Agreement on Media Streaming Technology - Microsoft Corp. and Progressive Networks Inc.
AGREEMENT BETWEEN MICROSOFT AND PROGRESSIVE NETWORKS ON MEDIA STREAMING
TECHNOLOGY
This "Agreement" is entered into and effective as of June 17, 1997 (the
"Effective Date") by and between MICROSOFT CORPORATION, a Washington
corporation located at One Microsoft Way, Redmond, WA 98052 ("Microsoft") and
PROGRESSIVE NETWORKS, INC., a Washington corporation located at 1111 Third
Avenue, Suite 2900, Seattle, WA 98101 ("PN").
1. DEFINITIONS
1.1 "Standard Code" means all of the PN and third party code (subject to
Section 2.2) used in PN's current version 4.0 streaming audio and video
client and server products, including, but not limited to, PN Internal
Tools, tools currently provided to third parties at no charge by PN [*]
and including bug-fixes developed by PN during the one year following
delivery by PN, for all operating system platforms, including but not
limited to all versions of Microsoft Windows, all versions of UNIX, the
Macintosh operating system, and the WebTV operating system. Standard
Code shall not include code PN's "Splitter" products or its Player Plus
software, nor shall it include future-developed technology for
advertisement insertion, datatypes other than audio or video (which are
not included in PN Clients or RA/RV Server), distributed networking
(such as Splitter finding), tools which are value-add technology on top
of base level encoders, billing and other value added technology
(technology which is not required for Compatibility purposes). It is
expressly understood that base level encoding and compression
technology is part of the Standard Code; further, thinning and
bandwidth negotiation are part of the Standard Code to the extent such
technologies are used in PN's current version 4.0 streaming audio and
video client and server products. Standard Code does not include added
PN or third party hardware or software technology bundled with Standard
Code as part of short term sales promotions.
1.2 "Internal Tools" means associated documentation, specifications, and
tools developed by either party, necessary to build and create
derivative works of the code.
1.3 "Software Development Kits" means code licensed by PN to third parties
for purposes of development as part of or in conjunction with PN's
streaming audio and video client and server products, and code
licensed by Microsoft to third parties for purposes of development as
part of or in conjunction with Microsoft's streaming audio and video
client and server products.
1.4 "Term" means the three (3) year period commencing upon the Effective
Date.
1.5 "Confidential Information" means: (i) any trade secrets relating to
either party's product or service plans, designs, costs, prices and
names, finances, marketing plans, business opportunities, personnel,
research, development or know-how; and (ii) the specific terms and
conditions of this Agreement. "Confidential Information" shall not
include information that: (i) is or becomes generally known or
available, whether by publication, commercial use or otherwise,
without restriction on disclosure and through no fault of the
receiving party; (ii) is known and has been reduced to tangible form
by the receiving party at the time of disclosure and is not subject to
restriction; (iii) is independently developed or learned by the
receiving party without reference to any Confidential Information of
the disclosing party; and (iv) is lawfully obtained from a third party
that has the right to make such disclosure.
1.6 "PN Clients" means PN's RealAudio and RealVideo standard player,
versions 4.0.
1.7 "RA/RV Server" means PN's Easy Start RealAudio/RealVideo server
software version 4.0, with 60 user stream capability.
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Portions of this agreement have been omitted pursuant to Rule 406 and filed
separately with the Commission.
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1.9 "Compatible" means audio/video client or server streaming software
which interoperates with the PN Clients or the RA/RV Server (including
current versions of the PN Clients and the RA/RV Server as of the date
of a subsequent delivery of Standard Code), respectively, or as the
parties may otherwise mutually agree. For purposes of this Agreement
"interoperates" means the clients and servers of both parties will
operate substantially as well with PN Clients and RA/RV Server
(including current versions of the PN Clients and the RA/RV Server as
of the date of a subsequent delivery of Standard Code) as with its own
products.
2. LICENSE GRANTS
2.1 Non-Exclusive License to Standard Code. PN hereby grants to Microsoft a
non-exclusive, perpetual, [*], worldwide, fully paid-up right and
license to: (i) use, copy, modify, translate and create derivative
works of the source and binary versions of the Standard Code; (ii)
reproduce, license, rent, lease, broadcast publicly display, transmit
or otherwise distribute in any medium now known or hereafter devised
(collectively, "Distribute") and have Distributed, to and by third
parties, binary versions of the Standard Code [*], (iii) [*]
sublicense, to and by third parties, the source versions of the
Standard Code, provided that Microsoft will only [*], license and
sublicense Standard Code source under conditions of confidentiality and
the same degree of care that Microsoft applies to its Windows NT source
code; and (iv) grant any and all of the rights set forth in this
Section 2 in the Standard Code to third parties, [*].
The foregoing license grants include a license under any current and
future patents owned or licensable by PN to the extent necessary: (i)
to exercise any license right granted herein; and (ii) to combine the
Standard Code and/or derivative works thereof with any hardware and
software.
2.2 Third Party Rights.
(a) PN. If PN does not have sufficient rights in third party code
included in Standard Code to grant the rights set forth in
Section 2.1, then PN shall so notify Microsoft. The license
grants set forth in Section 2.1 shall be presumed to grant
Microsoft all the rights which PN can grant, and [*] to enable
the license grant set forth in Section 2.1 to Microsoft. PN's
cumulative liability under this Section 2.2(a) shall be [*].
(b) Microsoft. If Microsoft does not have sufficient rights in third
party code included in Microsoft Code (as defined below) to grant
the rights set forth in Section 2.4, then Microsoft shall so
notify PN. The license grants set forth in Sections 2.4(b) and
(c) shall be presumed to grant PN all the rights which Microsoft
can grant, and Microsoft shall, [*] to enable the license grant
set forth in Sections 2.4(b) and (c) to PN. Microsoft's
cumulative liability under this Section 2.2(b) shall be [*].
(c) Cooperation. The parties shall cooperate with respect to
licensing and obtaining necessary rights to third party code.
For Standard Code delivered in the initial delivery or any
Microsoft Code to be delivered at the same time, within fifteen
(15) days of the Effective Date each party will notify the other
of any third party license issues. For subsequent deliveries of
code under this Agreement, each party will, on or before such
delivery, notify the other of any third party license issues.
2.3 Non-Exclusive License to PN Trademarks. PN hereby grants to Microsoft
a non-exclusive, perpetual, irrevocable, worldwide, fully paid- up
right and license to use and sublicense the use of any "PN Marks" for
identification of, or in conjunction with, or as part of Microsoft
products which are
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Compatible. For purposes of this Section 2.3, "PN Marks" means PN
trademarks and related logos for "Real Audio" and "Real Video." If
Microsoft exercises its rights under Section 3.3, the PN Marks will
also include those marks and associated logos which are used in
connection with the applicable versions of the Compatible PN Clients
and RA/RV Server.
PN agrees that it will license use of the PN Marks to third parties
only for use with products that are Compatible. Microsoft may only
sublicense the PN Marks for use in connection with third party
products which are Compatible, and which comply with the PN quality
control guidelines imposed on Microsoft under this Agreement.
Microsoft will use good faith efforts to ensure that its sublicensees
abide by PN's quality control guidelines, and will cooperate with PN
to remedy any violation thereof by its sublicensees.
Microsoft agrees that it will comply with PN's trademark usage
guidelines regarding the style and design of the PN Marks, which PN
will deliver to Microsoft within two (2) weeks of the Effective Date.
Microsoft agrees to cooperate with PN in facilitating PN's reasonable
monitoring and review of the nature and quality of products and
services bearing the PN Marks, and to supply PN with specimens of
Microsoft's use of the PN Marks upon reasonable request Microsoft
understands and agrees that the use of any PN Mark in connection with
this Agreement shall not create any right, title or interest in or to
the use of the PN Marks and that all such use and goodwill associated
with the PN Marks will inure to the benefit of PN. [*]
2.4 License Back
(a) Scope and Frequency of Delivery. Pursuant to Section 2.4(b),
Microsoft shall license back to PN (i) any and all modifications
and derivative works of the Standard Code, and (ii) Microsoft
software which is essentially of the same functionality as the
Standard Code, and associated Microsoft Internal Tools, Software
Development Kits and bug fixes (collectively "Microsoft Code").
Delivery of Microsoft Code so licensed back to PN shall occur
once on a date determined by PN [*] under Section 3.
(b) License Back - Source. Microsoft hereby grants to PN, for the
License Back term, a non-exclusive, worldwide, fully paid-up
right and license to: (i) copy, review and evaluate the source
version of the Microsoft Code solely for purposes of building
value-added products; (ii) use, copy, modify and create
derivative works of the source versions of the Microsoft Code
solely for purposes of correcting bugs or fixing errors in the
Microsoft Code; and (iii) use, copy, modify and create derivative
works of the source versions of the Microsoft Code solely for
purposes of porting the Microsoft Code to non-Microsoft operating
system platforms.
"License Back Term" means, as applicable, (i) a period of [*]
following initial delivery of the Standard Code by PN to
Microsoft under Section 3.2, or (ii) a period of [*] following
any subsequent delivery of Standard Code by PN to Microsoft under
Section 3.3.
(c) License Back - Binary. Microsoft grants to PN a non-exclusive,
worldwide, perpetual (provided PN continues to meet any royalty
obligations) right and license to Distribute and have
Distributed, to and by third parties, binary-only versions of the
Microsoft Code delivered during the License Back Term and any
derivative works of thereof created by PN under Section 2.4(b).
Any Distribution to a third party of Microsoft Code in binary
form is subject to a royalty as follows. If PN Distributes
Microsoft Code for Microsoft operating system platforms, and if
Microsoft Distributes the same or substantially similar software
for no fee, or as a feature of the operating system for no
additional cost, then during the same period for which Microsoft
so Distributes for free, PN shall owe no royalty. If PN
Distributes Microsoft Code for Microsoft operating system
platforms, and if Microsoft distributes the same or substantially
similar software for a fee or as a revenue product (including if
it converts from a [*], provided such conversion shall not affect
any existing agreements of PN) then PN shall pay for such
Microsoft Code on terms and conditions no less favorable than
those granted to any other resellers or licensees of the
Microsoft Code. If PN Distributes Microsoft Code for
non-Microsoft operating system platforms, then PN shall pay a
royalty to Microsoft equal to [*] PN receives for such
Distribution. Should PN wish to Distribute Microsoft Code for
non-Microsoft operating system platforms, the parties will enter
into an agreement outlining payment terms, including but not
limited to provisions for payment, audit and the like.
The foregoing license grants include a license under any current and
future patents owned or licensable by Microsoft to the extent
necessary: (i) to exercise any license right granted herein; and (ii)
to combine the Microsoft Code and/or derivative works thereof with any
hardware and software.
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2.5 Distribution of RA/RV Server. Until Microsoft distributes a
Compatible server product, Microsoft shall distribute the RA/RV Server
[*] Microsoft's website shall provide cross-links to PN's website for
additional information and support of the RA/RV Server. PN shall be
solely responsible for RA/RV Server end user support and shall have
the discretion to create appropriate support policies for end user
support.
2.6 Distribution of PN Clients. [*] between the parties effective [*] is
hereby [*] by this Section 2.6. For a period of [*] from the [*]
Microsoft will include the PN Clients (including Promo Player Plus)
with Microsoft Internet Explorer version 4.0 distributed on CD-ROM,
through OEMs, via "On-Line Systems" (as defined [*]) and in the same
manner, place or distribution mechanism as Microsoft distributes
NetShow (or any other equivalent streaming media client) as part of a
standard Microsoft product, except for any configurations of Internet
Explorer version 4.0 designed for minimal download size which do not
include NetShow (or any other equivalent streaming media client).
Provided that the parties [*] and further provided that PN supports
DirectShow and the mutually defined ASF file format (to the extent such
formats have been determined) within [*] Microsoft will continue to
include the PN Clients (and Promo Player Plus), as set forth in [*].
2.7 Support. During the Term, each party shall use commercially practical
efforts to:
(a) [*]
(b) Provide consistent points of contact at the program manager
and executive level; and
(c) Provide each other reasonable level of technical support.
PN will receive such information at such quarterly meetings and to the
same extent provided to Microsoft's own internal streaming media
operations.
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3. LICENSE FEE; DELIVERY; CONSULTING
3.1 Initial Delivery. On a date within thirty (30) days of signing this
agreement, such date to be set by Microsoft at its sole discretion, PN
shall make delivery to Microsoft of the Standard Code. At that time,
PN shall deliver to Microsoft PN's latest version of the Standard
Code, including any and all works in progress whether or not such
works have been released by PN. PN shall also provide Microsoft with
six (6) man-months of free consulting help by knowledgeable PN
employee's to train Microsoft with respect to the Standard Code,
including but not limited to how to build and create derivative works
of the Standard Code.
3.2 License Fee. In consideration for the rights and licenses granted
under this Agreement, Microsoft shall pay PN the sum of thirty millon
dollars ($30,000,000). Of this amount, twenty million dollars
($20,000,000) shall be paid [*] and ten million dollars ($10,000,000)
shall be paid within thirty (30) days of the earlier of (i) PN's
completion of the associated six (6) man months of consulting services
and (ii) six (6) months after the initial delivery of the Standard
Code from PN.
3.3 Subsequent Deliveries. During the first and second years following
initial delivery of the Standard Code, Microsoft shall have the option,
at its sole discretion, of receiving further deliveries, [*]. If
Microsoft takes the first optional delivery [*] following initial
delivery of the Standard Code, it shall pay PN a flat fee of
twenty-five million dollars ($25,000,000). If Microsoft takes the
second optional delivery, it shall pay PN a further flat fee of
thirty-five million dollars ($35,000,000). Within the time periods
specified, Microsoft shall decide the dates for such deliveries at its
sole discretion. If such deliveries are made, then the code delivered
shall be considered Standard Code for purposes of this agreement and
shall be subject to all the terms of this agreement. For amounts due
under this Section 3.3 [*].
3.4 Bug Fixes. PN shall deliver any bug fixes to the Standard Code on a
quarterly basis in the twelve (12) months following the initial [*].
3.5 UNIX Port. Regardless of whether Microsoft exercises its rights to
subsequent deliveries of Standard Code, PN shall deliver to Microsoft
any UNIX port of Microsoft Code which PN makes which PN does not
distribute or ceases to distribute. Such UNIX port shall be
considered licensed royalty-free to Microsoft under the terms of
Section 2.1.
4. PATENT ISSUES
4.1 Patent Covenant. PN covenants not to (a) sue or (b) bring, prosecute,
assist or participate in any judicial, administrative or other
proceedings of any kind against Microsoft or its licensees (including
but not limited to OEMs and other distributors) for infringement of PN
Patents which occurs during the Immunity Period on account of the
manufacture, use, sale, importation, promotion or distribution of any
Microsoft audio and video client and server streaming functionality
included in any Microsoft products and technology (except Foundry
products and technology), regardless of whether such products and
technology is marketed under a Microsoft trademark regardless of
whether such products include Standard Code. "PN Patents" as used in
this Section 4.1 means (i) any and all patents (other than design
patents or the equivalent), or the inventions, ideas or applications
thereof, worldwide, whether currently existing, or later developed,
applied for, issued prior to the Term, or issuing during
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the Term, and under which patents (or the inventions, ideas or
applications therefor) PN, or any of its Affiliates, now has or
obtains during the Term, the ability or right to license or grant
immunity from suit; and (ii) all extensions, divisionals,
continuations, continuations-in-art, re-examinations and reissue
patents of such patents, as well as patent applications thereof, to
the extent rights attach to such applications. The "Immunity Period"
shall commence upon the first to issue and shall terminate upon the
last to expire, of any of the PN Patents (in any jurisdiction).
For purposes of this Section 4, "Foundry" means a product or
technology manufactured, reproduced, sold, leased, licensed or
otherwise transferred ("Transferred") by one party to this Agreement
(the "Acting Party") to a third party, wherein the product or
technology is (i) designed by or for a third Party without substantial
input from the Acting Party and Transferred from the Acting Party to
such third party or such third party's customers on an exclusive or
substantially exclusive basis; or (ii) otherwise Transferred through
or by the Acting Party for the purpose of circumventing any patent
rights of the other Party to this Agreement.
4.2 Patent Covenant. Microsoft covenants not to (a) sue or (b) bring,
prosecute, assist or participate in any judicial administrative or
other proceedings of any kind against PN or its licensees (including
but not limited to OEMs and other distributors) for infringement of
Microsoft Patents which occurs during the Immunity Period on account
of the manufacture, use, sale, importation, promotion or distribution
of any PN audio and video client and server streaming functionality
included in any PN products and technology (except Foundry products
and technology), regardless of whether such products and technology is
marketed under a PN trademark regardless of whether such products
include Microsoft Code. "Microsoft Patents" as used in this Section
4.2 means (i) any and all patents (other than design patents or the
equivalent), or the inventions, ideas or applications thereof,
worldwide, whether currently existing, or later developed, applied
for, issued prior to the Term, or issuing during the Term and under
which patents (or the inventions, ideas or applications therefor)
Microsoft, or any of its Affiliates, now has or obtains during the
Term, the ability or right to license or grant immunity from suit; and
(ii) all extensions, divisionals, continuations, continuations-in-art
re-examinations and reissue patents of such patents, as well as patent
applications thereof, to the extent rights attach to such
applications. The "Immunity Period" shall commence upon the first to
issue and shall terminate upon the last to expire, of any of the
Microsoft Patents (in any jurisdiction).
4.3 Patent Protection. In addition to any indemnification obligation under
Section 10, where a third party is infringing PN Patents related to
audio and video client and server streaming technology, PN will, upon
Microsoft's request, use its best efforts to abate or suppress such
infringement, [*]. Any settlement [*] shall be in good faith for
valuable consideration, and, in the case where Microsoft is sued by
the third party for infringement of any third party patents related
to audio or video client or server streaming technology, and Microsoft
is financing a cause of action by PN against such third party as set
forth below, such consideration shall be mutually agreed upon by PN
and Microsoft. Should Microsoft request that PN initiate a patent
infringement action against a third party, Microsoft shall finance
such cause of action through a loan to PN under terms and conditions
to be agreed by the parties. Any proceeds, damages collected or other
remuneration as a result of such action shall be used first to pay
off such loan. Unless the parties otherwise agree, if PN is unable
under such cause of action to collect proceeds, damages or other
remuneration sufficient to repay the loan, then the loan shall be
forgiven to the extent PN cannot repay the difference from any proceeds
collected.
4.4 Covenants Personal and Non-Assignable. Each party agrees that the
respective covenant granted to it in Section 4.1 or Section 4.2 is
personal to it and may not be assigned, licensed or otherwise
transferred by it in whole or in part, to any third party, whether
under action of law or otherwise and including in connection with the
insolvency or bankruptcy of such party.
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5. MEDIA FILE FORMAT AGREEMENT
Microsoft and PN shall work in good faith and use best efforts to conclude,
within ten (10) business days, the agreement currently being negotiated to
align media file formats and client technology.
6. SOURCE DISTRIBUTION
6.1 Distribution. If, during the Term, PN licenses a third party all or a
substantial portion of the Standard Code in source form, ("Event
License"), then Microsoft shall be entitled to a refund of all license
fees paid for delivery of Standard Code, including any fees paid for
optional deliveries of Standard Code, as follows:
<TABLE>
<CAPTION>
Event License Event License Event License
License within the first year within the second year within the third year
of the Term of the Term of the Term
---------------------- ---------------------- ---------------------
<S> <C> <C> <C>
Amount of Refund of 100% [*] [*]
initial license fee
Amount of refund of Not applicable [*] [*]
license fee for first
optional delivery
(if any)
Amount of refund of Not applicable Not applicable [*]
license fee for second
optional delivery
(if any)
</TABLE>
6.2 Clarifications.
(a) PN warrants and represents that, in the United States, it has no
existing distribution agreements with [*], which agreements would
not be an [*].
(b) Notwithstanding anything to the contrary in Section 6.1, any
distribution agreements entered into prior to the Effective Date
shall not [*]. PN shall not renew such distribution agreements to
the extent such renewal would be an [*] and where it can control
or prevent such renewal.
(c) Notwithstanding anything to the contrary in Section 6.1, the
following shall not be considered [*]: (i) [*]; (ii) licenses for
internal use of the Standard Code within a company or other
organizations; (iii) licenses to bundle the Standard Code with
substantial hardware value-adds; (iv) [*]; or (v) portions of the
server Standard Code reasonably equivalent to those portions
currently distributed as part of PN's Software Development Kits.
6.3 Termination of Event License. PN may terminate any Event License
promptly upon becoming aware of such Event License, and PN will not owe
Microsoft any refund under this Section 6.
7. INVESTMENT
7.1 Non-Voting Preferred Stock. PN agrees to sell to Microsoft, and
Microsoft agrees to purchase from PN, three million, three hundred
thirty-eight thousand, three hundred seventy-four (3,338,374) shares
of non-voting preferred stock of PN at a per share price of eight
dollars and ninety-nine cents ($8.99). These shares are convertible
into voting or non-voting common stock (at Microsoft's option) of PN.
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These preferred shares will have terms and rights and preferences
comparable to existing preferred shares of PN.
7.2 Warrant. Simultaneously with the purchase of the preferred shares set
forth in Section 7.1, PN will grant to Microsoft a warrant to purchase
three million, seven hundred nine thousand, three hundred and five
(3,709,305) shares of non-voting preferred stock of PN, convertible
into voting or non-voting common stock (at Microsoft's option) of PN.
The purchase price of each share under the warrant shall equal
thirteen dollars and forty-eight cents ($13.48), subject to standard
adjustments for stock splits, stock dividends, reclassifications or
reorganizations. The warrant shall have a term of two and one-half
(2.5) years. In the event of an initial public offering ("IPO") of
PN, the warrant shall either be exercised by Microsoft on or before
the date of the IPO or shall expire.
7.3 Board of Directors. So long as Microsoft holds no less than (i)
3,338,374 shares of preferred stock (or common stock issued upon the
conversion of the preferred shares), or (ii) five percent (5%) of the
fully-diluted shares of PN, Microsoft shall have the right in its sole
discretion to have either (a) a Microsoft representative appointed to
the PN Board of Directors, or (b) a Microsoft representative appointed
as an observer to the PN Board of Directors. PN shall have the right
to approve such board member or observer, provided such approval shall
not be unreasonably withheld or delayed.
7.4 Approvals. Microsoft acknowledges that (i) PN's obligations under
this Section 7 are conditioned upon receiving certain shareholder
approvals and (ii) the warrant in Section 7.2 and all shares to be
purchased by Microsoft pursuant to this Section 7 will not have been
registered under the Securities Act of 1933, as amended, and therefore
may be issued and sold only upon Microsoft making such representations
and warranties as are customary in connection with the purchase of
restricted stock. Microsoft agrees to make such customary
representations and warranties. PN will use its reasonable best
efforts to obtain any necessary shareholder approvals identified by
this Section 7.4. In the event PN is unable to obtain such
shareholder approval(s) by 5 p.m., June 23, 1997, PN shall propose to
Microsoft alternative terms which do not require shareholder approval.
If Microsoft does not agree to such alternative terms, this Agreement
shall terminate. If Microsoft does agree to such alternative terms,
then notwithstanding such agreement by Microsoft and if PN convinces
its shareholders within twenty-five (25) days to accept the original
transaction, then the original terms shall apply. Absent such
shareholder approval of the original terms, the alternative terms
proposed by PN and agreed to by Microsoft shall be the basis of the
Agreement. Upon such termination, then notwithstanding anything to
the contrary herein (including but not limited to Section 11.5), this
Agreement shall terminate as though the parties never executed the
Agreement.
7.5 Definitive Agreements. Each party will use all reasonable efforts to
negotiate and close on any and all necessary agreements and approvals
required to perfect the investment set forth in this Section 7 within
thirty (30) days of the Effective Date.
7.6 Due Diligence. Microsoft's obligation to purchase preferred shares of
PN is subject to the satisfactory completion of due diligence by
Microsoft. PN will make available to Microsoft documents and
information as reasonably requested, so that Microsoft can perform a
full investigation of PN's business and legal conditions. Microsoft
will complete its due diligence within seven (7) days of notification
by PN that PN has collected and made available to Microsoft all the
due diligence materials requested by Microsoft.
7.7 Regulatory Approval. The parties acknowledge that a material
consideration of this Agreement is the ability to implement and
conclude the Agreement expeditiously. If, by 5 p.m., June 23, 1997,
either party, in its sole discretion, determines that any required
government or regulatory approvals (solely with respect to this
Agreement and not in combination with any other proposed or actual
transaction) could cause unacceptable delay in successfully
implementing and concluding the Agreement expeditiously, either party
may terminate this Agreement. Upon such termination, then
notwithstanding anything to the contrary herein (including but not
limited to Section 11.5), this Agreement shall terminate as though the
parties never executed the Agreement.
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8. CONFIDENTIALITY; ANNOUNCEMENTS
8.1 Announcement. The parties will announce their relationship under this
Agreement within thirty (30) days of the Effective Date. The precise
timing and content of any announcement of this Agreement must be
jointly agreed upon, but both parties will acknowledge the nature of
Microsoft's distribution of PN's technology, the fact of Microsoft's
investment in PN, and other matters of strategic importance agreed to
by the parties. [*] Upon such termination, then notwithstanding
anything to the contrary herein (including but not limited to Section
11.5), this Agreement shall terminate as though the parties never
executed the Agreement.
8.2 Restrictions on Use and Disclosure. Each party shall protect the
other's Confidential Information from unauthorized dissemination and
use with the same degree of care that such party uses to protect its
own like information. Neither party will use the other's Confidential
Information for purposes other than those necessary to directly
further the purposes of this Agreement. Each party will use its best
efforts not to disclose to third parties the other's Confidential
Information without the prior written consent (except with respect to
source code as set forth in Section 2.1) of the other party. Except
as expressly provided in this Agreement, no ownership or license
rights are granted in any Confidential Information.
9. WARRANTIES
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9.1 PN. PN warrants and covenants that:
(a) Except as may be otherwise provided in Section 7 and Section
2.2(a), it has the sufficient authority and all necessary rights
to enter into and perform according to the terms of this
Agreement;
(b) To the best of its knowledge, it has the full and exclusive right
to grant Microsoft the licenses granted herein to use the Standard
Code and PN trademarks; and
(c) Except as otherwise disclosed to Microsoft, it is not aware of any
lawsuits or other causes of action alleging that the Standard Code
infringes the intellectual property rights of any third party,
including but not limited to patent, copyright, trade secret and
trademark.
The representations and covenants contained in this Section 9.1 are
[*].
9.2 Microsoft. Microsoft warrants and covenants that:
(a) Except as otherwise provided in Section 2.2(b), it has the
sufficient authority and all necessary rights to enter into this
Agreement and perform according to the terms of this Agreement;
(b) To the best of its knowledge, it has the full and exclusive right
to grant PN the licenses granted herein to use the Microsoft Code;
and
(c) It is not aware of any lawsuits or other causes of action alleging
that the Microsoft Code infringes the intellectual property rights
of any third party, including but not limited to patent,
copyright, trade secret and trademark.
The representations and covenants contained in this Section 9.2 are [*]
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10. INDEMNITY
10.1 By PN.
(a) PN shall, at its expense and Microsoft's request, defend any
claim or action brought against Microsoft, and Microsoft's
subsidiaries, affiliates, directors, officers, employees, agents
and independent contractors, to the extent it is based upon a
claim that [*], and PN will indemnify and hold Microsoft harmless
[*]. Microsoft shall: (i) provide PN reasonably prompt notice in
writing of any PN Claims; (ii) permit PN, through counsel
mutually acceptable to Microsoft and PN, to answer and defend the
PN Claims; and (iii) provide PN information, assistance and
authority, at PN's expense, to help PN to defend such claim or
action. PN will not be responsible for any settlement made by
Microsoft without PN's written permission, which permission will
not be unreasonably withheld.
(b) PN may upon written notice thereof to Microsoft undertake to
conduct all proceedings or negotiations in connection with PN
Claims, assume the defense thereof, and if it so undertakes, it
shall also undertake all other required steps or proceedings to
settle or defend the PN Claims, including the employment of
counsel which shall be reasonably satisfactory to Microsoft, and
payment of all expenses. Microsoft, at its own expense, shall
have the right to employ separate counsel and participate in the
defense of the PN Claims. PN shall reimburse Microsoft upon
demand for any payments made or loss suffered by it at any time
after the date hereof, based upon the judgment of any court of
competent jurisdiction or pursuant to a bona fide compromise or
settlement of claims, demands or actions, in respect to any
damages to which the foregoing relates.
(c) PN may not settle any PN Claim on Microsoft's behalf without
first obtaining Microsoft's written permission, which permission
will not be unreasonably withheld or delayed. In the event
Microsoft and PN agree to settle a claim or action, PN agrees not
to publicize the settlement without first obtaining Microsoft's
written permission, which permission will not be unreasonably
withheld or delayed.
(d) PN shall have no liability under this Section 10.1 for any third
party intellectual property infringement claim based upon the
combination of the Standard Code with non-PN products, where such
infringement would not have occurred but for such combination.
10.2 By Microsoft.
(a) Microsoft shall, at its expense and PN's request, defend any
claim or action brought against PN, and PN's subsidiaries,
affiliates, directors, officers, employees, agents and
independent contractors, to the extent it is based upon a claim
that [*], and Microsoft will indemnify and hold PN harmless from
and against any costs, damages and fees reasonably incurred by
PN, including but not limited to fees of attorneys and other
professionals, that are attributable to such Microsoft Claims.
PN shall: (i) provide Microsoft reasonably prompt notice in
writing of any Microsoft Claims; (ii) permit Microsoft, through
counsel mutually acceptable to PN and Microsoft, to answer and
defend the Microsoft Claims; and (iii) provide Microsoft
information, assistance and authority, at Microsoft's exercise,
to help Microsoft to defend such claim or action. Microsoft will
not be responsible for any settlement made by PN without
Microsoft's written permission, which permission will not be
unreasonably withheld.
(b) Microsoft may upon written notice thereof to PN undertake to
conduct all proceedings or negotiations in connection with
Microsoft Claims, assume the defense thereof, and if it so
undertakes, it shall also undertake all other required steps or
proceedings to settle or defend the Microsoft Claims, including
the employment of counsel which shall be reasonably satisfactory
to PN, and payment of all expenses. PN, at its own expense,
shall have the right to employ separate counsel and participate
in the defense of the Microsoft Claims. Microsoft shall reimburse
PN upon demand for any payments made or loss suffered by it at
any time after the date hereof, based upon the judgment of any
court of competent jurisdiction or pursuant to a bona fide
compromise or settlement of claims, demands or actions, in
respect to any damages to which the foregoing relates.
(c) Microsoft may not settle any Microsoft Claim on PN's behalf
without first obtaining PN's written permission, which
permission will not be unreasonably withheld or delayed. In the
event PN and Microsoft agree to settle a claim or action,
Microsoft agrees not to publicize the settlement without first
obtaining PN's written permission, which permission will not be
unreasonably withheld or delayed.
(d) Microsoft shall have no liability under this Section 10.2 for
any third party intellectual property infringement claim based
upon the combination of the Microsoft Code with non-Microsoft
products, where such infringement would not have occurred but
for such combination.
11. TERMINATION
11.1 Term. Unless earlier terminated in accordance with Section 11.2, this
Agreement shall commence upon the Effective Date and continue in full
force and effect through the Term.
11.2 Termination By Either Party For Cause. Either party may suspend
performance and/or terminate this Agreement immediately upon written
notice at any time if the other party is in material breach of Section
8.2 and fails to cure that breach within five (5) days after written
notice thereof.
11.3 Dispute Resolution. If the a party is in material breach of any
material warranty, term, condition or covenant of this Agreement other
than those contained in Section 8.2, such party shall cure that breach
within forty-five (45) after written notice thereof. If a party
contests or disputes that material breach has so occurred, the parties
shall submit any dispute to structured negotiation as follows:
(a) Coverage. Other than actual or imminent material breaches of
Section 8.2, any dispute between the parties with respect to
this Agreement shall be submitted for structured negotiation.
The commencement, and any resolution reached as a result, of
any dispute resolution under Section 11.3 shall be considered
Confidential Information and protected under Section 8.
(b) Structured Negotiation. Either party may invoke this
procedure by giving written notice to the other party
designating a corporate officer with appropriate authority to
be its representative in negotiations relating to the dispute.
Upon receipt of such notice, the other party shall, within
five (5) business days, designate a corporate officer with
similar authority to be its
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<PAGE> 12
representative. The designated officers shall, following
whatever investigation each deems appropriate, but no event
later than twenty (20) business days after the original
notice, enter into discussions concerning the dispute. If
within an additional twenty (20) business days of their
initial meeting, the representatives do not resolve the
dispute, either party may submit the matter to binding
arbitration under Section 11.3(c).
(c) Binding Arbitration. Any dispute not settled by the parties
by structured negotiation (other than actions for injunctive
relief including specific performance) shall be submitted only
to binding arbitration. The arbitration will be conducted in
accordance with the procedures in this document and the
Arbitration Rides for Commercial Arbitration Rules of the AAA
("AAA Rules"). In the event of a conflict with such rules,
the provisions of this Agreement will control.
The arbitration shall take place in Seattle, Washington,
before a panel of three arbitrators appointed as follows:
each party shall select a single arbitrator, and the two (2)
selected arbitrators shall mutually agree upon a third. The
arbitrators selected shall have knowledge and experience in
the computer software business. The arbitrators shall rule on
the dispute by issuing a written opinion setting forth
findings of fact and the rationale for their decision within
thirty (30) days after the close of hearings. The decision
rendered by the arbitrators shall be final and binding and may
be entered as a judgment in any court of competent
jurisdiction. The arbitrator(s) shall control the scheduling
so as to process the matter expeditiously. The times
specified in this section may be extended upon mutual
agreement of the parties by the arbitrators upon a showing of
good cause.
Any issue concerning the extent to which any dispute is
subject to arbitration, or concerning the applicability,
interpretation or enforceability of these procedures,
including any contention that all or part of these procedures
are invalid or unenforceable, shall be governed by the Federal
Arbitration Act and resolved by the arbitrators. No potential
arbitrator may serve on the panel unless he or she has agreed
in writing to abide and be bound by these procedures.
All aspects of the arbitration shall be treated as
Confidential Information.
Unless provided otherwise in the Agreement, the arbitrators
may not award non-monetary or equitable relief of any sort.
They will have no power to award damages inconsistent with the
Agreement. In no event, even if any other portion of these
provisions is held to be invalid or unenforceable, shall the
arbitrators have power to make an award or impose a remedy
that could not be made or imposed by a court deciding the
matter in the same jurisdiction.
The parties may submit written briefs. Discovery shall be
controlled by the arbitrators and shall be permitted as
follows: each party may submit in writing to a party, and that
party shall so respond, to a maximum of any combination of
thirty-five (35) (none of which may have subparts) of
interrogatories, demands to produce documents, and requests
for admission.
Each party shall bear its own costs of the arbitration. A
party seeking discovery shall reimburse the responding party
the costs of production of documents (to include search time
and reproduction costs). The parties shall equally split the
fees of the arbitration and the arbitrators.
11.4 Effect of Termination.
(a) Neither party shall be liable to the other for damages of any
sort resulting solely from terminating this Agreement in
accordance with its terms.
(b) Any end user licenses already validly granted by PN as the
effective date of termination shall not be affected and shall
survive termination.
Page 12 of 14
<PAGE> 13
11.5 Survival. In the event of termination or expiration of this Agreement
for any reason, Sections 2.1 (provided that Microsoft has paid the
applicable license fees set forth in Section 3), 2.2, 2.4(c), 3.2 (to
the extent fees are due and owing), 4, 8.2, 9, 10, 11, 12 and 13 shall
survive termination.
12. LIMITATION OF LIABILITIES
NEITHER PARTY SHALL BE LIABLE FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL,
PUNITIVE OR SPECIAL DAMAGES, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
13. GENERAL
13.1 Notices. All notices and requests in connection with this Agreement
shall be deemed given as of the day they are received either by
messenger, delivery service, or in the United States of America mails,
postage prepaid, certified or registered, return receipt requested,
and addressed as follows:
To PN: To Microsoft:
Progressive Networks, Inc. Microsoft Corporation
1111 Third Avenue, Suite 2900 One Microsoft Way
Seattle, WA 98101 Redmond, WA 98052-6399
Attention: General Counsel Attention:
Phone: (206) 674-2213 Phone: (425) 882-8080
Fax: (206) 674-2695 Fax: (425) 936-7329
Copy to:
Microsoft Corporation
One Microsoft Way
Redmond, WA 98052-6399
Attention: Law & Corporate Affairs
Fax: (206) 936-7409
or to such other address as a party may designate pursuant to this
notice provision.
13.2 Independent Contractors. PN is an independent contractor for
Microsoft and nothing in this Agreement shall be construed as creating
an employer-employee relationship, a partnership, or a joint venture
between the parties.
13.3 Taxes. In the event taxes are required to be withheld on payments
made under this Agreement by any U.S. (state or federal) or foreign
government, Microsoft may deduct such taxes from the amount owed PN
and pay them to the appropriate taxing authority. Microsoft shall in
turn promptly secure and deliver to PN an official receipt for any
taxes withheld. Microsoft will use reasonable efforts to minimize
such taxes to the extent permissible under applicable law.
13.4 Governing Law. This Agreement shall be governed by the laws of the
State of Washington as though entered into between Washington
residents and to be performed entirely within the State of Washington,
and PN consents to jurisdiction and venue in the state and federal
courts sitting in the State of Washington. In any action or suit to
enforce any right or remedy under this Agreement or to interpret any
provision of this Agreement, the prevailing party shall be entitled to
recover its costs, including reasonable attorneys' fees.
Page 13 of 14
<PAGE> 14
13.5 Assignment. This Agreement shall be binding upon and inure to the
benefit of each party's respective successors and lawful assigns;
provided, however, that PN may not assign this Agreement, in whole or
in part, without the prior written approval of Microsoft. For purposes
of this Agreement, a merger, consolidation, or other corporate
reorganization, or a transfer or sale of any or all of a party's stock,
or of all or substantially all of its assets shall be deemed to be an
assignment; provided, however, that an IPO of PN stock shall not be
considered an assignment.
13.6 Construction. If for any reason a court of competent jurisdiction
finds any provision of this Agreement, or portion thereof, to be
unenforceable, that provision of the Agreement will be enforced to the
maximum extent permissible so as to effect the intent of the parties,
and the remainder of this Agreement will continue in full force and
effect. Failure by either party to enforce any provision of this
Agreement will not be deemed a waiver of future enforcement of that or
any other provision. This Agreement has been negotiated by the
parties and their respective counsel and will be interpreted fairly in
accordance with its terms and without any strict construction in favor
of or against either party.
13.7 Entire Agreement. This Agreement does not constitute an offer by
Microsoft and it shall not be effective until signed by both parties.
This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and merges all prior and
contemporaneous communications. It shall not be modified except by a
written agreement dated subsequent to the date of this Agreement and
signed on behalf of PN and Microsoft by their respective duly
authorized representatives.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
Effective Date written above.
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MICROSOFT CORPORATION PROGRESSIVE NETWORKS
--------------------------------------------------------------------------------
By: [s] Paul Martiz By: [s] Rob Glaser
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Name (Print): Paul Martiz Name (print): Rob Glaser
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Title: Group VP, Applications & Platforms Title: CEO
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Date: 6/17/97 Date: 6-17-97
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[*] denotes confidential treatment requested