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Exhibit 10.11
LICENSE AGREEMENT
This Agreement is made this 4/th/ day of January, 2000 ("Effective Date") by and
between e.Digital Corporation, a Delaware corporation with an office and place
of business at 13114 Evening Creek Drive South, San Diego, California 92128
United States of America (hereinafter "e.Digital") and Maycom Co., Ltd., a
Korean corporation with an office and place of business at Suite 463, APT
Factory 201, Haan-dong, Kwangmyung-City, Kyongki-Do, Korea (hereinafter
"Maycom").
WHEREAS, e.Digital has developed and has rights to a Multicodec Music
Player (hereinafter "Music Player") utilizing its patented technology,
trade secrets and know-how; and,
WHEREAS, Maycom desires to license e.Digital's Music Player technology
for use in its product; and,
WHEREAS, e.Digital and Maycom are willing to enter into a License
Agreement for the manufacture, use sale of the Music Player
technology.
NOW, THEREFORE, the parties hereto agree as follows.
A. DEFINITIONS.
1. "Licensed Information" shall mean e.Digital's confidential or
proprietary information, trade secrets, designs, drawings, reports,
memoranda, blueprints and know-how relating to the inventions
disclosed and claimed in the Licensed Patents filed and pending, and
inventions for which patents have not yet been filed but which relate
to the Music Player, but only to the extent the rights thereunder are
necessary for the Licensed Products to fulfill the specifications of
Exhibit B, Specifications.
2. "Licensed Patents" shall mean (a.) any and all of e.Digital's patents
and applications therefore identified in Exhibit A and all
continuations, continuations in part, divisionals, reissues and
reexaminations thereof, (b.) any and all applications subsequently
filed by e.Digital to the extent the rights thereunder are necessary
for the Licensed Product to fulfill the specifications of Exhibit B
and (c.) and any and all patents licensed or acquired by e.Digital to
the extent rights thereunder are necessary for the Licensed Product to
fulfill the specifications of Exhibit B.
3. "Licensed Product" or "Licensed Products" shall mean the product or
those categories of products identified in Exhibit C, which fulfill
the specifications of Exhibit B and thereby contain an implementation
of some or all of the Music Player Technology. e.Digital shall
determine, in its sole discretion, whether any particular product
falls within a category of products identified in Exhibit C and/or
fulfills the specifications of Exhibit B.
4. "Licensed Rights" shall mean the combination of Licensed Patents and
Licensed Information.
* Portions of this Exhibit have been omitted (based upon a request for
confidential treatment) and have been filed separately with the Securities &
Exchange Commission pursuant to Rule 24b-2.
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5. "Music Codecs" shall mean proprietary compression and decompression
processes of third parties, such as EPAC (Lucent), AAC (Dolby), MP3
(Fraunhofer) or WMA (Microsoft).
B. RIGHTS GRANTED.
1. Licenses Granted to Maycom. e.Digital hereby grants to Maycom, under
the Licensed Rights and subject to compliance with the terms and
conditions of this Agreement the following:
a. A nontransferable, nonexclusive license to manufacture, use,
offer to sell and sell the Licensed Products;
b. A nontransferable, nonexclusive license to use the Licensed
Rights for developing improvements to the Licensed Products.
C. OBLIGATIONS OF MAYCOM.
1. Confidentiality.
Maycom acknowledges that the Licensed Rights are the confidential
and/or proprietary information of e.Digital. Maycom agrees not to use,
disclose, or grant use of the Licensed Rights except as expressly
authorized by this Agreement. Upon termination of this Agreement
Maycom shall make no use whatsoever of the Licensed Rights and shall
not disclose the Licensed Information to any third parties.
2. Subcontracts and Subcontractors.
Maycom understands and agrees that this License Agreement does not
grant any rights to subcontract its rights, duties and obligations
under the Agreement. However, the parties understand and agree that
certain parts and components of the Licensed Products may have to be
obtained from third party subcontractors and/or suppliers.
Additionally, certain subassemblies may be manufactured by third
parties. Finally, it is understood by the parties, assembly of the
components may be undertaken by third parties. So as to satisfy the
obligations of Maycom with regard to confidentiality, as set forth
above in Article C.1, Maycom agrees as follows. Prior to the
procurement of any parts or components for the Licensed Products,
Maycom shall enter into appropriate agreements with such suppliers for
the protection of the proprietary and/or confidential information of
e.Digital. Such agreements shall contain, as a minimum, provisions
affording the same or equivalent protections as those afforded by the
non-disclosure agreements entered into between Maycom and e.Digital.
Further, any agreement for the manufacture of any subassembly shall in
a similar manner, be preceded by an appropriate agreement as set forth
above. Finally, any agreement for the manufacture or assembly and/or
testing of components of the Licensed Products shall contain
provisions the same or similar to those contained in Articles A, B, C,
E, H, J, K, L, M, N, O, P and Q of this License Agreement. In entering
into such an assembly agreement, Maycom acknowledges and agrees that
it is acting as an agent of e.Digital for these purposes only.
Further, should any of the obligations and duties contained in those
Articles set forth above, be breached, that e.Digital has the right,
in its sole discretion, to proceed against the breaching party for
whatever recourse which may be available.
3. Patent/Copyright Marking.
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Maycom shall conspicuously mark on a publicly exposed surface of all
Licensed Products manufactured, distributed or sold by Maycom, and
inside each instruction, servicing or other manual distributed with,
or prepared for use with respect to, any Licensed Product, appropriate
patent, patent pending and copyright markings identifying all Licensed
Patents and all copyrights of e.Digital applicable to such Licensed
Products and identifying e.Digital as the sole owner of the Licensed
Patents and copyrights. The content, form and language used in such
marking shall be in accordance with the laws and practices of the
country where such Licensed Products are manufactured, distributed and
sold.
4. Best Efforts.
Company agrees to use its best efforts to maximize the distribution
and sales of the Licensed Products.
5. Improvements by Maycom.
If Maycom shall hereafter during the term of this Agreement bring
about any improvements relating to the performance or manufacture of
the Licensed Products or otherwise relating to the Licensed Rights
("Improvements"), Maycom shall promptly disclose such Improvements to
e.Digital in confidence. However, Maycom will not implement any change
in design of the Licensed Products that affect either quality or
safety without the prior written approval of e.Digital. The ownership
of Improvements shall be determined as follows:
a. If an Improvement is based upon or relates to the Licensed
Information or other proprietary information which is disclosed
to Maycom in connection with this Agreement, or which is
disclosed within the Licensed Patents or which comes within the
scope of a claim or claims of the Licensed Patents, then such
Improvement shall become the sole property of e.Digital. If the
Improvement is patentable, Maycom shall assign and hereby does
assign to e.Digital its entire right, title and interest in the
Improvement and any patent issuing thereon in any country of the
world. e.Digital shall and hereby does grant to Maycom a non-
exclusive right to use such Improvement and any such patent in
accordance with the terms of this Agreement and such Improvement
and patent shall be deemed part of the Licensed Rights.
b. If an Improvement is not based upon or does not relate to the
Licensed Information or other proprietary information which is
disclosed to Maycom in connection with this Agreement, or which
is disclosed within the Licensed Patents or which comes within
the scope of a claim or claims of the Licensed Patents, then such
Improvement shall become the property of Maycom and e.Digital
shall retain, and/or Maycom shall and hereby does grant to
e.Digital, an unrestricted, perpetual, irrevocable royalty-free
non-exclusive license to fully exercise all intellectual property
rights with respect to such Improvement (with the right to
sublicense).
6. Improvements by e.Digital.
If (a.) e.Digital shall hereafter during the term of this Agreement
bring about any improvements in the Licensed Rights relating to the
performance or manufacturing of the Licensed Products, including any
such improvements brought about by e.Digital's vendors, other
licensees or subcontractors and (b.) such improvements are necessary
for Maycom to distribute and sell the Licensed Products or other-
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wise meet any updated specifications for the Licensed Products set
forth in Exhibit B, then to the extent permitted by the U. S.
Government and by third party rights, if applicable, e.Digital shall
promptly disclose the existence and general nature of such
improvements to Maycom in confidence and e.Digital shall and hereby
does grant Maycom a non-exclusive right to use such improvements in
accordance with the terms of this Agreement as if such improvements
were part of the Licensed Rights.
D. ROYALTY AND FEES.
1. Technology Transfer Fee.
*****************************************************.
2. Periodic Royalty.
Periodic Royalty in the amounts as set forth in Exhibit D shall be
paid to e.Digital in accordance with Article F below.
3. Music Codecs Royalty.
Music Codecs royalty shall be paid to e.Digital in accordance with the
licenses from the third party licensors.
E. BOOKS, RECORDS AND RIGHT OF INSPECTION..
1. Books and Records.
Maycom shall keep complete books of account and records of all
Licensed Products which are manufactured, sold, distributed or
otherwise disposed of, and all transactions relating to Maycom's
activities in connection with this Agreement. Such books and records
shall be kept in accordance with Generally Accepted Accounting
Principles (GAAP) of the United States, consistently applied and shall
be retained by Maycom and kept available for inspection, copying
and/or auditing by e.Digital for at least three (3) years after the
termination of this Agreement.
2. Right of Inspection.
e.Digital shall have the right, through its personnel or an
independent auditor selected by e.Digital and at e.Digital's expense,
to inspect and copy the books of account and records referred to in
Paragraph 1. of this Article E., and to interview the employees,
agents and accountants responsible for the preparation and maintenance
of such books of account and records on behalf of Maycom for the
purpose of verifying the accuracy of such books and records and the
reports provided for herein; provided however, that such examination
shall be made during normal business hours upon reasonable notice and
not more than twice per calendar year. Any such audit shall utilize
Generally Accepted Auditing Standards (GAAS) of the United States. If,
as a result of any such examination, as error of more than five
percent (5%) is discovered in the amount of royalty payments or the
number of units manufactured or sold, as specified in any report
specified in Article F. below, (a.) then the costs related to such
inspection shall be borne by Maycom and (b.) e.Digital shall
thereafter have the right to conduct such examinations not more often
than once per calendar quarter.
3. Confidentiality of Information.
e.Digital agrees not to divulge to third parties any confidential
information obtained from the books and records of Maycom as a result
of such inspections un-
* This portion of the Exhibit has been omitted (based upon a request for
confidential treatment) and has been filed separately with the Securities &
Exchange Commission pursuant to Rule 24b-2.
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less such information (a) was known to e.Digital prior to its
acquisition by e.Digital as a result of such inspection, (b) was known
to e.Digital from sources other than Maycom, or, (c) becomes a matter
of public knowledge other than by breach of this Agreement by
e.Digital.
F. PAYMENTS AND REPORTS.
1. Royalty Payments.
Royalty payments shall be calculated and reported for each calendar
month. All payments due under this Agreement shall be paid in United
States Dollars in accordance with Article C above and shall be made so
as to be received by e.Digital not later than ten (10) days after the
end of the quarter. Each royalty payment shall be accompanied by a
report in sufficient detail to permit confirmation of the accuracy of
the royalty made, including, without limitation, the quantity of
Licensed Products sold or otherwise transferred during the month and
the method by which the calculation of royalties was performed. Such
report shall be in a form and format as agreed upon by the parties.
2. Taxes.
All payments by Maycom shall be made free and clear of, and without
reduction for, any and all taxes, including, without limitation,
sales, use, property, license, value added, excise, franchise, income,
withholding or similar taxes, other than such taxes which are imposed
by the United States or any political subdivision thereof based upon
the net income of e.Digital. Any such taxes which are otherwise
imposed on payments to e.Digital shall be the sole responsibility of
Maycom.
G. INDEMNIFICATION.
1. Patent Indemnification.
e.Digital shall indemnify and hold Maycom harmless from all costs,
loss, damage and liability, except consequential damages, which may be
incurred on account of the infringement of an United States patent
arising out of the sale or use of Licensed Products, to the extent
such infringement is based upon Maycom's use of the Licensed Rights,
and e.Digital shall, at its own expense, defend all claims, suits or
actions or infringement claims of patents against Maycom, provided
e.Digital is promptly notified of such claims, suits and actions,
given all evidence in Maycom's possession, provide reasonable
assistance in and sole control of the defense thereof and all
negotiations for its settlement or compromise. In the event such a
charge of infringement, e.Digital's obligation under this Agreement
shall be fulfilled if e.Digital:
a. Obtains a third party license allowing Maycom to continue to sell
the infringing product.
b. Replaces or modifies the infringing product so as to be
substantially equal but non-infringing.
e. Digital shall not have any liability under any provision of this
Article G. if the patent infringement is based upon a use of a
product in a manner for which it was not designed, or if the
Licensed Product would not infringe but for (i) Maycom-made
modifications to the Licensed Product or (ii) combinations of the
Licensed
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Product with other technologies. The above states the entire liability
of e.Digital with respect to infringement of patents.
2. Liability Indemnification.
Maycom agrees to indemnify, hold harmless and defend e.Digital against
any and all claims, suits, losses, damages, costs, fees and expenses
resulting from or arising out of its sale, or otherwise transfer of
the Licensed Products, including, but not limited to, any damages,
losses, or liabilities whatsoever with respect to death or injury to
any person and damage to any property arising from the possession,
manufacture, use, sale or administration of the Licensed Products by
Maycom.
H. TERM AND TERMINATION.
1. Term of Agreement.
This Agreement shall commence on the Effective Date and shall continue
for a period of three (3) years thereafter, unless terminated earlier
as provided in this Article H. Upon termination or expiration, all
licenses granted to Maycom hereunder shall terminate, provided,
however, that Maycom shall be entitled to complete any obligations to
provide Licensed Products it may have incurred prior to the notice of
termination or expiration, for a period of six months after such
termination or expiration. Such obligations must have been created
prior to the notice of termination or expiration and must be reported
by Maycom in writing so as to be received by e.Digital within three
(3) calendar days after the notice of termination or expiration.
2. Termination for Cause.
This Agreement may be terminated for cause by one party for a material
breach by the other party. Failure to make payments when due shall
constitute a material breach. Should a party believe there has been a
material breach by the other party, then that party shall send written
notice setting forth the breach to the other party. The other party
shall have sixty (60) days to cure the breach, except for the breach
of the duty to make payments when due, which must be cured within
fifteen (15) days. If the breach is not cured by the end of this
period, or there have been repetitive breaches by the other party, the
first party may provide written notice to the other party terminating
this Agreement for cause. Said termination shall be effective ten (10)
days after the issuance of such notice.
3. Termination for Convenience.
Either party may terminate this Agreement for convenience upon six (6)
month prior written notice to the other party.
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I. NOTICE.
All notices herein shall be made by registered mail or by a delivery
service which provides a delivery receipt. Said notice shall be made to
Maycom at the following address:
Suite 463, APT Factory 201
Haan-dong, Kwangmyung-City
Kyongki-Do, Korea
and to e.Digital at:
13114 Evening Creek Drive South
San Diego. CA 92128 USA
Or to such address as may be designated in writing by either party.
J. SURVIVAL.
Articles C. (OBLIGATIONS OF MAYCOM), D. (ROYALTY AND FEES), E. (BOOKS.
RECORDS AND RIGHT OF INSPECTION), F. (PAYMENTS AND REPORTS), G.
(INDEMNIFICATION), H. (TERM AND TERMINATION), K. (APPLICABLE LAW), and L.
(LIMITATION OF LIABILITY) shall survive the termination or expiration of
this Agreement.
K. APPLICABLE LAW.
The parties agree that this Agreement is made in San Diego, California.
They further agree this Agreement is made in accordance with and shall be
governed and construed in accordance with the laws of the State of
California, without regard to conflict of laws rules. All disputes arising
hereunder shall be adjudicated in the state and federal courts having
jurisdiction over disputes arising in San Diego County, California, and
Licensee hereby consents to the jurisdiction of such courts. The official
language of this Agreement is English.
L. LIMITATION OF LIABILITY.
IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY LOST PROFITS,
LOST SAVINGS, OR ANY OTHER INCIDENTIAL, SPECIAL, OR CONSEQUENTIAL DAMAGES,
EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES,
ARISING OUT OF OR IN CONNECTION WITH THE AGREEMENT.
M. WAIVER.
No waiver of any provision of this Agreement or any rights or obligations
of either party hereunder shall be effective, except pursuant to a written
instrument signed by the party or parties waiving compliance and any such
written waiver shall be effective only in the specific instance and for the
specific purpose stated in such writing.
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N. AMENDMENTS IN WRITING.
Any amendments or additions to this Agreement shall not be valid unless
executed in writing by duly authorized representatives of the parties
hereto.
O. ASSIGNMENT.
This Agreement may not voluntarily be assigned in whole or in part, by
either party, without the prior written consent of the other party, except
upon merger, consolidation or other transfer of all or substantially all of
the assets of either party. Either party may, however, assign this
Agreement to its wholly or majority owned subsidiaries without the prior
written consent of the other, as long as the transferor remains liable
hereunder.
P. SEVERABILITY.
Whenever possible, each provision of this Agreement will be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be prohibited by or invalid under
applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of the
Agreement.
Q. EXPORT CONTROL.
Maycom acknowledges that the sale of Licensed Products is subject to the
export control laws of the United States of America, including the U. S.
Bureau of Export Administration regulations, as amended, and hereby agrees
to obey any and all such laws. Maycom agrees not to take any actions that
would cause either party to violate the U. S. Foreign Corrupt Practices Act
of 1977, as amended.
R. ENTIRE AGREEMENT.
This Agreement constitutes the entire understanding and agreement between
the parties with respect to the transactions contemplated herein and
supercedes any and all prior oral or written communications with respect to
the subject matter herein.
IN WITNESS WHEREOF, the Parties have signed this Agreement as of the date first
written above.
E.DIGITAL CORPORATION MAYCOM CO., LTD.
By: /s/ FRED FALK By: /s/ SU WON BAE
------------ --------------
Name: Mr. Fred Falk Name: Mr. Su Won Bae
Title: President & CEO Title: President
Date: January 4, 2000 Date: January 4, 2000
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EXHIBIT A
PATENTS AND PATENT APPLICATIONS
[To be provided]
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EXHIBIT B
SPECIFICATIONS
[To be provided]
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EXHIBIT C
LICENSED PRODUCT
SDMI specification (in effect when mass production is commenced), compliant, USB
upgradeable codec, (limited by the capabilities of the hardware architecture
chosen to meet commercial targets) Multicodec Music Player.
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EXHIBIT D
TECHNOLOGY TRANSFER FEE AND ROYALTY SCHEDULE
1. Technology Transfer Fee Schedule.
********************************************
2. Royalty Schedule.
For Maycom's customers and OEM customers, ***** per unit.
For e.Digital customers or OEM customers, ***** per unit.
For Maycom and e.Digital's joint customers, ***** per unit.
* This portion of the Exhibit has been omitted (based upon a request for
confidential treatment) and has been filed separately with the Securities &
Exchange Commission pursuant to Rule 24b-2.
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