iii) for online
versions of Licensee's Product, display the Compatibility Logos on web
pages featuring information about the Product in GIF images that point to
the current Sun Java page (http://java.sun.com) via hypertext link; (iv)
for both tangible-media and online versions, display the Compatibility
Logos on "splashscreens" appearing upon launch of Licensee's Product, if
any, and in general product information screens (e.g., "About", "Help",
"Info"); (v) display the Compatibility Logos on tangible marketing
collateral featuring Licensee's Products, including advertisements and
datasheets; and (vi) not display Compatibility Logos more prominently or
larger than Licensee's company name/logo and product name/logo, wherever
displayed.
Licensee shall comply with the current versions of the Sun Trademark &
Logo Policies and the Java/HotJava Trademark Guidelines
[http://java.sun.com/tm_guidelines.html], including but not limited to
using the Java/HotJava mark as an adjective followed by generic
descriptors, marking the Java/HotJava mark with a TM symbol, and
attributing the Java/HotJava mark as a trademark of Sun Microsystems,
Inc. in a legend on packaging, splashscreens, web page, and other
collateral and materials. Licensee may not include any Sun trademark
(e.g., Sun, Java, HotJava, Solaris, etc.) in Licensee's company, business
or subsidiary names, or in the name of any of Licensee's products,
services, technologies, or web pages. Licensee shall promptly modify any
usage and any material that does not conform to the Logo Guidelines, the
Sun Trademark & Logo Policies, or the Java/HotJava Trademark Guidelines
upon notice from Sun specifying the non-conformance. Licensee shall
notify its distributors and customers of any such non-conformance as to
materials or products already distributed, as may be reasonably requested
by Sun.
6. PROTECTION OF TRADEMARKS AND LOGOS
Sun is the sole owner of the Compatibility Logos (including the marks
depicted therein) and all goodwill associated therewith. Licensee's use
of the Compatibility Logos inures solely to the benefit of Sun. Licensee
shall not do anything that might harm the reputation or goodwill of the
Compatibility Logos. Licensee shall not challenge Sun's rights in or
attempt to register the Compatibility Logos, or any other name or mark
owned by Sun or substantially similar thereto. Licensee shall take no
action inconsistent with Sun's rights in the Compatibility Logos. If at
any time Licensee acquires any rights in, or registrations or
applications for, the Compatibility Logos by operation of law or
otherwise, it will immediately upon request by Sun and at no expense to
Sun, assign such rights, registrations, or applications to Sun, along
with any and all associated goodwill. Licensee shall assist Sun to the
extent reasonably necessary to protect and maintain the Compatibility
Logos worldwide, including but not limited to giving prompt notice to Sun
of any known or potential infringement of the Compatibility Logos, and
cooperating with Sun in the preparation and execution of any documents
necessary to record this License as may be required by the laws or rules
of any country. Sun may at its option commence, prosecute or defend any
action or claim concerning the Compatibility Logos in the name of Sun or
Licensee, or join Licensee as a party thereto. Sun shall have the right
to control any such litigation. Licensee shall not commence any action
regarding the Compatibility Logos. Sun shall reimburse Licensee for the
reasonable costs associated with providing such assistance, except to the
extent that any such costs result from a breach of the License by
Licensee.
<PAGE>
IN WITNESS WHEREOF, the parties hereby execute this Agreement through the
authorized representatives whose names appear below.
Sun Microsystems, Inc. Licensee: Curtis Mathes Marketing Corporation
By:___/s/ Lee Patch______ By:___/s/ F.Shelton Richardson, Jr._______
Name:____Lee Patch_______ Name:__ F.Shelton Richardson, Jr.______
(Print or Type) (Print or Type)
Title:___V.P., General Counsel_ Title:__V.P., Chief Financial Officer_____
Date:____3/28/97___ Date:______3/28/97__________________
COMPATIBILITY LOGOS LICENSED HEREUNDER
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
FINANCIAL STATEMENTS AT March 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-Q FOR FISCAL QUARTER ENDED March 31, 1997.
</LEGEND>
<S> <C>
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<PERIOD-TYPE> 9-MOS
<CASH> 1,925,884
<SECURITIES> 0
<RECEIVABLES> 512,570
<ALLOWANCES> 0
<INVENTORY> 487,570
<CURRENT-ASSETS> 5,110,535
<PP&E> 3,280,653
<DEPRECIATION> 972,700
<TOTAL-ASSETS> 14,131,616
<CURRENT-LIABILITIES> 1,957,790
<BONDS> 0
0
140,003
<COMMON> 350,915
<OTHER-SE> 11,201,265
<TOTAL-LIABILITY-AND-EQUITY> 14,131,616
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,549,519
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,201
<INCOME-PRETAX> (2,622,628)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,622,628)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,622,628)
<EPS-PRIMARY> (0.077)
<EPS-DILUTED> (0.078)
</TABLE>
