EXHIBIT 10.9
SOURCE CODE LICENSE AND SOFTWARE DISTRIBUTION AGREEMENT
(NON-EVD/HDTV 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 "Non-EVD/HDTV Product" means a platform or device that E-world desires to
port or use the Encoder and/or Decoder to or with other than the EVD/HDTV
Products.
1.2 "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.
1.3 "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.
1.4 "EVD/HDTV Product" means the EVD Equipment and HD TV Equipment.
1.5 "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.
1.6 "HD TV Equipment" means any HD TV equipment or device that contains an
Encoder and/or Decoder.
1.7 "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.
1.8 "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.
1.9 "Optimized Code" means Optimized Decoder Object Code, Optimized Decoder
Source Code, Optimized Encoder Object Code and Optimized Encoder Source
Code.
1.10 "Optimized Decoder Object Code" means the Decoder in binary or object form
that has been ported and optimized by E-world for use in Non-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.
1.11 "Optimized Decoder Source Code" means the Decoder in source code form that
has been ported and optimized by E-world for use in Non-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.
1.12 "Optimized Encoder Object Code" means the Encoder in binary or object form
that has been ported and optimized by E-world for use in Non-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.
1.13 "Optimized Encoder Source Code" means the Encoders in source code form
that has been ported and optimized by E-world for use in Non-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.
1.14 "Software" means the Source Code and object code for Encoders and
Decoders.
1.15 "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
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Employees who possess skills and training commensurate with the level of
sophistication of the Software to develop the Optimized Code.
1.16 "Encoder and Decoder" means On2's VP5 and VP6 encoder and decoder
algorithm. Such encoders being "Encoders" and such decoders being
"Decoders."
1.17 "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.
1.18 "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.
1.19 "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.
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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 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
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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.
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
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
within 30 days of delivering such written notice.
3 Grant of License.
3.1 Non-EVD Source Code License Grant.
(a) Subject to timely payment of the License Fee and Royalties and
compliance with the terms of this Agreement, On2 grants E-world a limited,
exclusive within the People's Republic of China, including Hong Kong,
Macau, and Taiwan (collectively "China") and non-exclusive outside China,
non-sublicensable, non-transferable, perpetual, irrevocable
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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 Non-EVD/HDTV Products. E-World has the right
to sublicense Optimized Decoder Object 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 limited,
exclusive within China and non-exclusive outside China, non-sublicensable,
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
Non-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, non-transferable,
perpetual, irrevocable license to use, copy, and distribute the Optimized
Decoder Object Code integrated with Non-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, non-transferable,
perpetual, irrevocable license to use, copy, and distribute the Optimized
Encoder Object Code solely when integrated with Non-EVD/HDTV Products.
(c) E-world may grant sublicenses to its original equipment manufacturers
("OEMs") to produce and sell Non-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 Steering Committee. To avoid conflict with On2's existing contractual
obligations, On2 and E-world shall form a steering committee (the
"Steering Committee") that shall consist of at least 2 members and not
more than 4 members. 50% of the Steering Committee shall consist of
representative(s) from E-world and 50% of the Steering Committee shall
consist of representative(s) from On2. The Steering Committee shall act
solely by unanimous written consent. The purpose of the Steering Committee
shall be to develop strategies and policies regarding the marketing, sale
and distribution by E-world of Non-EVD/HDTV Products. The Steering
Committee must approve Non-EVD/HDTV Products prior to their sale or
distribution outside China. The Steering Committee will meet or convene
each time E-world proposes the sale or distribution of a new Non-EVD/HDTV
Product. The Steering Committee may adopt such rules and/or policies as
On2 and E-world shall mutually agree.
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 will cause NT to pay) On2 a non-refundable
license fee of [*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT] (the "License Fee") payable as follows:
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
payable within 10 days of the Effective Date of this Agreement, (ii)
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT]
0 payable upon completion of the Initial Port and (iii) [*CONFIDENTIAL
MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] within six
months of completion of the Initial Port.
4.2 Royalties.
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(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
Non-EVD/HDTV Products in the amounts set forth on Exhibit B hereto (the
"Royalties"). Royalties will be owed to On2 and accrue when a Non-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 Non-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 Non-EVD/HDTV
Product type manufactured and the amount of Royalties accrued for each
Non-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 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
Non-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 Non-EVD/HDTV Products. The minimum royalties
will be paid in quarterly installments based on the Non-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 Non-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
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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 by On2 of the first portion of the License
Fee set forth in Section 4.1, 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.
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.
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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
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
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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.
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 a
Non-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
11
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 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
12
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 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
Non-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
13
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.
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' 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
14
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
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.
15
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.
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
16
NATURE TALENT CAPITAL LIMITED
By: /s/ ▇▇▇▇ ▇▇▇
Name: ▇▇▇▇ ▇▇▇
Title: Chairman
17
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
18
EXHIBIT B
ROYALTY AMOUNTS
Non-EVD/HDTV Product with Encoder or Decoder only:
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] per each
Non-EVD/HDTV Product manufactured or produced
Non-EVD/HDTV Product with Encoder and Decoder together:
[*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] per each
Non-EVD/HDTV Product manufactured or produced
19
EXHIBIT C
MINIMUM AMOUNTS
NON-EVD/HDTV PRODUCTS WITH DECODER ONLY:
2004: [*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] units
2005: [*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] units
NON-EVD/HDTV PRODUCTS WITH ENCODER ONLY:
2004: [*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] units
2005: [*CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT] units
20
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)
21
