Exhibit 10.8
SOURCE CODE LICENSE AND SOFTWARE DISTRIBUTION AGREEMENT
(EVD PRODUCTS)
THIS Source Code LICENSE and Software Distribution AGREEMENT ("Agreement") is
made and entered into effective JUNE 21ST, 2003 ("Effective Date") by and
between On2 Technologies, Inc., a Delaware corporation having a business address
at ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ ("On2") and Beijing
E-world Technology Co., Ltd., an entity organized under the laws of the People's
Republic of China with its principal offices at ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇-▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, People's Republic of China
("E-world") and Nature Talent Capital Limited, a company incorporated under the
laws of the British Virgin Islands, and having a business address at Room 701,
Shanghai Industrial ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇-▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
("NT").
In consideration of the mutual covenants and promises recited below, the
parties, intending to be legally bound, agree as follows:
TERMS AND CONDITIONS
1 Definitions.
1.1 "EVD" means the Enhanced Versatile Disc Technology System being
developed by E-world as a national industrial standard for China that
will be used to record and playback video/audio/data (multimedia) using
the EVD Equipment.
1.2 "EVD Equipment" means any equipment or device that can record and/or
playback video/audio/data using the EVD standard that contains an
Encoder and/or Decoder.
1.3 "EVD/HDTV Product" means the EVD Equipment and HD TV Equipment.
1.4 "HD TV" means the High Definition Television System which is China's
national industrial standard which E-world is participating in as a
leader in encoding and decoding.
1.5 "HD TV Equipment" means any HD TV equipment or device that contains an
Encoder and/or Decoder.
1.6 "Incorporated Technology" means any technology (including software and
source code) included in the Optimized Code that is owned by E-world or
its licensors, including all Intellectual Property Rights in such
technology.
1.7 "Intellectual Property Rights" means all intellectual property rights
arising under statutory or common law or any other legal system in the
world, including that which is acquired or obtained under a contract
with a third party, and whether or not perfected, comprising any of the
following: (i) copyrights, copyright registrations, mask works and mask
work registrations; (ii) rights relating to the protection of trade
secrets and
confidential information; (iii) patents, patent applications, reissue
patents and reissue applications, continuation and continuation in part
applications, invention registrations, ▇▇▇▇▇ patents; (iv) trademarks,
service marks, trade names, trade dress, domain names, and
registrations for the foregoing, of all kinds and types; (v) any right
analogous to those set forth in this definition in foreign
jurisdictions; and (vi) any renewals or extensions of the foregoing (as
and to the extent applicable) now existing, or hereafter filed, issued
or acquired.
1.8 "Optimized Code" means Optimized Decoder Object Code, Optimized Decoder
Source Code, Optimized Encoder Object Code and Optimized Encoder Source
Code.
1.9 "Optimized Decoder Object Code" means the Decoder in binary or object
form that has been ported and optimized by E-world for use in EVD/HDTV
Products. Optimized Decoder Object Code may contain the Decoder,
Incorporated Technology, and any modifications or additions to the
Software implemented by E-world as set forth in this Agreement.
1.10 "Optimized Decoder Source Code" means the Decoder in source code form
that has been ported and optimized by E-world for use in EVD/HDTV
Products. Optimized Decoder Source Code may contain Decoder Source
Code, Incorporated Technology, and any modifications or additions to
the Software implemented by E-world as set forth in this Agreement.
1.11 "Optimized Encoder Object Code" means the Encoder in binary or object
form that has been ported and optimized by E-world for use in EVD/HDTV
Products. Optimized Encoder Object Code may contain the Encoder,
Incorporated Technology, and any modifications or additions to the
Software implemented by E-world as set forth in this Agreement.
1.12 "Optimized Encoder Source Code" means the Encoders in source code form
that has been ported and optimized by E-world for use in EVD/HDTV
Products. Optimized Encoder Source Code may contain Encoder Source
Code, Incorporated Technology, and any modifications or additions to
the Software implemented by E-world as set forth in this Agreement.
1.13 "Software" means the Source Code and object code for Encoders and
Decoders.
1.14 "Source Code" means the source code version of On2's Encoder and
Decoder and any Updates thereto, along with all reasonably required
proprietary information, technical documentation, specifications, and
schematics that will enable E-world's Authorized Employees who possess
skills and training commensurate with the level of sophistication of
the Software to develop the Optimized Code.
1.15 "Encoder and Decoder" means On2's VP5 and VP6 encoder and decoder
algorithm. Such encoders being "Encoders" and such decoders being
"Decoders."
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1.16 "Initial Port" means the porting of the Encoder and Decoder to the
Chips by E-world. E-world agrees to start the Initial Port within a
week of receiving the Source Code and to use reasonable best efforts to
complete the Initial Port as quickly as possible. On2 agrees to use
reasonable best efforts pursuant to Section 2.11 hereof to provide
technical support relating to the Initial Port.
1.17 "Chips" means the two alternate digital signal processing chips
selected by E-world and On2 jointly for the purpose of running the
Encoder and Decoder. The digital signal processing chips selected will
have sufficient performance characteristics to support the resolutions
and framerates selected for the EVD system and non-EVD system.
1.18 "Update" means changes or additions to the Source Code made
commercially available by On2, including, without limitation,
revisions, patches and bug fixes and maintenance releases.
2 Source Code Use and Restrictions.
E-world's use of the Source Code is subject to the following
conditions:
2.1 Employees.
2.1.1 Authorized Employees. E-world may only grant access to Source
Code or Optimized Source Code to the minimum number of its
full-time employees required to perform E-world's obligations
under this Agreement. E-world will supply On2 with reasonably
requested information concerning each employee that E-world
intends to grant access to the Source Code or Optimized Source
Code. The initial Authorized Employees are set forth on
Exhibit D (each an "Authorized Employee"). Additional
Authorized Employees must be approved in writing by On2 prior
to accessing the Source Code or Optimized Source Code. All
Authorized Employees must meet the following conditions:
2.1.1.1 Need-to-Know. Authorized Employees must have an
absolute need-to-know to access Source Code or
Optimized Source Code to enable E-world to produce
the Optimized Code.
2.1.1.2 Confidentiality. Authorized Employees must be subject
to a confidentiality agreement containing terms at
least as strict as the confidentiality terms in this
Agreement prior to accessing the Source Code or
Optimized Source Code. E-world agrees that On2 is
entitled to enforce the terms of this Agreement
directly against each Authorized Employee.
2.1.2 E-world Oversight of Authorized Employees. E-world must cause
Authorized Employees to strictly abide by their obligations
under this Agreement. E-world must use the same efforts to
protect the confidentiality obligations of each Authorized
Employee after the termination of his/her employment as
E-world uses to enforce its own confidential information.
E-world will not, however, use less than reasonable efforts in
such enforcement. In any claim or legal action by
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On2 regarding a former Authorized Employee's obligations under
this Section 2, E-world will, at its own expense, provide On2
with all reasonable assistance and cooperation.
2.1.3 Authorized Employee Replacement. E-world must notify On2 in
writing regarding the replacement of any Authorized Employee.
On2 must approve the proposed replacement Authorized Employee
in writing prior to that employee accessing the Source Code or
Optimized Source Code. Replaced Authorized Employees will have
no access to the Source Code, Optimized Source Code, or other
Confidential Information.
2.2 Source Code and Optimized Source Code Use on Access Controlled
Computers. Source Code and Optimized Source Code must be used only on
access controlled, non-portable computers at a Source Code Site in
accordance with Section 2.8. All coding, debugging, compiling, and
related activities must be conducted entirely on such systems.
2.3 Source Code and Optimized Source Code Storage. E-world must store
Source Code only on its original media and may store only two copies of
the Optimized Source Code. Source Code and Optimized Source Code must
be completely and permanently deleted from any computer and stored in a
locked, secured location at the Source Code Site when not in use.
2.4 No Movement. E-world may not move the Source Code or Optimized Source
Code from the Source Code Site(s) without On2's prior written consent.
2.5 Backup and Archival Copies. E-world may make backup copies of the
Source Code and Optimized Source Code provided such backup copies are
stored only on external storage media kept within a secured location at
the Source Code Site.
2.6 Associated Information. All associated information (minutes from
meetings, engineering notebooks, etc.) containing Source Code and
Optimized Source Code must be treated in the same manner as Source
Code.
2.7 Controlled Passwords. Access to the Source Code or Optimized Source
Code on the computer systems described in Section 2.2 must be password
controlled. Authorized Employees must have a unique, non-trivial,
non-obvious password that is changed at least every thirty (30) days.
2.8 Source Code Sites.
2.8.1 Security at Source Code Sites. The Source Code, Optimized
Source Code, and the computers used in the development of the
Optimized Code must be located at the Source Code Sites. There
shall be a maximum of two Source Code Sites. Source Codes
Sites must be secure with access restricted to Authorized
Employees. E-world shall provide On2 with written notice of
the location of and security arrangements in place at each
Source Code Site.
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2.8.2 Inspection. On2 may inspect the Source Code Site(s), including
the computing systems and the Authorized Employee's office to
verify compliance with the provisions of this Agreement upon
reasonable notice to E-world. On2 agrees to comply with
E-world's reasonable visitor policies. On2 will bear the cost
of such inspection itself.
2.8.3 Clean Desk Policy. Authorized Employees must adhere to a
"clean desk" policy at their facilities at the Source Code
Site. "Clean desk" policy means all Source Code, Optimized
Code, and Confidential Information must be stored in a secured
location when not in use.
2.9 E-world's Responsibility. E-world is fully responsible to On2 for the
conduct of its employees who may in any way breach this Section 2 or
any other obligations imposed on E-world's employees under this
Agreement and for the losses arising from such breaches. E-world will,
upon request of On2, take all reasonable steps necessary to recover any
compromised Confidential Information improperly disclosed and will bear
the cost of such steps.
2.10 Notification. E-world agrees to notify On2 promptly in the event of any
breach of this Section 2, including breaches in its security.
2.11 On2 Porting and Optimization Support. For a period of 24 months
beginning on the date hereof, On2 will provide E-world with phone and
email Source Code porting, optimization and integration technical
support ("Technical Support"). Technical Support shall be available at
such times as On2 and E-world shall mutually agree, but at a minimum
such support shall be available during On2's normal business hours. To
the extent On2 or E-world is required to have its employees travel as a
part of rendering or receiving the Technical Support, each party will
pay its own travel and lodging expenses associated therewith. E-world
can elect to receive an additional 12 months of Technical Support by
delivering written notice of its desire to receive such additional
Technical Support at least 30 days prior to the 24 month anniversary of
the date hereof and paying On2 US$37,500 within 30 days of delivering
such written notice.
3 Grant of License.
3.1 EVD Source Code License Grant.
(a) Subject to timely payment of the License Fee (as defined in Section
4.1) and Royalties (as defined in Section 4.2) and the terms of this
Agreement, On2 grants E-world a royalty bearing, non-sublicensable,
exclusive within the People's Republic of China, including Hong Kong,
Macau and Taiwan (collectively, "China") and non-exclusive outside
China, non-transferable, perpetual, irrevocable license to use,
reproduce, and modify the Source Code solely to produce and compile
Optimized Decoder Source Code into Optimized Decoder Object Code to be
ported solely to the EVD/HDTV Products. E-world has the right to
sublicense Optimized Decoder Object
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Code in accordance with Section 3.2(c). Decoder Source Code and
Optimized Decoder Source Code may only be used subject to the terms of
this Agreement. E-world will not use or distribute, nor will it permit
others to use or distribute, the Decoder Source Code, Optimized Decoder
Source Code, or Optimized Decoder Object Code in a manner inconsistent
with the terms of this Agreement.
(b) Subject to timely payment of the License Fee and Royalties and
compliance with the terms of this Agreement, On2 grants E-world a
royalty bearing, non-sublicensable, exclusive within China and
non-exclusive outside China, non-transferable, perpetual, irrevocable
license to use, reproduce, and modify the Source Code solely to produce
and compile Optimized Encoder Source Code into Optimized Encoder Object
Code to be ported solely to the EVD/HDTV Products. E-world has the
right to sublicense Optimized Encoder Object Code in accordance with
Section 3.2(c). Encoder Source Code and Optimized Encoder Source Code
may only be used subject to the terms of this Agreement. E-world will
not use or distribute, nor will it permit others to use or distribute,
the Encoder Source Code or Optimized Encoder Source Code in a manner
inconsistent with the terms of this Agreement.
3.2 End User Encoder and Decoder Distribution License.
(a) Subject to timely payment of the License Fee and Royalties and
compliance with the terms of this Agreement, On2 grants E-world an
exclusive within China and non-exclusive outside China, worldwide,
non-transferable, perpetual, irrevocable license to use, copy, and
distribute the Optimized Decoder Object Code integrated with EVD/HDTV
Products.
(b) Subject to timely payment of the License Fee and Royalties and
compliance with the terms of this Agreement, On2 grants E-world an
exclusive within China and non-exclusive outside China, worldwide,
non-transferable, perpetual, irrevocable license to use, copy, and
distribute the Optimized Encoder Object Code solely when integrated
with EVD/HDTV Products.
(c) E-world may grant sublicenses to its original equipment
manufacturers ("OEMs") to produce and sell EVD/HDTV Products containing
Optimized Decoder Object Code and Optimized Encoder Object Code,
provided that such sublicenses are granted pursuant to written
sublicense agreements and such sublicense agreements (i) not contain
terms inconsistent with the terms of this Agreement, (ii) contain terms
at least as restrictive on each OEMs as the terms of this Agreement to
which E-world is subject, (iii) contain an undertaking by the OEMs to
pay Royalties to E-world or, if On2 so elects, directly to On2. E-world
will be responsible for the acts and omissions of its OEMs and for
enforcing the provisions of this Agreement and the sublicense
agreements with respect to such OEMs. If E-world fails to do so, On2
may do so directly. For the purposes of enforcing the terms of such
sublicense agreements only, On2 shall be a third party beneficiary of
each such sublicense agreement.
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3.3 Ownership. Other than the rights specifically granted above in Sections
3.1 and 3.2, nothing in this Agreement will be construed to grant to
E-world any intellectual property rights, or ownership of any of the
Software.
3.4 End Users. E-world agrees to enforce the terms of the ▇▇▇▇ to the same
extent that it enforces end user licenses of E-world owned technology,
but in no event shall E-world use less than reasonable care in such
enforcement. If E-world fails to enforce the terms of such EULAs, On2
may do so directly. For the purposes of enforcing the terms of the
EULAs only, On2 shall be a third party beneficiary of each such ▇▇▇▇.
3.5 Deployment Notice. E-world shall give On2 30 day's written notice prior
to commercial deployment of any product that contains or uses any
Software or Optimized Code. During such 30-day period E-world will also
give On2 the opportunity to test such product.
3.6 Standard Announcement. E-world represents and warrants that it has the
right to determine the EVD standard and has the ability to influence
the selection of the compression portion of the HD TV standard. Prior
to December 2003, E-world agrees to make VP5 and/or VP6 a part of the
People's Republic of China's industrial standard for EVD, and prior to
June 2006 E-world agrees to make VP5 and/or VP6 a part of the People's
Republic of China's HD TV standard. On2 and E-world will issue a
mutually agreed to press release upon the selection of On2 for each of
these standards.
4 Fees, Payment Terms and Royalties.
4.1 License Fee. In consideration of the license grants in Section 3.1
and 3.2, NT will pay (and E-world shall cause NT to pay) On2 a non-refundable
license fee of US$50,000 (the "License Fee") within 10 days of the Effective
Date of this Agreement.
4.2 Royalties.
(a) In consideration of the license grants in Section 3.1 and 3.2,
E-world shall pay (itself or through its agent or OEMs) to On2
royalties for EVD/HDTV Products in the amounts set forth on Exhibit B
hereto (the "Royalties"). Royalties will be owed to On2 and accrue when
an EVD/HDTV Product is manufactured or produced by E-world or its OEMs.
E-world shall owe On2 the Royalties regardless of whether it is paid or
collects royalties from its manufacturers, distributors or resellers
and regardless of who manufacturers, sells or licenses the EVD/HDTV
Products. Royalties shall be recorded by E-world as they accrue and be
reported to On2 within 10 days of the end of each calendar quarter (the
"Fee Report"). Each such Fee Report shall set forth the number of each
EVD/HDTV Product type manufactured and the amount of Royalties accrued
for each EVD/HDTV Product type. Within 30 days of the end of each
calendar quarter, E-world shall pay to On2 the amount of Royalties
accrued in the prior quarter. E-world agrees to provide On2 with such
other royalty information and OEMs and sale information as On2 shall
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reasonably request from time to time. In addition, E-world agrees to
institute such measures and policies as On2 may reasonably request to
ensure adequate reporting of EVD/HDTV Products manufactured and sold by
E-world and its OEMs.
(b) Minimum Payments. E-world agrees to guarantee minimum
non-refundable Royalty payments to On2 for EVD/HDTV Products. The
minimum royalties will be paid in quarterly installments based on the
EVD/HDTV Product minimum amounts set forth on Exhibit C hereto (with
the amount of quarterly payments being calculated using the royalty
rates in Exhibit B). If in any year the actual number of EVD/HDTV
Products manufactured exceeds the minimum unit amount set forth on
Exhibit C for such year, the excess amount will be deducted from the
following year's minimum amount.
(c) Audit Rights and Record Keeping. E-world agrees that it shall
maintain complete, clear and accurate records sufficient to establish
the Royalties payable pursuant to this Section 4.2. E-world will
maintain such books and records for a two-year period following the
expiration or termination of this Agreement. E-world shall have no
obligation to translate any records being audited or reviewed to
English or any other language. On2 shall have the right, on three (3)
days prior notice, itself or through its professional advisors to
conduct an audit of E-world's records to verify compliance with the
terms of this Agreement. If an underpayment or underreporting of fees
is discovered, E-world shall pay the amount of the underpayment or
correct and pay the underreported fees; provided, however, that if any
discovered discrepancy is equal to or greater than five (5%) of the
total amount due On2, E-world shall pay such amount, plus ten percent
(10%) interest thereon and the cost of the audit. At On2's request,
E-World shall undertake an audit, or shall assist On2 to audit, the
books and records of the OEMs to verify accuracy of the royalty and
sale information provided by the OEMs. If an underpayment or
underreporting of fees is discovered, E-world shall ensure that the OEM
pay the amount of the underpayment or correct and pay the underreported
fees (the costs of such audit shall be borne by On2); provided,
however, that if any discovered discrepancy is equal to or greater than
five (5%) of the total amount due On2 or E-world, E-world shall ensure
that the OEM shall pay such amount, plus ten percent (10%) interest
thereon and the cost of the audit.
4.3 All payments due to On2 under this Agreement shall be paid in United
States Dollars and remitted to the bank account outside China
designated by On2 by wire transfer of immediately available funds. All
such payments shall be free and clear of any deductions and charges
imposed under the laws of China.
5 Source Code Delivery.
5.1 Software Delivery: Upon receipt of the License Fee set forth in Section
4.1 by On2, On2 shall provide E-world one (1) copy in CDROM form of the
Software (i.e. the Source Code and object code for Encoders and
Decoders) within ten (10) days of the receipt date.
5.2 Update Delivery: On2 will provide E-world one (1) CDROM copy of any
Updates released during the term of this Agreement within ten (10) days
of the release date.
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6 Marketing.
6.1 Press Release. No party will issue any press releases concerning this
Agreement or the relationship between the parties without the prior
written consent of the other parties unless, in the opinion of its
counsel, such disclosure is required by law or the rules and
regulations of the AMEX or any governmental or supervisory authority to
which it is subject.
7 Confidential Information.
7.1 Confidentiality. Any party ("Disclosing Party") may from time to time
disclose Confidential Information to the other ("Recipient"). During
the term of this Agreement and for so long as the Confidential
Information does not enter the public domain, Recipient will keep in
confidence and trust and will not use, disclose or disseminate, or
permit any employee, agent or other person working under Recipient's
direction to use, disclose, or disseminate, the existence, source
content or substance of any Confidential Information to any other
person except as may be required to perform its obligations under this
Agreement or as may be required by law. Recipient will employ at least
the same methods and degree of care, but no less than a reasonable
degree of care, to prevent disclosure of the Confidential Information
as Recipient employs with respect to its own confidential user data,
trade secrets, and proprietary information. Recipient's employees and
independent contractors will be given access to the Confidential
Information only on a need-to-know basis, and only if they have
received instruction with regard to their obligation to maintain the
confidentiality of Confidential Information. Recipient will not copy or
load any of the Confidential Information onto any computing device or
store the Confidential Information electronically, except in
circumstances in which Recipient has taken reasonable precautions to
prevent unauthorized access. Upon request, a Recipient will promptly
deliver to the Disclosing Party all copies of documents containing the
Disclosing Party's Confidential Information and will promptly destroy
all memoranda, notes and other writings in its control containing such
Confidential Information. The provisions in this Section 7.1 are in
addition to any requirements contained in Section 2 (Source Code Use
and Restriction) regarding E-world's use of Source Code and Optimized
Code.
7.2 Confidential Information Definition. "Confidential Information" is all
nonpublic information concerning the business, technology, internal
structure and strategies of the Disclosing Party that is conveyed to
the Recipient orally or in tangible form and is either marked as
"confidential" or is identified as confidential prior to disclosure or
that, by its nature, the parties reasonably would or should understand
to be confidential. E-world acknowledges that the contents of this
Agreement (including, without limitation the pricing terms contained
herein), Optimized Code, Software, related documentation, listings,
flow charts, data, bench ▇▇▇▇ tests, specifications, underlying ideas,
algorithms, concepts, procedures, processes, principles, know-how,
methods of operation, designs, programming techniques (including all
underlying Intellectual Property Rights), input data formats and
structures, trade secrets, and other proprietary information provided
by On2 to E-world are Confidential Information. On2 acknowledges that
Incorporated Technology is Confidential Information. Confidential
Information will not include the
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fact that this Agreement exists. If any Confidential Information is
required to be disclosed by operation of law (including any
Confidential Information required to be disclosed as a result of On2's
disclosure obligations under the U.S. securities laws) or by an
instrumentality of the government, then in such event the Recipient
will promptly notify the Disclosing Party of any such request so as to
allow the Disclosing Party full opportunity to seek protective orders
or other relief prior to disclosure. The non-disclosure obligations
with respect to Confidential Information will not apply to information
(i) that at the time of disclosure was generally available to the
public, through no act or failure of Recipient; (ii) that is rightfully
known to Recipient at the time of receiving such information; (iii)
that is furnished to Recipient by a third party without restriction on
disclosure and without Recipient having actual notice or reason to know
that the third party lacks authority to so furnish the information;
(iv) that is independently developed by Recipient, or (v) the
Disclosing Party consents in writing to being disclosed.
8 Warranties.
8.1 On2 Warranties. On2 warrants that the Software does not infringe any
Intellectual Property Rights held by any third party.
8.2 E-world Warranties. E-world warrants that (i) neither porting or
optimizing the Software to or for any product nor the Incorporated
Technology, infringe any Intellectual Property Rights held by any third
party; and (ii) that it will not (and it will not allow any end user or
OEM) use, copy or distribute the Software or Optimized Code in a manner
inconsistent with the terms of this Agreement.
8.3 No Warranty. EXCEPT AS PROVIDED IN SUBSECTIONS 8.1 AND 8.2 ABOVE, THE
SOFTWARE, OPTIMIZED DECODER CODE, AND INCORPORATED TECHNOLOGY
(COLLECTIVELY THE "SUBJECT TECHNOLOGIES") ARE PROVIDED "AS-IS" WITHOUT
WARRANTY OF ANY KIND AND BOTH PARTIES EXPRESSLY AGREE AND ACKNOWLEDGE
THAT THE SUBJECT TECHNOLOGIES ARE BEING PROVIDED WITHOUT ANY
REPRESENTATIONS, WARRANTIES OR CONDITIONS WHETHER EXPRESS, IMPLIED,
STATUTORY, ARISING OUT OF A COURSE OF DEALING OR USAGE OF TRADE OR
OTHERWISE INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OR
CONDITIONS OF MERCHANTABILITY, MERCHANTABLE QUALITY, FITNESS OR
ADEQUACY FOR ANY PARTICULAR PURPOSE OR USE, NONINFRINGEMENT, QUALITY,
PRODUCTIVENESS, CAPACITY, OR THAT THE OPERATION OF THE SUBJECT
TECHNOLOGIES WILL BE ERROR-FREE. NO ORAL OR WRITTEN INFORMATION OR
ADVICE GIVEN BY A PARTY, ITS DIRECTORS, OFFICERS, EMPLOYEES, LICENSORS,
SUPPLIERS, AGENTS, OR TO ANYONE ELSE WHO HAS BEEN INVOLVED IN THE
CREATION, PRODUCTION, LICENSING, SUBLICENSING, SUPPLY OR DELIVERY OF
THE SUBJECT TECHNOLOGIES WILL CREATE A REPRESENTATION, CONDITION, OR
WARRANTY AND NEITHER PARTY MAY NOT RELY ON SUCH INFORMATION OR ADVICE.
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9 Indemnification.
9.1 On2's Indemnification of E-World. On2 agrees to defend E-world from and
against liability, judgments, costs, demands and expenses (including
reasonable attorneys' fees) based on any infringement of any third
party intellectual property rights as a result of the use of the
Software in accordance with the terms hereof, and On2 agrees to
indemnify E-world from any costs and/or damages awarded against E-world
in any such infringement claim or action or settlement thereof;
provided that: (i) On2 is promptly notified in writing of such claim,
(ii) E-world grants On2 sole control of the defense and any related
settlement negotiations, and E-world cooperates with On2 in defense of
such claim. Notwithstanding the foregoing, On2 shall have no liability
to E-world if the infringement results from: (a) use of the Software in
combination with software not provided by On2 unless such infringement
results directly and solely from use of the Software, (b) modifications
to the Software not made by On2, or (c) use of other than the latest
Update to the Software, if such infringement would have been avoided by
use of such Update. The foregoing states the entire liability of On2
with respect to infringement of any patents, copyrights, trade secrets
or other proprietary rights by the Software.
9.2 E-world's Indemnification of On2. E-world agrees to defend On2 from and
against any liability, judgments, costs, demands and expenses
(including reasonable attorneys' fees): (A) based on any breach by
E-world, its employees, NT or OEMs of ▇▇▇▇▇▇▇▇ ▇, ▇, ▇, ▇, ▇ ▇▇ ▇▇, (▇)
based on any use (directly or indirectly) of the Software or Optimized
Code by third parties through E-world except as otherwise contemplated
and allowed by this Agreement, (C) arising out of any claim by an end
user of an EVD/HDTV Product or third party customer of E-world or
E-world's manufacturers or (D) based on infringement of any third party
intellectual property right as a result of (a) the use by any person or
entity of the Software which has been modified other than by On2, (b) a
combination with software not provided by On2 unless such infringement
relates solely and directly from use of the Software or (c) use of
other than the latest Update to the Software, if such infringement
would have been avoided by use of such Update, and E-world agrees to
indemnify On2 from any costs and/or damages awarded against On2 in any
such infringement claim or action or settlement thereof; provided that:
(i) E-world is promptly notified in writing of such claim, and (ii) On2
grants E-world sole control of the defense and any related settlement
negotiations, and On2 cooperates with E-world in defense of such claim.
10 Exclusion of Damages, Limitation of Liability and Intellectual
Property.
10.1 Exclusion of Damages. EXCEPT IN RESPECT OF A PARTY'S BREACH OF SECTIONS
2 (SOURCE CODE), 3 (GRANT OF LICENSE), OR 6 (CONFIDENTIAL INFORMATION),
NEITHER PARTY WILL IN ANY CIRCUMSTANCE BE LIABLE TO THE OTHER, OR TO
ANY OTHER PERSON CLAIMING THROUGH SUCH PARTY, FOR ANY INDIRECT,
SPECIAL, INCIDENTAL, CONSEQUENTIAL, EXEMPLARY, PUNITIVE OR OTHER
DAMAGES OR EXPENSES OF ANY TYPE, INCLUDING, BUT NOT LIMITED TO, ANY
LOSS OF PROFITS, SAVINGS, BUSINESS, DATA, REVENUE, EQUIPMENT,
ANTICIPATED BENEFITS ARISING OUT OF THE USE OR INABILITY TO USE
SOFTWARE OR INCORPORATED
11
TECHNOLOGY, COSTS OF OVERHEAD OR COSTS ASSOCIATED WITH THE INABILITY TO
USE THE SUBJECT TECHNOLOGIES, LOSS FROM ANY COMPLETE OR PARTIAL
COMPUTER OR WORK STOPPAGE OR OTHER SIMILAR DAMAGES, WHETHER SUCH
DAMAGES OR EXPENSES ARISE OUT OF CONTRACT (INCLUDING FUNDAMENTAL
BREACH) OR TORT (INCLUDING NEGLIGENCE) EVEN IF ANY OF THE PARTIES HAD
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
10.2 Intellectual Property. (a) In the event of any infringement or
attempted infringement of the Software or On2's Intellectual Property
Rights (or any part thereof), E-world shall promptly notify On2 and
fully cooperate with On2 in any action deemed appropriate by On2 in its
sole discretion (including participating in or initiating any action or
proceeding) to enforce or safeguard On2's rights and interests. E-world
may not conduct or institute any action with respect to such
infringement without the prior written consent of On2. On2 shall have
full discretion with respect to such action. If On2 decides not to take
action, E-world may conduct or institute any such action but shall keep
On2 fully informed. In the event of any infringement or attempted
infringement of the Intellectual Property Rights of both E-world and
On2, the parties shall consult each other and cooperate to determine
any action to be taken with respect to such infringement.
(b) Any improvements or modifications made by E-world to the Software
or any of On2's Intellectual Property Rights and/or any development of
any new technology, technique, skill or process relating to the
Software or any of On2's Intellectual Property Rights shall be referred
to herein as "Improvements". E-world shall promptly inform and provide
copies to On2 of any Improvements. The parties agree that (i)
Improvements shall be jointly owned, (ii) treated as part of the
licensed Software and/or Intellectual Property Rights and such
Improvement shall not be used and exploited by E-world in a manner
inconsistent with the terms of this Agreement; (iii) without prior
written consent from the other party, neither party shall assign,
transfer or license any rights, title and interest in such Improvement
to any third party whether during the term of this Agreement or at any
time after its termination or expiration; and (iv) E-world shall not
seek or apply for intellectual property protection (including, without
limitation, patents or copyrights) for any Improvements without On2's
prior written consent, which consent shall not be unreasonably
withheld.
(c) If during the term of this Agreement, On2 decides to terminates its
video compression business or in the event of bankruptcy or liquidation
of On2, E-world shall continue to have the right to use the Software
and On2's Intellectual Property Rights in accordance with the licenses
granted under this Agreement and shall have the right use the Source
Code for development purposes.
11 Termination.
11.1 Termination. E-world or On2 may terminate this Agreement if the other
party is in material breach of this Agreement and fails to cure within
fifteen (15) days after written notice. If NT breaches its payment
obligations under this Agreement and the non-payment is not cured
within fifteen (15) days after written notice, On2 may terminate this
12
Agreement (E-world has no right to terminate in this circumstance).
Either of On2 or E-world may terminate this Agreement if the other
party becomes bankrupt or a receiver is appointed for a substantial
part of its assets or business, or any order is made approving a
petition or answer seeking reorganization under any applicable
bankruptcy law. If NT becomes bankrupt, liquidated, de-registered or
otherwise ceases to exist, only On2 shall have the right to terminate
this Agreement. Unless E-world properly terminates this Agreement as a
result of an uncured material breach by On2, E-world shall not be
relieved of any of its or NT's payment obligations set forth in this
Agreement.
11.2 Events Upon Termination and Expiration. Upon the termination of this
Agreement by On2 on account of an uncured material breach by E-world or
NT, without prejudice to any other rights that On2 may have, the
following will occur:
11.2.1 E-world will immediately cease all use and distribution of the
Software, Optimized Code and any On2 Confidential Information.
11.2.2 E-world will immediately return to On2, or destroy, all copies
of the Software, Optimized Code, On2 Confidential Information,
and all documentation created under this agreement in its
possession or control. Upon written request from On2, E-world
will promptly provide On2 with a written certification of
E-world's compliance with the foregoing.
11.2.3 E-world shall have no further right to market, sell or license
any EVD/HDTV Products that contain any Software or Optimized
Code.
11.3 Term. The term of this Agreement shall be perpetual.
12 Additional Terms.
12.1 Intellectual Property Notices. E-world will not, nor will it permit
others to, remove, alter, cover or obscure any confidentiality, trade
secret, proprietary or copyright notices, trademarks, proprietary,
Intellectual Property Rights or other identifying marks or designs from
any component of the Optimized Decoder Code including associated
documentation and delivery media, and will replicate such notice within
every copy or partial copy made.
12.2 Force Majeure. Neither On2 nor E-world be liable to the other for any
delays or losses resulting from events beyond its control, such as
fire, earthquake, or casualty arising out of earthquake, accidents,
adverse weather conditions, war, civil disorder, or government action;
provided, however, that the affected party take reasonable efforts to
mitigate the effects of such events. The affected party will promptly
notify the other of any such event, and On2 and E-world will meet
promptly to determine appropriate resolution.
12.3 Conflicts. In the event that any terms of this Agreement conflict with
the terms of any Exhibit, the terms of this Agreement will prevail.
12.4 Survival. The rights and obligations contained in Sections 7, 8, 9, 10,
11 and 12 will survive the termination of this Agreement for any
reason.
13
12.5 Non-Encumbrance. E-world will not pledge, mortgage, encumber or offer
as security in any manner any part of this Agreement, any of the rights
granted hereunder or any part of the Optimized Decoder Code,
accompanying documentation, or components.
12.6 Seizure. In the event of a pending seizure of the Software or Optimized
Decoder Code by a creditor of E-world, E-world must immediately inform
On2 and take all measures to have On2's Intellectual Property Rights
recognized and protected. E-world will pay all costs incurred
recovering the seized materials.
12.7 Assignment. Except as provided in this Section, neither On2 nor E-world
may assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement, without the prior written consent of
the other party. NT may not assign, delegate or otherwise transfer any
of its rights or obligations under this Agreement without the written
consent of On2. Any attempted assignment or delegation without the
appropriate party's prior written consent will be void and will give
such other party the right to terminate this Agreement. For the purpose
of this Section neither the sale of all, or substantially all, of On2's
assets including this Agreement, nor the sale or change of control of
On2 shall be deemed to be a prohibited assignment or delegation
hereunder. Subject to the foregoing, this Agreement will inure to the
benefit of and be binding on the respective successors and permitted
assigns of the parties.
12.8 Equitable Relief. E-world agrees that On2 will be entitled to equitable
relief, including injunctive relief without the posting of any
security, to prevent any breach, infringement, or further breach or
infringement of any Intellectual Property Rights or unauthorized
disclosure of the Software or Optimized Code. On2 may specifically
enforce such provisions or protect such rights by an action instituted
in any court having competent jurisdiction and E-world hereby submits
to the jurisdiction of the Federal Courts of New York in connection
with any action seeking such equitable relief. E-world acknowledges
that the Software and Optimized Code have a special and unique
character, giving them particular value, the loss of which cannot be
reasonably or adequately compensated for in damages. Nothing will
prevent E-world from disputing the occurrence of such a breach or
infringement.
12.9 Position of NT. For the avoidance of doubt, the parties expressly agree
that NT shall have no rights under this Agreement except as expressly
granted herein and On2 shall have no obligations towards NT unless
expressly stated.
12.10 Notices. All notices and demands under this Agreement must be in
writing and will be effective only if delivered by personal service,
overnight courier, or certified or registered, return receipt requested
United States mail, to the following addresses:
TO ON2:
On2 Technologies, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: General Counsel
14
TO E-WORLD:
Beijing E-world Technology Co., Ltd.
Triumph Plaza East-F4 ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, People's Republic of China
Attn: General Counsel
TO NT:
Nature Talent Capital Limited
Room 701, Shanghai Industrial ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇-▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
Attn: Chairman of the Board
Any party may change the addresses set forth above by written notice to
the other parties. Notice will be effective on receipt.
12.11 Waiver. No waiver of any provision of this Agreement will be binding
unless it is in writing. No indulgence or forbearance by a party will
constitute a waiver of the other party's right to insist on performance
in full and in a timely manner of all covenants in this Agreement.
Waiver of any provision will not be deemed to waive the same provision
thereafter or any other provision of this Agreement at any time.
12.12 Entire Agreement. This Agreement constitutes the entire agreement
between the parties pertaining to the specific subject matter herein
and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, express or implied.
12.13 Amendment. This Agreement may be amended only by written agreement
executed by the Parties.
12.14 Severability. If any provision or part of any provision contained in
this Agreement is found by a court of competent jurisdiction to be
invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions or portions
thereof, will not be in any way affected or impaired thereby.
12.15 Dispute Resolution and Choice of Law. Except for On2's rights and
remedies under Section 12.8 hereof and except for the right of any
party to enforce a claim for monies owed under this Agreement in any
court of competent jurisdiction, this Agreement shall be interpreted,
construed, and enforced in all respects in accordance with the laws of
the state of New York. Any dispute arising out of or in connection with
this contract, including any question regarding its existence, validity
or termination, shall be referred to and finally resolved by
arbitration under the London Court of International Arbitration Rules,
which Rules are deemed to be incorporated by reference into this
clause. The number of arbitrators shall be one. The seat, or legal
place, of arbitration shall be London, UK. The language to be used in
the arbitral proceedings shall be English.
15
12.16 Execution By Counterparts & Facsimile. This Agreement, and any
amendment, supplement, restatement or termination of any provision, may
be executed and delivered in counterparts by facsimile.
12.17 Independent Contractors. The relationship between On2 on the one hand
and E-world and NT on the other hand is that of independent
contractors. Nothing in this Agreement may be construed to make a party
the agent or partner of the other. No party may legally bind the other
parties in any manner.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their duly authorized representatives effective as of the Effective Date.
ON2 TECHNOLOGIES, INC. BEIJING E-WORLD TECHNOLOGY CO., LTD.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ Hao Jie
(Signature) (Signature)
Name: ▇▇▇▇ ▇▇▇▇▇▇▇ Name: Hao Jie
Title: EVP and Chief Financial Officer Title: President
NATURE TALENT CAPITAL LIMITED
By: /s/ ▇▇▇▇ ▇▇▇
Name: ▇▇▇▇ ▇▇▇
Title: Chairman
16
EXHIBIT A
END USER LICENSE AGREEMENT (▇▇▇▇) TERMS
- User shall not port, reverse engineer, reverse assemble or reverse
compile the [licensed software], or otherwise attempt to derive source
code from the [licensed software].
- User shall not alter, modify or change the [licensed software] or the
source code underlying the [licensed software] in any respect.
- This [End User License Agreement], and the license granted to you under
it, will terminate immediately if you are in breach of any of the terms
of this [End User License Agreement]. In the event of termination, you
must immediately stop using the software and either destroy all copies
of the [licensed software] or return them to [E-world].
- User may not copy, sell, sublicense, assignor redistribute the
[licensed software].
- [insert e-world or manufacturer's name] licensors shall have the right
to enforce the terms of this [End User License Agreement] against you.
- The licensed software may be used only in the People's Republic of
China
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EXHIBIT B
ROYALTY AMOUNTS
EVD/HDTV Product with Encoder or Decoder only:
US$2.00 per each EVD/HDTV Product manufactured or produced
EVD/HDTV Product with Encoder and Decoder together:
US$4.00 per each EVD/HDTV Product manufactured or produced
18
EXHIBIT C
MINIMUM AMOUNTS
EVD/HDTV PRODUCTS WITH DECODER ONLY:
2004: 800,000 units
2005: 1,600,000 units
EVD/HDTV PRODUCTS WITH ENCODER ONLY:
2004: 10,000 units
2005: 20,000 units
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EXHIBIT D
AUTHORIZED EMPLOYEES
▇▇▇▇ ▇▇▇▇▇▇▇▇ (Chinese Translation)
Hao Jie (Chinese Translation)
Li Qiuli (Chinese Translation)
Li Yi (Chinese Translation)
Peng Nanhong (Chinese Translation)
Tang Jiangjie (Chinese Translation)
▇▇▇ ▇▇▇ (Chinese Translation)
▇▇ ▇▇▇▇▇ (Chinese Translation)
Yang Mao (Chinese Translation)
20
